1
Exhibit 10(g)
ASSET PURCHASE AGREEMENT
Among
CLAY EQUIPMENT CORPORATION
as Seller
CLAY HOLDING, INC.
as the Sole Shareholder of Seller
and
TOP AIR MANUFACTURING, INC.
as Purchaser
April 11, 1995
2
Table of Contents
-----------------
Page
----
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . 1
II. TRANSFER OF ASSETS. . . . . . . . . . . . . . . . . . . 7
2.01 Transfer of Assets. . . . . . . . . . . . . . . 7
2.02 Transfer of Top Air Shares. . . . . . . . . . . 7
2.03 Assumption of Liabilities . . . . . . . . . . . 7
2.04 Transactions at Closing . . . . . . . . . . . . 9
III. ADJUSTMENT; HOLD BACK . . . . . . . . . . . . . . . . . 10
3.01 Preclosing Adjustment . . . . . . . . . . . . . 10
3.02 Hold Back . . . . . . . . . . . . . . . . . . . 10
IV. WARRANTIES AND REPRESENTATIONS OF CLAY COMPANIES. . . . 10
4.01 Organization and Standing of Clay
Equipment . . . . . . . . . . . . . . . . . . . 10
4.02 Organization and Standing of Clay Holding . . . 10
4.03 Authority . . . . . . . . . . . . . . . . . . . 10
4.04 Good Title and Condition of Assets. . . . . . . 11
4.05 Financial Statements. . . . . . . . . . . . . . 11
4.06 Absence of Changes. . . . . . . . . . . . . . . 12
4.07 Payment of All Debts and Liabilities. . . . . . 13
4.08 No Conflicting Agreements or Orders . . . . . . 13
4.09 Compliance. . . . . . . . . . . . . . . . . . . 13
4.10 Litigation. . . . . . . . . . . . . . . . . . . 14
4.11 Condition of Clay Equipment . . . . . . . . . . 14
4.12 Employment Agreements . . . . . . . . . . . . . 14
4.13 Labor Relations . . . . . . . . . . . . . . . . 14
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . 15
4.15 Name of Company . . . . . . . . . . . . . . . . 15
4.16 Inventory . . . . . . . . . . . . . . . . . . . 15
4.17 Leases. . . . . . . . . . . . . . . . . . . . . 16
4.18 Insurance . . . . . . . . . . . . . . . . . . . 16
4.19 Other Contracts . . . . . . . . . . . . . . . . 16
4.20 Documents . . . . . . . . . . . . . . . . . . . 16
4.21 Suppliers . . . . . . . . . . . . . . . . . . . 17
4.22 Real Property . . . . . . . . . . . . . . . . . 17
4.23 Customers; Accounts Receivable. . . . . . . . . 17
4.24 ERISA . . . . . . . . . . . . . . . . . . . . . 17
4.25 Environmental . . . . . . . . . . . . . . . . . 21
4.26 ESOP Participant. . . . . . . . . . . . . . . . 22
4.27 No Misrepresentation. . . . . . . . . . . . . . 22
V. REPRESENTATIONS AND WARRANTIES OF TOP AIR . . . . . . . 22
5.01 Organization and Standing of Top Air. . . . . . 22
5.02 Binding Agreement . . . . . . . . . . . . . . . 22
5.03 Agreement Within Authority. . . . . . . . . . . 23
5.04 No Conflicting Agreements or Orders . . . . . . 23
-i-
3
5.05 Corporate Action. . . . . . . . . . . . . . . . 23
5.06 No Conflict . . . . . . . . . . . . . . . . . . 23
5.07 No Misrepresentation. . . . . . . . . . . . . . 23
5.08 Shares Validly Issued . . . . . . . . . . . . . 23
VI. COVENANTS OF TOP AIR. . . . . . . . . . . . . . . . . . 23
6.01 Information . . . . . . . . . . . . . . . . . . 23
6.02 Satisfaction of Assumed Liabilities . . . . . . 24
6.03 Recognition of Collective Bargaining Unit . . . 24
6.04 Credit for Prior Service. . . . . . . . . . . . 24
6.05 Rollover of 401(k) Accounts . . . . . . . . . . 24
VII. COVENANTS OF CLAY COMPANIES PENDING CLOSING . . . . . . 24
7.01 Access to Information . . . . . . . . . . . . . 24
7.02 Maintain Properties . . . . . . . . . . . . . . 25
7.03 Maintain Organization . . . . . . . . . . . . . 25
7.04 Regular Course of Business. . . . . . . . . . . 25
7.05 Insurance . . . . . . . . . . . . . . . . . . . 25
7.06 Employees . . . . . . . . . . . . . . . . . . . 25
7.07 Business Changes. . . . . . . . . . . . . . . . 25
7.08 Consents. . . . . . . . . . . . . . . . . . . . 25
7.09 Environmental Audit . . . . . . . . . . . . . . 26
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF TOP AIR. . . . . 26
8.01 No Adverse Change . . . . . . . . . . . . . . . 26
8.02 Representations, Warranties and Agreements
of Clay Equipment . . . . . . . . . . . . . . . 26
8.03 Opinion of Counsel. . . . . . . . . . . . . . . 26
8.04 Absence of Litigation . . . . . . . . . . . . . 27
8.05 Corporate Approval. . . . . . . . . . . . . . . 27
8.06 Consents. . . . . . . . . . . . . . . . . . . . 27
8.07 Officers' Certificate . . . . . . . . . . . . . 27
8.08 Approval of Documents . . . . . . . . . . . . . 27
8.09 Casualty Loss . . . . . . . . . . . . . . . . . 27
8.10 Satisfactory Review of Clay Equipment's
Business and the Assets; Inspections. . . . . . 28
8.11 Dissenters' Rights. . . . . . . . . . . . . . . 28
8.12 Temporary Lease of Real Property. . . . . . . . 28
8.13 Evidence of Condemnation Award. . . . . . . . . 28
8.14 Evidence of New Plant Lease . . . . . . . . . . 28
8.15 Refinancing of Lender Debt. . . . . . . . . . . 28
8.16 Minimum Equity. . . . . . . . . . . . . . . . . 28
8.17 Environmental Audit . . . . . . . . . . . . . . 28
8.18 Approval by ESOP Trustee. . . . . . . . . . . . 28
8.19 Roll-Over of Shares . . . . . . . . . . . . . . 29
8.20 Accountants' Letter . . . . . . . . . . . . . . 29
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLAY
EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . 29
9.01 Representations, Warranties and Agreements
of Top Air. . . . . . . . . . . . . . . . . . . 29
9.02 Opinion of Counsel. . . . . . . . . . . . . . . 29
-ii-
4
9.03 Performance of Assumed Liabilities. . . . . . . 29
9.04 Corporate Approval. . . . . . . . . . . . . . . 29
9.05 Consents. . . . . . . . . . . . . . . . . . . . 29
9.06 Top Air's Certificate . . . . . . . . . . . . . 30
9.07 Approval of Documents . . . . . . . . . . . . . 30
9.08 Approval by ESOP Trustee. . . . . . . . . . . . 30
9.09 Registration of Shares. . . . . . . . . . . . . 30
X. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . 30
10.01 Indemnification of Top Air by the Clay
Companies . . . . . . . . . . . . . . . . . . . 30
10.02 Indemnification of Clay Equipment by Top
Air . . . . . . . . . . . . . . . . . . . . . . 32
10.03 Notice to Indemnifying Party. . . . . . . . . . 32
XI. AMENDMENT AND TERMINATION OF THE ESOP.. . . . . . . . . 33
11.01 Amendment to ESOP . . . . . . . . . . . . . . . 33
11.02 Termination of the ESOP . . . . . . . . . . . . 33
XII. SPECIAL MEETING OF STOCKHOLDERS.. . . . . . . . . . . . 33
12.01 Preparation of Proxy Materials. . . . . . . . . 33
12.02 The Holding of the Special Meeting. . . . . . . 34
XIII. REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . 34
13.01 Preparation and Filing of Registration
Statement . . . . . . . . . . . . . . . . . . . 34
13.02 Blue Sky Requirements . . . . . . . . . . . . . 34
XIX. CLOSING AND RISK OF LOSS. . . . . . . . . . . . . . . 34
14.01 Place and Time. . . . . . . . . . . . . . . . . 34
14.02 Risk of Loss. . . . . . . . . . . . . . . . . . 34
14.03 Simultaneous Performance. . . . . . . . . . . . 34
14.04 Transfer of Possession. . . . . . . . . . . . . 34
XV. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 34
15.01 No Commission . . . . . . . . . . . . . . . . . 34
15.02 Survival of Representations and Warranties. . . 35
15.03 Change of Name. . . . . . . . . . . . . . . . . 35
15.04 Incorporation of Schedules. . . . . . . . . . . 35
15.05 Further Assurances. . . . . . . . . . . . . . . 35
15.06 No Assumption of Clay Equipment's
Liabilities . . . . . . . . . . . . . . . . . . 35
15.07 Transfer Taxes. . . . . . . . . . . . . . . . . 35
15.08 Notices . . . . . . . . . . . . . . . . . . . . 35
15.09 Entire Agreement. . . . . . . . . . . . . . . . 36
15.10 Designation of Top Air as Agent . . . . . . . . 36
15.11 Binding Effect. . . . . . . . . . . . . . . . . 36
15.12 Third Parties . . . . . . . . . . . . . . . . . 37
15.13 Expenses of the Parties . . . . . . . . . . . . 37
15.14 Counterparts. . . . . . . . . . . . . . . . . . 37
15.15 Iowa Law to Govern. . . . . . . . . . . . . . . 37
15.16 Headings. . . . . . . . . . . . . . . . . . . . 37
-iii-
5
15.17 Publicity . . . . . . . . . . . . . . . . . . . 37
15.18 Mail and Communications . . . . . . . . . . . . 37
15.19 Allocation of Purchase Price. . . . . . . . . . 37
15.20 Review of Closing Balance Sheet . . . . . . . . 38
15.21 Acquisition Subsidiary. . . . . . . . . . . . . 38
-iv-
6
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is made as of
the 11th day of April, 1995, by and among TOP AIR MANUFACTURING,
INC., an Iowa corporation ("Top Air"), CLAY EQUIPMENT CORPORATION,
an Iowa corporation ("Clay Equipment") and Clay Holding, Inc., an
Iowa corporation ("Clay Holding").
WHEREAS, Clay Equipment owns all of the assets, rights and
property necessary for, and operates a business which is engaged
in, the design, manufacture, sale and distribution of certain
livestock equipment and other agricultural products (the
"Business"); and
WHEREAS, the directors of Clay Equipment and Clay Holding and
the sole shareholder of Clay Equipment have authorized and approved
this Agreement and have determined that it is in the best interests
of Clay Equipment and Clay Holding to transfer the Transferred
Assets to Top Air, in exchange for the Shares and the assumption by
Top Air of the Assumed Liabilities as provided for herein, all upon
the terms and conditions and subject to the provisions of this
Agreement; and
WHEREAS, the directors of Clay Holding have recommended that
the sole stockholder of Clay Holding approve the Transaction, and
have directed that Transaction provided for herein be submitted to
the ESOP, as the sole stockholder of Clay Holding, and the Plan
Participants, to whom shares of employee securities held by the
ESOP have been allocated, for such approval.
NOW, THEREFORE, in consideration of the premises and of the
agreements and provisions set forth herein, and subject to the
conditions herein contained, it is mutually agreed as follows:
I. DEFINITIONS.
-----------
For purposes of this Agreement, the following words and
phrases have the following meanings:
1.01 "Accounting Firm" means the firm of McGladrey & Pullen,
LLP, Waterloo, Iowa.
1.02 "Arbitrator" means the firm of independent certified
auditors, other than the Accounting Firm, selected by the
Accounting Firm to review the Closing Balance Sheet and issue its
report pursuant to Section 15.20.
1.03 "Accounts Receivables Schedule" is defined in Section
4.23.
