AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
THIS AGREEMENT is made and entered into this 27th day of June, 1996, by
and among MK Rail Corporation, a Delaware corporation having its principal
office at 1200 Reedsdale Street, Pittsburgh, Pennsylvania 15233 (the "Parent"),
Alert Manufacturing & Supply Co., an Illinois corporation having its principal
office at 1325 Pratt Boulevard, Elk Grove Village, Illinois 60007 (the
"Seller"), and All-State Industrial Rubber Co., Inc., an Iowa corporation,
having its principal office at 520 South 18th Street, West Des Moines, Iowa
50265 (the "Buyer"),
W I T N E S S E T H:
WHEREAS, the Seller desires to sell, and the Buyer desires to acquire,
substantially all of the assets, properties and business of the Seller as a
going concern, such assets, properties and business so to be acquired being
herein sometimes referred to as the "Business," in accordance with
the terms and conditions herein set forth; and
WHEREAS, in conjunction with the transactions contemplated hereby the
Buyer will acquire all such assets, properties and business;
NOW, THEREFORE, in consideration of the promises, covenants and
agreements hereinafter set forth, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
I. SALE OF ASSETS AND RELATED TRANSACTIONS
1.1 Purchase and Sale of Assets. Subject to the satisfaction or waiver
of the terms and conditions of this Agreement, on the Closing Date (as that term
is defined in Section III hereof), the Seller shall sell, convey, assign,
transfer and deliver to the Buyer, and the Buyer shall purchase and acquire from
the Seller, free and clear of all liens, claims, pledges, options, charges,
security interests and other encumbrances or restrictions of any kind
whatsoever, for the consideration set forth in Section 2.1 hereof, all real,
personal and mixed assets, both tangible and intangible (including the Business
of the Seller as a going concern), owned by or used or useful to the Seller in
connection with the Seller's Business and operations other than Excluded Assets
(as defined in Section 1.2 below) which shall be retained by the Seller, all of
which are hereinafter collectively called the "Purchased Assets." Subject to the
provisions of Section VI hereof, the Purchased Assets shall include all of such
assets existing on the date of this Agreement and all such assets acquired
between the date hereof and the Closing Date, and replacements and substitutions
therefor and shall include, without limitation:
1.
(a) Inventories. All inventories of raw materials, goods in process,
parts, finished goods, partly finished goods, goods in transit
and supplies used in connection with the Seller's Business
(collectively referred to herein as the "Inventories").
(b) Accounts Receivable. All accounts receivable of, and other
amounts due to, the Seller arising out of bona fide transactions
of the Business and carried on the regular books of account of
the Seller, as maintained in the ordinary course of the Business
and in accordance with generally accepted principles of
accounting consistently applied by the Seller, including, without
limitation, accounts receivable which arise in the ordinary
course of the Business between the date hereof and the Closing
Date, other than Excluded Accounts Receivable which shall be
retained by the Seller, all of which are hereinafter collectively
called the "Net Accounts Receivable." As used in this Section
1.1(b), the term "Excluded Accounts Receivable" shall mean the
aggregate amount of the Seller's (i) any accounts receivable
that, as of the Closing Date, shall have remained unpaid for a
period of one hundred eighty (180) days after billing, if the
Seller shall have not completed a bona fide transaction with the
obligor therefor in the ordinary course of business during the
period of one hundred twenty (120) days immediately preceding the
Closing Date, and, (ii) accounts receivable that, as of the
Closing Date, shall have remained unpaid for a period of seven
hundred thirty (730) days after billing.
(c) Equipment and Other Fixed Assets. All machinery, tools,
equipment, spare parts, motor vehicles, furniture, office
furnishings, office materials and supplies, fixtures, and other
tangible personal property of every kind and description owned or
leased by or used or useful to the Seller in connection with the
Business on the date hereof, and any additions, improvements and
replacements thereto between the date hereof and the Closing Date
(collectively referred to herein as the "Equipment"). All items
of such Equipment, as of the date of this Agreement, are listed
on Disclosure Exhibit 1.1-C hereto.
(d) Contracts. All rights and interest of the Seller in and to all
contracts, leases, insurance contracts, supply agreements,
purchase orders, licenses, agreements and other commitments which
relate to the Business, or which affect any of the Business or
the Purchased Assets or confer any material benefits on the
Business, and any claim or right or any benefit arising
thereunder or resulting therefrom, in effect on the Closing Date.
All such material contracts, leases, insurance contracts, supply
agreements, purchase orders, licenses, agreements and other
commitments which are in effect on the date hereof and which are
included in the "Purchased Assets," are listed on Disclosure
Exhibit 1.1-D hereto (which shall also specify those contracts,
leases, insurance contracts, supply agreements, purchase orders,
licenses, agreement and commitments the assignment of which
requires third-party consent) (collectively referred to herein as
the "Assigned Contracts").
2.
(e) Deposits, Prepayments and Other Assets. All advances, deposits,
prepaid items, supplies, leaseholds, leasehold improvements and
other assets pertaining to, or arising out of, the Business or
the Purchased Assets (collectively referred to herein as the
"Prepayments").
(f) Books, Records and Intangibles. All of the Seller's goodwill in,
and the going concern value of, the Business; the right to use
the Seller's name and any names, letters, marks, logos, designs,
drawings or other material or symbols associated with the
Seller's name or any trade name of the Seller; all trade marks,
trademark registrations, trademark applications, copyrights,
copyright registrations, copyright applications, patents, patent
applications, inventions, trade secrets, technical know- how,
licenses, processes, formulae, royalties, computer programs,
tapes, disks, computer hardware and software, technical
information, blue prints, drawings, and other technical papers,
manufacturing procedures and processes and the like; all customer
accounts records and customer list and supplier lists and files;
copies of all the books and records of the Seller pertaining to
the Business or any of the foregoing Purchased Assets; and all
right of the Seller under or pursuant to any warranties,
representations and guarantees made by suppliers in connection
with the products or services furnished to the Business or
otherwise pertaining to the Business or affecting the Purchased
Assets (collectively referred to herein as the "Miscellaneous
Assets").
1.2 Excluded Assets. Notwithstanding the provisions of section 1.1
hereof, the following assets pertaining to the Business (collectively referred
to herein as the "Excluded Assets") shall be retained by the Seller, shall not
be sold and transferred to the Buyer on the Closing Date and shall not create
any obligation or commitment of the Buyer after the Closing:
(a) all right, title and interest of the Seller in and to all cash,
bank balances, money in possession of banks and similar cash
items;
(b) all Excluded Accounts Receivable (as that term is defined in
Section 1.1(b) hereof);
(c) all employment agreements, whether written or verbal;
(d) all Employee Plans (within the meaning of Section 4.21 hereof)
and
(e) all the computer hardware and software and related information
used by or useful to the Seller which has been provided by the
Seller's affiliate, Power Parts Company, prior to the Closing.
1.3 Instruments of Conveyance and Transfer of Purchased Assets. At the
Closing, to effect the transfers, conveyances and assignments from the Seller to
the Buyer as herein provided, the Seller shall deliver to the Buyer the
following bills of sale, certificates, assignments and other instruments of
transfer assigning, transferring and conveying to the Buyer good and marketable
title 3.
to all of the Purchased Assets to be transferred hereunder, free and clear of
all security interests, mortgages, pledges, claims, liens, taxes, charges and
any other encumbrances or restrictions of any kind whatsoever except as
expressly permitted under this Agreement, all in form and substance
reasonably satisfactory to counsel for the Buyer, and dated the Closing Date:
(a) assignments (and consents thereto) of all leases and leasehold
interests in real and personal property;
(b) bill(s) of sale for all tangible personal property;
(c) assignments of all contracts and other intangible assets to be
transferred pursuant to this Agreement, including, without
limitation, the Assigned Contracts described in Disclosure
Exhibit 1.1-D hereto; and
(d) such other instruments or documents as the Buyer may reasonably
request in connection with the transfer to it of any personal
property to be transferred under this Agreement.
Seller further covenants and agrees to execute and deliver, from time
to time after the Closing and without further consideration, such other
documents and instruments of assignment, transfer or conveyance of any of the
Purchased Assets as the Buyer may reasonably require to evidence or perfect the
Buyer's right, title and interest in and to the Purchased Assets and the
Business.
1.4 Assignment of Contracts and Rights. This Agreement shall not
constitute an agreement to assign any claim, contract, license, lease
commitment, sales or purchase order, or any claim or right or any benefit
arising thereunder or resulting therefrom if an attempted transfer or assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way affect the respective rights the Buyer or the Seller have
thereunder. If such third party consent is not obtained, or if an attempted
transfer or assignment thereof would be ineffective or would affect the rights
of the Seller thereunder so that the Buyer would not in fact receive all such
rights, the Seller shall use reasonable, good faith efforts to cooperate with
the Buyer in any arrangement designed to provide for the Buyer those benefits to
which the Seller would be due. Such arrangements may include, but are not
limited to, obtaining such consent promptly and the enforcement for the benefit
of the Buyer of any and all rights of the Seller against a third party thereto
arising out of the breach or cancellation by such third party or otherwise. All
transfers or assignments to the Buyer of any claim, contract, license, lease,
agreement, commitment or sales or purchase order which shall require the consent
or approval of any third party shall be made subject to such consent or approval
being obtained. In the event the Seller is unable to obtain any necessary
consent, and the Buyer and the Seller are unable to make the arrangements
designed to provide the Buyer with the benefits under the applicable agreement
and the third party to such contract refuses performance by the Buyer in
writing, the Seller and Parent shall put the Buyer in the same financial
position as the Buyer would have been if such contract was assigned or
performance under such agreement was accepted.
4.
II. CONSIDERATION AND METHOD OF PAYMENT
2.1 Consideration. For and in full consideration of the sale,
assignments, conveyances and transfers of the Purchased Assets described herein,
and in consideration of the representations, warranties, covenants and
agreements of the Seller provided herein, the Buyer shall:
(a) pay to the Seller the sum of Four Million Five Hundred Thousand
Dollars ($4,500,000.00) (the "Estimated Purchase Price") plus any
increase or less any decrease, as the case may be, by the amount
of any Adjustment (as that term is defined in Section 2.3(c)
hereof) (the "Final Purchase Price"), subject to escrow as set
forth in, and in accordance with, this Agreement and the Escrow
Agreement (as described in Section 2.4 below); and
(b) assume the Assumed Obligations in accordance with Section 2.6
hereof.
The net amount of the adjustments, including prorations, required
pursuant to Section 2.7 below, to the extent determinable on the Closing Date,
shall be separately paid by the Buyer to the Seller or the Seller to the Buyer,
as the case may be, by check at the Closing, with final settlement
within ninety (90) days thereafter.
2.2 Payment of Purchase Price. At the Closing, the Buyer shall pay the
Final Purchase Price in the following manner:
(a) the amount equal to the Final Purchase Price minus the sum of Two
Hundred Thousand Dollars ($200,000.00) shall be paid to or upon
the order of the Seller in immediately available funds; and
(b) the remaining sum of Two Hundred Thousand Dollars ($200,000.00)
shall be deposited, held, invested, and disbursed in accordance
with the terms of Section 2.4 of this Agreement and the Escrow
Agreement (as that term is defined in Section 2.4 hereof).
2.3 Estimated Purchase Price Adjustments.
(a) Representatives of the Seller and the Buyer shall jointly
determine the actual amount of the Net Accounts Receivable as of
the close of business on the day immediately preceding the
Closing Date (the amount thereof being referred to herein as the
"Closing Net Accounts Receivable Amount") which shall reflect the
Net Accounts Receivable (as that term is defined in Section
1.1(b) hereof) carried on the regular books of account of the
Seller, maintained in the ordinary course of business and
prepared in accordance with generally accepted accounting
principles consistently applied by the Seller, on such date.
