EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
WEC COMPANY
("BUYER"),
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
("SHAREHOLDERS")
DATED AS OF JULY 6, 1999
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ARTICLE I PURCHASE AND SALE........................................................ 1
1.01 Purchase and Sale of Shares............................................. 1
1.02 Excluded Assets......................................................... 1
ARTICLE II PURCHASE PRICE - PAYMENT................................................ 1
2.01 Purchase Price.......................................................... 1
2.02 Payment of Purchase Price............................................... 2
2.03 Determination of Working Capital Value and Indebtedness Amount.......... 3
2.04 Section 338(h)(10) Election............................................. 5
2.05 Allocation of Purchase Price............................................ 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS......................... 6
3.01 Corporate............................................................... 6
3.02 No Violation............................................................ 7
3.03 Financial Statements.................................................... 7
3.04 Shareholders............................................................ 7
3.05 Capitalization.......................................................... 8
3.06 Tax Matters............................................................. 8
3.07 Accounts Receivable..................................................... 9
3.08 Inventory............................................................... 9
3.09 Absence of Certain Changes.............................................. 10
3.10 Absence of Undisclosed Liabilities...................................... 11
3.11 No Litigation........................................................... 11
3.12 Compliance With Laws and Orders......................................... 11
3.13 Title to and Condition of Properties.................................... 14
3.14 Insurance............................................................... 15
3.15 Contracts and Commitments............................................... 15
3.16 Labor Matters........................................................... 17
3.17 Employee Benefits Plans................................................. 17
3.18 Employment Compensation................................................. 20
3.19 Proprietary Rights...................................................... 20
3.20 Major Customers and Suppliers........................................... 21
3.21 Product Warranty and Product Liability.................................. 22
3.22 Affiliates' Relationships to Company.................................... 22
3.23 Assets Necessary to Business............................................ 22
3.24 Copies of Certain Documents............................................. 22
3.25 Underlying Documents.................................................... 23
3.26 Business of Company..................................................... 23
3.27 Disclosure of Material Facts............................................ 23
3.28 No Brokers or Finders................................................... 23
3.29 Disclaimer of Other Representations and Warranties...................... 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER................................. 24
4.01 Corporate............................................................... 24
4.02 Authority............................................................... 24
4.03 No Brokers or Finders................................................... 24
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4.04 Investment Purpose...................................................... 24
ARTICLE V OTHER MATTERS............................................................ 25
5.01 Title Insurance......................................................... 25
5.02 Surveys................................................................. 25
5.03 Environmental and Health and Safety Audits.............................. 25
5.04 Non-competition; Confidentiality........................................ 25
5.05 General Releases........................................................ 27
5.06 HSR Act Filings......................................................... 27
5.07 Customer and Supplier Information....................................... 27
5.08 Post-Closing Cooperation................................................ 27
5.09 Information Regarding Denric Tool Property and/or Off-Site Properties... 28
ARTICLE VI COVENANTS OF SHAREHOLDERS AND BUYER..................................... 29
6.01 Access to Information and Records....................................... 29
6.02 Bank Accounts........................................................... 29
6.03 Conduct of Business Pending the Closing................................. 29
6.04 Consents................................................................ 30
6.05 Other Action............................................................ 30
6.06 Updating of Schedules................................................... 30
6.07 No-Shop................................................................. 31
ARTICLE VII CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS............................ 31
7.01 Representations and Warranties True on the Closing Date................. 31
7.02 Compliance With Agreement............................................... 31
7.03 Absence of Litigation................................................... 31
7.04 Consents and Approvals.................................................. 31
7.05 Title Insurance......................................................... 31
7.06 HSR Waiting Period...................................................... 31
7.07 Lease Agreements........................................................ 32
7.08 Existing Lease Agreements............................................... 32
7.09 Environmental and Health and Safety Audit............................... 33
7.10 Due Diligence........................................................... 33
7.11 Transfer of Denric Tool Property........................................ 33
7.12 Assignment of Patent.................................................... 33
7.13 Condition Regarding Section 338(h)(10) Election......................... 33
7.14 Condition Regarding Lease Agreements.................................... 33
7.15 Delivery of ▇▇▇▇▇▇▇▇▇ Loan Documents.................................... 33
7.16 Delivery of Additional Environmental Materials.......................... 34
ARTICLE VIII CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS..................... 34
8.01 Representations and Warranties True on the Closing Date................. 34
8.02 Compliance With Agreement............................................... 34
8.03 Absence of Litigation................................................... 34
8.04 HSR Waiting Period...................................................... 34
8.05 Assignment of ▇▇▇▇▇▇▇▇▇ Loan............................................ 34
8.06 Condition Regarding Section 338(h)(10) Election......................... 34
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8.07 Condition Regarding Lease Agreements.................................... 35
ARTICLE IX INDEMNIFICATION ........................................................ 35
9.01 By Shareholders......................................................... 35
9.02 By Shareholders - Denric Tool and Environmental Matters................. 35
9.03 By Buyer................................................................ 36
9.04 By Buyer - Product Liability Issues..................................... 36
9.05 Indemnification of Third-Party Claims................................... 37
9.06 Payment................................................................. 38
9.07 Limitations on Indemnification.......................................... 38
9.08 Determination of Amount of Claims....................................... 39
9.09 Exclusive Remedy........................................................ 40
ARTICLE X CLOSING.................................................................. 40
10.01 Shareholders' Closing Deliveries....................................... 40
10.02 Buyer's Closing Deliveries............................................. 41
ARTICLE XI TERMINATION............................................................. 42
11.01 Right of Termination Without Breach.................................... 42
11.02 Termination for Breach................................................. 43
ARTICLE XII MISCELLANEOUS.......................................................... 44
12.01 Schedules.............................................................. 44
12.02 Further Assurance...................................................... 44
12.03 Disclosures and Announcements.......................................... 44
12.04 Assignment; Parties in Interest........................................ 44
12.05 Law Governing Agreement................................................ 45
12.06 Amendment and Modification............................................. 45
12.07 Notice................................................................. 45
12.08 Expenses............................................................... 46
12.09 Entire Agreement....................................................... 47
12.10 Counterparts........................................................... 48
12.11 Headings............................................................... 48
12.12 Glossary of Terms...................................................... 48
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Disclosure Schedules
Schedule 1.02 Excluded Assets
Schedule 2.03 12/31/99 GAAP-Adjusted Balance Sheet
Schedule 2.05 Allocation of Purchase Price
Schedule 3.01 Qualification
Schedule 3.02 No Violation
Schedule 3.03 Financial Statements
Schedule 3.05 Capitalization
Schedule 3.06 Tax Matters
Schedule 3.07 Accounts Receivable
Schedule 3.08 Inventory
Schedule 3.09 Absence of Certain Changes
Schedule 3.10 Absence of Undisclosed Liabilities
Schedule 3.11 Litigation
Schedule 3.12 Compliance with Laws and Orders
Schedule 3.13 Title to and Condition of Properties
Schedule 3.14 Insurance
Schedule 3.15 Contracts and Commitments
Schedule 3.16 Labor Matters
Schedule 3.17 Employee Benefit Plans
Schedule 3.18 Employment Compensation
Schedule 3.19 Proprietary Rights
Schedule 3.21 Product Warranty and Product Liability
Schedule 3.22 Affiliates' Relationships to Company
Schedule 3.24 Disclosure Documents
Schedule 3.25 Underlying Documents
Schedule 5.07 Major Customers and Suppliers
Schedule 7.04 Consents and Approvals
Schedule 7.07 Lease Agreements
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated July 6, 1999, by and
among WEC COMPANY d/b/a ▇▇▇▇▇ Equipment Company, a Delaware corporation
("Buyer"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (each individually,
"Shareholder," and together, "Shareholders").
RECITALS
Central Fabricators, Inc., a Wisconsin corporation ("Company"), is engaged
in the manufacture and sale of buckets and other material handling attachments
for construction equipment (the "Business"). Shareholders own all of the issued
and outstanding shares (the "Shares") of capital stock of Company.
Company's facilities consist of three individual manufacturing facilities
located in Schofield, Wisconsin (the "Facilities").
Buyer desires to purchase the Shares from Shareholders and Shareholders
desire to sell to Buyer the Shares, upon the terms and conditions set forth
herein.
THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
ARTICLE I
PURCHASE AND SALE
1.01 Purchase and Sale of Shares. Subject to the terms and conditions of
this Agreement, on the Closing Date (as defined herein) Buyer agrees to purchase
from Shareholders and Shareholders agree to sell to Buyer all of the Shares.
1.02 Excluded Assets. Anything herein to the contrary notwithstanding,
prior to the Closing Date, Shareholders shall cause the assets listed in
Schedule 1.02 (including the Denric Tool Property) (the "Excluded Assets") to be
transferred from the ownership of Company.
ARTICLE II
PURCHASE PRICE - PAYMENT
2.01 Purchase Price. The purchase price (the "Purchase Price") for the
Shares shall be equal to:
(a) Twenty-Seven Million Seven Hundred Thousand Dollars
($27,700,000); plus
(b) the Gross Up Amount, if any; plus
(c) the amount of cash and cash equivalents (including marketable
securities and investments) in Company's checking and other deposit and
investment accounts (collectively, "Cash and Cash Equivalents") as of the
Closing Date, as reflected on the Final Closing Balance Sheet; plus
(d) the amount, if any, by which the Working Capital Value as of the
Closing Date exceeds Three Million Forty-Two Thousand Dollars
($3,042,000); minus
(e) the amount, if any, by which Three Million Forty-Two Thousand
Dollars ($3,042,000) exceeds the Working Capital Value as of the Closing
Date; minus
(f) the Indebtedness Amount, as of the Closing Date.
2.02 Payment of Purchase Price. The Purchase Price shall be paid by Buyer
as follows:
(a) Cash to Escrow Agent. At the Closing, Buyer shall deliver to the
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Escrow Agent, under the Escrow Agreement, the sum of Five Hundred Thousand
Dollars ($500,000) (the "Escrow Amount").
(b) Cash to Shareholders. At the Closing, Buyer shall deliver to
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Shareholders or their designee the Purchase Price, calculated pursuant to
the Estimated Closing Balance Sheet, less the Escrow Amount.
(c) Post-Closing Adjustment. On or before the fifth business day
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following the final determination of the Final Closing Balance Sheet
("Settlement Date"), the parties shall make the following adjustments:
(i) Shareholders shall pay to Buyer the amount, if any, by
which the Working Capital Value as reflected on the Estimated
Closing Balance Sheet exceeds the Working Capital Value as reflected
on the Final Closing Balance Sheet, or Buyer shall pay to
Shareholders the amount, if any, by which the Working Capital Value
as reflected on the Estimated Closing Balance Sheet is less than the
Working Capital Value as reflected on the Final Closing Balance
Sheet; and
(ii) Shareholders shall pay to Buyer the amount, if any, by
which the Indebtedness Amount as reflected on the Estimated Closing
Balance Sheet is less than the Indebtedness Amount on the Final
Closing Balance Sheet, or Buyer shall pay to Shareholders the
amount, if any, by which the Indebtedness Amount as reflected on the
Final Closing Balance Sheet is less than the Indebtedness Amount on
the Estimated Closing Balance Sheet.
Any Settlement Date payments shall be made together with interest on
the amount being paid from the Closing Date to the date of payment
at a rate per annum equal to the prime rate of interest on the
Settlement Date, as stated in The Wall Street Journal.
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(d) Method of Payment. All payments under this Section 2.02 shall be
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made by wire transfer of immediately available funds to an account
designated by the recipient not less than forty-eight (48) hours prior to
the time for payment specified herein.
2.03 Determination of Working Capital Value and Indebtedness Amount.
(a) Definition of Working Capital Value. The term "Working Capital
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Value" shall mean the dollar amount by which the inventory and accounts
receivable of Company exceeds Company's accounts payable and accruals,
both as reflected in the Estimated Closing Balance Sheet or Final Closing
Balance Sheet, as applicable.
(b) Definition of Indebtedness Amount. The term "Indebtedness Amount"
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shall mean all indebtedness for borrowed money owed to unaffiliated third
parties (other than accounts payable) and all indebtedness for borrowed
money owed to any Shareholder or Shareholder Affiliate, all as outstanding
as of the Closing Date as reflected in the Estimated Closing Balance Sheet
or Final Closing Balance Sheet, as applicable. As used in this Agreement,
the term "Affiliate" shall mean and include all shareholders, directors,
and officers of Buyer or Company, the spouse of any such person, any
person who would be the heir or descendant of any such person if he or she
were not living and any entity in which any of the foregoing has a direct
or indirect interest, except through ownership of less than five percent
(5%) of the outstanding shares of any entity whose securities are listed
on a national securities exchange or traded in the national over-the-
counter market.
(c) Estimated Closing Balance Sheet. For purposes of determining the
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amount to be paid by Buyer at the Closing, (i) not less than fifteen (15)
days prior to the Closing Date, Buyer and Shareholders shall agree on a
restated version of the Recent Balance Sheet, such restated balance sheet
to be in form and detail identical to, and in its accounting principles
and policies consistent in every respect with, the December 31, 1998
adjusted balance sheet of Company, together with the journal entries and
working capital adjustment worksheet related thereto, all as prepared by
Ernst & Young and attached as Schedule 2.03 so that it has been prepared
on a basis consistent with the Recent Balance Sheet but in accordance with
generally accepted accounting principles and policies (the "GAAP-Adjusted
Recent Balance Sheet"), and (ii) not less than ten (10) business days
prior to the Closing Date, Shareholders, in consultation with Buyer, shall
prepare and deliver to Buyer a balance sheet of Company as of the close of
business on the business day immediately prior to the Closing Date
(hereinafter the "Effective Time") which shall represent Shareholders'
reasonable estimate of the Final Closing Balance Sheet; such balance sheet
to be in form and detail identical to, and in its accounting principles
and policies consistent in every respect with, the GAAP-Adjusted Recent
Balance Sheet. Such balance sheet shall be accompanied by schedules
setting forth in reasonable detail all assets and liabilities included
therein. The estimated balance sheet or the accompanying schedules shall
contain sufficient detail for the determination of Working Capital Value,
and Indebtedness Amount. In the event Buyer shall object to any of the
information set forth on the estimated balance sheet or accompanying
schedules as presented by Shareholders, the parties shall
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negotiate in good faith and agree on appropriate adjustments to the end
that such balance sheet and accompanying schedules reflect a reasonable
estimate of the Final Closing Balance Sheet, Working Capital Value and
Indebtedness Amount (the estimated balance sheet as finally determined by
the parties pursuant to this subsection is herein referred to as the
"Estimated Closing Balance Sheet"). In connection with the determination
of the Estimated Closing Balance Sheet, Shareholders shall provide to
Buyer such information and detail as Buyer shall reasonably request.
Copies of the GAAP-Adjusted Recent Balance Sheet and the Estimated Closing
Balance Sheet shall be attached to Schedule 2.03 once they have been
prepared and agreed upon by Buyer and Shareholders.
(d) Final Closing Balance Sheet. The Final Closing Balance Sheet
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of Company shall be prepared as follows:
(i) During a period of thirty (30) days following the Closing
Date, Shareholders, in consultation with Buyer, shall prepare and
deliver to Buyer a balance sheet of Company as of the Effective
Time, prepared in accordance with generally accepted accounting
principles from the books and records of Company (except, in the
case of unaudited financial statements, for the absence of footnote
disclosure), on a basis consistent with the generally accepted
accounting principles followed in the preparation of the GAAP-
Adjusted Recent Balance Sheet, and fairly presenting the financial
position of Company as of the Effective Time. The balance sheet
shall be accompanied by detailed schedules and by a report (1)
setting forth the amount of Working Capital Value and Indebtedness
Amount (as defined above) reflected in the balance sheet, and (2)
setting forth the amount of any adjustment to the Purchase Price to
be paid and by whom pursuant to Section 2.02(c) hereof.
