EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
by and between
MARK A. BAUMAN
("Seller")
and
NORTHCOAST ACQUISITION CORP.
("Buyer")
with respect to all of the
issued and outstanding shares of
NORTHCOAST OF AMERICA CRYOGENIC INC.
(the "Company")
March 15, 1999
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 PURCHASE AND SALE OF SHARES . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Estimated Payment at Closing. . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Adjustment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5.1 Closing Balance Sheet Preparation. . . . . . . . . . . . . . . . . .3
1.5.2 Closing Balance Sheet Review . . . . . . . . . . . . . . . . . . . .3
1.5.3 Closing Balance Sheet Dispute. . . . . . . . . . . . . . . . . . . .3
1.5.4 Post-Closing Refund. . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE 2 EARN-OUT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 Earn-Out Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1.1 Net Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1.2 Northcoast Companies.. . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Calculation and Payment of Earn-Out Amount. . . . . . . . . . . . . . . . .7
2.3 Supplemental Earn-Out Opportunity . . . . . . . . . . . . . . . . . . . . .7
2.4 Interim Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.5 Minimum Earn-Out if Early Termination of Employment Without Cause . . . . .8
ARTICLE 3 SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE
TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Authority and Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.2 Authorized and Issued Stock . . . . . . . . . . . . . . . . . . . . . . . .8
3.3 Title to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.4 Execution and Delivery; Enforceability. . . . . . . . . . . . . . . . . . .9
3.5 Noncontravention. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE 4 SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY. . . . . .9
4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
4.1.1 Organization and Power . . . . . . . . . . . . . . . . . . . . . . 10
4.1.2 Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.3 Other Ventures . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1.4 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 10
4.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.1 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 10
4.2.2 {Intentionally omitted.} . . . . . . . . . . . . . . . . . . . . . 10
ii
4.2.3 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2.4 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Financial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.1 Financial Records. . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.2 Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3.3 No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4.1 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 12
4.4.2 Product and Service Warranties . . . . . . . . . . . . . . . . . . 13
4.4.3 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5.1 Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5.2 Employment Termination . . . . . . . . . . . . . . . . . . . . . . 14
4.5.3 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5.4 Compliance with Contracts. . . . . . . . . . . . . . . . . . . . . 15
4.5.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5.6 Customers and Suppliers. . . . . . . . . . . . . . . . . . . . . . 16
4.5.7 Purchases and Sales. . . . . . . . . . . . . . . . . . . . . . . . 16
4.5.8 Prepayments and Deposits . . . . . . . . . . . . . . . . . . . . . 16
4.5.9 Capital Projects . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.6 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.1 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.2 Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.3 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7.4 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 18
4.7.5 Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.7.6 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7.7 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 19
4.7.8 Extent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.8 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9 Additional Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.9.1 Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . 20
4.9.2 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . 21
5.1 Organization and Power. . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.1 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
iii
ARTICLE 6 CLOSING; CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 22
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2 Conditions to Buyer's Obligation. . . . . . . . . . . . . . . . . . . . . 22
6.3 Conditions to Seller's Obligations. . . . . . . . . . . . . . . . . . . . 25
ARTICLE 7 ADDITIONAL COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1.1 Conduct of Business. . . . . . . . . . . . . . . . . . . . . . . . 26
7.1.2 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.1.3 Interim Financial Statements . . . . . . . . . . . . . . . . . . . 27
7.1.4 Supplemental Disclosure. . . . . . . . . . . . . . . . . . . . . . 27
7.1.5 Satisfaction of Conditions . . . . . . . . . . . . . . . . . . . . 27
7.1.6 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2 Nondisclosure, Noncompetition and Noninterference . . . . . . . . . . . . 28
7.3 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.4 Expenses; Transfer Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.7 Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.8 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.9 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.10 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.11 Further Assurances and Assistance. . . . . . . . . . . . . . . . . . . . 30
7.12 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.13 Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 8 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Indemnification by Seller . . . . . . . . . . . . . . . . . . . . . . . . 32
8.2 Indemnification by Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Notification of and Participation in Claims . . . . . . . . . . . . . . . 32
8.4 Survival; Limitations on Indemnification. . . . . . . . . . . . . . . . . 33
ARTICLE 9 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 33
9.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.2 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.3 Inclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.4 {Intentionally omitted.}. . . . . . . . . . . . . . . . . . . . . . . . . 34
9.5 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 Execution in Counterparts; Signature Pages. . . . . . . . . . . . . . . . 35
9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.8 Amendments, Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.9 No Third-Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.10 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
iv
9.11 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.12 Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.13 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
LIST OF SCHEDULES:
Schedule 4.1.2 (Qualification)
Schedule 4.2.3 (Consents)
Schedule 4.2.4 (Conflicts)
Schedule 4.3.1(a) (Financial Statements)
Schedule 4.3.1(b) (Exceptions from GAAP)
Schedule 4.3.2 (Liabilities)
Schedule 4.4.1 (Compliance with Laws)
Schedule 4.4.2 (Product and Service Warranties)
Schedule 4.4.3 (Product Liability)
Schedule 4.4.4 (Litigation)
Schedule 4.5.1 (Employment)
Schedule 4.5.2 (Employment Termination)
Schedule 4.5.3 (Contracts)
Schedule 4.5.5 (Insurance)
Schedule 4.5.8 (Prepayments and Deposits)
Schedule 4.5.9 (Capital Projects)
Schedule 4.6 (Employee Benefits)
Schedule 4.7.1 (Title)
Schedule 4.7.2 (Receivables)
Schedule 4.7.6 (Location of Assets)
Schedule 4.7.7 (Intellectual Property)
Schedule 4.8 (Real Property)
Schedule 4.9.1 (Conflicts of Interest)
v
INDEX OF DEFINED TERMS
Where
Term Defined
- --------------------------------------------------------- ----------------
Acquisition Balance Sheet . . . . . . . . . . . . . . . . Section 4.3.1(a)
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.1(d)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Asset Purchase Agreement. . . . . . . . . . . . . . . . . Section 6.2(n)
Automobile Note . . . . . . . . . . . . . . . . . . . . . Section 6.2(p)
Business Combination. . . . . . . . . . . . . . . . . . . Section 2.1.2
Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Chart . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Date. . . . . . . . . . . . . . . . . . . . . . . Section 6.1
Closing Payment . . . . . . . . . . . . . . . . . . . . . Section 1.4
Closing Working Capital . . . . . . . . . . . . . . . . . Section 1.3(b)
Company . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Contracts . . . . . . . . . . . . . . . . . . . . . . . . Section 4.5.3
Debt Certificate. . . . . . . . . . . . . . . . . . . . . Section 1.3(a)
Earn-Out Amount . . . . . . . . . . . . . . . . . . . . . Section 2.1
Earn-Out Period . . . . . . . . . . . . . . . . . . . . . Section 2.1
Employment Agreement. . . . . . . . . . . . . . . . . . . Section 6.2(m)
Estimated 1998 Tax Payment. . . . . . . . . . . . . . . . Section 7.13
Estimated Debt Adjustment . . . . . . . . . . . . . . . . Section 1.3(a)
Expenses. . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
F&B . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Final Closing Balance Sheet . . . . . . . . . . . . . . . Section 1.5.2 OR
Section 1.5.3
Final Post-Closing Purchase Price Adjustment. . . . . . . Section 1.5.2 OR
Section 1.5.3
Fourth-Year Earn-Out. . . . . . . . . . . . . . . . . . . Section 2.3
Georgia Lease . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Hazardous Substances. . . . . . . . . . . . . . . . . . . Section 4.7.4
Hazardous Waste . . . . . . . . . . . . . . . . . . . . . Section 4.7.4
Independent Accountants . . . . . . . . . . . . . . . . . Section 1.5.3
Intellectual Property Rights. . . . . . . . . . . . . . . Section 4.7.7
Liability . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.1(b)
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.3
Losses. . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.1
vi
Where
Term Defined
- --------------------------------------------------------- ----------------
Michigan Lease. . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Michigan Option Agreement . . . . . . . . . . . . . . . . Section 6.2(l)
NCI . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1.2(c)
NCI Acquisition . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
NCI Merger Agreement. . . . . . . . . . . . . . . . . . . Section 6.2(n)
Net Closing Indebtedness. . . . . . . . . . . . . . . . . Section 1.3(a)
Net Worth Differential. . . . . . . . . . . . . . . . . . Section 1.3(c)
Northcoast Companies. . . . . . . . . . . . . . . . . . . Section 2.1.2
Northcoast/Kansas . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Northcoast/Texas. . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
NREL . . . . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(n)
Post-Closing Purchase Price Adjustment. . . . . . . . . . Section 1.4
Pre-Closing Inventory . . . . . . . . . . . . . . . . . . Section 1.5.1
Preliminary Closing Balance Sheet . . . . . . . . . . . . Section 1.5.1
Preliminary Post-Closing Purchase Price Adjustment. . . . Section 1.5.1
Pre-Closing Taxes . . . . . . . . . . . . . . . . . . . . Section 7.13
Product Liability Claim . . . . . . . . . . . . . . . . . Section 4.4.3
Purchase Price. . . . . . . . . . . . . . . . . . . . . . Section 1.2
Seller. . . . . . . . . . . . . . . . . . . . . . . . . . Page 1
Shares. . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2
Tax Returns . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . Section 4.3.4
Texas Lease . . . . . . . . . . . . . . . . . . . . . . . Section 6.2(l)
Texas Option Agreement. . . . . . . . . . . . . . . . . . Section 6.2(l)
Three-Year Earn-Out . . . . . . . . . . . . . . . . . . . Section 2.3
Transferred Liquid Cylinder Repair Business . . . . . . . Section 2.1.1(c)
vii
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of the 15th day of March, 1999, by and between MARK A. BAUMAN
("Seller"), and NORTHCOAST ACQUISITION CORP., an Ohio corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller owns all of the issued and outstanding shares
of the capital stock (as more particularly in Section 3.2 hereof, the
"Shares") of Northcoast of America Cryogenic Inc., an Ohio corporation (the
"Company"); and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, all of the Shares upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, Seller and Buyer hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE.
Subject to the terms and conditions of this Agreement, at the
Closing (as defined in Section 6.1), Seller shall sell, transfer and deliver
to Buyer, and Buyer will purchase from Seller, all of Seller's right, title
and interest in and to all of the Shares.
1.2 PURCHASE PRICE.
The aggregate purchase price for all of the Shares (the
"Purchase Price") shall be an amount equal to:
(a) Eight Hundred Eleven Thousand Dollars ($811,000.00), PLUS
(b) the Earn-Out Amount, if any, payable pursuant to Article 2
of this Agreement, MINUS
(c) the amount, if any, by which the Net Closing Indebtedness
(as defined below) exceeds $650,624.00, MINUS
(d) the amount, if any, by which $379,666.00 exceeds the
Closing Working Capital (as defined below); MINUS
1
(e) the amount, if any, by which the Net Worth Differential (as
defined below) exceeds $45,000.00.
