Exhibit 2.4
ASSET PURCHASE AGREEMENT
among
NATIONWIDE PRECISION PRODUCTS CORP.,
THE STOCKHOLDERS LISTED ON SCHEDULE 1 ATTACHED HERETO
and
NATIONWIDE ACQUISITION DELAWARE, INC.
dated as of February 11, 1999
TABLE OF CONTENTS
RECITALS..........................................................................................................1
ARTICLE I
DEFINITIONS................................................................................................1
1.1 Definitions........................................................................................1
ARTICLE II
SALE AND PURCHASE OF ASSETS................................................................................8
2.1 Purchased Assets...................................................................................8
2.2 Excluded Assets...................................................................................10
2.3 Nonassignable Contracts, Leases and Permits.......................................................11
ARTICLE III
ASSUMPTION OF LIABILITIES.................................................................................12
3.1 Liabilities Assumed by Purchaser..................................................................12
3.2 Liabilities Not Assumed by Purchaser..............................................................13
ARTICLE IV
CONSIDERATION FOR PURCHASED ASSETS; CLOSING...............................................................15
4.1 Purchase Price....................................................................................15
4.2 Estimated Closing Working Capital.................................................................15
4.3 Post-Closing Adjustment...........................................................................15
4.4 Adjustments to Purchase Price.....................................................................17
4.5 Allocation of Purchase Price......................................................................17
ARTICLE V
CLOSING AND CLOSING DELIVERIES............................................................................18
5.1 The Closing.......................................................................................18
5.2 Deliveries of Seller..............................................................................18
5.3 Deliveries by Purchaser...........................................................................19
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS.............................................19
6.1 Representations and Warranties of Seller and the Stockholders.....................................19
6.1.1 Corporate Existence and Powers.............................................................19
6.1.2 Corporate Authorization; Enforceability....................................................20
6.1.3 Governmental Authorization.................................................................20
6.1.4 Non-Contravention; Consents................................................................20
6.1.5 Capitalization.............................................................................20
6.1.6 Subsidiaries...............................................................................20
6.1.7 Financial Statements......................................................................20
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6.1.8 No Undisclosed Liabilities.................................................................21
6.1.9 Intercompany Accounts......................................................................21
6.1.10 Tax Matters...............................................................................22
6.1.11 Absence of Certain Changes................................................................23
6.1.12 Contracts.................................................................................23
6.1.13 Insurance Coverage........................................................................24
6.1.14 Litigation................................................................................25
6.1.15 Compliance with Laws; Permits.............................................................25
6.1.16 Properties; Sufficiency of Assets.........................................................25
6.1.17 Intellectual Property.....................................................................26
6.1.18 Environmental Matters.....................................................................27
6.1.19 Plans and Material Documents..............................................................28
6.1.20 Interests in Customers, Suppliers, Etc....................................................29
6.1.21 Customer, Supplier and Employee Relations.................................................29
6.1.22 Other Employment Matters..................................................................29
6.1.23 Accounts Receivable.......................................................................30
6.1.24 Inventory.................................................................................30
6.1.25 Millennium Compliance.....................................................................31
6.1.26 Finders' Fees.............................................................................31
6.2 Stockholders' Representations and Warranties......................................................31
6.2.1 Authority; Enforceability..................................................................31
6.2.2 No Conflicts...............................................................................31
6.2.3 No Consents................................................................................31
6.2.4 Litigation.................................................................................32
6.2.5 Interests in Customers, Suppliers, Etc.....................................................32
6.3 No Inference of Assumption of Retained Liabilities or Acquisition of Excluded
Assets by Purchaser or any of its affiliates......................................................32
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................................................32
7.1 Corporate Existence and Power.....................................................................32
7.2 Corporate Authorization; Enforceability...........................................................32
7.3 Governmental Authorization........................................................................33
7.4 Non-Contravention.................................................................................33
7.5 Litigation........................................................................................33
ARTICLE VIII
CERTAIN COVENANTS.........................................................................................33
8.1 Conduct of Business of Seller.....................................................................33
8.2 Exclusive Dealing.................................................................................35
8.3 Review of Seller..................................................................................35
8.4 Reasonable Best Efforts...........................................................................35
8.5 Transfer of Employees and Benefit Plans...........................................................35
8.6 Books and Records.................................................................................37
8.7 Bulk Transfer Laws................................................................................38
8.8 Non-competition...................................................................................38
8.9 Collection of Payments............................................................................38
8.10 Accounts Receivable...............................................................................39
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8.11 Use of Names......................................................................................39
8.12 S Corporation Status..............................................................................39
8.13 Other Financial Statements........................................................................39
8.14 Available Cash....................................................................................39
8.15 Transfer Taxes; HSR Act Filing Fees...............................................................40
8.16 Further Assurances................................................................................40
8.17 Confidentiality...................................................................................40
ARTICLE IX
CONDITIONS TO CLOSING.....................................................................................41
9.1 Conditions to Obligations of Purchaser............................................................41
9.1.1 Representations, Warranties and Covenants of Seller and the Stockholders...................41
9.1.2 Seller's Certificate.......................................................................41
9.1.3 Stockholder Approval.......................................................................41
9.1.4 No Injunction, etc.........................................................................41
9.1.5 No Proceedings.............................................................................41
9.1.6 Required Filings...........................................................................41
9.1.7 Opinion of Counsel.........................................................................41
9.1.8 Termination of Security Interests..........................................................41
9.1.9 Ancillary Agreements.......................................................................42
9.1.10 Third-Party Consents; Governmental Approvals..............................................42
9.1.11 Financing.................................................................................42
9.1.12 Due Diligence.............................................................................42
9.1.13 No Material Adverse Change................................................................42
9.1.14 FIRPTA....................................................................................42
9.1.15 HSR Act...................................................................................42
9.2 Conditions to Obligations of Seller...............................................................42
9.2.1 Representations, Warranties and Covenants of Purchaser.....................................42
9.2.2 Purchaser's Certificate....................................................................42
9.2.3 No Injunction, etc.........................................................................43
9.2.4 Opinion of Counsel.........................................................................43
9.2.5 Ancillary Agreements.......................................................................43
9.2.6 HSR Act....................................................................................43
9.2.7 Offer of Employment........................................................................43
9.2.8 No Proceedings.............................................................................43
9.2.9 Third-Party Consents; Governmental Approvals...............................................43
ARTICLE X
SURVIVAL; INDEMNIFICATION.................................................................................43
10.1 Survival..........................................................................................43
10.2 Indemnification...................................................................................44
10.3 Tax Indemnification...............................................................................45
10.4 Procedures........................................................................................45
10.5 Treatment of Indemnification Payments.............................................................46
10.6 Indemnification Amounts Net of Benefits Received..................................................46
10.7 Exclusive Remedy..................................................................................47
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TABLE OF CONTENTS
(Not a part of this Agreement)
PAGE
ARTICLE XI
MISCELLANEOUS.............................................................................................47
11.1 Termination.......................................................................................47
11.2 Notices...........................................................................................48
11.3 Amendments and Waivers............................................................................48
11.4 Expenses..........................................................................................48
11.5 Successors and Assigns............................................................................48
11.6 No Third-Party Beneficiaries......................................................................48
11.7 Governing Law.....................................................................................49
11.8 Jurisdiction......................................................................................49
11.9 Waiver of Jury Trial..............................................................................49
11.10 Counterparts......................................................................................49
11.11 Headings..........................................................................................49
11.12 Entire Agreement..................................................................................49
11.13 Severability; Injunctive Relief...................................................................49
11.14 No Waiver.........................................................................................50
11.15 Certain Interpretive Matters......................................................................50
iv
(Not a part of this Agreement)
EXHIBIT AND SCHEDULE INDEX
EXHIBITS
EXHIBIT A: Audited Financial Statements
EXHIBIT B-1: Form of Employment Agreement/Mr. Ricotta
EXHIBIT B-2 Form of Employment Agreement/Mr. Nuccitelli
EXHIBIT C: Monthly Financial Statements
EXHIBIT D-1: Noncompetition Agreement with Mr. Ricotta
EXHIBIT D-2: Noncompetition Agreement with Mr. Nuccitelli
EXHIBIT D-3: Noncompetition Agreement with other Stockholders
EXHIBIT E: Parlec Agreement
EXHIBIT F: Sublease
EXHIBIT G: Bill of Sale
EXHIBIT H: Audited financial Statement Principles
EXHIBIT I: Form of Opinion of Harris, Beach & Wilcox
EXHIBIT J Form of Certificate of Amendment of Company's Charter
EXHIBIT K: Form of Opinion of Jones, Day, Reavis & Pogue
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(Not a part of this Agreement)
SCHEDULES
SCHEDULE 1: Stockholders
SCHEDULE 2.1(a)(xiii): Names
SCHEDULE 2.1(a)(xvi): Bank Accounts, etc.
SCHEDULE 2.2(c): Parlec Inventory
SCHEDULE 6.1.4: Non-Contravention; Consents
SCHEDULE 6.1.5: Capitalization
SCHEDULE 6.1.6: Subsidiaries
SCHEDULE 6.1.7(a): Matters with respect to Audited Financial Statements
SCHEDULE 6.1.7(b): Matters with respect to Monthly Financial Statements
SCHEDULE 6.1.7(c): Changes in the Company's Reserve or Accrual Policies
SCHEDULE 6.1.8: Undisclosed Liabilities
SCHEDULE 6.1.9: Intercompany Accounts
SCHEDULE 6.1.10: Tax Matters
SCHEDULE 6.1.11: Absence of Certain Changes
SCHEDULE 6.1.12(a): Contracts and Agreements
SCHEDULE 6.1.12(c): Grants of Severance or Termination Pay
SCHEDULE 6.1.13: Insurance Policies and Bonds
SCHEDULE 6.1.14: Litigation
SCHEDULE 6.1.15(a): Compliance with Laws; Permits
SCHEDULE 6.1.15(b): Government or Regulatory Permits and Licenses
SCHEDULE 6.1.16(a): Properties; Sufficiency of Assets
SCHEDULE 6.1.16(b): Real Property
SCHEDULE 6.1.17(a): Intellectual Property
SCHEDULE 6.1.17(b): Intellectual Property Disputes
SCHEDULE 6.1.18(a): Environmental Matters
SCHEDULE 6.1.19(a): List of Benefit Plans
SCHEDULE 6.1.19(b): List of Certain Benefit Plans
SCHEDULE 6.1.19(c): Benefit Plans Compliance
SCHEDULE 6.1.19(d) Non-Exempt Benefit Plans
SCHEDULE 6.1.19(h): Employees Entitled to Bonuses and Benefits
SCHEDULE 6.1.20: Interests in Customers, Suppliers, Etc.
SCHEDULE 6.1.21: Customer, Supplier and Employee Relations
SCHEDULE 6.1.22(a): Claims by Employees
SCHEDULE 6.1.22(b): Employees
SCHEDULE 6.1.22(d): Retired Employees Scheduled to Receive Benefits
in the Future
SCHEDULE 6.1.23: Accounts Receivable
SCHEDULE 6.1.24: Inventory
SCHEDULE 6.1.25: Millennium Compliance
SCHEDULE 6.2.4: Litigation
SCHEDULE 7.5: Litigation
SCHEDULE 8.5(a): Transferred Employees
SCHEDULE 8.5(b): Benefits
SCHEDULE 10.2.9: Third Party Consents; Government Approvals
vi
(Not a part of this Agreement)
SCHEDULE 12.2: Notices
vii
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
February 11, 1999, by and among NATIONWIDE PRECISION PRODUCTS CORP., a New York
corporation ("SELLER"), NATIONWIDE ACQUISITION DELAWARE, INC., a Delaware
corporation ("PURCHASER") and the Persons listed on SCHEDULE 1 attached hereto
(the "STOCKHOLDERS").
RECITALS
A. Seller is a full service manufacturing company engaged in
the business of engineering, assembly and finishing of precision machined parts,
extrusions and castings for the automotive, business machine and other
industries.
B. Purchaser wishes to purchase from Seller, and Seller wishes
to sell to Purchaser, all of the assets, properties and rights of Seller (other
than the Excluded Assets), subject to the Assumed Liabilities, upon the terms
and conditions of this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere
herein, the following terms, as used herein, have the following meanings when
used herein with initial capital letters:
"ACCOUNTANTS" has the meaning ascribed to such term in
Section 4.3(b).
"ACCOUNTS RECEIVABLE" has the meaning ascribed to such term in
Section 2.1(a)(vi).
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with the first Person on or after the date of this Agreement. For the purposes
of this Agreement, "CONTROL," when used with respect to any Person, means the
possession, directly or indirectly, of the power to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors (or
individuals holding comparable positions) of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the
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foregoing; PROVIDED, HOWEVER that Parlec will not be deemed to be an Affiliate
for purposes of Article II.
"AGREEMENT" means this Asset Purchase Agreement, as the same
may be amended from time to time in accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Bill of Sale, the
Non-competition Agreements, the Employment Agreements, the Sublease and the
Parlec Agreement.
"ASSUMED LIABILITIES" has the meaning ascribed to such term in
Section 3.1(b).
"AUDITED DECEMBER 1998 BALANCE SHEET" means the audited
balance sheet of Seller as of December 31, 1998 contained in the Audited
Financial Statements.
"AUDITED FINANCIAL STATEMENTS" means (a) the audited balance
sheets of Seller as of May 31, 1995, 1996, 1997 and 1998, together with the
related statements of income, changes in retained earnings and cash flows for
the periods then ended, and including the notes to such financial statements and
the related auditors' reports of Brovitz, Insero, Kasperski & Co., P.C. and (b)
the Audited Balance Sheet of Seller as of December 31, 1998, together with the
related statements of income, changes in retained earnings and cash flows for
the periods then ended, and including the notes to such financial statements and
the related report of Ernst & Young, LLP, all of which are attached hereto as
EXHIBIT A.
"AUDITED FINANCIAL STATEMENT PRINCIPLES" has the meaning
ascribed to such term in Section 4.3(a).
"BALANCE SHEET DATE" means December 31, 1998.
"BASE WORKING CAPITAL BALANCE" means an amount equal to $4.849
million.
"BENEFIT PLANS" has the meaning ascribed to such term in
Section 3.1(a)(iv).
"BILL OF SALE" has the meaning ascribed to such term in
Section 2.1(b).
"BONUSES" has the meaning ascribed to such term in Section
6.1.22(b).
"BUSINESS" means the businesses of Seller as currently
conducted as of the date hereof and on the Closing Date, as described in Recital
A.
"BUSINESS DAY" means a day other than a Saturday, Sunday or a
day on which banks located in New York City are authorized or required to close.
"CAPITAL STOCK" means (a) with respect to any Person that is a
corporation, any and all shares, interests, participation or other equivalents
(however designated and whether or not voting) of corporate stock, including the
common stock of such Person and (b) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
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"CAPITALIZED LEASE OBLIGATIONS" means, with respect any
Person, for any applicable period, the obligations of such Person that are
required to be classified and accounted for as capital lease obligations under
GAAP, and the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date determined in accordance with GAAP.
"CASH" means cash and cash equivalents as would be shown on
such balance sheet of Seller prepared in accordance with GAAP and on a basis
consistent with the principles and policies used in the preparation of the
Audited December 1998 Balance Sheet.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, Liability Act of 1980, 42 U.S.C. Sections 9601, et seq., as
amended.
"CLOSING" has the meaning ascribed to such term in Section
5.1.
"CLOSING DATE" has the meaning ascribed to such term in
Section 5.1.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such
term in Section 4.3(a).
"CLOSING WORKING CAPITAL BALANCE" has the meaning ascribed to
such term in Section 4.3(a).
"CLOSING WORKING CAPITAL BALANCE STATEMENT" has the meaning
ascribed to such term in Section 4.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"COMIDA" has the meaning ascribed to such term in Section
2.2(a).
"COMPUTER SYSTEMS" has the meaning ascribed to such term in
Section 6.1.25.
"CONFIDENTIAL INFORMATION" has the meaning ascribed to such
term in Section 8.17.
"CONSTITUENT OF CONCERN" means any substance defined as a
hazardous substance, hazardous waste, hazardous material, pollutant, or
contaminant by any Environmental Law, any petroleum hydrocarbon and any
degradation product of a petroleum hydrocarbon, asbestos, PCB or similar
substance, the handling, storage, treatment or exposure of or to which is
subject to regulation under any Environmental Law.
"CONTRACTS" has the meaning ascribed to such term in Section
2.1(a)(v).
