STOCK PURCHASE AND REDEMPTION AGREEMENT
BY AND BETWEEN
STANDARD AUTOMOTIVE CORPORATION
A DELAWARE CORPORATION
AND
▇▇▇▇ ▇▇▇▇▇▇▇
TABLE OF CONTENTS
Page
----
1. DEFINITIONS......................................................... 2
1.1 "Affiliate................................................. 2
1.2 "Ancillary Documents....................................... 2
1.3 "Assets.................................................... 2
1.4 "Code...................................................... 5
1.5 "Commitments............................................... 5
2. SALE AND REDEMPTION OF STOCK........................................ 5
2.1 Purchase and Sale of Stock................................. 5
2.2 Delivery of Possession and Instruments of
Transfer................................................ 6
3. CONSIDERATION....................................................... 6
3.1 Consideration.............................................. 6
3.2 Time and Mode of Payment................................... 7
3.3 Balance Sheet.............................................. 7
3.4 Other Consideration........................................ 12
3.5 Restrictive Covenants...................................... 13
3.6 Allocation of Consideration for Tax Purposes............... 17
4. CLOSING............................................................. 17
Closing and Closing Date............................................ 18
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER................... 18
5.1 Organization, Good Standing, Power, Etc.................... 18
5.2 Capital Stock.............................................. 19
5.3 Articles of Incorporation and By-Laws...................... 19
5.4 Subsidiaries, Divisions and Affiliates..................... 20
5.5 Equity Investments......................................... 20
5.6 Authorization of Agreement................................. 20
5.7 Effect of Agreement........................................ 20
5.8 Restrictions............................................... 21
5.9 Governmental and Other Consents............................ 22
5.10 Financial Statements....................................... 22
5.11 Absence of Certain Changes or Events....................... 23
5.12 Title to Assets; Absence of Liens and
Encumbrances........................................... 25
5.13 Equipment.................................................. 26
5.14 Insurance.................................................. 26
5.15 Agreements, Arrangements, Etc.............................. 28
5.16 Patents, Trademarks, Copyrights, Etc....................... 32
5.17 Permits, Licenses, Etc..................................... 33
5.18 Compliance with Applicable Laws............................ 34
5.19 Litigation................................................. 34
5.20 No Interest in Competitors................................. 35
5.21 Customers, Suppliers, Distributors and Agents.............. 36
5.22 Books and Records.......................................... 36
5.23 Employee Benefit Plans..................................... 36
5.24 Powers of Attorney......................................... 37
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5.25 Sufficiency of Assets and Commitments...................... 37
5.26 Labor Disputes, Unfair Labor Practices..................... 38
5.27 Past Due Obligations....................................... 39
5.28 Environmental Matters...................................... 39
5.29 Tax and Other Returns and Reports.......................... 41
5.30 Certain Tax Definitions.................................... 42
5.31 Recent Dividends and Other Distributions................... 43
5.32 Inventory.................................................. 43
5.33 Purchase and Sale Obligations.............................. 43
5.34 Other Information.......................................... 44
5.35 Accounts Receivable and Accounts Payable................... 44
5.36 Knowledge of AJAX and the Shareholder...................... 45
5.37 Subchapter S............................................... 45
6. REPRESENTATIONS AND WARRANTIES OF SAC............................... 45
6.1 Organization............................................... 46
6.2 Authorization of Agreement................................. 46
6.3 Effect of Agreement........................................ 46
6.4 Litigation................................................. 47
6.5 Governmental and Other Consents............................ 47
6.6 Compliance with Applicable Laws............................ 47
7. PRE-CLOSING COVENANTS OF THE SHAREHOLDER............................ 48
7.1 Conduct of Business Until Closing Date..................... 48
7.2 Shareholder Compensation................................... 50
7.3 Approvals, Consents and Further Assurances................. 51
7.4 Access to Properties, Records, Suppliers, Agents,
Etc................................................... 51
7.5 Advice of Changes.......................................... 52
7.6 Conduct.................................................... 52
7.7 Employee Benefit Plans..................................... 52
7.8 Cooperate with Capital Raising Efforts..................... 53
7.9 Satisfaction of Conditions by Shareholder.................. 53
7.10 Redemption................................................. 53
8. PRE-CLOSING COVENANTS OF SAC........................................ 54
8.1 Financing Efforts.......................................... 54
8.2 Timetable.................................................. 54
8.3 Counsel Fees............................................... 55
8.4 Advice of Changes.......................................... 55
8.5 Conduct.................................................... 55
8.6 Satisfaction of Conditions by SAC.......................... 55
9. POST-CLOSING COVENANTS.............................................. 56
9.1 Further Assurances......................................... 56
9.2 Shareholder's Review of AJAX's Records..................... 56
9.3 Subordination.............................................. 57
10. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SAC...................... 57
10.1 Accuracy of Representations and Warranties................. 57
10.2 Performance of Agreements.................................. 59
10.3 Litigation, Etc............................................ 59
10.4 Approvals and Consents..................................... 60
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10.5 Shareholder's Certificate.................................. 60
10.6 Good Standing Certificates................................. 60
10.7 No Material Adverse Change................................. 61
10.8 Actions, Proceeding, Etc................................... 61
10.9 Opinion of Counsel to Shareholder.......................... 61
10.10 Licenses, Permits, Consents, Etc........................... 61
10.11 Documentation of Rights.................................... 62
10.12 Lease Agreement............................................ 62
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
SHAREHOLDER......................................................... 62
11.1 Accuracy of Representations and Warranties................. 62
11.2 Performance of Agreements.................................. 62
11.3 No Injunction.............................................. 63
11.4 Opinion of Counsel to Buyer................................ 63
11.5 SAC's Certificate.......................................... 63
11.6 Good Standing Certificate.................................. 63
11.7 Guarantees................................................. 64
11.8 Agreements................................................. 64
11.9 Resolutions................................................ 65
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES:
INDEMNIFICATION..................................................... 65
12.1 Survival................................................... 65
12.2.1 Indemnification by the Shareholder......................... 66
12.2.2 Limitation on Shareholder's Indemnification................ 68
12.2.3 Excise Taxes............................................... 69
12.3 Indemnification by SAC..................................... 71
12.4 Right to Defend............................................ 71
12.5 Subrogation................................................ 72
13. TERMINATION OF AGREEMENT............................................ 73
13.1 Mutual Consent of the Parties.............................. 73
13.2 Failure of SAC to obtain Financing......................... 73
13.3 Break-up Fee............................................... 74
14. MISCELLANEOUS....................................................... 75
14.1 Expenses................................................... 75
14.2 Waivers.................................................... 75
14.3 Binding Effect: Benefits................................... 76
14.4 Assignment................................................. 76
14.5 Notices.................................................... 76
14.6 Entire Agreement........................................... 77
14.7 Headings; Certain Terms.................................... 78
14.8 Counterparts............................................... 78
14.9 Governing Law.............................................. 78
14.10 Severability............................................... 79
14.11 Amendments................................................. 79
14.12 Transaction Taxes.......................................... 79
14.13 Section References......................................... 79
14.14 Brokers and Finders........................................ 79
14.15 Lease and Option to Purchase............................... 80
14.16 Parties in Interest........................................ 80
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EXHIBIT INDEX
-------------
1. Exhibit 1.3(b) Inventory
2. Exhibit 1.3(c) Equipment
3. Exhibit 1.3(d) Rights (Patents, Trademarks, Copyrights,
etc.)
4. Exhibit 1.3(h) Real Property (owned or leased)
5. Exhibit 1.3(j) Excluded Assets
6. Exhibit 3.3(a) ▇▇▇▇ ▇▇▇▇▇▇▇ Consulting Agreement
7. Exhibit 3.3(b) ▇▇▇▇ ▇▇▇▇▇▇▇ Employment Agreement
8. Exhibit 3.4 Allocation for Consideration
9. Exhibit 4.1 Form of Closing Memorandum
10. Exhibit 5.1 Good Standing Certificates - AJAX
11. Exhibit 5.2 Outstanding Offers, Options, Warrants,
Equity Securities, Etc.
12. Exhibit 5.3 Articles of Incorporation and By-laws of
AJAX
13. Exhibit 5.4 Subsidiaries, Divisions and Affiliates of
AJAX
14. Exhibit 5.5 Equity Investments
15. Exhibit 5.8 Restrictions
16. Exhibit 5.9 Governmental and Other Consents
17. Exhibit 5.10 Financial Statements of AJAX
18. Exhibit 5.11 Material Adverse Changes
19. Exhibit 5.12 Notices, Liens and Encumbrances of AJAX
20. Exhibit 5.14 Insurance Policies
21. Exhibit 5.15 Commitments
22. Exhibit 5.16 Patents, Trademarks, Copyrights
23. Exhibit 5.17 Permits, Licenses, Etc.
24. Exhibit 5.19 Material Litigation
25. Exhibit 5.20 5% Interest Ownership Table
26. Exhibit 5.21(a) Customers, Suppliers, Distributions and
Agents
27. Exhibit 5.21(b) 20 Largest Purchasers and Providers
28. Exhibit 5.23 Employee Benefit Plans
29. Exhibit 5.24 Powers of Attorney
30. Exhibit 5.25 Sufficiency of Assets & Commitments
31. Exhibit 5.26 Material Labor Disputes
32. Exhibit 5.27 Past Due Obligations
33. Exhibit 5.28 Environmental Matters
34. Exhibit 5.29(a) Tax Examination Dates
35. Exhibit 5.29(b) Examinations of Tax Returns by Governmental
Agency
36. Exhibit 5.29(c) Proposal by Governmental Entity of
Deficiency, Assessment or Claim of Taxes
37. Exhibit 5.32(a) Inventory
38. Exhibit 5.32(b) Non-usable Inventory
39. Exhibit 10.10 Opinion of Counsel to AJAX
40. Exhibit 5.35 Accounts Receivable and Accounts Payable
41. Exhibit 10.13 Accountant's Letter
42. Exhibit 11.4 Opinion of Counsel to Sac
43. Exhibit 13.16 Lease Agreement
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of
the 11th day of August, 1997, by and between Standard Automotive Corporation, a
Delaware corporation ("SAC"), or its assignee under Section 14.4 of this
Agreement, and ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Shareholder").
RECITALS:
WHEREAS, the Shareholder is the record and beneficial owner of
seventy-five (75) shares of common stock of AJAX Manufacturing Company ("AJAX"),
which is all the issued and outstanding capital stock of AJAX (the "Common
Stock"); and
WHEREAS, Shareholder entered into a Stock Purchase Agreement
as of February 1997 with ▇▇▇▇▇▇▇ Partners, LLC ("▇▇▇▇▇▇▇"), with respect to
Shareholder's interest in Ajax and ▇▇▇▇▇▇▇ has assigned all of its rights
thereunder to SAC; and
WHEREAS, Shareholder and SAC desire to enter into this
agreement to confirm their agreement with respect to the purchase by SAC from
Shareholder of the Common Stock;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants and agreements of the parties hereinafter set forth, and for other
good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. DEFINITIONS
1.1 "Affiliate". As used in this Agreement, the term
"Affiliate" shall mean, as applied to any person or entity, any other person or
entity directly or indirectly controlling, controlled by, or under common
control with, that person or entity. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any person or entity, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of that person or entity, whether
through the ownership of voting securities, by contract, or otherwise.
1.2 "Ancillary Documents" shall have the meaning set
forth in Section 9 hereof.
1.3 "Assets". As used in this Agreement, the term
"Assets" shall mean the assets of AJAX (as of the Closing) as
follows:
(a) the business of AJAX as a going concern which is
the manufacture and sale of trailer and shipping container
chassis and sanitary waste containers, the
2
goodwill pertaining thereto and all of AJAX's right, title and
interest in and to the names "AJAX Manufacturing Company", and
all other names used by AJAX, as well as all logos relating
thereto (the "Business");
(b) all items of inventory owned by AJAX including,
without limitation, all raw materials, work-in progress and
finished products of AJAX (all of which are collectively
referred to hereinafter as "Inventory");
(c) all vehicles, machinery, equipment (including
equipment which has previously been fully depreciated by AJAX
and all equipment loaned to customers), furniture, fixtures
and non-inventory supplies of AJAX, including containers,
packaging and shipping material, tools and spare parts and
other tangible personal property owned by AJAX (all of which
are collectively referred to hereinafter as the "Equipment");
(d) all of AJAX's right, title and interest in and to
the United States and foreign rights of AJAX currently owned
or used by AJAX in the conduct of the Business (and the rights
proposed to be used) with respect to copyrights, licenses,
patents, trademarks, trademark rights, tradenames, service
marks, service right marks, trade secrets, shop rights,
know-how, technical information, techniques, discoveries,
designs,
3
proprietary rights and non-public information and
registrations, reissues and extensions thereof and
applications and licenses therefor, including but not limited
to the items listed on Exhibit 1.3(d) (all of such rights
being collectively referred to hereinafter as the "Rights");
(e) all books and records of AJAX including without
limitation all tax returns and financial information
pertaining to the Business, all in-house mailing lists, other
customer and supplier lists, trade correspondence, production
and purchase records, promotional literature, data storage
tapes and computer disks, computer software, order forms,
accounts payable records (including invoices, correspondence
and all related documents), accounts receivable ledgers, all
documents relating to uncollected invoices, and all shipping
records;
(f) all contracts, agreements and orders for goods;
all corporate opportunities under discussion and related to
the Business, including any documentation related thereto;
(g) all cash, accounts, deposits, trade receivables
of AJAX and all advance payments, prepaid items, rights to
offset and credits of all kinds of AJAX;
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(h) all real property owned by AJAX together with all
fixtures attached thereto, and all right, title and interest
in and to any lease of real property, together with the lease
of all fixtures attached to said property, (the "Real
Property");
(i) all real property and all personal property
owned by AJAX which is not specifically included in the
foregoing subsections (a) through (h) and not
specifically excluded on Exhibit 1.3(j); and
(j) all other assets of AJAX, except as
specifically excluded on Exhibit 1.3(j) ("Excluded
Assets").