1.04 "Assigned Contracts" means all of Clay Equipment's
contracts, leases and other agreements, a true copy of each of
which has been attached hereto by Clay Equipment in Schedule 1.04,
-------------
7
which Assigned Contracts will be assigned by Clay Equipment to Top
Air at the Closing, and the performance of which shall be assumed
by Top Air at the Closing, but shall not include the Union
Contract.
1.05 "Assumed Liabilities" means all liabilities and
obligations of Clay Equipment in respect of the Business, including
account payables, existing as of the close of business on December
31, 1994, but only if and to the extent that the same are accrued
or reserved for on the 1994 Balance Sheet and remain unpaid and
undischarged on the Closing Date, and all other liabilities and
obligations of Clay Equipment arising in the regular and ordinary
course of the Business from the period commencing January 1, 1995
through the Closing Date, to the extent that the same remain unpaid
and undischarged on the Closing Date and are accrued or reserved
for on the Closing Balance Sheet, excluding however, those
liabilities and obligations referred to in Section 2.03 or as
otherwise provided herein.
1.06 "Assets" means all of the rights of Clay Equipment and
all of the right, title and interest of Clay Equipment in and to
the property, real, personal and mixed, tangible or intangible, of
whatever kind or character and wherever located, which Assets shall
include (but not be limited to) the following:
(a) All cash or cash equivalents in transit, in hand or
in bank accounts;
(b) All inventory, stock in trade, merchandise, goods,
supplies and other products owned by Clay Equipment or
otherwise under the control of Clay Equipment as of the
Closing Date, including the rights and payment obligations of
Clay Equipment under the orders for the purchase of goods set
forth in Schedule 1.06(b), complete copies of which have been
----------------
provided to Top Air by Clay Equipment, but not including any
commitment of Clay Equipment for the purchase of goods which
is not set forth in Schedule 1.06(b);
----------------
(c) The Closing Accounts Receivable;
(d) All machinery, equipment, tools, vehicles,
furniture, fixtures, goods and other items of tangible
personal property owned by Clay Equipment set forth and
described in Schedule 1.06(d);
----------------
(e) All land, structures, improvements, including the
Real Property and fixtures, and all water lines, rights of
way, uses and easements;
(f) All technologies, methods, formulations, data bases,
trade secrets, know-how, inventions and intangible property
rights, including the name and all other trade names;
2
8
(g) All contract rights, including the Assigned
Contracts, but excluding the Union Contract;
(h) All rights, privileges, claims, demands and choses
in action, including, without limitation, the proceeds of the
Condemnation Award, the Relocation Expense Award and all
rights under express or implied warranties; and
(i) All records, files, books of account, customer and
supplier lists and other books and records of Clay Equipment
relating to the Business, including those relating to the
Transferred Assets and Assumed Liabilities.
1.07 "Balance Sheet Date" means the last day of the calendar
month immediately preceding the Closing Date.
1.08 "City" means the City of Cedar Falls, Iowa.
1.09 "Clay Companies" means, collectively, Clay Equipment and
Clay Holding.
1.10 "Condemnation Award" means the amount awarded to Clay
Equipment in connection with the Condemnation Proceeding, excluding
amounts attributable to the Relocation Expense Award.
1.11 "Condemnation Proceeding" means the proceeding of the
City or other appropriate governmental authority to take, condemn
or partially take or condemn the Real Property for a public use,
and the related relocation of the current facility being operated
by Clay Equipment to the New Facility.
1.12 "Closing" means the consummation of the Transaction
contemplated by this Agreement.
1.13 "Closing Accounts Receivable" is defined in Section
4.23.
1.14 "Closing Balance Sheet" means the consolidated balance
sheet of the Clay Companies as of the Balance Sheet Date.
1.15 "Closing Customer List" is defined in Section 4.23.
1.16 "Closing Date" means 10:00 a.m. on May 31, 1995, or such
other date and time as are mutually agreed upon in writing by Top
Air and the Clay Companies; provided, however, that if all of the
-------- -------
conditions to Closing have not been met, then Top Air shall have
the option to extend the Closing Date once, to a date not later
than December 31, 1995.
1.17 "Code" means the Internal Revenue Code of 1986, as
amended.
3
9
1.18 "Closing Inventory Count" means a physical count and
valuation to be taken by Top Air and Clay Equipment, of the
inventory of goods and supplies included in the Transferred Assets,
determined in accordance with the provisions of Section 4.16 as of
the Balance Sheet Date and included in the Closing Balance Sheet.
1.19 "Customer List" is defined in Section 4.23.
1.20 "Distribution" means the series of transactions
culminating in the distribution of the Shares to the Plan
Participants consisting of: (i) the distribution by Top Air,
pursuant to Section 2.02, to Clay Holding; (ii) the distribution of
such Shares by Clay Holding to the ESOP; and (iii) the distribution
of the Shares to the Plan Participants in accordance with Section
11.01(a).
1.21 "Environmental Laws and Regulations" means all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in
any Laws relating to pollution, nuisance, or the environment
including, without, (i) the Federal Clean Air Act, 42 U.S.C.
Sections 7401 et sec.; (ii) the Comprehensive Environmental
-- ---
Response, Compensation, and Liability Act, 42 U.S.C. Sections 9601
et sec.; (iii) the Federal Emergency Planning and Community Right-
- -- ---
to-Know Act, 42 U.S.C. Sections 1101 et sec.; (iv) the Federal
-- ---
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Sections 136
et sec.; (v) the Federal Water Pollution Control Act, 33 U.S.C.
- -- ---
Sections 1251 et sec.; (vi) the Solid Waste Disposal Act, 42
-- ---
8.S.C. Sections 6901 et sec.; (vii) the Toxic Substances Control
-- ---
Act, 15 U.S.C. Sections 2601 et sec.; (viii) Laws relating in
-- ---
whole or part to emissions, discharges, releases, or threatened
releases of any Hazardous Material; and (ix) Laws relating in whole
or part to the manufacture, processing, distribution, use,
coverage, disposal, transportation, storage or handling of any
Hazardous Material.
1.22 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and the rules and regulations thereunder.
1.23 "Escrow Agent" means Norwest Bank Iowa, N.A., Cedar
Falls, Iowa.
1.24 "Escrow Agreement" means the agreement between Top Air,
Clay Equipment and the Escrow Agent, in the form attached hereto as
Schedule 1.24, pursuant to which the Hold-Back Stock shall be
- -------------
deposited at the Closing with the Escrow Agent and held by the
Escrow Agent through the expiration thereof.
1.25 "ESOP" means the Clay Holding, Inc. Employee Stock
Ownership Plan established by the Clay Holding and existing
pursuant to the ESOP Trust.
4
10
1.26 "ESOP Trust" means the Second Restated Clay Holding,
Inc. Employee Stock Ownership Plan and Trust Agreement dated June
29, 1994.
1.27 "ESOP Trustee" means the trustee under the ESOP Trust.
1.28 "Excluded Assets" means the Real Property and those
other Assets listed in Schedule 1.28, which the parties hereby
-------------
expressly agree shall not be included in the Transferred Assets.
1.29 "Financial Statements" are defined in Section 4.05.
1.30 "Fixed Assets" means the fixed assets of Clay Equipment
as carried on Clay Equipment's books, with the book value thereof
to be determined for the purposes of this Agreement in accordance
with generally accepted accounting principles, consistently
applied, and consistent with Clay Equipment's past accounting
practices, including Clay Equipment's past depreciation and
amortization practices applicable thereto.
1.31 "Hazardous Materials" means any hazardous, infectious or
toxic substance, chemical, pollutant, contaminant, emission or
waste which is or becomes regulated by any local, state, federal or
foreign authority. Hazardous Materials include, without
limitation, anything which is (i) defined as a "pollutant" pursuant
to 33 U.S.C. Section 1362(6); (ii) defined as a "hazardous waste"
pursuant to 42 U.S.C. Section 6921; (iii) defined as a "regulated
substance" pursuant to 42 U.S.C. Section 6991; (iv) defined as a
"hazardous substance" pursuant to 42 U.S.C. Section 9601(14);
(v) defined as a "pollutant or contaminant" pursuant to 42 U.S.C.
Section 9601(33); (vi) petroleum; (vii) asbestos; (viii)
polychlorinated biphenyl.
1.32 "Hold-Back Stock" means that number of Shares, rounded
to the nearest whole number, which equals twenty-five percent (25%)
of the Shares being transferred by Top Air at Closing pursuant to
Section 2.02.
1.33 "Lender Debt" is defined in Section 4.04.
1.34 "Lender Liens" is defined in Section 4.04.
1.35 "Market Value" means the average of the bid and asked
prices of the Shares, on a per share basis, as reported on the
NASDAQ Small Cap Market for the trading day immediately preceding
the Closing Date.
1.36 "Minimum Stockholder's Equity" means the stockholder's
equity, as shown on the Closing Balance Sheet, of not less than
$1,250,000.
1.37 "New Facility" means the approximate 75,000 square foot
plant to be constructed upon a site of approximately 10.5 acres in
5
11
the Cedar Falls Industrial Park located within the City of Cedar
Falls, Iowa.
1.38 "1994 Balance Sheet" means the consolidated balance
sheet of Clay Holding included in the financial statements of Clay
Holding at and for the year ended December 31, 1994, audited and
reported upon by the Accounting Firm.
1.39 "Non-Hold-Back Stock" means the Shares, except for the
shares of Hold-Back Stock.
1.40 "Plan Participants" means those employees of the Clay
Companies who are participants under the ESOP.
1.41 "Proxy Material" means the prospectus of Top Air and
proxy or information statement and related materials of Clay
Holding included in the Registration Statement to be mailed to the
ESOP Trustee and the Plan Participants, giving notice of the
Special Meeting, describing and disclosing the material aspects of
the Transaction to be voted on, and describing the Distribution.
1.42 "Real Property" means the real property, consisting of
approximately 10.8 acres located in Black Hawk County, City of
Cedar Falls, Iowa, as more particularly described in Schedule 4.22,
-------------
and all improvements thereon, including Clay Equipment's current
manufacturing facility and corporate offices, commonly known and
numbered as 101 Lincoln Street, Cedar Falls, Iowa.
1.43 "Registration Statement" is defined in Section 13.01.
1.44 "Relocation Expense Award" means that portion of the
Condemnation Award attributable to the relocation of the machinery,
equipment and other fixed assets from the Real Property (which
presently houses Clay Equipment's facility) to the New Facility.
1.45 "Securities Act" means the Securities Act of 1933, as
amended.
1.46 "Shares" means those shares of Top Air no par value
common stock, to be issued and delivered by Top Air pursuant to
Section 2.02, subject to the preclosing adjustment provided in
Section 3.01.
1.47 "Special Meeting" means the meeting of the stockholders
of Clay Holding called for the purpose of approving the
Transaction.
1.48 "Transaction" means the acquisition by Top Air of the
Transferred Assets in exchange for the Shares and the assumption by
Top Air of the Assumed Liabilities pursuant to this Agreement.
6
12
1.49 "Transferred Assets" means all of the Assets except the
Excluded Assets.
1.50 "Union Contract" means the contract dated February 4,
1991 between Clay Equipment and Local 1728 of the International
Association of Machinists and Aerospace Workers.
II. TRANSFER OF ASSETS.
------------------
2.01 Transfer of Assets. At the Closing, and subject to the
------------------
terms, provisions and conditions of this Agreement, and in reliance
on the representations, warranties and covenants contained herein,
Clay Equipment shall transfer, convey and assign to Top Air, and
Top Air shall acquire, the Transferred Assets in exchange for the
Shares (subject to Section 3.02) and the assumption by Top Air of
the Assumed Liabilities.
2.02 Transfer of Top Air Shares. At the Closing, Top Air
--------------------------
shall deliver to Clay Holding and to the Escrow Agent certificates
representing the lesser of (a) 750,000 Shares, or (b) that number
of Shares (rounded to the nearest full share), having an aggregate
Market Value at Closing of One Million Dollars ($1,000,000). Such
certificates shall be issued in the name of Clay Holding, Top Air
having been advised by Clay Equipment that in furtherance of the
Distribution, Clay Equipment has authorized the distribution of the
Shares, as received, to its sole stockholder, Clay Holding. The
certificate(s) representing the Non-Hold-Back Stock will be
delivered directly to Clay Holding, and the certificate(s)
representing the Hold-Back Stock will be delivered to the Escrow
Agent pursuant to Sections 2.04(c) and 3.02.
