STOCK PURCHASE AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇ HOLDINGS, LTD.
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇
Dated as of February 7, 1997
SCHEDULES AND EXHIBITS
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Schedule 4.5 - Officers and Directors; Bank Accounts
Schedule 4.6 - Assets
Schedule 4.8 - Financial Statements
Schedule 4.9 - Undisclosed Liabilities
Schedule 4.10 - Tax Returns
Schedule 4.11 - Real Property Interests
Schedule 4.12 - Intangibles
Schedule 4.13 - Material Contracts
Schedule 4.14 - Employee Benefits
Schedule 4.16 - Litigation
Schedule 4.17 - License Revocation Proceedings
Schedule 4.18 - Insurance
Schedule 4.19 - Related Party Transactions
Schedule 4.20 - Actions Since Balance Sheet Date
Schedule 4.22 - Financial Advisors
Schedule 5.3 - Conflicts/Consents
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT, dated as of February 7, 1997 (the
"Agreement"), by and between ▇▇▇▇▇▇ Holdings, Ltd., a Pennsylvania
corporation ("▇▇▇▇▇▇") and ▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual resident of
Virginia (the "Shareholder").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Real-Tool, Inc., a Virginia corporation ("Real-Tool")
presently owns and operates a snow guard manufacture and sales business
located in the Commonwealth of Virginia (the "Business");
WHEREAS, the Shareholder owns all of the issued and outstanding
capital stock of Real-Tool;
WHEREAS, the Board of Directors of ▇▇▇▇▇▇ deems it advisable and
in the best interest of ▇▇▇▇▇▇ and its shareholders that ▇▇▇▇▇▇ acquire
all of the issued and outstanding capital stock of Real-Tool and that the
parties enter into certain related agreements on the terms set forth
herein; and
WHEREAS, certain terms used in this Agreement are defined in
Section 9.1.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree
as follows:
ARTICLE I
THE SALE AND PURCHASE
Upon the terms and subject to the conditions of this Agreement,
the Shareholder hereby sells, conveys, transfers, assigns and delivers to
▇▇▇▇▇▇, and ▇▇▇▇▇▇ hereby purchases from the Shareholder on the date
hereof, all of the issued and outstanding capital stock of Real-Tool owned
by the Shareholder, all free and clear of any and all liens, claims,
liabilities, obligations, pledges, encumbrances, charges and restrictions
of every kind, nature and description. The Shareholder is,
contemporaneously herewith, causing Real-Tool to cancel the Shareholder's
stock certificate evidencing the shares owned by the Shareholder and to
issue to ▇▇▇▇▇▇ a stock certificate evidencing such number or shares.
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price. ▇▇▇▇▇▇ shall pay the Shareholder, as
---------------
consideration for the Shareholder's one hundred (100) shares of the common
stock of Real-Tool, no par value (the "Real-Tool Common Stock") which are
all of the Real-Tool Common Stock issued and outstanding as of the date
hereof, the following:
(a) On the date hereof, one hundred thousand
(100,000) shares of the common stock of ▇▇▇▇▇▇, $0.01 par value (the
"▇▇▇▇▇▇ Shares"), in the form of a certificate evidencing such shares.
(b) On the date hereof, an amount equal to Seven
Hundred Fifty Thousand Dollars ($750,000), minus the amounts set forth in
Sections 3.1 and 3.2 hereof, and minus any amounts paid at Real-Tool's
request by ▇▇▇▇▇▇ to employees of Real-Tool as bonuses, payable by bank
treasurer's check or wire transfer.
(c) Commencing on April 15, 1997, an aggregate
amount in cash of Seven Hundred Fifty-Thousand Dollars ($750,000), in four
equal quarterly installments, together with interest payable on the
outstanding balance of the amount due pursuant to this Section 1.3(c) at
the applicable quarterly federal rate for the month of this Agreement.
(d) On the date hereof, an amount that the
Shareholder estimates to be ninety-five percent (95%) of Real-Tool's
actual cost for all finished and unfinished inventory (other than
inventory constituting a part of the Excluded Assets) as of the close of
business on the Business Day prior to the date hereof. Such amount shall
be specified pursuant to a certain side letter, to be dated on even date
herewith and to be executed by the Shareholder and acknowledged by ▇▇▇▇▇▇
(the "Side Letter"); provided, that within thirty (30) days of the date
hereof, ▇▇▇▇▇▇ and the Shareholder shall mutually agree on the full cost
of such inventory as of such date and the difference between such amount
and the amount paid to the Shareholder pursuant to this Section 2.1(d) shall
be paid in cash by ▇▇▇▇▇▇ to the Shareholder within ten (10) days after the
determination of such amount (if the amount as so determined is less than
the amount paid) or ▇▇▇▇▇▇ shall reduce the amount of the next Earn Out
Payment (as defined below) due pursuant to Section 2.1(e)(i) hereof, by
such difference (if the amount as so determined exceeds the amount paid).
(e) A Deferred Sales Contingent Consideration (the
"Earn Out"), payable by check or wire transfer no later than January 15,
April 15, July 15 and October 15 of each year for a period of fifteen (15)
years from the date hereof, equal to the sum of:
(i) six percent (6%) of the revenues derived by
▇▇▇▇▇▇, its Affiliates and all licensees of the Primary Patent from the
sales of the snow guards made in accordance with the design described in
and protected by the Primary Patent and any and all products based on,
derived
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from or incorporating any and all claimed inventions, and any and all
embodiments, modifications, improvements and variations thereof now
existing or hereafter developed, which such products, inventions,
embodiments, modifications, improvements or variations would, if sold by a
seller that did not own or license rights to the Patents (as defined
below) infringe on the Patents (collectively, the "Snow Guards"), net of
returns, warranty costs and bad debts, during the immediately preceding
calendar quarter (each, an "Earn Out Payment" and, collectively, the "Earn
Out Payments"); provided, that if any Snow Guards are sold as part of or
--------
in combination with any other ▇▇▇▇▇▇ product, the revenues received by
▇▇▇▇▇▇ in respect of such sale of Snow Guards shall be calculated for the
purposes of this Section 2.1(e) as if the Snow Guards had been
individually sold;
(ii) one hundred percent (100%) of any royalties
or license fees that ▇▇▇▇▇▇ or an Affiliate thereof derives from the
license to any other manufacturer or other Person, of the Primary Patent
and any and all products based on, derived from or incorporating any and
all claimed inventions, and any and all embodiments, modifications,
improvements or variations thereof now existing or hereafter developed by
▇▇▇▇▇▇ or any Affiliate thereof; provided, that if such royalties or
--------
license fees from other licensees represent more than six percent (6%) (or
seven percent (7%) if ▇▇▇▇▇▇ exercises the Option (as defined below)) of
the revenues derived by such third party licensees from the sales of Snow
Guards, net of returns, warranty costs and bad debt, then ▇▇▇▇▇▇ shall
only be required to pay to Shareholder the amount that would have been
paid had ▇▇▇▇▇▇ been the manufacturer and distributor of such products.
If, as of the end of any calendar year (beginning with the
calendar year ended December 31, 1997), the aggregate Earn Out Payments
for such calendar year (including the amount due pursuant to the next
January 15 Earn Out Payment) are less than Seventy-Five Thousand Dollars
($75,000), prorated for partial years and not counting, for this purpose,
the amount of any adjustment to any Earn Out Payment pursuant to Section
2.1(d) hereof or other provision of this Agreement, ▇▇▇▇▇▇ shall increase
the amount of the next January 15 Earn Out Payment by the amount of such
shortfall (the "Shortfall Payment"); provided, further, that ▇▇▇▇▇▇ shall
-------- -------
have the option (the "Option"), exercisable in its sole discretion by
written notice to the Shareholder at any time during the six (6) month
period beginning five (5) years after the date hereof, to both (i)
increase the Earn Out to a rate of seven percent (7%) commencing as of
February 1, 2002, and (ii) eliminate the obligation to make a Shortfall
Payment. If ▇▇▇▇▇▇ exercises the Option and at anytime thereafter
discontinue sales of the Snow Guards, ▇▇▇▇▇▇ shall assign the Patents and
rights of ▇▇▇▇▇▇ to all embodiments, modifications, improvements and
variations thereon, and transfer the pattern equipment, applicable
trademarks associated with the Snow Guards (and not generally applicable
to other ▇▇▇▇▇▇ products), and other related rights to the Shareholder.
Real-Tool shall be jointly and severally liable to the Shareholder with
regard to the Earn Out Payments and the other obligations of ▇▇▇▇▇▇
pursuant to this Section 2.1(e), and to secure such obligations, grants
the Shareholder a security interest in the Patents, the pattern equipment
and the applicable trademarks associated with the Snow Guards (and not
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generally applicable to other ▇▇▇▇▇▇ products. ▇▇▇▇▇▇, Real-Tool and the
Shareholder shall enter into a collateral security agreement and
assignment of the forms in a form to be mutually agreed upon whereby the
Patents, the pattern equipment and the applicable trademarks associated
with the Snow Guards (and not generally applicable to other ▇▇▇▇▇▇
products) are assigned to the Shareholder as collateral security to secure
the payment and performance by ▇▇▇▇▇▇ and Real-Tool of their obligations
under this Agreement, including but not limited to, their obligations to
reassign the patent under certain conditions.
▇▇▇▇▇▇ shall provide to the Shareholder within sixty (60)
days after each January 15 Earn Out Payment a schedule, certified as true
and correct by ▇▇▇▇▇▇, its chief financial officer and its independent
auditor, containing the calculation of all figures and amounts relevant to
the calculation of Earn Out Payments pursuant to this Section 2.1(e) in
connection with the preceding calendar year, and the Shareholder shall
have the right to have such figures and amounts audited by a reputable
certified public accountant of his choice, the cost of such audit to be
paid by the Shareholder unless the figures certified to by ▇▇▇▇▇▇, its
chief financial officer and its independent auditor are ultimately found
to understate by (i) at least twenty percent (20%) or (ii) Twenty-Five
Thousand Dollars ($25,000), whichever is less, the aggregate amount due to
the Shareholder for the period covered by such audit, in which case the
cost of such audit shall be paid by ▇▇▇▇▇▇ or reimbursed by ▇▇▇▇▇▇.
