EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
WEC COMPANY
("BUYER"),
TRU-PART MANUFACTURING CORPORATION
("COMPANY"),
CAL PROPERTIES
("CAL PROPERTIES"),
AND
to Section 15.11 only
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ AND ▇▇▇▇▇ ▇▇▇▇▇▇
("SHAREHOLDERS")
July 1, 1999
TABLE OF CONTENTS
ARTICLE
1. Purchase and Sale of Assets ........................................ 2
1.1. Assets to be Transferred....................................... 2
1.2. Excluded Assets................................................ 4
2. Assumption of Liabilities........................................... 5
2.1. Liabilities to be Assumed...................................... 5
2.2. Liabilities Not to be Assumed.................................. 6
3. Purchase Price - Payment............................................ 6
3.1. Purchase Price................................................. 6
3.2. Payment of Purchase Price...................................... 6
3.3. Determination of Company Purchase Price........................ 7
3.4. Prorations..................................................... 10
3.5. Other Payments and Adjustments................................. 10
3.6. Allocation of Purchase Price................................... 11
4. Representations and Warranties of Company and Shareholders.......... 11
4.1. Corporate...................................................... 11
4.2. Authority...................................................... 12
4.3. No Violation................................................... 12
4.4. Financial Statements........................................... 13
4.5. Tax Matters.................................................... 13
4.6. Accounts Receivable............................................ 14
4.7. Inventory...................................................... 14
4.8. Absence of Certain Changes..................................... 14
4.9. Absence of Undisclosed Liabilities............................. 16
4.10. No Litigation................................................. 16
4.11. Compliance With Laws and Orders............................... 16
4.12. Title to and Condition of Properties.......................... 18
4.13. Insurance..................................................... 21
4.14. Contracts and Commitments..................................... 21
4.15. Labor Matters................................................. 23
4.16. Employee Benefit Plans........................................ 24
4.17. Employment Compensation....................................... 25
4.18. Trade Rights.................................................. 25
4.19. Major Customers and Suppliers................................. 26
4.20. Product Warranty and Product Liability........................ 27
4.21. Affiliates' Relationships to Company.......................... 27
4.22. Assets Necessary to Business.................................. 27
4.23. No Brokers or Finders......................................... 27
4.24. Copies of Certain Documents................................... 28
i
4.25. Underlying Documents.......................................... 28
4.26. Business of Company........................................... 28
4.27. Disclosure of Material Facts.................................. 28
5. Representations and Warranties of CAL Properties.................... 28
5.1. Partnership.................................................... 29
5.2. Authority...................................................... 29
5.3. No Violation................................................... 29
5.4. Compliance With Laws and Orders................................ 30
5.5. Title to and Condition of Properties........................... 31
6. Representations and Warranties of Buyer............................. 33
6.1. Corporate...................................................... 33
6.2. Authority...................................................... 33
6.3. No Brokers or Finders.......................................... 34
6.4. No Violation................................................... 34
6.5. Disclosure..................................................... 34
7. Employees - Employee Benefits....................................... 34
7.1. Transferred Employees.......................................... 34
7.2. Payroll Tax.................................................... 34
7.3. Severance Pay.................................................. 35
7.4. Participation in Buyer Plans................................... 35
7.5. COBRA.......................................................... 35
7.6. Termination of Qualified Plans................................. 36
8. Other Matters....................................................... 36
8.1. Title Commitment............................................... 36
8.2. Environmental and Health and Safety Audits..................... 37
8.3. Noncompetition; Confidentiality................................ 37
8.4. Product Liability Matters...................................... 38
8.5. Use of Company's Name.......................................... 38
8.6. Unemployment Compensation...................................... 39
8.7. Property Leases................................................ 39
8.8. Delivery of Schedules.......................................... 39
9. Further Covenants of Company........................................ 39
9.1. Access to Information and Records.............................. 39
9.2. Conduct of Business Pending the Closing........................ 40
9.3. Change of Corporate Name....................................... 41
9.4. No Negotiations................................................ 41
9.5. Consents....................................................... 41
9.6. Other Action................................................... 41
9.7. Disclosure..................................................... 41
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10. Conditions Precedent to Buyer's Obligations......................... 41
10.1. Representations and Warranties True on the Closing Date....... 41
10.2. Compliance With Agreement..................................... 41
10.3. Absence of Litigation......................................... 42
10.4. Consents and Approvals........................................ 42
10.5. Title Insurance............................................... 42
10.6. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period.............................. 42
10.7. Environmental and Health and Safety Audit..................... 42
10.8. Due Diligence................................................. 42
10.9. Employment Agreement.......................................... 42
10.10. Escrow Agreement............................................. 42
10.11. Lease Agreements............................................. 42
10.12. Noncompetition Agreements.................................... 42
11. Conditions Precedent to Obligations of Sellers...................... 43
11.1. Representations and Warranties True on the Closing Date....... 43
11.2. Compliance With Agreement..................................... 43
11.3. Absence of Litigation......................................... 43
11.4. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period.............................. 43
11.5. Escrow Agreement.............................................. 43
11.6. Lease Agreements.............................................. 43
12. Indemnification..................................................... 43
12.1. By Company and CAL Properties................................. 43
12.2. By Buyer...................................................... 44
12.3. Indemnification of Third Party Claims......................... 44
12.4. Payment....................................................... 45
12.5. Limitations on Indemnification................................ 45
13. Closing............................................................. 47
13.1. Documents to be Delivered by Company and CAL Properties....... 47
13.2. Documents to be Delivered by Buyer............................ 48
14. Termination......................................................... 49
14.1. Right of Termination Without Breach........................... 49
14.2. Termination by Buyer.......................................... 49
14.3. Termination by Sellers........................................ 49
14.4. Effect of Termination......................................... 50
15. Miscellaneous....................................................... 50
15.1. Further Assurance............................................. 50
15.2. Disclosures and Announcements................................. 50
15.3. Assignment; Parties in Interest............................... 50
15.4. Amendment and Modification.................................... 51
15.5. Notice........................................................ 51
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15.6. Expenses...................................................... 53
15.7. Entire Agreement.............................................. 53
15.8. Counterparts.................................................. 53
15.9. Headings...................................................... 54
15.10. Governing Law................................................ 54
15.11. Shareholder Guarantee........................................ 54
15.12. Glossary of Terms............................................ 54
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Disclosure Schedule
1.1(a) Owned Real Property
1.1(d) Personal Property Leases
1.2(d) Notes Receivable
1.2(i) Excluded Contracts
2.1(c) Other Liabilities
3.2(e) Purchase Price Adjustment
3.6 Allocation of Purchase Price
4.1(c) Qualification to do Business
4.1(d) No Subsidiaries
4.3 No Violation
4.4 Financial Statements
4.5(b) Tax Returns Filed
4.5(c) Tax Audits
4.5(d) Consolidated Group
4.5(e) Other Tax Matters
4.6 Accounts Receivable
4.7 Inventory
4.8 Absence of Certain Changes
4.9 Absence of Undisclosed Liabilities
4.10 No Litigation
4.11(a) Compliance
4.11(b) Permits and Licenses
4.11(c) Environmental Matters
4.12(a) Marketable Title
4.12(c) Real Property
4.12(f) Company Further Covenants
4.13 Insurance
4.14(a) Real Property Leases
4.14(b) Personal Property Leases
4.14(c) Purchase Commitments
4.14(d) Sales Commitments
4.14(e) Contracts with Affiliates
4.14(g) Collective Bargaining Agreements
4.14(h) Loan Agreements
4.14(i) Guarantees
4.14(k) Burdensome on Restrictive Agreements
4.14(l) Other Material Contracts
4.14(m) No Default
4.15 Labor Matters
4.16(a) Disclosure and Delivery of Documents
4.16(b) Title IV of ERISA
4.16(c) Multiemployer Plans
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4.16(d) Controlled Group Status
4.16(e) Severance and Post-Retirement Benefits
4.16(f) Payments and Compliance
4.17 Employment Compensation
4.18(a) Trade Rights
4.18(b) Year 2000 Compliant
4.19(a) Major Customers
4.19(b) Major Suppliers
4.19(c) Dealers and Distributors
4.20 Product Warranty and Product Liability
4.21(a) Contracts with Affiliates
4.21(b) Affiliate Adverse Interests
4.21(c) Affiliate Obligations
4.26 Business of Company
5.1(c) CAL Properties Qualifications to do Business
5.4(a) CAL Properties Compliance
5.4(b) CAL Properties Permits and Licenses
5.4(c) CAL Properties Environmental Matters
5.5(a) CAL Properties Marketable Title
5.5(f) CAL Properties Further Covenants
7.1 Transferred Employees
7.5 COBRA
8.7 Property Leases
vi
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement") dated July 1, 1999, by and
among WEC COMPANY, a Delaware corporation ("Buyer"), TRU-PART MANUFACTURING
CORPORATION, a Minnesota corporation ("Company"), CAL PROPERTIES a (Minnesota)
general partnership ("CAL Properties") and as to Section 15.11 only, ▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
("Shareholders.").
RECITALS
A. Company is engaged in the distribution of agricultural equipment parts
including but not limited to products marketed under the brand name "TISCO" (the
"Business").
B. Company's facilities consist of Company headquarters in West Saint
▇▇▇▇, Minnesota, which is leased from CAL Properties, and warehouses located in
West Saint ▇▇▇▇, Minnesota; Sacramento, California; Nashville, Tennessee;
Dallas, Texas; and Richmond, Virginia (collectively, the "Facilities").
C. Buyer desires to purchase from Company and Company desires to sell to
Buyer the Business and substantially all of the property and assets of Company.
D. Buyer desires to purchase from CAL Properties and CAL Properties
desires to sell to Buyer the Owned Real Property.
E. A Glossary of Defined Terms is set forth in Section 15.12 of this
Agreement.
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
1.
PURCHASE AND SALE OF ASSETS
1.1. Assets to be Transferred. Subject to the terms and conditions of this
Agreement, on the Closing Date: (a) CAL Properties shall sell, transfer, convey,
assign and deliver to Buyer or an affiliate of Buyer, the Owned Real Property
and (b) Company shall sell, transfer, convey, assign, and deliver to Buyer or an
affiliate of Buyer, all of the business, rights, claims and assets (of every
kind, nature, character and description, whether real, personal or mixed,
whether tangible or intangible, whether accrued, contingent or otherwise, and
wherever situated) of Company, together with all rights and privileges
associated with such assets and with the business of the Company, other than the
Excluded Assets (the "Company Assets," and together with the Owned Real
Property, the "Purchased Assets"). Company and CAL Properties are sometimes
herein referred to collectively as "Sellers." The Purchased Assets shall
include, but not be limited to, the following:
(a) Owned Real Property. All of the real property, including land,
-------------------
buildings, fixtures, improvements, and all appurtenant rights owned by CAL
Properties, described on Schedule 1.1(a) (the "Owned Real Property").
(b) Personal Property. All machinery, equipment, vehicles, tools,
-----------------
supplies, spare parts, furniture and all other personal property (other
than personal property leased pursuant to Personal Property Leases) owned,
utilized or held for use by Company on the Closing Date.
(c) Inventory. All inventories of raw materials, work-in-process and
---------
finished goods and parts (including all such in transit or at remote
locations) of Company on the Closing Date, together with related packaging
materials (collectively the "Inventory").
(d) Personal Property Leases. All leases of machinery, equipment,
------------------------
vehicles, furniture and other personal property leased by Company,
including all such leases (the "Personal Property Leases") described in
Schedule 1.1(d).
(e) Trade Rights. All of the Company's interest in any Trade Rights.
------------
As used herein, the term "Trade Rights" shall mean and include: (i) all
trademark rights, business identifiers, trade dress, service marks, trade
names, and brand names associated with the Company's business, including
without limitation the "TISCO" name and associated marks, all registrations
thereof and applications therefor and all goodwill associated with the
foregoing; (ii) all copyrights, copyright registrations and copyright
applications, and all other rights associated with the foregoing and the
underlying works of authorship; (iii) all patents and patent applications
and all international proprietary rights associated therewith; (iv) all
contracts or agreements granting any right, title, license or privilege
under the intellectual property rights of any third party; (v) all
inventions, mask works and mask work registrations, knowhow, discoveries,
improvements, designs, trade secrets, shop and royalty rights, employee
covenants and agreements respecting intellectual property and
noncompetition and all other types of intellectual property; and (vi) all
claims for infringement or breach of any of the foregoing.
(f) Contracts. All of the Company's rights in, to and under all
---------
contracts, purchase orders and sales orders (the "Contracts") of Company
other than Excluded Contracts. To the extent that any Contract for which
assignment to Buyer is provided herein is not assignable without the
consent of another party, this Agreement shall not constitute an assignment
or an attempted assignment thereof if such assignment or attempted
assignment would constitute a breach thereof. Company and Buyer agree to
use their reasonable best efforts (without any requirement on the part of
Buyer or Company or CAL Properties to pay any money or agree to any change
in the terms of any such Contract) to obtain the consent of such other
party to the assignment of any such Contract to Buyer in all cases in which
such consent is or may be required for such assignment. If any such consent
shall not be obtained, Company agrees to cooperate with Buyer in any
reasonable arrangement designed to provide for Buyer the benefits intended
to be assigned to Buyer under the relevant Contract, including enforcement
at the cost
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and for the account of Buyer of any and all rights of Company against the
other party thereto arising out of the breach or cancellation thereof by
such other party or otherwise. If and to the extent that such arrangement
cannot be made, Buyer, upon notice to Company, shall have no obligation
pursuant to Section 1.1(f) or otherwise with respect to any such Contract
and any such Contract shall not be deemed to be a Purchased Asset
hereunder.