2.03 Assumption of Liabilities. At the Closing, Top Air
-------------------------
shall assume and agree to pay, discharge or perform, as
appropriate, the Assumed Liabilities of Clay Equipment. Such
agreement by Top Air shall be evidenced by the Assumption Agreement
in the form attached hereto as Schedule 2.03. Unless otherwise
-------------
required by law, in no event shall Top Air assume or incur any
liability or obligation under this Section 2.03 or under any other
provision of the Agreement in respect of any of the following:
(a) any liabilities or obligations arising out of or in
connection with the operation of the Real Estate,
including, without limitation, any liability
arising out of a breach or violation of any
Environmental Laws, and any liability or obligation
under or in connection with any other Excluded
Asset;
(b) liabilities or obligations arising out of any
breach by Clay Equipment of any provision of any
agreement, contract, commitment or lease, including
but not limited to liabilities or obligations
7
13
arising out of Clay Equipment's failure to perform
any agreement, contract, commitment or lease in
accordance with its terms prior to the Closing;
(c) any product liability or similar claim for injury
to person or property, regardless of when made or
asserted, which arises out of or is based upon any
express or implied representation, warranty,
agreement or guarantee made by Clay Equipment, or
alleged to have been made by Clay Equipment, or
which is imposed or asserted to be imposed by
operation of law, in connection with any service
performed or product sold or leased by or on behalf
of Clay Equipment on or prior to the Closing,
including without limitation any claim related to
damages or personal injury caused as a result of
any defective product, the return or replacement of
defective products or any claim seeking recovery
for consequential damage, lost revenue or income;
(d) any federal, state or local income or other tax (i)
payable with respect to the Business, Assets,
properties or operations of Clay Equipment or Clay
Holding for any period prior to the Closing Date;
or (ii) incident to or arising as a consequence of
the negotiation or consummation by Clay Equipment
and the transactions contemplated hereby;
(e) any liability or obligation arising prior to or as
a result of the Closing to any employee (including,
without limitation, any obligations to employees
under the Union Contract), agent or independent
contractor of Clay Equipment, whether or not
employed by Top Air after the Closing, or under any
benefit arrangement with respect thereto;
(f) any liability or obligation of Clay Equipment or
Clay Holding arising prior to the Closing related
to any violation of any Environmental Law, whether
or not disclosed in any Schedule hereto;
(g) any liability, damages, costs or expenses arising
from or in connection with those matters described
on Schedule 4.10;
(h) the Union Contract; or
(i) any obligation to the ESOP or to any Plan
Participant (including, without limitation, any
obligation under, arising from or in any manner
related to that certain promissory note made by the
8
14
ESOP evidencing indebtedness incurred by the ESOP
and owing to Clay Equipment).
2.04 Transactions at Closing. At the Closing:
-----------------------
(a) to the extent not then performed, Clay Holding will
amend and terminate the ESOP in accordance with
Article XI hereof;
(b) Clay Equipment will deliver to Top Air full
possession of the Transferred Assets and such
bill(s) of sale, endorsements, assignments and
other good and sufficient instruments of sale,
conveyance, transfer and assignment, all containing
covenants of general warranty, in form and
substance satisfactory to Top Air (including,
without limitation, a Bill of Sale and Assignment
in the form of Schedule 2.04), as will be required
-------------
or as may be desirable in the opinion of Top Air's
counsel in order to effectively vest in Top Air
full, indefeasible, merchantable, legal, equitable
and beneficial title to the Transferred Assets with
full substitution and subrogation to all rights and
actions of warranty, free and clear of all debts,
claims, security interests, liens, encumbrances and
other title retention agreements, pledges,
assessments, covenants, restrictions and charges of
every nature, except for those shown on Schedule
--------
4.04, and will assign the Assigned Contracts to Top
----
Air;
(c) Top Air will deliver the Hold-Back Stock to the
Escrow Agent (and Clay Holding will deliver
appropriate irrevocable stock powers, fully
endorsed in blank, with respect to the Hold-Back
Stock) and will deliver the Non-Hold-Back Stock to
Clay Holding;
(d) Top Air will assume the Assumed Liabilities
pursuant to an assumption agreement in the form of
Schedule 2.04(d);
----------------
(e) Clay Holding will distribute the Non-Hold-Back
Stock to the ESOP, together with an assignment of
its rights to receive shares of Hold-Back Stock to
the extent and at such time as such shares are
distributed to Clay Holding by the Escrow Agent,
free of escrow; and
(f) the parties shall perform all of the other
obligations required to be performed by them
hereunder on or before the Closing.
9
15
III. ADJUSTMENT; HOLD BACK.
---------------------
3.01 Preclosing Adjustment. The number of Shares to be
---------------------
delivered by Top Air at Closing shall be adjusted upward to reflect
one-half of the amount by which the Condemnation Award (excluding
the Relocation Expense Award) exceeds the sum of Five Hundred
Thousand Dollars ($500,000.00) based on the Market Value of the
Shares. By way of illustration only, if the Condemnation Award is
$550,000.00, and the Market Value of the Shares is $1.00 per share,
25,000 additional shares be shall delivered by Top Air at Closing
($50,000 times 1/2 divided by $1.00 per share).
3.02 Hold Back. To secure the rights of Top Air under
---------
Section 10.01 hereof, at the Closing, the shares of Hold-Back Stock
shall be deposited with the Escrow Agent, together with separate
stock powers endorsed in blank, to be held by the Escrow Agent
pursuant to the terms of the Escrow Agreement to be executed by the
parties hereto and the Escrow Agent.
IV. WARRANTIES AND REPRESENTATIONS OF CLAY COMPANIES.
------------------------------------------------
Each of the Clay Companies, jointly and severally, hereby
represent and warrant to, and covenant and agree with, Top Air as
follows:
4.01 Organization and Standing of Clay Equipment. Clay
-------------------------------------------
Equipment is a corporation duly organized, validly existing and is
in good standing with respect to the conduct of the Business under
the corporate and other laws of the State of Iowa and has all
necessary power and authority to own its assets as now owned and to
carry on its Business as now being conducted. Clay Equipment is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its Business or the ownership
of its property requires Clay Equipment to be so qualified.
4.02 Organization and Standing of Clay Holding. Clay
-----------------------------------------
Holding is a corporation duly organized, validly existing and is in
good standing with respect to the conduct of its business under the
corporate and other laws of the State of Iowa and has all necessary
power and authority to own its assets as now owned and to carry on
its business as now being conducted. Clay Holding is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership
of property by Clay Holding requires it to be so qualified.
4.03 Authority. Clay Equipment and Clay Holding each has
---------
full power and authority to enter into this Agreement and, subject
to the obtaining of the approval of the Transaction by the ESOP
Trustee, to consummate the transactions contemplated hereby, which
have been duly authorized by all proper and necessary corporate and
other action on the part of Clay Equipment and Clay Holding, and,
subject to the obtaining of the approval of the ESOP Trustee, no
10
16
further authorization, consent or approval of Clay Equipment, its
board of directors, Clay Holding or its Board of Directors, or of
any regulatory body or third party is required as a condition to
the validity of this Agreement or to give effect to the
transactions contemplated hereby. This Agreement constitutes a
valid and binding agreement of each of the Clay Companies and is
enforceable against them in accordance with its terms.
4.04 Good Title and Condition of Assets. Except for the
----------------------------------
indebtedness of Clay Equipment to Mercantile Bank of Northern Iowa
(the "Bank Debt") pursuant to three promissory notes numbered 9006,
9007 and GP-597,782 in the respective original principal amounts of
$485,000, $450,000 and $940,000 and the indebtedness of Clay
Equipment to Black Hawk County Economic Development Committee, Inc.
(the "County Debt") in the amount of $50,000 and the indebtedness
of Clay Equipment to the City pursuant to two promissory notes in
the respective principal amounts of $50,000 and $90,000 (the "City
Debt") (the Bank Debt, the County Debt and the City Debt are
collectively referred to as the "Lender Debt"), all of which
indebtedness is secured by the Assets (the "Lender Liens"), as more
fully set forth in Schedule 4.04(a), Clay Equipment has good and
----------------
marketable title to and interest in all of the Transferred Assets.
Except for the Lender Liens and those liens shown in Schedule
--------
4.04(a), the Transferred Assets are free and clear of restrictions
- -------
on or conditions to transfer or assignment, and free and clear of
all mortgages, conditional sales agreements, liens, pledges,
charges, encumbrances, claims, security interests, easements,
covenants, conditions or restrictions. At Closing, Clay Equipment
shall convey to Top Air good and marketable title to and interests
in the Transferred Assets, free and clear of all restrictions on or
conditions to transfer or assignment, mortgages, conditional sales
agreements, liens, pledges, charges, encumbrances, claims, security
interests, easements, covenants, conditions and restrictions,
except for the those liens shown on Schedule 4.04(a). Except as
----------------
listed on Schedule 4.04(a), all of the tangible personal property
----------------
constituting a part of the Transferred Assets is in good operating
condition and repair, ordinary wear and tear excepted, and conforms
to all applicable laws, ordinances and regulations. Schedule
--------
4.04(b) sets forth the unpaid principal balance of the Bank Debt,
- -------
the County Debt and the City Debt as of March 31, 1995.
4.05 Financial Statements. The consolidated balance sheet
--------------------
of the Clay Companies at December 31, 1994 and the income and
expense statement for the year then ended, audited and reported
upon the Accounting Firm, are attached hereto as Schedule 4.05 (the
-------------
"Financial Statements"). Clay Equipment has provided and will
continue to provide Top Air with comparable financial statements
for each calendar month concluding with the financial statement for
the calendar month immediately preceding the Closing Date (the
"Operating Reports"). Except as expressly stated on Schedule 4.05,
-------------
the Financial Statements and Operating Reports have been and will
continue to be prepared in accordance with generally accepted
11
17
accounting principles and practices consistently applied, are, and
will continue to be, accurate and complete, and fairly represent
and will continue to fairly represent the financial condition of
the Clay Companies and the income, expenses and results of
operations of the Clay Companies, for the time period(s) covered
thereby, and do not, and will not, omit to state or reflect any
material fact concerning the Clay Companies or the Business
required to be stated or reflected therein or necessary to make the
statements therein not misleading. Clay Equipment has no
outstanding or potential unasserted claims, contingent obligations
(whether as a guarantor, indemnitor, surety, accommodation party or
otherwise), liability for taxes or forward or long-term commitments
or obligations, except as set forth in the Financial Statements,
the Operating Statements or as set forth in the Schedules to this
Agreement.
4.06 Absence of Changes.
------------------
(a) Since December 31, 1994, there has not been
any:
(i) transaction by Clay Equipment except in the
ordinary course of business as theretofore conducted;
(ii) adverse change in the financial condition,
Assets, Business or prospects of Clay Equipment;
(iii) amendment or termination of any contract,
agreement or license to which Clay Equipment is a
party, except for the termination of contracts and
agreements in the ordinary course of business, none of
which are material, individually or in the aggregate,
to the continued conduct of the Business of Clay
Equipment as heretofore conducted;
(iv) mortgage, pledge or other encumbrance of, or the
granting of any security interest or lien with respect
to, any of the Assets; or
(v) any other event or condition of any character
that has had or in the future may have a materially
adverse affect on the financial condition, Business,
Assets or prospects of Clay Equipment or the Business
as heretofore conducted.
(b) Since December 31, 1994, Clay Equipment has not
had any customer account to which Clay Equipment had sales in
the Business in excess of $50,000 during the year then ended
which ceased doing business with Clay Equipment or advised
Clay Equipment that it intended to cease doing business with
Clay Equipment or substantially reduce the amount of business
it does or proposes to do with Clay Equipment. There are no
12
18
bids currently outstanding to customers or proposed customers
of Clay Equipment.
