EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF NOVEMBER 10, 1998
BY AND AMONG
APOGEE ENTERPRISES, INC.
AS SELLER
AND
COMPUDYNE CORPORATION,
AS PURCHASER
STOCK PURCHASE AGREEMENT
THIS AGREEMENT dated as of November 10, 1998 is made and entered into
by and between APOGEE ENTERPRISES, INC., a Minnesota corporation ("Seller"), and
COMPUDYNE CORPORATION, a Nevada corporation ("Purchaser"). Capitalized terms not
otherwise defined herein have the meanings set forth in Section 10.01.
STATEMENT OF PURPOSE
WHEREAS, Seller owns all of the outstanding capital stock of ▇▇▇▇▇▇▇
Industries, Inc., a Delaware corporation ("▇▇▇▇▇▇▇"), and Norshield
Corporation., an Alabama corporation ("Norshield" and each of ▇▇▇▇▇▇▇ and
Norshield is herein individually referred to as the "Company" and collectively
as the "Companies"), that own, manage and operate a number of separate
businesses which collectively are engaged in the design, manufacturer,
installation and distribution of locks, bullet resistant glass, metal window
surrounds, electronic control systems and similar products that are integrated
into detention security systems under the names ▇▇▇▇▇▇▇ Industries, Norshield,
▇▇▇▇▇, EMSS, Airteq and Trentech (with the exception of the Voice Track
business of ▇▇▇▇▇▇▇ (as hereinafter defined), the foregoing businesses are
herein referred to as the "Business");
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser all of the outstanding capital stock of the Companies to
enable Purchaser to acquire substantially all of the assets primarily used in,
held for use or held for the benefit of the Business except as hereinafter
provided;
WHEREAS, in connection with such purchase and sale, the Companies will
retain certain liabilities of the Companies and the Companies and Purchaser will
indemnify and hold Seller and its Affiliates harmless with respect to such
liabilities;
WHEREAS, in connection with such purchase and sale, Seller will assume
certain liabilities of the Companies and Seller will indemnify and hold the
Companies and the Purchaser harmless with respect thereto; and
WHEREAS, Purchaser and Seller desire to enter into this Agreement to
effect the purchase and sale of the capital stock of the Companies pursuant to
the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 Purchase and Sale. Seller agrees to sell to Purchaser, and
Purchaser agrees to purchase from Seller, all of the outstanding shares of
capital stock of each of the Companies (collectively the "Shares"). As a result
of the purchase of the Shares, Purchaser will acquire (through the Companies)
the right, title and interest of the Companies in and to the following assets at
the Closing on the terms and subject to the conditions set forth in this
Agreement:
(a) Transferred Projects. All Contracts for Construction
Projects related to the Business (collectively the "Transferred
Projects") which (i) are in process as of October 31, 1998 as listed on
Schedule 1.01(a)(i) and have not been completed by the Closing Date,
(ii) have been awarded as of the date hereof for bids submitted prior
to October 31, 1998, but have not yet been contracted as listed on
Schedule 1.01(a)(ii) and have not been completed by the Closing Date,
(iii) have been contracted but not commenced as of October 31, 1998, as
listed on Schedule 1.01(a)(iii) and have not been completed by the
Closing Date, (iv) are awarded or contracted after October 31, 1998 for
bids that have been submitted as of October 31, 1998 as listed on
Schedule 1.01(a)(iv) and have not been completed by the Closing Date,
and (v) are bid in the Ordinary Course of Business after the date
hereof and awarded or contracted, whether before or after the Closing
and, if contracted prior to the
2
Closing Date, have not been completed by the Closing Date, in all
cases, regardless of whether or not either of the Companies, as opposed
to Seller or another Affiliate of Seller other than the Companies, is
or are parties to such Contracts. A Transferred Project will not be
"completed" unless all amounts under the Contract have been billed. In
the event any Contract for a Transferred Project is not in the name of
one of the Companies but is in the name of an Affiliate of Seller,
Seller will take or cause such Affiliate to take, without undue
liability or expense to Seller or such Affiliate, such action as either
of the Companies or Purchaser may reasonably request to enable
Purchaser to have the benefits of such Contract after Closing; provided
that the Purchaser shall (i) cause the Companies to indemnify Seller
and its Affiliates with respect to any liabilities or obligations under
the Contracts for such Transferred Projects, and (ii) indemnify Seller
and its Affiliates with respect to any liabilities or obligations under
the Contracts for such Transferred Projects.
(b) Customer Orders. All Contracts for Customer Orders for
which payment in full has not been received as of the Closing Date.
(c) Acquired Assets. Except for the Excluded Assets and as
disclosed on Schedule 2.06, the term "Acquired Assets" as used in this
Agreement shall include the assets, properties and rights used by
either of the Companies or by Seller or one of its Affiliates other
than the Companies primarily in the Business or reflected on the
balance sheet as of August 29, 1998 for the Business referred to in
Section 2.04(a) subject to changes in the Ordinary Course of Business
prior to the Closing Date, including but not limited to the following:
(i) tangible personal property (such as supplies,
packaging goods, equipment, manufactured and purchased parts,
machinery, furniture, automobiles, trucks, tractors, trailers,
tools, jigs, and dies but excluding inventories),
(ii) inventories of raw materials, supplies,
manufactured and processed parts, work in process, packaging
goods and finished goods (the "Inventories"),
(iii) accounts receivable, notes, chattel paper and
other receivables,
(iv) agreements, contracts, indentures, mortgages,
instruments, liens, guarantees, other similar arrangements,
and rights thereunder, including without limitation,
agreements with sales agents and representatives,
(v) Government Authorizations held by the Companies
to the extent transferable,
(vi) intellectual property, goodwill associated
therewith, licenses and sublicenses granted and obtained with
respect thereto and with respect to the use of computer
software used by each Company, and rights to protection of
interests therein under the laws of all jurisdictions,
(vii) the trade names, trademarks, service marks and
patents listed in
3
Schedule 2.22(c) and Schedule 2.22(d) together with all other
intangible property, including customer lists,
(viii) real property, fixtures, improvements, and
fittings thereon, leaseholds and subleaseholds therein, and
easements, rights-of-way, and other appurtenants thereto (such
as appurtenant rights in and to public streets),
(ix) leases, subleases, and rights thereunder,
(x) prepayments, prepaid expenses, and deferred items
and deposits, and
(xi) Books and Records.
1.02 Excluded Assets. Notwithstanding any other provision of this
Agreement, the Acquired Assets shall exclude and, prior to Closing (or after
Closing and upon the request of Seller), the Companies shall assign or transfer
to Seller or an Affiliate of Seller, as designated by Seller, the following
assets, properties and rights of the Companies (the "Excluded Assets"):
(a) all Inter-Company Contracts with Affiliates that do not
relate to the Transferred Projects;
(b) Cash as of the Closing Date;
(c) all Inter-Company Receivables payable to either of the
Companies by Seller or any of its Affiliates as of the Closing Date;
(d) all assets primarily used in the Voice Track business of
▇▇▇▇▇▇▇ as set forth on Schedule 1.02(d);
(e) all insurance policies maintained by the Companies, Seller
or Seller's Affiliates;
(f) all refunds or credits, if any, of Taxes owed to either of
the Companies as of the Closing Date (except to the extent such refunds
or credits are included in the Closing Balance Sheet);
(g) any rights, including indemnification and claims for
recovery under litigation of either of the Companies, against third
parties arising out of or relating to events prior to Closing or
projects or Customer Orders completed prior to Closing (including any
retainage not yet paid with respect to such projects subject to
litigation as of the Closing Date), except any such rights relating to
Transferred Projects;
(h) the rights of either of the Companies in, to and under all
Contracts which are the responsibility of Seller under Section 8.02;
(i) all bank accounts, lockboxes and safety boxes, credit card
accounts and all
4
related records;
(j) all computer programs for the accounting and payroll
systems owned by or licensed to an Affiliate of the Companies and used
in the Business; and
(k) the other excluded assets listed on Schedule 1.02(k)
hereto.
1.03 Company Liabilities. After the Closing, the Companies will be
responsible and obligated for and will timely pay and discharge the following
Liabilities (the "Company Liabilities") relating to the Business:
(a) all Liabilities reflected on the Closing Date Balance
Sheet;
(b) all obligations arising on or after Closing Date under (i)
all Contracts of either of the Companies required to be disclosed to
Purchaser under Article II of this Agreement if so disclosed, and (ii)
all Contracts of either of the Companies primarily relating to the
Business or the Acquired Assets and not required to be disclosed under
Article II;
(c) all Liabilities arising or resulting from or related to
the Transferred Projects and Customer Orders, including but not limited
to completion of such projects or orders and all warranty claims with
respect to such projects or orders regardless of whether or not such
warranty claims relate to work performed prior to the Closing Date; and
(d) all Liabilities arising out of the Business as conducted
by the Companies or the Purchaser or their respective successors and
assigns on or after the Closing Date.
1.04 Seller Liabilities. "Seller Liabilities" shall mean all
liabilities and obligations of Seller and the Companies arising prior to the
Closing Date, whether such liabilities and obligations relate to payment,
performance or otherwise, are matured or unmatured, are known or unknown, are
contingent or non-contingent, are fixed or undetermined, or are present, future
or otherwise, other than the Company Liabilities. All of the Seller Liabilities
shall remain the sole responsibility of and shall be retained, paid, performed
or discharged solely by the Seller. Notwithstanding anything to the contrary
contained herein, and without limiting the foregoing, the following liabilities
and obligations of the Companies shall be considered Seller Liabilities for the
purposes of this Agreement (and the Closing Date Balance Sheet shall not include
any Seller Liabilities):
(a) any liability or obligation for the following Taxes: (A)
any Taxes arising as a result of the operation of the Business or
ownership of the Acquired Assets before the Closing Date, (B) any
deferred Taxes of any nature as of the Closing Date, and (C) any taxes
arising from the transfer (whether prior to, or after the Closing Date)
to Seller or an Affiliate of Seller as designated by Seller of any of
the Excluded Assets in accordance with Section 1.02 hereof;
(b) any Environmental, Health and Safety Liabilities arising
out of or relating
5
to the operation of the Business or ownership or operation of real
property prior to the Closing Date;
(c) any liability or obligation arising out of or relating to
any employee grievance commenced or relating to periods prior to the
Closing Date;
(d) any liability or obligation to indemnify, reimburse or
advance amounts to any officer, director, employee or agent of the
Companies for matters arising prior to the Closing Date, including
without limitation contributions to the applicable retirement plans for
employees of the Business earned through the Closing Date and any
severance or other payments with respect to any employee of the
Business terminated prior to the Closing, but excluding (i) those
relating to Transferred Projects or Customer Orders, and (ii) those
relating to employee bonuses as accrued on the Balance Sheet and will
be accrued on the Closing Balance Sheet in accordance with Seller's
practice for accruing bonuses as reflected on the Balance Sheet;
(e) any liability or obligation arising out of or resulting
from the non-compliance by either of the Companies with any Law or
Order prior to the Closing Date;
(f) any trade accounts payable that are delinquent as of the
Closing Date; and
(g) any Liability of either of the Companies to Seller shown
as "Intercompany Debt" on the balance sheets for the Business referred
to in Section 2.04(a).
1.05 Purchase Price. Subject to the adjustment under Section 1.07, the
purchase price for the Shares is Twenty-two Million Five Hundred Thousand U.S.
Dollars ($22,500,000.00) (the "Purchase Price"), payable as follows: (i)
Purchaser shall deliver the sum of Two Hundred Fifty Thousand U.S. Dollars
($250,000.00) into escrow simultaneously with the execution hereof pursuant to
the terms of an escrow agreement in form and substance substantially identical
to Exhibit A attached hereto (the "Escrow Agreement") which amount shall be
released to Seller, together with all interest earned thereon, upon consummation
of the transactions contemplated by this Agreement on the Closing Date; and (ii)
at Closing, Purchaser shall deliver to Seller the Purchase Price less the amount
delivered under clause (i) in the manner provided in Section 1.06.
1.06 Closing. The closing of the transactions contemplated by this
Agreement will take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.,
5500 Norwest Center, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at
such other place as Purchaser and Seller mutually agree, at 10:00 A.M. local
time, on the Closing Date. At the Closing: (i) Purchaser and Seller shall
deliver written instructions to the escrow agent under the Escrow Agreement to
pay the escrow funds held under the Escrow Agreement, together with all interest
earned thereon, to Seller by wire transfer of immediately available funds, and
(ii) Purchaser shall deliver to Seller the balance of the Purchase Price (as
preliminarily adjusted pursuant to Section 1.07(b) hereof) by wire transfer of
immediately available funds to such account as Seller may reasonably direct by
written notice delivered to Purchaser by Seller at least two Business Days
before the Closing Date. Simultaneously therewith, Seller will assign and
transfer to Purchaser good and valid title in and to the Shares and cause all of
the Acquired Assets to be free and clear of all Liens except Permitted
6
Liens. At the Closing, there shall be executed and delivered to Seller and
Purchaser the Administrative Services Agreement to be delivered pursuant to
Section 4.12, and the opinions, certificates, documents and instruments of
conveyance to be delivered under Articles VI and VII.
1.07 Adjustment to Purchase Price.
(a) No later than three (3) Business Days prior to the Closing
Date, Seller shall prepare and deliver to Purchaser a calculation of
the Net Working Capital (as defined below) estimated as of the opening
of business on the Closing Date (the "Estimated Net Working Capital").
The Estimated Net Working Capital shall be calculated in accordance
with GAAP, as applied on a consistent basis with the Financial
Statements provided to Purchaser pursuant to Section 2.04 hereof (the
"Working Capital Balance Sheet"); provided that there shall be no
reserve or accrual for warranty claims related to any projects which
are not Transferred Projects or Customer Orders. As used herein, the
term "Net Working Capital" shall mean an amount equal to the excess of
total current assets over total current liabilities of the Business
calculated in accordance with GAAP on a consistent basis with the
Working Capital Balance Sheet.
(b) If the Estimated Net Working Capital is less than
$16,352,196 ("Minimum Target Net Working Capital"), then the Purchase
Price payable to Seller at Closing shall be reduced by an amount equal
to the amount of such deficit (the "Estimated Working Capital Deficit
Adjustment"). If the Estimated Net Working Capital is in excess of
$19,180,349 (the "Maximum Net Working Capital" Purchaser shall pay to
Seller an amount equal to the amount of such excess (the "Estimated
Working Capital Surplus Adjustment").
(c) Within forty-five (45) days after the Closing Date, the
Purchaser will prepare and deliver to the Seller (i) a draft
consolidated balance sheet (the "Draft Closing Date Balance Sheet") for
the Business as of the Closing Date, including related schedules and
work papers, (ii) a computation and determination of the Net Working
Capital as of the Closing Date, and (iii) a computation and
determination of the Adjusted Purchase Price.
(d) If Seller has any objections to the Draft Closing Date
Balance Sheet, it will deliver a detailed statement describing such
objections to the Purchaser within fifteen (15) days of receipt
thereof. Purchaser and Seller will use reasonable efforts to resolve
any such objections among themselves. If the parties do not obtain a
final resolution within thirty (30) days after Purchaser has received
the statement of objections, Purchaser and Seller will select an
independent accounting firm mutually acceptable to them to resolve any
remaining objections. If Purchaser and Seller are unable to agree on
the choice of an accounting firm, they will select by lot a
nationally-recognized accounting firm which is not then currently and
has not provided the principal outside auditing services to any of the
parties hereto or any of their Affiliates within the past three (3)
years, which shall be jointly instructed by the Purchaser, on the one
hand, and the Seller, on the other hand, to determine the Net Working
Capital and the Adjusted Purchase Price in accordance with this
Agreement. (The accounting firm selected by either mutual agreement or
lot is herein referred to as the "Accountant".) The Accountant shall
deliver to each of Purchaser and Seller its
7
determinations within thirty (30) days after receiving the joint
instructions from Purchaser and Seller, and the determinations of the
Accountant will be set forth in writing and will be conclusive and
binding upon the parties. The expenses of the Accountant shall be borne
equally by Purchaser and Seller in amounts determined in reverse
proportion to the net benefit derived by each from any modification
resulting from the Seller's objection to the Draft Closing Balance
Sheet. The Purchaser will give the Seller the Draft Closing Date
Balance Sheet revised to reflect the Accountant's determinations. The
"Closing Date Balance Sheet" shall mean the Draft Closing Date Balance
Sheet, together with any revisions thereto pursuant to this Section
1.07, including the determination of the Accountant. The "Adjusted
Purchase Price" shall mean the Purchase Price, together with any
revisions thereto pursuant to this Section 1.07, including the
determination of the Accountant.
(e) For purposes of Seller's review of the Closing Date
Balance Sheet and the Adjusted Purchase Price, Purchaser will make
reasonably available to Seller and its accountants and other
representatives the work papers and backup materials used in preparing
the Draft Closing Date Balance Sheet at reasonable times and upon
reasonable notice at any time during (i) the preparation by Purchaser
of the Draft Closing Date Balance Sheet, (ii) the review by Seller of
the Draft Closing Date Balance Sheet, and (iii) the resolution by the
parties of any objections thereto.
