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EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
By and Among
MERCER FORGE CORPORATION
and
THE STOCKHOLDERS OF MERCER FORGE CORPORATION
LISTED ON ANNEX I HERETO,
as Sellers
and
NEENAH FOUNDRY COMPANY,
as Buyer
April 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....................................7
Section 1.3 Accounting Conventions............................7
Section 1.4 Business Days.....................................8
ARTICLE II
PURCHASE AND SALE OF STOCK: CLOSING.................................8
Section 2.1 Transfer of Stock.................................8
Section 2.2 Closing...........................................8
Section 2.3 Consideration for Stock...........................8
Section 2.4 Closing Deliveries by Sellers.....................8
Section 2.5 Closing Deliveries by Buyer.......................9
Section 2.6 Real Estate Matters to be Addressed at Closing....9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE STOCKHOLDERS...................................10
Section 3.1 Representations and Warranties of the
Sellers Concerning the Transaction...............10
Section 3.2 Representations and Warranties Concerning
the Company and Its Subsidiaries.................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER............................30
Section 4.1 Organization of Buyer............................30
Section 4.2 Authorization; Validity..........................30
Section 4.3 No Conflict or Violation.........................30
Section 4.4 Consents and Approvals...........................31
Section 4.5 No Brokers.......................................31
ARTICLE V
COVENANTS OF THE SELLERS AND COMPANY...............................31
Section 5.1 Access to Information and Records................31
Section 5.2 Conduct of Business..............................32
Section 5.3 Preservation of Business.........................32
Section 5.4 Notice of Events.................................33
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Section 5.5 Exclusivity......................................33
Section 5.6 Non-Competition; Non-Interference;
Non-Solicitation.................................33
Section 5.7 Consents and Best Efforts........................37
Section 5.8 Public Announcements.............................37
ARTICLE VI
TERMINATION........................................................38
Section 6.1 Termination......................................38
Section 6.2 Effect of Termination............................38
Section 6.3 Amendments.......................................39
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS.................................39
Section 7.1 Representations, Warranties and Covenants........39
Section 7.2 No Injunction....................................39
Section 7.3 Opinion of Counsel...............................39
Section 7.4 Payments.........................................39
Section 7.5 Certificates.....................................39
Section 7.6 HSR Act Waiting Period...........................39
Section 7.7 Documents to be Delivered by Buyer...............39
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS..................................40
Section 8.1 Representations, Warranties and Covenants........40
Section 8.2 Consents; Releases...............................40
Section 8.3 No Injunction....................................41
Section 8.4 HSR Act Waiting Period...........................41
Section 8.5 No Material Adverse Effect.......................41
Section 8.6 Funded Debt......................................41
Section 8.7 Stockholders Approval............................41
Section 8.8 Documents to be Delivered by Company.............41
Section 8.9 Absence of Litigation............................43
Section 8.10 Management Arrangements..........................43
Section 8.11 Real Property....................................43
Section 8.12 Financing........................................43
Section 8.13 All Proceedings To be Satisfactory...............43
Section 8.14 Tax Sharing Agreements...........................43
ARTICLE IX
POST-CLOSING COVENANTS.............................................43
Section 9.1 Further Assurances...............................43
Section 9.2 Tax Matters......................................43
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Section 9.3 Non-Solicitation; Non-Compete....................45
Section 9.4 Employees; Employee Benefit Plans................45
Section 9.5 Transition.......................................48
Section 9.6 Confidentiality..................................48
Section 9.7 Retroactive Insurance Premium Decreases..........48
Section 9.8 Kchikian Lease Agreements; Kchikian Employment
Agreement........................................48
ARTICLE X
INDEMNIFICATION....................................................49
Section 10.1 Survival, Representations and Warranties.........49
Section 10.2 Indemnification Obligation of Sellers............50
Section 10.3 Indemnification Obligation of Buyer..............52
Section 10.4 Indemnification Procedures.......................52
Section 10.5 Payment..........................................54
Section 10.6 Adjustment to Indemnities........................55
Section 10.7 No Contribution..................................56
ARTICLE XI
MISCELLANEOUS......................................................56
Section 11.1 Assignment.......................................56
Section 11.2 Notices..........................................56
Section 11.3 Choice of Law....................................58
Section 11.4 Entire Agreement; Amendments and Waivers.........58
Section 11.5 Counterparts.....................................58
Section 11.6 Invalidity.......................................58
Section 11.7 Headings.........................................58
Section 11.8 Expenses.........................................59
Section 11.9 Specific Performance.............................59
Section 11.10 Waiver of Jury Trial.............................59
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Annexes and Exhibits
Annex I - Stockholders
Exhibit A - Financial Statements
Exhibit B - Consent of Board of Directors
Exhibit C - Opinion of Kirkland & Ellis
Exhibit D - Opinion of Seller's Counsel
Exhibit E - Transition Services
Exhibit F - Assignment Agreement
Disclosure Schedule
Section 3.1(c) - Share Ownership
Section 3.2(a) - Directors and Officers
Section 3.2(b) - Capitalization
Section 3.2(c) - Filings and Approvals
Section 3.2(e) - Title to Assets
Section 3.2(f) - Subsidiaries
Section 3.2(h) - Events Subsequent to Most Recent Fiscal Year End
Section 3.2(k) - Tax Matters
Section 3.2(l)(i) - Owned Property
Section 3.2(l)(ii)(a) - Leases
Section 3.2(l)(ii)(b) - Lease Consents
Section 3.2(m) - Proprietary Rights
Section 3.2(o) - Inventory
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) - Environmental Matters
Section 3.2(y) - Transactions with Affiliates
Section 3.2(z) - Funded Debt
Section 4.4 - Buyer's Consents and Approvals
Section 5.7 - Sellers' Consents and Approvals
Section 8.2 - Consents and Releases
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated as of April 3,
1998, by and among MERCER FORGE CORPORATION, a Delaware corporation (the
"Company"), the stockholders of the Company listed on Annex I hereto (the
"Stockholders" or "Sellers"), and NEENAH FOUNDRY COMPANY, a Wisconsin
corporation (the "Buyer"). The Sellers, the Company and the Buyers are referred
to collectively herein as the "Parties".
WHEREAS, Sellers own 625 shares of common stock of the
Company, par value $1.00 per share (the "Stock"), constituting all of the issued
and outstanding capital stock of the Company; and
WHEREAS, Buyer desires to purchase from Sellers, and Sellers
desire to sell, transfer and convey to Buyer, the Stock, 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:
"Adjustment Statement" has the meaning set forth in Section
10.4(e).
"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.
"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.
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"Balance Sheet" means the consolidated balance sheet of the
Company as at November 30, 1996, together with the notes thereon reviewed by
KPMG Peat Marwick, previously delivered to Buyer and attached hereto as part of
Exhibit A.
"Balance Sheet Date" shall mean November 30, 1996.
"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 the Company or any Subsidiary, or (C) covers any
current or former employee of the Company or any Subsidiary.
"Cash Purchase Price" has the meaning set forth in Section
2.3.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Company Proprietary Rights" shall mean 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.
"Confidential Information" means any information concerning
the businesses and affairs of the Company and/or any of its Subsidiaries that is
not already generally available to the public (including, technology, methods of
doing business, supplier and customer information, and financial information).
"Consolidated EBITDA" means the aggregate EBITDA of the
Company and its Subsidiaries during the fiscal year ended November 30, 1998.
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"Controlled Group" has the meaning set forth in Section 1563
of the Code.
"Covered Activities" has the meaning set forth in Section 5.6.
"Covered Person" means each of Francesco Galesi and David
Buicko.
"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.