(g) Computer Software. All computer source codes, programs and other
-----------------
software of Company, including all machine readable code, printed listings
of code, documentation and related property and information of Company.
(h) Literature. All sales literature, promotional literature,
----------
catalogs and similar materials of Company.
(i) Records and Files. All records, files, invoices, customer lists,
-----------------
blueprints, specifications, designs, drawings, accounting records, business
records, operating data and other data of Company related to the Purchased
Assets.
(j) Notes and Accounts Receivable. All notes, drafts and accounts
-----------------------------
receivable of Company, except for those described in Sections 1.2(d),
1.2(e) and 1.2(g) hereof.
(k) Licenses; Permits. All licenses, permits and approvals of
--------
Company.
(l) Business Names. The business name "TISCO", and all rights to use
--------------
or allow others to use such name, and the corporate name "Tru-Part
Manufacturing Corporation" or proximate variations thereof.
(m) General Intangibles. All prepaid items, all causes of action
-------------------
arising out of occurrences before or after the Closing, and other
intangible rights and assets.
1.2. Excluded Assets. The provisions of Section 1.1 notwithstanding,
Company and CAL Properties shall not sell, transfer, assign, convey or deliver
to Buyer, and Buyer shall not purchase or accept the following assets of Company
and CAL Properties (collectively the "Excluded Assets"):
(a) Consideration. The consideration delivered by Buyer to Company
-------------
and CAL Properties pursuant to this Agreement.
(b) Tax Credits and Records. Federal, state and local income and
-----------------------
franchise tax credits and tax refund claims and associated returns and
records. Buyer shall have reasonable access to such returns and records and
may make excerpts therefrom and copies thereof.
(c) Corporate Franchise. Company's franchise to be a corporation, its
-------------------
certificate of incorporation, corporate seal, stock books, minute books and
other corporate records having exclusively to do with the corporate
organization and capitalization of
4
Company; provided, however, that Company shall change its corporate name as
provided in Section 9.4, below. Buyer shall have reasonable access to such
books and records and may make excerpts therefrom and copies thereof.
(d) Notes Receivable. Notes receivable owed to Company from CAL
----------------
Properties as described in Schedule 1.2(d).
(e) Obligations of Affiliates. Notes, drafts, accounts receivable or
-------------------------
other obligations for the payment of money, made or owed by any Affiliate.
For purposes of this Agreement, the term "Affiliate" shall mean and include
all shareholders, directors and officers of Company.
(f) Life Insurance Policies. Life insurance policies insuring the
-----------------------
lives of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, including the cash
surrender value thereof.
(g) N-Complete. Company's investment in N-Complete as reflected on
----------
the Recent Balance Sheet (including the note receivable from N-Complete in
the principal amount of $70,000).
(h) Cash and Cash Equivalents. All cash and cash equivalents of
-------------------------
Company, whether on hand, in banks or other depository institutions,
including ▇▇▇▇▇ cash balances at Company's various places of business.
(i) Excluded Contracts. The contracts described in Schedule 1.2(i)
------------------
(the "Excluded Contracts")
ARTICLE
2.
ASSUMPTION OF LIABILITIES
2.1. Liabilities to be Assumed. As used in this Agreement, the term
"Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or contingent, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. Subject to the
terms and conditions of this Agreement, on the Closing Date, Buyer shall assume
and agree to perform and discharge the following, and only the following,
Liabilities of Company (collectively, the "Assumed Liabilities"):
(a) Final Closing Balance Sheet Liabilities. The Liabilities
---------------------------------------
reflected or reserved against on the Final Closing Balance Sheet, but only
in the aggregate amounts so reflected or reserved against.
(b) Employee Obligations. Those liabilities referred to in Sections
--------------------
7.3 and 7.5.
5
(c) Other Liabilities. Those liabilities disclosed on Schedule
-----------------
2.1(c).
2.2. Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, Buyer is not assuming any Liabilities of
Sellers and all such Liabilities shall be and remain the responsibility of
Company or CAL Properties, as the case may be. Notwithstanding the generality of
the provisions of Section 2.1, Buyer is not assuming the following Liabilities
of Sellers:
(a) Indebtedness. Any indebtedness to any shareholder or to ▇▇▇▇▇
------------
Fargo, formerly known Norwest Bank Minnesota, N.A.
(b) N-Complete Liabilities. Any Liabilities relating to Company's
----------------------
investment in N-Complete.
ARTICLE
3.
PURCHASE PRICE - PAYMENT
3.1. Purchase Price. The consideration to be paid for the Company Assets
("Company Purchase Price") shall be provided by payment of the Cash Amount and
Buyer's assumption of the Assumed Liabilities.
(a) The "Cash Amount" shall be equal to:
(i) Thirty-Nine Million Five Hundred Thousand Dollars
($39,500,000); minus
(ii) the book value of the assets described in Sections 1.2(d),
(e), (f) and (g) as of the Closing Date; plus or minus, as the case
may be,
(iii) the Purchase Price Adjustment.
(b) The purchase price for the Owned Real Property ("Owned Property
Purchase Price") shall be One Million Two Hundred Fifty Eight Thousand
Dollars ($1,258,000), plus or minus the Prorations.
3.2. Payment of Purchase Price. The Company Purchase Price and the Owned
Property Purchase Price shall be paid by Buyer as follows:
(a) Assumption of Liabilities. At the Closing, Buyer shall deliver to
-------------------------
Company such documents and instruments as are reasonably required to
evidence Buyer's assumption of the Assumed Liabilities.
(b) Cash to Escrow Agent. At the Closing, Buyer shall deliver to the
--------------------
escrow agent pursuant to an escrow agreement in a form mutually
satisfactory to each of the Sellers and the Buyer (the "Escrow Agreement"),
the sum of One Million Five Hundred Thousand Dollars ($1,500,000) (the
"Escrow Amount").
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(c) Cash to Company. At the Closing, Buyer shall deliver to Company
---------------
the estimated Cash Amount, as calculated pursuant to the Estimated Closing
Balance Sheet, less the Escrow Amount.
(d) Cash to CAL Properties. At the Closing, Buyer shall deliver to
----------------------
CAL Properties the Owned Property Purchase Price.
(e) Purchase Price Adjustment. The Company Purchase Price shall be
-------------------------
adjusted (the "Purchase Price Adjustment") upward or downward, on a dollar-
for-dollar basis (with interest at a rate equal to the Wall Street
Journal's "prime rate" as in effect on the Closing Date, calculated from
the Closing Date until the date of payment), by the amount that the
Company's Average Working Capital as reflected in the Final Closing Balance
Sheet is greater or less than $12,996,771. For purposes hereof, the term
"Average Working Capital" shall mean the difference (whether positive or
negative) obtained when the sum of the Company's Average Accounts Payable
and Average Accrued Expenses is subtracted from the sum of the Company's
Average Inventories and Average Accounts Receivable. For purposes of this
Agreement the terms Average Accounts Payable, Average Accrued Expenses,
Average Inventories and Average Accounts Receivable shall mean the
arithmetic average of each such account over the twelve full calendar
months immediately preceding the month in which the Closing occurs. For
illustration purposes, attached hereto as Schedule 3.2(e) are such account
balances for the calendar months of June 1998 through May 1999. The parties
acknowledge that such balances are correct for purposes of calculating the
Average Working Capital. The parties acknowledge that in calculating the
Average Working Capital, there shall be excluded the following amounts: (i)
the balance, if any, on the Company's line of credit, (ii) any accrual of
interest with respect to notes to shareholders, and (iii) the amount, if
any, by which the outstanding checks written by the Company, together with
any cash withdrawals from Company accounts, exceeds the cash balance of the
Company. On or before the fifth business day following the final
determination of the Final Closing Balance Sheet (the "Settlement Date"),
either Company shall pay to Buyer or Buyer shall pay to Company the
Purchase Price Adjustment.
(f) Method of Payment. All payments under this Section 3.2 shall be
-----------------
made by wire transfer of immediately available funds to an account
designated by the recipient not less than 48 hours prior to the time for
payment specified herein.
3.3. Determination of Company Purchase Price.
(a) Estimated Closing Balance Sheet. For purposes of determining the
-------------------------------
estimated Company Purchase Price payable by the Buyer at the Closing, not
less than ten (10) business days prior to the Closing Date, Company shall,
in consultation with the Buyer, 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 which shall represent Company's
reasonable estimate of the Final Closing Balance Sheet. Such balance sheet
shall be in form and detail identical to, and in its accounting principles
and policies
7
consistent in every respect with, the Recent Balance Sheet, and shall be
accompanied by schedules setting forth in reasonable detail all assets and
liabilities included therein. Such balance sheet or the accompanying
schedules shall contain sufficient detail as to Company Assets and Assumed
Liabilities for the determination of estimated Average Working Capital. In
the event Buyer shall object to any of the information set forth on the
Estimated Closing Balance Sheet or accompanying schedules as presented by
Company, the parties shall 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 and
estimated Average Working Capital (the Estimated Balance Sheet as
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, Company shall provide
to Buyer such information and detail as Buyer shall reasonably request.
(b) Final Closing Balance Sheet. The balance sheet of Company
---------------------------
prepared as of the Closing Date and certified, at Buyer's sole expense, by
Buyer's independent accountants ("Buyer's Accountants") shall be prepared
as follows:
(i) Within 45 days after the Closing Date, Buyer shall deliver
to Company a balance sheet of Company as of the Closing Date, prepared
in accordance with generally accepted accounting principles from the
books and records of Company, on a basis consistent with the
accounting principles theretofore followed by Company in the
preparation of the Recent Balance Sheet and the Estimated Closing
Balance Sheet, and fairly presenting the financial position of Company
as of the Closing Date. For purposes of preparing the Final Closing
Balance Sheet the parties agree that the reserve for obsolete
inventory, the reserve for bad debt and the credit memo accrual will
reflect a balance which is no greater than the balance for each such
account on the Recent Balance Sheet. The balance sheet shall be
accompanied by detailed schedules of Company Assets and Assumed
Liabilities and by a report of Buyer's Accountants (1) setting forth
the amount of accounts payable, accrued expenses, inventories and
accounts receivable reflected in the balance sheet, (2) stating that
(a) the examination of the balance sheet has been made in accordance
with generally accepted auditing standards and (b) the balance sheet
has been prepared in accordance with generally accepted accounting
principles, on a basis consistent with the accounting principles
theretofore followed by Company, except as otherwise provided in this
Section 3.3, and (3) setting forth the amount of the Purchase Price
Adjustment and by whom to be paid pursuant to Section 3.2 hereof.
(ii) Within 30 days following the delivery of the balance sheet
referred to in (i) above, Company or its independent accountants
("Company's Accountants") may object to any of the information
contained in said balance sheet or accompanying schedules which could
affect the necessity or amount of any payment by Buyer or Company
pursuant to Section 3.2 hereof. Any such
8
such objection shall be made in writing and shall state Company's
determination of the amount of Average Working Capital.
(iii) In the event of a dispute or disagreement relating to the
balance sheet, schedules, or Purchase Price Adjustment which Buyer and
Company are unable to resolve by good faith discussions, either Buyer
or Company may elect to have all such disputes or disagreements
resolved by an accounting firm of nationally recognized standing (the
"Third Accounting Firm") to be mutually selected by Company and Buyer
or, if no agreement is reached, by Company's Accountants and Buyer's
Accountants. The Third Accounting Firm shall make a resolution of the
balance sheet of Company as of the Closing Date including a
calculation of Average Working Capital as of the Closing Date and a
determination of the Purchase Price Adjustment which shall be final,
binding and enforceable as an arbitration award for all purposes. The
Third Accounting Firm shall be instructed to use every reasonable
effort to perform its services within 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 Company as follows:
Company 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 the Purchase Price Adjustment as
finally determined by the Third Accounting Firm and the Purchase Price
Adjustment as reflected in the objection prepared and delivered by
Company in accordance with Section 3.2(c)(ii), and B is equal to the
absolute value of the difference (in dollars) between the Purchase
Price Adjustment as finally determined by the Third Accounting Firm
and Purchase Price Adjustment as reflected in the report prepared and
delivered by Buyer in accordance with Section 3.2(c)(i), provided that
if the Purchase Price Adjustment as reflected in the Company's
objection is less than that determined by the Third Accounting Firm,
Buyer shall pay one hundred percent (100%) of such fees and expenses;
provided further that if the Purchase Price Adjustment is as
determined by the Third Accounting Firm is less than the amount shown
in the report delivered by the Buyer, Sellers shall pay one hundred
percent (100%) of such fees and expenses. As used in this Agreement,
the term "Final Closing Balance Sheet" shall mean the balance sheet of
Company as of the Closing Date as finally determined for purposes of
this Article 3, whether by acquiescence of Company in the figures
supplied by Buyer in accordance with Section 3.2(b)(i), by negotiation
and agreement of the parties, or by the Third Accounting Firm in
accordance with Section 3.2(b)(iii).
(iv) Buyer agrees to permit Company and Company's Accountants,
during normal business hours, to have reasonable access to, and to
examine and make copies of, all books and records of Company,
including but not limited to the books, records, schedules, work
papers and audit programs of Buyer and
9
Buyer's Accountants and access to representatives of Buyer's
Accountants, which documents and access are necessary to review the
balance sheet delivered by Buyer in accordance with Section 3.2. In
addition, Company's Accountants shall have the opportunity to observe
the taking of the inventory in connection with the preparation of such
balance sheet. Company similarly agrees to permit Buyer's Accountants
and their respective representatives, during normal business hours, to
have reasonable access to any books and records of Company which do
not constitute Purchased Assets, in order to enable them to prepare
such balance sheet.
