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EXHIBIT 2.4
SHARE PURCHASE AGREEMENT
DATED AS OF MAY 31, 2000
BY AND AMONG
UTI ACQUISITION CORP.
(THE "PURCHASER")
UTI CORPORATION
(THE "COMPANY")
AND
THE SHAREHOLDERS OF THE COMPANY
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS....................................................................2
Section 1.1 Certain Definitions............................................................2
Section 1.2 Terms Generally...............................................................13
ARTICLE II PURCHASE AND SALE OF STOCK....................................................13
Section 2.1 Purchase and Sale.............................................................13
Section 2.2 Payment of Purchase Price.....................................................14
Section 2.3 Allocation of Purchase Price..................................................16
ARTICLE III THE CLOSING...................................................................16
Section 3.1 Closing.......................................................................16
Section 3.2 Closing Deliveries............................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS.................18
Section 4.1 Corporate Organization........................................................18
Section 4.2 Ownership of Shares...........................................................19
Section 4.3 Authorization, Etc............................................................19
Section 4.4 No Conflict...................................................................19
Section 4.5 Governmental Consents.........................................................19
Section 4.6 Capital Stock.................................................................20
Section 4.7 Financial Statements..........................................................20
Section 4.8 Absence of Certain Changes or Events..........................................20
Section 4.9 No Undisclosed Liabilities....................................................23
Section 4.10 Property; Inventory...........................................................23
Section 4.11 Intellectual Property.........................................................24
Section 4.12 Tax Matters...................................................................26
Section 4.13 Real Property.................................................................28
Section 4.14 Material Contracts............................................................30
Section 4.15 Relationship with Suppliers and Customers.....................................32
Section 4.16 Notes and Accounts Receivable; Bank Accounts..................................32
Section 4.17 Insurance.....................................................................32
Section 4.18 Employees.....................................................................33
Section 4.19 Employee Benefits.............................................................33
Section 4.20 Environmental Compliance......................................................36
Section 4.21 Litigation and Claims, Compliance with Laws...................................38
Section 4.22 Affiliate Transactions........................................................39
Section 4.23 Records.......................................................................39
Section 4.24 Brokers, Finders, Etc.........................................................40
Section 4.25 Representations and Warranties Generally......................................40
Section 4.26 Competing Business............................................................40
Section 4.27 Product Warranty and Liability................................................40
Section 4.28 Year 2000 Program.............................................................40
Section 4.29 Other Information.............................................................41
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER...................................41
Section 5.1 Organization..................................................................41
Section 5.2 Authorization, Etc............................................................41
Section 5.3 Brokers' Fees.................................................................42
Section 5.4 Capital Stock.................................................................42
Section 5.5 No Conflict...................................................................42
Section 5.6 Financial Statements..........................................................43
Section 5.7 No Undisclosed Liabilities....................................................43
Section 5.8 Absence of Certain Changes or Events..........................................43
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Section 5.9 Purchase for Investment.......................................................43
Section 5.10 Other Information.............................................................44
ARTICLE VI SELLERS' AND THE COMPANY'S OBLIGATIONS BEFORE CLOSING.........................44
Section 6.1 General.......................................................................44
Section 6.2 Access........................................................................44
Section 6.3 Operation of Business.........................................................44
Section 6.4 Preservation of Business; Insurance...........................................44
Section 6.5 Notices and Consents..........................................................45
Section 6.6 Exclusivity...................................................................45
Section 6.7 Delivery of Schedules; Notice of Developments; Update of Schedules............45
Section 6.8 Confidentiality...............................................................46
Section 6.9 Financial Statements..........................................................46
Section 6.10 Company Obligations; Affiliate Agreements.....................................46
Section 6.11 Real Property.................................................................47
Section 6.12 Due Diligence.................................................................47
Section 6.13 Intellectual Property Assignment..............................................47
ARTICLE VII PURCHASER'S RIGHTS AND OBLIGATIONS BEFORE CLOSING.............................48
Section 7.1 Due Diligence.................................................................48
Section 7.2 Confidentiality...............................................................48
Section 7.3 Commitment of Lenders.........................................................49
Section 7.4 Delivery of Schedules; Notice of Developments; Update of Schedules............49
ARTICLE VIII CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE...............................49
Section 8.1 Representations and Warranties True...........................................49
Section 8.2 Performance...................................................................50
Section 8.3 No Material Adverse Effect....................................................50
Section 8.4 Consents......................................................................50
Section 8.5 No Proceedings, Injunctions, Etc..............................................50
Section 8.6 Accounts......................................................................50
Section 8.7 Minimum Net Worth.............................................................50
Section 8.8 Sellers' and Officer's Certificates...........................................50
Section 8.9 Repayment of Debt; Collection of Certain Accounts Receivable..................50
Section 8.10 Opinion of Sellers' Counsel...................................................51
Section 8.11 Resignations..................................................................51
Section 8.12 Regulatory and Third Party Approvals..........................................51
Section 8.13 Financial Statements..........................................................51
Section 8.14 Financing.....................................................................51
Section 8.15 Lender's Due Diligence Review.................................................51
Section 8.16 Real Property.................................................................51
Section 8.17 Employment and Noncompetition Agreements......................................51
Section 8.18 Other Damages.................................................................52
Section 8.19 Shareholders' Agreement.......................................................52
Section 8.20 Termination and Release of Phantom Stock Options..............................52
ARTICLE IX CONDITIONS PRECEDENT TO SELLER................................................53
Section 9.1 Representations and Warranties True...........................................53
Section 9.2 Performance...................................................................53
Section 9.3 Consents......................................................................53
Section 9.4 No Proceedings, Injunctions, Etc..............................................53
Section 9.5 Sellers Due Diligence Review..................................................53
Section 9.6 Shareholders Agreement........................................................53
Section 9.7 Opinion of Purchaser's Counsel................................................53
Section 9.8 Officer's Certificate.........................................................53
Section 9.9 Employment Agreements.........................................................53
Section 9.10 Purchaser Secretary's Certificate.............................................53
Section 9.11 Errors and Omissions Policy...................................................54
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Section 9.12 Board of Directors Election...................................................54
Section 9.13 Management Options............................................................54
Section 9.14 Investment in Purchaser.......................................................54
ARTICLE X POST-CLOSING COVENANTS........................................................54
Section 10.1 General.......................................................................54
Section 10.2 Litigation Support............................................................54
Section 10.3 Tax Matters...................................................................54
Section 10.4 Public Disclosure; Confidentiality............................................55
Section 10.5 Cooperation with Initial Public Offering......................................55
Section 10.6 Employee Benefits.............................................................55
Section 10.7 Post-Closing Operation of Business............................................55
Section 10.8 D&O Insurance.................................................................56
Section 10.9 Section 338(h)(10) Election...................................................56
Section 10.10 Eligible Indebtedness.........................................................57
Section 10.11 Bonus Plan....................................................................59
ARTICLE XI INDEMNIFICATION...............................................................59
Section 11.1 Indemnification by Sellers....................................................59
Section 11.2 Indemnification by Purchaser..................................................59
Section 11.3 Procedures for Third-Party Claims.............................................59
Section 11.4 Procedures for Direct Claims..................................................61
Section 11.5 Limitations of Indemnification Obligations....................................62
Section 11.6 Survival of Representations, Warranties and Covenants.........................63
Section 11.7 Sole Remedy...................................................................63
ARTICLE XII.......................................................................................64
Section 12.1 Termination of Agreement......................................................64
Section 12.2 Effect of Termination.........................................................64
ARTICLE XIII......................................................................................65
Section 13.1 Fees and Expenses.............................................................65
Section 13.2 Entire Agreement..............................................................65
Section 13.3 Amendments....................................................................65
Section 13.4 Taxes.........................................................................65
Section 13.5 Governing Law; Dispute Resolution.............................................65
Section 13.6 Representation by Counsel.....................................................66
Section 13.7 Assignment....................................................................66
Section 13.8 Headings......................................................................66
Section 13.9 Notices.......................................................................66
Section 13.10 Counterparts..................................................................67
Section 13.11 Severability..................................................................67
Section 13.12 Specific Performance..........................................................67
Section 13.13 Legal Fees and Expenses.......................................................67
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SHARE PURCHASE AGREEMENT
This Share Purchase Agreement (this "Agreement"), dated as of May 31,
2000, is entered into by and among UTI Acquisition Corp., a Colorado corporation
(the "Purchaser"), UTI Corporation, a Pennsylvania corporation (the "Company"),
and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇. ("▇▇▇▇▇▇▇▇▇▇")
and A. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇▇," and together with Freed, and ▇▇▇▇▇▇▇▇▇▇,
the "Principal Shareholders") and the other shareholders of the Company
executing this Agreement identified on Annex I-A (the "Other Shareholders," who,
together with the Principal Shareholders, are hereafter each individually
referred to as a "Seller" and collectively referred to as "Sellers").
RECITALS:
A. Purchaser desires to purchase and Sellers desire to sell all of the
outstanding capital stock of the Company, on the terms and for the consideration
described below, so that Purchaser will become the sole owner of the Company and
all of the issued and outstanding capital stock of the Company.
B. The authorized capital stock of the Company consists of solely of
4,025,000 shares of common stock (the "Shares"), par value $0.10 per share, of
which 1,560,464 shares are issued and outstanding as of the date hereof.
▇. ▇▇▇▇▇▇▇ own all of the issued and outstanding capital stock of the
Company. Annex I-A to this Agreement sets forth the number of Shares owned by
each Seller and the share of the Purchase Price (as defined below) to be
received by each Seller with respect to all Shares owned by such Seller. By
entering into this Agreement, each Seller expressly severally confirms and
agrees to Annex I-A and the accuracy of the information provided therein with
respect to such Seller.
D. By entering into this Agreement, each Seller and the Company hereby
expressly waives any right of first refusal, including without limitation those
set forth in the Company's shareholders' agreement, and hereby expressly
terminates any and all agreements as to disposition of common stock of the
Company, including without limitation those agreements listed on Schedule 4.2
hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth or as referenced below:
"Actions" shall mean any litigation and proceedings of any nature,
whether at law or in equity, before any court, arbitrator, arbitration panel or
Governmental Authority.
"Affiliate" of a Person shall mean any Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person.
"Aiken Employment Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Aiken Noncompetition Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Allocations" shall have the meaning set forth in Section 10.9(b) of
this Agreement.
"Auditor" shall have the meaning set forth in Section 2.2(e)(iii) of
this Agreement.
"Auditor's Earnout Report" shall have the meaning set forth in Section
2.2(e)(iii) of this Agreement.
"Auditor's Eligible Indebtedness Report" shall have the meaning set
forth in Section 10.10(b)(iii) of this Agreement.
"Balance Sheet" shall have the meaning set forth in Section 4.7 of this
Agreement.
"Balance Sheet Date" shall mean April 30, 2000.
"Built-in Gain Tax" shall mean the federal and state income taxes
payable pursuant to Section 1374 of the Code.
"Business Plan" shall mean that certain plan, prepared by the Company
and delivered to the Purchaser prior to the execution of this Agreement, which
sets forth the Company's planned capital expenditures for fiscal year 2000.
"Class B-2 Certificate of Designation" shall have the meaning set forth
in Section 2.2(b) of this Agreement.
"Class B-2 Preferred Stock" shall have the meaning set forth in Section
2.2(b) of this Agreement.
"Class B-2 Subscription Agreement" shall have the meaning set forth in
Section 2.2(b) of this Agreement.
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"Clean-up" shall mean removal or remediation of, or other response to
(including, without limitation, testing, monitoring, sampling or investigating
of any kind) any Release or Contamination, to the satisfaction of all applicable
governmental agencies, in compliance with Environmental Laws and in compliance
with good commercial practice.
"Closing" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Closing Balance Sheet" shall mean the audited balance sheet of the
Company as of the Closing Date.
"Closing Cash Payment" shall have the meaning set forth in Section
2.2(a) of this Agreement.
"Closing Date" shall have the meaning set forth in Section 3.1 of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the initial paragraph of
this Agreement.
"Company Financial Statements" shall have the meaning set forth in
Section 4.7 of this Agreement.
"Computer Programs" shall mean (a) any and all computer software
programs and software development tools, including all source and object code,
(b) databases and compilations, including any and all data and collections of
data, whether machine readable or otherwise, (c) all descriptions, flow-charts
and other work product used to design, plan, organize and develop any of the
foregoing, (d) all domain names and the content contained on the respective
Internet site(s) and (e) all documentation, including user manuals and training
materials, relating to any of the foregoing.
"Contamination" shall mean the presence of any Hazardous Material at,
on, or under any real property.
"Contracts" shall mean all contracts, agreements, indentures, licenses,
leases, commitments, arrangements, sales orders and purchase orders of every
kind, whether written or oral.
"▇▇▇▇▇▇▇▇ Noncompetition Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Damages" shall mean, collectively, losses, Liabilities, Liens, costs,
damages, claims and expenses (including reasonable fees and disbursements of
counsel, consultants or experts and expenses of investigation) and, without
limiting the generality of the foregoing, with regard to environmental matters
shall also include specifically response costs, corrective action costs, natural
resource damages, costs to comply with orders or injunctions, damages or awards
for
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property damage or personal injury, fines, penalties and costs for testing,
remediation or cleanup costs, including those related to administrative review
of site remediation.
"Direct Claim" shall have the meaning set forth in Section 11.4 of this
Agreement.
"Disputes" shall have the meaning set forth in Section 13.5 of this
Agreement.
"Dollars" and "$" shall mean United States dollars.
"Earnout Adjustment Notice" shall have the meaning set forth in Section
2.2(e)(i) of this Agreement.
"Earnout Adjustment Objection Notice" shall have the meaning set forth
in Section 2.2(e)(ii).
"Earnout Amount" shall have the meaning set forth in Section 2.2(d) of
this Agreement.
"Earnout Objection Period" shall have the meaning set forth in Section
2.2(e)(ii) of this Agreement.
"Earnout Verification Period" shall have the meaning set forth in
Section 2.2(e)(i) of this Agreement.
"EBITDA" shall mean the Company's earnings (excluding any impact of
purchase accounting resulting from the transactions contemplated by this
Agreement) before interest, taxes, depreciation and amortization, all as
determined in accordance with GAAP, and applied on a consistent basis, and
adjusted to take into account the adjustments described in Section 10.7 hereof,
adjustments shown on Annex II attached hereto and such other adjustments to
which Purchaser and Sellers' Representative may mutually agree.
"Election" shall mean an election valid under Section 1.338(h)(10)-1T
of the Treasury Regulations.
"Eligible Indebtedness" shall mean the sum of (a) all interest-bearing
debt for borrowed money of the Company and the Subsidiaries on a consolidated
basis in an amount not exceeding $5,900,000 net of any cash of the Company and
the Subsidiaries on a consolidated basis on the Closing Balance Sheet, (b) the
federal income tax liability for the Built-in Gain Tax resulting from the
Election in an amount not exceeding $1,200,000 and (c) the state income tax
liability resulting from the Election in an amount not exceeding $1,200,000.
"Eligible Indebtedness Adjustment Notice" shall have the meaning set
forth in Section 10.10(b)(i) of this Agreement.
"Eligible Indebtedness Adjustment Objection Notice" shall have the
meaning set forth in Section 10.10(b)(ii) of this Agreement.
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"Eligible Indebtedness Objection Period" shall have the meaning set
forth in Section 10.10(b)(ii) of this Agreement.
"Eligible Indebtedness Verification Period" shall have the meaning set
forth in Section 10.10(b)(i) of this Agreement.
"Employment Agreements" shall have the meaning set forth in Section
8.17 of this Agreement.
"Employment Laws" shall mean all federal, state, local and municipal
Laws in effect at or prior to Closing relating to employees, dependent
contractors and independent contractors and their employment, or rendition of
services, including but not limited to taxation, health, labor, labor/management
relations, occupational health and safety, pay equity, employment equity or
discrimination, employment standards, benefits and workers' compensation.
"Environment" shall mean the environment or natural environment as
defined in any Environmental Laws, including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata and any sewer
system.
"Environmental Laws" shall mean all federal, state, local and municipal
Laws in existence, enacted or in effect at or prior to Closing relating to
pollution or protection of public health and safety, the workplace and the
Environment, including, without limitation, Laws relating to Releases,
threatened Releases or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
labeling, advertising, sale, display or handling of Hazardous Materials.
"Environmental Laws" shall include, but not be limited to the following statutes
and all rules and regulations relating thereto, all as amended and modified from
time to time:
(a) The Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section Section 9601-9675; the
Resource Conservation and Recovery Act of 1976 ("RCRA") 42 U.S.C.
Section 6901-6991; the Clean Water Act 33 U.S.C. Section 1321 et seq.;
the Clean Air Act 42 U.S.C. Section Section 7401 et seq.; the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA") 7 U.S.C. Section
136 et seq.; the Toxic Substances Control Act ("TSCA") ▇▇ ▇.▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇-▇▇▇▇; and the Food, Drug and Cosmetic Act
("FDCA"), and
(b) all similar state and local laws, statutes, codes,
ordinances, regulations and rules.
"Environmental Liabilities" shall mean Damages relating to or arising
in any way from (a) Environmental Laws; (b) violations of or Liabilities
pursuant to, and alleged violations of or Liabilities pursuant to Environmental
Laws; (c) Releases or Contamination; (d) Clean-up; (e) litigation, proceedings,
investigations, prosecutions, orders, citations, directives or notices (written
or oral) by any Person relating to any of the foregoing.
"Environmental Permits" shall have the meaning set forth in Section
4.20(b) of this Agreement.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall have the meaning set forth in Section 4.19(a)
of this Agreement.
"ERISA Plans" shall have the meaning set forth in Section 4.19(a) of
this Agreement.
"▇▇▇▇▇▇ Employment Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"▇▇▇▇▇▇ Noncompetition Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Former Real Property" shall have the meaning set forth in Section
4.20(a) of this Agreement.
"FY 1997" shall mean the fiscal year ended December 31, 1997.
"FY 1998" shall mean the fiscal year ended December 31, 1998.
"FY 1999" shall mean the fiscal year ended December 31, 1999.
"FY 2000" shall mean the fiscal year ended December 31, 2000.
"FY 2001" shall mean the fiscal year ended December 31, 2001.
"401(k) Plan" shall mean the Company's 401(k) Plan as in effect prior
to Closing.
"Freed Employment Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Freed Noncompetition Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"GAAP" shall mean generally accepted accounting principles, as in
effect in the United States, from time to time.
"Governmental Authority" shall mean any agency, public or regulatory
authority, instrumentality, department, commission, court, ministry, tribunal or
board of any government, whether foreign or domestic and whether national,
federal, provincial, state, regional, local or municipal.
"Hazardous Materials" shall mean those materials that are regulated by
or form the basis of liability under Environmental Laws and includes, without
limitation, (a) all substances identified under any Environmental Law as a
pollutant, contaminant, hazardous substance, or solid or hazardous waste,
hazardous material or chemical substance or dangerous substance, (b) petroleum
or petroleum derived substance or waste, (c) asbestos or asbestos-containing
material, (d) PCBs or PCB-containing materials or fluids, (e) any other
substance with respect to
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which a Governmental Authority may require Clean-Up and (f) any radioactive
material or substance.
"HSR Act" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended, and any regulations promulgated thereunder.
"Indebtedness" shall mean (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services (other
than current trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices) and including earn-out or
similar contingent purchase amounts, (b) any other indebtedness of such Person
which is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under lease, (d) all obligations of such Person in
respect of acceptances issued or created for the account of such Person, (e) all
liabilities secured by any Lien on any property owned by such Person even though
such Person has not assumed or otherwise become liable for the payment thereof
and (f) all guarantees by such Person of obligations of others.
"Indebtedness Excess" shall have the meaning set forth in Section
10.10(a) of this Agreement.
"Indemnifying Party" shall mean any Person or Persons required to
provide indemnification under this Agreement.
"Indemnifying Sellers" shall have the meaning set forth in Section 11.1
of this Agreement.
"Indemnitee" shall mean any Person or Persons entitled to
indemnification under this Agreement.
"Initial Earnout Payment" shall have the meaning set forth in Section
2.2(e) of this Agreement.
"Intellectual Property" shall mean all intellectual property rights
used in the business of the Company as currently conducted or as presently
contemplated by the Company to be conducted, including: all patents and patent
applications; trademarks, trademark registrations and applications; all service
marks, service ▇▇▇▇ registrations and applications, logos, designs, proprietary
rights, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing; all trade names, copyrights, copyright
registrations and applications; Computer Programs; all product plans,
technology, process engineering, drawings, schematic drawings, secret processes;
proprietary knowledge, including without limitation, trade secrets, know-how,
confidential confirmation, proprietary processes and formulae.
"Investigation" shall mean any investigation of any nature by any
Governmental Authority.
"Key Employee" shall mean an employee of the Company or any Subsidiary
whose annual gross compensation from the Company or such Subsidiary (or
combination thereof),
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whether in the form of salary, commissions, bonuses, perquisites or any
combination thereof, exceeds $70,000.
"Knowledge" with respect to any particular representation or warranty
contained in this Agreement, (i) when used to apply to the "Knowledge" of
Sellers or of any Seller, shall mean on the date this Agreement is executed, the
actual knowledge or conscious awareness of such Seller, and (ii) when used to
apply to the "Knowledge" of Principal Shareholders or of any Principal
Shareholder, shall mean (a) on the date this Agreement is executed, the actual
knowledge or conscious awareness of the Principal Shareholders, ▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and (b) at Closing, the actual knowledge or conscious
awareness of Principal Shareholders after due inquiry of the senior officers,
managers and directors of the Company or of any of the Company's Subsidiaries.
