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STOCK PURCHASE AGREEMENT
By and Among
NIEMIN PORTER & CO. d/b/a CAST ALLOYS, INC.
and
THE STOCKHOLDERS OF NIEMIN PORTER & CO.
LISTED ON ANNEX I HERETO,
as Sellers
and
NEENAH FOUNDRY COMPANY,
as Buyer
December 3, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS; INTERPRETATION..............................................................................1
Section 1.1 Certain Defined Terms..................................................................1
Section 1.2 Interpretation........................................................................10
Section 1.3 Business Days.........................................................................10
Section 1.4 Accounting Conventions................................................................10
ARTICLE II
PURCHASE AND SALE OF STOCK AND EQUIVALENTS; CLOSING.....................................................11
Section 2.1 Transfer of Stock and Warrants........................................................11
Section 2.2 Closing...............................................................................11
Section 2.3 Consideration for Stock and Warrants..................................................11
Section 2.4 Purchase Price Adjustment.............................................................12
Section 2.5 Closing Deliveries by Sellers.........................................................14
Section 2.6 Closing Deliveries by Buyer...........................................................15
Section 2.7 EBITDA Adjustment.....................................................................16
Section 2.8 Stock Options.........................................................................18
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS........................................................................19
Section 3.1 Representations and Warranties of the Sellers Concerning the
Transaction...........................................................................19
Section 3.2 Representations and Warranties Concerning the Company and Its
Subsidiaries..........................................................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................37
Section 4.1 Organization of Buyer.................................................................37
Section 4.2 Authorization; Validity...............................................................37
Section 4.3 No Conflict or Violation..............................................................37
Section 4.4 Consents and Approvals................................................................38
Section 4.5 No Brokers............................................................................38
ARTICLE V
COVENANTS OF THE SELLERS AND COMPANY....................................................................38
Section 5.1 Access to Information and Records.....................................................38
Section 5.2 Conduct of Business...................................................................39
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Section 5.3 Preservation of Business..............................................................39
Section 5.4 Notice of Events......................................................................39
Section 5.5 Exclusivity...........................................................................40
Section 5.6 Non-Competition; Non-Interference; Non-Solicitation...................................40
Section 5.7 Consents and Best Efforts.............................................................43
Section 5.8 Public Announcements..................................................................44
Section 5.9 Appointment of Sellers' Representatives...............................................44
Section 5.10 Indemnification of Sellers' Representatives...........................................45
Section 5.11 Additional Shares.....................................................................45
ARTICLE VI
TERMINATION.............................................................................................45
Section 6.1 Termination...........................................................................45
Section 6.2 Effect of Termination.................................................................46
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS......................................................................46
Section 7.1 Representations, Warranties and Covenants.............................................46
Section 7.2 No Injunction.........................................................................46
Section 7.3 Opinion of Counsel....................................................................46
Section 7.4 Payments..............................................................................47
Section 7.5 Certificates..........................................................................47
Section 7.6 HSR Act Waiting Period................................................................47
Section 7.7 Absence of Litigation.................................................................47
Section 7.8 Documents to be Delivered by Buyer....................................................47
Section 7.9 Management Arrangements...............................................................48
Section 7.10 Additional Seller.....................................................................48
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS.......................................................................48
Section 8.1 Representations, Warranties and Covenants.............................................48
Section 8.2 Consents; Releases....................................................................48
Section 8.3 No Injunction.........................................................................48
Section 8.4 HSR Act Waiting Period................................................................48
Section 8.5 No Material Adverse Effect............................................................48
Section 8.6 Additional Seller.....................................................................48
Section 8.7 Documents to be Delivered by Company..................................................49
Section 8.8 Absence of Litigation.................................................................50
Section 8.9 Management Arrangements...............................................................51
Section 8.10 Real Property.........................................................................51
Section 8.11 Financing.............................................................................51
Section 8.12 Due Diligence.........................................................................52
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Section 8.13 All Proceedings To be Satisfactory....................................................52
ARTICLE IX
POST-CLOSING COVENANTS..................................................................................52
Section 9.1 Further Assurances....................................................................52
Section 9.2 Tax Matters...........................................................................52
Section 9.3 Employee Benefits Matters.............................................................55
Section 9.4 Transition............................................................................56
Section 9.5 Confidentiality.......................................................................56
Section 9.6 Subsidiary Shares.....................................................................56
ARTICLE X
INDEMNIFICATION.........................................................................................57
Section 10.1 Survival, Representations and Warranties..............................................57
Section 10.2 Indemnification Obligation of Sellers.................................................57
Section 10.3 Indemnification Obligation of Buyer...................................................60
Section 10.4 Indemnification Procedures............................................................60
Section 10.5 Payment...............................................................................62
ARTICLE XI
MISCELLANEOUS...........................................................................................63
Section 11.1 Assignment............................................................................63
Section 11.2 Notices...............................................................................63
Section 11.3 Choice of Law.........................................................................65
Section 11.4 Entire Agreement; Amendments and Waivers..............................................65
Section 11.5 Counterparts..........................................................................65
Section 11.6 Invalidity............................................................................65
Section 11.7 Headings..............................................................................66
Section 11.8 Expenses..............................................................................66
Section 11.9 Specific Performance..................................................................66
Section 11.10 Time is of the Essence; Computation of Time...........................................66
Section 11.11 Waiver of Jury Trial..................................................................66
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Annexes and Exhibits
Annex I - Stockholders
Exhibit A - Financial Statements
Exhibit B - Form of Working Capital Statement
Exhibit C - EBITDA Calculation
Exhibit D - Form of Nieminski Release
Exhibit E - Form Opinion of Kirkland & Ellis
Exhibit F - Form Opinion of Counsel to Company and Sellers
Exhibit G-1 - Form of Executive Release
Exhibit G-2 - Form of Employee Release
Exhibit H - Form of Nieminski Agreement
Disclosure Schedule
Section 2.3 - Allocable Share
Section 3.1(c) - Shares Held by Sellers
Section 3.2(a) - Jurisdictions in Which the Company and International
Golf Are Qualified to Do Business
Section 3.2(b) - Capitalization
Section 3.2(c) - Non-Contravention
Section 3.2(e) - Title to Assets
Section 3.2(f) - Subsidiaries
Section 3.2(h) - Agreements Entered Into Since 6-30-98
Section 3.2(k) - Tax Matters
Section 3.2(l) - Real Property
Section 3.2(m) - Proprietary Rights
Section 3.2(p) - Contracts
Section 3.2(r) - Insurance
Section 3.2(s) - Litigation
Section 3.2(t) - Product Warranty Provisions
Section 3.2(w) - Employee Benefit Plans
Section 3.2(x) - Transactions with Affiliates
Section 3.2(y) - Environmental Matters
Section 3.2(z) - Funded Debt
Section 4.4 - Buyers Consents and Approvals
Section 8.2 - Consents and Releases
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of December 3, 1998, by and
among NIEMIN PORTER & CO. d/b/a CAST ALLOYS, INC., a California corporation (the
"Company"), the stockholders, option holders and warrant holders of the Company
listed on Annex I hereto (the "Stockholders" or the "Sellers"), and NEENAH
FOUNDRY COMPANY, a Wisconsin corporation (the "Buyer"). The Sellers, the Company
and the Buyer are referred to collectively herein as the "Parties".
WHEREAS, Sellers own 1,285,439 shares of Common Stock (as
defined below) of the Company and have the right to acquire 274,999 shares of
Common Stock pursuant to the Nieminski Agreement (as defined below), and 245,000
shares of Preferred Stock (as defined below) of the Company, and Executive
Options (as defined below) to purchase 117,000 shares of Common Stock
(collectively, the "Stock"), and warrants and contingent warrants to purchase
446,123 shares of Common Stock (the "Warrants") constituting all of the issued
and outstanding capital stock and capital stock equivalents of the Company; and
WHEREAS, Buyer desires to purchase from Sellers, and Sellers
desire to sell, transfer and convey to Buyer, the Stock and the Warrants, all
subject to the terms and conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1 Certain Defined Terms. As used herein, the terms
below shall have the following meanings:
"Acquisition Proposal" has the meaning specified in Section
5.5.
"Adjustment Statement" has the meaning specified in Section
2.4(c)(i).
"Affiliate" means, with respect to any Person, any other
Person who directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlled" and "controlling" have meanings correlative thereto.
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"Affiliated Group" means any affiliated group within the
meaning of Section 1504(a) of the Code or any similar group defined under a
similar provision of state, local or foreign law.
"Allocable Share" means with respect to the proportionate
share of any Seller in a particular amount, a fraction the numerator of which is
equal to the total portion of the Purchase Price payable to such Seller as set
forth in Section 2.3 of the Disclosure Schedule and the denominator of which is
the total portion of the Purchase Price payable to the Sellers in aggregate as
set forth in Section 2.3 of the Disclosure Schedule.
"Balance Sheet" means the audited consolidated balance sheet
of the Company and its Subsidiary International Golf as at June 30, 1998
together with the notes thereon audited by Arthur Andersen & Co., previously
delivered to Buyer and attached hereto as part of Exhibit A.
"Balance Sheet Date" means June 30, 1998.
"Base Rate" means the prime lending rate announced from time
to time by the Chase Manhattan Bank.
"Benefit Arrangement" means any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement, program, agreement or commitment providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, retirement benefits, life, health, disability or accident benefits
(including, without limitation, any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (A) is
not an Employee Welfare Benefit Plan, an Employee Pension Benefit Plan or
Multiemployer Plan, (B) is maintained or contributed to by or required to be
maintained or contributed to by Sellers or the Company or any of its
Subsidiaries, or (C) covers any current or former employee of the Company or any
of its Subsidiaries.
"Buyer" has the meaning set forth in the first paragraph of
this Agreement.
"Buyer Indemnitee" has the meaning specified in Section 10.2.
"Buyer Accountant" has the meaning specified in Section
2.4(c)(i).
"Closing" has the meaning specified in Section 2.2.
"Closing Date Balance Sheet" has the meaning specified in
Section 2.4(c)(i).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
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"Common Stock" means the Company's common stock, no par value.
"Common Stock Equivalents" has the meaning set forth in
Section 3.2(b).
"Company" has the meaning set forth in the first paragraph of
this Agreement.
"Company Business" has the meaning specified in Section
5.6(a).
"Company Proprietary Rights" means all Proprietary Rights
owned or used by the Company, along with all income, royalties, damages and
payments due or payable at the Closing or thereafter (including, without
limitation, damages and payments for past and future infringements or
misappropriation thereof), the right to sue and recover for past infringement or
misappropriation thereof, and all corresponding rights that, now or hereafter,
may be secured throughout the world and all copies and tangible embodiments of
any such Proprietary Rights.
"Company's Accountant" has the meaning specified in Section
2.4(c)(i).
"Confidential Company Information" has the meaning specified
in Section 5.6(a).
"Confidential Information" means any information concerning
the businesses and affairs of the Company that is not already generally
available to the public (including, technology, methods of doing business,
supplier and customer information, and financial information).
"Controlled Group" has the meaning set forth in Section 1563
of the Code.
"Covered Person" means each of John R.C. Porter, John Sheehan,
Randy Kelch, Ajendra Singh and Jim Collins.
"Credit Agreement" means the Credit Agreement by and among
Buyer and the lenders and other parties thereto dated as of April 30, 1997 as
amended and restated as of September 12, 1997, as of April 3, 1998 and as of
September 8, 1998, as the same may be amended, restated, supplemented, modified,
refinanced or replaced, from time to time.
"DGCL" means the Delaware General Corporation Law, as amended.
"Disclosure Schedule" means the disclosure schedule delivered
by the Company and the Sellers to the Buyer on the date hereof and initialed by
the Parties. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Agreement.
"Earn-Out Amount" has the meaning specified in Section 2.7(a).
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"Earn-Out Statement" has the meaning specified in Section
2.7(d).
"EBITDA" has the meaning specified in Section 2.7(c).
"EBITDA Deficiency" has the meaning specified in Section
2.7(b).
"EBITDA Rebate Amount" has the meaning specified in Section
2.7(b).
"Employee Benefit Plans" means all Benefit Arrangements,
Employee Pension Benefit Plans and Employee Welfare Benefit Plans.
"Employee Option" means each option to purchase Common Stock
issued pursuant to the Employee Option Plan, and collectively, the "Employee
Options."
"Employee Option Plan" means the Niemin Porter & Co. 1996
Employee Stock Option Plan adopted by the Company's board of directors as of
January 7, 1997, as the same may be amended, supplemented or modified from time
to time.
"Employee Pension Benefit Plan" means any "employee pension
benefit plan" as defined in Section 3(2) of ERISA (other than a Multiemployer
Plan) (A) which the Company or any Subsidiary maintains or contributes to or
with respect to which the Company or any Subsidiary has any liability, or (B)
which covers any current or former employee of the Company or any Subsidiary.
"Employee Release" has the meaning specified in Section 2.8.
"Employee Welfare Benefit Plan" means any "employee welfare
benefit plan" as defined in Section 3(1) of ERISA (A) which the Company or any
Subsidiary maintains or contributes to or with respect to which the Company or
any Subsidiary has any liability, or (B) which covers any current or former
employee of the Company or any Subsidiary.
"Encumbrances" means all Liens, encumbrances or other defects
in title.
"Environmental, Health, and Safety Laws" means all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now or
hereafter in effect, including, the General Law of Ecological
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Equilibrium and Environmental Protection and its amendments, the Regulations of
the General Law of Ecological Equilibrium and Environmental Protection in
Matters of Hazardous Waste, the Regulations to the General Law of Ecological
Equilibrium and Environmental Protection in Matters of Air Pollution, and
related Regulations, the Federal Labor Law, applicable Official Mexican Norms,
and any and all other Decrees, Regulations, Agreements which would apply in
Mexico to all those hazardous materials and wastes classified as such under the
applicable Official Mexican Norm and corresponding amendments.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" means The Chase Manhattan Bank.
"Escrow Agreement" means the Escrow Agreement dated as of the
Closing Date by and among the Buyer, the Sellers and the Escrow Agent.
"Escrow Portion" has the meaning specified in Section 2.7(b).
"Estimated Adjustment" has the meaning specified in Section
2.4(b).
"Estimated Closing Balance Sheet" has the meaning specified in
Section 2.4(a).
"Estimated Closing Working Capital" has the meaning specified
in Section 2.4(b).
"Estimated Taxes" has the meaning specified in Section 9.2(b).
"Executive Committee" means the managing body of the Company
comprised of Messrs. John Sheehan, Randy Kelch, Ajendra Singh and Jim Collins.
"Executive Option" means each option to purchase Common Stock
issued pursuant to the Executive Option Plan, and collectively, the "Executive
Options."
"Executive Option Plan" means the Niemin Porter & Co. 1996 Key
Executive Option Plan adopted June 28, 1996, as the same may be amended,
restated, supplemented or modified from time to time.
"Executive Release" has the meaning specified in Section 2.8.
"Executives" shall mean each of Ajendra Singh, John Sheehan,
Randy Kelch and any other person holding Executive Options.
"Final Closing Date Balance Sheet" has the meaning specified
in Section 2.4(c)(iv).
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"Final Closing Date Working Capital" has the meaning specified
in Section 2.4(c)(iv).
"Financial Statements" has the meaning specified in Section
3.2(g).
"Funded Debt" of the Company or any Subsidiary means, without
duplication, all obligations under indebtedness for borrowed money (including,
without limitation, principal, interest, overdrafts, penalties, premiums, fees,
expenses, indemnities and breakage costs), all obligations under capital leases,
notes payable, guaranties of indebtedness for borrowed money and drafts accepted
representing extensions of credit.
"GAAP" means generally accepted accounting principles as in
effect in the United States on the date of this Agreement, applied on a
consistent basis.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Income Taxes" means taxes measured by or with reference to
net income imposed by any federal, state, local or foreign governmental taxing
authority, including additions to tax and penalties related to such taxes, and
interest on such taxes and on such additions to tax and penalties.
"Independent Accounting Firm" has the meaning specified in
Section 2.4(c)(iii).
"International Golf" means International Golf, S.A. de C.V., a
corporation duly organized and validly existing under the laws of the United
Mexican States ("Mexico"), incorporated under Public Instrument number 15596,
Volume 206, dated 17 July, 1974, issued by Mr. Nicolas Gomez, Notary Public
number 2, in and for Mexicali, in Baja California, Mexico, same which is
recorded with the Public Registry of the Property, Commerce Section, in
Mexicali, Mexico, under entry number 11327, Folio 410, Book No. 34, on 29
August, 1974.
"Knowledge" means any fact or information of which a Person
has a conscious awareness or, by virtue of such Person's position should know
because the fact or information would ordinarily be reported to such Person or
the fact or information is a matter of public record or would be easily
discovered upon reasonable inspection or inquiry.
"Knowledge of the Company" means any fact or information of
which any member of the Executive Committee or board of directors of the Company
has conscious awareness or, by virtue of such person's position should know
because the fact or information would ordinarily be reported to such person or
the fact or information is a matter of public record or would be easily
discovered upon reasonable investigation or inquiry.
"Leased Property" has the meaning specified in Section
3.2(l)(ii).
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"Leases" has the meaning specified in Section 3.2(l)(ii).
"Lender" means the Chase Manhattan Bank, N.A. or such other
bank or financial institution as shall serve from time to time as the senior
lender or administrative agent under the Credit Agreement.
"Lien" means any claim, lien, pledge, option, charge, security
interest, mortgage, right-of-way, encumbrance or other right of any third party.
"Losses" means any claims, liabilities, losses, damages
(including consequential damages and damages for lost profits), deficiencies,
assessments, judgments, remediations and costs or expenses (including reasonable
attorneys', consultants' and experts' fees and expenses).
"Material Adverse Effect" has the meaning specified in Section
3.2(c).
"Monogram" means Monogram Software, Inc., a California
corporation.
"Most Recent Balance Sheet" has the meaning specified in
Section 3.2(g).
"Most Recent Financial Statements" has the meaning specified
in Section 3.2(g).
"Most Recent Fiscal Month End" has the meaning specified in
Section 3.2(g).
"Multiemployer Plan" means any "multiemployer plan," as
defined in Section 4001(a)(3) of ERISA with respect to which the Company has any
obligation to contribute or any liability or potential liability.
"Nieminski Agreement" means that certain Purchase and Sale
Agreement dated as of the date hereof by and between Gerald J. Nieminski as
Trustee of the Nieminski Living Trust and certain of the Sellers parties thereto
to purchase in the aggregate 274,999 shares of Common Stock in the form attached
hereto as Exhibit H.
"Nieminski Release" has the meaning specified in Section
6.1(b)(v).
"Objection Notice" has the meaning specified in Section
2.4(c)(i).
"Option Exercise and Sale Agreement" has the meaning specified
in Section 2.8.
"Option Plans" shall mean the Executive Option Plan and the
Employee Option Plan.
"Option Share Purchase Price" has the meaning specified in
Section 2.3(b).