"EBITDA" means for any fiscal period the consolidated net
income (or loss) of any Person (after eliminating all extraordinary or
non-recurring items of income or loss), as reflected in such Person's financial
statements for such period, plus to the extent deducted in computing such
consolidated net income (or loss) (i) interest and other expense in respect of
indebtedness for borrowed money and similar expense in respect of capitalized
leases, charged, accrued or otherwise allocated against such net income (or
loss), plus (ii) expenses for income taxes (whether paid, accrued or deferred)
charged or otherwise allocated against such net income, plus (iii) depreciation
and amortization of any assets or other non-cash charges (including, without
limitation, any depreciation, amortization or writeoff of intangible assets,
transaction costs or goodwill) charged, allocated or otherwise accrued against
such net income (or loss), plus, (iv) without duplication, expenses attributable
to investment banking or consulting fees or intercompany lease fees paid or
payable and charged, accrued or otherwise allocated against such net income, in
each case, excluding any such interest, depreciation, amortization costs and
expenses previously taken into account in determining EBITDA during any period
preceding such period, all as determined in accordance with generally accepted
accounting principles, consistently applied.
"Employee Benefit Plans" shall mean all Benefit Arrangements
(other than Multiemployer Plans), Employee Pension Benefit Plans and Employee
Welfare Benefit Plans.
"Employee Pension Benefit Plan" shall mean any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which the Company maintains or contributes to, or (B)
which covers any current or former employee of the Company.
"Employee Welfare Benefit Plan" shall mean any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA (other than a
Multiemployer Plan), (A) which any Seller or the Company maintains or
contributes to, or (B) which covers any current or former employee of the
Company.
"Encumbrances" has the meaning specified in Section 2.6(a).
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"Environmental, Health, and Safety Laws" shall mean 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.
"ERISA" shall mean 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.
"Fiduciary" has the meaning set forth in Section 3(21) of
ERISA.
"Financeable Leasehold" has the meaning specified in Section
2.6(a).
"Financial Statements" has the meaning specified in Section
3.2(g).
"Funded Debt" of the Company or any Subsidiary, shall mean,
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 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, as applied by the
Company on a consistent basis.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Income Taxes" shall mean 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.
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"Knowledge" means any fact or information which is actually
known or reasonably should be known by Mark Clark, James Ackerman, or David
Buicko, after due investigation.
"Lender" means the Buyer's senior lender (determined as of the
close of business on the Closing Date).
"Lease Property" has the meaning specified in Section
3.2(l)(ii).
"Leases" has the meaning specified in Section 3.2(l)(ii).
"Lien" shall mean 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; provided,
however, that any and all claims against any or all of the Sellers for
consequential damages or damages for lost profits shall be restricted to, and
only to, claims for the breach of a representation, warranty, covenant or
agreement for which Buyer Indemnitees have a right to indemnification under
Article X that have the effect of causing a shortfall (a "Consolidated EBITDA
Shortfall") of the Consolidated EBITDA below $7,500,000 and, provided, further,
that the amount of any award of consequential damages or damages for lost
profits in respect of any such claim shall equal the product of (x) the amount
of the Consolidated EBITDA Shortfall in respect of such claim and (y) six (6)),
deficiencies, assessments, judgments, remediations and costs or expenses
(including reasonable attorney's, consultants', and experts' fees and expenses).
"Material Adverse Effect" has the meaning specified in Section
3.2(c).
"Measurement Date" has the meaning specified in Section
10.4(e).
"Minimum Working Capital" has the meaning set forth in Section
3.2(b)(ii).
"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).
"Multiemployer Plan" shall mean any "multiemployer plan," as
defined in Section 4001(a)(3) of ERISA, (A) which any Seller or the Company
maintains or contributes to, or (B) which covers any current or former employee
of the Company.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
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"PBGC" shall mean 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.
"Pre-Closing Period" shall mean any taxable period ending on
or before the Closing Date.
"Prohibited Transaction" has the meaning set forth in Section
406 of ERISA and Section 4975 of the Code.
"Proprietary Rights" shall mean 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).
"Restricted Period" has the meaning specified in Section
5.6(a)(i).
"Restrictive Covenants" has the meaning specified in Section
5.6(b).
"Rotterdam" means Rotterdam Ventures, Inc., a New York
corporation, and one of the Sellers.
"Security Interest" shall mean 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.
"Stockholder Representative" has the meaning set forth in
Section 5.9.
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"Subsidiary" means any Person with respect to which the
Company or another specified Person (or a Subsidiary thereof) owns a majority of
the common stock of such Person or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or similar governing
body of such Person.
"Tax" shall mean 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, 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" shall mean 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 2.6(a).
"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 (i) Taxes and (ii)
intercompany receivables and payables shall not be included in the determination
of current assets or current liabilities.
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 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 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, 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,
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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.
Section 1.4 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.
ARTICLE II
PURCHASE AND SALE OF STOCK: CLOSING
Section 2.1 Transfer of Stock. Upon the terms and subject to
the conditions contained herein, Sellers shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall acquire and in reliance upon the
representations, warranties and covenants contained herein, at the Closing, the
Stock.
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)
March 31, 1998, and (ii) three (3) business days after the satisfaction or
waiver of all conditions to closing contained in Articles VII and VIII, (the
"Closing" or the "Closing Date"), at the offices of Kirkland & Ellis, 153 East
53rd Street, New York, NY, or such other time and/or place as the parties hereto
otherwise agree.
Section 2.3 Consideration for Stock. Upon the terms and
subject to the conditions contained herein, as consideration for the purchase of
the Stock, Buyer shall pay to Sellers, in the aggregate, the amount of forty-six
million eight hundred ninety-nine thousand seven hundred nineteen and 42/100
dollars ($46,899,719.42) (the "Purchase Price") as the same may be reduced as
described below, (a) by depositing or causing to be deposited with the Escrow
Agent by wire transfer of immediately available funds, $3,000,000 of the
Purchase Price (the "Escrow Deposit") to be held by the Escrow Agent in
accordance with Section 10.2 of this Agreement and in accordance with the Escrow
Agreement and (b) by tendering to Sellers, by wire transfer of immediately
available funds to the accounts and in the amounts designated by Sellers not
less than five (5) business days prior to Closing, an aggregate amount equal to
$43,899,719.42, less the amount of any Funded Debt outstanding as of the close
of business on March 31, 1998, or in the event the Closing shall not have
occurred on or prior to April 3, 1998, as of the close of business on the
Closing Date (the "Cash Purchase Price").
Section 2.4 Closing Deliveries by Sellers. To effect the
transfer referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.3 hereof, Sellers shall, on the Closing Date, deliver the
following:
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(a) Sellers shall cause to be delivered to Buyer
certificates evidencing the Stock, free and clear of any and all Liens
duly endorsed in blank for transfer or accompanied by stock powers duly
executed in blank;
(b) Sellers shall have delivered to Buyer 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, reasonably satisfactory in
form and substance to Buyer and its counsel;
(c) Sellers shall have delivered all other documents
required to be delivered pursuant to Article VIII hereof not
specifically mentioned above in this Section; and
(d) 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 2.5 Closing Deliveries by Buyer. To effect the
transfer referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.3 hereof, Buyer shall, on the Closing Date, deliver the
following:
(a) Buyer shall have tendered to Sellers the Cash
Purchase Price, as the same may be adjusted pursuant to Section 2.3, 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;
(b) Buyer shall have tendered to the Escrow Agent the
Escrow Deposit;
(c) Buyer shall have tendered all other documents
required to be delivered pursuant to Article VII hereof and not
specifically mentioned above in this Section; and
(d) 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 2.6 Real Estate Matters to be Addressed at Closing.
(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
the applicable Subsidiary's marketable title in and to the
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Owned Property in fee simple, the Company's or the applicable
Subsidiary's leasehold estate in any financeable Leased Property (a
"Financeable Leasehold") and Lender's mortgage lien on the Owned
Property free and clear of all Liens, encroachments, encumbrances or
other defects in title (collectively, "Encumbrances") other than the
matters disclosed in Section 3.2(l)(i) of the Disclosure Schedule,
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 shall
bear 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 any
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 applicable Subsidiary, showing Encumbrances other than
the matters disclosed in Section 3.2(l)(i) of the Disclosure Schedule.
Buyer shall bear the cost of obtaining such surveys.
(c) Buyer shall have received, or with respect to
clause (i) of this paragraph, Sellers shall use commercially reasonably
efforts to deliver to Buyer (i) from each landlord under a Lease an
estoppel, (ii) from each landlord under a Lease described in Section
3.2(l)(ii)(b) 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 Leased
Property and such other matters as Lender shall have reasonably
required.