"COVENANT PERIOD" means the period commencing on the date of
this Agreement and terminating on the expiration of the longest Covenant Period
contained in any of the Non- Competition Agreements.
"DAMAGES" has the meaning ascribed to such term in Section
10.2(a).
3
"DIRECT CLAIM" has the meaning ascribed to such term in
Section 10.4(c).
"EMPLOYEE BONUS ACCRUAL" means the accrual of bonuses in the
Ordinary Course of Business for all employees of Seller (excluding directors and
executive officers) for the period from June 1, 1998 through the Closing Date.
"EMPLOYMENT AGREEMENTS" means the employment agreements
between the Company and Mr. Ronald S. Ricotta and Mr. Jeffrey J. Nuccitelli,
respectively, substantially in the forms attached hereto as EXHIBITS B-1 and
B-2.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, citations,
summonses, notices of non-compliance or violation, requests for information,
investigations or proceedings relating in any way to any Environmental Law or
any permit issued under any such Law, including (a) Environmental Claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(b) Environmental Claims by any third-party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from alleged injury or threat of injury to
human health and safety or the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to
the environment which has resulted or could reasonably be expected to result in
a material loss, liability, cost or expense to Seller.
"ENVIRONMENTAL LAW" means any Law in effect or, to Seller's or
any Stockholder's knowledge, any Law reasonably expected to be adopted or made
effective, in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health and safety, including CERCLA; and any state and local
counterparts or equivalents to all of the foregoing.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
authorizations, certificates and approvals of Governmental Authorities relating
to or required by Environmental Laws and necessary for the Business of Seller as
currently conducted or conducted as of the Closing.
"ERISA" has the meaning ascribed to such term in Section
3.1(a)(iv).
"ESTIMATED WORKING CAPITAL BALANCE" has the meaning ascribed
to such term in Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning ascribed to such term in
Section 2.2.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
4
"GOVERNMENTAL AUTHORITY" means any domestic or foreign
governmental or regulatory authority, body, agency or official.
"HSR ACT" has the meaning ascribed to such term in Section
6.1.3.
"INDEBTEDNESS" means with respect to any Person, at any date,
without duplication, (a) all obligations of such Person for borrowed money,
including, without limitation, all principal, interest, premiums, fees,
expenses, overdrafts and penalties with respect thereto, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(c) all obligations of such Person to pay the deferred purchase price of the
property or services, except trade payables incurred in the Ordinary Course of
Business of such Person, (d) all obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (e) all Capitalized Lease Obligations of such Person, (f)
all other obligations of a Person which would be required to be shown as
indebtedness on a balance sheet of such Person prepared in accordance with GAAP,
and (g) all indebtedness of any other Person of the type referred to in clauses
(a) to (f) above directly or indirectly guaranteed by such Person or secured by
any assets of such Person.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in
Section 10.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in
Section 10.4(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how,
proprietary computer software, computer databases, Internet addresses (including
any registrations or applications for registration or renewal of any of the
foregoing) or any other similar type of proprietary intellectual property right,
in each case which is used or held for use or otherwise necessary in connection
with the conduct of the Business.
"IRS" means the Internal Revenue Service.
"LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code, permit, license, policy or rule of common law.
"LAST OFFER" has the meaning ascribed to such term in Section
4.3(b).
"LENDERS" has the meaning ascribed to such term in Section
5.2(v).
"LIEN" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person will be deemed to own, subject to a Lien, any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the business, assets, liabilities, condition (financial and other), results of
operations or prospects of Seller taken as a whole.
5
"MILLENNIUM COMPLIANCE" means that the Computer Systems are
capable of the following, during and/or after January 1, 2000: (a) handling date
information involving all and any dates, including accepting input, providing
output and performing date calculations in whole or in part; (b) operating
accurately without interruption on and in respect of any and all dates and
without change in performance; (c) responding to and processing two digit year
input without creating any ambiguity as to the century; and (d) storing and
providing date input information without creating any ambiguity as to the
century.
"MONTHLY FINANCIAL STATEMENTS" means (a) the unaudited monthly
statements of earnings of Seller covering the calendar year 1996, (b) the
unaudited monthly balance sheets of Seller covering the periods beginning
January 1, 1997 through the month ending immediately prior to the date hereof,
together with the related monthly statements of earnings and (c) the unaudited
monthly balance sheets of Seller covering the periods beginning with the month
in which this Agreement is executed and delivered through the Closing Date,
together with the related monthly statements of earnings, all of which are
attached or in the case of the financial statements referred to in clause (c),
will be attached prior to the Closing hereto as EXHIBIT C.
"NON-COMPETITION AGREEMENTS" means the Non-competition
Agreements between Purchaser and Mr. Ricotta, Mr. Nuccitelli and each of the
Stockholders, respectively substantially in the forms attached hereto as
EXHIBITS D-1, D-2 and D-3.
"ORDER" means any judgment, injunction, judicial or
administrative order or decree.
"ORDINARY COURSE OF BUSINESS" means, with respect to any
Person, the ordinary course of business of such Person, consistent in all
material respects with such Person's past practice and custom, including, with
respect to any category, quantity or dollar amount, term and frequency of
payment, delivery, accrual, and expense or any other accounting entry.
"PARLEC" means, Parlec, Inc., a New York corporation, located
at 101 Perinton Parkway, Fairport, New York, and its successors and assigns.
"PARLEC AGREEMENT" means the agreement between Purchaser and
Parlec, dated the Closing Date, in respect of specified machining and assembly
work, inventory consignments and non-hire covenants, substantially in the form
attached hereto as EXHIBIT E.
"PERMITS" has the meaning ascribed to such term in Section
6.1.15(b).
"PERMITTED LIEN" means, with respect to the property of any
Person (a) mechanics', workmen's, carriers' repairmen's or other like Liens
arising or incurred in the Ordinary Course Of Business of a Person in respect of
obligations that are not overdue or (b) other imperfections of title or
encumbrances, which do not materially affect the value or marketability of the
property subject thereto.
"PERSON" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
6
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending on or before the Closing Date.
"PURCHASE PRICE" has the meaning ascribed to such term in
Section 4.1.
"PURCHASED ASSETS" has the meaning ascribed to such term in
Section 2.1(a).
"PURCHASER" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"PUT DATE" means, with respect to any Account Receivable, the
90th day after the Closing Date.
"REAL PROPERTY" has the meaning ascribed to such term in
Section 6.1.16(b).
"RELIANCE LETTERS" has the meaning ascribed to such term in
Section 5.2(v).
"RETAINED LIABILITIES" has the meaning ascribed to such term
in Section 3.2(b).
"RETURNS" has the meaning ascribed to such term in Section
6.1.10(a).
"S CORPORATION" has the meaning ascribed to such term in
Section 6.1.10(j).
"SELECTED PURCHASER REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 7.1 (Corporate Existence
and Power), 7.2 (Corporate Authorization; Enforceability), 7.3 (Governmental
Authorization) and 7.4 (Non-Contravention).
"SELECTED SELLER AND STOCKHOLDERS REPRESENTATIONS AND
WARRANTIES" means the representations and warranties contained in Sections 6.1.1
(Corporate Existence and Power), 6.1.2 (Corporate Authorization;
Enforceability), 6.1.3 (Governmental Authorization), 6.1.4(a), (b), (d) and (e)
(Non-Contravention), 6.1.7(c) (Financial Statements - as to accrual and reserve
amounts and policies), 6.1.16 (Properties; Sufficiency of Assets -- as to
title), 6.1.26 (Finders' Fees), 6.2.1 (Authority; Enforceability) and Section
6.2.2 (No Conflicts).
"SELLER" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"SELLER PROPERTY" means any real property and improvements at
any time owned, leased, used, operated or occupied (whether for storage,
disposal or otherwise) by Seller.
"STOCKHOLDERS" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"SUBLEASE" means the long-term operating sublease in respect
of the real property and improvements thereon located at Seller's facility in
Henrietta, New York substantially in the form annexed hereto as EXHIBIT F.
7
"TAX" means (a) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by
Seller, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Taxing Authority (as hereinafter defined), (b) any liability of
Seller for the payment of any amounts of any of the foregoing types as a result
of being a member of an affiliated, consolidated, combined or unitary group, or
being a party to any agreement or arrangement whereby liability of Seller for
payment of such amounts was determined or taken into account with reference to
the liability of any other Person, and (c) any liability of Seller for the
payment of any amounts as a result of being a party to any Tax-Sharing
Agreements or with respect to the payment of any amounts of any of the foregoing
types as a result of any express or implied obligation to indemnify any other
Person.
"TAX-SHARING AGREEMENTS" means all existing Tax-sharing
agreements or arrangements (whether or not written) binding Seller.
"TAXING AUTHORITY" means any Governmental Authority
responsible for the imposition of any Tax.
"THIRD-PARTY CLAIM" means any claim, demand, action, suit or
proceeding made or brought by any Person who or which is not a party to this
Agreement.
"TRANSFER" has the meaning ascribed to such term in Section
2.1(a).
"TRANSFERRED EMPLOYEES" has the meaning ascribed to such term
in Section 8.5(b)(i).
"UNCOLLECTED ACCOUNTS RECEIVABLE" means all or any part of any
Account Receivable which remains uncollected by Purchaser for 90 days after the
Closing Date.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 PURCHASED ASSETS.
(a) At the closing provided for in Article V, Seller will
sell, assign, transfer, convey and deliver ("TRANSFER"), free and clear of all
Liens (except Permitted Liens), whether legal or equitable, to Purchaser and
Purchaser will purchase and accept from Seller on the terms and subject to the
conditions hereinafter set forth, all of the assets, properties, rights and
interests of Seller to the extent existing as of the Closing Date, other than
the Excluded Assets (all of such assets, properties, rights and interests being
hereinafter collectively referred to as the "PURCHASED ASSETS"), including but
not limited to:
(i) those assets, properties, rights and interests
reflected on the Audited December 1998 Balance Sheet;
8
(ii) all right, title and interest of Seller to all
machinery, equipment, tools, spare parts, supplies, furniture,
furnishings, vehicles and other fixed assets owned, leased or
otherwise used by Seller and, in each case, used or held for
use in the conduct of the Business;
(iii) all raw materials and inventories, wherever
located, including inventories of work-in-process, stores and
supplies, owned, leased or otherwise used by Seller and used
or held for use in connection with the conduct of the
Business;
(iv) subject to Section 2.2.(k), Cash as shown on a
balance sheet of the Business as of the Closing Date
determined in accordance with GAAP, deposits, advance payments
of any kind or prepayments by clients, letters of credit
naming Seller as account party, certificates of deposit,
notes, drafts, checks and similar instruments relating to or
arising out of the conduct of the Business;
(v) all right, title and interest of Seller to all
contracts (whether written or oral) (other than to the extent
that such contracts relate to the Retained Liabilities or
Excluded Assets), commitments, leases, purchase orders,
contracts to purchase raw materials, contracts for services
and supplies, contracts to supply or sell products and all of
the other agreements (whether written or oral) including those
set forth or required to be set forth in SCHEDULE 6.1.12(a)
(collectively, the "CONTRACTS");
(vi) all accounts receivable (including billed and
unbilled) of Seller relating to the conduct of the Business
("ACCOUNTS RECEIVABLE");
(vii) all Intellectual Property Rights of Seller;
(viii) all licenses, Permits, registrations, and
authorizations held by Seller relating to the conduct of the
Business;
(ix) the books and records of Seller relating to the
Purchased Assets including, without limitation, all customer
and supplier files, equipment maintenance and warranty
information, all correspondence with any customers, suppliers,
employees or governmental entities, all personnel records
related to the Transferred Employees, and any other reports,
marketing studies, plans and documents, including, without
limitation, data stored electronically;
(x) except as described in Section 2.2(g), all
prepaid claims, prepaid Taxes, prepaid insurance premiums and
other prepaid expense items and deferred charges, credits,
advance payments, security and other deposits made by a Seller
to any other Person relating to the conduct of the Business;
(xi) all policies of insurance, fidelity, surety or
similar bonds and third-party indemnities where Seller is an
indemnified party and the coverages
9
afforded thereby, in each case other than to the extent
relating to the Retained Liabilities or Excluded Assets;
(xii) lists of customers and vendors of Seller,
including, without limitation, any data stored electronically;
(xiii) the right to use the names set forth on
SCHEDULE 2.1(a)(xiii), and all variants thereof;
(xiv) the Business and goodwill of Seller;
(xv) except as described in Section 2.2(b), all
securities or other ownership interests in any Person held by
Seller;
(xvi) all bank accounts and bank account numbers,
telephone and facsimile numbers (together with all other
similar numbers), electronic mail addresses and web sites, in
each case, owned or used by Seller in the Business including
such items as set forth on SCHEDULE 2.1(a)(xvi),
(xvii) all rights of Seller pertaining to any
counterclaims, set-offs or defenses it may have with respect
to the Assumed Liabilities; and
(xviii) all other assets, properties and rights of
every kind and nature owned or held by Seller or in which
Seller has an interest on the Closing Date, known or unknown,
fixed or unfixed, accrued, absolute, contingent or otherwise,
whether or not specifically referred to in this Agreement.
(b) In confirmation of the foregoing sale, assignment and
transfer, Seller will execute and deliver to Purchaser at the Closing a Bill of
Sale and Assignment and Assumption Agreement (the "BILL OF SALE"), substantially
in the form attached hereto as EXHIBIT G and such other assignments and other
instruments of transfer as Purchaser may reasonably deem necessary or desirable.
2.2 EXCLUDED ASSETS. Anything in this Agreement to the
contrary notwithstanding, the following assets of Seller (the "EXCLUDED
ASSETS"), each to the extent existing on the Closing Date, are being retained by
Seller and will not be included in the Purchased Assets:
(a) all real property of Seller and all of Seller's right,
title and interest to Seller property under the Amended and Restated Lease
Agreement, dated as of November 1, 1994, between the County of Monroe Industrial
Development Agency ("COMIDA") and Seller, including all fixtures and other
equipment owned by COMIDA, together with all right, title and interest of Seller
to all leasehold improvements thereon and all easements, rights-of-way,
transferrable licenses and permits and other appurtenances thereof;
(b) investment by Seller in Parlec, Inc., as reflected on the
Audited December 1998 Balance Sheet;
10
(c) inventory of Seller related to Parlec assembly business
and which is identified on Schedule 2.2(c);
(d) cash surrender value of the life insurance policies
reflected on the Audited December 1998 Balance Sheet made available to officers
of Seller by Seller, net of loans;
(e) notes receivable from officers of Seller, as reflected on
the Audited December 1998 Balance Sheet;
(f) notes receivable from employees of Seller, as reflected on
the Audited December 1998 Balance Sheet;
(g) federal tax deposit, as reflected on the Audited December
1998 Balance Sheet;
(h) Tax records reasonably necessary for the discharge by
Seller of all income and other Taxes payable in respect of the conduct of the
Business of Seller, prior to the Closing Date, PROVIDED that Purchaser will have
reasonable access to such records prior to and after the Closing Date in
accordance with the provisions of Section 8.6(b) hereof to the extent Purchaser
will reasonably require such access;
(i) any and all prepayments made by Seller in connection with
a certain letter of credit issued by Manufacturer and Traders Trust Company in
connection with the financing of the property described in the lease referred to
in Section 2.2(a);
(j) the rights of Seller under this Agreement and the proceeds
payable to Seller pursuant to this Agreement;
(k) Cash in excess of $200,000 as shown the Closing Date
Balance Sheet, but only to the extent that the Closing Working Capital Balance
exceeds the Base Working Capital Balance (after giving effect to all other
adjustments to such excess as provided for in this Agreement); and
(l) bond and financing acquisition costs and accumulated
depreciation - MAC, in each case, as reflected on the Audited December 1998
Balance Sheet.
2.3 NONASSIGNABLE CONTRACTS, LEASES AND PERMITS. In the case
of any Purchased Assets constituting Contracts or Permits that are not by their
terms assignable or that require the consent of a third-party in connection with
the sale by Seller, Seller will, and the Stockholders will, jointly and
severally, cause Seller to, use its reasonable best efforts to obtain, or cause
to be obtained in writing, prior to the Closing Date, any consents necessary to
convey the benefits thereof. Purchaser will assist Seller in such manner as may
be reasonably requested in connection therewith; PROVIDED that such assistance
will not be deemed to require any expenditure of money on the part of Purchaser.
