EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
between
P&F INDUSTRIES, INC.
and
MARK C. WELDON
relating to the purchase and sale
of
NATIONWIDE INDUSTRIES, INC.
Dated as of May 3, 2002
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TABLE OF CONTENTS
Page
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Recitals
SECTION 1. DEFINITIONS........................................................1
SECTION 2. PURCHASE AND SALE OF COMPANY SHARES................................8
SECTION 3. CONTINGENT PAYMENT................................................12
SECTION 4. CLOSING...........................................................13
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER......................13
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER.......................28
SECTION 7. COVENANTS OF THE SELLER...........................................29
SECTION 8. COVENANTS OF THE BUYER............................................33
SECTION 9. INDEMNIFICATION...................................................33
SECTION 10. CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLER.................36
SECTION 11. CONDITIONS PRECEDENT TO PERFORMANCE BY THE BUYER..................37
SECTION 12. TERMINATION.......................................................39
SECTION 13. TAX MATTERS.......................................................40
SECTION 14. MISCELLANEOUS.....................................................41
INDEX TO SCHEDULES
2.1 Purchase Price Calculation
2.2(k) Illustrative Purchase Price Adjustments
5.2 Qualification
5.4 Consents, Waivers, Authorizations and Approvals
5.7 Financial Statements
5.8 Material Changes or Events
5.9 Tax Matter Exceptions
5.10 Undisclosed Liabilities
5.12 Leases
5.13(b) Liens on Assets
5.13(c) Equipment and Machinery
5.14(a) Intellectual Property
5.14(b) Intellectual Property Agreements
5.14(c) Intangible Assets
5.15 Licenses, Permits and Governmental Approvals
5.16 Exceptions to Compliance with Law
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5.17 Litigation
5.18 Contracts
5.20 (a) Employee Plans
5.20 (g) Post-Retirement Benefits
5.21 Customers, Suppliers and Competitors
5.22 Insurance
5.23 Transactions with Directors, Officers and Affiliates
5.26 (a) Employment Agreements or Contracts
5.26 (b) Exceptions to Compliance with Employment Laws
5.26(c) List of Company Employees
10.3 Consents and Approvals
11.13 Guaranteed Indebtedness
13.4 Tax Sharing Agreements
INDEX TO EXHIBITS
Exhibit A Form of Company Facility Purchase Agreement
Exhibit B Form of Employment Agreement
Exhibit C Form of Escrow Agreement
Exhibit D Form of Opinion of Counsel to the Buyer
Exhibit E Form of Opinion of Counsel to the Seller
Exhibit F Form of Releases by Directors and Officers
Exhibit G Form of Estoppel Letter
Exhibit H Form of Letter Agreement
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STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT, dated as of May 3, 2002, by and between Mark C.
Weldon (the "Seller") and P&F Industries, Inc., a Delaware corporation (the
"Buyer"), in connection with the purchase and sale of the outstanding shares of
capital stock of Nationwide Industries, Inc., a Florida corporation (the
"Company").
W I T N E S S E T H:
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WHEREAS, the Company is engaged in the business of importing and
manufacturing door, window and fencing hardware; and
WHEREAS, the Seller owns all of the issued and outstanding shares (the
"Company Shares") of the Company's Common Stock, $1.00 par value per share (the
"Company Common Stock");
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"Adjusted 2001 Cost of Goods Sold" shall mean, with respect to each valid
part number included in the inventories of the Company as of December 31, 2001,
the sum of (x) the cost of goods sold for such part number as reflected in the
unaudited Financial Statements referred to in Section 5.7 and (y) the product of
(A) the cost of goods sold for such part number as reflected in the unaudited
Financial Statements referred to in Section 5.7 and (B) the Usage Percentage for
such part number determined pursuant to Section 2.2(f);
"Adjusted 2001 EBIT" shall mean EBIT for the 2001 Fiscal Year reduced by
the aggregate increase in the cost of goods sold (as reflected in the unaudited
Financial Statements referred to in Section 5.7) as reflected in Adjusted 2001
Cost of Goods Sold;
"Adjusted EBIT Certificate" -- See Section 2.2(g);
"Affiliate" shall mean any Person, directly or indirectly, controlling,
controlled by or under common control with such Person;
"Base Year EBIT" -- See Section 3(a);
"Business Day" shall mean a day other than a Saturday, Sunday or other day
on which banks in the States of New York or Florida are not required or
authorized to close;
"Buyer" -- See Preamble hereto;
"Buyer Indemnitees" -- See Section 9.2;
"Closing" -- See Section 4;
"Closing Cash Portion" -- See Section 2.1;
"Closing Date" -- See Section 4;
"Closing Date Accounts Payable" shall mean the amount of the Company's
accounts payable on the Closing Date as reflected in the Closing Date Financial
Statements;
"Closing Date Accounts Receivable" shall mean the amount of the Company's
accounts receivable on the Closing Date as reflected in the Closing Date
Financial Statements;
"Closing Date Financial Statements" -- See Section 2.2(a);
"Closing Date Inventory" shall mean the amount of the Company's inventory
on the Closing Date as reflected in the Closing Date Financial Statements;
"Closing Escrow Portion" shall mean the aggregate amount of $3,025,000
deposited with the Escrow Agent on the Closing Date pursuant to Section 2.1 of
this Agreement, which Closing Escrow Portion consists of the Cost of Goods Sold
Escrow, the General Escrow, the Real Estate Escrow and the Tax Escrow;
"Closing Indebtedness" shall mean the amount of the Company's Indebtedness
outstanding on the Closing Date as reflected in the Closing Date Financial
Statements;
"Closing Purchase Price" -- See Section 2.1;
"Code" -- See Section 5.9(a);
"Company" -- See Recitals hereto;
"Company Common Stock" -- See Recitals hereto;
"Company Facility" shall mean the Company's manufacturing facility located
at 10333 Windhorst Road, Tampa, Florida;
"Company Facility Purchase Agreement" shall mean the Contract for Sale and
Purchase, dated as of May 1, 2002, between Countrywide Hardware, Inc., an
Affiliate of the Buyer, and W.I. Commercial Properties, Inc., relating to the
purchase of the Company Facility, in the Form of Exhibit A hereto;
"Company Shares" -- See Recitals hereto;
"Contingent Payment" -- See Section 3(a);
"Contingent Payment Escrow" -- See Section 9.2(b);
"Contingent Payment Financial Statements" -- See Section 3(b);
"Contracts" shall mean, collectively, the Leases, Purchase Orders, Sales
Orders and Other Contracts, including, without limitation, those described in
Section 5.18 hereto;
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"Controlled Group" -- See Section 5.20(d);
"Cost of Goods Sold Adjustment" shall mean the adjustment to the Purchase
Price contemplated by Section 2.2(j);
"Cost of Goods Sold Escrow" shall mean the $1,250,000 deposited with the
Escrow Agent on the Closing Date pursuant to Section 2.1 of this Agreement in
connection with the Cost of Goods Sold Adjustment;
"December 31, 2001 Balance Sheet" shall mean the unaudited balance sheet of
the Company as of December 31, 2001;
"EBIT" shall mean the Company's earnings before interest and income taxes,
as determined in accordance with GAAP, on the basis of the Company's financial
statements, increased by $100,000 for each Twelve-Month Period commencing with
the Twelve-Month Period ending on the first anniversary of the Closing Date (and
prorated for any portion of a Twelve-Month Period) that the Company shall employ
both a Comptroller and a Vice President of Marketing;
"Employment Agreement" shall mean the employment agreement between Mark C.
Weldon and the Company, substantially in the form of Exhibit B hereto;
"Environmental Laws" shall mean any federal, state, or local statute,
regulation, ordinance, order, decree, or other requirement of law (including,
without limitation, common law) relating to protection of human health or
welfare, natural resources or the environment or to the identification,
generation, use, transportation, handling, discharge, emission, treatment,
storage or disposal of any pollutant, contaminant, hazardous or solid waste, or
any hazardous or toxic substance or material. Without limiting the generality of
the foregoing, Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901
et seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq.;
the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et seq.; the Safe Drinking Water Act, 42 U.S.C. 300(f) et
seq.; the Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq.; and the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 5101 et seq.; each as
amended, together with the regulations promulgated thereunder, permits issued
thereunder, and analogous state and local statutes, regulations and ordinances;
"Environmental Permits" -- See Section 5.27(a)(i);
"Equipment and Machinery" shall mean all the equipment, machinery,
furniture, fixtures and improvements, tooling, spare parts, supplies and
vehicles owned, leased or used by the Company;
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended;
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"Escrow Agent" shall mean the financial institution acting as escrow agent
under the Escrow Agreement;
"Escrow Agreement" shall mean the escrow agreement substantially in the
form of Exhibit C hereto;
"Estimated Closing Indebtedness" shall mean an amount equal to $438,822;
"Final Closing Date Accounts Payable" -- See Section 2(c);
"Final Closing Date Accounts Receivable" -- See Section 2(c);
"Final Closing Date Inventory" -- See Section 2(c);
"Final Closing Indebtedness" -- See Section 2(c);
"Final March 31, 2002 Accounts Payable" -- See Section 2.2(c);
"Final March 31, 2002 Accounts Receivable" -- See Section 2.2(c);
"Final March 31, 2002 Inventory" -- See Section 2.2(c);
"Financial Statements" -- See Section 5.7;
"Fiscal Year" shall mean, with respect to the Company, each year ended
December 31;
"481 Adjustment" shall mean the amount specified in that certain agreement
between the Company and the Internal Revenue Service dated April 11, 2002
pursuant to which the Company will restate its opening inventory as of January
1, 2001 to $1,650,000 and report a positive adjustment to gross income of
$1,364,343 in four equal installments during the 2001-2004 taxable years;
"GAAP" shall mean generally accepted accounting principles;
"General Escrow" shall mean the $1,150,000 deposited with the Escrow Agent
on the Closing Date pursuant to Section 2.1 of this Agreement together with the
amount, if any, deposited with the Escrow Agent pursuant to the first sentence
of Section 2.2(d) of this Agreement;
"Governmental Entity" shall mean any federal, state or foreign governmental
or public body, agency or authority;
"Hazardous Substance" -- See Section 5.27(a)(iv);
"Indebtedness" shall mean, with respect to any Person, without duplication:
(i) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind; (ii) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments; (iii) all obligations of
such Person upon which interest charges are customarily paid;
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(iv) all obligations of such Person under conditional sale or other title
retention agreements relating to assets purchased by such Person; (v) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and accrued expenses
arising in the ordinary course of business in accordance with customary trade
terms); (vi) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed by such Person; (vii) all
guarantees by such Person of Indebtedness of others; (viii) all capital lease
obligations of such Person; (ix) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements; and (x) all obligations of
such Person as an account party to reimburse any bank or any other Person in
respect of letters of credit and bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or member; "Indemnitee" -- See Section
9.4;
"Indemnitor" -- See Section 9.4;
"Intangible Assets" shall mean all intangible personal property rights,
including, without limitation, all rights on the part of the Company to proceeds
of any insurance policies and all claims on the part of the Company for
recoupment, reimbursement and coverage under any insurance policies and all
goodwill of the Company, and including, without limitation, those items listed
on Schedule 5.14 hereto;
"Intellectual Property" shall mean: (i) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof; (ii) all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith, and all applications, registrations and renewals in
connection therewith; (iii) all copyrightable works (including, without
limitation, all software developed by the Company), all copyrights and all
applications, registrations and renewals in connection therewith; (iv) all mask
works and all applications, registrations and renewals in connection therewith;
(v) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals); (vi) all computer software
(including data and related documentation); (vii) internet web site, domain
names and registrations pertaining thereto and all intellectual property used in
connection with or contained in the Company's Web site; (viii) all other
proprietary rights, including all rights under agreements related to the
foregoing; and (ix) all copies and tangible embodiments thereof (in whatever
form or medium); including, without limitation, those items listed on Schedule
5.14 hereto;
"Leased Real Property" -- See Section 5.12;
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"Leases" -- See Section 5.12;
"Letter Agreement" shall mean the letter agreement, dated the Closing Date,
between the Buyer and Rhonda M. Weldon substantially in the form of Exhibit H
hereto;
"Licenses and Permits" -- See Section 5.15;
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien (statutory or other), conditional sale agreement, claim, charge,
limitation, restriction, assessment or defect in title;
"Losses" -- See Section 9.2;
"March 31, 2002 Accounts Payable" shall mean the amount of the Company's
accounts payable on March 31, 2002 as reflected on the March 31, 2002 Financial
Statements.
