STOCK PURCHASE AGREEMENT
by and among
FADAL ENGINEERING COMPANY INC.,
DAVID E. DE CAUSSIN AND MYRTLE ROSALIE DE CAUSSIN,
TRUSTEES OF THE
DAVID AND MYRTLE DE CAUSSIN FAMILY TRUST - 1988,
LARRY F. DE CAUSSIN AND ELSIE MARGARET DE CAUSSIN,
TRUSTEES OF THE
LARRY AND ELSIE DE CAUSSIN FAMILY TRUST - 1988,
GIDDINGS & LEWIS, INC.
and
BIKE CORP.
__________________________
dated as of April 24, 1995
__________________________
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF COMMON SHARES . . . . . . . . . . 1
1.1 Sale and Purchase of Common Shares . . . . . . . 1
1.2 Unadjusted Purchase Price . . . . . . . . . . . . 1
1.3 Adjustments to Purchase Price . . . . . . . . . . 2
SECTION 2. CLOSING AND DELIVERIES . . . . . . . . . . . . . . . . 5
2.1 Closing . . . . . . . . . . . . . . . . . . . . . 5
2.2 Deliveries by Shareholders . . . . . . . . . . . 5
2.3 Deliveries by Purchaser . . . . . . . . . . . . . 6
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND
COMPANY . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Organization, Power and Authority . . . . . . . . 7
3.2 Validity of Agreement . . . . . . . . . . . . . . 7
3.3 No Breach . . . . . . . . . . . . . . . . . . . . 7
3.4 Capitalization . . . . . . . . . . . . . . . . . 8
3.5 Options or Other Rights . . . . . . . . . . . . . 8
3.6 Subsidiaries and Investments . . . . . . . . . . 8
3.7 Consents . . . . . . . . . . . . . . . . . . . . 8
3.8 Financial Statements . . . . . . . . . . . . . . 9
3.9 No Material Adverse Changes . . . . . . . . . . . 9
3.10 Agreements, Etc. . . . . . . . . . . . . . . . . 10
3.11 Identification of Depositories and
Authority . . . . . . . . . . . . . . . . . . . . 11
3.12 Labor Matters . . . . . . . . . . . . . . . . . . 11
3.13 Licenses and Permits . . . . . . . . . . . . . . 11
3.14 Intellectual Property . . . . . . . . . . . . . . 12
3.15 Litigation and Orders . . . . . . . . . . . . . . 12
3.16 Tax Matters . . . . . . . . . . . . . . . . . . . 12
3.17 Environmental . . . . . . . . . . . . . . . . . . 15
3.18 Insurance . . . . . . . . . . . . . . . . . . . . 16
3.19 Accounts Receivable . . . . . . . . . . . . . . . 17
3.20 Real Property and Leases; Equipment . . . . . . . 17
3.21 Inventories . . . . . . . . . . . . . . . . . . . 18
3.22 Undisclosed Liabilities . . . . . . . . . . . . . 18
3.23 Customers and Suppliers . . . . . . . . . . . . . 18
3.24 Compliance With Laws . . . . . . . . . . . . . . 18
3.25 No Brokers', Finders' or Insider Fees . . . . . . 19
3.26 Interests in Clients, Customers, Etc. . . . . . . 19
3.27 Product Warranty and Product Liability . . . . . 19
3.28 Employee Benefit Plans; ERISA . . . . . . . . . . 19
3.29 Disclosure . . . . . . . . . . . . . . . . . . . 23
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND
PURCHASER . . . . . . . . . . . . . . . . . . . . . . 24
4.1 Investment Intent . . . . . . . . . . . . . . . . 24
4.2 Validity of Agreement. . . . . . . . . . . . . . 24
4.3 No Breach . . . . . . . . . . . . . . . . . . . . 24
4.4 Financing . . . . . . . . . . . . . . . . . . . . 24
4.5 Subsidiary Status . . . . . . . . . . . . . . . . 24
4.6 Parent Status . . . . . . . . . . . . . . . . . . 24
4.7 No Brokers', Finders', or Insider Fees . . . . . 24
4.8 Consents . . . . . . . . . . . . . . . . . . . . 25
4.9 Disclosure . . . . . . . . . . . . . . . . . . . 25
SECTION 5. CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . 25
5.1 Special Pre-Closing Transactions . . . . . . . . 25
5.2 Closing Date Publicity . . . . . . . . . . . . . 25
5.3 Satisfaction of Non-Operating Liabilities . . . . 25
SECTION 6. POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . 25
6.1 General . . . . . . . . . . . . . . . . . . . . . 25
6.2 Litigation Support . . . . . . . . . . . . . . . 26
6.3 Transition . . . . . . . . . . . . . . . . . . . 26
6.4 Tax Matters . . . . . . . . . . . . . . . . . . . 26
SECTION 7. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . 29
SECTION 8. [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . 29
SECTION 9. INDEMNIFICATION AND SURVIVAL . . . . . . . . . . . . . 29
9.1 General Indemnity . . . . . . . . . . . . . . . . 29
9.2 Indemnification Procedure . . . . . . . . . . . . 29
9.3 Limitations on Indemnification
Obligations . . . . . . . . . . . . . . . . . . . 30
9.4 Survival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . 31
SECTION 10. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 31
10.1 Exclusive Remedies . . . . . . . . . . . . . . . 31
SECTION 11. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . 31
11.1 Waivers and Amendments . . . . . . . . . . . . . 31
11.2 Notices . . . . . . . . . . . . . . . . . . . . . 31
11.3 Fees and Expenses . . . . . . . . . . . . . . . . 32
11.4 Successors and Assigns . . . . . . . . . . . . . 32
11.5 Choice of Law . . . . . . . . . . . . . . . . . . 33
11.6 Severability . . . . . . . . . . . . . . . . . . 33
11.7 Entire Agreement . . . . . . . . . . . . . . . . 33
11.8 Construction . . . . . . . . . . . . . . . . . . 33
11.9 Incorporation of Exhibits and
Schedules . . . . . . . . . . . . . . . . . . . . 33
11.10 Headings and Recitals . . . . . . . . . . . 33
11.11 Counterparts . . . . . . . . . . . . . . . . 33
11.12 Forum Selection and Consent to
Jurisdiction . . . . . . . . . . . . . . . 33
11.13 Certain Definitions . . . . . . . . . . . . 34
EXHIBITS
Exhibit A Form of Employment Agreement
Exhibit B-1 Form of Non-Competition Agreement
Exhibit B-2 Form of Non-Competition Agreement
Exhibit C-1 Form of Legal Opinion of Counsel to Company and
Shareholders
Exhibit C-2 Form of Legal Opinion of Counsel to Company and
Shareholders
Exhibit D Form of Agreement of Purchase and Sale
Exhibit E-1 Form of Legal Opinion of Counsel to Parent and Purchaser
(California)
Exhibit E-2 Form of Legal Opinion of Counsel to Parent and Purchaser
(Wisconsin)
Exhibit F Form of Confidential Information Agreement
SCHEDULES
Schedule 1.2 Allocation of Purchase Price
Schedule 2.2 Directors and Officers to Resign Prior to Closing
Schedule 3.1 Foreign Qualification
Schedule 3.3 Conflicts: Shareholders and Company
Schedule 3.4 Share Ownership
Schedule 3.7 Consents and Approvals
Schedule 3.8 Financial Statements
Schedule 3.9 No Material Adverse Changes; Permitted Liens
Schedule 3.10 Agreements, Etc.
Schedule 3.11 Depositories
Schedule 3.12 Labor
Schedule 3.13 Licenses and Permits
Schedule 3.14 Intellectual Property
Schedule 3.15 Litigation and Orders
Schedule 3.16 Tax Matters
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 3.20 Real Property, Leases and Equipment
Schedule 3.21 Useable and Saleable Inventories
Schedule 3.22 Undisclosed Liabilities
Schedule 3.23 Customers and Suppliers
Schedule 3.24 Compliance with Laws
Schedule 3.25 Broker's Fees
Schedule 3.26 Interests in Clients, Customers, Etc.
Schedule 3.27 Product Warranty and Liability Claims
Schedule 3.28 Employee Benefit Plans
Schedule 5.1 Special Pre-Closing Transactions
Schedule 6.4 338 Election
Schedule 9.4 Survival Periods
Schedule 11.13 Knowledge Persons
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of April 24, 1995
("Agreement"), is made by and among Giddings, & Lewis, Inc., a Wisconsin
corporation ("Parent"), Bike Corp., a Wisconsin corporation ("Purchaser"),
Fadal Engineering Company Inc., a California corporation ("Company"),
David E. de Caussin and Myrtle Rosalie de Caussin, trustees, of the David
and Myrtle de Caussin Family Trust - 1988 ("DM Trust"), and Larry F. de
Caussin and Elsie Margaret de Caussin, trustees, of the Larry and Elsie
de Caussin Family Trust - 1988 ("LE Trust," and collectively with the
DM Trust, "Shareholders").
R E C I T A L S:
A. Shareholders are the beneficial and record owners of all the
issued and outstanding shares of common stock, no par value ("Common
Shares"), of the Company, which constitute the entire equity interest of
the Company.
B. Shareholders desire to sell to Purchaser, and Purchaser
desires to purchase from Shareholders, all of the Common Shares upon the
terms and subject to the conditions set forth in this Agreement.
C. Purchaser is a wholly owned subsidiary of Parent and Parent is
making certain representations, warranties and covenants in this Agreement
as a material inducement to the Company and Shareholders to enter into
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and subject
to the terms and conditions herein set forth, the parties hereto hereby
agree as follows:
SECTION 1. SALE AND PURCHASE OF COMMON SHARES.
1.1 Sale and Purchase of Common Shares. At the Closing (as
hereinafter defined) (a) Shareholders shall sell, assign, transfer and
convey all of the Common Shares to Purchaser, (b) each of the Shareholders
shall deliver to Purchaser one or more stock certificates representing the
Common Shares owned by that Shareholder, with duly executed stock powers
attached in proper form for transfer, (c) Purchaser shall purchase all of
the Common Shares and (d) Parent shall cause Purchaser to pay and deliver
to Shareholders the Purchase Price (as hereinafter defined) pursuant to a
pay proceeds letter ("Pay Proceeds Letter"), which shall be executed by
Shareholders and delivered to Purchaser not later than one business day
prior to the Closing Date.
1.2 Unadjusted Purchase Price. In full consideration for the
Common Shares, at the Closing Parent shall cause Purchaser to pay to
Shareholders an aggregate amount in cash equal to One Hundred and Fifty
Million Dollars ($150,000,000) ("Unadjusted Purchase Price"), subject to
adjustment as provided in Section 1.3 ("Purchase Price"), by wire transfer
of immediately available funds to the accounts designated in the Pay
Proceeds Letter and which shall be allocated as set forth on Schedule 1.2.
1.3 Adjustments to Purchase Price.
(a) Not later than one business day prior to the Closing
Date (as hereinafter defined), the Company will deliver or cause the
Company's designated representative to deliver to Purchaser the Company's
estimate of its Total Stockholders' Equity (as hereinafter defined) as of
the Closing Date ("Estimated Total Stockholders' Equity Amount"),
certified by the Company's Chief Financial Officer. If the amount that
results from subtracting $48,575,000 ("Interim Total Stockholders' Equity
Amount") from the Estimated Total Stockholders' Equity Amount is a
negative amount, the Unadjusted Purchase Amount payable by Purchaser
pursuant to Section 1.2 will be reduced by the absolute value of such
negative amount. If the amount that results from subtracting the Interim
Total Stockholders' Equity Amount from the Estimated Total Stockholders'
Equity Amount is a positive amount, the Unadjusted Purchase Amount payable
by Purchaser pursuant to Section 1.2 will be increased by one-half of the
amount of such difference.