1.4 "Code" shall mean the Internal Revenue Code of 1986, as
amended and/or superseded.
1.5 "Commitments" shall mean all agreements, indentures,
mortgages, plans, policies, arrangements, and other instruments, including all
amendments thereto, fixed or contingent required to be disclosed on Exhibits
5.15.1 (a) through (p).
2. SALE AND REDEMPTION OF STOCK
2.1 Purchase and Sale of Stock. In exchange for the
consideration specified herein, and upon and subject to the terms
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and conditions of this Agreement, including but not limited to Section 7.10, SAC
agrees to purchase and acquire from the Shareholder, and the Shareholder agrees
to sell, assign, transfer, convey and deliver to SAC or its assignee under
Section 14.4 at the Closing (as hereinafter defined), all right, title and
interest in and to the Common Stock.
2.2 Delivery of Possession and Instruments of Transfer. At the
Closing, the Shareholder shall deliver to SAC possession of all of the
certificates representing the shares of Common Stock (other than those redeemed
in accordance with Section 7.10), duly endorsed in blank or accompanied by duly
executed stock powers, with all necessary transfer stamps, with signatures
guaranteed together with such other instruments of transfer requested by and
satisfactory to SAC and its counsel for the consummation of the transactions
contemplated under this Agreement and as are necessary to vest in SAC, all
right, title and interest in and to the shares of Common Stock (other than those
redeemed in accordance with Section 7.10) free and clear of any lien,
encumbrance, security agreement, equity, option, claim, charge or restriction,
other than restrictions imposed by federal or applicable state securities laws.
3. CONSIDERATION
3.1 Consideration. Subject to reduction as provided in Section
7.10, the aggregate consideration to be paid by SAC in full consideration for
its purchase of the Common Stock (other than
6
those shares redeemed in accordance with Section 7.10) and the other rights
provided herein (the "Purchase Price") shall be:
(i) $20,625,000 plus
(ii) 83.33% of the "Increased Net Worth" of AJAX
from April 1, 1996, through the Closing
Date.
For purposes hereof the Increased Net Worth shall mean the
excess of the Net Worth of AJAX as of the Closing Date as determined pursuant to
Section 3.3 hereof over $4,463,671.
3.2 Time and Mode of Payment. The Purchase Price set forth in
Section 3.1, shall be payable at the Closing by wire transfer to accounts
designated by Shareholder. For purposes of determining the amount to be paid at
Closing the parties will rely upon the most recent financial statements of Ajax
reviewed by BDO. Said payment shall be made provided good and marketable title
to the Common Stock (other than that redeemed in accordance with Section 7.10)
is delivered, free and clear of any lien, or encumbrance as set forth in Section
2.2 hereof and provided all other terms and conditions of this Agreement have
been complied with. Thereafter, the parties shall adjust the Purchase Price
based upon the Closing Balance Sheet as provided in Section 3.3.
3.3 Balance Sheet.
3.3.1 As soon as practicable after the Closing Date
(but not later than 70 days after the Closing Date), AJAX will prepare, and
cause BDO (or in the event of the unavailability of
7
BDO, another firm of accountants selected by SAC, in any case, "BDO") to audit
and report upon, the balance sheet of AJAX at the close of business on the day
immediately preceding the Closing Date (the "Effective Time"). The fees of BDO
for preparing the Closing Balance Sheet and Net Worth Statement shall not be
deducted in computing Net Worth. Such balance sheet shall be referred to herein
as the "Closing Balance Sheet." Except as specifically provided herein, the
Closing Balance Sheet will be prepared in accordance with generally accepted
accounting principles consistent with the accounting policies, practices and
assumptions utilized by AJAX in the preparation of the Financial Statements. For
purposes of preparing the Closing Balance Sheet: (w) for purposes of Sections
3.1(ii) and 3.3, the cash payments in accordance with Section 3.5(h) and Section
7.2(ii) shall be deemed paid prior to the Effective Time; (x) for valuation
purposes, inventories will be equal to the inventories reflected on the March
31, 1997, Balance Sheet of Ajax (as audited by BDO), as adjusted to the
Effective Time to reflect the purchase and sale of inventory in the interim
period. The inventories at the Effective Time shall be valued on a basis
consistent with the valuation method used in preparing the March 31, 1997,
Financial Statements, except that there will be no further markdowns for
obsolete, slow moving, and aged inventories, and that any adjustment for damaged
inventory will be based solely on damage arising after March 31, 1997. In
preparing the Closing Balance Sheet, any physical inventory taken by AJAX and
observed by BDO will be at SAC's expense; (y) no liability will be reflected on
the Closing Balance Sheet in respect of the liabilities of Ajax,
8
contingent or otherwise, referred to in Sections 12.2.2(b) and 12.2.3 or set
forth on an Exhibit or Schedule hereto and (z) no deduction shall be taken to
give effect to any redemption made in accordance with Section 7.10. The parties
will and will cause AJAX to provide BDO with such assistance and access to
personnel and books and records of AJAX as may be reasonably necessary in
connection with the preparation and audit of the Closing Balance Sheet and, in
general, will cooperate with BDO in facilitating such audit.
3.3.2 Immediately after the audit of the Closing
Balance Sheet has been completed by BDO, SAC will cause BDO to determine the
preliminary Net Worth (as defined below) of AJAX at the Effective Time. For
purposes hereof, the Net Worth of AJAX (the "Net Worth") shall mean an amount
equal to the Shareholder's Equity of AJAX as reflected on the Closing Balance
Sheet as determined in accordance with the procedures set forth in Sections
3.3.3 and 3.3.4.
3.3.3 BDO's determination of the preliminary Net
Worth at the Effective Time shall be delivered to Shareholder in writing (the
"Preliminary Net Worth Statement")together with a copy of the Closing Balance
Sheet no later than 70 days after the Closing. During the 30-day period
following the Shareholder's receipt of the Preliminary Net Worth Statement, the
Shareholder's accountants will be permitted to review the audit working papers
of BDO relating to the Closing Balance Sheet and the Preliminary Net
9
Worth Statement and will have access to AJAX's personnel as may be reasonably
necessary in connection therewith and, in general, SAC and AJAX will cooperate
with the Shareholder and the Shareholder's accountants in facilitating such
review. The Closing Balance Sheet and the Net Worth as disclosed in the
Preliminary Net Worth Statement shall become final and binding upon the parties
on the thirtieth day following the Shareholder's receipt thereof unless the
Shareholder gives written notice of its disagreement as to the Closing Balance
Sheet or the Preliminary Net Worth Statement ("Notice of Disagreement") to SAC
prior to such date. Any Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a Notice of Disagreement
is received by SAC in a timely manner, then the Net Worth shall become final and
binding upon the parties on the earlier of (x) the date the parties hereto
resolve in writing all differences they have with respect to any matter
specified in the Notice of Disagreement and (y) the date all disputed matters
are finally resolved in writing by the Arbitrators through Mediation, or by the
Final Arbitration, as the case may be (as such terms are defined in Section
3.3.4). The Net Worth that becomes final and binding on the parties in
accordance with the terms of this Section 3.3.3 shall be set forth in a
statement referred to herein as the "Final Net Worth Statement."
3.3.4 During the 15-day period following the delivery
of any Notice of Disagreement, the parties hereto shall attempt to resolve in
writing any differences which they may have
10
with respect to any matter specified in such Notice of Disagreement. If, at the
end of such 15-day period, the parties have not reached agreement on such
matters, either Shareholder or SAC shall have the right to submit the matters
which remain in dispute to the arbitrators (the "Arbitrators"), for review and
resolution. The Arbitrators shall be two persons or entities with offices in New
York City, one of which shall be selected by each of Shareholder and SAC. If
within 20 days of receipt by the Arbitrators of the matters which remain in
dispute, the Arbitrators have failed to resolve such matters, the parties shall
attempt to resolve the matters in dispute through non-binding mediation
conducted in New York City pursuant to the rules of the American Arbitration
Association ("Mediation" or "Mediator"). All matters not resolved through
Mediation shall be submitted to arbitration in New York City in accordance with
the rules and regulations of the American Arbitration Association (the "Final
Arbitration" and the arbitrators conducting the same, each a "Final
Arbitrator").
3.3.5 If the Net Worth of AJAX as of the Effective
Time as finally determined in accordance with Section 3.3.3 or 3.3.4 is greater
(less) than the net worth i.e. the shareholder's equity upon which the payment
on the Closing Date was computed, within ten(10) days of the final determination
of such Net Worth SAC (Shareholder) shall pay to Shareholder (SAC) or the Ajax
Note shall be increased (decreased), as appropriate in, an amount equal to
83.33% of such excess (deficiency).
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3.3.6 The fees of each Arbitrator shall be borne by
the party selecting such person or entity. The fees of the Mediator, the Final
Arbitrators, if any, and of the American Arbitration Association (in connection
with the Final Arbitration) shall be borne fifty percent by SAC and fifty
percent by Shareholder. The fees of BDO incurred in connection with the audit of
the Closing Balance Sheet and the preparation of the Preliminary Net Worth
Statement and in any arbitration or mediation shall be borne by AJAX (but shall
not be deducted in computing Net Worth), and the fees of the Shareholder's
accountants incurred in connection with their review of the Closing Balance
Sheet and the Preliminary Net Worth Statement and in any arbitration shall be
borne by the Shareholder.
3.4 Other Consideration. As additional inducements to SAC to
enter into this Agreement:
(a) The Shareholder and AJAX shall execute at the
Closing and deliver to each other a 3-year Consulting
Agreement providing for compensation of $160,000 per annum in
the form attached hereto as Exhibit 3.4(a) (the "Consulting
Agreement").
(b) ▇▇▇▇ ▇▇▇▇▇▇▇ and AJAX shall execute at the
Closing and deliver to each other a 3-year Employment
Agreement providing for compensation of $200,000 per
12
annum in the form attached hereto as Exhibit 3.4(b) (the
"Employment Agreement").
3.5 Restrictive Covenants. In consideration of the acquisition
of the Common Stock of AJAX by SAC and the amounts provided for in this Section
3.5, and subject to the provisions of paragraph (i) of this Section 3.5, the
parties agree as follows:
(a) The Shareholder shall not at any time during the
period of five years commencing as of the Closing Date (the "Period") engage in
any business, on behalf of any other company or himself, and shall not directly
or indirectly own or own an interest in (except for a less than 2% stock
ownership in a publicly-traded corporation), manage, operate, join, control, be
employed by or participate either directly or indirectly in the ownership,
management, operation or control of, or be connected in any manner with, any
business, which is competitive with the business of AJAX or its subsidiaries or
their successors and assigns (the "Acquired Business"), in any city, county,
state or other jurisdiction within the United States. For purposes of this
Section 3.5, the Acquired Business is as described on Exhibit 3.5.
(b) During the Period Shareholder shall not, directly
or indirectly, on his own behalf or on behalf of or as an employee of any other
person or business, contact or approach any person or business wherever located,
with a view of selling or
13
licensing or assisting others to sell or license products or services competing
with any products or services of the Acquired Business or sell or solicit orders
for the sale or licensing of such products or services.
(c) Unless authorized or instructed in writing by
AJAX, during the Period, Shareholder shall not, except as required in the
conduct of the Acquired Business, disclose to others, or use, any of AJAX's
inventions or discoveries or its secret or confidential information, knowledge
or data (oral, written, or in machine-readable form) which Shareholder has or
hereafter may obtain as a consequence of his relationship with AJAX, including
such inventions, discoveries, information (limited to confidential), knowledge,
know-how or data relating to machines, equipment, products, systems, software,
research and/or development, designs, compositions, formulae, processes,
manufacturing procedures or business methods, whether or not developed by
Shareholder, by others on behalf of AJAX or obtained by AJAX from third parties,
and irrespective of whether or not such inventions, discoveries, information,
knowledge or data have been identified by AJAX as secret or confidential, unless
and until, and then to the extent and only to the extent that, such inventions,
discoveries, information (limited to confidential), knowledge or data become
available to the public otherwise than by Shareholder's act or omission.
