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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of November 12, 1997 (this
"Agreement"), by and among TUFCO TECHNOLOGIES, INC., a Delaware corporation
("Buyer"), CHARLES COBAUGH ("Cobaugh") and JAMES BARNES ("Barnes," and together
with Cobaugh, the "Stockholders").
WHEREAS, the Stockholders are the beneficial and record owners of all
of the issued and outstanding shares of common stock, no par value per share
(the "Shares"), of Foremost Manufacturing Company, Inc., a Missouri corporation
(the "Company"); and
WHEREAS, Buyer desires to purchase and the Stockholders desire to
sell, all of the Shares, upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties contained herein, and intending to be legally
bound hereby the covenants and agreements contained herein, the parties hereto
agree as follows:
ARTICLE I
SALE OF STOCK
1.1. The Sale. Upon the terms and subject to the conditions of
this Agreement, at the closing (the "Closing"), the Stockholders hereby jointly
and severally agree to sell, convey, assign, transfer and deliver to Buyer, and
Buyer hereby agrees to purchase and acquire from each Stockholder, the Shares
owned by such Stockholder, free and clear of all Liens (as defined in Section
2.1 hereof). The number and class of Shares to be sold by each of the
Stockholders is set forth in Schedule 1.1 of the disclosure schedules delivered
in connection herewith and attached hereto (the "Disclosure Schedules") to this
Agreement.
1.2. Purchase Price.
(a) On the Closing Date (as hereinafter defined), Buyer shall (x)
subject to subsequent adjustment pursuant to Section 1.3 and Section 5.1
hereof, pay to the Stockholders Five Million dollars ($5,000,000), less the
dollar amount of all Indebtedness (as hereinafter defined) of the Company
existing on October 31, 1997, and amounts, if any, calculated in accordance
with Section 1.2(b) below (as so adjusted, the "Cash Purchase Price"); (y)
deliver to Bank One Trust Company, NA, with an office at 111 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, as escrow agent (the "Escrow Agent"),
$250,000 (such amount, the "Escrow Payment") to be held in an escrow fund (the
"Escrow Fund") in accordance with an Escrow Agreement substantially in the form
attached hereto as Exhibit A, to be executed and delivered by and among Buyer,
the Stockholders and the Escrow Agent as of the Closing Date (the "Escrow
Agreement"); and (z) issue to the Stockholders 25,907 shares of the common
stock, par value $.01 per share, of Buyer (the "Buyer Shares," and together
with the Cash Purchase Price and the Escrow Payment, the "Purchase Price").
For purposes of this Agreement, "Indebtedness" shall mean (i) any and all
indebtedness (including accrued interest thereon and other amounts payable with
respect thereto) for borrowed money or evidenced by notes, bonds, debentures or
similar evidences of indebtedness, or similar obligations (including, without
limitation, guarantees of indebtedness of others), but shall not include trade
accounts payable to the extent incurred in the
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ordinary course of business consistent with past practice but not yet due and
payable in accordance with their ordinary and customary terms and (ii) the
aggregate cash amount of all checks or other similar obligations for payment of
the Company's cash which have been issued by the Company as of October 31, 1997
and not collected on or prior to October 31, 1997, in excess of the Company's
available cash in its bank accounts on October 31, 1997 ("Bank Overdraft").
(b) In addition, all outstanding loans and advances (including
interest) owed by the Company to the Stockholders and owed by the Stockholders
to the Company on the Closing Date shall be canceled as follows: (i) in the
event such amount owed by the Company is greater than the amount owed by the
Stockholders, all such amounts owed by the Company to the Stockholders shall be
paid in full, and the Cash Purchase Price shall be reduced by the amount of
such excess; and (ii) in the event such amount owed by the Stockholders is
greater than the amount owed by the Company, such amount shall be canceled and
the Cash Purchase Price shall be reduced by the amount owed by the Stockholders
to the Company.
(c) The Company has advised Buyer, and Buyer expects that the
Indebtedness of the Company as of October 31, 1997 shall consist solely of
Indebtedness for borrowed money from Allegiant Bank.
1.3. Net Worth Adjustment.
(a) To the extent that on the Closing Date the Net Worth (as
hereinafter defined) of the Company, as determined in accordance with the
procedures set forth in Section 1.3(b) hereof, is determined to be less than
One Million dollars ($1,000,000), the Purchase Price payable by Buyer pursuant
to Section 1.2(a) hereof shall be reduced by an amount equal to the amount by
which the Net Worth of the Company is determined to be below One Million
dollars ($1,000,000). Within five business days after the final determination
of the Net Worth pursuant to the procedures in Section 1.3(b) hereof, in the
event that the Net Worth is determined pursuant to Section 1.3(b) to be less
than One Million dollars ($1,000,000), the Stockholders shall pay to Buyer, by
wire transfer, in immediately available funds, the amount by which such final
determination of the Net Worth shall be less than One Million dollars
($1,000,000). For purposes of this Agreement, the term "Net Worth" shall mean
the total assets of the Company minus the total liabilities of the Company, and
shall be determined in accordance with generally accepted accounting
principles, except that for purposes of computing Net Worth (i) depreciation of
assets (period and lives) shall be consistent with the Latest Balance Sheet;
(ii) there will be no reserve for "bad debt" with respect to accounts
receivable on the Closing Date Balance Sheet; (iii) inventory reflected on the
Closing Date Balance Sheet shall be based on a physical inventory done on
November 1 and 2, 1997 and there will be no reserve for obsolete or slow moving
inventory; and (iv) the Closing Date Balance Sheet will not reflect as an asset
any receivable from an employee. The Buyer and Stockholders agree that the
Closing Date Balance Sheet will reflect all liabilities in accordance with
generally accepted accounting principals, including without limitation, (i) the
dollar amount of all Indebtedness (other than the dollar amount of Indebtedness
which is subtracted from the Cash Purchase Price pursuant to Section 1.2); (ii)
all accrued property taxes (real estate and other assets) to the Closing Date;
(iii) accrued vacation pay to the Closing Date; (iv) accrued benefit costs to
the Closing Date; (v) federal and state income taxes to the Closing Date; (vi)
accrued payables to Guard Manufacturing Company Inc. to the Closing Date solely
with respect to health insurance premiums with respect to employees of the
Company, and compensation for Larry Oberman; and (vii) $3,000 deferred
compensation to employees of the Company.
(b) After the Closing Date, Buyer shall cause its independent
certified public accountants to prepare and deliver to the Stockholders, not
later than sixty (60) days after the Closing Date, a balance sheet of the
Company at the Closing Date (the "Closing Date Balance Sheet"), prepared in
accordance with generally
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accepted accounting principles, consistently applied with the application
thereof to the Latest Balance Sheet, to be used for purposes of calculating the
Net Worth of the Company at the Closing Date for purposes of Section 1.3(a)
hereof. Following the Closing Date, the Stockholders shall cause Anders,
Minkler and Diehl, the Company's independent certified public accountants, to
provide Buyer and its independent certified public accountants of Buyer with
access at all reasonable times, to the work papers and other information used
by the Stockholders' independent certified public accountants in preparing the
Latest Balance Sheet. The Stockholders shall have thirty (30) days after
delivery to it by Buyer of the Closing Date Balance Sheet during which to
notify Buyer of any good faith dispute of any item contained in the Closing
Date Balance Sheet. In the event that the Stockholders shall so notify Buyer
of any such dispute on or before the last day of such thirty (30) day period,
Buyer and the Stockholders and their respective independent accountants shall
cooperate in good faith to resolve such dispute as promptly as possible. If
the Stockholders fail to notify Buyer of any such good faith dispute on or
before the last day of such thirty (30) day period, the Closing Date Balance
Sheet shall be final and binding upon Buyer and the Stockholders, and such
Closing Date Balance Sheet shall be used to adjust the Purchase Price pursuant
to Section 1.3(a) hereof. If Buyer and the Stockholders and their respective
independent accountants are unable to resolve any such dispute within thirty
(30) days of Buyer's delivery of such notice, such dispute shall be resolved by
a jointly selected nationally recognized accounting firm (the "Independent
Accounting Firm") retained to resolve any disputes between Buyer and the
Stockholders over any item contained in the Closing Date Balance Sheet, which
shall make its determination as promptly as practicable, and such determination
shall be final and binding on the Buyer and the Stockholders. The Independent
Accounting Firm shall, acting as experts and not as arbitrators, determine on a
basis of the standards set forth in this Section 1.3, whether and to what
extent, if any, the Closing Date Balance Sheet requires adjustment. If the
Stockholders and Buyer cannot jointly agree on the identity of the Independent
Accounting Firm, the Stockholders and Buyer shall each submit to their
respective independent accountants the name of an accounting firm which does
not at the time provide services to the Company, the Stockholders or Buyer, and
the Independent Accounting Firm shall be selected by lot from these two firms
by the respective independent accountants of the Company and Buyer. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
shared equally by the Stockholders and Buyer. The Closing Date Balance Sheet,
as modified by resolution of any disputes by Buyer and the Stockholders or by
the Independent Accounting Firm, shall be final and binding upon Buyer and the
Stockholders, and such Closing Date Balance Sheet shall be used to adjust the
Purchase Price pursuant to Section 1.3(a) hereof.
(c) To the extent that Indebtedness on the Closing Date Balance
Sheet (not including the amount of Indebtedness for which the Cash Purchase
Price is reduced pursuant to Section 1.2(a) hereof) shall be in excess of
$300,000, the Stockholders shall pay to Buyer by wire transfer in immediately
available funds within five business days after the final determination of the
Net Worth pursuant to Section 1.2(b) hereof, an additional amount equal to the
amount such Indebtedness on the Closing Date Balance Sheet is in excess of
$300,000.
1.4. Closing. Upon the terms and subject to the conditions
contained in this Agreement, the Closing will take place at 10:00 a.m. on the
Closing Date at the offices of Ottsen, Mauze, Leggat & Belz, L.C., 112 South
Hanley, St. Louis, Missouri 63105, on November 13, 1997, or such later date
immediately following the date on which all of the conditions to each party's
obligations hereunder have been satisfied or waived, or at such other place or
time or both as the parties may mutually agree (the "Closing Date").
1.5. Deliveries by Stockholders and the Company.
(a) At the Closing, the Stockholders will deliver the following to
Buyer:
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(i) Certificates representing the Shares, accompanied by stock
powers duly endorsed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are
necessary to transfer to Buyer good title to all the Shares
free and clear of all Liens (as hereinafter defined);
(ii) The resignations of all members of the Boards of
Directors (all such persons collectively, the "Resigning
Directors") of the Company;
(iii) The stock books, stock ledgers, minute books and other
corporate records and corporate seals of Company;
(iv) The duly executed officer's certificate provided for in
Section 6.2(c);
(v) The Escrow Agreement;
(vi) The Cobaugh Employment and Non-competition Agreement
(as defined in Section 5.6 hereof);
(vii) The opinion of Ottsen, Mauze, Leggat & Belz L.C.,
substantially in the form attached hereto as Exhibit B;
(viii) The St. Louis Lease duly executed by the Eleven/Eleven
Company and the Company (as hereinafter defined);
(ix) All third party and governmental consents required in
connection with the transactions contemplated by this
Agreement;
(x) A release of liabilities and obligations, substantially
in the form of Exhibit C hereto by each Stockholder, and by
Guard Manufacturing Company, Inc., in favor of the Company
(the "Release");
(xi) A certification duly executed by the Stockholders with
respect to the accuracy and completeness of the Bank Overdraft
and aggregate amount of Indebtedness on October 31, 1997,
which shall include a detailed description thereof prepared by
the Company's independent certified public accountants;
(xii) A certification duly executed by the Stockholders with
respect to the good faith reasonably based estimate of the Net
Worth of the Company on the Closing Date.
(xi) All other documents, instruments and writings required
to be delivered by the Stockholders at or prior to the Closing
Date pursuant to this Agreement.
(b) At the Closing, the Stockholders will deliver to the Escrow
Agent, the Escrow Agreement, duly executed by the Stockholders.
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1.6. Deliveries by Buyer.