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"Option Shares" has the meaning specified in Section 2.8.
"Options" means collectively the Employee Options and the
Executive Options.
"Optionholders" shall mean the Executives and the Specified
Employees.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"Parties" has the meaning set forth in the first paragraph of
this Agreement.
"Paying Agent" shall mean a Person specified by Sellers in a
notice delivered to Buyer not less than five (5) business days prior to Closing,
who shall be responsible for the distribution of the Option Share Purchase
Price.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, partnership, corporation,
limited liability company, joint stock company, unincorporated organization or
association, trust, joint venture, association or other organization, whether or
not a legal entity, or a governmental authority.
"Potential Sale" has the meaning specified in Section 5.5.
"Pre-Closing Period" means any taxable period ending on or
before the Closing Date.
"Preferred Stock" means the Company's preferred stock, no par
value.
"Prohibited Transaction" has the meaning set forth in Section
406 of ERISA and Section 4975 of the Code.
"Proprietary Rights" means all (i) patents, patent
applications, patent disclosure and inventions (whether patentable or
unpatentable and whether or not reduced to practice), (ii) trademarks, service
marks, trade dress, trade names, logos, slogans, corporate names and Internet
domain names, and registrations and applications for registration thereof,
together with all of the goodwill associated therewith, (iii) copyrights and
copyrightable works, and registrations and applications for registration
thereof, (iv) computer software, data bases and documentation, and (v) trade
secrets and other confidential information (including ideas, formulae and
compositions), know-how, processes, techniques, research and development
information, drawings, specifications, designs, plans, proposals, data,
financial, business and marketing plans and customer and supplier lists and
information.
"Real Property" has the meaning specified in Section
3.2(l)(ii).
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"Restricted Period" has the meaning specified in Section
5.6(a)(i).
"Restrictive Covenants" has the meaning specified in Section
5.6(b).
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for Taxes not yet due and payable or
for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings and for which adequate reserves have been established on the Most
Recent Financial Statements, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money.
"Sellers" has the meaning set forth in the first paragraph of
this Agreement.
"Sellers' Representatives" means Thomas H. Lauer, John R. C.
Porter, and Randy Kelch acting from and after the date hereof as a committee on
behalf of the Sellers in accordance with Section 5.9.
"Specified Employees" means each Person listed in Section
3.2(b) of the Disclosure Schedule as a holder of Employee Options.
"Statement" has the meaning specified in Section 5.9(b).
"Stock" has the meaning set forth in the first recital to this
Agreement.
"Stockholders" has the meaning set forth in the first
paragraph of this Agreement.
"Subsidiary" means any Person whose (a) securities having
ordinary voting power to elect a majority of its board of directors or managing
or general partners (or other persons having similar functions) or (b) other
ownership interests (including partnership and membership interests) ordinarily
constituting a majority interest in the capital, profits or cash flow of such
Person, are at the time, directly or indirectly, owned or controlled by such
other Person, or by one or more other Subsidiaries of such other Person, or by
such other Person and one or more of its other Subsidiaries. Unless the context
otherwise requires, each reference herein to a Subsidiary refers to a Subsidiary
of the Company. With respect to United Mexican States, Subsidiary shall mean
International Golf.
"Target Working Capital" means $10,819,000.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property,
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personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not, and any amounts
payable pursuant to the determination or settlement of an audit.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Title Company" has the meaning specified in Section 8.10.
"Warrants" has the meaning set forth in the first recital to
this Agreement.
"Working Capital" means, as of the date of determination, an
amount equal to the consolidated current assets of the Company , less the
consolidated current liabilities of the Company, in each case determined in
accordance with GAAP, applied in a manner consistent with the preparation of the
Financial Statements, except that amounts in respect of Taxes and Funded Debt
shall not be included in the determination of current assets or current
liabilities and amounts in respect of capitalized tooling costs and amounts paid
in respect of brokerage expenses shall not be included in the determination of
current assets.
"Working Capital Rebate Amount" has the meaning specified in
Section 2.4(d).
"Working Capital Statement" has the meaning specified in
Section 2.4(a).
"1998 EBITDA" has the meaning specified in Section 2.7.
"1998 Fiscal Year" means the twelve month period beginning
January 1, 1998 and ending December 31, 1998.
Section 1.2 Interpretation. Unless otherwise indicated to the
contrary herein by the context or use thereof: (i) the words, "herein,"
"hereto," "hereof" and words of similar import refer to this Agreement as a
whole and not to any particular Section or paragraph hereof; (ii) the word
"including" means "including, but not limited to"; (iii) masculine gender shall
also include the feminine and neutral genders, and vice versa; and (iv) words
importing the singular shall also include the plural, and vice versa.
Section 1.3 Business Days. Whenever the last day for the
exercise of any privilege or the discharge of any duty hereunder shall fall upon
any day which is not a business day, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding business
day.
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Section 1.4 Accounting Conventions. Each accounting term used
herein shall have the meaning that is applied thereto in accordance with GAAP
and each account included in the Closing Date Balance Sheet and the Earn-Out
Statement shall be calculated in accordance with GAAP and shall be consistent
with the books and records of the Company; provided, that all known arithmetic
errors shall be taken into account in the calculation of each account set forth
above, regardless of their materiality. With respect to the calculation of the
levels of the accounts set forth above, except as specified in Exhibit B with
respect to the Closing Date Balance Sheet or Exhibit C with respect to the
Earn-Out Statement, no change in accounting principles shall be made from those
utilized in preparing the Financial Statements, including, with respect to the
nature or classification of accounts, closing proceedings, levels of reserves or
levels of accruals other than as a result of objective changes in the underlying
business. For purposes of the preceding sentence, "changes in accounting
principles" includes all changes in accounting principles, policies, practices,
procedures or methodologies with respect to financial statements, their
classification or their display, as well as all changes in practices, methods,
conventions or assumptions utilized in making accounting estimates.
ARTICLE II
PURCHASE AND SALE OF STOCK AND EQUIVALENTS; CLOSING
Section 2.1 Transfer of Stock and Warrants. On the Closing
Date (as defined below), upon the terms and subject to the conditions contained
herein, Sellers hereby agree to sell, convey, transfer, assign and deliver to
Buyer the Stock and the Warrants, and to cause each of the Optionholders to
sell, convey, transfer, assign and deliver to Buyer the Option Shares, in each
case free and clear of all Liens and other encumbrances or restrictions on
transfer or voting, and in reliance upon the representations, warranties and
covenants contained herein, at the Closing, Buyer shall acquire the Stock and
the Warrants and the Option Shares. In addition, on the Closing Date, Sellers
hereby agree that they will cause the respective owners to endorse for transfer
to Buyer (or its designee) the stock certificates of International Golf
designated in Section 2.1 of the Disclosure Schedule.
Section 2.2 Closing. The closing of the transactions
contemplated herein shall be held at 10:00 a.m., local time, on the later of (i)
December 18, 1998 and (ii) three (3) business days after the satisfaction or
waiver of all conditions to closing contained in Articles VII and VIII, at the
offices of Kirkland & Ellis, 153 East 53rd Street, New York, New York 10022,
(the "Closing") or such other time and/or place as the parties hereto otherwise
agree.
Section 2.3 Consideration for Stock and Warrants.
(a) Upon the terms and subject to the conditions contained
herein, as consideration for the purchase of the Stock and the Warrants, Buyer
shall pay to Sellers an aggregate amount of $57,570,000 (the "Purchase Price"),
as the same may be adjusted as described in Sections
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2.4 and 2.7 below by (i) depositing or causing to be deposited with the Escrow
Agent by wire transfer of immediately available funds, $10,000,000 (the "Escrow
Deposit") to be held by the Escrow Agent in accordance with Sections 2.4, 2.7
and 10.2 of this Agreement and in accordance with the Escrow Agreement and (ii)
tendering to Sellers, in accordance with Section 2.6, an aggregate amount (the
"Cash Purchase Price") equal to $47,570,000, less the sum of (A) the amount of
any Funded Debt outstanding as of the close of business on the Closing Date, (B)
the aggregate amount of any liability for Taxes shown as a current obligation,
liability or reserve on the Estimated Closing Balance Sheet, determined after
giving effect to the exercise of the Employee Options and the Executive Options
in accordance with Section 2.8, (C) the aggregate amount of any liability for
bonuses to employees shown as a current obligation, liability or reserve on the
Estimated Closing Balance Sheet, (D) the Option Share Purchase Price, and (E)
the Estimated Adjustment, if any. The Cash Purchase Price will be allocated
among the Sellers as set forth in Section 2.3(a) of the Disclosure Schedule, as
amended as of the Closing Date, taking into account the transfer of the Common
Stock, Preferred Stock and Warrants held thereby and the exercise or surrender
of any Option Shares in accordance with Section 2.8 hereof. Buyer and Sellers
have agreed that the portion of the Purchase Price allocable to the transfer of
all of the capital stock of International Golf shall be $20,000.
(b) Consideration for Option Shares. Upon the terms and
subject to the conditions contained herein, as consideration for the purchase of
the Option Shares, Buyer shall pay to the Specified Employees, by delivery to
the Paying Agent in accordance with Section 2.6(a)(iii), an aggregate amount
equal to the total purchase price to be paid to the Specified Employees for the
Option Shares to be sold thereby pursuant to the Option Exercise and Sale
Agreements (the "Option Share Purchase Price"), less the aggregate exercise
price payable to the Company with respect to the Option Shares, to be allocated
among the Specified Employees in accordance with Section 2.3(b) of the
Disclosure Schedule, as amended as of the Closing Date.
Section 2.4 Purchase Price Adjustment.
(a) Estimated Closing Balance Sheet. The Company
shall prepare and deliver to Buyer a balance sheet (the "Estimated
Closing Balance Sheet"), on or before a date not less than 5 business
days prior to the Closing Date together with a statement, substantially
in the form of Exhibit B, setting forth the Company's estimate of the
Working Capital of the Company as of the Closing Date (the "Working
Capital Statement"). The Estimated Closing Balance Sheet and the
Working Capital Statement will be prepared from the books and records
of the Company in accordance with the accounting principles set forth
in Section 1.4 above.
(b) Estimated Working Capital Adjustment. If the
Working Capital, as determined from the Working Capital Statement (the
"Estimated Closing Working Capital"), is less than the Target Working
Capital, then the Purchase Price payable at Closing shall be
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reduced dollar-for-dollar by the excess of the Target Working Capital
over the Estimated Closing Working Capital (the "Estimated
Adjustment").
(c) Preparation of Closing Balance Sheet; Dispute
Resolution.
(i) Preparation of Closing Balance Sheet.
On or before the 30th day after the Closing Date, personnel of
the Company and Arthur Andersen & Co. (the "Company's
Accountant") will prepare and deliver to the Buyer and the
Sellers' Representatives a consolidated balance sheet of the
Company and its Subsidiary as of the open of business on the
Closing Date which shall be audited by the Company's
Accountant (the "Closing Date Balance Sheet"), together with
the related audit report, and a statement, prepared in
accordance with Exhibit B (including with respect to
capitalized tooling costs), setting forth the Company's
determination of the Working Capital as of the Closing Date
(the "Adjustment Statement"). The Closing Date Balance Sheet
shall be prepared from the Company's books and records in
accordance with the accounting principles set forth in Section
1.4 above taking into account the payments to be made by the
Company in connection with the Closing, including the payments
by the Company of expenses of the Sellers required to have
been paid by Sellers or the Company in accordance with Section
11.8. During the preparation of the Closing Date Balance Sheet
and all activities in connection therewith, the Buyer will be
entitled to designate a representative (the "Buyer
Accountant") to observe and comment on the preparation of the
Closing Date Balance Sheet and the Adjustment Statement and
procedures relating thereto. On or prior to the 30th day after
the Buyer's receipt of the Closing Date Balance Sheet and the
Adjustment Statement, the Buyer may deliver to the Sellers'
Representatives a written notice stating in reasonable detail
the Buyer's objections (an "Objection Notice") to the Closing
Date Balance Sheet and/or the Adjustment Statement. If the
Buyer does not tender to the Sellers' Representatives an
Objection Notice within such 30-day period or if the Buyer
consents in writing to the Closing Date Balance Sheet and the
Adjustment Statement, then the Closing Date Balance Sheet and
the Adjustment Statement will be conclusive and binding upon
the parties and the Final Closing Date Working Capital
determined therefrom will likewise be binding on the parties,
in each case, for purposes of Section 2.4(d) below.
(ii) Dispute and Amicable Resolution. If
the Buyer timely gives an Objection Notice as described in
subsection (i) above, then the Sellers' Representatives and
the Buyer will attempt amicably to resolve their disputes as
reflected in the Objection Notice, and any amount agreed to in
writing by the Sellers' Representatives and the Buyer as the
Final Closing Date Working Capital of the Company as of the
Closing Date, will be conclusive and binding upon the parties
for purposes of Section 2.4(d) below.
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(iii) Resolution by Independent Accounting
Firm. If the Sellers' Representatives and the Buyer do not
resolve all disputes as reflected in the Objection Notice on
or prior to the 30th day after the Objection Notice is given,
then the Sellers' Representatives and the Buyer will retain a
single firm of certified public accountants that is mutually
acceptable to the Sellers' Representatives and the Buyer (if
the Sellers' Representatives and the Buyer are unable to agree
on a mutually acceptable accounting firm prior to the 5th day
following delivery of the Objection Notice, then such firm
will be chosen randomly by lot from among the accounting firms
formerly constituting the "big six" other than the Buyer
Accountant and the Company's Accountant) (the "Independent
Accounting Firm") to determine the Final Closing Date Working
Capital, as soon as practicable, and, in any event, within 30
days after the submission of any dispute thereto, all in
accordance with the standards and definitions set forth herein
and in Section 1.4 above. The Final Closing Date Working
Capital, determined by the Independent Accounting Firm (1)
must be within the range of values established for such amount
as determined by reference to the value assigned to such
amount by the Buyer Accountant and the Company in the
Objection Notice and the Adjustment Statement, respectively,
and, assuming compliance with the preceding clause, (2) will
be conclusive and binding upon the Parties for purposes of
Section 2.4(d) below. The fees and expenses of the Independent
Accounting Firm shall be paid by the party whose position on
Working Capital as determined from the Adjustment Statement
and the Objection Notice is farthest afield from the Final
Closing Date Working Capital.
(iv) "Final Closing Date Working Capital"
means the Working Capital as set forth on the Closing Date
Balance Sheet as finally determined pursuant to clauses (i),
(ii) and (iii) above (the "Final Closing Date Balance Sheet").
(d) Purchase Price Adjustment. The Cash Purchase
Price will be adjusted if the Final Closing Date Working Capital is
greater or less than the Estimated Closing Working Capital.
(i) If the Final Closing Date Working
Capital is greater than the Estimated Closing Working Capital,
then there shall be paid to the Sellers' Representatives, on
behalf of the Sellers: an aggregate amount equal to the lesser
of (x) the excess of the Target Working Capital over the
Estimated Closing Working Capital and (y) the excess of the
Final Closing Date Working Capital over the Estimated Closing
Working Capital, plus interest thereon at the Base Rate from
the Closing Date. Any such payment shall be made by wire
transfer of immediately available funds to an account or
accounts designated by the Sellers' Representatives in
writing, no later than (five) 5 business days after the
completion of the Final Closing Date Balance Sheet, and the
Sellers' Representatives shall distribute to each Seller, its
Allocable Share of such amount.
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(ii) If the Final Closing Date Working
Capital is less than the Estimated Closing Working Capital,
then the Purchase Price will be decreased on a
dollar-for-dollar basis by the amount of such deficiency plus
interest thereon at the Base Rate from the Closing Date (the
"Working Capital Rebate Amount"). In such event, subject to
the terms of the proviso set forth below, the Buyer and the
Sellers agree to cause the Escrow Agent to pay to the Buyer
from the Escrow Deposit the Working Capital Rebate Amount, by
wire transfer of immediately available funds to an account or
accounts designated by Buyer in writing, no later than five
(5) business days after the completion of the Final Closing
Date Balance Sheet; provided, however, that if the Working
Capital Rebate Amount exceeds $500,000, at Buyer's sole
discretion, the Buyer may (A) direct the Escrow Agent to pay
to the Buyer all or any portion of the Working Capital Rebate
Amount from the Escrow Deposit, but in no event less than
$500,000, and (B) each of the Sellers shall be jointly and
severally liable to the Buyer for the excess of the Working
Capital Rebate Amount over the amount paid to Buyer from the
Escrow Deposit pursuant to clause (A) above and the Sellers
shall pay to the Buyer such excess by wire transfer of
immediately available funds to an account or accounts
designated by Buyer in writing, no later than five (5)
business days after completion of the Final Closing Date
Balance Sheet.
Section 2.5 Closing Deliveries by Sellers. (a) To effect the
transfer referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.3 hereof, at the Closing, subject to the satisfaction or
waiver of the conditions specified in Article VII below, Sellers shall deliver
or cause to be delivered to the Buyer, the following:
(i) certificates evidencing the Stock, the Warrants
and the Option Shares, free and clear of any and all Liens
duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank or by such other instruments for
transfer as shall be reasonably acceptable to Buyer;
(ii) evidence of the exercise or cancellation of all
outstanding Options, in form and substance reasonably
satisfactory to Buyer;
(iii) evidence of the approval by the Company's Board
of Directors of the acceleration of the vesting of the Options
in form and substance reasonably satisfactory to Buyer;
(iv) all consents, approvals, releases, and waivers
from governmental authorities and other third parties required
or necessary as a result of the transactions contemplated
hereby, all of which are set forth in Section 3.2(c) of the
Disclosure Schedule, in each case in form and substance
reasonably satisfactory to Buyer and its counsel;
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(v) all other documents required to be delivered
pursuant to Article VIII hereof not specifically mentioned
above in this Section;
(vi) the original stock certificates of each
Subsidiary, which, with respect to International Golf, shall
be duly dated and endorsed in ownership by its owner, as it
appears in the shareholders' registry book of International
Golf; and
(vii) a certified copy of the shareholders' registry
book posting the transfer of the corresponding shares of
International Golf;
(b) All instruments and documents executed and
delivered to Buyer pursuant hereto shall be in form and substance, and
shall be executed in a manner, reasonably satisfactory to Buyer and its
counsel.
Section 2.6 Closing Deliveries by Buyer. (a) To effect the
transfer referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.3 hereof, at the Closing, subject to the satisfaction or
waiver of each of the conditions specified in Article VIII below, Buyer shall
tender or cause to be tendered the following:
(i) to Sellers, the Cash Purchase Price, by wire
transfer of immediately available funds to such account of
which Sellers shall have given notice to Buyer hereunder not
later than (five) 5 business days prior to the Closing Date;
(ii) to the Escrow Agent, the Escrow Deposit;
(iii) to the Paying Agent, the Option Share Purchase
Price by wire transfer of immediately available funds to such
account of which Sellers shall have given notice to Buyer
hereunder not later than (five) 5 business days prior to the
Closing Date;
(iv) all other documents required to be delivered
pursuant to Article VII hereof and not specifically mentioned
above in this Section.