14
(d) During the Period Shareholder shall not, except
as required in the conduct of the Acquired Business, disclose to others, or use,
any of the information relating to current or contemplated customers of AJAX,
business dealings with such customers, prospective sales and advertising
programs and agreements with such representatives of AJAX, present sources of
supply or any other business arrangements of AJAX, including but not limited to
customers, customer lists, costs, prices and earnings, whether or not such
information is developed by the Shareholder, by others on behalf of AJAX or is
obtained by AJAX from third parties, unless and until such information becomes
available to the public otherwise than by the Shareholder's act or omission.
(e) During the Period Shareholder shall not solicit
business competitive with that of the Acquired Business, from any person, firm
or entity which is a customer of AJAX at any time during the Period or was a
customer during the year preceding the Closing, induce or attempt to induce any
customer of AJAX to reduce its business with AJAX, or solicit any employee to
leave the employ of AJAX or any of its subsidiaries or affiliates. During the
Period, Shareholder shall also not solicit business competitive with the
Acquired Business from any contemplated customer of AJAX. For purposes of this
Section 3.5, a "contemplated customer" shall mean potential customers which AJAX
solicited or with which AJAX has had discussions concerning potential business
at any time during the Period.
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(f) The above covenants on the part of Shareholder
shall survive the Closing, and the existence of any claim or cause of action of
Shareholder against AJAX or SAC, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by AJAX or SAC of
such covenants except as otherwise set forth in paragraph 6(b) of the Consulting
Agreement. The Shareholder agrees that a remedy at law for any breach of the
foregoing covenants would be inadequate and that AJAX or ▇▇▇▇▇▇▇ shall be
entitled to a temporary and permanent injunction or an order for specific
performance of such covenants without the necessity of proving actual damage to
AJAX or SAC. Nothing in this Agreement shall be construed, however, to limit the
damages otherwise recoverable by AJAX or SAC.
(g) The parties intend that the covenants of
Shareholder contained in this Section 3.5 shall be construed as a series of
separate covenants, one for each city, county, state or other jurisdiction,
located within the United States of America. If, in any judicial proceeding, a
court shall refuse to enforce any of the separate covenants deemed included
herein, then the unenforceable covenants shall be deemed eliminated from these
provisions for the purposes of those proceedings to the extent necessary to
permit the remaining separate covenants to be enforced.
(h) Shareholder acknowledges that in consideration of
the covenants of Shareholder contained in this Section 3.5, Ajax
16
has prior to the date hereof paid to Shareholder the sum of $500,000. As
additional consideration for the covenants of Shareholder contained in this
Section 3.5, SAC shall issue to Shareholder options to purchase 50,000 shares of
the Common Stock of SAC or of such permitted assignee to which SAC may assign
its rights hereunder (such permitted assignee being referred to herein as the
"SAC Assignee"), such options to have a per share exercise price equal to 115%
of the initial public offering price per share of SAC's Common Stock, and to be
on such other terms and conditions as those issued to management of SAC prior to
the contemplated public offering of securities of SAC or SAC's Assignee, as the
case may be, except that such options to Shareholder shall be exercisable for a
period of five years from the Closing Date.
(i) Anything contained in this Section 3.5 to the
contrary notwithstanding, in the event that SAC or Ajax defaults in the payment
when due, of any installment of interest or principal of the SAC Note or the
Ajax Note (as hereinafter defined), and does not cure the same within any
applicable cure period, the covenants of Shareholder contained in this Section
3.5 shall be of no further force and effect.
3.6 Allocation of Consideration for Tax Purposes. None of the
parties shall, at any time hereafter, in any tax or information return filed
with any state or federal agency or in any audit, other tax proceeding or
otherwise, take a position which is contrary to the allocations hereinabove set
forth.
17
4. CLOSING
Closing and Closing Date. Subject to the provisions of this
Agreement, the consummation of the transactions contemplated by this Agreement
(the "Closing") shall be held at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ &
Ballon LLP at 10:00 A.M. (local time) on or before November 15, 1997, or at such
later date, place or time as the parties shall otherwise mutually agree upon
(the date of the Closing being referred to herein as the "Closing Date"). All
Closing transactions shall be deemed to take place simultaneously and no Closing
transaction shall be deemed consummated until all transactions to take place at
the Closing have been consummated.
5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
As an inducement to SAC to enter into this Agreement and
perform its obligations hereunder, the Shareholder hereby represents and
warrants to SAC as follows, each of which representations and warranties is
material and is being relied upon by SAC, and each of which is true as of the
date hereof:
5.1 Organization, Good Standing, Power, Etc. AJAX is a
corporation duly organized, validly existing and in good standing under the laws
of the State of New Jersey. AJAX is qualified to do business in all states in
which the nature of its Business requires qualification. AJAX has all requisite
corporate power and
18
authority to own or lease and operate its properties and assets, and carry on
its Business as it is presently being conducted.
5.2 Capital Stock.
(a) AJAX has authorized capital stock consisting of one
hundred (100) shares of common stock, no par value, of which seventy-five (75)
shares are issued and outstanding, and all of which are duly authorized, validly
issued, fully paid, nonassessable, free of preemptive rights, and, to the
Shareholder's knowledge, were issued in compliance with all federal and
applicable state securities laws.
(b) There are no outstanding offers, options, warrants,
rights, calls, commitments, obligations (verbal or written), conversion rights,
plans or other agreements (conditional or unconditional) of any character
providing for, requiring or permitting the offer, sale, purchase or issuance of
any shares of capital stock of AJAX or any other securities (as such term is
defined in the Securities Act of 1933, as amended). Except for the Common Stock,
there are no equity securities of the Company that are reserved for issuance or
are outstanding.
(c) The Common Stock is owned by the Shareholder free and
clear of all liens, charges, encumbrances or claims of any kind whatsoever,
except for restrictions imposed by federal or applicable state securities laws.
19
5.3 Articles of Incorporation and By-Laws. Included in Exhibit
5.3 hereto are correct and complete copies of the Certificate of Incorporation
of AJAX, as amended to date, and the By-Laws of AJAX, as amended to date. Such
Certificate of Incorporation and By-Laws are in full force and effect.
5.4 Subsidiaries, Divisions and Affiliates. There are no
subsidiaries, divisions or Affiliates of AJAX. Since January 1, 1990, the
Business has been conducted solely by AJAX and not through any Affiliate, joint
venture or other entity or person or under any other name.
5.5 Equity Investments. AJAX does not own or have any rights
to any equity interest, directly or indirectly, in any corporation, partnership,
joint venture, firm or other entity.
5.6 Authorization of Agreement. The Shareholder has all
requisite power and authority to execute, deliver and perform his obligations
under this Agreement. This Agreement has been, and the Ancillary Documents will
be, duly and validly executed and delivered by the Shareholder. This Agreement
constitutes a valid and binding obligation of the Shareholder enforceable in
accordance with its terms, except that such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally.
20
5.7 Effect of Agreement. Except as set forth on Exhibit 5.7,
the execution, delivery and performance of this Agreement by the Shareholder and
the consummation by the Shareholder of the transactions contemplated hereby,
will not, with or without the giving of notice and the lapse of time, or both,
(a) to the Shareholder's knowledge, violate any provision of law, statute, rule,
regulation or executive order to which AJAX or the Shareholder is subject; (b)
violate any judgment, order, writ or decree of any court applicable to the
Shareholder or AJAX; or (c) result in the breach of or conflict with any term,
covenant, condition or provision of, result in the modification or termination
of, constitute a default under, or result in the creation or imposition of any
lien, security interest, charge or other encumbrance upon any of the Assets or
the Common Stock pursuant to any corporate charter, by-law, commitment, contract
or other agreement or instrument, including any of the Commitments, to which
AJAX or the Shareholder is a party or by which any of the Assets or the Common
Stock is or may be bound or affected or from which AJAX or the Shareholder
derives benefit, which breach, conflict, modification, termination, default or
encumbrance described in this clause (c) would be materially adverse to the
Business, any of the Assets or the Common Stock.
5.8 Restrictions. Except as set forth on Exhibit 5.8, neither
AJAX nor the Shareholder is a party to any contract, commitment or agreement,
nor is any of them, the Common Stock or Assets subject to, or bound or affected
by, any provision of the
21
Articles of Incorporation, By-laws or other corporate restriction, or any order,
judgment, decree, or to the Shareholder's knowledge, any law, statute,
ordinance, rule, regulation or other restriction of any kind or character, which
would, individually or in the aggregate, materially adversely affect the
Business, the Common Stock, or any of the Assets.
5.9 Governmental and Other Consents. To the Shareholder's
knowledge, except as set forth on Exhibit 5.9 and excluding any filings,
authorizations, consents and approvals as may be required under federal or state
securities, antitrust or takeover laws, no consent, authorization or approval
of, or exemption by, any governmental or public body or authority is required in
connection with the execution, delivery and performance by the Shareholder of
this Agreement or the Shareholder of any of the instruments or agreements herein
referred to, or the taking of any action herein contemplated.
5.10 Financial Statements. Included in Exhibit 5.10 hereto are
correct and complete copies of the balance sheets of AJAX for the years ended
March 31, 1997 and 1996 (collectively, the "Financial Statements"). The
Financial Statements were audited by BDO. The Financial Statements are in
accordance with the financial books and records of AJAX in all material
respects, have been prepared on a consistent basis and fairly present the
financial position of AJAX at their respective dates and the results of
operations and cash flows for the respective periods covered
22
thereby. The Shareholder is not aware of any material negative modifications
that should be made to the Financial Statements in order for them to be in
accordance with generally accepted accounting principles. AJAX has provided to
BDO letters from its management with respect to certain financial reporting
matters described therein (collectively, the "Ajax Management Representation
Letter"). The parties hereby agree that the Ajax Management Representation
Letter was given solely for the purpose of enabling BDO to express an opinion
with regard to the Ajax Financial Statements and none of the representations
contained therein are meant to be representations given by Shareholder to SAC
under this Agreement. Said representations are not meant to supersede, modify,
expand or limit any of the representations contained in this Agreement and are
not being relied upon by SAC under this Agreement. Moreover SAC hereby agrees
that it shall not seek to recover for any alleged damages sustained under this
Agreement by reason of a breach of any representation or warranty contained in
the Ajax Management Representation Letter and further agrees that its only
remedies against Shareholder with respect to the transactions contemplated under
this Agreement are the remedies set forth herein.
5.11 Absence of Certain Changes or Events. Except as set forth
on Exhibit 5.11 since ▇▇▇▇▇ ▇▇, ▇▇▇▇, ▇▇▇▇ has not: (a) suffered any adverse
change in the Business or the Assets, and no event has occurred which,
individually or in the aggregate, has or have had a material adverse effect on,
AJAX's financial
23
condition, results of operations or Business or the value of the Assets; (b)
incurred damage to or destruction of any tangible Asset or portion of the
tangible Assets, whether or not covered by insurance which damage or destruction
has had a material adverse effect on the Business or the value of the Assets;
(c) incurred any material obligation or liability (fixed or contingent) except
(i) current business obligations incurred in the ordinary course of business,
none of which were entered into for grossly inadequate consideration, (ii)
obligations or liabilities under the Commitments to the extent required thereby,
and (iii) obligations and liabilities relating to the transaction contemplated
under this Agreement; (d) made or entered into contracts or commitments to make
any capital expenditures in excess of $50,000, except for those previously
committed, for those appropriate to repair, maintain or replace the material
Assets of AJAX, as AJAX reasonably determined and for those alterations in the
ordinary course of AJAX's Business; (e) mortgaged, pledged or subjected to lien
any of the material Assets other than in the ordinary course of the Business
provided that the aggregate amount of such mortgage, pledge or lien does not
exceed $50,000; (f) sold, transferred or leased any material Asset or material
portion of the Assets, or canceled or compromised any debt or material claims,
except in each case, in the ordinary course of business; (g) sold, assigned,
transferred or granted any rights under or with respect to any licenses,
agreements, patents, inventions, trademarks, trade names, copyrights or formulae
or with respect to know-how or any other intangible asset including, but not
limited to, the Rights; (h)
24
waived or released any other rights having a material adverse effect on the
Business or Assets; or (i) entered into any transactions not in the ordinary
course of business which would, individually or in the aggregate, materially
adversely affect the Assets or the Business.
5.12 Title to Assets; Absence of Liens and Encumbrances.
Except as set forth on Exhibit 5.12, (a) AJAX has good title to, and owns
outright, the Assets, which include all of AJAX's assets reflected in the March
31, 1997 Financial Statements (except as sold, used or otherwise disposed of in
the ordinary course of business since March 31, 1997), free and clear of all
mortgages, claims, liens, charges, encumbrances, security interests,
restrictions on use or transfer or other defects as to title (collectively, the
"Liens"), other than rights of third parties under leases to which AJAX is a
party, Liens for taxes not yet due and payable, minor title irregularities, and
other similar matters not having a material adverse affect on the Assets (the
"Permitted Encumbrances"); and (b) immediately following the Closing, AJAX will
have good and marketable title to all Assets, free and clear of all liens other
than Permitted Encumbrances. The leases and other agreements or instruments
under which AJAX holds, leases or is entitled to the use of any real or personal
property included in the Assets are in full force and effect and all rentals,
royalties or other payments accruing thereunder prior to the date hereof have
been duly paid or reserved. AJAX enjoys peaceable and undisturbed possession
under all such leases, and the change in ownership of
25
the Common Stock will not materially adversely affect such leases, other
agreements and instruments. To the Shareholder's knowledge, all Assets are in
conformity with all applicable zoning and other laws, ordinances, rules and
regulations. Except as set forth in Exhibit 5.12, no notice of violation of any
law, ordinance, rule or regulation thereunder pertaining to said Assets has been
received by the Shareholder or AJAX and which remains unsatisfied.