4.07 Payment of All Debts and Liabilities. On or prior to
------------------------------------
the Closing Date, Clay Equipment shall have paid or provided for
the payment of all accounts, debts, bills and liabilities of Clay
Equipment which are or subsequent to the Closing could become a
lien or encumbrance on or result in a security interest in the
Transferred Assets or otherwise affect the use of the Transferred
Assets subsequent to the Closing.
4.08 No Conflicting Agreements or Orders. There is no
-----------------------------------
provision of the Articles of Incorporation or By-laws of Clay
Equipment or Clay Holding, or of any mortgage, indenture, lease,
contract, security agreement, document, instrument, license or
agreement binding on either of the Clay Companies or affecting
their properties, or of any federal, state or local law, rule or
regulation, which conflicts with or in any way prevents or will be
violated by the execution, delivery or carrying out of the terms of
this Agreement, the consummation of the Transaction or the
Distribution, nor will such execution, delivery or consummation
constitute a default, or an event which with the giving of notice
or the passage of time, or both, would constitute a default, under
any of the foregoing, nor be the grounds for the suspension,
revocation, impairment, forfeiture, nonrenewal or termination of
any license, permit, franchise, certificate, consent or
authorization. The execution, delivery or consummation of this
Agreement will not constitute or result in: (a) the creation or
imposition of a security interest in or any lien, charge or
encumbrance on, or give to others any interest or right in or with
respect to, any of the Transferred Assets, or (b) a complete or
partial withdrawal from any employer or multi-employer/employee
benefit plan under ERISA or any funding deficiency or lien under
ERISA or any other law, rule or regulation against the Transferred
Assets. Neither of the Clay Companies is subject to any order,
writ, injunction, decree, judgment, award, determination, direction
or demand of any court, arbitrator, or federal, state, municipal or
other governmental department, bureau, agency or instrumentality
which would be violated by the execution, delivery or carrying out
of the terms of this Agreement, or the consummation of the
Transaction or the Distribution.
4.09 Compliance. Except as set forth in Schedule 4.09, Clay
---------- -------------
Equipment has conducted its Business and maintained its properties,
including all owned real property and the real property covered by
leases, in compliance with, and is not in violation of, applicable
laws, rules, regulations and orders of federal, state and local
governments and regulatory bodies (including, without limitation,
any and all applicable building, zoning and licensing laws,
ordinances, regulations or orders affecting the location, size and
function of the Assets and all Environmental Laws). Clay Equipment
has not received any claim or notice that Clay Equipment has not
13
19
complied in all respects in the operation of its Business and
related properties with such laws, rules and regulations. Clay
Equipment has all licenses, permits and consents required to be
obtained from federal, state, county or municipal authorities with
respect to the ownership or use of the Assets or the operation of
the Business or otherwise, a complete list of which is set forth in
Schedule 4.09.
- -------------
4.10 Litigation. Except as set forth in Schedule 4.10, no
---------- -------------
suit, action, decree, arbitration or legal, administrative or other
proceeding, controversy or investigation is pending or threatened
against Clay Equipment, or which otherwise might materially affect
the Business or financial condition of Clay Equipment or any of the
Assets, Clay Equipment's right to transfer the same, the possession
and use thereof or the operation by Top Air of a business similar
to that heretofore conducted by Clay Equipment. To the knowledge of
Clay Equipment, and except for the contemplated Condemnation
Proceeding and without notice to the contrary, there is no basis
for any such litigation, proceeding, controversy or investigation.
Clay Equipment is not in default with respect to any order, writ,
injunction or decree of any federal, state, local or foreign court,
department, agency or instrumentality, nor has the time period of
Clay Equipment's compliance with respect to any of the same been
extended or stayed. Clay Equipment is not presently a party to any
legal action to recover moneys due to Clay Equipment or damages
sustained by Clay Equipment.
4.11 Condition of Clay Equipment. Since December 31, 1994,
---------------------------
Clay Equipment has kept its Business and its organization intact;
has kept available the services of its principal managerial and
supervisory employees and agents; has maintained the good will of
its customers; and has conducted its Business in the same manner as
it had been conducted prior to that date.
4.12 Employment Agreements. Except as disclosed on Schedule
--------------------- --------
4.12 hereof, Clay Equipment has not entered into, and has no
- ----
obligation or liability with respect to, any employment or
consulting agreement, executive compensation plan, collective
bargaining agreement, deferred compensation agreement, bonus plan,
employee pension plan or retirement plan, employee profit sharing
plan, employee stock purchase or stock option plan, severance
agreement or any other agreement or arrangement providing for
remuneration or benefits to employees or their dependents.
4.13 Labor Relations. Clay Equipment has complied with all
---------------
applicable laws, rules and regulations relating to the employment
of labor, including those relating to wages (including overtime),
benefits (including vacation), hours, employee safety or other
conditions of employment, collective bargaining and the withholding
and payment of taxes. Clay Equipment has withheld all amounts
required by law or agreement to be withheld from the wages or
salaries of its employees, and is not liable for any arrears of
14
20
wages or any tax or penalties for failure to comply with the
foregoing. Clay Equipment has paid over, and will pay over, to the
appropriate governmental agencies or depositories, at the time or
times required by law (without any extensions or stays), all
"employment taxes" and "withholding taxes." There are no labor
disputes, controversies, grievances, strikes, work slowdowns or
stoppages, nor are there any proceedings before any court,
governmental agency or arbitrator relating to such matters,
including unfair labor practice claims, existing, pending or
threatened against Clay Equipment or between Clay Equipment and any
of its employees or any union representing or claiming to represent
any such employees, and except as described in Schedule 4.10, no
-------------
discharge has occurred which forms the basis for any claim of
discrimination against Clay Equipment.
4.14 Taxes. Except as set forth in Schedule 4.14, Clay
----- -------------
Holding has filed all federal, state and local tax returns and
estimates required to be filed by Clay Holding, which returns were
filed on a consolidated basis to include Clay Equipment within the
times and in the manner prescribed by law. Clay Equipment has
delivered to Top Air true and complete copies of the federal income
tax returns of Clay Holding for the three (3) years ended December
31, 1992, 1993 and 1994 and the results of the most recent audit of
Clay Holding's tax returns, if any, by the Internal Revenue Service
and the State of Iowa. There are no pending audits with respect to
such returns. No waiver or extension of any filing or payment date
or of any statute of limitations with respect to taxes has been
requested of or given by Clay Equipment or Clay Holding. No claims
have been asserted or threatened for taxes against Clay Equipment,
Clay Holding or the Transferred Assets. Clay Equipment and/or Clay
Holding have accrued on their books and records all taxes, charges
and assessments accruing on the Assets, the Business or the
operation thereof which are presently payable. Except as set forth
in Schedule 4.14, all taxes which are due and payable or will
-------------
become due and payable by Clay Holding and by Clay Equipment prior
to the Closing Date have been, or prior to the Closing Date will
be, paid in full or fully provided for and will be paid by Clay
Equipment or Clay Holding.
4.15 Name of Company. Clay Equipment is the sole legal
---------------
owner of, and uses, those trade names listed on Schedule 4.15
-------------
(collectively, the "Names"), and the use of the Names does not
conflict with the rights of others. At Closing, Clay Equipment
will assign each of the Names to Top Air. Clay Equipment agrees to
change its name immediately following the Closing and thereafter
not to use the Name or any name similar to "Clay Equipment
Corporation," and consents and agrees to the use of such name by
Top Air or any affiliate of Top Air subsequent to the Closing.
4.16 Inventory. The inventories contained in the
---------
Transferred Assets consist of items of a quality and quantity
currently usable and saleable in the ordinary course of business.
15
21
None of Clay Equipment's inventories are held by Clay Equipment on
consignment from others.
4.17 Leases. Except as set forth on Schedule 4.17, no
------ -------------
personal or real property used by Clay Equipment in connection with
the Business is held under any lease. Each of the leases
identified on Schedule 4.17 is currently in full force and effect.
-------------
Neither Clay Equipment nor, to the knowledge of Clay Equipment and
without notice to the contrary, any other party to such lease is in
default, nor to the knowledge of Clay Equipment and without notice
to the contrary has any event occurred, nor does any condition
exist, which with the giving of notice or the passage of time, or
both, would constitute a default thereunder.
4.18 Insurance. Clay Equipment has maintained and now
---------
maintains (a) "all risk" insurance on the full fair market value of
all of the Assets and on its Business, covering property damage by
fire or other casualties, and (b) adequate insurance protection
against all other liabilities, claims and risks against which it is
customary to insure. Clay Equipment has included a true and
correct copy of all such insurance policies in Schedule 4.18. All
-------------
such policies of insurance shall be in form and substance
satisfactory to Top Air with insurers reasonably recognized as
adequate by Top Air and all such policies shall be in such amounts
as may be reasonably satisfactory to Top Air.
4.19 Other Contracts. Except as listed on Schedule 4.19,
--------------- -------------
Clay Equipment is not a party to, nor is the property of Clay
Equipment bound by, any agreement not entered into in the ordinary
course of business, any indenture, mortgage, deed of trust, lease
or any other agreement between Clay Equipment and any third party
relating to the Transferred Assets or the Business of Clay
Equipment. There is no default of Clay Equipment or event that
with notice or lapse of time, or both, would constitute a default
nor, to the knowledge of Clay Equipment any default or threatened
default by any other party thereto, existing with respect to any of
such agreements. Clay Equipment has received no notice that any
party to any of such agreements intends to cancel or terminate any
of such agreements or to exercise or not exercise any options under
any of such agreements. Clay Equipment is not a party to, nor is
Clay Equipment or the Assets bound by, any agreement that is
materially adverse to the Assets or the business of Clay Equipment.
4.20 Documents. Clay Equipment has furnished to Top Air for
---------
its examination: (a) copies of all agreements, policies, leases,
and other instruments and documents listed on the Schedules
attached hereto and (b) copies of all tax receipts (including
receipts for the payment of sales taxes) for all taxes required to
be paid by Clay Equipment for three (3) years prior to the Closing
Date, each of which shall be in form and substance reasonably
acceptable to Top Air.
16
22
4.21 Suppliers. Attached hereto as Schedule 4.21 is a list
--------- -------------
of the suppliers of goods and services to Clay Equipment as of the
date of this Agreement and for the year ended December 31, 1994.
4.22 Real Property. Schedule 4.22 contains a complete and
------------- -------------
accurate legal description of each parcel of real property owned by
or leased to Clay Equipment, including the Real Property. Clay
Equipment does not own or lease any real property nor use any real
property in the conduct of its Business other than the real
property described in Schedule 4.22. The use of such property in
-------------
Clay Equipment's Business as heretofore used does not violate or
encroach upon the rights of any other party.
4.23 Customers; Accounts Receivable.
------------------------------
(a) No customer of Clay Equipment accounted for
more than 10% of Clay Equipment's sales during the 12 month
period ended December 31, 1994. Clay Equipment has provided
Top Air with a list of Clay Equipment's customers (the
"Closing Customer List") and the amount of purchases of each
of them for such period.
(b) Clay Equipment has delivered to Top Air a
current aged list of unpaid accounts receivable owing to Clay
Equipment (the "Accounts Receivable Schedule"), and will
deliver to Top Air, as of the close of business on the Balance
Sheet Date (the "Closing Accounts Receivable") and as of the
Closing Date, such updates of the Accounts Receivable Schedule
and other information pertaining to the accounts receivable of
Clay Equipment, certified as correct by Clay Equipment. The
Accounts Receivable Schedule and any such updates thereto or
other related information provided to Top Air set forth or
will set forth a true and correct list of all Accounts
Receivable as of the respective dates thereof. The Accounts
Receivable are, and the Closing Accounts Receivable will be,
legal, valid and binding claims, do not reflect any goods
placed on a consignment or other basis whereby payment is
conditional, and are and will be fully collectible in the
ordinary course of business in accordance with their terms,
without litigation or other collection expenses, within 180
days of the Closing Date at the full face value thereof, and
are not subject to any counterclaim or right of set off.