(ii) If, thirty (30) days after the Closing Date, Buyer and
Shareholders have not agreed on the balance sheet and report
described in (i) above, then Buyer's independent accountants
("Buyer's Accountants") shall prepare such balance sheet and report
and deliver it to Shareholders no later than forty-five (45) days
after the Closing Date.
(iii) Within thirty (30) days following the delivery of the
balance sheet referred to in (ii) above, Shareholders or their
independent accountants ("Shareholders' Accountants") may object to
any of the information contained in said balance sheet or
accompanying schedules or reports which could affect the necessity
or amount of any payment by Buyer or Shareholders pursuant to
Section 2.02 hereof. Any such objection shall be made in writing and
shall state Shareholders' determination of the amount of the Working
Capital Value and Indebtedness Amount.
(iv) In the event of a dispute or disagreement relating to the
balance sheet or schedules which Buyer and Shareholders are unable
to resolve, either party may elect to have all such disputes or
disagreements resolved by an accounting firm of nationally
recognized standing (the "Third Accounting
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Firm") to be mutually selected by Shareholders and Buyer or, if no
agreement is reached, by Shareholders' Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a resolution of the
balance sheet of Company as of the Effective Time and the calculations
of Working Capital Value and Indebtedness Amount, which shall be final
and binding for purposes of this Article II. The Third Accounting Firm
shall be instructed to use every reasonable effort to perform its
services within fifteen (15) days of submission of the balance sheet
to it and, in any case, as soon as practicable after such submission.
The fees and expenses for the services of the Third Accounting Firm
shall be shared by Buyer and Shareholders as follows:
Shareholders shall pay a percentage of such fees and expenses equal to
A/(A+B) and Buyer shall pay a percentage of such fees and expenses
equal to B/(A+B), where A is equal to the absolute value of the
difference (in dollars) between Working Capital Value and Indebtedness
Amount as finally determined by the Third Accounting Firm and Working
Capital Value and Indebtedness Amount as reflected in the objection
prepared and delivered by Shareholders in accordance with Section
2.03(d)(ii), and B is equal to the absolute value of the difference
(in dollars) between Working Capital Value and Indebtedness Amount as
finally determined by the Third Accounting Firm and Working Capital
Value and Indebtedness Amount as reflected in the report prepared and
delivered by Buyer in accordance with Section 2.03(d)(i). As used in
this Agreement, the term "Final Closing Balance Sheet" shall mean the
balance sheet of Company as of the Effective Time as finally
determined for purposes of this Article II, whether by negotiation and
agreement of the parties in accordance with Section 2.03(d)(i),
acquiescence of Shareholders in the figures supplied by Buyer in
accordance with Section 2.03(d)(ii), or by the Third Accounting Firm
in accordance with Section 2.03(d)(iv).
(v) After the Closing Date, Buyer agrees to permit Shareholders,
Shareholders' Accountants, and their respective representatives,
during normal business hours, to have reasonable access to, and to
examine any pre-Closing books and records of Company, which documents
and access are necessary to review any one or more of the balance
sheets to be prepared pursuant to this Section 2.03.
2.04 Section 338(h)(10) Election. At Buyer's request and at its sole
option, each Shareholder will join with Buyer in making an election under
Section 338(h)(10) of the Code and any corresponding elections under state,
local, or foreign tax law (the "338 Election"). Buyer will reimburse
Shareholders on an after-tax basis for any increase in federal, state, or
other taxes incurred by either Shareholder solely by reason of making the 338
Election over the amount of such taxes otherwise payable by such Shareholder
in connection with the transactions contemplated hereby as if the 338 Election
had not been made (such excess being referred to as the "Gross Up Amount").
If, however, the actual amount of reimbursement payable to Shareholders would
exceed $750,000, Shareholders may, in lieu of full reimbursement hereunder,
accept a Gross-Up Amount equal to $750,000. If, on the other hand,
Shareholders do not accept a Gross Up Amount equal to $750,000 in lieu of full
reimbursement hereunder and
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Buyer elects to abandon the 338 Election, Buyer and Shareholders will
negotiate in good faith in an attempt to determine a mutually acceptable
adjustment to the Purchase Price. The computation of the taxes otherwise
payable by each Shareholder as if the 338 Election had not been made shall
include the taxes payable as the result of the distribution of the Excluded
Assets pursuant to Section 1.02.
2.05 Allocation of Purchase Price. If the 338 Election is made, the
aggregate Purchase Price for the deemed sale and purchase of assets shall be
allocated among Company's assets for tax purposes in accordance with Schedule
2.05, which shall be jointly prepared by Buyer and Shareholders. Schedule 2.05
shall be agreed upon by the parties not less than five (5) business days prior
to the Closing. Shareholders and Buyer will follow and use such allocation in
all tax returns, filings or other related reports made by them to any
governmental agencies. To the extent that disclosures of this allocation or of
any related information are required to be made by the parties to the Internal
Revenue Service ("IRS") under the provisions of Section 338(b)(5) of the
Internal Revenue Code of 1986, as amended (the "Code"), or any regulations
thereunder, Buyer and Shareholders will disclose such reports to the other
prior to filing with the IRS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, make the following representations
and warranties to Buyer, each of which is true and correct on the date hereof,
shall remain true and correct to and including the Closing Date, shall be
unaffected by any investigation heretofore or hereafter made by Buyer, or any
knowledge of Buyer other than as specifically disclosed in the disclosure
schedules which are attached hereto and incorporated herein by reference (the
"Schedules"), and shall survive the Closing of the transactions provided for
herein. As used herein, the term "Management's Knowledge" shall mean the
actual collective knowledge, without additional investigation, of Shareholders
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
3.01 Corporate.
(a) Organization. Company is a corporation duly organized and
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validly existing under the laws of the State of Wisconsin. Company has
filed its most recent required annual report with, has not filed articles
of dissolution with, and has not been administratively dissolved by, the
Department of Financial Institutions of the State of Wisconsin. No grounds
exist for the administrative dissolution of Company by the Wisconsin
Department of Financial Institutions.
(b) Corporate Power. Company has all requisite corporate power and
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authority to own, operate, and lease its properties and to carry on the
Business as and where such is now being conducted.
(c) Qualification. Company is duly licensed or qualified to do
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business as a foreign corporation, and is in good standing, in each
jurisdiction where the character of the properties owned or leased by it,
or the nature of the Business, makes such licensing or qualification
necessary. The states in which Company is licensed or qualified to do
business are listed in Schedule 3.01.
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(d) No Subsidiaries. Company does not own any interest in any
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corporation, partnership or other entity.
3.02 No Violation. Except as set forth on Schedule 3.02, neither the
execution and delivery of this Agreement or the other documents and
instruments to be executed and delivered by Shareholders pursuant hereto, nor
the consummation by Shareholders of the transactions contemplated hereby and
thereby (a) will, to Management's Knowledge, violate any applicable statute,
law, ordinance, rule, or regulation (collectively, "Laws") and any order,
writ, injunction, judgment, plan, or decree (collectively, "Orders"), (b)
subject to obtaining the approvals, consents, and waivers referred to in
Schedule 7.04, except for applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), will, to Management's
Knowledge, require any authorization, consent, approval, exemption, or other
action by or notice to any government entity (including, without limitation,
under any "plant closing" or similar law), or (c) subject to obtaining the
approvals, consents, and waivers referred to in Schedule 7.04, will violate or
conflict with, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or will result in
the termination of, or accelerate the performance required by, or result in
the creation of any Lien (as defined in Section 3.13(a)) upon any of the
assets of Company or the Shares under any term or provision of the Articles of
Incorporation or By-laws of Company or, to Management's Knowledge, of any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Company is a party or by which Company or
either Shareholder or any of its assets or properties, or Shareholders, or any
of their assets or properties, may be bound or affected, except where such
violation or failure to obtain any such authorization, consent, approval,
exemption, or other action or to give such notice would not, individually or
in the aggregate, have a material adverse effect on the financial condition of
Company or on the ability of Buyer and Shareholders to consummate the
transactions contemplated by this Agreement.
3.03 Financial Statements. Included as Schedule 3.03 are true and complete
copies of the unaudited financial statements of Company consisting of (i)
unaudited balance sheets of Company as of December 31, 1998, December 31, 1997
and December 31, 1996, and the related unaudited statements of income for the
years then ended (including the notes and schedules, if any, contained therein
or annexed thereto), which financial statements have been compiled by ▇▇▇▇▇▇
▇▇▇▇▇▇ & Co., accountants for Company for such years, and (ii) an unaudited
balance sheet of Company as of May 31, 1999 (the "Recent Balance Sheet"), and
the related unaudited statement of income for the five (5) months then ended
and for the corresponding period of the prior year (including the notes and
schedules, if any, contained therein or annexed thereto). All of such
financial statements (including all notes and schedules, if any, contained
therein or annexed thereto) have been prepared in accordance with the books
and records of Company, and, to Management's Knowledge, present, in a year-to-
year consistent manner, subject to normal year-end adjustments to the Recent
Balance Sheet, the assets, liabilities, financial position, and the results of
operations of Company as of the dates and for the years and periods indicated.
3.04 Shareholders.
(a) Power. Each Shareholder has full power, legal right, and
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authority to enter into, execute, and deliver this Agreement and the other
documents and instruments to be executed and delivered by Shareholders
(such other documents sometimes
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referred to herein as "Ancillary Documents") and to carry out the
transaction contemplated hereby and thereby.
(b) Validity. This Agreement and the Ancillary Documents (i) have
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been (or, when executed and delivered, will be) duly and validly executed
and delivered by each Shareholder, and (ii) are, or, when executed and
delivered, will be the legal, valid, and binding obligations of such
Shareholder, enforceable in accordance with their respective terms, except
as such may be limited by bankruptcy, insolvency, reorganization, and
other laws affecting creditors' rights generally, and by general equitable
principles.
(c) Title. Except as set forth on Schedule 3.05, each Shareholder
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has, and at Closing Buyer will receive, good and marketable title to the
Shares, free and clear of all Liens including, without limitation, voting
trusts or agreements, proxies, marital or community property interests.
3.05 Capitalization. Schedule 3.05 sets forth a complete list of all the
authorized capital stock of Company. No shares of such capital stock are
issued or outstanding except for the Shares, which are owned of record and
beneficially by Shareholders in the respective numbers set forth in Schedule
3.05. Other than as set forth in this Agreement or as set forth on Schedule
3.05, there are no (a) securities convertible into or exchangeable for any of
Company's capital stock or other securities, (b) options, warrants, or other
rights to purchase or subscribe to capital stock or other securities of
Company or securities which are convertible into or exchangeable for capital
stock or other securities of Company, or (c) contracts, commitments,
agreements, understandings, or arrangements of any kind relating to the
issuance, sale, or transfer of any capital stock or other equity securities of
Company, and any such convertible or exchangeable securities or any such
options, warrants, or other rights.
3.06 Tax Matters.
(a) Provision For Taxes. To Management's Knowledge, the provision
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made for taxes on the Recent Balance Sheet is sufficient for the payment
of all unpaid federal, state, foreign, county, local, and other income, ad
valorem, excise, profits, franchise, occupation, property, payroll, sales,
use, gross receipts, and other taxes (and any interest and penalties)
through the date of the Recent Balance Sheet, and all assessments payable
by Company as of the date of the Recent Balance Sheet, whether or not
disputed at the date of the Recent Balance Sheet, and for all years and
periods prior thereto as to which the applicable period of limitations has
not expired. Since the date of the Recent Balance Sheet, Company has not
incurred any taxes other than taxes incurred in the ordinary course of the
Business consistent in type and amount with past practices of Company.
(b) Tax Returns Filed. Except as set forth on Schedule 3.06, all
-----------------
federal, state, foreign, county, local, and other tax returns required to
be filed by or on behalf of Company have been timely filed and, when
filed, were true and correct in all material respects, and the taxes shown
as due thereon were paid or adequately accrued. Except as set forth on
Schedule 3.06, Company has duly withheld and paid when due all taxes
-8-
which it is required to withhold and pay relating to salaries and other
compensation heretofore paid to the employees of Company.
(c) Tax Audits. The federal and state income tax returns of Company
----------
have been audited by the IRS and appropriate state taxing authorities for
the periods and as set forth in Schedule 3.06, and, since January 1, 1987,
Company has not received from the IRS or from the tax authorities of any
state, county, local, or other jurisdiction any notice of underpayment of
taxes or other deficiency which has not been paid nor any objection to any
return or report filed by Company. There are outstanding no agreements or
waivers extending the statutory period of limitations applicable to any
tax return or report.
(d) Consolidated Group. Schedule 3.06 lists every year Company was a
------------------
member of an affiliated group of corporations that filed a consolidated
tax return on which the statute of limitations does not bar a federal tax
assessment, and each corporation that has been part of such group.
(e) S Corporation Election. Company has, since January 1, 1987,
----------------------
continuously maintained its status and classification as an S corporation
pursuant to section 1362 of the Code.
(f) Agreements, Elections, and Payments. Except as set forth in
-----------------------------------
Schedule 3.06, since January 1, 1995, Company has not (i) filed any
consent or agreement under Section 341(f) of the Code, (ii) applied for
any tax ruling, (iii) entered into or been subject to a closing agreement
with any taxing authority, (iv) filed an election under Section 338(g) or
Section 338(h)(10) of the Code (nor has a deemed election under Section
338(e) of the Code occurred), (v) made any payments, or been a party to an
agreement (including this Agreement) that under any circumstances could
obligate it to make payments that will not be deductible because of
Section 280G of the Code, or (vi) been a party to any tax allocation or
tax sharing agreement.
(g) Basis. Schedule 3.06 contains accurate and complete
-----
descriptions of the following items as of the Closing Date:
(i) Company's basis in its assets, as of December 31, 1998; and
(ii) The Shareholders' basis in their Shares, as of December 31,
1998.
3.07 Accounts Receivable. All accounts receivable of Company reflected on
the Recent Balance Sheet, and incurred since the date thereof, represent arm's
length sales actually made in the ordinary course of the Business and, to
Management's Knowledge, are subject to no counterclaim or setoff and are not
in dispute. Schedule 3.07 contains an aged schedule of accounts receivable
included in the Recent Balance Sheet. All accounts receivable of Company
reflected on the Final Closing Balance Sheet will represent arm's length sales
actually made in the ordinary course of the Business.
3.08 Inventory. To Management's Knowledge, all inventory of Company
reflected on the Recent Balance Sheet consists of a quality and quantity
usable and saleable in the ordinary
-9-
course of the Business, had a commercial value at least equal to the value
shown on such balance sheet and is valued at the lower of cost (on a FIFO
basis) or market. To Management's Knowledge, all inventory purchased since the
date of such balance sheet consists of a quality and quantity usable and
saleable in the ordinary course of the Business. Except as set forth in
Schedule 3.08, all inventory of Company is located on premises owned or leased
by Company as reflected in this Agreement. All work-in-process contained in
inventory constitutes items in process of production pursuant to contracts or
open orders taken in the ordinary course of the Business.