(f) On the date hereof, an amount, payable by bank
treasurer's check or wire transfer, which amount shall equal the full
amount of all accounts receivable of Real-Tool as of the close of business
on the Business Day prior to the date hereof the invoice date of which is
no greater than sixty (60) days prior to the Business Day immediately
prior to the date hereof, minus the aggregate amounts of all undisputed
accounts payable of Real-Tool as of the close of business on the Business
Day immediately prior to the date hereof. Such amount shall be specified
pursuant to the Side Letter; provided, that ▇▇▇▇▇▇ shall use its
--------
reasonable efforts to collect all amounts due with respect to any account
receivable with such invoice date, and that if any such amount is not
collected by ▇▇▇▇▇▇, after its reasonable efforts to make such collection,
within ninety (90) days after the invoice date thereof, the amount not
collected may be offset in accordance with Section 9.6 hereof; provided
---------
further, however, that if any amount offset pursuant to the foregoing
------- -------
proviso is subsequently collected by ▇▇▇▇▇▇, the next payment due to the
Shareholder pursuant to Section 2.1(g) shall be increased by the amount of
such collection; provided further, that with regard to this Section 2.1(f)
----------------
and Section 2.1(g), amounts collected by Real-Tool or ▇▇▇▇▇▇ after the
date hereof from any customer of Real-Tool with respect to any account
receivable shall be applied on a first in, first out basis to the oldest
account receivable due from such customer.
(g) Commencing on the date hereof, quarterly
payments, due no later than January 15, April 15, July 15 and October 15
of each year, equal to the amount of revenues collected with respect to
accounts receivable of Real-Tool the invoice date of which is more than
sixty (60) days prior to the Business Day immediately prior to the date
hereof for
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the preceding calendar quarter, minus any amounts paid by ▇▇▇▇▇▇ or an
Affiliate thereof with respect to accounts payable of Real-Tool (other
than any amounts paid pursuant to Section 2.1(f) hereof) the invoice date
of which is more than sixty (60) days prior to the Business Day
immediately prior to the date hereof for the preceding calendar quarter.
To the extent that the foregoing computation results in a negative number,
that amount shall be carried forward to the following month to reduce the
amount otherwise due to the Shareholder. The Shareholder shall be liable
to ▇▇▇▇▇▇ for any amount by which total amounts paid by ▇▇▇▇▇▇ in respect
of such accounts payable exceed the amounts collected by ▇▇▇▇▇▇ in respect
of such accounts receivable.
(h) On the date hereof, an amount to be specified
pursuant to the Side Letter, which the Shareholder shall represent to be
fifty percent (50%) of the legal fees (excluding disbursements) of the
Shareholder and Real-Tool relating to the transactions contemplated
hereby; provided, that the amount payable by ▇▇▇▇▇▇ in connection pursuant
--------
to this Section 2.1(h) shall not exceed Twelve Thousand Five Hundred
Dollars ($12,500).
ARTICLE III
CONSIDERATION FOR RELATED AGREEMENTS
3.1 Consideration for Noncompetition Agreement. ▇▇▇▇▇▇ is
-------------------------------------------
contemporaneously herewith paying to the Shareholder as consideration for
the noncompetition agreement set forth in Section 7.4 hereof, Fifty
Thousand Dollars ($50,000), payable by bank treasurer's check or wire
transfer.
3.2 Consideration for Right of First Negotiation. ▇▇▇▇▇▇ is
---------------------------------------------
contemporaneously herewith paying to the Shareholder as consideration for
the right of first negotiation set forth in Section 7.3 hereof, Fifty
Thousand Dollars ($50,000), payable by bank treasurer's check or wire
transfer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to ▇▇▇▇▇▇ as
follows:
4.1 Organization and Good Standing. Real-Tool is a corporation
-------------------------------
duly organized, validly existing and in good standing under the laws of
the Commonwealth of Virginia and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now conducted. Real-Tool is not qualified to do business as a
foreign corporation in any other state. Real-Tool has an authorized
capital consisting of one thousand (1000) shares of Real-Tool Common
Stock, of which one hundred (100) shares are outstanding, all of which
outstanding shares are validly issued, fully paid and non-assessable.
There are no options, warrants, rights, stockholder agreements or other
instruments or agreements outstanding giving any Person the right to
-5-
acquire any shares of capital stock of Real-Tool or any other equity
interest in Real-Tool, nor are there any commitments to issue or execute
any such option, warrants, rights, instruments or agreements. The minute
books and stock records of Real-Tool are complete and accurate and all
signatures included therein are the genuine signatures of the persons
whose signatures are required. The Shareholder has delivered to ▇▇▇▇▇▇
true, correct and complete copies of the certificate of incorporation
(certified by the Clerk of the State Corporation Commission of the
Commonwealth of Virginia) and by-laws (certified by the secretary,
assistant secretary or other appropriate officer) of Real-Tool.
4.2 Authorization of Agreement. The Shareholder has all
---------------------------
requisite power, authority and legal capacity to execute and deliver this
Agreement and each other agreement, document or instrument or certificate
contemplated by this Agreement or to be executed by the Shareholder in
connection with the consummation of the transactions contemplated by this
Agreement (collectively, the "Seller Documents"), and to consummate the
transactions contemplated hereby and thereby. This Agreement and each of
the Seller Documents have been duly and validly executed and delivered by
the Shareholder and each other party thereto (other than ▇▇▇▇▇▇) and
(assuming the due authorization, execution and delivery by ▇▇▇▇▇▇ if a
party thereto) this Agreement and each of the Seller Documents constitutes
the legal, valid and binding obligations of the Shareholder and each other
party thereto (other than ▇▇▇▇▇▇), enforceable against such Person in
accordance with its respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity).
4.3 Subsidiaries and Other Interests. Real-Tool does not have
---------------------------------
any Subsidiaries and does not own any equity interests in any Person.
4.4 Conflicts; Consents of Third Parties.
-------------------------------------
(a) Neither the execution and delivery by the
Shareholder of this Agreement and any of the Seller Documents, the
consummation by the Shareholder of the transactions contemplated hereby
and thereby, nor compliance by the Shareholder with any of the provisions
hereof or thereof will (i) conflict with, violate, result in the breach or
termination of, constitute a default under, or give rise to any right of
acceleration under, any Contract to which Real-Tool or the Shareholder is
a party or by which Real-Tool or the Shareholder or any of their
properties or assets is bound; (ii) violate any Law or Order of any
Governmental Body by which Real-Tool or the Shareholder is bound; or (iii)
result in the creation of any Lien upon the properties or assets of Real-Tool
or the Shareholder.
(b) No waiver, Order or Permit, or declaration or filing
with or notification to, any Person or Governmental Body is required on
the part of Real-Tool or the Shareholder in connection with the execution
and delivery of this Agreement or the Seller Documents, the compliance by
Real-Tool or the Shareholder with any of the provisions hereof or thereof,
or the consummation of the transactions contemplated hereby or thereby.
-6-
4.5 Officers, Directors; Bank Accounts. Schedule 4.5 is a
-----------------------------------
correct and complete list of all directors of Real-Tool, all officers of
Real-Tool, all bank accounts and safe deposit boxes of Real-Tool and all
persons authorized to sign checks drawn on such accounts and to have
access to such safe deposit boxes.
4.6 Ownership and Transfer of Assets. All of the assets of
---------------------------------
which Real-Tool is the owner are set forth in reasonable detail on
Schedule 4.6 hereto (the "Assets"). Real-Tool is the owner of the Assets
free and clear of any and all Liens. Upon the consummation of the
transactions contemplated hereby, Real-Tool will continue to have good,
valid and marketable title to all of the Assets, free and clear of all
Liens, except for those Assets (including the Excluded Intellectual
Property (as defined in Section 4.12 below)) identified on Schedule 4.6 as
the "Excluded Assets," which Excluded Assets have been distributed by
Real-Tool to the Shareholder immediately prior to the execution of this
Agreement.
4.7 Ownership of Real-Tool Common Stock. The Shareholder owns
------------------------------------
all of the outstanding shares of Real-Tool Common Stock. The Shareholder
has good, marketable and unencumbered title to such shares, free and clear
of all Liens, security interests, pledges, claims, options and rights of
others. Upon the consummation of the transactions contemplated hereby,
▇▇▇▇▇▇ will have good, marketable and unencumbered title to such shares,
free and clear of all Liens, security interests, pledges, claims, options
and rights of others.
4.8 Financial Statements. The Shareholder has delivered to
---------------------
▇▇▇▇▇▇ (and such materials are attached hereto as Schedule 4.8) copies of
(i) the internally prepared unaudited balance sheets of Real-Tool as at
December 31, 1994, 1995 and 1996 and (ii) the internally prepared
unaudited statements of income and of cash flows of Real-Tool for the
years then ended (such statements are referred to herein as the "Financial
Statements"). Each of the Financial Statements has been prepared in
conformity with the practices consistently applied by Real-Tool without
modification of the accounting principles used in the preparation thereof,
and presents fairly the financial position, results of operations and cash
flows of Real-Tool as at the dates and for the periods indicated. For the
purposes hereof, the balance sheet of Real-Tool as at December 31, 1996 is
referred to as the "Balance Sheet" and December 31, 1996 is referred to as
the "Balance Sheet Date." ▇▇▇▇▇▇ expressly acknowledges that Real-Tool
has informed it that the Financial Statements have not been reviewed,
compiled, or audited by a certified public accountant, and ▇▇▇▇▇▇
expressly acknowledge its awareness that the accounting methods used may
not be in accordance with generally accepted accounting principles.