1.3 CERTAIN DEFINITIONS.
(a) "Net Closing Indebtedness" means an amount equal to (i)
the sum of all of the Company's indebtedness for borrowed money (including
obligations in respect of principal, accrued interest, and any applicable
prepayment charges or premiums), MINUS (ii) the sum of all cash and cash
equivalents held by the Company (not including checks or drafts issued but
not yet cleared), all as reflected on the Final Closing Balance Sheet (as
defined below). On the Closing Date, Seller will cause the Company to
estimate in good faith the amount of the Net Closing Indebtedness in
accordance with the preceding sentence, and will deliver to Buyer a
certificate signed by Seller and the Company's chief financial officer
setting forth such estimate (the "Debt Certificate"), together with such
supporting detail and lender confirmations as Buyer may request. The
"Estimated Debt Adjustment" will be the amount, if any, by which the estimate
of the Net Closing Indebtedness as set forth in the Debt Certificate exceeds
$650,624.00.
(b) "Closing Working Capital" means the difference between
(i) the Company's current assets MINUS (ii) the Company's current
liabilities, all as reflected on the Final Closing Balance Sheet; PROVIDED,
HOWEVER, that for purposes of such calculation, the Company's current assets
will not include any accounts or notes receivable from NCI, Northcoast/Texas
or Northcoast/Kansas, and the Company's current liabilities will not include
any accounts or notes payable to NCI, Northcoast/Texas or Northcoast/Kansas
and will not include any indebtedness for borrowed money (including
obligations in respect of principal, accrued interest, and any applicable
prepayment charges or premiums) taken into account in determining Net Closing
Indebtedness.
(c) "Net Worth Differential" means the difference between
(i) the net worth of the Company (I.E., all assets, net of depreciation and
amortization, less all liabilities) as actually reflected on the Final
Closing Balance Sheet, allowing for the variances from generally accepted
accounting principles identified on Schedule 4.3.1(b) hereto, MINUS (ii) the
net worth of the Company (I.E., all assets, net of depreciation and
amortization, less all liabilities) as it would be reflected on the Final
Closing Balance Sheet if the same were prepared without allowance for any of
the variances from generally accepted accounting principles identified on
Schedule 4.3.1(b) hereto.
1.4 ESTIMATED PAYMENT AT CLOSING.
At the Closing, Buyer will pay to Seller, subject to adjustment
as provided in Section 1.5 and subject to Section 7.13, an amount (the
"Closing Payment") equal to: (a) $811,000.00, MINUS (b) the Estimated Debt
Adjustment, if any, pursuant to Section 1.3(a) hereof. The Closing Payment
will be paid by means of a wire-transfer of immediately available funds to an
account designated by Seller. If, and to the extent that, the portion of the
Purchase Price payable before taking into account any Earn-Out Amount, as
determined in
2
accordance with Sections 1.2(a), 1.2(c), 1.2(d), 1.2(e) and 1.5 hereof, is
less than the Closing Payment, then Seller shall refund the amount of such
difference to Buyer in accordance with Section 1.5 ("Post-Closing Purchase
Price Adjustment").
1.5 ADJUSTMENT.
1.5.1 CLOSING BALANCE SHEET PREPARATION.
Promptly after the Closing, Seller will prepare a balance sheet
of the Company as of the Closing ("Preliminary Closing Balance Sheet"). The
Preliminary Closing Balance Sheet will be prepared in accordance with
generally accepted accounting principles and, to the extent permitted
thereby, on a basis consistent with the past practices of the Company;
PROVIDED, HOWEVER, that the preparation of the Closing Balance Sheet may vary
from generally accepted accounting principles by not taking into account the
accruals and adjustments identified as "GAAP Adjustments" on Schedule
4.3.1(b) hereto. Seller caused the Company to conduct a physical inventory
as of March 7, 1999 (the "Pre-Closing Inventory"), the results of which shall
be accurately reflected in the Preliminary Closing Balance Sheet. Based on
the Preliminary Closing Balance Sheet, Seller will prepare a written
calculation of the Net Closing Indebtedness in accordance with the provisions
of Section 1.3(a), a written calculation of the Closing Working Capital in
accordance with the provisions of Section 1.3(b), and a written calculation
of the Net Worth Differential in accordance with the provisions of Section
1.3(c), and based thereon, a calculation of the Post-Closing Purchase Price
Adjustment in accordance with the provisions of Section 1.4 (the "Preliminary
Post-Closing Purchase Price Adjustment").
1.5.2 CLOSING BALANCE SHEET REVIEW.
Not later than forty-five (45) days after the Closing Date,
Seller will deliver to Buyer the Preliminary Closing Balance Sheet and
Seller's calculation of the Preliminary Post-Closing Purchase Price
Adjustment. All work papers, documents and records used or generated by
Seller and his accountants and other representatives in connection with the
preparation of its Preliminary Closing Balance Sheet and the calculation of
the Preliminary Post-Closing Purchase Price Adjustment will be made available
to Buyer. Unless Buyer gives Seller a written objection by the thirtieth
(30th) day after Buyer's receipt of the Preliminary Closing Balance Sheet and
the Preliminary Post-Closing Purchase Price Adjustment, the Preliminary
Closing Balance Sheet and the Preliminary Post-Closing Purchase Price
Adjustment will become final and binding on the parties and shall be deemed
to be the "Final Closing Balance Sheet" and the "Final Post-Closing Purchase
Price Adjustment," respectively.
1.5.3 CLOSING BALANCE SHEET DISPUTE.
If Buyer objects to the Preliminary Closing Balance Sheet or to
the Preliminary Post-Closing Purchase Price Adjustment and Buyer and Seller
are able to resolve their dispute within fifteen (15) days after Buyer's
objection, the Preliminary Closing Balance Sheet and the Preliminary
Post-Closing Purchase Price Adjustment (each as adjusted to reflect such
3
resolution) will become final and binding on the parties and shall be deemed
to be the "Final Closing Balance Sheet" and the "Final Post-Closing Purchase
Price Adjustment," respectively. If Buyer objects to the Preliminary Closing
Balance Sheet or to the Preliminary Post-Closing Purchase Price Adjustment
and Buyer and Seller are unable to resolve their dispute within fifteen (15)
days after Buyer's objection, the dispute will be resolved in accordance with
the terms of this Agreement by the firm of Arthur Andersen LLP (the
"Independent Accountants"). The Independent Accountants will be instructed
to perform their services as expeditiously as possible. The resolution of
the Independent Accountants shall be presented in a "Final Closing Balance
Sheet" with respect to the Company and a "Final Post-Closing Purchase Price
Adjustment" with respect to the Company, each prepared by the Independent
Accountants, which shall be final and binding on the parties.
The fees and expenses of the Independent Accountants for the
resolution of any dispute shall be paid by Buyer and Seller in inverse
proportion to the respective amounts of the disputed matters which are
resolved in its favor. For example, if:
(a) Buyer claims that the Final Post-Closing Purchase
Price Adjustment should be $100;
(b) Seller claims that the Final Post-Closing Purchase
Price Adjustment should be $20; and
(c) the Independent Accountants determine that the Final
Post-Closing Purchase Price Adjustment is $40;
then the fees and expenses of the Independent Accountants would be paid 25%
by Seller (I.E., 20 DIVIDED BY 80), and 75% (I.E., 60 DIVIDED BY 80) by Buyer.
1.5.4 POST-CLOSING REFUND.
If, after giving effect to the Final Post-Closing Purchase
Price Adjustment, the portion of the Purchase Price payable before taking
into account any Earn-Out Amount pursuant to Article 2, as determined in
accordance with Sections 1.2(a), 1.2(c), 1.2(d), 1.2(e) and the foregoing
provisions of this Section 1.5, is less than the Closing Payment, then Seller
shall refund to Buyer the amount of such difference by means of a
wire-transfer of immediately available funds to an account designated by
Buyer. Any such post-closing refund shall be made not more than three (3)
days after the Preliminary Post-Closing Purchase Price Adjustment of the
Company becomes the Final Post-Closing Purchase Price Adjustment of the
Company.
4
ARTICLE 2
EARN-OUT
2.1 EARN-OUT AMOUNT.
Subject to the terms and conditions of this Agreement, Seller
shall be entitled to receive, as a component of the Purchase Price for the
Shares, an amount (the "Earn-Out Amount") equal to three percent (3%) of the
Net Sales of the Northcoast Companies (each as defined below) with respect to
each fiscal year or partial fiscal year during the three-year period that
begins on the Closing Date ("Earnout Period"), subject to possible extension
for one additional year in accordance with Section 2.3 hereof.
2.1.1 NET SALES.
(a) As used herein, the term "Net Sales" shall mean (i) the
Northcoast Companies' aggregated revenues in respect of sales and leases of
goods or services by the Northcoast Companies, net of any returns, credits,
discounts or allowances extended to customers and net of any freight charges,
sales taxes and other similar charges, all as reflected on the books and
records of the Northcoast Companies in accordance with generally accepted
accounting principles, consistently applied, of Buyer, PLUS (ii) those
revenues of Affiliates (as defined below) of the Northcoast Companies
described in Section 2.1.1(b), MINUS (iii) those revenues of the Northcoast
Companies described in Section 2.1.1(c). Revenues described in the foregoing
clause (i) shall include, without limitation, revenues in respect of: repair
and rehabilitation services with respect to cryogenic tanks, cryogenic
trailers and liquid cylinders; installation, maintenance and replacement
services with respect to VJ pipe; direct sales of pipe, pumps, trailers and
tanks; and direct sales of leased cryogenic equipment.
(b) In the event any Affiliate of a Northcoast Company shall
lease a product to an end-user customer of such Affiliate and, in connection
with such lease transaction, a Northcoast Company shall enter into a contract
with such Affiliate or with such customer to provide maintenance service with
respect to the product so leased, then "Net Sales" shall include the revenues
of such Affiliate in respect of such lease transaction, net of the items
described in Section 2.1.1(a), as reasonably determined by Buyer.
(c) The parties acknowledge that, from time to time after
the Closing, the Northcoast Companies may sell liquid cylinder repair
services to customers who have previously purchased such services from, but
whose business has been transferred or referred to the Northcoast Companies
by, their Affiliates (collectively, "Transferred Liquid Cylinder Repair
Business"). Section 2.1.1(a) notwithstanding, revenues realized by the
Northcoast Companies in respect of Transferred Liquid Cylinder Repair
Business shall be excluded from the calculation of "Net Sales" to the extent
such revenues are likely to have been realized by such Affiliates, taking
into account such customers' prior sales volumes, had such transfers or
referrals not occurred. The determination of the revenues to be excluded
from the calculation of "Net Sales" pursuant to this Section 2.1.1(c) shall
be made by mutual agreement of Buyer
5
and Seller, each acting reasonably and in good faith in accordance herewith,
and set forth in a writing signed by such parties at the time at which each
such transfer or referral occurs.