5.13 Equipment. Set forth on Exhibit 5.13 is a correct and
complete list as of February 1, 1997 of all equipment used by AJAX in the
Business (in excess of a fair market value of $10,000.00), indicating for each
piece of such equipment whether it is owned or leased and setting forth where it
is located. Except as noted on Exhibit 5.13, all of the equipment on Exhibit
5.13 and all Equipment (a) is and will be in working order and reasonable
operating condition and generally has been suitable to AJAX for the uses for
which it was designed or has been employed by AJAX, and (b) to the Shareholder's
knowledge conforms in all material respects with any laws, ordinances,
regulations, orders or other similar governmental requirements relating to its
use, as the same are currently in effect.
5.14 Insurance. There are no outstanding or unsatisfied
written requirements or recommendations imposed or made by any of AJAX'S current
insurance companies with respect to current policies covering any of the Assets
or the Business, or by any governmental authority requiring or recommending,
with respect to any of the
26
Assets or the Business, that any material repairs or other material work be done
on or with respect to, or requiring or recommending any material equipment or
facilities be installed on or in connection with, any of the Assets. AJAX
carries, and (with respect to any period for which a claim against AJAX may
still arise) has always carried workers' compensation insurance in reasonable
amounts, and other insurance (other than product liability insurance) which is
reasonably necessary to the conduct of the Business. On Exhibit 5.14 is set
forth a correct and complete list of (a) all currently effective insurance
policies and bonds covering the Assets or the Business, and their respective
annual premiums (as of the last renewal or purchase of new insurance), and (b)
for the three-year period ending on the date hereof, (i) all accidents,
casualties or damage occurring on or to the Assets or relating to the Business
which have exceeded Twenty-Five Thousand Dollars ($25,000.00) per accident,
casualty or damage, and (ii) claims for which written notice has been given for
product liability, damages, contribution or indemnification and settlements
(including pending settlement negotiations) relating thereto which per claim are
in excess of Twenty-Five Thousand Dollars ($25,000.00). Except as set forth on
Exhibit 5.14, as of the date hereof there are no material disputes between AJAX
and underwriters relating to any such policies or bonds, and all premiums due
and payable have been paid. Except as set forth on Exhibit 5.14, there are no
pending and AJAX has not received written notice of any terminations or premiums
increases with respect to any of such policies or bonds and to Shareholder's
knowledge, there is no
27
condition or circumstance applicable to the Business, other than the sale of the
Common Stock pursuant to this Agreement, which may result in such termination or
increase. AJAX and the Assets are in compliance with all conditions contained in
such policies or bonds, except for noncompliance which, individually or in the
aggregate, would not have a material adverse affect on the Business or the
Assets.
5.15 Agreements, Arrangements, Etc.
5.15.1 Except as set forth on Exhibit 5.15.1 (a) through (p),
AJAX is not a party to, nor are AJAX or any of the Assets bound by any:
(a) lease agreement (whether as lessor or lessee) providing
for annual payments in excess of $10,000 per lease per year;
(b) license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to trademarks, trade names,
patents, or copyrights (or applications therefor), unpatented designs or
processes, formulae, know-how or technical assistance, or other proprietary
rights;
(c) employment or other contract or agreement with an employee
or independent contractor, other than employees paid on an hourly rate, which
(i) may not be terminated without liability to
28
AJAX upon notice to the employee or independent contractor of not more than 30
days, or (ii) provides payments (contingent or otherwise) of more than $40,000
per year (including all salary, bonuses and commissions);
(d) agreement, contract or order with any buying agent,
manufacturer, leasing company, supplier or other individual or entity who
assists, provides or is otherwise involved in the acquisition, supplying or
providing Assets or other goods to AJAX which may not be terminated without
liability to AJAX upon notice of not more than thirty (30) days and other than
open purchase orders in the ordinary course of business;
(e) non-competition, secrecy or confidentiality agreements
other than with SAC;
(f) agreement, contract or order with any distributor, dealer,
leasing company, sales agent or customer for the sale of goods or services by
AJAX to any third party (including the government or any other governmental
authority) other than orders for the provision of goods or services in the
ordinary course of business;
(g) agreement with any labor union;
(h) agreement guaranteeing, indemnifying or otherwise becoming
liable for the obligations or liabilities of another;
29
(i) agreement with any banks or other persons for the
borrowing or lending of money or payment or repayment of draws on letters of
credit or currency swap or exchange agreements (other than purchase money
security interests which may, under the terms of invoices from its suppliers, be
granted to suppliers with respect to goods so purchased, or under the terms of
invoices delivered to its customers, be granted to AJAX with respect so sold to
its customers);
(j) agreement with any bank, finance company or similar
organization which acquires from AJAX receivables or contracts for sales on
credit;
(k) agreement granting any person a lien, security interest or
mortgage on any of the Assets, including, without limitation, any factoring or
agreement for the assignment of receivables or inventory;
(l) agreement for the incurrence of any capital expenditure in
excess of $50,000;
(m) advertising, publication or printing agreement;
(n) agreement which restricts AJAX from doing business
anywhere in the world;
30
(o) agreement or, to Shareholder's knowledge, a statute or
regulation giving any party the right to renegotiate or require a reduction in
prices or the repayment of any amount previously paid; or
(p) to Shareholder's knowledge, agreement or contract, not
included in or expressly excluded from the terms of the foregoing clauses (a)
through (o), materially affecting the Assets or Business, except contracts or
purchase orders for the purchase or sale of goods or services made in the usual
and ordinary course of business or having a value of less than $10,000.
5.15.2 Each of the Commitments is valid, in full force and
effect and enforceable in all material respects by AJAX in accordance with its
terms except that such enforcement may be limited by bankruptcy, insolvency or
other similar laws affecting the enforcements of creditors' rights generally.
5.15.3 Except as set forth on Exhibit 5.15.3, AJAX has
fulfilled, or has taken all action reasonably necessary to enable it to fulfill
when due, all of its obligations under the Commitments, except where the failure
to do so would not, individually or in the aggregate, have a material adverse
affect on the Business or the Assets. Furthermore, there has not occurred any
default by AJAX or to the Shareholder's knowledge any event which, with the
lapse of time or the election of any person other than AJAX, will become a
default, nor, to Shareholder's knowledge, has
31
there occurred any default by others or any event which, with the lapse of time
or the election of any person including AJAX, will become a default under any of
the Commitments, except for such defaults, if any, which have not resulted and
will not result in any material loss to or liability of AJAX or any of its
successors or assigns. Except as indicated on Exhibit 5.15.3, AJAX is not in
arrears in any material respect with respect to the performance or satisfaction
of any of the material terms or conditions to be performed or satisfied by it
under any of the Commitments and no waiver or variance has been granted by any
of the parties thereto.
5.15.4 As to those Commitments set forth on Exhibits 5.15 (a)
through (p), prior to Closing Shareholder shall obtain the consent of the
parties thereto other than AJAX to the consummation of the transactions
contemplated hereby.
5.16 Patents, Trademarks, Copyrights, Etc. Exhibit 1.3(d) sets
forth (i) the registered and beneficial owner and the expiration date, to the
extent applicable, for each of the Rights and (ii) the product, service, or
products or services of AJAX which make use of, or are sold, licensed or made
under, each such Right. All of the Rights are included in the Assets and
constitute all rights necessary for the conduct of the Business, as such
business is currently being conducted. Except as set forth on Exhibit 5.16,
since January 1, ▇▇▇▇, ▇▇▇▇ has not sold, assigned, transferred, licensed,
sub-licensed or conveyed the Rights, or any of them, or any interest in the
Rights, or any of them, to any
32
person, and has the entire right, title and interest (free and clear of all
security interests, liens and encumbrances of every nature) in and to the Rights
necessary to the conduct of the Business as currently being conducted; neither
the validity of such items nor the use thereof by AJAX, is the subject of any
pending or to Shareholder's knowledge threatened opposition, interference,
cancellation, nullification, conflict, concurrent use, litigation or other
proceeding. AJAX has received no notice that the conduct of the Business of AJAX
as currently operated and the use of the Assets conflicts with, or infringes
upon, legally enforceable rights of third parties. Except as set forth on
Exhibit 5.16, since January 1, 1990 the Rights owned by or licensed to AJAX have
not been used, and to the Shareholder's knowledge no use is now being made, by
any entity except AJAX and other entities duly licensed to use the same. Except
as set forth on Exhibit 5.16, to Shareholder's knowledge, there is no
infringement by any third party of any proprietary right owned by or licensed to
AJAX.
5.17 Permits, Licenses, Etc. There are no permits, licenses,
registrations, memberships, orders or approvals of governmental or
administrative authorities required to permit AJAX to carry on its Business as
currently conducted (other than (i) permits, licenses, registrations, trade
memberships, orders or approvals which are set forth on Exhibit 5.17, all of
which are in full force and effect, and (ii) other permits, licenses, orders or
approvals, the failure to obtain which would not, individually or
33
in the aggregate, have a material adverse affect on the Assets or
on the Business).
5.18 Compliance with Applicable Laws. Subject to the
provisions of Section 5.28 hereof and Section 5.29, to Shareholder's knowledge,
the conduct by AJAX of the Business does not violate or infringe, and AJAX has
received no written notice that there is any claim of violation or infringement
of, any law, statute, ordinance, regulation or executive order (including,
without limitation, the Federal Food, Drugs and Cosmetics Act, as amended, the
Occupational Safety and Health Act, the National Environmental Policy Act and
the Foreign Corrupt Practices Act and the respective regulations thereunder and
similar applicable state laws and regulations) currently in effect. AJAX is not
in default under any governmental or administrative registration, membership or
license issued to it, under any governmental or administrative order or written
demand directed to it, or with respect to any order, writ, injunction or decree
of any court directed to it which, in any case, materially adversely affects the
financial condition, results of operations or Business or the value of the
Assets.
5.19 Litigation. Except as set forth on Exhibit 5.19, there is
no action, suit, proceeding, arbitration, pending or, to the knowledge of
Shareholder, threatened, before any court or governmental, administrative or
other competent authority or private arbitration tribunal against or relating to
or affecting (directly or indirectly, including by way of indemnification) the
34
Common Stock, the Business or any of the material Assets, or the transactions
contemplated by this Agreement. AJAX has not waived any statute of limitations
or to the knowledge of Shareholder any other affirmative defense with respect to
any of its obligations. There is no continuing order, injunction or decree of
any court, arbitrator or governmental, administrative or other competent
authority to which AJAX is a party, or to the knowledge of Shareholder to which
AJAX or any material portion of the Assets is subject. Neither AJAX nor the
Shareholder or to the knowledge of Shareholder, any other current officer,
director, partner or key supervisory employee of AJAX or any Affiliate of AJAX
has been permanently or temporarily enjoined or barred by order, judgment or
decree of any court or other tribunal or any agency or other body from engaging
in or continuing any conduct or practice in connection with the Business.
5.20 No Interest in Competitors. Set forth on Exhibit 5.20 is
a list describing the extent to which AJAX, the Shareholder or to the knowledge
of Shareholder any other officer or director of AJAX or any Affiliate of any of
the foregoing, directly or indirectly, owns more than a five percent (5%)
interest in or controls or is an employee, officer, director, or partner of, or
consultant to any corporation, partnership, limited partnership, joint venture,
association or other entity which is a competitor, supplier or customer of AJAX
or does any type of business or has a professional relationship with AJAX.
35
5.21 Customers, Suppliers, Distributors and Agents. Except as
set forth on Exhibit 5.21 (a), Shareholder has no knowledge that any customer,
distributor, supplier or any other person or entity with material business
dealings with AJAX, will cease to continue such relationship with AJAX, or will
substantially reduce the extent of such relationship, at any time prior to or
after the Closing Date. Exhibit 5.21 (b) sets forth as to AJAX (a) the customers
representing the purchasers of 90% of its goods and/or services and (b) the
fifteen largest (in dollar value) providers of goods and/or services to it, in
each case with respect to each of the years ended March 31, 1995 and 1996.
5.22 Books and Records. The books of account and other
financial and corporate records of AJAX are in all material respects complete,
correct and up to date, with all necessary signatures, and are in all material
respects accurately reflected in the Financial Statements.
5.23 Employee Benefit Plans. Except as described in Exhibit
5.23, AJAX does not have any hospitalization, health insurance, pension,
retirement, profit sharing, stock option or similar plans. Since the date of its
incorporation AJAX has never maintained a pension, profit sharing, stock bonus,
bonus, deferred compensation, severance, stock option or purchase plan, or
retirement plan or arrangement, covering employees of AJAX (the "Employee
Benefit Plans").