(a) At the Closing, Buyer will deliver to the Stockholders the
following:
(i) The Cash Purchase Price, by wire transfer to a bank
account designated by the Stockholders in writing delivered to
Buyer at least two (2) business days prior to the Closing
Date;
(ii) The Buyer Shares;
(iii) The duly executed officer's certificate provided for in
Section 6.1(c);
(iv) The Escrow Agreement;
(v) The Cobaugh Employment and Non-competition Agreement (as
hereinafter defined);
(vi) The opinion of Battle Fowler LLP, substantially in the
form attached hereto as Exhibit D;
(vii) Certified copies of the resolutions, duly adopted by
the Board of Directors of Buyer, that will be in full force
and effect at the time of delivery, authorizing the execution,
delivery and performance of this Agreement; and
(viii) All other documents, instruments and writings required
to be delivered by Buyer at or prior to the Closing Date
pursuant to this Agreement.
(b) At the Closing, Buyer will deliver to the Escrow Agent, the
Escrow Agreement, duly executed by Buyer.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO THEMSELVES
Each Stockholder jointly and severally hereby represents and warrants
to Buyer that the following are true, correct and complete:
2.1. Ownership of Shares; Title. Each Stockholder is the owner of
record and beneficially of the Shares set forth next to its name on Schedule
1.1. of the Disclosure Schedules. All of the Shares are owned by the
Stockholders free and clear of any claim, levy, charge, pledge, hypothecation,
trust, security interest, proxy, voting arrangement, conditional sale or title
retention contract, or other encumbrance or restriction of any kind, including
restrictions affecting voting rights, transferability or incidents of record or
beneficial ownership (any of which being referred to as a "Lien"). The
consummation of the sale of the Shares will convey to Buyer good and marketable
title to Buyer free and clear of all Liens. There are no voting trusts,
stockholder agreements, proxies or
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other agreements or understandings in effect with respect to the voting or
transfer of the Shares to which any Stockholder is a party or is bound thereto.
Except for this Agreement, there are no outstanding warrants, options, rights
or agreements of any kind to acquire from such Stockholder any Shares owned by
such Stockholder. All of such Shares are fully paid and non-assessable.
2.2. Authority. Each Stockholder has full power, legal right and
authority to execute and deliver this Agreement, to sell the Shares in
accordance with the terms and subject to the conditions of this Agreement, and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all requisite action and no other
proceedings on the part of any Stockholder are necessary to authorize this
Agreement or to consummate the transactions so contemplated. This Agreement
has been duly and validly executed and delivered by each Stockholder and
constitutes a valid and binding agreement of each Stockholder, enforceable
against each Stockholder in accordance with its terms. The execution, delivery
and performance by each Stockholder of this Agreement and the transactions (and
the consummation of the transactions) contemplated hereby will not: (i) result
in the breach of, or constitute a default (with or without notice or lapse of
time, or both) under, any provision of (a) any debt instrument, indenture,
mortgage agreement or other instrument or arrangement to which such Stockholder
is a part, or by which any of the Shares owned by such Stockholder is bound or
(b) any judgment, order or decree by which such Stockholder is bound or by
which any of the Shares owned by such Stockholder is bound or affected; or (ii)
result in the imposition of any Lien on any of the Shares owned by such
Stockholder; or (iii) impair such Stockholder's ability to perform its or his
obligations under this Agreement.
2.3. Investor Representations. Each Stockholder represents and
warrants to Buyer that he is (A) an "accredited investor" as such term is
defined in the rules promulgated under the Securities Act of 1933, as amended
(the "Securities Act"); and (B) has such knowledge and experience in business
and financial matters as to be capable of evaluating the merits and risks of an
investment in the Shares and has the capacity to protect his own respective
interest in connection with the acquisition of the Shares. The Stockholders
acknowledge that the Shares are being issued by Buyer pursuant to Section 4(2)
of the Securities Act, and consequently will be subject to transfer
restrictions as more fully set forth in Section 5.5 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO THE COMPANY
The Stockholders jointly and severally represent and warrant to Buyer
that the following are true, correct and complete:
3.1. Due Incorporation and Authority. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Missouri, and has all requisite corporate power and authority to own,
lease and operate its assets and to carry on its business as now being and as
heretofore conducted. The Company has not at any time within the past five
years changed its name, been the surviving corporation in a merger, acquired
any business or changed its principal executive office.
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3.2. Consents and Approvals; No Violations. No filing with, and no
permit, order, authorization, consent or approval of, any public body or
governmental authority, domestic or foreign, or of any third party, is
necessary for the consummation by the Stockholders of the transactions
contemplated by this Agreement. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
will not: (i) violate, contravene, conflict with or result in the breach of
any provision of the Certificate of Incorporation of the Company or Bylaws of
the Company, or any resolution adopted by the Board of Directors of the Company
(or any committee thereof) or by the Company's stockholders; (ii) violate or
result in the breach of any of the terms of, result in a modification of, or
otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a default
under, any indenture, license, contract or other agreement to which the Company
is a party or by or to which the Company or any of its assets or properties may
be bound or subject; (iii) violate any order, writ, judgment, injunction, award
or decree of any court, arbitrator or governmental or regulatory body against,
or binding upon, the Company or upon any of its assets or properties; (iv)
violate any statute, law, ordinance, decree, order, rule or regulation of any
jurisdiction; (v) violate or result in the revocation or suspension of, or
impose any penalty under, any Permit (as defined in Section 3.10 hereof) issued
to the Company; (vi) result in the creation of any Lien upon the assets of the
Company; or (vii) result in the acceleration of any obligation under any note,
bond, mortgage, agreement, instrument, arbitration award, judgment or decree to
which the Company is a party or bound or from which it derives a benefit.
3.3. Subsidiaries and Other Affiliates. The Company does not own,
directly or indirectly, any interest in any other Person. For purposes of this
Agreement, "Person" shall mean any individual, entity, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental or regulatory body.
3.4. Qualification. The Company is duly qualified to do business
in the State of Missouri. The Company is in good standing in the State of
Missouri. The Company is not qualified to do business in any other state or
jurisdiction.
3.5. Outstanding Capital Stock. As of the date hereof, the
authorized capital stock of the Company consists solely of 30,000 shares of
common stock, no par value, of which 10,000 Shares are issued and outstanding.
There are no shares of capital stock of the Company held by the Company as
treasury shares. The issued and outstanding Shares are duly authorized, fully
paid, nonassessable and free of all preemptive rights. No legend or other
reference to any purported Lien appears upon any certificate representing the
Shares. None of the securities of the Company were issued in violation of
United States securities laws or the securities laws of any state.
3.6. Outstanding Options or Other Rights.
(a) There are no outstanding rights, subscriptions, warrants,
calls, unsatisfied preemptive rights, options, or other agreements of any kind
to purchase or otherwise to receive from the Company any of the Shares or any
of the authorized but unissued shares of the capital stock or any other
security of the Company, and there is no outstanding security of any kind
issued by the Company convertible into capital stock of the Company.
(b) Neither the Company nor any officer, director or Stockholder
has committed, either orally or in writing, to pay any bonus, fee, or
additional compensation to any employee of the
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Company in connection with the transactions contemplated by this Agreement.
(c) The Company has not granted to any Person any right of first
look, first offer, first refusal or other similar option to acquire the capital
stock or any of the assets of the Company or any division of the Company.
3.7. Certificate of Incorporation and Bylaws. The Company has
heretofore delivered to Buyer true and complete copies of its Certificate of
Incorporation (certified by the Secretary of State of Missouri) and Bylaws
(certified by its secretary or assistant secretary) in effect as of the date
hereof. There have been no amendments or modifications to the Certificate of
Incorporation or the Bylaws of the Company since their respective certification
dates.
3.8. Financial Statements; Books and Records.
(a) The statement of assets, liabilities and equity-income tax
basis of the Company as of May 31, 1997, 1996 and 1995 (collectively the
"Year-end Balance Sheets"), and the related statement of revenues, expenses and
retained earnings-income tax basis for the years then ended, compiled by
Anders, Minkler and Diehl, the Company's independent certified public
accountants (collectively, with the Year-end Balance Sheets, the "Financial
Statements"), which have been delivered to Buyer, fairly present the financial
position of the Company as at such dates and the results of operations of the
Company and cash flows for such respective periods, in each case prepared based
upon the amounts reflected in the financial and other books and records of the
Company, and except as otherwise expressly set forth on Schedule 3.8, in
accordance with generally accepted accounting principles, consistently applied
for the periods covered thereby.
(b) The statement of assets, liabilities and equity-income tax
basis of the Company as at September 30, 1997 ("Latest Balance Sheet"), and
related statement of revenues, expenses and retained earnings-income tax basis
for the period ended September 30, 1997, which is attached hereto as Exhibit E,
fairly presents the financial position of the Company as at September 30, 1997,
and was prepared based on amounts reflected in the financial and other books
and records of the Company and in accordance with generally accepted accounting
principals (except as otherwise expressly set forth on Schedule 3.8.
(c) Except as set forth on Schedule 3.8, the books of account,
minute books, stock record books, stock ledger and other records of the Company
("Books and Records") all of which have been delivered to Buyer, are complete
and correct and have been maintained in accordance with sound business
practices, including the maintenance of a system of internal controls. The
Stockholders and the Board of Directors of the Company have ratified all prior
actions taken by the Stockholders and the Board of Directors of the Company,
respectively, since the date of incorporation of the Company. The Books and
Records that have been delivered to Buyer represent all of the Books and
Records of the Company that are in possession of the Stockholders, the Company,
or to the knowledge of the Stockholders, any third parties. Neither the Board
of Directors nor the Stockholders have since the date of the incorporation of
the Company, approved, adopted, authorized or consented to any action by the
Company which is not set forth in the Books and Records delivered to Buyer,
that could have a material effect on the business, operations, results of
operations, condition (financial or otherwise), or prospects of the Company.
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3.9. Tax Matters.