If the consent of any third-party is not obtained prior to the Closing Date and
the Closing occurs notwithstanding the failure to obtain such consent, Seller
will, and the Stockholders will, jointly and severally, cause Seller to use its
reasonable best efforts to assist Purchaser to obtain such consent promptly.
During such period in which the applicable Contract or Permit is not capable of
being assigned to Purchaser due to
11
the failure to obtain any required consent, Seller will and the Stockholders
will cause the Seller to make such arrangements as may be necessary to enable
Purchaser to receive all the economic rights and liabilities under such contract
accruing on and after the Closing Date. Notwithstanding any provision to the
contrary set forth herein, the obligations of Seller and the Stockholders under
this section 2.3 represent all of Seller's and the Stockholders' obligations
from and after the Closing under this Agreement with respect to obtaining any
such assignment and/or consent of a third party in connection with any such
Contract or Permit.
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 LIABILITIES ASSUMED BY PURCHASER.
(a) Subject to Section 3.2, at the Closing, Purchaser will
assume, as of the Closing Date, and will subsequently pay, honor and discharge
when due and payable and otherwise in accordance with their terms, the following
liabilities and obligations of Seller to the extent existing on the Closing
Date:
(i) (x) all Accounts Payable and Accrued Expenses
only to the extent reflected on the Audited December 1998
Balance Sheet and not discharged prior to the Closing Date,
and (y) all Accounts Payable and Accrued Expenses arising
thereafter and to the extent reflected on the Closing Date
Balance Sheet, in the case of liabilities described in clauses
(x) and (y) of this clause 3.1(a)(i), to the extent that such
liabilities arose in the Ordinary Course of Business of Seller
and were not incurred in breach of this Agreement;
(ii) all liabilities and obligations under Contracts
to which Seller is a party that (A) are disclosed in SCHEDULE
6.1.12(a) and SCHEDULE 6.1.16(b); PROVIDED that the existence
of such Contract does not constitute a breach of
representation, warranty or covenant under this Agreement, and
(B) have been entered into by Seller in the Ordinary Course of
Business of Seller prior to the Closing Date and not in breach
of this Agreement, in each case other than liabilities and
obligations thereunder that relate to a breach by Seller of
any of the terms and conditions of any such Contracts prior to
the Closing Date;
(iii) all liabilities or obligations to Transferred
Employees in accordance with, and subject to the limitations
set forth in, Section 8.5 with respect to wages, salaries,
bonus, vacation, severance or other compensation reflected on
the Closing Date Balance Sheet (to the extent not discharged
prior to the Closing Date) or otherwise accruing on and after
the Closing PROVIDED that the existence thereof does not
constitute a breach of any representation, warranty or
covenant of Seller hereunder, it being understood that
severance liabilities that arise in connection with
constructive termination of such Transferred Employee
resulting from the terms and conditions of the offer of
employment made by Purchaser in compliance with Section 8.5
will not constitute Assumed Liabilities;
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(iv) except as provided in Section 3.2(a)(iii),
liabilities or obligations under any employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any
other plan, program, agreement, arrangement, policy, contract,
commitment, or scheme, written or oral, statutory or
contractual of Seller, including, but not limited to, any
deferred compensation agreement, executive compensation,
bonus, incentive or severance pay plan, any life, health,
disability or accident insurance plan or any holiday or
vacation practice under which employees or former employees of
Seller are eligible to participate or derive a benefit and as
to which Seller has or in the future could have any direct or
indirect actual or contingent liability (hereinafter the
"BENEFIT PLANS") but only to the extent liabilities or
obligations relate or pertain to a Transferred Employee;
PROVIDED that the existence of such Benefit Plans does not
constitute a breach of any representation, warranty or
covenant of Seller hereunder; PROVIDED FURTHER that severance
liabilities that result from the failure of any employees of
Seller to accept employment by Purchaser in compliance with
Section 8.5 will not constitute Assumed Liabilities;
(v) the obligation to issue credit as appropriate in
the Ordinary Course of Business of Seller;
(vi) any liability for Employee Bonus Accruals, but
only to the extent that such amount is accurately reflected on
the Closing Working Capital Balance Sheet and in the
calculation of the Base Working Capital Balance and PROVIDED
that Seller has complied with its obligations under Section
8.14; and
(vii) any other liability of Seller arising out of or
relating to the operation of the Business by Seller prior to
the Closing Date in the Ordinary Course of Business (other
than to the extent that the existence of any such liability
constitutes a breach of any representation or warranty under
this Agreement and other than to the extent that the
assumption of any such liability is otherwise limited by
clauses (i) through (vi) of this Section 3.1(a)).
(b) The liabilities to be assumed by Purchaser pursuant to
Section 3.1(a) are hereinafter sometimes collectively referred to as "ASSUMED
LIABILITIES."
3.2 LIABILITIES NOT ASSUMED BY PURCHASER.
(a) Anything in this Agreement to the contrary
notwithstanding, Purchaser will not assume, cause to be assumed or be deemed to
have assumed, or in any way be liable or responsible for, any liabilities or
obligations of Seller or any Stockholder, except as specifically provided in
Section 3.1(a). Without limiting the generality or effect of the foregoing,
Purchaser will not assume the following:
(i) any liability or obligation of Seller (including
the liability referred to in Section 6.1.26) or any
Stockholder arising out of or in connection with the
negotiation and preparation of the Agreement (including the
Ancillary
13
Agreements) and the consummation and performance of the
transactions contemplated hereby;
(ii) any liability or obligation of Seller or any
Stockholder for Indebtedness (including accrued interest);
(iii) any liability or obligation of Seller or any
Stockholder with respect to federal, state, local or foreign
Taxes for any Pre-Closing Tax Period or liability or
obligation of Seller or the Business as operated by Seller
arising out of or relating to noncompliance with Environmental
Law, the existence of an Environmental Condition, or an
Environmental Claim against Seller or against the Business as
operated by Seller;
(iv) any liability or obligation of Seller or any
Stockholder incurred in breach of this Agreement or any of the
Ancillary Agreements;
(v) all claims, liabilities and obligations with
respect to the Excluded Assets (irrespective of whether such
liabilities or obligations arise before, on or after the
Closing Date);
(vi) Employee Bonus Accruals that do not constitute
Assumed Liabilities; and
(vii) all other liabilities and obligations
(including all obligations of Seller or any Stockholder
arising out of or otherwise relating to facts or circumstances
existing or occurring on or prior to the Closing) which are
not set forth in Section 3.1(a) as Assumed Liabilities.
(b) All liabilities or obligations of Seller other than
Assumed Liabilities are hereinafter sometimes collectively referred to as the
"RETAINED LIABILITIES."
ARTICLE IV
CONSIDERATION FOR PURCHASED ASSETS; CLOSING
4.1 PURCHASE PRICE. In consideration for the Transfer by
Seller to Purchaser of the Purchased Assets pursuant to this Agreement,
Purchaser will deliver at the Closing to Seller in cash by wire transfer of
immediately available funds to one bank account specified at least two Business
Days prior to the Closing Date by Seller, $30.0 million, subject to adjustment
as provided in this Article IV (the "PURCHASE PRICE").
4.2 ESTIMATED CLOSING WORKING CAPITAL. Not less than two
Business Days prior to the Closing Date, Seller and Purchaser will prepare and
agree on an estimate of the Closing Working Capital Balance (the "ESTIMATED
CLOSING WORKING CAPITAL BALANCE") determined in accordance with Section 4.3, as
if it were the actual Closing Working Capital Balance, but based upon Seller's
and Purchaser's review of monthly financial information then available and
inquiries of personnel responsible for the preparation of the financial
information relating to Seller in the ordinary course, all in accordance with
the policies, principles and
14
methodologies set forth in EXHIBIT H attached hereto. The Purchase Price will be
reduced dollar-for-dollar by the amount, if any, by which the Estimated Closing
Working Capital Balance, determined in accordance with Section 4.3, is less than
the Base Working Capital Balance.
4.3 POST-CLOSING ADJUSTMENT. (a) Within 120 days after the
Closing Date, Purchaser will prepare and deliver or cause to be prepared and
delivered to Seller an audited balance sheet of Seller as of the opening of
business on the Closing Date (the "CLOSING DATE BALANCE SHEET") and a proposed
statement of the net working capital of Seller as of the Closing Date (the
"CLOSING WORKING CAPITAL BALANCE STATEMENT"), in each case, without giving
effect to the transactions described in this Agreement to be consummated at the
Closing. The Closing Date Balance Sheet and the Closing Working Capital Balance
Statement (i) will reflect, respectively, the financial position of Seller and
the components and calculation of the net working capital of Seller in each case
as of the Closing Date, (ii) will be prepared and determined in accordance with
GAAP, on a basis consistent with the policies, principles and methodology used
in connection with the preparation of the Audited Financial Statements, and
(iii) will be subject to adjustment in accordance with the policies, principles
and methodology set forth in EXHIBIT H attached hereto (the policies, principles
and methodology in clauses (ii) and (iii) being referred to herein as the
"AUDITED FINANCIAL STATEMENT PRINCIPLES"). Notwithstanding anything contained
herein to the contrary, there will be no changes in reserve or accrual amounts
or policies between May 31, 1998 and the Closing Date without the prior written
consent of Purchaser. The net working capital Seller as of the Closing Date
determined in accordance with this Section 4.3 is referred to herein as the
"CLOSING WORKING CAPITAL BALANCE." In the event of any inconsistency between the
policies, principles and methodology described in the foregoing clauses (ii) and
(iii), the policies, principles and methodology set forth in EXHIBIT H will
govern.
(b) If, within 30 days after the date of Purchaser's delivery
of the Closing Date Balance Sheet and the Closing Working Capital Balance
Statement, Seller disagrees in good faith with the determination of the Closing
Working Capital Balance proposed by Purchaser, Seller will give written notice
to Purchaser within such 30 day period (i) setting forth Seller's proposed
changes to the Closing Date Balance Sheet as prepared by Purchaser and the
determination by Seller of the Closing Working Capital Balance and (ii)
specifying in detail Seller's basis for disagreement with Purchaser's
preparation and determination of the Closing Date Balance Sheet and the Closing
Working Capital Balance. The failure by Seller to so express disagreement and
provide such specification within such 30 day period will constitute the
acceptance of Purchaser's preparation of the Closing Date Balance Sheet and the
computation of the Closing Working Capital Balance. If Purchaser and Seller are
unable to resolve any disagreement between them with respect to the preparation
of the Closing Date Balance Sheet and the determination of the Closing Working
Capital Balance within 30 days after the giving of notice by Seller to Purchaser
of such disagreement, the items in dispute will be referred for determination to
Pricewaterhouse Coopers LLP (the "ACCOUNTANTS") as promptly as practicable, but
not later than five days after the expiration of such 30 day period. Purchaser
and Seller will use reasonable efforts to cause the Accountants to render their
decision as soon as practicable thereafter (but in no event later than 30 days
after the submission to the Accountants of the notice of disagreement referred
to in the immediately preceding sentence), including without limitation by
promptly complying with all reasonable requests by the Accountants for
information, books, records and similar items. The Accountants will make a
determination as to each of the items in dispute (but only those items in
dispute), which determination will be (A) in writing, (B)
15
furnished to each of the parties hereto as promptly as practicable after the
items in dispute have been referred to the Accountants (but in no event later
than 30 days thereafter), (C) made in accordance with this Agreement (including
EXHIBIT H, and (D) conclusive and binding upon each of the parties hereto.
Nothing herein will be construed to authorize or permit the Accountants to
determine (i) any question or matter whatsoever under or in connection with this
Agreement, except the determination of what adjustments, if any, must be made in
one or more disputed items reflected in the Closing Date Balance Sheet and the
Closing Working Capital Balance Statement delivered by Purchaser in order for
the Closing Working Capital Balance to be determined in accordance with the
provisions of this Agreement (including EXHIBIT H), or (ii) a Closing Working
Capital Balance that is not equal to one of, or between, the Closing Working
Capital Balance as determined by Seller and as determined by Purchaser. The fees
and expenses of the Accountants will be paid by the party whose last written
settlement offer related to all items in dispute, in the aggregate, submitted to
the Accountants upon the referral of the matter to the Accountants in accordance
with this Section 4.3(b) (each, a "LAST OFFER") varies by the greatest absolute
amount from the determination by the Accountants of all such disputed items. No
party will disclose to the Accountants, and the Accountants will not consider
for any purpose, any settlement discussions or settlement offer (other than the
Last Offer) made by any party.
(c) During the period that Seller's advisors and personnel are
conducting their review of Purchaser's preparation of the Closing Date Balance
Sheet and determination of the Closing Working Capital Balance, Seller and its
representatives will have reasonable access during normal business hours to the
work papers, prepared by or on behalf of Purchaser and its representatives in
connection with Purchaser's preparation of the Closing Working Capital Balance
Statement and determination of the Closing Working Capital Balance; PROVIDED,
HOWEVER, that Seller will conduct such review in a manner that does not
unreasonably interfere with the conduct of the businesses of Seller or result in
substantial out-of-pocket costs to Purchaser. To the extent any such work papers
are in the control of Seller after the Closing, Seller will grant Purchaser and
its representatives reciprocal access rights for the purpose of finalizing the
preparation of the Closing Date Balance Sheet and the determination of the
Closing Working Capital Balance. Seller and Purchaser agree in good faith to use
all reasonable efforts to provide such information and access described in this
Section 4.3(c).
4.4 ADJUSTMENTS TO PURCHASE PRICE. (a) Upon the final
determination of the Closing Working Capital Balance, the parties shall make the
following adjustments:
(i) If the Closing Working Capital Balance exceeds
the Estimated Closing Working Capital Balance, then the
Purchase Price (if reduced pursuant to Section 4.2) will be
increased by, and Purchaser will pay to Seller the amount of
such difference; PROVIDED that the Purchase Price will in no
event exceed $30.0 million.
(ii) If the Closing Working Capital Balance is less
than the Estimated Closing Working Capital Balance, then the
Purchase Price will be decreased by, and the Stockholders
will, jointly and severally, pay or cause Seller to pay, to
Purchaser the amount of such difference.
(b) Any payment in respect of an adjustment required to be
made under Section 4.4(a) will be made by Purchaser or Seller, as applicable, in
cash by wire transfer of
16
immediately available funds to one account specified by Purchaser or Seller, as
applicable, in writing, prior to the date such payment is required to be made
hereunder. Such payment will be made on such of the following dates as may be
applicable: (i) if Seller shall have not objected to the preparation of the
Closing Date Balance Sheet and the determination of the Closing Working Capital
Balance, the earlier of (A) 30 days after delivery to Seller of the Closing Date
Balance Sheet and Closing Working Capital Balance Statement or (B) five days
after Seller has indicated that it has no objections to the preparation of the
Closing Date Balance Sheet and the determination of the Closing Working Capital
Balance, or (ii) if Seller shall have objected to the preparation of the Closing
Date Balance Sheet and the determination of the Closing Working Capital Balance
by Purchaser, within five days following final agreement or decision with
respect to the Closing Date Balance Sheet and the Closing Working Capital
Balance as provided in Section 4.3 and this Section 4.4.
4.5 ALLOCATION OF PURCHASE PRICE. The Aggregate Closing
Consideration will be allocated among the Purchased Assets as determined by
Seller in the manner required by Section 1060 of the Code with the prior written
consent of Purchaser which will not be unreasonably withheld or delayed. The
parties understand that no more than a nominal portion of the Purchase Price may
be allocated to the Non-competition Agreements. For purposes of determining the
Purchaser's basis in the Purchased Assets and gain or loss recognized by Seller
with respect to the sale of the Purchased Assets to Purchaser, Purchaser and
Seller covenant and agree that the aggregate Purchase Price will be allocated
among the Purchased Assets consistent with this Section 4.5 and the parties
further agree that they shall file all Tax returns and related forms (including,
without limitation, Form 8594) in accordance with the allocation determined in
accordance with this Section 4.5 and will not make any inconsistent statement or
take any inconsistent position on any Tax returns, in any refund claim, or
during the course of any IRS or other tax audit. Each party will notify the
other party if it receives notice that the IRS proposes any allocation that is
different from the allocation agreed upon under this Section 4.5.
ARTICLE V
CLOSING AND CLOSING DELIVERIES
5.1 THE CLOSING. The closing of the sale and purchase of the
Purchased Assets (the "CLOSING") will take place at the offices of Jones, Day,
Reavis & Pogue located at 599 Lexington Avenue, New York, New York at 10:00
a.m., New York time, as soon as possible after the date hereof but in no event
later than ten Business Days after satisfaction or waiver of the conditions to
Closing. The date upon which the Closing occurs is herein called the "CLOSING
DATE."