36
To Shareholder's knowledge, AJAX has complied with all of the
rules and regulations governing each of the Employee Benefit Plans maintained
for the benefit of AJAX's employees, including, without limitation, rules and
regulations promulgated pursuant to ERISA and the Code, by the Department of
Treasury, Department of Labor, and the Pension Benefit Plans Guaranty
Corporation, and each of the Employee Benefit Plans now operated has since its
inception been operated in accordance with its provisions and is in compliance
with such rules and regulations. To Shareholder's knowledge, neither AJAX nor
any Employee Benefit Plans maintained by AJAX or any fiduciaries thereof have
engaged in any prohibited transaction, as that term is defined in Section 406 of
ERISA or Section 4975 of the Code, nor have any of them committed any breach of
fiduciary responsibility with respect to any of the Employee Benefit Plans, and
Shareholder does not have any knowledge that any other person has not complied
with these rules and regulations.
5.24 Powers of Attorney. Except as set forth on Exhibit 5.24,
no person has any power of attorney to act on behalf of AJAX in connection with
any of AJAX's properties or business affairs other than such powers to so act as
normally pertain to the officers of AJAX and the authority granted to ▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ to sign checks on behalf of AJAX.
5.25 Sufficiency of Assets and Commitments. Except as set
forth in Exhibit 5.25, in Shareholder's reasonable judgment the
Assets and the Commitments, taken in the aggregate, are sufficient,
37
and constitute all of the property and Rights necessary, for the continuation of
the Business and operations of AJAX as now conducted.
5.26 Labor Disputes, Unfair Labor Practices. Except as set
forth on Exhibit 5.26, AJAX is not engaged in any illegal or unfair labor
practice which would have a material adverse affect on the Assets or the
Business. There is no pending or to the knowledge of Shareholder affirmatively
threatened (i) unfair labor practice complaint, charge, labor dispute, strike,
slowdown, walkout or work stoppage before the National Labor Relations Board or
any other authority or (ii) grievance or arbitration proceeding arising out of
or under a collective bargaining agreement involving employees of AJAX. There
have been no strikes, labor disputes, slow-downs, walkouts, or work stoppages
involving employees of AJAX during the last three (3) years except for claims
brought by or on behalf of individual employees seeking less than $20,000
individually. There has been no suit brought alleging discriminatory discharge
or treatment. To Shareholder's knowledge, no union representation question
exists with respect to the employees of AJAX and no union organizing activities
are taking place. Except as set forth on Exhibit 5.26 AJAX has not received
notice from any of its key supervisory employees of such employee's intent to
terminate his or her employment or bring any action against AJAX for any reason
related to the transactions contemplated by this Agreement.
38
5.27 Past Due Obligations. Except as set forth on Exhibit
5.27, AJAX has no obligations over $25,000 more than 30 days past due.
5.28 Environmental Matters.
(a) To the knowledge of Shareholder, except as set forth on
Exhibit 5.28, (i) AJAX is in compliance with all environmental laws,
regulations, permits and orders applicable to it, and with all laws,
regulations, permits and orders governing or relating to asbestos removal and
abatement; (ii) AJAX has not transported, stored, treated or disposed, or
allowed or arranged for any third parties to transport, store, treat or dispose,
of any Hazardous Substances or other waste to or at any location other than a
site lawfully permitted to receive such Hazardous Substances or other waste for
such purposes, or had performed, arranged for or allowed by any method or
procedure such transportation, storage, treatment or disposal in contravention
of any laws or regulations nor has AJAX disposed of, or allowed or arranged for
any third parties to dispose of, Hazardous Substances or other waste upon
property owned or leased by it in contravention of any applicable laws or
regulations; (iii) there has not occurred, nor is there presently occurring, a
Release of any Hazardous Substance on, into, above or beneath the surface of any
parcel of real property in which AJAX has (or will have after giving effect to
the transactions contemplated hereby) an ownership interest or any leasehold
interest in contravention of any applicable laws or regulations;
39
(iv) AJAX has not transported or disposed of, or allowed or arranged for any
third parties to transport or dispose of, any Hazardous Substance or other waste
to or at a site which, pursuant to the U.S. comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), has
been placed on the National Priorities List or its state equivalent; (v) AJAX
has not received notice and AJAX has no knowledge of any facts which if
disclosed to the proper governmental authority would give rise to any
substantive notice, that AJAX is a potentially responsible party for a federal
or state environmental cleanup site or for corrective action under CERCLA or
notice of any other Environmental Claim; (vi) AJAX has not undertaken (or been
requested to undertake) any response or remedial actions or cleanup actions of
any kind at the request of any federal, state or local governmental entity, or
at the request of any other person or entity; and (vii) there are no laws,
regulations, ordinances, licenses, permits or orders relating to environmental
matters requiring any work, repairs, construction or capital expenditures with
respect to any material portion of the Assets or properties of AJAX.
(b) For the purposes of this Agreement: (i) "Environmental
Claim" shall mean any written demand, claim, governmental notice or threat of
litigation or the actual institution of any action, suit or proceeding which
asserts that an Environmental Condition constitutes a violation of any statute,
ordinance, regulation, or other governmental requirement relating to the
emission, discharge, or Release of any Hazardous Substance
40
into the environment or the generation, treatment, storage, transportation, or
disposal of any Hazardous Substance, prior to Closing Date in each case in
contravention of any applicable laws or regulations; (ii) "Environmental
Condition" shall mean the presence on any real property during the period from
the date such real property was first owned, leased or used by AJAX to the
Closing Date, in surface water, ground water, drinking water supply, land
surface, subsurface strata or ambient air of any Hazardous Substance arising out
of or otherwise related to the operations or other activities of AJAX or of any
predecessor of AJAX, conducted or undertaken prior to the Closing Date, and in
each case in contravention of any applicable laws or regulations; (iii)
"Hazardous Substance" shall mean any substance defined in the manner set forth
in Section 101(14) of the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, as applicable on the Closing
Date, and shall include any additional substances designated under Section l
02(a) thereof prior to the Closing Date; and (iv) "Release" shall mean
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing into the environment
(including the abandonment or discarding of barrels, containers, and other
closed receptacles containing any hazardous substance or pollutant or
contaminant) in each case in contravention of any applicable laws or
regulations.
5.29 Tax and Other Returns and Reports. AJAX has timely filed
or will file all Tax Returns and information returns required
41
to be filed by AJAX prior to the Closing Date and has paid or reserved all Taxes
due for all periods ending on or before December 31, 1996, and will pay all
Taxes due prior to the Closing Date. Adequate provision has been made in the
Financial Statements referred to in Section 5.10 above, for all Taxes whether or
not due and payable as of the dates thereof and whether or not disputed. Exhibit
5.29(a) lists all audits of Tax Returns which have occurred since January 1,
1990. All required Tax Returns, including amendments to date, have been prepared
in good faith without negligence or willful misrepresentation. Except as set
forth on Exhibit 5.29(b), no governmental entity has in writing proposed
(tentatively or definitively), asserted or assessed or threatened in writing to
propose or assert, any deficiency, assessment, lien, or other claim for Taxes.
Except as provided in Exhibit 5.29(c), there are no agreements, waivers or other
arrangements providing for an extension of time with respect to the assessment
of any Taxes or deficiency against AJAX or with respect to any Tax Return filed
or to be filed by AJAX.
5.30 Certain Tax Definitions. For purposes of this Agreement,
the term "Taxes" means all taxes, including without limitation all Federal,
state, local, foreign and other income, franchise, sales, use, excise, property,
payroll, withholding, environmental, alternative or add-on minimum and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of my kind whatsoever, and all estimated taxes, deficiency assessments,
additions to tax, penalties, and interest, and any
42
contractual or other obligation to indemnify or reimburse any person with
respect to any such assessment. For purposes of this Agreement, the term "Tax
Return" shall mean any report, statement, return, declaration of estimated tax
or other information required to be supplied by or on behalf of AJAX to a taxing
authority in connection with Taxes, or with respect to grants of tax exemption,
including any consolidated, combined, unitary, joint or other return filed by
any person that properly includes the income, deductions or other tax
information concerning AJAX.
5.31 Recent Dividends and Other Distributions. Except as set
forth in Exhibit 5.31, there has been no dividend or other distribution of
assets or securities with respect to the Common Stock whether consisting of
money, property or any other thing of value, declared, issued or paid to or for
the benefit of Shareholder subsequent to March 31, 1996.
5.32 Inventory. Except as set forth in Exhibit 5.32 all of the
Inventory is of a quantity and quality saleable at regular prices or usable in
the ordinary course of business during the twelve months following the Closing.
5.33 Purchase and Sale Obligations. All purchases and sales
and all orders and other commitments for purchases, sales and orders, made by or
on behalf of AJAX have been made in the usual and ordinary course of its
business in accordance with normal practices. On the Closing Date, the
Shareholder shall deliver to
43
SAC a schedule of all such uncompleted purchase and sale orders and other
commitments for purchases and sales as of a date not earlier than ten (10) days
prior to the Closing.
5.34 Other Information. None of the information which has been
furnished by AJAX or the Shareholder or any of their representatives to SAC or
any of its representatives in connection with the transactions contemplated
hereby, which is contained in this Agreement (including the Exhibits hereto) or
any certificate or instrument delivered or to be delivered by or on behalf of
AJAX or the Shareholder in connection with the transactions contemplated hereby,
does or will contain any untrue statement of a material fact or omit a material
fact necessary to make the information contained herein or therein not
misleading. If SAC, after having been advised in writing of any fact or
circumstance which materially changes a representation or warranty of
Shareholder in this Agreement nevertheless elects to close the transaction
contemplated neither SAC nor AJAX shall thereafter allege that the existence of
such fact or circumstance constitutes a breach of this Agreement.
5.35 Accounts Receivable and Accounts Payable. All of the
accounts receivable of AJAX are actual and bona fide accounts receivable
representing obligations for the total dollar amount thereof showing on the
books of AJAX, and AJAX has received no written notice that any of the accounts
receivable are or will be subject to any recoupments, set-offs or
counter-claims. Exhibit
44
5.35 sets forth a true and correct aged (30-60-90) list of all accounts
receivable and accounts payable of AJAX as of the end of January 1997.
5.36 Knowledge of AJAX and the Shareholder. As to each
representation and warranty made by the Shareholder under this Article 5, any
fact or information known to AJAX or notice received by AJAX, shall be imputed
to the Shareholder as if such fact or information were known to the Shareholder
or such notice received by the Shareholder except that with respect to
representations and warranties of Shareholder which are limited to his knowledge
or awareness, such representation and warranties shall be limited to those
matters actually known to Shareholder without any obligation of inquiry.
5.37 Subchapter S. AJAX is and always has been taxed as a "C"
corporation and has never elected to be taxed under Subchapter S of the Internal
Revenue Code of 1986, as amended.
6. REPRESENTATIONS AND WARRANTIES OF SAC
As an inducement to Shareholder to enter into this Agreement
and perform his obligations hereunder, SAC hereby represents and warrants to
Shareholder as follows, each of which representations and warranties is material
and is being relied upon by Shareholder, and each of which is true as of the
date hereof:
45
6.1 Organization. SAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. SAC has
all requisite power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby.
6.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement by SAC, and the consummation of the transactions
contemplated hereby have been duly and effectively authorized by all necessary
corporate action. This Agreement has been duly and validly authorized, executed
and delivered on behalf of SAC. This Agreement constitutes a valid and binding
obligation of SAC, enforceable in accordance with its terms, except that such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally.
6.3 Effect of Agreement. The execution, delivery and
performance of this Agreement by SAC and consummation by SAC of the transactions
contemplated hereby will not, with or without the giving of notice and the lapse
of time, or both, (a) violate any provision of law, statute, rule, regulation or
executive order to which SAC is subject; (b) violate any judgment, order, writ
or decree of any court applicable to SAC; or (c) result in the breach of or
conflict with any term, covenant, condition or provision of the Certificate of
Incorporation and By-laws of SAC or any
46
commitment, contract or other agreement on instrument to which SAC is a party.
6.4 Litigation. There are no actions, suits, proceedings or
governmental investigations or inquiries pending or to its actual knowledge
threatened against SAC which, in its reasonable judgment, would prevent the
consummation of the transactions contemplated hereby.
6.5 Governmental and Other Consents. No consent, authorization
or approval of, or exemption by, any governmental or public body or authority is
required in connection with the execution, delivery and performance by SAC of
this Agreement or with any of the other instruments or agreements herein
referred to, or the taking of any action herein contemplated, except for such
consents as are required in connection with SAC's efforts to raise capital.
6.6 Compliance with Applicable Laws. The conduct by SAC of its
business and affairs does not violate or infringe and SAC has not received a
notice of any claims of violation or infringement of, any law, statute,
ordinance, regulation or executive order currently in effect. SAC is not in
default under any governmental or administrative registration, membership or
license issued to it, under any governmental or administrative order or demand
directed to it, or with respect to any order, writ, injunction or decree of any
court having jurisdiction over it.
