EXHIBIT 2.1
-----------
STOCK PURCHASE AGREEMENT
between
LMI AEROSPACE, INC.
and
BRIAN GEARY
Dated as of May 15, 2002
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................1
SECTION 1.1. Definitions...........................................1
ARTICLE II PURCHASE AND SALE OF SHARES.. ...................................7
SECTION 2.1. Basic Transaction.....................................7
SECTION 2.2. Payment of Purchase Price.............................7
SECTION 2.3. Escrow................................................7
SECTION 2.4. Additional Consideration..............................7
SECTION 2.5. The Closing...........................................7
SECTION 2.6. Closing Deliveries by the Seller......................8
SECTION 2.7. Closing Deliveries by the Buyer.......................8
ARTICLE III REPRESENTATIONS OF THE SELLER.....................................9
SECTION 3.1. Authorization of Transaction..........................9
SECTION 3.2. Brokers' Fees.........................................9
SECTION 3.3. Shares................................................9
SECTION 3.4. Organization, Qualification, and Corporate Power......9
SECTION 3.5. Capitalization.......................................10
SECTION 3.6. Noncontravention.....................................12
SECTION 3.7. Title to Assets......................................12
SECTION 3.8. Subsidiaries.........................................12
SECTION 3.9. Financial Statements.................................12
SECTION 3.10. Events Subsequent to Latest Balance Sheet............12
SECTION 3.11. Undisclosed Liabilities..............................14
SECTION 3.12. Legal Compliance.....................................15
SECTION 3.13. Tax Matters..........................................15
SECTION 3.14. Real Property........................................17
SECTION 3.15. Intellectual Property................................19
SECTION 3.16. Tangible Assets......................................21
SECTION 3.17. Inventory............................................21
SECTION 3.18. Contracts............................................22
SECTION 3.19. Notes and Accounts Receivable........................23
SECTION 3.20. Powers of Attorney...................................23
SECTION 3.21. Insurance............................................24
SECTION 3.22. Litigation...........................................24
SECTION 3.23. Product Warranty.....................................25
SECTION 3.24. Product Liability....................................25
SECTION 3.25. Employees............................................25
SECTION 3.26. Employee Benefits....................................25
SECTION 3.27. Environmental Matters................................29
SECTION 3.28. Permits..............................................30
SECTION 3.29. Backlog..............................................30
SECTION 3.30. No Conflict of Interest..............................30
SECTION 3.31. Bank Accounts........................................31
SECTION 3.32. Customers and Suppliers..............................31
SECTION 3.33. Claims Against Officers and Directors................31
SECTION 3.34. Improper and Other Payments..........................32
SECTION 3.35. Investments/Loans; Affiliates........................32
SECTION 3.36. Taxes................................................32
SECTION 3.37. Pension..............................................32
SECTION 3.38. Debt.................................................32
SECTION 3.39 Accuracy of Statements...............................32
SECTION 3.40 Product Approvals....................................33
SECTION 3.41 Southern Stretch Form Corporation and
Standard Bent Metal, Inc.............................33
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER......................33
SECTION 4.1. Organization of the Buyer............................33
SECTION 4.2. Authorization of Transaction.........................33
SECTION 4.3. Noncontravention.....................................34
SECTION 4.4. Brokers' Fees........................................34
SECTION 4.5. Legal Compliance.....................................34
SECTION 4.6. Litigation...........................................34
SECTION 4.7. Accuracy of Statements...............................34
SECTION 4.8. Securities Laws......................................34
ARTICLE V COVENANTS........................................................35
SECTION 5.1. General..............................................35
SECTION 5.2. Notices and Consents.................................35
SECTION 5.3. Operation of Business................................35
SECTION 5.4. Full Access..........................................37
SECTION 5.5. Exclusivity..........................................38
SECTION 5.6. Efforts..............................................38
SECTION 5.7. Maintenance of Insurance.............................38
SECTION 5.8. Notice and Supplemental Information..................38
SECTION 5.9. Press Releases and Public Announcements..............39
SECTION 5.10. Consistent Tax Reporting.............................39
SECTION 5.11. Resignation of Officers and Directors................39
SECTION 5.12. Transition...........................................39
SECTION 5.13. Confidentiality......................................39
SECTION 5.14. Noncompetition.......................................40
SECTION 5.15. Post-Closing Covenants...............................41
ARTICLE VI CONDITIONS TO OBLIGATION OF THE BUYER............................41
SECTION 6.1. Representations and Warranties True as of
Closing Date.........................................42
SECTION 6.2. Compliance with Covenants............................42
SECTION 6.3. Consents.............................................42
SECTION 6.4. Actions or Proceedings...............................42
SECTION 6.5. Certificate..........................................42
SECTION 6.6. Financial Condition at Closing.......................42
SECTION 6.7. Opinion of Counsel...................................42
SECTION 6.8. Resignations.........................................42
SECTION 6.9. Employment Agreements................................42
SECTION 6.10. Site Assessments.....................................42
SECTION 6.11. Customer Assurances..................................43
SECTION 6.12. Financing............................................43
SECTION 6.13. FIRPTA Certificate...................................43
SECTION 6.14. Termination of Certain Agreements....................43
SECTION 6.15. Insurance............................................43
SECTION 6.16. Contracts............................................43
SECTION 6.17. Sale of Standard Bent Metal, Inc.....................43
SECTION 6.18. Leased Real Property.................................43
SECTION 6.19. Board Approval.......................................44
SECTION 6.20. No Material Adverse Effect...........................44
SECTION 6.21. Documents............................................44
SECTION 6.22. Consent and Joinder Agreement........................44
SECTION 6.23. Seller Purchase of Assets............................44
SECTION 6.24. Dennis Geary Compensation............................44
ARTICLE VII CONDITIONS TO OBLIGATION OF THE SELLER...........................44
SECTION 7.1. Representations and Warranties True as of Closing....44
SECTION 7.2. Compliance with Covenants............................45
SECTION 7.3. Actions or Proceedings...............................45
SECTION 7.4. Certificate..........................................45
SECTION 7.5. Opinion of Counsel...................................45
SECTION 7.6. Documents............................................45
SECTION 7.7. Approval of Secured Promissory Note and Collateral...45
ARTICLE VIII SURVIVAL AND REMEDY; INDEMNIFICATION.............................45
SECTION 8.1. Survival of Representations and Warranties............45
SECTION 8.2. Indemnification by the Seller.........................46
SECTION 8.3. Indemnification by the Buyer..........................48
SECTION 8.4. Third-Party Claims....................................49
SECTION 8.5. Other Indemnification Provisions......................50
ARTICLE IX TAX MATTERS......................................................51
SECTION 9.1. Tax Matters...........................................51
SECTION 9.2. Tax Periods Ending on or Before the Closing Date......51
SECTION 9.3. Tax Periods Beginning Before and Ending After
the Closing Date......................................51
SECTION 9.4. Cooperation on Tax Matters............................52
SECTION 9.5. Tax Sharing Agreements................................52
SECTION 9.6. Certain Taxes.........................................52
ARTICLE X POST-CLOSING AGREEMENTS..........................................53
Section 10.1. Buyer's Obligation to Deliver Titles..................53
Section 10.2. Seller's Obligation Relating to Commercial Lease......53
ARTICLE X TERMINATION......................................................53
SECTION 11.1. Termination of Agreement..............................53
SECTION 11.2. Effect of Termination.................................54
ARTICLE XII MISCELLANEOUS....................................................54
SECTION 12.1. Expenses..............................................54
SECTION 12.2. No Third-Party Beneficiaries..........................54
SECTION 12.3. Entire Agreement......................................54
SECTION 12.4. Succession and Assignment.............................55
SECTION 12.5. Counterparts..........................................55
SECTION 12.6. Headings..............................................55
SECTION 12.7. Notices...............................................55
SECTION 12.8. Governing Law.........................................56
SECTION 12.9. Arbitration...........................................56
SECTION 12.10. Amendments and Waivers................................56
SECTION 12.11. Severability..........................................56
SECTION 12.12. Construction..........................................56
SECTION 12.13. Incorporation of Exhibits, Annexes and Schedules......57
SECTION 12.14. Specific Performance..................................57
EXHIBITS AND DISCLOSURE SCHEDULES
Exhibit A Escrow Agreement
Exhibit B Unaudited Balance Sheet Acquired Companies March 31, 2002
Exhibit C Accountants' Report
Exhibit D Promissory Note
Exhibit E Consent and Joinder Agreement
Exhibit F Seller's Opinion of Counsel
Exhibit G Buyer's Opinion of Counsel
Schedule 3.3 Shares
Schedule 3.5 Capitalization
Schedule 3.5(a) Exceptions Regarding Versaform Stock
Schedule 3.5(b) Exceptions Regarding 541775 B.C. Stock
Schedule 3.5(c) Exceptions Regarding Versaform Canada Stock
Schedule 3.6 Noncontravention
Schedule 3.7 Title to Assets
Schedule 3.9 Financial Statements
Schedule 3.10 Events Subsequent to Latest Balance Sheet
Schedule 3.10(b) Contracts More Than $100,000
Schedule 3.10(c) Accelerated or Termination of Contracts
Schedule 3.10(e) Capital Expenditure More Than $25,000
Schedule 3.10(g) Debt More Than $25,000
Schedule 3.10(l) Sale of Stock
Schedule 3.10(q) Increase Compensation
Schedule 3.10(r) Bonus Plan
Schedule 3.11 Undisclosed Liabilities
Schedule 3.12 Legal Compliance
Schedule 3.13 List of Tax Returns
Schedule 3.14 Real Property
Schedule 3.14(a) Owned Property
Schedule 3.14(b) Leased Property
Schedule 3.15 Intellectual Property
Schedule 3.15(a) Intellectual Property Used and Not Owned by Acquired Companies
Schedule 3.15(b) Intellectual Property Infringed by Acquired Companies
Schedule 3.15(c) Intellectual Property Patents Owned by Acquired Companies
Schedule 3.15(d) Intellectual Property Owned by Third Parties
Schedule 3.17 Inventory
Schedule 3.18 Contracts
Schedule 3.21 Insurance
Schedule 3.22 Litigation
Schedule 3.23 Product Warranty
Schedule 3.25(i) Employees and Compensation More Than $70,000
Schedule 3.25(ii) Employees Who Have No Plans to Leave
Schedule 3.26 Employee Benefits
Schedule 3.27 Environmental Matters
Schedule 3.27(c) No Liabilities and Disposition of Substance
Schedule 3.27(d) Equipment Which Contains Substance
Schedule 3.28 Permits
Schedule 3.29 Backlog
Schedule 3.30 No Conflicts
Schedule 3.31 Bank Accounts
Schedule 3.32 Customers and Suppliers
Schedule 3.32(a) Major Customers and Major Suppliers
Schedule 3.32(c) Price Reductions
Schedule 3.33 Claims Against Officers and Directors
Schedule 4.6 Buyer's Litigation
Schedule 5.3 Operation of Business
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of May 15, 2002, by and
between LMI Aerospace, Inc., a Missouri corporation (the "Buyer") and Brian
Geary, an individual (the "Seller").
WHEREAS, the Seller is the owner of all of the outstanding capital
stock of Versaform Corporation, a California corporation ("Versaform") of 541775
B.C., Ltd., a British Columbia corporation ("541775 B.C.") (collectively, the
"Shares");
WHEREAS, the Buyer desires to purchase the Shares from the Seller and
the Seller desires to sell to the Buyer all of the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms shall have the following
meanings for the purposes of this Agreement.
"Acquired Companies" means Versaform, Versaform Canada (a wholly-owned
subsidiary of 541775 B.C.), and 541775 B.C.
"Acquired Company" means any one of the Acquired Companies.
"Additional Consideration" has the meaning set forth in Section 2.4
below.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, Liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Affiliate" means, with respect to any specified Person, a Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"Affiliated Group" means any affiliated group within the meaning of
Code ss.1504(a) or any similar group defined under a similar provision of state,
local or foreign Law.
"Agreement" means this Stock Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended from time to time.
"Authority" means any governmental regulatory or administrative body,
governmental agency, governmental subdivision or authority, any court or
judicial authority, any public, private or industry governmental regulatory
authority, whether foreign, national, federal, state or local or otherwise, or
any Person lawfully empowered by any of the foregoing to enforce or seek
compliance with any regulation.
"Backlog" means orders for which there is a specific delivery date for
a specified product at a specified price.
"Business" means, with respect to Versaform, the business of aerospace
metal forming, with respect to 541775 B.C., the business of acting as a holding
company, and with respect to Versaform Canada, the business of commercial and
aerospace metal bending.
"Buyer" has the meaning set forth in the preface above.
"Buyer's Representatives" has the meaning set forth in Section 5.4
below.
"Buyer Indemnified Parties" has the meaning set forth in Section 8.2
below.
"Cash Amount" means Nine Million Five Hundred Sixty-Six Thousand
Dollars ($9,566,000.00).
"Closing" has the meaning set forth in Section 2.5 below.
"Closing Date" has the meaning set forth in Section 2.5 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competitive Business" has the meaning set forth in Section 5.14(a)
below.
"Confidential Information" means any information concerning the
Business and affairs of each of the Acquired Companies that is not already
generally available to the public.
"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
"Directors" shall mean all of the members of the Board of Directors of
the Acquired Companies.
"Employee" means each employee and leased employee regardless of
whether the term is initially capitalized.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or material fringe benefit or other retirement,
bonus, or incentive plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
ss.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
ss.3(1).
"Environmental Laws" mean all federal, state, provincial, local and
foreign statutes, regulations, ordinances and other provisions having the force
or effect of law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment
including, without limitation, all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Substances, materials or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended and as now or hereafter in
effect, including (but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, and the Waste Management Act, R.S.B.C. 1996 c. 482;
Canadian Environmental Protection Act, 1999; S.C. 1999, c. 33 and any
regulations thereto, each as amended, any so-called "Superlien" law, and any
other similar federal, state, provincial or local statutes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the U.S. Bank, National Association, Attention:
Brian Kabbas, 1 U.S. Bank Plaza, St. Louis, Missouri 63101.
"ERISA Affiliate" means, with respect to an Acquired Company, any
other Person that, together with the Acquired Company, would be treated as a
single employer under Section 414 of the Code.
"Escrow Agreement" shall mean the Escrow Agreement entered into by and
among the Buyer, the Seller and the Escrow Agent with respect to the Escrowed
Funds, in the form attached hereto as Exhibit A with only such changes as shall
be in form and substance satisfactory to the parties, acting reasonably.
"Escrowed Funds" has the meaning set forth in Section 2.3 below.
"Financial Statements" means the following:
(a) the audited financial statements of Versaform for the June
30, 1999, June 30, 2000 and June 30, 2001 fiscal years (including all
notes thereto), which are included in Schedule 3.9 consisting of the
balance sheet at such dates and the related statements of earnings and
cash flows for the twelve (12) month periods then ended;
(b) the unaudited financial statements of Versaform Canada and
541775 B.C. for the May 31, 1999, May 31, 2000 and May 31, 2001 fiscal
years (including all notes thereto), which are included in Schedule
3.9, consisting of the balance sheet at such dates and the related
statements of earnings and cash flows for the twelve (12) month
periods then ended; and
(c) the unaudited financial statements of the Acquired Companies
as of March 31, 2002 (which shall include, for comparative purposes,
financial statements as of March 31, 2001), which are included in
Schedule 3.9, consisting of the balance sheet at such date and the
related statement of earnings for the nine (9) month period then
ended; provided, however, that the inventory as reflected on the
Versaform financial statements shall have been audited.