(d) For purposes of this Article 2, an "Affiliate" of a
Northcoast Company means a corporation, partnership, limited liability
company or other business entity which directly or indirectly controls, is
controlled by, or is under common control with such Northcoast Company, and
"control" means possession of the power to direct or cause the direction of
the management and policies of an entity through ownership of voting
securities or by contract.
2.1.2 NORTHCOAST COMPANIES.
As used herein, the term "Northcoast Companies" shall mean and
include:
(a) Buyer, or, from and after any Business Combination (as defined
below) involving Buyer, the business carried on using only the
assets of Buyer (other than the Shares purchased hereunder) as
such assets exist immediately after the consummation of the
transactions contemplated by this Agreement, but including
replacements thereof in the ordinary course of business, and taken
substantially as an entirety, as reasonably determined by Buyer;
(b) the Company, or, from and after any Business Combination involving
the Company, the business carried on using only the assets of the
Company as such assets exist immediately after the consummation of
the transactions contemplated by this Agreement, but including
replacements thereof in the ordinary course of business, and taken
substantially as an entirety, as reasonably determined by Buyer;
and
(c) NCI Sales and Leasing, Inc., an Ohio corporation ("NCI"), or, from
and after any Business Combination involving NCI, the business
carried on using only the assets of NCI as such assets exist
immediately after the consummation of the transactions
contemplated by this Agreement, but including replacements thereof
in the ordinary course of business, and taken substantially as an
entirety, as reasonably determined by Buyer.
For purposes of this Section 2.1.2, a "Business Combination" shall mean a
merger or consolidation to which a Northcoast Company is a constituent entity
(whether or not it is the surviving entity), or a transaction in which a
Northcoast Company transfers all or substantially all of its assets to
another entity, or a transaction in which a Northcoast Company acquires all
or substantially all of the assets of another entity.
6
2.2 CALCULATION AND PAYMENT OF EARN-OUT AMOUNT.
(a) 1999. On or before March 1, 2000, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the period from the Closing Date to December
31, 1999.
(b) 2000. On or before March 1, 2001, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the 12-month period that ends on December 31,
2000.
(c) 2001. On or before March 1, 2002, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the 12-month period that ends on December 31,
2001.
(d) 2002. On or before May 1, 2002, Buyer will calculate
and pay to Seller the Earn-Out Amount, if any, that accrues to Seller
pursuant to Section 2.1 during the period that begins on January 1, 2002, and
ends on the third anniversary of the Closing Date.
2.3 SUPPLEMENTAL EARN-OUT OPPORTUNITY.
If the sum of the amounts payable to Seller pursuant to
paragraphs 2.2(a), 2.2(b), 2.2(c) and 2.2(d) (the "Three-Year Earn-Out")
equals or exceeds One Million Dollars ($1,000,000.00), then no Earn-Out
Amount shall accrue after the third anniversary of the Closing Date, and all
further liability of Buyer under this Article 2 shall cease (except liability
for payment of the Earn-Out Amount in accordance with Section 2.2). If, and
only if, the Three-Year Earn-Out is less than One Million Dollars
($1,000,000.00), then Buyer, on or before May 1, 2003, will calculate the
Earn-Out Amount, if any, that accrues to Seller pursuant to Section 2.1
during the period that begins on the third anniversary of the Closing Date
and ends on the fourth anniversary of the Closing Date (the "Fourth Year
Earn-Out"), and will pay to Seller the LESSER of (a) the Fourth Year
Earn-Out, or (b) such portion of the Fourth Year Earn-Out which, when added
to the Three-Year Earn-Out, equals One Million Dollars ($1,000,000.00). In
other words, if the Three-Year Earn-Out is less than $1,000,000.00, then the
sum of the Three-Year Earn-Out plus the Fourth Year Earn-Out shall not exceed
$1,000,000.00.
2.4 INTERIM PAYMENTS.
Buyer in its sole discretion may, but shall not be required to,
make advance payments of Earn-Out Amount prior to the time at which payments
of Earn-Out Amount become due pursuant to Sections 2.2 or 2.3. Any and all
such advance payments shall be applied to Buyer's liability, if any, for
payments of Earn-Out Amount in the order in which such payments become due in
accordance with Sections 2.2 and 2.3, and shall be refunded by Seller to
Buyer upon Buyer's demand if and to the extent any amounts advanced exceed
the Earn-Out Amount owed to Seller at the next scheduled date for payment
under Section 2.2 or 2.3.
7
2.5 MINIMUM EARN-OUT IF EARLY TERMINATION OF EMPLOYMENT WITHOUT
CAUSE.
Earn-Out Amount shall continue to accrue and be paid in
accordance with this Agreement notwithstanding any termination of Seller's
employment under the Employment Agreement for any reason during the Earn-Out
Period. However, if Seller's employment under the Employment Agreement is
terminated by the employer prior to the third anniversary of the date
thereof, and if such termination is effected by the employer without "cause"
for purposes of the Employment Agreement, then Buyer, on or before May 1,
2003, will pay to Seller as additional Earn-Out Amount the amount, if any, by
which (i) One Million Dollars ($1,000,000.00) exceeds (ii) the sum of (A) all
prior payments of Earn-Out Amount pursuant to Sections 2.2 and 2.3 hereof,
PLUS (B) all base salary payable to Seller after such termination pursuant to
the terms of the Employment Agreement.
ARTICLE 3
SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION
Seller represents and warrants to Buyer as follows:
3.1 AUTHORITY AND CAPACITY.
Seller possesses all requisite legal right, power, authority
and capacity to execute, deliver and perform this Agreement, including the
authority and capacity to sell and transfer the Shares to Buyer as provided
by this Agreement.
3.2 AUTHORIZED AND ISSUED STOCK.
The total authorized capital stock of the Company consists of
750 shares, all of which are Common Shares, without par value. Of such
authorized shares, a total of 100 are issued and outstanding (collectively,
the "Shares"), and all 100 are owned of record and beneficially by Seller
exclusively. All of the Shares have been duly authorized and validly issued,
are fully paid and nonassessable, and have been issued in compliance with
(and since issuance, have not been transferred except in compliance with) all
applicable federal and state securities laws and any preemptive rights,
rights of first refusal, or similar rights of any person. There does not
exist any right or security granted or issued by the Company, Seller or any
other person to cause the Company or Seller to issue or sell any shares of
capital stock of the Company to any person (including, without limitation,
any stock option, warrant, convertible debt obligation, subscription for
stock or securities convertible into stock of the Company, or any other
similar right, security, instrument or agreement). Neither the Company nor
Seller is a party to, and none of the Company Shares is subject to, any close
corporation agreement, voting trust agreement, buy-sell agreement, or other
similar agreement relating in any way to the voting or the transfer of any
Company Shares.
8
3.3 TITLE TO SHARES.
Seller owns all of the Shares free and clear of all liens,
charges, covenants, conditions, adverse claims, demands, encumbrances,
limitations, security interests or other title defects or restrictions of any
kind (collectively, "Liens").
3.4 EXECUTION AND DELIVERY; ENFORCEABILITY.
This Agreement has been, and each other document, instrument or
agreement to be executed and delivered by Seller in connection herewith will
upon such delivery be, duly executed and delivered by Seller, and
constitutes, or will upon such delivery constitute, the legal, valid and
binding obligation of Seller, enforceable in accordance with its terms.
3.5 NONCONTRAVENTION.
Seller is not required to submit any notice, report or other
filing with any governmental authority in connection with Seller's execution,
delivery or performance of this Agreement or any other document, instrument
or agreement to be executed and delivered by Seller in connection herewith,
and such execution, delivery and performance will not violate any statute,
rule, regulation, ordinance, arbitration award, judgment, order or decree
(each, a "Law") by which Seller is bound or any agreement to which Seller is
a party. No consent, approval or authorization of any governmental authority
or any other person is required to be obtained by Seller in connection with
Seller's execution, delivery and performance of this Agreement or any other
document, instrument or agreement to be executed and delivered by Seller in
connection herewith.
3.6 BROKERAGE.
No person is or will become entitled, by reason of any
agreement or arrangement entered into or made by or on behalf of Seller or
the Company, to receive any commission, brokerage, finder's fee or other
similar compensation in connection with the consummation of any of the
transactions contemplated by this Agreement.
ARTICLE 4
SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION.
9
4.1.1 ORGANIZATION AND POWER.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Ohio. The Company has
full corporate power to own, lease and operate its assets and carry on its
business as and where such assets are now owned or leased and as such
business is presently being conducted.
4.1.2 QUALIFICATION.
Schedule 4.1.2 lists each state or foreign country in which the
Company (i) owns or leases real property, (ii) has employees or sales agents,
or (iii) maintains inventory. The Company is qualified to do business as a
foreign corporation in each of the states and foreign countries listed in
Schedule 4.1.2. The Company is not required to be qualified to do business
in any other state or foreign country where the failure to be so qualified
would have a material adverse effect on the Company.
4.1.3 OTHER VENTURES.
Except as otherwise disclosed on Schedule 4.1.3, the Company
does not have any ownership interest in any other business entity, is not a
member of any partnership, joint venture or limited liability company, and
has never operated as a subsidiary or division of any other corporation or
other business entity.
4.1.4 {Intentionally omitted.}
4.2 AGREEMENTS.
4.2.1 {Intentionally omitted.}
4.2.2 {Intentionally omitted.}
4.2.3 CONSENTS.
Except as set forth on Schedule 4.2.3, no approval or consent
of, or filing with, any person, entity or governmental authority is required
to be obtained by the Company in connection with the transactions
contemplated hereby or the execution, delivery or performance by Seller of
this Agreement or any other agreement or document delivered or to be
delivered by or on behalf of Seller or the Company.
4.2.4 NO CONFLICTS.
Except as set forth on Schedule 4.2.4, no action taken by or on
behalf of Seller or the Company in connection herewith, including but not
limited to the execution, delivery and performance of this Agreement by
Seller and each other agreement and document to be delivered by Seller or the
Company in connection herewith, (i) gives rise to a right of
10
termination or acceleration or the loss or impairment of any material right
or benefit under any Contract by which the Company or any of its assets is
bound, (ii) disrupts or impairs any business relationship which the Company
has with any dealer, distributor, sales representative, supplier or customer,
(iii) conflicts with or violates any law, the Company's Articles of
Incorporation, the Company's Code of Regulations, any Contract by which the
Company or Seller is bound, or any order, arbitration award, judgment, decree
or other similar restriction to which the Company or Seller is subject, or
(iv) constitutes an event which, after notice or lapse of time or both, could
result in any of the foregoing.
4.3 FINANCIAL.
4.3.1 FINANCIAL RECORDS.
(a) Schedule 4.3.1(a) consists of (i) the balance sheets of
the Company as of December 31, 1997, 1996 and 1995 and the related statements
of income and retained earnings for the twelve-month periods then ended, and
(ii) the balance sheet of the Company as of November 30, 1998, and the
related income statement for the 11-month period then ended, and (iii) the
balance sheet of the Company as of January 31, 1999 (the "Acquisition Balance
Sheet"), all as prepared by the Company.