3.09 Absence of Certain Changes. Since May 31, 1999, unless otherwise
described in Schedule 3.09 or consented to in writing by Buyer, Company has
conducted the Business only in the ordinary and usual course consistent with
past practice and, without limiting the generality of the foregoing, there has
not been:
(a) Adverse Change. Any adverse change in the financial condition,
--------------
assets, liabilities or operations of Company;
(b) Damage. Any loss, damage or destruction in excess of $25,000,
------
whether covered by insurance or not, affecting the Business, Facilities,
or properties of Company;
(c) Increase in Compensation. Any increase in excess of $5,000 per
------------------------
individual per year or $50,000 for all employees in the aggregate in the
compensation, salaries or wages payable or to become payable to any
employee or agent of Company (including, without limitation, any increase
or change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit granted,
made or accrued;
(d) Labor Disputes. Any labor dispute or disturbance, other than
--------------
routine individual grievances which are not material to the Business,
financial condition or results of operations of Company;
(e) Commitments. Any commitment or transaction by Company
-----------
(including, without limitation, any borrowing or capital expenditure)
other than in the ordinary course of the Business consistent with past
practice;
(f) Dividends. Any declaration, setting aside, or payment of any
---------
dividend or any other distribution in respect of Company's capital stock,
any redemption, purchase or other acquisition by Company of any capital
stock of Company, or any security relating thereto, or any other payment
to any Shareholder in such person's capacity as a shareholder; provided,
---------
however, that Company may continue to make cash distributions to
-------
Shareholders for purposes of satisfying Shareholders' tax liabilities
arising by reason of Company's operations;
(g) Disposition of Property. Any sale, lease, or other transfer or
-----------------------
disposition of any properties or assets of Company, other than Excluded
Assets, in excess of $25,000,
-10-
except for the sale or disposition of inventory items in the ordinary
course of the Business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
------------
assumed, or guaranteed by Company;
(i) Liens. Any liens (statutory or otherwise), security interests,
-----
claims, pledges, licenses, equities, options, conditional sales contracts,
assessments, levies, easements, covenants, reservations, restrictions,
rights-of-way, exceptions, limitations, charges, or encumbrances of any
nature whatsoever (collectively, "Liens") made on any of the properties or
assets of Company;
(j) Amendment of Contracts. Any entering into, amendment or
----------------------
termination by Company of any contract, or any waiver of material rights
thereunder, other than in the ordinary course of the Business;
(k) Loans and Advances. Any loan or advance (other than advances to
------------------
employees in the ordinary course of the Business for travel and
entertainment in accordance with past practice) to any person including,
but not limited to, any officer, director or employee of Company, or any
Shareholder or Affiliate;
(l) Credit. Any grant of credit to any customer or distributor on
------
terms or in amounts more favorable than those which have been extended to
such customer or distributor in the past, any other change in the terms of
any credit heretofore extended, or any other change of Company's policies
or practices with respect to the granting of credit; or
(m) Unusual Events. Any other event or condition not in the ordinary
--------------
course of the Business.
3.10 Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet or as set forth in Schedule
3.10, to Management's Knowledge, Company does not have any liabilities other
than commercial liabilities and obligations incurred since the date of the
Recent Balance Sheet in the ordinary course of the Business and consistent with
past practice and none of which has or will have a material adverse effect on
the Business, financial condition or operations of Company.
3.11 No Litigation. Except as set forth in Schedule 3.11, there is no
action, suit, arbitration, proceeding, investigation, or inquiry, whether civil,
criminal, or administrative ("Litigation"), pending, or, to Management's
Knowledge, threatened against Company, its directors (in such capacity), the
Business, or any of its assets. Schedule 3.11 also identifies all Litigation
(other than any Litigation related to the Denric Tool Property or the Off-Site
Properties) to which Company or any of its directors have been parties since
January 1, 1996. Prior to Closing, Shareholders will supplement Schedule 3.11 to
reflect all such Litigation since January 1, 1994. Except as set forth in
Schedule 3.11, to Management's Knowledge, none of Company, the Business, or
Company's assets is subject to any Order of any government entity.
3.12 Compliance With Laws and Orders.
-11-
(a) Compliance. Except as set forth in Schedule 3.12, Company
----------
(including each and all of its operations, practices, properties and
assets) is in compliance with all applicable Laws (excluding Environmental
Laws which are addressed only in Section 3.12(c)) and Orders, including,
without limitation, those applicable to discrimination in employment,
occupational safety and health, trade practices, competition and pricing,
product warranties, zoning, building and sanitation, employment,
retirement and labor relations, and product advertising, except where the
failure to so comply would not have a material adverse effect on the
financial condition of Company. To Management's Knowledge, except as set
forth in Schedule 3.12, Company has not received notice of any violation
or alleged violation of any Laws (excluding Environmental Laws which are
addressed only in Section 3.12(c)) or Orders. To Management's Knowledge,
except as set forth in Schedule 3.12, all reports and returns required to
be filed by Company with any government entity (other than reports and
returns that relate to Environmental Laws, which are addressed only in
Section 3.12(c)) have been filed, and were accurate and complete when
filed. To Management's Knowledge:
(i) Neither Company nor any Shareholder has received any
written notice of any claim to the effect that the operation of the
Business, as it is now conducted, or any condition existing at any of
the Facilities, in any manner constitutes a nuisance or other tortious
interference with the rights of any person or persons.
(ii) Company has made all required payments to its unemployment
compensation reserve accounts with the appropriate governmental
departments of the states where it is required to maintain such
accounts and each of such accounts has a positive balance.
(iii) The deficiencies, if any, noted on any report of Company
required in any of the past five (5) years under the federal
Occupational Safety and Health Act of 1970, as amended, and under all
other applicable health and safety laws and regulations, have been
corrected, and Company has delivered to Buyer copies of all such
reports.
(b) Permits and Licenses. Company has all material permits, licenses,
--------------------
approvals, authorizations, and consents of all government entities and all
certification organizations required for the conduct of the Business (as
presently conducted) and operation of the Facilities and all such licenses,
permits, approvals, authorizations and consents are described in Schedule
3.12 and are, and following the Closing, will continue to be, in full force
and effect except as otherwise noted on Schedule 3.12. To Management's
Knowledge, except as set forth in Schedule 3.12, Company (including its
operations, properties, and assets) is currently in material compliance
with all such permits and licenses, approvals, authorizations, and
consents.
(c) Environmental Matters. (i) The applicable Laws relating to
---------------------
pollution or protection of the environment, including Laws in effect on the
date of this Agreement relating to emissions, discharges, generation,
storage, releases, or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic, hazardous, or petroleum or
-12-
petroleum-based substances or wastes ("Waste") into the environment
(including, without limitation, ambient air, surface water, ground water,
land surface, or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Waste including, without limitation, the Clean
Water Act, the Clean Air Act, the Resource Conservation and Recovery Act,
the Toxic Substances Control Act, and the Comprehensive Environmental
Response Compensation Liability Act ("CERCLA"), as amended, and their state
and local counterparts are herein collectively referred to as the
"Environmental Laws." To Management's Knowledge, except as set forth in
Schedule 3.12 and except for the Denric Tool Property and the Off-Site
Properties, Company is in compliance with all material limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables contained in the Environmental Laws
or contained in any code, Order, notice or demand letter issued, entered,
promulgated, or approved thereunder. To Management's Knowledge, except as
set forth in Schedule 3.12 and except for the Denric Tool Property and the
Off-Site Properties, there is no Litigation nor any demand, claim, hearing,
or notice of violation pending or threatened against Company relating in
any way to the Environmental Laws or any Order issued, entered,
promulgated, or approved thereunder. To Management's Knowledge, except as
set forth in Schedule 3.12 and except for the Denric Tool Property and the
Off-Site Properties, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions, omissions, or
plans which may interfere with or prevent compliance or continued
compliance with the Environmental Laws or with any Order issued, entered,
promulgated, or approved thereunder, or which may give rise to any
liability, including, without limitation, material liability under CERCLA
or similar state or local Laws, or otherwise form the basis of any
Litigation, hearing, notice of violation, study, or investigation, based on
or related to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge,
release or threatened release into the environment of, any Waste.
(ii) To Management's Knowledge, Shareholders and Company have
disclosed and made available to Buyer all written studies, analyses and
test results and copies of correspondence with any governmental entity or
any other third party since January 1, 1989 (except for any of such
information regarding the Denric Tool Property and the Off-Site
Properties), in the possession, custody or control of Company or any
Shareholder relating to (A) the environmental conditions on, under, about
or from any real property owned by Company, the Leased Real Property (as
defined in Section 3.13) or any predecessor in interest to Company at the
present time or in the past, and (B) any Hazardous Materials (as defined
below) used, managed, handled, transported, treated, generated, stored or
released by Company or any other person on, under, about or from the
Leased Real Property or in connection with the operation of Company.
Prior to Closing, Shareholders will provide to Buyer all information
described in the preceding paragraph for years prior to 1989. The term
"Hazardous Materials" shall mean (I) any petroleum, hazardous or toxic
petroleum-derived substances or petroleum products, flammable or explosive
materials, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls (PCBs); (II) any chemicals or other materials or
substances which are now regulated,
-13-
classified or defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutant" or "contaminant" or any other similar
denomination intended to classify substances by reason of toxicity,
carcinogenicity, ignitability, corrosivity or reactivity under any
Environmental Law; and (III) any other chemical or other material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority under any Environmental Law.
(iii) To Management's Knowledge, except as set forth in Schedule
3.12, all reports and returns required to be filed by Company with any
government entity as a result of the Environmental Laws, have been filed,
and were accurate and complete when filed.
3.13 Title to and Condition of Properties.
(a) Marketable Title. Company has good and marketable title to all
----------------
Company's assets, free and clear of all mortgages and Liens, except those
described in Schedule 3.13. Except as set forth on Schedule 7.04, none of
Company's assets are subject to any restrictions with respect to the
transferability thereof.
(b) Condition. To Management's Knowledge, except as described in
---------
Schedule 3.13, all tangible assets constituting Company's assets hereunder
are in good operating condition and repair (subject to normal wear and
tear), free from any defects (except such minor defects as do not
interfere with the use thereof in the conduct of the normal operations of
Company), and have been maintained consistent with the standards generally
followed by Company.
(c) Leased Real Property. Other than the Denric Tool Property and
--------------------
as set forth in Schedule 3.13, Company does not own or occupy any real
property. Schedule 3.13 lists the leases currently in effect with respect
to the real property used or occupied by Company other than the Denric
Tool Property (the "Leased Real Property"). Schedule 3.13 also sets forth,
with respect to each parcel of Leased Real Property leased pursuant to any
oral lease arrangement, the material terms of each such oral lease. To
Management's Knowledge, there are now in full force and effect duly issued
certificates of occupancy permitting the Leased Real Property and
improvements located thereon to be legally used and occupied as the same
are now constituted. To Management's Knowledge, there is no claim of
adverse possession or prescriptive rights involving any of the Leased Real
Property and no basis exists for any such claim. No public improvements
have been commenced and, to Management's Knowledge, none are planned which
in either case may result in special assessments against or otherwise
materially adversely affect any Leased Real Property. Except as set forth
on Schedule 3.12, to Management's Knowledge, no portion of any of the
Leased Real Property has been used as a landfill or for storage or
landfill of Hazardous Materials (other than Hazardous Materials which are
used in the ordinary course of the Business in accordance with the
Environmental Laws). To Management's Knowledge, there is no (i) Order
requiring repair, alteration, or correction of any existing condition
affecting
-14-
any Leased Real Property or the systems or improvements thereat,
(ii) condition or defect which could give rise to an Order of the sort
referred to in "(i)" above, or (iii) underground storage tanks, or any
structural, mechanical, or other defects of material significance
affecting any Leased Real Property or the systems or improvements thereat
(including, but not limited to, inadequacy for normal use of mechanical
systems or disposal or water systems at or serving the Leased Real
Property).
(d) No Condemnation or Expropriation. To Management's Knowledge,
--------------------------------
neither the whole nor any portion of the property or any other assets of
Company is subject to any Order to be sold or is being condemned,
expropriated, or otherwise taken by any government entity with or without
payment of compensation therefor, nor has any such condemnation,
expropriation or taking been proposed.
3.14 Insurance. Set forth in Schedule 3.14 is a complete and accurate list
of all policies of property and casualty, commercial general liability, workers
compensation, and other forms of insurance presently in effect with respect to
the Business and properties of Company. All such policies are valid,
outstanding, and enforceable policies and provide insurance coverage for the
properties, assets, and operations of Company, of the kinds, in the amounts, and
against the risks described therein and no such policy provides for or is
subject to any currently enforceable retroactive rate or premium adjustment,
loss sharing arrangement, or other actual or contingent liability arising wholly
or partially out of events arising prior to the date hereof. No notice of
cancellation or termination has been received with respect to any such policy.
Company has not been refused any insurance with respect to any aspect of the
operations of the Business nor has its coverage been limited by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the last three (3) years. Company has duly and timely made all
claims it has been entitled to make under each policy of insurance. Since
December 31, 1997, all commercial general liability and general liability
policies maintained by or for the benefit of Company have been "occurrence"
policies and not "claims made" policies. To Management's Knowledge, except as
set forth in Schedule 3.14, there is no claim by Company pending under any such
policies as to which coverage has been questioned, denied, or disputed by the
underwriters of such policies, there is no basis for denial of any claim under
any such policy.
3.15 Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule 3.15,
--------------------
Company has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule 3.15,
------------------------
Company has no individual lease of personal property involving
consideration or other expenditure in excess of $5,000 or involving
performance over a period of more than 12 (twelve) months.
(c) Purchase Commitments. Except as set forth in Schedule 3.15, to
--------------------
Management's Knowledge, Company has no purchase commitments for inventory
items or supplies that, together with amounts on hand, constitute in
excess of six (6) months normal usage, or which are at an excessive price.
-15-
(d) Sales Commitments. Company has no sales contracts or commitments
-----------------
to customers or distributors (collectively, "Sales Commitments") except
those made in the ordinary course of the Business, at arm's length and, to
Management's Knowledge, none of such Sales Commitments is for a sales
price which would result in a loss to Company.
(e) Contracts With Affiliates and Certain Others. Except as set forth
--------------------------------------------
in Schedule 3.15, to Management's Knowledge, Company has no agreement,
understanding, contract, or commitment (written or oral) with any
Affiliate or any other officer, employee, agent, consultant, distributor,
dealer, or franchisee that is not cancelable by Company on notice of not
longer than thirty (30) days without liability, penalty, or premium of any
nature or kind whatsoever.
(f) Powers of Attorney. Except as set forth in Schedule 3.15, Company
------------------
has not given a power of attorney, which is currently in effect, to any
person, firm, or corporation for any purpose whatsoever.
(g) Collective Bargaining Agreements. Company is not a party to any
--------------------------------
collective bargaining agreements with any unions, guilds, shop committees
or other collective bargaining groups.
(h) Loan Agreements. Except as set forth in Schedule 3.15, Company is
---------------
not obligated under any loan agreement, promissory note, letter of credit,
or other evidence of indebtedness as a signatory, guarantor or otherwise.
(i) Guarantees. Except as disclosed on Schedule 3.15, Company has not
----------
guaranteed the payment or performance of any person, firm, or corporation,
agreed to indemnify any person or act as a surety, or otherwise agreed to
be contingently or secondarily liable for the obligations of any person.
(j) Contracts Subject to Renegotiation. Company is not a party to any
----------------------------------
contract with any government entity body which is subject to
renegotiation.
(k) Restrictive Agreements. To Management's Knowledge, Company is not
----------------------
a party to nor is it bound by any agreement prohibiting or restricting
Company from competing in any business or geographical area or soliciting
customers or otherwise restricting it from carrying on the Business
anywhere in the world.
(l) Other Material Contracts. To Management's Knowledge, Company has
------------------------
no lease, license, contract, or commitment of any nature (other than the
Sales Commitments) involving consideration or other expenditure in excess
of $50,000 or involving performance over a period of more than six (6)
months, or which is otherwise individually material to the operations of
Company, except as explicitly described in Schedule 3.15 or in any other
Schedule.