"GAAP" means with respect to Versaform, United States generally
accepted accounting principles as in effect from time to time as consistently
applied by Versaform and, with respect to 541775 B.C. and Versaform Canada,
Canadian generally accepted accounting principles as in effect from time to time
as consistently applied by 541775 B.C. and Versaform Canada, respectively.
"Hazardous Substance" means any material or substance which (i)
constitutes a hazardous substance, toxic substance or pollutant (as such terms
are defined by or pursuant to any Environmental Laws) or (ii) is regulated or
controlled as a hazardous substance, toxic substance, pollutant or other
regulated or controlled material, substance or matter pursuant to any
Environmental Laws.
"Indemnified Party" has the meaning set forth in Section 8.4 below.
"Indemnifying Party" has the meaning set forth in Section 8.4 below.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions, and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith, (c) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information, and
business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary rights,
and (h) all copies and tangible embodiments thereof (in whatever form or
medium).
"Knowledge" means what is known or should have been known after
reasonable investigation.
"Latest Balance Sheet" means the unaudited balance sheet of the
Acquired Companies dated as of March 31, 2002 attached hereto as Exhibit B;
provided, however, that the inventory balance on such balance sheet shall be
determined in accordance with the Independent Accountants' Report on Applying
Agreed Upon Procedures issued by Nation Smith Hermes Diamond and dated May 3,
2002, a copy of which is attached hereto as Exhibit C.
"Law" means any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any
Authority.
"Leased Property" has the meaning set forth in Section 3.14(b) below.
"Leases" has the meaning set forth in Section 3.14(b) below.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Lien" means any mortgage, lien (except for any lien for Taxes not yet
due and payable), charge, restriction, pledge, security interest, option, lease
or sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"Major Customers" has the meaning set forth in Section 3.32(a)(i)
below.
"Major Suppliers" has the meaning set forth in Section 3.32(a)(ii)
below.
"Material Adverse Effect" shall mean any circumstances, developments
or matters whose effect on the Business any of the Acquired Companies,
properties, assets, results, operations, conditions (financial and other) and
prospects, either alone or in the aggregate, is or would reasonably be expected
to be materially adverse.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Property" has the meaning set forth in Section 3.14(a) below.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permits" has the meaning set forth in Section 3.28 below.
"Permitted Liabilities" means Liabilities owed to trade creditors, to
employees for wages, to governmental entities for payroll and personal property
taxes and other like Liabilities incurred in the Ordinary Course of Business
with maturities of less than one (1) year and Liabilities for income and
franchise taxes for the fiscal year beginning in 2001 not in excess of the
amount of the Reserve for Tax Liability.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Promissory Note" means the Seller's non-negotiable promissory note,
in the form attached hereto as Exhibit D, in the amount of One Million Three
Hundred Thousand Dollars ($1,300,000.00) payable in thirty-six (36) consecutive
monthly installments, the first thirty-five (35) of which shall be in the amount
of Thirty-Six Thousand One Hundred and Eleven Dollars and Eleven Cents
($36,111.11) and the thirty-sixth (36th) payment shall be in the amount of
Thirty-Six Thousand One Hundred Eleven Dollars and Fifteen Cents ($36,111.15)
with the first such payment being payable on July 1, 2002, bearing interest at
the rate of seven percent (7%) per annum, compounded annually.
"Purchase Price" means Eleven Million Three Hundred Sixty-Six Thousand
Dollars ($11,366,000.00) of which Ten Million Three Hundred Sixty-Six Thousand
Dollars ($10,366,000.00) shall be in consideration of the Versaform Shares and
One Million Dollars ($1,000,000.00) shall be in consideration of the 541775 B.C.
Shares plus any amounts payable pursuant to Section 2.4.
"Reserve for Tax Liability" means the reserve for unpaid state,
federal and foreign income and franchise taxes determined in accordance with
Section 8.2(b).
"Schedules" means the disclosure schedules accompanying this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Seller" has the meaning set forth in the preface above
"Shares" means the four hundred and seventy-five (475) shares of
common stock, no par value per share, of Versaform held of record by the Seller
and the one hundred (100) shares of common stock, no par value per share of
541775 B.C. held of record by the Seller.
"Subsidiary" means any corporation, partnership or limited liability
company with respect to which a specified Person (or a Subsidiary thereof) owns
a majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code ss.59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8.4 below.
"Threshold Amount" has the meaning set forth in Section 8.2(a) below.
"Transaction" means the acquisition by the Buyer of all of the Shares
of Versaform and 541775 B.C., which is the subject of this Agreement.
"Versaform" has the meaning set forth in the first Whereas clause
above.
"Versaform Canada" means Versaform Canada Corporation, a British
Columbia corporation.
"541775 B.C." has the meaning set forth in the first Whereas clause
above.
ARTICLE II
PURCHASE AND SALE OF SHARES
SECTION 2.1. Basic Transaction. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell, or cause to be sold, to the Buyer, all of the Shares
for the Purchase Price specified herein, subject to possible adjustments as
provided for in Section 2.4 of this Agreement.
SECTION 2.2. Payment of Purchase Price. On the Closing Date, in
consideration for the Shares, the Buyer shall pay to the Seller the Cash Amount.
The Cash Amount shall be paid to the Seller by means of wire transfer of
immediately available funds to an account or accounts designated by the Seller
in a written notice which shall include complete wire transfer instructions
delivered to the Buyer no less than five (5) days prior to the Closing Date.
SECTION 2.3. Escrow. On the Closing Date, the Buyer shall deposit by
wire transfer of immediately available funds with the Escrow Agent the amount of
Five Hundred Thousand Dollars ($500,000.00) (the "Escrowed Funds") in an
interest-bearing escrow account (the "Escrow Account") which amount shall be
held therein for up to twelve (12) months commencing on the Closing Date, in
accordance with the Escrow Agreement.
SECTION 2.4. Additional Consideration. No later than ninety (90) days
after each of the first, second and third anniversaries of the Closing Date, the
Buyer shall deliver to the Seller the Buyer's bank check in an amount equal to
five percent (5%) of the amount of net sales proceeds collected by Versaform
during the twelve (12) calendar months ending on each such anniversary pursuant
to agreements as currently existing and as exist in the future from time to time
by and between Versaform and Hamilton Sundstrand (including all subsidiaries,
affiliates and assignees of United Technologies and their subsidiaries and
affiliates excluding Sikorsky Aircraft Corporation) minus Three Million Dollars
($3,000,000.00) for each such twelve (12) month calculation ("Additional
Consideration"). For the purpose of this Section 2.4, net sales shall include
only those sales that are a direct or indirect result of Seller's sales efforts
whether before or after Closing. In the event Seller questions any one or more
of the calculations of Additional Consideration provided by this Section 2.4,
Seller shall give written notice to Buyer of his intent to review all such
matters and Seller shall have the unrestricted right, during Buyer's normal
business hours and upon two (2) days prior written notice, to inspect, photocopy
and review all documents, reports and data used by Buyer in making all
determinations directly related thereto.
SECTION 2.5. The Closing. The closing of this Transaction (the
"Closing") shall take place at the offices of Gallop, Johnson & Neuman, 101
South Hanley, Suite 1600, St. Louis, Missouri 63105, commencing at 10:00 a.m.
local time on the earlier of (i) June 30, 2002, or (ii) five (5) business days
following the satisfaction or waiver of all conditions to the obligations of the
parties to consummate this Transaction (other than conditions with respect to
actions the respective parties will take at the Closing itself) or such other
date as the parties may mutually determine, but in any event no later than June
30, 2002 (the "Closing Date"). It is the intent of the parties that the Buyer
shall assume control of the Acquired Companies immediately after the Closing.
SECTION 2.6. Closing Deliveries by the Seller. To effect the transfer
referred to in Section 2.1 hereof and the delivery of the Purchase Price, the
Seller shall deliver the following at the Closing:
(a) certificates evidencing the Shares, free and clear of any and
all Liens, duly endorsed in blank by the Seller for transfer or
accompanied by stock powers duly executed in blank;
(b) all consents, approvals, releases and waivers from
governmental Authorities and other third parties required or necessary
to consummate this Transaction satisfactory in form and substance to
the Buyer and its counsel;
(c) the executed Escrow Agreement duly executed by the Seller;
(d) all other documents required to be delivered to the Buyer
pursuant to Article VI hereof not specifically mentioned above in this
Section 2.6; and
(e) the Consent and Joinder Agreement executed by the Seller's
wife and in the form attached thereto as Exhibit E.
All instruments and documents executed and delivered to the Buyer
pursuant hereto shall be in form and substance and shall be executed
in a manner satisfactory to the Buyer and its counsel.
SECTION 2.7. Closing Deliveries by the Buyer. To effect the transfer
referred to in Section 2.1 hereof and the delivery of the Purchase Price, the
Buyer shall deliver the following at the Closing:
(a) to the Seller, the Cash Amount by wire transfer of
immediately available funds to such account or accounts of which the
Seller shall have given written notice to the Buyer hereunder not
later than five (5) business days prior to the Closing Date;
(b) to Stephen Prior, by wire transfer of immediately available
funds to such account or accounts of which Stephen Prior shall have
given written notice to the Buyer hereunder not later than five (5)
business days prior to the Closing Date, the amount of his fees as a
broker, finder or agent to the Seller in connection with the
Transaction but not in excess of One Hundred Ninety-Nine Thousand
Dollars ($199,000.00);
(c) the Promissory Note to the Seller;
(d) the Escrowed Funds with the Escrow Agent;
(e) the Escrow Agreement duly executed by the Buyer; and
(f) all other documents required to be delivered to the Seller
pursuant to Article VII hereof not specifically mentioned above in
this Section 2.7.
All instruments and documents executed and delivered to the Seller
pursuant hereto shall be in form and substance, and shall be executed in a
manner, satisfactory to the Seller and his counsel.
ARTICLE III
REPRESENTATIONS OF THE SELLER
The Seller hereby represents and warrants to the Buyer that the
statements contained in Sections 3.1 through 3.34 and Sections 3.39 through 3.41
of this Article III are correct and complete as of the date of this Agreement,
and except as amended pursuant to Section 5.8, will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Article III), except
as set forth in the Schedules hereto. The Seller hereby represents and warrants
to the Buyer that the statements contained in Sections 3.35 through Section 3.38
of this Article III will be correct and complete as of the Closing Date. Nothing
in the Schedules shall be deemed adequate to disclose an exception to a
representation or warranty made herein, however, unless the Schedule identifies
the exception with reasonable particularity. Without limiting the generality of
the foregoing, the mere listing (or inclusion of a copy) of a document or other
item shall not be deemed adequate to disclose an exception to a representation
or warranty made herein (unless the representation or warranty has to do with
the existence of the document or other item itself). An item disclosed in any
Schedule shall be deemed disclosed for purposes of all Schedules.
SECTION 3.1. Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms and
conditions. The Seller need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order to consummate this Transaction.
SECTION 3.2. Brokers' Fees. Neither the Seller nor any of the Acquired
Companies has any Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to this Transaction for which the Buyer
could become liable or obligated. Both Buyer and Seller agree that Seller shall
be solely responsible for all fees and remuneration to be paid to Stephen Prior
other than for those fees and remuneration described in Section 2.7(b).
SECTION 3.3. Shares. Except as set forth on Schedule 3.3, the Seller
holds of record and owns beneficially all of the Shares, free and clear of any
restrictions on transfer (other than any restrictions under the Securities Act
and state securities Laws), Taxes, Liens, options, warrants, purchase rights,
Contracts, commitments, equities, claims, and demands. The Seller is not a party
to any option, warrant, purchase right, or other Contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any Shares
(other than this Agreement). Except as set forth on Schedule 3.3, the Seller is
not a party to any voting trust, proxy, or other agreement or understanding with
respect to the voting of any Shares.
SECTION 3.4. Organization, Qualification, and Corporate Power.
(a) Versaform. Versaform is a corporation duly organized, validly
existing, and in good standing under the Laws of the State of
California. Versaform is duly authorized to conduct business and is in
good standing under the Laws of each jurisdiction except where the
failure to be so qualified would not have a Material Adverse Effect on
Versaform. Versaform has full corporate power and authority and all
licenses, Permits, and authorizations necessary to carry on the
Business in which it is engaged and to own and use the properties
owned and used by it. The copies of the articles of incorporation and
bylaws of Versaform (as amended to date) which have been (or will be)
delivered to the Buyer are correct and complete. The minute books
(containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of Versaform are correct
and complete. Versaform is not in default under or in violation of any
provision of its articles of incorporation or bylaws.
(b) 541775 B.C. 541775 B.C. is a corporation duly organized,
valid and existing under the Laws of British Columbia. 541775 B.C. is
duly authorized to conduct business and is in good standing under the
Laws of each jurisdiction except where the failure to be so qualified
would not have a Material Adverse Effect on 541775 B.C. 541775 B.C.
has full corporate power and authority and all licenses, Permits, and
authorizations necessary to carry on the Business in which it is
engaged and to own and use the properties owned and used by it. The
copies of the articles of incorporation and bylaws of 541775 B.C. (as
amended to date) which have been (or will be) delivered to the Buyer
are correct and complete. The minute books (containing the records of
meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books,
and the stock record books of 541775 B.C. are correct and complete.
541775 B.C. is not in default under or in violation of any provision
of its articles of incorporation or bylaws.
(c) Versaform Canada. Versaform Canada is a corporation duly
organized, valid and existing under the Laws of British Columbia.
Versaform Canada is duly authorized to conduct business and is in good
standing under the Laws of each jurisdiction except where the failure
to be so qualified would not have a Material Adverse Effect on
Versaform Canada. Versaform Canada has full corporate power and
authority and all licenses, Permits, and authorizations necessary to
carry on the Business in which it is engaged and to own and use the
properties owned and used by it. The copies of the articles of
incorporation and bylaws of Versaform Canada (as amended to date)
which have been (or will be) delivered to the Buyer are correct and
complete. The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board
of directors), the stock certificate books, and the stock record books
of Versaform Canada are correct and complete. Versaform Canada is not
in default under or in violation of any provision of its articles of
incorporation or bylaws.
SECTION 3.5. Capitalization.
(a) Versaform. The entire authorized capital stock of Versaform
consists of five hundred (500) shares of common stock, no par value,
of which four hundred and seventy-five (475) shares are issued and
outstanding and twenty-five (25) shares are unissued. All of the
issued and outstanding Shares of Versaform have been duly authorized,
are validly issued, fully paid, and nonassessable, and are held of
record by the Seller. Except as set forth on Schedule 3.5(a),there are
no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
Contracts or commitments that could require Versaform to issue, sell,
or otherwise cause to become outstanding any of the Shares of
Versaform. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to
the Shares of Versaform. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the Shares
of Versaform.
(b) 541775 B.C. The entire authorized capital stock of 541775
B.C. consists of (i) one million (1,000,000) shares of common stock,
no par value, of which one hundred (100) shares are issued and
outstanding and nine hundred ninety-nine thousand nine hundred
(999,900) shares are unissued, and (ii) one thousand two hundred
(1,200) preference shares, no par value, redeemable at One Hundred
Dollars ($100.00) per share, of which no shares are issued and
outstanding and one thousand two hundred (1,200) shares are held in
treasury. All of the issued and outstanding shares of 541775 B.C.
common stock and preferred stock have been duly authorized, are
validly issued, fully paid, and nonassessable, and all of such shares
of common stock are held of record by the Seller and all of such
shares of preferred stock are held of record by Versaform. Except as
set forth on Schedule 3.5(b), there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other Contracts or commitments that could
require 541775 B.C. to issue, sell, or otherwise cause to become
outstanding any of the shares of 541775 B.C. common stock or preferred
stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to
the shares of 541775 B.C. common stock or preferred stock. There are
no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the shares of 541775 B.C. common stock or
preferred stock.
