ASSET PURCHASE AGREEMENT
By and Among
▇▇▇▇▇▇▇ Capital Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, for himself
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, for the benefit of his
minor child, ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
And
NN Ball & Roller, Inc.
Dated as of
July 4, 1999
TABLE OF CONTENTS
I. Definitions..........................................................1
II. Purchase and Sale of Assets..........................................4
2.01 SALE OF ASSETS..............................................4
2.02 LIABILITIES.................................................5
2.03 PURCHASE PRICE..............................................5
2.04 PAYMENT OF PURCHASE PRICE...................................5
2.05 ALLOCATION OF PURCHASE PRICE................................6
2.06 LIMITATIONS.................................................6
III. Representations and Warranties of Seller and Shareholders............6
3.01 ORGANIZATION................................................6
3.02 AUTHORIZATION...............................................7
3.03 LITIGATION; COMPLIANCE WITH LAW.............................7
3.04 FINANCIAL STATEMENTS AND CONDITION, LIABILITIES.............7
3.05 ASSETS, CONSENTS............................................8
3.06 CONDITION OF TANGIBLE ASSETS...............................10
3.07 INTELLECTUAL PROPERTY LICENSES.............................10
3.08 LICENSES ..................................................10
3.09 REPORTS AND RECORDS........................................10
3.10 CONTRACTS..................................................10
3.11 CONFLICTS..................................................11
3.12 TAX MATTERS................................................11
3.13 EMPLOYEE BENEFIT PLANS.....................................12
3.14 ENVIRONMENTAL MATTERS......................................13
3.15 LABOR RELATIONS............................................15
3.16 INSURANCE..................................................15
3.17 YEAR 2000 ISSUES...........................................15
3.18 CUSTOMER RELATIONSHIPS.....................................16
3.19 ABSENCE OF CERTAIN CHANGES.................................16
3.20 INVESTMENT REPRESENTATIONS.................................16
3.21 PRODUCT DEFECTS............................................17
3.22 DISCLOSURE.................................................17
IV. Representations and Warranties by Buyer and Parent..................17
4.01 ORGANIZATION...............................................17
4.02 AUTHORIZATION..............................................17
4.03 ISSUANCE OF SHARES.........................................18
4.04 DISCLOSURE.................................................18
4.05 LITIGATION.................................................18
4.06 CONFLICTS..................................................18
4.07 CAPITALIZATION.............................................18
4.08 EXCHANGE ACT REPORTS.......................................18
4.09 FINANCIAL STATEMENTS.......................................19
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4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................19
4.11 REPORTING COMPANY; FORM S-3................................20
4.12 TRADING ON NASDAQ..........................................20
V. Covenants and Agreements of Seller..................................20
5.01 NEGATIVE COVENANTS.........................................20
5.02 AFFIRMATIVE COVENANTS......................................21
5.03 CONFIDENTIALITY............................................23
5.04 EMPLOYEE RESTRICTIONS......................................23
5.05 DISCLOSURE.................................................23
5.06 SURVEY AND TITLE REPORT....................................23
5.07 INTENTIONALLY OMITTED......................................24
5.08 COVENANT NOT TO COMPETE....................................24
5.09 COOPERATION................................................24
VI. Covenants and Agreements of Buyer...................................25
6.01 CORPORATE ACTION...........................................25
6.02 EMPLOYEE ISSUES............................................25
6.03 SELLER'S NAME..............................................26
6.04 CONFIDENTIALITY............................................26
6.05 INTENTIONALLY OMITTED......................................26
6.06 COOPERATION................................................26
6.07 EXCHANGE ACT REPORTS AND RULE 144..........................26
6.08 REGISTRATION RIGHTS........................................26
6.09 BOOKS AND RECORDS..........................................26
VII. Conditions Precedent to Buyer's Obligation to Close.................27
7.01 REPRESENTATIONS AND COVENANTS..............................27
7.02 CONSENTS ..................................................27
7.03 DELIVERY OF DOCUMENTS......................................27
7.04 LEGAL PROCEEDINGS..........................................27
7.05 INTENTIONALLY OMITTED......................................27
7.06 ▇▇▇▇ OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT.......28
7.07 ABSENCE OF MATERIAL CHANGE.................................28
VIII. Conditions Precedent to Seller's Obligation to Close................28
8.01 REPRESENTATIONS AND COVENANTS..............................28
8.02 DELIVERY BY BUYER..........................................28
8.03 LEGAL PROCEEDINGS..........................................28
IX. The Closing.........................................................28
9.01 CLOSING ..................................................28
9.02 DELIVERY BY SELLER.........................................29
9.03 DELIVERY BY BUYER..........................................30
X. Post-Closing Adjustment.............................................31
10.01 CLOSING BALANCE SHEET......................................31
10.02 INCREASE OR DECREASE IN NET ASSETS.........................31
10.03 BUYER REVIEW OF POST-CLOSING ADJUSTMENT....................32
XI. Risk of Loss........................................................32
XII Survival; Indemnification...........................................32
12.01 SURVIVAL OF SELLER'S AND SHAREHOLDER'S REPRESENTATIONS.....32
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12.02 INDEMNIFICATION BY SELLER AND SHAREHOLDERS.................33
12.03 SURVIVAL OF BUYER'S AND PARENT'S REPRESENTATIONS...........33
12.04 INDEMNIFICATION BY BUYER AND PARENT........................33
12.05 CONDITIONS OF INDEMNIFICATION FOR THIRD PARTY CLAIMS.......34
12.07 DUTY TO MITIGATE...........................................35
12.08 ACCOUNTS RECEIVABLE........................................35
XIII. Termination.........................................................35
XIV. Additional Actions and Documents; Amendments to Schedules...........36
XV. Brokers.............................................................36
XVI. Expenses............................................................36
XVII. Notices.............................................................36
XVIII. Waiver .............................................................38
XIX. Benefit and Assignment..............................................38
XX. [Intentionally Omitted].............................................38
XXI. Entire Agreement; Amendment.........................................38
XXII. Severability........................................................39
XXIII. Headings ...........................................................39
XXIV. Governing Law ......................................................39
XXV. Signature in Counterparts...........................................39
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LIST OF SCHEDULES:
Schedule l(a) Property
Schedule l(b) Leases of Property and Improvements
Schedule 1(d) Fixtures and Personal Property
Schedule 1(e) Inventory and Supplies
Schedule l(f) Licenses
Schedule 1(h) Contracts
Schedule l(i) Deposits and Prepaid Expenses
Schedule l(j) Vehicles
Schedule 1(l) Computer Software and Customer Information
Schedule 1(x) Permitted Encumbrances
Schedule 2.01 Excluded Assets
Schedule 2.02 Current Liabilities
Schedule 2.05 Purchase Price Allocation
Schedule 3.03 Litigation, Orders, Judgments and Decrees
Schedule 3.04(a) Financial Statements
Schedule 3.05(e) Agreements Requiring Consent
Schedule 3.07 Intellectual Property
Schedule 3.11 Conflicts With Agreements and Laws
Schedule 3.12 Tax Audits
Schedule 3.13(a) Pension Plans, Welfare Plans and Other Plans
Schedule 3.14(c) Environmental Matters
Schedule 3.14(c)(i. Underground Storage Tanks or Piping
Schedule 3.14(c)(v) Environmental Permits and Licenses
Schedule 3.15 Labor Relations
Schedule 3.16 Insurance
Schedule 3.18 Customer Relationships
Schedule 4.07(b) Buyer Capitalization
Schedule 5.02(b)(vi)(A) Capital Expenditure Commitments at Execution
Schedule 5.02(b)(vi)(B) Capital Expenditure Commitments between
Execution and Closing
Schedule 6.02 Continued Seller Employee Benefit Plans
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LIST OF EXHIBITS:
Exhibit A Seller's December 31, 1998 Adjusted Balance Sheet
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of this
4th day of July, 1999, by and among ▇▇▇▇▇▇▇ CAPITAL CORPORATION, a Nevada
corporation successor to and formerly known as Industrial Molding Corporation, a
Texas corporation (the "Seller"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, for himself, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, for the benefit of his minor child, ▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ (collectively the "Shareholders"), NN BALL & ROLLER, INC., a Delaware
corporation (the "Buyer").