(f) If the Net Working Capital as of the Closing Date is less
than the Minimum Net Working Capital by more than the Estimated Working
Capital Deficit Adjustment, Seller shall pay to Purchaser an amount
equal to the amount of such deficit over the Estimated Working Capital
Deficit Adjustment plus, if any, the Estimated Net Working Capital
Surplus Adjustment. If the Net Working Capital as of the Closing Date
is less than the Minimum Net Working Capital by less than the Estimated
Working Capital Deficit Adjustment, Purchaser shall pay to Seller the
difference between such actual deficit and the Estimated Working
Capital Deficit Adjustment. If Net Working Capital as of the Closing
Date exceeds Maximum Net Working Capital by more than the Estimated
Working Capital Surplus Adjustment, Purchaser shall pay to Seller an
amount equal to the amount of such excess over the Estimated Working
Capital Surplus Adjustment plus, if any, the Estimated Working Capital
Deficit Adjustment. If Net Working Capital as of Closing Date exceeds
the Target Net Working Capital by less than the Estimated Working
Capital Surplus Adjustment, Seller shall pay to Purchaser an amount
equal to the difference between the Estimated Working Capital Surplus
Adjustment and such actual excess amount. All payments to be made under
this Section 1.07(f) shall be made no later than five (5) Business Days
after the earliest to occur of (i) the 30th day after the Draft Closing
Date Balance Sheet shall have been given by Purchaser to Seller, if
Seller shall not have objected to the Draft Closing Date Balance Sheet
within such period; (ii) the first business day after which the
Purchaser and Seller have resolved any objection raised by Seller; or
(iii) the first business day after the date on which the determination
of the Accountant referred to in Section 1.06(d) above is given to
Purchaser and Seller.
1.08 Section 338(h)(10) Election and Allocation. Seller and Purchaser
agree to make a
8
joint election under Section 338(h)(10) of the Code to treat the sale of the
Shares as a sale of the assets of the Companies to Purchaser. The Adjusted
Purchase Price under this Agreement shall be allocated between each of the
Companies based on the net book value of each of the Companies as of the Closing
Date and then allocated in accordance with Schedule 1.08 hereto. After the
Closing, the parties shall make consistent use of the allocation specified in
Schedule 1.08 for all Tax purposes and in any and all filings, declarations and
reports with the IRS in respect thereof, including the reports required to be
filed under Section 1060 of the Code, if applicable, it being understood that
Purchaser shall prepare and deliver IRS Forms 8594 and 8023 to Seller within
forty-five (45) days after the Closing Date for Seller's review and approval if
such forms are required to be filed with the IRS. In any proceeding related to
the determination of any Tax, neither Purchaser nor Seller or their respective
Affiliates shall contend or represent that such allocation is not a correct
allocation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, as to itself and as to each of the Companies, hereby represents
and warrants to Purchaser (and with respect to Section 2.24(b), Purchaser
acknowledges and agrees) as follows as of the date hereof:
2.01 Organization and Good Standing.
(a) Seller is a corporation validly existing and in good
standing under the Laws of the State of Minnesota. Each Company is a
corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority
to conduct it business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform
all its obligations under the Contracts included in the Acquired
Assets. Each Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except as disclosed on
Schedule 2.01(a) and except for those jurisdictions in which the
failure to be qualified and in good standing would not have, and would
not reasonably be expected to have a Material Adverse Effect on the
Business.
(b) The Company has no subsidiaries except as disclosed on
Schedule 2.01(b), and does not own any shares of capital stock or other
securities of any other Person.
2.02 Enforceability; Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against it in accordance with its
terms. Upon the execution and delivery by Seller of the documents to be
executed and delivered by Seller at the Closing (collectively, the
"Transaction Documents"), each of the Transaction Documents will
constitute the legal, valid, and binding obligation of Seller,
enforceable against Seller in
9
accordance with its terms. Seller has the corporate power and authority
to execute and deliver this Agreement and the Transaction Documents to
which it is a party and to perform its obligations under this Agreement
and the Transaction Documents to which it is a party.
(b) Except as set forth in and subject to the provisions of
Schedule 2.02(b), neither the execution and delivery of this Agreement
nor the consummation or performance of any of the transactions
contemplated hereby will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a
violation or breach of (A) any provision of the organizational
documents of Seller, or (B) any resolution adopted by the
board of directors or the shareholders of Seller;
(ii) contravene, conflict with, or result in a
violation or breach of, or give any governmental body or other
Person the right to challenge any of the transactions
contemplated hereby or to exercise any remedy or obtain any
relief under, any Law or any Order to which Seller or either
Company, or any of the assets of either Company, may be
subject except where such contraventions, conflicts,
violations, breaches, and rights (A) would not, or would not
reasonably be expected to, in the aggregate have a Material
Adverse Effect on the Business, or (B) would occur as a result
of the identity or the legal or regulatory status of Purchaser
or its Affiliates;
(iii) contravene, conflict with, or result in a
violation or breach of any of the terms or requirements of, or
give any Governmental Authority the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by either Company or that otherwise
relates to the assets or the business of either Company except
where such contraventions, conflicts, violations, breaches,
and rights (A) would not, or would not reasonably be expected
to, in the aggregate have a Material Adverse Effect on the
Business; or (B) would occur as a result of the identity or
the legal or regulatory status of Purchaser or its Affiliates;
(iv) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person
the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract included in the Acquired
Assets except where such contraventions, conflicts,
violations, breaches and rights would not, or would not
reasonably be expected to, in the aggregate have a Material
Adverse Effect on the Business; or
(v) result in the imposition or creation of any Lien
upon or with respect to any of the Acquired Assets, except for
any imposition or creation of any Lien imposed by any action
of Purchaser or at Purchaser's direction.
10
(c) Except as set forth in Schedule 2.02(c), neither of the
Companies nor Seller is required to give any notice to or obtain any
consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the
transactions contemplated hereby except where failure to give such
notice or obtain such consent would not, or would not reasonably be
expected to, in the aggregate have a Material Adverse Effect on the
Business.
2.03 Capitalization. The authorized equity securities of ▇▇▇▇▇▇▇
consist of 1,000 shares of common stock, par value $.01 per share, of which 100
shares are issued and outstanding. The authorized equity securities of Norshield
consist of 10,000 shares of common stock, par value $.01 per share, of which
1,000 shares are issued and outstanding. Seller is and will be on the Closing
Date the record and beneficial owner of all of the shares of equity securities
of each Company issued and outstanding, free and clear of all Liens except for
any Liens to be released at the Closing. All of the outstanding equity
securities of each Company have been duly authorized and validly issued and are
fully paid and nonassessable. There are no contracts relating to the issuance,
sale, or transfer of any equity securities or other securities of either
Company. None of the securities of either Company was issued in violation of
Law. Except as set forth in Schedule 2.01(b), neither Company owns, or has any
right to acquire, any securities of any Person or any direct or indirect equity
or ownership interest in any other business.
2.04 Financial Statements. Prior to the execution of this Agreement,
Seller has delivered to Purchaser true and complete copies of the following
financial statements:
(a) the unaudited, consolidating balance sheets of the
Business dated as of February 28, 1996, 1997 and 1998, May 31 1998, and
August 29, 1998 (the latter of which is referred to herein as the
"Balance Sheet"); and
(b) the unaudited consolidating statements of income for the
Business for the year ended February 28, 1996, 1997 and 1998, and for
the quarterly periods ended May 31, 1998 and August 29, 1998.
Except as set forth on Schedule 2.04, all such financial statements were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods and present fairly the financial condition and results of operations of
the Business, as of the respective dates thereof and for the respective periods
covered thereby except for the absence of footnotes and normal year-end
adjustments which an audit would reveal and which will not have a Material
Adverse Effect on the Business.
2.05 Books and Records. The books of account and other financial
records of each Company, all of which have been made available to Purchaser, are
complete and correct in all material respects. The minute books of each Company
are complete and accurate in all material respects, and contain records of all
meetings held (and consents in lieu of meetings executed by) the shareholders
and the board of directors of each Company.
2.06 Sufficiency of Assets. Except as set forth on Schedule 2.06, the
Acquired Assets
11
constitute all of the assets, tangible and intangible, of any nature whatsoever,
required to operate the Business as currently operated by the Companies, except
for such assets the absence of which would not, or would not be reasonably
expected to, result in a Material Adverse Effect on the Business.
2.07 Description of Real Property.
(a) Owned Real Property. Schedule 2.07(a) contains a true and
correct legal description and common address of all tracts and parcels
of land owned by each Company or owned by an Affiliate of Seller and
used in the Business which will be owned by one of the Companies as of
the Closing Date (the "Real Property").
(b) Leased Real Property. Schedule 2.07(b) contains a true and
correct common address of all tracts and parcels of land leased by each
Company or leased by an Affiliate of Seller which, subject to the
consent of the lessor, if required, to the assignment of such lease by
such Affiliate to one of the Companies, will be leased by one of the
Companies as of the Closing Date, and a true and correct description
(by subject property, name of lessor and lease term) of all related
leases (the "Leases").
2.08 Leases. Except as disclosed on Schedule 2.08, each of the Leases
is a valid and binding obligation of the respective Company, is enforceable
against the respective Company in accordance with its terms and is, to Seller's
Knowledge, in full force and effect. There are no offsets or defenses by either
of the Companies or, to Seller's Knowledge, the other party thereto under the
Leases. There are no existing material defaults by either of the Companies, and
no events or circumstances have occurred which, with or without notice or lapse
of time or both, would constitute material defaults by either of the Companies,
under any of the Leases. Except as described in Schedule 2.08, the sale of the
Shares by Seller to Purchaser hereunder will not (i) permit the lessor to
accelerate the rent or cause the terms of any of the Leases to be renegotiated,
(ii) constitute a default under any of the Leases or (iii) require the consent
of the lessor under the Leases.
2.09 Title to Assets and Existing Evidence of Title to Real Property.
Each Company owns or will, as of the Closing Date, own good and marketable title
to all of the Real Property, and owns or will, as of the Closing Date, own all
of the other Acquired Assets owned by it, in each case free and clear of any
Liens, other than:
(a) Permitted Liens and as described on Schedule 2.09(a); and
(b) Liens described in Schedule 2.09(b), all of which will be
removed at or prior to the Closing.
Seller has delivered to Purchaser true and complete copies of all deeds,
existing title insurance policies and surveys of or pertaining to the Real
Property in Seller's or the Companies' possession.
2.10 Condition of Facilities. Except as disclosed on Schedule 2.10:
12
(a) Real Property. Use of the Real Property for the various
purposes for which it is presently being used is permitted as of right
under all material zoning laws and is not subject to "permitted
non-conforming" use or structure classifications. The Improvements are
in compliance with all Laws in all material respects, including zoning
and building laws. The Improvements are in good repair and in good
condition in all material respects, ordinary wear and tear excepted
and, to Seller's Knowledge, are free from patent and latent defects. To
Seller's Knowledge, no part of the Improvements encroaches on any real
property not included in the Real Property and there are no
Improvements primarily situated on adjoining property which encroach on
any part of the Real Property. To Seller's Knowledge, there is no
existing or proposed plan to modify or realign any street or highway or
any existing or proposed eminent domain proceeding that would result in
the taking of any material part of any Facility or that would
materially prevent or hinder the continued use of any Facility as
heretofore used in the conduct of the Business.
(b) Tangible Personal Property. The Tangible Personal Property
is in good repair and good operating condition in all material
respects, ordinary wear and tear excepted, and, to Seller's Knowledge,
is free from material latent and patent defects. All material Tangible
Personal Property is under the possession or control of the Companies
and their employees.
2.11 Accounts Receivable. All accounts receivable that are reflected on
the Balance Sheet or on the accounting records of the Company as of the Closing
Date represent or will represent valid obligations arising from sales actually
made, to be made, or services actually performed or to be performed by the
Company in the Ordinary Course of Business except for billing errors in the
Ordinary Course of Business that will not have a Material Adverse Effect on the
Business. No Inter-Company Receivables are reflected on the Balance Sheet or any
of the other financial statements described in Section 2.04 above. Schedule 2.11
contains a complete and accurate list of all accounts receivable as of the date
of the Balance Sheet, which list sets forth the aging of each such account
receivable. Since the date of the Balance Sheet, the Company has not changed its
normal credit and collection practices.
2.12 Inventories. Inventories now on hand that were purchased
subsequent to the date of the Balance Sheet were purchased in the Ordinary
Course of Business of the Company at a cost, to Seller's Knowledge, consistent
with market prices prevailing at the time of purchase.
2.13 Taxes. Subject to the disclosures on Schedule 2.13:
(a) Each Company, Seller or one of Seller's Affiliates has
duly filed or caused to be filed (or obtained valid, currently
effective extensions for filing set forth on Schedule 2.13) all
federal, state, local and foreign income, franchise, excise, payroll,
sales and use, property, provider, withholding and other tax returns,
reports, estimates and information and other statements or returns
which relate to the Business (including all federal income tax returns
for the consolidated group of which the Companies are a part) and which
are required to be filed by or on behalf of it pursuant to Law ("Tax
Returns").
13
All such Tax Returns were correct in all material respects as filed and
reflect in all material respects the federal, state, local and foreign
income, franchise, excise, payroll, sales and use, property, provider,
withholding and other taxes, duties, fees, imposts and governmental
charges (and charges in lieu of any thereof), together with interest,
and additions to tax and penalties required to be paid or collected by
(or allocable to) either Company (collectively "Taxes"). Seller, one of
Seller's Affiliates, or one of the Companies (i) has paid or caused to
be paid all Taxes as shown due on the Tax Returns and on any assessment
received by it with respect to the Business, and (ii) has properly and
fully recorded as accrued or deferred liabilities all Taxes for any
period from the date of the last reporting period covered by such Tax
Returns; provided, however, that any such accrued or deferred liability
shall be a Seller Liability in accordance with Section 1.04(a). Neither
Company nor Seller has received any written notice of any audit, or any
dispute or claim being threatened by any relevant taxing authority
concerning any such Tax Return or liability for such Taxes.
(b) There is no Tax sharing or allocation agreement that will
require any payment by either Company after the Closing Date except as
provided in Section 1.02(f) with respect to refunds of Taxes. Neither
Company is nor within the five years immediately preceding the Closing
Date has been an "S" corporation under the Code.
2.14 Employee Benefits. Seller and Purchaser acknowledge and agree
that, except for any multi-employer pension plan to which contributions are made
for union employees in the Business pursuant to a collective bargaining
agreement, all of the Employee Plans are Seller's plans and will be retained by
Seller after Closing so that after Closing such Employee Plans shall not be
applicable to the Transferred Employees and Purchaser will need to implement its
own employee benefit plans.
(a) Set forth on Schedule 2.14(a) is a complete and correct
list of all "employee benefit plans" as defined by Section 3(3) of
ERISA, all specified fringe benefit plans as defined in Section 6039D
of the Code, and all other bonus, incentive compensation, deferred
compensation, profit sharing, stock option, stock appreciation right,
stock bonus, stock purchase, employee stock ownership, savings,
severance, supplemental unemployment, layoff, salary continuation,
retirement, pension, health, life insurance, disability, accident,
group insurance, vacation, holiday, sick leave, fringe benefit or
welfare plan, and any other employee compensation or benefit plan,
agreement, policy, practice, commitment, contract, or understanding
(whether qualified or nonqualified, currently effective or terminated,
written or unwritten), and any trust, escrow or other agreement related
thereto, that (i) is maintained or contributed to by either Company or
any other corporation or trade or business controlled by, controlling,
or under common control with either Company (within the meaning of
Section 414 of the Code or Section 4001(a)(14) or 4001(b) of ERISA)
("ERISA Affiliate") and relating to employees of the Business, and (ii)
provides benefits, or describes policies or procedures applicable to
any current employee of either Company or the dependents of any
thereof, regardless of whether funded (the "Employee Plans").
(b) Seller has made available to Purchaser true, accurate and
complete copies of
14
(i) the documents comprising each Employee Plan (or, with respect to
any Employee Plan which is unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and
any other matters which relate to the obligations of the Company or any
ERISA Affiliate), (ii) all collective bargaining agreements pursuant to
which contributions are currently made or obligations incurred
(including both pension and welfare benefits) by either Company or with
respect to the employees of the Business, and (iii) all current summary
plan descriptions and employee handbooks regarding the Employee Plans.
(c) Full payment has been made of all amounts which are
required under the terms of each Employee Plan to be paid as
contributions by the Companies, Seller or Seller's Affiliates with
respect to the last day of the most recent fiscal year of such Employee
Plan ended on or before the date of this Agreement. No accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412
of the Code) has been incurred with respect to such Employee Plan,
whether or not waived provided that no representations are made as to
the accumulated deficiency status of any multi-employer plan as defined
in Section 3(37) of ERISA (the "Multi-Employer Plan"). Neither Company
is required to provide security to an Employee Plan under Section
401(a)(29) of the Code. Each Company, Seller or an Affiliate of Seller
has paid in full all required insurance premiums, subject only to
normal retrospective adjustments in the ordinary course, with regard to
the Employee Plans for policy years or other applicable policy periods
ending on or before the Closing Date. To the extent any such
retrospective adjustment results in a refund with respect to any period
ending on or prior to the Closing, such refund shall be an Excluded
Asset and to the extent such adjustment shall result in an obligation
with respect to any period ending on or prior to the Closing, such
obligation shall be a Seller Liability.
(d) Except as disclosed in Schedule 2.14(d), no Employee Plan,
if subject to Title IV of ERISA, has been completely or partially
terminated. The Pension Benefit Guaranty Corporation ("PBGC") has not
instituted or, to Seller's Knowledge, threatened a proceeding to
terminate any of the Employee Plans pursuant to Subtitle 1 of Title IV
of ERISA. To Seller's Knowledge, none of the Employee Plans has been
the subject of a reportable event (as defined in Section 4043 of ERISA)
as to which a notice would be required to be filed with the PBGC. Each
Company, Seller or an Affiliate of Seller has paid in full all
insurance premiums due to the PBGC with regard to the Employee Plans
for all applicable periods ending on or before the Closing Date.