(c) Versaform Canada. The entire authorized capital of Versaform
Canada consists of two thousand (2,000) Common Shares, no par value,
of which one hundred eight (108) shares are issued and outstanding and
one thousand eight hundred ninety-two (1,892) shares are unissued. All
of the issued and outstanding shares of Versaform Canada common stock
have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by Versaform. Except as set
forth on Schedule 3.5(c), there are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other Contracts or commitments that could
require Versaform Canada to issue, sell, or otherwise cause to become
outstanding any of the shares of Versaform Canada common stock. There
are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to the shares of
Versaform Canada common stock. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of the
shares of Versaform Canada common stock. Versaform holds of record and
beneficially owns all of the issued and outstanding shares of
Versaform Canada common stock free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and
state securities Laws), Taxes, Liens, options, warrants, purchase
rights, Contracts, commitments, equities, claims and demands.
Versaform is not a party to any option, warrant, purchase right or
other Contract or commitment that could require Versaform to sell,
transfer, or otherwise dispose of any shares of Versaform Canada
common stock. Except as set forth on Schedule 3.5(c), Versaform is not
a party to any voting trust, proxy or other agreement or understanding
with respect to any shares of Versaform Canada common stock.
(d) The assignments, endorsements, stock powers and other
instruments of transfer delivered by the Seller to the Buyer at the
Closing will be sufficient to transfer the Seller's entire interest,
legal and beneficial, in the Shares and, after such transfer, the
Buyer shall own all of the Shares. The Seller has full power and
authority (including full corporate power and authority) to convey
good and marketable title to all of the Shares, and upon transfer to
the Buyer of the certificates representing such Shares, the Buyer will
receive good and marketable title to such Shares, free and clear of
all Liens.
SECTION 3.6. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of this Transaction will (i) violate any
constitution, Law, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of the Acquired Companies is subject or any provision of the
articles of incorporation or bylaws of the Acquired Companies, or (ii) except as
set forth on Schedule 3.6, conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
Contract, lease, license, instrument, or other arrangement to which any of the
Acquired Companies is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Lien upon any of its
assets). None of the Acquired Companies needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the parties to consummate this Transaction.
SECTION 3.7. Title to Assets. Except as set forth on Schedule 3.7, the
Acquired Companies have good and marketable title to, or a valid leasehold
interest in, the properties and assets used by it, located on its premises, or
shown on the Latest Balance Sheet or acquired after the date thereof, free and
clear of all Liens, except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Latest Balance Sheet.
SECTION 3.8. Subsidiaries. None of the Acquired Companies has any
direct or indirect Subsidiaries, either wholly or partially owned, with the
exception of 541775 B.C. which owns all of the issued and outstanding shares of
Versaform Canada common stock, and none of the Acquired Companies has any direct
or indirect economic, voting or management interest in any Person or owns any
securities issued by any Person.
SECTION 3.9. Financial Statements. The Financial Statements of the
Acquired Companies are set forth on Schedule 3.9. The Financial Statements have
been and will be prepared in accordance with GAAP and present fairly the
financial position, assets and Liabilities of the Acquired Companies as of the
dates thereof and the revenues, expenses and results of operations of the
Acquired Companies for the periods covered thereby. The Financial Statements
were prepared from the books and records of the Acquired Companies and do not
reflect any transactions which are not bona fide transactions.
SECTION 3.10. Events Subsequent to Latest Balance Sheet. Since the
date of the Latest Balance Sheet, there has not been any change in the Business,
financial condition, operations, results of operations, or future prospects of
any of the Acquired Companies, or in any item set forth on any of the Schedules
attached hereto, which would have a Material Adverse Effect on any of the
Acquired Companies. Without limiting the generality of the foregoing, since that
date:
(a) none of the Acquired Companies has sold, leased, transferred,
or assigned any of its assets, tangible or intangible, other than for
a fair consideration in the Ordinary Course of Business;
(b) except as set forth on Schedule 3.10(b), none of the Acquired
Companies has entered into any Contract, lease, or license (or series
of related Contracts, leases, and licenses) involving more than One
Hundred Thousand Dollars ($100,000.00) or outside the Ordinary Course
of Business;
(c) except as set forth on Schedule 3.10(c), no party (including
any of the Acquired Companies) has accelerated, terminated, modified,
or canceled any agreement, Contract, lease or license (or series of
related Contracts, leases and licenses) to which any of the Acquired
Companies is a party or by which it is bound outside the Ordinary
Course of Business;
(d) none of the Acquired Companies has imposed any Lien upon any
of its assets, tangible or intangible;
(e) except as set forth on Schedule 3.10(e), none of the Acquired
Companies has made any capital expenditure (or series of related
capital expenditures) in an amount in excess of Twenty-Five Thousand
Dollars ($25,000.00) either individually or in the aggregate;
(f) none of the Acquired Companies has made any capital
investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments,
loans, and acquisitions);
(g) except as set forth on Schedule 3.10(g), none of the Acquired
Companies has issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation involving more than
Twenty-Five Thousand Dollars ($25,000.00) either individually or in
the aggregate;
(h) none of the Acquired Companies has delayed or postponed the
payment of accounts payable and other Liabilities outside the Ordinary
Course of Business;
(i) none of the Acquired Companies has cancelled, compromised,
waived, or released any right or claim (or series of related rights
and claims) either involving more than Twenty-Five Thousand Dollars
($25,000.00) or outside the Ordinary Course of Business;
(j) none of the Acquired Companies has granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
(k) there has been no change made or authorized in the articles
of incorporation or bylaws of any of the Acquired Companies;
(l) except as set forth on Schedule 3.10(l), none of the Acquired
Companies has issued, sold, or otherwise disposed any of its capital
stock, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(m) none of the Acquired Companies has declared, set aside, or
paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any capital stock;
(n) none of the Acquired Companies has experienced any damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(o) none of the Acquired Companies has made any loan to, or
entered into any other transaction with, any of its Directors,
officers, employees or Affiliates;
(p) none of the Acquired Companies has entered into any
employment Contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such Contract or
agreement;
(q) except for hourly employees and except as set forth on
Schedule 3.10(q), none of the Acquired Companies has granted any
increase in the base compensation of any of its Directors, officers,
and employees, or made any other change in employment terms for any of
its Directors, officers, and employees, in each case, with respect to
those Directors, officers and employees;
(r) except as set forth on Schedule 3.10 (r), none of the
Acquired Companies has adopted, amended, modified, or terminated any
bonus, profit sharing, incentive, severance, or other plan, Contract,
or commitment for the benefit of any of its Directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(s) none of the Acquired Companies has made or pledged to make
any charitable or other capital contribution outside the Ordinary
Course of Business;
(t) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business by any of the Acquired Companies; and
(u) none of the Acquired Companies has committed to any of the
foregoing.
SECTION 3.11. Undisclosed Liabilities. Except as set forth on Schedule
3.11, none of the Acquired Companies has any Liability (and to the Knowledge of
the Seller and the Directors and officers of the Acquired Companies, there is no
basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against it giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Latest
Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the date of the Latest Balance Sheet in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of Contract, breach of warranty, tort,
infringement, or violation of Law or arose out of any charge, complaint, action,
suit, claim, proceeding or demand).
SECTION 3.12. Legal Compliance. Except as set forth on Schedule 3.12,
the Acquired Companies and their respective Affiliates have complied with all
applicable Laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), including, but not
limited to, such Laws relating to wage, hour, employment and labor issues, and,
to the Knowledge of the Seller and the Directors and officers of the Acquired
Companies, no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
SECTION 3.13. Tax Matters.
(a) The Acquired Companies have duly and timely filed all Tax
Returns that each has been required to file for all periods through
and including the Closing Date. All such Tax Returns were correct and
complete in all respects. All Taxes owed by the Acquired Companies
(whether or not shown on any Tax Return) have been timely paid. None
of the Acquired Companies currently has requested or been granted any
extension of time within which to file any Tax Return. The Acquired
Companies have maintained adequate provision for all unpaid
Liabilities for Taxes, whether or not disputed, that have accrued with
respect to or are applicable to the period ended on and including the
Closing Date or to any years and periods prior thereto and for which
the Acquired Companies may be directly or contingently liable in its
own right or as a transferee of the assets of, or successor to, any
Person. None of the Acquired Companies has incurred any Tax
Liabilities other than in the Ordinary Course of Business for any
taxable year for which the applicable statute of limitations has not
expired. No claim has ever been made by an Authority in a jurisdiction
where any of the Acquired Companies does not pay Taxes or file Tax
Returns and is or may be subject to taxation by that jurisdiction.
There are no Liens on any of the assets of any of the Acquired
Companies that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) None of the Tax Returns that include the operations of any of
the Acquired Companies has ever been audited or investigated by any
taxing Authority, and no facts exist which would constitute grounds
for the assessment of any additional Taxes by any taxing Authority
with respect to the taxable years covered in such Tax Returns. No
issues have been raised in any examination by any taxing Authority
with respect to the businesses and operations of any of the Acquired
Companies which, by application of similar principals, reasonably
could be expected to result in a proposed adjustment to the Liability
for Taxes for any other period not so examined. Neither the Seller nor
the Directors and officers (and employees responsible for Tax matters)
of any of the Acquired Companies have received, or expect to receive,
from any taxing Authority any written notice of a proposed adjustment,
deficiency, underpayment of Taxes or any other such notice which has
not been satisfied by payment or been withdrawn, and no claims have
been asserted relating to such Taxes against any of the Acquired
Companies.
(c) Schedule 3.13 lists all federal, state, local, and foreign
income Tax Returns filed with respect to the Acquired Companies for
taxable periods for which the applicable statue of limitations has not
expired, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit.
The Seller has delivered to the Buyer correct and complete copies of
all federal, state, local and foreign income Tax Returns, examination
reports, and statements of deficiencies assessed against or agreed to
by any of the Acquired Companies for taxable periods for which the
applicable statute of limitations has not expired. None of the
Acquired Companies has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(d) The Acquired Companies have withheld and paid all Taxes
required to have been withheld and paid including, without limitation,
sales and use taxes, and all Taxes in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder,
or other third party.
(e) None of the Acquired Companies filed a consent to the
application of Section 341(f) of the Code.
(f) None of the Acquired Companies will be required, as a result
of (i) a change in accounting method for a Tax period beginning on or
before the Closing Date, to include any adjustment under Section
481(c) of the Code (or any corresponding provision of state, local or
foreign Tax Law) in taxable income for any Tax period beginning on or
after the Closing Date, or (ii) any "closing agreement," as described
in Section 7121 of the Code (or any corresponding provision of state,
local or foreign Tax Law), to include any item of income in, or
exclude any item of deduction from, any Tax period beginning on or
after the Closing Date.
(g) The Acquired Companies have disclosed on their respective
income Tax Returns all positions taken therein that could give rise to
an accuracy-related penalty under Section 6662 of the Code (or any
corresponding provision of Tax law).
(h) None of the Acquired Companies has made any payments, is
obligated to make any payments or is a party to any agreement that
under certain circumstances could obligate it to make any "excess
parachute payment" as defined in Section 280G of the Code or any
payments that will not be deductible under Section 162(m) of the Code.
(i) None of the Acquired Companies is a party to any Tax
allocation or sharing agreement. None of the Acquired Companies is
subject to any joint venture, partnership or other arrangement or
Contract which is treated as a partnership for federal income Tax
purposes.
(j) None of the assets of the Acquired Companies constitutes
tax-exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code, and none of the assets
reflected on the Financial Statements is subject to a lease, safe
harbor lease or other arrangement as a result of which the Acquired
Company holding legal title to the asset is not treated as the owner
for federal income Tax purposes.
(k) The basis of all depreciable or amortizable assets, and the
methods used in determining allowable depreciation or amortization
(including cost recovery) deductions of the Acquired Companies, are
correct and in compliance with the Code and the regulations thereunder
in all material respects.
(l) The Seller is not a "foreign person" as defined in Section
1445(f)(3) of the Code.
(m) None of the Acquired Companies (A) has been a member of an
Affiliated Group filing a consolidated federal income Tax Return or
(B) has any Liability for the Taxes of any Person (other than itself)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign Law), as a transferee or successor, by Contract, or
otherwise.
(n) None of the Acquired Companies is a party to or otherwise
subject to any arrangement having the effect of or giving rise to the
recognition of a deduction or loss in a taxable period ending on or
before the Closing Date and a corresponding recognition of taxable
income or gain in a taxable period ending after the Closing Date, or
any other arrangement that would have the effect of or give rise to
the recognition of taxable income or gain in a taxable period ending
after the Closing Date without the receipt of or entitlement to a
corresponding amount of cash.
SECTION 3.14. Real Property.
(a) Schedule 3.14(a) lists and describes briefly all real
property that the Acquired Companies own (the "Owned Property"). With
respect to each such parcel of Owned Property:
(i) except as set forth on Schedule 3.14(a), the identified
owner has good and marketable title to the parcel of Owned
Property, free and clear of all Liens, easements, covenants, or
other restrictions, except for installments of special
assessments of real estate Taxes not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair
the current use, occupancy, or value, or the marketability of
title, of the property subject thereto;
(ii) except as set forth on Schedule 3.14(a), there are no
pending or, to the Knowledge of the Seller and the Directors and
officers (and employees with responsibility for real estate
matters) of the Acquired Companies, threatened condemnation
proceedings, lawsuits, or administrative actions relating to the
property or other matters affecting adversely the current use,
occupancy, or value thereof;
(iii) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines
of the described parcels of land, are not in violation of
applicable setback requirements, zoning Laws, and ordinances (and
none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), and do not encroach
on any easement which may burden the land, and the land does not
serve any adjoining property for any purpose inconsistent with
the use of the land, and the property is not located within any
flood plain or subject to any similar type restriction for which
any permits or licenses necessary to the use thereof have not
been obtained;
(iv) all facilities have received all approvals of
governmental Authorities (including licenses and permits)
required in connection with the ownership or operation thereof
and have been operated and maintained in accordance with
applicable Laws, rules, and regulations;
(v) there are no leases, subleases, licenses, concessions,
or other Contracts, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the
parcel of Owned Property;
(vi) except as set forth on Schedule 3.14(a), there are no
outstanding options or rights of first refusal to purchase the
parcel of Owned Property, or any portion thereof or interest
therein;
(vii) there are no parties (other than the Acquired
Companies) in possession of the parcel of real property, other
than tenants under any leases disclosed in Schedule 3.14(a) who
are in possession of space to which they are entitled;
(viii) all facilities located on the parcel of real property
are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services
are adequate in accordance with all applicable Laws, ordinances,
rules, and regulations and are provided via public roads or via
permanent, irrevocable, appurtenant easements benefiting the
parcel of real property; and
(ix) except as set forth on Schedule 3.14(a), each parcel of
real property abuts on and has direct vehicular access to a
public road, or has access to a public road via a permanent,
irrevocable, appurtenant easement benefiting the parcel of real
property, and access to the property is provided by paved public
right-of-way with adequate curb cuts available.