3.4. Prorations. The following prorations (the "Prorations") relating to
the Purchased Assets shall be made as of the Closing Date, with Company or CAL
Properties, as the case may be, liable to the extent such items relate to any
time period up to the Closing Date (if not already taken into account on the
Final Closing Balance Sheet) and Buyer liable to the extent such items relate to
the Closing Date and periods subsequent to the Closing Date. Except as otherwise
specifically provided herein, the net amount of all Prorations shall be settled
and paid on the Settlement Date as provided by Section 3.2(e) hereof:
(a) Personal property taxes, real estate taxes and assessments, and
other taxes, if any, on or with respect to the Purchased Assets; provided
that special assessments for work actually commenced or levied prior to the
date of this Agreement shall be paid by Company or CAL Properties, as the
case may be, only to the extent such assessments are actually due prior to
the Closing Date. All amounts due after the Closing Date shall be paid by
Buyer.
(b) Rents, additional rents, taxes and other items payable by Company
under any lease, license, permit, contract or other agreement or
arrangement to be assigned to or assumed by Buyer.
(c) The amount of rents, taxes and charges for sewer, water, fuel,
telephone, electricity and other utilities; provided that, if practicable,
meter readings shall be taken at the Closing Date and the respective
obligations of the parties determined in accordance with such readings.
(d) All other items normally adjusted in connection with similar
transactions.
If the actual expense of any of the above items for the billing period within
which the Closing Date falls is not known on the Settlement Date, the proration
shall be made based on the expense incurred in the previous billing period, for
expenses billed less often than quarterly, and on the average expense incurred
in the preceding three billing periods, for expenses billed quarterly or more
often. Company agrees to furnish Buyer with such documents and other records as
shall be reasonably requested in order to confirm all proration calculations.
3.5. Other Payments and Adjustments. The amount of wages and other
remuneration due in respect of periods up to the Closing Date to employees of
Company shall be paid by Company directly to such employees. Except to the
extent reserved for on the Final Closing
10
Balance Sheet, Buyer shall receive a credit on the Settlement Date in an amount
equal to all vacation pay unpaid by Company as of the Closing Date attributable
to any period or partial period of employment by Company prior to the Closing
Date, plus employee payroll taxes applicable thereto due or to become due, for
Transferred Employees of Company who shall be employed by Buyer after the
Closing and (i) who have not as of the Closing Date taken vacation time earned
prior to Closing, or (ii) who have not earned vacation time as of the Closing
Date but who would have earned vacation time for any such period or partial
period of employment prior to the Closing (on a pro rata basis) had they
continued as employees of Company to the date when such vacation pay would have
accrued to them. Buyer shall pay any such credited or accrued amounts to the
Transferred Employees or, at its election, recognize equivalent days of vacation
time.
3.6. Allocation of Purchase Price. The aggregate Company Purchase Price
(including the assumption by Buyer of the Assumed Liabilities) shall be
allocated among the Purchased Assets for tax purposes in accordance with
Schedule 3.6. Company and Buyer shall 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 are required to be
made by the parties to the Internal Revenue Service ("IRS") under the provisions
of Section 1060 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any regulations thereunder, Buyer and Company shall disclose such reports to
the other prior to filing with the IRS.
ARTICLE
4.
REPRESENTATIONS AND WARRANTIES OF COMPANY AND
SHAREHOLDERS
Company makes 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 (the "Schedules") delivered
to Buyer prior to the closing of the transactions contemplated by this Agreement
and shall survive the Closing of the transactions provided for herein for a
period of two years.
4.1. Corporate.
(a) Organization. Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Minnesota.
(b) Corporate Power. Company has all requisite corporate power and
---------------
authority to own, operate and lease its properties, to carry on its
business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by Company pursuant hereto and to carry out the transactions
contemplated hereby and thereby.
11
(c) Qualification. Company is duly licensed or qualified to do
-------------
business as a foreign corporation, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business, makes such licensing or qualification
necessary except where such failure would not be material to the business,
financial condition or results of operation of Company taken as a whole,
(such effect, with reference to the Company, or, for purposes of Article 5,
with reference to CAL Properties, "Material Adverse Effect"). The states in
which Company is licensed or qualified to do business are listed in
Schedule 4.1(c).
(d) No Subsidiaries. Except as set forth in Schedule 4.1(d), Company
---------------
does not own any interest in any corporation, partnership or other entity.
4.2. Authority. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by Company pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors and shareholders of Company.
No other or further corporate act or proceeding on the part of Company is
necessary to authorize this Agreement or the other documents and instruments to
be executed and delivered by Company pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. This Agreement constitutes, and
when executed and delivered, the other documents and instruments to be executed
and delivered by Company pursuant hereto shall constitute, valid binding
agreements of Company, enforceable in accordance with their respective terms,
except as such may be limited by bankruptcy, insolvency, reorganization or other
laws affecting creditors' rights generally, and by general equitable principles.
4.3. No Violation. Neither the execution and delivery by Company of this
Agreement or the other documents and instruments to be executed and delivered by
Company pursuant hereto, nor the consummation by Company of the transactions
contemplated hereby and thereby (a) shall violate any applicable statute, law,
ordinance, rule or regulation (collectively, the "Laws") or order, writ,
injunction, judgment, plan or decree (collectively, the "Orders"), (b) except
for applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), shall require any authorization, consent, approval,
exemption or other action by or notice to any court, arbitrator, department,
commission, board, bureau, agency, authority, instrumentality or other body,
whether body, whether federal, state, municipal, foreign or other (collectively,
"Government Entities") (including, without limitation, under any "plant closing"
or similar law), or (c) subject to obtaining the consents referred to in
Schedule 4.3, shall 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 shall result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien other than a Permitted Lien
upon any of the assets of Company under, any term or provision of the corporate
charter or Bylaws of Company or 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 any of its assets or properties may be bound
or affected.
12
4.4. Financial Statements. Included as Schedule 4.4 are true and complete
copies of the financial statements of Company consisting of (i) balance sheets
of Company as of November 28, 1998, November 29, 1997 and November 30, 1996, and
the related statements of income and cash flows for the years then ended
(including the notes contained therein or annexed thereto), which financial
statements have been reported on, and are accompanied by, the signed,
unqualified opinions of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, independent auditors 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 statements of
income and cash flows for the six (6) months then ended and for the
corresponding period of the prior year (including the notes and schedules
contained therein or annexed thereto). All of such financial statements
(including all notes and schedules contained therein or annexed thereto) are
complete and accurate, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, for the
absence of footnote disclosure and year-end adjustments) applied on a consistent
basis, have been prepared in accordance with the books and records of Company,
and fairly present, in accordance with generally accepted accounting principles,
the assets, liabilities and financial position, the results of operations and
cash flows of Company as of the dates and for the years and periods indicated.
4.5. Tax Matters.
(a) Provision For Taxes. The provision made for taxes on the Recent
-------------------
Balance Sheet is sufficient in all material respects for the payment of all
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) and
assessments, whether or not disputed at the date of the Recent Balance
Sheet, for all years and periods prior thereto. Since the date of the
Recent Balance Sheet, Company has not incurred any taxes other than taxes
incurred in the ordinary course of business consistent in type and amount
with past practices of Company.
(b) Tax Returns Filed. Except as set forth on Schedule 4.5(b), 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. Company has duly withheld and paid
over as required all taxes which it is required to withhold and pay over
relating to salaries and other compensation heretofore paid to employees of
Company.
(c) Tax Audits. The federal and state income tax returns of Company
----------
have been audited by the Internal Revenue Service and appropriate state
taxing authorities for the periods and to the extent set forth in Schedule
4.5(c), and, except as set forth in Schedule 4.5(c), Company has not
received from the Internal Revenue Service or from the tax authorities of
any state, county, local or other jurisdiction any notice of any
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.
13
(d) Consolidated Group. Schedule 4.5(d) 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) Other. Except as set forth in Schedule 4.5(e), since January 1,
-----
1994 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 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 shall not be
deductible because of Section 280G of the Code, or (vi) been a party to any
tax allocation or tax sharing agreement.
4.6. Accounts Receivable. All accounts receivable of Company reflected on
the Recent Balance Sheet, and as incurred in the normal course of business since
the date thereof, represent arm's length sales actually made in the ordinary
course of the Business; are, to Company's Knowledge, collectible (net of the
reserves shown on the Recent Balance Sheet for doubtful accounts) in the
ordinary course; are subject to no counterclaim or setoff; and are not in
dispute. Schedule 4.6 contains a schedule of aged accounts receivable included
in the Recent Balance Sheet. All accounts receivable of Company reflected on the
Final Closing Balance Sheet shall represent arm's length sales actually made in
the ordinary course of the Business and shall be collectible (net of the reserve
shown on the Final Closing Balance Sheet for doubtful accounts) in the ordinary
course without the necessity of commencing legal proceedings and shall be
subject to no counterclaim or setoff. As used in this Agreement, the term
"Company's Knowledge" shall mean the actual knowledge of the Shareholders, ▇.▇.
▇▇▇▇▇▇▇▇▇ and D. ▇▇▇▇▇▇ ▇▇▇▇▇.
4.7. Inventory. Except as set forth on Schedule 4.7, all inventory of
Company reflected on the Recent Balance Sheet consists of a quality and quantity
usable and saleable in the ordinary course of the Business and is valued in
accordance with generally accepted accounting principles at the lower of cost
(on a LIFO basis) or market. 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 4.7, all
inventory of Company is located on premises owned or leased by Company as
reflected in this Agreement. Neither Company nor, to Company's Knowledge, any
such customer is in material breach of the terms of any obligation to the other,
and, to Company's Knowledge, no valid grounds exist for any setoff of amounts
billable to such customers on the completion of orders to which work-in-process
relates. All work-in-process is of a quality ordinarily produced in accordance
with the requirements of the orders to which such work-in-process is identified,
and shall require no material rework with respect to services performed prior to
Closing.
4.8. Absence of Certain Changes. Except as and to the extent set forth in
Schedule 4.8, since the date of the Recent Balance Sheet there has not been:
14
(a) Adverse Change. Any material adverse change in the financial
--------------
condition, assets, Liabilities, business, prospects or operations of
Company;
(b) Damage. Any loss, damage or destruction in excess of Twenty-Five
------
Thousand Dollars ($25,000) whether covered by insurance or not, affecting
Company's business or properties;
(c) Increase in Compensation. Except in the ordinary course of
------------------------
business and consistent with past practice, any increase in excess of Five
Thousand Dollars ($5,000) per individual per year or Fifty Thousand Dollars
($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 grievances which, individually and in the aggregate, 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 of Company in such person's capacity as a shareholder;
(g) Disposition of Property. Any sale, lease or other transfer or
-----------------------
disposition of any properties or assets of Company, except for the sale of
inventory items in the ordinary course of the Business;
(h) Indebtedness. Any indebtedness for borrowed money incurred,
------------
assumed or guaranteed by Company except in the ordinary course of business;
(i) Liens. Any Lien made on any of the properties or assets of
-----
Company except for Permitted Liens;
(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
15
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 that would be reasonable likely to have a Material
Adverse Effect.
4.9. Absence of Undisclosed Liabilities. Except as and to the extent
specifically reserved against in the Recent Balance Sheet or disclosed in
Schedule 4.9, 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 shall have a Material Adverse Effect on the Company. Except
as and to the extent described in the Recent Balance Sheet or in Schedule 4.9,
the Company has no knowledge of any basis for the assertion against Company of
any Liability and, to Company's Knowledge, there are no circumstances,
conditions, happenings, events or arrangements, contractual or otherwise, which
may give rise to Liabilities, except commercial liabilities and obligations
incurred in the ordinary course of the Business and consistent with past
practice.
4.10. No Litigation. Schedule 4.10 identifies all actions, suits,
proceedings, claims, arbitration, investigation or inquiry, whether civil,
criminal or administrative ("Litigation") to which Company or any of its
directors have been parties since January 1, 1994. Except as set forth in
Schedule 4.10 there is no Litigation pending or, to Company's Knowledge,
threatened against Company, its directors (in such capacity), its business or
any of its assets. To Company's knowledge, there is no basis for any Litigation.
4.11. Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 4.11(a), Company
----------
(including each and all of its operations, practices, properties and
assets) is in compliance in all material respects with all applicable Laws
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, product
advertising and the Environmental Laws. Except as set forth in Schedule
4.11(a), neither (i) Company nor its business or assets is subject to any
Order of any Government Entities, and (ii) Company has not received notice
of any violation or alleged violation of, and is subject to no Liability
for past or continuing violation of, any Laws or Orders. All reports and
returns required to be filed by Company with any Government Entity have
been filed, and were accurate and complete in all material respects when
filed. Without limiting the generality of the foregoing:
16
(i) The operation of Company's business as it is now conducted
does not, nor, to Company's Knowledge, does any condition existing at
any of the Facilities, in any manner constitute a nuisance or other
tortious interference with the rights of any person or persons in such
a manner as to give rise to or constitute the grounds for a suit,
action, claim or demand by any such person or persons seeking
compensation or damages or seeking to restrain, enjoin or otherwise
prohibit any aspect of the conduct of such business or the manner in
which it is now conducted.
(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) Company has delivered to Buyer copies of all reports of
Company since January 1, 1994 required under the federal Occupational
Safety and Health Act of 1970, as amended, and under all other
applicable health and safety laws and regulations. The deficiencies,
if any, noted on such reports have been corrected.
(b) Permits and Licenses. Company has all 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 except where such
failure would not result in a Material Adverse Effect. All such licenses,
permits, approvals, authorizations and consents are described in Schedule
4.11(b), are in full force and effect and except as otherwise noted on
Schedule 4.11(b) are assignable to Buyer in accordance with the terms
hereof. Except as set forth in Schedule 4.11(b), Company (including its
operations, properties and assets) is and has been in compliance with all
such permits and licenses, approvals, authorizations and consents, except
where such failure would not have a Material Adverse Effect.