4.9 No Undisclosed Liabilities. Except as set forth on Schedule
---------------------------
4.9, Real-Tool has no indebtedness, obligations or liabilities, whether
related to tax or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent, or otherwise, except as
and to the extent reflected in the Balance Sheet or in this Agreement or
any Schedule.
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4.10 Taxes.
-----
(a) Real-Tool has prepared and filed the Tax Returns listed
on Schedule 4.10 for the periods shown thereon. The Tax Returns
constitute all United States and Virginia tax returns required to be filed
by or with respect to Real-Tool or its assets, and the Tax Returns have
been properly prepared and duly and timely filed with the appropriate
taxing authorities in the jurisdictions in which such Tax Returns are
required to be filed. The Tax Returns are true, complete and correct in
all material respects. Real-Tool has duly and timely paid all Taxes that
are due, or claimed or asserted by any taxing authority to be due, from or
with respect to it for periods covered by such Tax Returns.
(b) Real-Tool has duly and timely withheld from employee
salaries, wages and other compensation and has paid over to the
appropriate taxing authorities all amounts required to be so withheld on
or prior to the date hereof and paid over for all periods under all
applicable laws.
(c) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection or assessment of, Taxes
due from or with respect to Real-Tool for any taxable period.
(d) All deficiencies asserted or assessments made as a
result of any examinations by the Internal Revenue Service or any other
taxing authority of the Tax Returns of or covering or including Real-Tool
have been fully paid, and there are no other audits or investigations by
any taxing authority in progress, nor has Real-Tool received any notice
from any taxing authority that it intends to conduct such an audit or
investigation.
(e) Real-Tool is not a foreign person within the meaning of
Section 1445 of the Code.
(f) No claim has been made by a taxing authority in a
jurisdiction where Real-Tool does not file Tax Returns such that it is or
may be subject to taxation by that jurisdiction.
(g) No property owned on the date hereof by Real-Tool will
be required to be treated as being (i) owned by another Person pursuant to
the provisions of Section l68(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately prior to the enactment of the Tax
Reform Act of 1986 or (ii) tax-exempt use property within the meaning of
Section 168(h)(1) of the Code.
(h) No property owned on the date hereof by Real-Tool is
subject to a Section 467 rental agreement.
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(i) Real-Tool is not a party to any tax sharing or similar
agreement or arrangement (whether or not written) pursuant to which it
will have any obligation to make any payments after the date hereof.
(j) The performance of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional
or subsequent event) result in any payment that would constitute an
"excess parachute payment" within the meaning of Section 280G of the Code.
(k) There are no liens with respect to Taxes upon any of the
assets of Real-Tool.
(l) Real-Tool has never been a member of an affiliated group
of corporations filing a consolidated, combined or unitary Tax Return.
(m) Real-Tool is not required to file any foreign tax
returns nor be subject to any foreign tax.
(n) No consent under Section 341(f)(1) of the Code with
respect to Real-Tool has been filed or will be filed at any time.
(o) As of the first day of its most recently completed
taxable year, Real-Tool had adjusted inventories as required by Section
263A of the Code. Schedule 40-1 sets forth the amount of each adjustment,
if any, required under said Section 263A and the regulations thereunder.
(p) Real-Tool has not utilized for income tax purposes any
investment tax credits which would be subject to recapture at the date
hereof or thereafter.
(q) There is no plan or intention on the part of the
Shareholder to dispose of the stock of Buyer received by him pursuant to
the transactions contemplated hereby except as permitted by this
Agreement.
4.11 Real Property. Schedule 4.11 sets forth a complete list of
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all interests in real property owned or leased by Real-Tool. The parties
acknowledge and agree that the lease for 4137 square feet of space located
in Valley Industrial Park at ▇▇▇-▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ has
been assigned by Real-Tool to the Shareholder immediately prior to the
execution of this Agreement, and that the Shareholder has agreed to assume
and perform the obligations of Real-Tool, as tenant, thereunder, and to
indemnify and hold ▇▇▇▇▇▇ harmless against any liability with respect
thereto.
-9-
4.12 Intangible Property.
-------------------
(a) Schedule 4.12 contains a complete and correct list of
each patent, trademark, trade name, service ▇▇▇▇ and copyright or other
intellectual property (collectively, the "Intellectual Property") owned or
used by Real-Tool, including without limitation the name "Real-Tool,"
which is the only name used by Real-Tool in the operation of the Business,
as well as all registrations thereof and pending applications therefor,
and each license or other agreement relating thereto. Except as set forth
on Schedule 4.12, each of the foregoing is owned by Real-Tool, free and
clear of all Liens and is in good standing and does not conflict with the
rights of any other Person. ▇▇▇▇▇▇ expressly acknowledges and agrees that
certain Intellectual Property (the "Excluded Intellectual Property") not
used in connection with the Business has been assigned by Real-Tool to the
Shareholder immediately prior to the date hereof. ▇▇▇▇▇▇ further
acknowledges that the Shareholder, in his individual capacity, is the
owner and developer of certain other intellectual property listed on
Schedule 4.6, and which is not related to the Business (the "Excluded
Intellectual Property"), and ▇▇▇▇▇▇ expressly acknowledges and agrees that
Real-Tool has no right, title or claim in and to any ideas, inventions,
development stage work or other intellectual property developed (or under
development) by the Shareholder and not expressly listed on Schedule
5.12(a) There have been no claims made and neither the Shareholder nor
Real-Tool has received any notice or has any reason to believe that any of
the foregoing rights of Real-Tool in the Intellectual Property (other than
the Excluded Intellectual Property) is invalid or conflicts with the
asserted or unasserted rights of others. Real-Tool possesses all patents,
patent licenses, trade names, trademarks, service marks, brand marks,
brand names, copyrights, know-how, formulae and other proprietary and
trade rights necessary for the conduct of the Business as now conducted,
not subject to any restrictions and without any conflict with the rights
of others, and Real-Tool has not forfeited or otherwise relinquished any
such patent, patent license, trade name, trademark, service ▇▇▇▇, brand
▇▇▇▇, brand name, copyright, know-how, formulae or other proprietary right
necessary for the conduct of the Business as conducted on the date hereof.
Except as it may be required to maintain such Intellectual Property,
neither the Shareholder, Real-Tool nor any Affiliate thereof is under any
obligation to pay any royalties or similar payments. Real-Tool is the
registered owner of the United States and foreign Patents set forth
opposite their names on Schedule 4.12 and have applications pending with
the U.S. Patent Office and foreign patents offices (as the case may be)
for the applications listed on Schedule 4.12 as being patents pending.
The Shareholder has no knowledge of any adverse claim of any kind with
respect to any of such patents or patent applications, nor does the
Shareholder have any knowledge, or reason to know, that a patent will not
issue on any such patent application. No process used by Real-Tool in the
Business or any product manufactured or sold by Real-Tool as part of the
Business infringes upon any patent, patent application, trademark or trade
name of any other party. Real-Tool has not done business at any address
other than the following addresses: Valley Industrial Park, ▇▇▇-▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.
4.13 Material Contracts. Schedule 4.13 sets forth all Contracts
------------------
to which Real-Tool is a party or by which it is bound, including, without
limitation: (i) Contracts with the Shareholder (or any Affiliates of the
-10-
Shareholder) or any current or former officer or director of Real-Tool;
(ii) Contracts with any labor union or association representing any
employee of Real-Tool; (iii) Contracts pursuant to which any Person is
required to purchase or sell a stated portion of its requirements or
output from or to another Person; (iv) Contracts for the sale or lease (as
lessor or lessee) of any real or personal property whether or not in the
ordinary course of business or for the grant to any Person of any
preferential rights to purchase any of its assets; (v) partnership or
joint venture agreements; (vi) Contracts containing covenants of Real-Tool
or any of its Affiliates not to compete in any line of business or with
any Person in any geographical area or covenants of any other Person not
to compete with Real-Tool in any line of business or in any geographical
area; (vii) Contracts relating to the acquisition by Real-Tool of any
operating business or the capital stock of any other Person; or (viii)
Contracts relating to the borrowing of money. There have been made
available to ▇▇▇▇▇▇ true and complete copies of each of the Contracts.
Except as set forth on Schedule 4.13, each of the Contracts and other
agreements is in full force and effect and is the legal, valid and binding
obligation of each party thereto, enforceable against such party in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Except as set forth on Schedule 4.13,
Real-Tool is not in default under any Contract, nor, to the knowledge of
the Shareholder, is any other party to any Contract in default thereunder
in any material respect.
4.14 Employee Benefits. Schedule 4.14 sets forth a complete and
-----------------
correct list of (i) all "employee benefit plans" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any other severance pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, stock purchase arrangements or
policies, life insurance, scholarship or other employee benefit plan,
program or arrangement maintained by Real-Tool or to which Real-Tool has
any liability (contingent or otherwise) with respect to employees,
officers, directors or shareholders of Real-Tool ("Employee Benefit
Plans"). None of the Employee Benefit Plans constitutes a multiple
employer plan as defined in Section 4063 and 4064 of ERISA ("Multiple
Employer Plans"), (ii) a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) ("Multiemployer Plans") or (iii) a "benefit plan,"
within the meaning of Section 5000(b)(l) of the Code providing continuing
benefits after the termination of employment (other than as required by
Section 4980B of the Code or Part 6 of Title I of ERISA and at the former
employee's or his beneficiary's sole expense).
4.15 Labor. Real-Tool is not party to any labor or collective
-----
bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of Real-Tool. There are no unfair
labor practice charges, grievances or complaints pending or, to the best
knowledge of the Shareholder, threatened by or on behalf of any employee
or group of employees of Real-Tool.