"Known Environmental Liability" shall have the meaning set forth in
Section 4.20(i) of this Agreement.
"Laws" shall mean statutes, common laws, rules, ordinances,
regulations, codes, licensing requirements, orders, judgments, injunctions,
decrees, licenses, permits and bylaws of a Governmental Authority.
"Lenders" shall mean the Persons who provide or will provide
interest-bearing loans to the Purchaser.
"Liabilities" shall mean debts, liabilities, commitments, obligations,
duties and responsibilities of any kind and description, whether absolute or
contingent, monetary or non-monetary, direct or indirect, known or unknown or
matured or unmatured, or of any other nature.
"Licenses" shall have the meaning set forth in Section 4.11(d) of this
Agreement.
"Lien" shall mean any security interest, lien, mortgage, claim, charge,
pledge, restriction, equitable interest or encumbrance of any nature and in the
case of securities any put, call or similar right of a third party with respect
to such securities.
"Litigation" shall mean any litigation, legal action, arbitration,
proceeding, material demand, material claim or, to the Knowledge of Sellers,
investigation, pending, threatened, planned or reasonably probable, against,
affecting or brought by or against the any of Sellers, the Company, the
Company's present or former employees or independent contractors affiliated at
any time with Sellers or the Company.
"Management Rollover Participants" shall have the meaning set forth in
Section 2.1(b) of this Agreement.
"Material Adverse Effect" shall mean, with respect to the same or any
similar events, acts, conditions or occurrences, net of any tax effect, whether
individually or in the aggregate, a material adverse effect on or change in (a)
any of the business, condition (financial or otherwise), operations, assets or
liabilities of the Company taken as a whole, (b) the legality or enforceability
against Sellers of this Agreement or (c) the ability of any Seller to perform
his, her or its
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obligations and to consummate the transactions under this Agreement. For
purposes of clause (a) of this definition and without limiting the generality of
the foregoing, an effect or change with respect to the same or any similar
event(s), act(s), condition(s) or occurrence(s) individually or in the aggregate
with respect to which the Company would have $750,000 in the aggregate or more
in Damages being imposed upon or sustained by the Company shall constitute a
Material Adverse Effect or change.
"Material Contract" shall have the meaning set forth in Section 4.14(a)
of this Agreement.
"Maximum Indemnification Amount" shall have the meaning set forth in
Section 11.5(b) of this Agreement.
"Minimum Net Worth" shall mean Net Worth of not less than $23,000,000
as reflected on the Closing Balance Sheet.
"Net Proceeds" shall have the meaning set forth in Section 11.5(b) of
this Agreement.
"Net Worth" shall mean the assets net of liabilities of the Company.
"Noncompetition Agreements" shall have the meaning set forth in Section
8.17 of this Agreement.
"Notice of Settlement" shall have the meaning set forth in Section
11.3(c) of this Agreement.
"Notice to Contest" shall have the meaning set forth in Section 11.3(c)
of this Agreement.
"Notice to Defend" shall have the meaning set forth in Section 11.3(a)
of this Agreement.
"Other Shareholders" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Owned Real Property" shall have the meaning set forth in Section
4.13(b) of this Agreement.
"Parent" shall mean MDMI Holdings, Inc., a Colorado corporation.
"PBGC" shall have the meaning set forth in Section 4.19(d) of this
Agreement.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, firm, partnership or other entity or
government or Governmental Authority.
"Phantom Stock" shall have the meaning set forth in Section 2.2(c) of
this Agreement.
"Phantom Stock Options" shall mean the Phantom Stock Options granted by
the Company under the Phantom Stock Option Plans.
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"Phantom Stock Option Plans" shall mean the: (a) Uniform Tubes, Inc.
Phantom Stock Option Plan, effective January 1, 1998, as amended, together with
all Plan Agreements executed thereunder; (b) Spectrum Manufacturing, Inc.
Phantom Stock Rights Agreement dated March 31, 1999, as amended, together with
all Plan Agreements executed thereunder; (c) Utitec--Division of UTI Corporation
Phantom Plan Arrangement, dated August 31, 1999 and effective January 1, 1999,
as amended, together with all Plan Agreements executed thereunder and (d)
incentive compensation arrangements pursuant to employment agreements for ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Jr. and ▇▇▇▇▇▇ ▇▇▇▇ with Micro-Med, each dated July 12,
1995.
"Plans" shall have the meaning set forth in Section 4.19(a) of this
Agreement.
"Principal Shareholders" shall have the meaning set forth in the
introductory paragraph of this Agreement.
"Purchase Price" shall have the meaning set forth in Section 2.2 of
this Agreement.
"Purchaser" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Purchaser Directive" shall have the meaning set forth in Section 10.8
of this Agreement.
"Parent Financial Statements" shall have the meaning set forth in
Section 5.6 of this Agreement.
"Purchaser Indemnitee" shall have the meaning set forth in Section 11.1
of this Agreement.
"Purchaser Secretary's Certificate" shall have the meaning set forth in
Section 3.2(b)(iv) of this Agreement.
"Purchaser's Due Diligence Period" shall have that meaning set forth in
Section 7.1 of this Agreement.
"Real Property" shall mean Owned Real Property and Leased Real
Property.
"Regulatory Action(s)" shall mean any claim, demand, action or
proceeding brought or instigated by any governmental agency in connection with
any Environmental Law (including without limitation civil, criminal or
administrative proceedings), whether or not seeking costs, damages, penalties or
expenses.
"Release" shall mean the spilling, leaking, disposing, discharging,
emitting, depositing, injecting, leaching, escaping or any other release or
threatened release, and whether intentional or unintentional, of any Hazardous
Material.
"Revised Schedules" shall have the meaning set forth in Section 6.7(b)
of this Agreement.
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"▇▇▇▇▇▇▇▇ Noncompetition Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Schedules" shall mean the disclosure schedules delivered pursuant to
this Agreement.
"▇▇▇▇▇▇ Noncompetition Agreement" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Sellers" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Sellers' Due Diligence Period" shall have the meaning set forth in
Section 6.12 of this Agreement.
"Sellers' Opinion" shall have the meaning set forth in Section 8.10 of
this Agreement.
"Sellers' Proposed Earnout Adjustment" shall have the meaning set forth
in Section 2.2(e)(i) of this Agreement.
"Sellers' Proposed Eligible Indebtedness Adjustment" shall have the
meaning set forth in Section 10.10(b)(i) of this Agreement.
"Sellers' Representative" shall mean the representative selected by
Sellers who shall initially be Freed.
"Shareholders' Agreement" shall have the meaning set forth in Section
8.19 of this Agreement.
"Shares" shall have the meaning set forth in Recital B of this
Agreement.
"SPD" shall have the meaning set forth in Section 4.19(b)(iv) of this
Agreement.
"SubParent" shall mean Medical Device Manufacturing, Inc., a Colorado
corporation.
"Subsidiary" shall mean any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Company.
"Survey" shall have the meaning set forth in Section 6.11 of this
Agreement.
"Systems" shall have the meaning set forth in Section 4.28(a) of this
Agreement.
"Tax Returns" shall mean all returns, declarations, reports, forms,
estimates, information returns, statements or other documents (including any
related or supporting information) filed or
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required to be filed with or supplied to any Governmental Authority in
connection with any Taxes.
"Taxes" shall mean all taxes, charges, fees, duties, levies, penalties
or other assessments, including, without limitation, income, gross receipts,
excise, real and personal property, sales, transfer, license, payroll,
withholding, social security, franchise, unemployment insurance, workers'
compensation, employer health tax, Built-in Gain Tax or other taxes, imposed by
any Governmental Authority and shall include any interest, penalties or
additions to tax attributable to any of the foregoing.
"Terminated Plans" shall have the meaning set forth in Section 4.19(p)
of this Agreement.
"Third Party Claim" shall have the meaning set forth in Section 11.3(a)
of this Agreement.
"Third Party Environmental Claim(s)" shall mean third party claims,
actions, demands or proceedings (other than Regulatory Actions) based on
negligence, trespass, strict liability, nuisance, toxic tort or detriment to
human health or welfare due to any Release of Hazardous Materials or
Contamination, and whether or not seeking costs, damages, penalties or expenses.
"Threshold Amount" shall have the meaning set forth in Section 11.5(b).
"Title Commitment" shall have the meaning set forth in Section 6.11 of
this Agreement.
"Title Company" shall have the meaning set forth in Section 6.11 of
this Agreement.
"Title Defect" shall have the meaning set forth in Section 6.11 of this
Agreement.
"Trailing EBITDA" shall mean the Company's earnings before interest,
taxes, depreciation and amortization for the 12-month period ending on April 30,
2000, as restated by the Sellers as of Closing.
"2000 EBITDA" shall mean the Company's earnings before interest, taxes,
depreciation and amortization for FY 2000 as determined by the audited balance
sheet for FY 2000 as of December 31, 2000 and the audited statement of income
and cash flow for the fiscal year then ended, which shall be prepared in
accordance with GAAP, applied on a consistent basis, and adjusted to take into
account the adjustments shown on Annex II attached hereto and such other
adjustments to which Purchaser and Sellers' Representative may mutually agree
exclusive of costs and expenses of the transactions contemplated herein.
"UTI Noncompetition Agreements" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Unknown Environmental Liability" shall mean an Environmental Liability
other than a Known Environmental Liability.
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Section 1.2 Terms Generally. The definitions in Section 1.1 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation" even if not actually
followed by such phrase unless the context expressly provides otherwise. All
references herein to Annexes, Articles, Sections, paragraphs, Exhibits and
Schedules shall be deemed references to this Agreement unless the context shall
otherwise require. Unless otherwise expressly defined, terms defined in the
Agreement shall have the same meanings when used in any section, Exhibit or
Schedule and terms defined in any section, Exhibit or Schedule shall have the
same meanings when used in the Agreement or in any other section, Exhibit or
Schedule. The words "herein," "hereof," "hereto" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
provision of this Agreement.
ARTICLE II
PURCHASE AND SALE OF STOCK
Section 2.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth in this
Agreement, on the Closing Date (as defined below in Section 3.1), Sellers will
sell to Purchaser, and Purchaser shall purchase from Sellers, the Shares for the
Purchase Price set forth in Section 2.2 below.
(b) Prior to the Closing Date, the Uniform Tubes, Inc. Phantom
Stock Option Plan, effective January 1, 1998, as amended, together with all Plan
Agreements executed thereunder shall be amended and cancelled and, in lieu
thereof, converted into common stock of the Company or, in the case of the
Management Rollover Participants, converted into common stock of the Company and
deferred compensation pursuant to the UTI Corporation 2000 Deferred Compensation
Plan, the form of which is attached hereto as Exhibit A-1 and the Uniform Tubes
Inc. Phantom Stock Option Plan Participant Election Form, the form of which is
attached hereto as Exhibit A-2. Upon Closing, such deferred compensation of the
Management Rollover Participants shall be converted into deferred compensation
pursuant to the UTI Corporation Key Executive Deferred Compensation Plan, the
form of which is attached hereto as Exhibit A-3 and stock options pursuant to
the 2000 Stock Option and Incentive Plan Non-Incentive Stock Option Plan, the
form of Stock Option Agreement which is attached hereto as Exhibit A-4.
Notwithstanding the foregoing, if the Closing does not occur, the options to
purchase common stock of the Parent shall be terminated and of no force and
effect as if the parties had never entered into such arrangements. "Management
Rollover Participants" shall mean Freed, ▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ ("▇▇▇▇▇▇") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"). The other Phantom Stock
Option Plans and deferred compensation agreements other than the deferred
compensation agreements to be entered into by the Management Rollover
Participants, the pension benefit plans identified on Schedule 4.19(a) hereto,
the UTI/SFM Feinmechanik GmbH Pension Plan, the UTI Corporation Deferred
Compensation Plan and the deferred portion of the Management Bonus for Spectrum
Manufacturing, Inc., shall be cancelled and, in lieu thereof, each participant
of these plans shall receive a cash payment from the Company in the amounts as
set forth on Annex I-B. The Company shall pay all amounts due to
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participants under the UTI Corporation Deferred Compensation Plan. All amounts
due under the UTI Corporation Deferred Compensation Plan shall be repaid by the
participants thereunder and the related notes and stock pledge agreements
cancelled.
(c) Prior to the Closing Date, the Company shall, and Sellers
shall cause the Company to use all necessary efforts to obtain all written
consents from all participants in the Phantom Stock Option Plans to the
cancellation of such participant's rights under the Phantom Stock Option Plans
to take effect at the Closing Date. Notwithstanding any other provision of this
Section, cash payments pursuant to Sections 2.2(a) and 2.2(d) may be withheld in
respect of any Phantom Stock Option Plan until necessary or appropriate consents
are obtained with respect to such Phantom Stock Option Plan.
Section 2.2 Payment of Purchase Price. Payment of the purchase price
(the "Purchase Price") shall be as follows:
(a) At Closing, Purchaser shall deliver a payment of
$135,442,037, subject to adjustment as provided herein (the "Closing Cash
Payment") by wire transfer of immediately available federal funds to Sellers, in
accordance with their respective ownership of the Shares as set forth on Annex
I-A. The Closing Cash Payment is determined as follows: $143,000,000 less the
sum of (i) $10,000 to be paid to Parent on behalf of Sellers receiving Class B-2
Preferred Stock pursuant to Section 2.2(b) hereof, (ii) $3,786,463 representing
the amount of reduction agreed to by the Management Rollover Participants and
(iii) $3,761,500 payable as directed by the Company to the participants of the
Phantom Stock Option Plans other than the participants in the Uniform Tubes,
Inc. Phantom Stock Option Plan.
(b) At Closing, in exchange for a cash contribution to Parent
of $.10 per share, Purchaser shall cause Parent to issue to each Seller listed
on Annex I-A, the number of shares of Class B-2 Preferred Stock of Parent
("Class B-2 Preferred Stock") as set forth opposite such Seller's name on Annex
I-A. The Class B-2 Preferred Stock shall have the rights and preferences set
forth in the certificate of designation for the Class B-2 Preferred Stock
attached hereto as Exhibit B. In connection with the issuance of the Class B-2
Preferred Stock to certain Sellers pursuant to this Section 2.2(b), such Sellers
shall each be required to execute a subscription agreement in the form attached
hereto as Exhibit C (the "Class B-2 Subscription Agreement").
(c) At Closing, Purchaser shall issue to each of the Persons
listed on Annex I-B the number of vested options to purchase Parent common stock
for $4.00 per share and Purchaser shall assume the deferred compensation
agreements with each of the Persons listed on Annex I-B in the amount set forth
opposite such Person's name in Annex I-B.
(d) Within 30 days after the delivery of audited financial
statements of the Company for the fiscal year ending December 31, 2000,
Purchaser shall pay, or shall cause the Company to pay, to Sellers an amount not
to exceed $10,000,000 equal to (i) the product of 3.5 and (ii) the amount, if
any, by which 2000 EBITDA exceeds $17,304,000. The Earnout Amount shall be
allocated among Sellers in accordance with the directions of the Sellers'
Representative which shall be in accordance with the formula used to determine
the allocation of the Closing Cash Payment among the Sellers.
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(e) Following the Closing, if Sellers disagree on the Earnout
Amount as determined by Purchaser and paid pursuant to Section 2.2(d) (the
"Initial Earnout Payment"), Sellers' Representative shall represent Sellers in
any such disagreement and the following procedure shall be employed:
(i) Sellers' Representative shall have until 45 days
after receipt of the Initial Earnout Payment (as may be extended, the "Earnout
Verification Period") to verify Purchaser's determination of the actual Earnout
Amount; provided, however, that the Earnout Verification Period shall be
extended until 30 days after receipt of backup information if Sellers'
Representative shall have made a request for backup information pursuant to the
next sentence of this paragraph. During such period, at the request of the
Sellers' Representative (which request shall have been made promptly after
receipt of the Initial Earnout Payment and in no event later than 30 days after
receipt of the Initial Earnout Payment), Purchaser shall cause the Company to
provide such representative back-up financial information and working papers and
the like necessary for such verification. Any proposed adjustments to the
Initial Earnout Payment shall be made by written notice by Sellers'
Representative to Purchaser within the Earnout Verification Period (an "Earnout
Adjustment Notice"), setting forth (A) Sellers' objections to the amount of the
Initial Earnout Payment, (B) Seller's determination of the amount of the Initial
Earnout Payment, and (C) Sellers' proposed adjustment to the amount of the
Initial Earnout Amount (the "Sellers' Proposed Earnout Adjustment"). If Sellers'
Representative does not deliver an Earnout Adjustment Notice to Purchaser within
the applicable Earnout Verification Period, the amount of the Initial Earnout
Payment shall be final and binding on the parties.
(ii) To the extent that Purchaser has any objection
to Sellers' Proposed Earnout Adjustment, such objection shall be made by a
written notice to Sellers' Representative that sets forth the basis for such
objection (the "Earnout Adjustment Objection Notice") within 15 days after
delivery of the Earnout Adjustment Notice (the "Earnout Objection Period"). If
Purchaser does not object to Sellers' Earnout Adjustment Notice within the
applicable Earnout Objection Period, then Sellers' Proposed Earnout Adjustment
shall be final and binding on the parties and Purchaser shall pay to Sellers by
wire transfer of immediately available funds, an amount equal to Sellers'
Proposed Earnout Adjustment within 30 days after the expiration of the Earnout
Objection Period.
(iii) If Purchaser delivers an Earnout Adjustment
Objection Notice in response to any Earnout Adjustment Notice delivered by
Sellers, and Sellers' Representative and Purchaser are unable to agree upon the
amount of the actual Earnout Amount within 10 days after receipt of the Earnout
Adjustment Objection Notice, then an independent "Big Five" accounting firm to
be mutually agreed upon by Purchaser and Sellers' Representative (the "Auditor")
shall be requested to conduct a review and determine the amount of the actual
Earnout Amount. The Auditor shall be instructed in performing such review to
provide Purchaser and Sellers' Representative copies of any and all
correspondence and drafts distributed to any party. Each of Sellers'
Representative and Purchaser shall be granted reasonable access to all documents
made available to the Auditor by the other party, provided that any information
contained in such documents shall be subject to the confidentiality provisions
set forth in this Agreement. Prior to issuing its final determination, the
Auditor shall issue a draft of its report to Purchaser and Sellers'
Representative and Purchaser and Sellers' Representative shall have the
opportunity to
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provide the Auditor with input and any additional information that such party
deems relevant, provided that the Auditor shall not be required to use any such
input or information in connection with its review and determination. The
Auditor shall promptly deliver copies of its report to Purchaser and Sellers'
Representative, setting forth its determination of the Earnout Amount (the
"Auditor's Earnout Report"). The costs and expenses of the Auditor and the
Auditor's Report contemplated by this Section shall be borne by Purchaser and
Sellers on a 50%/50% basis. Within 30 days after any agreement of the parties
regarding the actual amount of the Earnout Amount or the delivery of the
Auditor's Earnout Report, as appropriate, (A) Purchaser shall pay to Sellers,
the amount, if any, by which the agreed-upon Earnout Amount or the Earnout
Amount reflected in the Auditor's Earnout Report, as appropriate, exceeds the
Initial Earnout Payment or (B) Sellers shall pay to Purchaser the amount, if
any, by which the agreed upon Earnout Amount or the Earnout Amount reflected in
the Auditor's Earnout Report, as appropriate, is less than the Initial Earnout
Payment.
(f) Subject to Section 10.10 hereof, at Closing, Purchaser
shall assume the Eligible Indebtedness of the Company as of the Closing Date.
Section 2.3 Allocation of Purchase Price
The Purchase Price to be paid by Purchaser to Sellers and the
liabilities of the Company (plus other relevant items) shall be allocated among
the assets of the Company for all purposes as determined in accordance with
Section 10.9. The allocation of the Purchase Price was bargained and negotiated
for and each party shall file all Tax Returns in a manner consistent with such
determination.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The delivery of the Shares pursuant to Section 2.1
and the payment of the Purchase Price pursuant to Section 2.2 (hereinafter
called the "Closing") shall take place at 10:00 a.m. (Denver time) at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, on or before June 30, 2000 or on such other date, time and place as
may be mutually agreed upon by the parties hereto. The date on which the Closing
occurs is referred to herein as the "Closing Date." The transactions
contemplated herein to be consummated at Closing shall be deemed to take effect
at 12:01 a.m. (East Coast time) on the Closing Date.
Section 3.2 Closing Deliveries.
(a) By Sellers and the Company. At the Closing, Sellers shall
deliver or cause to be delivered to Purchaser the following:
(i) certificates representing the Shares duly
endorsed by the appropriate Seller, for transfer to Purchaser or accompanied by
duly executed stock powers, in either case executed in blank and otherwise in
form acceptable for transfer on the books of the Company;
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(ii) the certificates pursuant to Section 8.8;
(iii) the resignations of the directors of the
Company and Spectrum Manufacturing, Inc., pursuant to Section 8.11;
(iv) the stock books, stock ledgers, minute books and
corporate seals of the Company;
(v) a copy of the Articles of Incorporation of the
Company, certified by the Secretary of State of the Commonwealth of Pennsylvania
and Certificates of Good Standing from the Secretaries of State (or such similar
offices which perform the customary functions of a Secretary of State) of the
States identified on Schedule 4.1, each dated not more than 10 days before the
Closing Date;
(vi) the bylaws of the Company, along with a
certificate executed by the Secretary of the Company, dated as of the Closing
Date, certifying that such copies are true, correct and complete, and that such
bylaws were duly adopted and have not been amended or rescinded;
(vii) any approvals required pursuant to Section
8.12;
(viii) the Noncompetition Agreements, executed by
Hattersley, Mainwaring, Freed, Aiken, Cornwell, Farina, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
("▇▇▇▇▇▇") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") as set forth in Section 8.17;
(ix) the Employment Agreements, executed by Freed,
Aiken and ▇▇▇▇▇▇, as set forth in Section 8.17;
(x) the Sellers' Opinion as set forth in Section
8.10;
(xi) joinders to the Shareholders' Agreement,
executed by those Sellers receiving Class B-2 Preferred Stock; and
(xii) Class B-2 Subscription Agreements, executed by
those Sellers receiving Class B-2 Preferred Stock.