5.2 DELIVERIES OF SELLER. At the Closing, Seller and the
Stockholders will deliver to Purchaser:
(i) Bills of Sale duly executed by Seller;
17
(ii) instruments of assignment and assumption and
other instruments, as Purchaser may deem reasonably necessary
or desirable to transfer any of the Purchased Assets duly
executed by Seller;
(iii) certificates of an officer of Seller and
certificates of the Stockholders to evidence compliance with
the conditions set forth in Section 9.1.1;
(iv) certificates of Seller's Secretary or Assistant
Secretary as provided in Section 9.1.2;
(v) the opinion of Harris, Beach & Wilcox, LLP,
counsel to Seller and the Stockholders, dated the Closing Date
substantially in the form attached hereto as EXHIBIT I,
together with letters ("RELIANCE LETTERS") entitling the bank
lenders and underwriters engaged by or on behalf of Purchaser
(the "LENDERS") to provide the financing contemplated by
Section 9.1.11 to rely on such opinion;
(vi) evidence or copies of any consents, approvals,
orders, qualifications or waivers required by any third-party
or governmental entity pursuant to Section 9.1.10;
(vii) Certificate of Amendment of Seller's
Certificate of Incorporation, dated the Closing Date and in
proper form for filing substantially in the form attached
hereto as EXHIBIT J which Seller will, on the Closing Date,
file with the Secretary of State of the State of New York,
changing each Seller's corporate name to "Nuccitelli
Corporation," together with all other documentation required
to be filed in other jurisdictions where Seller is qualified
or licensed to do business to reflect such name change;
(viii) other Ancillary Agreements required to be duly
executed and delivered by parties other than Purchaser;
(ix) a non-foreign person affidavit as required by
Section 1445 of the Code;
(x) such other documents and instruments as may be
reasonably required to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements
and to comply with the terms hereof and thereof.
5.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser will
deliver or cause to be delivered to Seller:
(i) the Purchase Price by the wire transfer of
immediately available funds to the account specified pursuant
to Section 4.1;
(ii) certificate of an officer of Purchaser to
evidence compliance with the conditions set forth in Section
9.2.1;
18
(iii) certificate of Purchaser's Secretary or
Assistant Secretary as provided in Section 9.2.2;
(iv) Bills of Sale duly executed by Purchaser;
(v) the opinion of Jones, Day, Reavis & Pogue,
counsel to Purchaser, dated the Closing Date substantially in
the form attached hereto as EXHIBIT K;
(vi) other Ancillary Agreements required to be duly
executed and delivered by Purchaser; and
(vii) such other documents and instruments as may be
reasonably required to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements
and to comply with the terms hereof and thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
6.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
STOCKHOLDERS. Seller and the Stockholders jointly and severally represent and
warrant to Purchaser as of the date hereof and the Closing as follows:
6.1.1 CORPORATE EXISTENCE AND POWERS. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Seller has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. Seller is duly qualified to conduct
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary except for those jurisdictions where the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Seller has
heretofore delivered to Purchaser true and complete copies of its certificate of
incorporation and bylaws.
6.1.2 CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by Seller of this Agreement and each of the Ancillary
Agreements to which it will be a party at the Closing are, and will be at the
Closing, within Seller's corporate powers and have been duly authorized by all
necessary corporate action on the part of Seller. This Agreement has been and
each of the Ancillary Agreements to which Seller will be a party at the Closing
will have been duly executed and delivered by Seller and constitute, and will
constitute, at the Closing, valid and binding agreements of Seller, enforceable
against Seller in accordance with their terms, except to the extent that their
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
6.1.3 GOVERNMENTAL AUTHORIZATION. Except as may be required
under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), the
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execution, delivery and performance by Seller of this Agreement and each
Ancillary Agreement to which Seller is or will be a party at the Closing require
no action by or in respect of, or filing with, any Governmental Authority.
6.1.4 NON-CONTRAVENTION; CONSENTS. Except as disclosed on
SCHEDULE 6.1.4, the execution, delivery and performance by Seller of this
Agreement and each Ancillary Agreement to which Seller will be a party at the
Closing will not (a) violate the certificate of incorporation or bylaws or
comparable organizational documents of Seller, (b) violate any applicable Law or
Order, (c) require any filing with or permit, consent or approval of, or the
giving of any notice to, any Person (including filings, consents or approvals
required under any Permits of Seller or any licenses to which Seller is a
party), (d) result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of Seller or give rise to a loss of any benefit to which Seller is
entitled under any agreement or other instrument binding upon Seller or under
any license, franchise, permit or other similar authorization held by Seller, or
(e) result in the creation or imposition of any Lien on any asset of Seller,
except in the case of clauses (c), (d) and (e) for such filings, permits,
consents, approvals or notices and violations, breaches, conflicts and Liens
which, (i) individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect, or (ii) relate exclusively to the Excluded
Assets.
6.1.5 CAPITALIZATION. The authorized, issued and outstanding
Capital Stock of Seller (including the record and beneficial owners thereof and
the percentage of the issued and outstanding Capital Stock held by each such
owner) is as disclosed in SCHEDULE 6.1.5.
6.1.6 SUBSIDIARIES. Except as disclosed in SCHEDULE 6.1.6 and
except for the interests of the Seller and investments reflected on the face of
the Audited December 1998 Balance Sheet, Seller does not own any Capital Stock
or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
6.1.7 FINANCIAL STATEMENTS. (a) Seller has heretofore
furnished Purchaser a complete and correct copy of the Audited Financial
Statements. Except as disclosed in SCHEDULE 6.1.7(a), the Audited Financial
Statements, including the footnotes thereto, have been prepared in accordance
with GAAP and fairly present in all material respects the financial position of
Seller at the respective dates thereof and the results of the operations and
cash flows of the Seller for the periods indicated.
(b) Seller has also heretofore furnished Purchaser a complete
and correct copy of the Monthly Financial Statements through the month ended
immediately prior to the date hereof. Such Monthly Financial Statements have
each been prepared in accordance with GAAP (except for normal year-end
adjustments identified in SCHEDULE 6.1.7(b) and the absence of notes to such
financial statements, which, in each case, would not be material) and on a basis
consistent with the policies, principles and methodology used in connection with
the preparation of the Audited Financial Statement Principles. Except as
disclosed in SCHEDULE 6.1.7(b), such Monthly Financial Statements fairly
represent in all material respects the financial position of Seller at the date
thereof and the results of the operations and cash flows of Seller for the
periods indicated. The Monthly Financial Statements to be delivered after the
date hereof, when delivered in accordance with this Agreement, will have been
prepared in accordance with GAAP (except for normal year-end adjustments and the
absence of notes to such financial statements,
20
which, in each case, would not be material) and on a basis consistent with the
Audited Financial Statement Principles and will fairly represent in all material
respects the financial position of Seller at the dates thereof and the results
of the operations and cash flows of Seller for the periods indicated.
(c) There have been no changes in Seller's reserve or accrual
policies or amounts, except as disclosed on SCHEDULE 6.1.7(c), since May 31,
1998.
(d) The books of account, minute books, stock record books,
and other records of Seller, all of which have been made available to Purchaser,
have been maintained in accordance with sound business practices.
6.1.8 NO UNDISCLOSED LIABILITIES. There are no liabilities,
whether accrued, contingent, absolute, determined, determinable or otherwise, of
Seller or any facts or circumstances which could reasonably be expected to give
rise to any such liabilities of Seller other than (a) liabilities fully provided
for in the Audited December 1998 Balance Sheet; (b) liabilities specifically
disclosed on SCHEDULE 6.1.8; and (c) other undisclosed liabilities incurred
since the Audited December 1998 Balance Sheet in the Ordinary Course of Business
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
6.1.9 INTERCOMPANY ACCOUNTS. SCHEDULE 6.1.9 contains a
complete list of all intercompany transactions and balances as of February 10,
1999 between any Stockholder and any of their respective Affiliates, on the one
hand, and Seller or any of its Affiliates, on the other hand. Other than (a) as
disclosed on SCHEDULE 6.1.9 and (b) compensation paid in the Ordinary Course of
Business, since such date, there has not been any accrual of liability by Seller
to any Stockholder or any of such Stockholder's Affiliates or other transaction
between Seller or any of its Affiliates, on the one hand, and any Stockholder or
any of their Affiliates, on the other hand, or any action taken (other than this
Agreement) which could reasonably be expected to result in any such accrual, or
the incurrence of any legal or financial obligation to any such Person, after
such date.
6.1.10 TAX MATTERS. Except as disclosed in SCHEDULE 6.1.10:
(a) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
Seller (collectively, the "RETURNS") have, to the extent required to be filed on
or before the date hereof and on or before the Closing, been filed when due in
accordance with all applicable Laws;
(b) The Returns correctly reflected the facts regarding the
income, business, assets, operations, and activities and status of Seller;
(c) All Taxes owed by Seller (whether or not shown as due and
payable on the Returns that have been filed) have been timely paid, or withheld
(including withholding for independent contractors, consultants and other
employees) and remitted to the appropriate Taxing Authority;
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(d) Any reserves established for Taxes with respect to Seller,
for any Pre-Closing Tax Period (including for any Pre-Closing Tax Period for
which no Return has yet been filed) reflected on the books of Seller (excluding
any provision for deferred income taxes) are adequate in accordance with GAAP;
(e) Seller is not delinquent in the payment of any Tax, nor
has Seller requested any extension of time within which to file any Return
except for extensions granted as a matter of right;
(f) Neither Seller nor any member of any affiliated,
consolidated, combined or unitary group of which Seller is or has been a member
has granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension or
waiver) has not yet expired;
(g) There is no action, suit or proceeding now pending and no
claim, audit or investigation now pending of which Seller is aware or, to the
knowledge of Seller or any Stockholder, any action, suit, claim, audit or
investigation threatened against or with respect to Seller in respect of any
Tax;
(h) There are no Liens for Taxes upon the assets of Seller,
except Liens for current Taxes not yet due;
(i) Seller has not been a member of an affiliated,
consolidated, combined or unitary group or participated in any other arrangement
whereby any income, revenues, receipts, gain or loss of Seller was determined or
taken into account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset or liability of any other Person;
and
(j) Seller has made a timely and valid S election under
Section 1362 of the Code to be treated as an "S Corporation" within the meaning
of Section 1361(a) of the Code (an "S CORPORATION"). The first day of the first
taxable year for which Seller was an S Corporation was more than ten years prior
to the date hereof. Seller has also made all such elections permitted or
required under analogous provisions of state or local law.
6.1.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed on
SCHEDULE 6.1.11, since the Balance Sheet Date, there has not been any event,
occurrence, development, circumstances or state of facts which (a) has had or
which could reasonably be expected to have a Material Adverse Effect or (b)
would have constituted a violation of any covenant of Seller or any Stockholder
hereunder (including Section 8.1) had such covenant applied to any of them since
the Balance Sheet Date.
6.1.12 CONTRACTS. (a) Except as specifically disclosed in
SCHEDULE 6.1.12(a), Seller is neither a party nor bound by any of the following
(whether written or oral):
(i) any lease (whether of real or personal property)
providing for annual rentals of $50,000 or more;
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(ii) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets that
provides for either (A) annual payments by Seller of $50,000
or more or (B) aggregate payments by Seller of $100,000 or
more;
(iii) any sales, distribution or other similar
agreement providing for the sale by Seller of materials,
supplies, goods, services, equipment or other assets that
provides for either (A) annual payments to Seller of $50,000
or more or (B) aggregate payments to Seller of $100,000 or
more;
(iv) any partnership, joint venture or other similar
agreement or arrangement;
(v) any agreement relating to the acquisition or
disposition of any business (whether by merger, sale of stock,
sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (in any
case, whether incurred, assumed, guaranteed or secured by any
asset);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative,
marketing or other similar agreement;
(ix) any agreement that substantially limits the
freedom of Seller to compete in any line of business,
geographic area or with any Person or which would so limit the
freedom of Purchaser after the Closing Date;
(x) any agreement with (A) any Stockholder or any of
such Stockholder's Affiliates, (B) any Person directly or
indirectly owning, controlling or holding with power to vote,
5% or more of the outstanding voting securities of any of such
Stockholder's Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by any
Stockholder or any of such Stockholder's Affiliates, (D) any
director or officer of any Stockholder's Affiliates or any
"associates" or members of the "immediate family" (as such
terms are respectively defined in Rule 12b-2 and Rule 16a-1 of
the Exchange Act) of any such director or officer, or (E) any
director or officer of a Seller or with any "associate" or any
member of the "immediate family" (as such terms are
respectively defined in Rules 12b-2 and 16a-1 of the Exchange
Act) of any such director or officer;
(xi) any management service, consulting or any other
similar type of contract;
(xii) any warranty, guaranty or other similar
undertaking with respect to a contractual performance (or
Seller's standard forms of any of the foregoing) extended by
Seller, or any other warranty, guaranty or other similar
undertaking
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with respect to contractual performance extended by Seller
other than in the Ordinary Course of Business.
(xiii) any employment, deferred compensation,
severance, bonus, retirement or other similar agreement or
plan in effect as of the date hereof and entered into or
adopted by Seller, on the one hand, and any director or
officer of Seller or any other employee of Seller receiving
annual compensation of $70,000 or more, on the other hand; or
(xiv) any other agreement, commitment, arrangement or
plan not made in the Ordinary Course of Business of Seller
that is material to Seller.
(b) Each agreement, contract, plan, lease, arrangement or
commitment disclosed in SCHEDULE 6.1.12(a) or any other Schedule to this
Agreement or required to be disclosed pursuant to this Section is a valid and
binding agreement of the Seller, as the case may be, and is in full force and
effect, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and neither Seller nor, to the knowledge of Seller or any
Stockholder, any other party thereto is in default or breach in any material
respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment. To the knowledge of Seller or any Stockholder, there
is no event, occurrence, condition or act (including the consummation of the
transactions contemplated hereby) which, with the giving of notice or the
passage of time, or the happening of any other event or condition, could
reasonably be expected to become a material default or event of default
thereunder.
(c) SCHEDULE 6.1.12(c) sets forth every grant by Seller in the
past three years of any severance or termination pay to any employee of Seller
receiving annual compensation of $70,000 or more, or any director or officer of
Seller.
6.1.13 INSURANCE COVERAGE. Seller has furnished to Purchaser a
list of and true and complete copies of all of the insurance policies and
fidelity bonds covering the assets, Business, operations, employees, officers
and directors of Seller. There is no material claim by Seller 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. All premiums due and
payable under all such policies and bonds have been paid and Seller and the
Stockholders have complied in all material respects with the terms and
conditions of all such policies and bonds. Such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance coverage)
are in full force and effect and are disclosed in SCHEDULE 6.1.13. Such policies
of insurance and bonds are of the type and in amounts deemed by the management
of Seller to be sufficient in light of the business of Seller. Neither Seller
nor any Stockholder know of any threatened termination of, or premium increase
with respect to, any of such policies or bonds. Since the last renewal date of
any insurance policy, there has not been any material adverse change in the
relationship of either Seller or the Stockholders with its insurers or the
premiums payable pursuant to such policies.
6.1.14 LITIGATION. Except as disclosed in SCHEDULE 6.1.14 or
SCHEDULE 6.1.18, there is no action, suit, investigation, arbitration or
administrative or other proceeding pending or, to the knowledge of Seller or any
Stockholder, threatened, against or affecting Seller, the
24
Stockholders or any of their respective properties before any court or
arbitrator or any Governmental Authority which, if determined or resolved
adversely to any of them, could reasonably be expected, individually or when
considered together with all other such matters, (a) to materially and adversely
affect the right or ability of Seller to carry on the Business as now conducted,
(b) to have a Material Adverse Effect, or (c) which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement and the Ancillary Agreements to which Seller is
or will be a party at Closing; and neither Seller nor any Stockholder knows of
any valid basis for any such action, proceeding or investigation.
6.1.15 COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed
in SCHEDULE 6.1.15(a), Seller is not or has not been since the Balance Sheet
Date in violation of any applicable Law or Order, except for such violations
that have not had and could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(b) SCHEDULE 6.1.15(b) sets forth a list of each material
government or regulatory license, authorization, permit, franchise, consent and
approval (the "PERMITS") issued and held by or on behalf of Seller or required
to be so issued and held to carry on the Business as currently conducted and as
to be conducted at the Closing. Except as disclosed in SCHEDULE 6.1.15(b), each
Permit is valid and in full force and effect. Seller is not in default under,
and no condition exists that with notice or lapse of time or both could
constitute a default or could give rise to a right of termination, cancellation
or acceleration under, any material Permit held by Seller.