"March 31, 2002 Accounts Receivable" shall mean the amount of the Company's
accounts receivable on March 31, 2002 as reflected on the March 31, 2002
Financial Statements;
"March 31, 2002 Financial Statements" - See Section 2.2(a);
"March 31, 2002 Inventory" shall mean the amount of the Company's inventory
on March 31, 2002 as reflected on the March 31, 2002 Financial Statements;
"Multiemployer Plans" -- See Section 5.20(e);
"NLRB" -- See Section 5.26(b);
"Occurrence" -- See Section 5.28(b);
"Other Contracts" shall mean all Equipment and Machinery leases, and all
indentures, loan agreements, security agreements, partnership or joint venture
agreements, license agreements, maintenance contracts, service contracts,
employment, commission and consulting agreements, suretyship contracts, letters
of credit, reimbursement agreements, distribution agreements, contracts or
commitments limiting or restraining the Company from engaging or competing in
any lines of business or with any Person, documents granting the power of
attorney with respect to the affairs of the Company, agreements not made in the
ordinary course of business of the Company, options to purchase any assets or
property rights of the Company, working capital maintenance or other form of
guaranty agreements, and all other agreements to which the Company is a party,
but excluding Leases, Purchase Orders, Sales Orders and Plans;
"Owned Real Property" -- See Section 5.11;
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
Governmental Entity;
"Plans" -- See Section 5.20(a);
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"Post-Retirement Benefits" -- See Section 5.20(g);
"Product Liability Lawsuits" -- See Section 5.28(a);
"Products" -- See Section 5.28(a);
"Purchase Orders" shall mean all of the Company's outstanding purchase
orders, contracts or other commitments to suppliers of goods and services for
materials, supplies or other items used in its businesses;
"Real Estate Escrow" shall mean the $125,000 deposited with the Escrow
Agent on the Closing Date pursuant to Section 2.1 of this Agreement;
"Release" shall mean the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migrating into
the indoor or outdoor environment of any Hazardous Substance through or in the
air, soil, surface water, groundwater or any structure;
"Retrofits" -- See Section 5.28(a);
"Sales Orders" shall mean all of the Company' sales orders, contracts or
other commitments to purchasers of goods and services of its businesses;
"Securities Act" shall mean the United States Securities Act of 1933, as
amended, and all rules and regulations of the United States Securities and
Exchange Commission promulgated thereunder;
"Seller" -- See Preamble hereto;
"Six Month Inventory" -- See Section 2.2(e);
"Tax Escrow" shall mean the $500,000 deposited with the Escrow Agent on the
Closing Date pursuant to Section 2.1 of this Agreement;
"Tax Return" shall mean any report, return, information return, filing,
claim for refund or other information, including any schedules or attachments
thereto, and any amendments to any of the foregoing required to be supplied to a
taxing authority in connection with Taxes;
"Taxes" shall mean all federal, state, local or foreign taxes, including,
without limitation, income, gross income, gross receipts, production, excise,
employment, sales, use, transfer, ad valorem, profits, license, capital stock,
franchise, severance, stamp, withholding, Social Security, employment,
unemployment, disability, worker's compensation, payroll, utility, windfall
profit, custom duties, personal property, real property, registration,
alternative or add-on minimum, estimated and other taxes, governmental fees or
like charges of any kind whatsoever, including any interest, penalties or
additions thereto, whether disputed or not; and "Tax" shall mean any one of
them;
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"Twelve-Month Period" -- See Section 3(a);
"Usage Percentage" -- See Section 2.2(f); and
"Working Capital Adjustment Certificate" -- See Section 2.2(a).
SECTION 2. PURCHASE AND SALE OF COMPANY SHARES.
SECTION 2.1. Closing Purchase Price. Subject to the terms and conditions
set forth in this Agreement and in reliance upon the representations and
warranties of the Seller set forth below, on the Closing Date the Buyer shall
purchase from the Seller and the Seller shall sell to the Buyer, the Company
Shares, free and clear of all Liens. The aggregate purchase price for the
Company Shares being sold by the Seller (the "Purchase Price") shall be
$11,500,000, which amount shall be subject to adjustment after the Closing Date
in the manner set forth in Section 2.2 of this Agreement. Such purchase and sale
shall be effected on the Closing Date by the Seller delivering to the Buyer a
stock certificate evidencing the Company Shares being purchased by the Buyer
from the Seller, duly endorsed for transfer, against delivery by the Buyer (i)
to the Seller of $7,426,714 (the "Closing Cash Portion," which Closing Cash
Portion shall reflect a reduction to the Purchase Price in an amount equal to
the sum of (x) the Estimated Closing Indebtedness, (y) $325,101 with respect to
federal, state and local income Taxes of the Company attributable to the 481
Adjustment) and (z) $287,361 with respect to estimated federal, state and local
income Taxes of the Company payable for the period from January 1, 2002 through
April 30, 2002 (net of federal and state income Taxes overpaid for the 2001
Fiscal Year and federal income Taxes paid with respect to the first quarter of
Fiscal 2002 as set forth on Schedule 2.1) and (ii) to the Escrow Agent the
Closing Escrow Portion. Payment of the Closing Cash Portion shall be made by
certified check or by wire transfer of immediately available funds to such
account as the Seller shall, not less than three Business Days prior to the
Closing Date, designate in writing to the Buyer. The Closing Escrow Portion
delivered to the Escrow Agent on the Closing Date shall be held by the Escrow
Agent in accordance with the terms of the Escrow Agreement.
SECTION 2.2. Adjustment to Purchase Price.
(a) As soon as practicable, but no later than 45 days after the Closing
Date, the Buyer shall cause to be prepared and delivered to the Seller the
audited balance sheet of the Company as of March 31, 2002, accompanied by the
report on the balance sheet of BDO Seidman, LLP (the balance sheet as of March
31, 2002 being referred to as the "March 31, 2002 Financial Statements") and the
audited balance sheet of the Company as of the Closing Date, accompanied by the
report on the balance sheet of BDO Seidman, LLP (the balance sheet as of the
Closing Date being referred to as the "Closing Date Financial Statements"). The
March 31, 2002 Financial Statements and the Closing Date Financial Statements
shall be accompanied by a certificate (the "Working Capital Adjustment
Certificate") setting forth in reasonable detail the Buyer's calculation of the
March 31, 2002 Accounts Payable, the March 31, 2002 Accounts Receivable, the
March 31, 2002 Inventory, the Closing Date Accounts Payable, the Closing Date
Accounts Receivable, the Closing Date Inventory and the Closing Indebtedness;
provided, however, that solely for the purpose of preparing the Working Capital
Adjustment Certificate and without limiting the Buyer's rights under this
Agreement, all inventory of the Company will
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be assumed to be saleable in the lawful and ordinary business of the Company and
all accounts receivable of the Company will be assumed to be current and
collectible in amounts not less than the aggregate amount thereof. The March 31,
2002 Financial Statements shall (x) fairly present the financial position of the
Company as at the close of business on March 31, 2002 in accordance with GAAP
(except that the March 31, 2002 Financial Statements shall not include
footnotes) and (y) be prepared in accordance with the accounting policies and
practices used in preparing the December 31, 2001 Balance Sheet. The Closing
Date Financial Statements shall (x) fairly present the financial position of the
Company as at the close of business on the Closing Date in accordance with GAAP
(except that the Closing Date Financial Statements shall not include footnotes)
and (y) be prepared in accordance with the accounting policies and practices
used in preparing the December 31, 2001 Balance Sheet and (z) be based on a full
physical count of the inventories of the Company as of the Closing Date.
(b) If the Seller disagrees with the Buyer's calculation of the March 31,
2002 Accounts Payable, the March 31, 2002 Accounts Receivable, the March 31,
2002 Inventory, the Closing Date Accounts Payable, the Closing Date Accounts
Receivable, the Closing Date Inventory or the Closing Indebtedness as set forth
on the Working Capital Adjustment Certificate, the Seller may, within ten (10)
Business Days after the delivery of the Working Capital Adjustment Certificate,
deliver a notice to the Buyer disagreeing with such calculation and setting
forth the Seller's calculation of the March 31, 2002 Accounts Payable, the March
31, 2002 Accounts Receivable, the March 31, 2002 Inventory, the Closing Date
Accounts Payable, the Closing Date Accounts Receivable, the Closing Date
Inventory and the Closing Indebtedness; provided, however, that no objection can
be based on the use of accounting policies and practices so long as such
policies and practices are in accordance with GAAP consistently applied.. Any
such notice of disagreement shall specify those items or amounts as to which the
Seller disagrees, and the Seller shall be deemed to have agreed with all other
items and amounts contained on the Working Capital Adjustment Certificate.
(c) If a notice of disagreement is not delivered on a timely basis pursuant
to Section 2.2(b), the March 31, 2002 Accounts Payable, the March 31, 2002
Accounts Receivable, the March 31, 2002 Inventory, the Closing Date Accounts
Payable, the Closing Date Accounts Receivable, the Closing Date Inventory and
the Closing Indebtedness as reflected on the Working Capital Adjustment
Certificate will be final and binding on the parties. If a notice of
disagreement shall be duly delivered pursuant to Section 2.2(b), the Buyer and
the Seller shall, during the ten (10) Business Days following such delivery, use
their best efforts to reach agreement on the disputed items or amounts in order
to determine, as may be required, the March 31, 2002 Accounts Payable, the March
31, 2002 Accounts Receivable, the March 31, 2002 Inventory, the Closing Date
Accounts Payable, the Closing Date Accounts Receivable, the Closing Date
Inventory and the Closing Indebtedness as reflected on the Working Capital
Adjustment Certificate. If, during such period, the Buyer and the Seller are
unable to reach such agreement, they shall promptly thereafter cause independent
accountants of nationally recognized standing reasonably satisfactory to the
Buyer and the Seller, promptly to review this Agreement and the disputed items
or amounts for the purpose of calculating the March 31, 2002 Accounts Payable,
the March 31, 2002 Accounts Receivable, the March 31, 2002 Inventory, the
Closing Date Accounts Payable, the Closing Date Accounts Receivable, the Closing
Date Inventory and the Closing Indebtedness, as the case may be, as reflected on
the Working Capital Adjustment Certificate. In making such calculation, such
independent accountants shall consider
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only those items or amounts reflected on the Working Capital Adjustment
Certificate as to which the Seller has disagreed. Such independent accountants
shall deliver to the Buyer and the Seller, as promptly as practicable, a report
setting forth such calculations. Such report shall be final and binding upon the
Buyer and the Seller. The fees and disbursements of such independent accountants
shall be shared equally by the Buyer and the Seller. The March 31, 2002 Accounts
Payable, the March 31, 2002 Accounts Receivable and the March 31, 2002 Inventory
as finally determined pursuant to this Section 2.2(b) are referred to,
respectively, as the Final March 31, 2002 Accounts Payable, the Final March 31,
2002 Accounts Receivable and the Final March 31, 2002 Inventory. The Closing
Date Accounts Payable, the Closing Date Accounts Receivable, the Closing Date
Inventory and the Closing Indebtedness as finally determined pursuant to this
Section 2.2(b) are referred to, respectively, as the Final Closing Date Accounts
Payable, the Final Closing Date Accounts Receivable, the Final Closing Date
Inventory and the Final Closing Indebtedness.
(d) If (i) the sum of the Final Closing Date Accounts Receivable and the
Final Closing Date Inventory less the Final Closing Date Accounts Payable shall
exceed (ii) the sum of the March 31, 2002 Accounts Receivable and the March 31,
2002 Inventory less the March 31, 2002 Accounts Payable, the Buyer shall, within
three (3) Business Days following the determination, pursuant to Section 2.2(c),
of the Final March 31, 2002 Accounts Payable, the Final March 31, 2002 Accounts
Receivable, the Final March 31, 2002 Inventory, the Final Closing Date Accounts
Payable, the Final Closing Date Accounts Receivable and the Final Closing Date
Inventory, and based on such determination and as an adjustment to the Purchase
Price, (x) pay to the Seller (by wire transfer of immediately available funds to
such account as the Seller shall designate in writing) 90% of such excess and
(y) deliver to the Escrow Agent 10% of such excess, to be held by the Escrow
Agent in accordance with the terms of the Escrow Agreement. If (i) the sum of
the Final Closing Date Accounts Receivable and the Final Closing Date Inventory
less the Final Closing Date Accounts Payable shall be less than (ii) the sum of
the March 31, 2002 Accounts Receivable and the March 31, 2002 Inventory less
than the March 31, 2002 Accounts Payable, the Seller shall, within three (3)
Business Days following the determination, pursuant to Section 2.2(c), of the
Final Closing Date Accounts Payable, the Final Closing Date Accounts Receivable
and the Final Closing Inventory, and based on such determination and as an
adjustment to the Purchase Price, pay to the Buyer such amount by wire transfer
of immediately available funds to such account as the Buyer shall designate in
writing. If the Final Closing Indebtedness shall be less than the Estimated
Closing Indebtedness, the Buyer shall, within three (3) Business Days following
the determination, pursuant to Section 2.2(c), of the Final Closing Indebtedness
and based on such determination and as an adjustment to the Purchase Price, pay
to the Seller the amount of such deficiency by wire transfer of immediately
available funds to such account as the Seller shall designate in writing. If the
Final Closing Indebtedness shall exceed the Estimated Closing Indebtedness, the
Seller shall, within three (3) Business Days following the determination,
pursuant to Section 2.2(c), of the Final Closing Indebtedness and based on such
determination and as an adjustment to the Purchase Price, pay to the Buyer the
amount of such excess by wire transfer of immediately available funds to such
account as the Buyer shall designate in writing.
(e) The Buyer shall cause to be prepared a statement of cash flows of the
Company for the six month period ending on the six month anniversary of the
Closing Date and shall cause to be taken a physical count of the inventories of
the Company as of the six month
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anniversary of the Closing Date (the "Six Month Inventory"). The Six Month
Inventory shall (x) be conducted in accordance with the accounting policies and
practices used in conducting the physical inventory referred to in Section
2.2(a) and (y) be based on a perpetual inventory maintained by the Company
subsequent to the physical inventory referred to in Section 2.2(a), which
perpetual inventory shall include a daily adjustment by part number to inventory
levels for purchases, production and shipments.
(f) With respect to each valid part number included in the Six Month
Inventory, the Buyer shall calculate (x) a waste factor, which may be positive
or negative, which shall be expressed as a percentage of inventory shipped
during the six-month period succeeding the Closing Date (each, a "Usage
Percentage"), and (y) the Adjusted 2001 Cost of Goods Sold for each such part
number included in the inventories of the Company as of December 31, 2001 and
(z) Adjusted 2001 EBIT; provided, however, that the Usage Percentage with
respect to any part number which is not shipped during the six month period
succeeding the Closing Date shall be the weighted average Usage Percentage for
all part numbers which were shipped during such period.