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.
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(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. 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.
(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. All of the shares of capital
stock of the Company are held of record and owned beneficially as set
forth 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, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands.
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, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Each of the Company and its
Subsidiaries 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 Company and its
Subsidiaries 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
the directors and officers of each of the Company and its Subsidiaries.
(b) Capitalization.
(i) The entire authorized capital stock of
the Company consists of 1,000 shares of common stock, of which
625 shares of common stock are
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issued and outstanding and all of which together represent the
Stock. All of the issued and outstanding shares of Stock have
been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record free and clear of all
Liens, claims, encumbrances and restrictions whatsoever (other
than any restrictions under the Securities Act and state
securities laws) by the respective Sellers in the amounts set
forth opposite their names in Section 3.2(b) of the Disclosure
Schedule. 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. 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 do any facts exist which could form the
basis for any such claim.
(ii) As of the close of business on March
31, 1998, or in the event the Closing shall not have occurred
on or prior to April 3, 1998, as of the close of business on
the Closing Date, the Working Capital of the Company shall be
at least $5,400,000 ("Minimum Working Capital").
(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 any of the Company and its Subsidiaries or (ii) 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,
or future prospects 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 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
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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.
(d) Brokers' Fees. The Company and any of its
Subsidiaries do not have and will not 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.
(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 and its Subsidiaries, or leased or licensed by the
Company or any Subsidiary 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 its Subsidiaries in accordance
with past practices as of the Most Recent Fiscal Month End and as of
the date hereof.
(f) Subsidiaries. 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
each Subsidiary have been duly authorized and are validly issued, fully
paid, and nonassessable. The Company owns all of the issued and
outstanding shares of Capital Stock in each of its Subsidiaries 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
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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.
(g) Financial Statements. Attached hereto as Exhibit
A are the following financial statements (collectively the "Financial
Statements"): (i) reviewed consolidated balance sheets and statements
of income, changes in stockholders' equity, and cash flow as of and for
the fiscal years ended November 30, 1994, 1995, and 1996 (the "Most
Recent Fiscal Year End") for the Company and its Subsidiaries; and (ii)
unaudited internal consolidated balance sheet (the "Most Recent Balance
Sheet") and statement of income, changes in stockholders' equity, and
cash flow (the "Most Recent Financial Statements") as of and for the
period ended November 30, 1997 (the "Most Recent Fiscal Month End") for
the Company and its Subsidiaries. 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
its Subsidiaries as of such dates and the results of operations of the
Company and its Subsidiary for such periods; provided, however, that
the Most Recent Financial Statements are subject to normal year-end
adjustments (which will not be material individually or in the
aggregate) and lack footnotes and other presentation items.
(h) Events Subsequent to Most Recent Fiscal Year End.
Since the Most Recent Fiscal Year 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, except as set forth on Schedule 3.2(h) 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;
(ii) entered into any material agreement,
contract, lease, or license (or series of related agreements,
contracts, leases or licenses) involving more than $50,000,
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;
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(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 $50,000 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
$50,000 individually or in the aggregate;
(viii) created, incurred, assumed, or guaranteed
more than $50,000 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 or any of 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, purchased, or
otherwise acquired any of its capital stock, other than any
such dividend or distribution by any of its Subsidiaries 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;
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(xv) experienced any material changes in the
amount or scope of coverage of insurance now carried by them;
(xvi) made or been subject to any change in its
accounting practices, procedures or methods or in its cash
management practices;
(xvii) entered into any employment contract or
collective bargaining agreement, written or oral, or modified
the terms of any existing such contract or agreement;
(xviii) except as required or contemplated on or
prior to Closing pursuant to Section 9.4 of this Agreement,
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 increase
in the base compensation of or made any other change in the
employment terms of any of its directors, officers and
employees; and
(xix) 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, tort, infringement, claim or
lawsuit other than any such liabilities not in excess of $50,000
individually or in the aggregate.
(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, 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.
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(k) Tax Matters. Except as set forth in the
applicable subsection of Section 3.2(k) of the Disclosure Schedule:
(i) the Company and its Subsidiaries have duly
and timely filed all Tax Returns they were required to file.
All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Company or its
Subsidiaries (whether or not shown on any Tax Return) have
been timely paid. Other than as set forth in Section
3.2(k)(i) of the Disclosure Schedule, neither the Company nor
its Subsidiaries currently is the beneficiary of any
extension of time within which to file any Tax Return. The
Company and its Subsidiaries have maintained adequate
provision for, and adequate funds to pay, Taxes payable by
the Company and its Subsidiaries as of November 30, 1997 not
including deferred taxes as defined for purposes of GAAP that
do not represent a liability for taxes payable as of such
date, 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 its
Subsidiaries in filing their respective Tax Returns) will be
adequate for Taxes payable by the Company and its
Subsidiaries as of the Closing Date, other than Taxes
properly attributable to transactions occurring on the
Closing Date but after the Closing.
(ii) There is no material dispute or claim
concerning any Tax liability of any of the Company and 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 November
30, 1992, 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 adjustment,
deficiency, underpayment of Taxes or any other such notice
which has not been satisfied by payment or been withdrawn,
and no claims have
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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) 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;
(ix) 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;
(x) each of the Sellers is a United States
person as defined in Code Section 7701(a)(30);
(xi) except as set forth in Section
3.2(k)(xi) of the Disclosure Schedule, neither the Company
nor any of its Subsidiaries is a party to any Tax allocation
or sharing agreement; and
(xii) except as set forth in Section
3.2(k)(xii) of the Disclosure Schedule, 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.
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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, could become a default 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. The Real Property and all plants, buildings and
improvements located thereon conform to all applicable
building, zoning and other laws, ordinances, rules and
regulations. All permits, licenses and other approvals
necessary to the current occupancy and use of the Real
Property have been obtained, are in full force and effect and
have not been violated. There exists no violation of any
covenant, condition, restriction, easement, agreement or
order affecting any portion of the Real Property. All
improvements located on the Real Property have direct access
to a public road
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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, and none of the
Company nor any of its Subsidiaries or the Sellers has ever
received any 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 of the Sellers, 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 any of the Company and its Subsidiaries with
respect to any of the Company Proprietary Rights, identifies
each pending patent application or application for
registration which any of the Company and its Subsidiaries
has made with respect to any of the Company Proprietary
Rights, and identifies each material license, agreement, or
other permission which any of the Company and its
Subsidiaries has granted to any third party with respect to
any of the Company Proprietary Rights (together with any
exceptions). The Sellers have 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 any of the Company and its
Subsidiaries.
(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
the Company or any of 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:
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(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) none of the Company nor any of
its Subsidiaries has granted any sublicense or
similar right with respect to the license,
sublicense, agreement, or permission.
(iv) Each of 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) Except for such failures as would not
have a Material Adverse Effect, all computer systems used in
the business of the Company or any of its Subsidiaries
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 computer systems will not
be adversely affected 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 its
Subsidiaries own and lease, have been maintained in the Ordinary Course
of Business and such tangible assets as are necessary for normal
operation of business in the ordinary course are free from material
defects (patent and latent), and are in good operating condition and
repair (subject to normal wear and tear), considering their age and
operational use.
(o) Inventory. Except as set forth in Section 3.2(o)
of the Disclosure Schedule, the inventory of the Company and its
Subsidiaries consists of raw materials, work in process, 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 Most Recent Balance Sheet,
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as adjusted for the passage of time through the Closing Date in
accordance with past custom and practice.