(b) By Purchaser. At the Closing, Purchaser shall deliver or
cause to be delivered to Sellers the Purchase Price and the following:
(i) the officer's certificate described in Section
9.8;
(ii) a copy of the Articles of Incorporation of
Purchaser, certified by the Secretary of State of the State of Colorado, and a
Certificate of Good Standing from the Secretary of State of the State of
Colorado, each dated not more than 10 days before the Closing Date;
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(iii) (A) a certificate executed by the Secretary of
Purchaser certifying that the copies of the bylaws of Purchaser and of the
minutes of Purchaser authorizing this transaction attached to such certificate
are true, correct and complete copies thereof and that such bylaws and minutes
were duly adopted and have not been amended or rescinded ("Purchaser Secretary's
Certificate") and (B) a certificate executed by the Secretary of each of Parent
and SubParent certifying that copies of the minutes authorizing the election of
Freed to the Board of Directors of Parent and SubParent attached to such
certificate are true, correct and complete copies thereof and that such minutes
were duly adopted and have not been amended or rescinded;
(iv) the Employment Agreements, executed by
Purchaser;
(v) the Purchaser's Opinion as set forth in Section
9.7; and
(vi) stock certificates issued by Parent for a total
of 100,000 shares of Class B-2 Preferred Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS
The Company and the Principal Shareholders jointly and severally
represent and warrant to Purchaser that the statements contained in this Article
IV are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date, and each of the Other Shareholders
severally represents and warrants that the statements contained in Sections 4.2
(first two sentences only), 4.3, 4.4(d), 4.14(a)(x), 4.22, 4.24, 4.25, 4.26 and
4.29 are correct and complete as of the Closing Date with respect to itself and
its properties only.
Section 4.1 Corporate Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Except as set forth on Schedule 4.1, the Company
has no Subsidiaries, and does not have a direct or indirect ownership interest
in any Person. The Company is qualified to do business in the jurisdictions set
forth in Schedule 4.1. Except as set forth on Schedule 4.1, the Company has the
power and authority (corporate and otherwise) to own, lease and operate its
respective properties and assets and to carry on its business as now being
conducted and is duly qualified or licensed to do business as a foreign
corporation in good standing in the jurisdictions in which the ownership, lease
or operation of its property or the conduct of its business requires such
qualification. Sellers have delivered to Purchaser complete and correct copies
of the Company's charter documents and all amendments thereto to the date
hereof. Each Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or formation.
Each Subsidiary is qualified to do business in the respective jurisdictions
opposite such Subsidiary's name set forth in Schedule 4.1. Each Subsidiary has
the power and authority (corporate and otherwise) to own, lease and operate its
respective properties and assets and to carry on its business as now being
conducted and is duly qualified or licensed to do business as a foreign
corporation in good standing in the jurisdictions in which the ownership, lease
or operation of its property or the conduct of its business requires such
qualification. Sellers have delivered to Purchaser complete and correct copies
of each Subsidiary's charter documents and all amendments thereto to the date
hereof.
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Section 4.2 Ownership of Shares. Except as set forth on Schedule 4.2,
the Shares are owned by Sellers free and clear of all Liens, other than
restrictions imposed by federal and state securities laws. Annex I-A sets forth
the name of each Person owning Shares and the amount of Shares owned by such
Person. Other than the Shares held by Sellers, all of which are set forth and
accounted for in Annex I-A, there are no Shares of the Company issued or
outstanding. Upon the consummation of the transactions contemplated hereby,
Purchaser will acquire good title to the Shares free and clear of all Liens,
other than the restrictions on subsequent transfers imposed by federal and state
securities laws.
Section 4.3 Authorization, Etc. The Company and each Seller has full
power and authority to execute, deliver and perform its respective obligations
under this Agreement and the documents and instruments contemplated hereby and
to carry out the transactions contemplated hereby and thereby. The Company and
each Seller has duly approved and authorized the execution and delivery of this
Agreement and the documents and instruments contemplated hereby and the
consummation of the transactions contemplated hereby and thereby, and no other
corporate proceedings or other action on the part of the Company or any Seller
are necessary to approve and authorize the execution, delivery and performance
by the Company and each Seller of this Agreement and the documents and
instruments contemplated hereby or the consummation by the Company and Sellers
of the transactions contemplated hereby or thereby. This Agreement constitutes a
legal, valid and binding agreement of the Company and each Seller, enforceable
against the Company and such Seller in accordance with its terms, except that
(a) such enforcement may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally and (b) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
Section 4.4 No Conflict. Except as set forth in Schedule 4.4, neither
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by the Company, the Company
Subsidiaries or Sellers pursuant hereto, nor the consummation by the Company,
the Company Subsidiaries or Sellers of the transactions contemplated hereby or
thereby, nor compliance by the Company, the Company Subsidiaries or Sellers with
any of the provisions hereof or thereof will (a) conflict with or result in any
breach of any provision of the Articles of Incorporation, Bylaws or similar
organizational documents of the Company or Subsidiary, (b) constitute a change
in control under or require the consent from or the giving of notice to a third
party, result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, or result in the
creation of any Lien upon or affecting any of the Company's or any Subsidiary's
assets or properties pursuant to, any of the terms, conditions or provisions of
any contractual obligation of the Company, (c) violate any order, writ,
injunction, decree, statute, rule or regulation of any Governmental Authority
applicable to the Company, the Company Subsidiaries or Sellers or to which any
of their properties or assets may be bound or (d) result in triggering of any
right of first refusal or other similar right under any agreement to which the
Company, any Subsidiary or any Seller is a party.
Section 4.5 Governmental Consents. Except under the HSR Act and except
as set forth on Schedule 4.5, no consent, order or authorization of, or
registration, declaration or filing
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with, any Governmental Authority is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby by Sellers, the Company or any Subsidiary.
Section 4.6 Capital Stock. As of the date hereof, the authorized
capital stock of the Company consists of 4,025,000 shares of common stock, par
value $0.10 per share, of which 1,560,464 Shares are issued and outstanding and
owned by Sellers. The Company holds of record and owns beneficially all of the
issued and outstanding shares of each Subsidiary. Except as set forth on
Schedule 4.6, there are no outstanding subscriptions, options, warrants, calls,
rights, contracts, commitments, understandings, restrictions or arrangements
relating to the issuance, sale, transfer or voting of any Shares, including any
rights of conversion or exchange under any outstanding securities or other
instruments. All outstanding Shares have been validly issued and are fully paid,
nonassessable and free of preemptive or similar rights.
Section 4.7 Financial Statements. The Company has delivered to
Purchaser the Company's Financial Statements. For the purposes of this
Agreement, "Company Financial Statements" shall mean: (a) the Company's
unaudited consolidated balance sheet as of April 30, 2000, and the related
statement of income and cash flows for the four-month period then ended; (b) an
audited balance sheet for FY 1999 (the "Balance Sheet") and audited statements
of income and cash flow for the fiscal year then ended; (c) an audited balance
sheet for FY 1998 as of December 31, 1998 and audited statements of income and
cash flow for the fiscal year then ended; and (d) an audited balance sheet for
FY 1997 as of December 31, 1997 and audited statements of income and cash flow
for the fiscal year then ended. Except as set forth on Schedule 4.7, the Company
Financial Statements are in accordance with the books and records of the Company
(which books and records are correct and complete) and fairly present the
financial position of the Company and its results of operations as of and for
the periods indicated in accordance with GAAP and have been prepared in
accordance with GAAP consistently applied, subject in the case of the unaudited
Company Financial Statements, to normal and customary year-end adjustments
(which are not anticipated to be material) and the absence of footnotes.
Section 4.8 Absence of Certain Changes or Events. Except as set forth
on Schedule 4.8 and except as specifically contemplated in this Agreement
(including without limitation payments and other actions taken in connection
with the termination or amendment of the Phantom Stock Option Plans), since the
Balance Sheet Date (a) the Company and each Subsidiary has conducted its
business only in the ordinary course and consistent with past practice and in
accordance with the Business Plan, (b) there have not been any developments or
events which have had or could reasonably be expected, with the passage of time,
to have, a Material Adverse Effect and (c) neither the Company nor any
Subsidiary has:
(i) adopted any amendment to its Articles of
Incorporation, Bylaws or similar organization documents;
(ii) (A) sold, leased, transferred or disposed of any
assets or rights other than in the ordinary course of business consistent with
past practice, which assets or rights do not involve more than $250,000 in the
aggregate, (B) incurred any Lien thereupon, except for Liens incurred in the
ordinary course of business consistent with past practice which Liens would
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not in the aggregate exceed $250,000, (C) acquired or leased any assets or
rights other than assets or rights in the ordinary course of business consistent
with past practice, that individually or in the aggregate would involve more
than $250,000 or (D) entered into any commitment or transaction with respect to
(A), (B) or (C) above;
(iii) (A) incurred, assumed or refinanced any
Indebtedness other than in the ordinary course of business consistent with past
practice, or (B) made any loans, advances or capital contributions to, or
investments in, any Person other than a wholly-owned Subsidiary or any employee
or officer as a cash advance, in each case in the ordinary course of business
and consistent with past practice;
(iv) paid, discharged or satisfied any liability,
obligation, or Lien other than payment, discharge or satisfaction of (A)
Indebtedness as it matures and become due and payable or (B) liabilities,
obligations or Liens in the ordinary course of business consistent with past
practice;
(v) (A) changed any of the accounting or tax
principles, practices or methods used by the Company or any Subsidiary, except
as required by changes in applicable Tax Laws or (B) changed reserve amounts or
policies;
(vi) entered into any employment contract or other
arrangement or made any change in the compensation payable or to become payable
to any of Sellers or any of the Company or any Subsidiary's officers, employees,
agents, consultants or Persons acting in a similar capacity (other than general
increases in wages to employees and salaries to officers or Persons acting in a
similar capacity or Affiliates in the ordinary course consistent with past
practice), or to Persons providing management services, entered into or amended
any employment, severance, consulting, termination or other agreement or
employee benefit plan, except for cash advances made in the ordinary course of
business consistent with past practice, or made any loans to any of its
Affiliates, officers, employees, agents or consultants or Persons acting in a
similar capacity or made any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons pursuant to an employee
benefit plan or otherwise;
(vii) paid or made any accrual or arrangement for
payment of any pension, retirement allowance or other employee benefit pursuant
to any existing plan, agreement or arrangement to any Affiliate, officer,
employee or Person acting in a similar capacity, or paid or agreed to pay or
made any accrual or arrangement for payment to any Affiliate, officers,
employees or Persons acting in a similar capacity of any amount relating to
unused vacation days, except payments and accruals made in the ordinary course
consistent with past practice; except as contemplated by this Agreement,
granted, issued, accelerated or accrued salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with or for
the benefit of any Affiliate, officer, employee, agent or consultant or Person
acting in a similar capacity, whether past or present; or amended in any
material respect any such existing plan, agreement or arrangement to effect any
of the foregoing;
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(viii) entered into any collective bargaining
agreement;
(ix) made any payments (other than regular
compensation and cash advances payable to officers and employees or Persons
acting in a similar capacity of the Company or any Subsidiary in the ordinary
course consistent with past practice), loans, advances or other distributions,
or enter into any transaction, agreement or arrangement with, Sellers, Company's
Affiliates, officers, employees, agents, consultants or Persons acting in a
similar capacity, stockholders of their Affiliates, associates or family
members;
(x) made or authorized any capital expenditures,
except (A) in the ordinary course of business consistent with past practice, and
(B) for FY 2000, in the ordinary course of business consistent with past
practice and in accordance with the Business Plan, which are not in excess of
$250,000 individually or $1,000,000 in the aggregate;
(xi) incurred any Taxes, except in the ordinary
course of business consistent with past practice;
(xii) settled or compromised any Tax liability or
agreed to any adjustment of any Tax attribute or made any election with respect
to Taxes;
(xiii) failed to duly and timely file any Tax Return
with the appropriate Governmental Authorities required to be filed by it in a
true and complete and correct form or to timely pay all Taxes shown to be due
thereon, subject to any extensions and except any such Taxes subject to a good
faith dispute for which the Company or respective Subsidiary has made
appropriate reserves;
(xiv) (A) entered into, amended, renewed (other than
the automatic renewal of), terminated or waived any right under, any Material
Contract, or, except in the ordinary course of business consistent with past
practice, any other agreement, or (B) taken any action or failed to take any
action that, with or without either notice or lapse of time, would constitute a
default under any Material Contract;
(xv) (A) made any change in its working capital
practices generally, including accelerating any collections of cash or accounts
receivable or deferring payments or (B) failed to make timely accruals,
including with respect to accounts payable and liabilities incurred in the
ordinary course of business;
(xvi) failed to renew (at levels consistent with
presently existing levels), terminated or amended or failed to perform any of
its obligations or permitted any material default to exist or caused any
material breach under, or entered into (except for renewals in the ordinary
course of business consistent with past practice), any policy of insurance;
(xvii) has not experienced any damage, destruction,
or loss to its property not covered by insurance;
(xviii) disposed of or permitted to lapse any
Intellectual Property or granted any license or sublicense of any rights under
or with respect to any Intellectual Property;
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(xix) except in the ordinary course of business
consistent with past practice pursuant to appropriate confidentiality
agreements, and except as required by any Law or any existing agreements set
forth on Schedule 4.14 or as may be reasonably necessary to secure or protect
intellectual or other property rights of the Company, provided any confidential
information to any Person other than Purchaser;
(xx) suffered total or significant partial loss of
the business of any customers;
(xxi) suffered any change in the normal operating
balances of the Company's inventory or the inventory of any Subsidiary;
(xxii) changed the compensation levels applicable to
any class of Company employees or employees of any Subsidiary;
(xxiii) paid any bonuses payable or to become payable
to any of Sellers or any of the Company or any Subsidiary's officers, employees,
agents, consultants or Persons acting in a similar capacity;
(xxiv) declared, set aside or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind); or
(xxv) cancelled, compromised, waived or released any
right or claim outside the ordinary course of business.
Section 4.9 No Undisclosed Liabilities. The Company has no Liabilities
(and there is no basis for any present or future Liability) that would be
material to the Company taken as a whole, except for such Liabilities as (a) are
set forth on Schedule 4.9 hereto, (b) are reflected on the Company Financial
Statements (including any footnotes thereto) or (c) were incurred since the
Balance Sheet Date in the ordinary course of business consistent with past
practice and which individually and in the aggregate have not exceeded $250,000
and could not reasonably be expected, with the passage of time, to exceed
$250,000.
Section 4.10 Property; Inventory.
(a) The Company owns, or otherwise has a valid leasehold
interest providing sufficient and legally enforceable rights to use, all of the
property and assets used in the conduct of its businesses as historically and
currently conducted. Except as set forth on Schedule 4.10(a), the Company has
good and marketable title to all assets reflected on the Financial Statements or
acquired since the Balance Sheet Date, free and clear of all Liens, other than
immaterial assets disposed of since the Balance Sheet Date in the ordinary
course of business consistent with past practice. Such assets are in good
operating condition and repair (ordinary wear and tear excepted), have been
reasonably maintained consistent with standards generally followed in the
industry are suitable for their present uses, and, in the case of owned
structures, are structurally sound.
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(b) Schedule 4.10(b) sets forth by office location as of April
30, 2000, a complete and accurate list of all furniture, equipment, automobiles
and all other tangible personal property (including its net book value) owned
by, in the possession of, or used by the Company in connection with its business
as currently conducted and which have an initial book value in excess of $10,000
per item. Except for vehicles and except as set forth on Schedule 4.10(a) or
Schedule 4.10(b), no such tangible personal property is held under any lease,
security agreement, conditional sales contract, or other title retention or
security arrangement or subject to any liens or encumbrances, or is located
other than in the possession of the Company.
(c) The Company's inventory consists of raw materials,
work-in-process and consignment and finished goods salable by the Company in the
ordinary course of business. The Company Financial Statements reflect an
adequate reserve for all the Company's inventory that is slow-moving, as
determined in accordance with the Company's customary practices, or is obsolete,
damaged or defective.
Section 4.11 Intellectual Property.
(a) Except as set forth on Schedule 4.11(a), the Company or
one of its Subsidiaries is the sole and exclusive owner, or has the valid right
to use, sell and license, the Intellectual Property necessary or otherwise
material to the conduct of the Company's business as now conducted. Each such
item of Intellectual Property will be owned by or available for use by the
Company or its respective Subsidiary on substantially identical terms
immediately subsequent to the Closing, free and clear of all Liens. For purposes
of this Section 4.11, the term "Liens" shall not include any license agreement
or lease pursuant to which the Company or any of its Subsidiaries has the right
to use any Intellectual Property. Schedule 4.11(a) sets forth a complete and
accurate list (including whether the Company or one of its Subsidiaries is the
owner or licensee thereof) of all (i) patents and patent applications, (ii)
trademark or service ▇▇▇▇ registrations and applications, (iii) copyright
registrations and applications and (iv) material unregistered copyrights,
service marks, trademarks and trade names, each as owned or licensed by the
Company or one of its Subsidiaries. Except as otherwise disclosed on Schedule
4.11(a), the Company or one of its Subsidiaries currently is listed in the
records of the appropriate United States, state or foreign agency as the sole
owner of record for each owned application and registration listed on Schedule
4.11(a).
(b) Except as provided on Schedule 4.11(a), the registrations
listed on Schedule 4.11(a) are valid and subsisting, in full force and effect in
all material respects and have not been canceled, expired or abandoned. There is
no pending, existing, or to the Knowledge of the Principal Shareholders,
threatened, opposition, interference, cancellation proceeding or other legal or
governmental proceeding before any court or registration authority in any
jurisdiction against the registrations listed on Schedule 4.11(a) or the
Intellectual Property.
(c) Schedule 4.11(c) lists all of the Computer Programs other
than off-the-shelf applications which are owned, licensed, leased or otherwise
used by the Company or any of its Subsidiaries in connection with the operation
of its businesses as currently conducted, and identifies which is owned,
licensed, leased, or otherwise used, as the case may be. Each Computer Program
listed on Schedule 4.11(c) is either (i) owned by the Company or any of its
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Subsidiaries, (ii) currently in the public domain or otherwise available to a
Company or any of its Subsidiaries without the license, lease or consent of any
third party or (iii) used under rights granted to the Company or any Subsidiary
pursuant to a written agreement, license or lease from a third party, which
written agreement, license or lease is set forth on Schedule 4.11(c). The
Company and the Subsidiaries use the Computer Programs set forth on Schedule
4.11(c) in connection with the operation of its business as conducted on the
date hereof and, to the Knowledge of the Principal Shareholders, such use does
not violate the rights of any third party. All Computer Programs owned by the
Company and set forth in Schedule 4.11(c) were either developed by (x) employees
of the Company or one of its Subsidiaries within the scope of their employment,
(y) third parties as "work-made-for-hire," as that term is defined under Section
101 of the United States copyright laws, pursuant to written agreements or (z)
independent contractors who have assigned their rights to the Company or one of
its Subsidiaries pursuant to written agreements.
(d) Schedule 4.11(d) sets forth a complete and accurate list
of all agreements pertaining to the use of or granting any right to use or
practice any rights under any Intellectual Property, whether the Company or one
of its Subsidiaries is the licensee or licensor thereunder (the "Licenses") and
any written settlements or assignments relating to any Intellectual Property.
The Licenses are valid and binding obligations of each party thereto, and to the
Knowledge of the Principal Shareholders, enforceable against each such party in
accordance with their terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, and there are no breaches or defaults under
any Licenses.
(e) No trade secret or confidential know-how material to the
business of the Company or any Subsidiary as currently operated has been
disclosed or authorized to be disclosed to any third party, other than pursuant
to a non-disclosure agreement that protects the Company or such Subsidiary's
proprietary interests in and to such trade secrets and confidential know-how,
and other than disclosures to employees, officers, directors, agents, attorneys,
accountants, consultants, independent contractors or other representatives of
the Company or such Subsidiary, each of whom is obligated (by contract,
employment policy, cannons of ethics or the like) to maintain the
confidentiality of such information.
(f) To the Knowledge of the Principal Shareholders, the
conduct of the business of the Company and its Subsidiaries does not infringe
upon any intellectual property right owned or controlled by any third party and
to the Knowledge of the Principal Shareholders, no third party is infringing
upon any Intellectual Property owned by the Company or any Subsidiary and no
such claims have been made against a third party by the Company or any
Subsidiary. There are no claims or suits pending or, to the Knowledge of
Sellers, threatened, and neither Company nor any Subsidiary has received any
written notice of a third party claim or suit (x) alleging that the Company or
Subsidiary's activities or the conduct of its businesses infringes upon or
constitutes the unauthorized use of the proprietary rights of any third party or
(y) challenging the ownership, use, validity or enforceability of the
Intellectual Property.
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(g) There are no settlements, consents, judgments, orders or
other agreements to which the Company or any Subsidiary is subject which
restrict the rights of the Company or such Subsidiary to use any Intellectual
Property, or other agreements which restrict the Company or any Subsidiary's
rights to use any Intellectual Property owned by the Company or such Subsidiary.