5.
(b) On the day immediately preceding the Closing Date (the "Inventory
Valuation Date"), or on such other date(s) before the Closing
Date as the Seller and the Buyer shall mutually agree,
representatives of the Seller and the Buyer shall jointly
determine the fair market value of all items of the Inventories
(the "Closing Inventory Amount"). For this purpose, the "fair
market value" of each item of the Inventories (as that term is
defined in Section 1.1(a) hereof) shall be the lesser of the cost
or the fair market value of that item as of the Inventory
Valuation Date. Notwithstanding the foregoing, for purposes of
the adjustment described herein, the Closing Inventory Amount
shall not exceed One Million Five Hundred Sixty-Five Thousand
Dollars ($1,565,000).
(c) Upon certification of the Closing Net Accounts Receivable Amount
and the Closing Inventory Amount, the Final Purchase Price shall
be computed by adding to the Estimated Purchase Price an amount
(i) which is the sum of (x) the Total Closing Net Accounts
Receivable, plus (y) the lesser of the Inventory Amount or
$1,565,000, minus (z) $3,200,000. The adjustment provided in this
Section 2.3(c) (the "Adjustment") may be positive or negative.
Notwithstanding the foregoing, if any dispute arises over any
item reflected in or omitted from the certified list of the
Closing Inventory Amount, the Total Closing Net Accounts
Receivable plus Closing Inventory Amount net of any disputed
amount of the Closing Inventory Amount shall be the Adjustment
for purposes of the Closing.
(d) If the representatives of the Seller and the Buyer are unable to
agree prior to the Closing with respect to any determination of
the fair market value of any items of the Inventories for the
purpose of determining the Closing Inventory Amount, the Seller
and the Buyer hereby agree that such determination shall be
referred to Price Waterhouse (or, if such accounting firm has
been employed by any party hereto (or an affiliate thereof)
during the five (5) years preceding the date of such referral or
cannot for any reason serve to resolve the dispute, then to an
independent public accounting firm of national stature mutually
approved by the parties hereto) (the "Selected Accountants"),
which shall promptly make such a determination. The determination
of the Selected Accountants shall be conclusive and binding on
both the Seller and the Buyer. One half of the fees of the
Selected Accountants shall be borne by the Seller, and one half
thereof shall be borne by the Buyer. Within five (5) business
days following the determination of the Adjustment by the
Selected Accountants, the amount of any further Adjustment
required by this Section 2.3 to the Estimated Purchase Price
because of the determination by the Selected Accountants, plus
interest from and after the Closing Date to and including the
date of payment of such Adjustment at the rate of 5.0 percent per
annum, shall be paid by the Buyer to the Seller in immediately
available funds, or, alternatively, the Buyer by the Escrow Agent
(as defined hereafter) immediately in the amount of such further
Adjustment payable to the Buyer.
6.
(e) To the extent that the Selected Accountants have made a
determination of an Adjustment resulting in an obligation by the
Seller to the Buyer pursuant to Section 2.3(d) hereof and Parent
or Seller shall have failed to pay the Buyer such amount, then
Parent and the Seller acknowledge and agree that the Buyer may
withhold payment as a set-off against amounts that shall become
due and payable to Parent under the terms of the Sublease (as
that term is defined in Section 6.4 hereof).
2.4 Escrow.
(a) At Closing, the Seller, the Buyer and West Des Moines State Bank,
West Des Moines, Iowa, as Escrow Agent (the "Escrow Agent") shall
execute and deliver an Escrow Agreement substantially in the form
of Appendix I (the "Escrow Agreement"); and, in accordance with
Section 2.2(b) hereof, the sum of Two Hundred Thousand Dollars
($200,000.00) shall be deposited, held, invested and disbursed in
accordance with the terms of this Section 2.4 and the Escrow
Agreement.
(b) If, on November 1, 1996, any portion of the Closing Net Accounts
Receivable Amount transferred and assigned to the Buyer on the
Closing Date shall remain uncollected, then on November 1, 1996
the Buyer shall "put" any or all of the Uncollected Closing Net
Accounts Receivable to Seller by delivering to the Seller with a
copy to the Escrow Agent (i) written notice of the amount of each
Uncollected Closing Net Account Receivable and the name of the
party responsible for payment of such Uncollected Closing Net
Account Receivable (the "Put Notice") and (ii) such instruments
necessary to effect the lawful assignment and transfer to the
Seller of those Closing Net Accounts Receivable being "put"to the
Seller. In the event that Buyer has given Seller the Put Notice
as provided herein, the Escrow Agent shall immediately without
further notice release from escrow and deliver to the Buyer an
amount of funds equal to the amount of the Uncollected Closing
Net Accounts Receivable "put" to the Seller as described in the
Put Notice and the Escrow Agent shall release to the Seller the
remaining amount, if any, held under the Escrow Agreement. On
November 2, 1996, the Escrow Agent shall pay to the Seller all
amounts in the Escrow Fund if the Buyer has not given Seller the
Put Notice. As used in this Section 2.4, the term "Uncollected
Closing Net Accounts Receivable" shall mean that amount equal to
that portion of the Closing Net Accounts Receivable Amount that
shall remain uncollected by the Buyer as of the close of business
on October 31, 1996.
(c) To the extent the amount of the Uncollected Closing Net Accounts
Receivable or the amount of any Adjustment owed by the Seller to
the Buyer as a result of the Selected Accountant's determination
under Section 2.3(d) hereof shall exceed the funds held under the
Escrow Agreement at any time, Parent hereby agrees to immediately
pay to the Buyer in immediately available funds the amount of
such excess.
7.
2.5 Obligations. Except as set forth in Section 2.6 below, the Buyer
expressly does not, and shall not, assume or be deemed to have assumed under
this Agreement or by reason of any transactions contemplated hereunder any
debts, liabilities (contingent or otherwise) or obligations of the Seller of any
nature whatsoever, including, without limitation, (a) excise or property taxes,
contracts, agreements, commitments and leases required to be listed but not
listed on any Disclosure Exhibit hereto (as such Disclosure Exhibits are amended
in accordance with this Agreement), (b) all liabilities and obligations,
including, without limitation, any product liability claims, arising out of or
relating to the sale of products of the Business, including, without limitation,
manufactured, purchased or fabricated by the Seller, (c) obligations arising out
of or in connection with any litigation, proceeding or investigation of any
nature arising out of the operation of the Business, (d) liabilities or
obligations (contingent or otherwise) in connection with any current or prior
employment contract with any employee, whether written or verbal, or any current
or prior Employee Plan within the meaning of Section 4.21 and (e) all
liabilities and obligations (contingent or otherwise) for environmental matters
arising under any and all local, state, regional or federal law or jurisdiction,
for conduct, noncompliance, status, releases, events or occurrences prior to the
Closing Date.
2.6 Assumed Obligations. At the Closing the Buyer shall deliver an
undertaking satisfactory in form and substance to the Seller and its counsel
(the "Assumption Agreement") whereby the Buyer shall assume and agree to pay,
perform and discharge when due, subject to Section 2.4 hereof, the following
liabilities and obligations of the Seller to the extent the same are
attributable to the Purchased Assets and unpaid at the Closing Date (the
"Assumed Obligations"):
(a) the Trade Payables (as that term is defined in Section 4.15
hereof) of the Seller as of the Closing Date not to exceed in
the aggregate the sum of Seven Hundred Fifty Thousand Dollars
($750,000.00), to be paid by Buyer in accordance with their
respective terms;
(b) all liabilities and obligations of the Seller for performance,
after the Closing Date, under the Assigned Contracts (other
than any Excluded Asset).
The Buyer and the Seller acknowledge and agree that any provision of
this Agreement to the contrary notwithstanding, all liabilities and obligations
arising out of or relating to the sale of products of the Business, including
product liability claims, shall be the responsibility of the party which
manufactured or fabricated the product in question sold to the third-party
customer.
2.7 Adjustments and Prorations. All ad valorem real estate and other
property taxes, real or personal, shall be adjusted and prorated between the
Seller and the Buyer as of the Closing Date in accordance with generally
accepted accounting principles consistently applied by the
Seller.
Prorations and adjustments under this Section 2.7 shall be determined and paid
as provided in Section 2.2.
8.
2.8 Allocation of Final Purchase Price. For the purpose of determining
the allocation of the amount of the Final Purchase Price and the Assumed
Obligations among the Purchased Assets, the parties hereto agree that the Buyer
and Seller shall mutually determine an allocation of the amount of the Final
Purchase Price and the Assumed Obligations among the Purchased Assets (the
"Allocation"), and the Seller and the Buyer agree to jointly execute and report
a Form 8594 in a manner consistent with the allocation.
III. THE CLOSING
The closing with respect to the transactions provided for in this
Agreement (the "Closing") shall take place at the offices of Ahlers, Cooney,
Dorweiler, Haynie, Smith & Allbee, P.C., 600 Court Avenue, Des Moines, Iowa
50309, at 10 o'clock a.m. on July 26, 1996 (the "Closing Date") or at such other
place or on such date as the parties hereto may mutually agree.
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER AND PARENT
A. The Seller hereby represents and warrants to, and covenants and
agrees with, the Buyer as follows:
4.1 Organization; Power; Good Standing. The Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Illinois. The Seller has all requisite corporate power and authority to
own, operate and lease its properties, to carry on its business as now being
conducted and to enter into this Agreement and perform its obligations
hereunder. The Seller has not failed to qualify to do business in any
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary.
4.2 Affiliates; Officers and Directors.
(a) The Seller is a wholly-owned subsidiary of Power Parts Company, a
Nevada corporation which is a wholly-owned subsidiary of Parent,
a Delaware corporation; and
(b) Disclosure Exhibit 4.2 hereto sets out a true and complete list
of the officers and directors of the Seller.
4.3 Authority Relative to Agreement; Binding Obligation. The execution,
delivery and performance of this Agreement by the Seller have been duly and
effectively authorized by all necessary corporate action by the Seller,
including approval of the entire transaction by the requisite vote of the
Seller's board of directors and shareholders; if required. This Agreement has
been duly executed by the Seller and is a valid, legally binding and enforceable
agreement of the Seller enforceable in accordance with its terms, except as its
enforceability may be limited by bankruptcy,
9.
insolvency, moratorium or other laws relating to or affecting creditor's rights
generally and the exercise of judicial discretion in accordance with equitable
principles.
4.4 Effect of Agreement. Except as set forth in Disclosure Exhibit 4.4
hereto, the execution, delivery and performance of this Agreement by the Seller
and the consummation of the transactions contemplated hereby will not (i)
require the consent, approval or authorization of any person, corporation,
partnership, joint venture or other business association or public authority
(other than the shareholders of the Seller); (ii) violate, with or without the
giving of notice or the passage of time, or both, any provisions of law or
statute or any rule, regulation, order, award, judgment or decree of any court
or governmental authority or of any license applicable to the Seller or its
assets; or (iii) with or without the giving of notice, the passage of time, or
both conflict with or result in a breach or termination of any provision of,
accelerate the performance or maturity of, constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any of the Purchased
Assets pursuant to any corporate charter, bylaw, indenture, note, bond,
mortgage, deed of trust, lease, contract, permit, agreement or other instrument,
or any order, judgment, award, decree, statute, ordinance, regulation or any
other restriction of any kind or character, to which the Seller is a party, or
by which the Seller or any of the Purchased Assets may be bound.