RECITALS:
WHEREAS, Seller and INDUSTRIAL MOLDING GP, LLC, a Delaware limited
liability company (the "LLC") own and operate a full-service design and
manufacturing business focusing on custom plastic injection molded products for
the automotive, electronic, industrial, Christmas consumer and leisure markets
such as (i) bearing retainers for ball and roller bearing assemblies; (ii)
automotive seals; (iii) various plastic components for automotive systems; (iv)
instrument cases for sonar fishing devices; and (v) precision connectors and
lenses used for fiber optics in the electronic industry (such business as
currently conducted by Seller and LLC is referred to herein as the "Business"),
it being understood that the Business of ▇▇▇▇ Products (as defined herein),
shall be deemed not included in the Business; and
WHEREAS, Seller desires to sell, assign or transfer to Buyer, and Buyer
desires to purchase or acquire from Seller, all of the assets, except for the
Excluded Assets, used in connection with the Business and to assume certain
liabilities incurred in connection with the Business.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
ARTICLE I
Definitions
As used herein, the following terms shall have the meanings set forth
below, unless the context otherwise requires:
"Accounts Receivable" means all accounts receivable owing to Seller with
respect to the Assets or to the Business, whether under a contract or otherwise,
which are outstanding as of the end of the business day immediately preceding
the Closing Date.
"Affiliate" shall, for the purpose of Section 3.13, have the meaning set
forth in Section 3.13(a), and for all other purposes mean with respect to any
Person, any (i) officer, director, or holder of more than 10% of the outstanding
shares or equity interests of such Person or any spouse, relative by birth,
adoption or marriage of any such Person and (ii) any other Person which directly
or indirectly controls, is controlled by, or is under common control with such
Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of the
"controlled" Person, whether through ownership of voting securities, by
contract, or otherwise. "Affiliate" shall not include ▇▇▇▇.
"Assets" means all Seller's right, title, and interest in all real,
personal and mixed assets, both tangible and intangible, wherever located in the
world, including all membership interests in the LLC, that are owned or held by
Seller and that are held or used in connection with, or which otherwise
comprise, the Business, except for the Excluded Assets. Subject to the
provisions of Section 5, without limiting the foregoing, the Assets shall
include all such assets existing on the date of this Agreement and all such
assets acquired between that date and the Closing Date, and shall include,
without limitation, all of Seller's right, title and interest in and to the
following:
(a) The real property (the "Property") and all buildings, structures,
fixtures and other improvements located thereon or that are actually or
constructively attached thereto, and all modifications, additions, restorations
or replacements of the whole or any part thereof (the "Improvements"),
including, without limitation, the Property and Improvements set forth and
described in Schedule l(a);
(b) As lessor or as lessee (whether named as such therein or by assignment
or otherwise) in all leases and subleases, if any, of the Property and the
Improvements, including, without limitation, those described in Schedule 1(b),
and any and all amendments, modifications, supplements, renewals and extensions
thereof, together with all rents, royalties, security deposits, revenues,
issues, earnings, profits, income and other benefits due with respect to the
Property or the Improvements or any part thereof;
(c) All streets, roads and public places, opened or proposed, and all
easements and rights of way, public and private, tenements, hereditaments,
rights and appurtenances used in connection with, or belonging, incident or
appertaining to, the Property or the Improvements;
(d) All of the machinery, equipment, tooling (other than tooling owned by
customers), dies, fixtures, furnishings, and other property that are used or
useful in connection with, or which otherwise comprise, the Business, including,
without limitation, those set forth and described in Schedule 1(d);
(e) All of the inventory, raw materials, work in process, finished goods,
and supplies, including, without limitation, those set forth and described on
Schedule 1(e);
(f) All of the licenses, permits, approvals, qualifications and other
authorizations which have been issued by any regulatory body, or applications
therefor which are pending before such regulatory body, that are used in
connection with, or which otherwise comprise, the Business ("Licenses"),
including without limitation those Licenses set forth in Schedule 1(f);
(g) All of the patents, service marks, copyrights, franchises, licenses
(other than the Licenses), trademarks, trade names, logos and designs maintained
(including any and all applications, registrations, extensions and renewals
relating thereto), which are used in connection with, or which otherwise
comprise, the Business, including, without limitation, all of the rights and
interest in the name "Industrial Molding Corporation" and "IMC" (the
"Intellectual Property"), and all of the rights associated therewith including,
without limitation, those set forth and described in Schedule 3.07;
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(h) All of the contracts, agreements (written or verbal), leases of real
and personal property and other tangible and intangible assets used in
connection with, or which otherwise comprise, the Business, including, without
limitation, those contracts, agreements and leases set forth and described in
Schedule 1(h);
(i) All deposits, prepaid expenses, and Accounts Receivable, including,
without limitation, those set forth and described in Schedule 1(i);
(j) All automotive equipment and motor vehicles used in connection with the
Business, including, without limitation, those set forth and described in
Schedule 1(j);
(k) All engineering, business, financial and other books, papers, files and
records pertaining to the Business;
(l) All computer software (including object code and source code), trade
secrets, customer lists, supplier lists, customer account information and all
logs and business records used in the ordinary course of business, relating to
the Assets and the Business, including without limitation, those described in
Schedule 1(l);
(m) All other rights and property interests of any nature which relate to
or are primarily used or held for use in connection with the Business; and
(n) All of Seller's interest in plans, specifications, licenses,
certificates of occupancy, and warranties now in effect with respect to the
Property and the Improvements.