(b) All instruments and documents executed and
delivered to Sellers pursuant hereto shall be in form and substance,
and shall be executed in a manner, reasonably satisfactory to Sellers
and their counsel.
Section 2.7 EBITDA Adjustment. The Cash Purchase Price will be
adjusted if EBITDA for the Company's 1998 Fiscal Year, determined in accordance
with Section 2.7(c) below ("1998 EBITDA"), is greater than $10,100,000 or less
than $8,000,000 as follows:
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(a) If, and only if, 1998 EBITDA is equal to or greater than
$10,100,000, the Sellers shall be entitled to receive an additional
payment, subject to Section 2.7(e) below, in an amount (the "Earn-Out
Amount") equal to the excess of (x) the product of 1998 EBITDA
multiplied by 5.50, minus (y) the Purchase Price (prior to any
adjustment thereto pursuant to Section 2.4 hereof).
(b) If 1998 EBITDA is less than $8,000,000 (an "EBITDA
Deficiency"), then the Cash Purchase Price shall be decreased by an
amount (the "EBITDA Rebate Amount") equal to the product of (i) the
excess of (x) $8,000,000 over (y) 1998 EBITDA multiplied by (ii) 5.7.
In the event of an EBITDA Deficiency, subject to the last sentence of
this Section 2.7(b), Buyer and the Sellers agree to cause the Escrow
Agent to pay to the Buyer from the Escrow Deposit the EBITDA Rebate
Amount, plus interest thereon at the Base Rate from the Closing Date,
by wire transfer of immediately available funds to an account or
accounts designated by Buyer in writing, no later than five (5)
business days after completion of the Earn-Out Statement. In the event
that the sum of (x) the Working Capital Rebate Amount plus (y) the
EBITDA Rebate Amount plus interest exceeds $5,000,000, then at Buyer's
sole discretion, (A) the Buyer may direct the Escrow Agent to pay to
the Buyer all or any portion of the EBITDA Rebate Amount (plus interest
thereon at the Base Rate from the Closing Date) from the Escrow
Deposit, but in no event less than the difference of $5,000,000 minus
the portion of the Working Capital Rebate Amount paid from the Escrow
Deposit pursuant to Section 2.4(d) (such portion of the EBITDA Rebate
Amount (plus interest) paid to Buyer from the Escrow Deposit pursuant
to clause (A) being referred to herein as the "Escrow Portion") and (B)
each of the Sellers shall be jointly and severally liable to pay to the
Buyer an aggregate amount equal to the EBITDA Rebate Amount (plus
interest thereon at the Base Rate from the Closing Date) minus the
Escrow Portion, by wire transfer of immediately available funds to an
account or accounts designated by Buyer in writing, no later than five
(5) business days after completion of the Earn-Out Statement.
(c) For purposes of this Section 2.7, "EBITDA" means, for any
period, the consolidated net income or loss of the Company, excluding
any gains or losses from the sale of assets outside the ordinary course
of business and any extraordinary gains or losses, plus, without
duplication and to the extent deducted in determining net income of the
Company for such period, the sum of (i) interest expense for
indebtedness for borrowed money (including capitalized leases) for such
period, (ii) Income Tax expense for such period, (iii) non-cash charges
or non-cash losses (including non-cash transaction expenses and the
amortization of debt discounts), (iv) management fees, director's fees
and charge-offs of impaired assets, to the extent incurred after the
Closing Date, and (v) the amount of depreciation and amortization in
respect of the Company's assets for such period in each case determined
in accordance with GAAP for such period in accordance with Exhibit C
and the accounting principles set forth in Section 1.4 and derived from
the Company's consolidated financial statements for such period.
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(d) As promptly as practicable, but in any event not later
than 90 days after the later of the Closing Date and the last day of
the Company's 1998 Fiscal Year, Buyer shall cause to be prepared and
delivered to the Sellers' Representatives on behalf of the Sellers a
statement setting forth the 1998 EBITDA, which statement shall be
prepared from the Company's books and records in accordance with the
accounting principles set forth in Section 1.4 and shall be derived
from the Company's consolidated financial statements for such period
(the "Earn-Out Statement"). If the Earn-Out Statement reflects 1998
EBITDA in excess of $10,100,000, the Buyer shall pay or cause to be
paid to Sellers the Earn-Out Amount (plus interest) in accordance with
Section 2.7(a) above and if 1998 EBITDA is less than $8,000,000, the
Sellers shall pay or cause to be paid to the Buyer the EBITDA Rebate
Amount (plus interest) in accordance with Section 2.7(b) above. If the
Sellers disagree in any respect with Buyer's calculation of 1998 EBITDA
as set forth in the Earn-Out Statement, the Sellers' Representatives
may give Buyer a written notice stating in reasonable detail the
Sellers' objections to the Earn-Out Statement and the basis therefor
within 15 days after delivery of the Earn-Out Statement. The Sellers'
Representatives and the Buyer shall thereafter negotiate in good faith
to resolve any such disagreements. If the Sellers' Representatives and
the Buyer are unable to resolve any such disagreements within 30 days
after delivery of the Earn-Out Statement, the Sellers' Representatives
and the Buyer shall select an Independent Accounting Firm to resolve
the disagreements over accounting matters in accordance with the
provisions of Section 2.4(c) hereof. The fees and expenses of the
Independent Accounting Firm shall be paid by the party whose position
on 1998 EBITDA is most incorrect.
(e) Notwithstanding the provisions of Section 2.7(a) above, if
there shall have occurred and be continuing or result from the payment
of the Earn-Out Amount, any Default or Event of Default (as such terms
are defined in the Credit Agreement) under the Credit Agreement, Buyer
shall have no obligation to pay the Earn-Out Amount as provided in
paragraph (d) above, but in lieu thereof shall deliver to the Sellers'
Representatives on behalf of the Sellers a promissory note bearing
interest at a rate of 9% per annum and containing such terms and
conditions with reference to subordination as the Lender shall require,
in an aggregate amount equal to the Earn-Out Amount.
Section 2.8 Stock Options. To ensure the transfer to Buyer of
all of the outstanding capital stock and capital stock equivalents of the
Company, the Company and the Sellers shall take such actions as may be necessary
or appropriate in order to (a) accelerate the vesting of all outstanding
Options, if and to the extent any such Option is not currently exercisable in
full, (b) cause all outstanding Options to be exercised by the Optionholders
prior to the Closing, and (c) cancel and extinguish, without any liability of
the Company to make any payment with respect thereto, any Option that remains
unexercised as of the Closing. Each such exercise of Options by an Optionholder
shall be made pursuant to an agreement between the Company and such Optionholder
that is in form and substance satisfactory to the Buyer in the exercise of its
reasonable business judgment, which agreement (each, an "Option Exercise and
Sale Agreement") shall
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(i) provide for the sale and transfer to Buyer of the shares of Common Stock
issuable to such Optionholder upon exercise of such Option (the "Option Shares")
pursuant to Section 2.1 hereof without any further action by such Optionholder,
(ii) provide for the payment by such Optionholder of the aggregate exercise
price of his or her Options as set forth in Section 3.2(b) of the Disclosure
Schedule from the proceeds to such Optionholder of such sale, by directing the
Buyer to pay such amount to the Company concurrently with, but subject to and
conditioned upon, the purchase of such Option Shares by the Buyer, (iii) if the
Company has a withholding obligation generated by the exercise of such Option or
the sale of such Option Shares to the Buyer, provide for a portion of the
proceeds of such sale equal to the amount of such withholding to be paid by the
Buyer to the Company, for the purpose of the Company's remitting such amounts to
the appropriate taxing authorities, (iv) contain such representations and
warranties of the Optionholders as to title authority and capacity to sell the
Option Shares as the Buyer shall reasonably request and to require all such
Optionholders' signatures to be notarized, and (v) include a release in form and
substance as set forth in Exhibit G-1 (for the Executives (the "Executive
Release")) or Exhibit G-2 (for the Specified Employees (the "Employee
Release")). Except as otherwise agreed to by the parties, (i) the Option Plans
shall terminate as of the Closing and the provisions in any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any subsidiary shall be
terminated as of the Closing, and (ii) the Sellers shall take all action
necessary to ensure that following the Closing no participant in the Executive
Option Plan or the Employee Option Plan or other plans, programs or arrangements
shall have any right thereunder to acquire or participate in changes in value of
equity securities of the Company, or any subsidiary and to terminate all such
plans effective as of the Closing. Each Executive who exercises his Options
pursuant to this Section 2.8 shall be deemed a Seller for all purposes of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS
Section 3.1 Representations and Warranties of the Sellers
Concerning the Transaction. Each of the Sellers represents and warrants to the
Buyer that the statements contained in this Section 3.1 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3.1) with
respect to himself, herself or itself, except as set forth in Annex I attached
hereto.
(a) Authorization of Transaction. The Seller has full
power and authority to execute and deliver this Agreement and to
perform his, her or its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Seller,
enforceable in accordance with its terms and conditions. Assuming
compliance with the HSR Act, the Seller need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval
of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement.
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(b) Brokers' Fees. Neither the Company nor the Buyer
has or will have any liability or otherwise suffer or incur any loss as
a result of or in connection with any brokerage or finder's fee or
other commission of any person retained by or on behalf of the Company
or any Seller in connection with any of the transactions contemplated
by this Agreement.
(c) Company Shares. The Seller owns (or, with respect
to the shares of Common Stock purchasable by such Seller pursuant to
the Nieminski Agreement will own at or prior to the Closing),
beneficially and of record, the shares of Common Stock, Preferred Stock
and Common Stock Equivalents set forth opposite such Seller's name in
Section 3.1(c) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands and the sale, transfer and assignment of the Stock
and Warrants to Buyer hereunder will vest in Buyer good and clear title
to the Stock and Warrants free and clear of all Encumbrances of any
kind. The Stock, Warrants and Option Shares to be transferred to Buyer
constitute all of the issued and outstanding shares of capital stock
and all of the issued and outstanding Common Stock Equivalents of the
Company.
(d) International Golf Shares. As of the Closing, the
Sellers shall have caused the additional shareholders of record of
International Golf other than the Company to endorse the ownership, in
favor of the Buyer (or its designee), their respective stock
certificates.
(e) Purchase Price Allocation. Each of the Sellers
hereby acknowledges and agrees to the allocation of the Purchase Price
among the Sellers in accordance with Section 2.3 of the Disclosure
Schedule.
Section 3.2 Representations and Warranties Concerning the
Company and Its Subsidiaries. Each of the Company and the Sellers represents and
warrants to the Buyer that the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.2).
(a) Organization, Qualification, and Corporate Power.
Each of the Company and its Subsidiaries is a corporation duly
organized, and other than with respect to Monogram, validly existing,
and in good standing under the laws of the jurisdiction of its
incorporation. Each of the Company and its Subsidiaries, other than
Monogram, is duly authorized to conduct business and is in good
standing under the laws of each jurisdiction where such qualification
is required, except where the lack of such qualification would not have
a material adverse effect on the business, condition (financial or
otherwise), operations, results of operations, or future prospects of
the Company and its Subsidiaries. Each of the
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Company and its Subsidiaries, other than Monogram, has full corporate
power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. Section 3.2(a)
of the Disclosure Schedule lists each jurisdiction in which the Company
or its Subsidiaries is qualified to do business and the directors and
officers of each of the Company and its Subsidiaries.
(b) Capitalization. The entire authorized capital
stock of the Company consists of (i) 2,500,000 shares of Common Stock
of which 1,560,438 shares are issued and outstanding and 796,062 shares
of which are reserved for issuance upon exercise of the Warrants and
the Options and (ii) 245,000 shares of Preferred Stock of which 245,000
shares are issued and outstanding, and all of which together represent
the Stock and Option Shares. All of the issued and outstanding shares
of capital stock of the Company have been duly authorized, are validly
issued, fully paid, and nonassessable. Except as set forth under clause
(i) of the preceding sentence, no shares of the Company's capital stock
are reserved for issuance or are held as treasury shares. Except as set
forth in Section 3.2(b) of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
commitments that could require the Company to issue, sell, or otherwise
cause to become outstanding any of its capital stock, nor are there
outstanding or authorized any stock appreciation rights, phantom stock,
or similar rights or instruments (collectively, "Common Stock
Equivalents"). There is no action, suit, proceeding, hearing,
investigation, charge, complaint, demand or notice pending, or to the
Knowledge of the Company or any Seller, threatened by any present or
former shareholder of the Company with respect to the Company's capital
stock, nor to the Knowledge of the Company or any Seller do any facts
exist which could form the basis for any such claim.
(c) Noncontravention. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, or other restriction of any
government, governmental agency, or court to which any of the Company
and its Subsidiaries is subject or any provision of the charter or
bylaws of the Company and its Subsidiaries or (ii) except as set forth
in Section 3.2(c) of the Disclosure Schedule conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement to which any of the Company
and its Subsidiaries is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Lien upon
any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure
to give notice, or Security Interest would not have a material adverse
effect on the business, condition (financial or otherwise), operations,
results of operations of the Company and its Subsidiaries taken as a
whole, or on the ability of the Parties to consummate the transactions
contemplated by this Agreement (a "Material Adverse Effect"). Except as
set
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forth in Section 3.2(c) of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries needs to obtain any authorization, consent,
or approval of, or make any declaration, filing or registration with,
any government or governmental agency or regulatory authority in
connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby,
except where the failure to obtain such authorizations, consents,
approvals, declarations, filings or registrations would not have a
Material Adverse Effect. The parties acknowledge and agree that with
respect to the shares of International Golf to be transferred to Buyer
or its designee, such shares will not be transferred until the parties
have provided the corresponding concentration notification established
in Article 20 of the Mexican Federal Competition Law (Ley Federal de
Competencia Economica) to the Mexican Economic Competition Commission
("ECC") in the event said notification is to be applicable to the
transaction. Thus, it is understood by both parties that the
transaction related to the Subsidiary will legally and economically
take place only after the notification of concentration mentioned above
has been officially filed with the ECC.
(d) Brokers' Fees. None of the Company or its
Subsidiaries has any liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement, save for fees and expenses
payable to Prudential Securities Incorporated solely by the
Stockholders from proceeds of the sale of the Stock and Warrants.
(e) Title to Assets; Sufficiency. Except as set forth
on Section 3.2(e)(i) of the Disclosure Schedule, the Company and its
Subsidiaries have good and marketable title to, or a valid leasehold
interest in, the properties and assets used by them or otherwise
necessary to conduct their business, located on their premises, or
shown on the Most Recent Balance Sheet or acquired after the date
thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet. Except as set forth in
Section 3.2(e)(ii) of the Disclosure Schedule, the assets currently
owned by the Company or any of its Subsidiaries, or leased or licensed
by the Company or any of its Subsidiaries pursuant to a valid and
enforceable license or lease agreement, entered into in the ordinary
course of business or otherwise disclosed to Buyer constitute all of
the assets necessary to conduct the business of the Company and any of
its Subsidiaries in accordance with past practices as of the Most
Recent Fiscal Month End and as of the date hereof.
(f) Subsidiary. Section 3.2(f) of the Disclosure
Schedule sets forth for each Subsidiary of the Company (i) its name and
jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of
issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each
such holder, and (iv) the number of shares of its capital stock held in
treasury. All of the issued and outstanding shares of capital stock of
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each Subsidiary have been duly authorized and are validly issued, fully
paid, and nonassessable. Except for each director's qualifying shares
identified on Section 3.2(f) of the Disclosure Schedule, the Company
owns all of the issued and outstanding shares of capital stock in each
of its Subsidiaries. Shares owned by the Company in each of its
Subsidiaries are owned free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities
laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. There are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require any of the Company or its
Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any Subsidiary
of the Company to issue, sell, or otherwise cause to become outstanding
any of its own capital stock, nor any stock appreciation rights,
phantom stock, or similar rights or instruments. There are no voting
trusts, proxies, or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary of the Company.
Except for Monogram and International Golf, the Company has no
Subsidiaries. Monogram has no assets or liabilities.
(g) Financial Statements. Attached hereto as Exhibit
A are the following financial statements (collectively the "Financial
Statements"): (i) audited consolidated balance sheets and statements of
income, changes in stockholders' equity, and cash flow as of and for
the three most recent fiscal years ended December 31, 1995, 1996 and
1997 (the "Most Recent Fiscal Year End") for the Company and
International Golf; and (ii) an audited consolidated balance sheet (the
"Most Recent Balance Sheet") and audited statements of income, changes
in stockholders' equity, and cash flow (the "Most Recent Financial
Statements") as of and for the twelve months ended June 30, 1998 (the
"Most Recent Fiscal Month End") for the Company and International Golf.
The Financial Statements (including the notes thereto) have been
prepared from the books and records of the Company, are correct and
complete, have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and present
fairly the financial condition of the Company and International Golf as
of such dates and the results of operations of the Company and
International Golf for such periods.
(h) Events Subsequent to Most Recent Fiscal Month
End. Except as set forth in Section 3.2(h) of the Disclosure Schedule,
since the Most Recent Fiscal Month End, there has not been any material
adverse change in the business, condition (financial or otherwise),
operations, results of operations, or future prospects of the Company
and its Subsidiaries taken as a whole. Without limiting the generality
of the foregoing, since that date neither the Company nor any of its
Subsidiaries has:
(i) sold, leased, transferred, or assigned
any material assets, tangible or intangible, outside the
Ordinary Course of Business;
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(ii) entered into any material agreement,
contract, lease, or license (or series of related agreements,
contracts, leases or licenses) involving more than $100,000,
nor modified the terms of any such existing contract or
agreement, other than in the Ordinary Course of Business;
(iii) (nor has any other party thereto)
accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license
to which any of the Company and its Subsidiaries is a party or
by which any of them is bound;
(iv) other than with respect to the
cancellation of Affiliate receivables and payables at or prior
to Closing in accordance with the proviso in Section 5.2,
engaged in any activity which has resulted in any acceleration
or delay of the collection of its accounts or notes receivable
or any delay in the payment of its accounts payable;
(v) made any capital expenditures in an
amount in excess of $100,000 individually or in the aggregate,
other than in the Ordinary Course of Business;
(vi) imposed any Security Interest upon any
of its assets, tangible or intangible;
(vii) made any equity or debt investment in,
or any loan to, any other Person in an amount in excess of
$100,000 individually or in the aggregate;
(viii) created, incurred, assumed, or
guaranteed more than $100,000 in aggregate indebtedness for
borrowed money and capitalized lease obligations;
(ix) granted any license or sublicense of
any material rights under, allowed to lapse, disposed of or
otherwise experienced any material adverse change with respect
to any Company Proprietary Rights;
(x) made or authorized any change in the
charter or bylaws of any of the Company and its Subsidiaries;
(xi) issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(xii) declared, set aside, or paid any
dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed,
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purchased, or otherwise acquired any of its capital stock
(other than any such dividend or distribution by any of its
Subsidiaries solely to the Company);
(xiii) experienced any material damage,
destruction, or loss (whether or not covered by insurance) to
its property;
(xiv) made any loan to, or entered into any
other transaction with, any of its directors, officers, and
employees, other than employment arrangements entered into in
the Ordinary Course of Business and disclosed in writing to
Buyer;
(xv) granted any increase in the base
compensation of or made any other material change in the
employment terms of any of its directors, officers and
employees outside the Ordinary Course of Business;
(xvi) entered into any employment contract
or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of
its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan) or,
other than in the Ordinary Course of Business, granted any
increases in the base compensation of or made any other change
in he employment terms of any of its directors, officers and
employees; and
(xviii) committed to do any of the foregoing.