4.5 Financial Statements. The unaudited balance sheets of the Seller,
at December 31, 1995 and 1994 and related statements of liabilities and
stockholders' equity for each of the two years then ended, and the unaudited
balance sheet of the Seller, at April 26, 1996, and related statement of
liabilities and stockholders' equity for the same period, all as set forth in
Disclosure Exhibit 4.5 hereto, are in accordance with the books and records of
the Seller, are complete and correct in all material respects, fairly present
the financial position and results of operations of the Seller as of the dates
and for the periods indicated and have been prepared in conformity with
generally accepted accounting principles applied on a basis consistent with
prior years. The unaudited balance sheets at December 31, 1995 and 1994 and the
statements of liabilities and stockholders' equity for the same periods and the
unaudited balance sheet at April 26, 1996 and related statement of liabilities
and stockholders' equity for the four months ended April 26, 1996, as described
above, are collectively referred to herein as the "Financial Statements" .
4.6 Undisclosed Liabilities. Except as and to the extent disclosed in
the Financial Statements or as set forth in Disclosure Exhibit 4,5 or 4.6
hereto, the Seller had, at the respective dates of the Financial Statements and
as of the date of this Agreement no material liabilities or obligations of any
kind, whether accrued, absolute, contingent or otherwise, whether or not such
liabilities or obligations would have been required to be disclosed on a balance
sheet prepared in accordance with generally accepted accounting principles.
4.7 Absence of Certain Changes or Events. Since December 31, 1995,
except as otherwise disclosed in Disclosure Exhibit 4.5 or 4.7 hereto, in
conducting its Business and affairs, including but not limited to use and
operation of the Purchased Assets, the Seller has not, and will not have as of
the Closing Date:
10.
(a) incurred any obligation or liability (contingent or otherwise)
except (i) normal trade or business obligations incurred in the
ordinary course of business, the performance of which will not,
individually or in the aggregate, have a material adverse affect
on the Seller's financial condition or results of operations and
(ii) obligations under contracts, leases, supply agreements,
purchase orders, licenses, agreements, and other commitments
described in Disclosure Exhibit 1.1-D hereto the performance of
which will not, individually or in the aggregate, have a material
adverse affect on the Seller's Business, financial condition or
results of operations;
(b) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (contingent or otherwise), except (i)
current liabilities included in the Financial Statements, (ii)
current liabilities in excess of $25,000 in the aggregate that
have been incurred since the date of the Financial Statements in
the ordinary course of business and (iii) scheduled payments
pursuant to obligations under contracts, leases, supply
agreements, purchase orders, licenses, agreements and other
commitments described in Disclosure Exhibit 1.1-D hereto;
(c) mortgaged, pledged or subjected to any lien, charge, security
interest or to any other encumbrance any of the Purchased Assets
(whether tangible or intangible);
(d) made any material additions to, sold, assigned, transferred,
conveyed, leased or otherwise disposed of, or agreed to sell,
assign, transfer, convey, lease or otherwise dispose of, any of
the Purchased Assets, except for items of Inventories for fair
and adequate consideration in the ordinary course of the
Business;
(e) canceled or compromised any debt or claim, except for adjustments
made in the ordinary course of Business which, in the aggregate,
are not material;
(f) waived or released any material rights, whether or not in the
ordinary course of business;
(g) transferred or granted any rights under any concessions, leases,
licenses, agreements, patents, inventions, trademarks, trade
names, copyrights, or with respect to any know-how;
(h) made or granted any general wage or salary increase or entered
into any employment contract with any officer or employee
involving an annual basic rate of compensation in excess of
$25,000 or a period of employment of more than thirty days;
(i) entered into any transaction, contract or commitment other than
in the ordinary course of business;
(j) made any capital expenditure or entered into any commitment
therefor;
11.
(k) suffered any material casualty loss or damage, whether or not
such loss or damage shall have been covered by insurance;
(l) suffered any material adverse change in the Seller's Business,
the Purchased Assets or the operations, earnings, liabilities,
properties, business relationships, prospects or condition
(financial or otherwise), or in the results of the Seller's
Business and operations;
(m) lost any supplier or suppliers which loss or losses, individually
or in the aggregate, have or may have a material adverse affect
on the results of the Seller's Business and operations;
(n) lost any customer or customers which loss or losses, individually
or in the aggregate, have or may have a material adverse affect
on the results of operations of the Seller; or
(o) introduced or permitted any material change to occur with respect
to the Seller's Business and operations, including, without
limitation, its method of accounting, whether by act or by lapse
of time or attention.
4.8 Tax Matters. The Seller has duly filed with the appropriate United
States, state and local governmental agencies, and with the appropriate foreign
countries and political subdivisions thereof, all tax returns and reports
required to be filed under the Internal Revenue Code of 1986, as amended (the
"Code"), or the statutes, rules, ordinances, regulations or other laws of any
state, county, city or other political subdivision of a state; such returns and
reports are accurate and complete; and the Seller has paid in full or made
adequate provisions for all taxes, interest, penalties, assessments or
deficiencies shown to be due on such tax returns and reports or claimed to be
due by any taxing authority or otherwise due and owing. The Seller has made all
withholdings of tax required to be made under all applicable United States,
state and local tax regulations, and such withholdings have either been paid to
the appropriate governmental agencies or set aside in accounts for such purpose
or accrued, reserved against and entered upon the books of the Seller. The
provisions for income taxes payable reflected in the Financial Statements are
adequate. The United States income tax liabilities of the Seller have been
examined and reported on by the Internal Revenue Service (or closed by
applicable statutes of limitations) and finally determined and fully paid for
all fiscal years prior to and including the fiscal year ended October 28, 1992.
The Seller has not executed or filed with the Internal Revenue Service or any
other taxing authority, domestic or foreign, any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any taxes. The Seller is not a party to any pending action,
proceeding, suit, investigation or audit nor to Seller's knowledge is any
action, proceeding, suit, investigation or audit threatened, by any governmental
authority for assessment or collection of taxes and no claim for assessment or
collection of taxes has been asserted or proposed against the Seller.
12.
Further, the Seller has not received any notice of, and is not aware of any
information of, any increase or intention to seek increases in the assessed
value of the Purchased Assets.
4.9 Title to Properties; Absence of Liens and Encumbrances; Leases.
(a) The Seller has good and marketable title to all of its properties
and assets, including, without limitation, the Purchased Assets,
tangible and intangible, free and clear of all mortgages,
pledges, claims, liens, changes, security interests and any other
encumbrances hereto, other than (i) as specifically disclosed in
Disclosure Exhibit 4.9 hereto, (ii) any liens for taxes not yet
due and payable or being contested in good faith by appropriate
proceedings and (iii) such imperfections of title, easements,
liens, pledges, charges and encumbrances, if any, as do not
materially detract from the value or interfere with the present
use of any of its properties or otherwise materially impair its
business operations.
(b) All leases and easements pursuant to which the Seller leases or
uses any real or personal property belonging to or used in its
Business and all licensing agreements belonging to or used in its
Business and to which the Seller is a party are in good standing
and are valid and binding in accordance with their terms; and
there is not under any of such leases, easements or licensing
agreements any existing default, event of default or event which
with notice or lapse of time, or both, would constitute a default
(and in respect of which the Seller has not taken adequate steps
to prevent such a default or event of default from occurring).
None of the rights of the Seller under any of such leases,
easements or licensing agreements is subject to termination or
modification as the result of the transactions contemplated
hereby.
4.10 Litigation. There are no claims, actions, suits, proceedings or
investigations pending or to Seller's knowledge threatened against or affecting
the Seller at law or in equity, or before or by any federal, state, municipal or
governmental or nongovernmental department, commission, board, bureau, agency or
instrumentality, United States or foreign.
4.11 Labor Controversies. All employees are employees at will. Except
as set forth on Disclosure Exhibit 4.11 hereto, there are no controversies
pending or to Seller's knowledge threatened between the Seller and any of its
employees and the Seller has not taken or failed to take any action which would
provide a reasonable basis for any such controversy. The Seller has complied
with all material laws relating to the employment of labor, including any
provisions thereof relating to wages, hours, collective bargaining and the
payment of social security and similar taxes, and is not liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing. To the best of Seller's knowledge, there are no present employees of
the Seller who will not be available for employment by the Buyer on
substantially the same terms and conditions as they are presently employed by
the Seller. There are no organizational efforts presently being made or
threatened by or on behalf of any labor union with respect to employees of the
Seller.
13.
4.12 Patents; Trademarks; Intellectual Property Rights. The Seller has
protected by way of trademark, trade name or otherwise to the fullest extent
permitted by the law the names set forth in Disclosure Exhibit 4.12 hereto. No
other patents, trademarks, trade names, copyrights, trade secrets,
registrations, applications, technical information, data, formulae, blueprints,
drawings, computer hardware and software, proprietary know-how, manufacturing
procedures, process and the like ("Intellectual Property Rights") are necessary
for the conduct of the Sellers' business as now conducted. All such Intellectual
Property Rights are in good standing, are valid and enforceable and are free
from any default on the part of the Seller. The Seller is not a licensor or
licensee of any Intellectual Property Rights, nor is the Seller violating the
Intellectual Property Rights of others. No director, officer or employee of the
Seller owns, directly or indirectly, in whole or in part, any of the
Intellectual Property Rights or interests therein which the Seller has used, is
presently using, or the use of which is necessary for the Seller's business as
now conducted.
4.13 Purchased Assets; Inventory.
(a) The Purchased Assets, including, without limitation, each item of
Equipment as identified in Disclosure Exhibit 1.1-C are in
Sellers' possession and good operating condition and repair,
normal wear and tear excepted and are suitable and useable in the
ordinary course of the Business for the uses and purposes for
which they are being used or intended. There are no actions
pending or to Seller's knowledge threatened or consent decrees,
orders or agreements entered by the United States, any state or
local regulatory agency or court with respect to the compliance
of such properties or assets with applicable laws, statutes,
ordinances or regulations, including, without limitation, the
Environmental Laws (as that term is defined in Section 4.19
hereto).
(b) The Inventories reflected in the Financial Statements consist of
raw materials, parts and supplies, work in process, partly
finished goods, finished goods and goods in transit usable for
the intended purpose and salable within periods of time
consistent with the Seller's past experience, in the ordinary
course of business, subject only to adjustment consistent with
the Seller's established accounting practices. All Inventories of
raw materials, parts and supplies satisfy industry standards of
quality for the intended use of such assets and are in good
condition and usable for their intended purpose and use in the
regular and ordinary course of the Business; and all Inventories
of goods in process, partly finished goods, finished goods and
goods in transit satisfy the industry standards of quality,
without any material defect, for such assets and are usable or
salable in the regular and ordinary course of the Business. The
Inventories are not either inadequate or excessive in kind or
amount in light of the Seller's past experience in the ordinary
course of the Business and the Seller's obligations under the
Assigned Contracts.
4.14 Insurance. All of the insurable properties constituting the
Purchased Assets are adequately insured for the Seller's benefit against all
risks usually insured against by persons owning
14.
or operating similar properties in the localities where such properties are
located, all under valid and enforceable policies insured by insurers of
recognized responsibility. The operations constituting the Business have been
continuously covered, without gaps in such coverage, since the date of the
Seller's acquisition of the Business and will be covered as of the Closing Date
by liability and worker's compensation insurance. The Seller is adequately
insured, for its benefit, against all product liability claims relating to
products manufactured, fabricated, sold, or delivered by it to the same extent
that the risks of such claims are insured against by persons manufacturing,
fabricating, selling or delivering similar products, all under valid and
enforceable policies issued by insurer's of recognized responsibility. The
Seller is not in default with respect to any terms or conditions contained in
any of its insurance policies described herein in any respect that could result
in a cancellation of such policies or a refusal by the insurer to pay under such
policies, nor has it failed to give any notice or represent any claim under any
such insurance policies in due and timely fashion.