(c) Environmental Matters. The applicable Laws relating to pollution
---------------------
or protection of the environment, including Laws relating to emissions,
discharges, generation, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum or 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, in effect and as adopted at the time of Closing,
are herein collectively referred to as the "Environmental Laws". Without
limiting the generality of the foregoing provisions of this Section 4.11,
Company is in compliance with all limitations, restrictions, conditions,
standards, prohibitions,
17
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulations, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except where the failure to so comply
would not have a Material Adverse Effect. Except as set forth in Schedule
4.11(c), 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 Company's Knowledge, except as set forth in Schedule
4.11(c), 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, 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.
4.12. Title to and Condition of Properties.
(a) Marketable Title. Company has good and marketable and, in the
----------------
case of the Real Property, insurable, title to all the Company Assets, free
and clear of all mortgages, 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") except; (i)
those described in Schedule 4.12(a), (ii) Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings (and
which have been sufficiently accrued or reserved against in the Recent
Balance Sheet), (iii) municipal and zoning ordinances and easements for
public utilities, none of which materially interfere with the use of the
property as currently utilized, (iv) mechanics' carriers,' workers' or
other like liens arising in the ordinary course of business, (v) minor
imperfections of title which do not individually, or in the aggregate,
impair the continued use of the real property assets and fixtures to which
they relate in the operation of the Business as currently conducted and
(vi) liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the
ordinary course of business ("Permitted Liens"). To Company's Knowledge,
all presently existing Permitted Liens arising under clauses (ii), (iii),
(iv) and (vi), above are disclosed on Schedule 4.12(a). Subject to
obtaining the consents referred to in Section 4.3, none of the Company
Assets are subject to any restrictions with respect to the transferability
thereof. There are no third parties in or entitled to possession of the
Real Property. Company has complete and unrestricted power and right to
sell, assign, convey and deliver the Company Assets to Buyer as
contemplated hereby and so long as this Agreement remains in force, Company
shall not lease, convey, or otherwise transfer or encumber all or any part
of the Real Property. At Closing, Buyer shall receive good and marketable
title to all the Company Assets, free
18
and clear of all Liens of any nature whatsoever except those described in
Schedule 4.12(a) and except Permitted Liens.
(b) Condition. All tangible assets (real and personal) constituting
---------
Company Assets hereunder are in good operating condition and repair, normal
wear and tear excepted, free from any defects (except such minor defects as
do not interfere with the use thereof in the conduct of the normal
operations of the Business), have been maintained consistent with the
standards generally followed in the industry and are sufficient to carry on
the Business as conducted during the preceding twelve (12) months. All
buildings, plants and other structures owned or otherwise utilized by
Company are in good condition and repair, normal wear and tear excepted,
and have no material structural defects or defects affecting the plumbing,
electrical, sewerage, or heating, ventilating or air conditioning systems.
(c) Real Property. Schedule 4.12(c) sets forth all real property
-------------
owned, used or occupied by Company (the "Real Property"). Company
previously has delivered to Buyer copies of all written leases currently in
effect for any parcel of Real Property. Schedule 4.12(c) also sets forth,
with respect to each parcel of Real Property which is leased under any oral
agreement, the material terms of such lease. There are now in full force
and effect duly issued certificates of occupancy permitting the Real
Property and improvements located thereon to be legally used and occupied
as the same are now constituted. Neither the Real Property nor its use is
in violation of any local governmental rule, ordinance, regulation, or
building code, except where such violation would not result in a Material
Adverse Effect, nor is there a pending or, to Company's Knowledge,
threatened investigation regarding the possible violation of the foregoing.
There is no claim of adverse possession or prescriptive rights involving
any of the Real Property, and, to Company's Knowledge, no basis exists for
any such claim. No public improvements have been commenced and to Company's
knowledge none are planned which in either case may result in special
assessments against or otherwise materially adversely affect any Real
Property. No portion of any of the Real Property has been used as a
landfill or for storage or landfill of hazardous or toxic materials. Except
as disclosed, to Company's Knowledge there is no (i) planned or proposed
increase in assessed valuations of any Real Property, (ii) Order requiring
repair, alteration, or correction of any existing condition affecting any
Real Property or the systems or improvements thereat, (iii) condition or
defect which could give rise to an order of the sort referred to in "(ii)"
above, or (iv) underground storage tanks, or any structural, mechanical, or
other defects of material significance affecting any 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 Real Property).
(d) No Condemnation or Expropriation. 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
to Company's Knowledge has any such
19
condemnation, expropriation or taking been proposed, nor has Company agreed
to or committed to dedicate any part of the Real Property.
(e) No Certified Survey Map Required. No certified survey map or
--------------------------------
other state, municipal, or other governmental approval regarding the
division, platting, or mapping of real estate is required as a prerequisite
to the conveyance by Company to Buyer (or as a prerequisite to the
recording of any conveyance document) of any Owned Real Property or Leased
Real Property pursuant to the terms hereof.
(f) Further Covenants. Except as set forth in Schedule 4.12(f):
-----------------
(i) The Real Property has free and full access to and from all
adjoining streets, roads and highways, and there is no pending or, to
Company's Knowledge, threatened action which would impair such access.
(ii) The Real Property has not been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or assessment, or receive either an abatement or deferment of ad
valorem taxes or assessments which, in any such case, will result in
additional, catch-up ad valorem taxes in the future in order to
recover the amounts previously abated or deferred.
(iii) Company has not received any notice nor is it aware of any
litigation or administrative proceeding pending or threatened
(including the expiration of any appeal period with respect thereto)
relating to the Real Property or its use which may adversely affect
the validity of any license, permit or other governmental
determination or authorization necessary to development and operation
of the Real Property.
(iv) Company has not entered into nor is Company aware of any
agreements, commitments or arrangements concerning the Real Property
or development thereof with any person or entity, including, but not
limited to, governmental or quasi-governmental authorities, agencies,
departments, commissions, councils, boards or other instrumentalities,
adjoining landowners, public or private utility companies or
authorities, or highway or street authorities, except as set forth in
the Agreement.
(v) Company has not entered into any agreement which is
presently in effect (other than this Agreement) whereby Company has
agreed to sell, transfer, hypothecate or otherwise encumber the Real
Property, or whereby Company has entered into a lease or other
agreement for possession or use of the Real Property, or granted to
any third party an option or a right of first refusal to purchase or
lease all or any part of the Real Property.
(vi) Company represents that Company has delivered or disclosed
to Buyer all requested information regarding the Real Property and has
not failed to
20
deliver any material fact of which it has knowledge regarding the
condition of the Real Property.
4.13. Insurance. Set forth in Schedule 4.13 is a complete and accurate list
and description of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the business and properties of Company, true and correct copies of
which have heretofore been delivered to Buyer. Schedule 4.13 includes, without
limitation, the carrier, the description of coverage, the limits of coverage,
retention or deductible amounts, amount of annual premiums, date of expiration
and the date through which premiums have been paid with respect to each such
policy, and any pending claims in excess of $10,000. 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 customarily maintained by organizations similarly
situated; and no such policy (nor any previous 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. Schedule 4.13
indicates each policy as to which (a) the coverage limit has been reached or (b)
the total incurred losses to date equal 75% or more of the coverage limit. No
notice of cancellation or termination has been received with respect to any such
policy, and to Company's Knowledge, there has been no act or omission of Company
which could result in cancellation of any such policy prior to its scheduled
expiration date. 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 years. Company has duly and timely made
all claims it has been entitled to make under each policy of insurance. Since
January 1, 1994 all products liability and general liability policies maintained
by or for the benefit of Company have been "occurrence" policies and not "claims
made" policies. 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, and to Company's Knowledge there is no basis for denial of any
claim under any such policy. Company has not received any written notice from or
on behalf of any insurance carrier issuing any such policy that insurance rates
therefor shall hereafter be substantially increased (except to the extent that
insurance rates may be increased for all similarly situated risks) or that there
shall hereafter be a cancellation or an increase in a deductible (or an increase
in premiums in order to maintain an existing deductible) or nonrenewal of any
such policy. Such policies are sufficient in all material respects for
compliance by Company with all requirements of law and with the requirements of
all material contracts to which Company is a party.
4.14. Contracts and Commitments.
(a) Real Property Leases. Except as set forth in Schedule 4.14(a),
--------------------
Company has no leases of real property.
(b) Personal Property Leases. Except as set forth in Schedule
------------------------
4.14(b), Company has no leases of personal property involving consideration
or other expenditure
21
in excess of Ten Thousand Dollars ($10,000) or involving performance over a
period of more than six (6) months.
(c) Purchase Commitments. Except as set forth in Schedule 4.14(c),
--------------------
Company has no purchase commitments for inventory items or supplies that,
together with amounts on hand, constitute in excess of six months normal
usage.
(d) Sales Commitments. Except as set forth on Schedule 4.14(d),
-----------------
Company has no sales contracts or commitments to customers or distributors
which aggregate in excess of $20,000 to any one customer or distributor (or
group of affiliated customers or distributors). Company has no sales
contracts or commitments except those made in the ordinary course of
business, at arm's length, and no such contracts or commitments are for a
sales price which would result in a loss to the Company.
(e) Contracts With Affiliates and Certain Others. Except as set forth
--------------------------------------------
in Schedule 4.14(e), 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. The 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. Except as set forth in Schedule
--------------------------------
4.14(g), Company is not a party to any collective bargaining agreements
with any unions, guilds, shop committees or other collective bargaining
groups. Copies of all such agreements have heretofore been delivered to
Buyer.
(h) Loan Agreements. Except as set forth in Schedule 4.14(h), 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 4.14(i), 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 governmental body which is subject to renegotiation.
(k) Burdensome or Restrictive Agreements. Except as set forth in
------------------------------------
Schedule 4.14(k), Company is not a party to nor is it bound by any
agreement requiring Company to assign any interest in any trade secret or
proprietary information, or prohibiting or
22
restricting Company from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world.
(l) Other Material Contracts. Company has no lease, license, contract
------------------------
or commitment of any nature involving consideration or other expenditure in
excess of Twenty-Five Thousand Dollars ($25,000) 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 4.14(l) or in any other Schedule.
(m) No Default. Except as set forth in Schedule 4.14(m), 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 thereunder or cause the
acceleration of any of Company's obligations or result in the creation of
any Lien on any of the assets owned, used or occupied by Company. To
Company'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.
4.15. Labor Matters. Except as set forth in Schedule 4.15, since January 1,
1994 Company has not experienced any labor disputes or any work stoppage due to
labor disagreements in connection with its business. Except to the extent set
forth in Schedule 4.15, (a) Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except where the failure to so comply would not
have a Material Adverse Effect, and is not engaged in any unfair labor practice;
(b) there is no unfair labor practice charge or complaint against Company
pending or, to Company's Knowledge, threatened; (c) there is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or,
to Company'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, to Company's Knowledge, is
threatened respecting the employees of Company; (e) no grievance which might
have a Material Adverse Effect, nor any arbitration proceeding arising out of or
under collective bargaining agreements, is pending and, to Company's Knowledge,
no such claim therefor exists; (f) there are no administrative charges or court
complaints against Company concerning alleged employment discrimination or other
employment related matters pending or, to Company's Knowledge, threatened before
the U.S. Equal Employment Opportunity Commission or any Government Entity or
before any federal or state court; and (g) to Company's Knowledge, there are no
investigations, complaints, citations or other proceedings threatened or pending
against Company by the U.S. Occupational, Safety and Health Administration or
any state agency concerning any health or safety matters.
23
4.16. Employee Benefit Plans.
(a) Disclosure and Delivery of Documents. Schedule 4.16(a) 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, 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 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 the Company. (Such items, collectively, the "Employee
Plans/Agreements," and individually, an "Employee Plan/Agreement.") True
and correct copies of all the Employee Plans/Agreements, including all
amendments thereto, have heretofore been provided to Buyer, along with, to
the extent applicable to the particular Employee Plan/Agreement, the
following information: a copy of the annual report (form 5500 series) filed
for the last three years, a copy of the summary plan description, summary
annual report, summary of material modifications, and all material manuals
or communications filed or distributed with respect to the Employee
Plan/Agreement during the last three years, and a copy of any insurance
contract or trust agreement through which the Employee Plan/Agreement is
funded, the most recent IRS determination letter issued with respect to the
Employee Plan/Agreement.
(b) Title IV of ERISA. Except as disclosed on Schedule 4.16(b),
-----------------
Company does not maintain or contribute to, and has never maintained or
contributed to, an Employee Plan/Agreement that is subject to Title IV of
ERISA.
(c) Multiemployer Plans. Except as disclosed on Schedule 4.16(c),
-------------------
Company does not contribute and has never contributed (or been obligated to
contribute) to a multiemployer plan as defined in Section 4001(a)(13) of
ERISA.
(d) Controlled Group Status. Except as disclosed on Schedule 4.16(d),
-----------------------
Company is not a member of (i) a controlled group of corporations, (ii) a
group of trades or businesses under common control, or (iii) an affiliated
service group, within the meaning of Sections 414(b), (c) or (m),
respectively, of the Code.
(e) Severance and Post-Retirement Benefits. Except as disclosed on
--------------------------------------
Schedule 4.16(e), Neither Company nor any Employee Plan/Agreement
maintained or contributed to by Company provides or has any obligation to
provide (or contribute toward the cost of) post-retirement welfare benefits
with respect to current or former employees of Seller or any other entity,
including, without limitation, post-retirement medical, dental, life
24
insurance, severance or any other similar benefit, whether provided on an
insured or self-insured basis.