(b) Schedule 3.14(b) lists and describes briefly all real
property leased or subleased to the Acquired Companies (the "Leased
Property"). Schedule 3.14(b) also identifies the leased or subleased
properties for which title insurance policies are to be procured. The
Seller has delivered to the Buyer correct and complete copies of the
leases and subleases and other agreements for occupancy, including all
amendments, extensions and other modifications thereto ("Leases") with
respect to each Leased Property, as listed in Schedule 3.14(b) (as
amended to date). With respect to each Lease listed in Schedule
3.14(b):
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms following the consummation of this Transaction;
(iii) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are
true and correct with respect to the underlying lease;
(vii) none of the Acquired Companies has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold;
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental Authorities (including
licenses and permits) required in connection with the operation
thereof and have been operated and maintained in accordance with
applicable Laws, rules, and regulations;
(ix) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities; and
(x) to the Knowledge of Seller, the owner of the facility
leased or subleased has good and marketable title to the parcel
of real property, free and clear of all Liens, easements,
covenants, or other restrictions, except for installments of
special assessments of real estate Taxes not yet delinquent and
recorded easements, covenants, and other restrictions which do
not impair the current use, occupancy, or value, or the
marketability of title, of the property subject thereto.
SECTION 3.15. Intellectual Property.
(a) Except as set forth on Schedule 3.15(a), the Acquired
Companies own or have the right to use pursuant to license,
sublicense, Contract, or permission all Intellectual Property
necessary for the operation of their respective Businesses as
presently conducted. Each item of Intellectual Property owned or used
by the Acquired Companies immediately prior to the Closing hereunder
will be owned or available for use by the Acquired Companies on
identical terms and conditions immediately subsequent to the Closing
hereunder. The Acquired Companies have taken all necessary action to
maintain and protect each item of Intellectual Property that it owns
or uses.
(b) Except as set forth on Schedule 3.15(b), none of the Acquired
Companies has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties, and neither the Seller nor the Directors and officers
(and employees with responsibility for Intellectual Property matters)
of the Acquired Companies have ever received any charge, complaint,
claim, demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of the
Acquired Companies must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of the Seller
and the Directors and officers (and employees with responsibility for
Intellectual Property matters) of the Acquired Companies, no third
party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
the Acquired Companies.
(c) Schedule 3.15(c) identifies each patent or registration which
has been issued to the Acquired Companies with respect to any of their
Intellectual Property, identifies each pending patent application or
application for registration which any of the Acquired Companies has
made with respect to any of its Intellectual Property, and identifies
each license, Contract or other permission which any of the Acquired
Companies has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions). The Seller has
delivered to the Buyer correct and complete copies of all such
patents, registrations, applications, licenses, Contracts and
permissions (as amended to date) and has made available to the Buyer
correct and complete copies of all other written documentation
evidencing ownership and prosecution (if applicable) of each such
item. Schedule 3.15(c) also identifies each trade name or unregistered
trademark used by any of the Acquired Companies in connection with its
Business. With respect to each item of Intellectual Property required
to be identified in Schedule 3.15(c):
(i) the Acquired Companies possess all right, title, and
interest in and to the item, free and clear of any Lien, license,
or other restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of the Seller and the Directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Acquired Companies, is threatened which challenges the
legality, validity, enforceability, use, or ownership of the
item; and
(iv) none of the Acquired Companies has ever agreed to
indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to
the item.
(d) Schedule 3.15(d) identifies each item of Intellectual
Property that any third party owns and that any of the Acquired
Companies uses pursuant to license, sublicense, Contract or
permission. The Seller has delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, Contracts and permissions
(as amended to date). With respect to each item of Intellectual
Property required to be identified in Schedule 3.15(d):
(i) the license, sublicense, Contract or permission covering
the item is legal, valid, binding, enforceable, and in full force
and effect;
(ii) the license, sublicense, Contract or permission will
continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of
this Transaction;
(iii) no party to the license, sublicense, Contract or
permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or
default or permit termination, modification, or acceleration
thereunder;
(iv) no party to the license, sublicense, Contract or
permission has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in subsections (i) through (iv) above are
true and correct with respect to the underlying license;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(vii) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of the Seller and the Directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Acquired Companies, is threatened which challenges the
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(viii) none of the Acquired Companies has granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(e) To the Knowledge of the Seller and the Directors and officers
(and employees with responsibility for Intellectual Property matters)
of the Acquired Companies, the Acquired Companies will not interfere
with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result of
the continued operation of their Businesses as presently conducted and
as presently proposed to be conducted.
(f) Neither the Seller nor the Directors and officers (and
employees with responsibility for Intellectual Property matters) of
the Acquired Companies have any Knowledge of any new products,
inventions, procedures, or methods of manufacturing or processing that
any competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or process
of the Acquired Companies.
SECTION 3.16. Tangible Assets. The Acquired Companies own or lease all
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of their Businesses as presently conducted and as presently proposed to
be conducted. Each such tangible asset has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), is suitable for the purposes for which it presently is
used and, to the Knowledge of the Seller and the Directors and officers of the
Acquired Companies, free from defects (patent and latent). The assets of the
Acquired Companies at the Closing will be sufficient to permit the Buyer to
operate the Business as currently conducted.
SECTION 3.17. Inventory. The inventories of the Acquired Companies
consist of raw materials, supplies, manufactured and purchased parts, goods in
process and finished goods, all of which is merchantable and fit for the purpose
for which it was procured or manufactured, and, except as set forth on Schedule
3.17, none of which is obsolete, damaged, or defective, subject only to the
reserve for inventory writedown set forth on the face of the Latest Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Acquired Companies.
SECTION 3.18. Contracts. Schedule 3.18 lists the following Contracts
and other agreements to which the Acquired Companies are parties:
(a) any Contract (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease payments
in excess of Twenty-Five Thousand Dollars ($25,000.00) per annum;
(b) any Contract (or group of related Contracts) with any Major
Customer or Major Supplier;
(c) any lease, pledge, conditional sale or title retention
agreement involving the payment of more than Twenty-Five Thousand
Dollars ($25,000.00) in the aggregate;
(d) any Contract concerning a partnership or joint venture;
(e) any Contract with a sales representative, manufacturer's
representative, distributor, dealer, broker, sales agency, advertising
agency or other Person engaged in sales, distributing or promotional
activities, or any agreement to act as one of the foregoing on behalf
of any Person;
(f) any Contract (or group of related Contracts) under which it
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, or under which it
has imposed a Lien on any of its assets, tangible or intangible;
(g) any Contract pursuant to which any of the Acquired Companies
has made or will make loans or advances, or has or will have incurred
debts or become a guarantor or surety or pledged its credit on or
otherwise become responsible with respect to any undertaking of
another Person (except for the negotiation or collection of negotiable
instruments in transactions in the Ordinary Course of Business);
(h) any mortgage, indenture, note, bond or other agreement
relating to indebtedness incurred or provided by any of the Acquired
Companies;
(i) any form of Contract concerning confidentiality or
noncompetition or otherwise prohibiting any of the Acquired Companies
from freely engaging in any business;
(j) any Contract with the Seller or any Affiliate thereof;
(k) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors,
officers, and employees;
(l) any license, royalty or other Contract relating to
Intellectual Property;
(m) any Contract involving a governmental body;
(n) any collective bargaining agreement;
(o) any Contract for the employment of any individual on a
full-tune, part-time, consulting, or other basis providing annual
compensation in excess of Fifty Thousand Dollars ($50,000.00) or
providing severance benefits;
(p) any Contract, whether or not fully performed, relating to any
acquisition or disposition of any of the Acquired Companies or any
predecessor in interest or any acquisition or disposition of any
subsidiary, division, line of business, or real property;
(q) any Contract under which any of the Acquired Companies has
advanced or loaned any amount to any of its Directors, officers, and
employees;
(r) any Contract under which the consequences of a default or
termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of
any of the Acquired Companies;
(s) any other Contract (or group of related Contracts) the
performance of which involves consideration in excess of Twenty-Five
Thousand Dollars ($25,000.00);
(t) any commitment to do any of the foregoing described in
clauses (a) through (s).
The Seller has delivered to the Buyer a correct and complete copy (or form of
Contract for certain Contracts so identified on Schedule 3.18) of each written
Contract listed in Schedule 3.18 (as amended to date) and a written summary
setting forth the terms and conditions of each oral Contract referred to in
Schedule 3.18. With respect to each such Contract: (A) the Contract is legal,
valid, binding, enforceable, and in full force and effect; (B) the Contract will
continue to be legal; valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of this Transaction; (C) no party
is in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the Contract; and (D) no party has repudiated any
provision of the Contract.
SECTION 3.19. Notes and Accounts Receivable. All notes and accounts
receivable of the Acquired Companies are reflected properly on their respective
books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserve for bad debts set
forth on the face of the Latest Balance Sheet (rather than in any notes thereto)
as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practices of the Acquired Companies.
SECTION 3.20. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the Acquired Companies.
SECTION 3.21. Insurance. Schedule 3.21 sets forth the following
information with respect to each insurance policy (including policies providing
property, casualty, Liability, and workers' compensation coverage and bond and
surety arrangements) to which any Acquired Companies has been a party, a named
insured, or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of this Transaction; (C) none of the
Acquired Companies nor any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. The Acquired Companies have been covered by insurance in
scope and amount customary and reasonable for their respective Businesses.
Schedule 3.21 describes any self-insurance arrangements affecting the Acquired
Companies. Schedule 3.21 sets forth known claims, if any, made against the
Acquired Companies that are covered by insurance. Such claims have been
disclosed to and accepted by the appropriate insurance companies and are being
defended by such appropriate insurance companies. Except as set forth on
Schedule 3.21, no claims have been denied coverage during the last five (5)
years.
SECTION 3.22. Litigation. Schedule 3.22 sets forth each instance in
which any of the Acquired Companies (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, or charge or (ii) is a party or to
the Knowledge of the Seller and the Directors and officers (and employees with
responsibility for litigation matters) of the Acquired Company is threatened to
be made a party to any action, suit, proceeding, baring, or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Schedule 3.22 would reasonably be expected to result in any adverse change in
the business, financial condition, operations, results of operations, or future
prospects of any of the Acquired Companies. Neither the Seller nor the Directors
and officers (and employees with responsibility for litigation matters) of the
Acquired Companies have any reason to believe that any such action, suit,
proceeding, hearing, or investigation may be brought or threatened against any
of the Acquired Companies. Neither the Seller nor any of the Acquired Companies
has any Liability with respect to any claims or threatened claims by third
parties relating to any sale or proposed sale of any of the Acquired Companies
(whether structured as a sale of stock, a sale of assets, a merger or otherwise)
or any division of any of the Acquired Companies. Neither the Seller, nor any of
the Acquired Companies is a party to any litigation relating to such claims and,
to the Knowledge of the Seller and the Directors and officers (and employees
with responsibility for litigation matters) of the Acquired Companies, no such
litigation is threatened. Notwithstanding anything herein to the contrary and
regardless of Schedule 3.22, no Acquired Company has any liability with respect
to Case No. 653229 filed by plaintiff Joseph F. Kennedy in San Diego, California
on June 19, 1992.
SECTION 3.23. Product Warranty. To the Knowledge of the Seller, each
product manufactured, sold, leased, or delivered by the Acquired Companies has
been in conformity with all applicable contractual commitments and all express
and implied warranties, and the Acquired Companies have no Liability and no
specific or tangible information on which to believe there is any Liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated, or unliquidated,
and whether due or to become due) for replacement or repair thereof or other
damages in connection therewith. To the Knowledge of the Seller, no product
manufactured, sold, leased, or delivered by any of the Acquired Companies is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale or lease. Schedule 3.23 includes copies of
the standard terms and conditions of sale or lease for the Acquired Companies
(containing applicable guaranty, warranty, and indemnity provisions).
SECTION 3.24. Product Liability. None of the Acquired Companies has
Liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased or delivered by any of the Acquired
Companies.
SECTION 3.25. Employees. Schedule 3.25(i) contains a true, complete
and accurate list of the names, titles, annual compensation and all bonuses and
similar payments made for the current and preceding fiscal years for all
Directors, officers and employees of the Acquired Companies whose annual
compensation, including any bonuses, equals or exceeds Seventy Thousand Dollars
($70,000.00). To the Knowledge of the Seller, none of the employees listed on
Schedule 3.25(ii) has any plans to terminate employment with any of the Acquired
Companies. None of the Acquired Companies is a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. To
the Knowledge of the Seller, none of the Acquired Companies has committed any
unfair labor practice. Neither the Seller nor the Directors and officers (and
employees with responsibility for employment matters) of the Acquired Companies
have any Knowledge of any organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Acquired Companies. To the Knowledge of the Seller, none of the Acquired
Companies has engaged in any plant closing or employee layoff activities that
would violate or require notification pursuant to, the Worker Adjustment
Retraining and Notification Act of 1988, as amended, or any similar state, local
or foreign plant closing or mass layoff statute, rule or regulation.
SECTION 3.26. Employee Benefits.
(a) General. Except as set forth on Schedule 3.26, none of the
Acquired Companies nor any ERISA Affiliate is a plan sponsor of,
maintains, contributes to, has contributed to, participates in or has
participated in, or has any Liability or contingent Liability with
respect to:
(i) any Employee Welfare Benefit Plan or Employee Pension
Benefit Plan;
(ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement,
insurance or hospitalization program or any other fringe benefit
arrangements for any current or former employee, director,
consultant or agent, whether pursuant to Contract, arrangement,
custom or informal understanding, which does not constitute an
Employee Welfare Benefit Plan or Employee Pension Benefit Plan;
or
(iii) any employment agreement.
(b) Plan Documents and Reports. A true and correct copy of each
of the plans, arrangements, and agreements listed on Schedule 3.26
(referred to hereinafter as "Employee Benefit Plans"), and all
Contracts relating thereto, or to the funding thereof, including,
without limitation, all trust agreements, insurance Contracts,
administration Contracts, investment management agreements,
subscription and participation agreements, and recordkeeping
agreements, each as in effect on the date hereof, has been supplied to
the Buyer. In the case of any Employee Benefit Plan which is not in
written form, the Buyer has been supplied with an accurate description
of such Employee Benefit Plan as in effect on the date hereof. A true
and correct copy of the most recent annual report, actuarial report,
accountant's opinion of the plan's financial statements, summary plan
description and Internal Revenue Service determination letter with
respect to each Employee Benefit Plan, to the extent applicable, and a
current schedule of assets (and the fair market value thereof assuming
liquidation of any asset which is not readily tradable) held with
respect to any funded Employee Benefit Plan has been supplied to the
Buyer, and there have been no material changes in the financial
condition in the respective plans other than market gains or losses to
date from that stated in the annual reports and actuarial reports
supplied.
(c) Compliance with Employee Benefit Laws; Liabilities. As to all
Employee Benefit Plans:
(i) all Employee Benefit Plans comply and have been
administered in form and in operation in all material respects
with all applicable requirements of Law, and no event has
occurred which will or could cause any such Employee Benefit Plan
to fail to comply with such requirements and no notice has been
issued by any governmental Authority questioning or challenging
such compliance. Each of the Acquired Companies has performed all
of its obligations under each Employee Benefit Plan.
(ii) all Employee Benefit Plans which are Employee Pension
Benefit Plans comply in form and in operation with all applicable
requirements of sections 401(a) and 501(a) of the Code; there
have been no amendments to such plans which are not the subject
of a favorable determination letter issued with respect thereto
by the Internal Revenue Service; and no event has occurred which
will or could give rise to disqualification of any such plan
under such sections or to a tax under section 511 of the Code.
(iii) none of the assets of any Employee Benefit Plan is
invested in employer securities or employer real property.