(b) Except as expressly disclosed in Schedule 4.3.1(b), all
such financial statements were prepared from the Company's books of account
in accordance with generally accepted accounting principles, consistently
applied, are accurate and complete, and present fairly the financial position
and results of operations of the Company at the dates and for the periods
indicated, except, in the case of the Acquisition Balance Sheet and related
income statement, for customary year-end adjustments of a normal recurring
type which would not be material in the aggregate and the absence of
footnotes. The books of account of the Company accurately reflect all items
of income and expense (including, but not limited to, accruals) and all
assets and Liabilities of the Company in accordance with normal accrual
accounting practices, subject to customary year-end adjustments of a normal,
recurring type which would not be material in the aggregate.
As used in this Agreement, the term "Liability" means and
includes any responsibility, obligation, duty, commitment, claim or
liability, whether known or unknown, accrued, absolute, contingent or
otherwise.
4.3.2 LIABILITIES.
The Company has no Liabilities except (i) to the extent
provided for or reserved against on the Acquisition Balance Sheet, (ii)
current Liabilities which have arisen in the ordinary course of business
consistent with past practice since the date of the Acquisition Balance Sheet
(all of which have been recorded on the Company's books), or (iii) as listed
on Schedule 4.3.2. Since the date of the Acquisition Balance Sheet, there has
not been any incurrence (whether discharged or not) of any Liability by the
Company other than current Liabilities incurred in the ordinary course of
business consistent with past practice.
11
4.3.3 NO CHANGES.
Since the date of the Acquisition Balance Sheet, the Company
has been operated only in the ordinary course, consistent with past practice.
Since that date, there has not been any adverse change, or event or
circumstance which might reasonably be expected to result in an adverse
change, in the Company's assets, Liabilities, operating performance, business
relationships or prospects. Since the date of the Acquisition Balance Sheet,
there has been no change in any accounting policy or practice of the Company,
including practices with respect to the payment of accounts payable or the
collection of accounts receivable. Since the date of the Acquisition Balance
Sheet, the Company has not paid any dividend (whether in cash or in property)
or engaged in any transaction that has resulted in any shareholder of the
Company, any relative of a shareholder of the Company, or any entity
affiliated with any such shareholder or relative receiving any direct or
indirect economic benefit, other than payments of normal wages, salaries or
rents, and reimbursement of deductible business expenses actually incurred in
the ordinary course of business.
4.3.4 TAXES.
All tax returns, reports and declarations (collectively, "Tax
Returns") required by any governmental authority to be filed in connection
with the properties, business, income, expenses, net worth or franchises of
the Company have been timely filed, and all such Tax Returns are correct and
complete. The Company has delivered to Buyer copies of each of its most
recent federal, state and local Tax Returns. All governmental taxes, charges
or assessments and related deficiencies, interest and penalties
(collectively, "Taxes") due in connection with the properties, business,
income, expenses, net worth or franchises of the Company have been paid.
There are no Tax claims, audits or proceedings pending in connection with the
properties, business, income, expenses, net worth or franchises of the
Company, and, to the best knowledge of Seller and the Company, there are no
such threatened claims, audits or proceedings.
4.4 LEGAL.
4.4.1 COMPLIANCE WITH LAWS.
The Company is not in violation of (i) any outstanding
arbitration award, judgment, order or decree, or (ii) any law, regulation or
ordinance (each, a "law"), including any law relating to discrimination,
employment practices, protection of the environment, occupational health or
safety, working conditions, payroll withholding, pensions, zoning, or Taxes.
Except as disclosed on Schedule 4.4.1, there have been no allegations of or
inquiries concerning any violations of any law by the Company within the past
three years. Neither Seller nor the Company has received any notice or
allegation from any governmental authority of any jurisdiction to the effect
that the Company is or might be required to acquire or modify any asset or
change any aspect of its business operations in order to comply with any
applicable law. Except as listed on Schedule 4.4.1, no permits, licenses,
approvals or authorizations of any governmental authority are required to
conduct the Company's business. All such permits, licenses, approvals and
authorizations have been legally obtained and
12
maintained by the Company and are in full force and effect. No proceeding is
pending to revoke or limit any of them or otherwise to impose any conditions
or obligations on the possession or transfer of any of them. In addition,
there is no state of facts or event which could reasonably be expected to
form the basis for any revocation or limitation of them or other imposition
of conditions or obligations on the possession or transfer of any of them.
In the past three years, there have been no claims, notices, orders or
directives issued by any governmental authority with respect to the business
of the Company or any of the Company's assets. The Company is not required
to make, and has no reasonable expectation that it will be required to make
in order to operate its business after the Closing, any expenditures to
achieve or maintain compliance with any law, except in amounts similar to
those reflected in the financial statements contained on Schedule 4.3.1.
4.4.2 PRODUCT AND SERVICE WARRANTIES.
Except as set forth on Schedule 4.4.2, there have been no
product warranty or service warranty claims made by customers of the Company
in the past three years and there are no product warranties or service
warranties outstanding or currently being offered to customers of the Company.
4.4.3 PRODUCT LIABILITY.
Except as set forth on Schedule 4.4.3, no claims alleging
bodily injury or property damage as a result of any defect in the design or
manufacture of any product or the breach of any duty to warn, test, inspect
or instruct of dangers therein (each a "Product Liability Claim"), have been
made or threatened against the Company within the past three years. There
are no defects in the design or manufacture of products manufactured or sold
by the Company which defects could result in a Product Liability Claim, and
there has not been any failure by the Company to warn, test, inspect or
instruct of dangers which could form the basis for a product recall or any
Product Liability Claim against the Company.
4.4.4 LITIGATION.
Except as set forth on Schedule 4.4.4, no claim, litigation,
investigation or proceeding is pending or, to the knowledge of Seller and the
Company, threatened against the Company or involving the Company has been
concluded in the past three years, and there is no state of facts or event
which could reasonably be expected to form the basis for such a claim,
litigation, investigation or proceeding. No arbitration award, judgment,
order, decree or similar restriction is outstanding against or relating to
the Company or its assets, business or products.
4.5 BUSINESS.
4.5.1 EMPLOYMENT.
The Company employs a total of thirty-three (33) employees.
The Company does not use any leased or temporary employees. Schedule 4.5.1
lists the names, current
13
annual compensation rates and other compensation arrangements of all of the
Company's employees whose compensation paid or accrued during 1998 exceeded
$50,000.00 on an annualized basis. The Company has paid in full to all
employees, or made appropriate accruals for on its books of account, all
wages, commissions, bonuses and other direct compensation for all services
performed by its employees. The Company has withheld or collected from each
payment made to each of its employees the amount of all Taxes required to be
withheld or collected therefrom, and the Company has paid the same when due
to the proper governmental authorities. Except as set forth on Schedule
4.5.1, during the past three years there have been no controversies,
grievances or claims by any of the employees, former employees or
beneficiaries of any employees of the Company with respect to their
employment or employment benefits, including but not limited to any
discrimination claims, sexual harassment claims or workers' compensation
claims. There is no union representation of any of the Company's employees
and, to the knowledge of Seller and the Company, there has never been any
attempt by a labor organization to organize the Company's employees into a
collective bargaining unit. Since the date of the Acquisition Balance Sheet,
there has not been any general increase made or promised in the level or rate
of salaries or other compensation of any of the Company's employees.
4.5.2 EMPLOYMENT TERMINATION.
Except as set forth on Schedule 4.5.2, upon the termination of
employment of any of the Company's employees, the Company will not by reason
of anything done prior to or at the Closing be liable to any of its employees
for so-called "severance pay" or any other payments. To the knowledge of
Seller and the Company, none of the employees of the Company intends to
resign or seek other employment as a result of the transactions contemplated
hereby or otherwise.
4.5.3 CONTRACTS.
As used in this Agreement, the term "Contracts" means and
includes all agreements, contracts, leases, licenses, purchase or sales
orders, commitments, promises and similar arrangements evidencing or creating
any obligation, whether written or oral. Schedule 4.5.3 contains a complete
and accurate list of:
(a) all Contracts to which the Company is a party or by
which it is bound, involving amounts in excess of $50,000.00 or which are
cancelable by the Company only after giving at least 30 days' notice;
(b) all loan, financing, security, credit or other Contracts
evidencing or relating to indebtedness, guarantees or Liens;
(c) all Contracts with distributors, dealers or sales
representatives;
(d) all management, employment, consulting, or agency
Contracts and all collective bargaining Contracts;
14
(e) all Contracts providing employee benefits;
(f) all Contracts which contain an obligation of
confidentiality with respect to information furnished by the Company to a
third party or received by the Company from a third party;
(g) all Contracts containing covenants limiting the freedom
of the Company to compete in any line of business or with any person or in
any geographic area or market;
(h) all Contracts relating to patents, trademarks, trade
names or copyrights or applications for any of the foregoing, inventions,
trade secrets or other proprietary information;
(i) all Contracts relating to the past or present disposal
of waste;
(j) all Contracts pursuant to which the Company leases or
subleases any real property, or any interest therein, from or to any person;
(k) all Contracts pursuant to which the Company leases or
subleases any personal property, or any interest therein, from or to any
person;
(l) all Contracts with any shareholder, officer, director,
consultant or employee of the Company, or any relative of any of the
foregoing, or any corporation, partnership, limited liability company or
other entity directly or indirectly owned or controlled by Seller, or one or
more of his relatives; and
(m) all other Contracts entered into other than in the
ordinary course of business consistent with past practice, including but not
limited to Contracts (i) with suppliers for the purchase of goods or services
in excess of normal requirements or at prices in excess of the current market
price, (ii) for the sale by the Company of goods or services at prices not
reasonably calculated to produce gross profit margins consistent with those
achieved by the Company during its three prior fiscal years, or (iii) which
contain terms or conditions which the Company cannot reasonably expect to
fulfill in their entirety.
Seller has delivered to Buyer accurate and complete copies of each such
written Contract, and an accurate and complete written description of each
such oral Contract, in each case with all modifications and amendments
thereto. Since the date of the last year-end balance sheet included in the
financial statements on Schedule 4.3.1, there has been no modification or
termination of any Contract under circumstances which might have an adverse
effect on the Company.
4.5.4 COMPLIANCE WITH CONTRACTS.
With respect to each Contract which is required to be disclosed
on any Schedule to this Agreement, (i) the Company is not in default under or
in violation thereof, and (ii) no event has occurred which, with notice or
lapse of time or both, would constitute such a default
15
or violation. There have been no discussions or correspondence concerning
the breach by the Company of, or the termination of, any of such Contracts.
To the knowledge of Seller and the Company, there is no default under or
violation of any such Contract by any other party thereto.