(e) To Seller's Knowledge, the transactions contemplated
hereby will not result in any liability, (i) for the termination of or
withdrawal from any Employee Plan under Sections 4062, 4063, or 4064 of
ERISA, (ii) for any lien imposed under Section 302(f) of ERISA or
Section 412(n) of the Code, (iii) for any interest payments required
under Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for
any excise tax imposed by Section 4971 of the Code, (v) for any minimum
funding contributions under Section 302(c)(11) of ERISA or Section
412(c)(11) of the Code, or (vi) for withdrawal from any Multi-Employer
Plan under Section 4201 of ERISA.
(f) Except as disclosed on Schedule 2.14(f), each Company has
complied with
15
the continuation coverage provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), as amended, with respect to all
current employees and former employees of the Business and other
"qualified beneficiaries" (as defined in Code Section 4980B(g)(1) and
ERISA Section 607(3)). To Seller's Knowledge, all current and former
Employee Plans that are "group health plans," as defined in Section
5000(b) of the Code, have been operated in conformance with the
Medicare as Secondary Payer provisions of the Social Security Act, and
no person is subject to liability under Section 5000(a) of the Code
with respect to any such Employee Plan.
(g) The forms of all Employee Plans are in compliance with the
applicable terms of ERISA, the Code, and any other applicable laws,
including the Americans with Disabilities Act and the Family Medical
Leave Act, and such plans have been operated in compliance with such
laws and the written Employee Plan documents, except where such
failures would not have, and would not reasonably be expected to have,
in the aggregate a Material Adverse Effect on the Business. Neither of
the Companies nor, to Seller's Knowledge, any fiduciary of an Employee
Plan has violated the requirements of Section 404 of ERISA. All
required reports and descriptions of the Employee Plans (including
Internal Revenue Service Form 5500 Annual Reports, Summary Annual
Reports and Summary Plan Descriptions) have been timely filed with the
IRS, the United States Labor Department, or any other state or federal
agency and distributed, and all notices required by ERISA or the Code
or any other state or federal law or any ruling or regulation of any
state or federal administrative agency with respect to the Employee
Plans have been appropriately given, except where such failures would
not have, and would not reasonably be expected to have, in the
aggregate a Material Adverse Effect on the Business.
(h) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination
letter from the IRS, except that no representation is given as to any
Multi-Employer Plans. Each trust created under any Employee Plan has
been determined to be exempt from taxation under Section 501(a) of the
Code. Each of the Employee Plans that is an Employee Welfare Benefit
Plan (as defined in Section 3(1) of ERISA) that utilizes a funding
vehicle described in Section 501(c)(9) of the Code or is subject to the
provisions of Section 505 of the Code has been the subject of a
notification by the IRS that such funding vehicle qualifies for
tax-exempt status under Section 501(c)(9) of the Code and/or that the
plan complies with Section 505 of the Code, unless the IRS does not as
a matter of policy issue such notification with respect to the
particular type of plan, except that no representation is given as to
any Multi-Employer Plans. With respect to each Employee Plan, to
Seller's Knowledge, no event has occurred which will give rise to a
loss of any intended tax consequence or to any tax under Section 511 of
the Code, except that no representation is given as to any
Multi-Employer Plans.
(i) There is no material pending or, to Seller's Knowledge,
threatened Proceeding relating to any Employee Plan. Neither of the
Companies nor, to Seller's Knowledge, any fiduciary of an Employee Plan
has engaged in a transaction with respect to any Employee Plan that,
assuming the taxable period of such transaction expired as of the date
hereof, would subject either Company or Purchaser to a tax or penalty
imposed by either Section 4975 of the Code or Section 502(l) of ERISA
or a violation of Section 406 of
16
ERISA. The transactions contemplated hereby will not result in the
potential assessment of a tax or penalty under Section 4975 of the Code
or Section 502(l) of ERISA nor result in a violation of Section 406 of
ERISA.
(j) Each Company, Seller or an Affiliate of Seller has
maintained workers' compensation coverage on the Employees as required
by applicable state law for at least 30 days prior to the execution of
this Agreement.
(k) Except as required by Laws and as disclosed on Schedule
2.14(k), the consummation of the Transactions contemplated hereby will
not accelerate the time of vesting or the time of payment, or increase
the amount, of compensation due to any Transferred Employee. There are
no contracts or arrangements providing for payments that would subject
either Company or Purchaser to liability for tax under Section 4999 of
the Code.
(l) Except for the continuation coverage requirements of
COBRA, neither Company has obligations or potential liability for
benefits to employees following termination of employment or retirement
under any of the Employee Plans that are Employee Welfare Benefit
Plans.
2.15 Compliance with Laws; Governmental Authorizations.
(a) Except as set forth in Schedule 2.15(a):
(i) Each Company is in compliance with each Law that
is applicable to it or to the conduct or operation of the
Business or the ownership or use of any of its assets included
in the Acquired Assets, except any instances of noncompliance
that would not have, and would not reasonably be expected to
have, in the aggregate a Material Adverse Effect on the
Business;
(ii) To the Knowledge of Seller, neither Company has
received any notice or other communication (whether oral or
written) from any Governmental Authority or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Law, or (B) any
actual, alleged, possible, or potential obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature, except in
cases with respect to which notice or communication either (x)
has been resolved without any liability resulting from such
resolution being included in the Closing Balance Sheet, or (y)
will be retained by Seller as a Seller Liability (and no
amount will be accrued therefor in the Closing Balance Sheet).
(b) Schedule 2.15(b) contains a complete and accurate list of
each Governmental Authorization that is held by each Company or that
otherwise relates to the Business or the Acquired Assets. Schedule
2.15(b) identifies the holder of each Governmental Authorization not
held by either Company that is used in the Business. Each Governmental
Authorization listed or required to be listed in Schedule 2.15(b) is
valid and
17
in full force and effect, except where the invalidity or failure to be
in full force and effect would not have, and would not reasonably be
expected to have, in the aggregate a Material Adverse Effect on the
Business. Except as set forth in Schedule 2.15(b):
(i) Each Company is in compliance with all of the
terms and requirements of each Governmental Authorization
identified or required to be identified in Schedule 2.15(b),
except where such failure would not have, and would not
reasonably be expected to have, in the aggregate a Material
Adverse Effect on the Business.
(ii) To Seller's Knowledge, neither Company has
received any notice or other communication (whether oral or
written) from any Governmental Authority or any other Person
regarding (A) any actual, alleged, possible, or potential
violation of or failure to comply with any term or requirement
of any Governmental Authorization, or (B) any actual,
proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to
any Governmental Authorization, in each case which notice or
communication has not been resolved; and
(iii) all applications required to have been filed
for the renewal of the Governmental Authorizations listed or
required to be listed in Schedule 2.15(b) have been duly filed
on a timely basis with the appropriate Governmental
Authorities, and all other filings required to have been made
with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental
Bodies, except where the failure to make such filings would
not and would not reasonably be expected to have, in the
aggregate a Material Adverse Effect on the Business.
Except as disclosed in Schedule 2.15(a), the Governmental
Authorizations listed in Schedule 2.15(b) collectively constitute all
of the Governmental Authorizations necessary to permit the Companies to
lawfully conduct and operate the Business as of the date hereof and to
permit the Companies to own and use its assets in the manner in which
it owns and uses such assets as of the date hereof, except for such
omissions that would not have, and would not reasonably be expected to
have, in the aggregate, a Material Adverse Effect on the Business.
2.16 Legal Proceedings; Orders.
(a) Except as set forth in Schedule 2.16(a) there is no
pending or, to Seller's Knowledge, threatened Proceeding:
(i) by or against either Company or that otherwise
relates to or would reasonably be expected to affect the
Business or any of the Acquired Assets, except such
Proceedings that would not reasonably be expected to have a
Material Adverse Effect on the Business; or
18
(ii) that challenges, or that will or could
reasonably be expected to prevent, delay, make illegal, or
otherwise interfere with, any of the transactions contemplated
hereby.
(b) Except as set forth in Schedule 2.16(b):
(i) there is no Order or group of Orders to which
either Company or any of the Acquired Assets is subject and
which is material to either Company or to the operation of the
Business (a "Material Order"); and
(ii) to the Knowledge of Seller, no employee or agent
of either Company, who, in the case of an employee, is a
Transferred Employee and, in the case of an agent, is a party
to a contract that is a Company Liability, is subject to any
Order that prohibits such employee or agent from engaging in
or continuing any conduct, activity, or practice relating to
the Business in any material respect.
(c) Except as set forth in Schedule 2.16(c):
(i) Each Company is in compliance with all of the
terms and requirements of each Order, except where such
failure would not have, and would not reasonably be expected
to have, in the aggregate a Material Adverse Effect on the
Business;
(ii) To Seller's Knowledge, neither Company has
received any notice or other communication (whether oral or
written) from any Governmental Authority or any other Person
regarding any actual, alleged or potential violation of, or
failure to comply with, any term or requirement of any
Material Order.
2.17 Absence of Certain Changes and Events. Except as set forth in
Schedule 2.17, since the date of the Balance Sheet, each Company has conducted
the Business only in the Ordinary Course of Business and with respect to the
Business there has not been any:
(a) change in either Company's authorized or issued capital
stock; grant of any stock option or right to purchase shares of capital
stock of either Company; or issuance of any security convertible into
such capital stock;
(b) amendment to the organizational documents of either
Company;
(c) increase by either Company of any bonuses, salaries, or
other compensation (except in the Ordinary Course of Business) to any
Transferred Employee or entry into any employment, severance, or
similar Contract with any Transferred Employee or enter into any
agreement with any of the above for any bonus or other payment
contingent on the consummation of the transactions contemplated in the
Transaction Documents;
19
(d) adoption of, amendment to, or increase in the payments to
or benefits under, any Employee Plan (except as required by law)
applicable to Transferred Employees;
(e) damage to or destruction or loss of any Acquired Asset
material to the Business, whether or not covered by insurance;
(f) entry into, termination of, or receipt of notice of
termination of (i) any material license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement to which
either Company is a party and which constitutes an Acquired Asset or
relates to the Business, or (ii) any Contract or transaction involving
a total remaining commitment of at least $150,000.
(g) sale (other than sales of Inventories in the Ordinary
Course of Business), lease, or other disposition of any asset or
property of the Company (except a disposition of such property in the
Ordinary Course of Business) including without limitation the sale,
lease, or other disposition of any of the Intellectual Property Assets
or the creation of any Lien on any Acquired Asset;
(h) cancellation or waiver of any claims or rights with a
current value to the Company in excess of $150,000;
(i) material change in the accounting methods used by the
Company; or
(j) agreement, whether oral or written, by the Company to do
any of the foregoing.
2.18 Contracts; No Defaults.
(a) Schedule 2.18(a) contains an accurate and complete list,
and Seller has made available to Purchaser accurate and complete
copies, of:
(i) each Contract included in the Acquired Assets
that involves performance of services or delivery of goods or
materials by either Company of a remaining amount or value in
excess of $150,000 other than Contracts for Transferred
Projects and Customer Orders;
(ii) each Contract included in the Acquired Assets
that involves performance of services or delivery of goods or
materials to either Company of a remaining amount or value in
excess of $150,000, except with respect to any such Contract
that is entered into for the procurement of services, goods or
materials for a Transferred Project disclosure will be made on
schedule 2.18(a) only if the remaining amount or value for
such Contract is in excess of $500,000;
(iii) each Contract of either Company relating to the
Business that was not entered into in the Ordinary Course of
Business;
20
(iv) each Lease;
(v) each Contract with respect to Intellectual
Property Assets that is material to the Business;
(vi) each Contract with any labor union covering the
Transferred Employees or other employee representative of a
group of the Transferred Employees relating to wages, hours,
and other conditions of employment;
(vii) each Contract binding on either Company after
Closing containing covenants that restrict either Company's
business activity or limit the freedom of the Company to
engage in any line of business or to compete with any Person;
(viii) a description of the types of powers of
attorney of either of the Companies that are currently
effective and outstanding;
(ix) each Contract included in the Acquired Assets
for capital expenditures by either Company having a remaining
balance in excess of $150,000;
(x) with respect to the Business, each written
warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by the Company
other than in the Ordinary Course of Business and other than
Contracts relating to Transferred Projects or Customer Orders
or to completed projects which will be Seller's responsibility
after Closing;
(xi) each Contract included in the Acquired Assets
providing for commissions payable by either of the Companies
in respect of sales by either of the Companies; and
(xii) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Schedule 2.18(b):
(i) as of the Closing, Seller will not have any
rights under, and will not become subject to any obligation or
liability under, any Contract that relates to the business of
either Company, or any of the Acquired Assets except for the
Seller Liabilities and the rights, benefits, liabilities and
obligations of any Contract relating thereto and except for
the Excluded Assets; and
(ii) to the Knowledge of Seller, no officer,
director, agent, employee, consultant, or contractor of either
Company who is a Transferred Employee is bound by any Contract
that purports to limit the ability of such officer, director,
agent, employee, consultant, or contractor to (A) engage in or
continue any conduct, activity, or practice relating to the
Business, or (B) assign to the Company any rights
21
to any invention, improvement, or discovery relating to the
Business.
(c) Except as set forth in Schedule 2.18(c):
(i) each Contract identified or required to be
identified in Schedule 2.18(a) is valid and enforceable
against the respective Company that is a party thereto and to
Seller's Knowledge, against the other party or parties thereto
in accordance with its terms; and
(ii) each Contract identified or required to be
identified in Schedule 2.18(a) does not require the consent or
approval of the other party to such Contract in connection
with consummation of the sale of the Shares by Seller to
Purchaser.
(d) Except as set forth in Schedule 2.18(d), as to the
Contracts identified or required to be identified in Schedule 2.18(a):
(i) to the Knowledge of Seller, each Company is in
compliance with all applicable terms and requirements of each
Contract except where such failure would not have, and would
not reasonably be expected to have, in the aggregate a
Material Adverse Effect on the Business;
(ii) to the Knowledge of Seller, each other Person
that has or had any obligation or liability under any Contract
is in compliance with all applicable terms and requirements of
such Contract, except where such failure would not have, and
would not reasonably be expected to have, in the aggregate a
Material Adverse Effect on the Business; and
(iii) neither Company has given to or, to Seller's
Knowledge, received from any other Person any notice or other
communication (whether oral or written) regarding any actual,
alleged, possible, or potential violation or breach of, or
default under, any Contract that would have, or would
reasonably be expected to have, in the aggregate a Material
Adverse Effect on the Business.
(e) Except as disclosed in Schedule 2.18(e), there are no
renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to the Company under
any Contracts included in the Acquired Assets with any Person having
the contractual or statutory right to demand or require such
renegotiation and no such Person has made written demand for such
renegotiation that would have, or would reasonably be expected to have,
in the aggregate a Material Adverse Effect on the Business.
(f) Each Contract listed in Schedule 2.18(a) relating to the
sale, design, manufacture, or provision of products or services by
either Company has been entered into in the Ordinary Course of Business
of the Company and has been entered into without the commission of any
act alone or in concert with any other Person, or any consideration
having been paid or promised, that is or would be in violation of any
Law.
22
2.19 Environmental Matters. Except as disclosed in Schedule 2.19:
(a) Each Company is, and at all times has been, in compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law, except where such failure, violation or liability
would not have, and would not reasonably be expected to have, a
Material Adverse Effect on the Business. Neither Company nor Seller has
received any actual or threatened order, notice, or other communication
which is currently unresolved from (i) any governmental body or private
citizen acting in the public interest, or (ii) the current or prior
owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real,
personal, or mixed) in which either Company has had an interest, or
with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported,
used, or processed by either Company or any other Person for whose
conduct either Company may be held responsible.
(b) There are no pending or, to the Knowledge of Seller,
threatened claims, Liens, or other restrictions of any nature,
resulting from any Environmental, Health, and Safety Liabilities or
arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which either Company has or had
an interest.
(c) To Seller's Knowledge, there are no Hazardous Materials
present on or in the Facilities or at any geologically or
hydrologically adjoining property, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether movable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water, or sumps, except for Hazardous Materials used in the
Business which use is in accordance with the Environmental Laws in all
material respects. To the Knowledge of Seller, neither Company nor, any
other Person, has permitted or conducted, any Hazardous Activity
conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in which either Company has
or had an interest except in compliance in all material respects with
the Environmental Laws.
(d) To Seller's Knowledge, there has been no Release or threat
of Release, of any Hazardous Materials at or from the Facilities, or
from or by any other properties and assets (whether real, personal, or
mixed) in which either Company has or had an interest, or any
geologically or hydrologically adjoining property, whether by the
Company or any other Person.
(e) Seller has delivered to Purchaser true and complete copies
and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by Seller or, to Seller's Knowledge, initiated
by either of the Companies, pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning
compliance by either Company or any other Person for whose conduct it
is or may be held responsible, with
23
Environmental Laws.
2.20 Employees. Schedule 2.20 contains a complete and accurate list of:
(a) the following information for each of the Employees who are not covered by a
collective bargaining agreement as of August 29, 1998: current compensation paid
or payable, and date of hire; and (b) all Employees who are covered by a
collective bargaining agreement as of October 30, 1998.
2.21 Labor Disputes; Compliance. Except as disclosed in Schedule 2.21,
(i) neither Company is a party to any collective bargaining agreement or other
labor contract; (ii) there is not presently pending or existing, and, to
Seller's Knowledge, there is not threatened, any strike, slowdown, picketing,
work stoppage or material employee grievance process involving either Company;
(iii) to Seller's Knowledge, there is no organizational activity or other labor
dispute against or affecting either Company or the Facilities; (iv) to Seller's
Knowledge, no application for certification of a collective bargaining agent for
any class of employees of either Company is pending; (vii) no grievance or
arbitration proceeding is pending which would have, or would reasonably be
expected to have, a Material Adverse Effect on the Business, and; (viii) there
is no lockout of any employees by either Company, and no such action is
contemplated by Seller.