(b) As soon as practicable, and in no event more than
60 calendar days after the Closing Date, Shareholders will deliver or
cause Shareholders' designated representative to deliver to Purchaser a
reviewed Balance Sheet of the Company as of the Closing Date ("Closing
Date Balance Sheet") accompanied by a final computation of the Total
Stockholders' Equity as of the Closing Date ("Final Total Stockholders'
Equity Amount"). The Closing Date Balance Sheet will be prepared using
the same accounting principles, policies and practices used in preparing
the Balance Sheet (as hereinafter defined). Subject to Section 1.3(c), if
the Final Total Stockholders' Equity Amount is greater than the Estimated
Total Stockholders' Equity Amount, Parent and Purchaser will pay
immediately to Shareholders one-half the amount by which the Final Total
Stockholders' Equity Amount exceeds the Estimated Total Stockholders'
Equity Amount; if the Final Total Stockholders' Equity Amount is less than
the Estimated Total Stockholders' Equity Amount, Shareholders will pay
immediately to Purchaser one-half the amount by which the Final Total
Stockholders' Equity Amount is less than the Estimated Total Stockholders'
Equity Amount up to the Interim Total Stockholders' Equity Amount, and to
the extent the Final Total Stockholders' Equity Amount is less than the
Interim Total Stockholders' Equity Amount, the Shareholders will also pay
immediately to Purchaser the full amount by which the Final Total
Stockholders' Equity Amount is less than the Interim Total Stockholders'
Equity Amount. Any payment required to be made under this Section 1.3(b)
will bear interest, compounded every 30 days, at the Market Interest Rate
(as hereinafter defined) from the Closing Date to the date of payment.
Without limiting the generality or effect of any other provision hereof,
the Company and Purchaser will, and Purchaser will cause the Company to,
(A) provide Shareholders and their representatives access during normal
business hours to the facilities, personnel and accounting and other
records of the Company to the extent reasonably necessary to permit
Shareholders to prepare the Closing Date Balance Sheet as herein provided
and (B) take such actions as may be reasonably requested by Shareholders
to close, or to assist Shareholders in closing, as of the Closing Date,
the books and accounting records relating to the Company and otherwise
reasonably cooperate with Shareholders and its representatives in the
preparation of the Closing Date Balance Sheet.
(c) If, within 45 calendar days after the date of
Shareholders' delivery of their computation of the Final Total
Stockholders' Equity Amount, Purchaser determines in good faith that the
Final Total Stockholders' Equity Amount is inaccurate, Purchaser will give
notice to Shareholders, within such 45 calendar day period, (i) setting
forth Purchaser's determination of the correct Final Total Stockholders'
Equity Amount and (ii) specifying in reasonable detail Purchaser's basis
for its disagreement with Shareholders' computation. If Purchaser and
Shareholders are unable to resolve any disagreement between them within
10 calendar days after the giving of notice of such disagreement, the
items in dispute will be referred for determination to the Los Angeles
office of Coopers & Lybrand LLP ("Accountants") as promptly as practicable
(which firm of accountants has not provided services to Parent, Purchaser
or their Affiliates in the past 5 years and will not provide services at
anytime prior to completion of their services pursuant to this Section
1.3). The Accountants will make a determination as to each of the items
in dispute, which determination will be (A) in writing, (B) furnished to
the parties hereto as promptly as practicable after the items in dispute
have been referred to the Accountants, (C) made in accordance with this
Agreement, including without limitation the second sentence of
Section 1.3(b), and (D) conclusive and binding upon each of the parties
hereto. In connection with their determination of the disputed items, the
Accountants will be granted reasonable access to the books and records of
the parties hereto and each of the parties will cooperate in good faith
with the Accountants. The fees and expenses of the Accountants will be
borne equally by Shareholders and Purchaser. Within three business days
after the date on which the Accountants furnish to the parties hereto such
firm's written determination of the items in dispute, the appropriate
party will make payment to the other in accordance with this Section 1.3.
Notwithstanding the procedures contemplated by this Section 1.3(c),
undisputed amounts will be promptly paid to the appropriate party.
(d) For purposes of this Agreement, (i) "Total
Stockholders' Equity" means (A) the line item amount shown on the Closing
Date Balance Sheet for "Total Stockholders' Equity," determined in
accordance with the second sentence of Section 1.3(b) (1) without regards
to the Section 338(h)(10) Election (as hereinafter defined) and
(2) eliminating amounts properly classified as (q) "Cash," (r) "Interest
Receivable," (s) "Note Receivable - Officer/Shareholder - Current
Portion," (t) "Cash Surrender Value - Officers' Life Insurance," (u) "Note
Receivable - Officer/Shareholder - Long Term," (v) "Other Receivables" to
the extent of $15,000, and (w) all liabilities that would be properly
reflected on the Closing Date Balance Sheet other than "Accounts Payable,"
"Accrued Expenses," "Customer Deposits," "Contracts Payable" and "Taxes
Other Than Income Tax" (collectively, the items in quotation marks in this
clause (w) constitute "Normal Operating Liabilities") and (ii) "Market
Interest Rate" means a rate of interest per annum equal to the lower of
(A) 2.0% over the interest rate publicly announced by Citibank, N.A. as
its "reference" or "base" rate of interest as in effect on the Closing
Date or, if higher, the last business day immediately preceding the
payment date and (B) the maximum rate of interest allowable under the Laws
(as hereinafter defined) of the State of California.
(e) In addition to all other payments that Shareholders
are entitled to receive under this Agreement, Shareholders shall be paid
an additional amount equal to the incremental tax liability ("Incremental
Tax") to the Shareholders and the Company resulting from the Section
338(h)(10) election made pursuant to Section 6.4(a) hereof and as such
term is defined in Section 11.13 hereof. Purchaser shall pay to
Shareholders at Closing, as part of the Purchase Price, $2,000,000, which
is an estimate of the Incremental Tax (the "Estimate"). Such Estimate
shall be credited towards Purchaser's payment of the Incremental Tax or if
upon calculation of the Incremental Tax it is determined that the
Incremental Tax is less than the amount of the Estimate, then the
Shareholders shall immediately pay any such excess to the Purchaser by
means of wire transfer of immediately available funds to a bank account to
be designated in writing by Purchaser. The Incremental Tax shall
initially be calculated by Shareholders. Such calculation and sufficient
supporting information to permit Purchaser to verify the calculation of
the Incremental Tax shall be provided to Purchaser no later than June 15,
1996 (the "Incremental Tax Notice"). Purchaser shall notify Shareholders
of any disagreement with respect to the calculation of the Incremental Tax
within thirty (30) days of receipt of the Incremental Tax Notice; in the
event Purchaser shall not notify Shareholders of any disagreement within
said thirty (30) day period, Purchaser shall be deemed to have agreed to
Shareholders' computation of the Incremental Tax and shall immediately pay
to Shareholders the Incremental Tax so determined, less the Estimate
previously paid, within five (5) days of such determination, but in no
case sooner than March 15, 1996. If Purchaser and Shareholders are unable
to resolve any disagreement within ten (10) days of Purchaser notifying
Shareholders of the disagreement, the Incremental Tax shall be calculated
by the Accountants taking into account comments of each of Purchaser and
Shareholders. The final determination of the Incremental Tax as resolved
by the Accountants shall occur no later than sixty (60) days after the
date of the Incremental Tax Notice, and Purchaser shall pay to
Shareholders the Incremental Tax, less the Estimate previously paid, no
later than five (5) days after such final determination, but in no case
sooner than March 15, 1996. The payment of the Incremental Tax, less the
Estimate previously paid, shall be made by means of a wire transfer of
immediately available funds to a bank account to be designated in writing
by Shareholders.
The intent of Purchaser and Shareholders with respect to this
Section 1.3(e) is that the proceeds resulting to Shareholders from the
receipt of the Purchase Price net of all federal and California income
taxes applicable thereto equal the proceeds which would have resulted to
Shareholders from the receipt of the Purchase Price net of all federal and
California income taxes applicable thereto had no Section 338(h)(10)
election been made. The provisions of this Section 1.3(e) and the
definition of the term "Incremental Tax" as set forth in Section 11.13
have been prepared based upon the aforesaid stated intent of Purchaser and
Shareholders and this stated intent shall in all events control the
calculation of the Incremental Tax.
SECTION 2. CLOSING AND DELIVERIES.
2.1 Closing. The closing of the transactions contemplated
hereby ("Closing") shall take place at the offices of Jones, Day, Reavis &
Pogue, 555 West Fifth Street, Suite 4600, Los Angeles, California 90013 at
9:00 a.m., Los Angeles time, on April 24, 1995 ("Closing Date").
2.2 Deliveries by Shareholders. At the Closing, Shareholders
shall deliver or cause to be delivered to Purchaser the following items:
(a) one or more certificates representing the Common
Shares, all duly endorsed by Shareholders or accompanied by duly executed
stock powers in proper form for transfer, in either case with signatures
guaranteed in a manner reasonably satisfactory to Purchaser, representing
all of the then outstanding shares of capital stock of the Company and
with all requisite documentary and transfer taxes paid;
(b) the stock books, stock ledgers, minute books and
corporate seals of the Company and all other business books and business
records relating to the business or operation of the Company which are not
maintained at the Company;
(c) the Articles of Incorporation of the Company
("Articles of Incorporation"), certified by the Secretary of State of the
State of California;
(d) a certificate of the Secretary of State of the State
of California as to the good standing of the Company in California;
(e) a franchise tax certificate showing that the Company
has paid its franchise taxes in the State of California;
(f) a certificate of the Secretary of the Company
certifying as to the resolutions authorizing this Agreement, the
transactions contemplated hereby and the Bylaws of the Company ("Bylaws");
(g) the statement contemplated by Section 3.16(i);
(h) the Employment Agreements, in the form attached as
Exhibit A, executed by the persons identified in Exhibit A;
(i) the Non-Competition Agreement ("Non-Competition
Agreement"), in the form attached as Exhibit B-1 and B-2, executed by each
of David de Caussin and Larry de Caussin;
(j) the resignation of each director and officer of the
Company designated on Schedule 2.2, effective as of the Closing;
(k) the legal opinions of counsel to the Company and
counsel to Shareholders, in the form attached as Exhibit C-1 and Exhibit
C-2;
(l) an incumbency certificate for each officer of the
Company executing any documents delivered in connection with the
transactions contemplated hereby;
(m) evidence reasonably satisfactory to Purchaser of
satisfaction in full of the liabilities contemplated to be satisfied under
Section 5.3;
(n) the Agreement of Purchase and Sale ("Property
Agreement"), in the form attached as Exhibit D, executed by Plummer
Street, Ltd., a California limited partnership; and
(o) such other certificates, opinions, documents or
instruments as may reasonably be requested by Purchaser, consistent with
the terms of and transactions contemplated by this Agreement.