(m) No Default. To Management's Knowledge, Company is not in default
----------
under any lease, contract or commitment, nor has any event or omission
occurred which through the passage of time or the giving of notice, or
both, would constitute a default
-16-
thereunder or cause the acceleration of any of Company's obligations or
result in the creation of any Lien on the Facilities or any of the assets
owned, used, or occupied by Company. To Management's Knowledge, no third
party is in default under any lease, contract, or commitment to which
Company is a party, nor has any event or omission occurred which, through
the passage of time or the giving of notice, or both, would constitute a
default thereunder or give rise to an automatic termination, or the right
of discretionary termination, thereof.
3.16 Labor Matters. Except as set forth in Schedule 3.16, within the last
five (5) years Company has not experienced any labor disputes, union
organization attempts, or any work stoppage due to labor disagreements in
connection with the Business. Except to the extent set forth in Schedule 3.16,
(a) to Management's Knowledge, Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice charge or complaint against Company
pending or threatened; (c) there is no labor strike, dispute, request for
representation, slowdown, or stoppage actually pending or, to Management's
Knowledge, threatened against or affecting Company nor any secondary boycott
with respect to products of Company; (d) no question concerning representation
has been raised or is threatened respecting the employees of Company; (e) there
are no administrative charges or court complaints against Company concerning
alleged employment discrimination or other employment related matters pending
or, to Management's Knowledge, threatened before the U.S. Equal Employment
Opportunity Commission or any government entity or before any federal or state
court; and (f) there are no investigations, complaints, citations or other
proceedings pending or, to Management's Knowledge, threatened against Company by
the U.S. Occupational, Safety and Health Administration or any state agency
concerning any health or safety matters.
3.17 Employee Benefits Plans.
(a) Disclosure. Schedule 3.17 sets forth all pension, thrift,
----------
savings, profit sharing, retirement, incentive bonus or other bonus,
medical, dental, life, accident insurance, benefit, employee welfare,
disability, group insurance, cafeteria plan (as defined in Section 125 of
the Code), reimbursement plans for medical expenses or dependent care,
qualified transportation or parking benefit program, adoption or education
assistance program, stock purchase, stock option, stock appreciation,
stock bonus, executive or deferred compensation, hospitalization, and
other similar fringe or employee benefit plans, programs, and
arrangements, and any employment or consulting contracts, "golden
parachutes," collective bargaining agreements, severance agreements or
plans, vacation and sick leave plans, programs, arrangements, and
policies, including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), all employee manuals, and, to Management's
Knowledge, all written or binding oral statements of policies, practices,
or understandings relating to employment, which are provided to, for the
benefit of, or relate to, any persons employed by Company. The items
described in the foregoing sentence are hereinafter sometimes referred to
collectively as "Employee Plans/Agreements." True and correct copies of
all the Employee Plans/Agreements, including all amendments thereto, have
heretofore
-17-
been provided to Buyer. Each of the Employee Plans/Agreements is
identified on Schedule 3.17, to the extent applicable, as one or more of
the following: an "employee pension benefit plan" (as defined in Section
3(2) of ERISA), a "defined benefit plan" (as defined in Section 414 of the
Code), an "employee welfare benefit plan" (as defined in Section 3(1) of
ERISA), and/or as a plan intended to be qualified under Section 401 of the
Code. No Employee Plan/Agreement is a "multi-employer plan" (as defined in
Section 4001 of ERISA), and Company has never contributed or been
obligated to contribute to any such multi-employer plan.
(b) No Employee Benefit Plans Subject to Title IV of ERISA. Neither
-------------------------------------------------------
Company nor any affiliate of Company (within the meaning of Section 414(b)
or (c) of the Code) has ever sponsored, maintained, or contributed to an
employee benefit plan subject to the provisions of Title IV of ERISA.
(c) Prohibited Transactions, etc. To Management's Knowledge, there
----------------------------
have been no "prohibited transactions" within the meaning of Section 406
or 407 of ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any Employee
Plan/Agreement and no event or omission has occurred in connection with
which Company or any of its assets or any Employee Plan/Agreement,
directly or indirectly, could be subject to any liability under ERISA, the
Code, or any other Law or Order applicable to any Employee Plan/Agreement,
or under any agreement, instrument, Law, or Order pursuant to or under
which Company has agreed to indemnify or is required to indemnify any
person against liability incurred under any such Law or Order.
(d) Full Funding. The funds available under each Employee
------------
Plan/Agreement which is intended to be a funded plan exceed the amounts
required to be paid, or which would be required to be paid if such
Employee Plan/Agreement were terminated, on account of rights vested or
accrued as of the Closing Date (using the actuarial methods and
assumptions then used by Company's actuaries in connection with the
funding of such Employee Plan/Agreement).
(e) Controlled Group; Affiliated Service Group; Leased Employees.
------------------------------------------
Company is not currently a member of a controlled group of corporations as
defined in Section 414(b) of the Code or in common control with any
unincorporated trade or business as determined under Section 414(c) of the
Code. For the 1990 through 1993 tax years of Company, Company was a member
of a controlled group of corporations which included Denric Tool, Inc.
Company has never been a member of an "affiliated service group" within
the meaning of Section 414(m) of the Code. Except as set forth in Schedule
3.17, there are not and never have been any leased employees within the
meaning of Section 414(n) of the Code who perform services for Company and
no individuals are expected to become leased employees with the passage of
time.
(f) Payments and Compliance. With respect to each Employee
-----------------------
Plan/Agreement, to Management's Knowledge, except as set forth in Schedule
3.17, (i) all payments due from Company to date have been made and all
amounts properly accrued to date as liabilities of Company which have not
been paid have been properly
-18-
recorded on the books of Company and are reflected in Company's balance
sheets; (ii) Company has complied in all material respects with, and each
such Employee Plan/Agreement materially conforms in form and operation to,
all applicable laws and regulations, including but not limited to ERISA
and the Code, in all respects and all reports and information relating to
such Employee Plan/Agreement required to be filed with any governmental
entity have been timely filed; (iii) each Employee Plan/Agreement which is
a "group health plan" (as defined in Section 5000(b) of the Code) has been
operated in all material respects in accordance with the group health plan
continuation coverage requirements and portability requirements of the
Code and ERISA; (iv) all reports and information relating to each such
Employee Plan/Agreement required by applicable Laws and regulations to be
disclosed or provided to participants or their beneficiaries have been
timely disclosed or provided; (v) each such Employee Plan/Agreement which
is intended to qualify under Section 401 of the Code has received a
favorable determination letter from the Internal Revenue Service with
respect to such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and, to
Management's Knowledge, nothing has occurred since the date of such letter
that has or is likely to adversely affect such qualification or exemption;
(vi) there are no actions, suits, or claims pending (other than routine
claims for benefits) or, to Management's Knowledge, threatened with
respect to such Employee Plan/Agreement or against the assets of such
Employee Plan/Agreement; (vii) no investigation, review, or audit of any
Employee Plan/Agreement by the IRS, United States Department of Labor, or
other government entity is in progress, pending, scheduled, or noticed;
and (viii) no Employee Plan/Agreement is a plan which is established and
maintained outside the United States primarily for the benefit of
individuals substantially all of whom are nonresident aliens.
(g) Post-Retirement Benefits. Except as set forth in Schedule 3.17,
------------------------
no Employee Plan/Agreement provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with
respect to current or former Company's employees beyond their retirement
or other termination of service other than (i) coverage mandated by
applicable law, (ii) death or retirement benefits under any Employee
Plan/Agreement that is an employee pension benefit plan, (iii) deferred
compensation benefits accrued as liabilities on the books of Company
(including the Recent Balance Sheet), (iv) disability benefits under any
Employee Plan/Agreement that is an employee welfare benefit plan and which
have been fully provided for by insurance or otherwise, or (v) benefits in
the nature of severance pay.
(h) No Triggering of Obligations. Except as set forth in Schedule
----------------------------
3.17, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee of Company to
severance pay, unemployment compensation, or any other payment, except as
expressly provided in this Agreement, (ii) accelerate the time of payment
or vesting, or increase the amount of compensation due to any such
employee or former employee, or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
-19-
(i) Delivery of Documents. There has been delivered to Buyer, with
---------------------
respect to each Employee Plan/Agreement:
(i) a copy of the annual report, if required under ERISA, with
respect to each such Employee Plan/Agreement for the last two (2) years;
(ii) a copy of the summary plan description, together with each
summary of material modifications, required under ERISA with respect
to such Employee Plan/Agreement, all material employee communications
relating to such Employee Plan/Agreement, and, unless the Employee
Plan/Agreement is embodied entirely in an insurance policy to which
Company is a party, a true and complete copy of such Employee
Plan/Agreement;
(iii) if the Employee Plan/Agreement is funded through a trust or
any third party funding vehicle (other than an insurance policy), a
copy of the trust or other funding agreement and the latest financial
statements thereof;
(iv) the most recent determination letter received from the IRS
with respect to each Employee Plan/Agreement that is intended to be a
"qualified plan" under Section 401 of the Code; and
(v) a copy of any investment management agreement which
delegates authority for investment of the assets of any Employee
Plan/Agreement.
(j) Annual Reports. With respect to each Employee Plan/Agreement for
--------------
which an annual report has been filed and delivered to Buyer pursuant to
Section 3.17(i), hereof, no material adverse change has occurred with
respect to the matters covered by the latest such annual report since the
date thereof.
(k) Future Commitments. Company has not announced any plan or legally
------------------
binding commitment to create any additional Employee Plans/Agreements or
to amend or modify any existing Employee Plan/Agreement.
3.18 Employment Compensation. Schedule 3.18 contains a true and correct
list of all employees to whom Company is paying compensation, including bonuses
and incentives, at an annual rate in excess of Fifty Thousand Dollars ($50,000)
for services rendered or otherwise, and such list identifies the 1998 annual and
January 1 - May 13, 1999 rates of compensation and bonuses for each such
employee.
3.19 Proprietary Rights.
(a) Schedule 3.19 constitutes a full and complete list of all
trademarks, trade names, service marks, copyrights, and patents, or
applications therefor, owned or used by Company. Company owns or
possesses licenses or other rights to use all patents, patent
applications, trademarks, trademark registrations, applications for
trademark registrations, trade secrets, service marks, service ▇▇▇▇
registrations, applications for service ▇▇▇▇ registrations, trade names,
labels, slogans, claims of copyright, copyright registrations,
applications for copyright registrations, copyrights, drawings, designs,
-20-
proprietary know-how or information, or other rights with respect thereto
(collectively referred to as "Proprietary Rights"), used in the Business
or operation of Company. Except as set forth in Schedule 3.19, to
Management's Knowledge, the current operations of Company do not conflict
with or infringe, and no one has asserted to Company or any Shareholder
that such operations conflict with or infringe, any Proprietary Rights
owned, possessed, or used by any third party. To Management's Knowledge,
there are no third parties whose operations conflict with or infringe, nor
has anyone asserted that such operations conflict with or infringe, any
Proprietary Rights owned, possessed, or used by Company.
(b) Except as set forth in Schedule 3.19, to Management's Knowledge,
Company's internal systems and Company's major suppliers and vendors and
all Products and services marketed by Company are fully Year 2000
Compliant. To be "Year 2000 Compliant" an internal system or a Product or
service must, at all times before, during, and after January 1, 2000,
accurately process and handle date and time data (including, but not
limited to calculating, comparing, and sequencing) from, into, and between
the twentieth and twenty-first centuries, and the years 1999 and 2000,
including leap year calculations, to the extent that other information
technology used in combination with such internal systems and such
Products and services properly exchange date/time data with it. To the
extent any such internal systems and such Products and services must
perform as a system with other internal systems of Company or with other
Products or services marketed by Company, such internal systems and such
Products and services used in combination with such other internal systems
and such other Products and services, respectively, must properly exchange
date/time data with them in accordance with the foregoing warranty. There
are no pending, or, to Management's Knowledge, threatened, claims against
Company relating to whether the Products and services marketed by Company
are Year 2000 Compliant.
3.20 Major Customers and Suppliers.
(a) Major Customers. To Management's Knowledge, all customers will,
---------------
in the ordinary course of business, continue to be customers of Company
after the Closing at substantially the same level of purchases as
heretofore; provided, however, that Shareholders make no representation as
-------- -------
to the effect the transactions contemplated hereby may have on any such
customer.
(b) Major Suppliers. To Management's Knowledge, all suppliers will,
---------------
in the ordinary course of business, continue to be suppliers to Company
after the Closing and will continue to supply Company with substantially
the same quantity and quality of goods at competitive prices; provided,
---------
however, that Shareholders make no representation as to the effect the
-------
transactions contemplated hereby may have on any such supplier.
(c) Dealers and Distributors. Company does not utilize or hire any
------------------------
sales representatives, dealers, distributors or franchisees.
-21-
3.21 Product Warranty and Product Liability. Schedule 3.21 contains a true,
correct, and complete copy of Company's standard warranty or warranties for
sales of Products (as defined below) and, except as stated in Schedule 3.21,
there are no warranties, commitments, or obligations with respect to the return,
repair, or replacement of Products. Schedule 3.21 sets forth the aggregate
annual cost to Company of performing warranty obligations for customers for each
of the three (3) preceding fiscal years and the current fiscal year to the date
of the Recent Balance Sheet. Schedule 3.21 contains a description of all product
liability claims and similar Litigation relating to Products manufactured or
sold, or services rendered which are presently pending, or, to Management's
Knowledge, threatened, or which have been asserted or commenced against Company
within the last ten (10) years, in which a party thereto either requests
injunctive relief or alleges damages in excess of $50,000 (whether or not
covered by insurance). Except as set forth in Schedule 3.21, to Management's
Knowledge, there are no defects in design, construction, or manufacture of
Products which would adversely affect performance or create an unusual risk of
injury to persons or property. Except as set forth in Schedule 3.21, none of the
Products has been the subject of any replacement, field fix, retrofit, or recall
campaign and, to Management's Knowledge, no facts or conditions exist which
could reasonably be expected to result in such a recall campaign. To
Management's Knowledge, the Products have been designed, manufactured, and
labelled so as to meet and comply with all governmental standards and
specifications currently in effect, and have received all governmental approvals
necessary to allow their sale and use. The term "Products" means any and all
products currently or at any time previously manufactured, distributed, or sold
by Company, or by any predecessor of Company, under any brand name or ▇▇▇▇ under
which products are or have been manufactured, distributed, or sold by Company.
3.22 Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All material leases, contracts,
-------------------------
agreements, or other arrangements between Company and any Affiliate are
described on Schedule 3.22.
(b) No Adverse Interests. Except as set forth in Schedule 3.22, none
--------------------
of the Affiliates has any direct or indirect interest in (i) any entity
which does business with Company or is competitive with the Business, or
(ii) any property, asset, or right which is used by Company in the conduct
of the Business.
(c) Obligations. All material obligations of any Affiliate, and all
-----------
material obligations of Company to any Affiliate, are listed on Schedule
3.22.
3.23 Assets Necessary to Business. To Management's Knowledge, Company owns
all property and assets, tangible and intangible, and all leases, licenses, and
other agreements, which are necessary for the conduct of the Business as
presently conducted.
3.24 Copies of Certain Documents. Shareholders have heretofore caused, or
will cause, within ten (10) days hereof, Company to deliver to Buyer true and
complete copies of those documents which are listed on Schedule 3.24
(collectively, the "Disclosure Documents"). Shareholders shall deliver to Buyer
supplemental and/or updated Disclosure Documents as such disclosure may be
required prior to the Closing, and, in such case, Shareholders shall revise
-22-
Schedule 3.24 accordingly. Shareholders have determined, in their sole
discretion, what information they have made available to Buyer and Shareholders
have made no representation or warranty (express or implied) concerning the
completeness or accuracy of the Disclosure Documents, except pursuant to the
representations and warranties contained in this Article III and then expressly
subject to the limitations and restrictions specified in this Article III. Buyer
agrees that the determination by Buyer to engage and enter into this Agreement
is based solely on the representations and warranties contained in this Article
III, subject to the limitations and restrictions specified in this Article III,
and on Buyer's own investigation, analysis, and assessment of the Business.