2.22 Intellectual Property Assets.
(a) The term "Intellectual Property Assets" means all
intellectual property owned, used or licensed (as licensor or licensee)
by either Company in connection with the Business, including:
(i) Each Company's name, all assumed fictional
business names, trading names, registered and unregistered
trademarks, service marks, and applications (collectively,
"Marks");
(ii) all patents, patent applications, and
inventories and discoveries that may be patentable
(collectively, "Patents");
(iii) all copyrights in both published works and
unpublished works (collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential
information, customer lists, software, technical information,
data, process technology, plans, drawings, and blue prints
(collectively, "Trade Secrets").
(b) Schedule 2.22(b) contains a complete and accurate list of
all Contracts relating to the Intellectual Property Assets to which
either Company is a party or by which the Company is bound, except for
any license implied by the sale of a product and perpetual, paid-up
licenses for commonly available software programs with a value of less
than $150,000 under which the Company is the licensee. There are no
outstanding and, to Seller's Knowledge, no threatened disputes or
disagreements with respect to any Contract disclosed on Schedule
2.22(b).
24
(c) Schedule 2.22(c) contains a complete and accurate list of
all Patents in connection with the Business owned or, as of the Closing
Date, to be owned by the Companies. All of the issued Patents are
currently in compliance in all material respects with formal Laws in
the United States. No Patent is now involved in any interference,
reissue, reexamination, or opposition proceeding. To Seller's
Knowledge, no Patent is infringed or has been challenged or threatened
in any material way, except as disclosed on Schedule 2.22(c). To
Seller's Knowledge, none of the products manufactured or sold, nor any
process or know-how used, by either Company infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
(d) Schedule 2.22(d) contains a complete and accurate list of
all Marks in connection with the Business owned or, as of the Closing
Date, to be owned, by the Companies. All such Marks that have been
registered with the United States Patent and Trademark Office are
currently in compliance in all material respects with all formal Laws
in the United States. To Seller's Knowledge, no such ▇▇▇▇ is now
involved in any opposition, invalidation, or cancellation and no such
action is threatened with respect to any of such Marks. To Seller's
Knowledge, there is no interfering trademark or trademark application
of any third party. To Seller's Knowledge, no such ▇▇▇▇ is infringed or
has been challenged or threatened in any way, except as set forth in
Schedule 2.22(d). To Seller's Knowledge, none of such Marks used by the
Company infringes or is alleged to infringe any trade name, trademark,
or service ▇▇▇▇ of any third party.
(e) To Seller's Knowledge, no Copyright is infringed or has
been challenged or threatened in any way. To Seller's Knowledge, none
of the subject matter or any of the Copyrights infringes or is alleged
to infringe any copyright of any third party or is a derivative work
based on the work of a third party.
(f) To Seller's Knowledge, no Trade Secret is subject to any
material adverse claim or has been challenged or threatened in any way.
2.23 Compliance with the Foreign Corrupt Practices Act and Export
Control Laws
(a) To the Seller's Knowledge, the Companies and their
officers, managers, employees or agents have not, to obtain or retain
business, directly or indirectly offered, paid, or promised to pay, or
authorized the payment of, any money or other thing of value (including
any fee, gift, sample, travel expense, or entertainment with a value in
excess of $10,000 in the aggregate to any one individual in any year)
or any commission payment payable to:
(i) any person who is an official, officer, agent,
employee or representative of any Governmental Authority, or
of any existing or prospective customer (whether
government-owned or non-government-owned);
(ii) any political party or official thereof;
(iii) any candidate for political or political party
office; or
25
(iv) any other individual or entity while knowing or
having reason to believe that all or any portion of such money
or thing of value would be offered, given, or promised,
directly or indirectly, to any such official, officer, agent,
employee, representative, political party, political party
official, candidate, individual or any entity affiliated with
such customer, political party or official, or political
office.
(b) The Companies have at all times been in material
compliance with the export control laws of the United States. No
product sold or service provided by either Company during the last
five-years has been, directly or indirectly, sold to or performed on
behalf of Cuba, Iraq, Iran, Libya, or North Korea.
2.24 Disclosure; Disclaimer; Disclosure Schedules
(a) No representation or warranty or other statement made by
the Company or Seller in this Article II omits to state a material fact
necessary to make any of them, in light of the circumstances in which
it was made, not misleading.
(b) Except as expressly set forth in this Article II, Seller
makes no representation or warranty, express or implied, at law or in
equity, with respect to Seller, the Companies or the Business or any of
the Acquired Assets, Liabilities (including Company Liabilities) or
operations of the Companies or the Business, including without
limitation, with respect to merchantability or fitness for any
particular purpose, and any such representations and warranties are
hereby expressly disclaimed. Purchaser hereby acknowledges and agrees
that, except to the extent specifically set forth in this Article II,
Purchaser is purchasing the Acquired Assets on an AS IS and WHERE IS
basis. Without limiting the generality of the foregoing, Purchaser
acknowledges that it has not relied upon any representation, estimate,
projection or statement made by or on behalf of Seller as to the future
profitability of the Business, the Transferred Projects or the Acquired
Assets, and Purchaser shall make no claim (whether for indemnification
or otherwise) against Seller as to any projection, representation,
estimate or statement made by or on behalf of Seller as to the future
profitability of the Business, the Transferred Projects or the Acquired
Assets and Seller specifically disclaims any representations or
warranties as to any such representation, estimate, projection or
statement.
(c) Wherever a matter is disclosed by Seller on any Schedule
delivered by Seller to Purchaser under this Article II, such disclosure
shall modify any other representations or warranties contained in this
Article II to which such disclosure also applies even if it is not
specifically referenced on another relevant Schedule.
26
2.25 Relationships with Affiliates. Neither Seller nor any Affiliate of
Seller (except the Companies) has any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), primarily used in or
pertaining to the Business, except as disclosed on Schedule 2.25. Neither Seller
nor any Affiliate of Seller (except the Companies) owns of record or as a
beneficial owner, an equity interest or any other financial or profit interest
in any Person that (a) currently has a material financial interest in any
transaction with either Company other than business dealings or transactions
disclosed in Schedule 2.25, each of which has been conducted in the Ordinary
Course of Business with the Company at substantially prevailing market prices
and on substantially prevailing market terms, or is currently engaged in
competition with the Company with respect to any line of the products or
services of the Company (a "Competing Business") in any market presently served
by the Company, except for ownership of less than one percent of the outstanding
capital stock of any Competing Business that is publicly traded on any
recognized exchange or in the over-the-counter market.
2.26 Brokers or Finders. Neither of the Companies nor Seller has
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the sale of the Shares pursuant to this Agreement or the transactions
contemplated hereby.
2.27 Year 2000 Disclosure. To Seller's Knowledge, the failure of the
computer systems of the Companies which are not expected to be replaced by the
Enterprise Resource Planning system referred to in Section 4.02 to be year 2000
compliant will not have a Material Adverse Effect on the Business.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows as of the
date hereof:
3.01 Corporate Existence. Purchaser is a corporation validly existing
and in good standing under the Laws of the State of Nevada. Purchaser has full
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby.
3.02 Authority. The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of its obligations hereunder, have
been duly and validly authorized by the board of directors of Purchaser, no
other corporate action on the part of Purchaser or its stockholders being
necessary. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.
3.03 No Conflicts. The execution and delivery by Purchaser of this
Agreement do not, and the performance by Purchaser of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will not:
27
(a) conflict with or result in a violation or breach of any of
the articles of incorporation or by-laws of Purchaser;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Schedule 3.03(b)
hereto, conflict with or result in a violation or breach of any Law or
Order applicable to Purchaser or any of its assets and properties other
than such conflicts, violations or breaches which would not in the
aggregate reasonably be expected to materially and adversely affect the
validity or enforceability of this Agreement; or
(c) (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or lapse of time or both) a
default under, (iii) require Purchaser to obtain any consent, approval
or action of, make any filing with or give any notice to any Person as
a result or under the terms of, or (iv) result in the creation or
imposition of any Lien upon Purchaser or any of its assets or
properties under, any Contract or License to which Purchaser is a party
or by which any of its assets and properties is bound and which,
individually or in the aggregate with other such Contracts and
Licenses, is material to the validity or enforceability of this
Agreement or the performance by Purchaser of its obligations under this
Agreement.
3.04 Governmental Approvals and Filings. Except as disclosed in
Schedule 3.04 hereto, no consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority on the part of Purchaser is required
in connection with the execution, delivery and performance of this Agreement or
the consummation of the transactions contemplated hereby except where the
failure to obtain any such consent, approval or action, to make any such filing
or to give any such notice could not reasonably be expected to materially and
adversely affect the validity or enforceability of this Agreement or the
performance by Purchaser of its obligations under this Agreement.
3.05 Legal Proceedings. There are no Actions or Proceedings pending or,
to the knowledge of Purchaser, threatened against, relating to or affecting
Purchaser or any of its assets and properties which could reasonably be expected
to result in the issuance of an Order restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or the performance by Purchaser of its
obligations under this Agreement.
3.06 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Purchaser directly
with Seller without the intervention of any Person on behalf of Purchaser in
such manner as to give rise to any valid claim by any Person against Purchaser
or Seller for a finder's fee, brokerage commission or similar payment.
3.07 Financing and Bond Commitments. Purchaser has delivered to Seller
(a) a written commitment or commitments from reputable financing sources (the
"Financing Commitment") sufficient to provide all of the financing required by
Purchaser to consummate the transaction contemplated by this Agreement, and (b)
a written commitment or commitments from a reputable
28
bonding company or companies (the "Bonding Commitment") to satisfy the Bonding
Condition at Closing. Seller has accepted the Financing Commitment and the
Bonding Commitment and reasonably expects such commitments to be completed in
connection with the Closing. The Financing Commitment and Bonding Commitment are
attached hereto as Schedule 3.07.
3.08 Financial Statements. Prior to the execution of this Agreement,
Purchaser has delivered to Seller true and complete copies of the following
financial statements:
(a) the audited consolidated balance sheet of Purchaser as of
December 31, 1997 and the consolidated statements of operations, cash
flows and changes in stockholders' equity for the year ended December
31, 1997; and
(b) the unaudited consolidated balance sheet of Purchaser as
of June 30, 1998 and the consolidated statements of operations and cash
flows for the six months ended June 30, 1998.
All such financial statements were prepared in accordance with GAAP applied on a
consistent basis throughout the periods and present fairly the financial
condition and results of operations of Purchaser for the respective periods
covered thereby except, in the case of the unaudited financial statements, for
the absence of footnotes and normal year-end adjustments which an audit would
reveal and which will not have a materially adverse effect.
3.09 Security Clearances Purchaser has all necessary security
clearances to purchase and own the Shares of the Companies and to enable the
Companies to operate the Business which clearances are described on Schedule
3.09.
ARTICLE IV
COVENANTS OF SELLER
Seller covenants and agrees with Purchaser that, at all times from and
after the date hereof until or at the Closing with respect to Sections 4.01
through 4.10 and 4.12 hereof, and thereafter with respect to Sections 4.11 and
4.13 hereof, Seller will comply with all covenants and provisions of this
Article IV, except to the extent Purchaser may otherwise consent or waive in
writing.
4.01 Due Diligence. Seller will (a) provide Purchaser and its officers,
employees, counsel, accountants, financial advisors, consultants, lenders, and
other representatives (together, "Representatives") with reasonable access, upon
reasonable prior notice and during normal business hours, to all officers,
employees, agents, attorneys and accountants of the Business and to the Acquired
Assets and the Books and Records related thereto, but only to the extent that
such access does not unreasonably interfere with the business and operations of
the Companies or the Business, and (b) furnish Purchaser with all such
information and data (including without limitation copies of Contracts, Benefit
Plans and other Books and Records) concerning the business and operations of the
Business and the Companies as Purchaser reasonably may request in connection
with the transactions contemplated by this Agreement, except to the extent that
furnishing any such information or data would violate any Law, Order, Contract
or License applicable to either of the
29
Companies or the Business or by which any of their respective assets and
properties are bound in which case Seller shall describe the information or data
to the extent permitted and the specific reasons for Seller's in ability to
furnish the information or data to Purchaser.
4.02 Conduct of Business. Seller will cause the Companies to conduct
the Business only in the Ordinary Course of Business. Without limiting the
generality of the foregoing, Seller will cause the Companies to make all usual
or planned capital expenditures, including without limitation, expenditures with
respect to implementation of the Enterprise Resource Planning system (also known
as ERP or the Penta System), to pay all trade and account payables of the
Companies in accordance with their customary practices, to collect accounts
receivable in accordance with their customary practices, and to use commercially
reasonable efforts, to (a) preserve intact the present business organization and
reputation of the Business, (b) keep available (subject to dismissals and
retirements in the Ordinary Course of Business) the services of the key officers
and employees of the Business, (c) maintain the Acquired Assets in good working
order and condition, ordinary wear and tear excepted, and (d) maintain the good
will of key customers and suppliers of the Business.
4.03 Fulfillment of Conditions; Other Actions. Seller will proceed
diligently and in good faith to satisfy each condition to the obligations of
Seller contained in this Agreement and will not take or fail to take any action
that is reasonably expected to (or the omission of which would reasonably be
expected to) result in the nonfulfillment of any such condition. Promptly after
the date hereof, Seller shall cause to be delivered to Purchaser a title
insurance commitment covering the Real Property. From the date hereof until the
Closing, Seller will cause the Companies to reasonably cooperate with Purchaser
in taking such actions as Purchaser reasonably deems necessary to effect a
transition of the Business upon closing, provided that such requests shall not
unreasonably interfere with the conduct of the Business nor require the
Companies to effect any filings, incur any liabilities or enter into any
Contracts without Seller's prior written consent which may be withheld by Seller
in its reasonable discretion.
4.04 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. As soon as practicable after the date of
this Agreement, Seller agrees to make any filings required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Seller will furnish to Purchaser such necessary
information and reasonable assistance as the Purchaser may reasonably request in
connection with its preparation of any additional necessary filings or
submissions to any governmental agency, including, without limitation, any
additional filings necessary under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
4.05 Notice of Developments. Seller will give prompt written notice to
Purchaser of any material adverse development affecting the Business and any
breach of its representations and warranties contained in Article II hereof.
4.06 Exclusivity. Seller will not solicit, initiate, encourage or
accept any proposal or offer from any Person relating to the acquisition of the
Shares or any of the Acquired Assets (including any acquisition structured as a
merger, consolidation, or share exchange) other than in the Ordinary Course of
Business and neither Seller, its officers or any other representatives of Seller
shall participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any person to do or seek any of the
foregoing.
30
4.07 New Transferred Projects and Bids. After the date hereof until the
Closing Date, Seller will promptly notify Purchaser of (a) any bid made by
Seller that would be a Transferred Project if such bid was accepted and (b) the
acceptance or award of any bid made by Seller which shall become a Transferred
Project. To the extent that Purchaser is not also making a bid on any project,
Seller will cause the Companies to consult with Purchaser on any such bid in
advance of submitting such bid if the respective bid represents work or services
to be provided by the Companies (excluding subcontracted work or services
provided by a third party) of more than One Million Dollars ($1,000,000).
4.08 Establishment of Relationships. Upon the request of Purchaser,
Seller will cause the Companies, at Purchaser's expense, to use their reasonable
efforts to assist the Purchaser in establishing relationships with
representatives and agents in foreign countries comparable to those to which the
Companies are currently parties and which relate to the Business.
4.09 Updating Representations and Warranties. From time to time prior
to the Closing, Seller shall promptly supplement or amend any of its
representations and warranties under Article II which apply to the period after
the date hereof by delivering an updated Schedule to Purchaser with respect to
any change in fact occurring hereafter or event arising hereafter which would
render any such representation or warranty, if made after the date of this
Agreement, inaccurate or incomplete. Such supplement or amendment to Seller's
representations and warranties contained in an updated schedule shall be deemed
to modify the representations and warranties of Seller, and no such supplement
or amendment, or the information contained in an updated Schedule, shall
constitute a breach of a representation or warranty of Seller. If the
information in such supplement or amendment, together with the information in
any or all of the supplements or amendments previously provided by Seller or
otherwise in the possession of Purchaser indicates to Purchaser that the
Business has suffered or is reasonably likely to suffer a Material Adverse
Effect, Purchaser may terminate this Agreement within fifteen (15) days after
the receipt of such supplement or amendment, provided that if it appears to
Purchaser that the Material Adverse Effect may be cured within thirty (30) days
from the date the Purchaser received such supplement or amendment (the "Cure
Period") and the cure is promptly commenced by the Seller, Purchaser may not
terminate this Agreement under this Section until the day after the Cure Period
expires.
4.10 Hedge Contract. Seller has a hedge contract with ▇▇▇▇▇▇ Bank &
Trust Company (the "Bank") with respect to the South African currency. The Bank
has advised Seller that it will not permit the assignment of these contracts to
▇▇▇▇▇▇▇ or Purchaser. Within ten (10) Business Days after the Closing, Seller
and Purchaser shall reasonably cooperate with each other to effect a close out
all of its hedge contracts with respect to the South African currency in the
most efficient manner reasonably possible, and either (i) Seller will pay
Purchaser the net profit (after taking into account the costs and expenses
incurred by Seller in connection with such hedge contracts), or (ii) Purchaser
will pay Seller the net loss (after taking into account the costs and expenses
incurred by Seller in connection with such hedge contracts).
31
4.11 Covenant Not to Compete; Non-Solicitation of Transferred
Employees.