(p) Contracts. Section 3.2(p) of the Disclosure
Schedule lists the following contracts and other agreements to which
any of the Company or its Subsidiaries is a party:
(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,
other than with respect to standard form purchase orders
entered into in the Ordinary Course of Business for the
purchase of raw materials or supplies, involve consideration
in excess of $50,000 per annum;
(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
the Subsidiaries, or any capitalized lease obligation, in
each case, in excess of $100,000 or under which it has
imposed a Security Interest on any of its assets, tangible or
intangible;
(vi) any agreement concerning
confidentiality or noncompetition with the effect of
prohibiting the Company or any of its Subsidiaries from
freely engaging in any business;
(vii) any material agreement with any of
the Sellers and their Affiliates (other than 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, or 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 agreement involving 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 material severance benefits;
(xiv) any agreement under which the
consequences of a default or termination could 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; or
(xvi) any commitment to do any of the
foregoing described in clauses (i) through (xvi).
The Sellers have delivered to the Buyer a correct and complete copy of
each written agreement listed in Section 3.2(p) of the Disclosure
Schedule (as amended to date) 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 all material respects and will continue to
be so following the Closing; (B) no 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.
(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
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valid receivables subject to no setoffs or counterclaims, are current
and collectible, 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 legal,
valid, binding, enforceable, and 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 the 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 any of the Company and 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. Substantially all of the products manufactured,
sold, leased, and delivered by the Company and 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 its
Subsidiaries (containing applicable guaranty, warranty, and indemnity
provisions).
(u) Product Liability. 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) exceeding $50,000 individually or in the aggregate 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, no
executive, key employee, or significant group of employees presently
plans to terminate employment with the Company or any of its
Subsidiaries during the next 12 months. None of the Company and its
Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strike or claim of
unfair labor practices, material grievance, or other collective
bargaining dispute within the past three years. None of the Company and
its Subsidiaries has committed any unfair labor practice. To the
Knowledge of the Company, no organizational or decertification effort
is presently being made or threatened by, on behalf of or against any
labor union with respect to any
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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 violate or require notification
pursuant to, 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 transactions contemplated
by this Agreement.
(w) Employee Benefits.
(i) Section 3.2(w) of the Disclosure
Schedule lists each Employee Benefit Plan.
(A) Each such Employee Benefit Plan
(and each related trust, insurance contract, or fund)
complies in form and in operation in all material
respects with the applicable requirements of ERISA,
the Code, 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 such Employee
Benefit Plan. The requirements of Part 6 of Subtitle
B of Title I of ERISA have been met in all material
respects with respect to each such 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 from the Company or its
Controlled Group have been paid to each such Employee
Benefit Plan which is an 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 from the Company
or its Controlled Group have been paid to each such
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 such Employee Benefit
Plan which is an Employee Welfare Benefit Plan and to
each Multiemployer Plan.
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(D) Each such Employee Benefit Plan
which is an Employee Pension Benefit Plan that is
intended to comply with Code Section 401(a) has
received a favorable determination letter from the
Internal Revenue Service with respect to the
requirements of the Tax Reform Act of 1986.
(E) The Sellers have delivered to
the 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 most recent Form 5500
Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit
Plan and each other employee benefit plan (as such term is
defined in Section 3(3) of ERISA) that any of the Company, its
Subsidiaries, and the Controlled Group which includes the
Company and its Subsidiaries maintains or has maintained
within the last six years or to which any of them contributes,
ever has contributed, or has been required to contribute
within the last six years:
(A) There have been no Prohibited
Transactions. No Fiduciary has any liability for
material breach of fiduciary duty or any other
material failure to act or comply in connection with
administration or investment of assets. No action,
suit, proceeding, hearing, or investigation with
respect to the administration or the investment of
the assets of any 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.
(B) None of the Company and its
Subsidiaries has incurred 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) to
the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Code with respect
to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(iii) Other than as set forth in Section
3.2(w) of the Disclosure Schedule, none of the Company, its
Subsidiaries, and the other members of the Controlled Group
that includes the Company and its Subsidiaries contributes to,
has contributed to within the last six years, or has been
required to contribute
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within the last six years to any Multiemployer Plan or 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 withdrawal liability,
under any Multiemployer Plan.
(iv) Neither the Company nor its
Subsidiaries maintains or ever has maintained or contributes,
ever has contributed, or ever has been required to contribute
to any Employee Welfare Benefit Plan providing 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
Part 6 of Subtitle B of Title I of ERISA).
(x) Environmental, Health, and Safety.
(i) Other than as set forth in Section
3.2(x)(i) of the Disclosure Schedule, each of the Company, its
Subsidiaries, and their respective predecessors (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, written demand, or
notice has been filed or commenced against any of them
alleging any 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.
(ii) Other than as disclosed in Section
3.2(x)(ii) of the Disclosure Schedule, neither the Company nor
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 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 could
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 disclosed in Section
3.2(x)(iii) and except for instances that would not give rise
to a material liability, all properties and
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equipment used in the business of the Company, its
Subsidiaries, and their respective predecessors have been free
of asbestos, PCB's, petroleum, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins,
dibenzofurans, and other extremely hazardous substances.
(iv) Other than as disclosed in Section
3.2(x)(iv) 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 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 necessary 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).
(v) Other than as disclosed in Section
3.2(x)(iv) of the Disclosure Schedule, 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 (x) in the case of
clauses (1), (2) or (3), for such items that are in compliance
in all material respects with all applicable Environmental,
Health and Safety Laws and (y) in the case of clause (2), for
such items for which no remedial actions are necessary as of
the Closing Date to prevent any present or future material
liability.
(vi) 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.
(y) Transaction With Affiliates. Except as set forth
on in Section 3.2 (y) of the Disclosure Schedule, none of the Company's
nor any of its Subsidiaries' shareholders, directors, officers or
employees nor any of their respective relatives or Affiliates 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 or any of its Subsidiaries' shareholders, directors,
officers or employees nor any of their respective relatives or
Affiliates owns any material property or right, tangible or intangible,
which is used by the Company or any of its Subsidiaries.
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(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) Board Recommendation. The board of directors of
the Company, by unanimous written consent dated as of December 18,
1997, a copy of which is attached hereto as Exhibit B, has by unanimous
vote of the directors signing such consent (who constituted 100% of the
directors then in office) adopted resolutions to recommend that the
holders of the shares of Stock approve this Agreement and the
transactions contemplated herein.
(bb) 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 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, except that (i) such enforcement may be
subject to bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
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:
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(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 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 has resulted or 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.
ARTICLE V
COVENANTS OF THE SELLERS AND COMPANY
The Sellers and the Company hereby severally covenant and
agree with Buyer that from and after the date hereof to and including the
Closing Date, the Sellers and the Company shall, and the Sellers shall cause the
Company to, 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. All communications by Buyer, its
Affiliates and financing sources with the Company's
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customers, suppliers and lenders shall be subject to the Company's prior written
approval, which approval may be withheld in its sole discretion. 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 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 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; provided, that prior to Closing, all
intercompany obligations, including accounts payable or receivable, among the
Company and Rotterdam and its Affiliates will either be assigned, satisfied or
canceled and the Company shall have no further liability in respect of any
account or note payable or any other obligation to Rotterdam or any of its
Affiliates.
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
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present officers, employees, consultants and agents; 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) promptly 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 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 hereby agrees as
follows:
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(a) Covenant Against Competition. The Covered Person
acknowledges that (a) the principal business of the Company is the
manufacture and sale of forged metal products; (b) the Covered Person
is one of a limited number of Persons who have developed the Company's
business; (c) the Company's 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 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 "Company Group") concerning the business or affairs of any member
of the Company Group (including without limitation the Company's
technology, methods of doing business and supplier and customer
information) (collectively, "Confidential Company Information") are the
property of the Company or such other member of the Company Group 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 and ending three and one-half (3 1/2) years following
the Closing Date (the "Restricted Period"), the Covered Person
shall not (A) 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 in (including by himself, in association with any
Person, or through any Person) any business that 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 Buyer, the Company
or their respective Subsidiaries anywhere in the United
States, as such businesses exist or are proposed as of the
Closing Date or the date of this Agreement, or logical
extensions thereof (collectively, "Covered Activities"); or
(B) 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 five percent (5%) or
more of any class of securities of such Person and has no
active participation in the business of such Person; provided,
further, that, the Covered Person may own, directly or
indirectly, solely as an investment, securities of Forge Die &
Tool Corp. ("Forge Die"), if and for so long as Forge Die does
not, directly or indirectly (i) induce or influence any
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customer, supplier, lessor, licensor or any other person that
has or had during the one year period initially preceding the
Closing Date a business relationship with the Company, to
discontinue, reduce or adversely modify such business
relationship with the Company or otherwise engage in any
activity prohibited by Section 5.6(a)(iii), (ii) acquire any
ownership interest in any Person engaging in a Covered
Activity, or (iii) engage in any Covered Activity, except as
such businesses exist or are proposed as of the Closing Date
or logical extensions thereof.