Notwithstanding the foregoing or anything to the contrary contained in this
Agreement, the Assets shall not include any asset or other property of ▇▇▇▇
Products.
"Business of ▇▇▇▇ Products" means the development for and sale of products
into retail markets with a current focus on injection molded plastic products
for the Christmas market.
"Buyer Indemnitees" means Buyer, and its respective officers, directors,
shareholders, partners, employees, representatives and Affiliates, and each of
such persons' and Affiliates' officers, directors, shareholders, partners,
employees, representatives and Affiliates.
"Claim" means any claim for which any Person is entitled to
indemnification, recompense, damages or other legal or equitable relief, whether
or not such claim has been made in writing and whether or not made with, by or
before any Governmental Authority.
"Closing" means the closing of the sale of the Assets contemplated
hereunder.
"COBRA" shall mean the group health plan continuation coverage requirements
of Section 4980B of the Code and Title I, Part 6 of the Employee Retirement
Income Security Act of 1974, as amended.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
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"Encumbrance" means any mortgage, pledge, lien, claim, security interest,
agreement, restriction, defect in title, easement, encumbrance or charge, other
than a Permitted Encumbrance.
"Escrow Agreement" shall mean the Escrow Agreement to be dated as of the
Effective Time between Buyer, Seller, and Escrow Agent.
"▇▇▇▇ Products" shall mean ▇▇▇▇ Products Group, Inc., a Texas corporation
and a wholly owned subsidiary of Seller.
"Governmental Authority" means the United States, any state or
municipality, the government of any foreign country, any subdivision of any of
the foregoing, or any authority, department, commission, board, bureau, agency,
court, arbitration, instrumentality, or other body or any of the foregoing.
"Interim Balance Sheet" shall mean Seller's unaudited balance sheet as of
June 5, 1999, which shows the financial condition of Seller exclusive of ▇▇▇▇
Products.
"Knowledge of Seller" (or words of similar import) refers to all those
things which are the subject of actual knowledge of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, L. ▇▇▇▇▇ ▇▇▇▇▇▇, Jr., ▇▇▇▇▇ ▇. York, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, and
▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
"Permitted Encumbrances: means any (i) materialman's, mechanic's,
carriers', workers', repairmen's, and other similar liens arising or incurred in
the ordinary course of business, (ii) statutory liens with respect to which the
underlying obligations are not in default, and (iii) each other Encumbrance
identified as a "Permitted Encumbrance" in Schedule 1(x).
"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, trust,
unincorporated organization, or Governmental Authority.
"Seller Indemnitees" means Seller, and its officers, directors,
shareholders, partners, employees, representatives and Affiliates, and each of
such persons' and Affiliates' officers, directors, shareholders, partners,
employees, representatives and Affiliates.
"Seller's December 31, 1998 Adjusted Balance Sheet" shall mean the balance
sheet attached hereto as Exhibit A.
Additional terms have been defined throughout this Agreement and shall have
the meaning set forth herein. All references to clauses, Sections, Exhibits and
Schedules are references to clauses and Sections of and Exhibits and Schedules
to this Agreement.
ARTICLE II
Purchase and Sale of Assets
Section 2.01 Sale of Assets. On the basis of the representations,
warranties and agreements contained herein and subject to the terms and
conditions hereof, Seller shall, at the Effective Time, sell, transfer, convey,
assign and deliver to Buyer all of the Assets, free and clear
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of any Encumbrances. Seller shall retain and not transfer to Buyer the assets
set forth on Schedule 2.01 (the "Excluded Assets").
Section 2.02 Liabilities. At the Effective Time and subject to
Seller's and Shareholders' indemnification obligations under Article 12 hereof
for breach of representations and warranties and noncompliance with covenants
under this Agreement, Buyer shall assume and become responsible for all
liabilities of or relating to the Business incurred before or after the
Effective Time in the ordinary course of business, other than interest bearing
bank debt, including but not limited to the types of liabilities and obligations
included in the categories of current liabilities (including liability for
accrued vacation pay) set forth on Schedule 2.02; and the liabilities and
obligations of Seller to be performed after the Effective Time under the
contracts, agreements and leases assigned to Buyer under this Agreement
(collectively, the "Assumed Liabilities").
Notwithstanding anything to the contrary contained in this Agreement,
Buyer shall not assume or be deemed to assume or become responsible for any
debts, liabilities or obligations of Seller except as specified in Section 2.02,
and except for any costs or expenses of any description arising from the
transactions contemplated herein assumed by Buyer pursuant to the terms of this
Agreement.
Section 2.03 Purchase Price. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Assets to Buyer, Buyer agrees to pay
to Seller, and Seller agrees to accept from Buyer, a purchase price (the
"Purchase Price") equal to Twenty-Six Million Dollars ($26,000,000), as adjusted
by the net amount of the adjustments provided in Article 10, and Buyer agrees to
assume the Assumed Liabilities as provided in Section 2.02. The Purchase Price
shall be payable as described in Section 2.04.
Section 2.04 Payment of Purchase Price. Subject to the adjustments
described in Article 10, Buyer shall deliver the Purchase Price as follows:
2.04(a) At Closing, Buyer shall deliver to First American
National Bank (the "Escrow Agent") the sum of One Million Five Hundred Thousand
Dollars ($1,500,000) (the "Escrow Amount") to be held pursuant to the Escrow
Agreement to be applied to satisfy any Claims of Buyer against Seller or the
Shareholders under this Agreement. The Escrow Amount, less any amounts to be
paid to Buyer pursuant to the terms of the Escrow Agreement, shall be
distributed to the Seller by Escrow Agent, in accordance with the terms and
conditions of the Escrow Agreement, and paid to Seller upon the Buyer's release
to the public of its financial statements for the year ended December 31, 1999.
2.04(b) At Closing, Buyer shall pay to Seller the amount of
Twenty-Two Million Dollars ($22,000,000) in immediately available funds.