(f) Payments and Compliance. With respect to each Employee
-----------------------
Plan/Agreement, except as disclosed on Schedule 4.16(f) (i) all payments
due from any such plan (or from Company with respect to any such plan) have
been made, and all amounts properly accrued to date as liabilities of
Company which have not been paid have been properly recorded on the books
of Company; (ii) Company has complied with, and each such Employee
Plan/Agreement conforms in form and operation to, all applicable laws and
regulations, including but not limited to ERISA and the Code in all
material respects.
(g) COBRA. Company has complied with the continuation coverage
-----
requirements of Section 601 through 608 of ERISA, and the requirements of
any similar State law regarding continued insurance coverage, and Company
has incurred no liability with respect to its failure to offer or provide
continued coverage in accordance with the foregoing requirements, nor is
there any suit or action pending or threatened with respect to such
requirements.
4.17. Employment Compensation. Schedule 4.17 contains a true and correct
list of all employees to whom the 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 in the case of salaried
employees such list identifies the current annual rate of compensation for each
employee and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within each such
range.
4.18. Trade Rights.
(a) Schedule 4.18(a) lists all Trade Rights of the type described in
clauses (i), (ii), (iii), (iv), (v) or (vi) of Section 1.1(e) in which
Company now has any interest, specifying whether such Trade Rights are
owned, controlled, used or held (under license or otherwise) by Company,
and also indicating which of such Trade Rights are registered. All Trade
Rights shown as registered in Schedule 4.18(a) have been properly
registered, all pending registrations and applications have been properly
made and filed and all annuity, maintenance, renewal and other fees
relating to registrations or applications are current. In order to conduct
the business of Company, as such is currently being conducted or proposed
to be conducted, Company does not require any Trade Rights that it does not
already have. Company is not infringing and has not infringed any Trade
Rights of another in the operation of the business of Company, nor, to
Company's Knowledge, is any other person infringing the Trade Rights of
Company. Company has not granted any license or made any assignment of any
Trade Right listed on Schedule 4.18(a), and no other person has any right
to use any Trade Right owned or held by Company. Company does not pay any
royalties or other consideration for the right to use any Trade Rights of
others. There is no Litigation pending or, to Company's Knowledge,
threatened to challenge Company's right, title and interest with respect to
its continued
25
use and right to preclude others from using any Trade Rights of Company.
All Trade Rights of Company are valid, enforceable and in good standing,
and there are no equitable defenses to enforcement based on any act or
omission of Company.
(b) Except as disclosed in Schedule 4.18(b), to Company'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, such internal systems and such products and services used in
combination with other such internal systems and such products and
services, respectively, must properly exchange date/time data with them in
accordance with the foregoing warranty. There are no pending, and to
Company's Knowledge there are no threatened claims against Company relating
to whether the Products and services of Company are Year 2000 Compliant.
4.19. Major Customers and Suppliers.
(a) Major Customers. Schedule 4.19(a) contains a list of the ten (10)
---------------
largest customers, including distributors, of Company for each of the two
(2) most recent fiscal years and for the current fiscal year to the date of
the Recent Balance Sheet (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 period. To Company's Knowledge, there are no
facts indicating, nor any other reason to believe, that any of the
customers listed on Schedule 4.19(a) shall not continue to be customers of
the business of Company after the Closing at substantially the same level
of purchases as heretofore.
(b) Major Suppliers. Schedule 4.19(b) contains a list of the ten (10)
---------------
largest suppliers to Company for each of the two (2) most recent fiscal
years and for the current fiscal year to the date of the Recent Balance
Sheet (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 period. To Company's Knowledge, there are no facts indicating,
nor any other reason to believe, that any of the suppliers listed on
Schedule 4.19(b) shall not continue to be suppliers to the business of
Company after the Closing and shall not continue to supply the business
with substantially the same quantity and quality of goods at competitive
prices.
(c) Dealers and Distributors. Schedule 4.19(c) contains a list by
product line of all sales representatives, dealers, distributors and
franchisees of Company, together with representative copies of all sales
representative, dealer, distributor and franchise
26
contracts and policy statements, and a description of all substantial
modifications or exceptions.
4.20. Product Warranty and Product Liability. Schedule 4.20 contains a
true, correct and complete copy of Company's standard warranty or warranties for
sales of Products and, except as stated therein, there are no warranties,
commitments or obligations with respect to the return, repair or replacement of
Products. Schedule 4.20 sets forth the estimated aggregate annual cost to
Company of performing warranty obligations for customers for each of the five
(5) preceding fiscal years and the current fiscal year to the date of the Recent
Balance Sheet. Schedule 4.20 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 which to Company's Knowledge
are threatened, or which have been asserted or commenced against Company within
the last five (5) years, in which a party thereto either requests injunctive
relief or alleges damages (whether or not covered by insurance) which exceed
$5,000. 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 disclosed in Schedule 4.20, none of the Products
has been the subject of any replacement, field fix, retrofit, modification or
recall campaign and, to Company's Knowledge, no facts or conditions exist which
could reasonably be expected to result in such a recall campaign. The Products
have been designed, manufactured and labeled 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.
4.21. Affiliates' Relationships to Company.
(a) Contracts With Affiliates. All leases, contracts, agreements or
-------------------------
other arrangements between Company and any Affiliate are described on
Schedule 4.21(a).
(b) No Adverse Interests. Except as set forth in Schedule 4.21(b), no
--------------------
Affiliate has any direct or indirect interest in (i) any entity which does
business with Company or is competitive with Company's business, or (ii)
any property, asset or right which is used by Company in the conduct of its
business.
(c) Obligations. All obligations of any Affiliate to Company, and all
-----------
obligations of Company to any Affiliate, are listed on Schedule 4.21(c).
4.22. Assets Necessary to Business. The Purchased Assets include all
property and assets (except for the Excluded Assets), tangible and intangible,
and all leases, licenses and other agreements, which are necessary to permit
Buyer to carry on, or currently used or held for use in, the Business as
presently conducted.
4.23. No Brokers or Finders. None of Company, CAL Properties or the
Shareholders, nor any of their directors, officers, employees or agents have
retained, employed or
27
used any broker or finder in connection with the transaction provided for herein
or in connection with the negotiation thereof. Company and CAL Properties,
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 Company,
CAL Properties or the Shareholders in connection with the execution of this
Agreement or the transactions provided for herein.
4.24. Copies of Certain Documents. Company has heretofore delivered to
Buyer full and complete copies of: (a) all agreements entered into by Company,
if any, providing for the acquisition or disposition of businesses or product
lines; (b) all federal and other tax returns filed by Company and, to the extent
such returns relate to the properties, assets or operations of Company, by any
Shareholder, for the years ended November 28, 1998, November 29, 1997 and
November 30, 1996; and (c) a complete list of all investments of Company, if
any, in marketable or other securities (whether debt or equity).
4.25. Underlying Documents. Any underlying documents listed or described in
the Schedules referred to in this Agreement will be furnished to Buyer or its
representatives. All such documents furnished to Buyer will be true and complete
copies, without any amendments or modifications thereto, except as expressly
noted in the Schedules in which such documents are incorporated. 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.
4.26. Business of Company. Except as set forth in Schedule 4.26, To
Company'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 or prospects of
Company, other than such conditions as may generally affect the industry in
which Company participates.
4.27. Disclosure of Material Facts. To Company's Knowledge, Company has
disclosed to Buyer all material facts relating to the condition (financial or
otherwise), of the Business, assets, properties, liabilities, operations or
prospects of Company. The representations and warranties contained in Article 4
of this Agreement and in the Schedules hereto 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.
ARTICLE
5.
REPRESENTATIONS AND WARRANTIES OF CAL PROPERTIES
CAL Properties makes 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 Schedules delivered to Buyer prior
to the Closing of the transactions contemplated by this Agreement, and shall
survive the Closing of the transactions provided for herein for a period of two
years.
28
5.1. Partnership.
(a) Organization. CAL Properties is a general partnership duly
------------
organized, validly existing and in good standing under the laws of the
State of Minnesota.
(b) Partnership Power. CAL Properties has all requisite partnership
-----------------
power and authority to own, operate and lease its properties, to carry on
its business as and where such is now being conducted, to enter into this
Agreement and the other documents and instruments to be executed and
delivered by CAL Properties pursuant hereto and to carry out the
transactions contemplated hereby and thereby.
(c) Qualification. CAL Properties is duly licensed or qualified to do
-------------
business as a foreign partnership, and is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by it,
or the nature of its business, makes such licensing or qualification
necessary except where such failure would not result in a Material Adverse
Effect. The states in which CAL Properties is licensed or qualified to do
business are listed in Schedule 5.1(c).
(d) No Subsidiaries. CAL Properties does not own any interest in any
---------------
corporation, partnership or other entity.
5.2. Authority. The execution and delivery of this Agreement and the other
documents and instruments to be executed and delivered by CAL Properties
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the partners of CAL Properties. No other or
further partnership act or proceeding on the part of CAL Properties is necessary
to authorize this Agreement or the other documents and instruments to be
executed and delivered by CAL Properties pursuant hereto or the consummation of
the transactions contemplated hereby and thereby. This Agreement constitutes,
and when executed and delivered, the other documents and instruments to be
executed and delivered by CAL Properties pursuant hereto shall constitute, valid
binding agreements of CAL Properties, enforceable in accordance with their
respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
5.3. No Violation. Neither the execution and delivery of this Agreement or
the other documents and instruments to be executed and delivered by CAL
Properties pursuant hereto, nor the consummation by CAL Properties of the
transactions contemplated hereby and thereby (a) shall violate any applicable
Law or Order, (b) except for applicable requirements of the HSR Act, shall
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 consents referred to
in Section 10.4, shall 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 shall result in the termination of, or accelerate the performance
required by, or result in the creation of any Lien other than a Permitted Lien
upon any of the assets of CAL Properties under, any term or provision of the
partnership agreement or Bylaws of CAL Properties or of any contract,
commitment, understanding, arrangement, agreement or restriction
29
of any kind or character to which CAL Properties is a party or by which CAL
Properties or any of its assets or properties may be bound or affected.
5.4. Compliance With Laws and Orders.
(a) Compliance. Except as set forth in Schedule 5.4(a), CAL
----------
Properties (including each and all of its operations, practices, properties
and assets) is in compliance, except where such failure would not have a
Material Adverse Effect, with all applicable Laws and Orders relating to
the Owned Real Property. Except as set forth in Schedule 5.4(a), CAL
Properties has not received notice of any violation or alleged violation
of, and is subject to no Liability for past or continuing violation of, any
Laws or Orders relating to the Owned Real Property. All reports and returns
required to be filed by CAL Properties, relating to the Owned Real
Property, with any Government Entity have been filed, and were accurate and
complete, in all material respects, when filed. Without limiting the
generality of the foregoing, the operation of CAL Properties' business as
it is now conducted does not, nor does any condition existing at the Owned
Real Property, in any manner constitute a nuisance or other tortious
interference with the rights of any person or persons in such a manner as
to give rise to or constitute the grounds for a suit, action, claim or
demand by any such person or persons seeking compensation or damages or
seeking to restrain, enjoin or otherwise prohibit any aspect of the conduct
of such business or the manner in which it is now conducted.
(b) Permits and Licenses. CAL Properties has all permits, licenses,
--------------------
approvals, authorizations and consents of all Government Entities required
for the ownership and use of the Owned Real Property, except where the
failure would not have a Material Adverse Effect. All such licenses,
permits, approvals, authorizations and consents are described in Schedule
5.4(b), are in full force and effect and except as otherwise noted on
Schedule 5.4(b) are assignable to Buyer in accordance with the terms
hereof. Except as set forth in Schedule 5.4(b), CAL Properties (including
its operations, properties and assets) is and has been in compliance, in
all material respects, with all such permits and licenses, approvals,
authorizations and consents, except where such failure would not have a
Material Adverse Effect.
(c) Environmental Matters. Without limiting the generality of the
---------------------
foregoing provisions of this Section 5.4, CAL Properties is in compliance
in all material respects with all limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any
regulations, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except
where the failure to so comply would not have a Material Adverse Effect.
Except as set forth in Schedule 5.4(c), there is no Litigation nor any
demand, claim, hearing or notice of violation pending or threatened against
CAL Properties relating in any way to the Environmental Laws or any Order
issued, entered, promulgated or approved thereunder. Except as set forth in
Schedule 5.4(c), to Company's Knowledge, there are no past or present
events, conditions, circumstances, activities, practices, incidents,
actions, omissions or plans
30
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, 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.
5.5. Title to and Condition of Properties.
(a) Marketable Title. CAL Properties has good and marketable and
----------------
insurable title to the Owned Real Property, free and clear of all Liens,
except those described in Schedule 5.5(a) and Permitted Liens. To Company's
Knowledge, all presently existing Permitted Liens (arising under clauses
(a)(ii), (a)(iii), (a)(iv) and (a)(vi) of Section 4.12) are disclosed on
Schedule 5.5(a). The Owned Real Property is not subject to any restrictions
with respect to the transferability thereof. Other than the Company (or an
Affiliate), there are no third parties in or entitled to possession of the
Owned Real Property. CAL Properties has complete and unrestricted power and
right to sell, assign, convey and deliver the Owned Real Property to Buyer
as contemplated hereby and so long as this Agreement remains in force, CAL
Properties shall not lease, convey or otherwise transfer or encumber all or
any part of the Owned Real Property. At Closing, Buyer shall receive good
and marketable title to the Owned Real Property, free and clear of all
Liens of any nature whatsoever except those described in Schedule 5.5(a)
and Permitted Liens.