(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 (i) prospective facilities, (ii) sales
figures, (iii) profit or loss figures, and (iv) 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
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 Restricted Period, the
Covered Person shall not, without the prior written consent of
the Buyer, directly or indirectly, (i) 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, (ii) hire
any person within two years of the last day such person was an
employee of Buyer, the Company or any Subsidiary or (iii)
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 Buyer,
the Company or such Subsidiary, or in any way interfere with
the relationship between any such customer, supplier, licensee
or business relation and Buyer, the Company or any Subsidiary
(including, without limitation, making any disparaging
statements or communications about Buyer or its Subsidiaries).
Notwithstanding the foregoing, nothing in this Section shall
prevent any Seller
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from providing a letter of recommendation to an employee of
the Company or any Subsidiary with respect to a future
employment opportunity.
(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
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continuing, of such covenants, it being acknowledged and
agreed that Covered 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. Buyer, 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 of the
Disclosure Schedule. 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.
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
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 announcement or disclosure to current or future
financing sources or subsequent purchasers or
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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 Stockholder Representative. By
execution of a counterpart of this Agreement, the Stockholders hereby appoint
Mr. David Buicko to act as representative of the Stockholders (the "Stockholder
Representative") and take all actions in their name and stead in all matters
provided for herein, including without limitation the resolution or dispute of
any claims matters related to Article X. In the event of the death, incapacity,
removal or resignation of Mr. David Buicko, a successor Stockholder
Representative shall be appointed by vote of a majority of the Stockholders.
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, at any time prior to
Closing:
(a) by mutual consent of the Company and Buyer;
(b) by either the Company or Buyer, if the sale and
purchase of the Stock shall not have been consummated on or before the
date ninety (90) days after the date of this Agreement (the
"Termination Date");
(c) 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;
(d) by the Company, in the event that the conditions
to its obligations set forth in Article VII hereof have not been
satisfied or waived at or prior to the Termination Date;
(e) by Buyer, if the Stockholders fail to unanimously
adopt and approve this Agreement and the sale and purchase of the Stock
on or before March 25, 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, 9.6
and 11.8, which shall survive the termination of this Agreement, and except that
nothing herein will relieve any party from liability for any breach of any
agreement or covenant contained herein prior to such termination, provided that
no party shall be entitled to seek consequential damages or lost profits with
respect to any such claims.
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Section 6.3 Amendments. 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 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
6.3) 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.
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, to the
satisfaction, on or prior to the Closing Date, 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 C 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 2.3.
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.
Section 7.6 HSR Act Waiting Period. All applicable waiting
periods related to the HSR Act shall have expired.
Section 7.7 Documents to be Delivered by Buyer. At the
Closing, Buyer shall have delivered to Sellers, by delivery to the Stockholder
Representative, the following documents, in each case duly executed or otherwise
in proper form:
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(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 Seller may reasonably request.
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 in all material respects, except for any
such representations or warranties which are qualified by materiality or
Material Adverse Effect which shall be true and correct in all respects, 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 Sellers and the Company shall have performed all agreements
and covenants required hereby to be performed by any 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
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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.
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 could reasonably be
expected to have a Material Adverse Effect.
Section 8.6 Funded Debt. There shall not be outstanding any
Funded Debt.
Section 8.7 Stockholders Approval. This Agreement, and the
transactions contemplated thereby shall have been unanimously approved by all
the votes entitled to be cast with respect thereto by the holders of the
outstanding Stock; and dissenters' rights shall not have been asserted with
respect to any of the issued and outstanding shares of Stock.
Section 8.8 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:
(a) Stock Certificate(s). Stock certificates representing all
of the outstanding shares of the Stock, duly endorsed in blank or otherwise
acceptable for transfer, with all restrictive legends (if any) (other than
legends with respect to the Securities Act) either removed or properly canceled.
(b) Stock Option, 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 the chief
executive officer of the Company that each of the representations and warranties
made by the Company and the Sellers 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.
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(d) Opinion of Counsel. A written opinion of Mayer, Brown &
Platt, counsel to the Company, dated as of the Closing Date, addressed to Buyer,
substantially in the form of Exhibit D 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 Company and Sellers.
(g) Articles; Bylaws; Good Standings. (i) A copy of the
articles of incorporation of the Company and each Subsidiary certified as of a
recent date by the Secretary of State of the state of incorporation of each such
company, (ii) a copy of the bylaws of the Company and each Subsidiary certified
by the secretary of the Company and each Subsidiary, respectively and (iii)
certificates of good standing for the Company and its Subsidiary 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 (10) days prior to the Closing
Date.
(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 its Subsidiary.
(l) Kchikian Agreements. The Kchikian Amendment, the Kchikian
Employment Assignment and the Kchikian Lease Assignments duly executed by
Kchikian, the Company and Rotterdam, in form and substance satisfactory to
Buyer.
(m) 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.
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Section 8.9 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 Subsidiaries,
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 could be expected to
have a material adverse effect.
Section 8.10 Management Arrangements. Buyer shall have entered
into formal arrangements with Mark Clark, on terms and conditions satisfactory
to Buyer in its sole discretion.
Section 8.11 Real Property. Buyer shall have received each of
the deliveries required under Section 2.6.
Section 8.12 Financing. Buyer shall have received cash
proceeds of financing in an amount necessary to consummate the purchase of the
Stock 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.
Section 8.13 All Proceedings To be Satisfactory. All corporate
and other proceedings to be taken by 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.
Section 8.14 Tax Sharing Agreements. Buyer shall have received
evidence that any Tax allocation or sharing agreement to which the Company or
any Subsidiary is a party has been terminated and no liability in respect of any
such agreement exists.
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) Sellers shall be responsible for the payment of
any Taxes (including Taxes payable as a result of the disallowance of
any deduction) that may be imposed on the Company with respect to any
Pre-Closing Period (except to the extent reserved or
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accrued for on the Most Recent Balance Sheet or to the extent properly
attributable to transactions occurring on the Closing Date but after
the Closing). Buyer and the Company shall be responsible for the
payment of any Taxes that may be imposed on the Company for any taxable
period beginning after the Closing Date.
(b) Buyer shall file or cause to be filed when due
all Tax Returns of the Company for the taxable periods ending after the
Closing Date and shall pay or cause to be paid the Taxes shown to be
due on any such Tax Return. If the Closing does not terminate the
Company's current taxable year with respect to any Taxes, then Buyer
and the Company shall be responsible for the payment of the portion of
the Company's Taxes attributable to the portion of such taxable year
beginning after the Closing Date. For this purpose, Taxes shall be
apportioned between the pre-Closing and post-Closing portions of the
Company's current taxable year according to when the income was
actually earned except that exemptions, allowances or deductions that
are calculated on an annual basis shall be allocated to each such
portion of the taxable period on a daily basis.
(c) Sellers shall be entitled to all refunds of
Income Taxes for which Sellers are responsible under Section 9.2
hereof, and Buyer and the Company agree to remit to the Stockholder
Representative on behalf of Sellers any such refund received by Buyer
or the Company net of any Taxes imposed on the recipient by reason of
the receipt thereof and net of any fees and expenses incurred to
process the claim for refund.
(d) Buyer and the Company shall cooperate fully with
the Stockholder Representative, and among other things shall prepare
and submit to the Stockholder Representative such tax data and other
information as may be required for the preparation by Sellers of any
Tax Return for Sellers' taxable year which includes the Closing Date or
which otherwise relates to the Company's pre-Closing operations. Such
data and other information shall be prepared on a basis consistent with
that prepared for prior Pre- Closing Periods and shall be submitted to
the Stockholder Representative at such time as shall reasonably enable
Sellers to comply with applicable tax return filing requirements on a
timely basis.