2.04(c) At Closing, Buyer shall pay to Seller the amount of Two
Million Five Hundred Thousand Dollars ($2,500,000) by the transfer and delivery
of 440,038 shares (the "Shares") of the Common Stock of Buyer such number of
shares having been determined based on the average closing price of the Common
Stock of Parent as quoted on NASDAQ for the twenty (20) consecutive trading days
prior to and concluding three (3) trading days prior to the
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Effective Time (the "Share Price"). No fractional shares will be issued but will
be converted into cash using such average closing price.
2.04(d) Not later than forty-five days after the Closing, Buyer
shall pay to Seller an amount equal to the sum of (i) all survey fees, title
insurance premiums or commitment fees and appraisal fees paid by Seller, if any,
on behalf of Buyer under this Agreement, and (ii) all costs incurred by Seller
to achieve the reorganization of Seller or the Business within sixty (60) days
prior to Closing up to a maximum amount of Fifteen Thousand and 00/100 Dollars
($15,000.00). Provided, however, in no case shall Buyer pay or be liable for any
taxes incurred as a result of such reorganization.
2.04(e) Not later than the time or times specified in Section
10.02 and 10.03, Buyer shall pay to Seller, or Seller shall pay to Buyer, as the
case may be, the Post-Closing Adjustment specified in Article 10, if any.
Section 2.05 Allocation of Purchase Price. Buyer and Seller mutually
agree to allocate the Purchase Price in the amounts and according to the
categories set forth in an allocation schedule to be calculated by Seller as of
the Effective Time and provided to Buyer within 30 days thereafter. The
allocation to the membership interests in the LLC shall be based on the
aggregate value of the assets of the LLC, and the value of such assets shall be
calculated using the same basis and methodology used to prepare the allocation
attached as Schedule 2.05. Such Allocation shall be binding on Buyer and Seller
for all purposes including the reporting of gain or loss and determination of
basis for income tax purposes, and each of the parties hereto agrees that it or
they will file a statement setting forth such allocation with its or their
federal income tax returns and will also file such further information or take
such further actions as may be necessary to comply with the Treasury Regulations
that have been promulgated pursuant to Section 1060 of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
As an inducement to Buyer to enter this Agreement and to consummate the
transactions contemplated hereby, Seller and Shareholders, jointly and
severally, represent and warrant to Buyer as follows:
Section 3.01 Organization . Seller is a corporation duly organized,
validly existing, duly qualified to do business and in good standing under the
laws of the State of Nevada and is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the failure to
qualify or be in good standing would have a material adverse effect on the
Business or the Assets. Seller has all the requisite corporate power and
corporate authority to own, lease and otherwise to hold and operate the Assets,
to carry on its business as now conducted and to enter into and perform the
terms of this Agreement, the agreements and instruments referred to herein and
the transactions contemplated hereby and thereby. Seller owns all of the
membership interests in the LLC and has not granted any rights or options or
entered into any agreements to transfer or assign the membership interests to
any party other than Buyer. LLC is a limited liability company duly organized,
validly existing and in good standing under the laws of Delaware.
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Section 3.02 Authorization. The execution, delivery and performance of
this Agreement and of the other agreements and instruments to be executed by
Seller and the Shareholders hereunder and/or to be delivered by Seller and the
Shareholders at Closing (including the agreements and instruments effecting the
transfer of Assets to Buyer), and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate actions of Seller and necessary shareholder approval (none
of which actions or approval has been modified or rescinded and all of which
actions and approval are in full force and effect). This Agreement constitutes,
and upon execution and delivery of each of the agreements and instruments to be
executed or delivered as provided herein (including the agreements and
instruments effecting the transfer of Assets to Buyer), will constitute, valid
and binding agreements and obligations of Seller and the Shareholders
enforceable in accordance with their respective terms, except as enforceability
may be limited by (i) applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the enforcement of creditor's rights and
(ii) general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law). Except as specified in Schedule
3.05(e), the execution, delivery and performance by Seller and the Shareholders
of this Agreement and of the agreements and instruments referred to herein will
not require the consent, approval or authorization of any other Person where the
failure to obtain such consent would have a material adverse effect on the
Business or the Assets.
Section 3.03 Litigation; Compliance with Law. There is no material
action, suit, investigation, Claim, or any notice of any intention to commence
an investigation by any Governmental Authority or any other Person, or any
arbitration, litigation, or other challenge, pending or, to the knowledge of
Seller or Shareholders, threatened against or involving the Business or the
Assets or execution of or consummation of the transactions contemplated by this
Agreement or any of the agreements and instruments referred to herein, at law or
in equity, or before or by any court, arbitrator or other Governmental
Authority, and neither the Business nor the Assets are operating under or
subject to any material order, judgment, decree or injunction of any court,
arbitrator or other Governmental Authority, except for those matters listed and
accurately described in Schedule 3.03. Except as set forth on Schedule 3.03,
Seller has complied and is presently in compliance in all material respects with
all laws, ordinances, regulations, licenses, awards, orders, judgments, decrees
and injunctions applicable to the Business or the Assets, including, without
limitation, all federal, state and local laws, ordinances, regulations and
orders pertaining to employment or labor, including without limitation,
provisions relating to wages, hours, collective bargaining, occupational safety,
health, equal employment opportunity, environmental protection, building, fire,
zoning and other matters.
Section 3.04 Financial Statements and Condition, Liabilities. The
Seller's audited consolidated January 2, 1999 balance sheet and the audited
consolidated statements of income and cash flow for the year then ended, and the
Interim Balance Sheet attached as Schedule 3.04 (collectively the "Financial
Statements") are true, complete and accurate and have been prepared in
accordance with Seller's historical practices and have been prepared in
accordance with generally accepted accounting principles ("GAAP"), consistently
applied, and fairly present the financial position, and the results of
operations and cash flow of Seller at and for the periods ended January 2, 1999
and June 5, 1999, respectively.
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Except as reflected in the Financial Statements, there exist no
liabilities of Seller relating to the Business or the Assets, contingent or
absolute, matured or unmatured, known or unknown, required to be stated therein
in accordance with GAAP applied on a consistent basis throughout the periods
involved. Since January 2, 1999, Seller has not made any contract, agreement or
commitment or incurred any obligation or liability (contingent or otherwise)
relating to the Business or the Assets, nor has there been any discharge or
satisfaction of any material obligation or liability owed by or to Seller, which
is not in the ordinary course of business or which is inconsistent with past
business practices (other than such matters as would not have a material adverse
effect on the Business or the Assets), nor, since January 2, 1999, has there
occurred any material loss or material injury to the Assets as the result of any
fire, accident, act of God or the public enemy, or other casualty, or any
material adverse change in the Business or the Assets.
Section 3.05 Assets, Consents.