Company or Shareholders may have, from time to time, disclosed other documents
or information to Buyer or to Buyer's attorneys, accountants, environmental
consultants, or other representatives or agents which are not part of the
Disclosure Documents (collectively, the "Other Information") and Shareholders
make no representation or warranty (express or implied) whatsoever concerning
the completeness or accuracy of the Other Information.
3.25 Underlying Documents. Any underlying documents listed or described in
the Schedules referred to in this Agreement have heretofore been furnished to
Buyer or its representatives. Except as set forth in Schedule 3.25, all such
documents furnished to Buyer are true and complete copies and there are no
amendments or modifications thereto, except as expressly noted in the Schedules
in which such documents are incorporated. Except as set forth in Schedule 3.25,
the minute books of Company contain full, complete, and accurate records of all
meetings and other corporate actions taken by the directors and Shareholders of
Company.
3.26 Business of Company. To Management's Knowledge, there are no
conditions existing with respect to the markets, Products, Facilities, or
personnel of Company which would reasonably be expected to materially and
adversely affect the Business of Company, other than such conditions as may
affect the industry in which Company participates or the economy in general.
3.27 Disclosure of Material Facts. To Management's Knowledge, Shareholders
have disclosed to Buyer all material facts relating to the existing condition
(financial or otherwise) of the Business, assets, liabilities, and operations of
Company. The representations and warranties contained in Article III of this
Agreement and in the Schedules hereto, and any other documents or information
furnished to Buyer by any Shareholder, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements contained herein or therein not misleading.
3.28 No Brokers or Finders. Neither Company nor any of its directors,
officers, employees, Shareholders, or agents have retained, employed, or used
any broker or finder in connection with the transaction provided for herein or
in connection with the negotiation thereof.
3.29 Disclaimer of Other Representations and Warranties. EXCEPT AS
EXPRESSLY SET FORTH IN THIS ARTICLE III, SHAREHOLDERS MAKE NO REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, WITH RESPECT TO THE SHARES,
THE BUSINESS, COMPANY, OR ANY OF THE ASSETS, LIABILITIES, OR OPERATIONS OF
COMPANY, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR
FITNESS FOR ANY
-23-
PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY
EXPRESSLY DISCLAIMED. NOTWITHSTANDING ANY PROVISION OF THIS ARTICLE III TO THE
CONTRARY, NO REPRESENTATION OR WARRANTY CONTAINED IN THIS ARTICLE III SHALL BE
DEEMED TO IN ANY WAY RELATE TO OR CONSTITUTE A REPRESENTATION OR WARRANTY WITH
RESPECT TO ANY ONE OR MORE OF THE EXCLUDED ASSETS, INCLUDING WITHOUT LIMITATION
THE DENRIC TOOL PROPERTY.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Shareholders,
each of which is true and correct on the date hereof, shall remain true and
correct to and including the Closing Date, shall be unaffected by any
investigation heretofore or hereafter made by Shareholders or any notice to
Shareholders, and shall survive the Closing of the transactions provided for
herein.
4.01 Corporate.
(a) Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware.
(b) Corporate Power. Buyer has all requisite corporate power to enter
---------------
into this Agreement and the other documents and instruments to be executed
and delivered by Buyer and to carry out the transactions contemplated
hereby and thereby.
4.02 Authority. The execution and delivery of this Agreement and the
Ancillary Documents and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by the Board of Directors of Buyer. No
other corporate act or proceeding on the part of Buyer is necessary to authorize
this Agreement or the Ancillary Documents or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes and the
Ancillary Documents (a) have been or, when executed and delivered, will be, duly
and validly executed and delivered by Buyer and (b) are or, when executed and
delivered, will be, the legal, valid and binding obligations of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization and other laws affecting
creditors' rights generally, and by general equitable principles.
4.03 No Brokers or Finders. Except for Madison Dearborn Partners, Inc.,
neither Buyer nor any of its directors, officers, employees, or agents have
retained, employed, or used any broker or finder in connection with the
transaction provided for herein or in connection with the negotiation thereof.
4.04 Investment Purpose. Buyer is not acquiring the Shares with a view to
or for sale in connection with any distribution thereof within the meaning of
the Securities Act of 1933, as amended.
-24-
ARTICLE V
OTHER MATTERS
5.01 Title Insurance. Not less than fifteen (15) days prior to the Closing,
Buyer shall obtain leasehold title insurance commitments, issued by a title
insurance company or companies reasonably satisfactory to Buyer, agreeing to
issue to Buyer standard form lessee's policies of title insurance with respect
to all Leased Real Property, together with a copy of each document to which
reference is made in such commitments. Such policies shall be upon standard ALTA
Form 1992 leasehold owner's policies and in such amounts as shall be reasonably
acceptable to Buyer. All policies shall insure title in full accordance with the
representations and warranties set forth herein and shall be subject only to
such conditions and exceptions as shall be reasonably acceptable to Buyer, and
shall contain such endorsements as Buyer shall reasonably request (including,
but not limited to, an endorsement over rights of creditors, if requested by
Buyer or Buyer's lender).
5.02 Surveys. Not less than fifteen (15) days prior to the Closing, Buyer
shall obtain surveys of all Leased Real Property prepared in accordance with
ALTA/ASCM standards, each dated no more than ninety (90) days prior to the
Closing and each detailing the legal description, the perimeter boundaries, all
improvements located thereon, all easements and encroachments affecting each
such parcel of Leased Real Property, and such other matters as may be reasonably
requested by Buyer or the title insurance companies, each containing a surveyor
certificate reasonably acceptable to Buyer and the title insurance companies,
and each prepared by a registered land surveyor satisfactory to Buyer.
5.03 Environmental and Health and Safety Audits. Shareholders shall permit
Buyer, its representatives, or an environmental engineering firm retained by
Buyer to conduct environmental and health and safety audits of Company's
operations and Leased Real Property, as Buyer in its discretion shall consider
necessary or appropriate; provided, however, that Buyer shall not conduct
invasive testing or sampling of the Leased Real Property without the prior
written consent of Company, subject to such terms and conditions as Company may
reasonably request.
5.04 Non-competition; Confidentiality. Subject to the Closing, and as an
inducement to Buyer to execute this Agreement and complete the transactions
contemplated hereby, and in order to preserve the goodwill associated with the
Business being acquired pursuant to this Agreement, each Shareholder hereby
covenants and agrees as follows:
(a) Covenant Not to Compete. Subject to the provisions of (a)(v)
-----------------------
below, for a period of five (5) years from the Closing Date, no
Shareholder will, directly or indirectly:
(i) engage in, continue in, or carry on any business which
competes with the Business or is substantially similar thereto,
including owning or controlling any financial interest in any
corporation, partnership, firm, or other form of business organization
which is so engaged;
-25-
(ii) consult with, advise, or assist in any way, whether or not
for consideration, any corporation, partnership, firm, or other
business organization which is now or becomes a competitor of Buyer in
any aspect with respect to the Business including, but not limited to,
advertising or otherwise endorsing the products of any such
competitor, soliciting customers or otherwise serving as an
intermediary for any such competitor, loaning money or rendering any
other form of financial assistance to, or engaging in any form of
business transaction on other than an arm's length basis with any such
competitor;
(iii) offer employment to any employee of Buyer, without the
prior written consent of Buyer, except that Shareholders may offer
employment to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and/or any Company employee whose employment Buyer
or Company terminates after the Closing; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete or to commit any act which
materially and adversely affects the Business; provided, however, that
the foregoing shall not prohibit the ownership of securities of
corporations which are listed on a national securities exchange or
traded in the national over-the-counter market in an amount which
shall not exceed five percent (5%) of the outstanding shares of any
such corporation. The parties agree that the geographic scope of this
covenant not to compete shall extend throughout North America and
South America, and Shareholders acknowledge that such territory is
reasonable in light of the Business. The parties agree that Buyer may
sell, assign, or otherwise transfer this covenant not to compete, in
whole or in part, to any person, corporation, firm, or entity that
purchases all or part of the Business or the Shares. In the event a
court of competent jurisdiction determines that the provisions of this
covenant not to compete are excessively broad as to duration,
geographical scope, or activity, it is expressly agreed that this
covenant not to compete shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any such over broad provisions shall be deemed, without
further action on the part of any person, to be modified, amended,
and/or limited, but only to the extent necessary to render the same
valid and enforceable in such jurisdiction.
(v) The parties agree that this Section 5.04 shall not prohibit
Shareholders' ownership of a franchised dealer, provided such dealer
does not engage in the design, design control or manufacture of
buckets or other demolition or material handling attachments for
construction equipment and provided further that such dealer is not a
"master dealer" or otherwise engaged in the sale and/or distribution
of buckets or other demolition or material handling attachments for
construction equipment to other dealers or otherwise in an expanded
trade area.
(b) Covenant of Confidentiality. No Shareholder shall at any time
---------------------------
subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii)
-26-
disclose to any person, or (iii) keep or make copies of documents, tapes,
discs, or programs containing, any confidential information concerning
Company. For purposes hereof, "confidential information" shall mean and
include, without limitation, all Proprietary Rights in which Company has an
interest, all customer lists and customer information, and all other
information concerning Company's processes, apparatus, equipment,
packaging, products, and marketing and distribution methods not already in
the public domain.
(c) Equitable Relief for Violations. Each Shareholder agrees that the
-------------------------------
provisions and restrictions contained in this Section 5.04 are necessary to
protect the legitimate continuing interests of Buyer in acquiring Company,
and that any violation or breach of these provisions will result in
irreparable injury to Buyer for which a remedy at law would be inadequate
and that, in addition to any relief at law which may be available to Buyer
for such violation or breach and regardless of any other provision
contained in this Agreement, Buyer shall be entitled to injunctive and
other equitable relief as a court may grant after considering the intent of
this Section 5.04.
5.05 General Releases. At the Closing, each Shareholder and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ shall deliver general releases to Buyer, in form and substance reasonably
satisfactory to Buyer, Shareholders, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, releasing Company
from all liabilities to the Closing Date.
5.06 HSR Act Filings. To the extent such filings have not been completed
prior to the execution of this Agreement, Shareholders and Buyer shall, each in
cooperation with the other, file any reports or notifications that may be
required to be filed by it under the HSR Act with the Federal Trade Commission
and the Antitrust Division of the Department of Justice and shall furnish to the
other all such information in its possession as may be necessary for the
completion of the reports or notifications to be filed by the other. Prior to
making any communication, written or oral, with the Federal Trade Commission,
the Antitrust Division of the Federal Department of Justice, or any other
government entity or authority or members of their respective staffs with
respect to this Agreement or the transactions contemplated hereby, Shareholders
shall consult with Buyer.
5.07 Customer and Supplier Information. Not less than five (5) business
days prior to the Closing Date, Shareholders shall deliver to Buyer: (a)
Schedule 5.07, which shall contain a list of (i) the ten (10) largest customers
of Company for each of the two (2) most recent fiscal years (determined on the
basis of the total dollar amount of net sales) showing the total dollar amount
of net sales to each such customer during each such year, and (ii) the ten (10)
largest suppliers to Company for each of the two most recent fiscal years
(determined on the basis of the total dollar amount of purchases) showing the
total dollar amount of purchases from each such supplier during each such year;
and (b) a written representation of Shareholders that Schedule 5.07 is true,
correct and complete as of the Closing Date.
5.08 Post-Closing Cooperation. Shareholders and Buyer shall cooperate with
each other following the Closing, so that the parties may prepare the Final
Closing Balance Sheet and final tax return of Company. In connection therewith,
Buyer shall provide Shareholders access to the books and records of Company,
and, for a period of forty-five (45) days following the Closing, shall provide
Shareholder ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ with access to her former office and
-27-
computer at Company and access to Company employees to whom she may reasonably
need to have access for such purpose.
5.09 Information Regarding Denric Tool Property and/or Off-Site Properties.
(a) Buyer shall not initiate or cause to be initiated, directly or
indirectly, any communication with or voluntarily offer to provide any
information of any type or nature to any federal, state, or local
governmental entity, agency, or other regulatory or quasi-governmental
authority or to any other person or entity with respect to the Denric Tool
Property and Off-Site Properties or any one or more of them.
(b) Buyer shall promptly notify Shareholders of any request for
information or other communication of any type or nature, whether written
or oral, and provide Shareholders with a written copy of any written
materials received with respect thereto, which Buyer receives from any such
governmental entity, agency, or other regulatory or quasi-governmental
authority or from any other person or entity with respect to the Denric
Tool Property and Off-Site Properties or any one or more of them.
(c) Except as may be otherwise required under applicable law, Buyer
shall not respond to any request for information or other communication
described in Section 5.09(b) until Shareholders have had a reasonable
opportunity to review such request for information or other communication
and formulate a response thereto.
(d) Without in any way limiting Shareholders' indemnification
obligations under Section 9.02, or the procedures for indemnification
contained in Article IX, Buyer acknowledges and agrees that, after the
Closing Date, Shareholders or an entity formed by them shall be the owners
of the Denric Tool Property and shall have the sole and exclusive
responsibility and authority to:
(i) respond to any request for information or other
communication described in Section 5.09(b) and to otherwise contact,
notify, and negotiate with any such governmental entity, agency, or
other regulatory or quasi-governmental authority and all other
interested parties with respect to the Denric Tool Property and Off-
Site Properties or any one or more of them and all allegations,
complaints, proceedings (whether formal or informal), and findings
pertaining to any alleged violation of Environmental Laws or
regulations related thereto,
(ii) appeal or contest any finding of a violation of such
Environmental Laws or regulations or any order or requirement with
respect to the remediation thereof, and
(iii) effect the correction and remediation of any such violation
of such Environmental Laws and regulations.
(e) Buyer shall cooperate with Shareholders, and Shareholders'
employees, agents, invitees, contractors, consultants, and other parties as
Shareholders may reasonably determine, with respect to (i) the formulation
of a response by Shareholders
-28-
to any request for information or other communication described in Section
5.09(b) and (ii) any actions which Shareholders may elect to take as
described in Section 5.09(d).
ARTICLE VI
COVENANTS OF SHAREHOLDERS AND BUYER
Shareholders and Buyer covenant and agree as follows:
6.01 Access to Information and Records. During the period prior to the
Closing, Shareholders shall give Buyer, its counsel, accountants, and other
representatives: (a) access during normal business hours to all of the
properties, books, records, contracts, and documents of Company for the purpose
of such inspection, investigation, and testing as Buyer deems appropriate (and
Shareholders shall furnish or cause to be furnished to Buyer and its
representatives all information with respect to the business and affairs of
Company as Buyer may reasonably request); (b) access to employees, agents, and
representatives for the purposes of such meetings and communications as Buyer
reasonably desires; and (c) with the prior consent of Shareholders in each
instance (which consent shall not be unreasonably withheld), access to vendors,
customers, manufacturers of its machinery and equipment, and others having
business dealings with Company.
6.02 Bank Accounts. Not less than ten (10) days prior to the Closing,
Shareholders shall provide to Buyer a list of each bank in which Company has an
account or safe deposit box, the name and number of each such account or box,
and the names of all persons authorized to draw thereon or who have access
thereto, with the amounts they are authorized to draw.
6.03 Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by Buyer:
(a) No Changes. Company will carry on the Business diligently and in
----------
the same manner as heretofore and will not make or institute any material
changes in its methods of purchase, sale, management, accounting, or
operation.