(g) As soon as practicable, but not later than 210 days after the Closing
Date, the Buyer shall cause to be prepared and delivered to the Seller a
certificate (the "Adjusted EBIT Certificate") setting forth in reasonable detail
the Buyer's calculation of each Usage Percentage, the Adjusted 2001 Cost of
Goods Sold for each valid part number included in the inventories of the Company
as of December 31, 2001 and Adjusted 2001 EBIT.
(h) If the Seller disagrees with the Buyer's calculation of any Usage
Percentage, the Adjusted 2001 Cost of Goods Sold for any valid part number
included in the inventories of the Company as of December 31, 2001 or Adjusted
2001 EBIT as set forth in the Adjusted EBIT Certificate, the Seller may, within
ten (10) Business Days after the delivery of the Adjusted EBIT Certificate,
deliver a notice to the Buyer disagreeing with such calculation and setting
forth the Seller's calculation of such Usage Percentage, the Adjusted 2001 Cost
of Goods Sold for any valid part number included in the inventories of the
Company as of December 31, 2001 or Adjusted 2001 EBIT; provided, however, that
no objection can be based on the use of accounting policies and practices so
long as such policies and practices are in accordance with GAAP. Any such notice
of disagreement shall specify those items or amounts as to which the Seller
disagrees, and the Seller shall be deemed to have agreed with all other items
and amounts contained on the Adjusted EBIT Certificate.
(i) If a notice of disagreement is not delivered on a timely basis pursuant
to Section 2.2(h), each Usage Percentage, the Adjusted 2001 Cost of Goods Sold
for each valid part number included in the inventories of the Company as of
December 31, 2001 and Adjusted 2001 EBIT as reflected on the Adjusted EBIT
Certificate will be final and binding on the parties. If a notice of
disagreement shall be duly delivered pursuant to Section 2.2(h), the Buyer and
the Seller shall, during the ten (10) Business Days following such delivery, use
their best efforts to reach agreement on the disputed items or amounts in order
to determine, as may be required, each Usage Percentage, the Adjusted 2001 Cost
of Goods Sold for each valid part number included in the inventories of the
Company as of December 31, 2001 and Adjusted 2001 EBIT as reflected on the
Adjusted EBIT Certificate. If, during such period, the Buyer and the Seller are
unable to reach such agreement, they shall promptly thereafter cause independent
accountants of
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nationally recognized standing reasonably satisfactory to the Buyer and the
Seller, promptly to review this Agreement and the disputed items or amounts for
the purpose of calculating each Usage Percentage, the Adjusted 2001 Cost of
Goods Sold for each valid part number included in the inventories of the Company
as of December 31, 2001 and Adjusted 2001 EBIT, as the case may be, as reflected
on the Adjusted EBIT Certificate. In making such calculation such independent
accountants shall consider only those items or amounts reflected on the Adjusted
EBIT Certificate as to which the Seller has disagreed. Such independent
accountants shall deliver to the Buyer and the Seller, as promptly as
practicable, a report setting forth such calculations. Such report shall be
final and binding upon the Buyer and the Seller. The fees and disbursements of
such independent accountants shall be shared equally by the Buyer and the
Seller.
(j) If Adjusted 2001 EBIT shall equal or exceed $2,500,000, the Buyer
shall, within three (3) Business Days following the determination, pursuant to
Section 2.2(i), of Adjusted 2001 EBIT, and based on such determination and as an
adjustment to the Purchase Price, pay to the Seller (by wire transfer of
immediately available funds to such account as the Seller shall designate in
writing) the sum of $1,250,000 (which may be made by release to the Seller of
the Cost of Goods Sold Escrow). If Adjusted 2001 EBIT shall be less than
$2,500,000, the Seller shall, within three (3) Business Days following the
determination, pursuant to Section 2.2(i), of Adjusted 2001 EBIT, and based on
such determination and as an adjustment to the Purchase Price, pay to the Buyer
(by wire transfer of immediately available funds to such account as the Buyer
shall designate in writing) $4.60 for each $1.00 that Adjusted 2001 EBIT shall
be less than $2,500,000 (the Cost of Goods Sold Adjustment may be paid by
release to the Buyer of the Cost of Goods Sold Escrow to the extent sufficient
funds to make such payment are contained therein and any remaining funds
contained in the Cost of Goods Escrow after payment of the Cost of Goods Sold
Adjustment shall be released to the Buyer. In no event shall the payment to the
Buyer pursuant to this Section 2.2(j) exceed $1,250,000).
(k) For purposes of illustration only, Schedule 2.2(k) sets forth examples
of the adjustment to the Purchase Price contemplated by this Section 2.2.
SECTION 3. CONTINGENT PAYMENT.
(a) Subject to the terms and conditions set forth in this Agreement, the
Buyer shall pay the Seller an aggregate payment (each a "Contingent Payment")
equal to thirty percent (30%) of the Company's EBIT in excess of the Company's
Base Year EBIT for each of the twelve-month periods (each, a "Twelve-Month
Period") ending on the first, second, third, fourth and fifth anniversaries of
the Closing Date. "Base Year EBIT" shall mean an amount equal to the Company's
Adjusted 2001 EBIT; provided, however, that for purposes of calculating a
Contingent Payment for a period commencing with the Twelve-Month Period ending
on the second anniversary of the Closing Date, Base Year EBIT shall be increased
on a cumulative basis to the extent that EBIT for the preceding Twelve-Month
Period shall be less than Base Year EBIT and decreased, but not to an amount
less than Base Year EBIT (as originally calculated), to the extent that EBIT for
the succeeding Twelve-Month Period shall exceed Base Year EBIT for the
immediately preceding Twelve-Month Period.
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(b) Promptly following completion of each Twelve-Month Period, the Buyer
will prepare financial statements of the Company (which may be unaudited) and a
schedule calculating EBIT for such Twelve-Month Period and the proposed
Contingent Payment (such final statements, the "Contingent Payment Financial
Statements"), and deliver the Contingent Financial Statements and related
schedule to the Seller within 90 days of the end of such Twelve-Month Period.
(c) If the Seller disagrees with the Buyer's calculation of the Contingent
Payment, the Seller may, within ten (10) Business Days after the delivery of the
Contingent Payment Financial Statements, deliver a notice to the Buyer
disagreeing with such calculation and setting forth the Seller's calculation of
such amount; provided, however, that no objection can be based on the use of
accounting policies and practices so long as such policies and practices are in
accordance with GAAP consistently applied. Any such notice of disagreement shall
specify those items or amounts as to which the Seller disagrees, and the Seller
shall be deemed to have agreed with all other items and amounts contained in the
Contingent Payment Financial Statements.
(d) If a notice of disagreement is not delivered pursuant to Section 3(c),
the Contingent Payment as determined by reference to the Contingent Payment
Financial Statements and the related schedule will be final and binding on the
parties. If a notice of disagreement shall be duly delivered pursuant to Section
3(c), the Buyer and the Seller shall, during the ten (10) Business Days
following such delivery, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of the Seller's Contingent Payment. If, during such period, the Buyer and the
Seller are unable to reach such agreement, they shall promptly thereafter cause
independent accountants of nationally recognized standing reasonably
satisfactory to the Buyer and the Seller, promptly to review this Agreement and
the disputed items or amounts for the purpose of calculating the Contingent
Payment. In making such calculation, such independent accountants shall consider
only those items or amounts in the Contingent Payment Financial Statements as to
which the Seller has disagreed. Such independent accountants shall deliver to
the Buyer and the Seller, as promptly as practicable, a report setting forth
such calculations. Such report shall be final and binding upon the Buyer and the
Seller. The fees and disbursements of such independent accountants shall be
shared equally by the Buyer and the Seller.
SECTION 4. CLOSING.
SECTION 4.1. The closing (the "Closing") for the consummation of the
transactions contemplated by this Agreement shall take place at the offices of
Willkie Farr & Gallagher at 10:00 a.m. on April 30, 2002, or at such other place
and time as may be mutually agreed to by the parties hereto (the "Closing
Date").
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents and warrants to the Buyer as follows:
SECTION 5.1. Corporate Organization. The Company is a corporation duly
organized and validly existing under the laws of the State of Florida, and has
all requisite
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corporate power and authority to own its properties and assets and to conduct
its business as now conducted. Copies of the Articles of Incorporation and
By-laws of the Company, with all amendments thereto to the date hereof, have
been furnished to the Buyer or its representatives, and such copies are accurate
and complete as of the date hereof.
SECTION 5.2. Qualification to Do Business. The Company is duly qualified to
do business as a foreign corporation and is in good standing in every
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary
and in which the failure to be so qualified would have a material adverse effect
on the business, operations, properties, assets or condition (financial or
other) of the Company. Schedule 5.2 sets forth all jurisdictions in which the
Company is qualified to do business.
SECTION 5.3. No Conflict or Violation; Authority and Validity. (a) The
execution, delivery and performance by the Seller of this Agreement, the
Employment Agreement and the Escrow Agreement, the execution, delivery and
performance by the Company of the Employment Agreement and the execution,
delivery and performance by Rhonda M. Weldon of the Letter Agreement do not and
will not violate or conflict with any provision of the Articles of Incorporation
or By-laws of the Company and do not and will not violate any provision of law,
or any order, judgment or decree of any court or other governmental or
regulatory authority, nor violate nor will result in a breach of or constitute
(with due notice or lapse of time or both) a default under any contract, lease,
loan agreement, mortgage, security agreement, trust indenture or other agreement
or instrument to which the Seller, the Company or Rhonda M. Weldon is a party or
by which the Seller, the Company or Rhonda M. Weldon are bound or to which any
of their properties or assets is subject or result in the acceleration of any
Indebtedness created thereunder or give rise to a right thereunder to require
any payment to be made by the Company, nor will result in the creation or
imposition of any Lien upon any of the assets, properties or rights of the
Seller, the Company or Rhonda M. Weldon, nor will result in the cancellation,
modification, revocation or suspension of any of the Licenses and Permits.
(b) The Seller has the authority to enter into this Agreement, the
Employment Agreement and the Escrow Agreement and to carry out the Seller's
obligations hereunder and thereunder, the Company has the authority to enter
into the Employment Agreement and to carry out its obligations thereunder and
Rhonda M. Weldon has the authority to enter into the Letter Agreement and to
carry out her obligations thereunder. This Agreement, the Employment Agreement
and the Escrow Agreement have been duly executed and delivered by the Seller and
constitute the Seller's valid and binding obligations, enforceable against the
Seller in accordance with their terms, and the Employment Agreement has been
duly executed and delivered by the Company and constitutes the Company's valid
and binding obligation, enforceable against the Company in accordance with its
terms.
SECTION 5.4. Consents and Approvals. Schedule 5.4 sets forth a true and
complete list of each consent, waiver, authorization or approval of any
Governmental Entity, or of any other Person, and each declaration to or filing
or registration with any such Governmental Entity, that is required in
connection with the execution and delivery of this Agreement, the Employment
Agreement and the Escrow Agreement by the Seller, the execution and delivery of
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the Employment Agreement by the Company or the execution and delivery of the
Letter Agreement by Rhonda M. Weldon, or the performance by the Seller, the
Company or Rhonda M. Weldon of their obligations hereunder and thereunder.
SECTION 5.5. Capital Stock and Related Matters. (a) As of the date hereof,
the authorized capital stock of the Company consists of 100 shares of Company
Common Stock, of which 50 Company Shares are outstanding. The Company Shares are
the sole outstanding shares of capital stock of the Company and are owned
beneficially and of record by the Seller; the Company does not have outstanding
any securities convertible into or exchangeable for any shares of capital stock,
any rights to subscribe for or to purchase or any options for the purchase of,
or any agreements providing for the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any other character relating to the issuance
of, any capital stock, or any stock or securities convertible into or
exchangeable for any capital stock; and the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire, or to register under the Securities Act, any shares of capital stock.
The Company Shares have been duly authorized and validly issued and are fully
paid and nonassessable.
(b) The Seller has, and will have at the Closing, valid and marketable
title to all of the Company Shares, free and clear of any Liens.
SECTION 5.6. Subsidiaries and Equity Investments. The Company does not,
directly or indirectly, own or hold any rights to acquire any capital stock or
any other securities, interests or investments in any other Person other than
investments which constitute cash or cash equivalents.
SECTION 5.7. Financial Statements. Schedule 5.7 sets forth copies of the
December 31, 2001 Balance Sheet, together with the related unaudited statements
of income for the 2001 Fiscal Year (all of the financial statements referred to
above being hereinafter collectively referred to as the "Financial Statements").
The Financial Statements (i) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby (except that the
Financial Statements do not include footnotes and except for the 481
Adjustment), (ii) present fairly in all material respects the financial position
and results of operations of the Company as of such dates and for the periods
then ended (subject, in the case of the unaudited interim Financial Statements,
to normal year-end audit adjustments consistent with prior periods), (iii) are
in all material respects complete, correct and in accordance with the books of
account and records of the Company and (iv) reflect accurately in all material
respects all costs and expenses of the Company.
SECTION 5.8. Absence of Certain Changes or Events.
(a) Except as set forth on Schedule 5.8, since December 31, 2001, there has
not been:
(i) any material adverse change in the business, operations, properties,
assets or condition (financial or other) of the Company, or any event that has
had a material adverse effect on the foregoing, and, to the knowledge of the
Seller and the Company, no factor or condition exists and no event has occurred
that would be likely to result in any such change,
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other than changes in general economic conditions and changes which generally
affect the industry in which the Company operates;
(ii) any material loss, damage, destruction or other casualty to or
condemnation of the assets or properties of the Company (other than any for
which insurance awards have been received or guaranteed);
(iii) any change in any method of accounting or accounting practice of the
Company; or
(iv) any loss of the employment, services or benefits of any key employee
of the Company.