4.5.5 INSURANCE.
Schedule 4.5.5 lists all insurance policies maintained by the
Company and identifies for each such policy the following information:
underwriter, policy number, coverage type, premium, expiration date, coverage
amount and deductible. All such policies are in full force and effect, and
all premiums have been paid. The Company is not, and has not been at any
time, subject to Liability as a self-insurer. Schedule 4.5.5 also sets forth
a description of all claims pending under such insurance policies.
4.5.6 CUSTOMERS AND SUPPLIERS.
No customer or supplier which has accounted for more than two
percent (2%) of the Company's sales or purchases in the past year and no
other customer or supplier material to the Company's business (including any
supplier which is the Company's sole source of supply of any product or
service) has terminated, or threatened to terminate, its relationship with
the Company or has during the past year decreased or delayed materially, or
threatened to decrease or delay materially, its purchases from the Company or
its sale of services or supplies to the Company, and there is no state of
facts or event which could reasonably be expected to form the basis for such
a decrease or delay. To the knowledge of Seller and the Company, the
transactions contemplated by this Agreement will not adversely affect the
relationship of the Company with any customer or supplier. The Company is
not required, in the ordinary course of business, to provide any bonding or
any other financial security arrangements in connection with transactions
with any supplier.
4.5.7 PURCHASES AND SALES.
Since the date of the most recent year-end balance sheet
included in the financial statements on Schedule 4.3.1, the Company has not
made any purchase commitments in excess of its normal business requirements
and there has not been any reduction in the aggregate dollar volume of the
Company's backlog of sales orders.
4.5.8 PREPAYMENTS AND DEPOSITS.
Except as disclosed on Schedule 4.5.8, the Company has not
received any prepayments or deposits from customers for products to be
shipped, or for services to be performed, after the Closing.
4.5.9 CAPITAL PROJECTS.
Schedule 4.5.9 contains a description of all capital projects
committed for or authorized by the Company involving the expenditure of
$10,000.00 or more. Except as
16
disclosed on Schedule 4.5.9, the estimated aggregate cost of completing all
capital projects does not exceed $50,000.00.
4.6 EMPLOYEE BENEFITS.
Except as otherwise set forth on Schedule 4.6, the Company does
not maintain and is not required to contribute to any employee benefit plan,
welfare benefit plan or pension plan. Seller has delivered to Buyer accurate
and complete copies of each such written plan, and an accurate and complete
written description of each such oral plan, in each case with all
modifications and amendments thereto. Each employee benefit plan, welfare
benefit plan or pension plan maintained by the Company has been operated in
accordance with its terms and all applicable laws. The Company has not
engaged in any prohibited transaction with respect to any employee benefit
plan which it maintains or to which it contributes. The Company has the
right to amend or terminate, without the consent of any other person or
entity, any employee benefit plan which it maintains, except as otherwise
prohibited by law. No welfare benefit plan maintained by the Company is
funded by a trust or fails to satisfy any applicable requirement for
tax-favored treatment. There are no unfunded benefit liabilities or
accumulated funding deficiencies under any pension plan maintained by the
Company. The Company is not required, nor has it ever been required, to
contribute to or with respect to any multiemployer plan.
4.7 ASSETS.
4.7.1 TITLE.
Except as set forth on Schedule 4.7.1, the Company owns, with
good title, and in every case free and clear of all Liens, all of the
properties and assets which it purports to own (whether real, personal or
mixed, and whether tangible or intangible), including all properties and
assets reflected on the Acquisition Balance Sheet (other than assets disposed
of in the ordinary course of business since the date of the Acquisition
Balance Sheet).
4.7.2 RECEIVABLES.
All of the Company's accounts receivable represent valid
obligations arising from sales actually made or services actually performed.
None of the Company's accounts receivable is subject to any set-off or
counterclaim, and, to the knowledge of Seller and the Company, all of the
Company's accounts receivable are collectible to the extent included on the
Final Closing Balance Sheet. Schedule 4.7.2 sets forth a 30/60/90 day aging
summary of the Company's accounts receivable as of January 31, 1999. Seller
has delivered to Buyer the Company's complete aging schedule of accounts
receivables as of such date.
4.7.3 INVENTORIES.
All inventory has been valued on the Acquisition Balance Sheet
and on the Company's records and books of account at the lower of cost
(determined on a first-in, first-out basis) or market value on a basis
consistent with that reflected in the annual financial
17
statements included on Schedule 4.3.1. Obsolete inventory and inventory of
below-standard quality has been written down to amounts not in excess of net
realizable value. All of the Company's finished goods inventories are
currently salable in the ordinary course of business consistent with past
practice at gross profit margins consistent with the levels reflected in the
annual financial statements included on Schedule 4.3.1. All of the Company's
work-in-process, raw materials and supplies inventories can be used or
consumed in the usual and ordinary course of business as now conducted and
are not in amounts in excess of normal requirements. The Pre-Closing
Inventory was conducted in accordance with the Company's past practices and
will be accurately reflected in the Preliminary Closing Balance Sheet. The
Company's actual inventories as of the Closing will be the same as reflected
in the Pre-Closing Inventory except for sales or purchases of inventory in
the ordinary course of business during the period from March 7, 1999, to the
Closing.
4.7.4 ENVIRONMENTAL MATTERS.
The Company has not generated, used, treated, released, stored
or disposed of any Hazardous Substances or any Hazardous Waste (as such terms
are hereinafter defined) in a manner that has caused or could cause the
Company or Buyer to incur any Liability under any applicable laws. The
Company has complied in all respects with all federal, state and local
environmental laws, rules and regulations applicable to the Company and its
operations. To the knowledge of Seller and the Company, there are no
underground storage tanks located on (nor, to the knowledge of Seller and the
Company, have any underground storage tanks been removed from) any real
property currently owned or leased by the Company or formerly owned or leased
by the Company. For purposes of this Agreement, the term "Hazardous
Substances" shall have the meaning set forth in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
and the regulations thereunder, or as defined by any similar law of any
jurisdiction where the Company has conducted business or has generated, used,
treated, released, stored or disposed of any Hazardous Substances, and also
shall include petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls. For purposes of this Agreement, the term
"Hazardous Waste" shall have the meaning set forth in the Resource
Conversation and Recovery Act, as amended, and the regulations thereunder, or
as defined by any similar law of any jurisdiction where the Company has
conducted business or has generated, used, treated, released, stored or
disposed of any Hazardous Waste. To the knowledge of Seller and the Company,
there has not been any release of Hazardous Substances or Hazardous Waste at
or from any properties adjacent to any current or former facilities of the
Company. To the knowledge of Seller and the Company, there are no materials
containing asbestos or urea formaldehyde incorporated into the building or
interior improvements that are part of the Company's owned or leased
facilities, and there is no equipment or fixture containing any
polychlorinated biphenyls located at any of the Company's owned or leased
facilities.
4.7.5 CONDITION.
All of the Company's tangible assets, and all of the tangible
assets leased by the Company, are in good operating condition, normal wear and
tear excepted, neither require nor
18
are reasonably expected to require any special or extraordinary expenditures
to remain in such condition beyond maintenance and repairs necessary in the
ordinary course of business, and are capable of being used for their intended
purpose in the ordinary course of business consistent with past practice.
4.7.6 LOCATION.
All of the Company's assets are located at the address or
addresses set forth on Schedule 4.7.6.
4.7.7 INTELLECTUAL PROPERTY.
Schedule 4.7.7 lists all Intellectual Property Rights (as
defined below) owned by the Company or in which (as noted on such Schedule)
the Company has any rights or licenses. To the knowledge of Seller and the
Company, there has not been any infringement or alleged infringement by
others of any such Intellectual Property Rights. Except as set forth on
Schedule 4.7.7, the Company is not a party to any Contract, whether as
licensor, licensee, franchisor, franchisee, dealer, distributor or otherwise,
with respect to any Intellectual Property Rights. The Company has the right
to use all Intellectual Property Rights as are necessary to enable the
Company to conduct, and to continue to conduct after the Closing, all phases
of its business in the manner presently conducted by the Company, and that
use has not conflicted with, infringed upon or otherwise violated any rights
of any person or entity. The Intellectual Property Rights listed on Schedule
4.7.7 are valid and in full force and effect and are not subject to any
Taxes, maintenance fees, or actions falling due within the next three months.
Except as set forth on Schedule 4.7.7, there have been no interference
actions or other judicial, arbitration or other adversary proceedings
concerning the Intellectual Property Rights listed on Schedule 4.7.7. The
Company has not infringed any intellectual property right or other right of
any other person or entity. To the knowledge of Seller and the Company, none
of the Intellectual Property Rights has been used, divulged or appropriated
for the benefit of any past or present employees of the Company or any other
person or entity, or to the detriment of the Company. The Company has not
disposed of or permitted to lapse, or otherwise failed to preserve the
Company's right to use, any rights referenced in this Section 4.7.7.
"Intellectual Property Rights" means and includes all
intellectual property, including trade names, trademarks and service marks
and all registrations and applications therefor, together with the goodwill
of the business symbolized or represented by the foregoing, mask works, works
of authorship and all copyrights related thereto and all registrations and
applications therefor, inventions, discoveries, designs, industrial models
and all patent rights relating thereto and all applications therefor and all
reissues, divisions, continuations and extensions thereof, know-how, trade
secrets, processes, technology, discoveries, formulae and procedures.
19
4.7.8 EXTENT.
The Company owns, or has a valid and subsisting interest as a
lessee or licensee in, and in any case has the right to hold and to use, all
assets (whether real, personal or mixed, and whether tangible or intangible)
which have been used to conduct its business in the ordinary course as such
business is presently being conducted. Since the date of the most recent
fiscal year-end balance sheet included on Schedule 4.3.1, there has not been
any damage to or disposition (except for the sale of inventory in the
ordinary course of business consistent with past practice) or loss of
(whether or not covered by insurance) any asset of the Company. Over the
period covered by the financial statements included on Schedule 4.3.1, no
aspect of the business of the Company was conducted by any affiliate of the
Company or any affiliate of Seller or any former shareholder of the Company.
4.8 REAL PROPERTY.
Complete and accurate legal descriptions of all real property
owned or leased by the Company are set forth on Schedule 4.8. There is no
state of facts or event which could reasonably be expected to form the basis
for any condemnation proceedings which could effect such real property or any
future improvements by any public authority, any part of the cost of which
could be assessed against such real property. In the past three years, the
Company has not experienced any interruption in the delivery of adequate
utilities required in the operation of its business. The roof and foundation
of the real property owned or leased by the Company are watertight and free
of leaks, seepages and moisture.
4.9 ADDITIONAL MATTERS.
4.9.1 CONFLICTS OF INTEREST.
Except as set forth on Schedule 4.9.1, no shareholder, director
or employee of the Company, nor any relative of any shareholder, director or
employee of the Company, nor any affiliate of any of the foregoing, (i) owns,
directly or indirectly, any interest in, or is an employee or agent of, any
entity which is a competitor, lessor, lessee, customer or supplier of the
Company, (ii) owns, directly or indirectly, any interest in any tangible or
intangible property, asset or right which the Company uses in its business,
(iii) has any cause of action or claim against, owes any amount to, or is
owed any amount by the Company other than salary and reimbursement of
deductible business expenses in the ordinary course of business, or (iv) is a
party to any Contract with the Company.