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7. PRE-CLOSING COVENANTS OF THE SHAREHOLDER
The Shareholder hereby covenants and agrees with SAC that the
Shareholder shall do, or cause to be done, the following, between the date of
this Agreement and the Closing Date or date of termination of this Agreement (as
permitted by Section 13.1, 13.2 or 13.3 hereof), as the case may be:
7.1 Conduct of Business Until Closing Date. Except as
permitted or required hereby or as SAC may otherwise consent in writing, the
Shareholder shall cause AJAX to:
7.1.1 operate the Business only in the usual, regular and
ordinary manner, and use best efforts to (a) preserve the present business
organization of AJAX intact, (b) keep available the services of the present key
supervisory employees of AJAX and (c) preserve the current business
relationships of AJAX with customers, clients, suppliers, distributors and
others having material business dealings with it;
7.1.2 bear the risk of loss or damage to the Assets on and
prior to the Closing Date where such risk of loss is not the legal obligation of
another, and maintain all material properties necessary for the conduct of the
Business, whether owned or leased;
48
7.1.3 maintain the books, records and accounts of AJAX in the
usual, regular and ordinary manner, on a basis consistent with prior periods;
7.1.4 duly comply with all laws, rules and regulations
applicable to AJAX and to the conduct of its Business, if the failure to so
comply would have a material adverse effect on the Business or the financial
condition of AJAX;
7.1.5 perform all of the obligations of AJAX without default,
unless default under any such obligations would have no material adverse impact
on AJAX, its Assets or Business;
7.1.6 neither (a) amend AJAX's Certificate of Incorporation or
By-Laws; (b) merge with or into, consolidate, amalgamate or otherwise combine
with, any other entity; nor (c) change the character of the Business;
7.1.7 neither (a) encumber, mortgage, or voluntarily subject
to Lien other than as set forth on Exhibit 5.12, any of the existing Assets; (b)
transfer, sell, lease, license or otherwise dispose of any of, or any part of,
the Assets (other than in the ordinary course of business); (c) convey, transfer
or acquire any material Asset or property to, for or on behalf of AJAX other
than in the ordinary course of business; (d) enter into any arrangement,
agreement or undertaking, with respect to any of the employees relating to the
payment of bonus, severance, profit-sharing or
49
special compensation or any increase in the compensation payable or to become
payable to any such employee other than as referred to in Section 7.2; nor (e)
incur any material fixed or contingent obligation or enter into any agreement,
commitment, contract or other transaction or arrangement relating to the
Business of AJAX or the Assets other than in the ordinary course of business;
7.1.8 not make any distributions or dividends of Assets or
securities, nor any changes to the capital structure of AJAX; not agree to make
or make any sales of its securities; and
7.1.9 neither modify, change or terminate any of its material
obligations other than in the ordinary course of business, nor grant any power
of attorney with respect to the Business or the Assets to any party except SAC.
7.2 Shareholder Compensation. From February 1, 1997, through
the Closing Date, Shareholder shall prevent AJAX from paying, and he shall not
accept from AJAX, any cash or property except (i) reimbursements for business
expenses incurred by Shareholder on behalf of AJAX, (ii) a bonus for services
rendered in the amount of $470,000, which Shareholder acknowledges has been
received prior to the date hereof, (iii) salary for services rendered based on
an annual rate of $160,000, and (iv) rent for the premises currently occupied by
AJAX in accordance with the leasehold terms in effect as of the date hereof.
50
7.3 Approvals, Consents and Further Assurances. The
Shareholder shall use and shall cause AJAX to use its best efforts to obtain in
writing as promptly as possible all approvals, consents and waivers required to
be obtained by Shareholder under the Agreement in order to effectuate the
transactions contemplated hereby, and shall deliver to SAC copies, reasonably
satisfactory in form and substance to counsel to SAC, of such approvals and
consents. The Shareholder shall also use best efforts to assure that the other
conditions set forth in Article 10 hereof are satisfied by the Closing Date.
7.4 Access to Properties, Records, Suppliers, Agents, Etc. The
Shareholder shall cause AJAX to give to SAC and to SAC's counsel, financiers,
accountants and other representatives access to and copies of such of AJAX's
properties, personnel, books, tax returns, contracts, commitments and records as
relate to the Assets, suppliers, agents, distributors, etc. or other aspects of
the Business; and shall furnish to SAC and such representatives all such
additional instruments, contracts, documents or other written obligations
(certified by officers of AJAX, if so requested in writing) and financial and
other information concerning such Business, Assets, suppliers, agents, etc. as
SAC or its representatives may from time to time request, subject, however to
the terms and conditions of a Non-Disclosure Agreement of even date herewith
attached hereto as Exhibit 7.4.
51
7.5 Advice of Changes. If the Shareholder becomes aware of any
fact or facts which, if known at the date hereof, would have been required to be
set forth or disclosed in or pursuant to this Agreement, Shareholder shall
promptly advise SAC in writing thereof.
7.6 Conduct. Except as permitted or required hereby or as SAC
may otherwise consent in writing, Shareholder shall not, nor shall he permit
AJAX to, enter into any transaction or take any action which would result in any
of the representations and warranties of the Shareholder contained in this
Agreement not being true and correct as of the time immediately after such
transaction has been entered into or such event has occurred and on the Closing
Date.
7.7 Employee Benefit Plans. Except for payment of AJAX's
current obligations, AJAX shall not incur any additional obligations or
liabilities, including (i) liabilities for all claims incurred, whether or not
reported, on or before the Closing Date under all "employee welfare benefit
plans," within the meaning of Section 3(1) of ERISA, (ii) liabilities or
obligations for vacations or sick leave or retiree, medical or life benefits to
employees or former employees of AJAX other than in the ordinary course of
business, and (iii) liabilities of AJAX for all benefits accrued under any
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA
under each Employee Benefit Plan.
52
7.8 Cooperate with Capital Raising Efforts. Shareholder shall
reasonably cooperate in SAC's efforts to raise capital by assisting in the
preparation of a registration statement relating to the contemplated offering of
securities by SAC or SAC's Assignee, as the case may be, and, upon reasonable
request and adequate notice, meeting with the proposed underwriter of the
contemplated offering and SAC's or SAC's Assignee's proposed lenders, as the
case may be, but shall not be required to enter into any agreement with the
underwriter in connection with said registration.
7.9 Satisfaction of Conditions by Shareholder. The Shareholder
hereby covenants and agrees with SAC that, between the date of this Agreement
and the Closing Date or date of termination of this Agreement, as the case may
be, he shall use best efforts to assure that the conditions set forth in Article
10 hereof are satisfied by the Closing Date.
7.10 Redemption. (a) Notwithstanding the provisions of Article
2 or this Article 7, immediately prior to or contemporaneous with the Closing
Shareholder shall be permitted to cause Ajax to redeem from him such portion of
the Common Stock as to which SAC shall consent for an amount (the "Redemption
Amount") equal to $4 million. SAC's consent to the number of shares of Common
Stock shall not be unreasonably withheld or delayed. The Redemption Amount shall
be deducted from and reduce the Purchase Price payable for the shares of Common
Stock acquired by SAC.
53
(b) The Redemption Amount shall be paid by the delivery of a
three year promissory note of Ajax (the "Ajax Note") bearing interest at the
rate of 10% per annum in the form of Exhibit 7.10.1(a) provided that if the sum
of the Purchase Price and the Redemption Amount is less than $23,903,257, the
principal amount of the Ajax Note shall be reduced by the amount of such
deficiency and such portion of the Redemption Amount shall be paid to
Shareholder by wire transfer to accounts designated by Shareholder. The Ajax
Note shall be secured by a lien on substantially all of the assets of Ajax
pursuant to a Security Agreement (the "Security Agreement") substantially in the
form of Exhibit 7.10(b).
(c) Payment of the Ajax Note shall be guaranteed by SAC
pursuant to a Guaranty substantially in the form of Exhibit 7.10(c).
8. PRE-CLOSING COVENANTS OF SAC
8.1 Financing Efforts. SAC shall exercise its best efforts to
obtain such amounts, in the form of debt or equity, as may be necessary for SAC
to consummate the transaction contemplated hereby.
8.2 Timetable. SAC has provided Shareholder with a tentative
time schedule with respect to a contemplated public offering of its securities
to raise the equity necessary to consummate the transaction contemplated hereby.
Such timetable
54
assumes the filing of a registration statement with the Securities and Exchange
Commission on or about August 15, 1997, and SAC shall use its best efforts to
adhere to such schedule.
8.3 Counsel Fees. SAC shall reimburse Shareholder promptly
after submission of invoices to SAC for all reasonable legal fees and expenses
incurred in satisfying his obligation under Section 7.8, provided, the aggregate
amount of reimbursement for such fees and expense shall not exceed $20,000.
8.4 Advice of Changes. If SAC becomes aware of any fact or
facts which, if known at the date hereof, would have been required to be set
forth or disclosed in or pursuant to this Agreement, SAC shall promptly advise
Shareholder in writing thereof.
8.5 Conduct. Except as permitted or required hereby or as
Shareholder may otherwise consent in writing, SAC shall not enter into any
transaction or take any action which would result in any of the representations
and warranties of SAC contained in this Agreement not being true and correct as
of the time immediately after such transaction has been entered into or such
event has occurred and on the Closing Date.
8.6 Satisfaction of Conditions by SAC. SAC hereby covenants
and agrees with Shareholder that, between the date of this Agreement and the
Closing Date or date of termination of this
55
Agreement, as the case may be, SAC shall cause the conditions set forth in
Article 11 hereof to be satisfied by the Closing Date.
9. POST-CLOSING COVENANTS
9.1 Further Assurances. After the Closing hereunder, the
Shareholder, at the request of SAC, shall execute, acknowledge and deliver to
SAC, without further consideration, all such further assignments, conveyances,
endorsements, deeds, powers of attorney, consents and other documents (together
with the instruments referred to in Section 1.3, referred to herein collectively
as the "Ancillary Documents") and take such other action as SAC may reasonably
request (a) to transfer to and fully vest in SAC, and protect SAC's right, title
and interest in and to AJAX and to all of AJAX's right, title and interest in
and to the Assets, and (b) otherwise to consummate the transactions contemplated
by this Agreement.
9.2 Shareholder's Review of AJAX's Records. Until such time as
Shareholder is paid in full under the Note, Shareholder and/or his
representatives, upon reasonable prior notice to AJAX and SAC, shall be given
full access during regular business hours of AJAX to all financial and other
books and records of AJAX, provided, however, that such access and inspection
shall not be scheduled or conducted so as to interfere with the conduct of
AJAX'S business.
56
9.3 Subordination. Upon the request of SAC or Ajax,
Shareholder shall enter into a subordination agreement with one or more
commercial lenders (the "Lenders") whereby Shareholder shall subordinate its
right to receive payments of principal and interest under the Ajax Note to the
right of such Lenders to receive payments on the notes (the "Lender Notes")
evidencing Ajax's obligation to repay amounts borrowed from the Lenders,
provided the principal amount of the Lender Notes is $5 million or less;
further, Shareholder shall subordinate its liens under the Security Agreement
granted to secure repayment under the Ajax Note to any lien granted to the
Lenders to secure payment under the Lender Notes. Notwithstanding the foregoing,
Shareholder shall not be required in connection with any such subordination
agreement to refrain from taking any action ("standstill") to enforce its rights
under the Ajax Note and to foreclose upon its liens under the related Security
Agreement for more than 180 days after a default not cured by SAC or ▇▇▇▇.
▇▇. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SAC
The obligations of SAC pursuant to this Agreement are subject
to the satisfaction at the Closing of each of the following conditions, any or
all of which conditions may be waived by SAC in its sole discretion:
10.1 Accuracy of Representations and Warranties. All
representations and warranties made by the Shareholder (contained
57
in this Agreement, any Exhibit or Schedule hereto, or any certificate or
instrument delivered to SAC or its representatives by the Shareholder or their
representatives) shall be true on and as of the Closing Date with the same force
and effect as though made on and as of the Closing Date (i.e., with respect to
representations that a state of facts exists on or as of the date hereof, it is
a condition that such state of facts exists on or as of the Closing Date; and
with respect to a representation that a state of facts has or has not changed
between a date prior to the date hereof and the date hereof, it is a condition
that such state of facts has or has not changed between such prior date and the
Closing Date), except as affected by transactions, events and facts contemplated
hereby and specifically including all such transactions, events and facts that
occur and/or arise in the conduct of the Business in the ordinary course from
the date hereof through the Closing and such facts or circumstances as are
communicated in writing by Shareholder to SAC pursuant to Section
7.5.Shareholder acknowledges that if Shareholder discloses in writing any facts
or circumstances required to be disclosed in writing pursuant to Section 7.5,
SAC shall have the right not to close the transaction contemplated hereby and to
seek such other remedies as may be available, provided it may seek such other
remedies only if Shareholder knew as of the date hereof of such facts and
circumstances disclosed pursuant to Section 7.5; further, if SAC elects to
close, the rights and obligations of the parties with respect to such disclosed
facts and circumstances shall be as provided in Section 5.34.