(i) Undisclosed Liabilities. Neither the Company nor
any of its Subsidiaries has any material liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability
for taxes), except for (i) liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
liabilities which have arisen after the Most Recent Fiscal Month End in
the Ordinary Course of Business, none of which is a liability resulting
from, arising out of, relating to, in the nature of or caused by any
breach of contract, breach of warranty (other than for replacement or
repair in the Ordinary Course of Business), tort, infringement, claim
or lawsuit.
(j) Legal Compliance. Each of the Company and its
Subsidiaries has complied and is in compliance with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no
action, suit, grievance
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proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed, commenced or to the Knowledge of the Company,
threatened against any of them alleging any failure so to comply,
except in each case where the failure to so comply would not have a
Material Adverse Effect.
(k) Tax Matters.
(i) Except as set forth in Section
3.2(k)(i) of the Disclosure Schedule, the Company and each of
its Subsidiaries have duly and timely filed all Tax Returns
they were required to file. Except as set forth in Section
3.2(k)(i) of the Disclosure Schedule, all such Tax Returns
were correct and complete in all material respects. Except as
set forth in Section 3.2(k)(i) of the Disclosure Schedule, all
Taxes owed by the Company and any of its Subsidiaries (whether
or not shown on any Tax Return) have been timely paid. Neither
the Company nor any of its Subsidiaries currently is the
beneficiary of any extension of time within which to file any
Tax Return. The Company and each of its Subsidiaries have
maintained adequate provision for, and adequate funds to pay,
Taxes payable by the Company and its Subsidiaries as of the
Most Recent Fiscal Month End, and such provision and funds (as
adjusted for the passage of time through the Closing Date in
accordance with the past custom and practices of the Company
and each of its Subsidiaries in filing their respective Tax
Returns) will be adequate for Taxes payable by the Company and
each of its Subsidiaries as of the Closing Date.
(ii) There is no material dispute or claim
concerning any Tax liability of the Company or any of its
Subsidiaries either (A) claimed or raised by any authority in
writing or (B) as to which any of the Sellers has Knowledge
based upon personal contact with any agent of such authority.
(iii) Section 3.2(k)(iii) of the Disclosure
Schedule lists all federal, state, local, and foreign Tax
Returns filed with respect to any of the Company and its
Subsidiaries for taxable periods ended on or after December
31, 1991, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject
of audit. The Sellers have delivered to the Buyer correct and
complete copies of all federal Tax Returns, examination
reports, and statements of deficiencies assessed against, or
agreed to by any of the Company and its Subsidiaries for all
taxable periods for which the applicable statute of
limitations has not yet expired. Neither the Company nor any
of its Subsidiaries has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency.
(iv) neither the Company nor any of its
Subsidiaries has received, or expects to receive, from any
taxing authority any written notice of proposed
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adjustment, deficiency, underpayment of Taxes or any other
such notice which has not been satisfied by payment or been
withdrawn, and, to the Knowledge of the Company or any Seller,
no claims have been asserted relating to such Taxes against
the Company or any of its Subsidiaries;
(v) the Company and its Subsidiaries have
withheld and paid all required Taxes in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other similar third party;
(vi) neither the Company nor any of its
Subsidiaries has filed a consent to the application of Section
341(f) of the Code;
(vii) neither the Company nor any of its
Subsidiaries will be required, as a result of (A) a change in
accounting method for a Tax period beginning on or before the
Closing Date, to include any adjustment under Section 481(c)
of the Code (or any corresponding provision of state, local or
foreign Tax law) in taxable income for any Tax period
beginning on or after the Closing Date, or (B) any "closing
agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law),
to include any item or income in or exclude any item of
deduction from any Tax period beginning on or after the
Closing Date;
(viii) the Company and each of its
Subsidiaries have disclosed on its income Tax Returns all
positions taken therein that could give rise to an
accuracy-related penalty under Section 6662 of the Code (or
any corresponding provision of Tax law);
(ix) neither the Company nor any of its
Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will
not be deductible under Section 280G or Section 162(m) of the
Code;
(x) to the Knowledge of the Company or any
Seller, no claim has been made with respect to any taxable
year of the Company or its Subsidiaries for which the
applicable statute of limitations has not yet expired by a
taxing authority in a jurisdiction where neither the Company
nor any of its Subsidiaries pays Taxes or files Tax Returns
that any such entity is or may be subject to Taxes assessed by
such jurisdiction;
(xi) neither the Company nor any of its
Subsidiaries has been a United States real property holding
corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section
897(c)(1)(A)(ii);
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(xii) neither the Company nor any of its
Subsidiaries is a party to any Tax allocation or sharing
agreement; and
(xiii) neither the Company nor any of its
Subsidiaries (A) has been a member of an Affiliated Group
filing a consolidated federal income Tax Return or (B) has any
liability for the Taxes of any Person (other than the Company)
under Treas. Reg. Section 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(l) Real Property.
(i) Section 3.2(l)(i) of the Disclosure
Schedule contains a legal description of each parcel of real
property owned by the Company or any Subsidiary (the "Owned
Property"). The Company or its applicable Subsidiary has good
and marketable title in and to all of the Owned Property
subject to no Encumbrances, except as described on such
section of the Disclosure Schedule.
(ii) Section 3.2(l)(ii)(a) of the Disclosure
Schedule contains a list of all leases, subleases and other
occupancy agreements, including all amendments, extensions and
other modifications (the "Leases") for real property (the
"Leased Property"; the "Owned Property" and the "Leased
Property" collectively the "Real Property") to which the
Company or any Subsidiary is the "tenant", "subtenant" or
other lessee party. The Company or its applicable Subsidiary
has a good and valid leasehold interest in and to all of the
Leased Property, subject to no Encumbrances except as
described in such section of the Disclosure Schedule. Each
Lease is in full force and effect and is enforceable in
accordance with its terms. There exists no default or
condition which, with the giving of notice, the passage of
time or both, would reasonably be expected to become a
material default by the Company or its Subsidiary under any
Lease. Sellers have previously delivered to Buyer true and
complete copies of all the Leases. Except as described on
Section 3.2(l)(ii)(b) to the Disclosure Schedule, no consent,
waiver, approval or authorization is required from the
landlord under any Lease as a result of the execution of this
Agreement or the consummation of the transactions contemplated
hereby.
(iii) The Real Property constitutes all of
the real property owned, leased, occupied or otherwise
utilized in connection with the business of the Company and
its Subsidiaries. Except as set forth on Section 3.2(l)(iii)
of the Disclosure Schedule, other than the Company and the
Subsidiaries, there are no parties in possession or parties
having any current or future right to occupy any of the Real
Property. The Real Property is sufficient and appropriate for
the conduct of the business of the Company and its
Subsidiaries as currently conducted and as conducted since
December 31, 1997. The Real Property and all plants, buildings
and
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improvements located thereon conform to all applicable
building, zoning and other laws, ordinances, rules and
regulations. All permits, licenses and other approvals
required of the Company by applicable law or contract for the
current occupancy and use of the Real Property by the Company
or its Subsidiaries have been obtained, are in full force and
effect and have not been violated. There exists no violation
of any law, covenant, condition, restriction, easement,
agreement or order affecting any portion of the Real Property
which would have a material adverse effect on the value,
ownership, occupancy or use of such Real Property. All
improvements located on the Real Property have direct access
to a public road adjoining such Real Property. No such
improvements or accessways encroach on land not included in
the Real Property and no such improvement is dependent for its
access, operation or utility on any land, building or other
improvement not included in the Real Property. There is no
pending or, to the Knowledge of the Company and its
Subsidiaries, any threatened condemnation proceeding affecting
any portion of the Real Property.
(m) Intellectual Property.
(i) Neither the Company nor any of its
Subsidiaries has interfered with, infringed upon,
misappropriated, or violated any material Proprietary Rights
of any third party in any material respect. Neither of the
Company nor the Sellers has, since January 1, 1993, received
any written charge, complaint, claim, demand, or notice
alleging any such interference, infringement,
misappropriation, or violation (including any claim that any
of the Company and its Subsidiaries must license or refrain
from using any Proprietary Rights of any third party). To the
Knowledge of the Company or any Seller, no third party has
interfered with, infringed upon, misappropriated, or violated
any material Proprietary Rights of any of the Company or any
of its Subsidiaries in any material respect.
(ii) Section 3.2(m)(ii) of the Disclosure
Schedule identifies each patent or registration which has been
issued to the Company or any of its Subsidiaries with respect
to any of the Company Proprietary Rights, identifies each
pending patent application or application for registration
which the Company or any of its Subsidiaries has made with
respect to any of the Company Proprietary Rights, and
identifies each material license, agreement, or other
permission which the Company or any of its Subsidiaries has
granted to any third party with respect to any of the Company
Proprietary Rights (together with any exceptions). The Company
has delivered to the Buyer correct and complete copies of all
such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date). Section
3.2(m)(ii) of the Disclosure Schedule also identifies each
material trade name or unregistered trademark used by the
Company or any of its Subsidiaries.
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(iii) Section 3.2(m)(iii) of the Disclosure
Schedule identifies each material item of the Company
Proprietary Rights that any third party owns and that any of
the Company or its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission. The Sellers have
delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended
to date). With respect to each item of the Company Proprietary
Rights required to be identified in Section 3.2(m)(iii) of the
Disclosure Schedule:
(A) the license, sublicense,
agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and
effect in all material respects;
(B) no party to the license,
sublicense, agreement, or permission is in material
breach or default, and no event has occurred which
with notice or lapse of time would constitute a
material breach or default or permit termination,
modification, or acceleration thereunder;
(C) no party to the license,
sublicense, agreement, or permission has repudiated
any material provision thereof; and
(D) neither the Company nor any of
its Subsidiaries has granted any sublicense or
similar right with respect to the license,
sublicense, agreement, or permission.
(iv) The Company and its Subsidiaries own
or have a license to use all Proprietary Rights necessary for
the operation of their businesses as conducted as of the Most
Recent Fiscal Year End and as currently conducted.
(v) All material computer systems used by
the Company or its Subsidiary recognize and shall recognize
the advent of the year 2000 and can correctly recognize and
manipulate date information relating to dates before, on or
after January 1, 2000 and the operation and functionality of
such material computer systems will not be adversely affected
in any material respect by the advent of the year 2000 or any
manipulation of data featuring date information relating to
dates on or after January 1, 2000.
(n) Tangible Assets. The buildings, machinery,
equipment, and other tangible assets that the Company and any of its
Subsidiaries own and lease are free from material defects (patent and
latent), have been maintained in accordance with normal industry
practice, and are in good operating condition and repair (subject to
normal wear and tear), considering their age and operational use.
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(o) Inventory. The inventory of the Company and its
Subsidiaries consists of raw materials, manufactured and processed
parts, work in process, titanium scrap, and finished goods, all of
which is or was, prior to the sale thereof, in good condition, suitable
and usable or salable in the Ordinary Course of Business (subject only
to the reserve for inventory write-down reflected on the Closing Date
Balance Sheet) and merchantable and fit for the purpose for which it
was procured or manufactured.
(p) Contracts. Section 3.2(p) of the Disclosure
Schedule lists the following contracts and other agreements to which
any of the Company and its Subsidiaries are parties:
(i) any agreement (or group of related
agreements) for the consignment or lease of machinery,
equipment or other personal property to or from any Person
providing for lease payments in excess of $50,000 per annum;
(ii) any agreement (or group of related
agreements) for the purchase or sale of raw materials,
products, machinery, equipment or other personal property, or
for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year or
involve consideration in excess of $50,000, other than
releases under blanket purchase orders entered into in the
Ordinary Course of Business;
(iii) any pledge, conditional sale or title
retention agreement involving the payment of more than $50,000
in the aggregate;
(iv) any agreement concerning a partnership
or joint venture;
(v) any agreement (or group of related
agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, any mortgage,
indenture, note, bond or other agreement relating to
indebtedness incurred or provided by the Company or any of its
Subsidiaries, or any capitalized lease obligation, or under
which it has imposed a Security Interest on any of its assets,
tangible or intangible;
(vi) any agreement concerning
confidentiality or noncompetition;
(vii) any agreement with any of the Sellers
and their Affiliates (other than agreements solely between the
Company and its Subsidiaries);
(viii) any profit sharing, stock option,
stock purchase, stock appreciation, deferred compensation,
severance, or other material plan or
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arrangement for the benefit of its current or former
directors, officers, and employees;
(ix) any material license, royalty or other
agreement relating to the Company Proprietary Rights;
(x) except as provided under subsection
(v) above, any agreement containing commitments of suretyship,
guarantee or indemnification (except for guarantees,
warranties and indemnities provided by the Company or any
Subsidiary in the ordinary course of business and those having
a contract value, individually or in the aggregate of $25,000
or less);
(xi) any written agreement with a
governmental body;
(xii) any collective bargaining agreement;
(xiii) any agreement for the employment of
any individual on a full-time, part-time, consulting, or other
basis providing annual compensation in excess of $50,000 or
providing severance benefits in excess of $50,000;
(xiv) any agreement under which the
consequences of a default or termination would reasonably be
expected to have a Material Adverse Effect;
(xv) any other agreement (or group of
related agreements) the performance of which involves
consideration in excess of $50,000;
(xvi) any commitment to do any of the
foregoing described in clauses (i) through (xv).
The Company has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3.2(p) of the Disclosure Schedule and a
written summary setting forth the material terms and conditions of each oral
agreement referred to in Section 3.2(p) of the Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect in accordance with its terms in all material
respects and will continue to be so following the Closing; (B) the Company is
not, and to the Knowledge of the Company or any Seller, no third party is in
material breach or default, and no event has occurred which with notice or lapse
of time would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) no party has
repudiated any material provision of the agreement. Except as identified in
Section 3.2(p) of the Disclosure Schedule, neither the Company nor any of its
Subsidiaries is a party to any contract, agreement or understanding which
contains a "change in control", "potential change in control" or similar
provision which could be triggered by the transactions contemplated by this
Agreement.
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(q) Notes and Accounts Receivable. All notes and
accounts receivable of the Company and its Subsidiaries are reflected
properly on their books and records, are valid receivables subject to
no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries.
(r) Insurance. Section 3.2(r) of the Disclosure
Schedule sets forth the following information with respect to each
material insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and
surety arrangements) with respect to which any of the Company and its
Subsidiaries is a party, a named insured, or otherwise the beneficiary
of coverage:
(i) the name, address, and telephone
number of the agent;
(ii) the name of the insurer, the name of
the policyholder, and the name of each covered insured;
(iii) the policy number and the period of
coverage;
(iv) the scope (including an indication of
whether the coverage is on a claims made, occurrence, or other
basis) and amount (including a description of how deductibles
and ceilings are calculated and operate) of coverage; and
(v) a description of any retroactive
premium adjustments or other material loss-sharing
arrangements.
With respect to each such insurance policy: (A) the policy is in full
force and effect in all material respects; (B) neither the Company, its
Subsidiaries, nor to the Knowledge of the Company, any other party to
the policy is in material breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such
a material breach or default, or permit termination, modification, or
acceleration, under the policy; and (C) no party to the policy has
repudiated any material provision thereof. Section 3.2(r) of the
Disclosure Schedule describes any material self-insurance arrangements
affecting any of the Company and its Subsidiaries. All known claims, if
any, made against the Company or any of its Subsidiaries that are
covered by insurance have been disclosed to and accepted by the
appropriate insurance companies and are being defended by such
appropriate insurance companies and are described in Section 3.2(r) of
the Disclosure Schedule and, except as disclosed in Section 3.2(r) of
the Disclosure Schedule, no claims have been denied coverage during the
last three years.
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(s) Litigation. Section 3.2(s) of the Disclosure
Schedule sets forth each instance in which the Company or any of its
Subsidiaries (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, settlement, claim or charge or (ii) is a party
or, to the Knowledge of the Company, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any
arbitrator, none of which, individually or in the aggregate, will have
or result in a Material Adverse Effect.
(t) Product Warranty. Substantially all of the
products manufactured, sold, leased, and delivered by the Company and
its Subsidiaries have conformed in all material respects with all
applicable contractual commitments and all express and implied
warranties, and none of the Company and its Subsidiaries has any
liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, and whether due or to become due) for
replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on
the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for operations and transactions through the
Closing Date in accordance with past custom and practice of the Company
and its Subsidiaries and in accordance with the accounting principles
set forth in Section 2.4(e). Substantially all of the products
manufactured, sold, leased, and delivered by the Company or any of its
Subsidiaries are subject to standard terms and conditions of sale or
lease. Section 3.2(t) of the Disclosure Schedule includes copies of the
standard terms and conditions of sale or lease for each of the Company
and any of its Subsidiaries (containing applicable guaranty, warranty,
and indemnity provisions).
(u) Product Liability. Neither the Company nor any of
its Subsidiaries has any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to
become due) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Company or any of its
Subsidiaries.
(v) Employees. To the Knowledge of the Company and
each Seller, no executive, key employee, or significant group of
employees plans to terminate employment with the Company or any of its
Subsidiaries during the next twelve months. Neither the Company nor any
of its Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strike or material
grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past three years. Neither the Company nor
any of its Subsidiaries has committed any material unfair labor
practice. Neither the Company nor any of its Subsidiaries nor any of
the Sellers has any Knowledge of any union organizing or
decertification effort presently underway or threatened by or on
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behalf of or against any labor union with respect to any employee of
the Company or any of its Subsidiaries. Neither the Company nor any of
its Subsidiaries has engaged in any plant closing or employee layoff
activities that would implicate the Worker Adjustment Retraining and
Notification Act of 1988, as amended, or any similar state or local
plant closing or mass layoff statute, rule or regulation. The Company
has satisfied or will, prior to the Closing, satisfy any notice or
bargaining obligation it may have under any law or collective
bargaining agreement to any employee representative with respect to the
effects of the transactions contemplated by this Agreement.
(w) Employee Benefits.
(i) Section 3.2(w) of the Disclosure
Schedule lists each Employee Benefit Plan and each
Multiemployer Plan.