3.05(a) The Assets transferred hereunder comprise all of the
assets required for the continued conduct of the Business in the manner
currently conducted by Seller.
3.05(b) Seller is the sole and exclusive legal and equitable
owner of, and has good and marketable title to the Assets free and clear of any
Encumbrances, except for the Permitted Encumbrances.
3.05(c) On the Closing Date, Buyer (i) shall acquire good and
marketable title to, and all right, title and interest in, the Assets (excluding
the Licenses and any leased Assets) free and clear of any and all Encumbrances
and (ii) shall acquire good and marketable leasehold interests in any Assets
that are not owned by Seller but are leased to Seller, free and clear of any and
all Encumbrances.
3.05(d)
(i) The Property has direct and unobstructed access suitable
for use in connection with the Business (A) to all utilities
necessary for the uses to which the Property and all of the
Improvements are presently devoted by Seller through easements or
rights of way, and (B) to a public street for vehicular and
pedestrian access.
(ii) All Improvements lie entirely within the boundaries of
the Property, and no structure of any kind encroaches on the
Property.
(iii) No portion of the Property or the Improvements
relating thereto is the subject of, or affected by, any
condemnation or eminent domain proceedings currently instituted
or pending, and so far as Seller and the Shareholders reasonably
know, no such proceedings are threatened.
(iv) Neither the Property nor the Improvements are subject
to any covenant or other restriction preventing or limiting
Seller's or any Shareholder's right to convey its right, title,
and interest therein (including the leasing thereof to Buyer or
the assignment of leases pertaining thereto), other than
8
such covenants or restrictions that have either been complied
with or waived in writing so as to allow such a conveyance to
Buyer.
(v) Neither the Property nor the Improvements are subject to
any covenant or other restriction preventing or limiting Seller's
or any Shareholder's right to use such Property or Improvements
for the various purposes for which they are currently being used
other than the Permitted Encumbrances.
(vi) To the Seller's and the Shareholder's Knowledge, there
are no special assessments, fees or charges (including any
"impact fees" or charges in the nature thereof) of any kind or
nature whatsoever levied or assessed or pending or contemplated
against the Property by any governmental authority having
jurisdiction of the Property.
(vii) Seller is not a "foreign corporation," "foreign
partnership" or "foreign estate" as those terms are defined in
the Internal Revenue Code of 1986, as amended, and that Seller
will furnish to Buyer such further assurances with respect to
this representation and warranty as Buyer shall reasonably
request.
(viii) Seller has no interest as lessor or lessee in leases
of or for all or any portion of the Property. (ix) The Property
is in conformance in all material respects with all zoning and
other laws and codes. (x) With respect to the Property, there are
no (i) materialman's, mechanic's, carriers', workers',
repairmen's and other similar liens or (ii) statutory liens.
3.05(e) All of the Assets are transferable by Seller or by
Seller's sole act and deed, other than as set forth in Schedule 3.05(e), and no
consent on the part of any other Person is necessary to validate the transfer to
Buyer, except for the agreements that may be assigned only with the consent of
third parties. Schedule 3.05(e) is a true, correct and complete list of the
agreements that may be assigned only with the consent of third parties.
3.05(f) The Accounts Receivable shown on the Financial
Statements, or thereafter generated, created or acquired by Seller with respect
to the Business have been created in the ordinary course of business and to
Seller's Knowledge are collectible in amounts not less than the amounts thereof
carried on the books of Seller, and within a reasonable time from the date
incurred, except to the extent of the allowance for doubtful accounts shown on
such Financial Statements. Seller previously has delivered to Buyer a complete
and accurate list of all Accounts Receivable (whether billed or unbilled) with
respect to the Business as of date of such list.
3.05(g) The Inventory shown on the Financial Statements, or
thereafter created or acquired by Seller with respect to the Business is useable
and saleable for not less than the aggregate amount thereof carried on the books
of Seller, except to the extent of any reserve
9
against inventory shown on such Financial Statements. Seller has previously
delivered to Buyer a complete and accurate list of all inventory with respect to
the Business as of the date of such list.
Section 3.06 Condition of Tangible Assets. The Improvements and all
other tangible Assets are in good operating condition and repair, taking into
account their age and normal wear and tear, and are suitable and adequate for
the uses for which they are currently being used.
Section 3.07 Intellectual Property . Except for the items listed on
Schedule 2.01, Schedule 3.07 is a true, correct and complete listing of all
patents, registered trademarks, registered copyrights, and registered service
marks owned or licensed by or registered in the name of Seller and/or used or
held for use in the Business, all of which is transferable to Buyer by the sole
act and deed of Seller, other than as set forth on Schedule 3.05(e), and no
consent on the part of any other Person is necessary to transfer to Buyer such
intellectual property. Seller does not pay, and is not liable for, a royalty to
anyone with respect to such intellectual property or any trade secrets or know
how used in the operation of the Business ("Trade Secrets"), and Seller has the
right to bring action for the infringement thereof. Seller owns or possesses all
rights to use all such intellectual property and Trade Secrets necessary to the
conduct of the Business. Neither Seller nor any Shareholder has any knowledge
nor have they received any notice to the effect that any service rendered or
item produced or sold by Seller relating to the Business or the Assets may
infringe on any intellectual property right or other legally protectable right
of another Person. Seller has not granted a license or other right to use such
intellectual property or Trade Secrets to any other Person.
Section 3.08 Licenses. Seller possesses all Licenses necessary for the
operation of the Business as presently conducted by the Seller the failure of
which to possess would have a material adverse effect on the Business or the
Assets. The Licenses are valid and in full force and there are no orders,
complaints, proceedings or investigations, pending or, so far as Seller or any
Shareholder reasonably knows, threatened, which would affect the validity of the
Licenses. Seller is operating the Business in compliance in all material
respects with all requirements and limitations set forth in such Licenses.
Section 3.09 Reports and Records. All returns, reports and statements
relating to the Business currently required to be filed by Seller with any
Governmental Authority have been filed (except where failure to do so would not
have a material adverse effect on the Business or the Assets) and are true,
correct and complete in all material respects. All such reports, returns and
statements shall continue to be filed on a current basis until the Closing Date,
and will be true, correct, and complete in all material respects. All logs and
business records of every type and nature relating to the Business or the
Assets, have been maintained in all material respects (except where the failure
to do so would not have a material adverse effect upon the Business or the
Assets) as required by applicable laws, rules and regulations.
Section 3.10 Contracts. Schedule 1(h) contains a complete and accurate
list of all of the written contracts and agreements that are material to the
Assets or the Business; provided, however, Schedule 1(h) does not include
purchase orders requiring completion of performance before September 22, 1999.