Further, if a claim is made for damage occurring during the period prior to
the Closing Date, which is covered by the physical damage, liability or worker's
compensation insurance policy, then the Seller shall properly notify the Buyer
of the pendency and amount of such claim, and the Buyer shall have the right to
consult with the Seller in any negotiations or legal proceedings in respect
thereto. The Seller agrees that if any award for damages is made in respect to
any non-material physical damage to the Purchased Assets occurring prior to the
Closing Date but is awarded after the Closing Date, then the proceeds therefrom
shall be transferred promptly by the Seller to the Buyer unless such physical
damage has been previously corrected by the Seller in a manner satisfactory to
the Buyer.
4.15 Trade Notes and Accounts Payable. The trade notes and accounts
payable of the Seller reflected on the Financial Statements and all trade notes
and accounts payable arising thereafter and prior to the Closing Date arose from
bona fide transactions in the ordinary course of business of the Seller and were
paid or are not yet due and payable (the "Trade Payables").
4.16 Permits and Licenses. There is set forth in Disclosure Exhibit
4.16 a list of all permits, licenses or other authorizations of governmental
authorities in effect on the date hereof applicable to any of the Purchased
Assets or required by any such authority to be in effect, if not presently
effective for the operation or the conduct of the Business as currently
conducted by Seller, and true and correct copies of such permits, licenses or
other authorizations in effect have been delivered to Buyer. Except as set forth
in Disclosure Exhibit 4.16, no consent of any governmental authority is required
for the assignment by the Seller to the Buyer of any of such permits, licenses
or authorizations. The Business is conducted by the Seller in all material
respects in accordance with the requirements of all such permits, licenses or
authorizations, whether in effect or required to be in effect, and in accordance
with the requirements of all governmental authorities having jurisdiction over
the Business. No proceeding is pending or, to the knowledge of the Seller,
threatened, looking toward the revocation or limitation of any of the permits,
licenses or authorizations set forth in Disclosure Exhibit 4.16, nor has the
Seller received any notice of noncompliance thereunder or any notice asserting a
violation in respect of any of such permits, licenses or authorizations which
remains unremedied or unresolved, or the remedy or resolution of which requires
a continuing undertaking by the Seller which requires additional investment by
the Seller in the Business or a
15.
change in the method of operation of the Business, nor is the Seller aware of
any basis which could give rise to the delivery of such notice. To the knowledge
of the Seller, no federal, state or local governmental authority has threatened
to terminate or not to renew any such license, permit or
authorization.
4.17 Contracts. All the "Assigned Contracts" are listed in Disclosure
Exhibit 1.1-D, are, and on the Closing Date will be, in full force and effect,
except as shown on Disclosure Exhibit 1.1- D. True and complete copies of all
Assigned Contracts described in Disclosure Exhibit 1.1-D shall be delivered to
or made available for the Buyer's review prior to June 28, 1996. At the request
of the Buyer, any third party consent required for the assignment to the Buyer
of any material Assigned Contract will be obtained by Seller prior to the
Closing.
Except as indicated in Disclosure Exhibit 1.1-D, there are no material
contracts, agreements or commitments of any nature relating to the Business, or
which affect any of the Purchased Assets, including without limitation any (i)
assignment or pledge of the Seller's interest in the Business or any of the
Purchased Assets, (ii) supply agreements, (iii) service agreements, (iv)
individual employment agreements or collective bargaining agreements of any
nature, (v) employee welfare, retirement or other benefit plans, policies or
agreements, (vi) purchase orders, (vii) loan or guarantee agreements or (viii)
any other type of lease agreement, commitment or contingency which may become a
liability of the Buyer or the Purchased Assets upon the Buyer's assumption of
the ownership, operations or management of the Business and the Purchased
Assets.
4.18 Contract Observance. Except as disclosed in Disclosure Exhibit
1.1-D to this Agreement, the Seller has complied, and currently is in compliance
with, the material provisions of all Assigned Contracts, and neither the Seller
nor, to the knowledge of the Seller, any other party thereto is in default in
the performance, observance or fulfillment of any material obligation, covenant
or condition contained therein, and no event has occurred which, with or without
the giving of notice or lapse of time, or both, would constitute a default
thereunder by the Seller or by any other party.
4.19 Environmental Matters.
(a) To the best of Seller's knowledge, the Seller has obtained all
permits, licenses and other authorizations which are required to
conduct the Business under all Federal, state, county and local
statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, concessions, grants, franchises, agreements or
governmental restrictions relating to human health, the
environment or the general treatment, storage, recycling,
transportation, release or disposal of any materials into the
environment (collectively, "Environmental Laws"). Seller is in
compliance (i) with the terms and conditions of all such permits,
licenses and authorizations and (ii) with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any
Environmental Law applicable to it in connection with the conduct
of the Business or in any regulation, code, plan, 16.
order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder. In addition,
no notice, notification, demand, request for information,
citation, summons or order has been received and, to the best of
Seller's knowledge, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or
threatened by any Federal, regional, state, county or local
government or any executive, legislative, judicial, regulatory or
administrative entity, or other governmental entity with respect
to any alleged failure by the Seller to have any environmental
permit, license or authorization required in connection with the
conduct of the Business or with respect to any generation,
treatment, storage, recycling, transportation, release or
disposal, or any release as defined in 42 U.S.C. Section 9601(22)
("Release") of any hazardous substance, waste or material
regulated under Environmental Laws or other Hazardous Materials
generated by the Seller in the conduct of the Business. For the
purposes of this Agreement, "Hazardous Materials" shall mean
substances defined as "hazardous substances", "toxic substances"
or "hazardous wastes" in the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Federal Hazardous Materials Transportation Act,
as amended, and the Resource Conservation and Recovery Act, as
amended; oil and underground storage tanks; asbestos and material
containing asbestos; and those substances defined as "hazardous
wastes", "hazardous materials" or "hazardous substances" in the
laws of the State of Illinois, and as such substances are defined
in the regulations adopted and publications promulgated pursuant
to said laws.
(b) The Seller has not disposed of any Hazardous Material on the
property leased by the Seller with respect to the Business; and
to the best of the Seller's knowledge:
(i) no PCB is or has been present at the property leased by
the Seller with respect to the Business;
(ii) no asbestos is or has been present at the property
leased by the Seller with respect to the Business;
(iii)there are no underground storage tanks for Hazardous
Materials, active or abandoned, at the property leased
by the Seller with respect to the Business;
(iv) no Hazardous Materials have been released by the
Seller, in a reportable quantity, where such a quantity
has been established by statute, ordinance, rule,
regulation or order, at, on or under the property
leased by the Seller with respect to the Business; and
(v) no Hazardous Materials have been otherwise released by
the Seller at, on or under the property leased by the
Seller with respect to the Business, and no
17.
Hazardous Materials have ever been released at, on or
under any property adjoining the property leased by
the Seller with respect to the Business.
(c) The Seller has not received any notification and does not
otherwise have any knowledge with respect to any liability at any
location which is listed on the National Priorities List under
CERCLA, listed for possible inclusion on the National Priorities
List under the Comprehensive Environmental Response, Compensation
and Liability and Information System ("CERCLIS") by the
Environmental Protection Agency or on any similar state list or
which is the subject of Federal, state or local enforcement
actions or other investigations which may lead to claims against
the Seller for clean-up costs, remedial work, damages to natural
resources or personal injury claims, including, but not limited
to, claims under CERCLA.
(d) No oral or written notification of a Release of a Hazardous
Material has been filed by or on behalf of the Seller with
respect to the Business and no property now or previously owned
or, to the best of the Seller's knowledge, leased by the Seller
with respect to the Business is listed or, to the best of the
Seller's knowledge, proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS or on
any similar state list of sites requiring investigation or
clean-up.
(e) There are no encumbrances in favor of any governmental authority
for (i) any liability under Environmental Laws or (ii) damages
arising from or costs incurred by such governmental authority in
response to a Release or threatened Release of Hazardous Waste or
any toxic waste, substance or constituent or other substance into
the environment (collectively, "Environmental Encumbrances")
arising under or pursuant to any Environmental Laws, and, to the
best of the Seller's knowledge, no governmental actions have been
taken or are in process which could reasonably be anticipated to
subject the Business to such Environmental Encumbrances and, to
the best of the Seller's knowledge, the Seller is not required to
place any notice or restriction relating to the presence of
Hazardous Materials at the site of the Business.
4.20 Compliance with Applicable Law. The conduct of the Seller's
Business does not violate or infringe any material domestic or foreign laws,
statutes, ordinances or regulations or any material right or patent, trademark,
trade name, copyright, know-how or other proprietary right of third parties, the
enforcement of which would adversely affect the Seller's Business or the value
of its properties and assets.
4.21 Plans and Agreements Relating to Employees.
(a) Except as set forth on Disclosure Exhibit 4.21 attached hereto,
there are no employee benefit plans, contracts or arrangements of
any type (including, without limitation, (i) any employee benefit
plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (ii) any
personnel policies,
18.
deferred compensation plans, incentive plans, bonus plans or
arrangements, stock option plans, stock purchase plans, golden
parachute (or similar) agreements, severance pay plans, dependent
care plans, cafeteria plans, employee assistance programs,
scholarship programs, employment contracts and other similar
plans, agreements and arrangements which are not so described)
which are currently in effect or will be in effect on the Closing
Date for the benefit of employees of the Seller (or beneficiaries
of such employees) who provide or provided services to or in
connection with the Business. Each of such employee benefit
plans, contracts or arrangements is herein referred to as an
"Employee Plan."
(b) The Seller has delivered to the Buyer true, correct and complete
copies with respect to each Employee Plan.
(c) With respect to each funded Employee Plan which is an employee
pension plan within the meaning of Section 3(2) of ERISA, (i) the
plan is a qualified plan under Section 401(a) of the Code, and
its related trust is exempt from federal income taxation under
Section 501(a) of the Code; (ii) the plan is covered by a
favorable determination letter with respect to its qualified
status, and all amendments or other actions required by such
determination letter have been adopted or taken; (iii) there is
no change in the relevant facts or circumstances which would make
the submission on which such determination letter was based
materially inaccurate or which would otherwise adversely affect
the qualified status of the plan; (iv) no prohibited transactions
(as defined in Section 406 of ERISA or Section 4975 of the Code)
have occurred; (v) there has been no accumulated funding
deficiency within the meaning of Section 302(a)(2) of ERISA or
Section 412 of the Code, whether or not waived; (vi) the plan has
been administered in accordance with its terms and the provisions
of applicable law; (vii) no event has occurred and no
circumstance exists or is expected to occur or exist under which
Seller or any other person has incurred or may incur, directly or
indirectly, liability under the provisions of Title IV of ERISA;
(viii) no actions, suits or claims (other than routine claims for
benefits) are pending, threatened or imminent against Seller or
any fiduciary (as defined in Section 3(21) of ERISA) of the plan;
(ix) all disclosures, notices and filings required by applicable
law have been timely made, transmitted or filed as the cases may
be; and (x) all contributions for all periods ending prior to the
Closing (including periods from the first day of the current plan
year to the Closing) will have been made prior to or as soon as
practicable after the Closing by Seller in accordance with the
terms of the plan and applicable law.
(d) Disclosure Exhibit 4.21 sets forth a list of the Seller's
employees, together with their annualized base pay and a
description of the amount and basis of their other compensation.