(h) Except as set forth on Schedule 4.11(h), the consummation
of the transactions contemplated hereby will not result in the loss or
impairment of the right of Purchaser or its successors to own, use, license or
sublicense any of the Intellectual Property currently owned, used, licensed or
sublicensed by the Company or any Subsidiary nor will it require the consent of
any Governmental Authority or third party in respect of any such Intellectual
Property and no present or former employee, or officer of the Company or any
Subsidiary has any right, title or interest, directly or indirectly, in whole or
in part, in any Intellectual Property.
(i) All officers and directors of the Company and all salaried
employees of the Uniform Tubes division of the Company have executed and
delivered to the Company an agreement regarding assignment to the Company of any
Intellectual Property arising from services performed for the Company by such
persons. All officers and directors of the Subsidiaries have executed and
delivered to such Subsidiary an agreement regarding assignment to such
Subsidiary of any Intellectual Property arising from services performed for such
Subsidiary by such persons. Except as disclosed on Schedule 4.11(i), there is no
Intellectual Property developed by a shareholder, director, officer, consultant
or employee of the Company that is used in the business of the Company or any
Subsidiary that has not been transferred to, or is not owned free and clear of
any liens or encumbrances by, the Company or any Subsidiary.
Section 4.12 Tax Matters.
(a) Except as set forth on Schedule 4.12(a), the Company and
each Subsidiary has timely filed with the appropriate governmental agencies
complete and accurate Tax Returns required to be filed by it in respect of all
applicable Taxes of the Company and such Subsidiary required to be paid through
the date hereof, and will timely file any such Tax Return required to be filed
by it prior to the Closing Date with respect to all applicable Taxes required to
be paid through the Closing Date. All such Tax Returns were prepared in
compliance with applicable law and all Taxes due, or claimed to be due by any
taxing authority, pursuant thereto (whether or not shown as due on any Tax
Return) have been paid, except where subject to good faith dispute as identified
on Schedule 4.12(a). In addition, all Taxes due or claimed to be due by any
taxing authority (whether or not shown on any Tax Return), prior to the Closing
Date for which the Company or any Subsidiary may be liable in its own right or
as a transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity, have been paid on a
timely basis, or an adequate reserve has been established therefor. Except as
set forth on Schedule 4.12(a), neither the Company nor any Subsidiary is
currently the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where the
Company or any Subsidiary does not file Tax Returns that it is or may be subject
to taxation by that jurisdiction. There are no security
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interests on any of the assets of the Company or any Subsidiary that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) The Company and each Subsidiary has withheld and paid all
Taxes that the Company and such Subsidiary is required to withhold and pay in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(c) Except as set forth on Schedule 4.12(c), there is no basis
for any Tax authority to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no action, suit, proceeding, audit,
investigation, assessment, dispute or claim concerning any Tax liability of the
Company or any Subsidiary, either (i) claimed or raised by any authority
delivered to the Company or a Subsidiary in writing or (ii) based upon personal
contact with any agent of such authority.
(d) Correct and complete copies of all federal, state, local
and foreign income Tax Returns and all written communications from the Internal
Revenue Service or other Tax authorities relating to any such Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by the Company or any Subsidiary since December 31, 1993 have been made
available to Purchaser or will be made available to Purchaser prior to Closing.
(e) Neither the Company nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency, and no power of attorney granted
by the Company or any Subsidiary with respect to any Tax matter is currently in
force.
(f) Neither the Company nor any Subsidiary has made any
payments, is obligated to make any payments, or is a party to any agreement that
under any circumstances could obligate it to make any payments that will not be
deductible by reason of Section 280G of the Code. Neither the Company nor any
Subsidiary is a party to any Tax allocation or sharing agreement. Except as set
forth on Schedule 4.12(f), neither the Company nor any Subsidiary, (i) has been
a member of an affiliated group filing a consolidated federal income Tax Return,
(ii) is or has ever been a partner in a partnership or an owner of an interest
in an entity treated as a partnership for federal income tax purposes and (iii)
has any liability for the Taxes of any person (other than the Company) under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
(g) Except as set forth on Schedule 4.12(g), the unpaid Taxes
of the Company and of each Subsidiary do not exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of the
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company and its Subsidiaries in filing its Tax Returns.
(h) The Company has been a validly electing S corporation
within the meaning of Sections 1361 and 1362 of the Code since January 1, 1987,
and will be an S corporation up to and including the Closing Date. Other than
Metallurgical Holdings, Inc.
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(formerly known as eVasc Holdings, Inc.), a Delaware corporation, and UTI/SFM
Feinmechanik GmbH, each Subsidiary of the Company is a qualified subchapter S
subsidiary within the meaning of Section 1361 of the Code. Except as a result of
the Election, no Built-in Gain Tax has been incurred by the Company. The
Built-in Gain Tax that will be incurred by the Company if the Election is made
shall not exceed $1,200,000. Except as set forth on Schedule 4.12(h), the
Company has not in the past 10 years (i) acquired assets from another
corporation in a transaction in which the Company's tax basis for the acquired
assets was determined in whole or in part by reference to the tax basis of the
acquired assets (or any other property) in the hands of the transferor, (ii)
acquired the stock of any corporation, or (iii) taken any action that would
result in the loss of the Company's status as a validly electing S corporation.
Section 4.13 Real Property.
(a) Schedule 4.13(a) lists all real property currently leased
or subleased to the Company and each Subsidiary (the "Leased Real Property"),
and identifies the lessor, rental rate, lease term, expiration date and
existence of a renewal option. Sellers have delivered to Purchaser correct and
complete copies of the leases and subleases listed in Schedule 4.13(a), as such
leases or subleases have been amended to date. The current use of the Leased
Real Property by the Company and each Subsidiary, as applicable, does not, to
the Knowledge of Sellers, violate the certificate of occupancy thereof or any
local zoning or similar land use or other Laws. Neither the Company nor any
Subsidiary has received notice of any pending or threatened condemnation
proceeding, or of any sale or other disposition in lieu of condemnation,
affecting any of the Leased Real Property. Except as set forth on Schedule
4.13(a), to the Knowledge of Sellers, each parcel of Leased Real Property abuts
on or has direct vehicular access to a public road. Notwithstanding anything
herein to the contrary, Sellers make no representations or warranties as to the
state of title to any of the Leased Real Property. With respect to each lease
and sublease listed, except as otherwise indicated in Schedule 4.13(a):
(i) the lease or sublease is in full force and effect
and will remain in full force and effect on substantially similar terms after
the Closing, without the need to obtain the consent of any party thereto;
(ii) the Company or any Subsidiary, as applicable, is
in possession of the leased premises and all rental and other obligations of the
Company or such Subsidiary are current;
(iii) neither the Company nor any Subsidiary, as
applicable, is in breach or default (or has received notice of breach or
default), and no event has occurred which, with notice or lapse of time, would,
to the knowledge of Sellers, constitute a breach or default or permit
termination, modification or acceleration under such lease or sublease;
(iv) to the Knowledge of Sellers, no party has
repudiated any provision of such lease or sublease;
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(v) there are no disputes, oral agreements or
agreements by any of the parties to such lease to forbear in exercising any
rights now available to such party, in each case in effect as to the lease or
sublease to which the Company or any Subsidiary is a party;
(vi) neither the Company nor any Subsidiary has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any
interest in the leasehold or subleasehold;
(vii) all facilities leased or subleased by the
Company or any Subsidiary have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation of the Company's or any Subsidiaries' business therein, and have been
operated and maintained by the Company or such Subsidiary in compliance with
applicable laws; and
(viii) to the Knowledge of Sellers, the properties on
which all facilities leased or subleased thereunder reside are used in a manner
consistent with applicable zoning.
(b) Schedule 4.13(b) lists all real property that the Company
and any Subsidiary owns and all real property to be acquired by the Company or
any Subsidiary prior to Closing (the "Owned Real Property"). With respect to
each such parcel of Owned Real Property, except as otherwise indicated in
Schedule 4.13(b):
(i) the identified owner has good and marketable
title to the parcel of Owned Real Property, free and clear of any Lien,
easement, covenant or other restriction, except for taxes and special
assessments not yet delinquent and recorded easements, covenants and other
restrictions which do not impair the current use, occupancy or value, or the
marketability of title, of the property subject thereto;
(ii) neither the Company nor any Subsidiary has
received notice of any pending or threatened condemnation proceedings, lawsuits
or administrative actions relating to the property or other matters affecting
materially and adversely the current use, occupancy or value thereof;
(iii) Sellers will make available to Purchaser prior
to Closing copies of all existing deeds and title policies and surveys in the
possession of Sellers or the Company;
(iv) all Owned Real Property and the facilities
located thereon have received all approvals of governmental authorities
(including licenses and permits) required in connection with the ownership or
operation thereof and have been operated and maintained in accordance with
applicable laws, rules and regulations;
(v) neither Sellers, the Company or its Subsidiaries
has entered into nor is aware of any leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of any parcel of Owned Real Property;
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(vii) there are no parties (other than the Company)
in possession of the parcel of Owned Real Property, other than tenants under any
leases disclosed in Schedule 4.13(b) who are in possession of space to which
they are entitled; and
(viii) none of the structures on the Owned Real
Property encroaches upon real property of another Person, and no structure of
any other Person encroaches upon any Owned Real Property; and
(ix) each parcel of Owned Real Property abuts on or
has direct vehicular access to a public road.
Section 4.14 Material Contracts.
(a) Schedule 4.14 lists each of the following contracts and
other agreements (or, in the case of oral contracts of which the Principal
Shareholders, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ has Knowledge, summaries
thereof) to which the Company or any Subsidiary is a party or by or to which the
Company, any Subsidiary or any of their respective assets or properties is bound
or subject which are in force on the date hereof and, except for paragraphs
(ii), (vi), (viii), (ix) and (x) below, under which the Company, any Subsidiary
or any other contracting party is obligated to pay at least $250,000 in any one
year (such contracts and agreements being "Material Contracts"):
(i) any advertising, market research and other
marketing agreements;
(ii) any employment, severance, noncompetition,
consulting or other agreements of any nature with any current or former
stockholder, partner, officer or employee of the Company, any Subsidiary or any
Affiliate of any of such Persons;
(iii) any agreements relating to the making of any
loan or advance by the Company or any Subsidiary;
(iv) any agreements providing for the indemnification
by the Company or any Subsidiary of any Person;
(v) any agreements with any Governmental Authority
except those entered into in the ordinary course of business which are not
material to the Company or any Subsidiary;
(vi) any contracts and agreements for the sale of
assets or for the furnishing of services, goods or products by or to the Company
or any Subsidiary, including supply agreements, (A) with firm commitments having
a value in excess of $250,000 or (B) with firm commitments having a value in
excess of $100,000 and having a term which is greater than
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six months and which is not terminable by the Company on less than 90 days'
notice without the payment of any termination fee or similar payment;
(vii) any broker, distributor, dealer, representative
or agency agreements;
(viii) any agreements (including settlement
agreements) currently in effect pursuant to which the Company or any Subsidiary
licenses the right to use any Intellectual Property to any Person or from any
Person, and research and development agreements;
(ix) any confidentiality agreements entered into by
the Company or any Subsidiary during the period commencing five years prior to
the date hereof pursuant to which confidential information has been provided to
a third party or by which the Company or any Subsidiary was restricted from
providing information to third parties;
(x) any voting trust or similar agreements relating
to any of the ownership interests in the Company or any Subsidiary to which any
of Sellers, the Company or any Subsidiary is a party;
(xi) any joint venture, partnership or similar
documents or agreements;
(xii) any agreements that limit or purport to limit
the ability of the Company or any Subsidiary to own, operate, sell, transfer,
pledge or otherwise dispose of any assets; and
(xiii) all other agreements, contracts or commitments
not made in the ordinary course of business which are material to the Company or
any Subsidiary.
(b) To the Knowledge of the Principal Shareholders, each
Material Contract is legal, valid and binding on and enforceable against the
Company or Subsidiary party thereto and the other parties thereto and is in full
force and effect, subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally. Except
as set forth on Schedule 4.14(b), upon consummation of the transactions
contemplated by this Agreement, each Material Contract shall remain in full
force and effect without any loss of benefits thereunder and without the need to
obtain the consent of any party thereto to the transactions contemplated by this
Agreement. Neither the Company nor any Subsidiary is (and with the giving of
notice or lapse of time would not be) in material breach of, or material default
under, any Material Contract and, to the Knowledge of Principal Shareholders, no
other party thereto is in material breach of, or material default under, any
Material Contract, except for those breaches which would not result in a
Material Adverse Effect. Neither the Company nor any Subsidiary has received any
written notice that any Material Contract is not enforceable against any party
thereto, that any Material Contract has been terminated before the expiration of
its term or that any party to a Material Contract intends to terminate such
Material Contract prior to the termination date specified therein, or that any
other party is in breach of, or default under, any Material Contract. True and
complete copies of all Material Contracts or, in the case of oral
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agreements that constitute Material Contracts, if any, written summaries thereof
have been delivered to Purchaser.
Section 4.15 Relationship with Suppliers and Customers. To the
Knowledge of Principal Shareholders, except as set forth in Schedule 4.15, the
Company and each Subsidiary currently has good relationships with its suppliers
and customers. Neither the Company nor any Subsidiary is currently in dispute
with any current or former material supplier to the Company or such Subsidiary
or any material customer of the Company or such Subsidiary, and, except as set
forth on Schedule 4.15, since December 31, 1998, no supplier to or customer of
the Company or any Subsidiary has notified the Company or any Subsidiary that it
will stop doing business, or reduce its business, with the Company or such
Subsidiary, the cessation or reduction of which business would have a Material
Adverse Effect. Schedule 4.15 lists the 10 largest (in terms of dollar volume)
customers and suppliers of the Company (on a consolidated basis with the
Subsidiaries) during each of the three immediately preceding fiscal years of the
Company.
Section 4.16 Notes and Accounts Receivable; Bank Accounts. Schedule
4.16 sets forth all notes and accounts receivable of the Company and each
Subsidiary. Except as set forth in Schedule 4.16, all notes and receivables of
the Company and each Subsidiary reflected on the Company Financial Statements or
created after the Balance Sheet Date arose from valid transactions in the
ordinary course of business and are valid receivables not subject to setoffs or
counterclaims (other than in the ordinary course of business consistent with
past practice), are current and collectible and will be collected in accordance
with their terms at their recorded amounts, subject to any reserves for bad
debts reflected in the Company Financial Statements. Sellers will deliver to
Purchaser no later than the Closing Date a revised schedule of all notes and
accounts receivable of the Company and each Subsidiary as of one business day
prior to the Closing Date. Schedule 4.16 also sets forth (a) all related party
notes and accounts receivable (including those that will be repaid or offset
prior to Closing) and (b) all bank accounts maintained by the Company and each
Subsidiary.
Section 4.17 Insurance. Schedule 4.17 sets forth a complete and
accurate list as of the date hereof of all primary, excess and umbrella
policies, bonds and other forms of insurance owned or held by or on behalf of or
providing insurance coverage to the Company, each Subsidiary and their
respective business, properties and assets (or their respective officers,
salespersons, agents or employees or Persons acting in a similar capacity) and
the extent, if any, to which the limits of liability under such policies have
been exhausted. True and complete copies of such policies have been delivered to
Purchaser. All such policies are in full force and effect and all such policies
in such amounts will be outstanding and in full force and effect without
interruption until the Closing. Neither the Company nor any Subsidiary has
received notice of default under any such policy, nor has the Company or any
Subsidiary received written notice of any pending or threatened termination of
cancellation, coverage limitation or reduction, or material premium increase
with respect to any such policy. Schedule 4.17 sets forth a complete and
accurate summary of all of the self-insurance coverage provided by the Company
or any Subsidiary. No letters of credit have been posted and no cash has been
restricted to support any reserves for insurance on the Balance Sheet.
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Section 4.18 Employees.
(a) Except as set forth in Schedule 4.18, to the Knowledge of
Principal Shareholders, no executive, Key Employee or group of employees has any
plans to terminate employment with the Company. Except as set forth in Schedule
4.18, neither the Company nor any Subsidiary is a party to or bound by any
collective bargaining agreement nor has the Company or any Subsidiary
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes. Neither the Company nor any Subsidiary has taken
any action, or omitted to take any action, that would result in any unfair labor
practice. Except as set forth in Schedule 4.18, no organizational effort is
presently being made or, to the Knowledge of Sellers, is threatened by or on
behalf of any labor union with respect to employees of the Company or any
Subsidiary. All of the Company and each Subsidiary's current procedures,
policies and training practices with respect to employee matters, including,
without limitation, those relating to the hiring and termination of employees
and worker safety, conform with applicable Laws to which the Company and such
Subsidiary is subject, except for any such nonconformance that would not result
in a Material Adverse Effect. Neither the Company nor any Subsidiary is subject
to any claim for overdue overtime compensation due to any employee, and no such
claim has been threatened.
(b) Neither the Company nor any Subsidiary has received a
notice of any violation of any immigration and naturalization laws relating to
employment and employees and has properly completed and maintained all
applicable forms (including, but not limited to, I-9 forms) and the Company and
each Subsidiary is in compliance with all such immigration and naturalization
laws and there are no citations, investigations, administrative proceedings or
formal complaints of violations of the immigration or naturalization laws
pending or threatened before the Immigration and Naturalization Service of any
federal, state or administrative agency or court against or involving the
Company, any Subsidiary or any of Sellers.
Section 4.19 Employee Benefits.
(a) Schedule 4.19(a) contains a true and complete list of each
employment, bonus, deferred compensation, incentive compensation, stock
purchase, stock option, stock appreciation right or other stock-based incentive,
severance, change-in-control, or termination pay, hospitalization or other
medical, disability, life or other insurance, supplemental unemployment
benefits, profit-sharing, pension, or retirement plan, program, agreement or
arrangement, and each other employee benefit plan, program, agreement or
arrangement, but not including any plan, program, agreement or arrangement
providing for workers' compensation benefits (or benefits of like purpose),
sponsored, maintained or contributed to or required to be contributed to by the
Company or an Affiliate of the Company, whether or not incorporated other than
Micro-Coax, Inc. (an "ERISA Affiliate"), that together with the Company would be
deemed a "single employer" within the meaning of Section 4001(b)(1) of ERISA,
for the benefit of any current or former employee or director of the Company or
any ERISA Affiliate (the "Plans"). Schedule 4.19(a) identifies each of the Plans
that is an "employee welfare benefit plan," or "employee pension benefit plan"
as such terms are defined in Sections 3(1) and 3(2) of ERISA (such plans being
hereinafter referred to collectively as the "ERISA Plans"). Except as
specifically set forth on Schedule 4.19(a), neither the Company nor any ERISA
Affiliate has any
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formal plan or commitment, whether legally binding or not, to create any
additional Plan or modify or change any existing Plan that would affect any
current or former employee or director of the Company or any ERISA Affiliate.
(b) With respect to each of the Plans, the Company has
heretofore delivered to Purchaser true and complete copies of each of the
following documents, as applicable:
(i) a copy of the Plan documents (including all
amendments thereto) for each written Plan or a written description of any Plan
that is not otherwise in writing;
(ii) a copy of the annual report or Internal Revenue
Service Form 5500 Series, if required, with respect to each Plan for the last
three Plan years ending prior to the date of this Agreement for which such a
report was filed;
(iii) a copy of the actuarial report, if required
under ERISA, with respect to each ERISA Plan for the last three Plan years
ending prior to the date of this Agreement;
(iv) a copy of the most recent Summary Plan
Description ("SPD"), together with all summaries of material modification issued
with respect to such SPD, if required under ERISA, with respect to each ERISA
Plan, and all other material employee communications relating to each ERISA
Plan;
(v) if the Plan is funded through a trust or any
other funding vehicle, a copy of the trust or other funding agreement (including
all amendments thereto) and the latest financial statements thereof, if any;
(vi) all contracts relating to the Plans with respect
to which the Company or any ERISA Affiliate may have any material liability,
including insurance contracts, investment management agreements, subscription
and participation agreements and record keeping agreements; and
(vii) the most recent determination letter received
from the IRS with respect to each Plan that is intended to be qualified under
Section 401(a) of the Code.
(c) Except as disclosed on Schedule 4.19(c), no liability
under Title IV of ERISA has been incurred by the Company or any ERISA Affiliate
since the Balance Sheet Date that has not been satisfied in full.
(d) The Pension Benefit Guaranty Corporation (the "PBGC") has
not instituted proceedings pursuant to Section 4042 of ERISA to terminate any of
the ERISA Plans subject to Title IV of ERISA; and no condition exists that
presents a material risk that such proceedings will be instituted by the PBGC.
(e) With respect to each of the ERISA Plans that is subject to
Title IV of ERISA, the present value of accumulated benefit obligations under
such Plan, as determined by the Plan's actuary based upon the actuarial
assumptions used for funding purposes in the most
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recent actuarial report prepared by such Plan's actuary with respect to such
Plan, did not, as of its latest valuation date, exceed the then current value of
the assets of such Plan allocable to such accumulated benefit obligations.
(f) None of (i) the Company, (ii) any ERISA Affiliate, (iii)
any of the ERISA Plans, (iv) any trust created thereunder, or (v) to the
Knowledge of Sellers, any trustee or administrator thereof has engaged in a
transaction or has taken or failed to take any action in connection with which
the Company or any ERISA Affiliate could be subject to any material liability
for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA
or a tax imposed pursuant to Section 4975(a) or (b), 4976 or 4980B of the Code.
(g) All contributions and premiums which the Company or any
ERISA Affiliate is required to pay under the terms of each of the ERISA Plans
and Section 412 of the Code, have, to the extent due, been paid in full or
properly recorded on the financial statements or records of the Company and none
of the ERISA Plans or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each of the ERISA Plans ended prior to the date of this
Agreement. No lien has been imposed under Section 412(n) of the Code or Section
302(f) of ERISA on the assets of the Company or any ERISA Affiliate and no event
or circumstance has occurred that is reasonably likely to result in the
imposition of any such Lien on any such assets on account of any ERISA Plan.