(iv) there have been no "prohibited transactions" (as
described in section 406 of ERISA or section 4975 of the Code)
with respect to any Employee Benefit Plan and none of the
Acquired Companies has engaged in any prohibited transaction.
(v) there have been no acts or omissions which have given
rise to or may give rise to fines, penalties, taxes or related
charges under section 502 of ERISA or Chapters 43, 47, 68 or 100
of the Code for which any of the Acquired Companies may be
liable.
(vi) none of the payments contemplated by the Employee
Benefit Plans would, in the aggregate, constitute excess
parachute payments (as defined in section 280G of the Code
(without regard to subsection (b)(4) thereof)).
(vii) there are no actions, suits or claims (other than
routine claims for benefits) pending or, to the Knowledge of the
Seller and the Directors and officers (and employees with
responsibility for employee benefit matters) of the Acquired
Companies, threatened involving any Employee Benefit Plan or the
assets thereof and, to the Knowledge of the Seller and the
Directors and officers (and employees with responsibility for
employee benefit matters) of the Acquired Companies, no facts
exist which could give rise to any such actions, suits or claims
(other than routine claims for benefits).
(viii) with respect to each Employee Benefit Plan that is
subject to Title IV of ERISA:
(A) there has been no reportable event (as described in
section 4043 of ERISA) which has not been reported and for
which notice is not waived under applicable regulations; .
(B) no steps have been taken to terminate any such
plan;
(C) there has been no withdrawal (within the meaning of
section 4063 of ERISA) of a "substantial employer" (as
defined in section 4001(a)(2) of ERISA);
(D) no event or condition has occurred which would
constitute grounds under section 4042 of ERISA for the
termination of or the appointment of a trustee to administer
any such plan;
(E) there is no Liability to the PBGC;
(F) all filings required by ERISA and the Code as to
each Employee Benefit Plan have been timely filed and all
notices and disclosures to participants required by either
ERISA or the Code have been timely provided;
(G) all contributions and payments made or accrued with
respect to all Employee Benefit Plans are deductible under
Section 162 of the Code or under Section 404 of the Code;
and
(H) except as disclosed on actuarial reports supplied
to the Buyer, if each such plan were terminated immediately
after the Closing, there would be no unfunded Liabilities
with respect to any such plan, its participants or
beneficiaries or the PBGC.
(ix) Each Employee Benefit Plan which constitutes a "group
health plan" (as defined in section 607(1) of ERISA or section
4980B(g)(2) of the Code), including any plans of current and
former affiliates which must be taken into account under sections
4980B and 414(t) of the Code or section 601 of ERISA, has been
operated in compliance in all material respects with applicable
Law, including coverage requirements of section 4980B of the Code
and section 601 of ERISA to the extent such requirements are
applicable.
(x) None of the Acquired Companies has any Liability or
contingent Liability for providing, under any Employee Benefit
Plan or otherwise, any post-retirement medical or life insurance
benefits, other than statutory Liability for providing group
health plan continuation coverage under Part 6 of Title I of
ERISA and section 4980B of the Code.
(xi) Each Employee Benefit Plan can be terminated within
thirty (30) days, without payment of any additional contribution
or amount and without the vesting or acceleration of any benefits
promised by such Employee Benefit Plan. Each of the Acquired
Companies has the right to modify and terminate benefits to
retirees (other than under any Employee Benefit Pension Plan)
with respect to both retires and active employees.
(xii) No event has occurred or circumstance exists that
could result in a material increase in premium costs of any
Employee Benefit Plan that is insured, or a material increase in
benefit costs of such Employee Benefit Plan that is self-insured.
(xiii) Actuarially adequate accruals for all obligations
under the Employee Benefit Plans are reflected in the financial
statements of the Acquired Companies and such obligations include
a pro rata amount of the contributions and PBGC premiums which
would otherwise have been made in accordance with past practices
and applicable Law for the plan years which include the Closing
Date.
(xiv) There has been no act or omission by the Acquired
Companies that would impair the ability of the Acquired Companies
(or any successor thereto) to unilaterally amend or terminate (in
compliance with and subject to applicable Laws) any Employee
Benefit Plan.
(xv) Each Acquired Company and each ERISA Affiliate of an
Acquired Company has met the minimum funding standard, has made
all contributions required under ERISA Section 302 and Section
402 of the Code, has made all contributions required under the
terms of any Employee Benefit Pension Plan, and has made all
contributions which it has accrued on its books.
(d) Multiemployer Plans. None of the Acquired Companies
contributes to, has contributed to, participates in, or has
participated in, or has any Liability or contingent Liability with
respect to any Multiemployer Plan.
SECTION 3.27. Environmental Matters.
(a) Each of the Acquired Companies and their Affiliates:
(i) has complied and is in compliance with all Environmental
Laws and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand or notice has been filed or, to
the Knowledge of the Seller and the Directors and officers (and
employees with responsibility for environmental matters),
commenced against any of them alleging any such failure to
comply);
(ii) has obtained and complied with, and is in compliance
with, all Permits, licenses and other authorizations that are
required pursuant to Environmental Laws; and
(iii) has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables which are
contained in the Environmental Laws.
(b) None of the Acquired Companies or their Affiliates has
received any written or oral notice, report or other information
regarding any actual or alleged violation of Environmental Laws, or
any Liabilities or potential Liabilities (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including any investigatory, remedial
or corrective obligations, relating to any of them or its facilities
arising under Environmental Laws.
(c) Except as set forth on Schedule 3.27(c), none of the Acquired
Companies has any Liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), and the Acquired Companies and their Affiliates
have not handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other individual to
any substance or condition, or owned or operated any property or
facility in any manner that could give rise to any Liability, for
damage to any site, location or body of water (surface or subsurface),
for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental Law.
(d) Schedule 3.27(d) sets forth all properties and equipment used
in the business of the Acquired Companies and their Affiliates that
contain, or have contained, asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans
and other Hazardous Substances.
(e) None of the following exists at any property or facility
owned or operated by the Acquired Companies: (1) underground storage
tanks, (2) asbestos-containing material in any form or condition, (3)
materials or equipment containing polychlorinated biphenyls, or (4)
landfills, surface impoundments, or disposal areas.
(f) None of the Acquired Companies or their Affiliates has
treated, stored, disposed of, arranged for or permitted the disposal
of, transported, handled, or released any substance, including without
limitation any Hazardous Substance, or owned or operated any property
or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to
Liabilities, including any Liability for response costs, corrective
action costs, personal injury, property damage, natural resources
damages or attorney fees, or any investigative, corrective or remedial
obligations, pursuant to Environmental Laws.
(g) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or
consent of government agencies or third parties, pursuant to any of
the so-called "transaction-triggered" or "responsible property
transfer" Environmental Laws.
(h) None of the Acquired Companies or any of their Affiliates
has, either expressly or by operation of Law, assumed or undertaken
any Liability including, without limitation, any obligation for
corrective or remedial action, of any other Person relating to
Environmental Laws.
(i) No facts, events or conditions relating to the past or
present facilities, properties or operations of the Acquired
Companies or any of their Affiliates will prevent, hinder or
limit continued compliance with Environmental Laws, give rise to
any investigatory, remedial or corrective obligations pursuant to
Environmental Laws, or give rise to any other Liabilities
(whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental Laws including, without
limitation, any Liabilities relating to onsite or offsite
releases or threatened releases of Hazardous Substances or
wastes, personal injury, property damage or natural resources
damage.
SECTION 3.28. Permits. Schedule 3.28 is a true and accurate list of
all licenses, certificates, permits, franchises and rights (collectively,
"Permits") held by the Acquired Companies. Except for the Permits listed on
Schedule 3.28, there are no Permits or code approvals, whether private, federal,
state, local or foreign, which are necessary for the lawful operation of the
Businesses of the Acquired Companies as presently conducted.
SECTION 3.29. Backlog. Schedule 3.29 sets forth a true, complete and
correct list of all customer orders of the Acquired Companies which constitute
backlog ("Backlog") and the dollar amount represented by each such order as of
April 30, 2002. Except as set forth on Schedule 3.29, none of the Backlog orders
have been canceled and, to the Knowledge of the Seller, there are no threats of
cancellation with respect to the Backlog orders.
SECTION 3.30. No Conflict of Interest. Neither the Seller nor any
Affiliate thereof has or claims to have any direct or indirect interest in any
tangible or intangible property used in the Businesses of the Acquired Companies
except as a holder of Shares. Except as set forth on Schedule 3.30, neither the
Seller nor any Affiliate thereof has any direct or indirect interest in any
other Person which conducts a business similar to, has any Contract or
arrangement with, or does business or is involved in any way with, any of the
Acquired Companies, except for the ownership of less than one percent (1%) of
the outstanding stock of any publicly held corporation.
SECTION 3.31. Bank Accounts. Schedule 3.31 sets forth the names and
locations of each bank or other financial institution at which the Acquired
Companies have accounts (giving the account numbers) or safe deposit box and the
names of all Persons authorized to draw thereon or have access thereto, and the
names of all Persons, if any, now holding powers of attorney or comparable
delegation of authority from the Acquired Companies and a summary statement
thereof.
SECTION 3.32. Customers and Suppliers.
(a) Schedule 3.32(a) sets forth for each of the Acquired
Companies:
(i) a list of customers of each Acquired Company in terms of
revenue during each of the fiscal years ending in 1999, 2000 and
2001 and the period commencing on July 1, 2001 and ending on
March 31, 2002 (collectively, the "Major Customers"), showing
total revenue received in each such period from each such
customer;
(ii) a list of the twenty (20) largest suppliers of each
Acquired Company in terms of purchases during the fiscal year
ending in 2001 and during the period commencing on the first day
of the fiscal year commencing in 2001 and ending on March 31,
2002 (collectively, the "Major Suppliers"), and showing the
approximate total purchases in each such period from each such
supplier; and
(iii) for each Acquired Company, sales forecasts by customer
for the calendar year 2002.
(b) Since the date of the Latest Balance Sheet, there has not
been any adverse change in the business relationship, and there has
been no dispute between either the Acquired Companies and any Major
Customer or Major Supplier, and, to the Knowledge of the Seller and
the Directors and officers of the Acquired Companies, there are no
indications that any Major Customer or Major Supplier intends to
reduce its purchases from, or sales to, any of the Acquired Companies.
(c) Except as set forth on Schedule 3.32(c), there has been no
price reduction by model, customer or business segment that is to
become effective after the Closing.
SECTION 3.33. Claims Against Officers and Directors. Schedule 3.33
sets forth each pending or, to the Knowledge of the Seller and the Directors and
officers (and employees with responsibility for insurance matters) of the
Acquired Companies, threatened claim against any Director, officer, employee or
agent of the Acquired Companies or any other Person which could give rise to any
claim for indemnification against the Acquired Companies.
SECTION 3.34. Improper and Other Payments.
(a) None of the Acquired Companies, or any Director, officer,
employee, agent or representative thereof, the Seller, his respective
Affiliates nor any Person acting on behalf of any of them, has made,
paid or received any bribes, kickbacks or other similar payments to or
from any Person, whether lawful or unlawful;
(b) No contributions have been made, directly or indirectly, to a
domestic or foreign political party or candidate;
(c) No improper foreign payment (as defined in the Foreign
Corrupt Practices Act) has been made; and
(d) The internal accounting controls of the Acquired Companies
are adequate to detect any of the foregoing.
SECTION 3.35. Investments/Loans; Affiliates. On the Closing Date the
Acquired Companies shall have no equity interests in, or loans or other advances
to or from, the Seller, Southern Stretch Form Corporation or Standard Bent
Metal, Inc. or any other Affiliate which in the aggregate exceed One Thousand
Dollars ($1,000.00), and the Acquired Companies shall have no obligations,
regardless of amount, with respect to loans or advances by E. Dennis Geary to
any Acquired Company. Seller agrees to indemnify Buyer from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting from
Seller's breach of this covenant relative to the obligations of any Acquired
Company to E. Dennis Geary, without regard to the Threshold Amount and the
aggregate ceiling contained in Section 8.2(a) of this Agreement.
SECTION 3.36. Taxes. On the Closing Date the Acquired Companies shall
have no Liability for any Taxes with respect to any periods ending on or before
March 31, 2002.
SECTION 3.37. Pension. On the Closing Date, each of the Acquired
Companies shall have made all contributions required under the terms of all
Employee Benefit Pension Plans and shall have made all contributions which have
accrued on its books as of the Closing Date.
SECTION 3.38. Debt. On the Closing Date, none of the Acquired
Companies shall have any Liabilities other than Permitted Liabilities unless the
Buyer's written consent thereto shall have been delivered by the Buyer to the
Seller at least ten (10) days prior to the Closing Date.
SECTION 3.39. Accuracy of Statements. Neither this Agreement nor any
Schedule, exhibit, statement, list, document, certificate or other information
furnished or to be furnished by the Seller to the Buyer or any of the Buyer's
Representatives or any Affiliate of the Buyer in connection with this Agreement
or this Transaction contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
SECTION 3.40. Product Approvals. To the Knowledge of the Seller, the
Acquired Companies possess all the product approvals necessary for the lawful
operation of the Businesses of the Acquired Companies as presently conducted.
SECTION 3.41. Southern Stretch Form Corporation and Standard Bent
Metal, Inc. The Seller owns fifty percent (50%) of each class of outstanding
stock of Southern Stretch Form Corporation and, other than in his capacity as a
member of the Board of Directors of Southern Stretch Form Corporation, the
Seller does not actively participate in the day-to-day conduct of Southern
Stretch Form Corporation's business. The Seller owns fifty percent (50%) of each
class of outstanding stock of Standard Bent Metal, Inc., and the Seller does not
actively participate in the conduct of Standard Bent Metal, Inc.'s business.
There are outstanding purchase rights, exchange rights or other Contracts or
commitments that could prevent Versaform from transferring the shares of
Standard Bent Metal, Inc. stock owned by it to the Seller as contemplated by
Section 6.17 and the consent of no other person or entity is required to effect
such transfer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Article IV).
SECTION 4.1. Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Missouri and legally authorized to do business in the states in which
it conducts business. The Buyer is not in default under or in violation of any
provision of its articles of incorporation or bylaws.
SECTION 4.2. Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The Buyer need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate this Transaction.
SECTION 4.3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of this Transaction, will (i) violate
any constitution, Law, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Buyer is subject or any provision of its charter or bylaws or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice or consent under any agreement,
Contract, lease, license, instrument, or other arrangement to which the Buyer is
a party or by which it is bound or to which any of its assets is subject.
SECTION 4.4. Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
this Transaction for which the Seller could become liable or obligated.
SECTION 4.5. Legal Compliance. The Buyer and its Affiliates have
complied with all applicable Laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or to the Knowledge of the directors and
officers of the Buyer commenced against any of them alleging any failure so to
comply with respect to this Transaction.
SECTION 4.6. Litigation. Schedule 4.6 sets forth each instance in
which the Buyer (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or to the Knowledge of the
directors and officers (and employees with responsibility for litigation
matters) of the Buyer, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator, as a result of this Transaction. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Schedule 4.6 would reasonably be expected to result in any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Buyer. The directors and officers (and employees with
responsibility for litigation matters) of the Buyer have no reason to believe
that any such action, suit, proceeding, hearing, or investigation may be brought
or to the Knowledge of the directors and officers (and employees with
responsibility for litigation matters) of the Buyer is threatened against the
Buyer.
SECTION 4.7. Accuracy of Statements. Neither this Agreement nor any
Schedule, exhibit, statement, list, document, certificate or other information
furnished or to be furnished by or on behalf of the Buyer to the Seller or any
representative or Affiliate of the Seller in connection with this Agreement or
this Transaction contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
they are made, not misleading.