19.
(e) The Seller is not a party to any collective bargaining agreement
covering the employment of any employees, or to any employee
welfare benefit plan or employee pension benefit plan which is a
multi employer plan within the meaning of Section 3(37) of ERISA
covering any such employee.
(f) With respect to each Employee Plan which is a group health plan
within the meaning of Section 5000(b)(1) of the Code, the Seller
has complied with the provisions of Section 4980(B) of the Code.
4.22 Purchased Assets' Relationship to Business of the Seller. Except
as set forth in Disclosure Exhibit 4.22, the Purchased Assets, including,
without limitation, the Assigned Contracts and Equipment, constitute, and will
constitute as of the Closing Date, all of the properties and assets (other than
any Excluded Asset) used or useful in or necessary to the conduct of the
Business and operations of the Seller and, as such, constitute, and will
constitute as of the Closing Date, all of the properties and assets necessary in
order for the Buyer to conduct the Business as a going concern subsequent to the
Closing in the same manner in which the Business was conducted by the Seller at
December 31, 1995 as reflected in the Financial Statements.
4.23 Net Accounts Receivable. The Net Accounts Receivable (as that term
is defined in Section 1.1(b) hereof) (i) represent undisputed, bona fide
transactions completed in the ordinary course of the Business and in accordance
with the terms and provisions contained in the invoices therefor, (ii) are not
subject to set-offs, counterclaims or disputes presently extant or asserted with
respect thereto and (iii) are not subject to any agreement with any obligor
therefor for any deduction therefrom.
4.24 Misstatements and Omissions. No representation or warranty made by
Seller in this Agreement, and no statement made in any schedule, certificate or
other document furnished pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or fails to state, or will omit
or fail to state as of the Closing Date, any material fact or information
necessary to make such representation or warranty or any such statement not
materially misleading.
4.25 Books and Records. The books, records and work papers of the
Seller are complete and correct, have been maintained in accordance with
generally accepted accounting principles, as consistently applied in preparing
the Financial Statements and good business practices and accurately reflect the
basis for the financial condition and results of operations of the Seller set
forth in the Financial Statements.
B. The Parent hereby represents and warrants to, and covenants and
agrees with, the Buyer as follows:
4.26 Organization; Power; Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware. Parent has all requisite corporate power and authority to own, operate
and lease its properties, to carry on its business as now
20.
being conducted and to enter into this Agreement and perform its obligations
hereunder. Parent has not failed to qualify to do business in any jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary.
4.27 Authority Relative to Agreement; Binding Obligation. The
execution, delivery and performance of this Agreement by Parent have been duly
and effectively authorized by all necessary corporate action by Parent,
including approval of the entire transaction by the requisite vote of Parent's
board of directors and shareholders if required. This Agreement has been duly
executed by Parent and is a valid, legally binding and enforceable agreement of
Parent enforceable in accordance with its terms, except as its enforceability
may be limited by bankruptcy, insolvency, moratorium or other laws relating to
or affecting creditor's rights generally and the exercise of judicial discretion
in accordance with equitable principles.
4.28 Effect of Agreement. The execution, delivery and performance of
this Agreement by Parent and the consummation of the transactions contemplated
hereby will not (i) require the consent, approval or authorization of any
person, corporation, partnership, joint venture or other business association or
public authority (or of the shareholders of Parent); (ii) violate, with or
without the giving of notice or the passage of time, or both, any provisions of
law or statute or any rule, regulation, order, award, judgment or decree of any
court or governmental authority or of any license applicable to Parent or its
assets; or (iii) with or without the giving of notice, the passage of time, or
both conflict with or result in a breach or termination of any provision of,
accelerate the performance or maturity of, constitute a default under, or result
in the creation of any lien, charge or encumbrance upon any of the Purchased
Assets pursuant to any corporate charter, bylaw, indenture, note, bond,
mortgage, deed of trust, lease, contract, permit, agreement or other instrument,
or any order, judgment, award, decree, statute, ordinance, regulation or any
other restriction of any kind or character, to which Parent is a party, or by
which Parent or any of the Purchased Assets may be bound.
V. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller and Parent as follows:
5.1 Organization; Good Standing; Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Iowa and will have all requisite corporate power and authority to own, lease and
operate its properties, to carry on its business as now being conducted and to
enter into this Agreement and the Assumption Agreement and perform its
obligations hereunder.
On the Closing Date the Buyer will be duly qualified to do business as
a foreign corporation and will be in good standing in each of the jurisdictions
in which the property owned, leased or operated by it or the nature of the
business conducted by it after the consummation of the transaction
contemplated hereunder makes such qualification necessary.
21.
5.2 Authority Relative to Agreement. The execution, delivery and
performance of this Agreement and the Assumption Agreement, and the transactions
contemplated hereby and thereby by the Buyer, will have been duly and
effectively authorized and ratified by all necessary corporate action. This
Agreement has been duly executed by the Buyer and is a valid, legally binding
and enforceable agreement of the Buyer. This Agreement and the Assumption
Agreement will be duly executed by the Buyer and are valid, legally binding and
enforceable obligations of the Buyer enforceable in accordance with its terms,
except as their enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws relating to or affecting creditor's rights generally
and the exercise of judicial discretion in accordance with equitable principles.
5.3 Effect of Agreement. The execution, delivery and performance of
this Agreement and the Assumption Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not (i) require the consent,
approval or authorization of any person, corporation, partnership, joint venture
or other business association or other public authority; (ii) violate, with or
without the giving of notice or the passage of time, or both, any provisions of
law applicable to the Buyer; or (iii) conflict with or result in a breach or
termination of any provision of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of the properties or assets
of the Buyer pursuant to any indenture, corporate charter, bylaw, indenture
mortgage, deed of trust, lease, contract, agreement or other instrument or any
order, judgment, award, decree, statute, ordinance, regulation or any other
restriction of any kind or character, to which the Buyer is a party, or by which
the Buyer or any of its assets or properties may be bound.
VI. TRANSACTIONS PRIOR TO THE CLOSING DATE
6.1 Access to Information. The Seller shall give to the Buyer, its
employees, counsel, accountants, engineers and other consultants and
representatives, full access during normal business hours throughout the period
prior to the Closing Date to the Purchased Assets, books, contracts, commitments
and records of the Seller for such purposes as Buyer deems appropriate,
including but not limited to testing of the Purchased Assets provided the same
does not unreasonably interfere with the Seller's Business, and will furnish to
the Buyer during such period all such information concerning the affairs of the
Seller as the Buyer or its representatives may reasonably request. The Buyer
shall use its best efforts to cause its representatives to hold in strict
confidence all information so obtained from the Seller and, if the transactions
herein provided for are not consummated as contemplated herein, the Buyer will
return all such data as the Seller may reasonably request.
6.2 Conduct of the Seller's Business Pending the Closing Date. The
Seller hereby agrees that, except as described in Disclosure Exhibit 6.2 hereto,
prior to the Closing Date it will:
(a) operate its business only in the usual, regular and ordinary
manner and, to the extent consistent with such operation, use its
best efforts to: preserve and promote its present business
organization and reputation intact; avoid any act which might
have a material adverse affect upon the value of the Business as
a going concern; and keep
22.
available the services of its present officers and employees and
preserve its present relationships and goodwill with persons
having business dealings with it;
(b) maintain all of its properties, including, without limitation,
the Purchased Assets, in customary repair, order and condition,
reasonable wear and tear excepted, and maintain insurance upon
all of its properties and with respect to the conduct of its
business in such amounts and of such kinds comparable to that in
effect on the date hereof; and, in the event of loss, damage or
destruction of any of the Purchased Assets prior to the Closing
Date, or if any of the Purchased Assets shall cease to be in good
operating condition or repair or shall cease to be adequate for
the uses to which they are being put, the Seller shall promptly
replace (or repair if appropriate) any such property at the
Seller's sole cost and expense, provided that in the event of any
casualty, loss, damage or destruction for which the Seller is
insured, the Seller shall, at the Buyer's option, either repair
or replace such damaged property or transfer the proceeds of such
insurance to the Buyer;
(c) maintain its books, accounts and records in the usual, regular
and ordinary manner, on a basis consistent with prior years; and
perform all of its obligations without default;
(d) use its best efforts to comply duly with all laws applicable to
it and the conduct of the Business;
(e) conduct its operations so as to comply with all Environmental
Laws;
(f) make or grant no general wage or salary increase or increase in
compensation payable or to become payable to any employee,
officer, director or agent; pay or provide for no bonus, stock
option, stock purchase, profit sharing, deferred compensation,
pension, multi-employer pension, retirement or other similar
payment or arrangement except in the ordinary course of
administering existing plans referred to in any Employee Plan ;
pay or provide for no unfunded pensions, not covered by any
pension plan, other than the unfunded pensions, if any, referred
to in any Employee Plan and enter into no employment or
consulting agreement or sales agency with respect to the
performance of personal services which is not terminable without
liability by the Seller on thirty days notice or less.
(g) (i) incur or become subject to, or agree to incur or become
subject to, no obligation or liability (contingent or otherwise),
subject to the exceptions enumerated in Section 4.9(a) hereof;
(ii) discharge or satisfy no lien or encumbrance and pay no
obligation or liability (contingent or otherwise), subject to the
exceptions enumerated in Section 4.9(b) hereof; (iii) mortgage,
pledge or subject to lien, charge, security interest or any other
encumbrance none of the Purchased Assets; (iv) sell, assign,
transfer, convey, lease or otherwise dispose of, or agree to
sell, assign, transfer, convey, lease or
23.
otherwise dispose of, none of the Purchased Assets, except for
items of Inventories for fair and adequate consideration in the
ordinary course of business; (v) acquire or lease (other than a
renewal of an existing lease in the ordinary course of business),
or agree to acquire or lease (other than a renewal of an existing
lease in the ordinary course of business), no material assets or
property; (vi) cancel or compromise no debt or claim, except for
adjustments or settlements made in the ordinary course of
business; (vii) waive or release no rights; (viii) transfer or
grant no rights under any concessions, leases, licenses,
agreements, patents, inventions, trade names, trademarks,
copyrights, or with respect to any know-how or Intellectual
Property Rights; (ix) modify, change or terminate no existing
license, lease, contract or other document; (x) make no capital
expenditures and enter into no commitments therefor; (xi) enter
into no collective bargaining agreement and, through negotiation
or otherwise, make no commitment or incur any liability to any
labor organization; (xii) enter into no transaction and make or
enter into no contract or commitment which by reason of its size
or otherwise is not in the ordinary course of business;
(h) make no substantial renovation of property involving any
substantial obligation on the part of the Seller;
(i) make no change in its accounting procedures;
(j) agrees that it will enter into no transaction involving any
material obligation or liability of the Seller, nor any agreement
or understanding with respect to such transaction; and
(k) will not intentionally take any action that would result in any
of the Seller's representations, warranties and agreements
contained in Section IV of this Agreement not being true and
correct at and as of the time immediately after the occurrence of
such transaction or event and as of the Closing Date.
6.3 Consents. The Seller agrees that it shall cooperate with the Buyer
to obtain prior to the Closing all such consents, assignments, and approvals as
may be required in order to enable the Seller to perform its obligations
hereunder, including, but not limited to, all consents and approvals required to
permit it to make the transfers to the Buyer contemplated herein so that the
Buyer may enjoy after the Closing all rights and benefits presently enjoyed by
the Seller.