(b) Condition. All improvements upon the Owned Real Property are in
---------
good condition and repair, ordinary wear and tear excepted, have no
structural defects or defects affecting the plumbing, electrical, sewerage,
or heating, ventilating or air conditioning systems thereto, and have been
maintained consistent with reasonable commercial standards.
(c) Real Property. Schedule 1.1(a) accurately describes the Owned
-------------
Real Property. There are now in full force and effect duly issued
certificates of occupancy permitting the Owned Real Property and
improvements located thereon to be legally used and occupied as the same
are now constituted. Neither the Owned Real Property nor its use is in
violation of any local governmental rule, ordinance, regulation, or
building code, which violation would have a Material Adverse Effect, nor is
there a pending or threatened investigation regarding the possible
violation of the foregoing. There is no claim of adverse possession or
prescriptive rights involving the Owned Real Property, and, to Company's
Knowledge, no basis exists for any such claim. No public improvements have
been commenced and, to CAL Properties' knowledge, none are planned which
may result in special assessments against or otherwise materially adversely
affect the Owned Real Property. No portion of any of the Owned Real
Property has been used as a landfill or for storage or landfill of
hazardous or toxic
31
materials. Except as disclosed, CAL Properties has no notice or knowledge
of any (i) planned or proposed increase in assessed valuations of the Owned
Real Property, (ii) Order requiring repair, alteration, or correction of
any existing condition affecting Owned Real Property or the systems or
improvements thereat, (iii) condition or defect which could give rise to an
order of the sort referred to in (ii) above, or (iv) underground storage
tanks, or any structural, mechanical, or other defects of material
significance affecting the Owned 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
Owned Real Property).
(d) No Condemnation or Expropriation. Neither the whole nor any
--------------------------------
portion of the Owned Real Property 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 to the best of CAL
Properties' knowledge, has any such condemnation, expropriation or taking
been proposed, nor has CAL Properties agreed to or committed to dedicate
any part of the Owned Real Property.
(e) No Certified Survey Map Required. No certified survey map or
--------------------------------
other state, municipal, or other governmental approval regarding the
division, platting, or mapping of real estate is required as a prerequisite
to the conveyance by CAL Properties to Buyer (or as a prerequisite to the
recording of any conveyance document) of the Owned Real Property pursuant
to the terms hereof.
(f) Further Covenants. Except as set forth in Schedule 5.5(f):
-----------------
(i) The Owned Real Property has free and full access to and
from all adjoining streets, roads and highways, and there is no
pending or, to Company's Knowledge, threatened action which would
impair such access.
(ii) The Owned Real Property has not been classified under any
designation authorized by law to obtain a special low ad valorem tax
rate or assessment, or receive either an abatement or deferment of ad
valorem taxes or assessments which, in any such case, will result in
additional, catch-up ad valorem taxes in the future in order to
recover the amounts previously abated or deferred.
(iii) CAL Properties has not received any notice nor is it aware
of any litigation or administrative proceeding pending or threatened
(including the expiration of any appeal period with respect thereto)
relating to the Owned Real Property or its use which may adversely
affect the validity of any license, permit or other governmental
determination or authorization necessary to development and operation
of the Owned Real Property.
(iv) CAL Properties has not entered into nor is CAL Properties
aware of any agreements, commitments or arrangements concerning the
Owned Real Property or development thereof with any person or entity,
including, but not limited to, governmental or quasi-governmental
authorities, agencies,
32
departments, commissions, councils, boards or other instrumentalities,
adjoining landowners, public or private utility companies or
authorities, or highway or street authorities, except as set forth in
the Agreement.
(v) CAL Properties has not entered into any agreement which is
presently in effect (other than this Agreement) and leases to the
Company or an Affiliate whereby CAL Properties has agreed to sell,
transfer, hypothecate or otherwise encumber the Owned Real Property,
or whereby CAL Properties has entered into a lease or other agreement
for possession or use of the Owned Real Property, or granted to any
third party an option or a right of first refusal to purchase or lease
all or any part of the Owned Real Property.
(vi) CAL Properties represents that CAL Properties has delivered
or disclosed to Buyer all requested information regarding the Owned
Real Property and has not failed to deliver any material fact of which
it has knowledge regarding the condition of the Owned Real Property.
ARTICLE
6.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to Company and
CAL Properties, 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 Company or any notice to
Company, and shall survive the Closing of the transactions provided for herein.
6.1. 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.
6.2. Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto 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 or its shareholders is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto shall constitute, valid and binding agreements of
Buyer, enforceable in accordance with
33
their respective terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors' rights generally, and by
general equitable principles.
6.3. 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.
Buyer agrees to hold Company, CAL Properties and Shareholders harmless from and
against all 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.
6.4. No Violation. Neither the execution and delivery of this Agreement or
the other documents and instruments to be executed and delivered by Buyer
pursuant hereto, nor the consummation by Buyer of the transactions contemplated
hereby and thereby (a) shall violate any applicable Law or Order, or (b) except
for applicable requirements of the HSR Act, shall 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).
6.5. Disclosure. To Buyer's knowledge, no representation or warranty by
Sellers contains any untrue statement or fact or omits any material fact
necessary in order to make the statements of fact contained therein not
misleading.
ARTICLE
7.
EMPLOYEES EMPLOYEE BENEFITS
7.1. Transferred Employees. As soon as is practicable after the date
hereof, Company shall provide Buyer with Schedule 7.1 which shall be a complete
list of all current employees of the Company including such employees' job
titles and rates of pay. Buyer shall make offers of employment to each such
employee disclosed on Schedule 7.1. Such offers of employment shall contain a
provision for compensation that is substantially similar to each employee's
current compensation. The Company hereby authorizes the Buyer to enter into
discussions with any of such employees concerning the future employment of such
individual by the Buyer; provided, however, that without Company's prior consent
(i) such discussions will not be commenced prior to July 20, 1999 and then only
after the giving of notice by the Company to the employees of the Company of the
transactions contemplated by this Agreement; and (ii) all such discussions will
be conducted in such a manner as not to interfere unreasonably with the business
operations of the Company. Except as otherwise provided in this Agreement, the
terms and conditions of such employment will be established by the Buyer in its
sole discretion. Any such employee who accepts an employment offer with the
Company and reports for work on the date directed by the Buyer shall be
sometimes referred to as a "Transferred Employee." Prior to the Closing Date,
Buyer shall not communicate with either of the Unions representing current
employees of the Company.
7.2. Payroll Tax. Company agrees to make a clean cutoff of payroll and
payroll tax reporting with respect to Transferred Employees paying over to the
federal, state and city
34
governments those amounts respectively withheld or required to be withheld for
periods ending on or prior to the Closing Date. Company also agrees to issue, by
the date prescribed by IRS Regulations, Forms W-2 for wages paid through the
Closing Date. Except as set forth in this Agreement, Buyer shall be responsible
for all payroll and payroll tax obligations after the Closing Date for
Transferred Employees.
7.3. Severance Pay. The Buyer will be responsible for making any required
payment of severance compensation including any notice pay and severance pay in
order to comply with the requirements of the Worker Adjustment and Retraining
Act ("WARN") (or any similar state or local Law) to any employee of the Company
who is (i) not offered employment by the Buyer, (ii) who, as a result of being
offered a position by Buyer which is substantially different than the position
such employee held with Company, refuses to accept any such offer of employment
by the Buyer, or (iii) accepts employment with the Buyer and whose employment is
subsequently terminated by Buyer.
7.4. Participation in Buyer Plans. Each Transferred Employee will be
permitted to participate in the Buyer's benefit plans, policies and practices in
accordance with the terms thereof applicable to newly hired employees and
without regard to service with the Company or any aspect of participation in any
benefit plans, practices or policies of the Company, except (i) a Transferred
Employee will be eligible to participate in the Buyer's medical, dental
disability and life insurance plans effective as of the date in which he or she
becomes a Transferred Employee in accordance with the otherwise applicable terms
of such plans and the Buyer will waive or cause to be waived any pre-existing
condition, exclusions or limitations applicable to such persons under such
medical and dental plans provided such Transferred Employees participated in the
Company's medical or dental plans, as the case may be, on the Closing Date, (ii)
a Transferred Employee who would be eligible to participate in Buyer's employee
pension benefit plans if such Transferred Employee's service with the Company
were counted as eligibility service for purposes of such employee pension
benefit plan will be permitted to enter Buyer's employee pension benefit plan no
later than on the first day of the calendar month after the calendar month in
which Closing occurs and such Transferred Employee's service with the Company
will be counted for vesting purposes with respect to Buyer's employee pension
benefit plan; and (iii) the Buyer will recognize a Transferred Employee's
service with the Company for purposes of the Buyer's vacation, sick pay and
severance policies and (iv) the benefit plans offered by Buyer to Transferred
Employees who are members of a union at the warehouses located in West Saint
▇▇▇▇, Minnesota and Nashville, Tennessee will be subject to bargaining with the
appropriate union representatives. Prior to the Closing Date, the Company shall
be permitted to disclose to such unions the material provisions contained in
this Article 7, provided that the Company shall keep Buyer apprised of all
communications between the Company and such unions.
7.5. COBRA. Within three business days after the Closing, the Company will
deliver to Buyer a complete and accurate list of the date and nature of the
qualifying event pursuant to which each individual listed on Schedule 7.5 became
covered or eligible to be covered under any "group health plan" maintained by
the Company pursuant to the group health plan continuation requirements of
COBRA, and the last known address of each such individual, together with all
35
documents, records, forms, elections, notices and other materials relating to
such coverage or eligibility to elect such coverage in the possession of any of
or reasonably accessible to the Company. With respect to each individual listed
on Schedule 7.5 who received proper notification of his or her continuation
coverage rights pursuant to COBRA, in connection with any "qualifying event"
that has occurred on or before the Closing Date (including, without limitation
the "qualifying event" caused by the transaction, contemplated hereby) or (ii)
with respect to whom the deadline for providing such notice in connection with
such qualifying event has not passed as of the date of delivery of such list, as
between the Buyer, on the one hand, and the Company, on the other hand, the
Buyer is responsible for providing group health plan continuation coverage in
accordance with COBRA. Except with respect to each individual who becomes
entitled to COBRA benefits as a result of the "qualifying event" caused by the
transaction contemplated hereby, Company will reimburse Buyer for all costs
incurred in providing such coverage.
7.6. Termination of Qualified Plans. On or prior to the Closing Date, the
Company shall terminate the Tru-Part Manufacturing Corporation Profit Sharing
Plan and the Tru-Part Manufacturing Corporation Commissioned Employees' 401(k)
Profit Sharing Plan (collectively, the "Plans"), effective as of the date prior
to the Closing Date. Prior to the Closing Date, or promptly thereafter, the
Company shall, at the Company's expense, take any action required by the Plans
or applicable law in connection with the termination and seek a determination
letter from the IRS relating to the termination of the Plans. As soon as
administratively practicable after receiving a favorable determination letter,
the Company shall, at the Company's expense, complete the distribution of assets
from the Plans and take any other actions necessary to complete the termination
of the Plans. Buyer will allow Transferred Employees (who are still employed by
Buyer at such time) to roll over the distribution of their account balances from
the Plans to Buyer's Plan. Within five (5) days after the Closing Date, Buyer
shall make a contribution to each of the Plans, on behalf of and as an agent for
Company, in an amount equal to the accrued liability for such contributions
shown on the Estimated Closing Balance Sheet.
ARTICLE
8.
OTHER MATTERS
8.1. Title Commitment. Not less than five (5) days prior to the Closing,
CAL Properties at its sole expense, shall provide to Buyer a title insurance
commitment, issued by a title insurance company or companies reasonably
satisfactory to Buyer, agreeing to issue to Buyer standard form owner's policy
of title insurance with respect to the Owned Real Property, together with a copy
of each document to which reference is made in such commitment. Such policy, to
be purchased at Buyer's sole expense, shall be a standard ALTA 1990 Form B
owner's policy in the full amount of the Owned Real Property Purchase Price,
insuring good and marketable title thereto (expressly including all easements
and other appurtenances). The policy 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).
36
The title commitment shall (i) bear a date subsequent to the date hereof; (ii)
include legible copies of all documents, maps or plats set forth therein as
affecting the Real Property; and (iii) be updated at Closing.
8.2. Environmental and Health and Safety Audits. Buyer, at its sole
expense, shall promptly retain a firm engaged in the regular business of
environmental engineering to conduct such environmental and health and safety
audits of Company's operations and the real estate occupied by Company as Buyer
in its discretion shall consider necessary or appropriate.
8.3. Noncompetition; 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 of Company being acquired pursuant to this Agreement, and in addition
to and not in limitation of any covenants contained in any agreement executed
and delivered pursuant to this Agreement, Company hereby covenants and agrees as
follows:
(a) Covenant Not to Compete. For a period of two (2) years from the
-----------------------
Closing Date, Company shall not, 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;
(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, including any
Transferred Employee, without the prior written consent of Buyer; or
(iv) engage in any practice the purpose of which is to evade the
provisions of this covenant not to compete;
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 5% of the outstanding shares of any such
corporation; provided, further, that the foregoing shall not apply to the
N-Complete business being retained by the Company. The parties agree that
the geographic scope of this covenant not to compete shall extend
throughout North America
37
and Company acknowledge that such territory is reasonable in light of the
business of the Company. 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 Purchased Assets being acquired by Buyer hereunder. 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.
(b) Covenant of Confidentiality. Company shall not at any time
---------------------------
subsequent to the Closing, except as explicitly requested by Buyer, (i) use
for any purpose, (ii) 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 Trade 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, marketing and distribution
methods, not already in the public domain.