(a) For a period of five (5) years after the Closing Date,
neither Seller nor any Affiliate of Seller shall directly or
indirectly, own, manage, operate, control, act as consultant or advisor
to, render any services for, have any financial interest (other than as
a creditor) in, or otherwise be connected in any manner with the
ownership, management, operation, or control of any Person, firm,
partnership, corporation, or other entity (a "Competitor") that is
engaged in any business that directly competes with the Business;
provided that, notwithstanding any of the foregoing, nothing contained
in this Section 4.11 shall (i) restrict the ability of Seller and its
Affiliates to manufacture, fabricate, install or service glass
products, including the sale of bullet resistant glass for or to a
Competitor or any customer of the Business, (ii) impose any restriction
on any party that may acquire assets, properties or a business from
Seller or its Affiliates, or (iii) prevent Seller or any Affiliate from
acquiring or holding equity securities of any publicly traded company
if the amount of such securities represents less than 1% of the
outstanding capital stock of such company. All of the foregoing
provisions are reasonable and are necessary to protect and preserve the
value of the Shares to be acquired by Purchaser under this Agreement
and to prevent any unfair advantage being conferred on Seller or its
Affiliates. For a period of two (2) years after the Closing Date,
neither Seller nor any Affiliate of Seller shall make any direct sales
to the U. S. Department of State for use and installation in embassies
of fabricated and finished window or door systems using bullet
resistant glass, excluding field constructed curtainwall.
(b) Prior to Closing, Seller shall not, and shall cause its
Affiliates other than the Companies not to directly or indirectly
solicit any of the Transferred Employees to be hired or employed by
Seller or such Affiliates other than in the Business prior to the
Closing. For the two (2) years after the Closing Date, Seller shall
not, and Seller shall cause its Affiliates not to, directly or
indirectly solicit or hire any of the Transferred Employees so long as
they are employed by the Companies or Purchaser. Upon Closing, the
Transferred Employees shall be deemed employees of the Companies.
4.12 Administrative Services. At the Closing, Seller will cause its
Affiliate, ▇▇▇▇▇▇ Ltd., to enter into the administrative services agreement in
form and substance substantially identical to Exhibit B attached hereto (the
"Administrative Services Agreement") with the Companies, and the Purchaser shall
cause the Companies to enter into the Administrative Services Agreement at
Closing.
4.13 Vesting of Benefits under Certain Employee Plans. Seller will
cause to vest on the Closing Date all contributions to the Apogee Enterprises,
Inc. Retirement Plan (Plan No. 001) and Apogee Enterprises, Inc. Tax Relief
Investment Plan (Plan No. 005) with respect to each Transferred Employee, which
contributions have been accrued as of the Closing Date and will make payment of
all such contributions to such Employee Plans on or promptly after the Closing
Date.
32
ARTICLE V
COVENANTS OF PURCHASER
Purchaser covenants and agrees with Seller that, at all times from and
after the date hereof until the Closing with respect to Sections 5.01 through
5.04 hereof, and as of the Closing and thereafter with respect to Sections 5.05
through 5.10 hereof, Purchaser will comply with all covenants and provisions of
this Article V, except to the extent Seller may otherwise consent or waive in
writing.
5.01 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. As soon as practicable after the date of
this Agreement, Purchaser agrees to make any filings required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. Purchaser will furnish to Seller such necessary
information and reasonable assistance as Seller may reasonably request in
connection with its preparation of any additional necessary filings or
submissions to any governmental agency, including, without limitation, any
additional filings necessary under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act.
5.02 Notice of Developments. Purchaser will give prompt written notice
to Seller of any material adverse development affecting Purchaser or any breach
of any of its representations and warranties in Article III hereof.
5.03 Fulfillment of Conditions. Purchaser covenants and agrees with
Seller that, at all times from and after the date hereof until the Closing,
Purchaser will proceed diligently and in good faith to (a) satisfy each
condition to the obligations of Purchaser contained in this Agreement, (b)
obtain the financing contemplated by the Financing Commitment and the bonding
contemplated by the Bonding Commitment, and (c) obtain all security clearances
and other licenses (including construction licenses) necessary for performance
of the Contracts for the Transferred Projects (or the subcontract thereof) to
Purchaser as contemplated by this Agreement, and will not take or fail to take
any action that is reasonably be expected to (or the omission of which would be
reasonably expected to) result in the nonfulfillment of any such condition.
5.04 Payment and Performance Bonds. Purchaser shall use reasonable
commercial efforts to provide the individual standard subcontract payment and
performance bonds as provided in Schedule 5.04 hereto (the "Bonding Condition").
5.05 Offer of Employment to Employees. Purchaser shall, as of the
Closing Date, offer to employ (on substantially similar terms as such Employees
are currently employed in the Business) all of the Employees listed on Schedule
2.20 who are employed in the Business as of the Closing and such other persons
who are hired in the ordinary course of business after August 29, 1998 and are
employed in the Business as of the Closing Date, including Employees who are on
sick leave, military leave or other duly authorized leave of absence. Each
Employee who accepts Purchaser's offer of employment is herein referred to as a
"Transferred Employee" and all such employees are herein referred to as
"Transferred Employees;" provided, however, the persons listed on Schedule 2.20
as remaining with Seller or its Affiliates shall not be Transferred Employees.
Purchaser shall not terminate a Transferred Employee (except for cause) for a
period of sixty (60) days after employment of such Transferred Employee. To
effect the foregoing transition, upon Closing the Transferred Employees shall be
deemed employees of the Companies.
33
5.06 Employee Benefits. Purchaser will provide the Transferred
Employees hired by Purchaser under Section 5.05 with substantially the same
employee benefits as provided to its other employees which shall be reasonably
comparable to the Employee Plans. Purchaser will insure that, to the extent
permitted by law, such benefits provided to the Transferred Employees treat
employment with the Companies or Seller's Affiliates prior to the Closing Date
the same as employment with Purchaser from and after the Closing Date for
purposes of eligibility, vesting and benefit accrual under such benefit plans.
5.07 Warranty and Other Work. For a period of five (5) years after
Closing and upon the request of Seller, Purchaser agrees to perform warranty
work or repairs on any project of the Business that is not a Transferred
Project. Purchaser will promptly and diligently perform any such warranty work
or repairs requested by Seller. Purchaser will charge Seller and Seller will pay
Purchaser for any such warranty work or repairs performed by Purchaser the
actual cost (under Purchaser's customary costing formula) incurred by Purchaser
to perform such work or repairs plus 5% thereof. In the event that Purchaser
receives a claim from any customer of a breach of contractual warranty with
respect to work performed prior to Closing other than with respect to any
Transferred Project, Purchaser shall promptly notify Seller. In the event Seller
and such customer do not resolve such claim within a reasonable period after its
submission, a responsible officer of Seller and Purchaser will confer in good
faith to reach a mutually acceptable resolution of the claim. In the event
Seller and Purchaser fail to reach a mutually acceptable resolution within
thirty (30) days after such representatives first meet, then either party may
request that the extent of Seller's responsibility be determined by binding
arbitration in the manner contemplated by Section 8.04(b).
5.08 Access to Books and Records; Personnel. For a period of seven (7)
years after the Closing Date, Purchaser shall, upon the request of Seller,
provide Seller or its Representatives reasonable access to the Books and Records
of the Companies for any period prior to the Closing Date and permit the taking
of copies therefrom. So long as Seller has a right of access under this Section
5.08, Purchaser will provide Seller at least thirty (30) days prior written
notice before destroying such Books and Records or otherwise make such Books and
Records not readily accessible by Seller so that Seller may elect to receive
such Books and Records. For a period of seven (7) years after the Closing,
Purchaser shall make personnel of the Companies reasonably available to Seller
to provide information relating to any of the Seller Liabilities. Seller shall
reimburse Purchaser its reasonable out of pocket costs to provide such
assistance.
5.09 Multi-Employer Plan. At Closing and after Closing, Purchaser
shall, and Purchaser shall cause the Companies to, execute and deliver such
agreement or agreements consistent with ERISA ss.4204 and take all actions as
may be required by such agreements and by ERISA ss.4204 to the extent that
executing such agreements and taking such reasonable actions would prevent the
Seller (or any Affiliate of the Seller) from incurring any partial or complete
withdrawal liability to any Multiemployer Plan as a result of the transactions
contemplated by this Agreement if such transactions were to be deemed to
constitute an asset sale rather than a stock purchase. Purchaser and Companies
shall indemnify Seller (and Affiliates of the Seller) from any withdrawal
liability that may arise to the extent that such withdrawal liability is the
result of Purchaser's and/or Companies' failure to execute and deliver such
agreement or agreements consistent with ERISA
34
ss.4204 and take such reasonable actions as may be required by such agreements
and by ERISA ss.4204.
5.10 Voice Track. After Closing, Purchaser shall, and shall cause the
Companies to, (a) promptly transfer to Seller all amounts received by Purchaser
or either of the Companies in respect to accounts receivable for the Voice Track
business of ▇▇▇▇▇▇▇ which are Excluded Assets, and (b) provide Seller reasonable
assistance in billing and collecting the accounts receivable for the Voice Track
business of ▇▇▇▇▇▇▇, provided that neither Purchaser nor either of the Companies
shall be required to commence any Proceeding to effect such collections.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the fulfillment,
at or before the Closing, of each of the following conditions (all or any of
which may be waived in whole or in part by Purchaser in its sole discretion):
6.01 Representations and Warranties. The representations and warranties
made by Seller in this Agreement shall be true and correct in all material
respects on and as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date, and Seller
shall have delivered to Purchaser a certificate to that effect at Closing,
signed by an officer of Seller.
6.02 Performance. Seller shall have performed and complied with, in all
material respects, the agreements, covenants and obligations required by this
Agreement to be so performed or complied with by Seller at or before the
Closing.
6.03 Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.
6.04 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Purchaser and Seller to consummate the transactions
contemplated hereby shall have been duly obtained, made or given and shall be in
full force and effect, and all terminations or expirations of waiting periods
(including the waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act) imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement shall have occurred.
6.05 Third Party Consents. The consents, approvals and actions listed
in Schedules 2.02(b), 2.02(c), 3.03(b) and 3.04 hereto shall have been obtained
or taken and shall be in full force and effect.
6.06 Officer's Certificate. Seller shall have delivered to Purchaser an
officer's certificate dated as of the Closing Date certifying that (i) attached
thereto is a true and complete copy of
35
Seller's Articles of Incorporation and all amendments thereto; (ii) attached
thereto is a true and complete copy of Seller's Bylaws as in effect on the date
of such certification; (iii) attached thereto is a true and complete copy of
resolutions of Seller's board of directors approving this Agreement, all other
agreements and documents contemplated hereby and the consummation of the
transactions contemplated hereby and thereby; and (iv) as to the incumbency and
genuineness of the signature of each officer of Seller executing this Agreement
or any of the other documents contemplated hereby.
6.07 Financing and Bonding. Purchaser shall have obtained the financing
contemplated by the Financing Commitment or such other financing as is
acceptable to Purchaser to consummate the transactions contemplated by this
Agreement. Purchaser shall have obtained the bonding contemplated by the Bonding
Commitment to satisfy the Bonding Condition.
6.08 Closing Documents. At Closing, Seller shall execute and deliver
(or cause to be executed and delivered) to Purchaser the stock certificates for
the Shares accompanied by duly executed stock powers to effect the transfer of
the Shares to Purchaser and other agreements or instruments of conveyance as may
be reasonably necessary to consummate the transactions contemplated herein. All
actions to be taken by Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
shall be reasonably satisfactory in form and substance to Purchaser and its
counsel.
6.09 No Material Adverse Change. Since the date hereof to the Closing
Date, there shall not have been any material adverse change in the business,
operations, results of operations or financial condition of the Business or the
Companies.
6.10 Director Resignations. At Closing, Seller will cause to be
executed and delivered to Purchaser resignations as of the Closing Date from the
directors of the Companies.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller hereunder are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by Seller in its sole discretion):
7.01 Representations and Warranties. The representations and warranties
made by Purchaser in this Agreement, shall be true and correct in all material
respects on and as of the Closing Date as though made on and as of the Closing
Date or, in a case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date, and Purchaser
shall deliver to Seller a certificate to that effect at Closing, signed by an
officer of Purchaser.
36
7.02 Performance. Purchaser shall have performed and complied with, in
all material respects, the agreements, covenants and obligations required by
this Agreement to be so performed or complied with by Purchaser at or before the
Closing.
7.03 Officer's Certificates. Purchaser shall have delivered to Seller
an officer's certificate dated as of the Closing Date certifying that (i)
attached thereto is a true and complete copy of Purchaser's Articles of
Incorporation and all amendments thereto; (ii) attached thereto is a true and
complete copy of Purchaser's Bylaws as in effect on the date of such
certification; (iii) attached thereto is a true and complete copy of resolutions
of Purchaser's board of directors approving this Agreement, all other agreements
and documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby; and (iv) as to the incumbency and genuineness
of the signature of each officer of Purchaser executing this Agreement or any of
the other documents contemplated hereby.
7.04 Orders and Laws. There shall not be in effect on the Closing Date
any Order or Law restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.
7.05 Regulatory Consents and Approvals. All consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
necessary to permit Seller and Purchaser to consummate the transactions
contemplated hereby shall have been duly obtained, made or given and shall be in
full force and effect, and all terminations or expirations of waiting periods
(including the waiting period under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act) imposed by any
Governmental or Regulatory Authority necessary for the consummation of the
transactions contemplated by this Agreement shall have occurred.
7.06 Third Party Consents. The consents (or in lieu thereof, waivers)
listed in Schedules 2.02(b), 2.02(c), 3.03(b) and 3.04 shall have been obtained
and shall be in full force and effect.
7.07 Bonding Condition. Purchaser shall have provided to Seller and its
Affiliates the bonding and other documents required to satisfy the Bonding
Condition.
7.08 Closing Documents. At Closing, Purchaser shall deliver to Seller
the balance of the Purchase Price, and shall execute and deliver, or cause to be
delivered, such agreements or instruments as may be reasonably necessary to
consummate the transactions contemplated herein. All actions to be taken by
Purchaser in connection with consummation of the transactions contemplated
hereby and all certificates, opinions, instruments, and other documents required
to effect the transactions contemplated hereby shall be reasonably satisfactory
in form and substance to Seller and its counsel.
37
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS, INDEMNIFICATION
8.01 Survival of Representations, Warranties, Covenants and Agreements.
The representations and warranties of Seller and Purchaser contained in Articles
II and III of this Agreement will survive the Closing (unless the party
asserting a breach thereof or misrepresentation thereunder knew of the
misrepresentation or breach at the time of Closing) and remain in full force and
effect for a period of one year from the date of the Closing, provided, however,
that the representations and warranties of the Seller contained in Sections,
2.01, 2.02, 2.03 and 2.26 and the representations and warranties of Purchaser in
Sections 3.01, 3.02, 3.03 and 3.06 shall survive the Closing and remain in full
force and effect without time limit; and provided further, however, the
representations and warranties of the Seller contained in Sections 2.13 and 2.14
will survive the Closing until the expiration of any applicable statutes of
limitations (as the same may be extended from time to time). The covenants and
agreements of the parties contained in this Agreement shall survive the Closing
unless and until they are otherwise terminated pursuant to their terms or as a
matter of applicable laws.
8.02 Indemnification by Seller.
(a) Subject to Closing and the limitations of Section 8.02(b)
and the adjustments provided for in Section 8.02(c), Seller will
indemnify and hold harmless the Purchaser and its representatives,
shareholders, subsidiaries and Affiliates (collectively, the "Purchaser
Indemnified Parties") and will reimburse the Purchaser Indemnified
Parties for any loss, liability, claim, damage, expense (including
reasonable costs of investigation and defense and reasonable attorneys
fees and expenses to the extent defense is not provided by Seller and,
with respect to matters arising out of Contracts that neither
constitute Company Liabilities nor relate to Transferred Projects, the
reasonable time charges for participation in the defense of such
matters by Purchaser's personnel) or diminution of value, whether or
not involving a third party claim (collectively, "Losses"), arising
from or in connection with:
(i) any breach of any representation or warranty made
by Seller in Article II of this Agreement;
(ii) any breach of any covenant or obligation of
Seller in (A) Sections 4.01 through 4.10 of this Agreement and
(B) Sections 4.11 through 4.13, Section 11.06 and Article VIII
of this Agreement;
(iii) any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon
any agreement or understanding alleged to have been made by
any such Person with Seller or either of the Companies (or any
Person acting on their behalf) in connection with any of the
transactions contemplated by this Agreement;
38
(iv) any product or component thereof sold and
delivered by or any services provided by, the Companies, prior
to the Closing Date other than in connection with the
Transferred Projects and subject to the provisions of Section
5.07 hereof;
(v) all Seller Liabilities; and
(vi) any claims or threatened claims arising out of
the actions or inactions of either of the Companies, Seller or
its other Affiliates with respect to the Business prior to the
Closing Date, excluding however, any claims arising or
resulting from or related to the Transferred Projects
regardless of whether such claims result from actions or
inactions of either of the Companies, Seller or its other
Affiliates taken or failed to be taken prior to the Closing
Date or from actions or inactions of the Companies, Purchaser
or its Affiliates taken or failed to be taken on or after the
Closing Date.
The Losses described in clauses (i) and (ii)(A) above are collectively
referred to herein as "Purchaser Losses".
(b) Seller shall be liable to the Purchaser Indemnified
Parties for any Purchaser Losses only if the aggregate amount of all
Purchaser Losses exceeds $500,000 (the "Deductible"), in which case
Seller shall only be obligated to indemnify Purchaser for Purchaser
Losses in excess of the Deductible and, then, only to the extent
indemnification payable by Seller with respect to Purchaser Losses
under this Section 8.02 does not in the aggregate exceed $5,000,000.