(e) Buyer and the Company shall permit the
Stockholder Representative, and the Sellers shall permit Buyer and the
Company to have full access, at any reasonable time and from time to
time after the Closing Date, to all pre-Closing Tax Returns and all
books and records, wherever located, of the Company, or Sellers
relating to the Company, relevant to such Tax Returns. Sellers and
Buyer shall preserve such information until the expiration of all
applicable statutes of limitations (including any waivers or extensions
thereof), and shall make such information available to the other party
as may be reasonably required by the other party in connection with any
tax examination of or preparation of a Tax Return by the other party.
If Buyer or the Company shall receive a notice of a proposed adjustment
to Income Taxes for any Pre-Closing Period, then
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Buyer shall, or shall cause the Company to, promptly furnish to the
Stockholder Representative a copy of such notice.
Section 9.3 Non-Solicitation; Non-Compete. Each Seller that is
a Covered Person undertakes that such Seller shall not take any action in
contravention of the covenants set forth in Section 5.6 hereof.
Section 9.4 Employees; Employee Benefit Plans.
(a) Jackson Innova Plan. Sellers shall assume and
retain all liabilities and obligations of the Company arising under or
in connection with the "Jackson Innova Corporation Hourly Employees
Pension Plan" (the "Jackson Plan") including, but not limited to, all
liabilities and obligations arising under or in connection with that
certain settlement agreement by letter dated as of January 15, 1992
pertaining to litigation between the International Union, United
Automobile, Aerospace and Agricultural Implement Workers of America
(UAW) and the Company and Jackson Innova Corporation (the "Settlement
Agreement"); and Sellers shall indemnify, defend and hold harmless
Buyer from and against any and all Losses in respect of the Jackson
Plan and the Settlement Agreement.
(b) Salaried Defined Benefit Plan.
(i) Subject to Subparagraph (ii) hereof, Sellers
shall amend the "Galesi Group Salaried Employees Pension Plan" (the
"Salaried Plan") to cause all benefit accruals under the Salaried Plan
to cease as of the Closing Date with respect to all employees of the
Company and Sellers shall retain all liabilities and obligations of the
Company under the Salaried Plan for benefits accrued thereunder as of
the Closing Date by all current employees and former employees of the
Company. Sellers shall also recognize service by employees of the
Company who are participants in the Salaried Plan as of the Closing
Date ("Transferred Participants") with Buyer after the Closing Date for
the purpose of determining eligibility for early retirement benefits
provided that in no event shall any service or earnings subsequent to
the Closing Date be taken into account for benefit accrual purposes.
Each Transferred Participant shall be fully vested in his accrued
benefit under the Salaried Plan as of the Closing Date. The amount of
any pension payable under the Salaried Plan shall be determined for the
Transferred Participants based only on the length of continuous service
and earnings of such Transferred Participants as defined under the
Salaried Plan determined as of the Closing Date. Sellers shall cause
the Salaried Plan to be amended to reflect the provisions of this
Section 9.4(b) and shall within 3 months after the Closing Date provide
Buyer with a copy of such amendment. Nothing herein shall require Buyer
to establish a replacement defined benefit plan with respect to the
Transferred Participants.
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(ii) In consideration for the obligations assumed and
retained by Sellers pursuant to subparagraph (i) above, Buyer shall pay
to Rotterdam the amount of $151,423.00 on the Closing Date.
(iii) On an ongoing basis, Buyer shall provide
Sellers with information regarding the date of termination of
employment with the Company of Transferred Participants and their
subsequent mailing addresses as provided by such Transferred
Participants to the Company.
(c) Defined Contribution Plan.
(i) Effective as of the Closing Date, Buyer
shall cause to be adopted and maintained a defined
contribution plan or plans (the "Buyer's Defined Contribution
Plan") intended to be qualified under Section 401(a) of the
Code that has features concerning the timing and method of
distributions such that a direct transfer from the "Galesi
Group Employee Savings Plan" (the "Sellers' Defined
Contribution Plan") to the Buyer's Defined Contribution Plan
of account balances attributable to current employees of the
Company ("Transferred Employees") will not cause a violation
of Section 411(d)(6) of the Code, and that credits the
Transferred Employees with all of their years of service
credited under the Sellers' Defined Contribution Plan as of
the Closing Date for all purposes under the Buyer's Defined
Contribution Plan. As soon as practicable following the
Closing Date, Buyer shall submit the Buyer's Defined
Contribution Plan to the IRS for a favorable determination
that the Buyer's Defined Contribution Plan is qualified under
Section 401(a) of the Code.
(ii) In accordance with the applicable
provisions of Section 414(l) of the Code, upon receipt of an
opinion of counsel of Buyer reasonably acceptable to Sellers
regarding the qualified status of the Buyer's Defined
Contribution Plan, Sellers shall cause the assets of the
Sellers' Defined Contribution Plan attributable to the
accounts (whether or not vested) of each Transferred Employee
(or the beneficiaries or alternate payee(s) of each
Transferred Employee) to be transferred by the trustee of the
Sellers' Defined Contribution Plan to the trustee of the
Buyer's Defined Contribution Plan. The transfer of assets from
the Sellers' Defined Contribution Plan to the Buyer's Defined
Contribution Plan made pursuant to the terms of this Agreement
shall be in cash or in kind (including any promissory notes or
other evidences of indebtedness with respect to outstanding
loans made to Transferred Employees), as mutually agreed by
Sellers and Buyer, or in cash if no such agreement is made,
and shall be made as of and as soon as practicable after a
valuation date under the Sellers' Defined Contribution Plan
occurring coincident with or immediately following the Closing
Date, or as of such later valuation date as may be mutually
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selected by Sellers and Buyer. Such transfer shall account
appropriately for earnings and losses during the period from
the applicable valuation date to the actual date of transfer
(the "Transfer Date").
(iii) From the Closing Date until the
Transfer Date, Buyer shall make continuous payroll deductions
each pay period from the pay of each Transferred Employee who
has a loan(s) outstanding from the Sellers' Defined
Contribution Plan of amounts sufficient to pay the installment
payments of principal and interest on each such loan as
required by the promissory note or other evidence of
indebtedness relating to such loan. Such deducted amounts
shall be paid by Buyer to the trustee of the Sellers' Defined
Contribution Plan who shall accept such payments for a credit
against such loans.
(iv) On or prior to the Closing Date,
Sellers shall make a contribution to the Sellers' Defined
Contribution Plan of the amounts of any salary reduction,
matching, and profit sharing contributions attributable to or
payable on account of any Transferred Employee for any time
period ending on the Closing Date.
(d) Welfare Benefits. On and after the Closing Date,
Sellers shall retain and have sole responsibility for the payment of
premiums for any and all medical, dental, life, accidental death and
dismemberment, disability and other welfare benefits provided to
employees and former employees of the Company and its Subsidiaries (and
the eligible dependants of such employees and former employees) for
periods on or prior to the Closing Date. Buyer shall have sole
responsibility for the payment of such premiums, if any, as are
incurred for periods starting on and after the Closing Date and for
payment of all contributions due to the UIU Pension Plan and the NWPACC
Labor Management Benefit Trust Fund for periods on and after the
Closing Date.
(e) COBRA. Buyer shall be responsible for satisfying
or causing the Company to satisfy the continuation coverage
requirements for group health plans under Section 4980B of the Code or
Part 6 of Subtitle B of Title I of ERISA for all employees or former
employees of the Company (and any dependents of such employees or
former employees).
(f) Executive and Deferred Compensation Arrangements.
Sellers shall be solely responsible for the payment of any and all
amounts deferred pursuant to any non-qualified deferred compensation
arrangements maintained by Sellers with respect to any employee or
former employee of the Company other than such arrangements as are
listed on Schedule 9.4(f) hereto which are arrangements that will be
assumed by the Company as of the Closing Date.