2.3 Deliveries by Purchaser. At the Closing, Parent shall
cause Purchaser to and Purchaser shall deliver or cause to be delivered
the following items:
(a) an amount, in cash, equal to the Purchase Price in
the manner provided in Section 1.2;
(b) a certificate of the Secretary of Parent and
Purchaser certifying as to the resolutions authorizing this Agreement and
the transactions contemplated hereby;
(c) the legal opinions of counsel to Parent and
Purchaser, in the form attached as Exhibit E-1 and Exhibit E-2;
(d) a confidential information agreement ("Confidential
Information Agreement") in the form of Exhibit F with respect to each of
the individuals identified on Exhibit F, executed by Purchaser;
(e) the Property Agreement;
(f) the Employment Agreements;
(g) the Non-Competition Agreements; and
(h) such other certificates, opinions, documents or
instruments as may reasonably be requested by Shareholders, consistent
with the terms of and the transactions contemplated by this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS AND COMPANY.
Each of the Shareholders and the Company jointly and severally
hereby represent and warrant to Purchaser that:
3.1 Organization, Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of California and has the corporate power and
authority to own, operate and lease its properties and to carry on its
business as presently being conducted. Given the nature of the Company's
business and location of its properties, the Company is not, and is not
required to be, qualified to do business in any other state, other than
California, except as set forth on Schedule 3.1.
3.2 Validity of Agreement. This Agreement constitutes the
legal, valid and binding obligations of the Company and Shareholders,
enforceable against the Company and Shareholders in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or
principles governing the availability of equitable remedies. The Company
has the corporate power and authority to enter into this Agreement and to
undertake and perform fully the transactions contemplated hereby. All
necessary action has been taken by and on behalf of the Company with
respect to the authorization, execution, delivery and performance of this
Agreement. Each of the Shareholders has full capacity, authority and
right to execute and deliver this Agreement and to transfer and deliver to
Purchaser the Common Shares owned by such Shareholder, free and clear of
any mortgage, lien, pledge, encumbrance, security interest, claim, charge,
defect in title or other restriction (other than those arising solely by
virtue of the failure to register or qualify under applicable state and
federal securities laws and regulations) of any nature whatsoever,
("Lien") or option, warrant, call, convertible or exchangeable security,
right of conversion or exchange, subscription, unsatisfied preemptive
right, other agreement or right of similar nature, whether oral or written
("Option").
3.3 No Breach. Except as set forth on Schedule 3.3, neither
the execution and delivery of this Agreement by Shareholders and the
Company nor the performance of their obligations hereunder will (a)
violate, conflict with or result in a breach of any law, statute, code,
ordinance, regulation or other requirement ("Law") of any government or
political subdivision, whether federal, state or local, or court or
arbitrator ("Governmental Authority") or order, judgment, injunction,
award, decree, ruling, charge or writ of any Governmental Authority
("Order") or the Articles of Incorporation or Bylaws of the Company,
(b) except for any of the following that would not have a material adverse
effect on the business, financial condition, assets, liabilities, results
of operation or prospects of the Company or the transactions contemplated
hereby (a "Material Adverse Effect"), violate, conflict with or result in
a breach or termination of, or otherwise give any contracting party
additional rights or compensation under, or the right to terminate or
accelerate, or constitute (with notice or lapse of time, or both) a
default under the terms of, any note, deed, lease, instrument, security
agreement, mortgage, commitment, contract, agreement, license or other
instrument or oral understanding to which the Company or any Shareholder
is a party or by which any of the assets or properties of the Company or
any Shareholder are bound, or (c) result in the creation or imposition of
any Lien with respect to, or otherwise have an adverse effect upon, the
Shares or any of the properties or assets of the Company or any
Shareholder.
3.4 Capitalization. The authorized capital stock of the
Company consists of 135,000 Common Shares, of which only 18,480 Common
Shares are issued and outstanding, all of which were duly issued and are
fully paid and nonassessable. The Common Shares are the only authorized
class of capital stock of the Company. Each of the Shareholders (a) is
the record and beneficial owner of all of the Common Shares set forth
opposite such Shareholder's name on Schedule 3.4, (b) has full power,
right and authority, and any approval required by Law (other than under
the HSR Act), to make and enter into this Agreement to which such
Shareholder is a party and to sell, assign, transfer and deliver the
Common Shares to Purchaser, and (c) other than restrictions existing on
the date hereof which arise under the Amended and Restated Shareholders
Agreement identified on Schedule 3.3 ("Shareholders Agreement"), which
restrictions shall not exist on the Closing Date, has good and marketable
title to the Common Shares set forth opposite such Shareholder's name on
Schedule 3.4 free and clear of any Lien or Option. Upon the consummation
of the transactions contemplated by this Agreement in accordance with the
terms hereof, Purchaser shall acquire good and marketable title to the
Common Shares, free and clear of any Lien or Option.
3.5 Options or Other Rights. Other than Options existing on
the date hereof which arise under the Shareholders Agreement, which
Options shall not exist on the Closing Date, there are no authorized or
outstanding Options providing for or relating to the issuance, transfer or
voting of any Common Shares or any unissued securities of the Company.
3.6 Subsidiaries and Investments. The Company has no
Subsidiaries (as hereinafter defined) and has no equity interest, directly
or indirectly, in any Person in excess of 5% of the total equity ownership
of such Person ("Investments").
3.7 Consents. On or prior to the Closing, the Company shall
have received all approvals (as set forth on Schedule 3.7) from all
Governmental Authorities, except for those which if not obtained would not
have a Material Adverse Effect, including compliance with the filing
requirements of and waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder ("HSR Act"), and all consents and approvals of
third parties as may be required in connection with the execution,
delivery and performance by the Company or Shareholders of this Agreement
or the consummation of the transactions contemplated thereby or hereby,
except for those which if not obtained would not have a Material Adverse
Effect. Except as set forth on Schedule 3.7, and except for such of the
following which if not obtained would not have a Material Adverse Effect,
no consent, approval or authorization of any individual, sole
proprietorship, partnership, corporation, unincorporated society or
association, trust or other entity or Governmental Authority ("Person") is
required in connection with the execution, delivery and performance by the
Company or Shareholders of this Agreement or the consummation of the
transactions contemplated hereby.
3.8 Financial Statements.
(a) The Company has delivered to Purchaser correct and
complete copies of (i) the audited balance sheets of the Company as of
December 31, 1994, 1993 and 1992 (the 1994 audited balance sheet is
referred to herein as the "Balance Sheet"), and the related audited
statements of operations and cash flows for the years then ended, together
with the notes thereto and the reports thereon of the Company's
independent auditors, and the other financial information included
therewith (collectively, "Audited Financial Statements"), and (ii) the
reviewed balance sheet of the Company as of January 31, 1995 and the
related reviewed statements of operations and cash flows for the one-month
period then ended ("Interim Financial Statements," and collectively with
the Audited Financial Statements, "Financial Statements"), which are
attached as Schedule 3.8.
(b) Except as set forth on Schedule 3.8, the Financial
Statements (i) are accurate and complete in all material respects and are
consistent with the books and records of the Company (which are accurate
and complete in all material respects), (ii) have been prepared in
accordance with generally accepted accounting principles, consistently
applied throughout the periods indicated (except as otherwise stated
therein) and (iii) fairly present the financial position, results of
operations and cash flows of the Company at the respective dates thereof
and for the periods therein indicated, in each case in accordance with
generally accepted accounting principals consistently applied during the
periods involved (except as otherwise stated therein).
3.9 No Material Adverse Changes. Except as set forth on
Schedule 3.9 or Schedule 5.1, since December 31, 1994 there has not been
with respect to the Company any (a) material adverse change in the assets,
liabilities, business, operations, condition (financial or otherwise) or
prospects of the Company; (b) transaction except in the ordinary course of
business consistent with past custom and practice, including with respect
to quantity and frequency ("Ordinary Course of Business"); (c) capital
expenditures or commitments for capital expenditures exceeding $1,000,000
in addition to those set forth on Schedules 3.9 and 3.10) in the
aggregate; (d) unfulfilled commitment as of the date of this Agreement
requiring expenditures by the Company exceeding $100,000 (excluding
commitments expressly described elsewhere in this Agreement, the Schedules
or the Exhibits hereto, payroll or other compensation payments and fringe
benefits, related Taxes and Tax obligations and commitments incurred in
the Ordinary Course of Business); (e) termination or amendment of, or a
failure in any material respect to perform obligations or the occurrence
of any default under, any material contract, lease, agreement or license;
(f) failure to maintain in full force and effect substantially the same
level and types of insurance coverage as in effect on December 31, 1994,
or destruction, damage to, or loss of any asset of the Company (whether or
not covered by insurance) that materially and adversely affects the
assets, liabilities, business, operations, condition (financial or
otherwise) or prospects of the Company; (g) material change in accounting
principles, methods or practices, investment practices, claims, payment
and processing practices or policies other than in connection with the
AS400 conversion; (h) declaration, setting aside, or payment of a dividend
or other distribution in respect of its capital stock, or any direct or
indirect redemption, purchase or other acquisition of any shares of its
capital stock; (i) material revaluation of any assets or material write
down of the value of any inventory; (j) sale, assignment, disposition,
transfer or lapse of any material tangible or intangible asset, including
any rights to any Intellectual Property (as hereinafter defined), except
in the Ordinary Course of Business; (k) Lien placed or incurred with
respect to any tangible or intangible asset, other than liens identified
on Schedule 3.9 or liens identified in the Financial Statements
("Permitted Liens"); (l) increase or commitment to the increase of the
salary or other compensation payable or to become payable to any of its
officers, directors or employees, except in the Ordinary Course of
Business and applicable policies and procedures of the Company; (m)
cancellation of any debt or waiver or release of any material right or
claim, except for cancellations, waivers and releases in the Ordinary
Course of Business (i) which do not exceed $100,000 in the aggregate, or
(ii) with respect to machinery, equipment and inventory in the Ordinary
Course of Business; (n) issuance or sale of any equity security or of any
security convertible into or exchangeable for equity securities; (o)
amendment to its Articles of Incorporation or Bylaws; or (p) agreement or
understanding to take any of the actions described in this Section 3.9.
3.10 Agreements, Etc. Except as set forth on Schedule 3.10 or
as identified in another Schedule to this Agreement, the Company is not a
party to or bound by (a) any agreement, contract or commitment, whether
written or oral, relating to the employment of any Person, or any bonus,
deferred compensation, pension, profit sharing, stock option, employee
stock purchase, retirement insurance, health, welfare or other employee
benefit plan, (b) any loan or advance to, or Investment in, any other
Person or any agreement, contract or commitment, whether written or oral,
relating to the making of any such loan, advance or Investment, (c) any
indemnity, or any guarantee or other contingent liability, whether written
or oral, in respect of any indebtedness or obligation of any other Person
(other than the endorsement of negotiable instruments for collection in
the Ordinary Course of Business), (d) any agreement, contract or
commitment, whether written or oral, limiting the freedom of the Company
to engage in any line of business or to compete with any other Person,
(e) agreements, contracts or commitments, pursuant to which the obligation
of any party thereto is in excess of $100,000 except for sales of
inventory or purchases of raw material or outside services in the Ordinary
Course of Business or (f) to the best knowledge of the Company, any other
material agreement, contract, lease, arrangement, commitment, warranty or
instrument, whether written or oral, express or implied. All of such
agreements, arrangements, commitments, contracts and instruments set forth
on Schedule 3.10 and marked with a double asterisk (**) are in full force
and effect and enforceable in accordance with its terms, there exists no
material default or breach thereunder or event or circumstance which would
constitute (with notice or lapse of time or both) a material default or
breach by any party thereto, and the Company has not received any notice
claiming that the Company has committed any such default or breach or
indicating the desire or intention of any party thereto to amend, modify,
rescind or terminate the same. To the best knowledge of the Company, all
of such agreements, arrangements, commitments, contracts and instruments
set forth on Schedule 3.10 (or required to be set forth on Schedule 3.10)
other than those marked with a double asterisk are in full force and
effect and enforceable in accordance with its terms, there exists no
material default or breach thereunder or event or circumstance which would
constitute (with notice or lapse of time or both) a material default or
breach by any party thereto, and the Company has not received any notice
claiming that the Company has committed any such default or breach or
indicating the desire or intention of any party thereto to amend, modify,
rescind or terminate the same.