(c) Notwithstanding anything contained herein to the contrary,
the amount for which a Purchaser Indemnified Party is entitled to
indemnification hereunder for Purchaser's Losses shall be reduced by
the amount of any and all tax benefits, amounts recovered under
insurance policies, insurance loss funds or insurance deposits (net of
deductibles and incidental expenses) and further reduced by recovery of
any setoffs or counterclaims realized by the Purchaser Indemnified
Party that are measurable in dollars with reasonable certainty (net of
cost and expenses of recovering such amounts).
(d) For the purposes of determining Purchaser Losses, the
Seller's representations and warranties in Article II hereof, shall be
deemed to be made without reference to any materiality qualifications,
including, without limitation Material Adverse Effect qualifications.
(e) Any indemnification payable by Seller under this Section
8.02 shall be, to the extent permitted by law, an adjustment to
Purchase Price.
8.03 Indemnification by Purchaser. Purchaser will indemnify and hold
harmless Seller and its officers, directors, employees, agents, shareholders and
Affiliates (collectively the "Seller Indemnified Parties") and will reimburse
the Seller Indemnified Parties for any loss, liability, claim, damage, expense
(including reasonable costs of investigation and defense and reasonable
39
attorneys fees and expenses to the extent defense is not provided by Purchaser
and, with respect to matters arising out of Contracts that either constitute
Company Liabilities or relate to Transferred Projects, the reasonable time
charges for participation in the defense of such matters by Seller's personnel)
or diminution of value, whether or not involving a third party claim, arising
from or in connection with:
(a) any breach of any representation or warranty made by
Purchaser in Article III of this Agreement;
(b) any breach of any covenant or obligation of Purchaser in
this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with
Purchaser (or any Person acting on its behalf) in connection with any
of the transactions contemplated by this Agreement;
(d) any product or component thereof sold and delivered, or
any services provided by, the Companies, on or after the Closing Date;
(e) all Company Liabilities;
(f) any claims or threatened claims arising out of the actions
or inactions of either of the Companies, Purchaser or its other
Affiliates with respect to the Business on or after the Closing Date,
and
(g) any claims arising or resulting from or related to the
Transferred Projects regardless of whether such claims result from
actions or inactions of either of the Companies, Seller or its other
Affiliates taken or failed to be taken prior to the Closing Date, from
consummation of the transactions contemplated by this Agreement, from
actions taken by Seller or any of its Affiliates after Closing pursuant
to Purchaser's request under Section 1.01(a), or from actions or
inactions of the Companies, Purchaser or its other Affiliates taken or
failed to be taken on or after the Closing Date.
At Closing, Purchaser will cause the Companies to provide an indemnification
agreement in form and substance substantially identical to Exhibit C attached
hereto with joint and several liability for the Companies containing the terms
of this Article VIII and covering the matters set forth in clauses (d) through
(g) above.
8.04 Method of Asserting Claims. As used herein, an "Indemnified Party"
shall refer to a Purchaser Indemnified Party or a Seller Indemnified Party, as
applicable; the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder; and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or
administrative, instituted by any third party
40
for the liability or the costs or expenses of which are Losses (any
such third party action or proceeding being referred to as a "Claim"),
the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any
Indemnified Party's ability to seek reimbursement unless such failure
has materially and adversely affected the Indemnifying Party's ability
to defend successfully a Claim. The Indemnifying Party shall be
entitled to contest and defend such Claim; provided, that the
Indemnifying Party (i) has a reasonable basis for concluding that such
defense may be successful and (ii) diligently contests and defends such
Claim. Notice of the intention so to contest and defend shall be given
by the Indemnifying Party to the Notifying Party within 20 Business
Days after the Notifying Party's notice of such Claim (but, in all
events, at least five Business Days prior to the date that an answer to
such Claim is due to be filed). Such contest and defense shall be
conducted by reputable attorneys engaged by the Indemnifying Party. The
Notifying Party shall be entitled at any time, at its own cost and
expense (which expense shall not constitute a Loss unless the Notifying
Party reasonably determines that the Indemnifying Party is not
adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and
only to the extent that such expenses are reasonable) to participate in
such contest and defense and to be represented by attorneys of its or
their own choosing. If the Notifying Party elects to participate in
such defense, the Notifying Party will cooperate with the Indemnifying
Party in the conduct of such defense. Neither the Notifying Party nor
the Indemnifying Party may concede, settle or compromise any Claim
without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim
seeks equitable relief or (ii) if the subject matter of a Claim relates
to the ongoing business of any of the Indemnified Parties, which Claim,
if decided against any of the Indemnified Parties, would materially and
adversely affect the ongoing business or reputation of any of the
Indemnified Parties, then, in each such case, the Indemnified Parties
alone shall be entitled to contest, defend and settle such Claim in the
first instance and, if the Indemnified Parties do not contest, defend
or settle such Claim, the Indemnifying Party shall then have the right
to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party shall have a claim
against any Indemnifying Party that does not involve a Claim, the
Notifying Party shall deliver a notice of such claim with reasonable
promptness to the Indemnifying Party. If the Indemnifying Party
notifies the Notifying Party that it does not dispute the claim
described in such notice or fails to notify the Notifying Party within
30 days after delivery of such notice by the Notifying Party whether
the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its
Liability with respect to such claim, the chief executive officers of
each of the Indemnifying Party and the Notifying Party will proceed in
good faith to negotiate a resolution of such dispute, and if not
resolved through the negotiations of such Chief Executive Officers
within 60 days after the delivery of the Notifying Party's notice of
such claim, such dispute shall be resolved fully and finally in
Minneapolis, Minnesota by an arbitrator selected pursuant to, and an
41
arbitration governed by, the Commercial Arbitration Rules of the
American Arbitration Association. The arbitrator shall resolve the
dispute within 30 days after selection and judgment upon the award
rendered by such arbitrator may be entered in any court of competent
jurisdiction.
(c) After the Closing, the rights set forth in this Article
VIII shall be each party's sole and exclusive remedies against the
other party hereto for misrepresentations or breaches of covenants
contained in this Agreement. Notwithstanding the foregoing, nothing
herein shall prevent any of the Indemnified Parties from bringing an
action based upon actual and knowing fraud or other intentional breach
of an obligation of or with respect to either party in connection with
this Agreement and the Related Documents. In the event such action is
brought, the prevailing party's attorneys' fees and costs shall be paid
by the nonprevailing party.
ARTICLE IX
TERMINATION
9.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written
agreement of Seller and Purchaser;
(b) at any time before the Closing, by Seller or Purchaser, in
the event that any Order or Law becomes final which effectively
restrains, enjoins or otherwise prohibits or makes illegal the
consummation of any of the transactions contemplated by this Agreement
upon notification of the non-terminating party by the terminating
party;
(c) at any time after the Closing Date by Seller or Purchaser
upon notification to the non-terminating party by the terminating party
if the Closing shall not have occurred on or before such date;
(d) at any time before the Closing, by either Purchaser or
Seller if there has been a material misrepresentation, breach of
warranty or breach of covenant on the part of the other in the
representations, warranties and covenants set forth in this Agreement;
or
(e) by Purchaser pursuant to Section 4.09 hereof.
9.02 Effect of Termination. Upon termination pursuant to Section 9.01,
this Agreement will forthwith become null and void, and there will be no
liability or obligation on the part of Seller or Purchaser (or any of their
respective officers, directors, employees, agents or other representatives or
Affiliates), except that (i) the provisions with respect to expenses in Section
11.03 and confidentiality in Section 11.05 will continue to apply following any
such termination; and (ii) Section 9.03 will continue to apply following any
such termination and shall govern the disposition of the escrow deposit made
pursuant to Section 1.05.
42
9.03 Escrow Deposit. Upon termination of this Agreement by Seller or
Purchaser pursuant to Section 9.01(c) due to the failure of Purchaser to
complete the financing contemplated by the Financing Commitment or the bonding
contemplated by the Bonding Commitment or by Seller pursuant to Section 9.01(d),
any and all deposits made pursuant to the Escrow Agreement, and all interest or
earnings thereon then held by the Escrow Agent, shall be distributed to Seller.
Upon any other termination of this Agreement, any and all deposits made pursuant
to the Escrow Agreement, and all interest or earnings thereon then held by the
escrow agent, shall be distributed to Purchaser.
ARTICLE X
DEFINITIONS
10.01 Definitions.
(a) As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
arbitration or Governmental or Regulatory Authority investigation.
"Affiliate" means any Person that directly, or indirectly
through one of more intermediaries, controls or is controlled by or is
under common control with the Person specified. For purposes of this
definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
Person whether by Contract or otherwise and, in any event and without
limitation of the previous sentence, any Person owning more than 50% of
the voting securities of a second Person shall be deemed to control
that second Person.
"Agreement" means this Stock Purchase Agreement, the exhibits
and the schedules hereto and the certificates delivered in accordance
with the terms hereof, as the same shall be amended from time to time.
"Books and Records" means all files, documents, instruments,
papers, books and records, including without limitation personnel
records, financial statements, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, Licenses, customer lists, computer
files and programs, retrieval programs, operating data and plans and
environmental studies and plans.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the States of Connecticut, Illinois or
Minnesota are authorized or obligated to close.
"Business or Condition of" means the business, financial
condition or results of operations of the referenced company.
43
"Cash" means cash and cash equivalents, including marketable
securities and short term investments, calculated in accordance with
GAAP applied on a basis consistent with the preparation of the
Financial Statements.
"Closing" means the closing of the transactions contemplated
by Section 1.05.
"Closing Date" means the earlier of (a) forty five (45) days
after the date of this Agreement, (b) two (2) Business Days after the
conditions in Articles VI and VII have been satisfied, or (c) such
other date as Purchaser and Seller mutually agree upon in writing.,
provided however that (x) in the event Seller shall have amended or
supplemented any representation or warranty pursuant to the provisions
of Section 4.09, the Closing Date shall not occur until the expiration
of 15 days after the date Purchaser receives such amendment or
supplement, and (y) if such amendment or supplement shall give rise to
a Cure Period the expiration of which shall occur later than the
earlier of (a), (b), or (c) above, the Purchaser may elect to extend
the Closing Date to the day after the last day of the Cure Period, and
(z) if Purchaser reasonably requests, the Closing Date shall not occur
until two weeks after the date that would have been the Closing Date if
the extension were not requested.
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Contract" means any agreement, lease, sublease, evidence of
Indebtedness, mortgage, indenture, security agreement or other similar
arrangements.
"Construction Project" means any project for which the
Companies provide labor and materials to install security or detention
products offered for sale in the Business at the customer site;
provided that a construction project does not include Customer Orders.
"Customer Orders" means any purchase order from a customer for
security or detention products offered for sale in the Business where
the product is manufactured, assembled or fabricated by the Business
and shipped to the customer who installs the product.
"Environmental, Health and Safety Liabilities" means any cost,
damages, expense, liability, obligation, or other responsibility
arising from or under Environmental Law or Occupational Safety and
Health Law and consisting of or relating to:
(a) any environmental, health, or safety matter or
condition (including on-site or off-site contamination,
occupational safety and health, and regulation of chemical
substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims,
demands and response, remedial, or inspection costs and
expenses arising under any Environmental Law or Occupational
Safety and Health Law;
44
(c) financial responsibility under any Environmental
Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any cleanup, removal,
containment, or other remediation or response actions
("Cleanup") required by any applicable Environmental Law or
Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental
Authority or any other Person) and for any natural resource
damages; or
(d) any other compliance, corrective, or remedial
measures required under any Environmental Law or Occupational
Safety and Health Law.
The terms "removal," "remedial," and "response action" include the
types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.
9601 et seq., as amended ("CERCLA").
"Environmental, Health and Safety Requirements" shall mean all
federal, state, local and foreign statutes, regulations, and ordinances
concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without
limitation all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials,
substances or wastes, as such requirements are enacted and in effect on
or prior to the Closing Date.
"Environmental Law" means any Law that requires or relates to:
(a) advising appropriate authorities, employees, and
the public of intended or actual releases of pollutants or
hazardous substances or materials, violations of discharge
limits, or other prohibitions and the commencements of
activities, such as resource extraction or construction, that
could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials
into the Environment;
(c) reducing the quantities, preventing the release,
or minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed, formulated,
packaged, and used so that they do not present unreasonable
risks to human health or the Environment when used or disposed
of;
(e) protecting resources, species, or ecological
amenities;
(f) reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants,
oil, or other potentially harmful substances;
45
(g) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such
clean up or prevention; or
(h) making responsible parties pay private parties,
or groups of them, for damages done to their health or the
Environment, or permitting self-appointed representatives of
the public interest to recover for injuries done to public
assets.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"Employee" means the persons employed by Seller or an
Affiliate of Seller whose primary responsibilities are to perform
duties for the Business.
"Facilities" means the Real Property and Tangible Personal
Property currently constituting leasehold improvements or fixtures in
any of the Real Property.
"Financial Statements" means the financial statements of the
Business delivered to Purchaser pursuant to Section 2.05.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in the
immediately prior comparable period as applied, in the United States.
"Governmental Authorization" means any consent, license, or
permit issued, granted, given, or otherwise made available by or under
the authority of any Governmental or Regulatory Authority or pursuant
to any Law.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, Canada or any state, county, city
or other political subdivision.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended.
"Hazardous Activity" means the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or
use (including any withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment, and any other act, business, operation,
or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of the Facilities or the
Assets.
"Hazardous Material" means any substance, material or waste
which is regulated by any Governmental Authority, including any
material, substance or waste which is defined as a "hazardous waste,"
"hazardous material," "hazardous substance," "extremely hazardous
46
waste," "restricted hazardous waste," "contaminant," "toxic waste" or
"toxic substance" under any provision of Environmental Law, which
includes petroleum, petroleum products, asbestos, presumed
asbestos-containing material or asbestos-containing material, urea
formaldehyde and polychlorinated biphenyls.
"Improvements" means any buildings, fixtures and permanent
improvements located on the land, including any such items currently
under construction thereon used in the Business.
"Indebtedness" of any Person means all obligations of such
Person (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred purchase
price of goods or services (other than trade payables or accruals
incurred in the ordinary course of business), (iv) under capital leases
and (v) in the nature of guarantees of the obligations described in
clauses (i) through (iv) above of any other Person.
"Inter-Company Contract" means any Contract between one of the
Companies on the one hand and Seller or its other Affiliates on the
other hand."
"Inter-Company Receivables" means receivables payable to any
of the Companies from Seller or its other Affiliates."
"IRS" means the United States Internal Revenue Service.
"Knowledge of Seller or Seller's Knowledge" means the actual
knowledge of any officer of Seller, ▇▇▇▇▇▇ ▇▇▇▇▇ (President of ▇▇▇▇▇▇▇
and Norshield), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, (Vice President - Finance and
Administration of ▇▇▇▇▇▇▇) or ▇▇▇ ▇▇▇▇▇▇▇▇ (Executive Vice President of
▇▇▇▇▇▇▇), without imputation of notice or knowledge of any other source
or Person.
"Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the
United States, Canada, any other foreign country or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, fixed
or otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and
similar consents granted or issued by any Governmental or Regulatory
Authority.
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other
encumbrance.
47
"Material Adverse Effect" means, with respect to an entity,
business, or assets, any condition, event, change or occurrence that
would reasonably be expected to have, a material adverse effect on the
assets, business, operations, results of operations, or financial
condition of such business, entity or assets.
"Option" with respect to any Person means any security, right,
subscription, warrant, option, or other Contract that gives the right
to purchase or otherwise receive or be issued any shares of capital
stock of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock of such
Person.
"Order" means any writ, judgment, decree, injunction or
similar order of any Governmental or Regulatory Authority (in each such
case whether preliminary or final).
"Ordinary Course of Business" means the ordinary operations of
the Business, consistent with custom and practice (including with
respect to quantity and frequency).
"Permitted Lien" means (i) any Lien for Taxes (A) not yet due
or delinquent or (B) being contested in good faith by appropriate
proceedings for which Seller will remain liable as a Seller Liability
(and no amounts for such liability will be included in the Closing
Balance Sheet), (ii) any statutory Lien arising in the ordinary course
of business by operation of Law with respect to a Liability that is not
yet due or delinquent and (iii) with respect to any real property, any
easements of record that do not materially adversely affect the current
use and enjoyment of such real estate or materially detract from its
value and any minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not
materially adversely affect the value of the real estate or materially
impair the use of the real property.
"Person" means any natural person, corporation, general
partnership, limited partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
"Proceeding" means any charge, action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, judicial or investigative, whether formal or informal,
whether public or private) commenced, brought, conducted, or heard by
or before, or otherwise involving, any governmental body or arbitrator.
"Release" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal,
discharge, dispersal, leaching, or migration on or into the Environment
or into or out of any property.
"Subsidiaries" means any Persons in which the Business,
directly or indirectly through Subsidiaries or otherwise, beneficially
owns more than 50% of either the equity interests in, or the voting
control of, such Persons.
"Tangible Personal Property" means all machinery, equipment,
tools, furniture, office equipment, computer hardware, supplies,
materials, vehicles and other items of
48
tangible personal property (other than Inventories) of every kind owned
or leased by either of the Companies (wherever located and whether or
not carried on such Company's books).
"Voice Track Business of ▇▇▇▇▇▇▇" means the assets and
properties (including Contracts) used primarily in the business of
▇▇▇▇▇▇▇ relating to automated computer surveillance tracking system
utilizing voice verification and telecommunications technology to track
offenders who are released into the community by the criminal justice
system.
(b) Unless the context of this Agreement otherwise requires,
(i) words of any gender include each other gender; (ii) words using the
singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (iv) the
terms "Article" or "Section" refer to the specified Article or Section
of this Agreement; and (v) the phrase "ordinary course of business"
refers to the Business as conducted by the Business. All accounting
terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP. Any representation or warranty
contained herein as to the enforceability of a Contract shall be
subject to the effect of any bankruptcy, insolvency, reorganization,
moratorium or other similar law affecting the enforcement of creditors'
rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or
at Law).