4.24 ERISA.
-----
(a) List of Plans. Set forth in Schedule 4.24
------------- -------------
attached hereto is an accurate and complete list of all
employee benefit plans ("Employee Benefit Plans") within the
meaning of Section 3(3) of ERISA, whether or not any such
Employee Benefit Plans are otherwise exempt from the
provisions of ERISA, established, maintained or contributed to
or by Clay Equipment or any of its subsidiaries (including,
17
23
for this purpose and for the purpose of all of the
representations in this Section 4.24, all employers (whether
or not incorporated) which by reason of common control are
treated together with Clay Equipment, any of its subsidiaries
and/or Clay Holding as a single employer within the meaning of
Section 414 of the Code.
(b) Status of Plans. Neither Clay Holding nor any
---------------
of its subsidiaries maintain or contribute to any Employee
Benefit Plan subject to ERISA which is not, or in the past has
not been, in substantial compliance with ERISA, or which has
incurred any accumulated funding deficiency within the meaning
of Section 412 or Section 418B of the Code, or which has
applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412
of the Code. Clay Equipment has not incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in
connection with any Employee Benefit Plan covering any
employees of Clay Equipment or any such subsidiaries,
including any liability under Section 4069 of ERISA and any
penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility or have withdrawn from any such
plan in a manner which could subject it to liability under
Sections 4063, 4064 or 4068(f) of ERISA, and know of no facts
or circumstances which might give rise to any liability of
Clay Equipment or any of its subsidiaries to the PBGC under
Title IV of ERISA which could reasonably be anticipated to
result in any claims being made against Top Air by the PBGC.
Neither Clay Equipment nor any of its subsidiaries have
incurred any withdrawal liability (including any contingent or
secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan which is
a "Multiemployer Plan" (as such term is defined in Section
4001(a)(3) of ERISA), and no event has occurred, and there
exists no condition or set of circumstances, which presents a
risk of the occurrence of any withdrawal from or the
partition, termination, reorganization or insolvency of any
Multiemployer Plan which could result in any liability to a
Multiemployer Plan.
Clay Equipment does not maintain any Employee Benefit
Plan which is a "Group Health Plan" (as such term is defined
in Section 162(i)(3) of the Code) that has not been
administered and operated in all material respects in
compliance with the applicable requirements of Section 601 of
ERISA and Section 162(k) of the Code and neither Clay
Equipment nor any subsidiary are subject to any liability,
including, but not limited to, additional contributions,
fines, penalties or loss of tax deduction as a result of such
administration and operation. Neither Clay Holding nor any of
its subsidiaries maintain any Employee Benefit Plan (whether
qualified or nonqualified within the meaning of Section 401(a)
18
24
of the Code) providing for retiree health and/or life benefits
and having unfunded liabilities. Neither Clay Equipment nor
any of its subsidiaries maintain any Employee Benefit Plan
which is an "Employee Welfare Benefit Plan" (as such term is
defined in Section 3(l) of ERISA) and have provided any
benefit which is a "Disqualified Benefit" (as such term is
defined in Section 4976(b) of the Code) for which an excise
tax would be imposed.
(c) Contributions. Full payment has been made of
-------------
all amounts of which Clay Equipment is required to pay, under
applicable law or under any Employee Benefit Plan or any
agreement relating to any Employee Benefit Plan to which Clay
Equipment is a party, to have paid as contributions thereto as
of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the date hereof. Clay
Equipment has made adequate provision for reserves to meet
contributions that have not been made because they are not yet
due under the term, of any Employee Benefit Plan or related
agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date
as of which documents have been provided.
(d) Relationship of Accrued Benefits to Pension
-------------------------------------------
Plan Assets. As of the date of this Agreement (i) neither
-----------
Clay Equipment nor Clay Holding maintains any Employee Benefit
Plans which are subject to Title IV of ERISA and which are
"Single Employer Plans" (as such term is defined in Section
4001(a)(15) of ERISA); and (ii) using actuarial assumptions
and computation methods consistent with subpart 1 of subtitle
E of Title IV of ERISA, the aggregate liabilities of Clay
Equipment and its subsidiaries to all such Employee Benefit
Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent
fiscal year of each Multiemployer Plan ended prior to the date
hereof, would not exceed $50,000. There has been no material
change in the financial condition of any Multiemployer Plan or
in any such actuarial assumption or computation method or in
benefits under any Multiemployer Plan as a result of
collective bargaining or otherwise since the close of each
such fiscal year which, individually or in the aggregate,
would materially increase such liability.
(e) Tax Qualification. Each Employee Benefit Plan
-----------------
intended to be qualified under section 401(a) of the Code has
been determined to be so qualified by the Internal Revenue
Service and nothing has occurred since the date of the last
such determination which resulted or is likely to result in
the revocation of such determination.
(f) Compliance with Tax Reform Act of 1986. Clay
--------------------------------------
Holding and each of its subsidiaries have adopted on a timely
19
25
basis all amendments to Employee Benefit Plans which are
required by the Tax Reform Act of 1986 and all regulations
promulgated under the Code.
(g) Transactions. No "Reportable Event" (as such
------------
term is defined in Section 4043 of ERISA) for which the 30-day
notice requirement has not been waived by the PBGC has
occurred with respect to any Employee Benefit Plan and neither
Clay Equipment nor any of its subsidiaries have engaged in any
transaction with respect to the Employee Benefit Plans which
would subject it to a tax, penalty or liability for prohibited
transactions under ERISA or the Code nor have any of their
respective directors, officers or employees to the extent they
or any of them are fiduciaries with respect to such plans,
breached any of their responsibilities or obligations imposed
upon fiduciaries under Title I of ERISA or would result in any
claim being made under or by or on behalf of any such plans by
any party with standing to make such claim.
(h) Triggering Events. Except as set forth in
-----------------
Schedule 4.24, the execution of, and consummation of the
transactions contemplated by, this Agreement do not constitute
a triggering event under any Benefit Plan, policy,
arrangement, statement, commitment or agreement, whether or
not legally enforceable, which (either alone or upon the
occurrence of any additional or subsequent event) will or may
result in any payment (whether of severance pay or otherwise),
acceleration, vesting or increase in benefits to any employee
or former employee or director of Clay Equipment or any of its
subsidiaries.
(i) Other Plans. Clay Equipment does not presently
-----------
maintain any employee benefit plan or any other foreign
pension, welfare or retirement benefit, plan other than those
listed in Schedule 4.24. Any foreign pension, welfare or
-------------
retirement benefit plans listed in Schedule 4.24 are in
-------------
compliance with applicable law.
(j) Documents. Clay Holding and Clay Equipment
---------
have delivered or caused to be delivered to Top Air and its
counsel true and complete copies of (i) all Employee Benefit
Plans as in effect, together with all amendments thereto which
will become effective at a later date, as well as the latest
Internal Revenue Service determination letter obtained with
respect to any such Employee Benefit Plan qualified under
Section 401(a) or tax-exempt under Section 501(a) of the Code
and (ii) Form 5500 for the most recent completed fiscal year
for each Employee Benefit Plan required to file such form.
20
26
4.25 Environmental.
-------------
(a) The operations and activities of Clay Equipment
comply, and have in the past complied, in all respects, with
all Environmental Laws and Regulations. There are no pending
or currently proposed changes to any Environmental Laws and
Regulations which, when implemented or effective, would have
a material adverse effect on the operations of Clay Equipment
or the Business.
(b) Clay Equipment has obtained and is and has been
in full compliance with all requirements, permits, licenses
and other authorizations which are required with respect to
Clay Equipment's operations, as well as the transactions
contemplated hereby under all Environmental Laws and
Regulations. Schedule 4.25 lists each such permit, license or
-------------
other authorization. There are no other such permits,
licenses or other authorizations which are required by any
Environmental Laws and Regulations to be obtained after the
Closing.
(c) There is no civil, criminal, administrative or
other action, suit, demand, claim, hearing, notice of
violation, proceeding, investigation, notice or demand
pending, received, or, to the knowledge of Clay Equipment,
threatened against Clay Equipment relating in any way to any
Environmental Laws and Regulations except as shown in Schedule
--------
4.25.
----
(d) Except as shown in Schedule 4.25, Clay
-------------
Equipment has not caused or experienced any past or present
events, conditions, circumstances, plans or other matters
which: (i) are not in compliance with all Environmental Laws
and Regulations; (ii) may give rise to any statutory, common
law, or other legal liability, or otherwise form the basis of
any material claim, action, demand, suit, proceeding, hearing,
notice of violation or investigation based on or relating to
Hazardous Materials including, without limitation, such
matters relating to any property owned, leased or utilized by
Clay Equipment; (iii) arise from inventory of or waste from
Hazardous Materials; or (iv) arise from any off-site disposal,
release or threatened release of Hazardous Materials.
(e) No asbestos, polychlorinated biphenyls or lead-
based paints are on the Real Property or any other real
property or in any building owned, operated, leased or
utilized by Clay Equipment except as shown in Schedule 4.25.
-------------
(f) No past or present employee of Clay Equipment
has been exposed to any Hazardous Material owned, produced or
utilized except as is anticipated in the normal operation of
the Clay Equipment.
21
27
(g) Except as shown in Schedule 4.25, Clay
-------------
Equipment, has not received any notice or indication from any
governmental agency or private or public entity advising it
that it is or may be responsible for any investigation or
response costs with respect to a release, threatened release
or cleanup of chemicals or materials produced by, used,
stored, treated, or resulting from any business, commercial or
industrial activities, operations or processes, including,
without limitation, any Hazardous Materials. Clay Equipment
is not aware of any facts which might give rise to such
notice.
(h) Except as shown in Schedule 4.25, no
-------------
underground tanks, piping or subsurface structures of any type
exist or have existed on any real property now or previously
owned, operated, leased or utilized by Clay Equipment.
(i) Schedule 4.25 contains a complete description
-------------
of all environmental investigations, assessments, audits,
studies, tests and related materials in possession of Clay
Equipment, or known to Clay Equipment to exist, which relate
to the current or prior operations of Clay Equipment or any
real property now or previously owned, operated or utilized by
Clay Equipment and Clay Equipment has delivered to Top Air
copies of all of the above.
4.26 ESOP Participant. Schedule 4.26 contains the name of
---------------- -------------
each Plan Participant as of the date hereof (whether or not
currently employed by either of the Clay Companies) and indicates
as to each Plan Participant the number of shares of Clay Holding
common stock allocated to such Plan Participant and the state in
which such Plan Participant resides.
4.27 No Misrepresentation. No representation or warranty
--------------------
made by either Clay Equipment or Clay Holding in this Agreement or
any Schedule hereto contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein and therein not
misleading.
V. REPRESENTATIONS AND WARRANTIES OF TOP AIR.
-----------------------------------------
Top Air hereby represents and warrants to, and covenants and
agrees with, each of the Clay Companies as follows:
5.01 Organization and Standing of Top Air. Top Air is an
------------------------------------
Iowa corporation, validly existing and in good standing under the
laws of the State of Iowa.
5.02 Binding Agreement. This Agreement constitutes, and
-----------------
each other instrument to be executed and delivered by Top Air in
accordance herewith will constitute, when executed and delivered
22
28
pursuant hereto, the valid and legally binding obligations of Top
Air.
5.03 Agreement Within Authority. The execution and delivery
--------------------------
of this Agreement by Top Air, the consummation of the transactions
contemplated hereunder and the performance by Top Air of this
Agreement and the agreements and instruments which are executed and
delivered in connection herewith in accordance with each of their
terms will not (a) violate the Articles of Incorporation or Bylaws
of Top Air, or (b) violate any judgment, order, writ, injunction,
decree or demand against Top Air of any court or federal, state,
municipal or other governmental department, commission, board,
bureau, agency or instrumentality.
5.04 No Conflicting Agreements or Orders. No approval or
-----------------------------------
consent of any foreign, federal, state, county, local or other
governmental or regulatory body is required as a condition to the
validity of this Agreement or to give effect to the transactions
contemplated hereby.
5.05 Corporate Action. The execution and delivery of this
----------------
Agreement by Top Air and the performance of all acts contemplated
to be performed by it hereunder have been duly authorized by all
necessary corporate action. Top Air has duly executed and
delivered this Agreement and the agreements or instruments which
are executed in connection herewith.