(a) Except as set forth on Schedule 3.9 of the Disclosure
Schedules, (i) all Tax (as hereinafter defined) returns, statements, reports
and forms (including estimated tax or information returns and reports) required
to be filed with any Taxing Authority (as hereinafter defined) with respect to
any Pre-Closing Tax Period (as hereinafter defined) by or on behalf of the
Company (collectively, the "Returns") have, to the extent required to be filed
on or before the date hereof, been filed when due in accordance with all
applicable laws; (ii) as of the time of filing, the Returns were true, correct
and complete and correctly reflected the facts regarding the income, business,
assets, operations, activities and status of the Company and any other
information required to be shown therein; (iii) all Taxes shown as due and
payable on the Returns that have been filed or that were otherwise due and
payable have been timely paid, or withheld and remitted to the appropriate
Taxing Authority; (iv) the charges, accruals and reserves for Taxes with
respect to the Company for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Return has yet been filed) reflected on the
books of the Company (excluding any provision for deferred income taxes) are
adequate to cover such Taxes; (v) all Taxes that the Company is, or was,
required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the appropriate Taxing
Authority; (vi) the Company is not delinquent in the payment of any Tax and has
not requested any extension of time within which to file any Return and has not
yet filed such Return nor is late in the filing of any Return after giving
effect to any allowable extension for filing such Return; (vii) the Company has
not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension
or waiver) has not yet expired; (viii) there is no claim, audit, action, suit,
proceeding, or investigation now pending against or with respect to the Company
in respect of any Tax or Tax Asset, or any issue which a Taxing Authority has
indicated an intention to examine of which an officer of the Company is aware
by reason of his participation in industry groups or other trade associations,
which is present in any Returns filed by the Company; (ix) there are no
requests for rulings or determinations in respect of any Tax or Tax Asset
pending between the Company and any Taxing Authority; (x) the Company does not
own any interest in real property in any jurisdiction in which a Tax is imposed
on the transfer or a controlling interest in a Person that owns any interest in
real property; (xi) none of the property owned or used by the Company is
subject to a Tax benefit transfer lease executed in accordance with Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the Tax Equity and Fiscal Responsibility Act of 1982;
(xii) none of the property owned or used by the Company is subject to a lease,
other than a "true" lease for federal income tax purposes; (xiii) none of the
property owned by the Company is "tax exempt use property" within the meaning
of Section 168(h) of the Internal Revenue Code of 1986, as amended (the
"Code"); (xiv) none of the Stockholders, the Company, or any other person on
behalf of the Company has entered into or will enter into any agreement or
consent pursuant to Section 341(f) of the Code; (xv) there are no Liens for
Taxes upon the assets of the Company except Liens for current Taxes not yet
due; (xvi) the Company will not be required to include any adjustment in
taxable income for any Post-Closing Tax Period under Section 481 of the Code
(or any similar provision of the Tax laws of any jurisdiction) as a result of a
change in method of accounting for a Pre-Closing Tax Period or pursuant to the
provisions of any agreement entered into with any Taxing Authority with regard
to the Tax liability of the Company for any Pre-Closing Tax Period; (xvii) the
Company is not currently a party to a Tax sharing agreement or under any
contractual or other obligation to pay any amounts of the type described in
clause (2) or (3) of the definition of "Tax" set forth below; (xviii) all
information set forth in the Latest Balance Sheet relating to Tax matters is
true and complete in all material respects; (xix) except as set forth in
Schedule 3.9 of the Disclosure Schedules (which sets forth all federal and
state
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tax elections that are in effect with respect to the Company), none of the
Stockholders or the Company has in effect any tax elections for federal income
tax purposes under Sections 108, 168, 338, 1017, 1033 or 4977 of the Code; (xx)
there is no contract, agreement, plan or arrangement covering any person that,
individually or collectively, as a consequence of the transactions contemplated
by this Agreement could give rise to the payment of any amount that would not
be deductible by Buyer or the Company by reason of Section 280G of the Code;
(xxi) the Company is not a party to any industrial development bonds; (xxii)
during the previous two years the Company has not engaged in any exchange under
which the gain realized on such exchange was not recognized due to Section 1031
of the Code; (xxiii) Schedule 3.9 of the Disclosure Schedules contains a
listing of each asset of the Company, if any, with respect to which the
adjusted Tax basis for federal income tax purposes differs from the book basis
for financial reporting purposes by more than $10,000, and the amount of such
adjusted tax basis and book basis, (xxiv) for Income Tax purposes, the Company
has not, in a manner inconsistent with prior practice, accelerated the
recognition of items of loss, deduction or credit into any Pre- Closing Tax
Period, or deferred or delayed the recognition of items of income or gain into
any Post-Closing Tax Period, and (xxv) the Company has not made a disclosure on
a Return pursuant to Section 6662(d)(2)(B)(ii) of the Code.
(b) For purposes of this Agreement, "Tax" shall mean (i) any
federal, state, local, foreign or other tax, including, without limitation, any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by the Company payroll, employment, excise
(including the golden parachute excise tax imposed by Section 4999 of the Code
and the greenmail excise tax imposed by Section 5881 of the Code), severance,
stamp, capital stock, occupation, property, environmental or windfall profit
tax, premium, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any Taxing Authority,
(ii) liability of the Company for the payment of any amounts of the type
described in (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group, and (iii) liability of the Company for the payment
of any amounts as a result of being party to any Tax sharing agreement or with
respect to the payment of any amounts of the type described in (i) or (ii) as a
result of any express or implied obligation to indemnify any other Person, as a
successor or otherwise.
(c) For purposes of this Agreement, "Tax Asset" shall mean any
net operating loss, net capital loss, investment tax credit, foreign tax
credit, charitable deduction or any other credit or tax attribute which could
reduce Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes).
(d) For purposes of this Agreement, "Taxing Authority" shall mean
any governmental authority, domestic or foreign, having jurisdiction over the
assessment, determination, collection, or other imposition of any Tax.
(e) For purposes of this Agreement, "Post-Closing Tax Period"
shall mean any Tax period beginning on or after the Closing Date and those days
which include or follow the Closing Date and are included in the Tax period
which begins before the Closing Date and ends on or after the Closing Date.
(f) For purposes of this Agreement, "Pre-Closing Tax Period"
shall mean any Tax period ending prior to the Closing Date and those days which
precede the Closing Date and are
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included in the Tax period which begins before the Closing Date and ends on or
after the Closing Date.
3.10. Compliance with Laws. Except as set forth on Schedule 3.10 of
the Disclosure Schedules:
(a) The Company is in compliance with all applicable federal,
state, local and foreign laws, ordinances, regulations, orders, judgments,
injunctions, awards, decrees and other requirements of any governmental or
regulatory body, court or arbitrator;
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) will likely constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any applicable federal, state, local and foreign laws, ordinances,
regulations, orders, judgments, injunctions, awards, decrees and other
requirements of any governmental or regulatory body, court or arbitrator, or
(ii) will likely give rise to any obligation on the part of the Company to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature;
(c) The Company has not received, at any time in the past five
years, any notice or other communication (whether oral or written) from any
governmental or regulatory body or any other Person regarding (i) any actual or
alleged violation of, or failure to comply with, any applicable federal, state,
local and foreign laws, ordinances, regulations, orders, judgments,
injunctions, awards, decrees and other requirements of any governmental or
regulatory body, court or arbitrator that has not been resolved, or (ii) any
actual or alleged obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature not
reflected in the Latest Balance Sheet; and
(d) The Company has all licenses, permits, orders, consents or
approvals of, and has made all required registrations with, any governmental or
regulatory body that are necessary to the conduct of the business of the
Company, excluding those relating to compliance with laws relating to pollution
and protection of the environment (which are discussed in Section 3.11 hereto)
(collectively, "Permits"). Schedule 3.10 of the Disclosure Schedules contains
a complete and accurate list of each Permit that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned or used by,
the Company. All Permits are in full force and effect, no violations or
notices of such violations are or have been received by the Company or any
Stockholder in respect thereto, and no proceeding is pending or, to the
knowledge of the Stockholders, threatened, which may result in the revocation
or limitation of any such Permit.
3.11. Environmental Matters. Except as disclosed in Schedule 3.11
of the Disclosure Schedules:
(a) None of the real property owned or leased (as lessor or
lessee) by the Company is now or, to the best of the Company's knowledge, has
ever been during or prior to the time it was owned or leased by the Company,
used as a gasoline service station, a petroleum products storage facility, a
mine, a landfill, a dump or a site for the disposal of solid waste (as defined
under the Resource Conservation and Recovery Act, 42 U.S.C. ' 6901 et seq., as
amended ("RCRA")); the site of any storage, treatment or disposal of waste; or
the site of the burial, discharge, emission, leakage, release or threatened
release of hazardous substances, hazardous wastes, toxic substances,
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hazardous materials, pollutants or contaminants (collectively, "Hazardous
Substances") as those terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ' 9601 et seq., as amended
("CERCLA"); the Toxic Substance Control Act, 15 U.S.C. ' 2601 et seq., the
Clean Air Act, 42 U.S.C. ' 7401 et seq., as amended; the Hazardous Materials
Transportation Act, 49 U.S.C. ' 1801 et seq., as amended; the Superfund
Amendments and Reauthorization Act ("SARA") and RCRA or any other federal,
state or local law, code, ordinance, rule, regulation, decree or order relating
to the protection of the environment or human health (collectively,
"Environmental Laws"). Except as set forth on Schedule 3.11 of the Disclosure
Schedules, no hazardous waste as defined under RCRA or under any applicable
state law authorized under RCRA or hazardous substance or constituent as
defined under CERCLA, SARA and RCRA or any petroleum or fraction thereof is
present or stored on such property. All activities and operations of the
Company are in compliance with the requirements of all applicable environmental
laws and regulations of all federal, state and local governments or regulatory
bodies having jurisdiction over the Company or its properties, including,
without limitation, RCRA and CERCLA and analogous state laws.
(b) No notices, orders, directions, actions, suits or proceedings
are pending or, to the Stockholder's knowledge, threatened with respect to any
environmental condition affecting or originating from the real property owned
or leased (as lessor or lessee) by the Company. There are no underground
storage tanks on such property.
(c) The Company is in compliance with all reporting, permitting
and record-keeping requirements of Environmental Laws.
3.12. Actions and Proceedings. Except as disclosed in Schedule 3.12
of the Disclosure Schedules, there are no outstanding orders, judgments,
injunctions, awards or decrees of any court, arbitrator or governmental or
regulatory body against the Company (or any of its properties or assets) or any
actions, suits or claims (including product liability claims) or legal,
administrative or arbitral proceedings or investigations (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance)
(collectively, "Actions") pending, or, to the knowledge of the Stockholders,
threatened against or involving the Company or any of its properties or assets,
or that challenges, or that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated
hereby. To the knowledge of the Stockholders and the Company, no event has
occurred or circumstance exists that could reasonably be expected to give rise
to or serve as a basis for the commencement of any such Action. The Company
has delivered or made available to Buyer copies of all pleadings,
correspondence, and other documents relating to each Action listed in Schedule
3.12 of the Disclosure Schedules.
3.13. Contracts and Other Agreements.
(a) Schedule 3.13 of the Disclosure Schedules sets forth all of
the following contracts, understandings, agreements, or arrangements (written
and oral) to which the Company is a party or by or to which its respective
assets or properties are bound or subject and which are in effect on the date
hereof (the "Contracts"): (i) Contracts with any current or former officer,
director, stockholder or other affiliate of the Company or with any other
current or former employee or consultant of the Company or with an entity in
which any of the foregoing is a controlling Person, including, without
limitation, compensation plans or other arrangements; (ii) Contracts with any
labor union or association representing any employee of the Company; (iii)
Contracts (including sales or distribution agreements) with any Person to
provide goods or services that cannot be canceled by the
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Company on notice of 30 days or less without penalty; (iv) Contracts for the
sale or purchase of any assets of the Company in excess of $10,000; (v) joint
venture, partnership or similar agreements; (vi) Contracts under which the
Company agrees to indemnify any party or to pay or share the Tax liability of
any party; (vii) Contracts containing covenants of the Company not to compete
in any line of business or with any Person in any geographical area or
covenants of any other Person not to compete with the Company in any line of
business or in any geographical area; (viii) Contracts relating to the lending
or borrowing of money by the Company, including, without limitation,
capitalized leases and installment purchase obligations; (ix) any other
Contracts pursuant to the terms of which there is a direct current or future
obligation of the Company to make payments in excess of $10,000; and (x) any
guarantees of indebtedness given by the Company in respect of the indebtedness
or other obligation of any other Person; (xi) any lease, rental or occupancy
agreement, license, installment and conditional sale agreement, and other
Contracts affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property, identifying
those leases classified as capital leases for generally accepted accounting
principles purposes; (xii) any licensing agreement or other Contract with
respect to Intellectual Property (as hereinafter defined), including agreements
with current or former employees, consultants, or contractors regarding the
appropriation or the non- disclosure of any of the Intellectual Property;
(xiii) any Contract providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods; (xiv) any power of
attorney that is currently effective and outstanding; (xv) any Contract that
contains or provides for any express undertaking by the Company to be
responsible for consequential damages; (xvi) any Contract for capital
expenditures in excess of $10,000; and (xvii) each amendment, supplement, and
modification (whether oral or written) in respect of any of the foregoing. All
of such Contracts are valid and binding upon the Company. The Company is not
in default under any of such Contracts, has not received any notice of a
default, and, to the knowledge of the Stockholders, no other party to any such
Contract is in default thereunder and no event has occurred or condition exists
that with notice or lapse of time or both would constitute a default
thereunder.
(b) Schedule 3.13 of the Disclosure Schedules also lists all
Contracts currently in negotiation or proposed by the Company of a type which
if entered into by the Company would be required to be listed on Schedule 3.13
or on any other Schedule to this Agreement. The Company has made available to
Buyer true and correct copies of all the written Contracts listed on Schedule
3.13 of the Disclosure Schedules for its review (other than Contracts which
contain information that Buyer is to review after the date hereof and before
the Closing Date as contemplated in Section 5.14 hereof).
3.14. Tangible Property. Except as otherwise set forth on Schedule
3.13 of the Disclosure Schedules, Schedule 3.14 of the Disclosure Schedules
contains a complete and accurate list of the Tangible Property (as hereinafter
defined) of the Company all leaseholds and other interests in real property
held by the Company. The Tangible Property is in good operating condition and
repair and is suitable for its intended purposes and current operations,
subject to normal wear and tear, and none of the Tangible Property is in need
of maintenance or repairs except for ordinary, routine maintenance and repairs.