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Section 9.5 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 use commercially reasonable
efforts to refer all customer inquiries relating to the businesses of the
Company to the Company from and after the Closing. From and after the Closing
Date, until the Company shall have given Rotterdam not less than one month's
notice of its desire to terminate one or all of such services but in any event
no later than one year from Closing, Rotterdam shall continue to supply to the
Company the services set forth in Exhibit E, in substantially the same manner as
such services are currently provided at a cost to the Company not to exceed the
cost to Rotterdam to provide such services and in any event not to exceed $6,503
per annum or $542 per month.
Section 9.6 Confidentiality. 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; provided, however, that each Seller shall be allowed to keep
one copy of the Confidential Information relating to Taxes for its records. In
the event that Sellers are 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, Sellers 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 9.6. If, in the absence of a protective order or the
receipt of a waiver hereunder, Sellers are, on the advice of counsel, compelled
to disclose any Confidential Information to any tribunal or else stand liable
for contempt, Sellers may disclose the Confidential Information to the tribunal;
provided, that Sellers shall use their 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 9.7 Retroactive Insurance Premium Decreases. In the
event of any retroactive decrease in insurance premiums that creates a
receivable to the Company in respect of any insurance policy in effect in any
Pre-Closing Period and properly allocable to such Pre- Closing Period, then
Buyer shall promptly pay or cause to be paid to Sellers upon receipt thereof by
the Company, an aggregate amount of funds received by the Company with respect
to such retroactive decrease.
Section 9.8 Kchikian Lease Agreements; Kchikian Employment
Agreement.
(a) Rotterdam and the Company shall enter into an
assignment agreement substantially in the form of Exhibit F hereto (the
"Kchikian Lease
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Assignment") providing for the assignment to and assumption by
Rotterdam of all of the obligations under those certain Leases (the
"Kchikian Leases") between the Company and John Kchikian ("Kchikian")
set forth in Section 3.2(l)(ii) of the Disclosure Schedule.
(b)(i) The Company and Kchikian shall have entered
into an amendment (the "Kchikian Amendment") to that certain Employment
Agreement dated as of October 27, 1989 between the Company and Kchikian
as amended by the Amendment to Employment Agreement (the "Kchikian
First Amendment") made and effective as of the 12th day of February,
1994 (as so amended, the "Kchikian Employment Agreement") to terminate
the provisions of Sections 3(d) and 3(e) of the Kchikian Employment
Agreement and (ii) the Company and Rotterdam shall enter into an
assignment agreement substantially in the form of Exhibit G hereto (the
"Kchikian Employment Assignment") providing for (x) except as provided
in clause (y) below, the equal allocation of responsibility for all
salary and benefits obligations to Kchikian under the Kchikian
Agreement, (y) the assignment to Rotterdam of all of the obligations to
provide long term health, medical or dental coverage, including
pursuant to paragraph 3 of the Kchikian First Amendment, and (z) the
allocation of responsibility for expense reimbursement under Section 5
of the Kchikian Agreement based upon the company for which the related
services were provided. The Company and Rotterdam shall use
commercially reasonably efforts to cause Kchikian to consent to the
assignment of the foregoing obligations. Rotterdam hereby agrees to
indemnify the Company and the Buyer in respect of any and all Losses
incurred by the Company or Buyer as a result of any obligation under
the Kchikian Leases or the Kchikian Employment Agreement for which
Rotterdam is intended to assume the liability pursuant to the Kchikian
Lease Assignment or the Kchikian Employment Assignment.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival, Representations and Warranties. The
representations and warranties provided for in this Agreement shall survive for
18 months beyond the Closing Date, except that the representations and
warranties set forth in Sections 3.1 and 3.2(b),(d), (f) and (y) and 4.2 shall
survive indefinitely, the representations and warranties contained in Section
3.2(k) shall survive until 90 days after the expiration of the applicable
statute of limitations; and the representations and warranties contained in
Section 3.2(x) shall survive for six (6) years beyond the Closing Date. 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. The covenants and agreements in this Article X shall survive until
such time as any claim for indemnification is finally settled in accordance with
the terms hereof.
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Section 10.2 Indemnification Obligation of Sellers.
(a) Each of the Sellers (other than Rotterdam)
severally, and Rotterdam, jointly and severally, agree to indemnify
Buyer and its affiliates, stockholders, officers, directors, employees,
agents, representatives and successors and assigns (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, 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 each Seller from
whom indemnification is sought 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;
(iv) the shortfall, if any, in Working
Capital as of the Measurement Date below the Minimum Working
Capital;
(v) 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(x) of the Disclosure Schedule;
(vi) 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;
(vii) 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);
(viii) obligations of the Company incurred
in connection with any severance obligation arising as a
result of the transactions contemplated by this Agreement
other than with respect to any employee terminated by Buyer
after the Closing;
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(ix) obligations of the Company arising
during the period of Rotterdam's ownership of any shares of
capital stock 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; and
(x) 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 Rotterdam from and
after the Measurement Date.
(b) 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), (f), (k) and (y)) unless the
aggregate of all such Losses exceeds $287,500; provided, that in such
event, Sellers shall be responsible for the amount of all such Losses;
provided further, that only such Losses which individually exceed
$10,000, shall be included in the calculation of the $287,500 threshold
described above. In no event shall the Sellers be obligated to
indemnify the Buyer Indemnities under this Article X 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 the aggregate
amount of (i) in the case of each Seller (except as provided in clause
(ii) below), its proportionate share of the Escrow Deposit and (ii) in
the case of Rotterdam, $6,000,000 less any amounts recovered by Buyer
Indemnitees from the Escrow Deposit.
(c) 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 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. 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.
(d) 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 any amounts due from such Seller
pursuant to this Section 10.2 and in order to obtain such amounts,
Buyer commences a suit against such Seller to collect the amounts
provided for herein, if Buyer succeeds in such action or proceeding,
the Sellers, other than Rotterdam, shall be severally liable and
Rotterdam shall
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also be jointly and severally liable, to pay to Buyer its reasonable
costs and expenses (including reasonable attorneys' fees) in connection
with such suit; provided, however, that should Buyer be the losing
party on the merits in any such action or proceeding, Buyer shall pay
to each Seller party to such action its reasonable costs and expenses
(including reasonable attorneys' fees) in connection with 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 of 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) Except as provided in subsection (e) below, 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 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
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, at its option an Indemnifying Party may
appoint as lead counsel of such defense any legal counsel selected by
the Indemnified Party; provided, that before the Indemnifying Party
assumes control of such defense it must first:
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(i) enter into an agreement with the
Indemnified Party (in form and substance reasonably
satisfactory to the Indemnified Party) pursuant to which the
Indemnifying Party agrees to be fully responsible (with no
reservation of any rights other than the right to be
subrogated to the rights of the Indemnified Party) for all
Losses relating to such Proceeding and unconditionally
guarantees the payment and performance of any liability or
obligation which may arise with respect to such Proceeding or
the facts giving rise to such claim for indemnification; and
(ii) furnish the Indemnified Party with
evidence that the Indemnifying Party, in the Indemnified
Party's sole judgment, is and will be able to satisfy any such
liability.
(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 prior to
the date upon which the Indemnifying Party effectively assumes control
of such defense), and (ii) the Indemnifying Party will not be entitled
to assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the
Indemnified Party, if:
(i) the Indemnified Party reasonably
believes that an adverse determination of such Proceeding
could be detrimental to or injure the Indemnified Party's
reputation or future business prospects;
(ii) the Indemnified Party reasonably
believes that there exists or could arise a conflict of
interest which, under applicable principles of legal ethics,
could prohibit a single legal counsel from representing both
the Indemnified Party and the Indemnifying Party in such
Proceeding; or
(iii) a court of competent jurisdiction
rules that the Indemnifying Party has failed or is failing to
prosecute or defend vigorously such claim.
(d) the Indemnifying Party must obtain the prior
written consent of the Indemnified Party (which the Indemnified Party
will not unreasonably withhold) prior to entering into any settlement
of such claim or Proceeding or ceasing to defend such claim or
Proceeding, provided that any such settlement shall provide for the
full release of all claims against each Indemnified Party.