4.9.2 FULL DISCLOSURE.
No representation or warranty by Seller in this Agreement, and
no statement contained in any Schedule to this Agreement, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements contained therein, in light of the circumstances in which
they are made, not misleading. To the knowledge of Seller, there is no event
or circumstance which Seller has not disclosed to Buyer in writing which
adversely
20
affects or could reasonably be expected to adversely affect the business,
prospects, or condition (financial or otherwise) of the Company or the
ability of Seller to perform this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION AND POWER.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio. Buyer has full corporate
power to execute, deliver and perform this Agreement and all other agreements
and documents to be executed and delivered by it in connection herewith.
5.2 AGREEMENTS.
5.2.1 ENFORCEABILITY.
All requisite corporate action to approve, execute, deliver and
perform this Agreement and each other agreement and document delivered or to
be delivered by Buyer in connection herewith has been taken by Buyer. This
Agreement and every other agreement and document delivered or to be delivered
by Buyer in connection herewith has been, or upon delivery will be, duly
executed and delivered by Buyer and constitutes a binding obligation of
Buyer, enforceable in accordance with its terms.
5.2.2 CONSENTS.
No approval or consent of, or filing with, any person, entity
or governmental authority is required in connection with the transactions
contemplated hereby or the execution, delivery or performance by Buyer of
this Agreement or any other agreement or document delivered or to be
delivered by or on behalf of Buyer in connection herewith, except for filings
required to be made by Buyer or its affiliates under the Securities Exchange
Act of 1934, as amended, and the regulations thereunder.
5.2.3 NO CONFLICTS.
No action taken by or on behalf of Buyer in connection
herewith, including, but not limited to, the execution, delivery and
performance of this Agreement and each other agreement and document delivered
or to be delivered by it in connection herewith, (i) conflicts with or
violates any law, Buyer's Articles of Incorporation, Buyer's Code of
Regulations, or any Contract by which Buyer is bound, or (ii) constitutes an
event which, after notice or lapse of time or both, could result in any of
the foregoing.
21
ARTICLE 6
CLOSING; CLOSING CONDITIONS
6.1 CLOSING.
The consummation of the purchase and sale of the Shares and the
other transactions contemplated hereby (the "Closing") shall take place
simultaneously with the execution and delivery of this Agreement on the date
hereof, or on such other date as Buyer and Seller may agree in writing, at
the offices of Calfee, Halter & Griswold LLP at 800 Superior Avenue, Suite
1400, Cleveland, Ohio 44114, or at such other place as Buyer and Seller may
agree in writing. The date on which the Closing occurs is referred to herein
as the "Closing Date." The transfers and deliveries described in this
Article 6 shall be mutually interdependent and shall be regarded as occurring
simultaneously, and, notwithstanding any other provision of this Agreement,
no such transfer or delivery shall become effective or shall be deemed to
have occurred until all of the other transfers and deliveries provided for in
this Article 6 shall also have occurred or have been waived. Such transfers
and deliveries shall be deemed to have occurred and the Closing shall be
effective as of the commencement of business of the Company on the Closing
Date.
6.2 CONDITIONS TO BUYER'S OBLIGATION.
The obligation of Buyer to perform this Agreement is subject to
satisfaction of the following conditions at or before the Closing:
(a) AGREEMENTS PERFORMED. Seller shall have performed all
of the obligations under this Agreement to be performed by him at or before
the Closing;
(b) REPRESENTATIONS AND WARRANTIES ACCURATE. The
representations and warranties of Seller contained herein shall continue to
be accurate in all material respects just as if made at and as of the Closing;
(c) CERTIFICATE OF SELLER. Buyer shall have received a
certificate from Seller certifying as to the fulfillment of the conditions
set forth in Sections 6.2(a) and 6.2(b), signed by Seller;
(d) RELEASE OF GUARANTY. The Company shall have received an
unconditional release of its obligations under that certain Commercial
Guaranty, dated September 3, 1998, by the Company in favor of Heller
Financial, Inc., and evidence of such release shall have been given to Chart;
(e) GOOD STANDING. Buyer shall have received a certificate
as to the Company's good standing, dated no more than 10 days prior to the
Closing Date, from the
22
secretary of state of Ohio and of each other state in which the Company is
qualified to do business as a foreign corporation;
(f) NO CHANGE. There shall not have occurred any material
adverse change, or any event, fact or circumstance which might reasonably be
expected to result in a material adverse change, in the financial condition,
results of operations, assets, business or prospects of the Company;
(g) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transaction contemplated by this Agreement;
(h) MINUTE AND STOCK RECORD BOOKS. Seller shall have
delivered to Buyer the complete originals of all existing corporate minute
books and stock record books of the Company;
(i) SHARE CERTIFICATES. Seller shall have delivered to
Buyer all certificates evidencing or representing all of the Shares, in each
case duly endorsed for transfer to Buyer or in blank, or accompanied by a
stock power duly endorsed to Buyer or in blank, and otherwise in proper form
for transfer to Buyer, free and clear of all Liens;
(j) CONSENTS. Buyer shall have received all consents,
approvals, permits, licenses and registrations of all persons, entities, and
governmental authorities necessary for Buyer and Seller to execute, deliver
and perform this Agreement and for the Company to continue operate its
business as heretofore conducted;
(k) ESTOPPEL CERTIFICATES; EVIDENCE OF DUE AUTHORIZATION,
ETC. Buyer shall have received an estoppel certificate from each lessor of
real property leased by the Company to the effect that the Company has not
breached any of its obligations to such lessor and an agreement from each
mortgagee of such lessor to the effect that so long as the Company fulfills
its post-Closing obligations under the applicable lease, the Company will be
entitled to occupy the premises for the remainder of the lease term and will
be entitled to all other rights of the Company under such lease;
(l) REAL ESTATE LEASES. The Company shall have received (i)
a lease agreement with respect to the premises located at 6875 Old U.S. 223,
Ottawa Lake, Michigan 49267 (the "Michigan Lease"), including the form of
Purchase and Sale Agreement appended thereto (the "Michigan Option
Agreement"), mutually satisfactory to Buyer and Northcoast Real Estate, Ltd.,
an Ohio limited liability company ("NREL"), with the Michigan Lease duly
executed by NREL, and (ii) a lease agreement with respect to the premises
located at 127 Rickman Industrial Drive, Holly Springs, Georgia 30142 (the
"Georgia Lease"), mutually satisfactory to Buyer and NREL, duly executed by
NREL; and Buyer shall have received a lease agreement with respect to the
premises located at 16655 Buffalo Speedway, Houston, Texas 77047 (the "Texas
Lease"), including the form of Purchase and Sale Agreement appended thereto
(the "Texas Option Agreement"), mutually satisfactory to Buyer and F&B
23
Real Estate LLC, an Ohio limited liability company ("F&B"), with the Texas
Lease duly executed by F&B; and all prior lease agreements with respect to
such Michigan, Georgia and Texas facilities shall have been terminated to
Buyer's satisfaction;
(m) EMPLOYMENT AGREEMENT. Buyer shall have received an
Employment Agreement in a form mutually satisfactory to Buyer and Seller,
duly executed by Seller (the "Employment Agreement");
(n) OTHER CLOSINGS. The "Closing," as defined in that
certain Asset Purchase Agreement, dated as of the date of this Agreement (the
"Asset Purchase Agreement"), by and among Buyer, Northcoast of Texas
Cryogenics, Inc. ("Northcoast/Texas"), Northcoast of Kansas Cryogenics, Inc.
("Northcoast/Kansas"), Seller and Patrick J. Flynn with respect to
substantially all of the assets of Northcoast/Texas and Northcoast/Kansas,
shall have occurred; and the "Closing," as defined in that certain Agreement
and Plan of Merger, dated as of the date of this Agreement (the "NCI Merger
Agreement"), by and among Chart Industries, Inc., a Delaware corporation
("Chart"), NCI Acquisition Corp., an Ohio corporation ("NCI Acquisition"),
Seller, Patrick J. Flynn and NCI, shall have occurred;
(o) AFFILIATE RECEIVABLES. All accounts receivable of and
notes payable to the Company from Seller or from any entity directly or
indirectly controlled by Seller (other than Northcoast/Texas,
Northcoast/Kansas, or NCI) shall have been repaid to the Company in full,
except as otherwise provided in the Employment Agreement, and Seller shall
have delivered evidence of such repayment to Buyer;
(p) VEHICLE. Seller shall have purchased from the Company
the 1995 Lincoln Continental automobile referenced in that certain Fixed Rate
Simple Interest Note and Security Agreement, dated September 28, 1998, among
the Company, Seller and National City Bank (the "Automobile Note"), for cash
at a price equal to the unpaid principal amount and all accrued but unpaid
interest (including prepayment premiums, if any) on the Automobile Note, all
measured as of November 30, 1998, and Seller shall have delivered evidence of
such purchase to Buyer;
(q) RESIGNATIONS AND RELEASE. Buyer shall have received the
written resignations of all Directors and officers of the Company from their
respective directorships and offices as of the Closing, and shall have
received from Seller a duly executed general release of claims against the
Company; and
(r) OTHER. Buyer shall have received each other document
required to be delivered to Buyer hereunder.
Any agreement or document to be delivered to Buyer pursuant to this Section
6.2, the form of which is not attached to this Agreement as an exhibit, shall
be in form and substance satisfactory to Buyer.
24
6.3 CONDITIONS TO SELLER'S OBLIGATIONS.
The obligations of Seller to perform this Agreement are subject
to satisfaction of the following conditions at or before the Closing:
(a) AGREEMENTS PERFORMED. Buyer shall have performed all of
the obligations under this Agreement to be performed by it at or before the
Closing;
(b) REPRESENTATIONS ACCURATE. The representations and
warranties of Buyer contained herein shall continue to be accurate in all
material respects just as if made at and as of the Closing;
(c) CERTIFICATE OF BUYER. Seller shall have received a
certificate from Buyer certifying as to the fulfillment of the conditions set
forth in Sections 6.3(a) and 6.3.(b), signed by Buyer's chief executive
officer;
(d) LEGAL ACTION. There shall be no pending or threatened
legal action or inquiry which challenges the validity or legality of or seeks
to or could reasonably be expected to prevent, delay or impose conditions on
the consummation of the transactions contemplated by this Agreement;
(e) WIRE TRANSFER. Seller shall have received immediately
available funds by wire transfer in the amount of the Closing Payment;
(f) {Intentionally omitted.}
(g) REAL ESTATE LEASES. NREL shall have received the
Michigan Lease and the Georgia Lease, each duly executed by the Company, and
F&B shall have received the Texas Lease, duly executed by Buyer;
(h) OTHER CLOSINGS. The "Closing," as defined in the Asset
Purchase Agreement, shall have occurred; and the "Closing," as defined in the
NCI Merger Agreement, shall have occurred;
(i) EMPLOYMENT AGREEMENT. Seller shall have received the
Employment Agreement, in a form mutually satisfactory to Seller and Buyer,
duly executed by Buyer; and
(j) OTHER. Seller shall have received each other document
required to be delivered to Seller hereunder.