ARTICLE XI
MISCELLANEOUS
11.01 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
CompuDyne Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman and Chief Executive Officer
and
Quanta Security Systems, Inc.
Parkway Industrial Park
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Rock
49
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
City Place, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Seller, to:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by mail in the manner described above to the address as provided in this
Section, be deemed given upon receipt (in each case regardless of whether such
notice is received by any other Person to whom a copy of such notice, request or
other communication is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other party hereto.
11.02 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof,
including without limitation the letter of intent dated August 18, 1998 between
Purchaser and Apogee Enterprises, Inc., and the confidentiality agreement dated
July 16, 1998 between Purchaser and Apogee Enterprises, Inc., and contains the
sole and entire agreement between the parties hereto and their Affiliates with
respect to the subject matter hereof.
50
11.03 Expenses. Except as otherwise expressly provided in this
Agreement whether or not the transactions contemplated hereby are consummated,
each party will pay its own costs and expenses incurred in connection with the
negotiation, execution and closing of this Agreement and the transactions
contemplated hereby ("Expenses").
11.04 Public Announcements. Upon execution of this Agreement, Seller
and Purchaser shall announce the transaction contemplated by this Agreement in a
press release or press releases mutually agreed by Seller and Purchaser.
Following execution of this Agreement, Seller and Purchaser shall make such
filings as required by the federal securities laws, including a Form 8-K Current
Report with the Securities and Exchange Commission. At all times at or before
the Closing, Seller and Purchaser will not issue or make any reports, statements
or releases to the public or generally to the employees, customers, suppliers or
other Persons to whom the Business sells goods or provides services or with whom
the Business otherwise has significant business relationships with respect to
this Agreement or the transactions contemplated hereby without the consent of
the other. If either party is unable to obtain the approval of its public
report, statement or release from the other party and such report, statement or
release is, in the opinion of legal counsel to such party, required by Law in
order to discharge such party's disclosure obligations, then such party may make
or issue the legally required report, statement or release and promptly furnish
the other party with a copy thereof. Seller and Purchaser will also obtain the
other party's prior approval of any press release to be issued immediately
following the Closing announcing the consummation of the transactions
contemplated by this Agreement.
11.05 Confidentiality. Each party hereto will hold, and will use its
best efforts to cause its Affiliates and, in the case of Purchaser, any Person
who has provided, or who is considering providing, financing to Purchaser to
finance all or any portion of the Purchase Price or to provide bonding to
satisfy the Bonding Condition and their respective Representatives to hold, in
strict confidence from any Person (other than any such Affiliate, Person who has
provided, or who is considering providing, financing or Representative), unless
(i) compelled to disclose by judicial or administrative process (including
without limitation in connection with obtaining the necessary approvals of this
Agreement and the transactions contemplated hereby of Governmental or Regulatory
Authorities) or by other requirements of Law or (ii) disclosed in an Action or
Proceeding brought by a party hereto in pursuit of its rights or in the exercise
of its remedies hereunder, all documents and information concerning the other
party or any of its Affiliates furnished to it by the other party or such other
party's Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder) through no fault of such
receiving party or (c) later acquired by the receiving party from another source
if the receiving party is not aware that such source is under an obligation to
another party hereto to keep such documents and information confidential;
provided that following the Closing the foregoing restrictions will not apply to
Purchaser's use of documents and information concerning the Business furnished
by Seller hereunder. In the event the transactions contemplated hereby are not
consummated, upon the request of the other party, each party hereto will, and
will cause its Affiliates, any Person who has provided, or who is providing,
financing to such party and their respective Representatives to, promptly (and
in no event later than five days after such request) redeliver or cause to be
redelivered all copies of confidential
51
documents and information furnished by the other party in connection with this
Agreement or the transactions contemplated hereby and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings related thereto or based thereon prepared by the party furnished such
documents and information or its Representatives.
11.06 Further Assurances; Post-Closing Cooperation.
(a) Subject to the terms and conditions of this Agreement, at
any time or from time to time after the Closing, each of the parties
hereto shall execute and deliver such other documents and instruments,
provide such materials and information and take such other actions as
may reasonably be necessary, proper or advisable, to the extent
permitted by Law, to fulfill its obligations under this Agreement.
(b) Following the Closing, each party will afford the other
party, its counsel and its accountants, during normal business hours,
reasonable access to the books, records and other data relating to the
Business in its possession with respect to periods prior to the Closing
and the right to make copies and extracts therefrom, to the extent that
such access may be reasonably required by the requesting party in
connection with (i) the preparation of Tax Returns, (ii) the
determination or enforcement of rights and obligations under this
Agreement, (iii) compliance with the requirements of any Governmental
or Regulatory Authority or (iv) in connection with any actual or
threatened Action or Proceeding.
(c) If, in order properly to prepare its Tax Returns, other
documents or reports required to be filed with Governmental or
Regulatory Authorities or its financial statements or to fulfill its
obligations hereunder, it is necessary that a party be furnished with
additional information, documents or records relating to the Business
not referred to in paragraph (b) above, and such information, documents
or records are in the possession or control of the other party, such
other party agrees to use its commercially reasonable efforts to
furnish or make available such information, documents or records (or
copies thereof) at the recipient's request, cost and expense. Any
information obtained by Seller in accordance with this paragraph shall
be held confidential by Seller in accordance with Section 11.05.
(d) In the event and for so long as any party hereto is
actively contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement
or (ii) any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction involving the Business, the other parties will cooperate
with the contesting or defending party and its counsel in the contest
or defense, reasonably make available its personnel (including in-house
and outside counsel, provided there shall be no waiver of any
attorney-client work product or other privileges), and provide such
testimony and access to its books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party (unless the contesting or
defending party is entitled to indemnification therefor under Article
VIII above).
52
11.07 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
11.08 Amendment. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.09 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person.
11.10 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void, except for assignments and transfers by operation of Law.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
11.11 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
11.12 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.14 Consent to Jurisdiction. Each party hereby (a) irrevocably and
unconditionally submits to the exclusive jurisdiction of the courts of the State
of Minnesota and of the United States of America located in the State of
Minnesota with respect to all actions and proceedings arising out of or relating
to this Agreement and the transactions contemplated hereby, (b) agrees that all
claims with respect to any such action or proceeding shall be heard and
determined in such Minnesota State or Federal court and agrees not to commence
any action or proceeding relating to this Agreement or the transactions
contemplated hereby except in such courts, (c) irrevocably and
53
unconditionally waives any objection to the laying of venue of any action or
proceeding arising out of this Agreement or the transactions contemplated hereby
and irrevocably and unconditionally waives the defense of an inconvenient forum,
(d) consents to service of process upon him, her or it by mailing or delivering
such service to the address set forth in Section 11.01 hereof, and (e) agrees
that a final judgement in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
11.15 Governing Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Minnesota applicable to a Contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
11.16 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
54
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
SELLER:
APOGEE ENTERPRISES, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief Executive Officer
PURCHASER:
COMPUDYNE CORPORATION
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
55
EXHIBIT A
ESCROW AGREEMENT
This Escrow Agreement (this "Agreement") is made and entered into as of
November 10, 1998 by and among APOGEE ENTERPRISES, INC., a Minnesota corporation
("Seller"), COMPUDYNE CORPORATION, a Nevada corporation ("Purchaser"), and THE
BANK OF NEW YORK, as escrow agent ("Escrow Agent").
STATEMENT OF PURPOSE
WHEREAS, Purchaser and Seller are entering into this Agreement pursuant
to the terms of that Stock Purchase Agreement dated as of November 10, 1998 (the
"Purchase Agreement").
WHEREAS, pursuant to the Purchase Agreement, Purchaser is required to
deposit certain funds into escrow pursuant to this Agreement.
AGREEMENT
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of other good and valuable
consideration, the receipt and sufficiency whereof is hereby acknowledged, the
parties hereby agree as follows:
1. Definition of Terms. Terms not otherwise defined herein shall have
the meaning ascribed to such terms in the Purchase Agreement. The Escrow Agent
shall not be responsible for any other provisions of the Purchase Agreement.
2. Appointment and Acceptance. Purchaser and Seller hereby appoint
Escrow Agent as escrow agent for the purposes and upon the terms and conditions
set forth in this Agreement. Escrow Agent hereby accepts such appointment and
agrees to act as escrow agent hereunder and to hold, invest and dispose of any
funds received by it hereunder in accordance with the terms and conditions set
forth in this Agreement.
3. Deposit of Escrowed Funds. On the date hereof, Purchaser shall, as
partial payment of the Purchase Price, deliver to Escrow Agent for deposit in
escrow pursuant to the provisions of this Agreement, a wire transfer of
immediately available funds in the amount of $250,000 (the "Escrowed Funds").
4. Delivery of Escrow Funds upon Termination relating to Financing or
Bonding Contingencies. In accordance with paragraph 6 below, the Escrow Agent
shall deliver to Purchaser the Escrowed Funds upon receipt of notice from Seller
to the Escrow Agent and Purchaser that the Purchase Agreement has been
terminated due to a failure to satisfy the Financing Condition or the bonding
Condition under the Purchase Agreement.
5. Delivery of Escrowed Funds in Other Circumstances. In accordance
with paragraph 6 below, the Escrow Agent shall deliver to Purchaser the Escrowed
Funds upon receipt of notice
2
from Purchaser to the Escrow Agent and Seller that the Purchase Agreement has
been terminated for reasons other than due to a failure to satisfy the Financing
Condition or the Bonding Condition under the Purchase Agreement.
6. Contest of a Claim to Escrow Funds.
(a) If, at any ▇▇▇▇ ▇▇▇▇▇▇ or Purchaser shall claim that it is entitled
to payment of all or a portion of the Escrowed Funds (a "Right of Payment"),
such party shall give notice of such Right of Payment (the "Notice of Payment")
to the other party and the Escrow Agent. The Notice of Payment shall be an
affidavit describing the event or circumstances giving rise to the Right of
Payment, specifying the amount of the Escrowed Funds requested and certifying
that the Notice of Payment is being submitted in good faith.
(b) If Escrow Agent shall have received a Notice of Payment, Escrow
Agent shall promptly deliver a copy thereof to the other party hereto. Within
ten (10) Business Days ("Dispute Period") after delivery by Escrow Agent of a
copy of such Notice of Payment to such other party, such other party may deliver
to Escrow Agent a written notice (the "Notice of Dispute") disputing the request
for payment of Escrowed Funds stated in the Notice of Payment. The Notice of
Dispute shall be an affidavit specifying the amount being disputed (the
"Disputed Amount"), describing in reasonable detail the reasons for such dispute
and certifying that the Notice of Dispute is being submitted in good faith. If
Escrow Agent has not received a Notice of Dispute prior to the expiration of
Dispute Period referred to above, then Escrow Agent shall immediately pay to
such requesting party, by check or wire transfer of immediately available funds,
the full amount of the Escrowed Funds requested in the Notice of Payment. If
Escrow Agent has received a Notice of Dispute during the Dispute Period which
disputes in part the request for payment of Escrowed Funds stated in the Notice
of Payment, then Escrow Agent shall, following receipt of such Notice of
Dispute, immediately pay to such requesting party, by check or wire transfer of
immediately available funds, the amount, if any, of Escrowed Funds requested in
the Notice of Payment which is in excess of the Disputed Amount.
(c) If Escrow Agent receives a Notice of Dispute, Escrow Agent shall
promptly deliver a copy of the Notice of Dispute to the other party hereto, and
shall not deliver the Disputed Amount until Escrow Agent shall have received one
of the following:
(i) A certified copy of an order, decree or judgment issued or
rendered by a court of competent jurisdiction, which order, decree or
judgment has been finally affirmed on appeal or which by lapse of time
or otherwise is no longer subject to appeal (a "Final Decision")
directing the distribution of the Escrow Funds; or
(ii) A joint written direction executed by Purchaser and
Seller directing the distribution of the Escrowed Funds.
Upon receipt of either (i) or (ii) above, Escrow Agent shall immediately deliver
the Escrowed Funds to the proper party in accordance therewith.
7. Investment of Escrowed Funds. Escrow Agent shall invest the Escrowed
Funds,
3
from time to time, in 30-day United States Treasury obligations or certificates
of daily deposit having a maturity not to exceed 30 days, any governmental
mutual funds, or such other investments mutually designated by Purchaser and
Seller. The proceeds of all investments made hereunder shall be distributed in
accordance with this Agreement. Escrow Agent shall deliver monthly statements to
Purchaser and Seller in accordance with Escrow Agent's regular practice; the
parties hereby agree that, except for the foregoing, Escrow Agent shall have no
obligations to monitor, or advise the parties with respect to, such investments.
All interest or other income earned on the Escrow Funds shall become and be
retained and disbursed as part of the Escrow Funds. The party hereunder that
receives the interest or other income shall be responsible for filing all
necessary tax returns for any interest or other income paid or attributed to it
hereunder and shall pay any taxes thereon.
8. Termination of Escrow. On the Closing Date, Purchaser and Seller
shall direct the Escrow Agent to pay Seller the Escrow Funds and, upon such
payment, the escrow under this Agreement shall terminate. In the event of a
termination of the Purchase Agreement, Escrow Agent shall disburse the Escrowed
Funds in accordance with the provisions of paragraphs 4 through 6 hereof,
whereupon the escrow under this Agreement shall terminate.
9. No Liens on Escrowed Funds. During the term of this Agreement, each
of Purchaser and Seller agree to keep the Escrowed Funds free and clear of all
liens, claims, encumbrances, levies, garnishments or other attachments arising
with respect to it.
10. Notices. Any notices or other communication required to be sent or
given hereunder by any of the parties shall in every case be in writing and
shall be deemed properly served if (a) delivered personally, (b) sent by
registered or certified mail, in all such cases with first class postage
prepaid, return receipt requested, (c) delivered by a recognized overnight
courier service, or (d) sent by facsimile transmission to the parties at the
addresses as set forth below or at such other addresses as may be furnished in
writing.
If to the Seller:
Apogee Enterprises, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Chief Financial Officer
with a copy to:
4
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Purchaser:
CompuDyne Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Chairman and Chief Executive Officer
and
Quanta Security Systems, Inc.
Parkway Industrial Park
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Rock
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
City Place, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to Escrow Agent:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No. (▇▇▇)-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Date of service of such notice shall be (i) the date such notice is personally
delivered, (ii) three days after the date of mailing if sent by certified or
registered mail, (iii) the next succeeding business day after date of delivery
to the overnight courier if sent by overnight courier, or (iv) the next
succeeding business day after transmission by facsimile.
5
11. Escrow Agent's Liability. Escrow Agent undertakes to perform such
duties and only such duties as are specifically set forth in this Agreement, and
no implied covenants or obligations shall be read into this Agreement against
Escrow Agent. In the absence of bad faith, gross negligence or wilful misconduct
on its part, Escrow Agent may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to Escrow Agent. Escrow Agent may act upon
any instrument, certificate, opinion or other writing believed by it in good
faith and without gross negligence to be genuine, and shall not be liable in
connection with the performance by it of its duties pursuant to the provisions
of the Agreement, except for its own bad faith, gross negligence or wilful
misconduct. Escrow Agent may consult with counsel of its own choice and shall
have full and complete authorization and protection for any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion of such counsel. Escrow Agent may execute powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys.
12. Indemnification of Escrow Agent. Purchaser and Seller hereby agree
jointly and severally to indemnify Escrow Agent for, and to hold it harmless
against, any loss, liability or expense incurred without gross negligence,
wilful misconduct or bad faith on the part of Escrow Agent, arising out of or in
connection with its entering into the Agreement, carrying out its duties
hereunder and accepting the Escrowed Funds, including the costs and expenses of
defending itself against any claim of liability in connection with the exercise
or performance of any of its powers or duties hereunder (including reasonable
fees, expenses and disbursements of its counsel); provided that, as between
Purchaser and Seller the foregoing indemnity obligations shall be borne one-half
by Purchaser and one-half by Seller.
13. Escrow Agent to Follow Instructions of Purchaser and Seller.
Notwithstanding any provision contained herein to the contrary, Escrow Agent
shall at any time and from time to time take such action hereunder with respect
to the Escrowed Funds (and the securities in which any of the Escrowed Funds
shall have been invested) as shall be directed in writing by both Purchaser and
Seller, provided that Escrow Agent shall first be indemnified to its
satisfaction with respect to any of its costs or expenses which might be
involved.
14. Resignation of Escrow Agent. Escrow Agent, or any successor, may
resign at any time upon giving written notice, thirty (30) days before such
resignation shall take effect, to Purchaser and Seller. In the event Escrow
Agent shall resign or be unable to serve, it shall be succeeded by such bank or
trust company as Purchaser and Seller shall appoint, or if no appointment is
made, by a bank or trust company appointed by a court of competent jurisdiction.
In the absence of a successor so appointed by Purchaser and Seller, Escrow Agent
may petition such a court to appoint a successor escrow agent. The resigning
escrow agent shall transfer to its successor all monies, securities and
investments then held subject to this escrow and all pending notices,
instructions and directions then in its possession, and shall thereupon be
discharged, and the successor shall thereupon succeed to all the rights, powers
and duties and shall assume all of the obligations of the resigning escrow
agent.
6
15. Escrow Agent's Fee and Expenses, Etc.
(a) Escrow Agent shall be entitled to (i) a fee for services
rendered and for reimbursement of extraordinary expenses incurred in performance
of its duties which expenses are not included in said fee, plus (ii) out of
pocket expenses which expenses shall be charged as incurred. Such fees and
expenses shall be divided equally between the Purchaser, on one hand and Seller,
on the other hand.