4.16 Litigation. Except as set forth in Schedule 4.16, there is
----------
no suit, action, proceeding, investigation, claim or order pending or, to
-11-
the knowledge of the Shareholder, threatened, against Real-Tool (or, to
the knowledge of the Shareholder, pending or threatened against any of the
officers, directors or key employees of Real-Tool with respect to their
business activities on behalf of Real-Tool), or to which Real-Tool is
otherwise a party, before any court, or before any Governmental Body; nor,
to the knowledge of the Shareholder, is there any reasonable basis for any
such action, proceeding, or investigation. Real-Tool is not subject to
any Order of any Governmental Body and Real-Tool is not engaged in any
legal action to recover monies due it or for damages sustained by it.
4.17 Compliance with Laws. Real-Tool possesses all Permits of and
--------------------
from all Governmental Bodies necessary to own or lease its respective
properties and assets and to conduct the business in which it is engaged.
Except as set forth on Schedule 4.17, no proceeding has been threatened or
commenced that seeks to, or could reasonably be anticipated to, cause the
suspension, modification, revocation or withdrawal of any Permit.
Real-Tool is currently, and at all times has been, in material compliance
with all Laws applicable to it. Real-Tool has not received any written or
oral communication alleging that Real-Tool or the operations thereof may
be in violation of any Law or any Permit, or may have any liability under
any Law.
4.18 Insurance. Schedule 4.18 sets forth a complete and accurate
---------
list of all policies of insurance of any kind or nature covering Real-Tool
or any of its employees, properties or assets, including, without
limitation, policies of life, disability, fire, theft, workers
compensation, employee fidelity and other casualty and liability
insurance. All such policies are in full force and effect and Real-Tool
is not in default of any provision thereof. Real-Tool has not received
notice from any issuer of any of such policies of such issuer's intention
to cancel or refusal to renew any policy issued by it.
4.19 Related Party Transactions. Except as set forth on Schedule
--------------------------
4.19, Real-Tool has not borrowed any moneys from and has no outstanding
indebtedness or other similar obligations to the Shareholder or any of its
Affiliates. Except as set forth on Schedule 4.19 [reflect the year-end
bonus and assets being removed prior to the date hereof], since the
Balance Sheet Date Real-Tool has not made any payments in cash or
otherwise (as a dividend, other distribution or otherwise), or made any
loans to an Affiliate and has not entered into any agreements with any
Affiliate. Except as set forth in Schedule 4.19, none of Real-Tool, or
any of its officers, employees or Affiliates (i) owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from or
has the right to participate in the profits of, any Person which is (A) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of
Real-Tool, (B) engaged in a business related to the Business or (C) a
participant in any transaction to which Real-Tool is a party or (ii) is a
party to any Contract or transaction with Real-Tool.
4.20 Actions since Balance Sheet Date; Shareholder's Equity.
------------------------------------------------------
There has been no Material Adverse Change since the Balance Sheet Date.
Except as shown on Schedule 4.20, or as contemplated by this Agreement,
since the Balance Sheet Date, Real-Tool:
-12-
(a) has not taken any action outside of the ordinary and
usual course of business; provided, that the payment by Real-Tool of a
--------
year-end bonus to the Shareholder for the year ended December 31, 1996
shall not be deemed to be outside the ordinary course of business for the
purposes of this Section 4.20(a) or Section 4.20(d) below;
(b) has not borrowed any money or become contingently liable
for any obligation or liability of others;
(c) has paid all of its debts and obligations as they became
due;
(d) has not incurred any debt, liability or obligation of
any nature to any party except for obligations arising from the purchase
of goods or the rendition of services in the ordinary course of business;
(e) has not knowingly waived any right of substantial value;
and
(f) has used its best efforts to preserve its business
organization intact, to keep available the services of its employees, and
to preserve its relationships with its customers, suppliers and others
with whom it deals.
4.21 No Misrepresentation. No representation or warranty of
--------------------
Real-Tool or the Shareholder contained in this Agreement or in any
schedule hereto or in any certificate or other agreement or instrument
furnished by Real-Tool or the Shareholder to ▇▇▇▇▇▇ pursuant to the terms
hereof contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained herein or
therein not misleading. There are no material facts relating to
Real-Tool, the Business or the Assets that have not been disclosed in
writing to ▇▇▇▇▇▇.
4.22 Financial Advisors. Except as set forth on Schedule 4.22, no
------------------
Person has acted, directly or indirectly, as a broker, finder or financial
advisor for Real-Tool or the Shareholder in connection with the
transactions contemplated by this Agreement and no Person is entitled to
any fee or commission or like payment in respect thereof.
4.23 Securities Representations.
--------------------------
(a) The Shareholder is a resident of the Commonwealth of
Virginia, and is an "accredited investor" as that term is in Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the "1933
Act").
(b) The Shareholder has read the Securities Reports. ▇▇▇▇▇▇
has made available to the Shareholder all documents that the Shareholder
has requested relating to the ▇▇▇▇▇▇ Shares, and has provided answers to
all of the Shareholder's questions concerning the ▇▇▇▇▇▇ Shares. In
addition, the Shareholder has had an opportunity to discuss the ▇▇▇▇▇▇
Shares with representatives of ▇▇▇▇▇▇ and to ask questions of them.
Without limiting the foregoing, the Shareholder understands and
acknowledges that neither ▇▇▇▇▇▇ nor anyone acting on its behalf has made
-13-
any representations or warranties other than those contained herein
respecting ▇▇▇▇▇▇ or the future conduct of ▇▇▇▇▇▇'▇ business or of
Real-Tool's business, and the Shareholder has not relied upon any
representations or warranties other than those contained herein in the
belief that they were made on behalf of ▇▇▇▇▇▇.
(c) The Shareholder recognizes that receipt of the ▇▇▇▇▇▇
Shares involves certain risks, including without limitation those set
forth in the Registration Statement on the Form S-3 that is one of the
Securities Reports and has sufficient knowledge to understand all such
risks.
(d) The Shareholder hereby agrees to not sell, or otherwise
transfer, in the aggregate, more than fifty thousand (50,000) ▇▇▇▇▇▇
Shares during any calendar quarter.
(e) The Shareholder is acquiring the ▇▇▇▇▇▇ Shares to be
issued to him without a view to any distribution or resale thereof, other
than a distribution or resale that, in the opinion of counsel, which
opinion is satisfactory to ▇▇▇▇▇▇, may be made without violating the
registration provisions of the 1933 Act or applicable Virginia securities
laws. The ▇▇▇▇▇▇ Shares are "restricted securities" within the meaning of
Rule 144 under the 1933 Act and have not been registered under the 1933
Act and therefore must be held indefinitely unless they are subsequently
registered under the 1933 Act or an exemption from registration is
available.
(f) The Shareholder understands that there shall be endorsed on
the certificate evidencing the ▇▇▇▇▇▇ Shares delivered contemporaneously
herewith a legend substantially similar to the following:
"THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
'1933 ACT'), OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION
AND ARE 'RESTRICTED SECURITIES' AS DEFINED BY RULE 144 UNDER
THE 1933 ACT. THE SHARES MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR DISTRIBUTED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT REGISTERING THE SHARES UNDER THE 1933
ACT, OR IN LIEU THEREOF, AN OPINION OF COUNSEL, WHICH OPINION
IS SATISFACTORY TO THE ISSUER OF THE SHARES, TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACTS."
-14-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇▇
▇▇▇▇▇▇ hereby represents and warrants to the Shareholder that:
5.1 Organization and Good Standing. ▇▇▇▇▇▇ is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
5.2 Authorization of Agreement. ▇▇▇▇▇▇ has full corporate power
--------------------------
and authority to execute and deliver this Agreement and each other
agreement, document, instrument or certificate contemplated by this
Agreement or to be executed by ▇▇▇▇▇▇ in connection with the consummation
of the transactions contemplated hereby and thereby (the "▇▇▇▇▇▇
Documents"), and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by ▇▇▇▇▇▇ of this
Agreement and each ▇▇▇▇▇▇ Document have been duly authorized by all
necessary corporate action on behalf of ▇▇▇▇▇▇. This Agreement and each
▇▇▇▇▇▇ Document has been duly executed and delivered by ▇▇▇▇▇▇ and
(assuming the due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement and each ▇▇▇▇▇▇ Document when
so executed and delivered constitute the legal, valid and binding
obligations of ▇▇▇▇▇▇, enforceable against ▇▇▇▇▇▇ in accordance with their
respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought
in a proceeding at law or in equity).
5.3 Conflicts; Consents of Third Parties.
------------------------------------
(a) Except as set forth on Schedule 5.3 hereto, none of the
execution and delivery by ▇▇▇▇▇▇ of this Agreement and of the ▇▇▇▇▇▇
Documents, the consummation by ▇▇▇▇▇▇ of the transactions contemplated
hereby and thereby or compliance by ▇▇▇▇▇▇ with any of the provisions
hereof or thereof will (i) conflict with, or result in the breach of, any
provision of the certificate of incorporation or by-laws of ▇▇▇▇▇▇, (ii)
conflict with, violate, result in the breach or termination of, constitute
a default under, or give rise to any right of acceleration under, any
Contract to which ▇▇▇▇▇▇ is a party or by which ▇▇▇▇▇▇ or its properties
or assets is bound or (iii) violate any Law or Order of any Governmental
Body by which ▇▇▇▇▇▇ is bound.
(b) Except as set forth on Schedule 5.3, no waiver, Order or
Permit of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of ▇▇▇▇▇▇ in connection with
the execution and delivery of this Agreement or the ▇▇▇▇▇▇ Documents or
the compliance by ▇▇▇▇▇▇ with any of the provisions hereof or thereof, or
the consummation of the transactions contemplated hereby or thereby.
-15-
5.4 Financial Advisors. No Person has acted, directly or
------------------
indirectly, as a broker, finder or financial advisor for ▇▇▇▇▇▇ in
connection with the transactions contemplated by this Agreement and no
person is entitled to any fee or commission or like payment in respect
thereof.