(b) Maintain Organization. Company will take such action as may be
---------------------
necessary to maintain, preserve, renew, and keep in favor and effect the
existence, rights, and franchises of Company and will use its reasonable
best efforts to preserve the business organization of Company intact, to
keep available to Buyer the present officers and employees, and to
preserve for Buyer its present relationships with suppliers and customers
and others having business relationships with Company.
(c) No Breach. Shareholders will not do or omit any act, which may
---------
cause a breach of any material contract, commitment, or obligation, or any
breach of any representation, warranty, covenant, or agreement made by
Shareholders herein, or which would have required disclosure had it
occurred after the date of the Recent Balance Sheet and prior to the date
of this Agreement.
(d) No Material Contracts. No contract or commitment will be entered
---------------------
into, and no purchase of raw materials or supplies and no sale of goods or
services (real,
-29-
personal, or mixed, tangible or intangible) will be made, by or on behalf
of Company, except contracts, commitments, purchases, or sales which are
in the ordinary course of the Business and consistent with past practice,
or are not material to Company (individually or in the aggregate) and
would not have been required to be disclosed in the Schedules had they
been in existence on the date of this Agreement.
(e) No Corporate Changes. Shareholders shall not amend Company's
--------------------
Articles of Incorporation or By-laws, make any changes in authorized or
issued capital stock, or grant options or other forms of derivative
securities.
(f) Maintenance of Insurance. Shareholders shall maintain all of the
------------------------
insurance in effect as of the date hereof.
(g) Maintenance of Property. Company shall use, operate, maintain,
-----------------------
and repair all property of Company in a normal business manner.
(h) Interim Financials. Shareholders will provide Buyer with interim
------------------
monthly financial statements and other management reports as and when they
are available.
6.04 Consents. Shareholders will use their reasonable best efforts prior to
Closing to obtain all approvals, consents, and waivers listed on Schedule 7.04
which are necessary for the consummation of the transactions contemplated
hereby; provided, however, that neither Shareholders nor Company shall be
-------- -------
obligated to pay money or other compensation to any third party to obtain any
such approval, consent, or waiver.
6.05 Other Action. Shareholders and Buyer will use their respective
reasonable best efforts to cause the fulfillment at the earliest practicable
date of all of the conditions to the parties' obligations to consummate the
transactions contemplated in this Agreement. Without limiting the foregoing,
Shareholders agree to take all actions reasonably necessary to cause Company to
perform its obligations under this Agreement and to conduct the Business as
provided in Section 6.03.
6.06 Updating of Schedules. From the date hereof until the Closing Date,
Shareholders shall periodically update all of the Schedules and shall promptly
notify Buyer of any material changes or additions or events which may, after the
lapse of time, cause any change in any of such Schedules, other than changes to
such Schedules due to the consummation of the transactions contemplated hereby.
If an updated Schedule reveals a change which Buyer, in the exercise of Buyer's
reasonable discretion, determines has or will result in a material adverse
effect on the financial condition of Company, Buyer may notify Shareholders
within five (5) business days after receipt of such an updated Schedule that the
updated Schedule is not acceptable and that Buyer is terminating this Agreement
pursuant to Section 11.01(c). If Buyer does not exercise such right to terminate
this Agreement within a period of five (5) business days after receipt of such
an updated Schedule, the updated Schedule will be deemed to have been accepted
by Buyer, to have qualified the representations and warranties contained in
Article III of this Agreement, and to have cured any misrepresentation or breach
of warranty that otherwise might have existed hereunder by reason of the change.
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6.07 No-Shop. During the period prior to the Closing or any earlier
termination of this Agreement, neither Company nor Shareholders shall, directly
or indirectly, through any officer, director, agent or otherwise, (i) entertain,
solicit, initiate or encourage submission of inquiries, proposals or offers from
any potential buyer other than Buyer relating to the disposition of any
ownership interest in Company or any material portion of its assets, or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person other than Buyer (and its attorneys, accountants, and representatives)
information with respect to, the disposition of any ownership interest in
Company or any material portion of its assets.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction or waiver by Buyer prior to or at the
Closing of each of the following conditions:
7.01 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Shareholders in this Agreement, and the
statements contained in the Schedules or in any instrument, list, certificate,
or writing delivered by Shareholders pursuant to this Agreement, shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date,
except for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer.
7.02 Compliance With Agreement. Shareholders shall have in all material
respects performed and complied with all of their agreements and obligations
under this Agreement which are to be performed or complied with by them prior to
or on the Closing Date, including the delivery of the closing documents
specified in Section 10.01.
7.03 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any government entity shall have been
commenced, against Buyer, Company, or any of the Affiliates, officers, or
directors of any of them, with respect to the transactions contemplated hereby.
7.04 Consents and Approvals. All approvals, consents, and waivers that are
required to effect the transactions contemplated hereby, as listed on Schedule
7.04, shall have been received, and executed counterparts thereof shall have
been delivered to Buyer not less than two (2) business days prior to the
Closing.
7.05 Title Insurance. Buyer shall have obtained good and valid leasehold
title insurance policies or, in final form, irrevocable leasehold title
insurance binders, dated as of the Effective Time, conforming to the
specifications set forth in Section 5.01 hereof.
7.06 HSR Waiting Period. All applicable waiting periods related to the HSR
Act shall have expired.
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7.07 Lease Agreements. Buyer shall have entered into lease agreements
(collectively, the "Lease Agreements") with Shareholders for the properties
described in Schedule 7.07 (the "Post-Closing Leased Properties"). The Lease
Agreements shall (a) provide for, in the aggregate, total annual rent payments
of Three Hundred Fifty-Three Thousand Two Hundred and Sixteen Dollars
($353,216), and (b) be for, in the aggregate, 59,034 square feet of
manufacturing space at Four Dollars ($4.00) per square foot annual cost and
11,708 square feet of office space at Ten Dollars ($10.00) per square foot
annual cost. Each Lease Agreement: (a) shall be a seven (7) year triple net
lease; (b) shall provide for a seven (7) year renewal, at Buyer's option; (c)
shall contain a two percent (2%) annual escalation clause in Year 2 through Year
7 of the lease; (d) shall provide that, if Buyer proposes to exercise its
renewal option, the parties will agree to cause an independent analysis to be
performed on the applicable property for the purpose of determining prevailing
market rental rates (including escalation clauses) on like properties, and the
lease rental rate (and, if applicable, the escalation clause) shall be
accordingly adjusted for the renewal term; provided, however, that in no event
-------- -------
shall the lease rental rate during the renewal term be less than the lease
rental rate in effect as of the end of Year 7 of the lease as increased pursuant
to a two percent (2%) annual escalation clause in Year 8 through Year 14 of the
lease as so renewed; and (e) shall contain such other terms and conditions as
are mutually acceptable to Buyer and Shareholders. Notwithstanding the
foregoing, the parties acknowledge that if prior to Closing it is established by
Shareholders to the satisfaction of Buyer that current actual market rates for
the Post-Closing Leased Properties exceed the rental terms set forth above, the
parties will negotiate in good faith in an attempt to determine rental terms
more reflective of market rates. At the termination of each such Lease
Agreement, Buyer shall, at Shareholders' request, be obligated to cause to be
performed, at Buyer's expense, a Phase II environmental survey of the Post-
Closing Leased Properties. Buyer shall conduct, at Buyer's expense, any
remediation of environmental contamination caused directly or indirectly, by the
actions of Buyer, any Buyer Affiliate, or any person (other than any Shareholder
or Shareholder Affiliate) allowed access to the Post-Closing Leased Properties
by Buyer. The foregoing remediation shall be made only to the extent that it is
required by federal or state regulatory agencies, and, in such a case, to the
satisfaction of the appropriate federal or state regulatory agency with primary
jurisdiction over the environmental conditions. In the event of any dispute
regarding the cause or source of any environmental contamination the Lease
Agreements shall further provide that the parties shall negotiate in an attempt
to determine such cause or source, and if the parties are unable to reach
agreement, the parties will submit to alternative dispute resolution procedures
as specified in the Lease Agreements in order to resolve such dispute, and in
such event the party who is ultimately determined to be responsible shall bear
the costs of such alternative dispute resolution procedures, or, if the parties
are found to be jointly responsible, such costs, as well as the costs of
remediation, shall be shared in proportion to the respective level of
responsibility of each party.
7.08 Existing Lease Agreements. Company and/or Shareholders, as applicable,
shall have terminated (i) the existing shareholder agreement in place by and
between Company and Shareholders, (ii) all existing agreements in place between
Company and Shareholders and any Shareholder Affiliate, whether written or oral,
including but not limited to all existing lease agreements between Company and
Shareholders or any Shareholder Affiliate. In addition, the Company shall have
assigned to the Shareholders or a Shareholder Affiliate all of the Company's
rights and obligations under the existing lease agreement relating to the Denric
Tool Property between Company and the lessee thereof.
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7.09 Environmental and Health and Safety Audit. The results of the
environmental and health and safety audit conducted pursuant to Section 5.03
shall not have disclosed any present condition, process, or practice with
respect to Company, any Facility, or any property owned, occupied, or operated
by Company which is not in material compliance with all applicable Environmental
Laws and other Laws regarding occupational safety and health.
7.10 Due Diligence. Buyer shall have concluded its due diligence
investigation of Company and the results of such due diligence investigation
shall not have disclosed any item which, individually or in the aggregate, has
had or would have a material adverse effect on the financial condition of
Company.
7.11 Transfer of Denric Tool Property. Company shall have transferred the
Denric Tool Property to Shareholders or any Shareholder Affiliate pursuant to
documentation that contains no indemnification, representation, warranty or
post-closing covenant on the part of Company, nor any other terms which,
individually or in the aggregate, has had or would have a material adverse
effect on the financial condition of Company. Without in any way limiting the
previous sentence: (a) such documentation shall be in the form of a quitclaim
deed; (b) Buyer shall have approved of the form of such quitclaim deed (and all
other necessary transfer documents, if any) prior to its execution; (c) such
quitclaim deed shall be accompanied by a title commitment showing that Company,
as grantor under the quitclaim deed, is the true owner of the transferred
property; and (d) Shareholders shall have delivered to Buyer a properly
recorded, file-stamped copy of such quitclaim deed prior to the Closing Date.
7.12 Assignment of Patent. The patent, United States Patent Number
4,871,292, granted to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ on October 3, 1989, for a system for
attaching and locking material handling tools to a dipper boom, shall have been
validly assigned to Company.
7.13 Condition Regarding Section 338(h)(10) Election. In the event that,
pursuant to Section 2.04, Shareholders do not accept a Gross Up Amount equal to
$750,000 and Buyer and Shareholders are required to negotiate in good faith in
an attempt to determine a mutually acceptable adjustment to the Purchase Price,
Buyer and Shareholders shall have agreed upon a mutually acceptable adjustment
to the Purchase Price.
7.14 Condition Regarding Lease Agreements. In the event that, pursuant to
Section 7.07, Shareholders present independent evidence that current actual
market rates for the Post-Closing Leased Properties exceed the rental rates set
forth in Section 7.07 and such independent evidence is mutually acceptable to
Buyer and Shareholders as evidence of current actual market rates, and Buyer and
Shareholders are required to negotiate in good faith in an attempt to determine
rental rates more reflective of market rates, Buyer and Shareholder shall have
agreed upon a mutually acceptable adjustment to such rental rates.
7.15 Delivery of Schofield Loan Documents. At least five (5) days prior to
Closing, Shareholders shall have delivered to Buyer all loan documents between
the City of ▇▇▇▇▇▇▇▇▇, Wisconsin and Shareholders or Company pertaining to that
certain mortgage dated May 29, 1986 relating to the property located at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ (such mortgage and loan documents, the
"Schofield Loan Documents").
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(b) The Schofield Loan Documents shall not contain any unusual or
onerous terms and shall otherwise be satisfactory to Buyer in its
reasonable discretion.
7.16 Delivery of Additional Environmental Materials. Shareholders and
Company shall have disclosed and made available to Buyer, to Management's
Knowledge, all written studies, analyses and test results and copies of
correspondence with any governmental entity or any other third party prior to
January 1, 1989 (except for any of such information regarding the Denric Tool
Property and the Off-Site Properties), in the possession, custody or control of
Company or any Shareholder relating to (A) the environmental conditions on,
under, about or from any real property owned by Company, the Leased Real
Property or any predecessor in interest to Company at the present time or in the
past, and (B) any Hazardous Materials used, managed, handled, transported,
treated, generated, stored or released by Company or any other person on, under,
about or from the Leased Real Property or in connection with the operation of
Company.
ARTICLE VIII
CONDITIONS PRECEDENT TO SHAREHOLDERS' OBLIGATIONS
Each and every obligation of Shareholders to be performed on the Closing
Date shall be subject to the satisfaction or waiver by Shareholders prior to or
at the Closing of the following conditions:
8.01 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Buyer in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made or given on and as of the Closing Date.
8.02 Compliance With Agreement. Buyer shall have in all material respects
performed and complied with all of Buyer's agreements and obligations under this
Agreement which are to be performed or complied with by Buyer prior to or on the
Closing Date, including the delivery of the closing documents specified in
Section 10.02.
8.03 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no investigation by any government entity shall have been
commenced, against Buyer with respect to the transactions contemplated hereby.
8.04 HSR Waiting Period. All applicable waiting periods related to the HSR
Act shall have expired. 8.05 Assignment of Schofield Loan. Subject to Buyer's
review of the Schofield Loan Documents pursuant to Section 7.15, the Schofield
Loan Documents shall have been validly assigned to and assumed by Company, and
such assignment shall have been consented to by the City of ▇▇▇▇▇▇▇▇▇,
Wisconsin.
8.06 Condition Regarding Section 338(h)(10) Election. In the event that,
pursuant to Section 2.04, Shareholders do not accept a Gross Up Amount equal to
$750,000 and
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Buyer and Shareholders are required to negotiate in good faith in an attempt to
determine a mutually acceptable adjustment to the Purchase Price, Buyer and
Shareholders shall have agreed upon a mutually acceptable adjustment to the
Purchase Price.
8.07 Condition Regarding Lease Agreements. In the event that, pursuant to
Section 7.07, Shareholders present independent evidence that current actual
market rates for the Post-Closing Leased Properties exceed the rental rates set
forth in Section 7.07 and such independent evidence is mutually acceptable to
Buyer and Shareholders as evidence of current actual market rates, and Buyer and
Shareholders are required to negotiate in good faith in an attempt to determine
rental rates more reflective of market rates, Buyer and Shareholder shall have
agreed upon a mutually acceptable adjustment to such rental rates.
ARTICLE IX
INDEMNIFICATION
9.01 By Shareholders. Subject to the terms and conditions of this Article
IX, each Shareholder, jointly and severally, hereby agrees to indemnify, defend,
and hold harmless Buyer, and its directors, officers, employees, and controlled
and controlling persons (hereinafter "Buyer's Affiliates"), from and against all
Claims asserted against, resulting to, imposed upon, or incurred by Buyer,
Buyer's Affiliates, Company, or the Business, directly or indirectly, by reason
of, arising out of, or resulting from (a) the inaccuracy or breach of any
representation or warranty of any Shareholder contained in or made pursuant to
this Agreement (regardless of whether such breach is deemed "material"); (b) the
breach of any covenant of any Shareholder contained in this Agreement
(regardless of whether such breach is deemed "material"); or (c) obligations and
liabilities existing or arising from events occurring prior to the Closing Date
which are not reflected, or which exceed amounts reserved, on the Recent Balance
Sheet. As used in this Article IX, the term "Claim" shall include (i) all
liabilities; (ii) all losses, damages (including, without limitation,
consequential damages), judgments, awards, settlements, costs, and expenses
(including, without limitation, interest (including prejudgment interest in any
litigated matter), penalties, court costs and reasonable attorneys' fees and
expenses); and (iii) all demands, claims, suits, actions, costs of
investigation, causes of action, proceedings, and assessments, whether or not
ultimately determined to be valid.