(h) None of the ERISA Plans is a "multiemployer plan," as such
term is defined in Section 3(37) of ERISA.
(i) Except as disclosed on Schedule 4.19(i), with respect to
the Plans, the Company and its Affiliates have complied in all material respects
with all applicable provisions of the Code, ERISA, the National Labor Relations
Act, Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Fair Labor Standards Act, the Securities Act, the Securities
Exchange Act of 1934, and all other Laws pertaining to the Plans and all Plans
have been administered in material compliance with their terms.
(j) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code is so qualified. Subject to
Schedule 4.19(j), the Company has applied for and received a currently effective
determination letter from the IRS stating that it is so qualified, and no event
has occurred which would affect such qualified status.
(k) Any fund established under an ERISA Plan that is intended
to satisfy the requirements of section 501(c)(9) of the Code has so satisfied
such requirements.
(l) No amounts payable under any of the Plans or any other
contract, agreement or arrangement with respect to which the Company or any
ERISA Affiliate may have any liability could fail to be deductible for federal
income tax purposes by virtue of Section 280G of the Code.
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(m) Subject to Schedule 4.19(m), no Plan provides benefits,
including death or medical benefits (whether or not insured) with respect to
current or former employees of any of the Company or any ERISA Affiliate after
retirement or other termination of service (other than (i) coverage provided
under a policy or practice adopted to comply with a mandate of applicable Laws,
(ii) death benefits or retirement benefits under any "employee pension plan," as
that term is defined in Section 3(2) of ERISA, (iii) deferred compensation
benefits accrued as liabilities on the books of the Company or an ERISA
Affiliate or (iv) benefits, the full direct cost of which is borne by the
current or former employee (or beneficiary thereof)).
(n) Except as specifically set forth in this Agreement, the
consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee, officer or director of the Company or
any ERISA Affiliate to severance pay, unemployment compensation or any other
similar termination payment or (ii) except as set forth on Schedule 4.19(n),
accelerate the time of payment or vesting or increase the amount of or otherwise
enhance any benefit due any such employee, officer or director.
(o) There are no pending or, to the Knowledge of Principal
Shareholders, threatened or anticipated, claims by or on behalf of any Plan, by
an employee or beneficiary under any such Plan, or otherwise involving any such
Plan other than routine claims for benefits or appeals of any such claims that
have been denied.
Section 4.20 Environmental Compliance and Liabilities.
(a) Except as disclosed in Schedule 4.20: (i) the Company,
each Subsidiary and all Real Property is currently, and at all times during the
Company and each Subsidiary's ownership or operation of its respective business
has been, in compliance with all applicable Environmental Laws; and (ii) at all
times during the period of Company or each Subsidiary's ownership, tenancy, or
operation of the Real Property or any real property formerly owned, operated, or
leased by the Company or such Subsidiary ("Former Real Property"), there has not
been any Contamination or Release at, on, under or from the Real Property,
except any such Release or Contamination permitted by, and made in accordance
with, applicable Environmental Laws and which will not result in any liability
under applicable Environmental Laws. Except as disclosed on Schedule 4.20, to
the Knowledge of Principal Shareholders, at all times prior to the Company or
any Subsidiary's ownership or operation of the Real Property, there did not
occur any Contamination or Release at, on, under or from the Real Property,
except any such Contamination or Release permitted by, and made in accordance
with, applicable Environmental Laws and which will not result in any liability
under applicable Environmental Laws.
(b) Except as disclosed on Schedule 4.20, the Company and each
Subsidiary have obtained and maintained in full force and effect, all
environmental permits, licenses, certificates of compliance, approvals and other
authorizations necessary for each to conduct the activities and business of the
Company or such Subsidiary as currently conducted and to own or operate the Real
Property (collectively the "Environmental Permits"). The Company and each
Subsidiary have conducted its respective activities and business in compliance
in all material respects with all terms and conditions of any Environmental
Permits. Except as disclosed in Schedule 4.20, the Company and each Subsidiary
have filed all reports and notifications required
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to be filed by each under applicable Environmental Laws, and timely filed
applications for all Environmental Permits. All of the Environmental Permits
listed on Schedule 4.20 are transferable and none require consent, notification,
or other action to remain in full force and effect following consummation of the
transaction contemplated hereby, except that with respect to the Environmental
Permits held at the Collegeville, Pennsylvania facility this representation does
not apply to such permits unless, as a result of such transaction, Uniform
Tubes, Inc. continues to hold the permit and continues to use the same
identification number after the transaction is consummated.
(c) Except as disclosed in Schedule 4.20, none of Sellers, the
Company nor any Subsidiary has received any notice that any Third Party
Environmental Claims or Regulatory Actions have been asserted or assessed
against the Company, any Subsidiary or the Real Property or any Former Real
Property and, except as disclosed on Schedule 4.20, no Third Party Environmental
Claims or Regulatory Actions are pending or, to the Knowledge of Principal
Shareholders, threatened, against the Company, any Subsidiary, the Former Real
Property or the Real Property arising out of or due to, or allegedly arising out
of or due to, (i) the Release of any Hazardous Materials; (ii) any Contamination
of the Real Property, including, without limitation, the presence of any
Hazardous Material which has come to be located on or under the Real Property
from another location; (iii) any violation or alleged violation of any
Environmental Law with respect to the Real Property, the Former Real Property,
or the activities of the Company or any Subsidiary; (iv) any injury to human
health or safety or to the environment by reason of the past or present
condition of, or past or present activities on or under, the Real Property or
the Former Real Property; or (v) the generation, manufacture, storage,
treatment, handling, transportation or other use, however defined, of any
Hazardous Material by or for the Company or any Subsidiary on or off the Real
Property.
(d) Except as disclosed in Schedule 4.20, no (i)
polychlorinated biphenyls ("PCBs") or radioactive materials are present at the
Real Property and (ii) to the Knowledge of the Principal Shareholders, no
asbestos or asbestos containing materials, radon, or urea formaldehyde is
present at the Real Property.
(e) Except as disclosed in Schedule 4.20, neither the Company
nor any Subsidiary has transported or arranged for the treatment, disposal, or
transportation of any Hazardous Materials to any location (i) which is listed on
the EPA's National Priorities List (the "National Priorities List"), (ii) which,
to the Knowledge of the Principal Shareholders, is listed on the Comprehensive
Environmental Response, Compensation, Liability Information System ("CERCLIS")
or on any similar list of properties requiring Clean-up maintained by a
Governmental Authority, or (iii) which may lead to claims against Purchaser for
damages to natural resources, personal injury, Clean-up costs or Clean-up work,
including, but not limited to, claims under CERCLA.
(f) Except as disclosed on Schedule 4.20, none of the Real
Property or Former Real Property is listed in the National Priorities List, or
to the Knowledge of the Principal Shareholders, is listed on CERCLIS, or any
similar list of properties requiring Clean-up maintained by a Governmental
Authority. Except as disclosed on Schedule 4.20, to the Knowledge of Principal
Shareholders, no part of the Real Property or Former Real Property was
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ever used, nor is it now being used (i) as a landfill, dump or other disposal,
storage, transfer or handling area for Hazardous Materials which requires a
permit under Environmental Laws or (ii) as a gasoline service station. Except as
disclosed on Schedule 4.20, there are no and never have been any underground
improvements or above ground tanks on the Real Property used for the storage of
Hazardous Materials.
(g) Sellers have furnished Purchaser copies of all
environmental assessments, reports, audits and other documents in its possession
or under its control that relate to the Former Real Property or any liability of
the Sellers relating to the offsite disposal or treatment of Hazardous
Materials, and has made available to Purchaser copies of all such documents that
relate to compliance with Environmental Laws or any Real Property. Any
information Sellers have furnished to or made available to Purchaser concerning
the environmental condition of the Real Property or the Former Real Property or
the liability of Sellers relating to offsite disposal or treatment of Hazardous
Materials or concerning the operations of the Company and any Subsidiary related
to compliance with Environmental Laws is accurate and complete in all material
respects, for the stated purpose for which the information was prepared.
(h) Except as disclosed on Schedule 4.20, no authorization,
notification, recording, filing, consent, waiting period, remediation,
investigation, or approval is required under any Environmental Law in order to
consummate the transaction contemplated hereby.
(i) Schedule 4.20(i) sets forth a true, complete and accurate
list of the Company's Environmental Liabilities for which the Company has
accrued $3,554,577 on its Balance Sheet (such liabilities, the "Known
Environmental Liabilities"). There are no Environmental Liabilities other than
the Known Environmental Liabilities.
Section 4.21 Litigation and Claims, Compliance with Laws.
(a) Schedule 4.21(a) sets forth all Litigation as of the date
hereof, including the name of the claimant, the date of the alleged act or
omission, a summary as to the nature of the alleged act or omission, the date
the matter was referred to an insurance carrier of the Company (if referred),
the estimated amount of exposure, the amount the Company has reserved on its
books with respect thereto, if any, or the amount of the Company's claim and
estimated expenses of the Company in connection with such matters. There is no
Litigation which is not fully covered by the insurance policies referenced in
Section 4.17. Except as set forth in Schedule 4.21(a), none of the Company, each
Subsidiary and the Company and each Subsidiary's assets or properties, are
subject to any order, consent decree, settlement or similar agreement with any
Governmental Authority and there is no judgment, injunction, decree, order or
other determination of an arbitrator or Governmental Authority specifically
applicable to the Company any Subsidiary or any of their respective properties
or assets. There is no Litigation relating to alleged unlawful discrimination or
sexual harassment. As of the date hereof, there is no Litigation which seeks to
prevent consummation of the transactions contemplated hereby or which seeks
material damages in connection with the transactions contemplated hereby.
(b) Except as set forth in Schedule 4.21(b), the Company and
each Subsidiary has complied and is in compliance with all Laws applicable to
the Company or such Subsidiary
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and their respective business except where the failure to be in compliance would
not reasonably be expected, with the passage of time, to have a Material Adverse
Effect. Except as set forth in Schedule 4.21(b), the Company and each Subsidiary
holds all material licenses, permits and other authorizations of Governmental
Authorities necessary for each to conduct its respective business as now being
conducted or, under currently applicable Laws, to continue to conduct its
respective business as now being conducted. Except as set forth in Schedule
4.21(b), there is no intent to make any changes in the conduct of the business
of the Company or any Subsidiary that will result in or cause the Company or any
Subsidiary to be in noncompliance with applicable Laws or that will require
changes in or a loss of any such licenses, permits or other authorizations or an
increase in any expenses related thereto except where such noncompliance,
change, loss or increase would not reasonably be expected to have a Material
Adverse Effect. Such licenses, permits and other authorizations as aforesaid
held by the Company and each Subsidiary are valid and in full force and effect,
and there are no (i) Actions pending, or to the Knowledge of Principal
Shareholders, threatened or (ii) Investigations pending or, to the Knowledge of
Principal Shareholders, threatened that could result in the termination,
impairment or nonrenewal thereof.
Section 4.22 Affiliate Transactions. Schedule 4.22 lists all
agreements, arrangements and currently proposed agreements and arrangements, by
or between the Company and any Subsidiary, on the one hand, with or for the
benefit of any current or former shareholder, partner, officer or other
Affiliate of the Company, any Subsidiary or any of such Person's Affiliates, or
any entity in which any such Person has a direct or indirect material interest,
under which at least $60,000 has been paid since January 1, 1998, or under which
any contracting party is obligated to expend, or any contracting party is
reasonably likely to expend at least $60,000 per year. Schedule 4.22 lists all
payments of any kind since January 1, 1998, from the Company or any Subsidiary,
to or for the benefit of any current or former partner, officer or other
Affiliate of the Company, any Subsidiary or any of such Person's Affiliates, or
any entity in which any such Person has a direct or indirect material interest.
All outstanding debts and other obligations of the Company or any Subsidiary to
any Seller were incurred in return for fair and adequate consideration paid or
delivered by them in cash or other property. All debts of any Sellers or the
Company or any Subsidiary's officers or the respective Affiliates of the Company
to the Company are reflected on the Company Financial Statements.
Section 4.23 Records.
(a) The corporate minute books of the Company contain complete
and accurate records of all actions taken by Sellers as shareholders of the
Company and the Board of Directors and all committees thereto of the Company.
The corporate minute books of each Subsidiary contain complete and accurate
records of all actions taken by the shareholders of such Subsidiary and the
board of directors (or such similar body) and all committees thereto of such
Subsidiary. Complete and accurate copies of all such minute books have been
delivered by the Company to Purchaser. All officers and directors of the Company
and each Subsidiary have been properly elected.
(b) The accounting books and records of the Company and each
Subsidiary are complete and correct in all material respects, have been
maintained in accordance with
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applicable Laws and accurately reflect the basis for the financial condition and
results of operations of the Company and such Subsidiary as of the date thereof
or for the periods therefor set forth in the financial statements delivered to
purchaser.
Section 4.24 Brokers, Finders, Etc. None of the Company, any Subsidiary
or any Seller has employed, or is subject to the valid claim of, nor has the
Company, any Subsidiary or any Seller incurred any Liability that would be
payable by the Company or any Subsidiary, for any brokerage, finder's or other
fees or commissions of any broker, finder or other financial intermediary in
connection with the transactions contemplated by this Agreement.
Section 4.25 Representations and Warranties Generally. The
representations and warranties contained in any particular section of this
Article IV are not exclusive as to any particular subject matter covered by such
section and different sections may apply different tests to the same or similar
matters. One Schedule may specifically cross reference other applicable
Schedules or parts thereof without repeating disclosure that applies to more
than one section. Except as expressly set forth in this Article IV, the Company
and Sellers make no representation or warranty, express or implied, at law or in
equity, in respect of the Company, any Subsidiary, or any of their respective
assets, liabilities or operations, including, without limitation, with respect
to merchantability or fitness for any particular purpose, and any such other
representations or warranties are hereby expressly disclaimed.
Section 4.26 Competing Business. Except as set forth on Schedule 4.26,
Sellers have no direct or indirect interest of any nature whatever in any Person
which competes with, conducts any business similar to, has any arrangement or
agreement with, or is involved in any way with, any business similar to the
business of the Company or any Subsidiary.
Section 4.27 Product Warranty and Liability.
It is the Company and each Subsidiary's standard practice to sell each
product sold by the Company and each Subsidiary in conformity with all
applicable contractual commitments, if any, and all express and implied
warranties of the manufacturer. All products sold by the Company any each
Subsidiary have been sold in conformity with such practice, except for such
deviations therefrom that would not have a Material Adverse Effect. No product
sold by the Company or any Subsidiary is subject to any other express guaranty,
warranty or other indemnity beyond the applicable standard terms and conditions
of sale. Schedule 4.27 sets forth a list of all product liability claims raised
or asserted against the Company or any Subsidiary since January 1, 1996. No
third party has advised the Company or any Subsidiary that it has any liability
arising out of any injury to individuals or property as a result of the
ownership, possession or use of any product sold by the Company or any
Subsidiary prior to Closing.
Section 4.28 Year 2000 Program. Except as set forth in Schedule 4.28:
(a) All devices, systems, machinery, information technology,
computer software and hardware and other date sensitive technology
(collectively, the "Systems") necessary for the Company or any Subsidiary to
carry on its business as conducted immediately prior to the Closing Date are
Year 2000 Compliant to the extent necessary to ensure no material
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disruption of the operations of Purchaser. As used herein, Year 2000 Compliant
means that such Systems have been designed or modified to be used prior to,
during and after the Gregorian calendar year 2000 A.D., operated and will
continue to operate during each such time period without error relating to date
data, specifically including any error relating to, or the product of, date data
which represents or references different centuries or more than one century.
(b) Neither the Company nor any Subsidiary, nor, to the
Knowledge of Principal Shareholders, any of the Company or any Subsidiary's key
suppliers, vendors or customers, experienced or is experiencing any material
disruption of operations or failure with its Systems related to Year 2000
Compliance, and, to the Knowledge of the Principal Shareholders, all such
Persons have taken the steps necessary to become Year 2000 Compliant.
Section 4.29 Other Information. No representation or warranty of the
Company or Sellers in this Agreement, nor any statement, certificate or other
document furnished or to be furnished by the Company or Sellers to Purchaser
pursuant to this Agreement, nor the exhibits and schedules hereto, contains any
untrue statement of a material fact, or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers that the statements
in this Article V are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date:
Section 5.1 Organization. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
Except as set forth on Schedule 5.1, Purchaser has no Subsidiaries, and does not
have a direct or indirect ownership interest in any Person. Purchaser is
qualified to do business in the jurisdictions set forth in Schedule 5.1.
Purchaser has the power and authority (corporate and otherwise) to own, lease
and operate its respective properties and assets and to carry on its business as
now being conducted and is duly qualified or licensed to do business as a
foreign corporation in good standing in the jurisdictions in which the
ownership, lease or operation of its property or the conduct of its business
requires such qualification. Purchaser has delivered to Sellers complete and
correct copies of the Purchaser's charter documents and all amendments thereto
to the date hereof.
Section 5.2 Authorization, Etc. Purchaser has full corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the documents and instruments contemplated hereby and to carry out the
transactions contemplated hereby and thereby. Purchaser has duly approved and
authorized the execution and delivery of this Agreement and the documents and
instruments contemplated hereby and the consummation of the transactions
contemplated hereby and thereby, and no other corporate proceedings on the part
of Purchaser are necessary to approve and authorize the execution, delivery and
performance by Purchaser of this Agreement and the documents and instruments
contemplated hereby and the consummation by Purchaser of the transactions
contemplated hereby and thereby. This
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Agreement constitutes a legal, valid and binding agreement of Purchaser,
enforceable against Purchaser in accordance with its terms, except that (a) such
enforcement may be subject to applicable bankruptcy, insolvency or other similar
laws, now or hereafter in effect, affecting creditors' rights generally and (b)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
Section 5.3 Brokers' Fees. Purchaser has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Sellers could become
liable or obligated, except for that certain transaction fee payable to KRG
Capital Partners, LLC ("KRG") per the management agreement between KRG and the
Purchaser.
Section 5.4 Capital Stock. As of the date hereof, the authorized
capital stock of Purchaser is 1,000 shares of Common Stock, par value $0.01 per
share of which 100 shares are issued and outstanding. Purchaser is a
wholly-owned subsidiary of SubParent. As of the date hereof, the authorized
capital stock of SubParent is 1,000 shares of Common Stock, par value $0.01 per
share of which 100 shares are issued and outstanding. SubParent is a
wholly-owned subsidiary of Parent. As of the date hereof, the authorized capital
stock of Parent consists of (a) 50,000,000 shares of common stock, par value
$0.01 per share, of which 150,000 shares of voting common stock are issued and
outstanding and no shares of non-voting convertible common stock are issued and
outstanding and (b) 50,000,000 shares of preferred stock, par value $0.01 per
share, of which (i) 2,500,000 shares have been designated as Class A-1 5%
Convertible Preferred Stock, of which 868,372 shares are issued and outstanding,
(ii) 1,400,000 shares have been designated as Class A-2 5% Convertible Preferred
Stock, of which 1,125,000 shares are issued and outstanding, (iii) 26,456 shares
have been designated as Class A-3 5% Convertible Preferred Stock, of which
26,456 shares are issued and outstanding, (iv) 300,000 shares have been
designated as Class B-1 Convertible Preferred Stock, of which 300,000 shares are
issued and outstanding, (v) 6,250,000 shares have been designated Class A-4 5%
Convertible Preferred Stock, (vi) 200,000 shares have been designated Class B-2
Convertible Preferred Stock and (vii) 1,000,000 shares have been designated
Class AA Convertible Preferred Stock. Except for (i) warrants issued to Banc of
America Management Corporation or its assignee for non-voting convertible common
stock, and (ii) those restrictions contained in the Shareholders' Agreement, as
amended from time to time, there are no outstanding subscriptions, options,
warrants, calls, rights, contracts, commitments, understandings, restrictions or
arrangements relating to the issuance, sale, transfer or voting of any capital
stock of Purchaser, including any rights of conversion or exchange under any
outstanding securities or other instruments. All outstanding shares of capital
stock have been validly issued and are fully paid, nonassessable and free of
preemptive or similar rights. Parent is in the process of adopting a stock
option plan that shall result in the reservation of up to 10% of the Parent's
common stock for the employees of Parent and its Subsidiaries.
Section 5.5 No Conflict. Except as set forth in Schedule 5.5, neither
the execution, delivery or performance of this Agreement or the other documents
and instruments to be executed and delivered by Purchaser pursuant hereto, nor
the consummation by Purchaser of the transactions contemplated hereby or
thereby, nor compliance by Purchaser with any of the
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provisions hereof or thereof will (a) conflict with or result in any breach of
any provision of the Articles of Incorporation, Bylaws or similar organizational
documents of Purchaser, (b) constitute a change in control under or require the
consent from or the giving of notice to a third party, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, or result in the creation of any Lien upon or affecting any
of Purchaser's assets or properties pursuant to, any of the terms, conditions or
provisions of any contractual obligation of the Company or (c) violate any
order, writ, injunction, decree, statute, rule or regulation of any Governmental
Authority applicable to Purchaser or to which any of its properties or assets
may be bound.