5.5 No Misrepresentation. No representation or warranty of
--------------------
▇▇▇▇▇▇ contained in this Agreement or in any schedule hereto or in any
certificate or other agreement or instrument furnished by ▇▇▇▇▇▇ to the
Shareholder pursuant to the terms hereof (including, without limitation,
the Securities Reports) contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE VI
CONTINUATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Subject to Article VIII hereof, all representations and warranties
made in this Agreement shall survive the consummation of the transactions
provided for in this Agreement for a period of time equal to the
applicable statutes of limitations. Each warranty and representation
contained herein is independent of all other warranties and
representations contained herein (whether or not covering an identical or
a related subject matter) and must be independently and separately
complied with and satisfied. Exceptions or qualifications to any
warranties or representations contained herein shall not be construed as
exceptions or qualifications to any other warranty or representation. No
such representation or warranty shall be deemed to have been waived,
affected or impaired by any investigation made by any party to this
Agreement.
ARTICLE VII
COVENANTS
7.1 Effect of Investigation. Except as expressly otherwise
-----------------------
provided in this Agreement, no investigation by ▇▇▇▇▇▇ prior to or after
the date of this Agreement shall diminish or obviate any of the material
representations, warranties, covenants or agreements of the Shareholder
contained in this Agreement or the Seller Documents.
7.2 Preservation of Records. Subject to Section 7.7 hereof
-----------------------
(relating to the preservation of Tax records), the Shareholder and ▇▇▇▇▇▇
agree that each of them shall preserve and keep the records held by them
relating to the Business for a period of three (3) years from the date
hereof and shall make such records and personnel available to the other as
may be reasonably required by such party in connection with, among other
things, any insurance claims by, Legal Proceedings against or governmental
investigations of Real-Tool or ▇▇▇▇▇▇ or any of their respective
Affiliates or in order to enable the Shareholder or ▇▇▇▇▇▇ to comply with
their respective obligations under this Agreement and each other
agreement, document or instrument contemplated hereby. In the event
-16-
either the Shareholder or ▇▇▇▇▇▇ wishes to destroy such records after that
time, such party shall first give ninety (90) days prior written notice to
the other and such other party shall have the right at its option and
expense, upon prior written notice given to such party within that ninety
(90) day period, to take possession of the records within one hundred and
eighty (180) days after the date of such notice.
7.3 Right of First Negotiation. If the Shareholder or any
--------------------------
Affiliate thereof or any Person in whom the Shareholder has, directly or
indirectly, more than a five percent (5%) interest (collectively, a
"Related Person") desires to manufacture or distribute a product, other
than the Snow Guards, that is related to ▇▇▇▇▇▇'▇ current product line as
of the date hereof (a "Related Product") or to sell any or all rights to
any Related Product, the Shareholder or such Related Person shall give
notice to ▇▇▇▇▇▇ of such desire and shall attempt to negotiate in good
faith for a period of at least ninety (90) days to reach an agreement with
▇▇▇▇▇▇ whereby ▇▇▇▇▇▇ would become the exclusive worldwide distributor of
such Related Product (or would purchase all rights to such Related
Product, if applicable); provided, that nothing herein shall limit the
--------
right of the Shareholder or any Affiliated Entity (as defined below) to
manufacture or distribute Related Products directly or through an
Affiliated Entity (including the outsourcing of the manufacture of such
Related Products where the Shareholder or an Affiliated Entity will market
and distribute such Related Products) without being subject to the
provisions provided for herein. An "Affiliated Entity" is an entity at
least a majority of the equity and voting rights of which are owned by the
Shareholder and no part of the balance of such equity or voting rights are
owned by a competitor of ▇▇▇▇▇▇. During such negotiations, neither the
Shareholder nor any Related Person shall negotiate with regard to the
manufacture or distribution of the applicable Related Product with any
other Person (except that the Shareholder may consult with counsel or
other advisors in conducting negotiations with ▇▇▇▇▇▇), nor shall the
Shareholder or any Related Person at any time after the termination of
such negotiations enter into any agreement for the distribution of (or, if
applicable, sale of the rights to) such Related Product with any Person
other than ▇▇▇▇▇▇ unless on terms more favorable to the Shareholder or the
Related Person than those offered by ▇▇▇▇▇▇ without first offering such
terms to ▇▇▇▇▇▇ with ▇▇▇▇▇▇ having ten (10) Business Days to accept such
offer; provided, that in determining whether the terms offered by such
--------
Person other than ▇▇▇▇▇▇ are more favorable to the Shareholder than the
terms offered by ▇▇▇▇▇▇, the Shareholder shall be entitled to consider the
dollar amount of any guarantees offered by such Person in addition to the
percentage of sales to which the Shareholder would be entitled pursuant to
the terms offered by such other Person.
7.4 Noncompetition Agreement.
------------------------
(a) Duration and Extent of Noncompetition Agreement. For a
-----------------------------------------------
period of fifteen (15) years from the date hereof, the Shareholder shall
not (as principal, partner, director, officer, agent, employee, consultant
or otherwise) directly or indirectly engage in (except as an employee or
consultant of ▇▇▇▇▇▇ or an Affiliate of ▇▇▇▇▇▇), or directly or indirectly
be financially interested in, any business that is engaged in the
manufacture, sale or distribution of snow guards, snow bars or other snow
-17-
stopping equipment anywhere in the world. Nothing in the foregoing
sentence shall be deemed, however, to prevent Shareholder from owning
securities of ▇▇▇▇▇▇, or of any other publicly-owned corporation engaged
in any such business, provided that the total amount of securities of each
class owned by Shareholder in such other publicly-owned corporation does
not exceed five percent (5%) of the outstanding securities of such class.
(b) Remedies for Breach. The Shareholder acknowledges that the
-------------------
restrictions contained in Section 7.4(a) are reasonable and necessary in
order to protect ▇▇▇▇▇▇'▇ legitimate interests and that any violation
thereof would result in irreparable injury to ▇▇▇▇▇▇. The Shareholder
therefore acknowledges and agrees that, in the event of any violation
thereof, ▇▇▇▇▇▇ shall be authorized and entitled to obtain, from any court
of competent jurisdiction, preliminary and permanent injunctive relief as
well as an equitable accounting of all profits or benefits arising out of
such violation, which rights and remedies shall be cumulative and in
addition to any other rights or remedies to which ▇▇▇▇▇▇ may be entitled.
In the event that Section 7.4(a) above is held to be in any respect an
unreasonable restriction upon the Shareholder, then the court so holding
may reduce the territory to which it pertains and/or the period of time in
which it operates, or effect any other change to the extent necessary to
render such subparagraph enforceable by said court.
(c) Extension of Noncompetition Agreement. In the event of
-------------------------------------
any breach or violation of the restriction contained in Section 7.4(a)
above, the period therein specified shall ▇▇▇▇▇ during the time of any
violation thereof and that portion remaining at the time of commencement
of any violation shall not begin to run until such violation has been
fully and finally cured.
7.5 Shareholder's Agreement to Provide Services. The Shareholder
-------------------------------------------
hereby agrees to provide, subsequent to the date hereof, for no additional
consideration, transition services (including services relating to
customers and maintenance) to ▇▇▇▇▇▇ on an as-needed basis at the request
of ▇▇▇▇▇▇ for up to forty (40) hours. Any travel time incurred by the
Shareholder at ▇▇▇▇▇▇'▇ request pursuant to this Section 7.5 shall be
counted against the hour limit contained herein and ▇▇▇▇▇▇ shall pay all
reasonable costs of lodging, food and transportation incurred by the
Shareholder at ▇▇▇▇▇▇'▇ request.
7.6 Production of Snow Guards. ▇▇▇▇▇▇ agrees that at all times
-------------------------
that it produces Snow Guards it shall employ in such manufacture or
productions materials of a quality that meets or exceeds current
standards. ▇▇▇▇▇▇ further agrees to actively undertake diligent sales
promotional efforts in a cost-effective manner consistent with its
promotion of other ▇▇▇▇▇▇ products (as determined by ▇▇▇▇▇▇ in its
reasonable discretion) with regard to the sale of the Snow Guards in the
United States and elsewhere as appropriate for a period of fifteen (15)
years from the date hereof.
7.7 Cooperation with Respect to Tax Returns and Audits. The
--------------------------------------------------
Shareholder and ▇▇▇▇▇▇ agree to furnish or cause to be furnished to each
other, upon request, and each at their own expense, as promptly as
-18-
practicable, such information (including access to books and records) and
assistance as is reasonably necessary for the filing of any Tax Return,
for the preparation for any audit, and for the prosecution or defense of
any claim, suit or proceeding relating to any adjustment or proposed
adjustment with respect to Taxes, including providing additional
information and explanations of any material provided hereunder. With
respect to the books and records referred to in the preceding sentence,
each of the Shareholder and ▇▇▇▇▇▇ agrees to retain any such books and
records within its possession until six (6) months after the expiration of
the applicable statute of limitations. After such time, the Shareholder
or ▇▇▇▇▇▇, as the case may be, may dispose of such books and records,
provided that prior to such disposition, the Shareholder or ▇▇▇▇▇▇, as the
case may be, shall provide the other with a reasonable opportunity to take
possession of such books and records, at no cost or expense. The parties
recognize that in the event of any audit, assessment or adjustment with
respect to a Tax Return relating to periods prior to the date hereof, the
Shareholder may have indemnity liability under Article XIII. Accordingly,
▇▇▇▇▇▇ agrees to notify the Shareholder of any notices of audit, proposed
assessment or adjustment, and to allow the Shareholder to control the
negotiation and settlement thereof as provided in Section 8.5 hereof;
provided, that with respect to any such negotiation or settlement, ▇▇▇▇▇▇
--------
shall have the right to participate therein (with counsel of its own
choosing) or to review correspondence or negotiations by the Shareholder
with any Governmental Body; provided, further, that the Shareholder will
-------- -------
not settle, compromise or abandon any appeal, negotiation or other effort
to dispute such an audit, assessment or adjustment if such abandonment
would affect the Tax position of ▇▇▇▇▇▇ or any Affiliate thereof with
regard to any period ending after the date hereof, without the prior
written consent of ▇▇▇▇▇▇.