SECTION 4.8. Securities Laws. All of the Shares acquired by the Buyer
pursuant to this Agreement are being acquired by the Buyer for investment
purposes only and each certificate representing the Shares shall bear a
restricted securities legend consistent with the requirements of Section 4(2) of
the Securities Act of 1933.
ARTICLE V
COVENANTS
SECTION 5.1. General. Each of the parties will use his or its best
efforts to take all action and to do all things necessary in order to consummate
and make effective this Transaction (including satisfaction, but not waiver, of
the closing conditions set forth in Articles VI and VII below).
SECTION 5.2. Notices and Consents. The Seller will cause the Acquired
Companies to give any notices to third parties, and will cause the Acquired
Companies to obtain any third party consents, that the Buyer may reasonably
request. The Seller will cause the Acquired Companies to give any notices to,
make any filings with, and use its best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Sections 3.6 and 4.3 above.
SECTION 5.3. Operation of Business. From the date of this Agreement
until the Closing Date, the Seller shall cause the Acquired Companies to be
operated in the Ordinary Course of Business and to use commercially reasonable
efforts to preserve intact the present business organization and personnel of
the Acquired Companies, preserve the business relationships of the Acquired
Companies with other Persons material to the operation of the Acquired
Companies, and not permit any action or omission which would cause any of the
representations or warranties of the Acquired Companies contained herein to
become inaccurate or any of the covenants of the Acquired Companies to be
breached. Without limiting the generality of the foregoing, except as set forth
in Schedule 5.3, prior to the Closing and without the prior written consent of
the Buyer, the Seller shall cause each of the Acquired Companies to:
(a) not incur any obligation or enter into any Contract outside
the Ordinary Course of Business or which (i) requires a payment by any
party in excess of, or a series of payments which in the aggregate
exceed, One Hundred Thousand Dollars ($100,000.00) and (ii) has a term
of, or requires the performance of any obligations by any of the
Acquired Companies over a period in excess of six (6) months;
(b) not take any action, or enter into or authorize any Contract
or transaction involving more than One Hundred Thousand Dollars
($100,000.00) or outside the Ordinary Course of Business, other than
this Transaction;
(c) not sell, transfer, convey, assign or otherwise dispose of
any of its assets or properties other than in the Ordinary Course of
Business;
(d) not waive, release or cancel any claims against third parties
or debts owing to it, or any other rights;
(e) not make any changes in its accounting systems, policies,
principles or practices;
(f) not enter into, authorize, or permit any transaction with the
Seller or any Affiliate thereof, or enter into any Contract relating
to compensation or benefits with any Person, or, other than in the
Ordinary Course of Business, modify any compensation amounts or levels
of any officer or employee;
(g) except as required for this Transaction, not change or amend
its articles of incorporation or bylaws;
(h) not authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any
shares of capital stock or any other securities of any of the Acquired
Companies, or amend any of the terms of any such capital stock or
other securities, except as required for this Transaction;
(i) except as required for this Transaction, not split, combine,
or reclassify any shares of its capital stock, declare, set aside or
pay any dividend or other distribution in property other than cash in
respect of its capital stock, or redeem or otherwise acquire any
capital stock or other securities of any of the Acquired Companies;
(j) not make any borrowings, incur any debt, or assume,
guarantee, endorse (except for the negotiation or collection of
negotiable instruments in the Ordinary Course of Business and
consistent with past practice) or otherwise become liable (whether
directly, contingently or otherwise) for the obligations of any other
Person, or make any payment or repayment in respect of any
indebtedness in excess of Twenty-Five Thousand Dollars ($25,000.00)
(other than trade payables and accrued expenses in the Ordinary Course
of Business and consistent with past practice);
(k) not make any loans, advances or capital contributions to, or
investments in, any other Person or the operating assets of any Person
including, but not limited to Stretch Forming, Inc.;
(l) not enter into, adopt, amend or terminate any bonus, profit
sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit
or welfare of any Director, manager, officer or employee, or increase
in any manner the compensation or fringe benefits of any Director,
manager, officer or employee or pay any benefit not required by any
existing plan or arrangement or enter into any Contract, agreement,
commitment or arrangement to do any of the foregoing;
(m) not acquire, lease, encumber or otherwise impose a Lien on
any assets, whether tangible or intangible;
(n) not authorize or make any capital expenditures which
individually or in the aggregate are in excess of Twenty-Five Thousand
Dollars ($25,000.00);
(o) not make any Tax election or settle or compromise any
federal, state, local or foreign income Tax Liability, or waive or
extend the statute of limitations in respect of any such Taxes;
(p) not pay any amount, perform any obligation or agree to pay
any amount or perform any obligation, in settlement or compromise of
any suits or claims of Liability against any of the Acquired Companies
or any of their Directors, managers, officers, employees or agents;
(q) not terminate, modify, amend or otherwise alter or change any
of the terms or provisions of any agreement, or pay any amount not
required by Law or by any Contract;
(r) other than overnight deposits or money market instruments and
investments existing on the date hereof, not make any investments with
cash or the proceeds of existing investments;
(s) not declare set aside or pay any dividend or make any
distribution with respect to the Shares;
(t) not grant, award or pay any bonuses to any employees,
independent contractors or other representatives in excess of Fifty
Thousand Dollars ($50,000.00) in the aggregate; and
(u) make all contributions required under the terms of any
employee benefit Pension Plan and make all contributions which have
been accrued on the books of each of the Acquired Companies.
SECTION 5.4. Full Access. The Seller will permit and cause the
Acquired Companies to permit, representatives of the Buyer and prospective
lenders, i.e., any person (including, but not limited to, accountants,
appraisers, attorneys, engineers, etc.) hired by the Buyer or the Buyer's
prospective lenders to assist in performing a due diligence investigation of the
Acquired Companies or the assets or Business of any of the Acquired Companies
relative to this Transaction (collectively, "Buyer's Representatives") to have
full access to all premises, properties, personnel, books, records (including
Tax records), Contracts, and documents of or pertaining to the Acquired
Companies and shall make the officers and employees of the Acquired Companies
available to the Buyer's Representatives as the Buyer's Representatives shall
from time to time reasonably request, in each case to the extent that such
access and disclosure would not obligate the Acquired Companies to take any
actions that would disrupt the normal course of its business or violate the
terms of any agreement to which any of the Acquired Companies is bound or any
applicable Law or regulation. The Seller will deliver to the Buyer or the
Buyer's Representatives correct and complete copies of the articles of
incorporation and bylaws of each of the Acquired Companies, and will also
deliver the minute books, stock certificate books and stock record books of each
of the Acquired Companies. The Buyer's Representatives will not use any of the
Confidential Information received from the Acquired Companies except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, the Buyer's Representatives will return to the Acquired
Companies all tangible embodiments (and all summaries and copies, including
electronically stored information) of the Confidential Information that they
receive from the Acquired Companies or copied from Confidential Information
received from the Acquired Companies which are in its possession and will only
use such Confidential Information in the defense of any litigation related to
this Agreement; provided, however, that the Buyer's Representatives shall not be
responsible for the confidentiality of any information (i) which, at the time of
disclosure, is available publicly, through no fault of the Buyer (ii) which,
after disclosure, becomes available publicly through no fault of the Buyer's
Representatives, or (iii) which the Buyer's Representatives knew or to which the
Buyer's Representatives had access prior to disclosure.
SECTION 5.5. Exclusivity. The Seller will not (and the Seller will not
cause or permit any of the Acquired Companies to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of any of the Acquired Companies (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Seller will not vote his Shares in favor of any such acquisition
structured as a merger, consolidation, or share exchange. The Seller will notify
the Buyer immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
SECTION 5.6. Efforts.
(a) Subject to the terms and conditions hereof, each party hereto
shall use all reasonable efforts to consummate this Transaction as
promptly as practicable. An undertaking of a Person under this
Agreement to use such Person's commercially reasonable efforts shall
not require such Person to incur unreasonable expenses or obligations
in order to satisfy such undertaking.
(b) The Seller and the Buyer will, and the Seller shall cause the
Acquired Companies to, as promptly as practicable (i) make the
required filings with, and use their respective best efforts to obtain
all required authorizations, approvals, consents and other actions of,
governmental Authorities and (ii) use their respective commercially
reasonable efforts to obtain all other required consents of other
Persons, with respect to this Transaction.
(c) The Buyer will use commercially reasonable efforts to obtain
the financing necessary to consummate this Transaction.
SECTION 5.7. Maintenance of Insurance. The Seller shall cause the
Acquired Companies to continue to carry its existing insurance through the
Closing Date, and shall not allow, and shall cause the Acquired Companies not to
allow, any material breach, default or cancellation (other than expiration and
replacement of policies in the Ordinary Course of Business) of such insurance
policies or agreements to occur or exist.
SECTION 5.8. Notice and Supplemental Information. The Seller and the
Buyer shall each give prompt notice to the other parties of any material adverse
development causing a breach of any of their respective representations and
warranties in Articles III and IV respectively, and of their respective
covenants contained in this Article V. In addition, the Seller will, from time
to time, as necessary, within a reasonable period of time preceding the Closing,
by notice in accordance with the terms of this Agreement, supplement or amend
the Schedules, including one or more supplements or amendments to correct any
matter which would constitute a breach of any representation, warranty,
agreement or covenant contained herein. If the Seller supplements or amends the
Schedules with facts or circumstances that would reasonably be expected to have
a Material Adverse Effect on any of the Acquired Companies, the sole remedy of
the Buyer under this Section 5.8 shall be termination of the Agreement as
provided for in Section 11.1(e).
SECTION 5.9. Press Releases and Public Announcements. No party shall
issue any press release or make any public announcement relating to the subject
matter of this Agreement without the prior written approval of the Buyer and the
Seller; provided, however, that any party may make any public disclosure it
believes in good faith is required by applicable Law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing party will use its best efforts to advise the other parties prior to
making the disclosure).
SECTION 5.10. Consistent Tax Reporting. The Seller and the Buyer shall
treat and report this Transaction in all respects consistently for purposes of
any federal, state, local or foreign Tax. The parties hereto shall not take any
actions or positions inconsistent with the obligations set forth herein.
SECTION 5.11. Resignation of Officers and Directors. The Seller shall
cause each officer and Director and each trustee or fiduciary of any plan or
arrangement involving employee benefits of the Acquired Companies, if so
requested by the Buyer, to tender his or her resignation from such position,
effective as of the Closing.
SECTION 5.12. Transition. The Seller will not take any action, and the
Seller will cause the Acquired Companies not to take any action, that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of the Acquired Companies
from maintaining the same business relationships with any of the Acquired
Companies after the Closing as it maintained with any of the Acquired Companies
prior to the Closing. The Seller will refer all customer inquiries, and will
cause the Acquired Companies to refer all inquiries, relating to the Business of
the Acquired Companies to the Buyer from and after the Closing.
SECTION 5.13. Confidentiality. The Seller will, and shall cause the
Acquired Companies to, treat and hold as such, all of the Confidential
Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and, in the event of a Closing, deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in their
possession. In the event that the Seller or an Acquired Company is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Seller will notify the
Buyer in writing promptly of the request or requirement so that the Buyer may
seek an appropriate protective order or waive compliance with the provisions of
this Section 5.13. If, in the absence of a protective order or the receipt of a
waiver hereunder, a party is, on the advice of counsel, compelled to disclose
any Confidential Information to any tribunal or else stand liable for contempt,
the Seller may disclose the Confidential Information to the tribunal; provided,
however, that the Seller shall use his best efforts to obtain, at the request of
the Buyer, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate. The foregoing provisions shall not apply
to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
SECTION 5.14. Noncompetition.
(a) The Seller acknowledges that he has a special knowledge of
the Businesses and the proprietary and confidential information
included in the Businesses and that the Buyer is making a considerable
investment in the Businesses from which the Seller has benefited. In
consideration of this Agreement and such investment and benefit, and
as an inducement to the Buyer to enter into this Agreement and
consummate this Transaction, the Seller agrees that, for a period of
two (2) years after the Closing Date, the Seller will not, directly or
indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an
officer, employee, partner, director or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of,
any business that directly or indirectly designs and manufactures
aerospace components ("Competitive Business"); provided, however, that
the Seller may own less than one percent (1%) of any outstanding class
of securities registered pursuant to the Securities Exchange Act of
1934, as amended, of an issuer that is a Competitive Business.
(b) For a period of two (2) years following the Closing Date, the
Seller will not, without the express prior written approval of the
Board of Directors of the Buyer, (A) directly or indirectly recruit,
solicit or otherwise induce or influence any sales agent, joint
venturer, lessor, supplier, agent, representative or any other person
that has or had during the one (1) year period initially preceding the
Closing Date a business relationship with the Acquired Companies, to
discontinue, reduce or adversely modify such employment, agency or
business relationship with the Buyer, or any of the Acquired Companies
as it relates to the Businesses as conducted by the Buyer, or any of
the Acquired Companies after the Closing Date, or (B) employ or seek
to employ or cause any Competitive Business to employ or seek to
employ any person or agent who is employed or retained by the Buyer or
any of the Acquired Companies. Notwithstanding the foregoing, nothing
herein shall prevent the Seller from providing a letter of
recommendation to an employee with respect to a future employment
opportunity.
(c) For a period of two (2) years following the Closing Date, the
Seller will not, without the express prior written approval of the
Board of Directors of the Buyer, directly or indirectly, recruit,
solicit or otherwise induce or influence any customer of the Buyer, or
any of the Acquired Companies to discontinue, reduce or modify such
business relationship with the Acquired Companies.
(d) The Seller agrees that the violation or threatened violation
of any of the provisions of this Section 5.14 shall cause immediate
and irreparable harm to the Buyer and that the damage to the Buyer
will be difficult or impossible to calculate with precision.
Therefore, in the event the Seller violates this Section 5.14, an
injunction restraining the Seller from such violation may be entered
against the Seller in addition to any other relief available to the
Buyer.
(e) If, at the time of enforcement of any provision of this
Section 5.14, a court shall hold that the duration, scope or other
restrictions stated herein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope or other
restrictions reasonable under such circumstances shall be substituted
for the stated duration, scope or other restrictions and that the
court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and other restrictions permitted by
law; provided, however, that the substituted period shall not exceed
the period contemplated by this Agreement.
SECTION 5.15. Post-Closing Covenants. The Seller and the Buyer agree
as follows with respect to the period following the Closing:
(a) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as
any other party hereto reasonably may request, all at the sole cost
and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII). From and
after the Closing the Buyer will be entitled to access all documents,
books, records, agreements, and financial data of any sort relating to
the Acquired Companies.
(b) In the event and for so long as any party hereto actively is
contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection
with (i) this Transaction or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the
Closing Date involving any of the Acquired Companies, each of the
other parties hereto will cooperate with him or it and his or its
counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall
be necessary in connection with the contest or defense, all at the
sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor
under Article VIII).
(c) The Buyer shall use its reasonable best efforts to cause the
Seller to be nominated for a position as a member of the Buyer's Board
of Directors; provided, however, that the Buyer shall be under no such
obligation unless and until the Seller provides the Buyer with the
information reasonably required by the Buyer for a proxy statement to
be issued in connection with any such nomination.
(d) Written Consent of Seller for Section 338 Election. The Buyer
agrees not to make or cause an election under Internal Revenue Code
Section 338 with respect to the purchase of any Acquired Company,
without the written consent of the Seller. In the event that the
Seller agrees to any said election, the Buyer agrees to compensate and
reimburse the Seller, on a grossed-up basis, for any additional taxes
which become due or payable as a result of said election.