(b) In case said property shall be attached, garnished, or
levied upon any court order, or the delivery thereof shall be stayed or enjoined
by an order of court, or any order, judgement or decree shall be made or entered
by any court order affecting the property deposited under this Agreement, or any
part thereof, Escrow Agent is hereby expressly authorized in its sole direction,
to obey and comply with all writs, orders or decrees so entered or issued, which
it is advised by legal counsel of its own choosing is binding upon it, whether
with or without jurisdiction, and in case Escrow Agent obeys or complies with
any such writ, order or decree it shall not be liable to any of the parties
hereto or to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
(c) In case said Escrow Agent becomes involved in litigation
on account of this deposit or of this Agreement, it shall have the right to
retain counsel and shall have a lien on the property deposited hereunder for any
and all costs, attorneys' fees, charges, disbursements, and expenses in
connection with such litigation; and shall be entitled to reimburse itself
therefor out of the property deposited hereunder, and if it shall be unable to
reimburse itself from the property deposited hereunder, the parties hereto
jointly and severally agree to pay to said Escrow Agent on demand, its
reasonable charges, counsel and attorneys' fees, disbursements, and expenses in
connection with such litigation.
(d) In case conflicting demands are made upon it for any
situation not addressed in this Agreement, Escrow Agent may withhold performance
of this escrow until such time as said conflicting demands shall have been
withdrawn or the rights of the respective parties shall have been settled by
court adjudication, arbitration, joint order or otherwise.
(e) The parties acknowledge that Escrow Agent will have no
obligations or responsibilities with respect to tax reporting of the parties.
16. Successors. The obligations imposed and the rights conferred by
this Escrow Agreement shall be binding upon and inure to the benefit of the
respective heirs (including estates), successors and permitted assigns of the
parties hereto, but will not be assignable or delegable by any party without the
prior written consent of the other parties.
17. Governing Law. This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts of law.
18. Entire Agreement. This Agreement contains the entire agreement
between the
7
parties hereto with respect to the transactions contemplated herein.
19. Amendment. This Agreement cannot be terminated, altered or amended
except pursuant to an instrument in writing signed by Purchaser, Seller and
Escrow Agent.
20. Enforceability. If any provision of the Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision and shall not in any manner affect or render invalid or
unenforceable any other provision of this Escrow Agreement, and the Agreement
shall be carried out as if any such invalid or unenforceable provision were not
contained herein.
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed on original and all of which
together shall constitute one and the same instrument.
22. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any party
hereto.
23. Attorneys' Fees. In the event of a dispute between Purchaser and
Seller regarding the distribution of the Escrowed Funds, upon the issuance of a
final, non-appealable order or judgment by a court of competent jurisdiction,
the prevailing party's legal fees and related expenses shall be paid by the
non-prevailing party. The determination of which party is the "prevailing" party
shall be made by the court issuing such final, non-appealable order or judgment.
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed as of the date first above written.
APOGEE ENTERPRISES, INC.
By:
---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
President and Chief Executive Officer
COMPUDYNE CORPORATION
By:
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
THE BANK OF NEW YORK
By:
---------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President
9
EXHIBIT B
ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT, dated as of ____________, 1998 is made and entered into
by and among ▇▇▇▇▇▇, LTD., a Minnesota corporation ("Provider"), ▇▇▇▇▇▇▇
INDUSTRIES, INC., a Delaware corporation ("▇▇▇▇▇▇▇"), and NORSHIELD CORP., an
Alabama corporation ("Norshield" and collectively with ▇▇▇▇▇▇▇, the
"Companies").
STATEMENT OF PURPOSE
WHEREAS, on this date, Apogee Enterprises, Inc. ("Seller") has sold all
of the outstanding capital stock of the Companies to CompuDyne Corporation
("Purchaser") pursuant to that certain Stock Purchase Agreement dated November
__, 1998 (the "Stock Purchase Agreement") between Seller and Purchaser;
WHEREAS, while the Companies were part of Seller's group of entities,
the Companies were provided certain administrative services;
WHEREAS, Purchaser has requested that certain administrative services
continue to be provided to the Companies for a period of time not to extend
beyond September 1, 1999 in order to provide Purchaser sufficient time to
implement its own administrative systems; and
WHEREAS, pursuant to Section 4.12 of the Stock Purchase Agreement, this
Agreement is being entered into in conjunction with the Closing under the Stock
Purchase Agreement in order to provide the Companies with certain administrative
services as herein provided.
AGREEMENT
1. Administrative Services. Upon the terms and conditions of this
Agreement, Provider shall provide the Companies, on a non-exclusive basis, the
services described in Exhibit A hereto on a basis comparable to that currently
provided by Provider to the Companies (the "Services"). The Services will be
provided within the limitations, conventions and parameters of the system
currently used to provide the Services.
2. Term. The term of this Agreement will commence as of the date of
this Agreement and will continue until the earlier of (i) sixty (60) days after
written notice of termination is given to Provider by the Companies, or (ii)
September 1, 1999 (the "Termination Date").
3. Extension or Sale. If the Companies still require the Services after
September 1. 1999, and the hardware, software, manuals and other items used in
providing those services are still being utilized within the Provider, the
Service Period will be extended as required. If the hardware, software, manuals
and other items used to provide those services are not being utilized within the
Provider, the Companies may purchase the hardware, software, manuals and other
items used in providing the Services at their then remaining book value plus any
costs associated with
10
assumption of leases and necessary consents for assignments.
4. Compensation for Services. The Companies agree to pay Provider for
the Services as follows:
(a) from the date hereof until February 28, 1999 or such later date as
the Provider starts using alternative hardware and software for the Provider's
internal services (the "Adjustment Date"), a monthly fee of $25,000 commencing
on the date hereof; provided that if the Termination Date or the Adjustment Date
occurs in such a manner as to result in the provision of services for less than
a full month, the monthly fee shall be prorated accordingly; and
(b) from the Adjustment Date through the Termination Date, Provider's
reasonable cost (including personnel costs, overhead allocation and third party
expenses) to provide the Services, which cost the parties anticipate will be
higher than the fees set forth above.
Payment of such fees shall be paid monthly in advance commencing on the date
hereof and the same date for each month thereafter. In addition, the Companies
will reimburse Provider for any additional costs or expenses incurred by
Provider for additional services performed at the specific request of the
Companies or Purchaser.
5. Other Rights and Obligations.
(a) Without the prior written consent of the other party, each party
agrees that it shall use reasonable efforts to not disclose to any third party
any information proprietary to the other, including information concerning trade
secrets, customer lists, methods, processes or procedures, or any other
confidential information of the other party which it learns during the course of
its performance of this Agreement. No party shall use the proprietary
information of the other for any purpose, other than the purposes enumerated in
this Agreement, without the written consent of the other party.
(b) The Companies shall, jointly and severally, indemnify and hold
harmless Provider, its successors and assigns, from and against any and all
claims, actions, proceedings, costs, damages and liabilities, including
reasonable attorneys' fees and expenses, arising out of, connected with, or
resulting from the Services provided by Provider to the Companies hereunder,
except to the extent resulting from the gross negligence or willful misconduct
of Provider.
(c) Provider does not warrant or guarantee in any way the results of
the Services, provided that Provider agrees to use reasonable care in performing
the Services in a businesslike manner.
(d) Provider shall not have any liability to the Companies in
connection with this Agreement for any consequential, exemplary, special,
incidental or punitive damages even if it has been advised of the possibility of
such damages.
(e) As an inducement to Provider's undertakings hereunder, the
Companies agree that Provider shall not be liable for any mistakes of judgment,
except as a result of the
11
gross negligence or willful misconduct of Provider. Notwithstanding the
preceding sentence, the liability of Provider for any reason and upon any cause
of action or claim in contract, tort or otherwise, shall be limited to an amount
equal to the amount actually paid to Provider by the Companies under this
Agreement, excluding reimbursement of costs and expenses paid by Provider to any
third party providing a portion of the Services. This limitation applies to all
causes of action or claims in the aggregate including without limitation, breach
of contract, breach of warranty, negligence, strict liability,
misrepresentations and other torts.
(f). The Companies acknowledge that the Services provided and the
hardware and software utilized to provide those services are not year 2000
compliant and are not intended to become year 2000 compliant at any time during
the term of this Agreement.
5. Miscellaneous.
(a) This Agreement is binding upon and inures to the benefit of the
respective parties hereto and their successors and assigns.
(b) Any written notice provided pursuant to this Agreement shall be
deemed given (i) if by hand delivery, upon receipt thereof, (ii) if mailed,
three (3) days after deposit in the United States mail, postage prepaid, (iii)
if by facsimile, on the date of confirmation thereof; or (iv) if by next day
delivery service, upon such delivery. All notices shall be addressed to the
respective party at the address set forth below its name (or such other address
as a party may in the future specify in writing).
(c) The section headings used herein are for reference and convenience
only and shall not be deemed to affect the meaning or construction of the
provisions thereof.
(d) Provider shall not be liable to the other for any delay or failure
to perform any of the Services due to causes beyond its reasonable control.
Performance times shall be considered extended for a period of time equivalent
to the time lost because of such delay.
(e) If any provision of this Agreement is invalid under any applicable
statute or rule of law, it is to that extent deemed omitted and the remaining
provisions shall not be affected but shall remain in full force and effect.
(f) The waiver or failure of either party to exercise any right in any
respect provided for herein shall not be deemed a waiver of any further right
hereunder.
(g) No amendment hereof shall be valid unless in writing and signed by
an authorized representative of both parties.
(h) This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes all previous
communications, letters of understanding, and agreements, whether written or
oral, with respect to such subject matter. There are no representations,
understandings or agreements relative hereto which are not fully expressed
herein.
12
(i) The validity, construction and interpretation of this Agreement
shall be governed by the laws of the State of Minnesota.
(j) All provisions of this Agreement relating to indemnification and
confidentiality shall survive the termination of this Agreement.
13
IN WITNESS WHEREOF, Provider and the Companies have each caused this
Agreement to be signed and delivered by its duly authorized officer, all as of
the date first set forth above.
▇▇▇▇▇▇, LTD.
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
▇▇▇▇▇▇▇ INDUSTRIES, INC.
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
NORSHIELD CORP.
By:_______________________
Name:_____________________
Title:____________________
Address:__________________
14
Exhibit A
DESCRIPTION OF SERVICES
--------------------------------------------------------------------------------------------------------------------------------
PROVIDER SERVICE COMPANIES PROVIDER PERSONNEL
--------------------------------------------------------------------------------------------------------------------------------
JOB SET-UP Set-up in AS400 Job details sent to Provider
for set-up in AS400 Acct. Clerk
--------------------------------------------------------------------------------------------------------------------------------
PURCHASING
--------------------------------------------------------------------------------------------------------------------------------
Generate Payment for A/P Input the coded invoice Provide check stock for A/P
processing A/P clerk; partial Acctg. Mgr.
into AS400
--------------------------------------------------------------------------------------------------------------------------------
MANAGE PRODUCTION/JOB
--------------------------------------------------------------------------------------------------------------------------------
Record labor hours Direct entry into AS400
system or ADP
--------------------------------------------------------------------------------------------------------------------------------
Record material used Feed from A/P input
--------------------------------------------------------------------------------------------------------------------------------
Manage inventory Maintain AS400 Manages w/DCD ond AS400
--------------------------------------------------------------------------------------------------------------------------------
Job P&L tracking Material & labor data feed Partial staff accountant & acctg. Mgr;
from AS400 AS400 support; provides
month-end G/L support
--------------------------------------------------------------------------------------------------------------------------------
▇▇▇▇ THE CUSTOMER
--------------------------------------------------------------------------------------------------------------------------------
Compile & Maintain
billing information Customer set up in AS400 Job & customer info
with job setup provided to Provider
Billing Clerk
--------------------------------------------------------------------------------------------------------------------------------
Invoice the customer Enter invoice data in Invoice generated in the
AS400 for job & A/R field & sent to Accounting
Clerk Provider
--------------------------------------------------------------------------------------------------------------------------------
A/R Input collection info into Provide A/R collection
AS400 information to clear A/R
and to feed balance sheet
--------------------------------------------------------------------------------------------------------------------------------
PAYROLL
--------------------------------------------------------------------------------------------------------------------------------
Maintain payroll related
personnel data Employee set up in AS400 Personnel data sent to Provider Payroll clerk; Payroll mgr; Controller
--------------------------------------------------------------------------------------------------------------------------------
Enter labor hours Direct entry into AS400 system
or ADP worksheet
--------------------------------------------------------------------------------------------------------------------------------
Generate paychecks weekly * Coordinate w/ ADP
--------------------------------------------------------------------------------------------------------------------------------
Account reconciliation monthly * Coordinate w/ ADP
--------------------------------------------------------------------------------------------------------------------------------
Labor/union reporting job; union (monthly) * Coordinate w/ ADP
--------------------------------------------------------------------------------------------------------------------------------
Data feed to G/L and jobs Run payroll to G/L on Coordinate w/ ADP and Provider Payroll clerk; Payroll mgr; Controller;
AS400 * AS400 support
--------------------------------------------------------------------------------------------------------------------------------
Tax deposits Filed * Coordinate w/ ADP
--------------------------------------------------------------------------------------------------------------------------------
W2's Printed from Payroll Coordinate w/ ADP
system *
--------------------------------------------------------------------------------------------------------------------------------
Per diems Calculated by payroll * Person specific terms provided
to Provider
--------------------------------------------------------------------------------------------------------------------------------
MONTH-END ACCOUNTING
--------------------------------------------------------------------------------------------------------------------------------
G/L Manual adjustments; Run Direct G/L entry of manual
AS400 adjustments Controller; misc. Acctg. Staff;
AS400 support
--------------------------------------------------------------------------------------------------------------------------------
EXHIBIT C
INDEMNITY AGREEMENT
THIS AGREEMENT dated as of November __, 1998 is made and entered into
by and between APOGEE ENTERPRISES, INC., a Minnesota corporation ("Seller"),
▇▇▇▇▇▇▇ INDUSTRIES, INC., Nevada corporation ("▇▇▇▇▇▇▇"), and NORSHIELD
CORPORATION, an Alabama corporation ("Norshield").
WHEREAS, Seller and CompuDyne Corporation ("Purchaser") have entered
into the stock purchase agreement dated November ___, 1998 (the "Purchase
Agreement") pursuant to which Seller will, on this date, sell the outstanding
capital stock of ▇▇▇▇▇▇▇ and Norshield to Purchaser;
WHEREAS, pursuant to the Purchase Agreement, Purchaser has agreed to
cause ▇▇▇▇▇▇▇ and Norshield to enter into this indemnity agreement with and in
favor of Seller as a condition to the closing under the Purchase Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. Unless otherwise defined herein, the capitalized terms
herein shall have the meanings set forth in the Purchase Agreement.
2. Indemnification by ▇▇▇▇▇▇▇ and Norshield. ▇▇▇▇▇▇▇ and Norshield
will, jointly and severally, indemnify and hold harmless Apogee and its
officers, directors, employees, agents, shareholders and Affiliates
(collectively the "Seller Indemnified Parties") and will reimburse the Apogee
Indemnified Parties for any loss, liability, claim, damage, expense (including
reasonable costs of investigation and defense and reasonable attorneys fees and
expenses to the extent defense is not provided by ▇▇▇▇▇▇▇, Norshield or
Purchaser and, with respect to matters arising out of Contracts that either
constitute Company Liabilities or relate to Transferred Projects, the reasonable
time charges for participation in the defense of such matters by Apogee's
personnel) or diminution of value, whether or not involving a third party claim,
arising form or in connection with:
(a) any breach of any representation or warranty made by
Purchaser in Article III of the Purchase Agreement;
(b) any breach of any covenant or obligation of Purchaser in
the Purchase Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with
Purchaser (or any Person acting on its behalf) in connection with
any of the transactions contemplated by the Purchase Agreement;
(d) any product or component thereof sold and delivered, or
any services provided by, the Companies, on or after the Closing
Date;
(e) all Company Liabilities;
(f) any claims or threatened claims arising out of the actions
or inactions of either of the Companies, Purchaser or its other
Affiliates with respect to the Business on or after the Closing Date,
and
(g) any claims arising or resulting from or related to the
Transferred Projects regardless of whether such claims result from
actions or inactions of either of the Companies, Seller or its other
Affiliates taken or failed to be taken prior to the Closing Date, from
consummation of the transactions contemplated by the Purchase
Agreement, from actions taken by Seller or any of its Affiliates after
Closing pursuant to Purchaser's request under Section 1.01(a), or from
actions or inactions of the Companies, Purchaser or its other
Affiliates taken or failed to be taken on or after the Closing Date.
3. Applicability of Section 8.04. The provisions of Section 8.04 of the
Purchase Agreement shall also apply to this Agreement, except that, as used
therein, (a) "Indemnified Party" and "Notifying Party" mean the Seller and its
Affiliates, (b) "Indemnifying Party" means ▇▇▇▇▇▇▇ and Norshield (jointly and
severally), and (iii) "Claim" means any claim for indemnification asserted by
Seller under this Agreement.
4. Miscellaneous. The provisions of Article IX of the Purchase
Agreement (other than Sections 11.02 and 11.13) shall also apply to this
Agreement, except that, as used therein "Purchaser" means ▇▇▇▇▇▇▇ and Norshield.
2
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each party hereto as of the date first above
written.
SELLER:
APOGEE ENTERPRISES, INC.
By:
-------------------------------
Its:
----------------------------
▇▇▇▇▇▇▇:
▇▇▇▇▇▇▇ INDUSTRIES, INC.
By:
-------------------------------
Its:
----------------------------
NORSHIELD:
NORSHIELD CORPORATION
By:
-------------------------------
Its:
----------------------------
3