6.1.16 PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as
disclosed in SCHEDULE 6.1.16(a) and except for inventory disposed of in the
Ordinary Course Of Business of Seller, Seller has good title to, or in the case
of leased property has valid leasehold interests in, all property and assets
(whether real or personal, tangible or intangible) reflected in the Audited
December 1998 Balance Sheet or acquired after the date thereof. None of such
property or assets is subject to any Liens, except for (i) Liens disclosed in
the Audited December 1998 Balance Sheet or incurred after the date thereof in
the Ordinary Course of Business of Seller; (ii) Liens for Taxes not yet due or
being contested in good faith (and for which adequate accruals or reserves are
set forth on the Audited December 1998 Balance Sheet); and (iii) Permitted
Liens.
(b) SCHEDULE 6.1.16(b) sets forth a list of all real property
assets owned or leased by Seller ("REAL PROPERTY"). All such leases of real
property are valid, binding and enforceable in accordance with their respective
terms and Seller is a tenant or possessor in good standing thereunder and all
rents due under such leases have been paid. There does not exist under any such
lease any default or any event which with notice or lapse of time or both could
reasonably be expected to constitute a default, except for such defaults that
have not and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Seller is in peaceful and undisturbed
possession of the space and/or estate under each lease of which it is a tenant
and has good and valid rights of ingress and egress to and from all the Real
Property from and to the public street systems for all usual street, road and
utility purposes. Neither Seller nor any Stockholder has received any notice of
any appropriation, condemnation or like proceeding, or of any violation of any
applicable zoning Law or Order relating to or affecting the Real Property, and
to Seller's or any Stockholder's knowledge, no such proceeding has been
threatened or commenced.
25
(c) The Purchased Assets owned or leased by Seller (including
real, personal, tangible and intangible property), or which it otherwise has the
right to use (including real, personal, tangible and intangible property),
constitute all of the assets held for use or used in connection with the
Business and are in good operating condition and repair (normal wear and tear
excepted) and are adequate to conduct the Business as currently conducted.
6.1.17 INTELLECTUAL PROPERTY. (a) SCHEDULE 6.1.17(a) sets
forth a list of all Intellectual Property Rights of Seller and all material
licenses, sublicenses and other written agreements as to which Seller is a party
and pursuant to which any Person is authorized to use such Intellectual Property
Right, including the identity of all parties thereto.
(b) Except as disclosed in SCHEDULE 6.1.17(b):
(i) Neither Seller nor any Stockholder has, since
January 1, 1993, been sued or charged in writing with or been
a defendant in any claim, suit, action or proceeding relating
to the Business that is either pending or, to the knowledge of
Seller or any Stockholder, threatened, that, in either case,
has not been finally terminated prior to the date hereof and
that involves a claim of infringement by a Seller of any
trademark, service mark, trade name, invention, patent, trade
secret, copyright, know-how or any other similar type of
proprietary intellectual property right of any other Person
and neither Seller nor any Stockholder has knowledge of any
basis for any such claim of infringement and no knowledge of
any continuing infringement by any other Person of any
Intellectual Property Rights;
(ii) No Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by Seller or restricting the
licensing thereof by Seller to any Person; and
(iii) Seller has not entered into any agreement to
indemnify any other Person against any charge of infringement
of any trademark, service mark, trade name, invention, patent,
trade secret, copyright, know-how or any other similar type of
proprietary intellectual property right.
6.1.18 ENVIRONMENTAL MATTERS. (a) Except as disclosed
in SCHEDULE 6.1.18:
(i) Constituents of Concern have not been generated,
recycled, used, treated or stored on, transported to or from,
or released or disposed on, Seller Property or, to the
knowledge of Seller or any Stockholder, any property adjoining
or adjacent except in compliance with Environmental Laws;
(ii) Except as could not individually, or in the
aggregate reasonably be expected to have a Material Adverse
Effect, Seller is in compliance with Environmental Laws and
the requirements of permits issued under such Environmental
Laws with respect to the Seller Property;
(iii) There are no pending or, to the knowledge of
Seller, threatened Environmental Claims against Seller, or any
Seller Property;
26
(iv) There are no facts, circumstances, conditions or
occurrences regarding Seller's past or present business or
operations of any Seller Property, or to the knowledge of
Seller or any Stockholder, any property adjoining any Seller
Property, that could reasonably be expected (i) to form the
basis of an Environmental Claim against Seller or any of the
Seller Property or assets, or (ii) to cause any such current
Seller Property or assets to be subject to any restrictions on
its ownership, occupancy, use or transferability under any
Environmental Law;
(v) There are not now and to the knowledge of Seller,
or any Stockholder, there never have been any underground
storage tanks or sumps located on any Seller Property or, to
the knowledge of Seller or any Stockholder, located on any
property that adjoins or is adjacent to any Seller Property;
(vi) Neither Seller nor any Seller Property is listed
or proposed for listing on the National Priorities List under
CERCLA, or CERCLIS (as defined in CERCLA) or on any similar
federal or state of sites requiring investigation or clean-up;
(vii) There are no Environmental Permits that are
nontransferable or require consent, notification or other
action to remain in full force and effect following the
consummation of the transactions contemplated hereby; and
(viii) Seller has no liability under any
Environmental Law (including an obligation to remediate any
Environmental Condition whether caused by Seller or any other
Person) which could reasonably be expected to have a Material
Adverse Effect.
(b) There has been no environmental investigation, study,
audit, test, review or other analysis commenced or conducted by or on behalf of
Seller (or by a third-party of which Seller or any Stockholder has knowledge) in
relation to the current or prior business of Seller, or any property or facility
currently or, to the knowledge of Seller or any Stockholder, previously owned or
leased by Seller which has not been delivered to Purchaser prior to the date
hereof.
(c) Seller does not own or lease and/or has not owned or
leased any property, and does not conduct and has not conducted any operations,
in New Jersey or Connecticut.
(d) For purposes of this Section 6.1.18, the term "SELLER"
(including the use of such term in the term "SELLER PROPERTY") will include any
entity which is, in whole or in part, a predecessor of Seller.
6.1.19 PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 6.1.19(a)
sets forth a list of all Benefit Plans with respect to which Seller has or has
had in the six years preceding the date hereof any obligation or liability or
which are or were in the six years preceding the date hereof maintained,
contributed to or sponsored by Seller for the benefit of any current or former
employee, officer or director of Seller. With respect to each Benefit Plan
subject to ERISA, Seller has delivered to Purchaser a true and complete copy of
each such Benefit Plan (including all amendments thereto) and a true and
complete copy of each material document (including all amendments thereto)
prepared in connection with each such Benefit Plan, including, without
27
limitation, (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, and (iii) the
most recently filed IRS Form 5500 for each such Benefit Plan, if any. Except as
provided in Sections 8.5(d) and 8.5(e), Seller does not have any express or
implied commitment to create, incur liability with respect to or cause to exist
any employee benefit plan or to modify any Benefit Plan, other than as required
by Law.
(b) Except as disclosed in SCHEDULE 6.1.19(b), none of the
Benefit Plans is a plan that is or has ever been subject to Title IV of ERISA,
Section 302 of ERISA or Section 412 of the Code. None of the Benefit Plans is
(i) a "multiemployer plan" as defined in Section 3(37) of ERISA, (ii) a plan or
arrangement described under Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a
plan maintained in connection with a trust described in Section 501(c)(9) of the
Code. Except as disclosed in SCHEDULE 6.1.19(b), and except for benefits
provided in Seller's 401(k) plan, none of the Benefit Plans provides for the
payment of separation, severance, termination or similar-type benefits to any
person or provides for or, except to the extent required by Law, promises
retiree medical or life insurance benefits to any current or former employee,
officer or director of Seller.
(c) Except as disclosed in SCHEDULE 6.1.19(c), each Benefit
Plan is in compliance in all material respects with, and has always been
operated in all material respects in accordance with, its terms and the
requirements of all applicable Law and Seller has satisfied in all material
respects all of their statutory, regulatory and contractual obligations with
respect to each such Benefit Plan. No legal action, suit or claim is pending or,
to the knowledge of Seller or any Stockholder, threatened with respect to any
Benefit Plan (other than claims for benefits in the ordinary course) and no fact
or event exists that could reasonably be expected to give rise to any such
action, suit or claim.
(d) Except as disclosed in SCHEDULE 6.1.19(d), each Benefit
Plan or trust which is intended to be qualified or exempt from taxation under
Section 401(a), 401(k) or 501(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified or exempt, and no fact
or occurrence has occurred since the date of such determination letter to
adversely affect the qualified or exempt status of any Benefit Plan or related
trust, including Seller's 401(k) plan.
(e) There has been no non-exempt prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Benefit Plan. Seller has not incurred any material liability for
any excise tax arising under the Code with respect to a Benefit Plan and no fact
or event exists which could reasonably be expected to give rise to such
liability.
(f) All material contributions, premiums or payments required
to be made with respect to any Benefit Plan have been, or will be, made on or
before their due dates. For completed plan years of the Benefit Plans, all such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority, and
no fact or event exists which could give rise to any such challenge or
disallowance.
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(g) There has been no amendment to, written interpretation of
or announcement (whether or not written) by Seller thereof relating to, or
change in employee participation or coverage under, any Benefit Plan that would
increase materially the expense of maintaining such Benefit Plan above the level
of the expense incurred in respect thereto for the most recent fiscal year ended
prior to the date hereof.
(h) Except as disclosed in SCHEDULE 6.1.19(h) or in this
Agreement or the Ancillary Agreements, no employee or former employee of Seller
thereof will become entitled to any bonus, retirement, severance, job security
or similar benefit or enhanced such benefit (including acceleration of vesting
or exercise of an incentive award) as a result of the transactions contemplated
hereby.
6.1.20 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
disclosed in SCHEDULE 6.1.20, to the knowledge of Seller, none of the
Stockholders, nor any other director, officer or other employee of Seller
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer, competitor or potential competitor of Seller.
Ownership of securities of a Person whose securities are registered under the
Exchange Act of 2% or less of any class of such securities will not be deemed to
be an ownership interest purposes of this Section 6.1.20.
6.1.21 CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS. The
relationships of Seller with its customers, suppliers and employees are good
commercial working relationships and, except as disclosed in SCHEDULE 6.1.21,
none of the material customers or material suppliers of Seller or employees of
Seller receiving annual compensation in excess of $70,000 has canceled,
terminated or otherwise materially altered or notified Seller of any intention
or otherwise threatened to cancel, terminate or materially alter its
relationship with Seller since the Balance Sheet Date. Except as disclosed in
SCHEDULE 6.1.21, as of the date hereof, Seller has no reason to believe that
there will be any change in relations with material customers or suppliers or
employees of Seller receiving annual compensation in excess of $70,000 as a
result of the transactions contemplated by this Agreement which could reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate.
6.1.22 OTHER EMPLOYMENT MATTERS. (a) Seller is in material
compliance with all Laws in respect of employment and employment practices,
terms and conditions of employment and wages and hours, and has not, and is not,
engaged in any unfair labor practice; no unfair labor practice complaint against
Seller is pending before the National Labor Relations Board; there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving Seller; Seller is not a party to any collective bargaining agreement
and no collective bargaining agreement is currently being negotiated by Seller;
to the knowledge of Seller, no representation question exists regarding
employees of Seller; and except as specifically set forth on SCHEDULE 6.1.22(a),
no claim in respect of the employment of any employee has been asserted and is
currently pending or, to the knowledge of Seller or any Stockholder, threatened
against Seller.
(b) SCHEDULE 6.1.22(b) contains a complete and accurate list
of the following information for each employee or director of Seller, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since the
Balance Sheet Date: vacation accrued; service credited for purposes of
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vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), Seller severance pay, insurance, medical, welfare, or
vacation plan, or other Benefit Plan of Seller; and all bonuses and any other
amounts to be paid by Seller to employees of Seller, including bonuses and other
such amounts at or in connection with the Closing ("BONUSES").
(c) No current employee or current director of Seller or, to
the knowledge of Seller, any former employee or former director of Seller is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person that in any way adversely affected,
affects, or will affect (i) the performance of his duties as an employee or
director of Seller or (ii) the ability of Seller to conduct its respective
business.
(d) SCHEDULE 6.1.22(d) also contains a complete and accurate
list of the following information for each retired employee or director of
Seller or their dependents, receiving benefits or scheduled to receive benefits
in the future: name, pension benefits, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
6.1.23 ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE
6.1.23, all of the accounts receivable reflected on the Audited December 1998
Balance Sheet (net of the reserves set forth on the Audited December 1998
Balance Sheet) and all accounts receivable which have arisen since the Balance
Sheet Date (net of any additional reserves established since such date in
accordance with GAAP and in the Ordinary Course of Business of Seller, none of
which is material) are valid and enforceable claims, and the goods and services
sold and delivered which gave rise to such accounts receivable were sold and
delivered in conformity with the applicable purchase orders, agreements and
specifications. Such accounts receivable are subject to no defenses, offsets or
recovery in whole or in part by the Persons whose purchase gave rise to such
accounts receivable or by third-parties and are fully collectible in the
Ordinary Course of Business of Seller without resort to legal proceedings,
except to the extent of the amount of the reserve for doubtful accounts
reflected on the Audited December 1998 Balance Sheet.
6.1.24 INVENTORY. Except as set forth in SCHEDULE 6.1.24, all
inventories reflected on the Audited December 1998 Balance Sheet (net of the
reserves set forth on the Audited December 1998 Balance Sheet) and all
inventories which have been acquired or produced since the Balance Sheet Date
(net of any additional reserves established since the Balance Sheet Date in the
Ordinary Course of Business of Seller, none of which is material) are in good
condition, conform in all material respects with the applicable specifications
and warranties of Seller, are not obsolete, and are usable and salable in the
Ordinary Course of Business of Seller. The values at which such inventories are
carried are in accordance with GAAP, consistently applied. The amount and mix of
items in the inventories of supplies, in-process and finished products are, and
will be at the Closing Date, consistent with the past business practices of
Seller.
6.1.25 MILLENNIUM COMPLIANCE. SCHEDULE 6.1.25 describes the
measures that have been implemented to determine the extent to which the
computer systems used by Seller in its business (the "COMPUTER SYSTEMS") are not
in Millennium Compliance, and the material
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details of any program undertaken with a view towards causing the Computer
Systems to achieve Millennium Compliance.
6.1.26 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Seller or any Stockholder or any of their Affiliates who might be
entitled to any fee or other commission in connection with the transactions
contemplated by this Agreement.
6.2 STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES. Each
Stockholder, severally and not jointly and with respect to such Stockholder
only, represents and warrants to Purchaser as follows:
6.2.1 AUTHORITY; ENFORCEABILITY. Such Stockholder has all
requisite power and authority, and has taken all action necessary, to execute
and deliver this Agreement and each Ancillary Agreement to which such
Stockholder is or will be a party at the Closing, to consummate the transactions
contemplated hereby and to perform his obligations hereunder and thereunder.
This Agreement has been, and each of the Ancillary Agreements to which such
Stockholder will be a party at the Closing will have been, duly executed and
delivered by such Stockholder and constitute, and will constitute at the
Closing, legal, valid and binding obligations of such Stockholder enforceable
against such Stockholder in accordance with their respective terms, except to
the extent that their enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
6.2.2 NO CONFLICTS. The execution and delivery of this
Agreement and each Ancillary Agreement to which such Stockholder is or will be a
party at the Closing has not and will not at the Closing, and the consummation
of the transactions contemplated hereby and compliance with the terms hereof has
not and will not at the Closing, violate or conflict with in any respect or
result in a breach under any Contract, Law or Order applicable to such
Stockholder.
6.2.3 NO CONSENTS. Except as may be required under the HSR
Act, no consent of, approval or filing with, any court or other Person is
required to be obtained or made by or with respect to such Stockholder in
connection with the execution, delivery and performance of this Agreement or any
of the Ancillary Agreements to which such Stockholder is or will be a party at
the Closing or the consummation by such Stockholder of the transactions
contemplated hereby or thereby.