ARTICLE 7
ADDITIONAL COVENANTS
25
7.1 PRE-CLOSING COVENANTS.
7.1.1 CONDUCT OF BUSINESS.
From the date hereof until the Closing, except to the extent
that Buyer otherwise consents in writing, Seller will cause the Company to
operate its business substantially as presently operated and only in the
ordinary course. Seller will, and will cause the Company to, use their
respective best efforts to preserve intact the present business organization
and the relationships with persons having business dealings with the Company.
Without limiting the generality of the foregoing, Seller will cause the
Company not to:
(i) purchase or lease (or commit to purchase or lease)
any assets (other than inventory) in excess of
$10,000.00 individually or $50,000.00 in the
aggregate, except as otherwise expressly
contemplated by Section 4.5.9 hereof;
(ii) create, incur or assume any debt; assume, guarantee,
endorse or otherwise become liable or responsible
for the obligation of any other person or entity; or
make any loans, advances or capital contributions
to, or investments in, any other person or entity;
(iii) increase in any manner the rate of compensation of
any of its employees, other than normal increases
using standards consistent with past practice or as
required by any collective bargaining agreement; or
pay or agree to pay any bonus, pension, retirement
allowance, severance or other employee benefit not
required by any existing employee benefit plan;
(iv) permit any of its assets to be subjected to any
Lien;
(v) enter into any Contract, except in the ordinary
course of business consistent with past practice, or
modify or terminate any Contract under circumstances
which might adversely affect the condition
(financial or otherwise) or prospects of the
Company's business;
(vi) sell or dispose of any assets other than inventory
in the ordinary course of business;
(vii) engage in any unusual or novel method of transacting
business, or change any accounting procedures or
practices, including practices with respect to the
payment of accounts payable or the collection of
accounts receivable, or change its financial
structure; or
(viii) take any action the taking of which, or omit to take
any action the omission of which, would cause any of
the representations and
26
warranties herein to fail to be true and correct in
all respects as of the date of such action or
omission as though made at and as of the date of
such action or omission, except as otherwise
specifically contemplated by this Agreement.
7.1.2 ACCESS.
From the date hereof until the Closing, Seller will cause the
Company to provide Buyer, its lenders and their representatives full access
to the Company's personnel, facilities and all books and records and such
other information and persons relating to the Company as Buyer may request.
In addition, Seller will cause the Company to permit Buyer to perform
engineering, environmental and workplace condition surveys and such other
physical inspections as Buyer deems necessary. If the transactions
contemplated by this Agreement are not consummated for any reason, Buyer
agrees to return to Seller all materials obtained from Seller or the Company
and not to use for its own benefit any information not available to Buyer
from a source other than Seller or the Company and not to disclose any
information contained in the materials except information available to Buyer
from a source other than Seller or the Company or required to be disclosed by
law.
7.1.3 INTERIM FINANCIAL STATEMENTS.
Within 15 days after the end of each calendar month, if any,
prior to the Closing, Seller will deliver to Buyer unaudited balance sheets
of the Company and the related statements of income for the months then ended
and for that portion of such fiscal year ended with the last day of such
monthly accounting period, in each case certified by Seller to fairly present
the financial position and results of operations of the Company as at or for
the periods indicated on a basis consistent with past practice.
7.1.4 SUPPLEMENTAL DISCLOSURE.
Seller will immediately notify Buyer of any event or
circumstance which makes it necessary to correct any representation and
warranty contained in Article 3 or Article 4 which has been rendered
inaccurate thereby; or arises hereafter and which, had it existed on or prior
to the date hereof, would have resulted in an inaccuracy in a representation
and warranty contained in Article 3 or Article 4.
7.1.5 SATISFACTION OF CONDITIONS.
Seller will, and will cause the Company to, use their
respective best efforts to cause each of the conditions set forth in Section
6.2 to Buyer's proceeding with the Closing to be satisfied at or before the
Closing. Buyer shall use its best efforts to cause each of the conditions
set forth in Section 6.3 to Seller's proceeding with the Closing to be
satisfied at or before the Closing.
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7.1.6 TERMINATION.
This Agreement may be terminated (i) by the written agreement
of Buyer and Seller, or (ii) by Buyer or Seller at any time after March 23,
1999, if the Closing shall not have taken place on or before such date. If
this Agreement is terminated pursuant to clause (i) of the preceding
sentence, all provisions of this Agreement except Sections 7.3, 7.4 and 8
shall become void without any liability on the part of any party. If this
Agreement is terminated pursuant to clause (ii) of the first sentence of this
Section 7.1.6, all rights and remedies of each party hereunder and all other
provisions hereof related thereto shall survive termination to the extent
required so that any party responsible for any breach or nonperformance of
its obligations hereunder prior to termination shall remain liable for the
damages resulting therefrom.
7.2 NONDISCLOSURE, NONCOMPETITION AND NONINTERFERENCE.
Seller (i) shall at all times hold in strictest confidence any
and all confidential data and other confidential information concerning the
products, services, businesses, suppliers and customers of the Company, (ii)
for a period of five (5) years following the Closing Date, shall not, without
the prior written consent of Buyer, either directly or indirectly operate or
perform any advisory or consulting services for, invest in (other than
publicly traded stock constituting less than 5% of the equity of a publicly
held corporation), or otherwise operate or become associated in any capacity
with, any corporation, partnership, organization, proprietorship or other
business entity or association which sells or performs services then in
competition with the Company at any place within the United States of
America, and (iii) for a period of five (5) years following the Closing Date,
shall not, without the prior written consent of Buyer, directly or indirectly
induce or attempt to induce any employee, agent or other representative or
associate of the Company to terminate his or its relationship with the
Company, or in any way knowingly interfere with such a relationship or a
relationship between the Company and any of its suppliers or customers.
Seller acknowledges that compliance with his covenants in this Section 7.2 is
necessary to protect Buyer's and the Company's legitimate business interests
and that any breach of any such covenant will result in irreparable and
continuing damage to Buyer and the Company for which money damages alone will
not provide an adequate remedy, and that in the event of any such breach or
threatened breach of any such covenant, Buyer and the Company and their
respective successors and assigns shall be entitled to injunctive relief,
without having to post any bond, and to such other and further relief at law
or in equity as is proper under the circumstances.
7.3 PUBLICITY.
Neither Buyer nor Seller will make any public announcement
relating to this Agreement or the transactions contemplated hereby without
the written consent of the other, unless and except to the extent otherwise
required by law. If public disclosure or notice is required by law, Buyer or
Seller, as the case may be, will use his or its best efforts to give the
other party prior written notice of the disclosure to be made.
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7.4 EXPENSES; TRANSFER TAXES.
Except to the extent otherwise specifically provided herein,
Buyer shall pay all of the expenses incident to the transactions contemplated
by this Agreement which are incurred by Buyer or its representatives, and
Seller shall pay all of the expenses incident to the transactions
contemplated by this Agreement which are incurred by the Company or by Seller
or their respective representatives. Seller shall pay all sales or other
transfer Taxes, if any, which may be payable in connection with the
transactions contemplated by this Agreement.
7.5 {Intentionally omitted.}
7.6 RECEIVABLES.
Buyer shall cause the Company to use all reasonable efforts to
collect the accounts receivable reflected on the Final Closing Balance Sheet
but neither Buyer nor the Company shall be required to take or threaten legal
action to collect any such accounts receivable. At the option of Buyer,
Seller agrees to purchase from the Company, for an amount equal to the unpaid
balance thereof, less any allowance for doubtful accounts reflected on the
Final Closing Balance Sheet, all or any part of the accounts receivable
included thereon which shall not have been paid within ninety (90) days after
the Closing Date (other than accounts receivable from Northcoast/Texas,
Northcoast/Kansas or NCI), it being understood that Buyer shall exercise such
option at any time after such date up to the first anniversary of the Closing
Date without waiving any rights hereunder. Seller shall have the right to
verify the existence of the unpaid balance of any accounts receivable.
7.7 EMPLOYMENT.
Seller shall pay the cost of any compensation, severance or
other benefits which may be payable to any employees of the Company or to
such other persons as shall claim compensation, severance or other benefits
in connection with the consummation of the transactions contemplated by this
Agreement. Subject to Sections 6.2(m) and 6.3(i), nothing in this Agreement
shall be deemed to require the Company to retain after the Closing any of its
employees for any period of time or at any particular compensation rate or in
any particular position.
7.8 {Intentionally omitted.}
7.9 NO ASSIGNMENT.
Without the consent of Seller, Buyer may assign all or any part
of this Agreement and all or any part of its rights and obligations hereunder
to any affiliate of Buyer, to any of Buyer's lenders, and to any person or
entity which purchases from Buyer substantially all of Buyer's business, in
which event Seller shall execute and deliver any documents reasonably
requested by the assignee in connection with such assignment. Except as
provided in the preceding sentence, no assignment by any party of this
Agreement or any
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right or obligation hereunder may be made without the prior written consent
of all other parties, and any assignment attempted without such consent will
be void.
7.10 CONSENT TO JURISDICTION.
Any action or proceeding brought by a party against any other
party in connection with this Agreement may be commenced in any federal or
state court located in Cuyahoga County, Ohio, or Lucas County, Ohio, and all
objections to personal jurisdiction and venue in any action or proceeding so
commenced are hereby waived. So long as service and process is by notice as
provided in Section 9.1 of this Agreement or as required by any such court,
all objections to improper service of process are hereby waived.
7.11 FURTHER ASSURANCES AND ASSISTANCE.
The parties agree that each will execute and deliver any and
all documents in addition to those expressly provided for herein that may be
necessary or appropriate to effect or give evidence to the provisions of this
Agreement and each of the other agreements and instruments delivered by them
in connection herewith and the consummation of the transactions contemplated
hereby. Seller further agrees that at any time and from time to time after
the Closing, it will execute and deliver to Buyer such further conveyances,
assignments or other written assurances as Buyer may reasonably request to
perfect and protect Buyer's title to the Shares.
7.12 RIGHT OF SET-OFF.
Upon notice to Seller, Buyer may set-off against any payments
of Earn-Out Amount payable pursuant to Article 2 of this Agreement (i) any
amounts to which Buyer may be entitled under Article 8 hereof, (ii) any
amounts to which Buyer may be entitled under Article 8 of the Asset Purchase
Agreement, (iii) any amounts to which Chart or NCI Acquisition may be
entitled under Article 8 of the NCI Merger Agreement, (iv) any amounts to
which Chart or its nominee may be entitled under Article 10 of the Michigan
Option Agreement, the Georgia Option Agreement or the Texas Option Agreement.