(A) Each Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all material
respects with its terms and, to the extent
applicable, with the requirements of ERISA, the Code,
any applicable collective bargaining agreement, and
other applicable laws.
(B) All required reports and
descriptions (including Form 5500 annual reports,
summary annual reports, PBGC-l's, and summary plan
descriptions) have been filed or distributed
appropriately with respect to each Employee Benefit
Plan. The requirements of Part 6 of Subtitle B of
Title I of ERISA and of Code Section 4980B ("COBRA")
have been met in all material respects with respect
to each Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(C) All contributions (including all
employer contributions and employee salary reduction
contributions) which are due have been paid to each
Employee Pension Benefit Plan and to each
Multiemployer Plan and all contributions for any
period ending on or before the Closing Date which are
not yet due have been paid to each Employee Pension
Benefit Plan and to each Multiemployer Plan or
accrued in accordance with the past custom and
practice of the Company and its Subsidiaries. All
premiums or other payments for all periods ending on
or before the Closing Date have been paid with
respect to each Employee Welfare Benefit Plan and to
each Multiemployer Plan. No Employee Pension Benefit
Plan has an "accumulated funding deficiency" within
the meaning of Code Section 412 or Section 302 of
ERISA.
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(D) Each Employee Benefit Plan which
is an Employee Pension Benefit Plan has received a
determination letter from the Internal Revenue
Service that such Employee Benefit Plan is qualified
under Code Section 401(a), and nothing has occurred
since the date of such determination that could
adversely affect the qualification of such Employee
Benefit Plan.
(E) Sellers have delivered to Buyer
correct and complete copies of the plan documents and
summary plan descriptions, the most recent
determination letter received from the Internal
Revenue Service, the three most recent Form 5500
annual reports, and all related trust agreements,
insurance contracts, and other funding agreements
which implement each Employee Benefit Plan.
(F) There have been no Prohibited
Transactions with respect to any Employee Benefit
Plan. No fiduciary (as defined in Section 3(21) of
ERISA) has any liability for breach of fiduciary duty
or any other failure to act or comply in connection
with the administration or investment of the assets
of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to
the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine
claims for benefits) is pending or, to the Knowledge
of any Seller or any director or officer of the
Company or its Subsidiaries, threatened.
(ii) None of the Company and its
Subsidiaries has incurred any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) to the PBGC
(other than PBGC premium payments) or otherwise under Title IV
of ERISA or under the Code.
(iii) None of the Company, its Subsidiaries,
and the other members of the Controlled Group of Corporations
that includes the Company and its Subsidiaries contributes to,
has contributed to, or has been required to contribute to any
Multiemployer Plan or has any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including
any withdrawal liability, under any Multiemployer Plan.
(iv) None of the Employee Welfare Benefit
Plans presently provides or in the past provided for medical,
health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their
spouses, or their dependents (other than in accordance with
COBRA).
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(x) Transaction With Affiliates. Except as set forth
on in Section 3.2 (x) of the Disclosure Schedule, none of the Company's
shareholders, directors, officers nor, to the Knowledge of the Company
or to the Knowledge of any Seller, any of their respective relatives or
Affiliates nor any employee of the Company is involved in any material
business arrangement or relationship with the Company or any of its
Subsidiaries (whether written or oral), and none of the Company's
shareholders, directors, officers or employees nor any of their
respective relatives or Affiliates owns any property or right, tangible
or intangible, which is used by the Company or any of its Subsidiaries.
(y) Environment, Health, and Safety.
(i) Other than as set forth in Section
3.2(y)(i) of the Disclosure Schedule, each of the Company, its
Subsidiaries, and their respective predecessors and Affiliates
(A) has complied and is in compliance with all applicable
Environmental, Health, and Safety Laws in all material
respects (and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against any of them alleging any such
failure to comply with or any actual or potential liability
under, Environmental, Health and Safety Laws), and (B) has
obtained and complied with and is in material compliance with
all of the terms and conditions of all material permits,
licenses, and other authorizations which are required under
the Environmental, Health, and Safety Laws, and (C) has
complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in the Environmental, Health, and Safety Laws.
(ii) Other than as set forth in Section
3.2(y)(ii) of the Disclosure Schedule, neither the Company nor
any of its Subsidiaries has liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) under any
Environmental, Health and Safety Laws, and the Company, its
Subsidiaries, and their respective predecessors and Affiliates
have not handled or disposed of or released any substance,
arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition, or
owned or operated any property or facility in any manner that
would give rise to any material liability, for damage to any
site, location, or body of water (surface or subsurface), for
any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health,
and Safety Law.
(iii) Other than as set forth in Section
3.2(y)(iii) of the Disclosure Schedule neither the Company nor
any of its Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported,
handled, or released any substance, including without
limitation any hazardous substance, or
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owned or operated any property or facility and no such
property or facility is contaminated by any such substance in
a manner that has given or would give rise to material
liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, or any
investigative, corrective or remedial obligations, pursuant to
Environmental, Health and Safety Laws (including CERCLA and
RCRA).
(iv) None of the following exists at any
Owned Property or Leased Property: (1) underground storage
tanks; (2) asbestos-containing material in any form or
condition; (3) materials or equipment containing
polychlorinated biphenyls; or (4) landfills, surface
impoundments or disposal areas, except in each case for such
items for which neither the Company nor any of its
Subsidiaries has liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) under any
Environmental, Health and Safety Laws.
(v) Except as set forth in Section 3.2(y)(v)
of the Disclosure Schedule, neither this Agreement nor the
consummation of the transactions contemplated hereby will
result in any obligations for site investigation or cleanup,
or notification to or consent of government agencies or third
parties, pursuant to any so-called "transaction-triggered" or
"responsible transfer" Environmental, Health and Safety Laws.
(z) Funded Debt. Except as set forth in
Section 3.2(z) of the Disclosure Schedule neither the Company
nor any of its Subsidiaries has outstanding any Funded Debt,
nor is a guarantor or is otherwise responsible for any
liability or obligation (including indebtedness) of any other
Person.
(aa) Disclosure. The representations and
warranties contained in this Section 3.2 do not contain any
untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and
information contained in this Section 3.2 not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Company and the
Sellers as follows:
Section 4.1 Organization of Buyer. Buyer is a corporation
organized, validly existing and in good standing under the laws of the State of
Wisconsin and has all requisite power
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and authority to conduct its business as it is presently being conducted and to
own and lease its properties and assets.
Section 4.2 Authorization; Validity. Buyer has all necessary
power and authority to enter into this Agreement and has taken all action
necessary (including, without limitation, authorization from its board of
advisors) to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Buyer and is a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms.
Section 4.3 No Conflict or Violation. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in:
(a) a violation of or a conflict with any provision
of the constitutive documents of Buyer;
(b) a breach of, or a default under, any term or
provision of any contract, commitment, indenture, undertaking,
instrument or license to which Buyer is a party or by which its assets
are bound, which breach or default would have a material adverse affect
on Buyer's ability to consummate the transactions contemplated hereby;
or
(c) a violation by Buyer of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree
or award, which violation would have a material adverse effect on
Buyer's ability to consummate the transactions contemplated hereby.
Section 4.4 Consents and Approvals. Except as set forth in
Section 4.4 of the Disclosure Schedule, no consent, approval or authorization
of, or declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
Buyer in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby, except
for consents, approvals or authorizations, declarations, filings or
registrations, the failure of which to obtain would not in the aggregate impair
the ability of Buyer to perform its obligations hereunder.
Section 4.5 No Brokers. Neither Buyer nor any affiliate of
Buyer has entered into or will enter into any agreement, arrangement or
understanding with any person or entity which will result in the obligation of
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
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ARTICLE V
COVENANTS OF THE SELLERS AND COMPANY
The Sellers and the Company hereby each covenant and agree
with Buyer that from and after the date hereof to and including the Closing
Date, the Sellers and the Company shall do or refrain from doing the following:
Section 5.1 Access to Information and Records. At or prior to
the Closing Date, Buyer and its financing sources shall be entitled, through
their respective representatives and agents, to make such investigation of the
assets, properties, business and operations of the Company and its Subsidiaries
and such examination of the books, records, Tax Returns, financial condition and
operations of the Company and its Subsidiaries as Buyer or its financing sources
may reasonably request. Any such investigation and examination shall be
conducted at reasonable times and under reasonable circumstances and the Company
and Sellers shall cooperate fully therein, including with respect to all
communications with the Company's customers, suppliers and lenders with
Company's prior written consent. No investigation by Buyer shall diminish or
obviate any of the representations, warranties, covenants or agreements of the
Company or Sellers under this Agreement. In order that Buyer and its financing
sources may have full opportunity to make such a business, accounting and legal
review, examination or investigation as it or they may wish of the business and
affairs of the Company and its Subsidiaries, the Company shall furnish the
representatives of Buyer and its financing sources during such period with all
such information and copies of such documents concerning the affairs of the
Company and its Subsidiaries as such representatives may reasonably request and
cause its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in connection with such review and
examination and to make full disclosure to Buyer and its financing sources of
all material facts affecting the financial condition and business operations of
the Company and its Subsidiaries. Until the Closing and if the Closing shall not
occur, thereafter, Buyer and its Affiliates and financing sources shall keep
confidential and shall not use in any manner inconsistent with the transactions
contemplated by this Agreement and after termination of this Agreement, Buyer
and its Affiliates and financing sources shall not disclose, nor use for their
own benefit, any information or documents obtained from the Company concerning
its assets, properties, business and operations, unless (a) readily
ascertainable from public or published information, or trade sources, (b)
already known or subsequently developed by Buyer independently of any
investigation of the Sellers or Company, (c) received from a third party not
under an obligation to the Sellers or Company to keep such information
confidential or (d) required by any law or order. In the event this transaction
does not close for any reason, Buyer and its Affiliates and financing sources
shall return or destroy all such confidential information and compilations
thereof as is practicable. Buyer shall cause its officers, directors, agents and
advisors to comply with the provisions of this Section 5.1.
Section 5.2 Conduct of Business. From the date hereof through
the Closing Date, each of the Company and its Subsidiaries shall (i) conduct its
business in the ordinary course in the same manner as it has been conducted
since the date of the Most Recent Financial Statements and
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in such a manner so that the representations and warranties contained in Article
III shall continue to be true and correct in all material respects on and as of
the Closing Date as if made on and as of the Closing Date (except as otherwise
expressly contemplated herein), and (ii) without limiting the generality of the
foregoing, not undertake any of the action, fail to take any action or permit to
occur any event, which such action, failure or occurrence, had it taken place
prior to the date hereof, would be required to be disclosed pursuant to Section
3.2(h) without the prior written consent of the Buyer, not to be unreasonably
withheld.
Section 5.3 Preservation of Business. From the date hereof
through the Closing Date, each of the Company, its Subsidiaries and Sellers
shall use its best efforts to (i) preserve intact its business, assets,
properties and organizations; (ii) keep available the services of their present
officers and key employees; and (iii) maintain its present suppliers and
customers and to preserve its goodwill.
Section 5.4 Notice of Events. The Company, its Subsidiaries
and each Seller, with knowledge thereof, shall promptly notify Buyer of (a) any
event, condition or circumstance occurring, or failing to occur, from the date
hereof through the Closing Date, which occurrence or failure to occur would
constitute, or would reasonably be expected to result in a violation or breach
of this Agreement, (b) any event, occurrence, transaction or other item which
would have been required to have been disclosed on any Schedule or statement
delivered hereunder had such event, occurrence, transaction or item existed on
the date hereof, other than items arising in the ordinary course of business
which would not render any representation or warranty of the Company or Sellers
materially misleading.
Section 5.5 Exclusivity. Until the earlier occurs of the
Closing or the termination of this Agreement, none of the Sellers, the Company,
nor any of their respective directors, officers, employees, agents,
representatives, shareholders or Affiliates (collectively, the "Company Group")
shall initiate, solicit, entertain, negotiate, accept or discuss, directly or
indirectly, or encourage inquiries or proposals (each, an "Acquisition
Proposal") with respect to, or furnish any information relating to or
participate in any negotiations or discussions concerning, or enter into any
agreement with respect to, any acquisition or purchase of all or a substantial
portion of the business, assets, properties, capital stock or capital stock
equivalents of the Company or any of its Subsidiaries (a "Potential Sale"),
whether by merger, combination, sale of stock, sale of assets, or otherwise, or
enter into any agreement, arrangement or undertaking requiring it to abandon,
terminate or fail to consummate the transaction contemplated by this Agreement.
The Sellers and the Company shall, and shall cause each other member of the
Company Group to, immediately cease and cause to be terminated any existing
activities, including discussions or negotiations with any parties, other than
Buyer, conducted prior to the date hereof with respect to any Acquisition
Proposal. The Company or the Sellers shall (i) immediately inform Buyer of any
inquiries any member of the Company Group receives after the date hereof
concerning an Acquisition Proposal or Potential Sale and provide Buyer with
copies of all correspondence or other documents received in connection
therewith, and (ii) inform the Persons sending such inquiries, requests or
proposals that the Company
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is bound by an exclusivity arrangement (without any reference to Buyer, its
Affiliates, or its potential financing sources). The Sellers and the Company
represent that each is not a party to or bound by any agreement with respect to
an Acquisition Proposal other than under this Agreement. Each of the Sellers and
the Company shall cause its officers, directors, agents and advisors to comply
with the provisions of this Section 5.5.
Section 5.6 Non-Competition; Non-Interference;
Non-Solicitation. As a significant inducement to Buyer to enter into and perform
its obligations under this Agreement, each Covered Person agrees as follows:
(a) Covenant Against Competition. The Covered Person
acknowledges that (1) the principal business of Buyer and the Company
(as successor in interest to the Stock the Company) is the manufacture
and sale of investment-cast products, including golf club heads,
(collectively, the "Company Business"); (2) the Covered Person is one
of a limited number of Persons who have developed the Company Business;
(3) the Company Business is, in part, national and international in
scope; the Covered Person's work for the Company has given and will
continue to give him access to the confidential affairs and proprietary
information of the Buyer and the Company; the information, observations
and data disclosed to, developed by or obtained by him while employed
by the Company or any of its Subsidiaries (collectively, the
"Consolidated Company") concerning the business or affairs of any
member of the Consolidated Company (including, without limitation, the
Company's technology, methods of doing business and supplier and
customer information, but excluding any personal biographical
information or personal diaries, payroll records, appointment books or
calendars, except to the extent any Confidential Information regarding
the Company is contained therein) (collectively, "Confidential Company
Information") are the property of Buyer and the Company or such other
member of the Consolidated Company and that the continued success of
the Company Group depends in large part on keeping this information
from becoming known to its competitors; the agreements and covenants of
the Covered Person contained in this Section 5.6 are essential to the
business and goodwill of Buyer and the Company; and Buyer would not
have entered into this Agreement and purchased the Stock but for the
covenants and agreements set forth in this Section 5.6.
Accordingly, the Covered Person covenants and agrees that:
(i) During the period commencing on the date
hereof ending three (3) years following the Closing Date (the
"Restricted Period"), the Covered Person shall not in the
United States of America, directly or indirectly, own,
operate, manage, control, participate in, consult with,
advise, permit his name to be used by, provide services for,
lease, or in any manner engage (including by himself, in
association with any Person, or through any Person) in (A) the
Company Business; or (B) in any business which manufactures or
sells any products or provides any services which may be used
as substitutes for or are otherwise in competition with any
products or services in the business of the Consolidated
Company as such
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businesses exist or are proposed as part of the Company's
plans as of the Closing Date or the date of this Agreement, or
logical extensions thereof in the area of golf club
manufacture, assembly or distribution (collectively, "Covered
Activities"); or (C) become interested in any such Person
which engages in any Covered Activities (other than Buyer) as
a partner, shareholder, principal, agent, consultant or in any
other relationship or capacity; provided, however, that
notwithstanding the above, the Covered Person may own,
directly or indirectly, solely as an investment, securities of
any such Person which are traded on any national securities
exchange or NASDAQ if the Covered Person is not a controlling
person of, or a member of a group which controls, such Person,
does not, directly or indirectly, own three percent (3%) or
more of any class of securities of such Person and has no
active participation in the business of such Person.
(ii) At all times after the date hereof, the
Covered Person shall keep secret and retain in strictest
confidence, and shall not use for his benefit or the benefit
of others, except in connection with the business and affairs
of Buyer, the Company and their affiliates, all Confidential
Company Information including, without limitation, information
with respect to (A) prospective facilities, (B) sales figures,
(C) profit or loss figures, and (D) customers, clients,
suppliers, sources of supply and customer lists and shall not
disclose such Confidential Company Information to anyone
outside of Buyer, the Company and their Affiliates, advisors,
financiers and others having a similar confidential
relationship to the Company, except with the express written
consent of the Buyer and except for Confidential Company
Information which is at the time of receipt or thereafter
becomes publicly known through no wrongful act of the Covered
Person. The Covered Person shall deliver to Buyer on the
Closing Date, or at any other time Buyer may request, all
memoranda, notes, plans, records, reports, computer tapes,
printouts and software and other documents and data (and
copies thereof) relating to the Confidential Company
Information, Work Product (as defined below) or the business
of the Company or any Subsidiary which he may then possess or
have under his control.
(iii) During the two-year period following
the Closing Date the Covered Person shall not, without the
prior written consent of the Buyer, directly or indirectly,
(A) induce or attempt to induce any employee of Buyer, the
Company or any Subsidiary to leave the employ of Buyer, the
Company or such Subsidiary, or in any way interfere with the
relationship between Buyer, the Company or any Subsidiary and
any employee thereof, (B) hire any person within two years of
the last day such person was an employee of Buyer, the Company
or any Subsidiary other than any such person terminated by the
Company or the Subsidiary, other than for cause or (C) induce
or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of Buyer, the
Company or any Subsidiary to cease doing business with or
otherwise materially alter its relationship with Buyer,
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the Company or such Subsidiary, or make any disparaging
statements or communications about Buyer or its Subsidiaries.
(iv) All inventions, innovations,
improvements, developments, methods, designs, analyses,
drawings, reports, characters, props, molds and all similar or
related information (whether or not patentable) which relate
to the Company's or any of its Subsidiaries' actual or
anticipated business, research and development or existing or
future products or services and which are conceived, developed
or made by the Covered Person while an employee of, or a
consultant to, the Company or its Subsidiaries (collectively,
"Work Product") belong to the Company and its Subsidiaries.
Covered Person shall promptly disclose such Work Product to
the Buyer and perform all actions requested by the Buyer
(whether on or after the Closing Date) to establish and
confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other
instruments).
(v) That (A) the covenants set forth in
Section 5.6(a) are reasonable in geographical and temporal
scope and in all other respects, (B) Buyer would not have
entered into this Agreement but for the covenants of the
Covered Person contained herein, and (C) the covenants
contained herein have been made in order to induce Buyer to
enter into this Agreement and purchase the Stock from which
Covered Person will receive substantial benefit; and
(vi) That if, at the time of enforcement of
the covenants contained in Section 5.6 (a)(i), a court shall
hold that the duration, scope or area restrictions stated
therein are unreasonable under circumstances then existing,
the parties agree that the maximum duration, scope, or area
reasonable under such circumstances shall be substituted for
the stated duration, scope or area.