During the past three years there has not been any significant interruption of
the operations of the Company due to inadequate maintenance of the Tangible
Property. All leases, conditional sale contracts, franchises or licenses
pursuant to which the Company may hold or use any interest owned or claimed by
the Company (including, without limitation, options) in or to Tangible Property
are in full force and effect, and free and clear of all Liens. For purposes
of this Agreement, "Tangible Property" means the facilities, machinery,
equipment, furniture, leasehold improvements, fixtures, vehicles, structures,
any related capitalized items and other fixed assets and tangible property,
other than the Real Property, material to the business of the Company.
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3.15. Real Property; Leased Property. The Company has no fee title
to and does not own and has never owned any real property. All real property
leased by the Company (the "Leased Properties") is correctly identified on
Schedule 3.15 of the Disclosure Schedules. The Company has a valid leasehold
interest in the Leased Properties, free and clear of all Liens.
3.16. Intellectual Property. Schedule 3.16 of the Disclosure
Schedules sets forth all patents, patent applications, trademarks, trademark
applications, trade names, service marks, service mark applications, customer
lists, copyrights and copyright applications as to which the Company is the
owner or the exclusive licensee. The Company owns, or is licensed to use, all
patents, trademarks, trade names, service marks, processes, know how, customer
lists and trade secrets (collectively, the "Intellectual Property") used in, or
necessary for, the conduct of its business as currently conducted. Except as
disclosed in Schedule 3.16 of the Disclosure Schedules, (i) no person has a
right to receive a royalty with respect to any of the Intellectual Property;
(ii) no claim has been asserted in writing or threatened by a third party with
respect to the use of such Intellectual Property by the Company; (iii) the use
of such Intellectual Property by the Company does not infringe on the rights of
any Person; (iv) consummation of the transactions contemplated by this
Agreement will not impair or alter any of the Company's Intellectual Property
rights; and (v) there are no infringements of the Intellectual Property by any
third party.
3.17. Title to Assets. The Company owns and has good and valid
title to all of its assets, including, without limitation, the Tangible
Property, Leased Property, Intellectual Property, and the other assets
reflected on the Latest Balance Sheet (except for assets consumed or disposed
of in the ordinary course of business since September 30, 1997) or acquired
after September 30, 1997 or described in Schedules 3.14, 3.15 and 3.16 of the
Disclosure Schedules hereof, in each case free and clear of any Lien except for
Liens specifically described in Schedule 3.17 of the Disclosure Schedules. The
Company owns, leases, licenses or rents all of the assets used by it in its
business and is in possession of all owned or leased by it, and such assets,
collectively, are sufficient for the conduct of the Company's business in the
same manner as conducted as of the date hereof.
3.18. No Undisclosed Liabilities. The Company has no Funded Debt
except for Indebtedness. The Company has no liabilities or obligations
(whether known or unknown and whether absolute, accrued, contingent, or
otherwise), except for liabilities and obligations that were fully and
adequately reflected or reserved against on the Latest Balance Sheet and
liabilities and obligations incurred in the ordinary course of business since
September 30, 1997. Since September 30, 1997, all liabilities and obligations
(other than trade accounts payable incurred in the ordinary course of business
consistent with past practice but not yet due and payable in accordance with
their terms) have been paid in the ordinary course of business consistent with
past practice. For purposes of this Agreement, "Funded Debt" shall include:
(i) all Indebtedness; (ii) all obligations of the Company for the deferred and
unpaid purchase price of any property (other than trade accounts payable in the
ordinary course of business constituting current liabilities to the extent not
evidenced by a promissory note or other instrument); (iii) amounts in respect
of the rent or hire of property under leases or lease arrangements by which,
under generally accepted accounting principles, have been or are required to be
capitalized; (iv) amounts in respect of obligations under conditional sales or
other title retention agreements; (v) all liabilities secured by any Lien or
any property owned by the Company even though such liabilities are non-
recourse to the Company; (vi) the undrawn face amount of all letters of credit
(other than undrawn face amounts of all letters of credit, including standby
letters of credit, which have been issued for supplies acquired in the ordinary
course of business which have
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not yet been delivered to the Company in accordance with the terms of such
letters of credit to the extent not evidenced by a promissory note or other
instrument); (vii) amounts in respect of all swap, cap, collar and other
interest rate or currency hedging arrangements; and (viii) all accrued and
unpaid liabilities of the Company with respect to any pension plan, 401(k)
plan, vacation plan or other bonus or incentive plan of the Company.
3.19. Employee Benefit Plans.
(a) Schedule 3.19 of the Disclosure Schedules contains a true and
complete list of each bonus, deferred compensation, incentive compensation,
stock purchase, stock option, severance or termination pay, hospitalization or
other medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b)(1) of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA") or Section 414 of the Code, for the benefit of any
employee or former employee of the Company, whether formal or informal and
whether legally binding or not (the "Employee Benefit Plans"). Schedule 3.19
of the Disclosure Schedules identifies each of the Employee Benefit Plans that
is an "employee welfare benefit plan," or "employee pension benefit plan" as
such terms are defined in Sections 3(1) and 3(2) of ERISA (such plans being
hereinafter referred to collectively as the "ERISA Plans").
(b) Except as disclosed in Schedule 3.19 of the Disclosure
Schedule, the Company does not sponsor or maintain any Employee Benefit Plans.
The Company does not contribute to or have any obligation with respect to any
Employee Benefit Plan other than the Employee Benefit Plans set forth on
Schedule 3.19 of the Disclosure Schedules. No Employee Benefit Plan is
intended to qualify under Section 401(a) of the Code and each Employee Benefit
Plan has complied at all times in form, operation and administration with its
terms and the requirements provided by any and all statutes, orders or
governmental rules and regulations currently in effect and applicable to the
Employee Benefit Plans, including but not limited to ERISA and the Code, as
amended from time to time.
(c) Neither the Company nor any ERISA Affiliate now nor in the
past five years maintained or contributed to a Plan which is subject to Title
IV of ERISA or which is or was intended to qualify under Section 401(a) of the
Code.
(d) Neither the Company nor any ERISA Affiliate now or in the past
five years has contributed to a "multi employer plan" within the meaning of
Section 3(37) of ERISA.
(e) Neither the Company nor any ERISA Affiliate has any obligation
to provide health or other non-pension benefits to retired or other former
employees of the Company or such ERISA Affiliate following their retirement or
other termination of employment, except as required by Section 4980B of the
Code or Part 6 of Title I of ERISA.
(f) Except as set forth on Schedule 3.19 of the Disclosure
Schedules, neither the execution and delivery of this Agreement nor the
transactions hereunder will (i) entitle any current or
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former employee to severance pay, unemployment compensation or any similar
payment; (ii) accelerate the time of payment or vesting or increase the amount
of any compensation due to any current or former employee; (iii) directly or
indirectly result in any payment made or to be made to or on behalf of any
person to constitute a "parachute payment" within the meaning of Section 280G
of the Code.
(g) No employee or former employee of the Company is currently
receiving benefits under the Company's disability income and life insurance
plan.
3.20. Insurance. Schedule 3.20 of the Disclosure Schedules sets
forth a list and brief description of all policies or binders of fire,
liability, workmen's compensation, vehicular, title and other insurance held by
or on behalf of the Company or by or on behalf of its officers, directors
and/or employees (in such capacities) at the Company's expense. Such policies
and binders are valid, outstanding, enforceable and in full force and effect,
and are adequate and sufficient to cover any and all loss or damage in
connection with the operation or conduct of the Company's business. The
Company has not received any notice of cancellation or nonrenewal of any such
policy or binder. There is no inaccuracy in any application for such policies
or binders or any failure to pay premiums when due. The Company has not
received any written notice from any of its insurance carriers that any
insurance premiums will be materially increased in the future or that any
insurance coverage listed on Schedule 3.20 of the Disclosure Schedules will not
be available in the future on substantially the same terms as now in effect.
The Company has not had any application or other request for insurance rejected
within the last three years.
3.21. Officers, Directors and Employees. Schedule 3.21 of the
Disclosure Schedules sets forth the name, total 1997 compensation (including
salary, bonus and other forms of cash compensation) and annual base salary at
the date hereof of each person who is now an officer or director of the
Company, and each person who is an employee who receives an annual salary of
$30,000 or more, consultant, agent or other representative of the Company.
Except as set forth on Schedule 3.21 of the Disclosure Schedules, there is no
other compensation payable by the Company.
3.22. Operations of the Company. Except as disclosed in Schedule
3.22 of the Disclosure Schedules, since May 31, 1997, the Company has operated
its business in the ordinary course, and during such time period, the Company
has not:
(i) declared or paid any dividends or declared or made any other
distributions or payments of any kind (as compensation, fees or
otherwise, except for their current compensation which is expressly
disclosed on Schedule 3.21 of the Disclosure Schedules, pro rated for
partial years) to the Stockholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of
its capital stock;
(ii) incurred any Funded Debt, except for Indebtedness which will
be deducted from the Cash Purchase Price pursuant to Section 1.2
hereof, and except for working capital borrowings from Allegiant Bank
incurred during the period of November 1, 1997 to the day prior to the
Closing Date, in an aggregate amount not to exceed $300,000;
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(iii) waived any material right under any contract or other
agreement listed on, or required to be listed on, Schedule 3.13;
(iv) purchased, acquired or redeemed any outstanding capital stock
or equity interests of the Company;
(v) take any action or omit to take any action that would cause
any of the representations or warranties set forth herein to be untrue
in any material respect;
(vi) made any change in its accounting methods or practices except
as required by generally accepted accounting principles or made any
material write downs of assets or writeoffs of notes or accounts
receivable;
(vii) made any material changes in any of its business policies;
(viii) made any wage or salary increase, or increase in any other
direct or indirect compensation, or any payment or commitment to pay
any bonus or any severance or termination pay to any of its officers,
directors, employees, consultants, agents or other representatives, or
any accrual for or commitment or agreement to make or pay the same,
other than in the ordinary course of business, except that any such
amounts payable to the Stockholders shall be limited to the monthly
compensation set forth on Schedule 3.21 of the Disclosure Schedules;
(ix) made any loan or advance to any of its stockholders, officers,
directors, employees, consultants, agents or other representatives, or
made any other loan or advance other than in the ordinary course of
business;
(x) made any acquisition of all or any material part of the
assets, properties, capital stock or business of any other Person;
(xi) terminated or failed to renew, or received any notice of
termination or written threat (that was not subsequently withdrawn) to
terminate or fail to renew, any contract or other agreement listed on,
or required to be listed on, Schedule 3.13;
(xii) sold or entered into an agreement to sell any assets or
properties having a fair market value in excess of $10,000 in the
aggregate, other than in the ordinary course of business;
(xiii) sold or permitted the use by Persons other than pursuant to
licenses or other agreements set forth on Schedule 3.16 of any
Intellectual Property;
(xiv) entered into any collective bargaining agreement;
(xv) encountered any strike, work stoppage or comparable event;
(xvi) incurred any damage or destruction as to any of its assets or
properties, whether covered by insurance or not, which could have a
material adverse effect on the business, operations, results of
operations, condition (financial or otherwise), or
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prospects of the Company, whether or not covered by insurance;
(xvii) undertaken any capital expenditures or commitments for
additions to property, plant or equipment in excess of $10,000,
individually;
(xviii) there has been no material adverse change in the business,
operations, results of operations, condition (financial or otherwise),
or prospects of the Company, and to the best of the Company's and each
Stockholder's knowledge, no event has occurred or circumstance exists
that may result in such a material adverse change;
(xix) implemented any addition to or modification of the Employee
Benefit Plans; or
(xx) entered into any agreement to do any of the foregoing.
3.23. Banks, Brokers and Proxies. Schedule 3.23 of the Disclosure
Schedules sets forth: (i) the name of each bank, trust company, securities or
other broker or other financial institution with which the Company has an
account, credit line or safe deposit box or vaults; (ii) the name of each
Person authorized by the Company to draw thereon or to have access to any safe
deposit box or vault; and (iii) names of all Persons authorized by proxies or
powers of attorney to act on behalf of the Company in matters concerning its
business or affairs.