3.11 Identification of Depositories and Authority. Schedule
3.11 lists the names and addresses of all banks, trust companies, savings
and loan associations and other financial institutions in which the
Company has accounts, deposits or safe deposit boxes and the signatories
thereunder.
3.12 Labor Matters. Except as set forth on Schedule 3.12:
(a) the Company has paid in full to, or accrued on behalf of, all
employees of the Company all wages, salaries, commissions, bonuses and
other direct compensation for all services performed by them and all
amounts required to be reimbursed to such employees; (b) to the best
knowledge of the Company, the Company is in material compliance with all
federal, state, local and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment
and wages and hours; (c) there is no unfair labor practice complaint
against the Company pending of which the Company has received notice
before the National Labor Relations Board or any comparable state, local
or foreign agency; (d) there is no labor strike, dispute, slowdown or
stoppage actually pending of which the Company has received notice or, to
the best knowledge of the Company, threatened against or involving the
Company; (e) to the best knowledge of the Company, there are no efforts
being made on the part of any labor union or other labor organization or
employee bargaining group with respect to representation or organization
of the Company's employees; and (f) to the best knowledge of the Company,
no grievance which would have a Material Adverse Effect nor any
arbitration proceeding arising out of or under collective bargaining
agreements is pending and no claim therefor has been asserted. There are
no collective bargaining agreements or other employee representation
agreements which exist or are currently being negotiated by the Company.
3.13 Licenses and Permits. Schedule 3.13 sets forth a
complete and accurate list and description of all material licenses,
permits (other than building permits) and other authorizations of any
Governmental Authority held by the Company ("Governmental Permits") and
used by it in the conduct of its business. Complete and correct copies of
all such Governmental Permits as currently in effect have been, or at
least twenty (20) days prior to the Closing will be, made available to
Purchaser. To the best knowledge of the Company, all such Governmental
Permits are currently in full force and effect. The Company is in
material compliance with the terms of such licenses, permits and
authorizations and there is no pending or, to the best knowledge of the
Company, threatened termination, expiration or revocation thereof. Except
for the licenses, permits, and authorizations set forth and described on
Schedule 3.13, to the best knowledge of the Company, neither the Company's
conduct of its business nor its ownership or use of any of its properties
or assets is dependent on any license, permit or other authorization,
whether written or oral.
3.14 Intellectual Property. Schedule 3.14 sets forth an
accurate and complete list of all letters patents, patents, patent
applications, patent licenses, material software licenses, material
know-how licenses, material trade names, material brand names, material
trademarks, material copyrights, material service marks, trademark
registrations and applications, service mark registrations and
applications and copyright registrations and applications and all other
material intangible property rights owned or used by the Company in the
operation of its business (collectively, "Intellectual Property"). Except
as set forth on Schedule 3.14 to the best knowledge of the Company, the
Company, without payment of any license fee, royalty or similar charge,
owns the entire right, title and interest in and to the Intellectual
Property and the trade secrets, know-how and technology used in the
operation of its business, and the Company has the exclusive right to use
and license the same without infringement or violation of the rights of
others. To the best knowledge of the Company, there are no pending or
threatened proceedings or litigation or other adverse claims (or basis
therefor) affecting or challenging the Intellectual Property or the trade
secrets, know-how or technology used in the operation of the Company's
business. To the best knowledge of the Company, no Person is infringing
the Intellectual Property or the trade secrets, know-how or technology
used in the operation of the Company's business.
3.15 Litigation and Orders. Except as set forth on
Schedule 3.15 or any other Schedule to this Agreement, there is no, nor
has there been in the last five years, any material claim, litigation,
action, suit, proceeding, investigation or inquiry, administrative or
judicial, at law or in equity, before or by any Governmental Authority
pending of which the Company has been notified or, to the best knowledge
of the Company, threatened against or affecting the Company or any of its
properties or assets, including, without limitation, any seeking to enjoin
or prevent the consummation of the transactions contemplated hereby, or
otherwise claiming this Agreement or the transactions contemplated hereby
or the consummation thereof are improper. To the best knowledge of the
Company, there is no basis upon which any such material claim, litigation,
action, suit, proceeding, investigation or inquiry could reasonably be
brought or initiated. Except as set forth on Schedule 3.15, the Company
and its properties and assets are not subject to any Order.
3.16 Tax Matters.
(a) Except as set forth on Schedule 3.16, the Company
has timely filed all Tax Returns (as hereinafter defined) required to be
filed by it, to the best knowledge of the Company, each such Tax Return
has been prepared in material compliance with all applicable laws and
regulations, and all such Tax Returns are true and accurate in all
material aspects. All Taxes (as hereinafter defined) due and payable by
the Company have been paid. The Company has delivered to Purchaser
complete copies of all federal income tax Returns, filed with respect to
the Company for taxable periods ended on or after December 31, 1989, and
all examination reports and statements of deficiencies assessed against or
agreed to by the Company with respect to such taxable periods.
(b) Except as set forth on Schedule 3.16:
(i) with respect to each taxable period of the
Company, either such taxable period has been audited by the relevant
taxing authority or the time for assessing or collecting income Tax with
respect to each such taxable period has closed and such taxable period is
not subject to review by any relevant taxing authority;
(ii) no deficiency or proposed adjustment which
has not been settled or otherwise resolved for any amount of Tax has been
proposed, asserted or assessed by any taxing authority against the
Company;
(iii) the Company has not consented to
extend the time in which any Tax may be assessed or collected by any
taxing authority with respect to any taxable period for which the statute
of limitations is open;
(iv) the Company has not requested or been
granted an extension of the time for filing any Tax Return to a date later
than the Closing Date;
(v) there is no action, suit, taxing authority
proceeding or audit now in progress or pending with respect to which the
Company has been notified or, to the best knowledge of the Company,
threatened against or with respect to the Company with respect to any Tax;
(vi) since 1986, the Company has not been a
member of an affiliated group as defined in Section 1504 of the Code (or
any analogous combined, consolidated or unitary group defined under state,
local or foreign income Tax law) of which the Company is or has been a
member ("Affiliated Group") or filed or been included in a combined,
consolidated or unitary income Tax Return;
(vii) the Company is not a party to or
bound by any Tax allocation or Tax sharing agreement and has no current or
potential contractual obligation to indemnify any other Person with
respect to Taxes;
(viii) the Company does not reasonably
expect any taxing authority to claim or assess any additional Taxes for
any period ending on or prior to the Closing Date and is not aware of any
facts which would constitute grounds for the assessment of any Taxes for
any period prior to the Closing Date;
(ix) the Company does not own any interest in
real property in any jurisdiction in which a Tax (other than a net income
or franchise tax) will be imposed on a transfer of any interest in real
property as a result of the transactions contemplated by this Agreement;
(x) no claim has ever been made by a taxing
authority in a jurisdiction where the Company does not pay Tax or file Tax
Returns that the Company is or may be subject to Taxes assessed by such
jurisdiction;
(xi) the Company has withheld and paid, or in
the case of Taxes not currently due has made provisions to pay, all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, creditor, independent contractor or other third
party;
(xii) the Company has no permanent
establishment in any foreign country, as defined in the relevant tax
treaty between the United States of America and such foreign country; and
(xiii) to the best knowledge of the Company,
the Company has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662 for Tax Returns
due after December 31, 1989 and within the meaning of Code Section 6661
for Tax Returns due before January 1, 1990.
(c) To the best knowledge of the Company, Schedule 3.16
contains a list of states, territories and jurisdictions (whether foreign
or domestic) in which the Company is required to file Tax Returns relating
to the operations of the Company.
(d) Since January 1, 1987, the Company has had in effect
a valid election under Section 1362 of the Code and any corresponding
state tax provision to be an S corporation and no such election has been
terminated.
(e) Except as set forth on Schedule 3.16, the Company is
not a party to any "safe harbor lease" within the meaning of
Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982, nor has the Company entered
into any compensatory agreements with respect to the performance of
services for which payment thereunder would result in a nondeductible
expense to the Company pursuant to Section 280G of the Code.
(f) The Company has not agreed, nor is it required, to
make any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise.
(g) The Company has not participated in or cooperated
with an international boycott within the meaning of Section 999 of the
Code.
(h) Except as set forth on Schedule 3.16, the Company
has not entered into a transaction which is being accounted for as an
installment obligation under Section 453 of the Code, nor has the Company
entered into an interest rate swap, currency swap or other similar
transaction.
(i) The Common Shares of the Company do not constitute
"United States real property interests" within the meaning of
section 987(c) of the Code. At the Closing, the Company will provide
Purchaser with a statement to that effect meeting the requirements of
Treasury Regulations Sections 1.1445-2(c)(3) and 1.897.2(h).
3.17 Environmental.
(a) Except as set forth on Schedule 3.17, to the best
knowledge of the Company, the Company's current and former operations,
properties and assets (i) are and have been in compliance in all material
respects with all Environmental Laws (as hereinafter defined), and (ii)
are not the subject of any federal, state, local or foreign investigation
evaluating whether any remedial or other response action is needed to
respond to a release or threatened release of any Hazardous Substance (as
hereinafter defined). For purposes of this Agreement, (i) "Environmental
Law(s)" shall mean any statute, ordinance, code, law, rule, regulation,
order, or other requirement, standard or procedure enacted, adopted, or
applied by any Governmental Authority, relating to pollution, protection
of worker health and safety or protection of public health, safety or
welfare or the environment, including, without limit, those relating to
emissions, discharges, releases or threatened releases of Hazardous
Substances (as hereafter defined) into the environment, or otherwise
relating to the manufacture, generation, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Substances, and (ii) "Hazardous Substance" shall mean any pollutant,
contaminant, industrial, toxic, hazardous or noxious substance or waste
which is regulated by any Governmental Authority, including, without
limit, any petroleum or petroleum compounds (refined or crude), flammable
substances, explosives, radioactive materials, asbestos or asbestos-
containing materials, polychlorinated biphenyls ("PCBs"), or any other
materials or pollutants which pose a hazard or potential hazard to the
Property or to persons in or about the Property, or cause the Property to
be in violation of any Environmental Law, whether existing as of the date
hereof, previously enforced, or subsequently enacted.