(b) Rights and Remedies upon Breach. If the Covered
Person breaches, or threatens to commit a breach of, any of the
provisions of Section 5.6 (a) (the "Restrictive Covenants"), Buyer
shall have the following rights and remedies (upon compliance with any
necessary prerequisites imposed by law upon the availability of such
remedies), each of which rights and remedies shall be independent of
the other and severally enforceable, and all of which rights and
remedies shall be in addition to, and not in lieu of, any other rights
and remedies available to Buyer under law or in equity:
(i) The right and remedy to have the
Restrictive Covenants specifically enforced (without posting
bond) by any court having equity jurisdiction, including,
without limitation, the right to an entry against the Covered
Person of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations,
threatened or actual, and whether or not then continuing, of
such covenants, it being acknowledged and agreed that Covered
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Person's services are unique and that the Covered Person has,
and has had, access to confidential Company Information and
Work Product and that any breach or threatened breach of the
Restrictive Covenants will cause irreparable injury to Buyer
and that money damages will not provide an adequate remedy to
Buyer.
(ii) The right and remedy to require the
Covered Person to account for and pay over to Buyer all
compensation, profits, monies, accruals, increments or other
benefits (collectively, "Benefits") derived or received by him
as the result of any transactions constituting a breach of the
Restrictive Covenants, and the Covered Person shall account
for and pay over such Benefits to Buyer.
(iii) In the event of an alleged breach or
violation by the Covered Person of Section 5.6(a), the
Restricted Period shall be tolled during the period of such
breach until such breach or violation has been duly cured.
Section 5.7 Consents and Best Efforts. Each of the Buyer, the
Sellers and the Company will, as soon as reasonably practicable, commence to
take all commercially reasonable actions required to obtain all consents,
approvals, waivers and agreements of, and to give all notices and make all other
registrations or filings with, any third parties, including governmental
authorities, including any such filing required under the HSR Act, necessary to
authorize, approve or permit the full and complete sale, conveyance, assignment,
transfer and delivery of the Stock and the continuance in full force and effect
of the permits, contracts and other agreements set forth on the Disclosure
Schedules, and shall cooperate with each other with respect thereto; provided,
that it shall be the obligation of the Company and Sellers to procure all
authorizations, consents and approvals set forth in Section 5.7 and Section
3.2(l)(ii)(b) of the Disclosure Schedule, except to the extent applicable law
requires Buyer to obtain its own permit or license. In addition, subject to the
terms and conditions herein provided, each of the parties hereto covenants and
agrees to use all commercially reasonable efforts to take, or cause to be taken,
all actions, or do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, to consummate and make
effective as promptly as practicable the transactions contemplated hereby and to
cause the fulfillment of the Parties' obligations hereunder. Sellers shall use
their best efforts to cause the execution and delivery to Buyer of the Nieminski
Agreement and the Nieminski Release within five (5) days of the date hereof.
Section 5.8 Public Announcements. The timing and content of
all announcements regarding any aspect of this Agreement or the transactions
contemplated hereto to the financial community, government agencies, employees
(except as necessary to further due diligence) or the general public shall be
mutually agreed upon in advance by the Parties hereto; provided, that each party
hereto may make any such announcement which it in good faith believes, based on
advice of counsel, is necessary or advisable in connection with any requirement
of law or regulation, it being understood and agreed that each party shall
promptly provide the other parties hereto with copies of any such announcement;
and provided further that Buyer or its affiliates may make any
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announcement or disclosure to current or future financing sources or subsequent
purchasers or assignees of substantially all of the capital stock or assets of
Buyer, or any Subsidiary or Affiliate thereof without consent of or disclosure
to the Company or the Sellers.
Section 5.9 Appointment of Sellers' Representatives.
(a) By execution of a counterpart of this Agreement,
each of the Sellers hereby irrevocably makes, constitutes and appoints
the Sellers' Representatives as the representatives of the Sellers and
as their agents and attorneys-in-fact with the power and authority to
take all action on behalf of all Sellers with respect to (i) all
matters provided for herein and required under this Agreement,
including the resolution or dispute of any matters related to Article
X, and (ii) any action or decision required to be made under the Escrow
Agreement. The Sellers' Representatives shall act as a committee in
accordance with the procedures set forth in the DGCL applicable to
boards of directors of Delaware corporations and the provisions of the
bylaws of the Company as in effect as of the date hereof applicable to
the board of directors of the Company, and the Buyer shall be entitled
to deal with the Sellers' Representatives on such basis.
(b) Actions by the Sellers' Representatives. The
Company, Buyer, Escrow Agent, and all other Persons shall be entitled
to rely, as conclusive evidence of any action, decision or notice by or
from the Sellers' Representatives, on a written statement that the
Sellers' Representatives have taken such action or decision or given
such notice (a "Statement") tendered by (i) not less than two of the
Sellers' Representatives, or (ii) any other Person whose name is
provided to the Buyer and the Escrow Agent in a writing executed by
each individual who is then a Sellers' Representative; and neither the
Buyer, the Company, Escrow Agent nor any other Person shall be required
to make any inquiry or investigation as to the accuracy of any
Statement or shall be deemed to have knowledge, actual or constructive,
that any Statement is not accurate in any respect. Each Sellers'
Representative (i) hereby delegates the power and authority to such
Persons to give Statements, (ii) shall be bound by any Statements,
(iii) shall be estopped from asserting that any Statement is not
accurate in any respect or does not bind the Sellers, and (iv) hereby
releases the Company, the Buyer, the Escrow Agent and all other Persons
from any liability arising from any action taken by them in reliance on
any Statement.
Section 5.10 Indemnification of Sellers' Representatives. The
Sellers hereby agree to indemnify, defend and save and hold harmless each of the
Sellers' Representatives from and against any and all expenses, losses, claims,
liabilities, and causes of action (including attorneys' fees) incurred by such
Sellers' Representatives or asserted against such Sellers' Representative
arising from his capacity as a Sellers' Representative, except to the extent
that such Sellers' Representative is determined to have acted fraudulently or in
breach of the provisions of this Agreement.
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Section 5.11 Additional Shares. The Company and Sellers shall
use their best efforts (a) to cause John Sheehan to execute a counterpart of
this Agreement on or before December 8, 1998 and if Mr. Sheehan shall fail to do
so, the Sellers jointly and severally agree to reimburse the Buyer for the
filing fees incurred by Buyer in filing the notification required under the HSR
Act, and (b) to cause the performance of the obligations of Gerald J. Niminski
as Trustee under the Nieminski Agreement.
ARTICLE VI
TERMINATION
Section 6.1 Termination. This Agreement may be terminated and
the sale and purchase of the Stock may be abandoned, notwithstanding the
approval thereof by the shareholders of the Company:
(a) within 15 days of the date hereof by Buyer or the
Sellers' Representatives if Nieminski shall have failed to execute and
deliver the Nieminski Agreement and the Nieminski Release on terms and
conditions satisfactory to the Sellers' Representatives and Buyer; or
(b) at any time prior to Closing:
(i) by mutual written consent of the
Company, Sellers' Representatives and Buyer;
(ii) by either the Sellers' Representatives
or Buyer, if the sale and purchase of the Stock shall not have
been consummated on or before December 31, 1998 (the
"Termination Date");
(iii) by Buyer, in the event that the
conditions to its obligations set forth in Article VIII hereof
have not been satisfied or waived at or prior to the
Termination Date;
(iv) by the Sellers' Representatives, in
the event that the conditions to the Sellers' obligations set
forth in Article VII hereof have not been satisfied or waived
at or prior to the Termination Date;
(v) by Buyer, if Nieminski shall have
failed to execute a release in the form of Exhibit D hereto
(the "Nieminski Release");
(vi) by either the Sellers' Representatives
or Buyer, if as of the Closing, 1998 EBITDA is estimated to be
less than $7.0 million based on the good
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faith projection of such terminating party as evidenced in
writing to the reasonable satisfaction of the other Parties;
and
(vii) by Buyer if John Sheehan shall have
failed to have executed a counterpart to this Agreement as a
Seller on or before December 8, 1998.
Section 6.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 6.1 hereof, all rights and obligations of the
parties hereunder shall terminate and no party shall have any liability to the
other party, except for obligations of the parties hereto in Sections 5.8, 9.5
and 11.8 and the obligations of Buyer contained in Section 5.1 with respect to
confidentiality, which shall survive the termination of this Agreement, and
except that nothing herein will relieve any party from liability for any breach
of any representation, warranty, agreement or covenant contained herein prior to
such termination.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Sellers to transfer the Stock to Buyer on
the Closing Date are subject, in the discretion of the Sellers' Representatives,
to the satisfaction, on or prior to the Closing Date, except as contemplated by
this agreement, of each of the following conditions:
Section 7.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Buyer shall have
performed all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date.
Section 7.2 No Injunction. No injunction, stay or restraining
order shall be in effect prohibiting the consummation of the transactions
contemplated by this Agreement.
Section 7.3 Opinion of Counsel. Buyer shall have delivered to
Seller an opinion of Kirkland & Ellis, counsel to Buyer, substantially in the
form of Exhibit E hereto.
Section 7.4 Payments. Buyer shall have tendered the Cash
Purchase Price to Sellers and the Escrow Deposit to the Escrow Agent in
accordance with Section 2.6.
Section 7.5 Certificates. Buyer will furnish Sellers with such
certificates of its officers, directors and others to evidence compliance with
the conditions set forth in this Article VII as may be reasonably requested by
and satisfactory to Sellers and their counsel.
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Section 7.6 HSR Act Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
Section 7.7 Absence of Litigation. No action, suit,
investigation or proceeding shall have been commenced or threatened by a
governmental agency or third party against Seller, the Company, its Subsidiary,
or any of the affiliates, officers or directors of any of them, with respect to
the transactions contemplated hereby, challenging the rights of the parties
hereto to consummate such transactions or which reasonably would be expected to
have a Material Adverse Effect.
Section 7.8 Documents to be Delivered by Buyer. At the
Closing, Buyer shall have delivered to Sellers, the following documents, in each
case duly executed or otherwise in proper form:
(a) Compliance Certificate. A certificate signed by
the chief executive officer of the Buyer that each of the
representations and warranties made by the Buyer in this Agreement is
true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had
been made or given on and as of the Closing Date, and that the Buyer
has performed and complied in all material respects with all of its
obligations under this Agreement which are to be performed or complied
with on or prior to the Closing Date.
(b) Certified Resolutions. Certified copies of the
resolutions of the Board of Directors of the Buyer, authorizing and
approving this Agreement and the consummation of the transactions
contemplated hereby.
(c) Consents and Approvals. Material consents, if
any, of third parties necessary for the Buyer to execute, deliver and
perform this Agreement.
(d) Incumbency Certificate. Incumbency certificates
relating to each person executing (as corporate officer or otherwise on
behalf of another person) any document executed and delivered to
Sellers pursuant to the terms hereof.
(e) Other Documents. All other documents, instruments
or writings required to be delivered to Seller at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Sellers may reasonably request.
Section 7.9 Management Arrangements. Buyer shall have made
arrangements with the members of the Executive Committee with respect to the
bonus to be payable thereto with respect to the Company's 1999 earnings on terms
and conditions satisfactory to the Executive Committee.
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Section 7.10 Additional Seller. John Sheehan shall have
executed a counterpart of this Agreement.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Stock as provided
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions:
Section 8.1 Representations, Warranties and Covenants. All
representations and warranties of Sellers and the Company contained in this
Agreement shall be true and correct when made and, except as contemplated by
this Agreement, at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Seller and the Company
shall have performed all agreements and covenants required hereby to be
performed by either of them prior to or at the Closing Date.
Section 8.2 Consents; Releases. All consents, approvals and
waivers from governmental authorities and other parties required or necessary as
a result of the transactions contemplated hereby, including, without limitation,
those set forth in Section 8.2 of the Disclosure Schedule, shall have been
obtained, including under the HSR Act. Releases reasonably satisfactory in form
and substance to Buyer and its counsel shall have been obtained from all of the
persons and entities set forth in Section 8.2 of the Disclosure Schedule,
including the Nieminski Release.
Section 8.3 No Injunction. No injunction, stay or restraining
order shall be in effect prohibiting the consummation of the transactions
contemplated by this Agreement.
Section 8.4 HSR Act Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
Section 8.5 No Material Adverse Effect. During the period from
the date hereof to the Closing Date, no event shall have occurred or be
continuing (including any litigation) which has had or would reasonably be
expected to have a Material Adverse Effect.
Section 8.6 Additional Seller. John Sheehan shall have
executed a counterpart of this Agreement.
Section 8.7 Documents to be Delivered by Company. At the
Closing, Company and Sellers shall have delivered to Buyer the following
documents, in each case duly executed or otherwise in proper form:
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(a) Stock and Warrant Certificate(s). Stock
certificates representing all of the outstanding shares of the
Company's Common Stock and Preferred Stock and certificates
representing all of the outstanding Warrants, in each case duly
endorsed in blank or otherwise acceptable for transfer, with all
restrictive legends (if any) either removed or properly canceled.
(b) Stock Options, etc. Evidence of the exercise,
conversion or cancellation of all options, warrants, convertible
securities and other rights or securities disclosed in Section 3.2(b)
of the Disclosure Schedule, if any, in form and substance satisfactory
to Buyer.
(c) Compliance Certificate. A certificate signed by a
member of the Company's Executive Committee that each of the
representations and warranties made by the Company in this Agreement is
true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had
been made or given on and as of the Closing Date, and that the Company
and each of the Sellers has performed and complied in all material
respects with all of its obligations under this Agreement which are to
be performed or complied with on or prior to the Closing Date.
(d) Opinion of Counsel. A written opinion of Sidley &
Austin, counsel to the Company, and of counsel to each of the Sellers,
each dated as of the Closing Date, addressed to Buyer, substantially in
the form of Exhibit F hereto.
(e) Certified Resolutions. Certified copies of the
resolutions of the Board of Directors and the stockholders of the
Company, authorizing and approving this Agreement and the consummation
of the transactions contemplated hereby.
(f) Escrow Agreement. The Escrow Agreement duly
executed by the Escrow Agent, Company and Sellers.
(g) Articles; Bylaws; Good Standings. (i) A copy of
the articles of incorporation of Company and Monogram certified as of a
recent date by the Secretary of State of the State of California, (ii)
a copy of the bylaws of the Company certified by the secretary of the
Company, (iii) certificates of good standing for the Company and
International Golf from the Secretary of State of the state of
incorporation of each such company and from each other jurisdiction in
which such company is required to qualify to do business, in each case
dated not more than ten days prior to the Closing Date, (iv) copies of
the Certificate of Suspension of Monogram from the Secretary of State
of California, and (v) original or certified copy of the articles of
incorporation and bylaws of International Golf, bearing the
registration number and relative information issued by the Public
Registry of Property of the City of Tijuana.
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(h) Consents and Approvals. Material consents, if
any, of third parties necessary for the Company, or the Stockholders to
execute, deliver and perform this Agreement.
(i) Incumbency Certificate. Incumbency certificates
relating to each person executing (as corporate officer or otherwise on
behalf of another person) any document executed and delivered to Buyer
pursuant to the terms hereof.
(j) Releases. Fully executed UCC-3 Termination
Statements and other terminations and/or releases necessary to
terminate or release all Security Interests in, and Liens on, any
assets of the Company or the Subsidiary relating to any Funded Debt.
(k) Resignations. Written resignations and releases
of the directors and officers of the Company and International Golf.
(l) Nieminski Release; Employee and Executive
Releases. The Nieminski Agreement and the Nieminski Release, duly
executed by all parties thereto; and the Executive Release or Employee
Release, as applicable, duly executed by each Executive or Specified
Employee, as applicable.
(m) Subsidiary Shares. The shares of capital stock of
each Subsidiary, duly endorsed in blank or otherwise acceptable for
transfer, with all restrictive legends (if any) either removed or
properly cancelled.
(n) Other Agreements. Evidence of the termination of
each of (i) the Niemin Porter & Co. Redeemable Preferred Stock and
Warrant Purchase Agreement dated March 5, 1991 between the Company,
John R.C. Porter, Gerald J. Nieminski, Gerald J. Nieminski as Trustee
of the Nieminski Living Trust and the Investors (as defined therein)
(the "Preferred Stock Purchase Agreement"), (ii) the Registration
Rights Agreement (as defined in the Preferred Stock Purchase Agreement)
and (iii) the Voting Agreement dated March 5, 1991 between the Company,
John R.C. Porter, Gerald J. Nieminski, Gerald J. Nieminski as Trustee
of the Nieminski Living Trust and the Investors (as defined therein).
(o) Other Documents. All other documents, instruments
or writings required to be delivered to Buyer at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Buyer may reasonably request.
Section 8.8 Absence of Litigation. No action, suit,
investigation or proceeding shall have been commenced or threatened by a
governmental agency or third party against Buyer, the Company, its Subsidiary,
or any of the affiliates, officers or directors of any of them, with respect to
the transactions contemplated hereby, challenging the rights of the parties
hereto to consummate such transactions or which reasonably would be expected to
have a Material Adverse Effect.
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Section 8.9 Management Arrangements. Buyer shall have entered
into formal arrangements with such members of management as Buyer shall
determine, on terms and conditions satisfactory to Buyer in its sole discretion.
Section 8.10 Real Property.
(a) At the Closing, a title insurance company
selected by Buyer (the "Title Company") shall have delivered policies
of title insurance, issued at standard rates, insuring the Company's or
as applicable, the Subsidiary's marketable title in and to the Owned
Property in fee simple, the Company's or, as applicable, the
Subsidiary's leasehold estate in any financeable Leased Property (a
"Financeable Leasehold") and Lender's mortgage lien on the Owned
Property and each Financeable Leasehold, in each case free and clear of
all Encumbrances, and including such endorsements and affirmative
coverages as Buyer and the Lender shall reasonably require (including
without limitation non-imputation endorsements). Sellers shall provide
all such affidavits, indemnities and other such information as the
Title Company reasonably shall require in order to afford such
coverage. Buyer and Sellers shall each bear 50% of the cost of
obtaining such title insurance.
(b) Buyer shall have obtained a survey of each Owned
Property and each Leased Property to which the Company or the
Subsidiary holds a Financeable Leasehold conforming to the Minimum
Standard Detail Requirements jointly established and approved in 1992
by ALTA and ACSM certified to the Buyer, Lender, Title Company and the
Company or the Subsidiary, showing no Encumbrances. Sellers and Buyer
shall each bear 50% of the cost of obtaining such surveys.