ARTICLE VI
CONDITIONS TO OBLIGATION OF THE BUYER
The obligation of the Buyer to consummate this Transaction is subject
to satisfaction of the following conditions:
SECTION 6.1. Representations and Warranties True as of Closing Date.
The representations and warranties set forth in Article III shall have been
accurate, true and correct on and as of the date of this Agreement, and shall
also be accurate, true and correct on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date.
SECTION 6.2. Compliance with Covenants. The Seller shall have
performed and complied with all of the covenants hereunder in all material
respects through the Closing.
SECTION 6.3. Consents. The Acquired Companies shall have procured all
of the third party consents required by this Agreement.
SECTION 6.4. Actions or Proceedings. No action, suit, or proceeding
shall be pending or threatened before any court or quasi judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of this Transaction,
(B) cause this Transaction to be rescinded following consummation, (C) affect
adversely the right of the Buyer to own the Shares, or to control Versaform or
541775 B.C. or of 541775 B.C. to own all of the issued and outstanding stock of,
or control, Versaform Canada, or (D) affect adversely the right of any of the
Acquired Companies to own its assets and to operate its Business (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect).
SECTION 6.5. Certificate. The Seller shall have delivered to the Buyer
a certificate to the effect that each of the conditions specified above in
Sections 6.1-6.4 is satisfied in all respects.
SECTION 6.6. Financial Condition at Closing. On the Closing Date none
of the Acquired Companies shall have any Liabilities other than Permitted
Liabilities.
SECTION 6.7. Opinion of Counsel. The Buyer shall have received from
counsel to the Seller an opinion in form and substance as set forth in Exhibit F
attached hereto, addressed to the Buyer, and dated as of the Closing Date.
SECTION 6.8. Resignations. The Buyer shall have received the
resignations, effective as of the Closing, of each Director and officer of the
Acquired Companies other than those whom the Buyer shall have specified in
writing at least five (5) business days prior to the Closing.
SECTION 6.9. Employment Agreements. The Acquired Companies shall have
entered into written employment agreements with employees of the Acquired
Companies determined by the Buyer, in its sole discretion, to be key employees
on terms acceptable to the Buyer, in its sole discretion.
SECTION 6.10. Site Assessments. The Seller shall have delivered to the
Buyer no less than thirty (30) days prior to the Closing Date a Phase I Site
Assessment for each parcel of real property owned or used by the Acquired
Companies. Each such Phase I Site Assessment shall be performed in accordance
with the professional standard established by the American Society of Testing
and Materials Standard Practice E 1527-00.
SECTION 6.11. Customer Assurances. The Buyer shall have received
sufficient oral assurances (the sufficiency of which shall be determined by the
Buyer in its sole discretion) from what it determines in its sole discretion to
be "key customers" that (i) such customers are aware of the sale of the Shares
contemplated by this Agreement, (ii) such customers will continue purchasing
from the Acquired Companies at levels acceptable to the Buyer in its sole
discretion, and (iii) such customers will not cancel any orders already placed
with the Acquired Companies.
SECTION 6.12. Financing. The Buyer shall have obtained on terms and
conditions which are commercially reasonable all of the financing it needs in
order to consummate this Transaction and fund the working capital requirements
of the Acquired Companies after the Closing.
SECTION 6.13. FIRPTA Certificate. The Buyer shall have received from
the Seller a duly executed certificate in the form specified by Treasury
Regulation ss. 1.1445-2(b)(2).
SECTION 6.14. Termination of Certain Agreements. The Seller shall
have, and the Seller shall have caused his Affiliates and the Acquired Companies
to, and that the Acquired Companies and its Affiliates shall have, effective as
of the Closing, without any cost to any of the Acquired Companies, terminated,
rescinded, canceled and rendered void and of no effect any and all Contracts
between any of the Acquired Companies on the one hand and the Seller or any
Affiliate thereof (other than one of the Acquired Companies) on the other hand.
The Seller agrees that effective as of the Closing, all rights of the Seller or
any Affiliate thereof or any Affiliates of any of the Acquired Companies (other
than one of the Acquired Companies) to indemnification by any of the Acquired
Companies (whether by Contract, bylaws, Law or otherwise) are terminated, void,
of no effect and unenforceable by them except as may arise pursuant to this
Agreement.
SECTION 6.15. Insurance. The Buyer shall be satisfied as to the
availability and cost of adequate and reasonable insurance covering the
Businesses and assets of each of the Acquired Companies.
SECTION 6.16. Contracts. None of the Contracts entered into by any of
the Acquired Companies shall be breached or subject to termination, modification
or change as a result of this Transaction.
SECTION 6.17. Sale of Standard Bent Metal, Inc.. The Seller shall have
purchased from Versaform, and Versaform shall have sold to the Seller, all of
Versaform's equity interests in Standard Bent Metal, Inc. at a price equal to
the book value of such equity interests on Versaform's books as of the date
hereof.
SECTION 6.18. Leased Real Property. The Buyer shall have obtained
assurances, in a form satisfactory to the Buyer in its sole discretion, from the
owners of all real property leased by the Acquired Companies that the
transactions contemplated hereby will not have any adverse effect on any lease.
SECTION 6.19. Board Approval. The Board of Directors of the Buyer
shall have authorized the execution and delivery of this Agreement and the
consummation of this Transaction.
SECTION 6.20. No Material Adverse Effect. Since the date of this
Agreement, no event has occurred which could reasonably be expected to have a
Material Adverse Effect on any of Acquired Companies or on any item set forth on
any Schedule.
SECTION 6.21. Documents. All actions to be taken by the Seller in
connection with consummation of this Transaction and all certificates, opinions,
instruments, and other documents required to effect this Transaction will be
reasonably satisfactory in form and substance to the Buyer.
SECTION 6.22. Consent and Joinder Agreement. The Seller shall have
delivered to the Buyer the Consent and Joinder Agreement (in the form attached
hereto as Exhibit E) duly executed by the Seller and the Seller's spouse.
SECTION 6.23. Seller Purchase of Assets. The Seller shall have
purchased from Versaform the following assets for the following amounts in U.S.
currency: (i) for an aggregate of Sixty Thousand Dollars ($60,000.00), a 2000
Volvo (VIN: YV1LW56D3Y2650261) and a 2001 Yukon (VIN: 1GKFK66UX1J251979); (ii)
for Twenty Five Thousand Dollars ($25,000.00) an insurance policy written by GE
Life & Annuity on the life of the Seller, policy number N02735188; and (iii) for
Twenty Five Thousand Dollars ($25,000.00) that certain promissory note dated
November 1, 1996, including accrued interest thereon, the maker of which is
Standard Bent Metal, Inc., and the payee of which is Versaform the original
principal amount of which was One Hundred Eleven Thousand Dollars ($111,000.00).
SECTION 6.24. Dennis Geary Compensation. The Buyer shall have
received, in the form and substance acceptable to the Buyer in its sole
discretion, Dennis Geary's acknowledgment that his rate of compensation with
respect to services rendered to the Acquired Companies shall be One Thousand
Dollars per week for so long as he shall be employed by any Acquired Company and
that the Acquired Companies have no other compensation obligation to Dennis
Geary.
ARTICLE VII
CONDITIONS TO OBLIGATION OF THE SELLER
The obligation of the Seller to consummate this Transaction is subject
to satisfaction of the following conditions:
SECTION 7.1. Representations and Warranties True as of Closing. The
representations and warranties set forth in Article IV shall have been accurate,
true and correct on and as of the date of this Agreement, and shall also be
accurate, true and correct on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date.
SECTION 7.2. Compliance with Covenants. The Buyer shall have performed
and complied with all of its covenants hereunder in all material respects
through the Closing.
SECTION 7.3. Actions or Proceedings. No action, suit, or proceeding
shall be pending before any court or quasi judicial or administrative agency of
any federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of this Transaction or (B) cause this Transaction to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect).
SECTION 7.4. Certificate. The Buyer shall have delivered to the Seller
a certificate to the effect that each of the conditions specified above in
Sections 7.1 - 7.3 is satisfied in all respects.
SECTION 7.5. Opinion of Counsel. The Seller shall have received from
counsel to the Buyer an opinion in form and substance as set forth in Exhibit G
attached hereto, addressed to the Seller, and dated as of the Closing Date.
SECTION 7.6. Documents. All actions to be taken by the Buyer in
connection with the consummation of this Transaction and all certificates,
opinions, instruments, and other documents required to effect this Transaction
will be reasonably satisfactory in form and substance to the Seller.
SECTION 7.7. Approval of Secured Promissory Note and Collateral. All
of the terms and provisions of the Promissory Note including, but not limited
to, the form and quality of the collateral therefor shall be satisfactory to
Seller in the exercise of Seller's sole discretion. Notwithstanding any of this
provision of this Agreement, no signature of the Seller on this Agreement shall
constitute the Seller's approval of or consent to the terms of this Agreement
and the Seller shall have no obligation to the Buyer and the Buyer shall acquire
no rights under this Agreement until the Seller has given his written approval
and consent to the Promissory Note and the Collateral and the same is
transmitted, via telecopier, by the Seller's counsel to the Buyer or the Buyer's
counsel.
ARTICLE VIII
SURVIVAL AND REMEDY; INDEMNIFICATION
SECTION 8.1. Survival of Representations and Warranties. All of the
terms and conditions of this Agreement, together with the warranties,
representations, agreements and covenants contained herein or in any instrument
or document delivered or to be delivered pursuant to this Agreement, shall
survive the execution of this Agreement and the Closing Date, notwithstanding
any investigation heretofore or hereafter made by or on behalf of any party
hereto; provided, however, that unless otherwise stated, the agreements and
covenants set forth in this Agreement shall survive and continue until all
obligations set forth therein shall have been performed and satisfied.
Notwithstanding the foregoing, (a) the representations and warranties contained
in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 4.1, 4.2, 4.3 and 4.4 of this
Agreement shall survive the Closing and continue in full force and effect
indefinitely; (b) and the representations and covenants set forth in Sections
3.13, 3.22, 3.26, 3.27 and 9.6 of this Agreement shall survive the Closing and
continue in full force and effect until the expiration of the applicable statute
of limitations (including any extensions or waivers thereof); and (c) all other
representations and warranties, and the related agreements of the Seller and the
Buyer to indemnify each other set forth in this Article VIII, shall survive and
continue for, and all indemnification claims with respect thereto shall be made
prior to the end of, twenty-four (24) months from the Closing Date, except for
representations, warranties and related indemnities for which an indemnification
claim shall be pending as of the end of the applicable period referred to above,
in which event such indemnities shall survive with respect to such
indemnification claim until the final disposition thereof (the "Indemnification
Period").
SECTION 8.2. Indemnification by the Seller.
(a) In the event that, during the Indemnification Period there is
(i) a breach (or an alleged breach) of any of the representations or
warranties made by, or any breach of or failure to perform any
covenant, agreement or obligation of, the Seller in this Agreement or
any other document contemplated hereby, or in any document relating
hereto or thereto or contained in any exhibit or Schedule to this
Agreement, (ii) any Liabilities, Adverse Consequences or remediation,
clean-up or similar obligations or costs under Environmental Laws and
relating to the Business and activities or the ownership, operation or
lease by any of the Acquired Companies of facilities in respect of any
periods prior to the Closing, or (iii) any demands, assessments,
judgments, costs and reasonable legal and other expenses or other
Adverse Consequences arising from, or in connection with, any
investigation, action, suit, proceeding or other claim incident to any
of the foregoing and, if there is an applicable survival period
pursuant to Section 8.1, then, provided that the Buyer made a written
claim for indemnification and provided that Buyer incurs an aggregate
of One Hundred Thousand Dollars ($100,000.00) in out-of-pocket
expenses and costs as reduced by Tax benefits, if any, (as provided in
Section 8.2(c) of this Agreement) in connection with any of the
foregoing (the "Threshold Amount"), then thereafter the Seller agrees
(subject to the limitations set forth in this Section 8.2) to
indemnify the Buyer and its Affiliates, directors, officers.
employees, stockholders, the Buyer's Representatives and agents
(collectively, the "Buyer Indemnified Parties") from and against the
entirety of any Adverse Consequences the Buyer Indemnified Parties may
suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer Indemnified Parties may
suffer through and after the end of the applicable survival period)
resulting from, arising out of, relating to, in the nature of, or
caused by any breach (or alleged breach) of the foregoing; provided,
however, there will be a Two Million Five Hundred Thousand Dollars
($2,500,000.00) aggregate ceiling on the obligation to indemnify the
Buyer Indemnified Parties from and against Adverse Consequences
resulting from, arising out of, or relating to, the items identified
in this Article VIII. The right to indemnification 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 except for Knowledge acquired directly from
a Schedule attached hereto or directly from written documentation
provided by the Seller to the Buyer, 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.
(b) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (excluding any applicable ceiling
provisions), the Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of any of the Acquired Companies (x) for any
Taxes of any of the Acquired Companies and any entities owned by or
affiliated with the Company with respect to any Tax year or portion
thereof ending on or before the Closing Date (or for any Tax period
beginning before and ending after the Closing Date to the extent
allocable determined in a manner consistent with Section 9.3) to the
portion of such period beginning before and ending on the Closing
Date), to the extent such Taxes are not reflected in the Reserve for
Tax Liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income), and (y)
for the unpaid Taxes of any Person (other than any of the Acquired
Companies) under Reg. ss.1.1502-6 (or any similar provision of state,
local, or foreign Law), as a transferee or successor, by Contract or
otherwise; provided, however, that the Seller shall have no obligation
to indemnify the Seller for any amount by which the Taxes shown on the
relevant Tax return filed by the Buyer for the period including the
Closing Date exceeds the Reserve for Tax Liability. Within
seventy-five (75) days after Closing, the Buyer shall determine the
amount of the reserve for federal and state income and franchise taxes
for the period ending on the Closing Date (the "Reserve for Tax
Liability") and shall notify the Seller of such amount. If within
fifteen (15) days following receipt of such notification, the Seller
has not given the Buyer notice of the Seller's objection to the amount
of the Reserve for Tax Liability (which notice must contain a
statement of the basis of the Seller's objection), then such amount
shall be the "Reserve for Tax Liability" for purposes of this
Agreement. If the Seller gives notice of objection and the dispute is
not resolved between the Buyer and the Seller within fifteen (15) days
after the Seller delivers such notice to the Buyer, either the Seller
or the Buyer may submit the dispute to arbitration in accordance with
Section 12.9.
(c) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (excluding any applicable ceiling
provisions), the Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by any unknown, undisclosed, or contingent debts or obligations
(including, but not limited to, environmental and employee benefit
Liability exposures) of the Acquired Companies to the extent such
debts or obligations relate to any time periods prior to the Closing
Date.
(d) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (provided, however, that a breach of the
representations and warranties contained in Section 3.23 shall be
determined as if all references to "to the Knowledge" of the Seller
were deleted therefrom), the Seller agrees to indemnify the Buyer from
and against the entirety of any Adverse Consequences the Buyer may
suffer resulting from, arising out of or relating to, any product
warranty honored by an Acquired Company with respect to any product or
part manufactured before the Closing Date.
(e) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (excluding any applicable ceiling
provisions), the Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, or relating to any claim made or
asserted on or before the Closing Date for any injury to individuals
or damage to property as a result of the ownership, possession, use or
disposal of any product manufactured, sold, leased or delivered by any
of the Acquired Companies.