(b) Except as set forth on Schedule 3.17:
(i) To the best knowledge of the Company, the
Company has not generated, stored, transported, recycled, treated,
disposed of or otherwise handled any Hazardous Substances for itself or
for any other Person in violation of Environmental Law, nor, to the best
knowledge of the Company, has any other Person at any time stored,
transported, recycled, treated, disposed of or otherwise handled any
Hazardous Substances on any property owned or leased by the Company at any
time in violation of Environmental Law;
(ii) to the best knowledge of the Company,
there are no former or current locations where any Hazardous Substances
from the operation of the business have been stored, treated, recycled or
disposed of in violation of Environmental Law;
(iii) to the best knowledge of the Company,
there are no Hazardous Substances located on, within or under any land,
buildings or other improvements owned or leased by the Company at any time
in violation of Environmental Law including, without limitation, any
surface and subsurface waters on or under any real property owned or
leased by the Company at any time;
(iv) to the best knowledge of the Company,
there has not been and there is no ongoing or threatened release, and
there has been no past release, of Hazardous Substances into the
environment from the operation of the Company in violation of
Environmental Law or from any facility in violation of Environmental Law
at which any Hazardous Substances generated by the Company have been
stored, treated, recycled or disposed of;
(v) to the best knowledge of the Company,
there are no PCBs nor any asbestos or asbestos-containing material located
on or within any land, building or other improvement owned or leased by
the Company;
(vi) to the best knowledge of the Company, the
Company is not under any current obligation imposed by any Governmental
Authority to make any expenditure to achieve or maintain compliance with
any Environmental Law other than under Environmental Laws applicable
generally to persons engaged in businesses similar to the Company's
business;
(vii) the Company has no knowledge of any
information indicating that any Person, including any employee, may have
impaired health, or that the environment may have been damaged, as the
result of the operation of the business or the release or threat of
release of Hazardous Substances from or on any land, building or other
improvement owned or leased by the Company;
(viii) the Company has not received notice
of any claim or investigation based on Environmental Law, including but
not limited to CERCLA;
(ix) to the best knowledge of the Company, no
underground storage tanks are or have ever been located on any properties
owned or leased by the Company; and
(x) the Company has not received notice under
the citizen suit provision of any Environmental Law in connection with any
properties owned or operated by the Company, or their activities thereon.
3.18 Insurance. Schedule 3.18 sets forth a true and complete
list and brief description (including applicable premiums and deductibles)
of all policies of, and binders evidencing, life, fire, workmen's
compensation, product liability, general liability and other forms of
insurance, including title insurance, owned or maintained by the Company
(other than key man insurance). To the best knowledge of the Company,
such policies (which are, to the best knowledge of the Company, sufficient
for compliance with law and contractual obligations) are in full force and
effect, are not maintained by Affiliates of the Company other than the
20701 Plummer Street L.P. and, to the best knowledge of the Company, the
Company is not in default under any of them and has not received a notice
of cancellation with respect to any insurance policies.
3.19 Accounts Receivable. All trade and other accounts
receivable of the Company are valid and bona fide obligations due to the
Company and are, to the best knowledge of the Company, collectible in the
Ordinary Course of Business, net of any allowance for doubtful accounts
reflected on the Company's Financial Statements.
3.20 Real Property and Leases; Equipment.
(a) The Company owns no real property. Schedule 3.20
constitutes a complete and correct list of all real properties leased or
subleased by the Company. The Company has delivered or caused to be
delivered true, complete and correct copies of all documents evidencing
the lease or sublease of the leased properties reflected on Schedule 3.20.
Each such lease and sublease is valid and in full force and effect and
enforceable in accordance with its terms and has not been further
supplemented, amended or modified. Except as set forth on Schedule 3.20,
there exists no material event of default, or event, occurrence, condition
or act, which constitutes or would constitute (with notice or lapse of
time or both) a material default in any respect under any such leases or
subleases. The Company has not received any notice of any event of
default or any event, occurrence, condition or act which constitutes or
would constitute (with notice or lapse of time or both) a default in any
respect under any lease or subleases. Except as set forth on Schedule
3.20, to the best knowledge of the Company, the building fixtures and
improvements thereon, and the present use thereof, comply, in all material
respects with all restrictive covenants, deeds and other restrictions and
all zoning laws, ordinances and regulations of Governmental Authorities
having jurisdiction thereof, including provisions relating to permissible
nonconforming uses, if any, and such premises are not presently affected,
nor to the best knowledge of the Company threatened, by any condemnation
or eminent domain proceeding nor do they constitute a nuisance to or
interfere with the rights of any Person.
(b) Except as set forth on Schedule 3.20, all equipment
and tangible personal property used by the Company are either owned, free
and clear of all Liens other than Permitted Liens, or are (i) used under
capital leases reflected on the Financial Statements or (ii) used under
operating leases. Such Liens, individually and in the aggregate, are not
substantial in amount, do no detract from the value of, or impair the use
of, in the businesses of the Company, the properties subject thereto, and
have arisen only in the Ordinary Course of Business and consistent with
past practice. Schedule 3.20 sets forth a complete and accurate
description of all capital leases and operating leases pursuant to which
the Company leases property. All such leases are valid and in full force
and effect and enforceable in accordance with their terms and have not
been further supplemented, amended or modified. The Company has not
received any notice of, and there exists no event of material default, or
event, occurrence, condition or act, which constitutes or would constitute
(with notice or lapse of time or both) a material default in any respect
under any such lease. All of the equipment and tangible personal property
owned or leased by the Company is in good operating condition (other than
equipment which is in the process of construction) and repair, subject to
normal wear and tear, and to the best knowledge of the Company, none of
such assets are in need of maintenance or repairs except for ordinary,
routine maintenance. The real property and assets owned or leased by the
Company on the date hereof include all properties and assets necessary to
permit the Company to conduct its respective business and operations in
all material respects in the manner in which it has been conducted since
December 31, 1994.
3.21 Inventories. Except as set forth on Schedule 3.21, to
the best knowledge of the Company, the inventories of the Company are of a
quality and quantity useable and saleable in the Ordinary Course of
Business, subject to appropriate and adequate allowances reflected in the
Financial Statements for obsolete, excess, slow-moving and other irregular
items.
3.22 Undisclosed Liabilities. Except (a) as set forth on
Schedule 3.22 or any other Schedule to this Agreement, (b) as set forth in
the Financial Statements, (c) such of the following as do not exceed
$250,000 individually or $1,000,000 in the aggregate or (d) such as may
have arisen in the Ordinary Course of Business after December 31, 1994
(which are not otherwise prohibited by, in violation of or which will
result in a breach of the representations, warranties and covenants of the
Company and Shareholders contained in this Agreement), there are no debts,
liabilities or obligations, including, to the best knowledge of the
Company, contingent or otherwise, of the Company.
3.23 Customers and Suppliers. Schedule 3.23 sets forth (i)
the Company's 20 largest (in terms of revenue) customers (including
distributors) for the years ended December 31, 1992, 1993 and 1994, and
(ii) the Company's 12 largest suppliers for the fiscal year ended December
31, 1994 and, with respect to such suppliers, amounts paid to such
suppliers by the Company for the fiscal years ended December 31, 1992,
1993 and 1994 ("Material Customers and Suppliers"). Except as set forth
on Schedule 3.23, (a) all Material Customers and Suppliers continue to be
customers or licensees or suppliers or licensors of the Company and none
of such Material Customers and Suppliers has reduced materially its
business with the Company from the levels achieved during the year ended
December 31, 1994, and the Company has no reason to believe that any such
reduction will occur; (b) the Company is not involved in any claim,
dispute or controversy with any of its Material Customers and Suppliers
other than claims, disputes or controversies arising in the Ordinary
Course of Business which are not material in amount; and (c) the Company
is not involved in any claim, dispute or controversy with any of its other
customers or licensees or any of its suppliers or licensors which,
individually or in the aggregate, could reasonably be anticipated to have
a material adverse effect upon the Company's assets, liabilities,
business, operations, condition (financial or otherwise) or prospects.
3.24 Compliance With Laws. Except as set forth on Schedule
3.24 or any other Schedule to this Agreement, to the best knowledge of the
Company, the Company has complied with, and is not in violation of or in
default under, any Law or Order applicable to the Company or to any of its
businesses, assets, properties or employees the violation of which could
reasonably be expected to have a material adverse effect upon the
Company's assets, liabilities, business, operations, condition (financial
or otherwise) or prospects.
3.25 No Brokers', Finders' or Insider Fees. Except as set
forth on Schedule 3.25, no Person has, or immediately following the
consummation of the transactions contemplated hereby will have, as a
result of any act or omission of the Company or Shareholders, any right,
interest, or valid claim against the Company or Purchaser for any
commission, fee or other compensation as a finder or broker in connection
with the transactions contemplated by this Agreement, nor are there any
fees or any payments or promises of payment, however characterized, other
than as contemplated by this Agreement, which have been paid or which are
or may become payable in connection with the transactions contemplated
hereby to the Company, Shareholders or any director, officer or employee
of the Company, or any Affiliate of any of the foregoing which is not
satisfied on or prior to Closing.
3.26 Interests in Clients, Customers, Etc. Except as set
forth on Schedule 3.26, none of the Shareholders have any direct or
indirect contract, equity or similar interest (a) in, or is a director,
officer or employee of, any Person which is a client, customer, supplier,
lessor, lessee, debtor, creditor or competitor or potential competitor of
the Company, (b) in any property, asset or right which is owned or used by
the Company in the conduct of its respective business, or (c) in any
contractual relationship with the Company other than the employment of
Shareholders as employees of the Company or as provided in this Agreement.
3.27 Product Warranty and Product Liability. Except as set
forth on Schedule 3.27, there are (i) to the best knowledge of the
Company, no product warranty claims (other than claims arising in the
Ordinary Course of Business) pending of which the Company has received
notice, or threatened against the Company, (ii) product liability claims
pending of which the Company has received notice or, to the best knowledge
of the Company, threatened against the Company and, (iii) to the best
knowledge of the Company, no state of facts or the occurrence of any event
forming the basis for any such product warranty, product liability or
other tort claim. The Company has provided Purchaser with a complete and
accurate list of all warranty information provided to its customers.
Schedule 3.27 sets forth a complete and accurate summary of (i) material
product warranty claims outside the Ordinary Course of Business and (ii)
product liability claims made against the Company within the past five
years.
3.28 Employee Benefit Plans; ERISA.
(a) Identification of Plans/Definitions. Schedule 3.28
includes a complete listing or description of all "employee benefit
plans," as defined in Section 3(3) of ERISA (as hereinafter defined), and
all other deferred compensation, severance, bonus, incentive, stock
option, salary continuation, excess benefit, employee insurance or similar
compensation or welfare benefit plans, contracts, programs, funds, or
arrangements of any kind (whether written or oral, qualified or
nonqualified, funded or unfunded, foreign or domestic, currently effective
or terminated) and any trust, escrow, or similar agreement related
thereto, whether or not funded, in respect of any present or former
employees, directors, officers, shareholders, consultants, or independent
contractors of the Company or any predecessor or a Controlled Group
Member, or to which the Company or any predecessor or a Controlled Group
Member has at any time during the past five years made or is required to
make payments, transfers, or contributions (the above hereinafter
individually or collectively referred to as "Employee Plan" or "Employee
Plans", respectively). For purposes of Section 3.28: (i) "Controlled
Group Member" means each trade or business (whether or not incorporated)
which together with the Company would be treated as a "single employer"
within the meaning of Code Section 414(b), (c), (m), or (o) or Section
4001 of ERISA, and includes all "leased employees" attributable to that
single employer under Code Section 414(n) or (o), (ii) "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended, and
(iii) "WARN" means the Worker Adjustment and Retraining Notification Act,
29 U.S.C. Section 2101-2109 (1989).
(b) Delivery of Relevant Documents. Company has
delivered or made available to Purchaser (i) all current and prior plan
documents with amendments for each Employee Plan or, in the case of an
unwritten Employee Plan, a written description thereof, (ii) all actions
taken by the board of directors for the Company adopting the Employee
Plans and any amendments thereto, (iii) all determination letters from the
Internal Revenue Service ("IRS") with respect to any of the Employee
Plans, (iv) all current and prior summary plan descriptions, description
of material modifications, annual reports, and summary annual reports, (v)
all current and prior trust agreements, insurance contracts, and other
documents relating to the funding or payment of benefits under any
Employee Plan, and (vi) any other documents, forms or other instruments
relating to any Employee Plan reasonably requested in writing by
Purchaser.