6.2.4 LITIGATION. Except as disclosed in SCHEDULE 6.2.4, there
is no action, suit, investigation, arbitration or administrative or other
proceeding pending, or, to the knowledge of such Stockholder threatened, against
or affecting such Stockholder before any court or arbitrator or any Governmental
Authority, which, if determined or resolved adversely to such Stockholder could
reasonably be expected to, individually or when considered together with all
other such matters, adversely affect the right or ability of such Stockholder to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements to which he is or will be a party at the Closing; and such
Stockholder knows of no valid basis for any such action, proceeding or
investigation.
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6.2.5 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
disclosed in SCHEDULE 6.1.20, neither such Stockholder, nor, to the knowledge of
such Stockholder, any other director, officer or other employee of Seller,
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer, competitor or potential competitor of Seller.
Ownership of securities of a company whose securities are registered under the
Exchange Act of 2% or less of any class of such securities will not be deemed to
be an ownership interest for purposes of this Section 6.2.5.
6.3 NO INFERENCE OF ASSUMPTION OF RETAINED LIABILITIES OR
ACQUISITION OF EXCLUDED ASSETS BY PURCHASER OR ANY OF ITS AFFILIATES. Nothing
contained in any of the representations and warranties set forth in this
Agreement will be construed to constitute the assumption by Purchaser or any of
its affiliates of any of the Retained Liabilities, or the acquisition by
Purchaser or any of its affiliates of any of the Excluded Assets, all of which
are and will remain after the date hereof for the account of Seller and the
Stockholders.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
7.1 CORPORATE EXISTENCE AND POWER. Purchaser is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Purchaser has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
7.2 CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by Purchaser of this Agreement and each of the
Ancillary Agreements to which it is or will be a party at the Closing are and
will be at the Closing within Purchaser's corporate power and have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been and each of the Ancillary Agreements to which Purchaser is or
will be a party at the Closing will have been duly executed and delivered by
Purchaser and constitute, and will constitute at the Closing, valid and binding
agreements of Purchaser, enforceable against Purchaser in accordance with their
terms, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
7.3 GOVERNMENTAL AUTHORIZATION. Except as may be required
under the HSR Act, the execution, delivery and performance by Purchaser of this
Agreement and each of the Ancillary Agreements to which Purchaser will be a
party at the Closing require no action by or in respect of, or filing with, any
Governmental Authorities.
7.4 NON-CONTRAVENTION. The execution, delivery and
performance by Purchaser of this Agreement and each Ancillary Agreement to which
Purchaser is or will be a party at the Closing, do not and will not at the
Closing (a) violate the certificate of incorporation or bylaws or comparable
organizational documents of Purchaser or (b) violate any applicable Law or
Order.
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7.5 LITIGATION. Except as disclosed in SCHEDULE 7.5, there is
no action, suit, investigation, arbitration or administrative or other
proceeding pending or, to the knowledge of Purchaser, threatened against or
affecting Purchaser, or any of Purchaser's properties before any court or
arbitrator or any Governmental Authority which, if determined or resolved
adversely to Purchaser, could, individually or in the aggregate, reasonably be
expected to materially and adversely affect the right or ability of Purchaser to
consummate the transactions contemplated by this Agreement and any Ancillary
Agreement to which Purchaser will be a party at Closing.
ARTICLE VIII
CERTAIN COVENANTS
8.1 CONDUCT OF BUSINESS OF SELLER. During the period from the
date of this Agreement to the Closing Date, the Stockholders will, jointly and
severally, cause Seller to, and Seller will, conduct its operations only in the
Ordinary Course of Business of Seller (including managing their working capital
in accordance with its past practice and custom) and use their respective
reasonable best efforts to: (a) preserve intact its business organizations, (b)
keep available the services of its officers and employees and (c) maintain its
relationships and goodwill with licensors, suppliers, distributors, customers,
landlords, employees, agents and others having business relationships with any
of them or the Business. Seller will confer with Purchaser concerning
operational matters of a material nature and report periodically to Purchaser
concerning the Business of Seller, operations and finances of Seller. Without
limiting the generality or effect of the foregoing, prior to the Closing Date,
except with the prior written consent of Purchaser, Seller will not, and the
each Stockholder will cause Seller not to:
(a) Amend or modify their certificates of incorporation or
bylaws from their respective forms on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any
bonuses to any director, officer, employee or stockholder of Seller, or enter
into any employment, severance, or similar agreement with any director, officer,
stockholder or employee of Seller, PROVIDED, HOWEVER, that the compensation of
employees of Seller receiving annual compensation of less than $70,000 may be
changed in the Ordinary Course of Business of Seller;
(c) Except as contemplated by Sections 8.5(d) and 8.5(e),
adopt or increase any benefits under any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of its employees;
(d) Except as contemplated by Section 8.14, enter into any
contract or commitment except contracts and commitments (for capital
expenditures or otherwise) in the Ordinary Course of Business of Seller (and in
any case not exceeding the dollar amounts with respect to specified categories
of Contracts in Section 6.1.12);
(e) Incur, assume or guarantee any Indebtedness other than in
the Ordinary Course of Business;
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(f) Enter into any transaction or commitment relating to the
assets or the Business of Seller which, individually or in the aggregate, could
be material to Seller, or cancel or waive any claim or right of substantial
value which, individually or in the aggregate, could be material to Seller
without the prior written consent of Purchaser which will not be unreasonably
withheld or delayed;
(g) Make any change in accounting methods or practices
(including changes in reserve or accrual amounts or policies);
(h) Issue or sell any Capital Stock, or make any other changes
in its capital structure, including the grant of any stock option or other right
to purchase shares of Capital Stock of Seller;
(i) Sell, lease or otherwise dispose of any material asset or
property without the prior written consent of Purchaser which will not be
unreasonably withheld or delayed;
(j) Except as expressly permitted under this Agreement,
write-off as uncollectible any notes or accounts receivable, except write-offs
in the Ordinary Course of Business of Seller charged to applicable reserves,
none of which individually or in the aggregate is material; write-off, write-up
or write-down any other material asset of Seller; or alter its customary time
periods for collection of accounts receivable or payments of accounts payable;
(k) Create or assume any Lien other than a Permitted Lien;
(l) Make any loan, advance or capital contributions to or
investment in any Person;
(m) Terminate or close any material facility, business or
operation of Seller;
(n) Cause or permit to occur any event, development or state
of circumstances or facts which individually or together with other matters, has
had or could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; or
(o) Agree to do any of the foregoing.
8.2 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date and the termination of this
Agreement in accordance with its terms, neither Seller nor any Stockholder or
any of their respective Affiliates, or any officer or director of Seller or any
of its Affiliates, or other representative of any of the foregoing (including
advisors, agents, attorneys, employees or consultants) will take any action to,
directly or indirectly, encourage, initiate, solicit or engage in discussions or
negotiations with, or provide any information to any Person, other than
Purchaser (and its Affiliates and representatives), concerning any purchase of
any Capital Stock of Seller or any merger, asset sale or similar transaction
involving Seller. Seller and each Stockholder will disclose to Purchaser the
existence or occurrence of any proposal or contract which it or he or any of
their representatives described above may receive in respect of any such
transaction and the identity of the Person from whom such a proposal or contract
is received.
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8.3 REVIEW OF SELLER. Purchaser may, prior to the Closing
Date, directly or through its representatives, review the properties, books and
records of Seller and their financial and legal condition to the extent it deems
necessary or advisable to familiarize itself with such properties and other
matters. Seller will permit Purchaser and their representatives to have, after
the date of execution of this Agreement, reasonable access to the premises and
to all the books and records of Seller and to cause the officers of Seller to
furnish Purchaser with such financial and operating data and other information
with respect to the Business and properties of Seller as Purchaser will from
time to time reasonably request. Seller will deliver or cause to be delivered to
Purchaser such additional instruments, documents, certificates and opinions as
Purchaser may reasonably request for the purpose of (i) verifying the
information set forth in this Agreement or on any Schedule attached hereto and
(ii) consummating or evidencing the transactions contemplated by this Agreement.
8.4 REASONABLE BEST EFFORTS. Seller and Purchaser will
cooperate and use their respective reasonable best efforts to take, or cause to
be taken, all appropriate actions, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable Laws (including, without
limitation, the filing of Notification and Report Forms under the HSR Act with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice) to consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, their respective reasonable best
efforts to obtain, prior to the Closing Date, all licenses, Permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
and parties to contracts with Seller as are necessary for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby. Notwithstanding any other provision hereof, in no
event will Purchaser or any of its Affiliates be required to (a) enter into or
offer to enter into any divestiture hold-separate, business limitation or
similar agreement or undertaking in connection with this Agreement or the
transactions contemplated hereby or (b) make any payment in connection with any
consent or approval or condition to Closing set forth in any subsection of
Section 9.1 which it is necessary or advisable for Seller to obtain or satisfy
in order to consummate the transactions contemplated by this Agreement.
8.5 TRANSFER OF EMPLOYEES AND BENEFIT PLANS. As of the
Closing Date:
(a) Employees of Seller with respect to the Business
immediately prior to the Closing Date whose names are listed on SCHEDULE 8.5(a)
will be offered employment with Purchaser or an Affiliate of Purchaser each such
offer to include (i) a substantially equivalent title, level of responsibility
and compensation as each such employee had as an employee of Seller on the date
hereof and (ii) the benefits listed on SCHEDULE 8.5(b), PROVIDED that this
Section 8.5 will not be construed to prohibit Purchaser from modifying or
eliminating any such benefits after the Closing Date;
(b) Purchaser will assume all obligations relating to the
payment of (i) Employee Bonus Accruals to the extent provided in Section
3.1(a)(vii), salary, wages and benefits reflected on the Closing Date Balance
Sheet (to the extent not discharged prior to the Closing Date) or otherwise
arising or accruing after the Closing Date, PROVIDED that the existence thereof
does not constitute a breach of any representation, warranty or covenant of
Seller hereunder, in each case with respect to any employee of Seller who
accepts employment with Purchaser (the "TRANSFERRED EMPLOYEES"), and (ii)
severance payments and other severance
35
benefits to which the Transferred Employees become entitled because of
termination of their employment with and by Purchaser or an Affiliate of
Purchaser after they become employees of Purchaser (other than severance arising
from constructive termination resulting from the terms and conditions of the
offer of employment made by Purchaser in compliance with this Section 8.5);
(c) Purchaser will assume the obligations of Seller under each
of the employment agreements listed on SCHEDULE 6.1.12(a)(iii) to which Seller
is party; and
(d) Prior to the Closing Date and subject to the compliance by
Seller with its obligations under Section 8.5(g), Purchaser will take all action
necessary to establish a defined contribution plan for Transferred Employees
(the "TRANSFEREE 401(K) PLAN") containing substantially the same terms and
conditions as the Nationwide Precision/Parlec Section 401(k) Plan (the
"NATIONWIDE/PARLEC 401(K) PLAN") and, effective as of or as promptly as possible
after the Closing Date, Seller will cause assets of the Nationwide/Parlec 401(k)
Plan attributable to the benefits of Transferred Employees to be transferred in
a manner that satisfies Section 414(l) of the Code to the Transferee 401(k)
Plan; PROVIDED, HOWEVER, that no transfer will occur until Purchaser has
received such assurances as may be reasonable that the applicable provisions of
the Code have been satisfied. The assets transferred from the Nationwide/Parlec
401(k) Plan to the Transferee 401(k) Plan will be equal to the vested and
nonvested account balances of Transferred Employees as of the date of Transfer.
Purchaser will take such action as may be necessary to provide each Transferred
Employee participating in the Transferee 401(k) Plan after the transfer with an
initial account balance that is at least equal to the account balance
transferred from the Nationwide/Parlec 401(k) Plan, and to provide all benefits
protected by Law, including optional forms of benefit.
(e) With respect to all other Benefit Plans in which Seller
and Parlec or any other employer participate, Purchaser will take all action
necessary to establish, effective as of the Closing Date, benefit plans for
Transferred Employees containing substantially the same terms and conditions as
such Benefit Plans (the "TRANSFEREE PLANS"). Purchaser will assume sponsorship
of the Transferee Plans, and Seller will take all action necessary to transfer
sponsorship of the Transferee Plans to Purchaser, effective as of the Closing.
(f) Purchaser will assume sponsorship of all Benefit Plans not
described in Sections 8.5(d) and 8.5(e) above, and Seller will take all action
necessary to transfer sponsorship of such Benefit Plans to Purchaser, effective
as of the Closing.
(g) Seller will provide all reasonable assistance to Purchaser
in connection with the performance by Purchaser of its obligations under
Sections 8.5(d), 8.5(e) and 8.5(f).
Nothing contained in this Agreement will confer upon any
Transferred Employee, or any legal representative thereof, any rights or
remedies, including, without limitation, any right to employment for any
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement (other than as provided in the Employment Offer Letter).
Notwithstanding anything to the contrary contained in this Agreement, neither
Purchaser nor any Affiliate of Purchaser will be required to continue any
particular Benefit Plan after the Closing Date for the Transferred Employees,
and any such Benefit Plan may be amended or terminated in accordance with its
terms and any applicable Law.
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8.6 BOOKS AND RECORDS. (a) From and after the Closing Date,
Purchaser will give Seller's representatives reasonable access to such
documentation and information and reasonable access to and cooperation of
employees which Seller may reasonably require (i) to prepare and file Tax
returns and to respond to any issues which may arise with respect to Taxes for
which Seller or any Stockholder are responsible to the extent relating to the
Purchased Assets or Assumed Liabilities, (ii) with respect to any Retained
Liabilities; and (iii) to defend any claim which Seller is required to defend
pursuant to this Agreement or in connection with the operation of the Business
prior to the Closing Date. Prior to the sixth anniversary of the Closing Date,
Purchaser will give Seller at least ten days prior written notice of Purchaser's
intention to dispose of any books, records or other documentation which are
delivered to Purchaser under the terms of this Agreement and that Seller may
reasonably require, and Seller will have the opportunity to obtain possession,
at its own expense, of any such books, records or documentation prior to
Purchaser's disposition thereof. In the absence of bad faith or willful
misconduct, Purchaser will have no liability arising out of or in connection
with its retention and handling of such records.
(b) From and after the Closing Date, Seller and each
Stockholder will give Purchaser's representatives reasonable access to such
documentation, information and reasonable access to and cooperation of each
Stockholder and other employees of Seller which Purchaser may reasonably require
(i) to prepare and file tax returns and respond to any issues which may arise
with respect to Taxes for which Purchaser is responsible to the extent relating
to the Purchased Assets or Assumed Liabilities or (ii) to defend any claim which
Purchaser is required to defend pursuant to this Agreement or in connection with
the operation of the Business after the Closing Date. Prior to the sixth
anniversary of the Closing Date, Seller will give Purchaser at least ten days
prior written notice of Seller's intention to dispose of any books, records or
other documentation contemplated by this Section 8.6(b) and that Purchaser may
otherwise reasonably require, and Purchaser will have the opportunity to obtain
possession, at its own expense, of any such books, records or documentation
prior to Seller's or the Stockholders' disposition thereof. In the absence of
bad faith or willful misconduct, Seller will have no liability arising out of or
in connection with its retention and handling of such records. Without limiting
the generality or effect of the foregoing, Seller will deliver or cause to be
delivered to Purchaser such additional instruments, documents, certificates and
opinions as Purchaser may reasonably request for the purpose of (x) verifying
the information set forth in this Agreement or on any Schedule attached hereto
and (y) consummating or evidencing the transactions contemplated by this
Agreement.
8.7 BULK TRANSFER LAWS. Seller will use its reasonable best
efforts to assist Purchaser in complying with the provisions of any Laws of any
jurisdiction relating to bulk transfers which may be applicable in connection
with the transfer of the Purchased Assets to Purchaser.
8.8 NON-COMPETITION. (a) During the Covenant Period, Seller
will not promote, participate, engage or have any other interest (whether Seller
is acting as owner, purchaser, shareholder, employee, broker, agent, principal,
trustee, corporate officer, director, consultant or in any other capacity) (i)
in any business which is competitive with any product or service offered by
Seller on or prior to the Closing Date (including tooling services but excluding
the performance of the Subject Work by Parlec in accordance with the terms of
the Parlec Agreement) or (ii) otherwise in the business of manufacturing and
supplying of complex machined metal parts for original equipment manufacturers;
37
(b) During the Covenant Period, Seller will not directly or
indirectly solicit, canvass or approach any Person who, to the knowledge of
Seller or any Stockholder, was provided with products or services by Seller at
any time prior to the Closing Date, to offer that Person products or services
similar to or derivative of products or services provided by Seller to such
Person at any time within the two year period prior to the Closing Date by
Seller.