Seller has delivered true, complete and correct copies
10
of all of the written contracts listed in Schedule 1(h) (the "Assumed
Contracts") (and all amendments or modifications thereto) to Buyer. Except as
listed on Schedule 1(h), Seller has not entered into any oral agreements that
are material to the Assets or the Business. Any contract or agreement requiring
performance after September 22, 1999 is "material" for purposes of this Section.
Except for the consents listed on Schedule 3.05(e), Seller has the right to
assign, transfer, and convey to Buyer the Assumed Contracts. Seller has not
entered into any agreement or understanding, whether written or oral, which
waived any of Seller's rights under any such Assumed Contract. To Seller and
Shareholders' Knowledge, the unperformed obligations ascertainable from the
terms on the face of such Assumed Contracts, are the only existing unperformed
obligations thereunder. Each Assumed Contract is in full force and effect, and
constitutes a valid and binding obligation of, and is legally enforceable in
accordance with its terms against, Seller, and to the Seller's and Shareholders'
Knowledge, against the other parties to such Assumed Contracts. Seller has fully
performed all of its obligations under such Assumed Contracts and to Seller's
and Shareholders' Knowledge is not in default thereunder, and to Seller's and
Shareholders' Knowledge there has not occurred any event which (whether with or
without notice, lapse of time, or the happening or occurrence of any other
event) would constitute such a default. Except for the consents listed on
Schedule 3.05(e), the consummation of the transactions contemplated by this
Agreement will not (and will not give any Person a right to) terminate or modify
any rights of, or accelerate or increase any obligation of Seller under any
Assumed Contract. So far as Seller and the Shareholders reasonably know, there
has not been (i) any failure of any party to any such Assumed Contract to comply
with all material provisions thereof, (ii) any threatened cancellation thereof,
(iii) any outstanding dispute thereunder, or (iv) any basis for any claim of
material breach or default thereunder.
Section 3.11 Conflicts. Except as set forth in Schedule 3.11, the
execution and delivery of this Agreement and the agreements and instruments
referred to herein, the fulfillment of and the compliance with the respective
terms and provisions of each, and the consummation of the transactions described
in each, do not and will not conflict with or violate any law, ordinance,
regulation, order, award, judgment, injunction, restrictive covenant or decree
applicable to Seller, or applicable to the Assets or to the Business, or
conflict with or result in a breach of or constitute a material default under
any of the terms, conditions or provisions of the articles of incorporation or
bylaws of Seller, or any contract, agreement, lease, commitment, or written
understanding to which Seller is a party or by which Seller is bound or to which
any of the Assets or the Business is subject, or result in the acceleration of
any indebtedness or in the creation of any Encumbrance upon the Assets (whether
by virtue of a written or verbal agreement) which would have a material adverse
effect upon the Business or the Assets.
Section 3.12 Tax Matters. All ad valorem and other property taxes and
all sales taxes relating to the Assets or the Business have been fully paid to
the extent due and there are no delinquent property tax liens or assessments.
Seller has also timely filed (or will timely file) all federal, state, local and
other tax returns and reports of whatever kind pertaining to the Assets and
required to be filed by Seller for all periods up to and including the Closing
Date. Except as set forth on Schedule 3.12, Seller has paid (or will timely pay)
all taxes of whatever kind, including any interest, penalties, governmental
charges, duties, fees, and fines imposed by the United States, foreign
countries, states, counties, municipalities, and subdivisions, and by all
governmental entities or taxing authorities, which are due and payable by Seller
or LLC (or which relate to any period prior to the Closing Date) or for which
assessments relating to any
11
period prior to the Closing Date have been received, the nonpayment of which
would result in an Encumbrance on any of the Assets. There are no liens for
taxes upon the Assets. Except as set forth on Schedule 3.12, no audits are
currently pending with respect to any federal or state tax returns of Seller,
and Seller has received no written notice of any claims by any Governmental
Authority with respect to the nonpayment of taxes or non-filing of tax returns
or reports.
Section 3.13 Employee Benefit Plans.
3.13(a) Except as specifically described in Schedule 3.13(a),
neither Seller nor any Affiliates (as defined below) has within the past seven
(7) years established, sponsored, maintained, or made any contributions to, or
been parties to any contract or other arrangement or been subject to any statute
or rule requiring it to establish, maintain, sponsor, or make any contribution
to, (i) any "employee pension benefit plan" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended, and regulations
thereunder ("ERISA")) ("Pension Plan"); (ii) any "employee welfare benefit plan"
(as defined in Section 3(l) of ERISA) ("Welfare Plan"); or (iii) any deferred
compensation agreement, plan or arrangement; bonus plan or arrangement; stock
option or stock purchase plan; incentive award plan or arrangement; personnel
policy; vacation policy; severance pay plan, policy, program or agreement;
retiree benefit plan or arrangement; fringe benefit program or practice (whether
or not taxable); employee loan; consulting agreement; employment agreement; and
each other employee benefit plan, agreement, arrangement, program, practice or
understanding which is not described above as a Pension Plan or Welfare Plan,
and any insurance contracts relating thereto ("Other Plan"). Seller and the
Affiliates have no obligations or liabilities (whether accrued, absolute,
contingent, or unliquidated, whether or not known, and whether due or to become
due) with respect to any Pension Plan, Welfare Benefit or Other Plan that arises
other than in the ordinary course of plan sponsorship or administration that is
not listed in Schedule 3.13(a). For purposes of this Section 3.13 only, the term
"Affiliate" shall include all Persons under common control with Seller within
the meaning of Sections 4001(a)(14) or (b)(1) of ERISA or any regulations
promulgated thereunder, or Sections 414(b), (c), (m) or (o) of the Code.
3.13(b) Each plan or arrangement listed in Schedule 3.13(a) (and
any related trust, insurance contract, or other vehicle pursuant to which
benefits under such plans or arrangements are funded or paid) has been
administered in all material respects in compliance with its terms and is in
compliance in all material respects, in both form and operation, with applicable
provisions of ERISA, the Code, COBRA and other applicable law, except as noted
on Schedule 3.13(a). All required governmental filings relating to such plans or
arrangements have been accurately and timely filed (taking into account
permissible filing extensions). Each Pension Plan listed in Schedule 3.13(a) has
been determined by the Internal Revenue Service to be qualified under Section
401(a) and, if applicable, Section 401(k) of the Code, and nothing has occurred
or been omitted since the date of the last such determination that resulted or
will result in the revocation of such determination, except that the Industrial
Molding Corporation 401(k) Profit Sharing Trust was amended and restated in
September of 1998, and no such determination by the Internal Revenue Service has
yet been made with regard to such amendment and restatement of such plan;
however, the Seller and Shareholders have no reason to believe that such
amendment and restatement adversely affects such plan's qualification under
Section 401(a) or 401(k) of the Code. Seller and the Affiliates have made all
required contributions or
12
payments to or under each plan or arrangement listed in Schedule 3.13(a) on a
timely basis and have made adequate provision for reserves to meet contributions
and payments, which arise as a result of actions or omissions prior to Closing,
under such plans or arrangements that have not been made because they are not
yet due. Neither Seller nor any of its Affiliates have contributed to, nor do
they have any past or present obligation to contribute to, any multiemployer
plan as such term is defined in Section 3(37) of ERISA. Neither Seller nor any
of its Affiliates have any obligation to provide life or medical benefits to
former retired employees or beneficiaries thereof, other than such benefits as
Seller or its Affiliates are obligated to provide under COBRA.