(f) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (including any applicable ceiling
provisions), the Seller agrees to indemnify the Buyer from and against
the entirety of any Adverse Consequences the Buyer may suffer
resulting from, arising out of, or relating to any claim made or
asserted after the Closing Date for any injury to individuals or
damage to property as a result of the ownership, possession, use or
disposal of any product manufactured, sold, leased or delivered by any
of the Acquired Companies.
(g) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (excluding any applicable ceiling
provisions and references to the Threshold Amount), the Seller agrees
to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of or
relating to any amount any employee leasing company or professional
employer organization (including, but not limited to, Simplified
Employment Services, Inc.), retained by any Acquired Company should
have paid, withheld or paid directly or indirectly over to any person
including, but not limited to, persons rendering services to the
Acquired Company, governmental entities, taxing authorities,
retirement plan fiduciaries, insurers or benefit plan providers.
(h) Notwithstanding anything to the contrary in this Article
VIII, without limiting any of the foregoing and subject to the
provisions of Section 8.2(a) (excluding any applicable ceiling
provisions and references to the Threshold Amount), the Seller agrees
to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer resulting from, arising out of, or
relating to any breach by Seller of the representation contained in
Section 3.35 relative to the obligations of any Acquired Company to E.
Dennis Geary, and the covenant of Seller contained in Section 10.2
relative to Seller's obligation to obtain an Amendment to Commercial
Lease; provided, however, that the aggregate liability of the Seller
with respect to the breach of the covenant contained in Section 10.2
shall not exceed Three Hundred Thousand Dollars ($300,000.00).
SECTION 8.3. Indemnification by the Buyer. Provided that the Seller
makes a written claim for indemnification against the Buyer within the survival
period set forth in Section 8.1 and that the amount sought by Buyer, together
with amounts previously sought by Seller pursuant to this Section 8.3, is in
excess of the Threshold Amount, the Buyer agrees to indemnify the Seller
against, and agrees to hold him harmless from, any and all Adverse Consequences
the Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller may suffer
through and after the end of the applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by (i) any breach of or
any inaccuracy in any representation or warranty made by the Buyer pursuant to
this Agreement, any agreement, or instrument contemplated hereby, any document
relating hereto or thereto or contained in any exhibit or Schedule to this
Agreement; (ii) any breach of or failure by the Buyer to perform any agreement,
covenant or obligation of the Buyer set out in this Agreement, any agreement, or
instrument contemplated hereby, any document relating hereto or thereto or
contained in any exhibit or Schedule to this Agreement; and (iii) any
obligations and Liabilities in respect of the Acquired Companies from and after
the Closing Date.
SECTION 8.4. Third-Party Claims.
(a) If any third party shall notify any party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may
give rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Article VIII, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing
within forty-five (45) days after the Indemnified Party has given
notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Parry from and against the entirety of any
Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (B) the Indemnifying Party provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against
the Third Party Claim and fulfill its indemnification obligations
hereunder, (C) the Third Party Claim involves only money damages and
does not seek an injunction or other equitable relief, (D) settlement
of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim
actively and diligently.
(c) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8.4(b) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim,
(B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 8.4(b) above is
or becomes unsatisfied in the reasonable judgment of the Indemnified
Party, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or
obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Party will reimburse the Indemnified
Party promptly and periodically for the reasonable costs of defending
against the Third Party Claim (including attorneys' fees and
expenses), and (C) the Indemnifying Party will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article IX.
SECTION 8.5. Other Indemnification Provisions.
(a) The liability of any party under this Article VIII shall be
in addition to, and not exclusive of any other liability that such
party may have at law or equity based on a party's fraudulent acts or
omissions. None of the provisions of this Agreement shall be deemed a
waiver of any defenses which may be available in respect of actions or
claims for fraud including, but not limited to, defenses of statutes
of limitations or limitations of damages.
(b) The Seller hereby agrees that he will not make any claim for
indemnification against any of the Acquired Companies by reason of the
fact that he was a director, manager, officer, employee, or agent of
any such entity or was serving at the request of any such entity as a
partner, member, trustee, director, manager, officer, employee, or
agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses,
or otherwise and whether such claim is pursuant to any statute,
charter document, bylaw, agreement, or otherwise) with respect to any
action, suit, proceeding, complaint, claim, or demand brought by the
Buyer against the Seller (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable
Law, or otherwise).
(c) Indemnification claims shall be reduced, by and to the
extent, that an Indemnified Party shall be entitled to receive
proceeds under insurance policies, risk sharing pools, or similar
arrangements specifically as a result of, and in compensation for, the
subject matter of an indemnification claim by such Indemnified Party,
net of any increased premiums or similar costs arising out of the
making of such claims against such arrangements; provided, however,
that indemnification claims shall be reduced by Tax benefits, if any.
(d) The Buyer shall have the right to offset indemnification
amounts due them from the Seller pursuant to this Agreement against
payments due to the Seller pursuant to this Agreement or any other
agreement between the Buyer and the Seller.
ARTICLE IX
TAX MATTERS
SECTION 9.1. Tax Matters. The following provisions shall govern the
allocation of responsibility as between the Buyer and the Seller for certain tax
matters following the Closing Date:
SECTION 9.2. Tax Periods Ending on or Before the Closing Date. The
Seller shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for the Acquired Companies for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. The Seller shall permit the
Buyer to review and comment on each such Tax Return described in the preceding
sentence prior to filing. The Buyer and the Seller shall attempt in good faith
to resolve any disagreements regarding such Tax Returns; provided, however, that
the final decision regarding any such Tax Return shall rest with the Seller.
SECTION 9.3. Tax Periods Beginning Before and Ending After the Closing
Date. The Buyer shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of the Acquired Companies for Tax periods which begin
before the Closing Date and end after the Closing Date. The Buyer shall permit
the Seller to review and comment on each such Tax Return described in the
preceding sentence prior to filing. The Buyer and the Seller shall attempt in
good faith to resolve any disagreements regarding such Tax Returns; provided,
however, that the final decision regarding any such Tax Return shall rest with
the Buyer. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Tax period that includes (but
does not end on) the Closing Date, the portion of such Tax which relates to the
portion of such Tax period ending on the Closing Date shall (x) in the case of
any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire Tax period multiplied by a
fraction the numerator of which is the number of days in the Tax period ending
on the Closing Date and the denominator of which is the number of days in the
entire Tax period, and (y) in the case of any Tax based upon or related to
income or receipts be deemed equal to the amount which would be payable if the
relevant Tax period ended on the Closing Date. Any credits relating to a Tax
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant Tax period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Acquired Companies.
SECTION 9.4. Cooperation on Tax Matters.
(a) The Buyer and the Seller shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Article IX and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to
any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The
Seller agrees (A) to retain all books and records with respect to Tax
matters pertinent to the Acquired Companies, as the case may be,
relating to any taxable period beginning before the Closing Date until
the expiration of the statute of limitations (and, to the extent
notified by the Buyer or the Seller, any extensions thereof) of the
respective taxable periods, and to abide by all record retention
agreements entered into with any taxing Authority, and (B) to give the
other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other
party so requests, the Seller, as the case may be, shall allow the
other party to take possession of such books and records.
(b) The Buyer and the Seller further agree, upon request, to use
their reasonable efforts to obtain any certificate or other document
from any governmental Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to this
Transaction); provided, however, that no party shall be required to
take any action which would reasonably be expected to have an adverse
effect on such party.
(c) The Buyer and the Seller further agree, upon request, to
provide the other party with all information that either party may be
required to report pursuant to Section 6043 of the Code and all
Treasury Department Regulations promulgated thereunder.
SECTION 9.5. Tax Sharing Agreements. All Tax sharing agreements or
similar agreements with respect to or involving any of the Acquired Companies
shall be terminated as of the Closing Date and, after the Closing Date, any of
the Acquired Companies shall not be bound thereby or have any Liability
thereunder.
SECTION 9.6. Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, shall be paid by the
Seller when due; and the Seller will, at his own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
ARTICLE X
POST-CLOSING AGREEMENTS
Section 10.1. Buyer's Obligation to Deliver Titles. As soon as
reasonably practicable after Closing, the Buyer shall take the actions necessary
to deliver to the Seller title, free and clear of all Liens, to the assets
purchased by the Seller pursuant to Section 6.23.
Section 10.2. Seller's Obligation Relating to Commercial Lease. Seller
agrees to deliver to Buyer an Amendment to Commercial Lease, in form acceptable
to Buyer, with respect to that certain Commercial Lease dated February 1, 2001,
between E. Dennis Geary, Trustee of the Geary Family Trust (as "Landlord") and
Versaform (as "Tenant"), relative to the premises known as 1315 South Cleveland
Street, Oceanside, California 92054, which Amendment shall (i) guarantee
Versaform unlimited legal access to such premises over a certain railroad
right-of-way owned by the North County Transportation District which is adjacent
to the premises and (ii) obligate the Landlord to perform all maintenance and
make all repairs, replacements, improvements and expenditures in connection with
such right-of-way, including, but not limited to, Versaform's right to cross the
right-of-way. In the event of a breach of this covenant by Seller, Seller agrees
to indemnify Buyer from and against the entirety of any Adverse Consequences the
Buyer may suffer resulting from Seller's breach of this covenant, without regard
to the Threshold Amount and the aggregate ceiling contained in Section 8.2(a) of
this Agreement, provided, however, that the aggregate liability of the Seller
with respect to a breach of the covenant contained in this Section 10.2 shall
not exceed Three Hundred Thousand Dollars ($300,000.00). Seller agrees that
Versaform and Buyer shall not be obligated, as a condition precedent to
exercising any of its rights and remedies for such indemnification, to first
exhaust its remedies against the Landlord.
ARTICLE XI
TERMINATION
SECTION 11.1. Termination of Agreement. Certain of the parties may
terminate this Agreement as provided below:
(a) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written
notice to the Seller on or before the ninety (90) day following the
date of this Agreement, but prior to the Closing, if the Buyer is not
satisfied with the results of its continuing business, legal,
environmental, and accounting due diligence regarding the Acquired
Companies;
(c) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing (A) in the event
the Seller has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Buyer has notified the Seller of the breach, and the breach has
continued without cure for a period of ten (10) days after the notice
of breach, or (B) if the Closing shall not have occurred on or before
June 30, 2002 by reason of the failure of any condition precedent
under Article VI hereof (unless the failure results primarily from the
Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement);
(d) the Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing (A) in the event
that the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Seller have notified the Buyer of the breach, and the breach has
continued without cure for a period of ten (10) days after the notice
of breach or (B) if the Closing shall not have occurred on or before
June 30, 2002, by reason of the failure of any condition precedent
under Article VII hereof (unless the failure results primarily from
the Seller breaching any representation, warranty, or covenant
contained in this Agreement;
(e) the Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event:
(x) the Seller supplements or amends the Schedules with facts or
circumstances that would reasonably be expected to have a Material
Adverse Effect on any of the Acquired Companies, or (y) any of the
Acquired Companies does anything outside of the Ordinary Course of
Business to affect the working capital of any of the Acquired
Companies between the date hereof and the Closing Date; and
(f) the Seller shall have the right to terminate this Agreement
at any time prior to Closing by giving written notice to the Buyer if,
in the exercise of the Seller's sole discretion, Seller determines
that any provision of the Promissory Note including, but not limited
to, the form and quality of the collateral therefor, are
unsatisfactory.
SECTION 11.2. Effect of Termination. If any party terminates this
Agreement pursuant to Section 11.1 above, all rights and obligations of the
parties hereunder shall terminate other than those set forth in Sections 5.4,
5.9 and 5.13, without any Liability of any party to any other party (except for
any Liability of any party then in breach).
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. Expenses. Each party will bear his or its own costs and
expenses (including, but not limited to, legal fees and expenses) incurred in
connection with this Agreement and this Transaction.
SECTION 12.2. No Third-Party Beneficiaries. Subject to the provisions
of Section 12.5, this Agreement shall not confer any rights or remedies upon any
Person other than the parties and their respective successors and permitted
assigns.
SECTION 12.3. Entire Agreement. This Agreement (including the
documents referred to herein) constitutes the entire agreement among the parties
and supersedes any prior understandings, agreements, or representations by or
among the parties, written or oral, to the extent they related in any way to the
subject matter hereof.
SECTION 12.4. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties named herein and their
respective successors and permitted assigns. No party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the Buyer and the Seller; provided,
however, that the Buyer may, upon prior written notice (i) assign any or all of
its rights and interests hereunder to one or more of its Affiliates, (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder) and (iii) grant a security
interest in respect of its rights hereunder to its lenders.
SECTION 12.5. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
SECTION 12.6. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 12.7. Notices. All notices, requests, demands, claims, and
other communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two (2) business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
(a) If to the Seller, addressed as follows:
Mr. Brian Geary
with a copy to:
Mr. Brian Geary
c/o Law Offices of William M. Aul
8880 Rio San Diego Drive, Suite 800
San Diego, California 92108
(b) If to the Buyer, addressed as follows:
Mr. Ronald S. Saks
LMI Aerospace, Inc.
P. O. Box 900
St. Charles, Missouri 63302
with a copy to:
Mr. Sanford S. Neuman
Gallop, Johnson & Neuman, L.C.
101 South Hanley, Suite 1600
St. Louis, Missouri 63105
Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
SECTION 12.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic Laws of the State of California as if
this Agreement were fully performed and all obligations recited herein were
undertaken solely within the State of California without giving effect to any
choice or conflict of Law provision or rule (whether of the State of California
or any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of California. Any dispute or claims made
under this Agreement or any attempt to enforce the terms of this Agreement shall
be resolved in San Diego, California pursuant to Section 12.9 of this Agreement.
SECTION 12.9. Arbitration. Any dispute or claim arising to or in any
way related to this Agreement or the subject matter hereof shall be settled as
follows: (A) if the amount in controversy is less than One Hundred Thousand
Dollars ($100,000.00), the matter shall be settled by binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association ("AAA"). AAA shall designate one (1) arbitrator from an approved
list of arbitrators following both parties review and deletion of those
arbitrators having a conflict of interest with either party; (B) if the amount
in controversy is greater than One Hundred Thousand Dollars ($100,000.00) but
less than Five Hundred Thousand Dollars ($500,000.00), AAA shall designate three
(3) arbitrators from an approved list of arbitrators following both parities
review and deletion of those arbitrators having a conflict of interest with
either party and the matter shall be settled by binding arbitration in
accordance with the rules and regulations of AAA, and (C) if the amount in
controversy exceeds Five Hundred Thousand Dollars ($500,000.00), the dispute or
claim shall be settled in California Superior Court for San Diego County.
SECTION 12.10. Amendments and Waivers. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by the Buyer and the Seller. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
SECTION 12.11. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
SECTION 12.12. Construction. The parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
SECTION 12.13. Incorporation of Exhibits, Annexes, and Schedules. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
SECTION 12.14. Specific Performance. Each of the parties acknowledges
and agrees that the other parties would be damaged irreparably in the event any
of the provisions of Sections 5.4, 5.5, 5,9, 5.13, 5.14, and 5.15 of this
Agreement are not performed in accordance with their specific terms or otherwise
are materially breached. Accordingly, each of the parties agrees that the other
parties shall be entitled to an injunction or injunctions to prevent breaches of
the aforementioned provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
parties and the matter, in addition to any other remedy to which they may be
entitled, at law or in equity.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"Buyer"
LMI Aerospace, Inc.
By: /s/ Ronald S. Saks
---------------------------------------
Ronald S. Saks, President
"Seller"
/s/ Brian Geary
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Brian Geary, an individual