(c) Buyer shall have received (i) from each landlord
under a Lease an estoppel, (ii) from each landlord under a Lease
described in Section 3.2(l)(ii) of the Disclosure Schedule, a consent
to the transactions contemplated by this agreement and (iii) from each
mortgagee and ground lessor of any Leased Property a nondisturbance
agreement, in each case in form and substance reasonably satisfactory
to Buyer and Lender. Lender shall receive from each landlord under a
Lease designated by Lender an agreement regarding the subordination to
Lender of such landlord's lien against personal property on the
applicable demised premises and such other matters as Lender shall have
reasonably required.
Section 8.11 Financing. Buyer shall have received cash
proceeds of financing from the Lender in an amount necessary to consummate the
purchase of the Stock and Warrants and to pay all fees and expenses in
connection therewith and to provide for ongoing working capital needs of Buyer
and the Company, and having such terms and conditions as are satisfactory to
Buyer in its sole discretion.
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Section 8.12 Due Diligence. Buyer shall have completed its due
diligence review of the Company and the Subsidiary, and Buyer shall, in good
faith, be satisfied with the results of such due diligence review.
Section 8.13 All Proceedings To be Satisfactory. All corporate
and other proceedings to be taken by the Company or the Sellers in connection
with the transactions contemplated hereby, and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Buyer and its
counsel, and the Buyer and said counsel shall have received all such counterpart
originals or certified or other copies of such documents as it or they may
reasonably request.
ARTICLE IX
POST-CLOSING COVENANTS
Section 9.1 Further Assurances. On and after the Closing Date,
Sellers and Buyer will take all appropriate action and execute (or cause to be
executed) all documents, instruments or conveyances of any kind which may be
reasonably necessary or advisable to carry out any of the provisions hereof.
Section 9.2 Tax Matters.
(a) As used herein, the term "Pre-Closing Period"
shall mean any taxable year or period that ends on or before the
Closing Date and that portion of any Straddle Period which occurs prior
to the Closing Date and includes the Closing Date. As used herein, the
term "Straddle Period" shall mean any taxable year or period beginning
before and ending after the Closing Date. As used herein, the term
"Post-Closing Period" shall mean any taxable year or period that begins
after the Closing Date and that portion of any Straddle Period which
occurs after the Closing Date.
(b) Sellers shall be responsible for the payment of
any Taxes that are imposed on the Company with respect to any
Pre-Closing Period; provided, however, that Sellers shall not be
responsible for (i) any Taxes to the extent shown as a current
obligation, liability or reserve on the Estimated Closing Balance Sheet
(determined after giving effect to the exercise of the Options in
accordance with Section 2.8) (the "Estimated Taxes"), and (ii) any
Taxes that result from any actual or deemed election under Section 338
of the Code or any similar provisions of state, local or foreign law as
a result of the purchase of the Stock or the deemed purchase of the
stock of any Subsidiary (such Taxes described in this proviso being
referred to herein as "Excluded Taxes"). Sellers shall be entitled to
any refund of (or credit for) Taxes allocable to any Pre-Closing Period
and in the event that the Estimated Taxes withheld from the Purchase
Price pursuant to Section 2.3 exceed the actual Taxes paid by the
Company with respect to the Pre-Closing Period, the Company shall pay
to the Sellers' Representatives on behalf of the Sellers the amount of
such excess. If, as a result
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of any action, suit, investigation, audit, claim, assessment or amended
Tax Return, there is any change after the Closing Date in an item of
income, gain, loss, deduction, credit or amount of Tax that results in
an increase in a Tax liability for which Sellers would otherwise be
liable pursuant to this Section 9.2, and such change results in a
decrease in the Tax liability of the Company, any Subsidiary, Buyer or
an Affiliate or successor of any thereof for any taxable year or period
beginning after the Closing Date or for the portion of any Straddle
period beginning after the Closing Date, Sellers shall not be liable
pursuant to this Section 9.2 with respect to such increase to the
extent of such decrease.
(c) Buyer and the Company shall be responsible for
the payment of any Taxes that are imposed on the Company with respect
to any Post-Closing Period and for the payment of any Excluded Taxes.
(d) For purposes of this Section 9.2, whenever it is
necessary to determine the liability for Taxes of the Company for a
Straddle Period, such determination of the Taxes of the Company for the
Pre-Closing Period and Post-Closing Period portions of the Straddle
Period shall be determined:
(i) in the case of Taxes that are either (x)
based upon or related to income or receipts, or (y)
imposed in connection with any sale or other transfer
or assignment of property (real or personal, tangible
or intangible), by assuming that the Straddle Period
consisted of two taxable years or periods, one which
ended at the close of the Closing Date and the other
which began at the beginning of the day following the
Closing Date, and items of income, gain, loss,
deduction and credit of Company for the Straddle
Period shall be allocated between such two taxable
years or periods on a "closing of the books basis" by
assuming that the books of the Company were closed at
the close of the Closing Date, provided, however,
that transactions that are not in the ordinary course
of business and that occur on the Closing Date after
the Closing shall be allocated to the portion of the
Straddle Period beginning after the Closing Date; and
(ii) in the case of Taxes not described in
clause (i) above that are imposed on a periodic basis
and measured by the level of any item, the amount of
such Taxes attributable to the Pre-Closing Period
portion of the Straddle Period shall be deemed to be
the amount of such Taxes for the entire Straddle
Period (or, in the case of such Taxes determined on
an arrears basis, the amount of such Taxes for the
immediately preceding period) multiplied by a
fraction the numerator of which is the number of
calendar days in the Pre-Closing Period portion of
the Straddle Period and the denominator of which is
the number of calendar days in the entire Straddle
Period.
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(e) None of Buyer or any Affiliate of Buyer shall (or
shall cause or permit Company to) amend, refile or otherwise modify (or
grant an extension of any statute of limitation with respect to) any
Tax Return relating to the Company with respect to any Pre-Closing
Period without the prior written consent of the Sellers'
Representatives, which consent shall not be unreasonably withheld.
(f) The Company shall file or cause to be filed when
due (taking into account all extensions properly obtained) all Tax
Returns that are required to be filed by or with respect to Company for
taxable years or periods ending on or before the Closing Date, and
Sellers shall remit or cause to be remitted any Taxes (other than
Excluded Taxes) due in respect of such Tax Returns; provided, that not
less than 30 days prior to the proposed filing, and in any event, not
later than 135 days after Closing, the Company shall cause a copy of
such Tax Returns to be delivered to Sellers' Representatives for review
and approval on behalf of the Sellers. Buyer shall file or cause to be
filed when due (taking into account all extensions properly obtained)
all Tax Returns that are required to be filed by or with respect to the
Company for taxable years or periods ending after the Closing Date, and
Buyer shall remit or cause to be remitted any Taxes due in respect of
such Tax Return.
(g) Buyer shall promptly notify Sellers in writing
upon receipt by Buyer, any of its Affiliates or Company of written
notice of any pending or threatened federal, state, local or foreign
Tax audits, examinations or assessments which would affect the Tax
liabilities for which Sellers may be liable pursuant to this Agreement;
provided, that any failure to notify Sellers shall only reduce Sellers'
obligations under this Agreement to the extent that such failure or
delay actually increases Sellers' liability or impairs Sellers' ability
to contest any such liabilities.
(h) Subject to Section 9.2(i), Sellers shall, within
30 days of the receipt of any notice provided by Buyer to Sellers, give
notice to Buyer that Sellers intend to represent the Company's interest
in any Tax audit or administrative or court proceeding arising out of
such notice and relating solely to Pre-Closing Periods or otherwise
relating solely to Taxes for which Sellers may be liable pursuant to
this Agreement, and to employ counsel of their choice at their expense;
provided, that in the case of any Tax audit or administrative or court
proceeding relating (in whole or in part) to Taxes attributable to the
Pre-Closing Period portion of a Straddle Period, Sellers shall be
entitled to participate at their expense in such audit or proceeding;
and provided, further, that Sellers shall not settle any Tax claim in a
manner that increases the Company's or the Buyer's Post-Closing Period
Taxes without the prior written consent of the Buyer. None of Buyer,
any of its Affiliates or the Company may settle any Tax claim for any
Taxes for which Sellers may be liable pursuant to this Agreement
without the prior written consent of the Sellers' Representatives,
which consent shall not be unreasonably withheld.
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(i) If Sellers do not give the notice to Buyer
specified in Section 9.2(h) within the specified time after Buyer's
notification of Sellers: (i) Buyer may choose to represent the
Company's interest relating to Pre-Closing Periods (including the
Pre-Closing Period portion of a Straddle Period) or otherwise relating
to Taxes for which Sellers may be liable pursuant to this Agreement and
to employ counsel of Buyer's choice at Sellers' expense and Sellers
shall not be entitled to participate in any audit or proceeding; and
(ii) Buyer, its Affiliates or the Company may settle any Tax claim
arising out of such notice without the consent of Sellers and Sellers
shall continue to be liable for any Pre-Closing Period Taxes other than
Excluded Taxes.
(j) After the Closing Date, each of Sellers and Buyer
shall (and shall cause their respective Affiliates to):
(i) assist the other party in preparing any Tax
Returns which such other party is responsible for preparing
and filing in accordance with this Section 9.2;
(ii) cooperate fully in preparing for any audits of,
or disputes with taxing authorities regarding any Tax Returns
of the Company;
(iii) make available to the other party and to any
taxing authority as reasonably requested all information,
records, and documents relating to Taxes of the Company;
(iv) provide timely notice to the other party in
writing of any pending or threatened Tax audits or assessments
of the Company for taxable periods for which the other party
may have a liability under this Agreement;
(v) furnish the other with copies of all
correspondence received from any taxing authority in
connection with any Tax audit or information request with
respect to any such taxable period;
(vi) timely sign and deliver such certificates or
forms as may be necessary or appropriate to establish an
exemption from (or otherwise reduce), or file Tax Returns or
other reports with respect to, Taxes described in this Section
9.2 or Section 11.8; and
(vii) timely provide to the other party powers of
attorney or similar authorizations necessary to carry out the
purposes of this Section 9.2 and Section 11.8.
Section 9.3 Employee Benefits Matters. Each of Sellers
acknowledges and agrees that as soon as practicable following the Closing Date,
the Company shall prepare (or cause to be
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prepared) such filings and other materials and take (or cause to be taken) all
further actions as are necessary to cause the Internal Revenue Service to issue
a determination that the Cast Alloys, Inc. Savings and Retirement Plan is
qualified under Section 401(a) of the Code and has been so qualified since the
effective date of such plan. All costs, fees (including, but not limited to,
attorneys' fees but excluding attorney's fees and costs incurred to prepare or
file the initial determination letter request), expenses, and penalties incurred
as a result of or in connection with the issuance by the Internal Revenue
Service of such determination shall be the sole responsibility of Sellers, and
Sellers shall indemnify and hold Buyer and the Company harmless from and against
any such costs, fees, expenses or penalties. In addition, Sellers shall
indemnify and hold Buyer and the Company harmless from and against any Losses
that may be incurred by the Company as a result of any failure of the medical
benefit plan maintained by the Company to have complied with the provisions of
Section 105(h) of the Code prior to or on the Closing Date.
Section 9.4 Transition. Neither the Sellers, their respective
Affiliates, nor, prior to Closing, any officer, employee of agent of the
Company, shall take any action that is designed or intended to have the effect
of discouraging any lessor, licensor, customer, supplier, or other business
associate of any of the Company from maintaining the same business relationships
with the Company after the Closing as it maintained with the Company prior to
the Closing. The Sellers and their Affiliates will refer all customer inquiries
relating to the businesses of the Company to the Company from and after the
Closing.
Section 9.5 Confidentiality. Each of the Sellers will treat
and hold as such all of the Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of Buyer,
all tangible embodiments (and all copies) of the Confidential Information which
are in its possession. In the event that any Seller is requested or required (by
oral question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, such Seller will notify Buyer promptly of
the request or requirement so that Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 9.5. If, in the
absence of a protective order or the receipt of a waiver hereunder, such Seller
is, on the advice of counsel, compelled to disclose any Confidential Information
to any tribunal or else stand liable for contempt, such Seller may disclose the
Confidential Information to the tribunal; provided, that such Seller shall use
its reasonable best efforts to obtain, at the reasonable request of Buyer, an
order or other assurance that confidential treatment will be accorded to such
portion of the Confidential Information required to be disclosed as Buyer shall
designate.
Section 9.6 Subsidiary Shares. Each of Sellers acknowledges
and agrees that following the Closing, the Company will file a formal petition
with the appropriate Mexican court in the place of domicile of International
Golf for either a judicial proceeding known as "Jurisdiccion Voluntaria" or a
judicial proceeding known as "Juicio Ordinario Mescantil" to obtain a resolution
declaring the Company and Buyer (or its designee) the legitimate owners of
International Golf, (the
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"Subsidiary Share Proceeding"). Each of the Sellers hereby agrees to assist and
cooperate fully with Buyer and the Company in connection with the Subsidiary
Share Proceeding and make available to the Company such information, records or
documents such Seller has that may be requested in connection with the
Subsidiary Share Proceeding. Sellers hereby agree to indemnify, defend, and hold
Buyer and the Company harmless from and against (i) any and all reasonable
costs, fees (including, but not limited to attorney's fees) and expenses up to
$50,000 and one-half of any such costs, fees and expenses in excess of $50,000,
and (ii) any and all penalties and other Losses, in each case, incurred as a
result of or in connection with the Subsidiary Share Proceeding, and as may be
necessary following the Subsidiary Share Proceeding to cause the registered
owners (other than the Company) of the Shares of International Golf to endorse
and transfer such shares to Buyer (or its designee(s)) at no cost or expense to
Buyer or the Company (or any such designee).
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival, Representations and Warranties. The
respective representations and warranties of the Company, Sellers and Buyer
contained herein or in any certificates or other documents delivered at the
Closing shall not be deemed waived or otherwise affected by any investigation,
inquiry or examination made by or on behalf of any party hereto, or the
knowledge of any party's officers, directors, shareholders, employees or agents
or the acceptance by any party of any certificate or opinion hereunder. The
representations and warranties provided for in this Agreement shall survive for
eighteen months beyond the Closing Date, except that (a) the representations and
warranties set forth in Sections 3.2(k) and 3.2(w) shall survive until 90 days
after the expiration of the applicable statute of limitations, (b) the
representations and warranties set forth in Section 3.2(y) shall survive for a
period of four (4) years after the Closing Date and (c) the representations and
warranties set forth in Sections 3.1 and 3.2(b), (d) and (f) and Section 4.2
shall survive indefinitely; provided, that any representation or warranty in
respect of which indemnity may be sought under this Article X, and the indemnity
with respect thereto, shall survive the time at which it would otherwise
terminate pursuant to this Section 10.1 if notice of the inaccuracy or breach or
potential inaccuracy or breach thereof giving rise to such right or potential
right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time. The provisions of this Section 10.1
shall not limit any covenant or agreement of the parties hereto which, by its
terms, contemplates performance after the Closing Date. The indemnification
provisions contained in this Article X are in addition to, and not in derogation
of, any statutory, equitable, or common law remedy any party hereto may have for
any breach of any representation, warranty, or covenant; provided, however, that
the indemnification provisions contained in this Article X constitute the sole
and exclusive remedy for any claim which might otherwise be properly asserted
under Section 10(b) of the Securities Exchange Act of 1934 or Section 17(a) of
the Securities Act of 1933, or rules adopted thereunder where such claim is
based primarily on a misrepresentation or omission alleged to (i) have been made
recklessly by any of the Sellers or (ii) be the result of the gross negligence
of any of the Sellers. The covenants and agreements in this Article X shall
survive
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until such time as any claim for indemnification is finally settled in
accordance with the terms hereof.
Section 10.2 Indemnification Obligation of Sellers.
(a) Each of the Sellers agrees to indemnify Buyer and
its affiliates, stockholders, officers, directors, employees, agents,
representatives and successors and assigns (including, from and after
the Closing, the Company) (collectively, the "Buyer Indemnitees") in
respect of, and save and hold each Buyer Indemnitee harmless against
and pay on behalf of or reimburse each Buyer Indemnitee as and when
incurred, such Seller's Allocable Share of any Losses which any Buyer
Indemnitee suffers, sustains or becomes subject to as a result of or by
virtue of, without duplication:
(i) any facts or circumstances which
constitute a misrepresentation or breach by the Company or any
Seller set forth in this Agreement (including any Schedule),
or any certificate delivered by the Company pursuant to this
Agreement (provided that the Sellers' Representatives is given
written notice of such Loss during the survival period
specified in Section 10.1 above);
(ii) any nonfulfillment or breach of any
covenant of the Company or any Seller set forth in this
Agreement;
(iii) any Funded Debt (but only to the
extent that such Funded Debt has not been deducted from the
Purchase Price pursuant to Section 2.3);
(iv) any matter set forth in Section
3.2(e), Section 3.2(p)(iii), Section 3.2(p)(v), Section 3.2(s)
or Section 3.2(y) of the Disclosure Schedule;
(v) any retroactive increase in insurance
premiums payable by the Company in respect of any insurance
policy in effect in any Pre-Closing Period and properly
allocable to such Pre-Closing Period except to the extent
reflected as a current liability on the Closing Date Balance
Sheet and the Working Capital Statement;
(vi) expenses of the Company and the
Sellers incident to this Agreement and the transactions
contemplated hereby (including, without limitation, the fees
and expenses and Taxes described in Section 11.8) except to
the extent reflected as a current liability on the Closing
Date Balance Sheet and the Working Capital Statement;
(vii) obligations of the Company incurred in
connection with any severance obligation arising as a result
of the Closing of the transactions
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contemplated by this Agreement (and not by any action of the
Company from and after the Closing) except to the extent
reflected as a current liability on the Closing Date Balance
Sheet and the Working Capital Statement;
(viii) any dividend, distribution,
redemption, purchase or other payment in respect of the
capital stock of the Company to the Sellers or any other
payment or transfer by the Company to any Seller from and
after the date hereof; and
(ix) obligations (including any
indemnification obligations) of the Company incurred in
connection with the agreements between the Company and
Prudential Securities Incorporated dated April 27, 1998 as
amended July 20, 1998.
(b) Each of the Sellers jointly and severally, agree to
indemnify the Buyer Indemnitees in respect of, and save and hold each Buyer
Indemnitee harmless and pay on behalf of or reimburse each Buyer Indemnitee as
and when incurred, any Losses which any Buyer Indemnitee suffers, sustains or
becomes subject to as a result of or by virtue of (i) any obligations of the
Company to any former shareholder of the Company or any Affiliate or successor
in interest of any such former shareholder in respect of the shares of stock
held thereby or other rights in respect of the Company's capital stock or
earnings on or prior to the Closing Date, including any rights under the Option
Plans; (ii) the Working Capital Rebate Amount, if any (but only to the extent
that such Working Capital Rebate Amount has not been paid to Buyer in accordance
with Section 2.4 hereof); (iii) the EBITDA Rebate Amount (plus interest), if any
(but only to the extent that such EBITDA Rebate Amount has not been paid to
Buyer in accordance with Section 2.7 hereof); (iv) Taxes allocable to any
Pre-Closing Period, other than Excluded Taxes; (v) its ownership interest in or
acquisition of such ownership interest in Monogram; (vi) the exercise of the
Options and the subsequent sale to Buyer of the Option Shares by each of the
Optionholders as contemplated by this Agreement; and (vii) the actions or
proceedings addressed in Section 9.3 and 9.6.