7.8 Tag-Along Rights. Neither the President nor the Chairman of
----------------
the Board of ▇▇▇▇▇▇ shall at any time during which the Shareholder owns at
least one-quarter of the ▇▇▇▇▇▇ Shares received pursuant to Section 2.1(a)
of this Agreement, transfer ▇▇▇▇▇▇ Shares beneficially owned by them as
part of a transaction pursuant to which a majority of the ▇▇▇▇▇▇ Shares
outstanding as of the effective date of such transaction are transferred
to any Person, unless the Shareholder is given the opportunity, by
ten (10) days prior notice of the material terms of such transaction, to
transfer in connection with such transaction, on the same terms as apply
to the Chairman of the Board or the President of ▇▇▇▇▇▇, such percentage
of his ▇▇▇▇▇▇ Shares as is equal to the greater of (a) the percentage of
▇▇▇▇▇▇ Shares owned by the Chairman of the Board of ▇▇▇▇▇▇ being
transferred pursuant to the transaction or (b) the percentage of the
▇▇▇▇▇▇ Shares owned by the President of ▇▇▇▇▇▇ being transferred pursuant
to the transaction.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by the Shareholder. Subject to the limits
----------------------------------
set forth in Section 8.2 hereof, the Shareholder shall indemnify, hold
harmless, and, upon request, defend, ▇▇▇▇▇▇, its Affiliates and its
officers, directors and employees, equity holders, agents and
-19-
representatives, from and against any and all losses, claims, actions,
suits, damages, liabilities, judgments, deficiencies, penalties, fines,
forfeitures, and the costs and expenses incident thereto, including,
without limitation, reasonable costs of defense, settlement and attorneys'
and experts' fees arising from or relating to:
(a) a breach of this Agreement by the Shareholder;
(b) a claim by a third party that, without regard to the
merits of the claim, would constitute such breach;
(c) any liabilities and obligations of, or claims against,
Real-Tool or the Shareholder, existing at and prior to (or, as to the
Shareholder, subsequent to) the date hereof (whether absolute, accrued,
contingent or otherwise), including, but not limited to, any claim by any
taxing authority and any warranty claim related to the Snow Guards or any
other product sold by Real-Tool prior to the date hereof; and
(d) any claim by a third party that ▇▇▇▇▇▇'▇ ownership or
use of the Assets, or sale of the Snow Guards, or any portion thereof,
infringes any rights or interests of the third party.
8.2 Limitations of Liability of the Shareholder.
-------------------------------------------
Notwithstanding the provisions of Section 8.1, the liability of
Shareholder for any breaches of representations and warranties under this
Agreement shall be limited as follows:
(a) Products Liability. ▇▇▇▇▇▇ acknowledges that Real-Tool
------------------
has existing products liability insurance, which insurance ▇▇▇▇▇▇ and
Real-Tool may elect to continue or replace with other coverage at their
election. ▇▇▇▇▇▇ hereby expressly waives any and all claims against the
Shareholder for claims or liabilities which may arise based upon products
liability, whether relating to Snow Guards sold prior to or after the date
hereof.
(b) Materiality Threshold. With respect to claims under Section
---------------------
8.1(a) hereof, (i) the Shareholder shall not be liable with regard to such
claims unless the aggregate amount of such claims exceeds Twenty Thousand
Dollars ($20,000) (except that claims with respect to breach of ongoing
obligations under Article VII and with respect to the payment of amounts
due under Section 2.1 hereof shall give rise to liability without regard
to the limitations of this Section 8.2(a)); provided, that if the
--------
aggregate amount of such claims exceeds Twenty Thousand Dollars ($20,000),
the Shareholder shall be liable for such entire amount; provided, however,
------- -------
that the Shareholder shall be liable for any claims by third parties or
relating to Taxes without regard to the limitations of this Section
8.2(a).
(c) Liability Cap. The Shareholder's total liability for
-------------
claims under Section 8.1(a) hereof shall not exceed the total amount of
all consideration received pursuant to this Agreement, including cash and
-20-
▇▇▇▇▇▇ Shares, which for the purposes of this Article XIII shall be valued
at the Market Price (as defined below) on the date of the claim for
indemnification (except that with respect to any ▇▇▇▇▇▇ Shares sold by the
Shareholder at least thirty (30) days prior to the date of such claim,
such ▇▇▇▇▇▇ Shares shall be valued at the amount for which they were
sold). "Market Price" shall mean, as of any day, the closing sales price
of the ▇▇▇▇▇▇ Shares on the principal national securities exchange on
which the ▇▇▇▇▇▇ Shares are then listed or, if the ▇▇▇▇▇▇ Shares are not
then listed on a national securities exchange, then the closing sales
price of the ▇▇▇▇▇▇ Shares on such day as reported on the Nasdaq National
Market or the Nasdaq SmallCap Market, as applicable of the Nasdaq Stock
Market, Inc. ("Nasdaq"), or, if the ▇▇▇▇▇▇ Shares are not then included on
Nasdaq, then the average of the closing bid and ask prices of the ▇▇▇▇▇▇
Shares on such day in the over-the-counter market as reported by Nasdaq
or, if such prices are not reported by Nasdaq, then as reported by the
National Quotation Bureau, Inc., or any successor organization.
(d) Time Limit. Except for claims with respect to Section
-----------
4.10 hereof (prior period tax liabilities), which shall be governed by the
applicable statute of limitations, and Section 4.12 hereof (ownership of
the Primary Patent), the Shareholder's liability for claims made by ▇▇▇▇▇▇
under Section 8.1 (except for claims relating to breach of ongoing
obligations under Article VII) shall terminate one (1) year after the date
hereof; provided, that the Shareholder shall remain liable for claims with
--------
respect to which ▇▇▇▇▇▇ has provided written notice of the particulars
thereof to the Shareholder prior to the expiration of such one (1) year
period. In the case of claims with respect to Section 4.10, Section 8.6
shall govern. In the case of claims with respect to Section 4.12, the
Shareholder's liability for claims made by ▇▇▇▇▇▇ under Section 8.1 shall,
after one (1) year from the date hereof, be limited in amount to future
amounts payable under Section 2.1(e). There shall be no time limit for
claims with respect to fraud.
8.3 Indemnification by ▇▇▇▇▇▇. ▇▇▇▇▇▇ shall indemnify, hold
-------------------------
harmless, and, upon request, defend, the Shareholder from and against any
and all losses, claims, actions, suits, damages, liabilities, judgments,
deficiencies, penalties, fines, forfeitures, and the costs and expenses
incident thereto, including, without limitation, costs of defense,
settlement and attorneys' and experts' fees arising from or relating to:
(a) a breach of this Agreement by ▇▇▇▇▇▇;
(b) a claim by a third party (other than a claim arising
with respect to product liability) that, without regard to the merits of
the claim, would constitute such breach; and
(c) any liabilities and obligations of, or claims against,
▇▇▇▇▇▇ arising subsequent to the date hereof and not subject to
indemnification under Section 8.1 hereof.
Provided, however, that with respect to claims under clause
-------- -------
(a) of this Section 8.3, (i) ▇▇▇▇▇▇ shall not be liable with regard to
such claims unless the aggregate amount of such claims exceeds Twenty
Thousand Dollars ($20,000) (except that claims with respect to breach of
-21-
ongoing obligations under Article VII and with respect to the payment of
amounts due under Section 2.1 hereof shall give rise to liability without
regard to the limitations of this Section 8.3(a)); (ii)if the aggregate
amount of such claims exceeds Twenty Thousand Dollars ($20,000), ▇▇▇▇▇▇
shall be liable for such entire amount; and (iii)▇▇▇▇▇▇'▇ total liability
for such claims shall not exceed the total amount of all consideration
paid to the Shareholder pursuant to this Agreement, including cash and
▇▇▇▇▇▇ Shares, which for the purposes of this Article XIII shall be valued
at the Market Price on the date of the claim for indemnification.
8.4 Remedies Cumulative. Except as herein expressly provided,
-------------------
the remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
8.5 Indemnification Procedures.
--------------------------
(a) In the event that any claim shall be asserted by any
party against any other party that, if sustained, would result in a claim
for indemnity under the provisions of this Article XIII, the party against
whom such claim is asserted shall, within a reasonable time after learning
of such claim, notify the party responsible for such indemnification (the
"Indemnitor") of such claim, and shall extend to the Indemnitor a
reasonable opportunity to defend against such claim, at the Indemnitor's
sole expense and through legal counsel reasonably acceptable to the party
requesting such indemnification (it being stipulated that Wolf, Block,
▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, current
patent counsel for Real-Tool and the Shareholder, are deemed acceptable),
provided that the Indemnitor proceed in good faith, expeditiously and
diligently. No determination shall be made pursuant to such claim for
indemnity while such defense is still being made until the earlier of (A)
the resolution of said claim by the Indemnitor with the claimant, or (B)
the termination of the defense by the Indemnitor against such claim or the
failure of the Indemnitor to prosecute such defense in good faith in an
expeditious and diligent manner. The party asserting the claim for
indemnification shall be entitled to rely upon the opinion of its counsel
as to the occurrence of either of said events. Such party shall, at its
option and expense (and without right of reimbursement), have the right to
participate in any defense undertaken by the Indemnitor with legal counsel
of its own selection. No settlement or compromise of any claim which may
result in a claim for indemnity may be made by the Indemnitor without the
prior written consent of the party asserting the claim for indemnification
unless (A) prior to such settlement or compromise Indemnitor acknowledges
in writing its obligation to pay in full the amount of the settlement or
compromise and all associated expenses and (B) the party asserting the
claim for indemnification is furnished with security reasonably
satisfactory to the party asserting the claim for indemnification that
Indemnitor will in fact pay such amount and expenses.