(c) During the Covenant Period, Seller will not directly or
indirectly solicit, canvass or approach any Person who, to the knowledge of
Seller, provided products or services to Seller at any time during the two years
before the Closing Date to endeavor to cause such Person to cease providing
products or services to Purchaser.
(d) During the Covenant Period, Seller will not directly or
indirectly employ, solicit or entice away any Board of Directors member,
management committee member, director, officer or other employee of Purchaser or
any other Person directly or indirectly controlled by Purchaser until such
individual has not been employed or otherwise affiliated or associated with
Purchaser or such other Person for at least two consecutive years; PROVIDED,
HOWEVER, that this provision will not prohibit Seller from hiring Mr. Ronald S.
Ricotta after the expiration of the term of his Employment Agreement prior to
the expiration of such two year period.
8.9 COLLECTION OF PAYMENTS. Following the Closing: (a) Seller
will promptly, and in any event, not later than seven days following receipt,
forward to Purchaser any payments received by Seller with respect to any of the
Purchased Assets, and any checks, drafts or other instruments payable to Seller
will, when so delivered, bear all endorsements required to effectuate the
transfer of the same to Purchaser, (b) Seller will promptly forward to Purchaser
any mail or other communications received by Seller relating to the Purchased
Assets or the Assumed Liabilities, (c) Purchaser will promptly, and in any
event, not later than seven days following receipt, forward to Seller any
payments received by Purchaser with respect to any of the Excluded Assets, and
any checks, drafts or other instruments payable to Purchaser shall, when so
delivered, bear all endorsements required to effect the transfer of the same to
Seller and (d) Purchaser will promptly forward to Seller any mail or other
communications received by Purchaser relating to the Excluded Assets or the
Retained Liabilities.
8.10 ACCOUNTS RECEIVABLE. (a) Seller and the each Stockholder
will use their reasonable best efforts to assist Purchaser in the collection of
Accounts Receivable. On the Business Day immediately following the Put Date,
Purchaser may transfer to Seller, and if so transferred, the Stockholders will,
jointly and severally, cause Seller to, and Seller will, purchase from
Purchaser, each Uncollected Accounts Receivable for an amount equal to the
difference between (i) the face amount thereof, and (ii) the amount of any
reserve for doubtful accounts set forth on the Closing Date Balance Sheet.
During the 90 day period immediately following the Put Date, Purchaser will use
all reasonable efforts (but at no substantial out-of-pocket cost to Purchaser)
to assist Seller in the collection of the then Uncollected Accounts Receivable.
Purchaser hereby covenants and agrees to execute any and all documents
reasonably necessary to transfer any and all right, title and interest in
Uncollected Accounts Receivable to Seller.
(b) Any payment received by Seller after the Closing in
respect of an Account Receivable (other than Uncollected Accounts Receivable
transferred to Seller by Purchaser in accordance with Section 8.10(a)) will be
deemed to be made in trust for the benefit of Purchaser. Seller will and the
Stockholders will, jointly and severally, cause Seller to, upon receipt of such
38
payment, pay to Purchaser or its designee by wire transfer in immediately
available funds the full amount of such payment. Any payment received by the
Purchaser after the Closing in respect of an Uncollected Account Receivable
transferred and conveyed to Seller in accordance with Section 8.10(a) will be
deemed to be made in trust for the benefit of Seller, and Purchaser will, upon
receipt of such payment, pay to Seller or its designee by wire transfer in
immediately available funds the full amount of such payment.
8.11 USE OF NAMES. On and after the Closing Date, Seller will,
and the Stockholders will, jointly and severally, cause Seller to, discontinue
all use of the names "Nationwide Precision Products Corp." alone or in any
combination of words for any product or service and will as promptly as
possible, but in no event later than 30 days after the Closing Date, eliminate
such names from all signs, purchase orders, invoices, sales orders, packaging
stock, labels, letterheads, shipping documents and other materials used by
Seller.
8.12 S CORPORATION STATUS. Seller will continue to be a valid
S Corporation through the Closing.
8.13 OTHER FINANCIAL STATEMENTS. (a) Seller and each
Stockholder will, prior to the Closing and thereafter as necessary in the
judgement of Purchaser, deliver to Purchaser the written consent(s) of Brovitz,
Insero, Kasperski & Co., P.C. authorizing the use by Purchaser or an Affiliate
of Purchaser of the Audited Statements in connection with the financing
contemplated by Section 9.1.11 (including a registration statement to be filed
with the Securities and Exchange Commission in connection therewith).
(b) Seller and each Stockholder will, prior to the Closing,
deliver to Purchaser within twenty days after the last day of each applicable
month the Monthly Financial Statements contemplated by clause (ii) of the
definition thereof.
8.14 AVAILABLE CASH. Seller will, and each Stockholder will
cause Seller to, (a) have available Cash of not less than $200,000 at the
Closing (before giving effect to the payment of the Purchase Price) and (b)
deliver evidence of the foregoing reasonably satisfactory to Purchaser.
8.15 TRANSFER TAXES; HSR ACT FILING FEES. Purchaser will pay
all filing fees required to be paid in connection with the filings required to
be made under the HSR Act. All transfer, documentary, sales, use, stamp,
registration and value added Taxes imposed on Purchaser or Seller which are
incurred in connection with this Agreement will be borne equally by Seller and
Purchaser.
8.16 FURTHER ASSURANCES. From time to time, as and when
requested by any party hereto, the other parties will execute and deliver, or
cause to be executed and delivered, all such documents and instruments and will
take, or cause to be taken, all such further actions, as the requesting party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
8.17 CONFIDENTIALITY. It is understood that the business of
Purchaser and Precision Partners, L.L.C. and its subsidiaries and of Seller, and
all matters related thereto, are of a confidential nature. Prior to the date
hereof, there may have been revealed, and on or after the
39
date hereof there may be revealed, to Purchaser and its Affiliates or
representatives, on the one hand, and to Seller and its Affiliates and
representatives, on the other, "CONFIDENTIAL INFORMATION" (as hereinafter
defined) concerning the business of Purchaser and Precision Partners, L.L.C. and
its affiliates or the business of Seller. In consideration for and as an
inducement to the parties to execute, deliver and perform this Agreement, each
of the parties hereto hereby agrees that, following the termination of this
Agreement or any other failure of the Closing to be consummated, neither party
shall divulge or appropriate for their own use, or for the use of any third
party, any Confidential Information of the other party. As used herein, the term
"Confidential Information" means the following oral or written information
relating to each party's business: know-how, technology, inventions, designs,
methodologies, trade secrets, patents, secret processes and formulae,
information relating to the development, research, testing, manufacturing,
marketing, sales, distribution and uses of products, sources of supplies,
budgets and strategic plans, the identity and special needs of customers, plants
and other properties, and any other information which may give the party who
received such Confidential Information an opportunity to obtain an advantage
over its competitors who do not know or use such information; PROVIDED, HOWEVER,
that the term "CONFIDENTIAL INFORMATION" shall not include (i) any such
information that, prior to its use or disclosure by any party hereto, can be
shown to have been in the public domain or generally known or available to
customers, suppliers or competitors of the business of Purchaser and Precision
Partners, L.L.C. and its affiliates or Seller, as the case may be, through no
breach of the provisions of this Section; (ii) any such information that, prior
to its use or disclosure by any party hereto was rightfully in the receiving
party's possession, without violation of the provisions of this Section or other
non-disclosure covenants that were executed for the benefit of Purchaser and
Precision Partners, L.L.C. and its affiliates or Seller, as the case may be; or
(iii) any such information that, prior to its use or disclosure by Purchaser or
Seller, as the case may be, was developed by such party without violation of the
provisions of this Section or other non-disclosure covenants that were executed
for the benefit of Purchaser and Precision Partners, L.L.C. and its affiliates
or Seller, as the case may be.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the Closing are subject to the satisfaction of the
following conditions:
9.1.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AND
THE STOCKHOLDERS. (a) The representations and warranties of Seller and each
Stockholder made in this Agreement will be true and correct in all respects (or,
if any such representation is not expressly qualified by "materiality,"
"Material Adverse Effect" or words of similar import, then in all material
respects) as of the date hereof and as of the Closing, as though made as of the
Closing; (b) Seller and each Stockholder shall have performed and complied with
all terms, agreements and covenants contained in this Agreement required to be
performed or complied with by Seller and each Stockholder on or before the
Closing Date; and (c) Seller will have delivered to Purchaser a certificate of
Seller's Chief Executive Officer and each Stockholder will have delivered to
Purchaser a certificate of Stockholder, all dated the Closing Date, confirming
the foregoing and such other evidence of compliance with their obligations as
Purchaser may reasonably request.
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9.1.2 SELLER'S CERTIFICATE. Seller shall have delivered to
Purchaser a certificate from Seller's Secretary or an Assistant Secretary
certifying as to the due adoption of resolutions adopted by its Board of
Directors (and its stockholders, if required) authorizing the execution of this
Agreement and the Ancillary Agreements and the taking of any and all actions
deemed necessary or advisable to consummate the transactions contemplated herein
and therein.
9.1.3 STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved in the manner and by
the requisite vote of the Stockholders required by applicable Law.
9.1.4 NO INJUNCTION, ETC. No provision of any applicable Law
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.1.5 NO PROCEEDINGS. No proceeding challenging this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or seeking to prohibit, alter, prevent or materially delay the Closing
or seeking damages will have been instituted by any Person (other than Seller)
before any court, arbitrator or Governmental Authority and be pending.
9.1.6 REQUIRED FILINGS. All actions by or in respect of or
filings by Seller or any Stockholder with any Person required to permit the
consummation of the Closing shall have been taken, made or obtained.
9.1.7 OPINION OF COUNSEL. Purchaser shall have received an
opinion of Harris, Beach & Wilcox, LLP, counsel to Seller and the Stockholders,
dated the Closing Date substantially in the form attached hereto as EXHIBIT I,
together with the Reliance Letters to the Lenders.
9.1.8 TERMINATION OF SECURITY INTERESTS. Seller shall have
obtained releases and other documentation reasonably requested by Purchaser in
form and in substance satisfactory to Purchaser providing for the termination
and release of all Liens (other than Permitted Liens) on the Purchased Assets.
9.1.9 ANCILLARY AGREEMENTS. Each of the Ancillary Agreements
shall have been executed and delivered by the parties thereto other than
Purchaser.
9.1.10 THIRD-PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals, waivers and Permits, if any, disclosed or required to be
disclosed on any Schedule attached hereto or otherwise required in connection
with the consummation of the transactions contemplated by this Agreement shall
have been received. All of the consents, approvals, authorizations, exemptions,
waivers and Permits from Governmental Authorities that will be required in order
to enable Purchaser to consummate the transactions contemplated hereby shall
have been obtained.
9.1.11 FINANCING. Purchaser shall have available to it
financing necessary to consummate Closing on terms satisfactory to Purchaser in
its sole discretion.
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9.1.12 DUE DILIGENCE. Purchaser shall have completed, or
caused to be completed by its attorneys, accountants and other representatives,
to its satisfaction, business, legal, environmental and accounting due diligence
investigations and reviews of Seller.
9.1.13 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
no event shall have occurred which, individually or when considered together
with all other matters, has had or could reasonably be expected to have a
Material Adverse Effect.
9.1.14 FIRPTA. Seller shall have furnished to Purchaser, on or
prior to the Closing Date, a non-foreign person affidavit required by Section
1445 of the Code.
9.1.15 HSR ACT. Any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby shall have expired or been
terminated.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller and the Stockholders to consummate the Closing are subject to the
satisfaction of the following conditions:
9.2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
The representations and warranties of Purchaser made in this Agreement will be
true and correct in all respects (or, if any such representation is not
expressly qualified by "materiality," "Material Adverse Effect" or words of
similar import, then in all material respects) as of the date hereof and as of
Closing, as though made as of the Closing; (b) Purchaser shall have performed
and complied with all terms, agreements and covenants contained in this
Agreement required to be performed or complied with by Purchaser on or before
the Closing Date; and (c) Purchaser shall have delivered to Seller a certificate
of Purchaser's Chief Executive Officer, dated the Closing Date, confirming the
foregoing and such other evidence of compliance with its obligations as Seller
may reasonably request.
9.2.2 PURCHASER'S CERTIFICATE. Purchaser will have delivered
to Seller a certificate from its Secretary or Assistant Secretary certifying as
to the due adoption of resolutions adopted by its Board of Directors (and its
stockholders, if required) authorizing the execution of this Agreement and the
Ancillary Agreements and the taking of any and all actions deemed necessary or
advisable to consummate the transactions contemplated herein and therein.
9.2.3 NO INJUNCTION, ETC. No provision of any applicable Law
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.2.4 OPINION OF COUNSEL. Seller shall have received an
opinion of Jones, Day, Reavis & Pogue, counsel to Purchaser, dated the Closing
Date substantially in the form attached hereto as EXHIBIT K.
9.2.5 ANCILLARY AGREEMENTS. Each of the Ancillary Agreements
shall have been executed by Purchaser, if Purchaser is a party thereto.
9.2.6 HSR ACT. Any applicable waiting period under the HSR Act
relating to the transactions contemplated hereby shall have expired or been
terminated.
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9.2.7 OFFER OF EMPLOYMENT. Each of the employees listed on
SCHEDULE 8.5(a) shall have been offered employment by Purchaser.
9.2.8 NO PROCEEDINGS. No proceeding challenging this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or seeking to prohibit, alter, prevent or materially delay the Closing
or seeking damages will have been instituted by any Person (other than
Purchaser) before any court, arbitrator or Governmental Authority and be
pending.
9.2.9 THIRD-PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals, waivers and Permits required in connection with the
consummation of the transactions contemplated by this Agreement, and all of the
consents, approvals, authorizations, exemptions waivers and Permits from
Governmental Authorities that will be required in order to enable Seller to
consummate the transactions contemplated hereby, in each case set forth on
SCHEDULE 9.2.9, shall have been received or obtained.
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. (a) The representations and warranties of the
parties contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith will survive the Closing
until the first to occur of (i) the completion of Purchaser's audit in
accordance with GAAP, (including receipt by Purchaser of an opinion of its
auditors with respect, thereto) of its financial statements for Purchaser's
fiscal year ended December 31, 2000 or (ii) March 31, 2001; PROVIDED, HOWEVER,
that the representations and warranties contained in Section 6.1.10 and 6.1.18
will survive the Closing until the expiration of the statute of limitations
applicable to the matters covered thereby (after giving effect to any waiver,
mitigation or extension thereof granted by Seller), and the Selected Seller and
Stockholders Representations and Warranties will survive the Closing
indefinitely. Notwithstanding the immediately preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement will survive the time at which it would otherwise terminate
pursuant to the immediately preceding sentence if written notice of the
inaccuracy or breach thereof giving rise to such right of indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time; PROVIDED, HOWEVER, that the applicable representation or warranty will
survive only with respect to the particular inaccuracy or breach specified in
such written notice. All covenants and agreements of the parties contained in
this Agreement, will survive the Closing indefinitely.
10.2 INDEMNIFICATION. (a) On and after the Closing, Seller and
the Stockholders, jointly and severally, will indemnify, defend and hold
harmless Purchaser and its officers, directors, employees, affiliates,
stockholders and agents, and the successors to the foregoing (and their
respective officers, directors, employees, affiliates, stockholders and agents),
against any and all liabilities, damages and losses, in each case, actually
incurred (including diminution in value of the Business, and, if but only to the
extent asserted in a Third-Party Claim, punitive damages, but excluding lost
profits and other consequential damages), and all costs or expenses actually
incurred, including reasonable attorneys' and consultants' fees and
43
expenses ("DAMAGES"), incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by Seller or any Stockholder
in any subsection of Section 6.1 to be true and correct as of the Closing Date
(other than a breach of Section 6.1.10 with respect to Taxes which will be
governed by Section 10.3), (ii) the breach of any covenant or agreement made or
to be performed by Seller or any Stockholder pursuant to this Agreement and
(iii) any Retained Liabilities; PROVIDED, HOWEVER, that neither Seller nor any
Stockholder will be liable under clause (i) of this Section 10.2(a) (other than
with respect to a breach of any of the Selected Seller and Stockholders
Representations and Warranties) unless the aggregate amount of Damages exceeds
$250,000 and then from the first dollar to the full extent of such Damages;
PROVIDED, FURTHER, HOWEVER, that the aggregate liability of Seller and the
Stockholders under clause (i) of Section 10.2(b) and under clause (i) of this
Section 10.2(a) will not exceed (other than with respect to a breach of any of
the Selected Seller and Stockholders Representations and Warranties), an amount
equal to $10.0 million (the "CAP").