(c) Notwithstanding the foregoing, the Sellers shall
not be required to indemnify the Buyer Indemnitees in respect of any
Losses Buyer suffers, sustains or becomes subject to as a result of or
by virtue of any of the occurrences referred to in Section 10.2(a)(i)
above (other than losses arising out of any misrepresentation or breach
under any of Sections 3.2(b), (d), (e), (f), (h)(x), (h)(xi), (k), (x)
and (z)) except to the extent that the aggregate of all such Losses
exceeds $250,000; provided, that only such Losses which individually
exceed $10,000 shall be included in the calculation of the $250,000
threshold described above. In no event shall the Sellers be obligated
to indemnify the Buyer Indemnities hereunder in respect of any Losses
any Buyer Indemnitee suffers, sustains, or becomes subject to, as a
result of or by virtue of any of the occurrences referred to in Section
10.2(a)(i) above in the aggregate in excess of $12,500,000.
(d) To induce Buyer to enter into this Agreement and
to consummate the transactions contemplated hereby, the Company and the
Sellers have agreed that, subject to
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the provisions of this Section 10.2 and the other Sections of this
Article X, the Escrow Deposit shall be withheld and placed in escrow at
Closing for the purpose of securing the indemnification obligations to
the Buyer Indemnitees under this Article X and Sections 2.4 and 2.7 of
this Agreement. The Escrow Deposit shall be withheld and placed at
Closing in an interest bearing escrow account with the Escrow Agent who
shall hold and administer the Escrow Deposit in accordance with the
terms of the Escrow Agreement.
(e) To induce Buyer to enter into this Agreement and
to consummate the transactions contemplated hereby each of the Sellers
acknowledges and agrees, that in addition to any other remedies of
Buyer, any liabilities of the Sellers under this Agreement may be
satisfied by exercise by Buyer, in its sole discretion, of a right of
offset against any amounts that are or shall be payable to the Sellers,
including any such amounts payable in respect of the Earn-Out Amount;
provided, that if any Seller fails to pay promptly any amount due
pursuant to this Section 10.2 and in order to obtain such amounts Buyer
exercises such right of offset, Buyer shall be entitled to exercise
such offset in the full amount of all Losses notwithstanding the
provisions of subsections (b) and (c) above.
(f) Each of the Sellers acknowledges that the
agreement contained in this Article X is an integral part of the
transactions contemplated by this Agreement and that, without such
agreement, Buyer would not enter into this Agreement; accordingly, if
any Seller fails to pay promptly the amounts due from such Seller
pursuant to this Section 10.2 and in order to obtain such amounts,
Buyer commences a suit against one or more of the Sellers to collect
the amounts provided for herein, such Seller shall also be liable to
pay to Buyer such Seller's Allocable Share of Buyer's reasonable costs
and expenses (including attorneys' fees) in connection with the
successful prosecution of any such suit.
Section 10.3 Indemnification Obligation of Buyer. Buyer will
indemnify Sellers and their respective affiliates, stockholders, officers,
managers, directors, employees, agents, representatives and successors and
assigns (collectively, the "Seller Indemnitees") in respect of, and save and
hold each Seller Indemnitee harmless against any Losses which such Seller
Indemnitee suffers, sustains or becomes subject to as a result of or by virtue
of, without duplication: (a) any facts or circumstances which constitute a
misrepresentation or breach by Buyer set forth in this Agreement or any
certificate delivered by Buyer pursuant to this Agreement (provided that Buyer
is given written notice of such Loss during the applicable survival period
specified in Section 10.1 above); or (b) any nonfulfillment or breach of any
covenant or agreement of the Buyer set forth in this Agreement.
Section 10.4 Indemnification Procedures.
(a) Any Person making a claim for indemnification
pursuant to Section 10.2 or 10.3 above (each, an "Indemnified Party")
must give the party from whom indemnification is sought (an
"Indemnifying Party") written notice of such claim promptly
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after the Indemnified Party receives any written notice of any action,
lawsuit, proceeding, investigation or other claim (a "Proceeding")
against or involving the Indemnified Party by any Person or otherwise
discovers the liability, obligation or facts giving rise to such claim
for indemnification; provided, that the failure to notify or delay in
notifying an Indemnifying Party will not relieve the Indemnifying Party
of its obligations pursuant to Section 10.2 or 10.3 above, as
applicable, except to the extent that such failure actually harms the
Indemnifying Party.
(b) With respect to the defense of any Proceeding
brought by a third party against or involving an Indemnified Party in
which any Person in question seeks only the recovery of a sum of money
(and not for injunctive or equitable relief) for which indemnification
is provided in Section 10.2 or 10.3 above (a "Third Party Claim"), at
its option an Indemnifying Party may appoint as lead counsel to defend
such Third Party Claim any legal counsel selected by the Indemnifying
Party reasonably acceptable to the Indemnified Party; provided, that
before the Indemnifying Party assumes control of such defense it must
first:
(i) notify the Indemnified Party within 30
days after the Indemnified Party has been given notice of the
Third Party Claim, that the Indemnifying Party assumes
responsibility for any and all Losses related to such
Proceeding and the facts giving rise to such claim for
indemnification and will unconditionally indemnify the
Indemnified Party from and against the entirety of any Losses
(subject to Section 10.2(b) or 10.3, as applicable) the
Indemnified Party may suffer, resulting from, arising out of,
relating to, in the nature of or caused by such Third Party
Claim (with no reservation of any rights other than the right
to be subrogated to the rights of the Indemnified Party); and
(ii) in the event and to the extent that the
amount of any Loss which may result from the Third Party Claim
if successfully asserted, or the facts giving rise to such
claim, would be in excess of the lesser of $5,000,000 or the
amount of funds then on deposit in the Escrow Account (such
lesser amount, the "Available Escrow") furnish the Indemnified
Party with commercially reasonable evidence that the
Indemnifying Party is and will be able to satisfy any such
liability to the extent it exceeds the Available Escrow.
(c) Notwithstanding Section 10.4(b) above: (i) the
Indemnified Party will be entitled to participate in the defense of
such claim and to employ counsel of its choice for such purpose at its
own expense (provided that the Indemnifying Party will bear the
reasonable fees and expenses of such separate counsel incurred if the
Indemnifying Party delays in assuming or does not assume control of
such defense); (ii) the Buyer (or its designee) will be entitled to
assume control of the defense of such claim, if such claim or
Proceeding involves a claim by or against (A) a material customer of
the Company or
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Subsidiary or (B) a material supplier of the Company or the Subsidiary
and in the case of this clause (B), the Company or Buyer in its
reasonable business judgment believes that an adverse determination of
such proceeding would be detrimental to or injure the Buyer or the
Company's reputation or future business prospects; provided, that the
Indemnified Party will not enter into any compromise or settlement of
such claim or proceeding for which the Indemnifying Party would be
liable hereunder without the prior written consent of the Indemnifying
Party (which the Indemnifying Party will not unreasonably withhold);
(iii) the Buyer (or its designee) will be entitled to assume control of
the defense of such claim if such claim or Proceeding involves a claim
by or against an employee or agent of the Company or its Subsidiary and
such claim relates to actions or conditions alleged to have existed
both prior to and following the Closing; provided, that the Sellers'
Representatives will be entitled to participate in the defense of such
claim and to employ counsel of its choice for such purpose at its own
expense; and provided, further that neither Buyer nor Sellers'
Representatives will enter into any compromise or settlement of such
claim or proceeding without the prior written consent of the other (not
to be unreasonably withheld), (iv) if one or more Indemnifying Parties
are named as defendants in such Proceeding, and if counsel appointed by
the Indemnifying Parties in accordance with Section 10.4(b) hereof has
advised that, in the opinion of such counsel under applicable
principles of legal ethics, there is a conflict of interest that
prohibits such counsel from representing the Indemnified Parties in
addition to the Indemnifying Parties (or if a court should so
determine), then the Indemnified Parties shall be entitled to
participate in the defense of such claim using counsel of its choice
and at the expense of the Indemnifying Parties; and in such event the
provisions of Section 10.4(b) (with respect to the control of the
defense of such proceeding) and Section 10.4(d) (with respect to the
settlement or compromise of such Proceeding) shall continue to be
applicable; (v) the Indemnifying Party will be required to relinquish
control of the defense of such claim and will pay the reasonable fees
and expenses of legal counsel retained by the Indemnified Party if a
court of competent jurisdiction rules that the Indemnifying Party has
failed or is failing to prosecute or defend vigorously such claim or if
the Indemnifying Party shall have failed to timely provide evidence
required by subsection 10.4(b)(ii) above, which evidence shall also be
required if the Available Escrow shall at any time after the
Indemnifying Party assumes control of any Third Party Claim, become
inadequate to satisfy the amount of any Loss which may result from such
claim;
(d) the Indemnifying Party must obtain the prior
written consent of the Indemnified Party (which the Indemnified Party
will not unreasonably withhold; provided, that any such compromise or
settlement shall provide for the full and final release of all claims
against each Indemnified Party in form and substance reasonably
satisfactory to such Indemnified Parties) prior to entering into any
compromise or settlement of such claim or Proceeding or ceasing to
defend such claim or Proceeding. The Indemnifying Party shall not enter
into any compromise or settlement of any claim or Proceeding other than
for money damages and not for injunctive or equitable relief.
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Section 10.5 Payment. Upon the determination of the liability
under Article X or otherwise between the parties or by judicial proceeding, the
appropriate party shall pay to the other, as the case may be, within 10 days
after such determination, the amount of any claim for indemnification made
hereunder. Anything to the contrary herein notwithstanding, no Seller shall be
obligated to make any payment to any Buyer Indemnitee pursuant to Section 10.2
(other than with respect to any claim for breach of Section 9.2 or Section 10.2)
until and unless the Escrow Deposit is exhausted. In the event that the
Indemnified Party is not paid in full for any such claim pursuant to the
foregoing provisions promptly after the other party's obligation to indemnify
has been determined in accordance herewith, it shall have the right,
notwithstanding any other rights that it may have against any other Person, to
setoff the unpaid amount of any such claim against any amounts owed by it under
any instrument or agreement entered into pursuant to this Agreement or
otherwise. Upon the payment in full of any claim, either by setoff or otherwise,
the entity making payment shall be subrogated to the rights of the Indemnified
Party against any Person with respect to the subject matter of such claim.
Section 10.6 Waiver. Each Seller hereby agrees that he shall
not make any claim for indemnification against the Company by reason of the fact
that he was a shareholder, director, officer, employee or agent of the Company
or was serving at the request of the Company as a partner, trustee, director,
officer, employee or agent of another entity (whether such claim is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses or otherwise) with respect to any claim, action, suit, proceeding,
complaint or demand brought by the Buyer against any Seller (whether such
action, suit, proceeding, complaint, claim or demand is pursuant to this
Agreement, applicable law or otherwise) or with respect to any Third Party Claim
for which any Buyer Indemnitee is entitled to indemnification hereunder. Each
Seller hereby acknowledges and agrees that he shall have no claims or right to
contribution or indemnity from the Company with respect to any amounts paid by
such Seller to any of the Buyer Indemnitees hereunder.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Assignment. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by the Company or any of the
Sellers without the prior written consent of Buyer, or by Buyer without the
prior written consent of Sellers, except that Buyer may, without such consent,
directly or indirectly, all of its rights and obligations under this Agreement
to any of its Affiliates, any Person which provides financing to the Buyer or
any of its Subsidiaries or any subsequent Buyer of the Buyer or its Affiliates
(whether by merger, consolidation, sale of stock, sale of assets or otherwise).
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns. This Agreement shall be for the sole benefit
of the parties hereto and their respective heirs, successors, permitted assigns
and legal representatives
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and is not intended, nor shall be construed, to give any Person, other than the
parties hereto and their respective heirs, successors, assigns and legal
representatives, any legal or equitable right, remedy or claim hereunder.
Section 11.2 Notices. Any notice, request, demand, waiver,
consent, approval or other communication which is required or permitted
hereunder shall be in writing. All such notices shall be delivered personally,
by telecopier, by certified mail, return receipt requested by reputable
overnight courier (costs prepaid), and shall be deemed given or made upon
receipt thereof. All such notices are to be given or made to the parties at the
following addresses (or to such other address as any party may designate by a
notice given in accordance with the provisions of this Section):
If to Buyer:
Neenah Foundry Company
2121 Brooks Avenue
Neenah, Wisconsin 54957
Attention: James K. Hildebrand
Telecopy No.: (414) 729-3603
With copies (which shall not constitute notice to Buyer) to:
Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor, Zone 4
New York, NY 10043
Attention: John D. Weber
Telecopy No.: (212) 888-2940
and
Kirkland & Ellis
153 East 53rd Street
New York, ANY 10022
Attention: Kirk A. Radke, Esq.
Telecopy No.: (212) 446-4900
If to the Company:
Niemin Porter & Co., d/b/a Cast Alloys, Inc.
20409 Prairie Street, Suite A
Chatsworth, California 91324
Attention: Executive Committee
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With copies (which shall not constitute notice to the Company
or Sellers) to:
Sidley & Austin
555 West Fifth Street, 40th Floor
Los Angeles, California 90013
Attention: Moshe Kupietzky, Esq.
Telecopy No.: (213) 896-6600
If to Sellers:
c/o John R.C. Porter
805 St. James Ct.
Flatts Harbor, Bermuda
Telecopy No.: (441)-________
With copies (which shall not constitute notice to the Sellers)
to:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts
Attention: Barry B. White
Telecopy No.: (617) 832-7000
SECTION 11.3 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTS OF LAW PRINCIPLES,
PROVISIONS OR RULES (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
OR ANY DOCUMENT RELATED HERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF
CALIFORNIA OR THE UNITED STATES OF AMERICA FOR THE CENTRAL DISTRICT OF
CALIFORNIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO
HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY FORUM
NON CONVENIENS, WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
Section 11.4 Entire Agreement; Amendments and Waivers. This
Agreement, together with all Exhibits and Schedules hereto, constitutes the
entire agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. This Agreement may be amended, at any
time prior to the Closing Date, by action taken by the Board of Directors of the
Company and the Buyer; provided, that after approval of the sale and purchase of
the Stock by the
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Stockholders, no amendment, which under applicable law may not be made without
the approval of a majority of the Stockholders, may be made without such
approval. This Agreement (including the provisions of this Section 11.4) may not
be amended or modified except by an instrument in writing signed on behalf of
all of the parties required pursuant to the preceding sentence. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the Party to be bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
Section 11.5 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This Agreement
shall be binding upon each of the Sellers signatory hereto from the date first
written above notwithstanding the fact that one or more of the other Sellers
named on the signature pages hereto have not signed this Agreement.
Section 11.6 Invalidity. In the event that any one or more of
the provisions contained in this Agreement or in any other instrument referred
to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement or any other such
instrument.
Section 11.7 Headings. The headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 11.8 Expenses. Except as otherwise provided herein,
Sellers and Buyer will each be liable for their respective costs and expenses
(including brokers' fees) incurred in connection with the negotiation,
preparation, execution and performance of this Agreement and the consummation of
the transactions contemplated hereby; provided, that (i) any such costs and
expenses incurred by the Company (including the fees and expenses of the
Company's accountant in connection with the preparation and review of the
Closing Date Balance Sheet) shall be deemed to have been incurred by Sellers and
(ii) Sellers shall pay any and all, stock transfer, real property transfer,
transfer gains, stamp and other similar Taxes, if any, assessed in connection
with the transactions contemplated by this Agreement and shall have delivered
evidence satisfactory to Buyer and the Title Company of the payment of such
Taxes.
Section 11.9 Specific Performance. Each of the Buyer, the
Company and Sellers acknowledges and agrees that the other party would be
damaged irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each party agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the
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United States or any state thereof having jurisdiction over the parties and the
matter (subject to Section 11.3), in addition to any other remedy to which they
may be entitled, at law or in equity.
Section 11.10 Time is of the Essence; Computation of Time.
Buyer, Sellers and Company agree that time is of the essence with respect to
every covenant, condition to be satisfied, and action to be taken hereunder, and
shall proceed accordingly with respect to every action necessary, proper or
advisable to make effective the transactions contemplated by this Agreement.
Whenever the last day for the exercise of any privilege or the discharge of any
duty hereunder shall fall upon any day which is not a business day, the party
having such privilege or duty may exercise such privilege or discharge such duty
on the next succeeding business day.
Section 11.11 Waiver of Jury Trial. Each of the parties hereto
waives to the fullest extent permitted by law any right it may have to trial by
jury in respect of any claim, demand, action or cause of action based on, or
arising out of, under or in connection with this Agreement, or any course of
conduct, course of dealing, verbal or written statement or action of any party
hereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise. The parties to this Agreement each hereby
agrees that any such claim, demand, action or cause of action shall be decided
by court trial without a jury and that the parties to this Agreement may file an
original counterpart of a copy of this Agreement with any court as evidence of
the consent of the parties hereto to the waiver of their right to trial by jury.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
NEENAH FOUNDRY COMPANY
By: /s/ James K. Hildebrand
---------------------------------------------------------
Name: James K. Hildebrand
Its: CEO
NIEMIN PORTER & CO., d/b/a CAST ALLOYS,
INC.
By: /s John R.C. Porter
---------------------------------------------------------
Name: John R.C. Porter
Its: Chairman
/s/ John R.C. Porter
-------------------------------------------------------------
JOHN R.C. PORTER
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ADHILL LIMITED PARTNERSHIP
By: /s/ Thomas H. Laller
---------------------------------------------------------
Name: Thomas H. Laller
Its: GP Authorized Signatory
ADVENT INTERNATIONAL INVESTORS II
LIMITED PARTNERSHIP
By: /s/ Thomas H. Laller
---------------------------------------------------------
Name: Thomas H. Laller
Its: GP Authorized Signatory
INTERNATIONAL NETWORK FUND LP
By: /s/ Thomas H. Laller
---------------------------------------------------------
Name: Thomas H. Laller
Its: GP Authorized Signatory
ADVENT PERFORMANCE MATERIALS
LIMITED PARTNERSHIP
By: /s/ Thomas H. Laller
---------------------------------------------------------
Name: Thomas H. Laller
Its: GP Authorized Signatory
/s/ Ajendra Singh
-------------------------------------------------------------
AJENDRA SINGH
/s/ Randy Kelch
-------------------------------------------------------------
RANDY KELCH
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/s/ John Sheehan
-------------------------------------------------------------
JOHN SHEEHAN