5.06 No Conflict. The execution and delivery of this
-----------
Agreement and each other instrument to be executed by Top Air in
accordance herewith and the consummation of the transactions
contemplated herein by Top Air will not conflict or be inconsistent
with or result in the termination of or constitute a breach of or
default under the terms of any indenture, mortgage, deed of trust,
covenant, agreement or other instrument to which Top Air is a party
or to which its property is subject.
5.07 No Misrepresentation. No representation or warranty
--------------------
made by Top Air in this Agreement or any Exhibit or Schedule hereto
contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the
statements contained herein and therein not misleading.
5.08 Shares Validly Issued. The Shares, when issued
---------------------
pursuant to and as contemplated by the Agreement in exchange for
the Transferred Assets, will be validly issued, fully paid and
nonassessable, and free and clear of all liens, encumbrances and
restrictions, except as contemplated herein.
VI. COVENANTS OF TOP AIR.
--------------------
6.01 Information. In the event the Transaction is not
-----------
consummated for any reason, all copies of non-public proprietary
23
29
documents and information provided to Top Air by Clay Equipment or
Clay Holding hereunder shall be returned to Clay Equipment by Top
Air, and Top Air shall maintain the same in confidence and shall
not disclose or utilize the same except with the consent, or for
the benefit, of Clay Equipment.
6.02 Satisfaction of Assumed Liabilities. After Closing,
-----------------------------------
Top Air shall pay, perform and discharge, and shall indemnify Clay
Equipment with respect to, the Assumed Liabilities and shall
promptly pay any amount thereof determined to be due. Top Air,
however, shall have the right to contest in good faith any of such
Assumed Liabilities, and Clay Equipment shall cooperate fully with
Top Air in connection with any such contest. In the event that Top
Air does so contest any of the Assumed Liabilities, Top Air will
bear the cost, expense and liability reasonably incurred by Clay
Equipment in connection therewith, including but not limited to
reasonable attorneys' fees.
6.03 Recognition of Collective Bargaining Unit. After
-----------------------------------------
Closing, Top Air covenants and agrees to recognize Local 1728 of
the International Association of Machinists and Aerospace Workers
as the Bargaining Agent of the same group of employees who are
presently included in the Bargaining Unit of Clay Equipment.
6.04 Credit for Prior Service. After Closing, Top Air
------------------------
covenants and agrees with respect to employees of Clay Equipment
employed by Top Air to recognize service with Clay Equipment for
purposes of participation, vesting and for all other purposes under
Top Air employee benefit plans.
6.05 Rollover of 401(k) Accounts. After Closing, Top Air
---------------------------
covenants and agrees that all employees of Clay Equipment who have
accounts in the Clay Equipment Corporation 401(k) Plan will be
given the opportunity to roll their accounts into the Top Air
Manufacturing 401(k) Plan.
VII. COVENANTS OF CLAY COMPANIES PENDING CLOSING.
-------------------------------------------
Pending Closing, each of the Clay Companies, jointly and
severally, covenant and agree as follows:
7.01 Access to Information. Top Air and its counsel,
---------------------
accountants and other representatives shall have full access during
normal business hours to all properties, books, accounts, records,
agreements and documents of or relating to the Business. Clay
Equipment shall furnish or cause to be furnished to Top Air and its
counsel, accountants and representatives all data and information
concerning the operations, finances and assets of Clay Equipment
requested by Top Air, including, without limitation, the updating
of any of the Schedules attached hereto.
24
30
7.02 Maintain Properties. Clay Equipment shall maintain the
-------------------
Assets on a current basis and in customary repair, order and
condition.
7.03 Maintain Organization. Clay Equipment shall keep its
---------------------
organization intact, keep available the services of its employees
and maintain the relationship and goodwill of its customers.
7.04 Regular Course of Business. Clay Equipment shall not,
--------------------------
without the prior written consent of Top Air, purchase, sell or
otherwise dispose of any property or assets, or incur any
liability, obligation or commitment or engage in any activity or
transaction, except in the regular and customary course of
business.
7.05 Insurance. Clay Equipment shall cause its policies of
---------
insurance relating to the Business and the Assets of Clay Equipment
to continue to be kept in full force and effect and will refrain
from taking any action which impairs the continued insurability of
the Transferred Assets or the Business.
7.06 Employees. Without the prior written consent of Top
---------
Air, Clay Equipment will not, and will not agree to, enter into or
amend any representation, employment or compensation agreement or
grant any increase or change in the salaries or other compensation
or benefits payable or to become payable by Clay Equipment to any
officer, employee, sales agent or representative of Clay Equipment.
7.07 Business Changes. Clay Equipment will not do or agree
----------------
to do any of the following without the prior written consent of Top
Air:
(a) Enter into any contract, commitment or
transaction not in the usual and ordinary course of Clay
Equipment's Business as heretofore conducted;
(b) Make any material capital expenditure; or
(c) Agree to, modify, amend, cancel or terminate
any of its existing contracts or agreements.
7.08 Consents. As soon as reasonably practical after the
--------
execution and delivery of this Agreement, and in any event on or
before the Closing Date, Clay Equipment will obtain the written
consent of all persons whose consent to the execution of, and
closing of the transactions contemplated by, this Agreement is
required, in form and substance acceptable to Top Air; and Clay
Equipment will furnish Top Air original executed copies of such
consents as they are obtained.
25
31
7.09 Environmental Audit.
-------------------
(a) Clay Equipment, at its sole cost, shall cause
to be performed a phase 1 environmental audit and such
additional environmental audits as indicated by the phase 1
audit as being necessary and appropriate (collectively,
"Audits") of the Business and Real Property. In the course of
the Audits, Top Air shall conduct such due diligence
inquiries, which it deems necessary to satisfy itself
regarding the environmental conditions of Clay Equipment's
operations and facilities. Clay Equipment shall allow Top Air
access to Clay Equipment's facilities, files and personnel and
will cooperate fully with Top Air in regard to Top Air's
environmental inquiries.
(b) All environmental information, data, results,
audits, studies, reports, and plans, including but not limited
to the Audits, and any drafts thereof, shall be held in
strictest confidence by the parties, their affiliates,
partners, employees, officers, directors, agents, and
contractors, and shall not be released or disclosed without
the prior written consent of Clay Equipment.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF TOP AIR.
----------------------------------------------
The obligations of Top Air hereunder are subject to
fulfillment (or waiver by Top Air), prior to or on the Closing
Date, of the following conditions:
8.01 No Adverse Change. There shall have been no adverse
-----------------
change in or loss or damage to the Transferred Assets or the
Business of Clay Equipment as heretofore conducted.
8.02 Representations, Warranties and Agreements of Clay
--------------------------------------------------
Equipment. The representations, warranties, covenants and
- ---------
agreements of Clay Equipment and Clay Holding herein shall be true
and not breached as of the Closing Date, with the same effect as
though such representations, warranties, covenants and agreements
had been repeated by Clay Equipment and Clay Holding as of the
Closing Date, and all of the obligations of Clay Equipment and Clay
Holding hereunder shall have been duly performed.
8.03 Opinion of Counsel. Top Air shall have received the
------------------
favorable opinion of counsel for the Clay Companies, dated as of
the Closing Date, in the form of Schedule 8.03 and otherwise in
-------------
form and substance reasonably satisfactory to Top Air and Top Air's
counsel. In rendering such opinion, counsel for the Clay Companies
may rely on written certificates of the chief executive officer or
the chief financial officer of Clay Equipment and Clay Holding and
appropriate public officials as to factual matters, provided a copy
thereof is attached to and forms a part of the opinion of counsel
26
32
with the knowledge and consent of the chief executive officer or
the chief financial officer of Clay Equipment and/or Clay Holding.
8.04 Absence of Litigation. No action, suit or proceeding
---------------------
before any court or any governmental body or authority pertaining
to the Transaction or Distribution or to their consummation or to
the Assets or the Business of Clay Equipment shall have been
instituted or threatened on or before the Closing Date except as
detailed in Schedule 4.10.
-------------
8.05 Corporate Approval. The execution and delivery of this
------------------
Agreement by Clay Equipment and Clay Holding and the performance of
their respective covenants and obligations under it, shall have
been duly authorized by all necessary corporate and other action of
Clay Equipment and Clay Holding, and the ESOP Trustee shall have
approved the Transaction by voting a majority of the outstanding
shares of Clay Holding common stock in favor thereof, and Top Air
shall have received copies of all resolutions pertaining to such
authorization and approval, certified by the Secretary of Clay
Equipment, the secretary of Clay Holding and the ESOP Trustee.
8.06 Consents. All necessary agreements, approvals and
--------
consents (including, without limitation, the approval of the ESOP
Trustee) of any parties to the consummation of the Transaction and
other transactions by the Clay Companies contemplated by this
Agreement, the Distribution or otherwise pertaining to the related
matters covered by this Agreement related to the Clay Companies,
shall have been obtained by the Clay Companies and delivered to Top
Air.
8.07 Officers' Certificate. Top Air shall have received a
---------------------
certificate, dated the Closing Date, signed and verified by the
Chief Executive Officer and Chief Financial Officer of each of Clay
Equipment and Clay Holding certifying, in the form of Schedule 8.07
-------------
hereto, that the conditions specified in this Article VIII have
been fulfilled.
8.08 Approval of Documents. The form and substance of all
---------------------
certificates, instruments, opinions and other documents delivered
to Top Air under this Agreement shall be satisfactory to Top Air
and its counsel.
8.09 Casualty Loss. The Business shall not have been
-------------
curtailed or interrupted by, and the Transferred Assets shall not
have been affected by, any loss, destruction or damage due to fire
or other casualty unless, if any such destruction or damage shall
have occurred, Top Air shall have determined that such loss,
destruction or damage is not of such nature as to curtail or
interrupt the Business of Clay Equipment or determined that
available insurance proceeds are sufficient to repair or replace
any damaged or lost Transferred Assets and Clay Equipment shall
27
33
have assigned the proceeds of any such insurance to Top Air, which
Clay Equipment agrees to do upon the request of Top Air.
8.10 Satisfactory Review of Clay Equipment's Business and
----------------------------------------------------
the Assets; Inspections. Top Air shall have been given access to
- -----------------------
and been permitted to review the Assets, the Business of Clay
Equipment and such other information as shall have been requested
by Top Air, and Top Air shall be satisfied, in its sole discretion,
with the physical, operating and financial condition of the Assets
and the Business of Clay Equipment.
8.11 Dissenters' Rights. No person entitled to appraisal or
------------------
dissenters' rights shall have asserted such rights.
8.12 Temporary Lease of Real Property. Clay Equipment shall
--------------------------------
have entered into a lease agreement with Top Air for the occupancy
by Top Air of the Real Property in order for Top Air to operate the
Transferred Assets pending occupancy of the New Facility.
8.13 Evidence of Condemnation Award. If not received prior
------------------------------
to Closing, Clay Equipment shall have delivered to Top Air evidence
satisfactory to Top Air of the agreement and obligation of the City
with respect to the amount and payment of the Condemnation Award in
an amount of not less than $500,000.
8.14 Evidence of New Plant Lease. Clay Equipment shall have
---------------------------
delivered to Top Air evidence satisfactory to Top Air of the
commitment of the City and/or other governmental authority to build
the New Facility and to enter into a lease of the New Facility with
Top Air, all on terms and conditions satisfactory to Top Air.
8.15 Refinancing of Lender Debt. Top Air shall have secured
--------------------------
the binding commitment of a financial institution to refinance the
Lender Debt on terms satisfactory to Top Air.
8.16 Minimum Equity. The stockholder's equity, as shown on
--------------
the Closing Balance Sheet and determined in accordance with Section
15.20, is not less than the Minimum Equity.
8.17 Environmental Audit. Top Air shall have received
-------------------
delivery of the Audits described in Section 7.09, and in its sole
and exclusive judgment, the information revealed by the Audits
satisfies Top Air that the use or condition of the Real Property or
the Assets poses no material health or safety hazard, or that the
actual or potential financial exposure for clean up or other
remedial costs would not be material, regardless of who would be
responsible for such hazards or the cleanup and other costs.