6.4 Sublease. Parent agrees that it shall prior to or at the Closing
enter into a sublease for a term of one (1) year beginning on the Closing Date
for the facility at 1325 Pratt Boulevard, Elk Grove, Illinois, for the same
space presently occupied by the Seller and on the same financial terms
applicable to the Seller, which sublease shall contain two (2) six (6) month
renewal options and shall expressly allow the Buyer the right of set-off agreed
to by the parties under Section 2.3(e) hereof (the "Sublease").
24.
VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND
PARENT
The obligations of the Seller and Parent under this Agreement are
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of the Buyer herein contained shall be true and correct on and as of
the Closing Date, with the same force and effect as though made on and as of
such date, except as affected by the transactions contemplated hereby.
7.2 Performance of Agreements. The Buyer shall have performed all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it at or prior
to the Closing Date.
7.3 Officers' Certificate. The Buyer shall have furnished the Seller
with a certificate, dated as of the Closing Date, of the Buyer's President and
Secretary to the effect that, to the best knowledge, information and belief of
such officers, the Buyer has fulfilled the conditions specified in Sections 7.1
and 7.2 hereof.
7.4 Sublease. The Buyer shall have entered into the Sublease.
7.5 Opinion of Counsel. The Seller shall have received the written
opinion of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., counsel for
the Buyer, dated the Closing Date, acceptable to Seller's counsel. In rendering
its opinion, such counsel may rely, to the extent appropriate, as to matters of
fact upon statements and certificates of officers of the Buyer.
7.6 Resolutions of Board of Directors. The Seller shall have received
from the Buyer certified copies of the Resolutions of the Board of Directors of
the Buyer approving this Agreement and authorizing the consummation of the
transactions contemplated hereby.
7.7 Actual or Threatened Actions. There shall not be any actual or, in
the opinion of the Seller, threatened action or proceeding by or before any
court or other governmental body or agency which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement in
accordance with the terms hereof.
7.8 Employees and Employee Benefit Matters. The Buyer shall make offers
of employment, upon such terms as shall be mutually agreeable to the parties, to
all employees of the Seller. The Seller and the Buyer acknowledge and agree that
the Buyer does not hereby assume, and shall not be deemed to have assumed, any
liability or obligations whatsoever with regard to the Seller's employees
arising out of their employment by Seller prior to the Closing Date.
25.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligation of the Buyer under this Agreement to purchase the
Purchased Assets and to assume the Assumed Obligations at Closing is subject to
the satisfaction at or prior to the Closing
of each of the following conditions precedent:
8.1 Accuracy of Representations and Warranties. The representations and
. The representations and warranties of the Seller and Parent herein contained
shall be true and correct as of the date hereof and as of the Closing Date with
the same force and effect as though made on and as of such date.
8.2 Performance of Agreements. The Seller and Parent shall have
performed all obligations and agreements and complied with all covenants and
conditions required by this Agreement to be performed or complied with by the
Seller or Parent, as the case may be, at or prior
to the time of Closing .
8.3 Resolutions of Board of Directors. The Buyer shall have received
from the Seller certified copies of the Resolutions of the Board of Directors of
the Seller approving this Agreement and authorizing the consummation of the
transactions contemplated hereby.
8.4 Actual or Threatened Actions. There shall not be any actual or, in
the opinion of the Buyer, threatened action or proceeding by or before any court
or other governmental body or agency which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement in accordance with
the terms hereof or which might affect the right of the Buyer to own, operate or
control the Purchased Assets after the Closing Date.
8.5 Officers' Certificate. The Seller shall have delivered to the Buyer
a certificate dated the Closing Date, of the President and Secretary of the
Seller to the effect that the Seller has fulfilled the conditions specified in
Sections 6.2, 6.3, 8.1, 8.2 and 8.4 hereof. Such certificate shall include a
schedule which shall contain an update of the information disclosed in the
Disclosure Exhibits hereto and a complete and correct list and description of
the information specified in Section 4.10 as of a date not more than three (3)
days prior to the Closing Date.
8.6 Determination of Closing Date Net Accounts Receivable Amount. The
representatives of the Seller and the Buyer shall have jointly determined the
amount of the Closing Net Accounts Receivable Amount.
8.7 Loss of Assets. No loss, destruction, impairment or condemnation of
any of the Purchased Assets shall have occurred by reason of theft, loss, fire,
explosion, disaster, flood, accident, strike, riot, insurrection, act of God or
other similar occurrence (unless repaired, replaced or restored pursuant to
Section 6.2(b) hereof prior to the Closing Date) which, individually or in the
aggregate, shall have a material adverse affect on the business, operations,
results of operations or condition (financial or otherwise) of either the
Business or the Purchased Assets.
26.
8.8 Accuracy of Representations and Warranties. The Buyer shall not
have discovered any material error, misstatement or omission in any of the
representations or warranties made by the Seller herein or in any of the
Financial Statements.
8.9 Material Changes. Prior to the Closing Date, there shall not have
occurred, nor shall there exist as of the Closing Date, any event, series of
events or set of circumstances which constitutes or has resulted in a material
adverse change in the Business, the Purchased Assets or the material business
relationships, condition (financial or otherwise) or results of the Business or
operations of the Seller, since the dates of the Financial Statements.
8.10 Consents. All material consents shall have been received by the
Buyer including, but not limited to, all consents and approvals required to
permit the Buyer to enjoy after the Closing Date all rights and benefits
presently enjoyed by the Seller.
8.11 Noncompetition Agreements. Parent, the Seller and each subsidiary
of Parent shall execute and deliver to Buyer a noncompetition agreement in
substantially the form of Appendix II attached hereto.
8.12 Execution and Delivery of Sublease. Parent shall have executed and
delivered to the Buyer the Sublease.
8.13 Opinion of Counsel. The Buyer shall have received the written
opinion of Doepken, Keevican & Weiss, counsel for the Seller, dated the Closing
Date, in form acceptable to Buyer's counsel. In rendering its opinion, such
counsel may rely, to the extent appropriate, as to matters of
fact upon statements and certificates of officers of the Seller.
IX. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
9.1 Events of Default. A breach of any representation or warranty by
the Seller or Parent, or breach as a result of the failure of the Seller or
Parent to perform any of its covenants and obligations under this Agreement,
shall be considered a default hereunder giving rise to the
indemnification set forth in Section 9.3 hereof.
9.2 Survival of Representations, Warranties and Agreements. All
representations, warranties and agreements made by the Seller and the Buyer in
this Agreement or in any exhibit, certificate, document or instrument delivered
pursuant to the provisions hereof or in connection with the transactions
contemplated hereby, and the remedies of the Buyer and the Seller with respect
thereto, shall be deemed to be material and to have been relied upon by the
Buyer or the Seller, as the case may be, shall survive the Closing Date and,
except as otherwise specifically provided in this Agreement, shall remain
operative and in full force and effect for a period of eighteen (18) months
following the Closing Date, except as to any matters with respect to which a
bona fide written claim shall have been made or an action at law or in equity
shall have commenced before such date, in
27.
which event survival shall continue (but only with respect to, and to the extent
of, such claim) until the final resolution of such claim or action, including
all applicable periods for appeal; provided, however, that the representations,
warranties, covenants and agreements contained in Section 4.9, Sections 9.3(a),
9.3(c), and 9.3(d) to the extent applicable to Section 9.3(a) or Sections
9.3(c), 9.4(a), 9.4(c), and 9.4(d) to the extent applicable to Section 9.4(a) or
9.4(c) and Section 9.7 hereof shall continue without any time limitation, and
the representations, warranties and agreements contained in Sections 4.8, 4.19
and 4.21 shall survive for the periods equal to the applicable statute of
limitations relating thereto. Further, notwithstanding any other provision in
this Agreement to the contrary, the obligation of the Seller and Parent to
indemnify and hold harmless the Buyer under Section 10.4 hereof shall begin on
the Closing Date and end upon the latest of (i) three years from the date of the
last filing of a return or report of Taxes relating to the Business and the
Purchased Assets and covering such Taxes for which indemnification is provided
in Section 10.5 hereof , (ii) the expiration of the applicable statute of
limitations, or (iii) six months following the ultimate disposition of any claim
with respect to any Taxes relating to the Business or the Purchased Assets.
9.3 Indemnification to the Buyer. Parent and the Seller agree, jointly
and severally, to indemnify and hold the Buyer harmless from, against and in
respect of:
(a) all obligations and liabilities of the Seller, whether accrued,
absolute, fixed, contingent or otherwise, not expressly assumed
by the Buyer under this Agreement;
(b) any and all loss, liability or damage suffered or incurred by the
Buyer because of a breach of any obligation or liability of the
Seller under this Agreement, or because of any inaccuracy,
misrepresentation or breach of any representation, warranty,
covenant or agreement of the Seller or Parent (i) under this
Agreement or (ii) any documents furnished to the Buyer in
connection with the Closing as of the date of this Agreement and
as of the Closing Date;
(c) any and all loss, obligations and liabilities of the Seller
(other than the Assumed Obligations as that term is defined in
Section 2.6 hereof), including any and all claims, actions,
suits, proceedings, demands and judgments, and all reasonable
costs and expenses (including accounting and attorney's fees)
incurred in connection therewith, resulting from any causes of
action or claims of any kind asserted by unrelated third parties
arising out of or relating to the Seller's actions or omissions
in the conduct of the Business or ownership or operation of the
Purchased Assets, including, without limitation, any action or
claim arising out of or relating to products manufactured,
fabricated, purchased, sold or delivered by the Seller, prior to
the Closing Date without any time limitations notwithstanding any
provision of Section 9.2 to the contrary; and
(d) all reasonable costs and expenses (including accounting and
attorneys' fees) incurred by the Buyer in connection with any
action, suit, proceeding, demand, assessment or judgment incident
to any of the matters indemnified against it in this Section 9.3.
28.
This agreement to indemnify the Buyer shall be in addition to any
liability which the Seller may incur to the Buyer and shall not
foreclose any other rights or remedies that the Buyer may have to
enforce the provisions of this Agreement.
9.4 Indemnification to the Seller and Parent. The Buyer agrees to
indemnify and hold the Seller and Parent harmless from, against and in respect
of:
(a) all obligations and liabilities of the Buyer, whether accrued,
absolute, fixed, contingent or otherwise, expressly assumed by
the Buyer under the Assumption Agreement;
(b) any and all loss, liability or damage suffered or incurred by the
Seller or Parent because of a breach of any obligation or
liability of the Buyer under this Agreement, or because of any
inaccuracy, misrepresentation or breach of any representation,
warranty, covenant or agreement of the Buyer (i) under this
Agreement or (ii) any documents furnished to the Seller or Parent
in connection with the Closing as of the date of this Agreement
and as of the Closing Date;
(c) any and all loss, obligations and liabilities of the Buyer,
including any and all claims, actions, suits, proceedings,
demands and judgments, resulting from any causes of action or
claims of any kind asserted by unrelated third parties arising
out of or relating to the Buyer's actions or omissions in the
conduct of the Business or ownership or operation of the
Purchased Assets, including, without limitation, any action or
claim arising out of or relating to products manufactured,
fabricated, purchased, sold or delivered by the Buyer (other than
products manufactured or fabricated by the Seller prior to the
Closing Date), after the Closing Date without any time
limitations notwithstanding any provision of Section 9.2 to the
contrary; and
(d) all reasonable costs and expenses (including accounting and
attorneys' fees) incurred by the Seller or Parent in connection
with any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters indemnified against it in this
Section 9.4.
This agreement to indemnify the Seller or Parent shall be in addition to any
liability which the Buyer may incur to the Seller or Parent and shall not
foreclose any other rights or remedies that the Seller
or Parent may have to enforce the provisions of this Agreement.
9.5 Representation, Cooperation and Settlement.
(a) Buyer.