(c) Operational Compliance. Except as provided on
Schedule 3.28, to the best knowledge of the Company, each Employee Plan
has been maintained, operated, and administered in compliance with its
terms and any related documents or agreements and in compliance with all
Laws.
(d) Qualified for Tax-Exempt Status. To the best
knowledge of the Company, each Employee Plan intended to qualify under
Code Section 401(a) is so qualified (or in the case of the Company's
401(k) is in the process of being so qualified), and has heretofore been
determined by the IRS to be so qualified (or in the case of the Company's
401(k) is in the process of being so qualified), and, to the best
knowledge of the Company, each trust maintained in connection with each
such plan is tax-exempt under Code Section 501(a), and has heretofore been
determined by the IRS to be exempt (or in the case of the Company's 401(k)
is in the process of being so determined), and nothing has occurred since
the date of any such determination that could reasonably be expected to
give the IRS grounds to revoke such determination.
(e) All Contributions Deductible. To the best knowledge
of the Company, all contributions, transfers, and payments made by or on
behalf of the Company in respect of any Employee Plan, other than
transfers incident to an incentive stock option plan within the meaning of
Code Section 422A, have been or are fully deductible under the Code.
(f) [Omitted]
(g) No Risk of Assessments or Claims. Except as set
forth on Schedule 3.28, to the best knowledge of the Company, there is no
pending or threatened assessment, complaint, claim (other than a routine
claim for benefits), proceeding, audit, or investigation of any kind in or
before any Governmental Authority with respect to any Employee Plan, nor
is there any basis for one.
(h) No Prohibited Transactions. No "prohibited
transaction" within the meaning of ERISA Sections 406 or 407 or Code
Section 4975 to which a statutory, class or individual exemption does not
apply, nor any breach of a duty imposed by Title I of ERISA, has occurred
with respect to any Employee Plan, nor is any request pending at, or
contemplated to be filed with, the Department of Labor for an exemption
from, or an advisory opinion with respect to, any such matter.
(i) Insurance Premiums Paid/Insurer Solvency. To the
best knowledge of the Company, any insurance premium with respect to any
Employee Plan and any premium imposed on the Company or Controlled Group
Member under ERISA Section 4007 that is required or payable through the
Closing Date will have been paid, accrued, and booked on or before the
Closing Date, and, with respect to any insurance policy related to any
Employee Plan, there is no currently determinable liability of the Company
in the nature of a retroactive rate adjustment, loss sharing arrangement,
or other actual or contingent liability, nor would there be any such
liability if such insurance policy was terminated on the Closing Date. To
the best knowledge of the Company, no insurance company issuing any such
policy is in receivership, conservatorship, liquidation or similar
proceeding and, to the best knowledge of the Company, no such proceedings
with respect to any insurer are imminent.
(j) No Payments Due. All benefits, expenses, and other
amounts due and payable under any Employee Plan, and all contributions,
transfers, or payments required to be made to any Employee Plan, have been
timely paid or made, accrued, and booked.
(k) No Liability under Prior Plans or Foreign Plans.
With respect to any "pension plans," within the meaning of Section 3(2) of
ERISA, maintained or contributed to, currently or in the past, by the
Company or any Controlled Group Member, or to which the Company or a
Controlled Group Member has or has had an obligation to contribute,
neither the Company nor Shareholders have any liability for or in
connection with the funding, termination or reorganization of, or the
withdrawal of the Company or a Controlled Group Member from, any such
pension plan and no Employee Plan is established and maintained outside
the United States.
(l) Compliance with COBRA. With respect to each group
health plan that is benefiting any current or former employee of the
Company or a Controlled Group member, the Company and each Controlled
Group Member has complied with the continuation coverage requirements of
Code Section 4980B and Part 6 of Title I of ERISA.
(m) No Retiree Liability. No Employee Plan provides
benefits, including, without limitation, death or medical benefits, beyond
termination of service or retirement other than (i) coverage mandated by
law, (ii) death or retirement benefits under any Employee Plan qualified
under Code Section 401(a), or (iii) deferred compensation benefits to the
extent reflected on the books of the Company.
(n) Bonding of Plan Officials. Each "fiduciary" and
"plan official" as defined in ERISA Section 412 of each Employee Plan is
bonded to the extent required by ERISA Section 412.
(o) No Leased Employees. There are no leased employees
within the meaning of Code Section 414(n) or (o), or the regulations
thereunder, who perform services for the Company or a Controlled Group
Member.
(p) No Indemnification Agreements. Neither a Controlled
Group Member, the Company, the Shareholder nor any Employee Plan has
agreed to guarantee or indemnify the performance of any Person with
respect to any Employee Plan.
(q) No Golden Parachutes. Any Employee Plan that
provides for "parachute payments" within the meaning of Code Section 280G
provides that "excess parachute payments" will not be paid thereunder.
(r) No Future Undisclosed Obligations. Shareholders and
the Company have taken no action directly or indirectly to obligate the
Company to institute any plan, program, arrangement or agreement for the
benefit of employees or former employees of the Company other than the
Employee Plans, nor have the Shareholders or the Company taken any action
directly or indirectly to obligate the Company to amend any Employee Plan,
other than amendments required by law or which are solely technical in
nature.
(s) No Severance Plan. Except as set forth on
Schedule 3.28, there is no Employee Plan under which any employee of the
Company is entitled to claim or receive severance pay or benefits.
(t) Compliance with WARN. Within 90 calendar days prior
to the date hereof, the Company has not had a layoff of any of its
employees or taken any other action which constitutes a plant closing or
mass layoff under WARN. The Company has complied in all respects with the
applicable provisions of WARN.
(u) No Termination of Overfunded Plan. Since
December 31, 1988, no Employee Plan has been terminated with assets in
excess of the amount required in order to satisfy all liabilities to plan
participants and beneficiaries.
(v) Medicare Secondary Payor Compliance. Each Employee
Plan that is subject to Section 1862(b)(1) of the Social Security Act has
been operated in compliance with the secondary payor requirements of
Section 1862(b)(1) of such Act.
(w) No Welfare Plan Funding Vehicle. No Employee Plan
is or at any time was funded through a "welfare benefit fund" as defined
in Section 419(e) of the Code, and no benefits under any Employee Plan are
or at any time have been provided through a voluntary employees'
beneficiary association (within the meaning of Section 501(c)(9) of the
Code or a supplemental unemployment benefit plan (within the meaning of
Section 501(c)(17) of the Code).
(x) No Payment or Obligation Triggered by Transaction.
The execution and performance of this Agreement will not (i) constitute a
stated triggering event under any Employee Plan that will result in any
payment (whether of severance pay or otherwise) becoming due from
Shareholders or Company to any officer, employee, or former employee (or
dependents of such employee), or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due to any employee,
officer or director of Company.
(y) No Defined Benefit/Title IV Liability. Neither the
Company nor a Controlled Group Member has, or has had within the past six
years, an obligation to contribute to a (i) "defined benefit plan" as
defined in Section 3(35) of ERISA, (ii) a pension plan subject to the
funding standards of Section 302 of ERISA or Section 412 of the Code,
(iii) a "multiemployer plan" as defined in Section 3(37) of ERISA or
Section 414(f) of the Code, or a "multiple employer plan" within the
meaning of Section 210(a) of ERISA or Section 413(c) of the Code.
3.29 Disclosure. To the best knowledge of the Company,
neither the Company nor Shareholders have withheld from Purchaser any
material facts relating to the assets, liabilities, business, operations,
condition (financial or otherwise) or prospects of the Company that would
be required to be disclosed as an exception to the representations and
warranties set forth herein. To the best knowledge of the Company, no
representation, warranty or statement made on behalf of the Company or
Shareholders (i) in this Agreement, or (ii) in the Exhibits or Schedules
hereto contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained therein, in
light of circumstances in which they were or are made, not false or
misleading.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser jointly and severally hereby
represent and warrant to Shareholders and the Company that:
4.1 Investment Intent. The Common Shares are being purchased
for Purchaser's own account for investment and not with the view to, or
for resale in connection with, any distribution or public offering thereof
within the meaning of the Securities Act.
4.2 Validity of Agreement. This Agreement constitutes the
legal, valid and binding obligation of Parent and Purchaser, enforceable
against Parent and Purchaser in accordance with its terms. Parent and
Purchaser have the corporate power and authority to enter into this
Agreement and to undertake and perform fully the transactions contemplated
hereby. All necessary corporate action has been taken by and on behalf of
Parent and Purchaser with respect to the authorization, execution,
delivery and performance of this Agreement.
4.3 No Breach. Neither the execution and delivery of this
Agreement by Parent and Purchaser nor the performance of their obligations
hereunder will (a) violate, conflict with or result in a breach of any Law
of any Governmental Authority or Order or the Articles of Incorporation or
Bylaws of Parent or Purchaser, (b) violate, conflict with or result in a
breach or termination of, or otherwise give any contracting party
additional rights or compensation under, or the right to terminate or
accelerate, or constitute (with notice or lapse of time, or both) a
default under the terms of, any note, deed, lease, instrument, security
agreement, mortgage, commitment, contract, agreement, license or other
instrument or oral understanding to which Parent or Purchaser is a party
or by which any of the assets or properties of Parent or Purchaser are
bound, or (c) result in the creation or imposition of any Lien with
respect to, or otherwise have an adverse effect upon, any of the
properties or assets of Parent or Purchaser.
4.4 Financing. Purchaser has adequate financing in place to
consummate the purchase of the Common Shares.
4.5 Subsidiary Status. Purchaser is a wholly owned
subsidiary of Parent.
4.6 Parent Status. Parent has outstanding securities which
are registered under Section 12 of the Securities Exchange Act of 1934.
4.7 No Brokers', Finders', or Insider Fees. No Person has
or, immediately following the consummation of the transactions
contemplated hereby, will have, as a result of any act or omission of
Purchaser, any right, interest or valid claim against the Company or
Shareholders for any commission, fee or other compensation as a finder or
broker in connection with the transactions contemplated by this Agreement.
4.8 Consents. On or prior to the Closing, Parent and
Purchaser shall have received all approvals from all Governmental
Authorities, except for those which if not obtained would not have a
Material Adverse Effect (as applicable to Parent and Purchaser), including
compliance with the filing requirements of and waiting period under the
HSR Act and all consents and approvals of third parties as may be required
in connection with the execution, delivery and performance by Parent and
Purchaser of this Agreement or the consummation of the transactions
contemplated thereby or hereby, except for those which if not obtained
would not have a Material Adverse Effect. Except for such of the
following which if not obtained would not have a Material Adverse Effect,
no consent, approval or authorization of any Person is required in
connection with the execution, delivery and performance by Parent and
Purchaser of this Agreement or the consummation of the transactions
contemplated hereby.