8.18 Approval by ESOP Trustee. Top Air shall have been
------------------------
advised by the ESOP Trustee to the effect that all of the matters
referred to in Section 9.08 have occurred.
28
34
8.19 Roll-Over of Shares. Plan Participants entitled to the
-------------------
distribution of more than ten percent (10%) of the Shares shall
have failed to direct the ESOP Trustee as described in Section
11.01(a)(i).
8.20 Accountants' Letter. Top Air shall have obtained the
-------------------
advice in writing of the Accounting Firm that the Transaction shall
be accounted for as a purchase transaction, which advice shall not
have been withdrawn as of the Closing Date.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF CLAY EQUIPMENT.
-----------------------------------------------------
The obligations of Clay Equipment hereunder are conditioned
upon the fulfillment (or waiver by Clay Equipment), prior to or at
the Closing Date, of the following:
9.01 Representations, Warranties and Agreements of Top Air.
-----------------------------------------------------
The representations, warranties, covenants and agreements of Top
Air contained herein shall be true and not breached at and as of
the Closing Date, with the same effect as though such
representations, warranties, covenants and agreements had been
repeated by Top Air at and as of such time, and all of the
obligations of Top Air hereunder shall have been duly performed.
9.02 Opinion of Counsel. Clay Equipment shall have received
------------------
the favorable opinion of counsel for Top Air, dated as of the
Closing Date, in the form of Schedule 9.02 and otherwise in form
-------------
and substance satisfactory to Clay Equipment and Clay Equipment's
counsel. In rendering their opinion, counsel for Top Air may rely
on written certificates of the officers of Top Air and appropriate
public officials as to factual matters, provided a copy thereof is
attached to and forms a part of the opinion of Top Air's counsel
with the knowledge and consent of such officers.
9.03 Performance of Assumed Liabilities. Top Air shall have
----------------------------------
assumed and agreed to perform the Assumed Liabilities from and
after the Closing Date, as provided in Sections 2.03, 2.04 and
6.02.
9.04 Corporate Approval. The execution and delivery of this
------------------
Agreement by Top Air and the performance of Top Air's respective
covenants and obligations under it, shall have been duly authorized
by all necessary corporate and other action of Top Air, and Clay
Equipment shall have received copies of all resolutions pertaining
to such authorization, certified by the Secretary of Top Air.
9.05 Consents. All necessary agreements and consents of any
--------
parties to the consummation of the transactions by Top Air
contemplated by this Agreement, or otherwise pertaining to the
matters covered by it, shall have been obtained by Top Air and
delivered to Clay Equipment.
29
35
9.06 Top Air's Certificate. Clay Equipment shall have
---------------------
received a certificate, dated the Closing Date, signed and verified
by Top Air's chief executive officer and chief financial officer
certifying, in the form of Schedule 9.06 hereto, that the
-------------
conditions specified in this Article IX (except for Section 9.08)
have been fulfilled.
9.07 Approval of Documents. The form and substance of all
---------------------
certificates, instruments, opinions and other documents delivered
to Clay Equipment under this Agreement shall be satisfactory to
Clay Equipment and its counsel.
9.08 Approval by ESOP Trustee. Clay Equipment shall have
------------------------
been advised in writing by the ESOP Trustee that (i) the Proxy
Material was mailed to all ESOP Participants at least ten days
prior to the Special Meeting, (ii) the Special Meeting was duly
held, (iii) pursuant to the Special Meeting, the ESOP Trustee was
directed to vote in excess of a majority of the allocated shares
held by the ESOP in favor of the transactions contemplated
hereunder, (iv) the ESOP Trustee has voted a majority of the
outstanding shares of the Clay Holding common stock in favor of and
for the approval of the Transaction, and (v) as a result of the
foregoing, the Transaction has been approved by the shareholders of
Clay Holding.
9.09 Registration of Shares. The Registration Statement
----------------------
shall have been declared effective by the Securities and Exchange
Commission and no stop order shall be in effect.
X. INDEMNIFICATION
---------------
This Article sets forth the respects in which Top Air shall be
indemnified by the Clay Companies in the event Top Air shall become
obligated or liable for, or shall discharge, obligations or
liabilities of Clay Equipment and/or in the event of any
misrepresentation or breach of warranty or agreement on the part of
either of the Clay Companies hereunder, and the respects in which
Clay Equipment shall be indemnified by Top Air in the event Clay
Equipment shall become obligated for, or shall discharge, any
liabilities of Top Air in the event of any misrepresentations or
breach of warranty or agreement on the part of Top Air hereunder.
10.01 Indemnification of Top Air by the Clay Companies.
------------------------------------------------
(a) Representations, Warranties, Covenants and
------------------------------------------
Agreements. Each of the Clay Companies, jointly and
----------
severally, agree to indemnify Top Air and hold Top Air
harmless against any and all loss, liability, damage, claim,
cost and expense of any nature whatsoever, including, without
limitation, attorneys' fees, arising from or in connection
with any representation or warranty made by either of the Clay
Companies not being complete, accurate and true at the date of
30
36
this Agreement and on the Closing Date or the failure by
either of the Clay Companies to fulfill and fully perform each
covenant or agreement on the part of either of the Clay
Companies under this Agreement or under any other instrument
or document executed and delivered by either of the Clay
Companies in connection with the transactions contemplated
hereby, as any of the same may be amended from time to time.
(b) Failure to Discharge Liabilities. Each of the Clay
--------------------------------
Companies, jointly and severally, agree to indemnify Top Air
and hold Top Air harmless against any and all loss, liability,
damage, claim, cost and expense of any nature whatsoever,
including, without limitation, attorneys' fees, arising from
or in connection with: (i) any transferee liability law (other
than the unemployment compensation experience rating of former
employees of either of the Clay Companies), (ii) any payment
or performance made by Top Air to any third party in order to
perform or discharge fully or partially any liability or
obligation of Clay Equipment (except for the Assumed
Liabilities), which Top Air shall have the option or be
required to do, (iii) any judgment or other circumstances
pursuant to which Top Air may be held liable or accountable
for, or the Transferred Assets to be acquired hereunder may be
charged in respect of, any liability or obligation of Clay
Equipment other than the Assumed Liabilities, (iv) the
presence of contaminants, pollutants and other harmful
substances in the premises subject to any lease or occupancy
assumed by Top Air hereunder, and (v) the noncompliance by
Clay Equipment with any Environmental Laws.
(c) Remedies Not Exclusive. The rights and remedies of
----------------------
Top Air provided for in this Article or otherwise in this
Agreement shall be deemed to be cumulative and in addition to
and not in limitation or exclusion of all other rights and
remedies, whether by terms of other provisions of this
Agreement or at law or in equity or otherwise, which may exist
on the part of Top Air by reason of any misrepresentation or
breach of warranty, covenant or agreement on the part of Clay
Equipment or Clay Holding. Such rights and remedies shall be
cumulative and may be exercised at any time or from time to
time, and any failure or delay of Top Air in exercising any
right or remedy at any time shall not constitute a waiver
thereof or restrict its subsequent enforcement or the
enforcement of any other right or remedy of Top Air. In
addition to any other rights and remedies of Top Air hereunder
or otherwise, any amounts due and payable to Top Air by reason
of the obligations of Clay Equipment and/or Clay Holding to
indemnify Top Air and hold Top Air harmless hereunder shall be
subject to a right of setoff and reduction on the part of Top
Air against any amounts due and payable by Top Air to Clay
Equipment hereunder or under any other agreement, at the
discretion and designation of Top Air, in whole or in part.
31
37
10.02 Indemnification of Clay Equipment by Top Air.
--------------------------------------------
(a) Representations, Warranties, Covenants and
------------------------------------------
Agreements. Top Air agrees to indemnify Clay Equipment and
----------
hold Clay Equipment harmless against any and all loss,
liability, damage, claim, cost and expense of any nature
whatsoever, including, without limitation, attorneys' fees,
arising from or in connection with any representation or
warranty made by Top Air not being complete, accurate and true
at the date of this Agreement and on the Closing Date or the
failure by Top Air to fulfill and fully perform each covenant
or agreement on the part of Top Air under this Agreement
(including, but not limited to, Top Air's failure to discharge
the Assumed Liabilities as and when they become due) or under
any other instrument or document executed and delivered by Top
Air in connection with the transactions contemplated hereby,
as any of the same may be amended from time to time.
(b) Remedies Not Exclusive. The rights and remedies of
----------------------
Clay Equipment provided for in this Article or otherwise in
this Agreement shall be cumulative and in addition to and not
in limitation or exclusion of all other rights and remedies,
whether by the terms of other provisions of this agreement or
at law or in equity or otherwise, which may exist on the part
of Clay Equipment by reason of any misrepresentation or breach
of warranty, covenant or agreement on the part of Top Air
hereunder. Such rights or remedies may be exercised at any
time or from time to time, and any failure or delay of Clay
Equipment in exercising any right or remedy at any time shall
not constitute a waiver thereof or restrict its subsequent
enforcement or the enforcement of any other right or remedy of
Clay Equipment.
10.03 Notice to Indemnifying Party. In the event that any
----------------------------
party may be entitled to, or intends to assert a claim for,
indemnification hereunder, not later than thirty (30) days after
actual notice of any claim or the filing of any action giving rise
to such claim for indemnification, the indemnified party will, if
a claim in respect thereof is to be made against another party or
parties hereto, notify the indemnifying party or parties thereof.
In case any action is threatened or brought against any indemnified
party, and it notifies the indemnifying party or parties thereof,
the indemnifying party or parties will be entitled to participate
in or assume the defense thereof with counsel reasonably
satisfactory to such indemnified party and, after notice of its
election to assume the defense thereof, the indemnifying party or
parties will no longer be liable for any legal or other expense
subsequently incurred by the indemnified party in connection with
the defense thereof; provided, however, that the indemnified party
shall be entitled at all times to participate in the defense of any
such action at its own cost.
32
38
XI. AMENDMENT AND TERMINATION OF THE ESOP.
-------------------------------------
To effect the Distribution, the Clay Companies will cause the
ESOP to be amended and, contemporaneously with the Closing, to be
terminated and, subject to Section 3.02, the Shares to be
distributed to the Plan Participants, all in accordance with this
Article XI.
11.01 Amendment to ESOP. At or prior to Closing, the Clay
-----------------
Companies will cause the ESOP to be amended so as to provide that
upon the termination thereof: (a) with respect to each Plan
Participant entitled to distribution of the ESOP assets, including
the Shares (initially consisting of the Non-Hold-Back Stock), such
Plan Participant shall either (i) direct the ESOP Trustee in
writing to distribute or "roll-over" his or her ESOP assets to an
"Eligible Retirement Plan" (as defined in Section 402(c)(8)(B) of
the Code), or (ii) make payment to the ESOP Trustee of the amount
required to be withheld for federal tax purposes in respect of the
ESOP assets being distributed to such Plan Participant (currently,
20% of the value of such ESOP assets); (b) for a period of one year
following the Closing Date, none of the Shares distributed to a
Plan Participant or his or her Eligible Retirement Plan will be
transferable or assignable without the prior written consent of Top
Air, except by operation of law, in which case such transfer or
assignment shall not affect the restrictions of this clause (b) on
such Shares in the hands of the transferee or assignee, who will
hold such Shares subject to such restrictions and the certificates
evidencing the Shares will contain an appropriate legend thereon,
and (c) such other amendments reasonably deemed necessary by Top
Air in order to carry out the intent of this Article XI.
11.02 Termination of the ESOP. On or before the Closing, the
-----------------------
Clay Companies will cause the ESOP to be terminated. In addition
to the distribution of the Non-Hold-Back Stock and other ESOP
assets, if any, pursuant to Section 11.01(a), the ESOP will assign
its rights to the Plan Participants with respect to the Hold-Back
Stock so as to require the ESOP to distribute all shares of Hold-
Back Stock in accordance with Section 11.01(a) when, and to the
extent, received by it pursuant to the Distribution.