(b) In the event that the party asserting the claim for
indemnification asserts the existence of any claim for indemnification
under this Agreement, the party asserting the claim for indemnification
shall give written notice to the Indemnitor of the nature and amount of
the claim for indemnification asserted, which notice shall be accompanied
by, if the same has not been previously provided, copies of supporting
documents or calculations. If the Indemnitor, within a period of thirty
(30) days (or sixty (60) days, if such longer period is reasonably
-22-
requested to permit evaluation of the claim) after the giving of notice by
the the party asserting the claim for indemnification, shall not give
written notice to the party asserting the claim for indemnification
announcing its intent to contest such assertion of the party asserting the
claim for indemnification (such notice by the Indemnitor being hereinafter
called the "contest notice"), such assertion of the party asserting the
claim for indemnification shall be deemed accepted and the amount of the
claim for indemnification shall be deemed established. In the event,
however, that a contest notice is given to the party asserting the claim
for indemnification within said thirty (30) day period, then the contested
assertion shall be settled by arbitration to be held in accordance with
Section 9.7 hereof. The determination of the arbitrator(s) shall be
delivered in writing to the Indemnitor and the party asserting the claim
for indemnification and shall be final, binding and conclusive upon all of
the parties hereto, and the amount of the claim for indemnification, if
any, determined to exist, shall be deemed established.
(c) The party asserting the claim for indemnification and
the Indemnitor may agree in writing, at any time, as to the existence and
amount of a claim for indemnification, and, upon the execution of such
agreement such claim for indemnification shall be deemed established.
(d) The Indemnitor shall pay the amount of established
claims for indemnification to the party asserting the claim for
indemnification within five (5) days after the establishment thereof in
cash; provided, however, that if the Shareholder is the Indemnitor and
-------- -------
▇▇▇▇▇▇ is reasonably projected to make additional Earn Out Payments, and
the next Earn Out Payment due is reasonably anticipated to exceed the
amount of the established claim for indemnification, such payment shall be
made via offset against the next Earn Out Payment. Any amounts not paid
by Indemnitor when due under this subparagraph shall bear interest from
the due date thereof until the date paid at a floating interest rate that
is five (5) percentage points higher than the prime rate quoted by the
Wall Street Journal from time to time.
8.6 Indemnification for Taxes.
-------------------------
(a) (i) The Shareholder shall be liable for, and shall
indemnify ▇▇▇▇▇▇ and hold it harmless against, all Taxes of Real-Tool with
respect to periods ending on or before the date hereof, including, without
limitation, all Taxes of Real-Tool or the Shareholder attributable to the
transactions contemplated by this Agreement. Except as otherwise provided
in this Section 8.6, all such liability and the amount thereof shall be
determined under Sections 8.1, 8.2 and 8.5.
(ii) The Shareholder shall prepare and file the Tax
Returns of Real-Tool with respect to Taxes for the taxable year ended
December 31, 1996 (the "1996 Returns"). Prior to filing the 1996 Returns,
the Shareholder shall provide copies thereof to ▇▇▇▇▇▇, and shall allow
▇▇▇▇▇▇ five (5) Business Days to object to the 1996 Returns based on its
reasonable review thereof. The 1996 Returns shall be filed by certified
mail, return receipt requested, and the Shareholder shall provide to
▇▇▇▇▇▇ copies of the proof of mailing of the 1996 Returns and, when
available to the Shareholder, copies of proof of receipt of same by the
appropriate authority. The Shareholder shall also provide to ▇▇▇▇▇▇ proof
of payment, satisfactory to ▇▇▇▇▇▇ in its reasonable discretion, with
respect to the 1996 Returns; provided, that if the Shareholder does not
--------
-23-
cause the 1996 Returns to be filed and payment to be made with respect
thereto within ten (10) days of the date hereof, ▇▇▇▇▇▇ may prepare and
file Tax Returns with regard to such period, and the Shareholder shall be
liable for payment in connection with such Tax Returns in accordance with
Section 8.6(a)(iv) hereof.
(iii) The Shareholder has the right, with respect to
the taxable year beginning January 1, 1997, to make an election with
respect to Real-Tool under sec. 1362(a) of the Code.
(iv) All Tax Returns that are due after the date
hereof, but are for tax periods of Real-Tool ending on or before the date
hereof, shall be timely prepared by ▇▇▇▇▇▇ and filed by ▇▇▇▇▇▇, as
appropriate, with the appropriate authorities. Such Tax Returns shall be
subject to the reasonable review and approval by the Shareholder. Copies
of all such Tax Returns shall be made available to the Shareholder at
least twenty (20) business days prior to the date on which they are
required to be filed (including extensions). The Shareholder shall be
liable for all Taxes relating to such periods. The Taxes to be paid with
respect to such periods shall be paid by the Shareholder, by delivery to
▇▇▇▇▇▇ of the Shareholders' check in the amount of the Tax shown as due,
at least ten (10) days prior to the date that the Tax Return is due.
(v) (A) For any tax period of Real-Tool that includes
the date hereof but that does not end on the date hereof, ▇▇▇▇▇▇ shall
timely prepare and file with the appropriate authorities all Tax Returns
and shall pay the Taxes due with respect to such Tax Returns. Such Tax
Returns shall be subject to the reasonable review and approval by the
Shareholder. Copies of such returns shall be made available to the
Shareholder at least twenty (20) days before they are due. The
Shareholder shall pay to ▇▇▇▇▇▇ the excess of (1) a pro rated amount of
the Taxes of Real-Tool for any such period over (2) the amount of the
Taxes paid prior to the date hereof by Real-Tool with respect to such
period. Such payment by the Shareholder to ▇▇▇▇▇▇ shall be made at least
ten (10) days prior to the date the Tax Return is due.
(B) In the case of Taxes imposed upon or measured
by net income, the pro rated amount shall be the amount of the Taxes for
the period, multiplied by a fraction, the numerator of which shall be the
net income and gain of Real-Tool for that portion of the tax period ending
on the date hereof, and the denominator of which shall be the net income
and gain of Real-Tool for the entire period.
(C) In the case of all Taxes imposed upon or
measured by property or capital, the pro rated amount shall be based upon
the number of days in the period up to and including the date hereof
divided by the total number of days in the tax period.
(D) In the case of all Taxes other than those
imposed upon or measured by net income or property or capital, including
but not limited to gross receipts taxes, sales and use taxes and payroll
taxes, the pro rated amount shall be based upon the transactions occurring
on or before the date hereof.
-24-
(vi) Any liability for Taxes relating to Tax Returns not
filed on or before the date hereof shall not be subject to the limitations
on liability contained in the proviso clause of Section 8.1(d) hereof.
(b) Tax Information and Notifications
---------------------------------
(i) After the date hereof, the Shareholder and ▇▇▇▇▇▇
shall provide each other and their respective agents and representatives
timely access and reasonable assistance and cooperation during normal
business hours in making tax information relating solely to Real-Tool and
copies thereof relating to taxable periods of Real-Tool through and
including the date hereof available to each other and their respective
agents and representatives, including access for the timely filing of
short-period returns. All pertinent books of account, papers and records
relating solely to Real-Tool shall be retained either until the statute of
limitations to which they relate has expired by lapse of time or by the
terms of an agreement for extension of time or until such date as the
parties hereto shall have otherwise agreed and ending on or before the
date hereof.
(ii) The Shareholder and Real-Tool shall be liable on a
pro rata basis (determined as in subsection (a)(iii) above) for all
reasonable expenses, costs, fees (including attorney's and accountant's
fees) incurred by ▇▇▇▇▇▇ after the date hereof in connection with the
resolution of all tax disputes and tax audits of Real-Tool with respect to
any tax period which includes the date hereof but which does not end on
the date hereof. With respect to all other Taxes for which the
Shareholder or ▇▇▇▇▇▇ are liable, they shall be responsible for all of
▇▇▇▇▇▇'▇ costs in any tax disputes relating thereto. The Shareholder and
Real-Tool shall make payment of their share of such costs, expenses and
fees within fifteen (15) days after receipt of notice of such expenses
from ▇▇▇▇▇▇.
(ii) Except as otherwise provided in this subsection,
and notwithstanding anything to the contrary contained in subsection (a)
above, ▇▇▇▇▇▇ shall control resolution of any audit or investigation, and
any proceedings with taxing authorities, with respect to the Tax liability
occurring on or after the date hereof. However, ▇▇▇▇▇▇, at its sole
option, may extend to the Shareholder the opportunity to assume the
defense of the matter.
-25-
ARTICLE IX
MISCELLANEOUS
9.1 Certain Definitions.
-------------------
For purposes of this Agreement, the following terms shall
have the meanings specified in this Section 9.1:
"Affiliate" means, with respect to any Person, any other
---------
Person controlling, controlled by or under common control with such
Person.
"Business Day" means any day of the year on which federally
------------
chartered banking institutions in Philadelphia, Pennsylvania, are open to
the public for conducting business and are not required or authorized to
close.
"Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
"Contract" means any oral or written contract, agreement,
--------
indenture, note, bond, loan, instrument, lease, commitment or other
arrangement or agreement.
"Environmental Law" means any foreign, federal, state or
-----------------
local law, statute, regulation, code, ordinance, rule of common law or
other requirement in any way relating to the protection of human health
and safety or the environment as now or hereafter in effect including,
without limitation, the Comprehensive Environmental Response, Compensation
and Liability Act (42 U.S.C. sec. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. sec. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. sec. 6901 et seq.), the Clean
Water Act (33 U.S.C. sec. 1251 et seq.), the Clean Air Act (42 U.S.C. sec.
7401 et seq.), the Toxic Substances Control Act (15 U.S.C. sec. 2601 et
seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
sec. 136 et seq.), and OSHA, as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and all
analogous foreign, state or local laws.