3.24. Labor Relations. In the past five years, the Company has not
been a party to any collective bargaining contract. There are no labor
disputes, material employee grievances, arbitration proceedings or any union
organization activities, strikes, work stoppages or slowdowns pending, or to
the Stockholders' knowledge, threatened between the Company and any of its
employees and their representatives, and no such strikes, stoppages or
slowdowns have occurred in the past five years. There are no charges of unfair
labor practices pending or, to the Stockholders' knowledge, threatened against
the Company before any governmental, regulatory or administrative agency or
authority. To the knowledge of the Stockholders, no event has occurred or
circumstance exists that could reasonably be expected to provide the basis for
any work stoppage or other labor dispute. There is no lock-out of any
employees by the Company, and no such action is contemplated by the Company.
The Company has complied with all applicable laws relating to employment, civil
rights, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxed, occupational safety and health, and plant closing. The Company
has not failed to pay any compensation, damages, taxes, fines, penalties, or
other amounts, however designated.
3.25. No Broker's, Finder's or Similar Fees. Except as set forth on
Schedule 3.25 of the Disclosure Schedules, there are no brokerage commissions,
finder's or agent's fees or similar fees or commissions payable in connection
with the transactions contemplated by this Agreement based on any agreement,
arrangement or understanding with the Company, or any action taken by or on
behalf of the Company.
3.26. Certain Payments. Neither the Company nor any director,
officer, agent, or employee of the Company, or, to the Stockholder's knowledge,
any other Person acting for or on behalf of the Company, has, directly or
indirectly, in violation of any applicable laws, (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback, or other payment to
any Person,
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private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business; (ii) to pay for
favorable treatment for business secured; or (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of
the Company or any affiliate of the Company, or (b) established or maintained
any fund or asset that has not been recorded in the Books and Records which
payment, fund or asset is reasonably probable to result in any liability or
other negative consequence to the Company.
3.27. Inventory; Accounts Receivable; Account Payable.
(a) The inventory of the Company consists of merchandise of a
quality and quantity usable and saleable in the ordinary course of business at
prices consistent with the Company's past practices, and such inventory is
carried on the Latest Balance Sheet and the books and records of the Company at
the lower of cost or market (on a FIFO basis), in accordance with generally
accepted accounting principles (except that there is no reserve for obsolete or
slow moving inventory).
(b) The accounts receivables of the Company, as reflected on the
Financial Statements and the Latest Balance Sheet, represent actual sales made
in the ordinary course of business. Such accounts receivable are free of
rights of set-off and are current and collectible in full in the ordinary
course of business, without resort to litigation (except for those which the
Stockholders pay to Buyer pursuant to Section 5.10 hereof). Except as
expressly and fully set forth on Schedule 3.27, since May 31, 1997, the Company
has collected all accounts receivable in the ordinary cause of business in
accordance with the terms thereof, and has not accelerated the collection
thereof in contemplation of the transactions contemplated herein or otherwise.
(c) Except as expressly and fully set forth on Schedule 3.27,
since May 31, 1997 the Company has paid all accounts payable in the ordinary
course of business in accordance with the terms thereof, and has not delayed
the payment thereof in contemplation of the transactions contemplated herein or
otherwise.
3.28. Potential Conflicts of Interest. Except as set forth on
Schedule 3.28 of the Disclosure Schedules, no officer, director or affiliate of
the Company, no Stockholder, no immediate family member of any Stockholder or
any officer, director or affiliate or of the Company or a Stockholder, and no
entity controlled by one or more of the foregoing:
(i) owns, directly or indirectly, any interest in or is an
officer, director, employee or consultant of, any Person, that is a
competitor, lessor, lessee, supplier, distributor, sales agent or
customer of the Company;
(ii) owns, directly or indirectly, in whole or in part, any
Intellectual or Tangible Property (other than of an immaterial nature)
that the Company uses in the conduct of its business;
(iii) has any cause of action or other claim whatsoever against, or
owes any amount to, the Company, except for claims in the ordinary
course of business for items such as accrued vacation pay, accrued
benefits under employee benefit plans, stock options, employment
agreements and similar matters;
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(iv) is presently subject to or a party to any other business
arrangements or Contracts with the Company (other than as an employee,
officer, director or stockholder of the Company); or
(v) has received from the Company any advances of any kind
whatsoever to, or been issued any notes or other form of debt
(Sections 3.28(i), (ii), (iii), (iv) and (v) collectively referred to
herein as "Affiliate Transactions").
3.29. Disclosure. No representation or warranty of any of the
Stockholders contained in this Agreement or any exhibit, certificate or
schedule (excluding any financial projections of the Company) furnished or to
be furnished by the Stockholders to Buyer pursuant hereto (including, without
limitation, the Disclosure Schedules) materially misstates a material fact, or
omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
No Person has been authorized by the Company to make any representation or
warranty relating to the Company, the business of the Company or otherwise in
connection with the transactions contemplated hereby and, if made, such
representation or warranty must not be relied upon as having been authorized by
the Company, unless set forth herein or in the Disclosure Schedules.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to each Stockholder that the
following are true and correct:
4.1. Corporate Organization; Etc. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted.
4.2. Authority Relative to this Agreement. Buyer has all requisite
corporate authority and power to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Buyer have been duly and validly authorized by all required corporate action on
the part of Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Buyer and, assuming this Agreement has been duly authorized,
executed and delivered by each Stockholder, constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms.
4.3. Consents and Approvals; No Violations. No filing with, and no
permit, authorization, consent or approval of any public body or governmental
authority, domestic or foreign, is necessary for the consummation by Buyer of
the transactions contemplated by this Agreement. Neither the execution and
delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby nor compliance by Buyer with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-Laws of Buyer; (ii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of
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time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any of the terms, conditions or provisions of any
indenture, license, contract, agreement or other instrument or obligation to
which Buyer or any of its subsidiaries is a party or by which any of them or
any of their properties or assets may be bound; or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Buyer, any
of its subsidiaries.
4.4. The Buyer Shares. The Buyer Shares will, when issued and
delivered to the Stockholders in accordance with this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
4.5. Investment. Buyer is purchasing the Shares for its own
account for investment and not with a view to, or for sale in connection with,
any distribution of the Shares. Buyer acknowledges that the Shares have not
been registered under the Securities Act, or applicable state securities laws
and agrees to comply fully with such laws in connection with any resale or
transfer thereof.
4.6. Brokers and Finders. Buyer has not employed any investment
banker, broker or finder or incurred any liability for any investment banking
fees, brokerage fees, commissions or finders, fees in connection with the
transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE PARTIES
5.1. Earn-Out.
(a) Subject to Sections 5.1(b) hereof, for a period of one year,
commencing on November 1, 1997 (the "Earn-Out Period"), the Stockholders may be
entitled to additional Purchase Price as provided in Section 5.1(b) hereof (the
"Additional Consideration"), payable in accordance with Sections 5.1(b) and
5.1(c) hereof.
(b) In the event that the Net Sales (as hereinafter defined) of
the Company and Buyer's Paint and Sundries Sector (of which the Company shall
be a part of after the Closing) during the Earn-Out Period shall be equal to or
within the range of dollar figures listed below under the heading "Net Sales,"
then the Stockholders shall be entitled to receive from Buyer, in the
aggregate, the Additional Consideration equal to that amount under the heading
"Additional Consideration" set forth below which shall be directly across from
such number under the heading "Net Sales" set forth below. For purposes of
calculating the Additional Consideration, "Net Sales" of the Company shall
include, without limitation, the revenues of the Company (at selling prices
that are within the pricing guidelines established by the mutual agreement of
Charles Cobaugh and the Chief Executive Officer of Buyer) for the period
commencing November 1, 1997 through and including October 31, 1998, net of
returns, allowances and customer discounts, as reflected in the Buyer's audited
financial statements for the year ended September 30, 1998 and the Buyer's
financial books and records for the one-month period ending October 31, 1998
(the "Earn-Out Financial Statement").
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Net Sales* Additional Consideration
- --------- ------------------------
$ 9.0 million - $9.49 million $150,000
$ 9.5 million - $9.99 million $400,000
$ 10.0 million - $10.49 million $500,000
$ 10.5 million - $10.99 million $600,000
$ 11.0 million - $11.49 million $700,000
$ 11.5 million - $11.99 million $800,000
$ 12.0 million and above $900,000
- --------------------
*Plus, in each case, the actual net sales of the Paint and Sundries Sector of
the Buyer for the Buyer's fiscal-year ended September 30, 1997.
(c) Buyer shall prepare and deliver to the Stockholders, on or
before sixty (60) days after the end of the Earn-Out Period, the Earn-Out
Financial Statements, including, consolidating financial information with
respect to the Company and the Paint and Sundries Sector of Buyer, for the
Earn-Out Period, and the calculation of the Additional Consideration. Unless
the Stockholders object in writing to the calculation of the Additional
Consideration within thirty (30) days after delivery to the Stockholders by
Buyer pursuant to the previous sentence, the calculation of the Additional
Consideration shall be final and binding upon Buyer and the Stockholders. If
the Stockholders object in writing within said thirty (30) days, each of Buyer
and the Stockholders agree to use their good faith efforts to negotiate a
mutually acceptable settlement within the next thirty (30) days (the
"Settlement Period"). If Buyer and the Stockholders do not reach a settlement
within the Settlement Period, then Buyer and the Stockholders, within thirty
(30) days following the Settlement Period, shall (i) select and agree upon a
firm of independent certified public accountants (the "Independent Earn-Out
Accountants") to resolve all disputes in connection with the Additional
Consideration for purposes of this Section 5.1, and (ii) present in writing to
such Independent Earn-Out Accountants and to the other parties, unless
previously furnished, all non-privileged and non-confidential work papers and
other information of the independent accountants of Buyer used to prepare the
Earn-Out Financial Statements, and such additional information on their behalf
as they shall reasonably desire supporting their positions. The resolution of
the dispute rendered by such Independent Earn-Out Accountants shall be final
and binding upon Buyer and the Stockholders. The fees and expenses of the
Independent Earn-Out Accountants for services rendered under this Section
5.1(c) shall be borne and paid by equally by Buyer and the Stockholders.
Upon a final determination in accordance with this Section 5.1(c), Buyer shall
pay to the Stockholders, as soon as practicable following such determination,
the Additional Consideration that the Stockholders shall be entitled to receive
in accordance with this Section 5.1.
5.2. Conduct of Business.
(a) From the date hereof through the Closing Date, the Company
shall conduct its business in the ordinary course, and in such manner so that
the representations and warranties contained in Article III hereof shall
continue to be true and correct on and as of the Closing Date as if made on and
as of the Closing Date. Consistent with the foregoing, the Stockholders,
directors and officers of the Company shall use their respective best efforts
to preserve intact the current business organization of the Company, keep
available the services of the current officers, employees, and agents of the
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company. In addition, the Stockholders and the Company
shall give Buyer prompt notice of (i) any event, condition or
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circumstance occurring after the date hereof through the Closing Date that
would constitute a violation or breach of any representation, warranty or
covenant contained in this Agreement, and (ii) any event, occurrence,
transaction or other item occurring from the date hereof through the Closing
Date which would have been required to have been disclosed on any Disclosure
Schedule delivered hereunder, had such event, occurrence or action existed on
the date hereof.
(b) Between the date of this Agreement and the Closing Date, the
Company will not, and the Stockholders will not cause the Company to, without
the prior written consent of Buyer, take any affirmative action, or fail to
take any action within its control, as a result of which any of the changes or
events listed in Section 3.22 is or will (whether or not with notice or lapse
of time or both) occur, or which otherwise would cause any of the
representations and warranties made by the Stockholders herein, including
without limitation those contained in Section 3.27, to become untrue or
inaccurate.