9.02 By Shareholders - Denric Tool and Environmental Matters.
(a) The Denric Tool Property and Other Environmental Matters. Subject
--------------------------------------------------------
to the terms and conditions of this Article IX, except as set forth
herein, and without limiting the generality of the foregoing, each
Shareholder, jointly and severally, hereby agrees to indemnify, defend,
and hold harmless Buyer and Buyer's Affiliates from and against all Claims
asserted against, resulting to, imposed upon, or incurred by Buyer,
Buyer's Affiliates, Company or the Business, directly or indirectly, by
reason of, arising out of or in any way related to any liabilities
associated with the property located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 51 in
Rothschild, Wisconsin (the "Denric Tool Property"), and any violation of
Laws with respect to activities conducted on the Denric Tool Property,
including without limitation Claims arising out of environmental
contamination, pollution, spills, releases or discharges at, on, under or
from the Denric
-35-
Tool Property, including without limitation Claims by any third party or
governmental authority arising out of or in any way related to: (i) the
information gathering, investigation, removal, remediation, clean-up or
closure of or related to any environmental condition at, on, under or from
the Denric Tool Property or at, on, under or from any other property
impacted by contamination, pollution, spills, releases or discharges at,
on, under or from the Denric Tool Property (hereinafter, "Off-Site
Properties"), pursuant to CERCLA, the Resource Conservation and Recovery
Act, or any other Environmental Laws, or under any federal or state common
law theory of liability; (ii) damage or diminution in value to the Denric
Tool Property or Off-Site Properties; (iii) bodily injury or death to any
person; or (iv) natural resource damages at the Denric Tool Property or
Off-Site Properties.
(b) Other Environmental Issues. Subject to the terms and conditions
--------------------------
of this Article IX, except as set forth herein, and without limiting the
generality of the foregoing, each Shareholder, jointly and severally,
hereby agrees to indemnify, defend, and hold harmless Buyer and Buyer's
Affiliates from and against all Claims asserted against, resulting to,
imposed upon, or incurred by Buyer, Buyer's Affiliates, Company, the
Business, any third party, or any governmental authority, directly or
indirectly, by reason of, arising out of or in any way related to any of
the following: (i) the transport of hazardous wastes from Denric Tool to
the Facilities and the disposal of such hazardous wastes without required
permits for such activity, as referenced on Schedule 3.12(c)(1); (ii)
Company's management, transportation, treatment, storage or disposal of
spent paint filters; and (iii) Company's failure to meet its Form R
reporting obligations for the years 1987 through 1998 relative to
Company's welding, grinding, polishing and painting operations; ((i), (ii)
and (iii), collectively, the "Other Environmental Issues"). In the event
that the matters described in any one or more of (i), (ii), or (iii) above
is resolved to Buyer's satisfaction (in its sole discretion) prior to
Closing, the corresponding obligation of Shareholders to provide
indemnification pursuant to this Section 9.02 with respect to such matter
shall terminate.
9.03 By Buyer. Subject to the terms and conditions of this Article IX,
Buyer hereby agrees to indemnify, defend, and hold harmless each Shareholder
from and against all Claims asserted against, resulting to, imposed upon or
incurred by any such Shareholder, directly or indirectly, by reason of, arising
out of, or resulting from (a) the inaccuracy or breach of any representation or
warranty of Buyer contained in or made pursuant to this Agreement (regardless of
whether such breach is deemed "material"); (b) the breach of any covenant of
Buyer contained in this Agreement (regardless of whether such breach is deemed
"material"); or (c) obligations and liabilities existing or arising from events
occurring on or after the Closing Date.
9.04 By Buyer - Product Liability Issues.
(a) Indemnification for Product Liability Claims. Subject to the
--------------------------------------------
terms and conditions of this Article IX, Buyer hereby agrees to indemnify,
defend, and hold harmless each Shareholder from and against all product
liability Claims and similar Litigation relating to Products manufactured
or sold, or Product warranty services rendered by Company at any time,
whether prior to or after the Closing Date (collectively, "Product
Liability Claims").
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(b) Product Liability Claims During Escrow Term. Nothing in this
-------------------------------------------
Section 9.04 shall be deemed to limit Buyer's right to make claims against
the Escrow Amount during the term of the Escrow Agreement (the "Escrow
Term") pursuant to Section 9.01(c) for any Pre-Closing Product Liability
Claims which exceed the amounts reserved for such claims on the Recent
Balance Sheet. The parties acknowledge and agree that if any Shareholder
makes a Claim against Buyer with respect to any Pre-Closing Product
Liability Claim during the Escrow Term, Buyer shall be entitled to
reimbursement from the Escrow Amount for any amounts paid in satisfaction
of its obligations under this Section 9.04. As used in this Section 9.04, a
"Pre-Closing Product Liability Claim" is any Product Liability Claim
arising out of finished goods Products manufactured or sold prior to the
Closing Date (the date of manufacture being determined by reference to the
Products' serial numbers) or Product warranty services rendered, by Company
(or its predecessors) at any time prior to the Closing Date.
(c) Waiver for Failure to Notify. The parties agree that it would
----------------------------
not serve their intentions if Shareholders failed to reveal a known actual
or potential Pre-Closing Product Liability Claim until after conclusion of
the Escrow Term. Accordingly, to the extent that either Shareholder has
actual knowledge of any pending or threatened Pre-Closing Product Liability
Claim on any date prior to the conclusion of the Escrow Term, and the
Shareholders do not provide Buyer with written notice of such Pre-Closing
Product Liability Claim prior to the conclusion of the Escrow Term and
final disbursement of any Escrow Amount to the Shareholders, then the
Shareholders shall be deemed to have irrevocably waived their rights to
indemnification under this Section 9.04 as to that Pre-Closing Product
Liability Claim.
9.05 Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article IX with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
(a) Notice and Defense. The party or parties to be indemnified
------------------
(whether one or more, the "Indemnified Party") will give the party from
whom indemnification is sought (the "Indemnifying Party") prompt written
notice of any such Claim, and the Indemnifying Party will undertake the
defense thereof by representatives chosen by it. Failure to give such
notice shall not affect the Indemnifying Party's duty or obligations under
this Article IX, except to the extent the Indemnifying Party is prejudiced
thereby. So long as the Indemnifying Party is defending any such Claim
actively and in good faith, the Indemnified Party shall not settle such
Claim. The Indemnified Party shall make available to the Indemnifying Party
or its representatives all records and other materials reasonably required
by them and in the possession or under the control of the Indemnified Party
for the use of the Indemnifying Party and its representatives in defending
any such Claim and shall in other respects give reasonable cooperation in
such defense.
(b) Failure to Defend. If the Indemnifying Party, within a
-----------------
reasonable time after notice of any such Claim, fails to defend such Claim
actively and in good faith, the Indemnified Party will (upon further
notice) have the right to undertake the defense, compromise or settlement
of such Claim; provided, however, that the Indemnified Party
-37-
shall not enter into any settlement or compromise of any Claim or consent
to the entry of a judgment with respect to such Claim, on behalf of and for
the account and risk of the Indemnifying Party without the prior written
consent of the Indemnifying Party, which consent shall not be unreasonably
withheld.
(c) Indemnified Party's Rights. Anything in this Article IX to the
--------------------------
contrary notwithstanding, (i) if there is a reasonable probability that a
Claim may materially and adversely affect the Indemnified Party other than
as a result of money damages or other money payments, the Indemnified Party
shall have the right to defend, compromise, or settle such Claim, and (ii)
the Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry
of any judgment which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim.
9.06 Payment.
(a) Time for Payment. Upon judgment, determination, settlement, or
----------------
compromise of any third-party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified
Party in reimbursement of any amount theretofore required to be paid by it,
the amount so determined by judgment, determination, settlement, or
compromise and all other Claims of the Indemnified Party with respect
thereto unless, in the case of a judgment, an appeal is made from the
judgment. If the Indemnifying Party desires to appeal from an adverse
judgment, then the Indemnifying Party shall post and pay the cost of the
security or bond, if any, to stay execution of the judgment pending appeal.
(b) Effect of Payment. Upon the payment in full by the Indemnifying
-----------------
Party of such amounts, the Indemnifying Party shall succeed to the rights
of such Indemnified Party, to the extent not waived in settlement, against
the third party who made such third-party Claim.
9.07 Limitations on Indemnification.
(a) Time Limitation. No Claim shall be brought under this Article
---------------
IX after the lapse of one (1) year following the Closing. Regardless of the
foregoing, however, or any other provision of this Agreement:
(i) There shall be no time limitation on claims or actions
brought for breach of any representation or warranty made by
Shareholders in Sections 3.04 and 3.05, and Shareholders hereby
waive all applicable statutory limitation periods with respect
thereto.
(ii) No Claim shall be brought under this Article IX for
intentional concealment or misrepresentation of a material fact with
intent to cause injury to Buyer in connection with the sale of the
Shares to Buyer by Shareholders after the lapse of seven (7) years
following the Closing.
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(iii) There shall be no time limitation (A) on any Claims
relating in any to the Denric Tool Property or the Off-Site
Properties, as described in Section 9.02, (B) on any Claims relating
in any way to any of the Other Environmental Issues, or (C) on
Claims brought by Shareholders pursuant to Section 9.04.
(iv) If any act, omission, disclosure, or failure to disclosure
shall form the basis for a claim for breach of more than one
representation or warranty and such claims have different periods of
survival hereunder, the termination of the survival period of one
claim shall not affect a party's right to make a claim based on the
breach of representation or warranty still surviving.
(b) Amount Limitation.
-----------------
(i) Except as provided for in Subsections 9.07(b)(ii) and
(iii), Shareholders shall have liability to Buyer and Buyer's
Affiliates only to the extent of the Escrow Amount.
(ii) Shareholders shall have liability to Buyer and Buyer's
Affiliates for Claims relating to indemnification under Subsections
9.07(a)(i) and (ii), and Buyer shall have liability to Shareholders
for Claims under Section 9.03, only to the extent such liability
does not exceed the Purchase Price.
(iii) Shareholders shall have liability to Buyer and Buyer's
Affiliates for Claims relating to indemnification under Section
9.07(a)(iii), and Buyer shall have liability to Shareholders for
Claims relating to indemnification under Section 9.04, to the full
extent of such liability.
(iv) Notwithstanding any provision of this Article IX to the
contrary, no claim for indemnification shall be deemed to arise
unless and until the aggregate Claims of a party shall exceed Fifty
Thousand Dollars ($50,000); but, in such event, the Indemnified
Party shall be entitled to indemnification in full for all Claims.
(c) No Waiver. The closing of the transactions contemplated by this
---------
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, unless the party seeking indemnification knew or
had reason to know of the breach, violation, or failure of condition
constituting the basis of the Claim at or before the Closing.
9.08 Determination of Amount of Claims. The parties shall make appropriate
---------------------------------
adjustments for tax benefits and insurance coverage and shall take into account
the time cost of money (using as the discount rate the prime rate of interest as
announced from time to time in The Wall Street Journal) in determining the
amount of any Claim for purposes of this Article IX. All indemnification
payments under this Article IX shall be deemed adjustments to the Purchase
Price, and shall be increased, as appropriate, to compensate Buyer and Company
for the reduction in tax benefits resulting from the reduction in the Purchase
Price.
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9.09 Exclusive Remedy. Buyer and Shareholders acknowledge and agree that
the foregoing indemnification provisions in this Article IX shall be the sole
and exclusive remedy of Buyer and Buyer's Affiliates and assignees pursuant to
Section 12.04 and Shareholders with respect to the Shares, the Business, Company
or any of the assets, liabilities, or operations of Company, and the
transactions contemplated by this Agreement.
ARTICLE X
CLOSING
The closing of this transaction (the "Closing") shall take place at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ at such date and time as the parties hereto shall
agree upon. Such date is referred to in this Agreement as the "Closing Date."
10.01 Shareholders' Closing Deliveries. At the Closing, Shareholders
shall deliver to Buyer the following documents, in each case duly executed or
otherwise in proper form:
(a) Stock Certificates. Stock certificates representing the
------------------
Shares, duly endorsed for transfer or with duly executed stock powers
attached.
(b) Compliance Certificate. A certificate signed by Shareholders
----------------------
that each of the representations and warranties made by Company and
Shareholders in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer), and that Shareholders have
performed and complied with all of Shareholders' obligations under this
Agreement which are to be performed or complied with on or prior to the
Closing Date.
(c) Opinion of Counsel. A written opinion of ▇▇▇▇▇, ▇▇▇▇ &
------------------
▇▇▇▇▇▇▇, A Limited Liability S.C., counsel to Shareholders, dated as of
the Closing Date, addressed to Buyer and to Credit Suisse First Boston
("CSFB"), in form and substance mutually satisfactory to the parties.
(d) Resignations. The resignations of the officers and directors
------------
of Company, effective as of the Closing Date and in form and substance
reasonably satisfactory to Buyer.
(e) Non-competition Agreement. A non-competition agreement duly
-------------------------
executed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, in form and substance reasonably
satisfactory to ▇▇. ▇▇▇▇▇▇ and Buyer, which non-competition agreement
shall contain the following terms:
(i) Buyer shall pay to ▇▇. ▇▇▇▇▇▇ an aggregate amount of
$50,000 per quarter for twelve (12) quarters ($600,000 in total)
commencing on the 15/th/ day of the first month after the Closing.
(ii) Buyer shall contribute toward the cost of health care and
dental care coverage obtained by ▇▇. ▇▇▇▇▇▇ on behalf of himself and his
wife and
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current dependents, the aggregate sum of $97,200, which amount
shall be paid in equal periodic installments to the applicable
insurance provider or providers, during a period that begins on
the Closing Date and ends on ▇▇. ▇▇▇▇▇▇'▇ 65/th/ birthday, or the
date that would have been ▇▇. ▇▇▇▇▇▇'▇ 65/th/ birthday, in the
event of his death prior to that date. To the extent of the
actual cost of the health and dental care coverage obtained by
▇▇. ▇▇▇▇▇▇ and his wife and current dependents during any taxable
year of ▇▇. ▇▇▇▇▇▇, any payments by Buyer as provided for herein
during such taxable year shall be treated by Buyer and ▇▇. ▇▇▇▇▇▇
as employer-provided coverage under an accident or health plan
eligible for the exclusion from gross income under Section 106 of
the Code. Within 15 days of the close of his taxable year, ▇▇.
▇▇▇▇▇▇ shall provide to Buyer documentation of the actual cost of
the health care and dental care coverage obtained by ▇▇. ▇▇▇▇▇▇,
his wife and current dependents, for such taxable year. Buyer's
contributions hereunder shall lin no way abrogate the rights of
▇▇. ▇▇▇▇▇▇ and/or his spouse and eligible dependents to
continuation coverage under any Employee Plan/Agreement which is
a "group health plan" (as defined in Section 5000(b) of the
Code).
(f) Lease Agreements. The Lease Agreements, duly executed by
----------------
Shareholders.
(g) Escrow Agreement. The escrow agreement duly executed by
----------------
Shareholders and the Escrow Agent, in form and substance reasonably
satisfactory to the Escrow Agent, Buyer and Shareholders (the "Escrow
Agreement").
(h) Articles; By-laws. A copy of the By-laws of Company certified
-----------------
by the secretary of Company and a copy of the Articles of Incorporation of
Company certified by the Department of Financial Institutions of the State
of Wisconsin.
(i) General Releases. The general releases referred to in Section
----------------
5.05, duly executed by the persons referred to in such section.