"Governmental Body" means any government or governmental or
-----------------
regulatory body thereof, or political subdivision thereof, whether
federal, state, local or foreign, or any agency, instrumentality or
authority thereof, or any court or arbitrator (public or private).
"Hazardous Material" means any substance, material or waste
------------------
which is regulated by the United States or any state or local governmental
authority including, without limitation, petroleum and its by-products,
asbestos, and any material or substance which is defined as a "hazardous
-26-
waste," "hazardous substance," "hazardous material," "restricted hazardous
waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of Environmental
Law.
"Law" means any federal, state, local or foreign law (including
---
common law), statute, code, ordinance, rule, regulation or other
requirement, including, without limitation, any Environmental Law.
"Legal Proceeding" means any judicial, administrative or arbitral
----------------
actions, suits, proceedings (public or private), claims or governmental
proceedings.
"Lien" means any lien, pledge, mortgage, deed of trust, security
----
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or similar
agreement, encumbrance or any other restriction or limitation whatsoever.
"Material Adverse Change" means any material adverse change in the
-----------------------
Business, results of operations, prospects or condition (financial or
otherwise) of Real-Tool.
"Order" means any order, injunction, judgment, decree, ruling,
-----
writ, assessment or arbitration award.
"OSHA" means the Occupational Safety and Health Act of 1970, as
----
amended, and any other Federal, state or local statute, law, ordinance,
code, rule or regulation or judicial or administrative order or decree
regulating, relating to or imposing liability or standards of conduct
concerning employee safety and/or health, as now or at any time hereafter
in effect.
"Patents" means any and all United States or foreign patents owned
-------
by Real-Tool or the Shareholder, other than the Excluded Intellectual
Property.
"Primary Patent" means United States patent number 5,282,340.
--------------
"Permits" means any approvals, authorizations, consents, licenses,
-------
permits or certificates, including without limitation any Permits required
to handle Hazardous Material or otherwise required under any Environmental
Law.
"Person" means any individual, corporation, partnership, firm,
------
joint venture, association, joint-stock company, trust, unincorporated
organization, Governmental Body or other entity.
"Securities Reports" means, collectively, the Annual Report on
------------------
Form 10-K of ▇▇▇▇▇▇ for the year ended December 31, 1995, the Quarterly
-27-
Reports on Form 10-Q of ▇▇▇▇▇▇ for the periods ending March 31, June 30
and September 30, 1996, the Proxy Statement of ▇▇▇▇▇▇ dated July 8, 1996
and the Registration Statement of ▇▇▇▇▇▇ on Form S-3, as filed with the
United States Securities and Exchange Commission on November 7, 1996.
"Subsidiary" of a Person means any other Person of which a
----------
majority of the outstanding voting securities or other voting equity
interests are owned, directly or indirectly, by such Person.
"Taxes" means all taxes, charges, fees, levies, imposts, duties,
-----
and other assessments, including but not limited to any income,
alternative minimum or add-on tax, estimated, gross income, gross
receipts, sales, use, transfer, gains, transactions, intangibles, ad
valorem, value-added, franchise, registration, title, license, capital,
paid-up capital, profits, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, recording, real property, personal
property, Federal highway use, commercial rent, environmental, windfall
profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalties, or additions to tax, and any interest or penalties imposed with
respect to the filing, obligation to file or failure to file any Tax
Return, assessed by any federal, state (including the District of
Columbia), local, foreign (including possessions and territories of the
United States) government or agency.
"Tax Return" means any return, declaration, report, claim for
----------
refund, information return, statement, or other similar document relating
to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
9.2 Confidentiality. The Shareholder agrees to maintain as
---------------
confidential all non-public information received from ▇▇▇▇▇▇ and further
agrees not to trade in ▇▇▇▇▇▇'▇ securities on the basis of any such
information.
9.3 Expenses. The parties shall each bear their own expenses
--------
incurred in connection with the negotiation and execution of this
Agreement and each other agreement, document and instrument contemplated
by this Agreement and the consummation of the transactions contemplated
hereby and thereby.
9.4 Termination. This Agreement may be terminated by written
-----------
agreement of the parties hereto and in such event this Agreement shall
have no further force or effect and there shall be no liability to the
parties hereto.
9.5 Further Assurances. Each of the Shareholder and ▇▇▇▇▇▇
------------------
agrees to execute and deliver such other documents or agreements and to
take such other action as may be reasonably necessary or desirable,
without payment of further consideration, for the implementation of this
Agreement and the consummation of the transactions contemplated hereby.
-28-
9.6 Right of Set-Off. ▇▇▇▇▇▇ shall be entitled to set-off
----------------
against any amounts payable by ▇▇▇▇▇▇ pursuant to Sections 2.1(c), (e),
(f) and (g) any amounts owed by the Shareholder to ▇▇▇▇▇▇ pursuant to
this Agreement, including without limitation pursuant to Sections 2.1(f)
and (g) and Article XIII hereof; provided, that before asserting any
--------
rights of set-off pursuant to this Section 9.6, ▇▇▇▇▇▇ shall provide, no
later than ten (10) days before implementing such right, notice of its
intent to make such set-off, with a reasonable explanation of the reasons
therefor to the Shareholder; provided further, that with respect to any
-------- -------
right of set-off arising with respect to the claim of a third party
against ▇▇▇▇▇▇ (in accordance with the indemnification provisions of
Article XIII hereof), ▇▇▇▇▇▇ shall not assert such right of set-off if (a)
within ten (10) days of receiving the notice set forth in the above
proviso, the Shareholder agrees to defend such claim and to indemnify and
hold harmless ▇▇▇▇▇▇, in accordance with Article XIII hereof, with respect
to such claim; (b) the Shareholder demonstrates to ▇▇▇▇▇▇'▇ reasonable
satisfaction his ability to fulfill such obligations in a manner that does
not adversely affect ▇▇▇▇▇▇'▇ business; and (c) the Shareholder continues
to defend such claim in a manner that does not adversely affect ▇▇▇▇▇▇'▇
business.
9.7 Arbitration.
-----------
(a) The parties hereto waive their rights to seek remedies
in court, including any right to a jury trial, and agree that in the event
of any dispute arising between the parties, such dispute shall be settled
by arbitration to be conducted in Baltimore, Maryland in accordance with
the rules of the American Arbitration Association ("AAA") applying the
laws of Pennsylvania. Disputes will not be resolved in any other forum or
venue. The parties hereto understand that any party's right to appeal or
to seek modification of rulings in an arbitration is severely limited.
Any award rendered by the arbitrators shall be final and binding and
judgment may be entered upon it in any court of competent jurisdiction in
Pennsylvania, Virginia or any other applicable jurisdiction.
Notwithstanding the foregoing, the parties agree that they shall retain
the right to institute court actions for injunctive and other non-monetary
equitable relief.
(b) Any arbitration entered into with respect to the right
of first negotiation set forth in Section 7.3 hereof shall be conducted
pursuant to the most expedited procedures available under the rules of the
AAA.
(c) In connection with any dispute regarding calculation of
the amount of the Earn Out Payments due under Section 2.1(e) hereof, the
parties will specify that the arbitrators appointed with respect to such
dispute be reputable certified public accountants, to the extent such
appointments are reasonably practicable.
(d) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or
proceeding by the mailing of a copy thereof in accordance with the
provisions of Section 9.12.
-29-
9.8 Default. Should any party to this Agreement default in the
-------
payment of any amount due under this Agreement, and remain in default
thereof ten (10) days after receiving written notice of such default, the
amount of such default shall accrue interest from the date first owed
until the date paid at a floating interest rate that is five (5)
percentage points higher than the prime rate quoted by the Wall Street
Journal from time to time.
9.9 Entire Agreement; Amendments and Waivers. This Agreement
----------------------------------------
(including the schedules and exhibits hereto), the Seller Documents and
the ▇▇▇▇▇▇ Documents represent the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof and
can be amended, supplemented or changed, and any provision hereof or
thereof can be waived, only by written instrument making specific
reference to this Agreement or specific Seller Document or ▇▇▇▇▇▇ Document
signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. No action taken pursuant to
this Agreement, including without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty,
covenant or agreement contained herein. The waiver by any party hereto of
a breach of any provision of this Agreement or specific Seller Document or
▇▇▇▇▇▇ Document shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies provided by law.
9.10 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to principles of conflicts of law.
9.11 Table of Contents and Headings. The table of contents and
------------------------------
section headings of this Agreement are for reference purposes only and are
to be given no effect in the construction or interpretation of this
Agreement.
9.12 Notices. All notices and other communications under this
-------
Agreement shall be in writing and shall be deemed given when delivered
personally, sent by nationally recognized overnight courier or mailed by
certified mail, return receipt requested, to the parties (and shall also
be transmitted by facsimile to the Persons receiving copies thereof) at
the following addresses (or to such other address as a party may have
specified by notice given to the other party pursuant to this provision):
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If to ▇▇▇▇▇▇:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, President
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇ (ext. 120)
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wolf, Block, ▇▇▇▇▇▇ and ▇▇▇▇▇-▇▇▇▇▇
Twelfth Floor, Packard Building
Fifteenth & Chestnut Streets
Philadelphia, Pennsylvania 19102
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
If to Real-Tool or the Shareholder:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, III
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No: (▇▇▇) ▇▇▇-▇▇▇▇
9.13 Severability. If any provision of this Agreement is invalid
------------
or unenforceable, the balance of this Agreement shall remain in effect.
9.14 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed
by all of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as
of the date first written above.
▇▇▇▇▇▇ HOLDINGS, LTD.
By:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
JOINDER
--------
The undersigned hereby joins in the above Stock Purchase Agreement
for purposes of agreeing to Section 2.1(e) of the Stock Purchase
Agreement.
REAL-TOOL, INC.
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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