Section 5.6 Financial Statements. The Purchaser has delivered to the
Company and the Sellers the Parent's Financial Statements. For the purposes of
this Agreement, "Parent Financial Statements" shall mean an audited balance
sheet for FY 1999 as of the December 31, 1999 and audited statements of income
and cash flow for the fiscal year then ended. Except as set forth on Schedule
5.6, the Parent Financial Statements are in accordance with the books and
records of the Purchaser (which books and records are correct and complete), and
fairly present the financial position of the Purchaser and its results of
operations in all material respects as of and for the periods indicated in
accordance with GAAP and have been prepared in accordance with GAAP consistently
applied, subject in the case of the unaudited Parent Financial Statements, to
normal and customary year-end adjustments (which are not anticipated to be
material) and the absence of footnotes.
Section 5.7 No Undisclosed Liabilities. The Purchaser has no
Liabilities (and there is no basis for any present or future Liability) that
would be material to the Purchaser taken as a whole, except for such Liabilities
as are set forth on Schedule 5.7 hereto. The Parent has no Liabilities (and
there is no basis for any present or future Liability) that would be material to
the Parent taken as a whole, except for such Liabilities as (a) are set forth on
Schedule 5.7 hereto, (b) are reflected on the Parent Financial Statements
(including any footnotes thereto) or (c) were incurred since the Balance Sheet
Date in the ordinary course of business consistent with past practice and which
individually and in the aggregate have not exceeded $250,000 and could not
reasonably be expected, with the passage of time, to exceed $250,000.
Section 5.8 Absence of Certain Changes or Events. Except as set forth
on Schedule 5.8, since the Balance Sheet Date, (a) the Purchaser has conducted
its business only in the ordinary course and consistent with past practice, and
(b) there have not been any developments or events which have had or could
reasonably be expected, with the passage of time, to have, a Material Adverse
Effect on the Purchaser.
Section 5.9 Purchase for Investment. Purchaser is acquiring the Shares
for investment purposes and not with a view toward any resale or distribution
thereof. Purchaser acknowledges that the securities to be acquired in accordance
herewith have not been registered for the purpose of the transactions
contemplated by this Agreement or otherwise under the Securities Act of 1933, as
amended, or under any state securities laws. Purchaser will not sell or
otherwise distribute all or any portion of the securities acquired hereunder
except in compliance with applicable laws relating to the sale or other
distribution of securities.
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Section 5.10 Other Information. No representation or warranty of the
Purchaser in this Agreement, nor any statement, certificate or other document
furnished or to be furnished by the Purchaser to the Company or the Sellers
pursuant to this Agreement, nor the exhibits and schedules hereto, contains any
untrue statement of a material fact, or omits to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
ARTICLE VI
SELLERS' AND THE COMPANY'S OBLIGATIONS BEFORE CLOSING
Sellers and the Company covenant that from the date of this Agreement
until the Closing:
Section 6.1 General. Each of Sellers, as applicable, and the Company
will use his or its reasonable best efforts to take all action and to do all
things necessary in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction of the closing conditions
set forth in Article VIII below).
Section 6.2 Access. Commencing on the date of the execution of this
Agreement and continuing through the Closing Date, Purchaser and its counsel,
accountants and other representatives shall have access during business hours of
the Company to all properties, books, accounts, records, contracts and documents
of or relating to the Company. Principal Shareholders and the Company shall
furnish or cause to be furnished to Purchaser and its Lenders and their
representatives all data and information concerning the business, finances and
properties of the Company that may reasonably be requested to complete its due
diligence review pursuant to Section 7.1 of this Agreement.
Section 6.3 Operation of Business. The Company will carry on its
business and activities diligently and in substantially the same manner as they
previously have been carried out and, except for the payment of legal and
accounting fees associated with this Agreement (provided, however, that such
payments shall be subject to the Eligible Indebtedness requirements and may,
accordingly, be subject to a purchase price adjustment pursuant to Section 8.9
hereof) and except as expressly contemplated by this Agreement, including
without limitation, Sections 2.1(b) and (c), shall not make or institute any
unusual or novel methods of manufacture, purchase, sale, lease, management,
accounting or operation that vary materially from those methods used by the
Company as of the date of this Agreement. Without limiting the generality of the
foregoing, except as contemplated by this Agreement, including without
limitation, Sections 2.1(b) and (c), during the period from the date of this
Agreement to the Closing Date, Sellers will not cause or permit the Company to
(a) declare, set aside, or pay any dividend or make any distribution with
respect to its capital stock or redeem, purchase or otherwise acquire any of its
capital stock or (b) otherwise engage in any practice, take any action or enter
into any transaction of the type described in Section 4.8 above, other than in
the ordinary course of business.
Section 6.4 Preservation of Business; Insurance. Except as contemplated
by this Agreement, Principal Shareholders will cause the Company to, and the
Company will, keep its business and properties substantially intact, including
its present operations, physical facilities,
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working conditions and relationships with lessors, lessees, licensors,
licensees, suppliers, customers and employees, and to continue to carry its
existing insurance, subject to variations in amounts required by the ordinary
operations of its business.
Section 6.5 Notices and Consents. Principal Shareholders will cause the
Company to, and the Company will, use its reasonable best efforts to obtain any
third-party consents, including, without limitation, the consent of lessors and
sublessors, and with respect to the Material Contracts, the consent of the other
parties thereto (if such consent is required under the terms of the Material
Contract). If required by law, Principal Shareholders and the Company shall
cooperate and share information regarding the preparation of any filings
required by the HSR Act and will seek early termination of any waiting period
imposed by the HSR Act. Sellers shall be responsible to pay 50% of the filing
fees and costs in connection with all filings required by the HSR Act, with the
remaining 50% to be paid by Purchaser.
Section 6.6 Exclusivity. Until the earliest of (a) the date of Closing,
or (b) the termination (for whatever reason) of this Agreement, neither the
Company nor Sellers shall solicit, initiate or encourage any other bids for the
sale of all or any portion of the equity or assets of the Company or enter into
any other negotiations for the sale of all or any portion of the equity or
assets of the Company without the written consent of Purchaser. Sellers will
notify Purchaser immediately if any person makes any proposal, inquiry or
contact with respect to any of the foregoing. Notwithstanding the foregoing, if
by June 1, 2000 the financing commitments set forth in Section 8.14 hereof have
not been obtained, the exclusivity provisions of this Section 6.6 shall
automatically terminate.
Section 6.7 Delivery of Schedules; Notice of Developments; Update of
Schedules
(a) Principal Shareholders will give prompt written notice to
Purchaser of any development causing a breach of any of the representations and
warranties in Article IV above. No disclosure by Principal Shareholders pursuant
to this Section 6.7, however, shall be deemed to amend or supplement the
Schedules, unless set forth in the Revised Schedules (as defined below) in
accordance with and subject to the terms of subparagraph (b) of this Section
6.7; provided, however, if Purchaser determines not to terminate this Agreement
pursuant to Section 12.1 and to consummate the transactions contemplated hereby
despite the existence of a misrepresentation or breach of warranty of which
Purchaser has been informed in writing by Sellers, the facts giving rise to such
misrepresentation or breach may be set forth in the Revised Schedules at Closing
and such disclosure shall be deemed to amend or supplement the Schedules for
purposes of curing such misrepresentation or breach of warranty.
(b) At least one business day prior to the Closing Date,
Principal Shareholders shall deliver to Purchaser revised Schedules (the
"Revised Schedules") which shall amend and revise the Schedules to reflect
events or developments which have occurred since the date hereof to the date of
delivery of the Revised Schedules or have been discovered by the Sellers as a
result of inquiries made by Sellers of Company management, and would have been
appropriate subject matter for the Schedules in accordance with representations
and warranties set forth in Article IV. Notwithstanding anything herein to the
contrary, the Revised Schedules are not intended and shall not be used or
interpreted to correct misstatements or omissions in the Schedules as of the
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date of execution of this Agreement unless Purchaser determines not to terminate
this Agreement pursuant to Section 12.1 and to consummate the transactions
contemplated hereby despite the existence of such misstatements or omissions in
the Schedules of which Purchaser has been informed in writing by Principal
Shareholders, in which case the facts giving rise to such misstatements or
omission may be set forth in the Revised Schedules at Closing and such
disclosure shall be deemed to amend or supplement the Schedules for purposes of
curing such misstatements or omission.
Section 6.8 Confidentiality. Sellers and the Company agree that, unless
and until the Closing has been consummated, Sellers, the Company and its
officers and directors and other representatives of Sellers and the Company
shall hold in strict confidence, and shall not use to the detriment of
Purchaser, (a) any data or information with respect to the business of Purchaser
obtained in connection with this transaction or Agreement or (b) the terms or
existence of this Agreement. If the transactions contemplated by this Agreement
are not consummated, Sellers will return to Purchaser all data and information
that Purchaser may reasonably request, including, but not limited to,
worksheets, tests, reports, manuals, lists, memoranda and other documents
prepared by or made available to Sellers in connection with this transaction.
The foregoing shall not preclude Sellers or the Company from (x) the use or
disclosure of such information which currently is known generally to the public
or which subsequently has come into the public domain, other than by way of
disclosure by any of Sellers or the Company in violation of this Agreement, (y)
the disclosure of such information to the extent required by law or court order,
provided that, to the extent practicable, prior to such disclosure required by
law or court order, Sellers or the Company will give Purchaser prior written
notice of the nature of the required disclosure, or (z) disclosing to attorneys,
accountants, agents and other representatives of such Seller such information as
each Seller deems reasonably necessary in connection with the negotiation,
execution and delivery of this Agreement.
Section 6.9 Financial Statements. The Company shall promptly prepare at
the end of each month, and in any event within 10 days after the prior month's
end, promptly deliver to Purchaser the balance sheet, income statement and
statement of cash flows, prepared consistently with the practices used in
preparation of the Company Financial Statements, of the Company for each month
ended between the date of this Agreement and the Closing Date.
Section 6.10 Company Obligations; Affiliate Agreements.
(a) At or prior to the Closing, except with respect to amounts
owed by or to the Company and any Subsidiary, Sellers shall, and Sellers shall
cause each of their respective Affiliates to, repay any Indebtedness or other
amounts owing from such Persons to the Company.
(b) At the Closing, other than as specified in writing by
Purchaser at least five days prior to the Closing Date, Sellers shall cause all
agreements between any Seller or its Affiliates, on the one hand, and the
Company, on the other hand (including without limitation the Company's
Micro-Coax guaranty) to be terminated in all respects such that there is no
liability thereunder on the part of the Company. Principal Shareholders (other
than ▇▇▇▇ ▇▇▇▇▇) agree, jointly and severally, to indemnify Purchaser for any
cost or expense incurred in connection with Seller's failure to satisfy the
obligations specified in this Section 6.10.
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Section 6.11 Real Property. Principal Shareholders shall provide to
Purchaser, within 20 days after the date of this Agreement, (a) a commitment or
commitments of title insurance (the "Title Commitment") issued by Commonwealth
Land Title Insurance Company (the "Title Company"), and photocopies of all
recorded items described as exceptions therein, committing to insure in
reasonable amounts, (i) the Company's fee interest in any Owned Real Property,
and (ii) the Company's leasehold interest in any Leased Real Property, and (b)
an ALTA-ASCM survey (the "Survey") of the Owned Real Property (and to the extent
required by the Lender, any Leased Real Property), certified to Purchaser and
the Title Company and the Lender, if applicable. If Purchaser shall notify
Principal Shareholders within 20 days of its receipt of both the Title
Commitment and the Survey of any Lien or other matter affecting fee or leasehold
title to the Real Property which, in the reasonable determination of Purchaser,
will interfere with the use of the Real Property (each, a "Title Defect"),
Principal Shareholders shall exercise their reasonable best efforts to remove
or, with the consent of Purchaser, cause the Title Company to commit to insure
over by endorsement, each Title Defect prior to Closing; provided, however, that
the Principal Shareholders shall not be required to expend, or cause to be
expended, any money to effect such removal or insurance. Purchaser shall be
responsible for all cost and expenses related to the Title Commitment, the title
policy and the Survey.
Section 6.12 Due Diligence. The parties agree that Sellers shall
conduct a due diligence investigation of the Purchaser (including, without
limitation, a review of the information, documents and other matters identified
on any Schedule or delivered pursuant to the terms of this Agreement) which
commenced upon the signing of the letter of intent relating to the transaction
contemplated hereby and shall be completed by Sellers not later than the date of
execution and delivery date of this Agreement (the "Sellers' Due Diligence
Period").
Section 6.13 Intellectual Property Assignment Sellers shall cause the
Company to and the Company shall use commercially reasonable efforts to cause
all officers, directors, salaried employees (other than administrative and
clerical salaried employees), engineers, and sales employees of the Company and
all officers, directors, salaried employees (other than administrative and
clerical salaried employees), engineers and sales employees of the Subsidiaries
to execute and deliver to the Company or such Subsidiary, as applicable, an
agreement regarding assignment to the Company or such Subsidiary of any
Intellectual Property arising from services performed for the Company or such
Subsidiary by such persons. There shall be no Intellectual Property developed by
a stockholder, director, officer, salaried employee, engineer or sales employee
of the Company or any Subsidiary that is used in the business of the Company or
any Subsidiary that shall not have been transferred to, or shall not be owned
free and clear of any liens or encumbrances by, the Company or any Subsidiary.
ARTICLE VII
PURCHASER'S RIGHTS AND OBLIGATIONS BEFORE CLOSING
Section 7.1 Due Diligence.
(a) The parties agree that Purchaser shall conduct a due
diligence investigation of the Company (including, without limitation, (i) a
review of the information, documents and other matters identified on any
Schedule or delivered pursuant to the terms of this
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Agreement and investigations of the Company's customers, (ii) satisfactory
review, at the sole discretion of the Purchaser, of the Company's Trailing
EBITDA, and (iii) interviews with the Company management, including the heads of
each division within the Company) which commenced upon the signing of the letter
of intent relating to the transaction contemplated hereby and, except as
provided in subsection (c) below, shall be completed by Purchaser no later than
the execution and delivery date of this Agreement (the "Purchaser's Due
Diligence Period").
(b) Purchaser and Sellers acknowledge that, during the Due
Diligence Period, Purchaser and the Lenders may perform a due diligence review,
including, a Phase I and, if desired by Purchaser or the Lenders, Phase II
environmental review of the Company and the Real Property, the scope and
substance of which shall be subject mutually agreed upon by Purchaser, the
Lenders and Principal Shareholders. In addition, at the request of the Purchaser
and Lenders, the Purchaser may update any Phase I environmental review
previously completed by the Company. All such environmental reviews will be
performed by Environmental Strategies Corporation, Purchaser and the Lenders and
engaged on behalf of Purchaser. A Phase II environmental review will be
performed only to the extent recommended by such expert or required by the
Lenders. In the event any Phase II environmental review is required, Principal
Shareholders shall use their reasonable best efforts, and shall cause the
Company to use its reasonable best efforts, to secure all consents necessary to
permit any such Phase II environmental review to proceed. The Company shall be
responsible for the costs and expenses related to the Phase I environmental
review, Phase II environmental review (to the extent such a review is deemed
necessary) and update of any Phase I environmental review previously completed
by the Company; provided, however, that Purchaser shall pay for any such costs
and expenses to the extent they exceed $50,000.00 in the aggregate.
(c) Any inventory of raw, consignment and finished goods taken
on or prior to the Closing Date shall be performed by the Company's personnel
using methods and procedures mutually acceptable to the parties hereto.
Purchaser's representative shall have the right to observe the taking of any
such inventory and have access to any documentation relating thereto.
Section 7.2 Confidentiality. Purchaser agrees that, unless and until
the Closing has been effected, Purchaser and its officers, directors and other
representatives shall hold in strict confidence, and shall not disclose or use
to the detriment of Sellers or the Company, (a) any and all data and information
with respect to the business of the Company or Sellers obtained in connection
with this Agreement or (b) the terms or existence of this Agreement. If the
transactions contemplated by this Agreement are not consummated, Purchaser will
return to Sellers all data and information that Sellers may reasonably request,
including, but not limited to, worksheets, tests, reports, manuals, lists,
memoranda and other documents prepared by or made available to Purchaser in
connection with this transaction. The foregoing shall not preclude Purchaser
from (x) the use or disclosure of such information which currently is known
generally to the public or which subsequently has come into the public domain,
other than by way of disclosure by Purchaser in violation of this Agreement or
(y) the disclosure of such information to the extent required by law or court
order, provided that, to the extent practicable, prior to such disclosure
required by law or court order, Purchaser will give Sellers prior written notice
of the nature of the required disclosure.
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Section 7.3 Commitment of Lenders. Purchaser shall use its reasonable
best efforts to obtain debt financing described in Section 8.15 and the consent
of any Lenders to the transactions contemplated by this Agreement no later than
May 24, 2000, provided, that such financing shall be subject to (i) customary
conditions and restrictions, (ii) review and acceptance of the Company's
Trailing EBITDA, and (iii) review of the Sellers' disclosure schedules as
revised for Closing.
Section 7.4 Delivery of Schedules; Notice of Developments; Update of
Schedules.
(a) Purchaser will give prompt written notice to Sellers of
any development causing a breach of any of the representations and warranties in
Article V above. No disclosure by Purchaser pursuant to this Section 7.4,
however, shall be deemed to amend or supplement the Schedules, unless set forth
in the Revised Schedules in accordance with and subject to the terms of
subparagraph (b) of this Section 7.4; provided, however, if the transactions
contemplated hereby are consummated despite the existence of a misrepresentation
or breach of warranty of which Sellers have been informed in writing by
Purchaser, the facts giving rise to such misrepresentation or breach may be set
forth in the Revised Schedules at Closing and such disclosure shall be deemed to
amend or supplement the Schedules for purposes of curing such misrepresentation
or breach of warranty.
(b) At least one business day prior to the Closing Date,
Purchaser shall deliver to Sellers Revised Schedules which shall amend and
revise the Schedules to reflect events or developments which have occurred since
the date hereof to the date of delivery of the Revised Schedules and would have
been appropriate subject matter for the Schedules in accordance with
representations and warranties set forth in Article V. Notwithstanding anything
herein to the contrary, the Revised Schedules are not intended and shall not be
used or interpreted to correct misstatements or omissions in the Schedules as of
the date of execution of this Agreement unless the transactions contemplated
hereby are consummated despite the existence of such misstatements or omissions
in the Schedules of which Sellers have been informed in writing by Purchaser, in
which case the facts giving rise to such misstatements or omission may be set
forth in the Revised Schedules at Closing and such disclosure shall be deemed to
amend or supplement the Schedules for purposes of curing such misstatements or
omission.
ARTICLE VIII
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligations of Purchaser to purchase the Shares under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below. Purchaser may waive any or all of these conditions in
whole or in part without prior notice.
Section 8.1 Representations and Warranties True. Except as otherwise
permitted by this Agreement, all representations and warranties by the Company
or the Sellers in this Agreement, or in any written statement that shall be
delivered to Purchaser by Sellers under this Agreement, shall be true on and as
of the Closing Date as though made at that time.
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Section 8.2 Performance. The Company or the Sellers, as applicable,
shall have performed, satisfied and complied, in all material respects, with all
covenants, agreements, and conditions required by this Agreement to be performed
or complied with by them, or any of them, on or before the Closing Date.
Section 8.3 No Material Adverse Effect. During the period from the
Balance Sheet Date to the Closing Date, there shall not have been any Material
Adverse Effect in the financial condition or the results of operations of the
Company or the relationship between the Company and any significant customers,
and the Company shall not have sustained any loss or damage to its assets,
whether or not insured, that materially affects its ability to conduct a
material part of its business.
Section 8.4 Consents. Sellers and the Company shall have procured all
of the third-party authorizations and consents required by this Agreement,
including, without limitation, the consents of lessors under any leases, and,
with respect to the Material Contracts, of the other parties thereto (of such
consent is required under the terms of the Material Contract) and shall have
delivered such consents to Purchaser. In addition, any waiting period under the
HSR Act, if applicable, shall have expired or been terminated.
Section 8.5 No Proceedings, Injunctions, Etc. No action, suit or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction
wherein an unfavorable injunction, judgment, order, decree ruling or charge
would (a) prevent consummation of any of the transactions contemplated by this
Agreement, (b) cause any of the transactions contemplated by this Agreement to
be rescinded or voided following consummation, (c) affect adversely the right of
Purchaser to own and vote the Shares or (d) affect adversely the right of the
Company to own its assets and to operate its business (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect).
Section 8.6 Accounts. The Company's accounts payable and accounts
receivable shall be in a condition consistent with the ordinary course of
business, as determined by historical conditions for the Company.
Section 8.7 Minimum Net Worth. The Closing Balance Sheet shall reflect,
at a minimum, the Minimum Net Worth. Principal Shareholders shall have delivered
to Purchaser an estimated Closing Balance Sheet dated within five days of the
Closing Date.
Section 8.8 Principal Shareholders' and Officer's Certificates. The
Chief Executive Officer, Chief Financial Officer or Vice-President of the
Company and the Principal Shareholders shall have delivered to Purchaser a
certificate to the effect that each of the conditions specified above in
Sections 8.1 through 8.7 have been satisfied.
Section 8.9 Repayment of Debt; Collection of Certain Accounts
Receivable. Contemporaneous with Closing, Principal Shareholders shall cause the
Company to repay all revolving lines of credit and other interest-bearing debt
of the Company in excess of the Eligible Indebtedness which shall be treated as
a Purchase Price reduction, or Purchaser shall repay all such revolving lines of
credit and other interest-bearing debt of the Company by wire transfer and
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receive a dollar-for-dollar reduction in the Purchase Price in the amount equal
to such repayments. Principal Shareholders shall cause eVasc to repay, or the
Principal Shareholders, jointly and severally, or Sellers, severally, shall pay
the Company any and all amounts owing to the Company from eVasc.