4.9 Disclosure. To the best knowledge of Parent and
Purchaser, neither Parent nor Purchaser have withheld from the Company or
the Shareholders any material facts relating to the assets, liabilities,
business, operations, condition (financial or otherwise) or prospects of
Parent or Purchaser that would be required to be disclosed as an exception
to the representations and warranties set forth herein. To the best
knowledge of Parent and Purchaser, no representations, warranty or
statement made on behalf of Parent or Purchaser (i) in this Agreement, or
(ii) in the Exhibits or Schedules hereto contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements contained therein, in light of circumstances in which they were
or are made, not false or misleading.
SECTION 5. CERTAIN COVENANTS.
5.1 Special Pre-Closing Transactions. Effective immediately
prior to Closing, the Company and the Shareholders shall have consummated
the Special pre-Closing Transactions described in Schedule 5.1.
5.2 Closing Date Publicity. Parent, Purchaser, the Company
and Shareholders will cooperate with each other with respect to any
Closing Date public disclosures and cooperate with respect to any Closing
Date disclosures to the Company's distributors, suppliers and customers.
5.3 Satisfaction of Non-Operating Liabilities. Shareholders
at or prior to the Closing shall cause the Company to satisfy in full
(such that the Company will have no liability) any liabilities that would
be properly reflected on the Closing Date Balance Sheet other than the
Normal Operating Liabilities.
SECTION 6. POST-CLOSING COVENANTS.
6.1 General. If at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties shall take such further action (including
the execution and delivery of such further instruments and documents) as
any other party may reasonably request.
6.2 Litigation Support. In the event and for so long as any
party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand of
third parties after the Closing in connection with (i) any transaction
contemplated by this Agreement or (ii) any fact, situation, circumstances,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing
involving the Company, each of the other parties shall cooperate in the
defense or contest, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the defense or contest, all at the sole cost and expense
of the contesting or defending party (unless the contesting or defending
party is entitled to indemnification therefor under Section 9).
6.3 Transition. Shareholders shall not take any action that
is designed or intended to have the effect of discouraging any actual or
potential lessor, licensor, customer, supplier, or other business
associate of the Company from maintaining the same business relationships
with the Company after the Closing as it maintained with the Company prior
to the Closing.
6.4 Tax Matters.
(a) Section 338(h)(10) Election.
(i) Each Shareholder and Purchaser will make
an election under Code Section 338(h)(10) (and any corresponding
provisions of state, local, or foreign law) (collectively, a "Section
338(h)(10) Election") with respect to the purchase and sale of the Common
Shares. Prior to Closing, Purchaser and Shareholders shall agree on the
form and content (including all required Purchase Price allocations) of
the Section 338(h)(10) Election, which shall be reflected on Schedule 6.4.
Purchaser will be responsible for preparing and timely filing any forms
used to make a Section 338(h)(10) Election with Shareholders having the
right to review such forms and consent to the manner in which such forms
are prepared, such consent not to be unreasonably withheld. Such forms
shall be filed promptly following the final determination of the Purchase
Price, assumed liabilities and other relevant items pursuant to Section
6.4(a)(iv) hereof. Each Shareholder shall sign promptly all federal and
state forms used to make a Section 338(h)(10) Election requiring their
signature, which forms shall be filed by Purchaser on behalf of each
Shareholder as described in the preceding sentence.
(ii) Shareholders shall pay any federal, state,
local or foreign income tax and franchise tax attributable to the making
of a Section 338(h)(10) Election and shall, subject to the provisions of
Section 1.3(e), indemnify Purchaser and the Company against any such
federal, state, local or foreign income tax and franchise tax.
(iii) Promptly after the Closing Date, each
Shareholder shall provide to Purchaser any information (including Tax
elections made by or on behalf of the Company) reasonably requested by
Purchaser in connection with its filing of a Section 338(h)(10) Election.
(iv) The Purchase Price, assumed liabilities
and other relevant items shall be allocated among the Company's assets as
determined by Purchaser and the Company prior to Closing. Purchaser and
Shareholders shall file any Tax Returns and any other governmental filings
on a basis consistent with such allocation of fair market value.
(b) Tax Periods Ending on or Before the Closing Date.
The Purchaser shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for the Company for all periods ending on or
prior to the Closing Date or for which the date of measurement for such
Tax occurs on or prior to the Closing Date which are filed after the
Closing Date, except for the Company's income Tax Returns for such periods
which Shareholders shall prepare and cause to be filed. The Purchaser
shall permit Shareholders to review, comment on and approve (which
approval shall not be unreasonably withheld) each such Tax Return
described in the preceding sentence prior to filing. Shareholders shall
reimburse Purchaser for income and franchise Taxes of the Company with
respect to such periods within fifteen (15) days prior to any payment by
Purchaser or the Company of such Taxes.
(c) Tax Periods Beginning Before and Ending After the
Closing Date. Purchaser shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company for Tax periods which
begin before the Closing Date and end after the Closing Date ("Straddle
Tax Returns"). Purchaser shall permit Shareholders to review, comment on
and approve (which such approval shall not be unreasonably withheld) each
of the Straddle Tax Returns prior to filing.
(d) Cooperation on Tax Matters.
(i) Purchaser, the Company and Shareholders
shall cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns pursuant to this
Section 6.4 and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include promptly providing the other party
a copy of any correspondence or notice from any tax authority with respect
to Taxes for which such other party may have an interest or
responsibility, signing any Tax Return, amended Tax Returns, claims or
other documents necessary to settle any Tax controversy or refund claim
for any tax period ending on or prior to the Closing Date, the retention
and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such Tax Return
preparation and filing, audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Company and Shareholders agree to retain all books and records with
respect to Tax matters pertinent to the Company relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Purchaser or
Shareholders, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any
taxing authority; provided that for taxable periods which include any date
in 1994 or 1995, Shareholders shall retain all Tax Returns and related
work papers for at least ten years after the date such Tax Returns are
filed.
(ii) Purchaser shall have the right to
participate in any Tax proceeding related to a pre-Closing Tax year of the
Company which may have the effect of increasing Purchaser's or the
Company's Tax liability for any Tax period ending after the Closing, and
Shareholders shall not settle or compromise any such proceeding without
Purchaser's prior written consent; provided, however, Purchaser hereby
agrees to consent if Shareholders fully indemnify Purchaser for any
increase in Purchaser's or the Company's Tax. Purchaser shall promptly
notify and furnish copies to Shareholders of any notice received after the
Closing involving any Tax matter relating to any period prior to the
Closing.
(iii) Shareholders shall have the right to
participate in any Tax proceeding related to a post-Closing Tax year of
the Company which may have the effect of increasing Shareholders' Tax
liability for any Tax period ending on or before the Closing, and
Purchaser shall not settle or compromise any such proceeding without
Shareholders' prior written consent; provided, however, Shareholders
hereby agree to consent if Purchaser fully indemnifies Shareholders for
any increase in Shareholders' Tax.
(iv) Purchaser and Shareholders further agree,
upon request, to use their best efforts to obtain any certificate or other
document from any Governmental Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(v) Without the prior written consent (which
shall not be unreasonably withheld) of Purchaser, neither Shareholders nor
the Company shall make or change any election, change an annual accounting
period, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment relating to the Company, surrender any
right to claim a refund of Taxes, or take any other similar action, or
omit to take any action relating to the filing of any Tax Return or the
payment of any Tax, if such action or omission for Tax periods ending on
or prior to the Closing Date would have the effect of increasing the Tax
liability or decreasing any Tax asset of the Company, Purchaser or any
Affiliate of Purchaser, with respect to any Tax period beginning after the
Closing Date. Shareholders shall notify Purchaser of any consent to any
extension or waiver of the limitation period applicable to any Tax claim
or assessment relating to the Company within 15 days of making such
consent or waiver.
(e) Tax Sharing Agreements. All tax-sharing agreements
or similar agreements with respect to or involving the Company shall be
terminated as of the Closing Date and, after the Closing Date, the Company
shall not be bound thereby nor shall it have any liability thereunder.
SECTION 7. [INTENTIONALLY OMITTED]
SECTION 8. [INTENTIONALLY OMITTED]
SECTION 9. INDEMNIFICATION AND SURVIVAL.
9.1 General Indemnity.
(a) Subject to the provisions of this Section 9, from
and after the Closing, Shareholders jointly and severally hereby agree to
indemnify and hold harmless Purchaser, Purchaser's Affiliates, the
Company, and its and their officers, directors, employees, agents and
representatives and the successors and assigns of each of them, from,
against and in respect of any and all Losses (as hereinafter defined)
resulting from, relating to or arising out of (i) any breach of any
representation, warranty, covenant or agreement of Shareholders or the
Company contained herein and (ii) any and all claims, penalties, or
assessments that are asserted by (A) either the IRS or the Department of
Labor with respect to the failure by the Company to timely file any annual
returns required by the Code or ERISA with respect to periods required to
be filed prior to Closing and (B) the FTB or IRS with respect to any Tax
resulting from the disallowance of any deduction for compensation paid by
the Company for periods up to and including the Closing Date.
(b) Subject to the provisions of this Section 9, from
and after the Closing, Parent and Purchaser jointly and severally hereby
agree to indemnify and hold harmless Shareholders, Shareholders'
Affiliates (other than the Company or its Affiliates) and its and their
officers, directors, employees, agents and representatives and the
successors and assigns of each of them, from, against and in respect of
any and all Losses resulting from, relating to or arising out of (i) any
breach of any representation, warranty, covenant or agreement of Parent or
Purchaser contained herein and (ii) other obligations, actions or
omissions by Parent, Purchaser or their Affiliates (other than Losses with
respect to which the Shareholders are required to indemnify an Indemnified
Party pursuant to Section 9.1(a)).
(c) The party or parties being indemnified are referred
to herein as the "Indemnified Party" and the indemnifying party is
referred to herein as the "Indemnifying Party". "Loss" shall mean any and
all liabilities, damages, deficiencies, costs, claims, judgments, amounts
paid in settlement, interests, penalties, assessments, out-of-pocket
expenses (including reasonable attorneys' and auditors' fees and
disbursements).
9.2 Indemnification Procedure.
(a) The Indemnified Party shall use commercially
reasonable efforts to minimize any Losses in respect of which indemnity
may be sought hereunder; provided, however, that this sentence shall not
be construed to release the Indemnifying Party from liability for the
breach of any representation, warranty, covenant or agreement contained in
this Agreement or to waive the rights of an Indemnified Party to
indemnification for the breach of any representation, warranty, covenant
or agreement contained in this Agreement. The Indemnified Party shall
give prompt written notice ("Indemnification Notice") to the Indemnifying
Party after discovery by the Indemnified Party of any matters giving rise
to a claim for indemnification or reimbursement under this Agreement;
provided, however, that if no prejudice results from a failure to deliver
prompt notice of a claim, no penalty shall be exacted therefor and the
Indemnified Party shall continue to be entitled to indemnification.