29.
(i) The Buyer agrees to give prompt written notice to the Seller
of any claim against the Buyer which might give rise to a
claim by the Buyer against the Seller based on the indemnity
agreement contained in Section 9.3 hereof, stating the
nature and basis of the first-mentioned claim and the amount
thereof.
(ii) The Buyer shall have full responsibility and authority with
respect to the disposition of any action, suit or proceeding
brought against it. In the event any action, suit or
proceeding is brought against the Buyer with respect to
which the Seller may have liability under the indemnity
agreement contained in Section 9.3 hereof, however, the
Seller shall have the right, without prejudice to the
Buyer's rights under this Agreement, at the Seller's sole
expense, to be represented by counsel of its own choosing
and with whom counsel for the Buyer shall confer in
connection with the defense of any such action, suit or
proceeding. The Buyer shall make available to the Seller and
its counsel and accountants, all books and records of the
Buyer relating to such action, suit or proceeding, and the
parties agree to render to each other such assistance as may
reasonably be requested in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
(b) Seller.
(i) The Seller and Parent agree to give prompt written notice to
the Buyer of any claim against the Buyer which might give
rise to a claim by the Seller and Parent against the Buyer
based on the indemnity agreement contained in Section 9.4
hereof, stating the nature and basis of the first-mentioned
claim and the amount thereof.
(ii) The Seller and Parent shall have full responsibility and
authority with respect to the disposition of any action,
suit or proceeding brought against them. In the event any
action, suit or proceeding is brought against the Seller and
Parent with respect to which the Buyer may have liability
under the indemnity agreement contained in Section 9.4
hereof, however, the Buyer shall have the right, without
prejudice to the Seller's and Parent's rights under this
Agreement, at the Buyer's sole expense, to be represented by
counsel of its own choosing and with whom counsel for the
Seller and Parent shall confer in connection with the
defense of any such action, suit or proceeding. The Seller
and Parent shall make available to the Buyer and its counsel
and accountants, all books and records of the Seller and
Parent relating to such action, suit or proceeding, and the
parties agree to render to each other such assistance as may
reasonably be requested in order to ensure the proper and
adequate defense of any such action, suit or proceeding.
30.
9.6 Limitation of Indemnification.
(a) The Seller and Parent shall be liable, jointly and severally, for
indemnification under this Section IX only in the event the
amount of a single claim or an aggregate amount of several claims
for indemnity under this Agreement by Buyer shall exceed the sum
of Twenty Five Thousand Dollars ($25,000.00) but in such event
for the entire amount of any claim for which indemnity would
otherwise be due and payable to the Buyer hereunder; except that
this limitation on the indemnification obligation of the Seller
and Parent shall not apply: (a) to any amount owed by the Seller
to the Buyer in connection with the computation of the Final
Purchase Price, any Adjustment or the amount of Uncollected
Closing Net Accounts Receivable Amount, as required under Section
II hereof and (b) to any loss, liability or obligation described
in Section 9.3 (c) hereof.
(b) The Buyer shall be liable for indemnification under this Section
IX only in the event the amount of a single claim or an aggregate
amount of several claims for indemnity under this Agreement by
the Seller or Parent shall exceed the sum of Twenty Five Thousand
Dollars ($25,000.00) but in such event for the entire amount of
any claim for which indemnity would otherwise be due and payable
to the Seller or Parent hereunder; except that this limitation on
the indemnification obligation of the Buyer shall not apply: (i)
to any amount owed by the Buyer to the Seller in connection with
the computation of the Final Purchase Price, any Adjustment or
the amount of Uncollected Closing Net Accounts Receivable Amount,
as required under Section II hereof and (ii) to any loss,
liability or obligation described in Section 9.4 (c) hereof and
(iii) failure to pay the Trade Payables assumed by Buyer.
9.7 Bulk Sales Agreement for Indemnification. The Buyer hereby waives
compliance by the Seller with the provisions of bulk sales and similar laws
applicable to this transaction, if any; provided, however, that any loss,
liability, obligation, expense or cost suffered by the Buyer as a result of the
failure by the Seller to comply therewith shall be borne by the Seller and that
the Seller shall indemnify and hold the Buyer harmless therefrom,
notwithstanding any other provision of this Agreement to the contrary.
X. TRANSACTIONS SUBSEQUENT TO THE CLOSING DATE
10.1 Control of Settlements and Disputes. Subject to Section 9.4
hereof, from and after the Closing Date the Buyer shall have complete control
over the payment, settlement or other disposition of, or any dispute involving,
any obligation or liability of the Seller assumed by the Buyer under the
Assumption Agreement, and the Buyer shall have the right to conduct and control
all negotiations and proceedings with respect thereto. The Seller will notify
the Buyer promptly of any claim made with respect to any such obligation or
liability and will not, except with the prior written consent of the Buyer,
voluntarily make any payment of, or settle or offer to settle, or consent to any
31.
compromise with respect to, any such obligations or liabilities. The Seller
will, at the expense of the Buyer, cooperate with the Buyer in any reasonable
manner requested by the Buyer in connection with any negotiations or proceedings
involving any such obligations or liabilities.
10.2 Further Assurances. From time to time after the Closing Date, upon
the request of the Buyer, the Seller will (a) make available to the Buyer any
records, documents and data retained by the Seller, and (b) execute, deliver and
acknowledge all such further instruments of transfer and conveyance as the Buyer
may reasonably require to more effectively transfer the Purchased Assets to the
Buyer and to put the Buyer in possession of any of the Purchased Assets.
10.3 Certain Employee Benefit Matters.
(a) The account balance of any Transferred Employee in the "MK Rail
Corporation Savings Plan," as amended (the "MK Rail Savings
Plan"), as of the Closing Date, including earnings or losses
thereon through the date of transfer, shall be transferred in
cash (or such other form as may be agreed upon by Buyer and
Seller) to the trustee of the trust maintained under the
All-State Industrial Rubber Co., Inc.401(k) Plan" or any similar
plan established by the Buyer for this purpose (the "Buyer's
401(k) Plan") as soon as practicable after the first valuation
date with respect to the MK Rail Savings Plan following the
Closing Date in a plan-to-plan transfer meeting the requirements
of Section 414(l) of the Code. During the period prior to the
plan-to- plan transfer required by this subsection, the Seller
will cause the fiduciaries of the MK Rail Savings Plan to process
and distribute benefits with respect to the Transferred Employees
whose employment with the Buyer is terminated, and the amount to
be transferred in the plan-to-plan transfer will be reduced
accordingly.
(b) All plan-to-plan transfers of assets and liabilities pursuant to
this Section 10.4 will be effected in accordance with the
provisions of Section 414(l) of the Code and will otherwise be
made in accordance with the applicable plan provisions, as
amended, and the provisions of applicable law. The Buyer and the
Seller shall make or cause to be made any plan amendments and
filings as may be required or requested of the Buyer and the
Seller , respectively, in connection with said plan-to-plan
transfers whether before or after the Closing Date. The Seller
may require, as a condition of making a plan-to-plan transfer
hereunder, evidence reasonably satisfactory to the Seller of the
qualified status of the Buyer's 401(k) Plan including, without
limitation, a copy of a favorable determination letter from the
Internal Revenue Service or, if none, a written opinion of
outside counsel that such a favorable determination letter could
be obtained without substantial changes to the plan. The Buyer
may require, as a condition of receiving a plan-to-plan transfer
hereunder, evidence reasonably satisfactory to the Buyer of the
qualified status of the MK Rail Savings Plan including, without
limitation, a copy of a recent favorable determination from the
Internal Revenue Service or, if none, a written opinion of
outside counsel that such a favorable determination letter could
be obtained without substantial changes to the
32.
plan. Each of the parties hereto shall pay its own expenses in
connection with the plan-to-plan transfers contemplated by
this Section 10.3. The Buyer and the Seller shall provide each
other with such records and information as they may reasonably
request to carry out their respective obligations under this
Section 10.3.
10.4 Certain Tax Matters.
(a) Tax Returns Through Closing. The Seller shall prepare and file on
a timely basis all reports and returns of any federal, state,
local and foreign income, profits, franchise, unincorporated
business, capital, general corporate, sales, use, occupation,
withholding, social security, property, excise and any and all
other taxes (all such taxes being collectively referred to herein
as "Taxes") relating to the Business and the Purchased Assets
with respect to all periods through and including the Closing
Date and shall pay or cause to be paid when due all Taxes
relating to the Business and the Purchased Assets for such
periods, including any interest, additions to tax or penalties
thereon, together with interest on such additions to tax or
penalties. The Seller shall be entitled to receive any Tax refund
relating to the Business and the Purchased Assets in respect of
any period prior to, through and including the Closing Date.
(b) Subsequent Liability. If, subsequent to the Closing Date, any
liability for Taxes relating to the Business or the Purchased
Assets is imposed on the Buyer with respect to any period ending
on or prior to the Closing Date, then the Seller and Parent,
jointly and severally, shall indemnify and hold the Buyer
harmless from and against, and shall pay, the full amount of such
Tax liability, including any interest, additions to tax and
penalties thereon, together with interest on such additions to
tax or penalties (as well as reasonable attorneys' or other fees
and disbursements of the Buyer incurred in determination thereof
or in connection therewith). The Buyer shall notify the Seller,
upon its receipt of any notice thereof, of the imposition or
threatened imposition of any liability for Taxes relating to the
Business or the Purchased Assets in respect of any period ending
on or prior to the Closing Date, and the Seller shall, at its
sole expense and in its reasonable discretion, either settle any
such Tax claim that may be the subject of indemnification under
this Section 10.4(b) at such time and on such terms as it shall
deem appropriate or assume the entire defense thereof; provided,
however, that the Seller shall in no event take any position in
such settlement or defense that would subject the Buyer to any
civil fraud or any civil or criminal penalty. Notwithstanding the
foregoing, the Seller shall not consent, without the prior
written approval of the Buyer, which prior written approval shall
not be unreasonably withheld, to any change in the treatment of
any item which would, in any manner whatsoever, affect the Tax
liability of the Buyer for a period subsequent to the Closing
Date.
33.
10.5 Net Accounts Receivable. The Buyer shall use reasonable efforts to collect
the Net Accounts Receivable assigned to the Buyer by the Seller at the Closing;
provided however that Buyer shall not be required to engage a collection agency
or attorneys to collect the Net Accounts Receivable. As Buyer receives payments
from the account debtors of the Net Accounts Receivable assigned to the Buyer,
such payments shall be credited against amounts first invoiced under the Net
Accounts Receivable assigned to the Buyer by Seller hereunder unless otherwise
designated by the account debtor or where the amount of invoices to the account
debtor corresponds to the amount of the payments from the account debtor.
XI. ALTERNATIVE DISPUTE RESOLUTION ("ADR"); ADDITIONAL
PROCEEDINGS
11.1 Agreement to Use Procedure. The parties have entered into this
Agreement in good faith and in the belief that it is mutually advantageous to
them. It is with that same spirit of cooperation that they pledge to attempt to
resolve any dispute amicably without the necessity of litigation. Accordingly,
they agree that if any dispute arises among them relating to this
Agreement,
or any document executed and delivered in connection with the terms and
conditions of, or any transaction contemplated by, this Agreement (the
"Dispute"), they will first utilize the procedures specified in this Section XI
(the "Procedure") before any Additional Proceedings (as that term is defined in
Section 11.11 hereof).