(b) Since December 31, 2001, the Company has operated in the ordinary
course of its business consistent with past practice and, except as set forth on
Schedule 5.8, has not:
(i) incurred any obligation or liability (whether absolute, accrued,
contingent or otherwise) except in the ordinary course of business consistent
with past practice;
(ii) failed to discharge or satisfy any Lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or otherwise),
other than liabilities being contested in good faith and for which adequate
reserves have been provided and Liens arising in the ordinary course of business
that do not, individually or in the aggregate, interfere with the use,
operation, enjoyment or marketability of any of its assets, properties or
rights;
(iii) mortgaged, pledged or subjected to any Lien any of its assets,
properties or rights, except Liens for Taxes not yet due and payable and Liens
arising in the ordinary course of business that do not, individually or in the
aggregate, interfere with the use, operation, enjoyment or marketability of any
of its assets, properties or rights;
(iv) sold or transferred any of its assets or canceled any debts or claims
or waived any rights, except in the ordinary course of business consistent with
past practice;
(v) disposed of any patents, trademarks or copyrights or any patent,
trademark or copyright applications;
(vi) defaulted on any obligation;
(vii) entered into any transaction material to its business, except in the
ordinary course of business consistent with past practice;
(viii) written down the value of any inventory or written off as
uncollectible any of its accounts receivable or any portion thereof not
reflected in the December 31, 2001 Balance Sheet;
(ix) granted any increase in the compensation or benefits of its employees
or entered into any employment or severance agreement or arrangement with any of
them;
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(x) made any capital expenditure in excess of $10,000, or additions to
property, plant and equipment used in its operations other than ordinary repairs
and maintenance;
(xi) laid off any of its employees;
(xii) discontinued the sale of any products or product line or program of
the Company;
(xiii) incurred any obligation or liability for the payment of severance
benefits;
(xiv) declared, paid or set aside for payment any dividend or other
distribution in respect of shares of its capital stock or other securities, or
redeemed, purchased or otherwise acquired, directly or indirectly, any shares of
its capital stock or other securities, or agreed to do so; or
(xv) entered into any agreement or made any commitment to do any of the
foregoing.
SECTION 5.9. Tax Matters. (a) (i) The Company has filed when due all Tax
Returns required by applicable law to be filed and the Company has paid all
Taxes required to be paid in respect of the periods covered by such Tax Returns;
(ii) the Company reports its income under the accrual method of accounting for
federal income Tax purposes; (iii) the information contained in such Tax Returns
is true, complete and accurate in all material respects; (iv) Taxes of the
Company for periods ending on or before the Closing Date (whether or not shown
on any Tax Return), if required to have been paid, have been paid (except for
Taxes which are being contested in good faith); (v) except as disclosed on
Schedule 5.9, there is no action, suit, proceeding, investigation, audit or
claim now pending against, or with respect to, the Company in respect of any Tax
or assessment, nor is there any claim for additional Tax or assessment asserted
by any Tax authority; (vi) any liability of the Company for Taxes that are not
yet due and payable, or which are being contested in good faith, have been
provided for in the financial statements of the Company in accordance with GAAP;
(vii) none of the assets, properties or rights of the Company are "tax-exempt
use property" within the meaning of Section 168(h) of the Internal Revenue Code
of 1986, as amended (the "Code"); (viii) none of the assets, properties or
rights of the Company include any lease made pursuant to former Section
168(f)(8) of the Internal Revenue Code of 1954; and (ix) there is no Lien
affecting any of the assets, properties or rights of the Company that arose in
connection with any failure or alleged failure to pay any Tax.
(b) There are no states other than Florida in which the Company is required
to file franchise and income Tax Returns.
SECTION 5.10. Absence of Undisclosed Liabilities. Except as set forth on
Schedule 5.10, the Company does not have any indebtedness or liability, absolute
or contingent, known or unknown, which is not shown or provided for on the
December 31, 2001 Balance Sheet other than liabilities as shall have been
incurred or accrued in the ordinary course of business since December 31, 2001.
Except as shown on the December 31, 2001 Balance Sheet or on Schedule 5.10, the
Company is not directly or indirectly liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obliged in any other way to
provide funds in
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respect of, or to guarantee or assume, any debt, obligation or dividend of any
Person, except endorsements in the ordinary course of business in connection
with the deposit, in banks or other financial institutions, of items for
collection.
SECTION 5.11. Owned Real Property. The Company owns no real property.
SECTION 5.12. Leases.
(a) Schedule 5.12 sets forth a list of all leases, licenses, permits,
subleases and occupancy agreements, together with all amendments and supplements
thereto, with respect to all real properties in which the Company has a
leasehold interest, whether as lessor or lessee (each, a "Lease" and
collectively, the "Leases"; the property covered by Leases under which the
Company is a lessee is referred to herein as the "Leased Real Property") and in
which the Company had a leasehold interest. The Seller has furnished true,
correct and complete copies of all Leases to the Buyer or its representatives.
No option has been exercised under any of such Leases, except options whose
exercise has been evidenced by a written document, a true, complete and accurate
copy of which has been delivered to the Buyer or its representatives with the
corresponding Lease. Except as set forth on Schedule 5.12, the transactions
contemplated by this Agreement do not require the consent or approval of the
other party to the Leases, nor will such transactions violate any Lease or cause
the Company to be in default under any Lease.
(b) Each Lease is in full force and effect and no Lease has been modified
or amended except pursuant to an amendment referred to on Schedule 5.12. Neither
the Company nor any other party to a Lease has given to the other party written
notice of or has made a claim with respect to any breach or default. The Company
is not in default under any Lease and, to the knowledge of the Seller and the
Company, no other party to a Lease is in default. There are no events which with
the passage of time or the giving of notice or both would constitute a default
by the Company or, to the knowledge of the Seller and the Company, by any other
party to such Lease.
(c) None of the Leased Real Property is subject to any sublease, license or
other agreement granting to any Person or entity any right to the use, occupancy
or enjoyment of such property or any portion thereof. The Company has not
received any notice from any utility company or municipality of any fact or
condition which could result in the discontinuation of presently available or
otherwise necessary sewer, water, electric, gas, telephone or other utilities or
services for any of the Leased Real Property. The Leased Real Property, all
improvements thereon and thereto, and the operations therein conducted conform
to all applicable health, fire, insurance, environmental, safety, zoning and
building laws, ordinances and administrative regulations, Permits and other
regulations (including, without limitation, the Americans with Disabilities
Act), except for possible nonconforming uses or violations that do not and will
not interfere with the present use, operation or maintenance thereof by the
Company as now used, operated or maintained or access thereto, and that do not
and will not affect the value thereof, and that do not and will not give rise to
any penalty, fine or other liability, and the Company has not received any
notice to the contrary. Each Leased Real Property is occupied and used by the
Company in compliance with the Lease applicable thereto and pursuant to and in
conformity with a validly issued certificate of occupancy which currently
remains in effect.
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(d) The plumbing, electrical, heating, air conditioning, elevator,
ventilating and all other mechanical or structural systems for which the Company
is responsible under the Leases in the buildings or improvements are in good
working order and condition and are fully useable for their intended purpose,
and the roof, basement and foundation walls of such buildings and improvements
for which the Company is responsible under the Leases are in good condition and
free of leaks and other defects. To the knowledge of the Seller and the Company,
all such mechanical and structural systems and such roofs, basement and
foundation walls for which others are responsible under said Leases are in good
working order and condition and free of leaks and other defects. To the
knowledge of the Seller and the Company, there are no other physical defects or
deferred maintenance items at any Leased Real Property that interfere with or
impede the Company's use of such property in the ordinary course of its business
or that the Company is obligated under any of the Leases to repair or otherwise
correct.
(e) There are no guaranties (from the Seller or from other Persons) in
favor of the lessors of any of the Leased Real Property.
(f) The Company has not sold, assigned, transferred, pledged or encumbered
all or any part of its leasehold interests in the Leased Real Property.
(g) Access from public streets and provision for parking and
loading/unloading at each Leased Real Property conforms to all applicable legal
requirements and is adequate for the conduct of the business of the Company in
the normal course.
(h) To the knowledge of the Seller and the Company, no Leased Real Property
is subject to a fee mortgage, deed of trust, other security interest or similar
encumbrance, nor to a ground lease or underlying lease.
(i) There is no pending, or, to the knowledge of the Seller or the Company,
threatened: (i) condemnation of any part of the Leased Real Property by any
Governmental Entity; (ii) special assessment against any part of the Leased Real
Property; or (iii) litigation against the Seller or the Company or any lessor
for breach of any restrictive covenant affecting any part of the Leased Real
Property.
SECTION 5.13. Assets of the Company.
(a) The assets, properties and rights of the Company constitute all of the
assets and rights which are used in the operation of the business of the Company
immediately prior to the Closing and which are necessary or required for the
conduct of such business as currently conducted. There are no assets,
properties, rights or interests of any kind or nature that the Company has been
using, holding or operating in its business prior to the Closing that will not
be used, held or owned by the Company immediately following the Closing, other
than those assets, properties or rights conveyed in the ordinary course of
business consistent with past practice.
(b) Except as set forth on Schedule 5.13(b), the Company has good and
marketable title, free and clear of any Liens, to, or a valid leasehold interest
under enforceable leases in, all of the assets, properties and rights of the
Company.
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(c) Schedule 5.13(c) sets forth a complete and correct list and brief
description of each item of Equipment and Machinery having an original purchase
cost or aggregate lease cost exceeding $10,000. The Equipment and Machinery is
in good operating condition and repair.
SECTION 5.14. Intellectual Property; Intangible Assets. (a) Schedule
5.14(a) sets forth a complete and correct listing of the Intellectual Property
used by the Company in connection with its business. The Company owns all right,
title and interest in and to, or has a valid and enforceable license or
otherwise has the right to use, in all jurisdictions in which it carries on
business, all Intellectual Property without, to the knowledge of the Seller and
the Company, violating or conflicting with the rights of others. Except as set
forth on Schedule 5.14(a), all Intellectual Property is owned by the Company,
free and clear of all Liens. All of the Company's Intellectual Property is
valid, subsisting, unexpired, in proper form and enforceable and all renewal
fees and other maintenance fees that have fallen due on or prior to the date of
this Agreement have been paid. There has not been communicated to the Company
the threat of any claim that the holder of such Intellectual Property is in
violation or infringement of any Intellectual Property right of any other
Person, or challenging the Company's ownership or use of, or the validity or
enforceability of, any of the Company's Intellectual Property. The consummation
of the transactions contemplated by this Agreement will not prohibit the Company
from using any of the Intellectual Property in a manner substantially similar to
its current use of such Intellectual Property in its businesses.
(b) Schedule 5.14(b) sets forth a complete list of all: (i) licenses,
sublicenses and other agreements in which the Company or any sublicensee of the
Company has granted to any Person the right to use the Intellectual Property;
and (ii) all other consents, indemnifications, forbearances to sue, settlement
agreements and licensing or cross-licensing arrangements to which the Company is
a party relating to the Intellectual Property or the proprietary rights of any
third party. Except as set forth on Schedule 5.14(b), the Company is not under
any obligation to pay royalties or other payments in connection with any
license, sublicense or other agreement, nor restricted from assigning its rights
under any sublicense or agreement respecting Intellectual Property, nor will the
Company otherwise be, as a result of the execution and delivery of this
Agreement or the performance of its obligations under this Agreement, in breach
of any license, sublicense or other agreement relating to the Intellectual
Property.
(c) Schedule 5.14(c) sets forth a true and complete list of all of the
Intangible Assets and a summary description of each such item. There is no
restriction affecting the use of any of the Intangible Assets, and no license
has been granted with respect thereto. Each of the Intangible Assets is valid
and in good standing, is not currently being challenged, is not involved in any
pending or, to the knowledge of the Seller and the Company, threatened
administrative or judicial proceeding, and does not conflict with any rights of
any other Person. The Company's rights in and to the Intangible Assets are
sufficient and adequate in all respects to permit the conduct of the business of
the Company as now conducted and as has been proposed by the Company to be
conducted, and, to the knowledge of the Seller and the Company, none of the
products or operations of the business of the Company involves any infringement
of any proprietary right of any other Person.
SECTION 5.15. Licenses and Permits. Schedule 5.15 sets forth a true and
complete list of all licenses, permits, franchises, authorizations and approvals
issued or granted
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to the Company by any Governmental Entity (the "Licenses and Permits"), and all
pending applications therefor. Each License and Permit has been duly obtained,
is valid and in full force and effect, and is not subject to any pending or, to
the knowledge of the Seller and the Company, threatened administrative or
judicial proceeding to revoke, cancel, suspend or declare such License and
Permit invalid in any respect. The Licenses and Permits are sufficient and
adequate in all respects to permit the continued lawful conduct of the business
of the Company in the manner now conducted, and none of the operations of the
Company are being conducted in a manner that violates any of the terms or
conditions under which any License and Permit was granted. The consummation of
the transactions contemplated by this Agreement will not result in the
termination or suspension of any License or Permit.
SECTION 5.16. Compliance with Law. Except as set forth on Schedule 5.16,
the operations of the business of the Company have been conducted in all
material respects in accordance with all applicable laws, regulations, orders
and other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over the Company and its assets, properties and
operations. Except as set forth on Schedule 5.16, the Company has not received
notice of any material violation of any such law, regulation, order or other
legal requirement, and is not in default with respect to any order, writ,
judgment, award, injunction or decree of any national, state or local court or
governmental or regulatory authority or arbitrator, domestic or foreign,
applicable to the Company or any of its assets, properties or operations.