(b) In the event that the Indemnifying Party advises the
Indemnified Party that the Indemnifying Party will contest a claim for
indemnification hereunder, or fails, within thirty (30) days of receipt of
any Indemnification Notice to notify, in writing, the Indemnified Party of
its election to defend, settle or compromise, at its sole cost and
expense, any action or claim (or discontinues its defense at any time
after it commences such defense), then the Indemnified Party may, at its
option, defend, settle or otherwise compromise or pay such action or
claim. In any event, unless and until the Indemnifying Party elects in
writing to assume and does so assume the defense of any such claim or
action, the Indemnified Party's costs and expenses arising out of the
defense, settlement or compromise of any such action or claim shall be
Losses subject to indemnification hereunder.
(c) The Indemnified Party shall cooperate fully with the
Indemnifying Party in connection with any negotiation or defense of any
such action or claim by the Indemnifying Party and shall furnish to the
Indemnifying Party all information reasonably available to the
Indemnifying Party which relates to such action or claim. The
Indemnifying Party, if the defending party, shall keep the Indemnified
Party fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. If the Indemnifying Party
elects to defend any such action or claim, then the Indemnified Party
shall be entitled to participate in such defense with counsel of its
choice at its sole cost and expense. If the Indemnifying Party does not
assume the defense, the Indemnified Party shall use reasonable efforts to
keep the Indemnifying Party apprised at all times as to the status of the
defense. Payment of indemnification amounts hereunder shall be made to
the Person specified by the Indemnified Party. Anything in this Section 9
to the contrary notwithstanding, no Person shall, without each of the
parties' prior written consent, settle or compromise any claim or consent
to entry of any judgment in respect thereof which imposes any future
obligation on any other party or which does not include, as an
unconditional term thereof, the giving by the claimant or the plaintiff to
the other parties, a release from all liability in respect of such claim
(it being agreed that if the Indemnified Party rejects a settlement that
fully satisfies the requirements hereof, the Indemnifying Party shall not
be obligated to indemnify the Indemnified Party in respect of such claim
in excess of the amount of such rejected settlement).
9.3 Limitations on Indemnification Obligations. The
indemnification obligations of Shareholders under this Agreement
(excluding indemnification obligations for Losses resulting from, relating
to or arising out of the breach of the representations and warranties set
forth in Section 3.4 or Section 9.1(a)(ii), as to which no minimum or
maximum limitations shall apply) shall not apply to any Loss being
indemnified thereunder (i) until the aggregate of all Losses of the
Indemnified Parties shall exceed $1,650,000, and then only to the extent
of such excess or (ii) to the extent the aggregate of all Losses for which
the Shareholders have made payment to or for the benefit of Parent,
Purchaser or their Affiliates or related Indemnified Parties, exceeds
$75,000,000.
9.4 Survival of Representations and Warranties. All of the
representations and warranties of Shareholders, the Company and Purchaser
contained in Sections 3 and 4 above shall survive for the periods set
forth on Schedule 9.4.
SECTION 10. REMEDIES.
10.1 Exclusive Remedies. The provisions of Section 9 of this
Agreement set forth the exclusive remedies of the parties for any and all
breaches of this Agreement.
SECTION 11. MISCELLANEOUS.
11.1 Waivers and Amendments. This Agreement may be amended or
modified only by an instrument in writing duly executed by the parties to
this Agreement.
11.2 Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly given
on the date of service if personally served or if mailed, on the third day
after it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth below:
If to Parent or Purchaser:
Bike Corp.
142 Doty Street
Fond du Lac, Wisconsin 54936
Attention: Douglas E. Barnett
With a copy to:
Jones, Day, Reavis & Pogue
555 West Fifth Street, Suite 4600
Los Angeles, California 90013
Attention: Erich Spangenberg
If to the Company:
Fadal Engineering Company Inc.
20701 Plummer Street
Chatsworth, California 91311
Attention: David E. de Caussin and
Larry F. de Caussin
With a copy to:
Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley Maron
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, Suite 2400
Los Angeles, CA 90017-5704
Attention: David S. Kyman
If to Shareholders:
David E. de Caussin
19227 Mayall Street
Northridge, CA 91324
Larry F. de Caussin
22335 N. Summit Ridge
Chatsworth, CA 91311
With a copy to:
Maron & Sandler
844 Moraga Drive
Los Angeles, CA 90049
Attention: Stanley Maron
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, Suite 2400
Los Angeles, CA 90017-5704
Attention: David S. Kyman
11.3 Fees and Expenses. Each party shall bear their own costs
and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated thereby.
11.4 Successors and Assigns. No party hereto shall assign any
rights or delegate any duties hereunder without the prior written consent
of the other parties hereto. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the parties.
11.5 Choice of Law. This Agreement shall be governed by and
construed and interpreted in accordance with laws of the State of
California regardless of the laws that might otherwise govern under
principles of conflict of laws applicable thereto.
11.6 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
11.7 Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, to the extent
they have related in any way to the subject matter hereof.
Notwithstanding the foregoing, the Confidentiality Agreement executed on
October 31, 1994 shall survive through the Closing.
11.8 Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement. Any reference
to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word "including" shall mean including
without limitation.
11.9 Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
11.10 Headings and Recitals. The section headings and
recitals contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this
Agreement.
11.11 Counterparts. This Agreement may be executed
concurrently in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
11.12 Forum Selection and Consent to Jurisdiction. Any
legal action arising out of or relating to this Agreement or the
transactions described herein shall only be brought and litigated in the
courts of the State of California in Los Angeles County or in the United
States District Court for the Central District of California. Each of
Parent, Purchaser and Shareholders irrevocably submits to the exclusive
jurisdiction of (a) the courts of the State of California in Los Angeles
County, and (b) the United States District Court for the Central District
of California, for the purposes of any suit, action or other proceeding
arising out of this Agreement or any transaction contemplated hereby.
Parent and Purchaser hereby irrevocably designate, appoint and empower CT
Corporation System, 818 West Seventh Street, Los Angeles, California
90017, and Shareholders hereby irrevocably designate, appoint and empower
Stanley Maron, Maron & Sandler, 844 Moraga Drive, Los Angeles, California
90049, in each case as its true and lawful agent and attorney-in-fact in
its name, place and stead to receive and accept on its behalf service of
process in any action, suit or proceeding in California with respect to
any matters as to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence.
11.13 Certain Definitions. For purposes of this
Agreement:
"Affiliate" shall mean any Person which directly or indirectly
controls, is controlled by, or is under common control with such Person.
A Person shall be deemed to control another Person if such Person owns 10%
or more of any class of stock of the "controlled" Person or possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the controlled Person, whether through
ownership of stock or partnership interests, by contract, or otherwise.
"Dollars" shall mean United States Dollars.
"Best Knowledge of the Company" shall mean (i) the actual
knowledge of any of the Persons identified on Schedule 11.13 ("Knowledge
Persons"), (ii) information made available to any such Knowledge Persons
as a result of making inquiry of Knowledge Persons and the Company's
advisors with respect to matters on which they have been specifically
engaged in connection with the subject matter and specific content of the
representation and warranty and (iii) the information that would have been
made available to any such Person had he made such inquiry.
"Incremental Tax" means the sum of: (i) the increase in
federal and California income taxes resulting from the recognized income
and gain on all assets of the Company taxed as ordinary income rather than
as capital gain for federal income tax purposes resulting from the
Section 338(h)(10) election, if any; multiplied by the "Gross Up Factor"
which is 1 divided by (1 minus the combined marginal income tax rate of
the Shareholders for federal and California income taxes taking into
account the deduction, if any, the Shareholders would receive against
their federal income taxes for California income taxes paid after taking
into account all factors, including, but not limited to, the alternative
minimum tax and any adjustments in computing the alternative minimum tax);
(ii) the amount of the income tax payable by the Company to the State of
California pursuant to California Revenue and Tax Code Section 23802(b)(1)
as a result of the Section 338(h)(10) election taking into account the
increased amount paid to the Shareholders pursuant to subsections (i) and
(iii) hereof and the increase caused by this subsection (ii), and
(a) assuming no compensation or other tax deductible payments are made
with respect to the Purchase Price and the Incremental Tax and, (b) taking
into account the federal tax savings of the Shareholders, if any,
attributable to the deductibility for federal income tax purposes of such
California tax against the income of the Company which flows through to
the Shareholders; multiplied by the "Gross Up Factor" as defined above;
(iii) the increase in California income taxes payable by the Shareholders
attributable to the amount determined in subsection (ii) multiplied by the
"California Gross Up Factor" which is 1 divided by (1 minus the marginal
income tax rate of the Shareholders for California income taxes); and
(iv) the difference between (A) the total amount of federal and California
income tax paid by the Company and/or the Shareholders as a result of the
Section 338(h)(10) election other than those items already taken into
account pursuant to (i), (ii) and (iii) immediately above, and (B) the
total amount of federal and California income tax which the Shareholders
would have incurred if the Shareholders had sold the Common Stock pursuant
to this Agreement for the Purchase Price and no Section 338(h)(10)
election had been made; multiplied by the "Gross Up Factor" as defined
above.
"Special Pre-Closing Transactions" shall mean the transactions
described in reasonable detail on Schedule 5.1 which Shareholders will
cause the Company to effect at or prior to the Closing.
"Subsidiaries" shall mean any Person of which at least a
majority of the outstanding shares or other equity interests having
ordinary voting power for the election of directors or comparable managers
of such Person, whether or not at the time the shares of any other class
or classes or other equity interests of such Person shall have or might
have voting power by reason of the happening of any contingency, are at
the time owned, directly or indirectly, by the Company, by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
"Tax" shall mean any federal, state, local or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, real property gains, registration, value added,
excise, natural resources, severance, stamp, occupation, premium, windfall
profit, customs, duties, real property, personal property, capital stock,
social security, unemployment, disability, payroll, license, employee or
other withholding, or other tax, of any kind whatsoever, including any
interest, penalties or additions to tax or additional amounts in respect
of the foregoing; the foregoing shall include any transferee or secondary
liability for a Tax and any liability assumed by agreement or arising as a
result of being (or ceasing to be) a member of any Affiliated Group (or
being included (or required to be included) in any Tax Return relating
thereto).
"Tax Return" shall mean any return, declaration, report, claim
for refunds, information return or other document (including any related
or supporting schedule, statement or information) filed or required to be
filed in connection with the determination, assessment or collection of
any Tax of any party or the administration of any laws, regulations or
administrative requirements relating to any Tax.
* * *
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the day and year first above written.
BIKE CORP.
By: /s/ Douglas E. Barnett
Name: Douglas E. Barnett
Title: President
FADAL ENGINEERING COMPANY INC.
By: /s/ David E. de Caussin
Name: David E. de Caussin
Title: President
GIDDINGS & LEWIS, INC.
By: /s/ Joseph R. Coppola
Name: Joseph R. Coppola
Title: Chairman
DAVID AND MYRTLE DE CAUSSIN FAMILY
TRUST - 1988
/s/ David E. de Caussin
David E. de Caussin, Trustee
/s/ Myrtle Rosalie de Caussin
Myrtle Rosalie de Caussin, Trustee
LARRY AND ELSIE DE CAUSSIN FAMILY
TRUST - 1988
/s/ Larry F. de Caussin
Larry F. de Caussin, Trustee
/s/ Elsie Margaret de Caussin
Elsie Margaret de Caussin, Trustee