11.2 Initiation of Procedure. The party seeking to initiate the
Procedure (the "Initiating Party") will give written notice to the other
parties. The notice must describe in general terms the nature of the Dispute and
the Initiating Party's claim for relief. Additionally, the notice must identify
one or more individuals with authority to settle the Dispute on the Initiating
Party's behalf. The party receiving the notice (the "Responding Party", whether
one or more) will have five business days within which to designate by written
notice to the Initiating Party, one or more individuals with authority to settle
the Dispute on the Responding Party's behalf. The individuals so designated will
be known as the "Authorized Individuals". The Responding Party may authorize
himself or herself as an Authorized Individual. The Initiating Party and the
Responding Party will collectively be referred to as the "Disputing Parties" or
individually "Disputing Party".
11.3. Direct Negotiations. The Authorized Individuals may investigate
the Dispute as they deem appropriate. But they agree to promptly, and in no
event later than 30 days from the date of the Initiating Party's written notice,
meet to discuss the Dispute's resolution. The Authorized Individuals will meet
at the times and places and with the frequency as they may agree. If the Dispute
has not been resolved within ten (10) days from their initial meeting date, the
Disputing Parties will cease direct negotiations and will submit the Dispute to
mediation in accordance with the following procedure.
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11.4 Mediator Selection. The Authorized Individuals will have five
business days from the date they cease direct negotiations to submit to each
other a written list of acceptable qualified attorney-mediators not affiliated
with any Party. Within five days from the date the list is received, the
Authorized Individuals will rank the mediators in numerical order of preference
and exchange the rankings. If one or more names are on both lists, the highest
ranking person will be designated as the mediator. If no mediator has been
selected under this procedure, the Disputing Parties agree jointly to request a
state or federal district judge of their choosing to supply within ten business
days a list of potential qualified attorney-mediators. Within five business days
from the date the list is received, the Authorized Individuals will again rank
the proposed mediators in numerical order of preference and will simultaneously
exchange the list and will select as the mediator the individual receiving the
highest combined ranking. If the mediator is not available to serve, they will
proceed to contact the mediator who was next highest in ranking until they are
able to select a mediator.
11.5 Mediation Time and Place. In consultation with the mediator
selected, the Authorized Individuals will promptly designate a mutually
convenient time and place for the mediation. Unless circumstances require
otherwise, the time for mediation may not be later than thirty (30) days after
selecting the mediator.
11.6 Information Exchange. If any Disputing Party to this Agreement has
substantial need for information in another Disputing Party's possession in
order to prepare for the mediation, all Disputing Parties will attempt in good
faith to agree to procedures to expeditiously exchange the information, with the
mediator's help if required.
11.7 Summary of Views. At least seven days before the first scheduled
mediation session, each Disputing Party will deliver to the mediator and to the
other Disputing Parties a concise written summary of its views on the matter in
Dispute and the other matters required by the mediator. The mediator may also
request that a confidential issue paper be submitted by each Disputing Party to
him or her.
11.8 Parties to be Represented. In the mediation, each Disputing Party
will be represented by an Authorized Individual and may be represented by
counsel. In addition, each Disputing Party may, with the mediator's permission,
bring the additional persons as needed to respond to questions, contribute
information and participate in the negotiations.
11.9 Conduct of Mediation.
(a) Mediation Format. The mediator will determine the format for the
meetings. The format must be designed to assure that:
(i) both the mediator and the Authorized Individuals have an
opportunity to hear an oral presentation of each Disputing
Party's views on the matter in dispute; and
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(ii) the Disputing Parties attempt to negotiate to resolve the
matter in dispute, with or without the assistance of counsel
or others, but with the mediator's assistance.
(b) Commitment to Participate in Mediation in Good Faith. To this
end, the mediator is authorized to conduct both joint meetings
and separate private caucuses with the Disputing Parties. The
mediation session will be private. The mediator will keep
confidential all information learned in private caucus with any
Disputing Parties unless specifically authorized by the Disputing
Parties to disclose the information to the other Disputing Party.
The Disputing Parties agree to sign a document agreeing that the
mediator will be governed by applicable Iowa law and the other
rules as the mediator will prescribe. The Disputing Parties
commit to participate in the proceedings in good faith with the
intention of resolving the Dispute if at all possible.
11.10 Termination of Procedure.
(a) Procedure to Terminate Mediation. The Disputing Parties agree to
participate in the mediation procedure to its conclusion. The
mediation will be terminated by:
(i) executing a settlement agreement by the Disputing Party;
(ii) declaring to the mediator that the mediation is terminated;
or
(iii)a Disputing Party declaring in writing that the mediation
process is terminated when one full day's mediation session
is concluded.
(b) If Dispute is Not Resolved. Even if the mediation is terminated
without the Dispute's resolution, the Disputing Parties agree not
to terminate negotiations and not to commence any Additional
Proceedings before five days following the mediation expiration.
Any Disputing Party may, however, commence Additional Proceedings
within the five-day period if the Dispute could be barred by an
applicable statute of limitations.
11.11 Arbitration. The parties agree to participate in good faith in
the ADR to its conclusion. If the Disputing Parties are not successful in
resolving the Dispute through the ADR, then the Disputing Parties may mutually
agree to submit the matter to binding arbitration or a private adjudicator, or
either Disputing Party may seek an adjudicated resolution through the
appropriate court ("Additional Proceedings")
11.12 Mediation Fees; Disqualification. The mediator's fees and
expenses will be shared equally by the Disputing Parties. The mediator will be
disqualified as a witness, consultant, expert, or counsel for any Disputing
Party with respect to the Dispute and any related matters.
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11.13 Confidentiality. Mediation is a compromise negotiation for
purposes of federal and state rules of evidence and constitutes privileged
communication under Iowa law. The entire mediation process is confidential, and
no stenographic, visual or audio record will be made. All conduct, statements,
promises, offers, views and opinions, whether oral or written, made in the
mediation's course by any Disputing Party, their agents, employees,
representatives or other invites and by the mediator are confidential and will,
in addition and where appropriate, be deemed privileged. The conduct,
statements, promises, offers, views and opinions will not be discoverable or
admissible for any purpose, including impeachment, in any litigation or other
proceeding involving the parties. It will not be disclosed to anyone not any
Party's agent, employee, expert, witness or representative. Evidence otherwise
discoverable or admissible is not, however, excluded from discovery or admission
as a result of its use in the mediation.
XII. TERMINATION.
12.1 Anything contained herein to the contrary notwithstanding, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing Date, without liability:
(a) by mutual written consent of the Seller and the Buyer;
(b) by the Seller if any of the conditions set forth in Section VII
hereof shall not have been satisfied on or before the Closing
Date, and shall not have been waived in writing by the Seller;
(c) by the Buyer if any of the conditions set forth in Section VIII
hereof shall not have been satisfied on or before the Closing
Date, and shall not have been waived in writing by the Buyer;
(d) by either party hereto, if the Closing Date does not occur on or
prior to July 26, 1996; provided, however, that the party seeking
termination pursuant to clause (b), (c) or (d) shall not be in
breach of any of its representations, warranties, covenants or
agreements contained in this Agreement.
12.2 If this Agreement is terminated and the transactions contemplated
hereby are abandoned as described in Section 12.1 hereof, this Agreement shall
become void and of no further force and effect. Nothing in Section 12.1 shall be
deemed to release either party from any liability for any breach by such party
of the terms and provisions of this Agreement. Nothing in Section 12.1 or
elsewhere in this Agreement shall impair the right of the Buyer, prior to any
termination of this Agreement pursuant to Section 12.1, to compel specific
performance by the Seller of its obligations to the Buyer hereunder.
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XIII. MISCELLANEOUS
13.1 Noncompetition. Parent on behalf of itself and each of its
subsidiaries, and Seller agree not to compete with the Buyer for a period of
five years commencing on the Closing Date as provided in the noncompetition
agreement attached as Appendix II hereto.
13.2 Brokerage. The Seller, represents and warrants to the Buyer that
the Seller has not incurred any obligations or liabilities, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other like
payments in connection with this Agreement or the transactions contemplated
hereby. The Buyer represents and warrants to the Seller that the Buyer has not
incurred any obligations or liabilities, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other like payments in connection
with this Agreement or the transactions contemplated hereby. The Seller and the
Buyer each agree to indemnify and hold the other harmless against and in respect
of any such obligations or liabilities based in any way on agreements,
arrangements or understandings claimed to have been made by it or them with any
third party and not disclosed herein.
13.3 Waivers and Amendment.
(a) The Seller or the Buyer may, by written notice to the other, (i)
extend the time for the performance of any of the obligations or
other actions of the other; (ii) waive any inaccuracies in the
representations or warranties of the other contained in this
Agreement; (iii) waive compliance with any of the covenants of
the other contained in this Agreement; and (iv) waive or modify
performance of any of the obligations of the other.
(b) This Agreement may be amended, modified or supplemented only by a
written instrument executed by all the parties hereto. Except as
provided in the preceding sentence, no action taken pursuant to
this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained
herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as
a waiver of any subsequent breach.
13.4 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, the Buyer shall pay the fees and expenses of its
counsel, accountants, other experts and all other expenses incurred by it
incident to the negotiation, preparation and execution of this Agreement, and
the Seller shall pay any and all such fees and expenses incurred by it incident
to the negotiation, preparation and execution of this Agreement and the
performance by it of its obligations hereunder.
38.
13.5 Occurrences of Conditions Precedent. Each of the parties hereto
agrees to use its best efforts to cause all conditions precedent to its
obligations under this Agreement to be satisfied.
13.6 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid:
(a) If to Parent, to:
1200 Reedsdale Street
Pittsburgh, PA 15233
Attention: President
With a copy to:
Michael A. Weiss, Esq.
Doepken Keevican & Weiss, Professional Corporation
600 Grant Street
37th Floor, USX Tower
Pittsburgh, PA 15219
(b) If to the Seller, to:
1325 Pratt Boulevard
Elk Grove Village, IL 60007
Attention: President
With a copy to:
Michael A. Weiss, Esq.
Doepken Keevican & Weiss, Professional Corporation
600 Grant Street
37th Floor, USX Tower
Pittsburgh, PA 15219
(c) If to the Buyer, to:
520 South 18th Street
West Des Moines, Iowa 50265
Attention: Robert G. Pulver, President
or to such other address as any party shall have specified by notice in writing
to the other.
13.7 Integration Clause. This Agreement, the Assumption Agreement and
the Exhibits hereto constitute the entire agreement between the Buyer and the
Seller with respect to the subject matter hereof.
39.
13.8 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors; nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto, or their successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
13.9 Non-assignability. This Agreement and any rights pursuant hereto
shall not be assignable by either party without the prior written consent of the
other.
13.10 Applicable Law. This Agreement shall be deemed a contract made
under the laws of the state of Iowa, and this Agreement and the legal relations
among the parties hereto shall, for all purposes, be governed by, construed,
interpreted and enforced in accordance with the laws of the state of Iowa. Any
suit, action or other legal proceeding arising out this Agreement or any
document executed and delivered in connection with this Agreement shall be
brought in the courts of record of the state of Iowa or the courts of the United
States located in the state of Iowa. Parent and the Seller hereby consent to the
jurisdiction of each such court in any suit, action or proceeding and waives any
objection which they may have to the laying of venue of any suit, action or
proceeding in any such courts.
13.11 Section and Other Headings. The Section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
13.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
13.13 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed and delivered this Agreement as of the date first
above written.
MK RAIL CORPORATION
By:_______________________________________
William D. Grab, Vice President
ALERT MANUFACTURING AND SUPPLY CO.
By:_______________________________________
Name: _________________________________
Title:_________________________________
ALL-STATE INDUSTRIAL RUBBER CO.,INC.
By:________________________________________
Robert G. Pulver, President
41.