SECTION 5.17. Litigation. (a) Except as set forth on Schedule 5.17, there
are no claims, actions, suits, proceedings, labor disputes or investigations
pending or, to the knowledge of the Seller and the Company, threatened, before
any national, state or local court or governmental or regulatory authority,
domestic or foreign, or before any arbitrator of any nature, brought by or
against the Company or any of its officers, directors, employees, agents or
Affiliates involving, affecting or relating to the Company, the assets,
properties or rights of the Company or the transactions contemplated by this
Agreement, nor is any basis known to the Seller or the Company for any such
action, suit, proceeding or investigation. Schedule 5.17 sets forth a list and a
summary description of all such pending actions, suits, proceedings, disputes or
investigations. Neither the Company nor its assets, properties or rights is
subject to any order, writ, judgment, award, injunction or decree of any
national, state or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, that negatively affects in any material respect
or might negatively affect in any material respect the business, assets,
properties or rights of the Company, or that would or might interfere with the
transactions contemplated by this Agreement.
(b) Neither the Seller, the Company nor their respective assets, properties
or rights are subject to any order, writ, judgment, award, injunction or decree
of any national, state or local court or governmental or regulatory authority or
arbitrator.
SECTION 5.18. Contracts.
(a) Schedule 5.18 sets forth a complete and correct list and, if such
contract is not in writing, a summary description of all Contracts (as in effect
on the date hereof).
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(b) Each Contract is valid, binding and enforceable against the parties
thereto in accordance with its terms, and is in full force and effect on the
date hereof. The Company has performed all obligations required to be performed
by it to date under, and is not in default or delinquent in performance, status
or any other respect (claimed or actual) in connection with, any Contract, and,
to the knowledge of the Seller and the Company, no event has occurred which,
with due notice or lapse of time, or both, would constitute such a default. To
the knowledge of the Seller and the Company, no other party to any Contract is
in default in respect thereof, and no event has occurred which, with due notice
or lapse of time or both, would constitute such a default. The Seller has
delivered to the Buyer or its representatives true and complete originals or
copies of all the Contracts.
SECTION 5.19. Inventories. The inventories of the Company reflected on the
March 31, 2002 Financial Statements, or acquired by the Company after the date
thereof and prior to the Closing Date, are carried at not more than the lower of
cost or net realizable value, and do not include any obsolete inventory or
surplus inventory for which adequate reserves have not been established on the
March 31, 2002 Financial Statements. As used herein, "obsolete inventory" is
inventory which, at March 31, 2002, was not usable or salable in the lawful and
ordinary course of business of the Company as now conducted because of legal
restrictions, failure to meet specifications, loss of market, damage, physical
deterioration or for any other cause, in each case net of reserves provided
therefor on the Balance Sheet; and "surplus inventory" is inventory that, at
both the six-month anniversary and the eighteen-month anniversary of the Closing
Date, exceeded the Company's requirements of such inventory for twelve months
(based on annualized usage without material reduction in March 31, 2002 margins
for each part number developed during the six-month period succeeding the
Closing Date and including as Obsolete Inventory any part number with respect to
which there are no sales without material reduction in March 31, 2002 margins
during the eighteen-month period succeeding the Closing Date).
SECTION 5.20. Employee Plans.
(a) Schedule 5.20(a) sets forth all "employee benefit plans," as defined in
Section 3(3) of ERISA, and all other employee benefits, policies or payroll
practices, including, without limitation, any retirement, health, insurance,
severance, deferred compensation, bonus, incentive, stock purchase, stock option
or fringe benefit plans or programs maintained or sponsored by the Company, or
with respect to which the Company has any responsibility or liability
(collectively referred to herein as the "Plans"). With respect to the Plans, the
Seller has delivered to the Buyer or its representatives copies of: (i) the plan
documents, and, where applicable, related trust agreements, and any related
agreements which are in writing; (ii) summary plan descriptions; (iii) the most
recent Internal Revenue Service determination letter relating to each Plan for
which a letter of determination was obtained; (iv) to the extent required to be
filed, the most recent Annual Report (Form 5500 Series and accompanying
schedules of each Plan and applicable financial statements) as filed with the
Internal Revenue Service; and (v) audited financial statements, if any.
(b) In all material respects, each Plan conforms to, and its administration
is in compliance with, all applicable requirements of law, including, without
limitation, ERISA and the Code and all of the Plans are in full force and effect
as written, and all premiums,
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contributions and other payments required to be made by the Company under the
terms of any Plan have been made or accrued.
(c) Each Plan maintained by the Company that is intended to be qualified
under Section 401(a) of the Code and each trust maintained pursuant thereto has
been determined to be exempt from federal taxation under Section 501 of the Code
by the Internal Revenue Service and the Company has received a favorable
determination letter from the Internal Revenue Service with respect to each such
Plan. To the knowledge of the Seller and the Company, no circumstances or events
have occurred that could adversely affect the qualified status of any Plan or
related trust. No Plan maintained by the Company that is an employee welfare
benefit plan as defined in Section 3(1) of ERISA is funded through a voluntary
employee beneficiary association as defined in Section 501(c)(9) of the Code.
(d) Neither the Company nor any trade or business (whether or not
incorporated) under common control with the Company within the meaning of
Sections 414(b), (c), (m) or (o) of the Code (the "Controlled Group") has ever
maintained, contributed to or incurred any liability with respect to any plan
subject to Title IV of ERISA or Section 412 of the Code. Neither the Company nor
any member of the Controlled Group has any material liability under Section 4062
of ERISA to the Pension Benefit Guaranty Corporation or to a trustee appointed
under Section 4042 of ERISA. Neither the Company nor any member of the
Controlled Group has engaged in any transaction described in Section 4069 of
ERISA.
(e) There are no multiemployer plans (as defined in SubSection 3(37) of
ERISA) ("Multiemployer Plans") to which the Company or any other member of the
Controlled Group is, or has been, required to make a contribution or other
payment. Neither the Company nor any member of the Controlled Group has
withdrawn in a complete or partial withdrawal from any Multiemployer Plan, nor
has any of them incurred any material liability due to the termination or
reorganization of such a Multiemployer Plan.
(f) There has been no non-exempt prohibited transaction (within the meaning
of Section 4975 of the Code or Part 4 of Subtitle B of Title I of ERISA) with
respect to any Plan or penalty under Section 502(i) of the Code for which the
Company could have any liability.
(g) Except as set forth on Schedule 5.20(g), the Company does not maintain
any Plan providing post-retirement benefits other than Plans qualified under
Section 401(a) of the Code ("Post-Retirement Benefits") or as required under
applicable continuation of coverage laws. The Company is not liable for
Post-Retirement Benefits under any plan not maintained by the Company. The
Company has complied in all material respects with the requirements of Section
4980B of the Code and Sections 601 to 608 of ERISA relating to continuation
coverage for group health plans.
(h) There has been no material violation of ERISA or the Code with respect
to the filing of applicable reports, documents and notices regarding the Plans
with the Secretary of Labor or the Secretary of the Treasury or the furnishing
of required reports, documents or notices to the participants or beneficiaries
of the Plans.
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(i) There are no pending actions, claims or lawsuits which have been
asserted, instituted or, to the knowledge of the Seller and the Company,
threatened, against the Plans, the assets of any of the trusts under the Plans
or the Plan sponsor or the Plan administrator, or, to the knowledge of the
Seller and the Company, against any fiduciary of the Plans with respect to the
operation of the Plans (other than routine benefit claims).
(j) There has been no mass layoff or plant closing as defined by the Worker
Adjustment and Retraining Notification Act or any similar state or local "plant
closing" law with respect to the employees of the Company.
(k) The execution of, and the performance of the transactions contemplated
by, this Agreement will not, either alone or upon the occurrence of subsequent
events, result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee.
(l) There are no Company employee stock option plans outstanding.
SECTION 5.21. Customers and Suppliers. Schedule 5.21 sets forth a complete
and correct list of: (a) all customers whose purchases from the Company exceeded
5% of the net sales of the Company during Fiscal Year 2001; (b) the twenty (20)
largest suppliers by dollar volume of the Company and the aggregate dollar
volume of purchases (broken down by principal categories) by the Company from
such suppliers during Fiscal Year 2001; (c) all distributors of any products of
the Company; and (d) all sales representatives of the Company. Except as set
forth on Schedule 5.21, none of such customers, suppliers, distributors or
representatives has or, to the knowledge of the Seller and the Company, intends
to terminate or change significantly its relationship with the Company.
SECTION 5.22. Insurance. Schedule 5.22 lists the fidelity bonds and the
aggregate coverage amount and type and generally applicable deductibles of all
policies of title, liability, fire, casualty, business interruption, workers'
compensation and other forms of insurance insuring the Company and its assets,
properties and operations. The Seller has furnished a true, complete and
accurate copy of all such policies and bonds to the Buyer or its
representatives. Except as set forth on Schedule 5.22, all such policies and
bonds are in full force and effect, to the knowledge of the Seller and the
Company have been underwritten by financially sound and reputable insurers, are
sufficient for all applicable requirements of law and will not in any way be
affected by or terminated or lapsed by reason of the consummation of the
transactions contemplated by this Agreement. The Company shall maintain the
coverage under all policies and bonds listed on Schedule 5.22 in full force and
effect through the Closing Date. The Company is not in default under any
provisions of any such policy of insurance nor has the Company received notice
of cancellation of any such insurance. There is no claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. To the
knowledge of the Seller and the Company, the insurance maintained by the Company
in connection with its business is adequate in accordance with industry
standards, the requirements of any applicable Leases and is in at least the
minimum amount required by currently applicable environmental regulations.
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SECTION 5.23. Transactions with Directors, Officers and Affiliates. Except
as set forth on Schedule 5.23, the Company is not a party to any agreement or
arrangement with any of the directors, officers or stockholders of the Company
or any Affiliate or family member of any of the foregoing under which it: (a)
leases any real or personal property (either to or from such Person); (b)
licenses technology (either to or from such Person); (c) is obligated to
purchase any tangible or intangible asset from or sell such asset to such
Person; (d) purchases products or services from such Person; (e) pays or
receives commissions, rebates or other payments; or (f) provides or receives any
other material benefit. Except as set forth on Schedule 5.23, the Company does
not employ as an employee or engage as a consultant any family member of any of
the directors, officers or stockholders of the Company. Except as set forth on
Schedule 5.23, to the knowledge of the Seller and the Company, during the past
three years none of the directors, officers or stockholders of the Company, or
any family member of any of such Persons, has been a director or officer of, or
has had any direct or indirect interest in, any Person which during such period
has been a supplier, customer or sales agent of the Company or has competed with
or been engaged in any business of the kind being conducted by the Company. No
Affiliate of the Company owns or has any rights in or to any of the assets,
properties or rights used by the Company in the ordinary course of its
businesses.
SECTION 5.24. Change in Ownership. To the knowledge of the Seller and the
Company, the consummation of the transactions contemplated by this Agreement
will not result in any material adverse change in the business of the Company or
in the loss of the benefits of any material relationship with any customer or
supplier.
SECTION 5.25. Receivables. All notes and accounts receivable payable to or
for the benefit of the Company reflected on the March 31, 2002 Financial
Statements, or acquired by the Company after the date thereof and before the
Closing Date, have been collected or are (or will be) current and collectible in
amounts not less than the aggregate amount thereof (net of reserves established
in accordance with prior practice) carried (or to be carried) on the books of
the Company, and are not subject to any counterclaims or set-offs.
SECTION 5.26. Labor Matters.
(a) Except as set forth on Schedule 5.26(a): (i) the Company is not a party
to any outstanding employment agreements or contracts with officers or employees
of the Company that are not terminable at will, or that provide for the payment
of any bonus or commission; (ii) the Company is not a party to any agreement,
policy or practice that requires it to pay termination or severance pay to
salaried, non-exempt or hourly employees of the Company (other than as required
by law); (iii) the Company is not a party to any collective bargaining agreement
or other labor union contract applicable to employees of the Company nor do the
Seller or the Company know of any activities or proceedings of any labor union
to organize any such employees; and (iv) the Company is not a party to any
consulting agreements.
(b) Except as set forth on Schedule 5.26(b): (i) the Company is in
compliance in all material respects with all applicable laws relating to
employment and employment practices, wages, hours, and terms and conditions of
employment; (ii) there is no unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB") relating to the Company;
(iii) there is no labor strike, material slowdown or material work stoppage or
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lockout pending or, to the knowledge of the Seller and the Company, threatened
against or affecting the Company, and the Company has not experienced any
strike, material slowdown or material work stoppage, lockout or other collective
labor action by or with respect to employees of the Company; (iv) there is no
representation claim or petition pending before the NLRB or any similar foreign
agency and no question concerning representation exists relating to the
employees of the Company; (v) there are no charges with respect to or relating
to the Company pending before the Equal Employment Opportunity Commission or any
state, local or foreign agency responsible for the prevention of unlawful
employment practices; and (vi) the Company has received no notice from any
national, state, local or foreign agency responsible for the enforcement of
labor or employment laws of an intention to conduct an investigation of the
Company and no such investigation is in progress.
(c) Schedule 5.26(c) lists the name, position, starting employment date,
current annual salary and bonus and commissions during Fiscal Year 2001 of each
current employee of the Company.
SECTION 5.27. Environmental Matters. (a) Except as set forth on Schedule
5.27:
(i) The operations of, and the properties owned or operated by, the Company
are, and have been, in compliance with all applicable Environmental Laws and all
permits, registrations, approvals and other authorizations issued thereunder
("Environmental Permits").
(ii) Neither the Company nor the Seller reasonably expect that material
expenditures are or will be necessary for the Company to maintain full
compliance with Environmental Laws currently in effect or proposed or
anticipated to be adopted.
(iii) The Company has obtained, or has made timely and complete application
for or for renewal of, all Environmental Permits required for the operation of
the Company's business and properties, and no additional Environmental Permits
or modifications to Environmental Permits are reasonably expected to be required
for the operation of the Company's business and properties.