The exercise of such right of set-off by Buyer in good faith, whether or not
ultimately determined to be justified, will not constitute a breach of this
Agreement. Neither the exercise of nor any failure to exercise such right of
set-off will constitute an election of remedies or limit Buyer, NCI
Acquisition, or Chart or its nominees in any manner in the enforcement of any
other rights or remedies that may be available to any of them.
7.13 CERTAIN TAX MATTERS.
After the Closing, Buyer, the Company and Seller will
coordinate the preparation of all necessary Tax Returns relating to the
Company with respect to periods ending on or before the Closing Date. Each
party agrees to timely furnish to the other party any records and other
information reasonably requested by it in connection therewith.
Notwithstanding any other provision of this Agreement or any disclosure to
Buyer hereunder or otherwise, Seller shall be responsible for the payment of,
and shall pay, any and all federal,
30
state and local income taxes (including interest and penalties, if any)
payable by the Company with respect to all periods ending on or before the
Closing Date (collectively, "Pre-Closing Taxes"), and will promptly reimburse
Buyer or the Company upon demand for any payments of Pre-Closing Taxes which
either Buyer or the Company or any of their Affiliates may make after the
Closing. To secure such obligation, but without limiting Buyer's rights or
Seller's obligations under the preceding sentence, Seller will deposit with
Buyer at the Closing, or Buyer may withhold from the portion of the Purchase
Price payable to Seller at the Closing pursuant to Section 1.4 hereof, cash
in the amount of Twenty-Five Thousand Dollars ($25,000.00) (the "Estimated
1998 Tax Payment"). Buyer shall apply the Estimated 1998 Tax Payment to the
payment of all Pre-Closing Taxes and, no later than the date which is six (6)
months after the Closing Date, shall pay to Seller the remainder, if any, of
the Estimated 1998 Tax Payment not so applied.
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ARTICLE 8
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLER.
Seller shall indemnify Buyer and the Company against and hold
Buyer and the Company harmless from (i) any and all loss, damage, liability
or deficiency (collectively, "Losses") resulting from or arising out of any
inaccuracy in or breach of any representation, warranty, covenant or
obligation made or incurred by Seller herein or in any other agreement,
instrument or document delivered by or on behalf of Seller in connection
herewith; and (ii) any and all costs and expenses (including reasonable legal
and accounting fees) (collectively, "Expenses") related to any of the
foregoing. In addition, and notwithstanding any disclosure to Buyer
hereunder or otherwise, Seller shall indemnify Buyer and the Company and
their respective Affiliates against and hold them harmless from any and all
Losses resulting from or arising out of: (i) the death of the Company's
employee Hillard Mitchell Jr. in or about September 1998, and any and all
Expenses related thereto, including in any present or future litigation
relating thereto; and (ii) any matters alleged by plaintiffs in the pending
litigation captioned ANDREW WILBORN AND DEMETRIUS WILBORN VS. NORTHCOAST OF
TEXAS CRYOGENIC, INC. [sic], Case No. 98-42541 in the 151st Judicial
District, Harris County, Texas, or in the pending litigation captioned ANDREW
WILBORN AND DEMETRIUS WILBORN V. NORTHCOAST CRYOGENIC, INC. [sic], Case No.
2:98-CV-296 PG in the United States District Court for the Southern District
of Mississippi, Hattiesburg Division, and any and all Expenses related
thereto, including in any other present or future litigation relating to such
matters; and (iii) any matters alleged in or arising out of the pending
litigation captioned MILWAUKEE PRECISION CASTING, INC. VS. NORTHCOAST OF
AMERICA CRYOGENIC, INC., Case No. 98CV009914 in the Circuit Court of
Milwaukee County, Wisconsin, and any and all Expenses related thereto,
including in any other present or future litigation relating to such matters.
8.2 INDEMNIFICATION BY BUYER.
Buyer shall indemnify Seller against and hold Seller harmless
from (i) any and all Losses resulting from or arising out of any inaccuracy
in or breach of any representation, warranty, covenant or obligation made or
incurred by Buyer herein or in any other agreement, instrument or document
delivered by or on behalf of Buyer in connection herewith; and (ii) any and
all Expenses related to any of the foregoing.
8.3 NOTIFICATION OF AND PARTICIPATION IN CLAIMS.
No claim for indemnification will arise until notice thereof is
given to the party from whom indemnity is sought. In the event that any
legal proceedings shall be instituted or any claim or demand be asserted by
any third party in respect of which Seller on the one hand, or Buyer on the
other hand, may have an obligation to indemnify the other, the party
asserting such right to indemnity shall give or cause to be given to the
party from whom indemnity may be sought written notice thereof, and such
party shall have the right, at its option and expense, to be present at the
defense of such proceeding, claim or demand, but not to control the
32
defense, negotiation or settlement thereof, which control shall at all times
rest with the party asserting such right to indemnity, unless the party from
whom indemnity may be sought irrevocably acknowledges full and complete
responsibility for indemnification of the party asserting such right to
indemnity, in which case such party may assume such control through counsel
of its choice. The parties agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any such third
party legal proceeding, claim or demand.
8.4 SURVIVAL; LIMITATIONS ON INDEMNIFICATION.
The representations, warranties, covenants and agreements of
the parties contained herein or in any other agreements or documents executed
in connection herewith shall survive the Closing. Notwithstanding the
foregoing, the indemnification of Buyer and the Company provided under
Section 8.1 shall be limited in certain respects as follows: any claim for
indemnification relating to any inaccuracy in or breach of any representation
or warranty of Seller must be made within eighteen (18) months after the
Closing Date, except that (i) there shall be no limits on the time for making
a claim for indemnification relating to the representations and warranties
contained in Article 3 ("Seller's Representations and Warranties Concerning
the Transaction"), Sections 4.1.1 ("Organization and Power"), or 4.7.1
("Title"), (ii) any claim for indemnification relating to the representations
and warranties contained in Section 4.3.4 ("Taxes") may be made until the
expiration of the applicable statute of limitations for either the assessment
or collection of Taxes for the periods referred to therein, and (iii) any
claim for indemnification relating to the representations and warranties
contained in Sections 4.6 ("Employee Benefits") or 4.7.4 ("Environmental
Matters") may be made until the second (2nd) anniversary of the Closing Date.
There shall be no limits on the time for making a claim for indemnification
relating to the undertakings of Seller set forth in Section 7.13 hereof or in
the second sentence of Section 8.1 hereof.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 NOTICES.
All notices and other communications required by this Agreement
shall be in writing and shall be deemed given if delivered by hand or mailed
by registered or certified mail to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
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(a) If to Buyer, to: Northcoast Acquisition Corp.
c/o Chart Industries, Inc.
5885 Landerbrook Drive, Suite 150
Mayfield Heights, Ohio 44124
Attention: James R. Sadowski
With a copy to: Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Thomas F. McKee, Esq.
(b) If to Mark A. Bauman, to: Mark A. Bauman
8106 Beck Road
Ottawa Lake, Michigan 49267
If to Patrick J. Flynn, to: Patrick J. Flynn
9478 Douglas Road
Temperance, Michigan 48182
If to Seller, to Seller in care of both Mark A. Bauman and
Patrick J. Flynn at their respective addresses as provided
herein.
In each case,
with a copy to: Wasserman, Bryan, Landry & Honold
300 Inns of Court Building
405 North Huron Street
Toledo, Ohio 43604
Attention: David L. Honold, Esq.
9.2 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
9.3 INCLUSION.
In every place where it is used in this Agreement, the word
"including" is intended and shall be construed to mean "including, without
limitation".
9.4 {Intentionally omitted.}
9.5 HEADINGS.
The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
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9.6 EXECUTION IN COUNTERPARTS; SIGNATURE PAGES.
This Agreement may be executed and delivered in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. This Agreement may be
executed and delivered with separate signature pages with the same effect as
though all parties had executed and delivered the same signature page.
9.7 SEVERABILITY.
In the event any part of Section 7.2 of this Agreement shall be
found by a court of competent jurisdiction to be invalid or unenforceable for
any reason, Seller hereby grants to such court full authority and discretion,
and hereby authorizes and requests such court to exercise all such authority
and discretion as it may possess hereunder or under applicable law, to reform
such provision to the end that Seller shall be subject to nondisclosure,
noncompetition and noninterference covenants that are reasonable under the
circumstances and enforceable by Buyer and the Company. In the event any
other provision of this Agreement shall be held unenforceable or invalid to
any extent for any reason, such provision shall remain in force and effect to
the maximum extent permitted, and the enforceability or validity of the
remaining provisions of this Agreement shall not be affected thereby.
9.8 AMENDMENTS, WAIVERS.
No amendment to or waiver of any of the provisions of this
Agreement, including this Section 9.8, shall be valid or enforceable unless
such amendment or waiver is set forth in writing and signed by the party
against whom enforcement of such amendment or waiver is sought or such
party's authorized representative. Unless otherwise expressly stated
therein, each such amendment or waiver shall be effective only with respect
to the specific instance in which it is given, and no such amendment or
waiver shall constitute a waiver of any other provision hereof (whether or
not similar), or a continuing waiver.
9.9 NO THIRD-PARTY RIGHTS.
Nothing expressed or implied in this Agreement is intended or
shall be construed to confer on any person, other than the parties hereto and
their respective successors and permitted assigns, any rights under this
Agreement.
9.10 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents to be
delivered hereunder constitute the entire agreement between the parties
pertaining to the subject matter hereof and supersede all prior and
contemporaneous negotiations, agreements and understandings of the parties.
There are no warranties, representations or other agreements between the
parties in connection with the subject matter hereof except as specifically
set forth herein or in the agreements or instruments delivered in connection
herewith, and no supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party sought to
be bound thereby.
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9.11 SCHEDULES AND EXHIBITS.
The schedules and exhibits referenced in this Agreement
constitute an integral part of this Agreement as if fully rewritten herein.
All references in this document to "this Agreement" and the terms "herein,"
"hereof," "hereunder" and the like shall be deemed to include all of such
schedules and exhibits.
9.12 TIME PERIODS.
Any action required hereunder to be taken within a certain
number of days shall, except as may otherwise be expressly provided herein,
be taken within that number of calendar days; PROVIDED, HOWEVER, that if the
last day for taking such action falls on a Saturday, a Sunday, or a day which
shall be in Cleveland, Ohio, or New York, New York, a legal holiday or a day
on which banking institutions therein are authorized by law to close, then
the period during which such action may be taken shall automatically be
extended to the next business day.
9.13 GOVERNING LAW.
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio, without giving effect to the
choice-of-laws or conflict-of-laws provisions thereof.
{The remainder of this page is intentionally left blank.}
36
IN WITNESS WHEREOF, Buyer and Seller have executed and
delivered this Stock Purchase Agreement as of the date first written above.
/s/ Mark A. Bauman
------------------------------
MARK A. BAUMAN
NORTHCOAST ACQUISITION CORP.
By: /s/ James R. Sadowski
---------------------------
James R. Sadowski,
President and Chief Operating Officer
37