5.3. Corporate Examinations and Investigation; Confidentiality.
(a) Prior to the Closing Date, Buyer shall be entitled, through
its employees, directors, officers, representatives, agents and contractors to
make such investigations of the assets, properties, business and operations of
the Company (including, without limitation, investigations of and access to the
Company's customers and customer list, selected canvas and other core business
suppliers and the Company's accounts receivable debtors) and such examinations
of the books, records, Tax Returns and financial condition of the Company as
they consider necessary in connection with the transactions contemplated in
this Agreement; provided, however, that the names of the Company's customers
shall not be provided to Buyer until the last business day prior to the Closing
Date. Any such investigation and examination shall be conducted at reasonable
times and under reasonable circumstances and the Company shall cooperate
therein. The Stockholders acknowledge that prior to the Closing Date, Buyer's
and the Company's independent accountant shall jointly conduct a physical
inventory and a review of the Company's accounts receivable. No investigation
by Buyer shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Company under this Agreement. In order that
Buyer may have full opportunity to make such physical, business, accounting and
legal review, examination or investigation as it may wish of the business and
affairs of the Company, the Company shall make available to employees,
directors, officers, representatives, agents and contractors of Buyer during
such period all such information and copies of such documents concerning the
affairs of the Company as such representatives may request, shall permit
representatives of Buyer access to the properties of the Company and all parts
thereof, and shall cause its officers, employees, consultants, agents,
accountants and attorneys to cooperate with such representatives in connection
with such review and examination.
(b) The Purchaser acknowledges that certain information furnished
to Buyer by the Company is confidential, proprietary and otherwise not
generally available to the public and such information, whether furnished by
the Company or any of the directors, officers, employees, agents or
representatives of the Company (the "Company's Representatives") and whether in
written, oral, visual, magnetic or electronic form, shall include, but not be
limited to, information regarding or relating to financial data, market
information, marketing plans, customer requirements, business plans, trade
secrets, researched development information, technical information, and any
other information relating to the operation, business or finances of the
Company (the "Confidential Information").
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(c) Buyer agrees that prior to the Closing Date it will not
disclose any Confidential Information, other than to directors, officers,
employees and representatives (including attorneys and accountants) of Buyer in
connection with Buyer's investigation and evaluation of the transactions
contemplated hereby, without the consent of the Stockholders, which consent
shall not be unreasonably withheld, except where the disclosure of such
information is required by court or governmental agency subpoena, order or
directive (provided that Buyer will previously provide to the Stockholders the
content of such disclosure, the reasons such disclosure is required and the
time and place such disclosure will be made). Anything to the contrary herein
notwithstanding, in the event that the Stockholders shall not consent to the
disclosure by Buyer of Confidential Information, and Buyer, in Buyer's sole
discretion, determines it is necessary or advisable to disclose Confidential
Information in order to make any filing or obtaining any consent or approval
necessary or appropriate for the consummation of the transactions contemplated
hereby, Buyer shall have the right to terminate this Agreement in accordance
with Section 8.1 hereof.
(d) The Confidential Information shall not include portions of the
Confidential Information that (i) is or becomes generally available to the
public through no action by Buyer or any of the directors, officers, employees,
agents or representatives of the Buyer (the "Buyer's Representatives" in
violation of this Agreement; or (ii) is or becomes available to Buyer or the
Buyer's Representatives from a source, other than the Company or the Company's
representatives, which Buyer believes, is not prohibited from disclosing such
portions to Buyer.
5.4. Issuance of Buyer Shares. On or prior to the Closing Date,
Buyer shall issue to the Stockholders, the Buyer Shares, which shares when
issued shall be validly issued, fully paid and nonassessable; and will use all
reasonable efforts on and after the Closing, to cause the Buyer Shares to be
quoted on NASDAQ.
5.5. Restricted Stock. The Stockholders acknowledge and agree that
their respective ability to sell, transfer or otherwise dispose of any or all
of the Buyer's Shares shall be restricted unless such transaction is registered
under the Securities Act, or an exemption from such registration is available
and the Stockholders provide an opinion of counsel to such effect (which
counsel and opinion shall be reasonable acceptable to Buyer). The Stockholders
further acknowledge that Buyer is under no obligation to register the sale,
transfer or other disposition of the Buyer Shares by or on behalf of the
Stockholders under the Securities Act, or to take any other action necessary in
order to make compliance with an exemption from such registration available.
The Stockholders further acknowledge that there will be placed on the
certificates of the Buyer Shares issued to the Stockholders, a legend stating
in substance:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE
ACT OR SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER."
5.6. Employment and Non-Competition Agreement. On the Closing
Date, the Company and Cobaugh shall enter into an employment and
non-competition agreement substantially in the form attached as Exhibit F (the
"Cobaugh Employment and Non-competition Agreement").
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5.7. Stockholders Non-Compete.
(a) The Stockholders jointly and severally acknowledge and agree
with respect to the Company that the business of the Company is conducted in
the United States (the "Territory"), and that the Company's reputation and
goodwill are an integral part of its business success throughout the Territory.
If the Stockholders deprive Buyer of any of the Buyer's or the Company's
goodwill or in any manner utilizes their reputation and goodwill in competition
with Buyer or the Company, Buyer will be deprived of the benefits it has
bargained for pursuant to this Agreement. Accordingly, as an inducement for
Buyer to enter into this Agreement, the Stockholders agree that for a period of
seven (7) years after the Closing Date (the "Non-competition Period") the
Stockholders shall not, without Buyer's prior written consent, directly or
indirectly, own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be connected as a director,
officer, employee, partner, consultant or otherwise with, any profit or
non-profit business or organization in the Territory that, directly or
indirectly, competes with, or is about to compete with any other Person that
competes directly or indirectly with Buyer or the Company. In addition, during
the Non-competition Period, the Stockholders shall not have an equity interest
in any such firm or business. In the event the agreement in this Section 5.7
shall be determined by any court of competent jurisdiction to be unenforceable
by reason of its extending for too great a period of time or over too great a
geographical area or by reason of its being too extensive in any other respect,
it shall be interpreted to extend only over the maximum period of time for
which it may be enforceable and/or over the maximum geographical area as to
which it may be enforceable and/or to the maximum extent in all other respects
as to which it may be enforceable, all as determined by such court in such
action.
(b) During the Non-competition Period, the Stockholders shall not
(i) solicit, raid, entice, induce or contact, or attempt to solicit, raid,
entice, induce or contact, any Person that is a customer of Buyer or the
Company to become a customer of any other Person for services or the same as,
or competitive with, those services or sold, rendered or otherwise made
available to customers by Buyer or the Company as of the Closing Date, or
approach any such Person for such purpose or authorize the taking of such
actions by any other Person or assist or participate with any such Person in
taking such action, or (ii) solicit, raid, entice, induce or contact, or
attempt to solicit, raid, entice, induce or contact, any Person that currently
is or at any time during the Non-competition Period shall be (or, in the case
of termination is at the time of termination), an employee, agent or consultant
of or to the Company to do anything from which the Stockholders are restricted
by reason of this Section 5.7, and the Stockholders shall not approach any such
employee, agent or consultant for such purpose or authorize or participate with
the taking of such actions by any other Person or assist or participate with
any such Person in taking such action. The term "customer" shall include: (i)
customers of Buyer and the Company existing immediately after the Closing; and
(ii) customers that have used the products and services of the Company within
the five (5) year period prior to the Closing Date.
(c) During the Non-competition Period, the Stockholders shall not
make any statement or other communication that impugns or attacks the
reputation or character of Buyer, the Company or their affiliates or their
representatives, or damages the goodwill of Buyer, the Company or their
affiliates or their representatives, take any action that would interfere with
any contractual or customer or supplier relationships of Buyer, the Company or
their affiliates or its or their representatives, including but not limited to
any action that would result in a diminution of business, or otherwise take any
action that is detrimental to the best interests of Buyer, the Company or their
affiliates.
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(d) The Stockholders acknowledge that a breach of the covenants
contained in this Section 5.7 will cause irreparable damage to Buyer and the
Company, the exact amount of which will be difficult to ascertain, and that the
remedies at law for any such breach will be inadequate. Accordingly, the
Stockholders agree that if either Stockholder breaches the covenant contained
in this Section 5.7 in addition to any other remedy that may be available at
law or in equity, Buyer shall be entitled to specific performance and
injunctive relief, without posting bond or other security.
(e) If any provision of this Section 5.7 is deemed to be invalid
or unenforceable or is prohibited by the law of the jurisdiction or state where
it is to be performed, this Section 5.7 shall be deemed divisible as to such
provision and such provision shall be inoperative to the extent, and only to
the extent, it is so unenforceable or prohibited, and otherwise this Section
5.7 shall be given full force and effect.
5.8. Escrow Agreement. On the Closing Date, Buyer and each
Stockholder shall have entered into the Escrow Agreement.
5.9. St. Louis Lease. On the Closing Date, the Stockholders shall
have caused the Company to have executed a three-year triple-net lease (the
"St. Louis Lease") at $2.25 per square foot for the office and manufacturing
space currently occupied by the Company at 3745, 3759, 3763 and 3801 Forest
Park Blvd., St. Louis, Missouri (comprising of an aggregate 51,840 square
feet), and such St. Louis Lease shall provide, among other things, for two
successive three-year renewal options at market rates, substantially in the
form attached hereto as Exhibit G. The Stockholders and Buyer acknowledge and
agree that the landlord under the St. Louis Lease shall cause and be solely
responsible for complying with applicable fire and building laws, and any costs
and expenses incurred in connection with such compliance.
5.10. Accounts Receivable. Upon the delivery by Buyer to the
Stockholders of a written notice stating the amount of accounts receivable of
the Company ("Closing Accounts Receivable") reflected on the Closing Date
Balance Sheet which were not collected by Buyer or the Company during the
period of 150 days after the Closing Date, the Stockholders shall promptly pay
to Buyer the dollar amount of the Closing Accounts Receivable as Buyer did not
recover during the 150 day period after the Closing Date. Buyer will provide
the Stockholders with such information as the Stockholders reasonably request
supporting the calculation of uncollected accounts receivable. Buyer will use
all reasonable efforts in the ordinary course of business to collect the
Closing Accounts Receivable on and after the Closing; provided, that such
obligation shall not require Buyer to make any extraordinary expenditures,
including, without limitation, collection agencies and attorneys' fees. Upon
payment by the Stockholders of amounts due to Buyer under this Section 5.10,
Buyer will assign all of its right, title and interest in and to the Closing
Accounts Receivable which have been paid for by the Stockholders and upon
subsequent collection of amounts due with respect to any such purchased Closing
Accounts Receivable, will promptly forward such amounts to the Stockholders.
5.11. Reasonable Best Efforts. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable to fulfill the conditions to
the parties' obligations hereunder and to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
making all required filings and applications and obtaining all consents,
approvals, orders, waivers, licenses, permits and
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authorizations required in connection with the transactions contemplated
hereby. If at any time after the Closing Date any further action is necessary
or desirable to carry out the purposes of this Agreement, the parties hereto
shall take or cause to be taken all such necessary action, including, without
limitation, the execution and delivery of such further instruments and
documents as may be reasonably requested by the other party for such purposes
or otherwise to consummate and make effective the transactions contemplated
hereby. All Books and Records of the Company and all of the Stockholders shall
be transferred at the Closing to Buyer.
5.12. No Negotiation. Until such time, if any, as this Agreement is
terminated pursuant to Article VIII hereof, neither the Company, any
Stockholder nor any of the directors, officers, employees, agents or
representatives of the Company will directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale, lease or exchange of the business or
assets (other than in the ordinary course of business consistent with past
practice) of the Company, or any of the capital stock of the Company, or any
merger, consolidation, business combination, or similar transaction involving
the Company. The Company and the Stockholders will promptly advise and notify
Buyer in writing of any such inquiries, proposals or other contacts.
5.13. No Incurrence of Indebtedness. From and after October 31,
1997, the Company shall not incur any Indebtedness in excess of $300,000,
without the prior written consent of Buyer.