(iv) No substance identified or regulated pursuant to any Environmental
Law, including, without limitation, any hazardous substance, hazardous waste,
toxic substance, pollutant, contaminant or petroleum or any fraction thereof
("Hazardous Substance"), has come to be located on, at, beneath or near any real
property currently or formerly owned, operated, leased or used by the Company in
violation of any Environmental Law or in any manner which will give rise to
liability under any Environmental Law.
(v) No real property currently or formerly, owned, operated, leased or used
by the Company contains or formerly contained any underground or aboveground
storage tank, surface impoundment, landfill, land disposal area, polychlorinated
biphenyls, asbestos, asbestos-containing material or urea formaldehyde
insulation.
(vi) The Company has not disposed of, transported or arranged for the
disposal or transportation of any Hazardous Substance at or to any facility with
respect to which
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the Company will be liable for undertaking or paying for any environmental
investigation or any other action to respond to the Release or threatened
Release of any Hazardous Substance or will be required to pay natural resource
damages.
(vii) The Company has not received notice of, nor is there pending or
threatened against the Company, any claim, notice of violation or potential
liability, request for information, investigation, proceeding, order, decree or
lawsuit pursuant to any Environmental Law arising out of the operation of the
Company's business.
(viii) To the knowledge of the Seller and the Company, no other party with
whom the Company has contracted for environmental matters is or has been the
subject of any claim, action or proceeding arising out of the violation or
alleged violation of any Environmental Law or the disposal, arrangement for the
disposal, Release or threatened Release of any Hazardous Substance.
(ix) The Company has not, by agreement or otherwise, assumed any liability
of or duty to indemnify any other Person for any claim, damage or loss arising
out of the use, treatment, storage or disposal of any Hazardous Substance.
(x) No Hazardous Substance has migrated from any real property currently or
formerly owned, operated, leased or used by the Company to any other real
property, nor, to the knowledge of the Seller and the Company, has any Hazardous
Substance migrated from any other real property onto any real property owned,
operated, leased or used by the Company.
(xi) The Company has not committed any act or omission which could give
rise to liability under any Environmental Law.
(xii) There is no condition in existence on, at, beneath or near any real
property owned, leased or used by the Company which could give rise to any claim
against, liability of, or loss by, the Buyer pursuant to Environmental Laws.
(xiii) There are no endangered species, or wetlands, at any of the
properties currently owned or operated by the Company nor is any such property
subject to any current or threatened deed restriction, use restriction,
institutional or engineering control under Environmental Laws.
(xiv) No Lien arising under any Environmental Law has been attached to, or
is threatened against, any property currently owned or operated by the Company.
(xv) None of the property currently owned or operated by the Company is
currently or was previously the subject of any environmental investigation or
response activity and none is identified on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability Information
System or analogous state or local list of sites requiring or which may require
environmental investigation or response activity.
(b) The Seller has provided the Buyer or its representatives with copies of
all (i) Environmental Permits, (ii) notices, demands, claims or actions against
the Company pursuant
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to any Environmental Law, and (iii) reports, data or other documentation related
to all investigations, audits or assessments of environmental conditions at
property owned, leased or used by the Company and the Company's compliance with
Environmental Law.
(c) None of the matters set forth on Schedule 5.27 will have a material
adverse effect on the business, properties or operations of the Company.
SECTION 5.28. Products Liability. (a) (i) There is no notice, demand,
claim, action, suit, inquiry, hearing, proceeding, notice of violation or
investigation of a civil, criminal or administrative nature before any court or
governmental or other regulatory or administrative agency, commission or
authority, domestic or foreign, against or involving any products manufactured,
produced, distributed or sold by or on behalf of the Company (including any
parts or components) (collectively, "Products"), or class of claims or lawsuits
involving the same or similar Product which is pending or, to the knowledge of
the Seller and the Company, threatened, resulting from an alleged defect in
design, manufacture, materials or workmanship of any Product, or any alleged
failure to warn, or from any breach of implied warranties or representations
(collectively, "Product Liability Lawsuits"); (ii) to the knowledge of the
Seller and the Company, there has not been any Occurrence (as hereinafter
defined); and (iii) there has not been, nor is there under consideration or
investigation by the Seller or the Company, any Product rework or retrofit
(collectively, "Retrofits") conducted by or on behalf of the Company.
(b) For purposes of this Section 5.28, the term "Occurrence" shall mean any
accident, happening or event which takes place at any time which is caused or
allegedly caused by any alleged hazard or alleged defect in manufacture, design,
materials or workmanship including, without limitation, any alleged failure to
warn or any breach of express or implied warranties or representations with
respect to, or any such accident, happening or event otherwise involving any
Product that is likely to result in a claim or loss.
SECTION 5.29. Indebtedness Owed to Affiliates. No Indebtedness of the
Company is owed to any Affiliate of the Company.
SECTION 5.30. Accuracy of Information. None of the representations,
warranties or statements of the Seller contained in this Agreement, or in the
exhibits hereto, contains any untrue statement of a material fact.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer hereby represents and warrants to the Seller as follows:
SECTION 6.1. Corporate Organization. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own its
properties and assets and to conduct its businesses as now conducted.
SECTION 6.2. Qualification to Do Business. The Buyer is duly qualified to
do business as a foreign corporation and is in good standing in every
jurisdiction in which the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary
and in which the failure to be so qualified would have a
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material adverse effect on the business, operations, properties, assets or
condition (financial or other) of the Buyer and its subsidiaries taken as a
whole.
SECTION 6.3. Authorization and Validity of Agreement and Escrow Agreement.
The Buyer has all requisite corporate power and authority to enter into this
Agreement and the Escrow Agreement and to carry out its obligations hereunder
and thereunder. The execution and delivery by the Buyer of this Agreement and
the Escrow Agreement and the performance of the Buyer's obligations hereunder
and thereunder have been duly authorized by all necessary corporate action by
the Board of Directors of the Buyer, and no other corporate proceedings on the
part of the Buyer are necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed and delivered by the Buyer
and constitutes the Buyer's valid and binding obligation enforceable against the
Buyer in accordance with its terms.
SECTION 6.4. No Conflict or Violation. The execution, delivery and
performance by the Buyer of this Agreement and the Escrow Agreement do not and
will not violate or conflict with any provision of the Certificate of
Incorporation or By-laws of the Buyer and do not and will not violate any
provision of law, or any order, judgment or decree of any court or other
governmental or regulatory authority, nor violate nor will result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
contract, lease, loan agreement, mortgage, security agreement, trust indenture
or other agreement or instrument to which the Buyer is a party or by which it is
bound or to which any of its properties or assets is subject.
SECTION 6.5. Consents and Approvals. The execution, delivery and
performance by the Buyer of this Agreement and the Escrow Agreement do not
require the consent or approval of, or filing with, any Governmental Entity or
other Person, except for such consents, approvals and filings, of which the
failure to obtain or make would not, individually or in the aggregate, have a
material adverse effect on the ability of the Buyer to consummate the
transactions contemplated hereby.
SECTION 7. COVENANTS OF THE SELLER.
The Seller hereby covenants as follows:
SECTION 7.1. Conduct of Business Before the Closing Date. Without the prior
written consent of the Buyer, between the date hereof and the Closing Date, the
Seller shall not permit the Company to, except as required or expressly
permitted pursuant to the terms hereof:
(i) make any change in the conduct of the business of the Company or enter
into any transaction other than in the ordinary course of business consistent
with past practice;
(ii) make any change in its Articles of Incorporation or By-laws; issue any
additional shares of capital stock or equity securities or grant any option,
warrant or right to acquire any capital stock or equity securities or issue any
security convertible into or exchangeable for capital stock or alter in any way
any of its outstanding securities or make any change in outstanding shares of
capital stock or other ownership interests or the capitalization of the Company,
whether by reason of a reclassification, recapitalization, stock split or
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combination, exchange or readjustment of shares, stock dividend or otherwise;
(iii) make any sale, assignment, transfer, abandonment or other conveyance
of the assets, properties or rights of the Company or any material part thereof,
except transactions pursuant to existing Contracts set forth in the Schedules
hereto and dispositions of inventory or of worn-out or obsolete equipment for
fair or reasonable value in the ordinary course of business consistent with past
practice;
(iv) subject any of the assets, properties or rights of the Company, or any
part thereof, to any Lien or suffer such to exist, other than such Liens as may
arise in the ordinary course of business consistent with past practice by
operation of law and that will not, individually or in the aggregate, have a
material adverse effect on the Company;
(v) redeem, retire, purchase or otherwise acquire, directly or indirectly,
any shares of the capital stock of the Company or declare, set aside or pay any
dividends or other distribution in respect of such shares;
(vi) acquire any assets, raw materials or properties, or enter into any
other transaction, other than in the ordinary course of business consistent with
past practice;
(vii) enter into any new (or amend any existing) employee benefit plan,
program or arrangement or any new (or amend any existing) employment, severance
or consulting agreement, grant any general increase in the compensation of
officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or grant any increase in
the compensation payable or to become payable to any employee, except in
accordance with pre-existing contractual provisions or consistent with past
practice;
(viii) make or commit to make any capital expenditure in excess of $20,000;
(ix) pay, lend or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement or arrangement with, any of
its Affiliates;
(x) fail to keep in full force and effect insurance comparable in amount
and scope to coverage currently maintained;
(xi) take any other action that would cause any of the representations and
warranties made by the Seller in this Agreement not to remain true and correct;
(xii) make any change in any method of accounting or accounting principle,
method, estimate or practice, except for any such change required by reason of a
concurrent change in GAAP, or write down the value of any inventory or write off
as uncollectible any accounts receivable except in the ordinary course of
business consistent with past practice;
(xiii) make, change or revoke any election or method of accounting with
respect to Taxes affecting or relating to the Company;
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(xiv) enter into any closing or other agreement or settlement with respect
to Taxes affecting or relating to the Company;
(xv) settle, release or forgive any claim or litigation or waive any right
thereto;
(xvi) make, enter into, modify, amend in any material respect or terminate
any Contract, bid or expenditure, where such Contract, bid or expenditure is for
(A) a Contract entailing payments in excess of $20,000 or (B) a Contract having
a term in excess of six (6) months;
(xvii) amend, terminate or surrender any Lease;
(xviii) create, incur, assume or suffer to exist any Indebtedness; or
(xix) commit to do any of the foregoing.
SECTION 7.2. Consents and Approvals. The Seller shall, and shall cause the
Company to, at the cost and expense of the Seller, (a) use their commercially
reasonable efforts to obtain all necessary consents, waivers, authorizations and
approvals of all Governmental Entities, and of all other Persons, required in
connection with the execution, delivery and performance by the Seller of this
Agreement, the Employment Agreement and the Escrow Agreement, in connection with
the execution, delivery and performance by the Company of the Employment
Agreement and in connection with the execution, delivery and performance by
Rhonda M. Weldon of the Letter Agreement, and (b) diligently assist and
cooperate with the Buyer, at the Buyer's cost, in preparing and filing all
documents required to be submitted by the Buyer to any Governmental Entity, in
connection with such transactions and in obtaining any governmental consents,
waivers, authorizations or approvals which may be required to be obtained by the
Buyer in connection with such transactions (which assistance and cooperation
shall include, without limitation, timely furnishing to the Buyer all
information concerning the Company or the Seller that counsel to the Buyer
determines is required to be included in such documents or would be helpful in
obtaining any such required consent, waiver, authorization or approval).
SECTION 7.3. Access to Properties and Records. The Seller shall cause the
Company to afford to the Buyer, and to the accountants, counsel and
representatives of the Buyer, access during normal business hours throughout the
period prior to the Closing Date (or the earlier termination of this Agreement
pursuant to Section 12) to all properties, books, Contracts, commitments and
files and records (including, but not limited to, Tax Returns and correspondence
with accountants) of the Company and, during such period, shall furnish promptly
to the Buyer all other information concerning the Company, its properties and
personnel as the Buyer may reasonably request, provided that no investigation or
receipt of information pursuant to this Section 7.3 shall qualify any
representation or warranty of the Seller or the conditions to the obligations of
the Buyer. The Seller also shall cause the Company to afford to the Buyer full
access to all assets and operations of the Company throughout the period prior
to the Closing Date including, without limitation, access for purposes of visual
inspection,
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record review or testing, at the Buyer's sole option, of soil, groundwater,
structural and mechanical components, tanks or other conditions.
SECTION 7.4. Negotiations. From and after the date hereof and until the
earlier to occur of the Closing Date or the termination of this Agreement
pursuant to Section 12, the Seller shall not, and shall cause the officers and
directors of the Company and any Persons acting on behalf of the Seller or the
Company not to, directly or indirectly, encourage, solicit, engage in
discussions or negotiations with, or provide any information to, any Person or
group (other than the Buyer or its representatives) concerning any merger, sale
of substantial assets, purchase or sale of shares of capital stock or similar
transaction involving the Company or any other transaction inconsistent with the
transactions contemplated hereby. The Seller shall promptly communicate to the
Buyer any inquiries or communications concerning any such transaction which he
or the Company may receive or of which he or the Company may become aware.
SECTION 7.5. Commercially Reasonable Efforts. Upon the terms and subject to
the conditions of this Agreement, the Seller will use, and will cause the
Company to use, its commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable consistent with applicable law to consummate and make effective the
transactions contemplated hereby.
SECTION 7.6. Notice of Breach. Through the Closing Date, the Seller shall
promptly give written notice with particularity upon having knowledge of any
matter that may constitute a breach of any representation, warranty, agreement
or covenant contained in this Agreement.
SECTION 7.7. Covenant Not to Compete.
(a) The Seller shall not and shall cause the Seller's Affiliates not to,
for a period of five years after the later to occur of the Closing Date and the
termination of the Seller's employment with the Company, compete with the
Company or engage or participate, directly or indirectly, in the business or
businesses which are engaged in by the Company immediately prior to the Closing
in any geographical area where such business or businesses are engaged in or
proposed to be engaged in by the Company immediately prior to the Closing.