(c) Equitable Relief for Violations. Company agrees that the
provisions and restrictions contained in this Section 8.3 are necessary to
protect the legitimate continuing interests of Buyer in acquiring the
business and goodwill of the business through the purchase of the Purchased
Assets and the assumption of the Assumed Liabilities, and that any
violation or breach of these provisions shall 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 8.3.
8.4. Product Liability Matters. At or prior to the Closing, Company
at Buyer's expense shall cause Buyer to be named as an additional insured under
each of its occurrence-type policy or policies of insurance insuring against
claims for personal injury and property damage arising out of or resulting from
any products manufactured by Company prior to the Closing Date. At the Closing,
Company shall deliver to Buyer one or more certificates of insurance evidencing
the insurance policy then in effect that has the Buyer named as an additional
insured. Following the Closing, Buyer shall continue to utilize Company's
product serial number system presently in effect or a similar system which shall
permit the manufacturer of the products of the business to be determined.
8.5. Use of Company's Name. Following the Closing, neither Company nor any
Affiliate shall, without the prior written consent of Buyer, make any use of the
name "Tru-Part Manufacturing Corporation" or "TISCO" or any other name
confusingly similar thereto, except
38
as may be necessary for Company to pay its liabilities, prepare tax returns and
other reports, and to otherwise wind up and conclude its business.
8.6. Unemployment Compensation. Company shall, upon the request of Buyer,
cooperate with Buyer in any efforts by Buyer to obtain the transfer of Company's
portion of any state unemployment compensation accounts applicable to
Transferred Employees, to the extent Buyer elects to be a successor to such
accounts. In connection therewith, Company shall execute such documents as Buyer
may reasonably request in order to effectuate such transfer.
8.7. Property Leases. Buyer shall enter into leases for the properties
described on Schedule 8.7 (the "Leased Real Properties") with the lessors
identified on Schedule 8.7 (the "Lessors") on terms and conditions mutually
acceptable to Buyer and Company (the "Lease Agreements").
8.8. Delivery of Schedules. As soon as is practicable after the date
hereof, but in any event at least five (5) days prior to the Closing Date, the
parties shall cooperate to prepare the Schedules contemplated by this Agreement.
The party responsible for preparing any respective Schedule shall provide such
proposed Schedule to the other party. The receiving party shall have an
opportunity to review such Schedule and, prior to the Closing Date, to object to
the form or substance of such Schedule. If no objection is made by the receiving
party prior to the Closing Date, such Schedule shall become part of this
Agreement. If a timely objection is made by the receiving party, the parties
will attempt to resolve the dispute through good faith negotiation. If, in
either parties' sole and absolute discretion, resolution of the dispute cannot
be resolved through good faith negotiation, either party may terminate this
Agreement without liability to the other party pursuant to Article 12 herein.
ARTICLE
9.
FURTHER COVENANTS OF COMPANY
Company covenants and agrees as follows:
9.1. Access to Information and Records. During the period prior to the
Closing:
(a) Company shall give Buyer, its counsel, accountants and other
representatives (i) 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 Company 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 request); (ii) access to employees, agents
and representatives for the purposes of such meetings and communications as
Buyer reasonably desires; and (iii) with the prior consent of Company 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; and
39
(b) CAL Properties shall give Buyer and its representatives access to
the Owned Real Estate for purposes of inspection, investigation and testing
upon reasonable advance notice by Buyer.
9.2. Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by the Buyer:
(a) No Changes. Company shall carry on its business diligently and in
----------
the same manner as heretofore and shall not make or institute any changes
in its methods of purchase, sale, management, accounting or operation.
(b) Maintain Organization. Company shall take such action as may be
---------------------
necessary to maintain, preserve, renew and keep in force and effect the
existence, rights and franchises of Company and shall 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. Company shall 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 Company
herein, or which would have required disclosure on Schedule 4.8 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 shall be entered
---------------------
into, and no purchase of raw materials or supplies and no sale of goods or
services (real, personal, or mixed, tangible or intangible) shall be made,
by or on behalf of Company, except contracts, commitments, purchases or
sales which are in the ordinary course of business and consistent with past
practice, or are not material to the Company (individually or in the
aggregate) and would not have been required to be disclosed in the
Disclosure Schedule had they been in existence on the date of this
Agreement.
(e) No Corporate Changes. Company shall not amend its Articles of
--------------------
Incorporation or Bylaws or make any changes in authorized or issued capital
stock.
(f) Maintenance of Insurance. Company 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 prudent business manner consistent with
its past practice.
(h) Interim Financials. Company shall provide Buyer with interim
------------------
monthly financial statements and other management reports as and when they
are available to Company management.
40
9.3. Change of Corporate Name. Concurrently with the Closing, Company
shall change its corporate name to a name bearing no resemblance to its present
name so as to permit the use of its present name by Buyer.
9.4. No Negotiations. Unless this Agreement is terminated pursuant to
Article 14, the Company shall not directly or indirectly (through a
representative or otherwise) solicit or furnish any information to any
prospective buyer, commence, or conduct presently ongoing, negotiations with any
other party or enter into any agreement with any other party concerning the sale
of Company, Company's assets or business or any party thereof or any equity
securities of Company (an "Acquisition Proposal"), and Company shall immediately
advise Buyer of the receipt of any Acquisition Proposal.
9.5. Consents. Company shall use its reasonable best efforts prior to
Closing to obtain all consents necessary for the consummation of the
transactions contemplated hereby.
9.6. Other Action. Company shall use its 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.
9.7. Disclosure. Company shall have a continuing obligation to promptly
notify Buyer in writing with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the Schedules, but no such
disclosure shall cure any breach of any representation or warranty which is
inaccurate.
ARTICLE
10.
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 prior to or at the Closing of each of the
following conditions:
10.1. Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Company and CAL Properties in this
Agreement, and the statements contained in the Schedules or in any instrument,
list, certificate or writing delivered by Company 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.
10.2. Compliance With Agreement. Company and CAL Properties shall have
performed and complied in all material respects 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 this Agreement.
41
10.3. 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, CAL Properties or any of the affiliates,
officers or directors of any of them, with respect to the transactions
contemplated hereby.
10.4. Consents and Approvals. All approvals, consents and waivers that are
required to effect the transactions contemplated hereby shall have been
received, and executed counterparts thereof shall have been delivered to Buyer
not less than two business days prior to the Closing. After the Closing, Company
shall continue to use its reasonable efforts to obtain any consents or
approvals, the receipt of which prior to Closing has been waived by Buyer, and
the Company shall not be relieved of any liability hereunder for failure to
perform any of its respective covenants or for the inaccuracy of any
representation or warranty.
10.5. Title Insurance. CAL Properties shall have delivered to Buyer the
title insurance commitment, dated as of the Closing Date, conforming to the
specifications set forth in Section 8.1 hereof.
10.6. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
10.7. Environmental and Health and Safety Audit. The results of the
environmental and health and safety audit conducted pursuant to Section 8.2
shall not have disclosed any past or present condition, process or practice with
respect to Company or any property owned, occupied or operated by Company which
is not in full compliance with all applicable Environmental Laws.
10.8. Due Diligence. Buyer and its accountants, counsel, and other
authorized representatives shall have been afforded access as provided in
Section 9.1, and Buyer shall be satisfied, in its sole discretion (and without
waiving any liability of Company, CAL Properties or Shareholders for a breach of
the representations and warranties made by them in this Agreement), with the
condition and nature of the Purchased Assets and the Assumed Liabilities.
10.9. Employment Agreement. Buyer and ▇.▇. "▇▇▇▇" ▇▇▇▇▇▇▇▇▇ shall have
reached a mutually satisfactory agreement for ▇▇. ▇▇▇▇▇▇▇▇▇'▇ employment by
Buyer for an initial term of two (2) years commencing on the Closing Date.
10.10. Escrow Agreement. Company, Buyer and the escrow agent shall have
executed the Escrow Agreement.
10.11. Lease Agreements. Buyer, as lessee, and the Lessors shall have
entered into the Lease Agreements. Any lease agreements between the Lessors and
Company shall have been terminated.
10.12. Noncompetition Agreements. Buyer and each of the Shareholders shall
have entered into noncompetition agreements in a form and substance satisfactory
to Shareholders
42
calling for aggregate payments to Shareholders of $500,000 (the "Shareholder
Noncompetition Agreements").
ARTICLE
11.
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
Each and every obligation of Sellers and Shareholders to be performed on
the Closing Date shall be subject to the satisfaction prior to or at the Closing
of the following conditions:
11.1. 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.
11.2. Compliance With Agreement. Buyer shall have performed and complied
in all material respects 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 13.2.
11.3. 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.
11.4. ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
11.5. Escrow Agreement. Company, Buyer and the escrow agent shall have
executed the Escrow Agreement.
11.6. Lease Agreements. Buyer, as lessee, and the Lessors shall have
entered into the Lease Agreements.
ARTICLE
12.
INDEMNIFICATION
12.1. By Company and CAL Properties. Subject to the terms and conditions
of this Article 12, Company and CAL Properties hereby agree to indemnify, defend
and hold harmless Buyer, and its directors, officers, employees and controlled
and controlling persons ("Buyer's Affiliates"), from and against all Claims
asserted against, resulting to, imposed upon, or incurred by Buyer, Buyer's
Affiliates or the business and assets transferred to Buyer pursuant to this
Agreement, directly or indirectly, by reason of, arising out of or resulting
from (a) the inaccuracy or breach of any representation or warranty of Company
or CAL Properties contained in or made
43
pursuant to this Agreement; (b) the breach of any covenant of Company or CAL
Properties contained in this Agreement; or (c) the Excluded Liabilities. As used
in this Article 12, the term "Claim" shall include (i) all Liabilities; (ii) all
losses, damages (but excluding any claims for consequential damages, lost
profits, or punitive damages), judgments, awards, settlements, costs and
expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties (except penalties imposed on Buyer
due to its own actions or inactions), court costs and 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.
12.2. By Buyer. Subject to the terms and conditions of this Article 12,
Buyer hereby agrees to indemnify, defend and hold harmless Company and CAL
Properties, their directors, officers, employees and controlling persons, and
each Shareholder from and against all Claims asserted against, resulting to,
imposed upon or incurred by any such person, directly or indirectly, by reason
of or resulting from (a) the inaccuracy or breach of any representation or
warranty of Buyer contained in or made pursuant to this Agreement; (b) the
breach of any covenant of Buyer contained in this Agreement; (c) the Assumed
Liabilities; or (d) the operation of the Business after the Closing Date.
12.3. Indemnification of Third Party Claims. The obligations and
liabilities of any party to indemnify any other under this Article 12 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") shall give the party from
whom indemnification is sought (the "Indemnifying Party") prompt written
notice of any such Claim, and the Indemnifying Party shall 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 12, 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 shall (upon further notice) have
the right to undertake the defense, compromise or settlement of such 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, and the
Indemnifying Party shall thereafter have no right to challenge the
Indemnified Party's defense, compromise, settlement or consent to judgment.
44
(c) Indemnified Party's Rights. Anything in this Article 12 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.
12.4. 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 to stay execution of the judgment pending appeal.
Notwithstanding the foregoing, if the Claims of the Indemnified Party with
respect to any particular matter exceed One Hundred Thousand Dollars
($100,000), the Indemnifying Party shall be required to advance funds to
Indemnified Party against ongoing Claims pending final resolution of the
matter by judgment, determination, settlement or compromise.
(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.
12.5. Limitations on Indemnification.
(a) Time Limitation. No claim or action shall be brought under this
---------------
Article 12 for breach of a representation or warranty after the lapse of
two (2) years following the Closing, except as to Claims of which notice
has been given to the Indemnifying Party prior to the expiration of such
period. Regardless of the foregoing, however, or any other provision of
this Agreement:
(i) There shall be no time limitation on, and Company and CAL
Properties hereby waive all applicable statutory limitation periods
with respect to, Claims (A) for breach of Section 4.12(a) or 5.5(a) or
(B) based upon fraud in connection with the sale of the Purchased
Assets to Buyer ("Fraud and Title Claims").
45
(ii) If any act, omission, disclosure or failure to disclose
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) Notwithstanding any provision of this Article 12 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.
(ii) Sellers shall have no liability for indemnification
pursuant to this Article 12 for any amounts in excess of the Escrow
Amount; provided, however, that such limitation shall not apply to
Fraud and Title Claims.
(c) Waiver. The closing of the transactions contemplated by this
------
Agreement shall constitute a waiver by any party of its rights to
indemnification hereunder, if the party seeking indemnification has actual
knowledge of the breach, violation or failure of condition constituting the
basis of the Claim at or before the Closing.
(d) Tax and Insurance Reduction. All claims or indemnification by
---------------------------
any party hereto shall be determined net of: (i) any proceeds of insurance
coverage payable to the Indemnified Party with respect to such claim, and
(ii) any tax benefit realized by the Indemnified Party resulting from the
claim, and (iii) in the case where the Indemnified Party is the Buyer, any
adverse effects on Buyer's future depreciation and amortization deductions
resulting from the purchase price adjustments caused by the indemnification
payments.
(e) Source of Indemnification. The Buyer acknowledges and agrees
-------------------------
that with respect to all claims for indemnification (other than Fraud and
Title Claims, (i) the Buyer's sole source of seeking reimbursement for such
claims shall be the escrow account established pursuant to the Escrow
Agreement, and (ii) Buyer is not entitled to indemnification from the
Sellers (or their successors or assigns) in excess of the Escrow Amount,
nor is it entitled to any further indemnification once the Escrow Amount
has been properly distributed pursuant to the Escrow Agreement.