5.14. Suppliers; Distributors; Customers. On or prior to three (3)
days prior to the Closing Date, the Stockholders will (i) provide to Buyer
Schedule 5.14 of the Disclosure Schedules which will list by percentage and
identify the total purchases by the Company for the twelve months ended
September 30, 1997 of the ten largest suppliers and distributors to the Company
and of the total sales to the ten largest customers of the Company for such
periods; provided, however, that the names of the Company's customers shall not
be provided to Buyer until the last business day prior to the Closing Date, and
(ii) will represent and warrant to Buyer (which shall be considered a
representation and warranty under Article III hereunder and incorporated in
reference therein) that no Person listed on Schedule 5.14 of the Disclosure
Schedules, has advised the Company, in writing or orally, that it intends or
within the last twelve months has threatened in writing to the Company to
cancel or otherwise terminate the business relationship of such Person with the
Company or that it intends to modify its business relationship to the Company
or to decrease or limit its purchase or supply of products or services from or
to the Company.
5.15. October 31, 1997 Certificate. The Stockholders shall provide
to Buyer, no later than three (3) business days prior to the Closing Date, a
certificate (the "October 31, 1997' Certificate") duly executed by the
Stockholders, that shall have been reviewed by Anders, Minkler and Diehl, that
sets forth an accurate and complete listing (including amount) of all
Indebtedness of the Company on October 31, 1997, calculated based on amounts
reflected in the financial and other books and records of the Company and in
accordance with generally accepted accounting principles applied on a basis
consistent with the Latest Balance Sheet. Upon delivery of the Stockholders'
Certificate, this Section 5.15 shall constitute a representation and warranty
under Article III hereof and be deemed to be incorporated by reference therein.
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5.16. Benefit Plans. Prior to the Closing Date, the Company shall
cause the Company's life insurance and long term disability plan (the "Company
Plans") to be transferred to Guard Manufacturing Company and Guard
Manufacturing Company shall assume the Company Plans as of such date prior to
the Closing. As of the Closing Date, the Company shall cease to be a
participating employer under the health and welfare plans maintained by Guard
Manufacturing Company (the "Guard Plans). Prior to the Closing Date the
Company has terminated the employment of Dolores J. Margolus, who the Company
represents is an employee at will, and as of such date prior to the Closing
Guard Manufacturing Company has employed Dolores J. Margolus and Dolores J.
Margolus has accepted such employment. The Stockholders shall take, or cause
to be taken, all such action as may be necessary to effect such cessation of
participation, plan transfer and assumption, and termination of employment and
employment. Neither the Company nor Buyer shall have any liability with
respect to the Guard Plans or the Company Plans, including, but not limited to
premium payments, reserves or administrative expenses with respect thereto or
to or with respect to the employment or termination of employment of Dolores J.
Margolus. As of the Closing Date, individuals who are employed by the Company
on the Closing Date and who provide services to the Company after the Closing
Date ("Company Employees") shall be eligible to participate in the health, life
insurance and disability plans of Buyer, subject to all of the terms and
conditions of those plans in effect from time to time, including, but not
limited to pre-existing condition exclusions and actively at work requirements.
5.17. Net Worth Certificate. The Stockholders shall provide to
Buyer, no later than one (1) business day prior to the Closing Date a
certificate ("Net Worth Certificate"), duly executed by the Stockholder, that
shall have been reviewed by Anders, Minkler and Diehl, that sets forth the
Stockholder good faith, reasonably based, estimate of the Net Worth of the
Company on the Closing Date.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE AGREEMENT
6.1. Conditions to the Stockholders' Obligations. The obligations
of the Stockholders to consummate the transactions contemplated hereby at the
Closing is subject to satisfaction or waiver by the Stockholders of the
following conditions:
(a) the representations and warranties of Buyer contained herein
shall be true and correct at and as of the date hereof and as of the Closing
Date as though such representations and warranties were made at and as of the
date of this Agreement;
(b) Buyer shall have performed and complied with all agreements,
obligations, covenants and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing;
(c) the Stockholders shall have received a duly executed
certificate of an authorized, officer of Buyer to the effect that the
conditions in paragraphs (a) and (b) of this Section 6.1 have been satisfied;
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(d) the Stockholders shall have received from Buyer, by wire
transfer in immediately available funds, the Cash Purchase Price;
(e) the Escrow Agent shall have received from Buyer, by wire
transfer in immediately available funds, the Escrow Payment;
(f) the Stockholders shall have received from Buyer, duly executed
by Buyer, the Escrow Agreement;
(g) the Stockholders shall have received from Buyer, certificates
representing the Buyer Shares;
(h) Cobaugh shall have received from Buyer, duly executed by
Buyer, the Cobaugh Employment and Non- competition Agreement; and
(i) all deliveries of Buyer to the Stockholders required under
Section 1.6 hereof shall have been delivered to the Stockholders.
6.2. Conditions to Buyer's Obligations. The obligations of Buyer
to consummate the transactions contemplated hereby at the Closing is subject to
the satisfaction or waiver of the following conditions:
(a) the representations and warranties of the Stockholders
contained herein shall be true and correct at and as of the date hereof and as
of the Closing Date as though such representations; and warranties were made at
and as of the date of this Agreement;
(b) the Stockholders shall have performed and complied with all
agreements, obligations, covenants and conditions required by this Agreement to
be performed or complied with by them on or prior to the Closing;
(c) Buyer shall have received a duly executed certificate from the
Stockholders to the effect that the conditions in paragraphs (a) and (b) of
this Section 6.2 have been satisfied;
(d) the Stockholders shall have delivered to Buyer certificates
representing all of the Shares, accompanied by stock powers duly endorsed in
blank or accompanied by duly executed instruments of transfer, in each case,
endorsed or executed by the appropriate Stockholder;
(e) all approvals, authorizations, and consents required in order
for the Stockholders and the Company to consummate the transactions
contemplated hereby, including, without limitation, all consents required for
the Company to retain its rights and benefits under contracts and agreements to
which it is a party or governmental licenses or approvals which the Company
uses in the ordinary course of business, shall have been obtained and be in
full force and effect, and all notices required to be given to government
authorities by the Stockholders shall have been given, and all applicable
waiting periods shall have expired, and Buyer shall have been furnished with
appropriate evidence of the granting of such approvals, authorizations and
consents;
(f) the Stockholder shall have delivered to Buyer an opinion of
Ottsen, Mauze, Leggat & Belz L.C., substantially in the form of Exhibit B;
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(g) Buyer shall have received from Cobaugh, duly executed by
Cobaugh, the Cobaugh Employment and Non- competition Agreement;
(h) Buyer shall have received, from the Stockholders, duly
executed by the Company and the Eleven/Eleven Company, the St. Louis Lease;
(i) Buyer shall have received from the Stockholders, the
resignations of the Resigning Directors;
(j) there shall not have occurred any event or condition that has
had, or may have, a material adverse effect on the business, operations,
results of operations, condition (financial or otherwise), or prospects of
either the Company or Buyer, as determined in the sole discretion of the Buyer
or the Buyer's lender, Bank One Trust Company, NA;
(k) the Stockholders shall have provided Buyer with the
information referred to in Section 5.14 hereof, and with customary
confirmations of accounts receivable or accounts payable, as the case may be,
obtained by Anders, Minkler and Diehl, the Company's independent certified
public accountants (i) with respect to accounts receivable of the Company, at
least 80% of the Company's aggregate accounts receivable balance at September
30, 1997 and (ii) with respect to trade payables of the Company, for the ten
largest trade payable creditors of the Company but not less than 60% of the
Company's aggregate trade payables balance at September 30, 1997, together in
each case with the names of each such trade creditor or debtor, and the Buyer
shall be fully satisfied, as to the results of its due diligence investigation
with respect to the above;
(l) All deliveries to the Stockholders by Buyer required under
Section 1.5 hereof, including, without limitation, the Release, shall have been
delivered to Buyer;
(m) There shall not have been instituted any legal proceeding
seeking to prohibit or otherwise to challenge the consummation of the
transactions contemplated by this Agreement, or to obtain substantial damages
with respect thereto. In addition, there shall not have been any action taken
or any law, rule, regulation, order, judgment, or decree proposed, enacted or
deemed applicable to the transactions contemplated by this Agreement by any
governmental or regulatory body or by any court or other tribunal that makes
illegal any of the transactions contemplated by this Agreement or that
otherwise prohibits, restricts or delays consummation of any of the
transactions contemplated by this Agreement;
(n) All outstanding loans and advances by the Company to any
Stockholder, if any, shall have been paid in full or withheld from the payment
to be made to such Stockholder hereunder;
(o) Buyer shall have received from the Stockholders the October
31, 1997 Certificate, duly executed by the Stockholders, and Buyer shall be
fully satisfied as to the results of its due diligence with respect thereto;
(p) Buyer shall be fully satisfied with its due diligence of all
environmental matters which relate to the Company or the Company's business,
including, without limitation, the risk, if any, of liability to the Company or
the Buyer with respect thereto.
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(q) Buyer shall have reviewed the Net Worth Certificate, duly
executed by the Stockholders, and shall be fully satisfied as to the results of
its due diligence with respect thereto.
(r) Buyer shall have received a certificate of existence and good
standing as of a recent date for the Company from the Missouri Secretary of
State; and
(s) Buyer shall have received from the Stockholders and the Escrow
Agent, duly executed by the Stockholders and the Escrow Agent, the Escrow
Agreement.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
7.1. Survival. All of the representations and warranties made by
or on behalf of the Stockholders in this Agreement, and in any certificates,
exhibits or other instruments delivered pursuant hereto (including, without
limitation, the Disclosure Schedules) shall survive the Closing Date for a
period of three years from the Closing Date; provided, however, that the
representations and warranties of the Stockholders set forth in Article II
hereof shall survive the Closing Date, indefinitely; and provided, further,
that the representations and warranties of the Stockholders set forth in
Section 3.9, Section 3.11 and Section 3.19 hereof shall survive until sixty
(60) days after the date the applicable statutes of limitations against the
Company shall expire, or if there is no applicable statute of limitations,
indefinitely. The right to indemnification, payment of Damages or other remedy
based on such representations, warranties, covenants, and obligations will not
be affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after
the execution and delivery of this Agreement or the Closing Date, with respect
to the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
7.2. Indemnification. From and after the Closing, the Stockholders
shall jointly and severally indemnify and hold harmless Buyer and the Company
(following the Closing) and their respective officers, directors, affiliates,
stockholders and agents (collectively, the "Buyer Indemnified Parties") from
and against any costs or expenses (including without limitation attorneys'
fees, and the out-of-pocket expenses of testifying and preparing for testimony
and responding to document and other information requests, and in connection
with the enforcement of any rights hereunder, whether or not a party to such
litigation), judgments, liabilities, fines, amounts paid in settlement, losses,
claims and damages (collectively, "Damages"), as incurred, to the extent they
relate to, arise out of or are the result of: (i) the breach of or any
inaccuracy in or state of facts inconsistent with any of the representations
and warranties of the Stockholders contained in or made pursuant to this
Agreement; or (ii) the breach or nonperformance of any covenant or agreement of
the Stockholders contained in this Agreement.
7.3. Tax Indemnification.
(a) The Stockholders shall pay, indemnify and hold harmless Buyer
and the Company (after the Closing) from and against all liabilities relating
to Taxes of the Company attributable to taxable periods ending on or before the
Closing Date, to the extent that such liabilities
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are not reflected on the Closing Date Balance Sheet. For purposes of the
preceding sentence, the Closing Date shall be treated as the last day of a
taxable period, and the Buyer's independent certified public accountants shall
determine the amount, if any, of Taxes properly accruable for any period that
does not in fact end on the Closing Date based upon a closing of the books of
the Company as of the Closing Date. Buyer and Stockholders shall be afforded a
reasonable opportunity to receive and comment on such accrual. This Section
7.3 shall survive the Closing until six-months after the applicable statute of
limitations.
(b) (i) Buyer shall provide notice of any claim for
indemnification pursuant to this Section 7.3 to the Stockholders. Such notice
shall include a calculation of the amount of the requested indemnity payment.
If the Stockholders disagree with the calculation of the indemnity payment, the
Stockholders and Buyer shall attempt to resolve such disagreement for a period
of fifteen (15) days. If the parties fail to reach an agreement at the end of
such period, such disagreement shall be submitted to a nationally recognized
firm of independent certified public accountants mutually selected by the
Stockholders and Buyer, whose determination shall be final and binding on all
parties. The cost of such nationally recognized firm of independent certified
public accountants shall be borne equally by the Stockholders and Buyer.