Section 8.10 Opinion of Sellers' Counsel. Purchaser shall have received
from ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel to Sellers, an opinion,
addressed to Purchaser and dated as of the Closing (the "Sellers' Opinion"), in
form and substance substantially as set forth in Exhibit D.
Section 8.11 Resignations. Other than Freed, Purchaser shall have
received the resignations, effective as of the Closing, of all of the directors
of the Company and all of the directors of Spectrum Manufacturing, Inc.
Section 8.12 Regulatory and Third Party Approvals. Sellers and the
Company shall be in receipt of all necessary regulatory or third party approvals
required hereunder, including, but not limited to, any approvals required under
the HSR Act.
Section 8.13 Financial Statements. The Company shall have a Trailing
EBITDA of not less than $16,300,000. In the event that the Company's Trailing
EBITDA does not meet these requirements, the Purchaser may terminate this
Agreement in accordance with Section 12.1(c) hereof.
Section 8.14 Financing. Purchaser shall have received commitments for
$130,000,000 in senior term, revolver debt or subordinated debt financing, or
any combination thereof, for the consummation of the transactions contemplated
by is Agreement, on terms and conditions acceptable to Purchaser in its
discretion. Purchaser has provided the commitment letters for such financing to
the Sellers on or prior to the date hereof.
Section 8.15 Lender's Due Diligence Review. Lenders shall have been
satisfied in all respects with the results of their due diligence review of the
Company and its operations and assets, including the satisfactory completion of
calls to the Company's customers and suppliers, and Purchaser shall have
obtained the consent of its Lenders to the transactions contemplated by this
Agreement. Additionally, Lenders shall have completed a due diligence review of
all aspects of the Company's environmental liability as reflected on the
Company's Balance Sheet.
Section 8.16 Real Property. There shall be no Title Defects which the
Title Company has not deleted from the Title Commitments or, with the consent of
Purchaser, committed to insure over by endorsement.
Section 8.17 Employment and Noncompetition Agreements. Freed shall have
executed an employment agreement in substantially the form of Exhibit E-1
attached hereto (the "Freed Employment Agreement"), Aiken shall have executed an
employment agreement in substantially the form of Exhibit E-2 attached hereto
(the "Aiken Employment Agreement") and ▇▇▇▇▇▇ shall have executed an employment
agreement with the Company in the form of Exhibit E-3 attached hereto (the
"▇▇▇▇▇▇ Employment Agreement" and, together with the Freed Employment
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Agreement and the Aiken Employment Agreement, the "Employment Agreements").
Freed shall have executed a noncompetition agreement in substantially the form
of Exhibit F-1 attached hereto (the "Freed Noncompetition Agreement"). Aiken
shall have executed a noncompetition agreement in substantially the form of
Exhibit F-2 attached hereto (the "Aiken Noncompetition Agreement"). ▇▇▇▇▇▇ shall
have executed a noncompetition agreement in substantially the form of Exhibit
F-3 attached hereto (the "▇▇▇▇▇▇ Noncompetition Agreement"). ▇▇▇▇▇▇▇▇ shall have
executed a noncompetition agreement in substantially the form of Exhibit F-4
attached hereto (the "▇▇▇▇▇▇▇▇ Noncompetition Agreement"). ▇▇▇▇▇▇▇▇ shall have
executed a noncompetition agreement in substantially the form of Exhibit F-5
attached hereto (the "▇▇▇▇▇▇▇▇ Noncompetition Agreement"). ▇▇▇▇▇▇ shall have
executed a noncompetition agreement in substantially the form of Exhibit F-6
attached hereto (the "▇▇▇▇▇▇ Noncompetition Agreement"). Each of ▇▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇ shall have executed a noncompetition agreement in substantially the
form of Exhibit F-7 attached hereto (the "UTI Noncompetition Agreement" and,
together with the Freed Noncompetition Agreement, Aiken Noncompetition
Agreement, ▇▇▇▇▇▇ Noncompetition Agreement, ▇▇▇▇▇▇▇▇ Noncompetition Agreement,
▇▇▇▇▇▇▇▇ Noncompetition Agreement and ▇▇▇▇▇▇ Noncompetition Agreement the
"Noncompetition Agreements").
Section 8.18 Other Damages. Notwithstanding any other provision of this
Agreement to the contrary, any breaches of the representations, warranties or
covenants set forth herein shall not be deemed a failure to satisfy the
conditions set forth in Sections 8.1, 8.2, 8.3 and 8.4 or give rise to a
termination right pursuant to Section 12.1(c)(i) if the aggregate Damages that
could reasonably be expected to result from all such breaches and events do not
exceed $3,000,000, and if the aggregate Damages resulting from such breaches and
events exceed $3,000,000, the conditions set forth in Sections 8.1, 8.2, 8.3 and
8.4 shall be deemed not to have been satisfied and such failure to satisfy the
conditions in Sections 8.1, 8.2, 8.3 and 8.4 cannot be waived by Purchaser.
Nothing set forth in this Section 8.18 shall be interpreted as a waiver of any
breach of any representation, warranty or covenant in this Agreement.
Section 8.19 Shareholders' Agreement. At Closing, Sellers receiving the
Class B-2 Preferred Stock hereunder shall execute joinders to the existing
shareholders' agreement of the Parent (the "Shareholders' Agreement") which
Shareholders' Agreement is attached hereto as Exhibit G.
Section 8.20 Termination and Release of Phantom Stock Options. Prior to
or at Closing, Sellers shall have obtained written consents and releases from
all participants under the of Phantom Stock Option Plans, which consents and
releases shall be in a form reasonably satisfactory to Purchaser.
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ARTICLE IX
CONDITIONS PRECEDENT TO SELLERS' PERFORMANCE
The obligation of Sellers to sell and transfer the Shares under this
Agreement are subject to the satisfaction at or before the Closing of all the
following conditions. Sellers may waive any or all of these conditions in whole
or in part without prior notice.
Section 9.1 Representations and Warranties True. All representations
and warranties by Purchaser contained in this Agreement or in any written
statement delivered by Purchaser under this Agreement shall be true on and as of
the Closing Date as though such representations and warranties were made on and
as of that date.
Section 9.2 Performance. Purchaser shall have performed and complied
with all covenants and agreements and satisfied all conditions that it is
required by this Agreement to perform, comply with, or satisfy before or at the
Closing.
Section 9.3 Consents. Purchaser shall have procured all of the
third-party authorizations and consents specified in this Agreement. In
addition, any waiting period under the HSR Act, if applicable, shall have
expired or been terminated.
Section 9.4 No Proceedings, Injunctions, Etc. No action, suit or
proceeding shall be pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local or foreign jurisdiction
wherein an unfavorable injunction, judgment, order, decree ruling or charge
would (a) prevent consummation of any of the transactions contemplated by this
Agreement or (b) cause any of the transactions contemplated by this Agreement to
be rescinded or voided following consummation.
Section 9.5 Sellers Due Diligence Review. Sellers shall have been
satisfied in all respects with the results of their due diligence review of the
Purchaser and its operations.
Section 9.6 Shareholders' Agreement. At Closing, Parent and each of the
shareholders of Parent shall continue to be bound by the Shareholders'
Agreement.
Section 9.7 Opinion of Purchaser's Counsel. Sellers shall have received
from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel to Purchaser, an opinion, addressed to
Sellers and dated as of the Closing (the "Purchaser's Opinion"), in form and
substance substantially as set forth in Exhibit H.
Section 9.8 Officer's Certificate. Purchaser shall have delivered to
Sellers' Representative a certificate by its Chief Executive Officer to the
effect that each of the conditions specified above in Sections 9.1 through 9.6
have been satisfied.
Section 9.9 Employment Agreements. Purchaser or Sub shall have executed
the Employment Agreements.
Section 9.10 Purchaser Secretary's Certificate. Purchaser shall have
delivered the Purchaser Secretary's Certificate.
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Section 9.11 Errors and Omissions Policy. Purchaser shall have adopted
an errors and omissions policy for the Company's directors and officers
customary for the industry in the which the Company operates.
Section 9.12 Board of Directors Election. Freed shall have been elected
to the Board of Directors of Parent and SubParent.
Section 9.13 Management Options. The Company's management team shall be
granted options to acquire, in the aggregate, 100,000 shares of common stock of
Parent which options shall have an initial exercise price equal to $16.00.
Section 9.14 Investment in Purchaser. Between the date hereof and the
Closing Date, Parent shall have received at least $45,000,000 in cash from one
or more third parties as an equity investment in Parent.
ARTICLE X
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the
Closing:
Section 10.1 General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
including obtaining any third-party consents not obtained prior to Closing, each
of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Article XI below). Sellers acknowledge and agree that from and after the
Closing, Purchaser will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to the Company.
Section 10.2 Litigation Support. In the event that and for so long as
any party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
(including Tax audits) in connection with (a) any transaction contemplated under
this Agreement or (b) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act,
or transition on or prior to the Closing Date involving the Company, each of the
other parties will cooperate with such party and its counsel in the contest or
defense, make available its personnel, 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 XI below).
Section 10.3 Tax Matters. Sellers and Purchaser agree to provide each
other with such cooperation and information as either of them reasonably may
request of the other in relation to (a) preparation of any Tax Return of any
Seller, the Company or with respect to the Company's operations, (b) determining
any Taxes or right to a refund of Taxes of any Seller, the Company or
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with respect to the Company's operations or (c) responding to any audit or
examination of Tax Returns of any Seller or the Company or with respect to the
Company's operations.
Section 10.4 Public Disclosure; Confidentiality. From and after the
Closing Date, Sellers shall keep confidential all information relating to the
Company and its operations. The foregoing shall not preclude Sellers from (a)
the use or disclosure of such information which currently is known generally to
the public or which subsequently has come into the public domain, other than by
way of disclosure by any of Sellers in violation of this Agreement or (b) the
disclosure of such information to the extent required by law or court order,
provided that, to the extent practicable, prior to such disclosure required by
law or court order, Sellers will give Purchaser prior written notice of the
nature of the required disclosure.
Section 10.5 Cooperation with Initial Public Offering. Principal
Shareholders shall use their reasonable best efforts to cooperate with Parent,
SubParent, the Company and their respective representatives and agents in
connection with any proposed initial public offering of capital stock of the
Company, Parent, SubParent or Purchaser after the Closing Date, including, but
not limited to, providing, organizing and preparing information regarding the
Company and participating in underwriter due diligence sessions and investor
meetings at such times as are requested by the underwriters of such public
offering.
Section 10.6 Employee Benefits. After Closing, employees of the Company
or any Affiliate of the Company shall be eligible to participate in employee
benefit plans, programs, agreements and arrangements that the Company or the
Affiliate, respectively, or Purchaser determines to make available and shall, in
any event, be credited for their pre-Closing service with the Company or any
Affiliate for purposes of eligibility, vesting, and the application of any
pre-existing condition limitation or exclusion under any such plan, program,
agreement or arrangement.
Section 10.7 Post-Closing Operation of Business. For the period from
the Closing Date through December 31, 2000, if the Company modifies any of its
accounting, procurement, write-off, inventory costing, reserve for environmental
liabilities, obsolescence, revenue recognition, expense recognition or other
methods or policies from those in effect immediately prior to the Closing Date,
which modification could reasonably be expected to adversely affect the
calculation of the Earnout Amount, the calculation of the Earnout Amount shall
be adjusted such that the Earnout Amount shall be determined as if the Company
had not modified such policies. Without limiting the foregoing, until the
earlier of December 31, 2000 and the time when Purchaser has paid the full
Earnout Amount, if Purchaser, directly or indirectly, directs or causes Company
to take and/or refrain from taking any action or actions (each a "Purchaser
Directive") which Sellers' Representative reasonably believes will have a
material adverse effect on 2000 EBITDA then Sellers' Representative shall,
within 15 business days of the Purchaser Directive provide a written objection
to the Purchaser's Board of Directors. After receipt of such objection notice,
Purchaser shall, to the reasonable satisfaction of Sellers' Representative, (a)
attempt to reassess and restructure the Purchaser Directive and/or (b) adjust
the calculation of the Earnout Amount to account for the Purchaser Directive. If
Purchaser and Sellers' Representative cannot reach agreement on appropriate
modifications to the Purchaser Directive and/or the calculation of the Earnout
Amount, then a third-party valuation and appraisal expert, selected by the
agreement
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of Purchaser and Sellers' Representative, shall be engaged to provide an
independent assessment of the effect of the Purchaser Directive on 2000 EBITDA.
The cost of such third-party valuation and appraisal expert shall be paid by the
Company and excluded from the calculation of 2000 EBITDA.
Section 10.8 D&O Insurance. Purchaser agrees not to amend or otherwise
modify indemnification of the Company's officers and directors to terms less
favorable than those set forth in the Company's articles and bylaws in effect on
the date hereof. Parent, SubParent and Purchaser shall provide for
indemnification for directors and officers of Parent, SubParent and Purchaser to
the fullest extent permitted under Colorado law. Concurrently with the initial
public offering of Parent, if any, Parent shall obtain D&O insurance at a level
comparable to that obtained for companies similarly-situated to Parent.
Section 10.9 Section 338(h)(10) Election.
(a) The Company, Sellers and Purchaser shall jointly make the
election provided for by Section 338(h)(10) of the Code and Section
1.338(h)(10)-1T of the Treasury Regulations and any comparable election under
state or local tax law with respect to the purchase of the capital stock of the
Company (collectively, the "Election") unless Purchaser requests in writing that
an election not be made with respect to a particular state. Sellers and
Purchaser shall join in timely executing and filing Internal Revenue Service
Form 8023 and any other forms and schedules as may be required under the Code
(the "Section 338 Forms"). Furthermore, Purchaser and Sellers shall cooperate
with each other to take all actions necessary and appropriate, including filing
such additional forms, returns, elections, schedules and other documents as may
be required to effect and preserve a timely Election in accordance with the
provisions of Section 1.338(h)(10)-1T of the Treasury Regulations (or any
comparable provisions of state or local tax law) or any successor provisions.
Sellers and Purchaser shall report the purchase by Purchaser of the Shares
pursuant to this Agreement consistent with the Election and shall take no
position inconsistent therewith in any Tax Return, any proceeding before any
taxing authority or otherwise.
(b) Purchaser shall be responsible for the preparation and
filing of all Section 338 Forms. Purchaser shall deliver such forms and related
documents to Sellers prior to the due date of filing. Sellers shall review all
Section 338 Forms prepared by Purchaser and shall provide any objections within
thirty days of receipt. As soon as practicable after the Closing, but in no
event later than 120 days after Closing, Sellers and Purchaser shall determine
and agree upon the "Aggregate Deemed Sale Price" of the Company's assets (within
the meaning of, and in accordance with, Section 1.338(h)(10)-1T(d)(3) of the
Treasury Regulations) and Purchaser shall make a reasonable determination of the
proper allocations (the "Allocations") of the Aggregate Deemed Sale Price among
the assets of the Company (in accordance with Section 338(b)(5) of the Code and
the Treasury Regulations promulgated thereunder) and shall deliver to Sellers a
copy of the Allocations for their review. If the parties can not reach agreement
on any matter relating to the preparation of the Section 338 Forms, the
determination of the Aggregate Deemed Sale Price or the Allocations, on or
before 150 days after Closing, either Sellers or Purchaser may submit the matter
to arbitration by a nationally recognized accounting firm mutually acceptable to
Sellers and Purchaser for resolution of the disagreement within 10 days, it
being agreed that
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Sellers and Purchaser shall share the fees and expenses of the accounting firm.
Sellers and Purchaser shall (i) be bound by such determination and such
allocation for purposes of determining any Taxes, (ii) prepare and file their
Tax Returns on a basis consistent with such determination of the Aggregate
Deemed Sale Price and such Allocations and (iii) take no position inconsistent
with such determination and Allocations on any applicable Tax Return, in any
proceeding before any taxing authority or otherwise. In the event that any of
the Allocations is disputed by any taxing authority, the party receiving notice
of the dispute shall promptly notify the other party hereto concerning
resolution of the dispute.
(c) If Sellers can not recognize the gain attributable to the
Earnout Amount pursuant to either the installment sale method or the "open
transaction" method, as reasonably determined by Purchaser and Sellers'
Representative, Purchaser shall pay to Sellers interest at the rate of 8%,
compounded annually for the period beginning on the Closing Date and ending
April 14, 2001, on the amount of the calendar year 2000 federal and state income
tax liability that is attributable to the Earnout Amount. The amount payable to
Sellers shall be paid on April 14, 2001.
Section 10.10 Eligible Indebtedness.
(a) Following the Closing, Purchaser shall determine if (i) the
actual amount of the interest-bearing debt for borrowed money of the Company and
the Subsidiaries on a consolidated basis exceeds $5,900,000 net of any cash of
the Company and the Subsidiaries on a consolidated basis on the Closing Balance
Sheet, (ii) the federal income tax liability for the Built-in Gain Tax resulting
from the Election exceeds $1,200,000 or (iii) the state income tax liability
resulting from the Election exceeds $1,200,000. If an excess exists with respect
to one or more of the foregoing items set forth in (i), (ii) or (iii) above,
which excess was not otherwise addressed through a dollar-for-dollar reduction
in the Purchase Price pursuant to Section 8.9, all such excesses shall be
aggregated, the amount determined shall be referred to as the "Indebtedness
Excess" and the following adjustments shall be made: (x) if an Indebtedness
Excess exists, the amount of the excess shall be offset against the Earnout
Amount, reducing the Earnout Amount by a dollar-for-dollar amount equal to the
Indebtedness Excess or (y) if no Indebtedness Excess exists, no adjustment shall
be made. If the Earnout Amount is not greater than or equal to the Indebtedness
Excess, Sellers shall cause the amount by which the Indebtedness Excess exceeds
the Earnout Amount to be paid in immediately available federal funds within 30
days after the determination that the Indebtedness Excess exceeds the Earnout
Amount.
(b) If Sellers disagree on the Indebtedness Excess as
determined by Purchaser, Sellers' Representative shall represent Sellers in any
such disagreement and the following procedure shall be employed:
(i) Sellers' Representative shall have until 45 days
after receipt of Purchaser's determination of the Indebtedness Excess (as may be
extended, the "Eligible Indebtedness Verification Period") to verify Purchaser's
determination of the Indebtedness Excess; provided, however, that the Eligible
Indebtedness Verification Period shall be extended until 30 days after receipt
of backup information if Sellers' Representative shall have made a
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request for backup information pursuant to the next sentence of this paragraph.
During such period, at the request of the Sellers' Representative (which request
shall have been made promptly after receipt of the determination of the
Indebtedness Excess and in no event later than 30 days thereafter), Purchaser
shall cause the Company to provide such Sellers' Representative back-up
financial information and working papers and the like necessary for such
verification. Any proposed adjustments to the Indebtedness Excess shall be made
by written notice by Sellers' Representative to Purchaser within the Eligible
Indebtedness Verification Period (an "Eligible Indebtedness Adjustment Notice"),
setting forth (A) Sellers' objections to the amount of the Indebtedness Excess,
(B) Seller's determination of the amount of the Indebtedness Excess, and (C)
Sellers' proposed adjustment (the "Sellers' Proposed Eligible Indebtedness
Adjustment"). If Sellers' Representative does not deliver an Eligible
Indebtedness Adjustment Notice to Purchaser within the applicable Eligible
Indebtedness Verification Period, the Indebtedness Excess as determined by
Purchaser shall be final and binding on the parties.
(ii) To the extent that Purchaser has any objection
to Sellers' Proposed Eligible Indebtedness Adjustment, such objection shall be
made by a written notice to Sellers' Representative that sets forth the basis
for such objection (the "Eligible Indebtedness Adjustment Objection Notice")
within 15 days after delivery of the Eligible Indebtedness Adjustment Notice
(the "Eligible Indebtedness Objection Period"). If Purchaser does not object to
Sellers' Eligible Indebtedness Adjustment Notice within the applicable Eligible
Indebtedness Objection Period, then Sellers' Proposed Eligible Indebtedness
Adjustment shall be final and binding on the parties. If Purchaser's
determination of the Indebtedness Excess resulted in an excessive offset against
the Earnout Amount, Purchaser shall pay to Sellers by wire transfer of
immediately available funds, an amount equal to Sellers' Proposed Eligible
Indebtedness Adjustment within 30 days after the expiration of the Eligible
Indebtedness Objection Period.
(iii) If Purchaser delivers an Eligible Indebtedness
Adjustment Objection Notice in response to any Eligible Indebtedness Adjustment
Notice delivered by Sellers, and Sellers' Representative and Purchaser are
unable to agree upon the amount of the actual Indebtedness Excess within 10 days
after receipt of the Eligible Indebtedness Adjustment Objection Notice, then the
Auditor shall be requested to conduct a review and determine the amount of the
actual Indebtedness Excess. The Auditor shall be instructed in performing such
review to provide Purchaser and Sellers' Representative copies of any and all
correspondence and drafts distributed to any party. Each of Sellers'
Representative and Purchaser shall be granted reasonable access to all documents
made available to the Auditor by the other party, provided that any information
contained in such documents shall be subject to the confidentiality provisions
set forth in this Agreement. Prior to issuing its final determination, the
Auditor shall issue a draft of its report to Purchaser and Sellers'
Representative and Purchaser and Sellers' Representative shall have the
opportunity to provide the Auditor with input and any additional information
that such party deems relevant, provided that the Auditor shall not be required
to use any such input or information in connection with its review and
determination. The Auditor shall promptly deliver copies of its report to
Purchaser and Sellers' Representative, setting forth its determination of the
actual Indebtedness Excess (the "Auditor's Eligible Indebtedness Report"). The
costs and expenses of the Auditor and the Auditor's Report contemplated by this
Section shall be borne by Purchaser and Sellers on a 50%/50% basis. Within 30
days after any agreement of the parties regarding the actual amount of the
Indebtedness Excess or the delivery of the
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Auditor's Eligible Indebtedness Report, as appropriate, (A) Purchaser shall pay
to Sellers, the amount, if any, by which the agreed-upon Indebtedness Excess or
the Indebtedness Excess reflected in the Auditor's Eligible Indebtedness Report,
as appropriate, is less than amount of Purchaser's initial determination of the
Indebtedness Excess or (B) Sellers shall pay to Purchaser the amount, if any, by
which the agreed upon Indebtedness Excess or the Indebtedness Excess reflected
in the Auditor's Eligible Indebtedness Report, as appropriate, exceeds the
amount of Purchaser's initial determination of the Indebtedness Excess.