(b) On and after the Closing, Seller and the Stockholders,
severally and not jointly (except where the covenants of the Stockholders are
expressly set forth in this Agreement to be joint and several, in which case the
indemnification obligations of the Stockholders under this Section 10.2(b) with
respect to a breach of any such covenants will be joint and several), will
indemnify, defend and hold harmless Purchaser and its officers, directors,
employees, affiliates, stockholders and agents and the successors to the
foregoing (and their respective officers, directors, employees, affiliates,
stockholders and agents) against Damages incurred or suffered as a result of or
arising out of (i) the failure of any representation or warranty made by any of
the Stockholders in any subsection of Section 6.2 of this Agreement to be true
and correct as of the Closing Date or (ii) the breach of any covenant or
agreement made or to be performed by a Stockholder pursuant to this Agreement;
PROVIDED, HOWEVER, that the aggregate liability of Seller and the Stockholders
under clause (i) of Section 10.2(a) and under clause (i) of this Section 10.2(b)
will not exceed the Cap.
(c) On and after the Closing, Purchaser will indemnify, defend
and hold harmless Seller and its officers, directors, employees, affiliates,
stockholders and agents and the successors to the foregoing (and their
respective officers, directors, employees, affiliates, stockholders and agents)
against Damages incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by Purchaser in Article VII of
this Agreement to be true and correct as of the Closing Date, (ii) the breach of
any covenant or agreement made or to be performed by Purchaser pursuant to this
Agreement or (iii) any Assumed Liability; PROVIDED, HOWEVER, that Purchaser will
not be liable under clause (i) of this Section 10.2(c) (other than with respect
to a breach of any of the Selected Purchaser Representations and Warranties)
unless the aggregate amount of Damages exceeds $250,000 and then from the first
dollar to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that
Purchaser's liability under clause (i) of this Section 10.2(c) (other than with
respect to a breach of any of the Selected Purchaser Representations and
Warranties) will not exceed, in the aggregate an amount equal to the Cap.
10.3 TAX INDEMNIFICATION. On and after the Closing, Seller and
the Stockholders, jointly and severally, will indemnify, defend and hold
harmless Purchaser, and its officers, directors, employees, affiliates and
agents and the successors to the foregoing (and their respective officers,
directors, employees, affiliates and agents) against (i) all Taxes (and losses,
claims and expenses related thereto) resulting from, arising out of, or incurred
with respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the
44
failure of any representation or warranty made pursuant to Section 6.1.10 to be
true and correct as of the Closing Date and (ii) all Taxes imposed on or
asserted against Purchaser or for which Purchaser or any of its Affiliates may
be liable in respect of the Purchased Assets, the Business or the income or
operations of Seller for all Pre-Closing Tax Periods (net of reserves for Taxes
accurately reflected on the Closing Date Balance Sheet).
10.4 PROCEDURES. (a) If any Person who or which is entitled to
seek indemnification under Section 10.2 or Section 10.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third-Party Claim
against such Indemnified Party with respect to which the Person against whom or
which such indemnification is being sought (an "INDEMNIFYING PARTY") is
obligated to provide indemnification under this Agreement, the Indemnified Party
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 20 days after receipt of such written notice of such
Third-Party Claim. Such notice by the Indemnified Party will describe the
Third-Party Claim in reasonable detail, will include copies of all available
material written evidence thereof and will indicate the estimated amount, if
reasonably practicable, of the Damages that has been or may be sustained by the
Indemnified Party. The Indemnifying Party will have the right to participate in,
or, by giving written notice to the Indemnified Party, to assume, the defense of
any Third-Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel (reasonably satisfactory to the Indemnified
Party), and the Indemnified Party will cooperate in good faith in such defense.
(b) If, within ten days after giving notice of a Third-Party
Claim to an Indemnifying Party pursuant to Section 10.4(a), an Indemnified Party
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third-Party Claim as provided in the
last sentence of Section 10.4(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party
fails to take reasonable steps necessary to defend diligently such Third-Party
Claim within ten days after receiving written notice from the Indemnified Party
that the Indemnified Party reasonably believes the Indemnifying Party has failed
to take such steps, the Indemnified Party may assume its own defense, and the
Indemnifying Party will be liable for all reasonable costs and expenses paid or
incurred in connection therewith. Without the prior written consent of the
Indemnified Party, the Indemnifying Party will not enter into any settlement of
any Third-Party Claim which would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or which provides for
injunctive or other non-monetary relief applicable to the Indemnified Party, or
does not include an unconditional release of all Indemnified Parties. If a firm
offer is made to settle a Third-Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder and
the Indemnifying Party desires to accept and agree to such offer, the
Indemnifying Party will give written notice to the Indemnified Party to that
effect. If the Indemnified Party fails to consent to such firm offer within ten
days after its receipt of such notice, the Indemnified Party may continue to
contest or defend such Third-Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third-Party Claim will not exceed
the amount of such settlement offer. The Indemnified Party will provide the
Indemnifying Party with reasonable access during normal business hours to books,
records, and employees of the Indemnified Party necessary in connection with the
Indemnifying Party's
45
defense of any Third-Party Claim which is the subject of a claim for
indemnification by an Indemnified Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages
which does not result from a Third-Party Claim (a "DIRECT CLAIM") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 20 days after the Indemnified Party
becomes aware of such Direct Claim. Such notice by the Indemnified Party will
describe the Direct Claim in reasonable detail, will include copies of all
available material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of Damages that has been or may be sustained
by the Indemnified Party. The Indemnifying Party will have a period of ten days
within which to respond in writing to such Direct Claim. If the Indemnifying
Party does not so respond within such ten day period, the Indemnifying Party
will be deemed to have rejected such claim, in which event the Indemnified Party
will be free to pursue such remedies as may be available to the Indemnified
Party on the terms and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any
specified information in any notice as provided in Section 10.4(a), 10.4(b) or
10.4(c) will not affect the rights or obligations of any party hereunder, except
and only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise materially prejudiced
as a result of such failure.
10.5 TREATMENT OF INDEMNIFICATION PAYMENTS. Any amount paid by
Seller, the Stockholders or Purchaser under Section 10.2 or 10.3 will be treated
as a capital contribution and/or an adjustment to the Purchase Price.
10.6 INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The
amount of Damages for which indemnification is provided under Sections 10.2 and
10.3 shall be computed net of any insurance proceeds received by the Indemnified
Party in connection with such Damages. If the amount with respect to which any
claim is made under this Section 10.6 gives rise to a currently realizable Tax
benefit to the Indemnified Party, the indemnity payment shall be reduced by the
amount of such currently realizable Tax benefit then available to the party
making the claim if and to the extent actually realized by such party in the
year in which such indemnity payment is made to such party or in the next
succeeding year.
10.7 EXCLUSIVE REMEDY. Absent fraud, Article X constitutes the
exclusive remedy for the breach of covenants, agreements, representations or
warranties set forth in this Agreement; PROVIDED, HOWEVER, that the provisions
of this Section 10.7 will not prevent the Stockholders, Seller or Buyer from
seeking the remedies of specific performance or injunctive relief in connection
with the breach of a covenant or agreement of any party hereto.
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ARTICLE XI
MISCELLANEOUS
11.1 TERMINATION. (a) This Agreement may be terminated
at any time prior to the Closing:
(i) by the mutual written consent of Purchaser and
Seller;
(ii) by Purchaser, if there has been a material
violation or breach by Seller or any Stockholder of any
covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any
condition to the obligations of Purchaser at the Closing, and
such violation or breach has not been waived by Purchaser or,
in the case of a covenant breach, cured by Seller or any
Stockholder within the earlier of (x) ten days after written
notice thereof from Purchaser or (y) the Closing Date;
(iii) by Seller, if there has been a material
violation or breach by Purchaser of any covenant,
representation or warranty contained in this Agreement which
has prevented the satisfaction of any condition to the
obligation of Seller or any Stockholder at the Closing, and
such violation or breach has not been waived by Seller or any
Stockholder or, with respect to a covenant breach, cured by
Purchaser within the earlier of (x) ten days after written
notice thereof by Seller or (y) the Closing Date;
(iv) by Purchaser or Seller if the transactions
contemplated hereby have not been consummated by March 31,
1999; PROVIDED, HOWEVER, that (i) neither Purchaser nor Seller
will be entitled to terminate this Agreement pursuant to this
Section 11.1(a)(iv) if such Person's breach of this Agreement
has prevented the consummation of the transactions
contemplated hereby;
(v) by Purchaser, if the conditions to Closing set
forth in Sections 9.1.11, 9.1.13 or 9.1.15 have not been
satisfied on or before March 31, 1999, or, on or prior to
March 1, 1999, if the condition to Closing set forth in
Section 9.1.12 has not been satisfied by such date; or
(vi) by Seller, if the condition to Closing set forth
in Section 9.2.6 has not been satisfied on or before March 31,
1999 or if the condition to Closing set forth in Section
9.1.12 has not been satisfied by March 1, 1999.
(b) In the event that this Agreement is terminated pursuant to
Section 11.1(a), all further obligations of the parties hereto under this
Agreement (other than pursuant to Section 11.4, which will continue in full
force and effect) will terminate without further liability or obligation of
either party to the other party hereunder; PROVIDED, HOWEVER, that no party will
be released from liability hereunder if this Agreement is terminated and the
transactions abandoned by reason of (i) failure of such party to have performed
its obligations hereunder or (ii) any misrepresentation made by such party of
any matter set forth herein.
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11.2 NOTICES. All notices, requests and other communications
to any party hereunder will be in writing (including facsimile transmission) and
will be given to such party at its address and facsimile number set forth in
SCHEDULE 11.2 (which may be changed by such party upon notice in accordance with
this Section 11.2). All such notices, requests and other communications will be
deemed received on the date of receipt by the recipient thereof if received
prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the
place of receipt. Otherwise, any such notice, request or communication will be
deemed not to have been received until the next succeeding Business Day in the
place of receipt.
11.3 AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder will operate as a waiver thereof nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. Subject to
Section 10.7, the rights and remedies herein provided will be cumulative and not
exclusive of any rights or remedies provided by law.
11.4 EXPENSES. Except as otherwise expressly provided for
herein, the parties will pay or cause to be paid all of their own fees and
expenses incident to this Agreement and in preparing to consummate and
consummating the transactions contemplated hereby, including the fees and
expenses of any broker, finder, financial advisor, legal advisor or similar
person engaged by such party.
11.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto; PROVIDED that Purchaser may assign its
rights and obligations under this Agreement to a wholly-owned Affiliate of
Purchaser, it being understood that such assignment will not relieve Purchaser
from its obligations hereunder.
11.6 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article XI, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied will give or be
construed to give to any Person, other than the parties hereto and such
permitted assigns any legal or equitable rights hereunder.
11.7 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the conflict of laws rules of such state.
11.8 JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any court of competent jurisdiction in the City of Rochester or the United
States District Court for the Western District of New York and each of the
parties hereby consents to the non-exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably
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waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum. Process
in any such suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 11.2 will be deemed effective service of process on such
party.
11.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.10 COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which will be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
11.11 HEADINGS. The headings in this Agreement are for
convenience of reference only and will not control or affect the meaning or
construction of any provisions hereof.
11.12 ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits hereto) constitutes the entire agreement among the
parties with respect to the subject matter of this Agreement. This Agreement
(including the Schedules and Exhibits hereto) supersedes all prior agreements
and understandings, both oral and written, between the parties with respect to
the subject matter hereof of this Agreement.
11.13 SEVERABILITY; INJUNCTIVE RELIEF. (a) The provisions of
this Agreement are severable. If any provision of this Agreement is held
invalid, illegal or otherwise unenforceable, in whole or in part, the remaining
provisions or enforceable parts thereof will not be affected thereby and will be
enforced to the fullest extent permitted by law. In addition, should any
provision or any portion thereof ever be adjudicated by a court of competent
jurisdiction to exceed the time or other limitation permitted by applicable Law
as determined by such court in such action, then such provisions will be
decreased, performed to the maximum time or other limitations prescribed by
applicable Law, the parties acknowledging their desire that in such event such
action be taken.
(b) The parties acknowledge and agree that the provisions of
Section 8.17 are reasonably necessary to protect the legitimate interests of
Seller, its Affiliates and their businesses and (i) that any violation of
Section 8.17 will result in irreparable injury to Seller, and its Affiliates,
the exact amount of which will be difficult to ascertain and the remedies at Law
for which will not be reasonable or adequate compensation to Seller and its
Affiliates for such a violation. Accordingly, Purchaser hereby agrees that if
Purchaser violates any of the provisions of Section 8.17 in addition to any
other remedy available at law or in equity, Seller will be entitled to seek
specific performance or injunctive relief without posting a bond, or other
security, and without the necessity of proving actual damages.
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(c) The parties acknowledge and agree that the provisions of
Sections 8.2, 8.8 and 8.17 are reasonably necessary to protect the legitimate
interests of Purchaser, its Affiliates and their businesses and (i) that any
violation of Sections 8.2, 8.8 or 8.17 will result in irreparable injury to
Purchaser, and its Affiliates, the exact amount of which will be difficult to
ascertain and the remedies at Law for which will not be reasonable or adequate
compensation to Purchaser and its Affiliates for such a violation. Accordingly,
Seller hereby agrees that if Seller violates any of the provisions of Sections
8.2, 8.8 or 8.17 in addition to any other remedy available at law or in equity,
Purchaser will be entitled to seek specific performance or injunctive relief
without posting a bond, or other security, and without the necessity of proving
actual damages.
11.14 NO WAIVER. No action or inaction taken or omitted
pursuant to this Agreement will be deemed to constitute a waiver of compliance
with any representations, warranties or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.
11.15 CERTAIN INTERPRETIVE MATTERS. (a) Unless the context
otherwise requires, (i) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement; (ii) each of the Schedules will apply only to the corresponding
Section or Subsection of this Agreement, except that an item set forth or on
Schedule may be deemed to be disclosed on another Schedule if the disclosure
relating to such item is on its face expressly responsive to the representation
and warranty to which such Schedule relates, it being understood that the
foregoing exception will not be deemed to include any facts or circumstances
derived from, or not otherwise expressly set forth in the disclosure with
respect to such Scheduled item; (iii) each term defined in this Agreement has
the meaning assigned to it; (iv) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP; (v) words
in the singular include the plural and VICE VERSA; and (vi) the term "INCLUDING"
means "including without limitation." All references to $ or dollar amounts will
be to lawful currency of the United States. To the extent the term "DAY" or
"DAYS" is used, it will mean calendar days.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
(c)(i) All references to the "KNOWLEDGE OF SELLER" or
to words of similar import will be deemed to be references to
the actual knowledge of one or more of the officers or
directors of Seller, which knowledge will include such
knowledge as such officers or directors would have had after
due inquiry of the responsible employees of Seller and their
counsel and accountants.
(ii) All references to the "KNOWLEDGE OF
STOCKHOLDERS" or to words of similar import will be deemed
references to the actual knowledge of each Stockholder.
(iii) All references to the "KNOWLEDGE OF PURCHASER"
or to words of similar import will be deemed to be references
to the actual knowledge of one or
50
more of the executive officers or directors of Purchaser after
due inquiry, which knowledge will include such knowledge as
such executive officers or directors would have had after due
inquiry of the responsible officers and employees of Purchaser
and its counsel and accountants.
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The parties hereto have caused this Agreement to be duly
executed by their respective authorized officers or in their individual
capacity, if applicable, as of the day and year first above written.
NATIONWIDE PRECISION PRODUCTS CORP.
By: /s/ Michael R. Nuccitelli
----------------------------------
Name: Michael R. Nuccitelli
Title: President
NATIONWIDE ACQUISITION DELAWARE, INC.
By: /s/ James E. Ashton
----------------------------------
Name: James E. Ashton
Title: Chief Executive Officer
STOCKHOLDERS
By: /s/ John F. Nuccitelli
----------------------------------
John F. Nuccitelli
By: /s/ Robert L. Nuccitelli
----------------------------------
Robert L. Nuccitelli
By: /s/ Michael R. Nuccitelli
----------------------------------
Michael R. Nuccitelli
52