(f) Limitation on Remedies. Notwithstanding anything contained in
----------------------
this Agreement to the contrary, either party shall only have the right to
make a claim against the other party for damages (other than an
indemnification claim pursuant to this Article 12) if the non-claiming
party has willfully and materially breached any of its representations,
covenants or agreements set forth in this Agreement. For purposes of this
provision, a party shall be deemed to have willfully breached any of its
representations, covenants or agreements set forth in this Agreement if
such party has
46
intentionally and knowingly taken, or intentionally and knowingly failed to
take, any action which causes a breach of any of its representations,
covenants or agreements set forth in this Agreement.
ARTICLE
13.
CLOSING
The closing of this transaction (the "Closing") shall take place at the
offices of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
on such date and time as Buyers and Sellers shall agree upon. Such date is
referred to in this Agreement as the "Closing Date".
13.1. Documents to be Delivered by Company and CAL Properties. At the
Closing, Company and CAL Properties shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
(a) Deeds, Bills of Sale. Warranty deeds to real estate and bills of
--------------------
sale and such other instruments of assignment, transfer, conveyance and
endorsement as shall be sufficient in the opinion of Buyer and its counsel
to transfer, assign, convey and deliver to Buyer the Purchased Assets as
contemplated hereby.
(b) Compliance Certificate. A certificate signed by an officer of
----------------------
Company and a partner of CAL Properties, respectively, that each of the
representations and warranties made by them, respectively, 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 Company and CAL Properties have performed and
complied with all of Company's and CAL Properties' 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 ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ &
------------------
▇▇▇▇▇▇▇▇, counsel to Sellers and Shareholders, dated as of the Closing
Date, addressed to Buyer and to Credit Suisse First Boston, as
Administrative Agent, in a form mutually acceptable to each party.
(d) Lease Agreements. The Lease Agreements.
----------------
(e) Certified Resolutions. A certified copy of the resolutions of the
---------------------
Boards of Directors and shareholders of Company authorizing and approving
this Agreement and the consummation of the transactions contemplated by
this Agreement.
(f) Escrow Agreement. The Escrow Agreement.
----------------
(g) Articles; Bylaws; Good Standing. A copy of the corporate charter
-------------------------------
of Company certified by the Secretary of State of the state of its
incorporation, a copy of the
47
Bylaws of Company certified by its corporate secretary, and copies of a
good standing certificate of Company from the Secretary of State of its
state of incorporation and each state Company is qualified to do business
as a foreign corporation.
(h) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Buyer pursuant to
the terms hereof.
(i) Other Documents. All other documents, instruments or writings
---------------
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.
(j) Noncompetition Agreements. The Shareholder Noncompetition
-------------------------
Agreements.
13.2. Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to Company the following documents, in each case duly executed or
otherwise in proper form:
(a) Cash Purchase Price. To Company, a wire transfer as required by
-------------------
Section 3.2(c); to the Escrow Agent a wire transfer as required by Section
3.2(b); and to CAL Properties a wire transfer as required by Section 3.2(d)
hereof.
(b) Assumption of Liabilities. Such undertakings and instruments of
-------------------------
assumption as are reasonably sufficient in the opinion of Company and its
counsel to evidence the assumption by Buyer of the Assumed Liabilities.
(c) Compliance Certificate. A certificate signed by an 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 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 Company), 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.
(d) Opinion of Counsel. A written opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel
------------------
to Buyer, dated as of the Closing Date, addressed to Company and
Shareholders, in a form mutually acceptable to each party.
(e) Lease Agreements. The Lease Agreements.
----------------
(f) 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.
(g) Escrow Agreement. The Escrow Agreement.
----------------
48
(h) Incumbency Certificate. Incumbency certificates relating to each
----------------------
person executing any document executed and delivered to Company by Buyer
pursuant to the terms hereof.
(i) Noncompetition Agreements. The Shareholder Noncompetition
-------------------------
Agreements.
(j) Other Documents. All other documents, instruments or writings
---------------
required to be delivered to Company at or prior to the Closing pursuant to
this Agreement and such other certificates of authority and documents as
Company may reasonably request.
ARTICLE
14.
TERMINATION
14.1. 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 Sellers;
(b) by either Buyer or Sellers if the Closing shall not have occurred
on or before September 1, 1999, provided the terminating party has not,
through breach of a representation, warranty or covenant, prevented the
Closing from occurring on or before such date;
(c) by either Buyer or Sellers if any of the Schedules to be
delivered in connection herewith are not satisfactory to each party in each
parties' sole and absolute discretion; or
(d) by either the Buyer or the Sellers if any of (i) the Lease
Agreements, (ii) the Escrow Agreement, (iii) the Non-Compete Agreements, or
(iv) any other agreement to be delivered by either party in connection with
the closing of the transactions contemplated hereby are not satisfactory to
each party in such party's sole and absolute discretion.
14.2. Termination by Buyer. If (i) there has been a material violation or
breach by Sellers 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 which Buyer has not waived in writing, or (iii) Sellers shall have
attempted to terminate this Agreement under this Article 14 or otherwise without
grounds to do so, then Buyer may, by written notice to Sellers at any time prior
to the Closing that such violation, breach, failure or wrongful termination
attempt is continuing, terminate this Agreement with the effect set forth in
Section 14.4 hereof.
14.3. Termination by Sellers. 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
49
has not been waived in writing by Sellers, or (ii) there has been a failure of
satisfaction of a condition to the obligations of Sellers which Sellers has not
waived in writing, (iii) by Sellers if the Title Commitment discloses defects to
title, which, in Seller's reasonable estimation, would require an expenditure of
more than $100,000 to cure; or (iv) Buyer shall have attempted to terminate this
Agreement under this Article 14 or otherwise without grounds to do so, then
Sellers may, by written notice to Buyer at any time prior to the Closing that
such violation, breach, failure or wrongful termination attempt is continuing,
terminate this Agreement with the effect set forth in Section 14.4 hereof.
14.4. Effect of Termination. In the event of termination and abandonment
pursuant to this Article 14, written notice thereof shall forthwith be given to
the other party or parties, the provisions of this Agreement shall terminate,
and the transactions contemplated herein shall be abandoned, without further
action by any party hereto. If this Agreement is terminated as provided herein:
(i) each party will, upon request, redeliver all documents, work papers and
other material of any other party (and all copies thereof) relating to the
transactions contemplated herein, whether so obtained before or after the
execution hereof, to the party furnishing the same; (ii) the Confidentiality
Agreement dated December 4, 1998 shall remain in full force and effect; and
(iii) no party shall have any liability for a breach of representation,
warranty, agreement, covenant or other provision of this Agreement, unless such
breach was due to a willful or bad faith action or omission of such party or any
representative, agent, employee or independent contractor thereof.
ARTICLE
15.
MISCELLANEOUS
15.1. Further Assurance. From time to time, at Buyer's request and without
further consideration, Company and CAL Properties shall 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 business and assets
being transferred hereunder.
15.2. 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 Sellers or Buyer shall be
subject to the approval of the other in all essential respects.
15.3. 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 subsidiary, hereunder; and (ii) Buyer may assign its interest in this
Agreement to Credit
50
Suisse First Boston, as agent, as additional security for Buyer's
obligations to such lender and Sellers agree to execute such documents as
reasonably may be required by such lender in order to effect such
assignment.
(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.
15.4. Amendment and Modification. The parties hereto may amend, modify and
supplement this Agreement in such manner as may be agreed upon by them in
writing.
15.5. 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, demands or requests 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 ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(and to)
▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Buyer shall furnish to Company in writing.
51
(b) If to Sellers or Shareholders, to:
Tru-Part Manufacturing Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
Tru-Part Manufacturing Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(with copies, which copies shall not constitute notice, to)
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
3400 Plaza VII
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP
500 Pillsbury Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other person or address as Company 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 paragraph, 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 paragraph, 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.
52
15.6. Expenses. Regardless of whether or not the transactions contemplated
hereby are consummated:
(a) Expenses to be Paid by Buyer. Buyer shall pay for the following:
----------------------------
(i) Environmental Audit. The fees and other expenses relating
-------------------
to the environmental audit performed pursuant to Section 8.2 hereof.
(ii) HSR Filing. The filing fees relating to the applicable
----------
requirements of the HSR Act.
(iii) SAS 71 Fees. The fees of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ associated with the
-----------
SAS 71 review.
(iv) Professional Fees. All fees and expenses of Buyer's legal,
-----------------
accounting, investment banking and other professional counsel in
connection with the transactions contemplated hereby.
(b) Expenses to be Paid by Sellers. Sellers shall pay, and shall
------------------------------
indemnify, defend and hold Buyer harmless from and against, each of the
following:
(i) Professional Fees. All fees and expenses of Company's
-----------------
legal, accounting, investment banking and other professional counsel
in connection with the transactions contemplated hereby.
(ii) Title Commitment. All fees and expenses relating to
----------------
obtaining the title commitment as contemplated by Section 8.1.
(c) 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.
(d) Costs of Litigation or Arbitration. The parties agree that the
----------------------------------
prevailing party in any action brought with respect to or to enforce any
right or remedy under this Agreement shall be entitled to recover from the
other party or parties all reasonable costs and expenses of any nature
whatsoever incurred by the prevailing party in connection with such action,
including without limitation attorneys' fees and prejudgment interest.
15.7 Entire Agreement. This instrument embodies 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.
15.8 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.
53
15.9 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
15.10. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
15.11. Shareholder Guarantee. Each of the Shareholders severally and not
jointly, hereby unconditionally guarantees the obligation of the Sellers to
indemnify the Buyer for any Fraud and Title Claim successfully asserted by Buyer
pursuant to Article 12. Any payments due under this Section 15.11 may be
accomplished in whole or in part, at the option of the Buyer, by setting off any
amount owed to the Shareholders by the Buyer. To the extent setoff is made by
the Buyer in satisfaction or partial satisfaction of an obligation under this
Section 15.11 that is disputed by the Shareholders, upon a subsequent
determination by final judgment not subject to appeal that all or a portion of
such obligation was not owed to the Buyer, the Buyer shall pay the Shareholders
the amount which was set off and not owed together with interest from the date
of setoff until the date of such payment at an annual rate equal to the Prime
Rate as published in the Wall Street Journal.
15.12. Glossary of Terms. The following sets forth the location of
definitions of capitalized terms defined in the body of this Agreement:
"Acquisition Proposal" - Section 9.4
"Affiliate" - Section 1.2(e)
"Assumed Liabilities" - Section 2.1
"Average Accounts Payable" - Section 3.2(e)
"Average Accounts Receivable" - Section 3.2(e)
"Average Accrued Expenses" - Section 3.2(e)
"Average Inventories" - Section 3.2(e)
"Average Working Capital" - Section 3.2(e)
"Business" - Recitals
"Buyer's Accountants" - Section 3.3(b)
"Buyer's Affiliates" - Section 12.1
"Cash Amount" - Section 3.1(a)
"CERCLA" - Section 4.11(c)
"Claim" - Section 12.1
"Closing" - Preamble to Article 13
"Closing Date" - Preamble to Article 13
"Code" - Section 3.6
"Company Assets" - Section 1.1
"Company Purchase Price" - Section 3.1(a)
"Company's Accountants" - Section 3.3(b)(ii)
"Company's Knowledge" - Section 4.6
"Contracts" - Section 1.1(f)
54
"Closing Date" - Section 3.3(a)
"Employee Plans/Agreements" - Section 4.16(a)
"Environmental Laws" - Section 4.11(c)
"ERISA" - Section 4.16(a)
"Escrow Agreement" - Section 3.2(b)
"Escrow Amount" - Section 3.2(b)
"Estimated Closing Balance Sheet" - Section 3.3(a)
"Excluded Contracts" - Section 1.1(i)
"Excluded Assets" - Section 1.2
"Facilities" - Recitals
"Final Closing Balance Sheet" - Section 3.3(b)(iii)
"Fraud and Title Claims" - Section 12.5(a)(i)
"Government Entities" - Section 4.3
"HSR Act" - Section 4.3
"IRS" - Section 3.6
"Indemnified Party" - Section 12.3(a)
"Indemnifying Party" - Section 12.3(a)
"Inventory" - Section 1.1(c)
"Laws" - Section 4.3
"Lease Agreement" - Section 8.7
"Leased Real Properties" - Section 8.7
"Lessors" - Section 8.7
"Liability" - Section 2.1
"Liens" - Section 4.12(a)
"Litigation" - Section 4.10
"Material Adverse Effect" - Section 4.1(c)
"Orders" - Section 4.3
"Owned Property Purchase Price" - Section 3.1(b)
"Owned Real Property" - Section 1.1(a)
"Permitted Liens" - Section 4.12(a)
"Personal Property Leases" - Section 1.1(d)
"Plans" - Section 7.6
"Products" - Section 4.20
"Proration" - Section 3.4
"Purchased Assets" - Section 1.1
"Purchase Price Adjustment" - Section 3.2(e)
"Real Property" - Section 4.12(c)
"Real Property Leases" - Section 8.7
"Recent Balance Sheet" - Section 4.4
"Schedules" - Preamble to Article 4
"Sellers" - Section 1.1
"Settlement Date" - Section 3.2(e)
"Shareholder Noncompetition Agreements" - Section 10.12
"Third Accounting Firm" - Section 3.3(b)(iii)
"Trade Rights" - Section 1.1(e)
55
"Transferred Employee" - Section 7.1
"WARN" - Section 7.3
"Waste" - Section 4.11(c)
"Year 2000 Compliant" - Section 4.18(b)
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.
56
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
TRU-PART MANUFACTURING
CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Its: Chairman of Board
CAL PROPERTIES
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------
Its: Managing Partner
SHAREHOLDERS:
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as to Section 15.11
only
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as to Section 15.11 only
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, as to Section 15.11 only
57
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇, as to Section 15.11 only
58