(b) The Seller agrees that a monetary remedy for a breach of the agreement
set forth in Section 7.7(a) hereof will be inadequate and impracticable and
further agrees that such a breach would cause the Buyer irreparable harm, and
that the Buyer shall be entitled to temporary and permanent injunctive relief
without the necessity of proving actual damages. In the event of such a breach,
the Seller agrees that the Buyer shall be entitled to such injunctive relief,
including temporary restraining orders, preliminary injunctions and permanent
injunctions, as a court of competent jurisdiction shall determine.
(c) If any provision of this Section 7.7 is invalid in part, it shall be
curtailed, both as to time and location, to the minimum extent required for its
validity under the laws of the United States and shall be binding and
enforceable with respect to the Seller as so curtailed.
SECTION 7.8. Non-Solicitation of Employees. The Seller shall not, and shall
cause the Seller's Affiliates not to, for the five-year period commencing on the
later to occur of
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the Closing Date and the termination of the Seller's employment with the
Company, make, offer, solicit or induce to enter into, any written or oral
arrangement, agreement or understanding regarding employment or retention as a
consultant with any Person who was, on the date hereof, a full-time employee of
the Company.
SECTION 8. COVENANTS OF THE BUYER.
SECTION 8.1. Actions Before Closing Date. The Buyer shall not take any
action which shall cause it to be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement. The Buyer shall
use commercially reasonable efforts to perform and satisfy all conditions to
Closing to be performed or satisfied by it under this Agreement as soon as
possible, but in no event later than the Closing Date.
SECTION 8.2. Consents and Approvals. The Buyer shall, at the cost and
expense of the Buyer, (a) use its commercially reasonable efforts (which in no
event shall require the Buyer or any Affiliate of the Buyer to divest any
assets) to obtain all necessary consents, waivers, authorizations and approvals
of all Governmental Entities, and of all other Persons, required in connection
with the execution, delivery and performance by the Buyer of this Agreement and
the Escrow Agreement and (b) diligently assist and cooperate with the Seller in
preparing and filing all documents required to be submitted by the Seller to any
Governmental Entity, in connection with such transactions and in obtaining any
governmental consents, waivers, authorizations or approvals which may be
required to be obtained by the Seller in connection with such transactions
(which assistance and cooperation shall include, without limitation, timely
furnishing to the Seller all information concerning the Buyer that counsel to
the Seller determines is required to be included in such documents or would be
helpful in obtaining any such required consent, waiver, authorization or
approval).
SECTION 8.3. Inventories. The Buyer shall cause to be taken a physical
count of the inventories of the Company as of the second and fourth monthly
anniversary of the Closing Date.
SECTION 8.4. Cash Balances. As soon as practicable but not more than five
Business Days after the Closing Date, the Buyer shall pay the Seller an amount
equal to the cash in the Company's bank account at the close of business on the
Closing Date.
SECTION 9. INDEMNIFICATION.
SECTION 9.1. Survival. The representations and warranties made by the
Seller and the Buyer in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Closing and the consummation of the
transactions contemplated by this Agreement, for a period terminating on the
second anniversary date of the Closing Date; provided, however, that the
representations and warranties contained in Sections 5.9 and 5.20 shall survive
for a period equal to the later of the second anniversary date of the Closing
Date and the applicable statute of limitations, the representations and
warranties contained in Section 5.16 and 5.17 shall survive for a period equal
to the later of the second anniversary date of the Closing Date, and the statute
of limitations applicable to a third party bringing the suit, action, claim or
proceeding that is the basis for the breach of such representations and
warranties and the representations and
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warranties contained in Sections 5.5, and 5.27 shall survive indefinitely. No
claim or action for indemnification under this Section 9 shall be asserted or
maintained by any party hereto after the expiration of the period referred to in
the preceding sentence with respect to the reason for which indemnification is
sought, except for claims made in writing prior to such expiration or actions
(whether instituted before or after such expiration) based on any claim made in
writing prior to such expiration. The covenants made by the Seller and the Buyer
in this Agreement shall survive the Closing and the consummation of the
transactions contemplated by this Agreement.
SECTION 9.2. Indemnification by the Seller. (a) Notwithstanding the Closing
and regardless of any investigation at any time made by or on behalf of the
Buyer or of any knowledge or information that the Buyer may have, the Seller
shall indemnify and fully defend, save and hold the Buyer, any Affiliate of the
Buyer, and their respective directors, officers, agents, employees and directors
of the Company designated by the Buyer or any Affiliate of the Buyer (the "Buyer
Indemnitees"), harmless if any Buyer Indemnitee shall at any time or from time
to time suffer any damage, liability, obligation, loss, cost, expense (including
all reasonable attorneys' fees), deficiency, interest, penalty, impositions,
assessments or fines (collectively, "Losses") arising out of or resulting from,
or shall pay or become obliged to pay any sum on account of, one or more of the
following:
(i) any untruth or inaccuracy in any representation or certification of the
Seller or the breach of any warranty of the Seller contained in this Agreement
or in any certificate delivered to the Buyer in connection with the Closing, in
each case without regard to any limitation as to "materiality" or "material
adverse effect" contained therein;
(ii) any failure of the Seller duly to perform or observe any term,
provision, covenant, agreement or condition contained in this Agreement on the
part of the Seller to be performed or observed; or
(iii) the action entitled D&D Group Pty, Ltd., an Australian Corporation
and D&D Technologies (USA), Inc. a California Corporation v. Nationwide
Industries, Inc., a Florida Corporation, for infringement of U.S. Patent Nos.
6,058,747 and 0439,497 in the United States District Court for the Central
District of California Southern Division;
provided, however, that the Seller shall have no obligation to make any payment
under Section 9.2(a)(i) with respect to any representation or warranty made in
good faith without actual knowledge or notice of falsity unless the aggregate
amount to which all Buyer Indemnitees are entitled by reason of all such claims
under Section 9.2(a)(i) exceeds $115,000, it being understood that once such
amount is exceeded, the aggregate of all such claims in excess of such amount
shall be payable by the Seller on demand by the Buyer; provided, however, that
the foregoing limitation shall not apply with respect to any representation or
warranty contained in Section 5.5, Section 5.9, Section 5.11, Section 5.12 or
Section 5.29 of this Agreement.
(b) The Buyer shall be entitled, at its option, to deposit any Contingent
Payment payable to the Seller in accordance with Section 3 of this Agreement
into escrow as a source of payment for any amounts due by the Seller to the
Buyer in accordance with the terms of this Agreement which are the subject of a
Tax Claim, Real Estate Claim or General Claim (each as
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defined in the Escrow Agreement) existing on the date of such deposit,
including, without limitation, in accordance with this Section 9, such amounts
(the "Contingent Payment Escrow") to be held by the Escrow Agent subject to the
terms and conditions of the Escrow Agent.
(c) Except as set forth in the proviso to Section 2.2(a) of this Agreement
with respect to inventory and accounts receivable, the Buyer shall be precluded
from asserting a claim for indemnification under this Section 9.2 to the extent
that such claim arises out of matters that were covered in substance by the
purchase price adjustments contained in Section 2.2(d) and Sections 2.2(j), such
precluded claims to include, for example, (i) a claim that the Financial
Statements were inaccurate in violation of Section 5.7 because of the
misstatement of any component of the working capital adjustment contained in
Section 2.2(d), and (ii) a claim that the Financial Statements were inaccurate
in violation of Section 5.7 because of a misstatement of inventory or cost of
goods sold.
SECTION 9.3. Indemnification by the Buyer. Notwithstanding the Closing, the
Buyer shall indemnify and agree to fully defend, save and hold the Seller
harmless if the Seller shall at any time or from time to time suffer any Losses
arising out of or resulting from, or shall pay or become obligated to pay any
sum on account of, one or more of the following:
(a) any untruth or inaccuracy in any representation or certification of the
Buyer or the breach of any warranty of the Buyer contained in this Agreement or
in any certificate delivered to the Seller in connection with the Closing, in
each case without regard to any limitation as to "materiality" or "material
adverse effect" contained therein; or
(b) any failure of the Buyer duly to perform or observe any term,
provision, covenant, agreement or condition contained in this Agreement on the
part of the Buyer to be performed or observed;
provided, however, that the Buyer shall have no obligation to make any payment
under Section 9.3(a) with respect to any representation or warranty made in good
faith without actual knowledge or notice of falsity unless the aggregate amount
to which the Seller is entitled by reason of all such claims under Section
9.3(a) exceeds $115,000, it being understood that once such amount is exceeded,
the aggregate of all such claims in excess of such amount shall be payable by
the Buyer on demand by the Seller.
SECTION 9.4. Procedures for Indemnification. If a party entitled to
indemnification under this Section 9 (an "Indemnitee") asserts that a party
obligated to indemnify it under this Section 9 (an "Indemnitor") has become
obligated to such Indemnitee pursuant to Section 9.2 or 9.3, or if any suit,
action, investigation, claim or proceeding is begun, made or instituted as a
result of which the Indemnitor may become obligated to an Indemnitee hereunder,
such Indemnitee shall give written notice to the Indemnitor. The Indemnitor
agrees to defend, contest or otherwise protect the Indemnitee against any such
suit, action, investigation, claim or proceeding at its sole cost and expense.
The Indemnitee shall have the right, but not the obligation, to participate at
its own expense in the defense thereof by counsel of the Indemnitee's choice and
shall in any event cooperate with and assist the Indemnitor to the extent
reasonably possible. If the Indemnitor fails timely to defend, contest or
otherwise protect against such suit, action, investigation, claim or proceeding,
the Indemnitee shall have the right to do so, including, without limitation, the
right to make any compromise or settlement thereof, and the Indemnitee shall be
entitled to recover the entire cost thereof from the Indemnitor, including,
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without limitation, reasonable attorneys' fees, disbursements and amounts paid
as the result of such suit, action, investigation, claim or proceeding.
SECTION 9.5. Sole Remedy. Subject to the terms of this Agreement, the
indemnification provided by this Section 9 and recovery against the Real Estate
Escrow is the sole and exclusive remedy of the Buyer Indemnitees against the
Seller for Losses arising out of Section 5.12 of this Agreement.
SECTION 10. CONDITIONS PRECEDENT TO PERFORMANCE BY THE SELLER.
The obligations of the Seller to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, at or before the Closing Date,
of the following conditions, any one or more of which (other than Section 10.4)
may be waived by the Seller in his sole discretion:
SECTION 10.1. Representations and Warranties of the Buyer. All
representations and warranties made by the Buyer in this Agreement shall be true
and correct in all material respects (except for each of the representations and
warranties made by the Buyer that are limited by materiality, which shall be
true and correct in all respects) on and as of the Closing Date as if again made
by the Buyer on and as of such date, and the Seller shall have received a
certificate to that effect dated the Closing Date and signed by any officer of
the Buyer.
SECTION 10.2. Performance of the Obligations of the Buyer. The Buyer shall
have performed in all material respects all obligations required under this
Agreement to be performed by it on or before the Closing Date, and the Seller
shall have received a certificate to that effect dated the Closing Date and
signed by any officer of the Buyer.
SECTION 10.3. Consents and Approvals. All consents, waivers, authorizations
and approvals of any Governmental Entity, and of any other Person, required in
connection with the execution, delivery and performance of this Agreement and
set forth on Schedule 10.3 shall have been duly obtained and shall be in full
force and effect on the Closing Date.
SECTION 10.4. No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or other governmental or
regulatory authority, domestic or foreign, nor any statute, rule, regulation,
decree or executive order promulgated or enacted by any Governmental Entity that
declares this Agreement invalid or unenforceable in any respect or which
prevents the consummation of the transactions contemplated hereby shall be in
effect; and no action or proceeding before any court or regulatory authority,
domestic or foreign, shall have been instituted or threatened by any
Governmental Entity or by any other Person, which seeks to prevent or delay the
consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement, and which in any
such case has a reasonable likelihood of success in the opinion of counsel to
the Seller.
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SECTION 10.5. Opinion of Counsel. The Seller shall have received an
opinion, dated as of the Closing Date, from Willkie Farr & Gallagher, covering
the matters set forth on Exhibit D to be covered by each such opinion, subject
in each case to customary qualifications, limitations and qualifications for
opinions given in transactions of the kind contemplated hereby.
SECTION 10.6. Escrow Agreement. The Buyer shall have executed and delivered
to the Seller the Escrow Agreement and the Escrow Agreement shall be in full
force and effect and the Buyer shall not be in breach thereof.
SECTION 10.7. Other Closing Documents. The Seller shall have received such
other certificates, instruments and documents in confirmation of the
representations and warranties of the Buyer or in furtherance of the
transactions contemplated by this Agreement as the Seller or his counsel may
reasonably request.
SECTION 10.8. Legal Matters. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of the
Buyer under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the Buyer in furtherance of
the transactions contemplated hereby, shall be reasonably satisfactory in form
and substance to counsel to the Seller.
SECTION 11. CONDITIONS PRECEDENT TO PERFORMANCE BY THE BUYER.
The obligations of the Buyer to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, at or before the Closing Date of
the following conditions, any one or more of which (other than Section 11.4) may
be waived by the Buyer in its sole discretion:
SECTION 11.1. Representations and Warranties of the Seller. All
representations and warranties made by the Seller in this Agreement shall be
true and correct in all material respects (except for each of the
representations and warranties made by the Seller that are limited by
materiality, which shall be true and correct in all respects) on and as of the
Closing Date as if again made by the Seller on and as of such date, and the
Buyer shall have received a certificate to that effect dated the Closing Date
and signed by the Seller.