(ii) Within 10 days after the indemnity calculation has been
resolved or determined, as provided in Section 7.3(d)(i), the Stockholders
shall pay to Buyer such amounts as have been determined to be due Buyer as a
result of the indemnifications provided in Section 7.3(a).
7.4. Limitations on Amount.
(a) The Stockholders will have no liability pursuant to Section
7.2 until the total of all Damages with respect to such matters exceeds $25,000
(except with respect to Damages for a breach of Article II or of Section 3.9
hereof for which the Stockholders shall be fully liable to Buyer), in which
case all Damages shall be collectible hereunder; and the Stockholders shall
have no liability to Buyer or the Company for Damages pursuant to Section 7.2
in excess of the Purchase Price.
(b) In the event that following the receipt of a payment of
Damages from the Stockholders pursuant to Section 7.2, Buyer or the Company
shall absolutely and unconditionally receive insurance proceeds or collect
monies from third parties (in each case net of all costs and expenses of
collection) for exactly the same matter for which the Stockholders paid Damages
to Buyer and/or the Company and Buyer and the Company have been made fully
whole with respect to all Damages with respect to such matter, then Buyer shall
pay to the Stockholders the amount of such excess recoveries beyond that
necessary to make Buyer whole, up to but not in excess of the amount of Damages
actually paid by the Stockholders to the Buyer and the Company.
7.5. Claims.
(a) Promptly after receipt by an indemnified person under this
Article VII of notice of the commencement of any action or proceeding against
it, such indemnified person will, if a claim is to be made against an
indemnifying party under this Article VII, give notice to the indemnifying
party of the commencement of such action or proceeding, specifying the factual
basis of the claim and the amount thereof in reasonable detail to the extent
then known by such indemnified person, but the failure to notify the
indemnifying party will not relieve the indemnifying party of any liability
that it may have to any indemnified person.
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(b) If any action or proceeding referred to in Section 7.5(a) (in
connection with matters covered by Section 7.2) is brought against an
indemnified person, the indemnifying party will be entitled to participate in
such action or proceeding and, to the extent that it wishes (unless an
indemnifying party is also a party to such action or proceeding and the
indemnified person determines that joint representation would be inappropriate)
to assume the defense of such action or proceeding with counsel satisfactory to
the indemnified person and, after notice from the indemnifying person to the
indemnified person of its election to assume the defense of such action or
proceeding, the indemnifying person will not, as long as the indemnifying
person diligently conducts such defense, be liable to the indemnified person
under this Article VII for any fees of other counsel or any other expenses with
respect to the defense of such action or proceeding, in each case subsequently
incurred by the indemnified person in connection with the defense of such
action or proceeding, other than reasonable costs of investigation, and other
than where the indemnified person has separate defenses in which case the
indemnifying person shall be responsible for the fees and expenses of one firm
of counsel for the indemnified person. If the indemnifying party assumes the
defense of an action or proceeding, (i) it will be conclusively established for
purposes of this Agreement that the claims made in that action or proceeding
are within the scope of and subject to indemnification; (ii) no compromise or
settlement of such claims may be effected by the Representative without the
Indemnified Person's prior written consent; (iii) the indemnifying person will
have no liability with respect to any compromise or settlement of such claims
effected without the indemnifying person's prior written consent; and (iv) the
indemnified person will cooperate as the indemnifying person may reasonably
request in investigating, defending and (subject to clause (ii)) settling such
action or proceeding (with the Indemnified Person's out-of-pocket costs in
providing such cooperation to be reimbursed by the indemnifying parties). The
indemnified party shall cooperate with the indemnified party with respect to
matters for which the indemnifying party is indemnifying the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified person
determines that there is a probability that an action or proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Agreement,
the indemnified person may, by notice to the indemnifying person, assume the
exclusive right to defend, compromise, or settle such action or proceeding.
7.6. Right of Set-Off. To secure the performance of the
indemnification obligations of the Stockholders hereunder, Buyer may, but shall
in no event be obligated to, set-off the amount of any Damages Buyer may have
pursuant to Section 7.2 and Section 7.3 hereof against any and all unpaid
Additional Consideration until the aggregate amount set-off hereunder equals
the amount of such Damages.
ARTICLE VIII
TERMINATION
8.1. Termination of Agreement. This Agreement may, by notice given
prior to the Closing, be terminated as follows:
(a) by Buyer, on the one hand, or the Stockholders, on the other
hand, if a material breach of any provision of this Agreement has been
committed by the other party and such breach is not waived and cannot be cured
prior to the Closing Date;
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(b) (i) by Buyer if any of the conditions in Section 6.2 hereof
have not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Stockholders, if any of the
conditions in Section 6.1 hereof has not been satisfied as of the Closing Date
or if satisfaction of such a condition is or becomes impossible (other than
through the failure of the Stockholders to comply with their obligations under
this Agreement) and such parties have not waived such condition on or before
the Closing Date;
(c) by mutual consent of the Buyer and the Stockholders;
(d) by Buyer pursuant to Section 5.3(c) hereof; or
(e) by Buyer or the Stockholders, if the Closing has not occurred
(other than through the failure of any party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on or
before November 30, 1997.
If this Agreement is terminated pursuant to the provisions of Section
8(c) hereof, this Agreement shall become void and of no further force and
effect, and no party hereto shall have any liability to any other party. If
this Agreement is terminated pursuant to Section 8(a), 8(b) or 8(d) hereof,
each party hereto shall be entitled to all other remedies it may have at law or
in equity.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. Amendment and Modification. This Agreement may be amended or
modified at any time by the parties hereto, pursuant to an instrument in
writing signed by Buyer and each of the Stockholders.
9.2. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, between the parties hereto with respect to the subject
matter hereof and (b) shall not be assigned, by operation of law or otherwise
by a party hereto, without the prior written consent of the other parties.
9.3. Validity. The invalidity or unenforceability of any term or
provision of this Agreement in any situation or jurisdiction shall not affect
the validity or enforceability of the other terms or provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.4. Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and shall be deemed given
upon receipt by the other parties at the following addresses or facsimile
numbers:
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(a) if to Buyer, to:
Tufco Technologies, Inc.
4800 Simonton Road
Dallas, Texas 75244
Facsimile No.: 920-336-0344
Attention: Louis LeCalsey III
with a copy to:
Battle Fowler LLP
Park Avenue Tower
75 East 55th Street
New York, New York 10022
Facsimile No.: (212) 856-7817
Attention: Carl A. de Brito, Esq.
(b) if to the Stockholders, to:
James Barnes
11 Ellsworth Lane
St. Louis, Missouri 63124
and
Charles Cobaugh
50 Clermont Avenue
St. Louis, Missouri 63124
with a copy to:
Ottsen, Mauze, Leggat & Belz L.C.
112 South Hanley Road
St. Louis, Missouri 63105
Facsimile No.: 314-863-3821
Attention: Robert Leggat, Esq.
9.5. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware (regardless of the laws that might otherwise govern
under applicable principles of conflicts of law) as to all matters, including
but not limited to matters of validity, construction, effect, performance and
remedies.
9.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and shall in no way be construed to
define, limit, describe, explain, modify, amplify, or add to the
interpretation, construction or meaning of any provision of, or scope or intent
of, this Agreement nor in any way affect this Agreement.
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9.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.8. Expenses. Except as otherwise contemplated by this Agreement,
whether or not this Agreement and the transactions contemplated hereby are
consummated, and except as otherwise expressly set forth herein, all costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses (it being agreed that the fees and expenses of the
Company's counsel and certified public accountants in connection with the
transactions contemplated by this Agreement shall be borne by the
Stockholders).
9.9. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its affiliates and nothing
in this Agreement, express or implied, is intended by or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
9.10. No Waivers. Except as otherwise expressly provided herein, no
failure to exercise, delay in exercising or single or martial exercise of any
right, power or remedy by any party, and no course of dealing between the
parties, shall constitute a waiver of any such right, power or remedy.
9.11. Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement were not Performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof and immediate injunctive relief, in addition to any other remedy at law
or equity.
9.12. Transfer Taxes. The Stockholders shall be responsible for,
and pay, all sales, use, transfer, filing, conveyance, recording, and other
similar Taxes and fees, including without limitation all applicable real estate
transfer and real property gains Taxes and recording fees and stock transfer
Taxes (collectively, "Transfer Taxes"), arising out of or in connection with
the transactions effected pursuant to this Agreement. If Buyer has primary
responsibility under applicable law for the payment of any particular Transfer
Tax, Buyer shall prepare and file the relevant Tax Return, pay the Transfer Tax
shown on such Tax Return, and notify the Stockholders of such Transfer Tax. In
such event, the Stockholders shall reimburse Buyer for the Transfer Tax in
immediately available funds within five days of the delivery of such notice.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly signed as of the date first above written.
TUFCO TECHNOLOGIES, INC.
By: /s/ Louis LeCalsey III
-----------------------------------
Name: Louis LeCalsey III
Title: President and CEO
STOCKHOLDERS
By: /s/ Charles Cobaugh
-----------------------------------
Charles Cobaugh, Individually
By: /s/ James Barnes
-----------------------------------
James Barnes, Individually
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INDEX
Page
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ARTICLE I SALE OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. The Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Net Worth Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5. Deliveries by Stockholders and the Company . . . . . . . . . . . . . . . . . . . 3
1.6. Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO THEMSELVES . . . . . . . . . . . . . . . . . . . 5
2.1. Ownership of Shares; Title . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3. Investor Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS AS TO . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1. Due Incorporation and Authority . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2. Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . 7
3.3. Subsidiaries and Other Affiliates . . . . . . . . . . . . . . . . . . . . . . . 7
3.4. Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5. Outstanding Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6. Outstanding Options or Other Rights . . . . . . . . . . . . . . . . . . . . . . 7
3.7. Certificate of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . 8
3.8. Financial Statements; Books and Records . . . . . . . . . . . . . . . . . . . . 8
3.9. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.10. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12. Actions and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13. Contracts and Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14. Tangible Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.15. Real Property; Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.16. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17. Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.18. No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.19. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.20. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.21. Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . . . 16
3.22. Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.23. Banks, Brokers and Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.24. Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
39
3.25. No Broker's, Finder's or Similar Fees . . . . . . . . . . . . . . . . . . . . . 18
3.26. Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.27. Inventory; Accounts Receivable; Account Payable . . . . . . . . . . . . . . . . 19
3.28. Potential Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . 19
3.29. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 20
4.1. Corporate Organization; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2. Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . . . . . 20
4.3. Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . 20
4.4. The Buyer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5. Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6. Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE V COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . . 21
5.1. Earn-Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3. Corporate Examinations and Investigation; Confidentiality . . . . . . . . . . . 23
5.4. Issuance of Buyer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5. Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6. Employment and Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . 24
5.7. Stockholders Non-Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.8. Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.9. St. Louis Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.10. Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.11. Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.12. No Negotiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.13. No Incurrence of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.14. Suppliers; Distributors; Customers . . . . . . . . . . . . . . . . . . . . . . . 27
5.15. October 31, 1997 Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.16. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17. Net Worth Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE AGREEMENT . . . . . . . . . . . . . . 28
6.1. Conditions to the Stockholders' Obligations . . . . . . . . . . . . . . . . . . 28
6.2. Conditions to Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VII SURVIVAL AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.3. Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.4. Limitations on Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5. Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.6. Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
40
ARTICLE VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.1. Termination of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE IX MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1. Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2. Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3. Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.6. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.8. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.9. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.10. No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.11. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
41
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Escrow Agreement
Exhibit B Form of Opinion of Ottsen, Mauze, Leggat & Belz
L.C.
Exhibit C Release of Liabilities and Obligations by the
Selling Stockholders and Guard Manufacturing, Inc.
Exhibit D Form of Opinion of Battle Fowler LLP
Exhibit E Financial Statements of Foremost Manufacturing
Company, Inc.
Exhibit F Form of Employment and Non-Competition Agreement
for Charles Cobaugh
Exhibit G Form of Lease
Disclosure Schedules
(ALL EXHIBITS AND SCHEDULES HAVE BEEN OMITTED, BUT SHALL BE PROVIDED TO THE
SECURITIES AND EXCHANGE COMMISSION UPON REQUEST.)