Section 10.11 Bonus Plan. Following Closing, Purchaser shall approve a
plan for the Company that is substantially in accordance with the terms set
forth on Annex III hereto. In addition, at a minimum, upon the completion of the
audit of the Company's financial statements for FY 2000, participants in the
Company's existing discretionary bonus plan for executive management shall be
entitled to a pro rata payment of any bonus earned under that plan for the
period from January 1, 2000 through May 31, 2000 based on amounts accrued
therefor on the Company's financial statements as of the Closing Date.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnification by Sellers. Each of the Principal
Shareholders agree, jointly and severally, and each of the Other Shareholders
agree, severally (the Principal Shareholders and the Other Shareholders,
together, "Indemnifying Sellers"), to indemnify Purchaser and every Affiliate
(and their respective officers, directors, shareholders, agents and
representatives) of Purchaser (which shall specifically include the Company)
(each, a "Purchaser Indemnitee") against and hold them harmless from any and all
Damages which may be asserted against, imposed upon or sustained by a Purchaser
Indemnitee by reason of or arising out of the breach, default, inaccuracy or
failure of any of the warranties, representations, covenants or agreements of
the Company or Sellers contained in this Agreement or in any certificate or
instrument required to be delivered pursuant hereto or as a result of any
Unknown Environmental Liability.
Section 11.2 Indemnification by Purchaser. From and after Closing,
Purchaser agrees to indemnify Sellers and hold them harmless from and against
any and all Damages which may be asserted against, imposed upon or sustained by
Sellers at any time by reason of or arising out of the breach, default,
inaccuracy or failure of any warranties, representations, conditions, covenants
or agreements of Purchaser contained in this Agreement or in any certificate,
instrument or document delivered pursuant hereto.
Section 11.3 Procedures for Third-Party Claims.
(a) If any Indemnitee receives written notice of the assertion
of any claim or of the commencement of any action or proceeding by any entity
who is not a party to this Agreement (a "Third Party Claim") against or
affecting such Indemnitee, and if such assertion were presumed to be true
(regardless of the actual outcome) then a party could be obligated to provide
indemnification under this Agreement as a result of or in connection with such
claim, action or proceeding, such Indemnitee will give such Indemnifying Party
reasonably prompt
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written notice thereof, but in any event no later than 30 calendar days after
receipt of such written notice of such Third Party Claim; provided, however,
that failure to give notice as provided in this paragraph (a) shall not relieve
the Indemnifying Party of its indemnification obligations under this Article XI
except to the extent that such Indemnifying Party is actually prejudiced by such
failure. Said written notice to the Indemnifying Party shall set forth the basis
of the Third Party Claim in reasonable detail and include copies of all
pertinent correspondence relating to such Third Party Claim. The Indemnifying
Party will have the right to assume and control the defense of any Third Party
Claim at such Indemnifying Party's sole expense and by such Indemnifying Party's
own counsel, by giving written notice to the Indemnitee (the "Notice to Defend")
no later than 30 calendar days after receipt of the above-described notice of
such Third Party Claim. The Indemnitee also will have the right to participate
in the defense of any Third Party Claim assisted by counsel of its own choosing,
but all fees and expenses of such counsel shall be paid by the Indemnitee and
not be subject to reimbursement hereunder. The Indemnifying Party and the
Indemnitee will cooperate with each other in good faith in such defense and make
available all employees and books and records in its control as reasonably
deemed necessary with respect to such defense (but not to the extent that would
require waiver of any privilege). If the Indemnitee does not receive from the
Indemnifying Party a Notice to Defend with respect to a Third Party Claim or a
written notice of objection to the claim for indemnification specifying in
reasonable detail the basis for the objection within the 30-day period described
above, the Indemnitee may, at its option, elect to solely defend the Third Party
Claim assisted by counsel of its own choosing, and the Indemnifying Party will
be liable for all reasonable costs and expenses, and all settlement amounts
(subject to and in accordance with paragraph (c) below of this Section 11.3) or
other liabilities, losses, damages and injuries paid or incurred in connection
therewith to the extent such claim is or would have been indemnifiable under
this Agreement if such claim is or had been proved. In such event, the
Indemnifying Party will also have the right to participate in the defense of any
Third Party Claim assisted by counsel of its choosing at its own expense.
(b) If, within the 30 day period set forth in paragraph (a)
above of this Section 11.3, an Indemnitee receives a Notice to Defend from an
Indemnifying Party with respect to any Third Party Claim, the Indemnifying Party
will not be liable for any legal expenses of the Indemnitee incurred after
receipt by the Indemnitee of such Notice to Defend.
(c) In the event there is a dispute between the Indemnifying
Party and Indemnitee concerning whether a Third Party Claim should be contested,
settled or compromised, it shall be settled, compromised or contested, in
accordance with the next succeeding sentences; provided, however, that the
Indemnitee, or its respective successors or assigns, shall neither be required
to refrain from paying or satisfying any claim which has matured by court
judgment or decree, unless appeal is taken thereafter and proper appeal bond
posted by the Indemnifying Party, nor shall the Indemnitee be required to
refrain from paying or satisfying any Third Party Claim after and to the extent
that such Third Party Claim has resulted in an unstayed injunction. The
Indemnifying Party shall not, without the Indemnitee's prior written consent,
not to be unreasonably withheld, settle or compromise any action or claim or
consent to the entry of any judgment with respect to any action, claim or
proceeding for anything other than money damages paid by the Indemnifying Party
unless the settlement does not involve the imposition of any liability or
obligation on the Indemnitee or any restriction on its activities.
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The Indemnifying Party may, without the Indemnitee's written consent, settle or
compromise any such action or claim or consent to entry of any judgment with
respect to any such action or claim which requires solely the payment of money
damages by the Indemnifying Party. Subject to the foregoing, in the event that
the Indemnifying Party, on the one hand, or the Indemnitee, on the other hand,
has reached a good faith, bona fide settlement, agreement or compromise, subject
only to approval hereunder, with any claimant regarding a matter which may be
the subject of indemnification hereunder and desires to settle on the basis of
such agreement or compromise, such party who desires to so settle or compromise
shall notify the other party in writing of its desire setting forth the terms of
such settlement or compromise (the "Notice of Settlement"). The Third Party
Claim may be settled or compromised on such basis unless within 20 days of the
receipt of the Notice of Settlement the party who issued the Notice of
Settlement receives a notice from the other party of its desire to continue to
contest the matter (the "Notice to Contest") and, in such case:
(i) should the Indemnitee deliver a Notice to
Contest, the claim shall be so contested and the liability of the Indemnifying
Party shall be limited as provided in clause (iii) below;
(ii) if the settlement or compromise could result in
a further claim for indemnification being made against the Indemnifying Party
and if the Indemnifying Party delivers the Notice to Contest, the claim shall be
so contested and the liability of the Indemnitee shall be limited as provided in
clause (iii) below; and
(iii) if a matter is contested as provided in clauses
(i) or (ii) above and is later adjudicated, settled, compromised or otherwise
disposed of and such adjudication, compromise, settlement or disposition results
in a liability, loss, damage or injury in excess of the amount for which one
party desired previously to settle the matter, then the liability of such party
shall be limited to such lesser proposed settlement amount (plus attorney's fees
and expenses to the date of the proposed but unapproved settlement to the extent
provided for in paragraphs (a) and (b) above) and the party contesting the
matter shall be solely responsible for any additional amount.
Section 11.4 Procedures for Direct Claims. Any claim for which an
Indemnitee intends to assert a right to indemnifiable Damages under this
Agreement which does not result from a Third Party Claim (a "Direct Claim")
shall be asserted by giving each Indemnifying Party reasonably prompt written
notice thereof, and each Indemnifying Party shall have a period of 45 calendar
days from the receipt thereof within which to respond to such Direct Claim. If
any Indemnifying Party does not so respond within such 45 calendar day period,
such Indemnifying Party shall be deemed to have rejected such claim, in which
event the Indemnitee shall be free to pursue such remedies as may be available
to the Indemnitee pursuant to this Agreement. A failure to give timely notice as
provided in this Section 11.4 shall not affect the rights or obligations of any
party hereunder except and only to the extent that, as a result of such failure,
any party which was entitled to receive such notice was deprived of its right to
recover any payment under its applicable insurance coverage, incurred an
obligation or liability which otherwise would have been avoided, or was
otherwise actually prejudiced. Notwithstanding
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anything to the contrary contained herein, neither Purchaser nor any Seller
shall have a right to incidental or consequential damages from the other as a
result of any Direct Claim.
Section 11.5 Limitations of Indemnification Obligations.
(a) All the representations and warranties made by Purchaser
or Sellers in this Agreement shall survive until the date which is 18 months
after the Closing Date; provided, however, that (i) the representations and
warranties in Section 4.20 shall survive until the third anniversary of the
Closing Date, (ii) the representations and warranties in Sections 4.1, 4.2, 4.3
and 4.6 shall survive without termination and (iii) the representations and
warranties in Sections 5.1 and 5.2 shall survive without termination. In the
event notice of any claim for indemnification under Section 11.3(a) hereof shall
have been given within the applicable survival period, the representations and
warranties that are the subject of such indemnification claim shall survive
until such time as such claim is finally resolved. The covenants and agreements
of the parties set forth in this Agreement (exclusive of the indemnification
obligations of the parties hereunder unless an indefinite duration for such
indemnification obligation is expressly provided herein) shall survive
indefinitely except as expressly provided herein.
(b) Subject to the second sentence of this Section 11.5(b), a
Purchaser Indemnitee shall not have any right to indemnification under this
Agreement until the aggregate of all amounts claimed by all Purchaser
Indemnitees exceeds $3,000,000 (the "Threshold Amount") and in such event the
indemnification obligations of the respective Indemnifying Parties hereunder
shall apply to all Damages in excess of such amount; provided, however, that (i)
only individual claims exceeding $25,000 shall be permitted to be made by a
Purchaser Indemnitee pursuant to this Section 11.5, and (ii) only the amount of
any individual claim in excess of $25,000 shall be applied in calculating the
Threshold Amount. In no event shall (x) the individual liability of an
Indemnifying Seller for Damages pursuant to this Article XI exceed 25% of the
Net Proceeds, as fully adjusted in accordance with the terms herein and (y) the
aggregate liability of Indemnifying Sellers for Damages pursuant to this Article
XI exceed $39,000,000 (the "Maximum Indemnification Amount"); provided, however,
that the limitations on the indemnity set forth in this sentence shall not apply
to the liability for breaches of the representations or warranties in Sections
4.1, 4.2, 4.3 and 4.6. For purposes of this Agreement, the "Net Proceeds" shall
mean the portion of the Purchase Price (including the Closing Cash Payment,
Class B-2 Preferred Stock and the Earnout Amount) allocable to such Seller.
Notwithstanding the foregoing, a Purchaser Indemnitee shall have right to
indemnification under this Agreement for any Unknown Environmental Liability
when the aggregate of all amounts claimed by all Purchaser Indemnitees for
Unknown Environmental Liabilities exceeds $1,000,000 and in such event the
indemnification obligations of the respective Indemnifying Parties hereunder
shall apply to all Damages in excess of such amount, subject to the Maximum
Indemnification Amount. Notwithstanding any provision to the contrary set forth
in this Agreement, a Purchaser Indemnitee shall not have any right to
indemnification under this Agreement for Damages relating to a breach of the
representations set forth in Section 4.13(b)(i) (title to Owned Real Property)
unless and until it has caused the Company to pursue its available rights with
respect to such Damages under all title insurance policies relating to any
property that is the subject of such breach, and the amount of indemnifiable
Damages relating to any such breach shall not include any amounts recovered
under such policies; provided, however, that
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(i) such limitation shall not apply unless and until the Principal Shareholders
have delivered, or caused to be delivered, to Purchaser, title insurance
policies for the Owned Real Property, reasonably acceptable to Purchaser, which
policies name Purchaser as an insured thereunder, (ii) in the event that
Purchaser has made a claim under such title insurance policies and the claim has
not been paid within three (3) months of the date of such claim, then Purchaser
shall have the right to proceed directly against the Indemnifying Sellers
pursuant to this Article XI notwithstanding the limitations set forth above
(provided, however, that in the event the title insurance company subsequently
pays such claim, Purchaser will reimburse the Indemnifying Shareholders for any
amounts paid by the Indemnifying Shareholders to the Purchaser Indemnitees with
respect to such claim) , and (iii) in causing the Company to pursue its rights
under such title insurance policies, Purchaser shall not be required to expend
any money, it being understood and agreed that the Principal Shareholders shall
be solely responsible for all costs and expenses related to pursuing such claim
under the title insurance policies, which obligation shall survive the Closing.
Purchaser shall cause the Company to take all steps necessary to preserve such
claims under the applicable title insurance policies and to notify promptly
Sellers of any such claims.
(c) A Seller Indemnitee shall not have any right to
indemnification under this Agreement until the aggregate of all amounts claimed
by all Seller Indemnitees exceeds the Threshold Amount and, in such event, the
respective Indemnifying Parties shall be liable only for the amount in excess of
the Threshold Amount; provided, however, that the maximum aggregate liability
payable to all Seller Indemnitees by Purchaser for Damages pursuant to and in
accordance with this Agreement shall not in any event exceed $39,000,000.
(d) No Damages shall be asserted by a Purchaser Indemnittee or
a Seller Indemnittee with respect to any matter that is covered by insurance, to
the extent proceeds of such insurance are paid to such Indemnitee.
Section 11.6 Survival of Representations, Warranties and Covenants. The
representations, warranties, post-closing covenants set forth in Article X
hereof, indemnities, conditions and agreements contained herein are and will be
deemed to be continuing representations, warranties, covenants, indemnities,
conditions and agreements that survive the Closing and remain in full force and
effect regardless of any investigations or knowledge of or on behalf of any
party, but subject to the applicable limitations contained in Section 11.5.
Section 11.7 Sole Remedy. Except in the case of fraud or intentional
misrepresentation, the provisions and procedures set forth in this Article XI
shall constitute the parties' exclusive rights and remedies for any breach of
this Agreement. Further, each of the Sellers hereby agrees that he or it will
not make any claim for indemnification against Purchaser or any of its
Affiliates or Subsidiaries by reason of the fact that he or it was a director,
officer, employee or agent of any such entity or was serving at the request of
any such entity as a partner, trustee, officer, director, employee or agent of
another entity (whether such claim is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses or otherwise, and whether
such claim is pursuant to any statute, charter document, bylaw, agreement or
otherwise) with respect to any action, suit, proceeding, complaint, claim or
demand brought by Purchaser against such Seller
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(whether such action, suit, proceeding, complaint, claim or demand is pursuant
to this Agreement, applicable law or otherwise).
ARTICLE XII
TERMINATION
Section 12.1 Termination of Agreement.
The parties may terminate this Agreement as provided below:
(a) Purchaser and Sellers may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(b) Purchaser may terminate this Agreement by written notice
to Sellers at any time prior to Closing if its Lenders refuse to consent to the
transaction contemplated by this Agreement.
(c) Purchaser may terminate this Agreement by giving written
notice to Sellers at any time prior to the Closing (i) in the event Sellers have
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Purchaser has notified Sellers of the breach,
and the breach has continued without cure for a period of 30 days after the
notice of breach or (ii) if the Closing shall not have occurred on or before
June 30, 2000, by reason of the failure of any condition precedent under Article
VIII hereof (unless the failure results primarily from Purchaser itself
breaching any representation, warranty or covenant contained in this Agreement).
(d) Purchaser may terminate this Agreement prior to the
expiration of the Due Diligence Period if it is not satisfied in all respects
with the results of its due diligence review related to customer calls of the
Company's and its Subsidiaries' customers.
(e) Sellers may terminate this Agreement by giving written
notice to Purchaser at any time prior to the Closing (i) in the event Purchaser
has breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Sellers have notified Purchaser of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of breach or (ii) if the Closing shall not have occurred on or before
June 30, 2000 by reason of the failure of any condition precedent under Article
IX hereof (unless the failure results primarily from Sellers themselves
breaching any representation, warranty or covenant contained in this Agreement).
Section 12.2 Effect of Termination. If any party terminates this
Agreement pursuant to Section 12.1 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party, except that the provisions of Section 6.8 and 7.2 shall survive the
termination. Nothing set forth in this Section 12.2 shall mitigate or otherwise
compromise the rights or obligations of the parties under Section 13.12 or in
the event of a breach of the terms or provisions of this Agreement generally.
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ARTICLE XIII
MISCELLANEOUS
Section 13.1 Fees and Expenses. Except as contemplated by this
Agreement, until Closing, all costs and expenses incurred in connection with
negotiating and preparing this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
Section 13.2 Entire Agreement. This Agreement, which also includes the
Annexes, Schedules and Exhibits hereto, sets forth the entire agreement and
understanding among the parties and merges and supersedes all prior discussions,
agreements and understandings of every kind and nature among them as to the
subject matter hereof, and no party shall be bound by any condition, definition,
warranty or representation other than as expressly provided for in this
Agreement or as may be on a date on or subsequent to the date hereof duly set
forth in writing signed by each party which is to be bound thereby.
Section 13.3 Amendments. This Agreement (including the Annexes,
Schedules and Exhibits hereto) shall not be changed, modified or amended except
by a writing signed by each party to be charged, and this Agreement may not be
discharged except by performance in accordance with its terms or by a writing
signed by each party to be charged. The rights and remedies of the parties
hereunder are cumulative and not exclusive of any other right or remedy any
party may have. No failure or delay by any party hereto in exercising any right,
power or privilege shall operate as a waiver of any such right, power or
privilege, except as expressly set forth in this Agreement. No waiver of any
default shall constitute a waiver of any other or any subsequent default. No
single or partial exercise of any right, power or privilege shall preclude the
further or other exercise of the same or other right, power or privilege.
Section 13.4 Taxes. Any Taxes in the nature of a sales or transfer tax,
any stock transfer tax or any other taxes that may be or may become payable by
Sellers including, but not limited to, any Taxes resulting from or ensuing as a
consequence of the consummation of any transaction contemplated hereby shall be
paid by Sellers, and Sellers shall indemnify and hold harmless Purchaser from
and against all such Taxes.
Section 13.5 Governing Law; Dispute Resolution. This Agreement and its
validity, construction and performance shall be governed in all respects by the
laws of the Commonwealth of Pennsylvania without giving effect to principles of
conflicts of law. Any claim, controversy or dispute between the parties, their
agents, employees, officers, directors or affiliated agents ("Dispute") shall be
resolved by arbitration conducted by a single arbitrator engaged in the practice
of law, under the then current rules of the American Arbitration Association
("AAA"). The Federal Arbitration Act, 9 U.S.C. Section Section 1-16, not state
law, shall govern the arbitrability of all Disputes. The arbitrator shall not
have the authority to award punitive damages. The arbitrator's award shall be
final and binding and may be entered in any court having jurisdiction thereof.
The prevailing party, as determined by the arbitrator, shall be entitled to an
award of reasonable attorneys' fees and costs. It is expressly agreed that
either party may seek injunctive relief or specific performance of the
obligations hereunder in an appropriate court of law or equity pending an award
in arbitration.
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Section 13.6 Representation by Counsel. Each party and its counsel
cooperated in the drafting and preparation of this Agreement and the documents
referred to herein. Accordingly, any rule of law or any legal decision that
would require interpretation of any ambiguities in this Agreement against the
party that drafted it is of no application and is hereby expressly waived by
each party.
Section 13.7 Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
legal representatives and permitted assigns. The Agreement may not be assigned
by any of Sellers except with the prior written consent of Purchaser; provided,
however, that any Seller may assign this Agreement to any member of his family
or to any trust for the benefit of such family member. Purchaser may assign this
Agreement without the consent of Sellers only to an Affiliate of Purchaser.
Nothing herein contained shall confer or is intended to confer on any third
party or entity which is not a party to this Agreement any rights under this
Agreement, except for Purchaser and its Affiliates which are acknowledged to be
third party beneficiaries and Purchaser Indemnitees who are acknowledged to be
third party beneficiaries under Article XI.
Section 13.8 Headings. The headings in the Articles, Sections,
paragraphs, Exhibits, Schedules and sections of this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
Section 13.9 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
FedEx, to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Purchaser, to:
Rivo Technologies
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
KRG Capital Partners, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Tower One, Suite 1500
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Sellers, to:
Sellers' Representative
UTI Corporation
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & Ingersoll, LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Section 13.10 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 13.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 13.12 Specific Performance. The parties hereto agree that if
any of the provisions of this Agreement are not performed in accordance with
their specific terms or are otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.
Section 13.13 Legal Fees and Expenses. In the event that any
arbitration or legal action is brought for the enforcement of this Agreement, or
because of any alleged dispute, breach,
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default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in said action or
proceeding, in addition to any other relief to which such party may be entitled.
[SIGNATURE PAGES FOLLOW]
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SIGNATURES
IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
and each of Sellers has signed this Agreement as of the date first written
above.
PURCHASER
UTI ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
COMPANY
UTI CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
SELLERS
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