SECTION 11.2. Performance of the Obligations of the Seller. The Seller
shall have performed in all material respects all obligations required under
this Agreement to be performed by it on or before the Closing Date and the Buyer
shall have received a certificate to that effect dated the Closing Date and
signed by the Seller.
SECTION 11.3. Consents and Approvals. All consents, waivers, authorizations
and approvals of any Governmental Entity and of any other Person, required in
connection with the execution, delivery and performance of this Agreement shall
have been duly obtained and shall be in full force and effect on the Closing
Date.
SECTION 11.4. No Violation of Orders. No preliminary or permanent
injunction or other order issued by any court or governmental or regulatory
authority, domestic
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or foreign, nor any statute, rule, regulation, decree or executive order
promulgated or enacted by any Governmental Entity, which declares this Agreement
invalid or unenforceable in any respect or prevents the consummation of the
transactions contemplated hereby, or which materially and adversely affects the
assets, properties, operations, prospects, net income or financial condition of
the Company shall be in effect; and no action or proceeding before any court or
governmental or regulatory authority, domestic or foreign, shall have been
instituted or threatened by any Governmental Entity or by any other Person which
seeks to prevent or delay the consummation of the transactions contemplated by
this Agreement or which challenges the validity or enforceability of this
Agreement, and which in either such case has a reasonable likelihood of success
in the opinion of counsel to the Buyer.
SECTION 11.5. No Material Adverse Change. During the period from December
31, 2001 to the Closing Date there shall not have been any material adverse
change in the assets, properties, business, operations, prospects, net income or
financial condition of the Company.
SECTION 11.6. Opinion of Counsel. The Buyer shall have received an opinion,
dated as of the Closing Date from Thomas P. McNamara, P.A., covering the matters
set forth on Exhibit E, subject to customary qualifications, limitations and
qualifications for opinions given in transactions of the kind contemplated
hereby.
SECTION 11.7. Employment Agreement. The Seller shall have executed and
delivered to the Company the Employment Agreement and the Employment Agreement
shall be in full force and effect and the Seller shall not be in breach thereof.
SECTION 11.8. Escrow Agreement. The Seller shall have executed and
delivered to the Buyer the Escrow Agreement and the Escrow Agreement shall be in
full force and effect and the Seller shall not be in breach thereof.
SECTION 11.9. Company Facility Purchase Agreement; Lease Agreement. W.I.
Commercial Properties, Inc. shall have executed the Company Facility Purchase
Agreement, the Company Facility Purchase Agreement shall be in full force and
effect and W.I. Commercial Properties, Inc. shall not be in breach thereof and
the Company shall have executed a Lease with W.I. Commercial Properties, Inc.
with respect to the Company Facility in form satisfactory to the Buyer, such
Lease shall be in full force and effect and neither the Company nor W.I.
Commercial Properties, Inc. shall be in breach thereof.
SECTION 11.10. Releases by Directors and Officers. There shall have been
delivered to the Buyer releases by the officers and directors of the Company of
all claims against the Company except for compensation and expenses payable to
such officers and directors up to the Closing Date for the then current pay
period in the form of Exhibit F.
SECTION 11.11. Lease Estoppels. The Seller shall have obtained and
delivered to the Buyer a signed estoppel letter from the Company and
Purification Technologies, Inc., each as lessee under separate Leases with W.I.
Commercial Properties, Inc., which estoppel letters (i) shall be dated not more
than twenty days prior to the Closing, (ii) shall be substantially in the form
of, and shall set forth the information referred to on, the general form of
estoppel
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letter attached hereto as Exhibit G, and (iii) shall contain such additional
Lease-specific information, approvals, consents, clarifications, and/or
assurances as the Buyer may deem necessary and require after reviewing such
Lease. The Buyer may decline to approve either estoppel letter if it does not
meet the foregoing requirements or sets forth information that is inconsistent
with the Seller's representations in this Agreement or otherwise substantively
unsatisfactory to the Buyer.
SECTION 11.12. Letter Agreement. Rhonda M. Weldon shall have executed and
delivered to the Buyer the Letter Agreement and the Letter Agreement shall be in
full force and effect and Rhonda M. Weldon shall not be in breach thereof.
SECTION 11.13. Guarantees. The Company shall be released as a guarantor of
any Indebtedness outstanding on the Closing Date, including without limitation
the Indebtedness set forth on Scheduled 11.13 hereto, such release to be
acceptable to the Buyer and not require any payment by the Company to any
Person.
SECTION 11.14. Other Closing Documents. The Buyer shall have received such
other certificates, instruments and documents in confirmation of the
representations and warranties of the Seller or in furtherance of the
transactions contemplated by this Agreement as the Buyer or its counsel may
reasonably request.
SECTION 11.15. Legal Matters. All certificates, instruments, opinions and
other documents required to be executed or delivered by or on behalf of the
Seller under the provisions of this Agreement, and all other actions and
proceedings required to be taken by or on behalf of the Seller or the Company in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel to the Buyer.
SECTION 12. TERMINATION.
SECTION 12.1. Conditions of Termination. Notwithstanding anything to the
contrary contained herein, this Agreement may be terminated at any time before
the Closing:
(a) By mutual consent of the Seller and the Buyer;
(b) By the Buyer if the Seller has breached any representation, warranty,
covenant or agreement contained in this Agreement and has not cured such breach
within ten (10) Business Days after written notice to the Seller (provided, that
the Buyer is not then in material breach of the terms of this Agreement, and
provided, further, that no cure period shall be required for a breach which by
its nature cannot be cured) such that the conditions set forth in Section 11.1
or Section 11.2 hereof, as the case may be, will not be satisfied;
(c) By the Seller if the Buyer has breached any representation, warranty,
covenant or agreement contained in this Agreement and has not cured such breach
within ten (10) Business Days after written notice to the Buyer (provided, that
the Seller is not then in material breach of the terms of this Agreement, and
provided, further, that no cure period shall be required for a breach which by
its nature cannot be cured) such that the conditions set forth in Section 10.1
or Section 10.2 hereof, as the case may be, will not be satisfied;
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(d) By the Seller or the Buyer if: (i) there shall be a final,
non-appealable order of a federal or state court in effect preventing
consummation of the transactions contemplated hereby; or (ii) there shall be any
final action taken, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the transactions contemplated
hereby by any Governmental Entity which would make consummation of the
transactions contemplated hereby illegal; or
(e) By the Seller or the Buyer if the Closing shall not have been
consummated by June 30, 2002, provided that the right to terminate this
Agreement under this Section 12.1(e) shall not be available to any party whose
failure to fulfill any material obligation under this Agreement has been both
willful and the cause of, or resulted in, the failure of the Closing to occur on
or before such date.
SECTION 12.2. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 12.1 hereof, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of the Seller or the Buyer, or their respective officers, directors,
stockholders, partners, option holders or other Persons under their control,
except to the extent that such termination results from the willful breach by a
party hereto of any of its representations, warranties, covenants or agreements
set forth in this Agreement, and provided that the provisions of Sections 9, 12
and 14 hereof shall remain in full force and effect and survive any termination
of this Agreement.
SECTION 13. TAX MATTERS
The following provisions shall govern the allocation of responsibility
between the Buyer and the Seller for certain tax matters following the Closing
Date:
SECTION 13.1. Tax Periods Ending on or Before the Closing Date. The Buyer
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
which are filed after the Closing Date. The Buyer shall permit the Seller to
review and comment on each such Tax Return described in the preceding sentence
prior to filing. The Seller shall reimburse the Buyer for Taxes of the Company
with respect to such periods within fifteen (15) days after payment by the Buyer
or the Company of such Taxes, except to the extent such Taxes were provided for
on the Closing Date Financial Statements.
SECTION 13.2. Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer 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. The Seller shall pay to the Buyer
within fifteen (15) days after the date on which Taxes are paid with respect to
such periods an amount equal to the portion of such Taxes which relates to the
portion of such taxable period ending on the Closing Date, except to the extent
such Taxes were provided for on the Closing Date Financial Statements. For
purposes of this Section 13.2, in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be
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the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days in the taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
taxable period and (y) in the case of any Tax based upon or related to income or
receipts be deemed equal to the amount which would be payable if the relevant
taxable period ended on the Closing Date. Any credits relating to a taxable
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Company.
SECTION 13.3. Cooperation on Tax Matters. (a) The Buyer and the Seller
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of all Tax Returns and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such 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 Seller shall deliver all of the Company's Tax
records at Closing, and the Buyer shall thereafter cause the Company 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 the
Buyer or the Seller, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority.
(b) The Buyer and the Seller further agree, upon request, to cooperate
fully in seeking to obtain any certificate or other document from any
Governmental Entity 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).
SECTION 13.4. Tax Sharing Agreements. Except as set forth on Schedule 13.4,
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 or have any liability thereunder.
SECTION 13.5. Certain Taxes. Any transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) imposed by any governmental subdivision upon the Seller in connection
with this Agreement shall be paid by the Seller when due, and the Seller will,
at the Seller's own expense, file all necessary Tax Returns and other
documentation with respect to any such applicable transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, the Buyer will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
SECTION 14. MISCELLANEOUS.
SECTION 14.1. Successors and Assigns. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations
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hereunder without the prior written consent of the other parties hereto and any
such attempted assignment without such prior written consent shall be void and
of no force and effect; provided, however, that the Buyer may assign its rights
hereunder to an Affiliate; provided, further, however, that no such assignment
shall reduce or otherwise vitiate any of the obligations of the Buyer hereunder.
This Agreement shall inure to the benefit of and shall be binding upon the
successors and permitted assigns of the parties hereto.
SECTION 14.2. Governing Law, Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of Florida, without giving effect to the principles of conflicts of
laws thereof. The parties hereto irrevocably elect as the sole judicial forum
for the adjudication of any matters arising under or in connection with this
Agreement, and consent to the jurisdiction of, the court of the United States of
America for the Middle District of Florida.
SECTION 14.3. Expenses. The Seller shall pay any legal, accounting and
other fees, expenses and costs incurred by the Company in connection with this
Agreement and the transactions contemplated hereby. All of the other fees,
expenses and costs incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party hereto incurring
such fees, expenses and costs.
SECTION 14.4. Broker's and Finder's Fees. The Buyer represents and warrants
that it has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement, other than Economic Enterprises,
Inc., whose fees and expenses shall be the responsibility of the Buyer and,
insofar as the Buyer knows, no other Person is entitled to any commission or
finders fee in connection with any of these transactions. The Seller represents
and warrants that neither the Seller nor the Company has dealt with a broker or
finder in connection with any of the transactions contemplated by this Agreement
and, insofar as the Seller or the Company know, no Person is entitled to any
commission or finder's fee in connection with any of these transactions.
SECTION 14.5. Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
SECTION 14.6. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the day after delivery to Federal Express or similar overnight courier
or the Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:
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If to the Seller:
Nationwide Industries, Inc.
10333 Windhorst Road
Tampa, Florida 33619
Attn: Mark C. Weldon
Telecopy: (813) 490-0545
Copy to:
Thomas P. McNamara, P.A.
2909 Bay to Bay Blvd.
Tampa, Florida 33629
Attn: Thomas P. McNamara
Telecopy: (813) 837-1532
If to the Buyer:
P&F Industries, Inc.
300 Smith Street
Farmingdale, NY 11735
Attn: Joseph A. Molino, Jr., Vice President
Telecopy: (631) 694 1836
Copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
Attn: Neil Novikoff, Esq.
Telecopy: (212) 728-8111
Any party may change its address for the purpose of this Section by giving
the other party written notice of its new address in the manner set forth above.
SECTION 14.7. Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as a further or
continuing waiver of any such condition, or of the breach of any other
provision, term, covenant, representation or warranty of this Agreement.
SECTION 14.8. Public Announcements. The parties agree that after the
signing of this Agreement, the Seller shall not, and shall not permit the
Company to, make any press release or public announcement concerning the
transactions contemplated hereby without the prior written approval of the Buyer
unless a press release or public amendment is required by
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law. Before the Buyer makes any such announcement or other disclosure, it agrees
to give the Seller prior notice and an opportunity to comment on the proposed
disclosure.
SECTION 14.9. Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the transactions
contemplated hereby and supersedes and replaces all prior and contemporaneous
agreements and understandings, oral or written, with regard to such
transactions. All Exhibits and Schedules hereto and any documents and
instruments delivered pursuant to any provision hereof are expressly made a part
of this Agreement as fully as though completely set forth herein.
SECTION 14.10. Parties in Interest. Nothing in this Agreement is intended
to confer any rights or remedies under or by reason of this Agreement on any
Persons other than the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement is intended to relieve or discharge
the obligations or liability of any third Persons to the Seller or the Buyer. No
provision of this Agreement shall give any third parties any right of
subrogation or action over or against the Seller or the Buyer.
SECTION 14.11. Scheduled Disclosures. Disclosure of any matter, fact or
circumstance in a Schedule to this Agreement shall be specific as to the Section
and subsection of this Agreement to which such disclosure applies and shall not
be deemed to be disclosure thereof for purposes of any other section, subsection
or Schedule hereto.
SECTION 14.12. Section and Paragraph Headings; Transactions Contemplated by
this Agreement. The Section and paragraph headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
SECTION 14.13. Knowledge. References in this Agreement to (i) the knowledge
of the Seller shall refer to the knowledge of the Seller, (ii) the knowledge of
the Company shall refer to the knowledge of the Seller or any of the Company's
officers or directors and (iii) the knowledge of the Buyer shall refer to the
knowledge of any of the Buyer's officers or directors.
SECTION 14.14. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
P&F INDUSTRIES, INC.
By: /s/ Richard A. Horowitz
------------------------------
Richard A. Horowitz
Chief Executive Officer
/s/ Mark C. Weldon
------------------------------
Mark C. Weldon
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