3.13(c) There are no threatened, pending or anticipated claims,
suits or other proceedings (including but not limited to any audit, enforcement
action or similar proceeding conducted by any federal or state agency) with
respect to any plan or arrangement listed in Schedule 3.13(a) other than
ordinary claims by participants and beneficiaries thereunder.
3.13(d) Neither the Seller nor its Affiliates, nor any of
director, officer, employee or agent of either, or any "party in interest" or
"disqualified person" (as such terms are defined in Section 3 of ERISA and
Section 4975 of the Code) has, with respect to any plan or arrangement listed in
Schedule 3.13(a), engaged in or been a party to any non-exempt "prohibited
transaction" (as such term is defined in Section 406 of ERISA and Section 4975
of the Code) in connection with which, directly or indirectly, Buyer or Parent
or any such plan or arrangement could be subject to either a material penalty
assessed pursuant to Section 502(i) of ERISA or a material tax imposed under
Section 4975 of the Code.
Section 3.14 Environmental Matters.
3.14(a) Hazardous Materials. For purposes of this section,
"Hazardous Materials" means any wastes, substances, or materials, whether
solids, liquids or gases, that are deemed hazardous, toxic, pollutants, or
contaminants, including but not limited to substances defined as "hazardous
wastes," "hazardous substances," "toxic substances," "radioactive materials," or
other similar designations in, or otherwise subject to regulation under, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
ss. 9601 et seq.; the Toxic Substance Control Act, 15 U.S.C. ss. 2601 et seq.;
the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1802 et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. ss. 9601 et seq.; the Clean
Water Act, 33 U.S.C. ss. 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
ss. 300f et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; or other
applicable federal, state, or local laws, including any plans, rules,
regulations, orders, or ordinances adopted, or other criteria and guidelines
promulgated pursuant to the preceding laws or other similar laws, regulations,
rules, orders, or ordinances in effect as of the date of this Agreement relating
to the protection of human health and the environment (collectively
"Environmental Laws"). "Hazardous Materials" includes but is not limited to
polychlorinated biphenyls (PCBs), petroleum and petroleum products (including,
without limitation, crude oil or any fraction thereof), asbestos, mercury and
lead-based paints.
3.14(b) Release. For purposes of this section, "Release" means
any emission, spill, seepage, leak, escape, leaching, discharge, injection,
pumping, pouring,
13
emptying, dumping, disposing, or release of Hazardous Materials from any source
(including, without limitation, the Property and property adjacent thereto) into
or upon the environment, including the air, soil, improvements, surface water,
groundwater, the sewer, septic system, or waste treatment, storage, or disposal
systems at, on, above, or under the Property, which occurred at any time prior
to the Closing Date.
3.14(c) Environmental Representations and Warranties. Except as
disclosed in the Current Phase I Environmental Site Assessment of the Property
and Improvements dated June 23, 1999, and attached as Schedule 3.14(c):
(i) There are no pending or, to the knowledge of Seller or
the Shareholders, threatened actions, suits, Claims, legal proceedings or any
other proceedings based on Hazardous Materials or the Environmental Laws
relating to the Assets, or any part thereof, or otherwise arising from Seller's
activities involving Hazardous Materials;
(ii) There are no conditions, facilities, procedures or any
other facts or circumstances involving Hazardous Materials in any material
quantity which would impose liability therefor on any responsible parties
present at the Property or related Improvements, or disposed of by Seller upon
or from the Property or related Improvements that could give rise to claims,
expenses, losses, liabilities, or governmental action against Buyer, including
without limitation the following conditions arising out of or attributable to
the Assets or the Business: (A) the presence of any Hazardous Materials in any
material quantity on the Property or the Release of any Hazardous Materials in
any material quantity by Seller into the environment from the Property; (B) the
off-site disposal of Hazardous Materials originating on or from the Property
from Seller's business and operations; (C) the Release of any Hazardous
Materials by Seller in any material quantity into any storm drain, sewer, septic
system or publicly owned treatment works; (D) any material noncompliance with
federal, state or local requirements governing occupational safety and health,
or the presence or Release in or into the air, soil or water supply systems of
the Property of any Hazardous Materials; or (E) any facility operations,
procedures or designs, which do not conform in any material respect to the
statutory or regulatory requirements of any Environmental Laws.
(iii) Intentionally Omitted.
(iv) Except as set forth on Schedule 3.14(c)(iv) attached
hereto and made a part hereof, the Property contains no underground storage
tanks, or underground piping associated with tanks, used currently or in the
past for the management of Hazardous Materials.
(v) Seller has been duly issued, and currently has and will
maintain through the Closing Date, all permits, licenses, certificates and
approvals required under any Environmental Laws, which permits, licenses,
certificates and approvals are described on Schedule 3.14(c)(v) attached hereto.
3.14(d) Buyer Investigation. Seller hereby grants to Buyer the
right to enter and inspect the Property and Improvements. In order to complete
such investigation, Buyer or its designated consultant shall have the right but
not the obligation at Buyer's sole expense: (1) to conduct tests of the soil,
surface or subsurface waters, and air
14
quality at, in, on, beneath or about the Property, in a manner consistent with
good engineering practice; (2) to inspect all records, reports, permits,
applications, monitoring results, studies, correspondence, data and any other
information or documents relevant to Hazardous Materials or other environmental
conditions; and (3) to inspect all buildings and equipment at the Property for
asbestos-containing materials or other Hazardous Materials. Buyer agrees to
conduct such investigations in a manner designed to minimize the disruption to
Seller's business activities, and Seller agrees to permit Buyer reasonable
access to all portions of the Property at reasonable times to be mutually agreed
upon. Buyer shall have the unilateral right, in its sole discretion, to
terminate its obligations under this Agreement without penalty on or before the
completion of the investigation if the investigation reveals any material
condition, contamination or pollution existing or resulting from the operation
or possession of the Property or the conduct of any business or operations
thereon that have given or are likely to give rise to an unsatisfied on-site or
off-site response, removal, closure or remedial obligations under any of the
Environmental Laws or have had or are likely to have a material adverse effect
upon Buyer's intended use of the Property or the Assets. Buyer agrees, and Buyer
shall cause its agents to agree, to keep and hold confidential any and all
reports, summaries, studies or results that are the product of such
investigations, and not to disclose such reports without the written consent of
Seller or unless required to do so by applicable law.