(j) Other Documents. All other documents, instruments, or writings
---------------
reasonably required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
10.02 Buyer's Closing Deliveries. At the Closing, Buyer shall deliver to
Shareholders the following documents, in each case duly executed or otherwise in
proper form:
(a) Estimated Purchase Price. To Shareholders the estimated
------------------------
Purchase Price as required by Section 2.02(b), and to the Escrow Agent the
Escrow Amount as required by Section 2.02(a).
(b) Compliance Certificate. A certificate signed by an executive
----------------------
officer of Buyer that the representations and warranties made by Buyer in
this Agreement are true and correct on and as of the Closing Date with the
same effect as though such
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representations and warranties had been made or given on and as of the
Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Shareholders), and that Buyer has
performed and complied with all of Buyer's obligations under this Agreement
which are to be performed or complied with on or prior to the Closing Date.
(c) Opinion of Counsel. A written opinion of ▇▇▇▇▇ & Lardner, counsel
------------------
to Buyer, dated as of the Closing Date, addressed to Shareholders, in form
and substance mutually satisfactory to the parties.
(d) Certified Resolutions. A certified copy of the resolutions of the
---------------------
Board of Directors of Buyer authorizing and approving this Agreement and
the consummation of the transactions contemplated by this Agreement.
(e) Non-Competition Agreement. The non-competition agreement referred
-------------------------
to in Section 10.01(e), duly executed by Buyer.
(f) Lease Agreements. The Lease Agreements, duly executed by Buyer.
----------------
(g) Escrow Agreement. The Escrow Agreement, duly executed by Buyer and
----------------
the Escrow Agent.
(h) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Shareholders by
Buyer pursuant to the terms hereof.
(i) Other Documents. All other documents, instruments, or writings
---------------
reasonably required to be delivered to Shareholders at or prior to the
Closing pursuant to this Agreement and such other certificates of
authority and documents as Shareholders may reasonably request.
ARTICLE XI
TERMINATION
11.01 Right of Termination Without Breach. This Agreement may be terminated
without further liability of any party at any time prior to the Closing:
(a) by mutual written agreement of Buyer and Shareholders, or
(b) by Buyer in the event that, pursuant to Section 6.06 hereof, Buyer
determines that a new Schedule or an updated Schedule reveals a change which
Buyer, in the exercise of Buyer's reasonable discretion, determines has
resulted or will result in a material adverse effect on the financial
condition of Company and Buyer has notified Shareholders that the relevant
Schedule is not acceptable and Buyer is terminating this Agreement, or
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(c) by Buyer, in the event of a failure of either or both of the
conditions set forth in Sections 7.13 or 7.14, or a failure to arrive at a
mutually acceptable non-competition agreement pursuant to Section 10.01(e),
or Shareholders, in the event of a failure of either or both of the
conditions set forth in Sections 8.06 or 8.07, or a failure of ▇▇. ▇▇▇▇▇▇ to
arrive at an acceptable non-competition agreement pursuant to Section
10.01(e).
11.02 Termination for Breach.
(a) Termination by Buyer. If (i) there has been a material violation
--------------------
or breach by Shareholders of any of the agreements, representations, or
warranties contained in this Agreement which has not been waived in writing by
Buyer, or (ii) there has been a failure of satisfaction of a condition to the
obligations of Buyer (other than those conditions described in Section
11.01(c), as to which 11.01(c) shall form the basis for termination) which
Buyer has not waived in writing, or (iii) Shareholders shall have attempted to
terminate this Agreement under this Article XI or otherwise without grounds to
do so, then Buyer shall give written notice to Shareholders at any time prior
to the Closing that such violation, breach, failure, or wrongful termination
attempt is continuing and, if such violation, breach, failure, or wrongful
termination is not cured by Shareholders within ten (10) days after the date of
such notice, Buyer may terminate this Agreement with the effect set forth in
Section 11.02(d) hereof.
(b) Termination by Shareholders. If (i) there has been a material
---------------------------
violation or breach by Buyer of any of the agreements, representations, or
warranties contained in this Agreement which has not been waived in writing by
Shareholders, or (ii) there has been a failure of satisfaction of a condition
to the obligations of Shareholders (other than those conditions described in
Section 11.01(c), as to which 11.01(c) shall form the basis for termination)
which Shareholders have not waived in writing, or (iii) Buyer shall have
attempted to terminate this Agreement under this Article XI or otherwise
without grounds to do so, then Shareholders shall give written notice to Buyer
at any time prior to the Closing that such violation, breach, failure, or
wrongful termination attempt is continuing and, if such violation, breach,
failure, or wrongful termination is not cured by Buyer within ten (10) days
after the date of such notice, Shareholders may terminate this Agreement with
the effect set forth in Section 11.02(d) hereof.
(c) Drop-Dead Date. If the Closing shall not have occurred on or
--------------
before August 15, 1999, this Agreement shall terminate and, provided
Shareholders have not, through breach of a representation, warranty, or
covenant, prevented the Closing from occurring on or before such date, Buyer
shall be required to pay to Shareholders an amount equal to Five Hundred
Thousand Dollars ($500,000), which payment shall be the sole and exclusive
remedy of Shareholders for Buyer's failure to close.
(d) Effect of Termination. Termination of this Agreement pursuant to
---------------------
this Section 11.02 shall not in any way terminate, limit, or restrict the
rights and remedies of any party hereto against any other party which has
violated, breached, or failed to satisfy any of the representations,
warranties, covenants, agreements, conditions, or other provisions of this
Agreement prior to termination hereof. In addition to the right
-43-
of any party under common law to redress for any such breach or violation,
each party whose breach or violation has occurred prior to termination
shall jointly and severally indemnify each other party for whose benefit
such representation, warranty, covenant, agreement, or other provision was
made from and against all losses, damages (including, without limitation,
consequential damages), costs, and expenses (including, without limitation,
interest (including prejudgment interest in any litigated matter),
penalties, court costs, and reasonable attorneys' fees and expenses)
asserted against, resulting to, imposed upon, or incurred by the
indemnified party, directly or indirectly, by reason of, arising out of, or
resulting from such breach or violation. Subject to the foregoing, the
parties' obligations under Section 12.08 of this Agreement shall survive
termination. Notwithstanding any provision of this Section 11.02 to the
contrary, (i) in no event shall the total amount payable pursuant to this
Section 11.02 by Shareholders in the event of a breach by Shareholders of
Section 6.07 exceed the Purchase Price, and (ii) in no event shall the
total amount payable pursuant to this Section 11.02 for any other reason
exceed Five Hundred Thousand Dollars ($500,000).
ARTICLE XII
MISCELLANEOUS
12.01 Schedules. Except as specifically provided for herein, the Schedules
shall not vary, change, or alter the language of the representations and
warranties contained in this Agreement and, to the extent the language in the
Schedules does not conform in every respect to the language of such
representations and warranties, such language shall be disregarded and be of no
force or effect. Disclosure of documents, events, conditions, or other
information pursuant to any Schedule shall be deemed to be a disclosure to and
for the purposes of other Schedules if and only if the correlative disclosure is
obvious from the language and context of the Schedule in which such disclosure
occurs.
12.02 Further Assurance. From time to time, at Buyer's request and without
further consideration, Shareholders, at Buyer's expense, will execute and
deliver to Buyer such documents and take such other action as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated hereby and to vest in Buyer good, valid and marketable title to the
Shares.
12.03 Disclosures and Announcements. Both the timing and the content of
all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by either Shareholders or Buyer
shall be subject to the approval of the other in all essential respects.
12.04 Assignment; Parties in Interest.
(a) Assignment. Except as expressly provided herein, the rights and
----------
obligations of a party hereunder may not be assigned, transferred, or
encumbered without the prior written consent of the other parties.
Notwithstanding the foregoing, (i) Buyer may, without consent of any other
party, cause one or more subsidiaries of Buyer to carry out all or part of
the transactions contemplated hereby; provided, however, that Buyer shall,
nevertheless, remain liable for all of its obligations, and those of any
such
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subsidiary, to Shareholders hereunder; and (ii) Buyer may assign its
interest in this Agreement to CSFB, as agent, as additional security for
Buyer's obligations to such lender and Shareholders agree to execute
acknowledgements of such assignments as reasonably may be required by such
lender.
(b) Parties in Interest. This Agreement shall be binding upon,
-------------------
inure to the benefit of, and be enforceable by the respective successors
and permitted assigns of the parties hereto. Nothing contained herein
shall be deemed to confer upon any other person any right or remedy under
or by reason of this Agreement.
12.05 Law Governing Agreement. This Agreement shall be construed and
interpreted according to the internal laws of the State of Illinois, excluding
any choice of law rules that may direct the application of the laws of another
jurisdiction.
12.06 Amendment and Modification. This Agreement may not be modified or
terminated orally. Buyer and Shareholders may amend, modify, and supplement this
Agreement in such manner as may be agreed upon by them in writing.
12.07 Notice. All notices, requests, demands, and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission, or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, requests, demands, or
other communications are as follows:
(a) If to Buyer, to:
▇▇▇▇▇ Equipment Company
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(with a copy, which copy shall not constitute notice,
to)
Madison Dearborn Partners, Inc.
Three First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(and to)
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Buyer shall furnish to Shareholders in
writing.
(b) If to Shareholders, to:
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(with a copy, which copy shall not constitute notice,
to)
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇, A Limited Liability S.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
P.O. Box 8050
Wausau, Wisconsin 54402-8050
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Shareholders shall furnish to Buyer in
writing.
If personally delivered or sent by overnight courier, such communication
shall be deemed delivered upon actual receipt; if electronically transmitted
pursuant to this section, such communication shall be deemed delivered the next
business day after transmission (and sender shall bear the burden of proof of
delivery); and if sent by U.S. mail pursuant to this section, such communication
shall be deemed delivered as of the date of delivery indicated on the receipt
issued by the relevant postal service or, if the addressee fails or refuses to
accept delivery, as of the date of such failure or refusal. Any party to this
Agreement may change its address for the purposes of this Agreement by giving
notice thereof in accordance with this Section.
12.08 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
(a) Brokerage. Except as to Madison Dearborn Partners, Inc., who
---------
shall be compensated by Buyer, Shareholders and Buyer each represent and
warrant to each other that there is no broker involved or in any way
connected with the transfer provided for herein. Buyer agrees to hold
Shareholders harmless from and against all
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claims for brokerage commissions or finder's fees incurred through
any act of Buyer in connection with the execution of this Agreement
or the transactions provided for herein. Shareholders, jointly and
severally, agree to hold Buyer harmless from and against all claims
for brokerage commissions or finder's fees incurred through any act
of any Shareholder in connection with the execution of this Agreement
or the transactions provided for herein.
(b) Expenses to be Paid by Shareholders. Shareholders agree
-----------------------------------
that they shall pay out of Company's Cash and Cash Equivalents all of
their costs and expenses (including their legal fees and expenses)
incurred in connection with this Agreement and the transactions
contemplated hereby. For purposes of the Purchase Price calculation
set forth in Section 2.01, Cash and Cash Equivalents shall be reduced
by any and all transaction expenses of Shareholders (including,
without limitation, any transfer taxes related to the transfer of the
Excluded Assets) that have not been paid as of the Closing.
(c) Expenses to be Paid by Buyer. Buyer shall pay, and shall
----------------------------
indemnify, defend and hold Shareholders harmless from and against,
each of the following:
(i) Environmental and Health and Safety Audit. The fees
-----------------------------------------
and other expenses relating to the environmental and health
and safety audit performed pursuant to Section 5.03 hereof.
(ii) HSR Related Filings. The filing fees relating to the
-------------------
applicable requirements of the HSR Act.
(iii) Transfer Taxes. Any sales, use, excise, transfer, or other
--------------
or other similar tax imposed with respect to the transactions
provided for in this Agreement and any interest and survey costs or
penalties related thereto; provided, however, that any such expenses
arising out of the transfer of the Excluded Assets shall be the
exclusive responsibility of Shareholders.
(iv) Title Insurance and Surveys. All premiums for the
---------------------------
issuance of the title insurance policies issued pursuant to Section
5.01 hereof and the cost of surveys performed pursuant to Section
5.02.
(d) Other. Except as otherwise provided herein, each of the parties
-----
shall bear its own expenses and the expenses of its counsel and other
agents in connection with the transactions contemplated hereby.
12.09 Entire Agreement. This Agreement, together with the Schedules,
Exhibits, and Ancillary Documents referred to herein, all of which are hereby
incorporated herein by reference, embody the entire agreement between the
parties hereto with respect to the transactions contemplated herein and there
have been and are no agreements, representations, or warranties between the
parties other than those set forth or provided for herein.
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12.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.11 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
12.12 Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Affiliate" - Section 2.03(b)
"Agreement" -- Preamble
"Ancillary Documents" - Section 3.04(a)
"Business" - Recitals
"Buyer" -- Preamble
"Buyer's Accountants" - Section 2.03(d)(ii)
"Buyer's Affiliates" - Section 9.01
"Cash and Cash Equivalents" - Section 2.01
"CERCLA" - Section 3.12(c)
"Claim" - Section 9.01
"Closing" - Preamble to Article X
"Closing Date" - Preamble to Article X
"Code" - Section 2.05
"Company" - Recitals
"CSFB" - Section 10.01(c)
"Customer Information" - Section 5.07
"Denric Tool Property" - Section 9.02(a)
"Disclosure Documents" - Section 3.24
"Effective Time" - Section 2.03(c)
"Employee Plans/Agreements" - Section 3.17(a)
"Environmental Laws" - Section 3.12(c)
"ERISA" - Section 3.17(a)
"Escrow Agreement" - Section 10.01(g)
"Escrow Amount" - Section 2.02(a)
"Escrow Term" - Section 9.04(a)
"Estimated Closing Balance Sheet" - Section 2.03(c)
"Excluded Assets" - Section 1.02
"Facilities" - Recitals
"Final Closing Balance Sheet" - Section 2.03(d)(iv)
"GAAP-Adjusted Recent Balance Sheet" - Section 2.03(c)
"Gross Up Amount" - Section 2.04
"Hazardous Materials" - Section 3.12(c)(ii)
"Health and Dental Care Coverage" - Section 10.01(e)
"HSR Act" - Section 3.02
"IRS" - Section 2.05
"Indebtedness Amount" - Section 2.03(b)
"Indemnified Party" - Section 9.03(a)
-48-
"Indemnifying Party" - Section 9.03(a)
"Laws" - Section 3.02
"Lease Agreements" - Section 7.07
"Leased Real Property" - Section 3.13(c)
"Liens" - Section 3.09(i)
"Litigation" - Section 3.11
"Management's Knowledge" - Preamble to Article III
"Off-Site Properties" - Section 9.02(a)
"Orders" - Section 3.02
"Other Information" - Section 3.24
"Other Environmental Issues" - Section 9.02(b)
"Pre-Closing Product Liability Claim" - Section 9.04(a)
"Post-Closing Leased Properties" - Section 7.07
"Product Liability Claims" - Section 9.04(a)
"Products" - Section 3.21
"Proprietary Rights" - Section 3.19(a)
"Purchase Price" - Section 2.01(a)
"Recent Balance Sheet" - Section 3.03
"Schedules" - Preamble to Article III
"▇▇▇▇▇▇▇▇▇ Loan Documents" - Section 7.15
"Settlement Date" - Section 2.02(c)
"Shareholder" and "Shareholders" -- Preamble
"Shareholders' Accountants" - Section 2.03(d)(iii)
"Shares" - Recitals
"Third Accounting Firm" - Section 2.03(d)(iv)
"Waste" - Section 3.12(c)
"Working Capital Value" - Section 2.03(a)
"Year 2000 Compliant" - Section 3.19(b)
"338 Election" - Section 2.04
Where any group or category of items or matters is defined collectively in the
plural number, any item or matter within such definition may be referred to
using such defined term in the singular number.
[*** The next page is the signature page. ***]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first above written.
WEC COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------------------
Its: Vice President
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