XII. SPECIAL MEETING OF STOCKHOLDERS.
-------------------------------
In order to satisfy the condition to Closing that the
Transaction be approved by the ESOP Trustee, the Special Meeting
will be held pursuant to this Article XII.
12.01 Preparation of Proxy Materials. Promptly following the
------------------------------
execution of this Agreement, Top Air, with the assistance of the
Clay Companies, shall prepare the Proxy Materials which will
constitute the prospectus of Top Air and the proxy or information
statement of Clay Holding included in the Registration Statement.
33
39
12.02 The Holding of the Special Meeting. Upon the
----------------------------------
effectiveness of the Registration Statement, Clay Holding shall
mail or cause to be mailed the Proxy Material to the ESOP Trustee
and each of the Plan Participants at least ten days prior to the
date of the Special Meeting, and shall cause the Special Meeting to
be duly held and a vote taken thereat for the approval of the
Transaction. The Board of Directors of Clay Holding shall
recommend the approval of the Transaction and shall use its best
efforts to obtain such approval. Clay Holding shall not permit any
matter to be submitted for shareholder action at the Special
Meeting, other than as contemplated hereunder, without the prior
written consent of Top Air.
XIII. REGISTRATION STATEMENT.
----------------------
13.01 Preparation and Filing of Registration Statement.
------------------------------------------------
Promptly after the execution hereof, Top Air shall prepare and file
as soon as reasonably practicable with the Securities and Exchange
Commission a Registration Statement on Form S-4 (the "Registration
Statement") for the registration of the Shares under the Securities
Act in connection with the Transaction and the Distribution.
13.02 Blue Sky Requirements. Top Air shall take any action
---------------------
required to be taken under any applicable state Blue Sky or
securities laws in connection with the issuance of the Shares and
the Distribution thereof.
XIX. CLOSING AND RISK OF LOSS.
------------------------
14.01 Place and Time. The Closing shall take place on the
--------------
Closing Date at the offices of Top Air, 406 Highway 20 and Dudley
Road, Parkersburg, Iowa 50665, or at such other place as may be
agreed upon by Top Air and Clay Equipment.
14.02 Risk of Loss. The entire risk of loss with respect to
------------
the Transferred Assets will remain on Clay Equipment until the
transactions contemplated hereby are closed.
14.03 Simultaneous Performance. None of the transactions
------------------------
described in Article II will occur unless all such transactions
occur.
14.04 Transfer of Possession. Possession of the Transferred
----------------------
Assets shall be delivered to Top Air at Closing.
XV. MISCELLANEOUS.
-------------
15.01 No Commission. All negotiations on behalf of Clay
-------------
Equipment and Top Air, respectively, relative to this Agreement and
the transactions contemplated hereby have been carried on by Clay
Equipment and Top Air directly between Clay Equipment and Top Air
and without the intervention of any third party, either as the
34
40
result of any action of Clay Equipment or Top Air, or otherwise, to
the knowledge of Clay Equipment or Top Air, in such manner as to
give rise to any valid claim against Clay Equipment or Top Air for
a finders' fee, brokerage commission or other like payment.
15.02 Survival of Representations and Warranties. The
------------------------------------------
representations and warranties of Top Air and the Clay Companies,
respectively, contained herein shall survive the Closing,
regardless of any investigations made by or on behalf of or any
disclosure to Top Air or Clay Equipment, for two (2) years
following the Closing Date.
15.03 Change of Name. Immediately following the Closing,
--------------
Clay Equipment shall change its name to a name other than Clay
Equipment Corporation or any portion thereof or any name similar
thereto.
15.04 Incorporation of Schedules. The Schedules hereto shall
--------------------------
be deemed to be incorporated in and form a part of this Agreement.
15.05 Further Assurances. Each of the parties agrees to do,
------------------
execute, acknowledge and deliver, and cause to be done, executed,
acknowledged and delivered, all such further acts, assignments,
transfers, instruments, documents, deeds and assurances as shall be
required in order to carry out this Agreement and give effect
hereto.
15.06 No Assumption of Clay Equipment's Liabilities. EXCEPT
---------------------------------------------
FOR THE ASSUMED LIABILITIES, TOP AIR DOES NOT HEREBY, OR OTHERWISE,
ASSUME OR AGREE TO DISCHARGE OR PERFORM ANY LIABILITY OR OBLIGATION
OF CLAY EQUIPMENT, AND NO SUCH ASSUMPTION OF ANY LIABILITY OF CLAY
EQUIPMENT SHALL ACCRUE TO TOP AIR BY OPERATION OF LAW OR OTHERWISE.
15.07 Transfer Taxes. All sales, transfer, excise and other
--------------
taxes, if any, payable by reason of the transactions contemplated
hereunder shall be paid by Clay Equipment.
15.08 Notices. Any notice, consent, request, claim or other
-------
communication hereunder shall be in writing and shall be deemed to
have been duly given at the time of mailing by United States
Certified, Registered or Express mail, or by next business day
courier (for example, Federal Express) postage or charges prepaid,
addressed as follows:
If to Top Air:
Steven R. Lind, President
Top Air Manufacturing, Inc.
406 Highway 20
Parkersburg, Iowa 50665
35
41
with a copy to:
Robert H. Wexler, Esq.
Gallop, Johnson & Neuman, L.C.
16th Floor
101 South Hanley Road
St. Louis, Missouri 63105
If to Clay Equipment:
Leonard J. Hare , President
Clay Equipment Corporation
101 Lincoln Street, Box 729
Cedar Falls, Iowa
with a copy to:
John C. Larsen, Esq.
Redfern, Mason, Dieter, Larsen & Moore
315 Clay Street
Cedar Falls, Iowa 50613
or to such other address as any party may designate by written
notice hereunder.
15.09 Entire Agreement. This Agreement embodies the entire
----------------
Agreement between the parties, and no representations, inducements,
promises or other agreements, oral or otherwise, not embodied
herein, shall be of any force or effect. This Agreement may not be
modified or terminated except in writing signed by the parties
hereto.
15.10 Designation of Top Air as Agent. Clay Equipment hereby
-------------------------------
designates and constitutes Top Air, its officers and agents, as
agents and attorneys-in-fact of Clay Equipment, with power (for the
purposes of collecting sums due to the Top Air hereunder, or for
sales made by Top Air subsequent to Closing) to sign and endorse
the name of Clay Equipment and transfer all checks, drafts, notes,
money orders and other instruments that may come into the
possession of Top Air, granting to Top Air, its officers and
agents, full power to do any and all things necessary to be done as
fully and effectively as Clay Equipment might or could do, in order
to give effect to this Agreement subsequent to the Closing, hereby
ratifying all that Top Air, its officers and agents, shall lawfully
do or cause to be done by virtue hereof. This power of attorney
shall be deemed to be coupled with an interest and shall be
irrevocable.
15.11 Binding Effect. This Agreement shall be binding upon
--------------
and inure to the benefit of the parties and their respective
successors and assigns.
36
42
15.12 Third Parties. Nothing contained in this Agreement or
-------------
in any instrument or document executed by any party hereto in
connection with the transactions contemplated hereby shall create
any rights in, or be deemed to have been executed for the benefit
of, any person, firm or corporation that is not a party hereto.
15.13 Expenses of the Parties. All expenses involved in the
-----------------------
preparation, authorization and consummation of this Agreement,
including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants in connection therewith,
shall be borne solely by the party who shall have incurred the
same, and no other party shall have any liability in respect
thereof.
15.14 Counterparts. This Agreement may be executed
------------
simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall
constitute one and the same instrument.
15.15 Iowa Law to Govern. This Agreement shall be governed
------------------
by and interpreted and enforced in accordance with the internal
laws of the State of Iowa, without regard to its conflicts of law
provisions or interpretations.
15.16 Headings. The headings in the Articles and Sections of
--------
this Agreement are inserted for convenience only and shall not
constitute a part hereof.
15.17 Publicity. Neither of the parties shall issue, or
---------
permit any of its representatives to issue, any report, statement
or release or otherwise publicly disclose any information
concerning this Agreement and the transactions contemplated hereby
or by any ancillary agreement, or consummated pursuant hereto or
thereto, without the prior written consent of the other party.
Nothing contained herein shall prevent any party to this Agreement
from furnishing any required information to any governmental entity
or complying with its legal or contractual obligations, in each
case in the opinion of counsel to such party. Top Air and Clay
Equipment shall, as soon as practicable following the execution
hereof, prepare a joint press release regarding this transaction to
be delivered to the news media.
15.18 Mail and Communications. After the Closing, each party
-----------------------
will promptly deliver to the other party the original of any mail
or other communication received by that party but pertaining to the
business of the other party.
15.19 Allocation of Purchase Price. The Purchase Price shall
----------------------------
be allocated among the Assets in accordance with the provisions of
Schedule 15.19 attached hereto. Each party agrees that it will
- --------------
file IRS Form 8594, reporting the allocation of the Purchase Price
to the Internal Revenue Service ("IRS") in accordance with Schedule
--------
37
43
15.19, and will not take any position that varies from or is
- -----
inconsistent with such allocation in any other filing made by such
party with the IRS or any other governmental entity.
15.20 Review of Closing Balance Sheet. In order to determine
-------------------------------
whether or not the Minimum Stockholders Equity has been met, not
later than ten days following the Balance Sheet Date, the Clay
Companies shall prepare the Closing Balance Sheet and the related
statements of income for the period from January 1, 1995 to the
Balance Sheet Date in accordance with generally accepted accounting
principles, consistently applied, except that the Closing Inventory
shall be determined on a FIFO basis, and the effect of the
Condemnation Award and the Relocation Expense Award shall not be
considered. In preparing such Closing Balance Sheet and related
financial statements, the Clay Companies shall consult with Top Air
and shall permit Top Air to participate in and review the
preparation thereof, including all work papers, schedules and
calculations related thereto, prior to the issuance thereof. Top
Air shall commence its review of said work papers, schedules and
calculations as soon as practicable. Any dispute which may arise
between the Clay Companies on the one hand and Top Air on the other
hand as to such financial statements shall be resolved in the
following manner:
(a) Top Air, if it disputes the financial statements,
shall notify Clay Equipment in writing within ten days after
its receipt of such financial statements that Top Air disputes
the financial statements, specifying in reasonable detail the
nature of the dispute;
(b) During the five day period following the date of
such notice, the Clay Companies and Top Air shall attempt to
resolve such dispute and determine the appropriateness of the
financial statements; and
(c) If at the end of such five day period, the parties
shall have failed to reach an agreement with respect to such
dispute, the matter shall be referred to an Arbitrator
selected by the Accounting Firm. The Arbitrator shall issue
its report as to the financial statements within ten days
after such dispute is referred to the Arbitrator. Each of the
parties shall bear all costs and expenses incurred by it in
connection with such arbitration except for the fees and
expenses of the Arbitrator which shall be borne equally by the
Clay Companies on the one hand and Top Air, on the other hand.
This provision for arbitration shall be specifically
enforceable by the parties and the decision of the Arbitrator
in accordance with the provisions hereof shall be final and
binding and there shall be no right of appeal therefrom.
15.21 Acquisition Subsidiary. Top Air may, in its sole
----------------------
discretion, establish a subsidiary wholly owned by Top Air for the
38
44
purpose of acquiring the Transferred Assets and assuming the
Assumed Liabilities and, if such subsidiary is so established, all
references to Top Air hereunder, where applicable, shall be deemed
to be reference to such subsidiary; provided, however, that nothing
-------- -------
contained in this Section 15.21 shall affect the indemnification
obligations of Top Air set forth in Section 10.02.
39
45
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
TOP AIR MANUFACTURING, INC.,
an Iowa corporation
By: /s/Steve R. Lind
-------------------------------------
Title: President & CEO
----------------------------------
CLAY EQUIPMENT CORPORATION,
an Iowa corporation
By: /s/Leonard J. Hare
-------------------------------------
Title: CEO
----------------------------------
CLAY HOLDING, INC.,
an Iowa corporation
By: /s/Leonard J. Hare
-------------------------------------
Title: CEO
----------------------------------
40