(e) In connection with any claim by Buyer as a result
of a shortfall in Working Capital resulting in a breach of the
representation and warranty contained in
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Section 3.2(b)(ii), Buyer shall give notice to the Stockholder
Representative setting forth Buyer's determination of the Working
Capital as of the close of business on March 31, 1998, or in the event
the Closing shall not have occurred on or prior to April 3, 1998, as of
the close of business on the Closing Date (the date of such
determination, the "Measurement Date") and any proposed adjustment to
the Purchase Price as a result thereof (the "Adjustment Notice"). On or
prior to the 30th day after the Stockholder Representative's receipt of
the Adjustment Statement, the Stockholder Representative may give the
Buyer a written notice stating in reasonable detail the Stockholder
Representative's objections, if any (an "Objection Notice"), to the
Adjustment Statement. If the Stockholder Representative does not tender
to the Buyer an Objection Notice within such 30-day period, or
otherwise agrees in writing with the Adjustment Statement, then the
Adjustment Statement will be conclusive and binding upon the parties
and the Working Capital determined therefrom will likewise be binding
on the parties for purposes of this Section. If the Stockholder
Representative and the Buyer do not resolve all disputes as reflected
in the Objection Notice on or prior to the 15th day after the Objection
Notice is given, then the Stockholder Representative and the Buyer will
retain a firm of certified public accountants that is mutually
acceptable to the Stockholder Representative and the Buyer (if the
Stockholder Representative and the Buyer are unable to agree on a
mutually acceptable accounting firm prior to the 22nd 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's accountant and Rotterdam's
accountant) (the "Independent Accounting Firm") to determine the
Working Capital as of the close of business on the Measurement Date, 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 1.3. The amount of
Working Capital as of the close of business on the Measurement Date,
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 Stockholder Representative
and the Buyer 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 this
Section. The fees and expenses of the Independent Accounting Firm will
be split equally between the Buyer and the Sellers. If any amount is
determined to be owed to Buyer hereunder as a result of a shortfall in
Working Capital, Rotterdam shall pay any amount so owing, plus interest
thereon at the Base Rate from the Closing Date, to Buyer by wire
transfer of immediately available funds to an account or accounts
designated by Buyer in writing, no later than three (3) business days
after the determination thereof.
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 ten (10)
days after such determination, the amount of any claim for indemnification made
hereunder. Anything to the contrary herein notwithstanding, no Seller
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shall be obligated to make any payment to any Buyer Indemnitee pursuant to
Section 10.2(a)(i), Section 10.2(a)(ii) (other than with respect to any claim
for breach of Section 9.2, Section 9.4 or Section 9.8) or Sections 10.2(a)(vi),
(viii) and (ix) until and unless the Escrow Deposit is exhausted. To the extent
the Escrow Deposit is exhausted, the Buyer Indemnitees shall have recourse
against, and only against, Rotterdam for the amount of any claim for
indemnification under this Article X and Rotterdam hereby acknowledges and
agrees that it shall be jointly and severally liable for the entire amount of
any such claim. To the extent Rotterdam has made payments in respect of any
claim for indemnification hereunder, each other Seller shall, on written notice
thereof, promptly pay Rotterdam an amount equal to such other Seller's pro rata
portion (based on his relative ownership of Stock prior to Closing) of such
Losses.
Section 10.6 Adjustment to Indemnities.
(a) The amount of indemnity payable under Section
10.2 or Section 10.3 shall be treated by Buyer, Sellers and the Company
as an adjustment to the Purchase Price of the Stock, and shall be
calculated after giving effect to (i) any proceeds received from
insurance policies covering the damage, loss, liability or expense that
is the subject of the claim for indemnity, net of any increase in
premium as a result of such claim and (ii) the actual realized Tax
benefit to the Indemnified Party resulting from the damage, loss,
liability or expense that is the subject of the indemnity and of the
indemnity payment itself; provided that, to the extent that any Tax
benefit is realized in a Tax year other than the year in which the
indemnity is paid, the Indemnified Party shall make a payment to the
Indemnifying Party in the amount of such realized Tax benefit in the
year in which it is realized. For purposes of this Section 10.6, an
actual realized Tax benefit is an actual reduction in Taxes payable or
a refund of Taxes previously paid.
(b) If an audit, claim for refund, or amended return
(collectively, an "Adjustment") after the Closing Date shall both (i)
increase a Tax liability for which the Sellers are responsible under
Section 10.2 and (ii) decrease a Tax liability of the Company (except
Tax liabilities of the Company for which the Sellers are so
responsible), and if such Adjustment is not taken into account under
Section 10.6(a) in computing the amount of an indemnification payment
under Section 10.2, then, when and to the extent that the Company
derives a Tax benefit from such decrease (through a reduction of Taxes,
refund of Taxes paid or credit against Taxes due), the Company shall
promptly pay to the Stockholder's Representative an amount equal to the
amount of such reduction, refund or credit, but not before (A) the
benefit of the reduction is received or, if contested, a final
determination is made of any contest in which the reduction is at
issue, (B) the refund is received, or (C) the credit is actually
utilized. Cumulative amounts paid for Adjustments pursuant to this
Section 10.6(b) shall not exceed the cumulative increases in Tax
liability (including interest and penalties) of the Sellers resulting
from Adjustments described in this Section 10.6(b). For purposes of
this Section 10.6(b), (1) a reduction in otherwise available losses or
Tax credits shall be considered an increase in Tax liability at such
time
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as Taxes are actually required to be paid that would not have been
payable had such losses or credits not been so reduced, and (2) an
addition to available losses or Tax credits shall be considered a
decrease in Tax liability at such time as such additional losses or
credits actually are used, treating the additional losses and credits
as being the last losses and credits utilized by the Company.
Section 10.7 No Contribution. Anything to the contrary herein
notwithstanding, no Seller shall have any right to seek any indemnification or
contribution from or remedy against the Company whether arising prior to or
after the Closing Date in respect of any breach of any representation or
warranty by the Company or the failure of the Company to comply with any
covenant or agreement to be performed by the Company on or prior to the Closing
Date and each Seller hereby waives any such claim it may have against the
Company with respect thereto whether at law, in equity or otherwise.
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,
assign, 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 purchaser 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 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, or 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):
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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, NY 10022
Attention: Kirk A. Radke, Esq.
Telecopy No.: (212) 446-4900
If to the Company or Sellers:
Rotterdam Ventures, Inc.
Rotterdam Industrial Park
Building 6
Rotterdam, NY 12306
Attention: David Buicko
Telecopy No.: (518) 356-5334
With copies (which shall not constitute notice to the Company
or Sellers) to:
Rotterdam Ventures, Inc.
Rotterdam Industrial Park
Building 6
Rotterdam, NY 12306
Attention: Steven Porter
Telecopy No.: (518) 356-5334
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and
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: Thomas M. Vitale
Telecopy No.: (212) 262-1910
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 REFERENCE TO THE CHOICE OF LAW OR CONFLICTS OF LAW PRINCIPLES
THEREOF. 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 NEW YORK OR
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, 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. 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.
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.
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Section 11.8 Expenses. Except as otherwise provided herein,
Sellers and Buyer will each be liable for their respective costs and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement and the consummation of the transactions
contemplated hereby; provided, that any such costs and expenses incurred by the
Company at or prior to the Closing shall be deemed to have been incurred by
Sellers. Buyer and Seller shall split equally all real property transfer, stamp
and other similar Taxes, if any, assessed in connection with the transactions
contemplated by this Agreement.
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 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 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
MERCER FORGE CORPORATION
By: /s/ David M. Buicko
--------------------------------
Name: David M. Buicko
Its: EVP
ROTTERDAM VENTURES, INC.
By: /s/ David M. Buicko
--------------------------------
Name: David M. Buicko
Its: EVP
/s/ Mark Clark
--------------------------------
MARK CLARK
/s/ David M. Buicko
--------------------------------
DAVID BUICKO
/s/ Eugene Ruiz
--------------------------------
EUGENE RUIZ
/s/ John Kchikian
--------------------------------
JOHN KCHIKIAN