58
10.2 Performance of Agreements. The Shareholder shall have
performed and complied in all material respects with all covenants, obligations
and agreements to be performed or complied with by him or before the Closing
Date pursuant to this Agreement.
10.3 Litigation, Etc.
10.3.1 Except as set forth on Exhibit 5.19, no claim, action,
suit, proceeding, arbitration, investigation or hearing or note of hearing shall
be pending or threatened against or affecting the Shareholder, the Common Stock,
AJAX or any of the Assets, which (a) might result either in an action to enjoin
or prevent the consummation of the transactions contemplated by this Agreement
or (b) would materially adversely affect the Business or the ability of SAC to
consummate the transactions contemplated by this Agreement or to own the Common
Stock or to operate the Business.
10.3.2 AJAX shall not be in violation of any law, statute,
ordinance, rule, regulation or executive order, the enforcement of which would,
individually or in the aggregate, materially adversely affect the Assets or the
Business; or which would individually or in the aggregate, materially adversely
affect the ability of SAC to consummate the transactions contemplated by this
Agreement or to own the Common Stock or to operate the Business.
59
10.3.3 No law, regulation or decree shall have been proposed,
adopted or promulgated, or become effective, the enforcement of which would
materially adversely affect the ability of SAC to consummate the transactions
contemplated by this Agreement or to own the Common Stock or to operate the
Business.
10.4 Approvals and Consents. AJAX shall have obtained, and SAC
shall have received copies of, all of the approvals and consents referred to in
Section 7.3, each of which approvals and consents shall be in full force and
effect and reasonably satisfactory in form and substance to SAC and its counsel.
10.5 Shareholder's Certificate. SAC shall have received an
accurate certificate of the Shareholder, dated the Closing Date, reasonably
satisfactory in form and substance to SAC and its counsel, certifying (a) as to
the fulfillment of the matters specified in Sections 10.1 through 10.3, and (b)
any changes that SAC is required to be notified of pursuant to Section 7.5, or
that previously had not been disclosed to SAC.
10.6 Good Standing Certificates. SAC shall have received a
certificate of the office of the Secretary of State of New Jersey, dated within
20 days before the Closing Date, certifying that the records of such state
regarding AJAX incorporated in such state reflect that said business has not
been dissolved, canceled, or withdrawn, nor has its charter/authority been
voided/revoked for non-payment of state taxes by proclamation; that it continues
to
60
maintain active status within the State of New Jersey and that at the time of
the issuance of said certificate no annual reports are outstanding.
10.7 No Material Adverse Change. There shall have been no
material adverse changes in the financial condition, Business, operations,
Assets, liabilities, management or prospects of AJAX.
10.8 Actions, Proceeding, Etc. All actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement shall have been completed.
10.9 Opinion of Counsel to Shareholder: SAC shall have
received an opinion of ▇▇▇▇▇▇▇▇▇▇, Keen & ▇▇▇▇▇▇▇, counsel to Shareholder,
addressed to SAC, dated the Closing Date, to the effect set forth in, and
substantially in the form, of Exhibit 10.9.
10.10 Licenses, Permits, Consents, Etc. SAC shall have
received evidence, in form and substance reasonably satisfactory to counsel for
SAC, that such licenses, permits, consents, approvals, authorizations or orders
of governmental authorities as are necessary to the consummation of the
transactions contemplated by this Agreement and the continued operation of the
Business have been obtained.
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10.11 Documentation of Rights. AJAX shall have delivered to
SAC true and complete copies of all of the documentation held by AJAX relating
to each of the Rights.
10.12 Lease Agreement. SAC shall have received the Lease
Agreement and the Option Agreement described in Exhibit 14.15 hereto duly
executed by the lessor named therein.
11. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder under this Agreement are
subject to the satisfaction at the Closing of each of the following conditions,
any or all of which conditions may be waived by Shareholder in his sole
discretion:
11.1 Accuracy of Representations and Warranties. All
representations and warranties by SAC in this Agreement shall be true as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
11.2 Performance of Agreements. SAC shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement, including without limitation the payment of the Purchase Price
as set forth in the first sentence of Section 3.2.
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11.3 No Injunction. No third party injunction, stay or
restraining order shall be in effect prohibiting the consummation of the
transactions contemplated hereby.
11.4 Opinion of Counsel to Buyer. The Shareholder shall have
received an opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ & Ballon LLP, counsel to
SAC, addressed to the Shareholder, dated as of the Closing Date, to the effect
set forth in, and substantially in the form, of Exhibit 11.4.
11.5 SAC's Certificate. Shareholder shall have received an
accurate certificate of SAC, dated the Closing Date, reasonably satisfactory in
form and substance to Shareholder and its counsel, certifying (a) as to the
fulfillment of the matters specified in Sections 11.1 through 11.3, and (b) any
changes that Shareholder is required to be notified of pursuant to Section 8.4,
or that previously had not been disclosed to Shareholder.
11.6 Good Standing Certificate. Shareholder shall have
received such certificate with respect to the existence of SAC or SAC's
Assignee, as the case may be, issued by the office of the Secretary of State of
the state of its organization, dated within 20 days before the Closing Date,
certifying that the records of such state regarding SAC or SAC's Assignee, as
the case may be, indicate that SAC or SAC's Assignee as the case may be, was
duly organized and is still existing and in good standing.
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11.7 Guarantees. SAC shall cause AJAX to pay at Closing in
satisfaction of obligations of AJAX existing as of the date hereof guaranteed by
Shareholder or ▇▇▇▇ ▇▇▇▇▇▇▇ (the "Guaranteed Obligations") such amounts as may
be necessary, not to exceed $100,000, to obtain for Shareholder and ▇▇▇▇ ▇▇▇▇▇▇▇
a release from the Guaranteed Obligations; further, SAC shall exercise best
efforts to obtain for Shareholder and ▇▇▇▇ ▇▇▇▇▇▇▇ a release from all Guaranteed
Obligations and, together with AJAX, shall indemnify Shareholder and ▇▇▇▇
▇▇▇▇▇▇▇ and hold him harmless from any obligation thereunder.
11.8 Agreements. AJAX, SAC or SAC's Assignee, as the
case may be, shall execute and deliver to the appropriate party:
i) The Consulting Agreement referred to in
Section 3.4(a);
ii) The Employment Agreement referred to in
Section 3.4(b);
iii) The Options referred to in Section 3.5;
iv) The Lease Agreement (and Option) referred to
in Section 14.15;
v) The Ajax Note;
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vi) The Security Agreement referred to in Section
7.10;
vii) The SAC Guaranty of the Ajax Note; and
viii) Such UCC-1's and other instruments as are
necessary to perfect Shareholder's lien under the Ajax Security Agreement.
11.9 Resolutions. Shareholder shall have received a certified
copy of resolutions of the Board of Directors of SAC and the Board of Directors
of SAC's Assignee, as the case may be, authorizing the execution, delivery and
performance of this Agreement and consummation of the transactions contemplated
hereby.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES:
INDEMNIFICATION
12.1 Survival. The representations and warranties set forth in
this Agreement, in any Exhibit or Schedule hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of
eighteen (18) months after the Closing Date and shall thereupon terminate and
expire and shall be of no force or effect thereafter, except (i) with respect to
any claim, written notice of which shall have been delivered to SAC, or the
Shareholder, as the case may be prior to the expiration of such eighteen (18)
months, such claim shall survive the termination of such period and shall
survive for as long as such claim is unsettled, provided Shareholder shall have
no liability for such
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claim if it shall remain unsettled and one of the SAC Indemnified Parties shall
not have commenced a litigation with respect thereto within 36 months of the
Closing Date and (ii) with respect to any litigation which shall have been
commenced to resolve such claim on or prior to such date. Notwithstanding the
foregoing, with respect to Taxes, the period shall be the applicable statute of
limitations, and with respect to trade payables and accounts receivable, the
period shall be one (1) year.
In addition to the foregoing limitation of indemnification,
SAC shall not be entitled to indemnification for any claim contending the
insufficiency of a payment of or reserve for federal or state tax liability
unless such claim is derived from SAC's or AJAX's payment of additional taxes,
penalties or interest made as a consequence of an audit by the appropriate
governmental authority not arising from communications (other than routine
communications in connection with its tax obligations) initiated by SAC, SAC's
Assignee (as the case may be) or AJAX.
12.1.1
12.2.1 Indemnification by the Shareholder. (a) The Shareholder
hereby covenants and agrees with SAC that, regardless of any investigation made
at any time by or on behalf of SAC or any information SAC may have and,
regardless of the Closing hereunder, provided that proper and timely notice is
given in accordance with Sections 12.1 and 12.4, the Shareholder shall indemnify
SAC and AJAX and their respective directors, officers, employees and Affiliates
and each of their successors and assigns (individually,
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a "SAC Indemnified Party"), and hold them harmless from, against and in respect
of any and all direct, actual and non-consequential costs, losses, claims,
liabilities, fines, penalties, damages and expenses (including interest which
may be imposed in connection therewith, court costs and reasonable fees and
disbursements of counsel; collectively "Losses") incurred by any of them
resulting from any misrepresentation, breach of warranty or nonfulfillment of
any agreement, covenant or obligation by the Shareholder made in this Agreement
(including without limitation any Exhibit hereto and any certificate or
instrument delivered in connection herewith).
(b) There shall be no obligation on the part of Shareholder to
indemnify or hold a SAC Indemnified Party harmless, except to the extent the sum
of all Losses (other than Losses relating to Taxes which are the subject of the
following paragraph) for which SAC Indemnified Parties seek to be indemnified
exceeds $250,000 (the "General Basket"), in which event Shareholder shall be
responsible for all Losses in excess of $250,000.
(c) There shall be no obligation on the part of Shareholder to
indemnify or hold a SAC Indemnified party harmless with respect to Losses
arising out of or related to Taxes ("Tax Losses") except to the extent that the
Tax Losses exceed $50,000 (the "Tax Basket"), in which event Shareholder shall
be responsible for all such Tax Losses without regard to the Tax Basket.
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(d) Neither the General Basket nor the Tax Basket shall be
applicable with respect to a breach of Sections 5.1, 5.2, 5.3 or 5.7(a) and (b)
and Shareholder's liability with respect to such sections shall be in effect
without any "Basket."
(e) In determining whether Shareholder has any obligation
under the foregoing subparagraphs (a) through (d), and, if so, the amount
thereof, there shall be deducted from any Loss or Tax Loss (i) the proceeds of
any insurance in respect of the incident giving rise to such Loss or Tax Loss
and (ii) the net cash effect of any tax benefit received by Ajax in respect of
any Loss or Tax Loss, offset by the cash effect of any tax burden resulting from
payments made by Shareholder pursuant to Section 12.
12.1.2
12.2.2 Limitation on Shareholder's Indemnification. (a)
Notwithstanding the foregoing, Shareholder's obligation to indemnify the SAC
Indemnified Parties shall not exceed the sum of $2,000,000 (the "Shareholder's
Cap"), except that the Shareholder's Cap shall not apply with respect to a
breach of Sections 5.1, 5.2, 5.6, 5.29 and 5.37 or any of them.
(b) Shareholder acknowledges that Ajax has received from the
New Jersey Department of Environmental Protection Notice of Civil Administrative
Penalty Assessment with respect to emissions from paint spray booths.
Notwithstanding the General Basket, Shareholder shall repay to SAC such portion
of the Purchase Price as is equal to the sum of all fines, penalties,
assessments and
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interest thereon, if any, paid by Ajax and arising out of or related to the use
by Ajax of the paint spray booths prior to the Closing, provided Shareholder's
liability under this paragraph and with respect to any Losses arising out of any
Environmental Conditions shall be capped at $250,000 (the "Environmental Cap").
Subject to the limits of the Environmental Cap, Shareholder shall indemnify the
Company and hold it harmless from and against the cost of any equipment Ajax
must purchase to satisfy any order or directive issued by the New Jersey
Department of Environmental Protection within six months of the Closing Date.
Amounts paid pursuant to this Paragraph will not count towards the Shareholder's
Cap.
12.2.3 Excise Taxes. Shareholder acknowledges that the
Internal Revenue Service ("IRS") has delivered to Ajax notice of a proposed
adjustment of Ajax's excise tax liability for calendar years 1995 and 1996,
together with penalties and interest, in the amount of $1,721,918 (the "Excise
Claim"). Notwithstanding Section 12.2.1(b) and 12.2.2(a) hereof, Shareholder
shall re-pay to SAC such portion of the Purchase Price as is equal to any
liability of Ajax arising out of the Excise Claim, reduced by the net cash
effect of any federal and/or state tax benefit received by Ajax upon payment of
such liability, offset by any federal and/or state tax burdens that may result
from payments made by Shareholder pursuant to this Section 12.2.3.
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To secure Shareholder's obligation under this Section 12.2.3,
a portion of the Purchase Price in an amount equal to the Excise Claim shall be
deposited in escrow with counsel designated by SAC (the "Escrow Agent") to be
held and paid over in accordance with the terms of an Escrow Agreement among
SAC, Shareholder, Ajax and the Escrow Agent substantially in the form annexed
hereto as Exhibit 12.2.3.
Subject to the consent of Ajax, not to be unreasonably
withheld or delayed, Shareholder, at his cost, shall be permitted to select
counsel and a firm of accountants to contest the Excise Claim; provided Ajax
shall have the right, at its cost, to have its counsel participate in such
defense and the Excise Claim shall not be settled in a manner which unreasonably
impacts upon the future liability of Ajax for excise taxes. SAC hereby confirms
that the law firm of ▇▇▇▇▇▇▇▇▇▇, Keen & ▇▇▇▇▇▇▇ is reasonably acceptable to
contest the Excise Claim.
Shareholder's right to direct the defense of the Excise Claim
shall continue only for so long as such defense does not subject Ajax to
liability in excess of the amount held in escrow, after taking into
consideration the fact that the amount to be paid by Shareholder in respect of
the Excise Claim shall be reduced by the net cash effect of any federal and/or
state tax benefit received by Ajax upon payment of the Excise Claim, offset by
any federal and/or state tax burdens that may result from payments made by
Shareholders pursuant to this Section 12.2.3.
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Amounts paid pursuant to this Section 12.2.3. will not count
towards the Shareholder's Cap.
12.2.4 Industrial Site Recovery Act. SAC hereby acknowledges
and agrees that Shareholder shall cause Ajax, or at Shareholder's request, SAC,
to join in the execution and delivery to the New Jersey Department of
Environmental Protection of a Remediation Agreement or similar arrangement which
shall acknowledge and confirm that the obligations of the parties under the New
Jersey Industrial Site Recovery Act ("ISRA") with respect to the leased premises
described in the Lease shall survive the Closing. SAC further acknowledges and
confirms that it will indemnify Shareholder and hold him harmless from and
against any liability incurred by him under ISRA to the extent that such
liability, together with any liability, which Shareholder may incur under
Section 5.28 and 12.2.2(b), shall exceed $250,000. This indemnity in favor of
Shareholder shall survive the Closing until the expiration of any applicable
statute of limitation.
12.2 Indemnification by SAC. Subject to the limitations set
forth in Section 12.1, SAC hereby covenants and agrees with the Shareholder that
SAC shall indemnify the Shareholder and his heirs, successors and assigns (each,
a "Shareholder Indemnified Party") and hold them harmless from, against and in
respect of any and all costs, losses, claims, liabilities, fines, penalties,
damages and expenses (including interest which may be imposed in connection
therewith and court costs and reasonable fees and disbursements of counsel)
incurred by any of them resulting from any misrepresentation, breach of warranty
or the nonfulfillment of any
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agreement, covenant or obligation by SAC made in this Agreement (including
without limitation any Exhibit hereto and any certificate or instrument
delivered in connection herewith).
12.3 Right to Defend. Except as provided above with respect to
the Excise Liability, if the facts giving rise to any such indemnification shall
involve any actual claim or demand by any third party against a SAC Indemnified
Party or a Shareholder Indemnified Party (referred to hereinafter as an
"Indemnified Party"), the indemnifying parties shall be entitled to prompt
notice of and entitled (without prejudice to the right of any Indemnified Party
to participate at its own expense through counsel of its own choosing) to defend
or prosecute such claim at their expense and through counsel of their own
choosing if they give written notice of their intention to do so no later than
the time by which the interest of the Indemnified Party would be materially
prejudiced as a result of its failure to have received such notice for purposes
hereof, the Indemnified Party will not be considered materially prejudiced if
any notice or demand or claim received by an Indemnified Party is not promptly
delivered to the indemnifying party; provided, however, that if the defendants
in any action shall include both the indemnifying parties and an Indemnified
Party, and the Indemnified Party shall have reasonably concluded that counsel
selected by the indemnifying parties has a conflict of interest because of the
availability of different or additional defenses to the Indemnified Party than
those available to the Indemnified Party, the Indemnified Party shall cooperate
fully in
72
the defense of such claim and shall make available to the indemnifying parties
pertinent information under its control relating thereto, but shall be entitled
to be reimbursed, as provided in this Article 12, for all reasonable costs and
expense of said defense by separate counsel incurred by it in connection
therewith.
12.4 Subrogation. If the Indemnified Party receives payment or
other indemnification from the indemnifying party hereunder, the indemnifying
party shall be subrogated to the extent of such payment or indemnification to
all rights in respect of the subject matter of such claim to which the
Indemnified Party may be entitled, to institute appropriate action for the
recovery thereof, and the Indemnified Party agrees reasonably to assist and
cooperate with the indemnifying party at no expense to the Indemnified Party in
enforcing such rights.
13. TERMINATION OF AGREEMENT.
13.1 Mutual Consent of the Parties. This Agreement may be
terminated and the transaction contemplated hereby may be abandoned at any time,
by the mutual consent of the parties. In the event of the termination of this
Agreement, pursuant to this Section 13.1, no party shall have any liability
hereunder, including any liability for damages. In the event that a condition
precedent to a party's obligation is not met, nothing contained herein shall be
deemed to require any party to terminate this
73
Agreement rather than to waive such condition precedent and proceed with the
Closing.
13.2 Failure of SAC to obtain Financing. (a) SAC has advised
Shareholder that SAC or SAC's Assignee, as the case may be, intends to conduct a
public offering ("IPO") of its securities to obtain a portion of the monies
necessary to consummate the transaction contemplated hereby. Shareholder shall
have the right to terminate this Agreement by written notice during the period
from August 15, 1997 through August 30, 1997, if SAC or SAC's Assignee, as the
case may be, has not filed a registration statement (the "Registration
Statement") with the Securities & Exchange Commission ("SEC") with respect to
the IPO prior to August 15, 1997, provided Shareholder shall not have the right
to terminate this Agreement pursuant to this sentence if prior to August 15,
1997, SAC (i) pays to Shareholder the sum of $50,000 or (ii) enters into a
bona-fide written commitment (the "Commitment") with an arms' length party which
agrees to provide the equity financing necessary to consummate the transaction
contemplated hereby (the "Private Financing"). Notwithstanding the payment of
the aforesaid $50,000, if SAC has not obtained the Commitment or filed the
Registration Statement prior to August 30, 1997, Shareholder shall have the
right to terminate this Agreement pursuant to written notice to SAC, provided
that the right granted in this sentence shall expire if the Registration
Statement shall be filed or SAC shall obtain the Commitment prior to receipt of
notice of termination.
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(b) Shareholder shall have the right to terminate this Agreement at any
time after November 15, 1997, if the transaction contemplated hereby has not
been closed by that time.
(c) If SAC shall pay to Shareholder the $50,000 referred to in
subsection (a), such amount shall be credited towards the Purchase Price.
13.3 Break-up Fee. If Shareholder shall terminate this
Agreement as a result of a breach by SAC of its material obligations hereunder
or as a result of SAC's inability to consummate the transaction contemplated
hereby as a result of its inability to obtain the necessary financing, SAC shall
pay to Shareholder a break-up fee of $75,000; provided SAC shall not be
obligated to pay such break-up fee if its inability to raise its financing
results, directly or indirectly, from (i) the discovery of facts or information
regarding the Shareholder, AJAX or its Business which are materially different
from the information provided by Shareholder to date and which reflects
materially adversely upon the Shareholder or the Business; (ii) the failure of
Shareholder to comply in all material respects with the covenant contained in
Section 7.8; or (iii) a breach of a material representation or warranty of
Shareholder contained herein.
14. MISCELLANEOUS
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14.1 Expenses. Except as and to the extent otherwise provided
in this Agreement, whether or not the transactions contemplated by this
Agreement are consummated, the Shareholder and SAC shall each pay their own
respective expenses and the fees and expenses of their respective counsel and
other experts, it being acknowledged that the fees and expenses of BDO and such
other firms of accountants as SAC may engage in connection with the transaction
contemplated hereby shall be borne by SAC, unless otherwise provided herein.
14.2 Waivers. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representation, warranty, covenant or agreement contained herein or in any other
documents. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach. Any party hereto may, at or before the Closing, waive any conditions to
its obligations hereunder which are not fulfilled.
14.3 Binding Effect: Benefits. This Agreement shall inure to
the benefit of the parties hereto and shall be binding upon the parties hereto
and their respective heirs, successors and permitted assigns. Except as
otherwise set forth herein, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors
76
and assigns any rights, remedies, obligations, or liabilities under or by reason
of this Agreement.
14.4 Assignment. Without limitation, and without the consent,
prior, written or otherwise, of AJAX, this Agreement and all of the rights and
obligations hereunder may be assigned by SAC to any entity owned or controlled
by, or affiliated with it; provided that such assignment shall not relieve SAC
of any of its obligations hereunder, and provided further that SAC's assignee
shall assume all of SAC's obligations hereunder.
14.5 Notices. All notices, requests, demands and other
communications which are required to be or may be given under this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
in person or upon receipt when transmitted by facsimile or telex or after
dispatch by certified or registered first class mail, postage prepaid, return
receipt requested, to the party to whom the same is so given or made:
If to SAC, to:
Standard Automotive Corporation
▇/▇ ▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ & Ballon LLP ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Att: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
77
If to the Shareholder, to:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇▇▇, Keen & ▇▇▇▇▇▇▇
Radnor Court
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATT: ▇▇▇▇ ▇▇▇▇▇, Esq.
14.6 Entire Agreement. This Agreement (including the Exhibits
hereto) constitute the entire agreement and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof and supersede all prior agreements, representations,
warranties, statements, promises and understandings, whether written or oral,
with respect to the subject matter hereof. No party hereto shall be bound by or
charged with any written or oral arguments, representations, warranties,
statements, promises or understandings not specifically set forth in this
Agreement or in any Exhibit hereto or in certificates and instruments to be
delivered pursuant hereto on or before the Closing.
14.7 Headings; Certain Terms. The section and other headings
contained in this Agreement are for reference purposes only and shall not be
deemed to be a part of this Agreement or to affect the meaning or interpretation
of this Agreement. As used in this Agreement, the term "including" means
"including, but not limited to" unless otherwise specified; the word "or" means
78
"and/or," and the word "person" means and refers to any individual, corporation,
trust, partnership, joint venture, government or governmental authority, or any
other entity; and the plural and singular forms are used interchangeably.
14.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which when executed, shall be deemed to be an
original and all of which together shall be deemed to be one and the same
instrument.
14.9 Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New Jersey, without giving effect to
the choice of law principles thereof
14.10 Severability. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this Agreement
shall not be affected thereby, and each term and provision of the agreement
shall be valid and enforced to the fullest extent permitted by law.
14.11 Amendments. This Agreement may not be modified or
changed except by an instrument or instruments in writing signed by the party or
parties against whom enforcement of any such modification or amendment is
sought.
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14.12 Transaction Taxes. The Shareholder shall pay any and all
taxes imposed upon the sale of the Common Stock and transfer of ownership
thereof.
14.13 Section References. All references contained in this
Agreement to any section number are references to sections of this Agreement
unless otherwise specifically stated.
14.14 Brokers and Finders. (a) Shareholder represents and
warrants that it has dealt with no brokers, finders or investment bankers in
connection with this Agreement other than the ▇▇▇▇▇▇▇▇▇ Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇. Shareholder shall pay at the
Closing all fees due Gottesman and upon receipt of the Purchase Price $500,000
of such amounts as may be due ▇▇. ▇▇▇▇▇▇▇. Shareholder shall indemnify AJAX, SAC
and their successors and assigns and hold them harmless from a claim by any
party that it is due a commission, finder's or similar fee as a result of
actions taken by Shareholder.
(b) SAC represents and warrants that it has dealt with no
broker, finder or investment banker in connection with this transaction other
than ▇▇▇▇▇▇▇▇▇ and Harrier and that the amount which will be due Harrier upon
consummation of this transaction is $500,000. SAC shall indemnify Shareholder,
his successors and assigns and hold them harmless from (i) a claim by any party
(other than ▇▇▇▇▇▇▇▇▇ and Harrier) that it is due a commission, finder's
80
or similar fee as a result of actions taken by SAC and (ii) a claim by Harrier
that he is due an amount in excess of $500,000.
14.15 Lease and Option to Purchase. Set forth on Exhibit 14.15
is a copy of a lease for the premises known as ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and the surrounding twenty-two acres (collectively, the
"Premises"). The aforesaid lease shall be executed on or before the Closing Date
and shall contain a provision which grants the lessee named therein an option to
purchase the Premises.
14.16 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective heirs, successors, personal representatives and permitted assigns,
nor is anything in this Agreement intended to relieve or discharge the
obligations or liability of any third persons to any party to this Agreement,
nor is anything in this Agreement intended to impose any liability or obligation
on any third party, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement, or have caused this Agreement to be signed in their respective names
by an officer thereunder duly authorized, as of the date first above written.
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________________________________
▇▇▇▇ ▇▇▇▇▇▇▇
STANDARD AUTOMOTIVE CORPORATION
By:_____________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, __________
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