Section 3.15 Labor Relations. Schedule 3.15 is an accurate and
complete list of all employees whose employment relates to the Assets or to the
Business, and the position held by, the rate of compensation (including salary,
bonuses and commissions) and 1998 profit sharing amounts of each such employee.
There are no strikes, work stoppages, or grievance proceedings pending or
threatened between Seller and any of its employees or agents or any union or
collective bargaining unit, nor, to the Knowledge of Seller and Shareholders,
are there any union organization efforts or other controversies pending or
threatened between Seller and any such parties. Except as disclosed on Schedule
3.15, there are no collective bargaining agreements, employment agreements
between Seller and any of its employees or professional service contracts not
terminable at will relating to the Assets or the Business. The consummation of
the transactions contemplated hereby will not cause Buyer to incur or suffer any
material liability relating to, or obligation to pay, severance, termination, or
other payments to any Person or entity.
Section 3.16 Insurance. Schedule 3.16 includes an accurate and
complete list of all material policies of title, property, fire, casualty,
liability and other forms of insurance of any kind relating to the Assets or the
Business, including policy numbers, policy periods, policy limits, and retention
or deductible amounts, and, to the knowledge of Seller and Shareholders, any
pending claims thereunder. All such policies: (i) are in full force and effect;
(ii) are sufficient for compliance in all material respects by Seller with all
requirements of law and of all agreements to which Seller is a party; (iii) are
valid and enforceable policies; and (iv) insure against risks of the kind
customarily insured against and in amounts customarily carried by corporations
similarly situated and provide customary insurance coverage for the Business or
the Assets.
Section 3.17 Year 2000 Issues. Seller has reviewed the areas within
the Business which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the risk that certain
computer applications used by Seller may be
15
unable to recognize and perform properly date-sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). To the
Knowledge of Seller and Shareholders, the Year 2000 Problem will not have a
material adverse effect upon the Business or the Assets.
Section 3.18 Customer Relationships. Except as set forth on Schedule
3.18 since January 2, 1999, there have not been any material and adverse
changes, terminations, cancellations or limitations of the business relationship
of the Seller with any customer or supplier which individually or in the
aggregate provided more than $500,000 of services or purchases during the prior
fiscal year other than such changes that occur in the ordinary course of
business.
Section 3.19 Absence of Certain Changes. Since January 2, 1999, Seller
has carried on its business and conducted its operations and affairs only in the
ordinary and normal course consistent with past practice and there has not been
any material damage, destruction or loss (whether or not covered by insurance)
affecting the Business or the Assets.
Section 3.20 Investment Representations.
3.20(a) Seller and each Shareholder represent and warrant that
the Shares are being acquired by Seller for investment purposes only, and not
with a view to the resale or distribution of all or any part thereof within the
meaning of the Securities Act of 1933 (the "Securities Act"). Seller and each
Shareholder understand that the Shares have not been registered under the
Securities Act or any blue sky or other state securities law or regulation in
reliance, in part, upon the representations and warranties contained herein.
Seller and each Shareholder also understand that they cannot offer for sale,
sell, or otherwise transfer the Shares unless such offer, sale or transfer has
been registered under the Securities Act and under any applicable state blue sky
laws or unless an exemption from such registration is available with respect to
any such proposed offer, sale or transfer.
3.20(b) Seller and each Shareholder have such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Shares and is able to bear the
economic risk of an investment in the Shares, including, without limitation, the
risk of losing part or all of its investment in the Shares and the possible
inability to sell or transfer the Shares for an indefinite period of time.
3.20(c) Seller and the Shareholders acknowledge that the transfer
of any or all of the Shares may be refused by the Buyer's transfer agent unless
the Shares for which such transfer is sought are registered under the Securities
Act and all other applicable federal securities or blue sky laws or an exemption
from such registration is available.
3.20(d) Seller and each Shareholder acknowledge and agree,
subject to Buyer's obligation to remove the legend described below in accordance
with the terms of Section 6.07, that the certificates representing the Shares
shall bear the following legend:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or under any
applicable state securities laws, and may not be sold or otherwise
transferred in the absence of such
16
registration or an exemption under such Act.
Section 3.21 Product Defects. To the Knowledge of Seller or the
Shareholders, all products manufactured or modified by Seller are free from any
defects in material and workmanship that would (1) allow a purchaser or user
thereof to return any such product for refund or replacement (other than returns
consistent in amount and frequency with Seller's historical experience), (2)
require under any applicable law a recall of any such product, or (3) give rise
to a claim by any person for personal injury caused by any such product when
used in the manner for which such product was designed and intended.
Section 3.22 Disclosure. To the Knowledge of Seller and Shareholders,
no document, statement, certificate, opinion letter, schedule or exhibit to be
furnished or delivered to Buyer by Seller or Shareholders pursuant to this
Agreement contains or will contain any material untrue or misleading statement
of fact or omits or will omit any fact necessary to make the statements
contained herein or therein not materially misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES BY BUYER AND PARENT
Buyer represents and warrants to Seller and Shareholders as of the date
hereof and as of the Closing Date as follows:
Section 4.01 Organization . Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Buyer has all of the requisite corporate power and authority to enter into and
perform the terms of this Agreement and the agreements and instruments to be
executed by Buyer hereunder and to carry out the transactions contemplated
hereby and thereby.
Section 4.02 Authorization. The execution, delivery and performance of
this Agreement and of the other agreements and instruments to be executed by
Buyer hereunder, and the consummation of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary corporate
actions of Buyer (none of which actions has been modified or rescinded and all
of which actions are in full force and effect). This Agreement constitutes, and
upon execution and delivery each other agreement and instrument to be executed
by Buyer hereunder will constitute, a valid and binding agreement and obligation
of Buyer, enforceable in accordance with its terms, except as enforceability may
be limited by (i) applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting the enforcement of creditors' rights and (ii) general
equitable principles (regardless of whether enforceability is considered in a
proceeding in equity or at law). The execution, delivery and performance by
Buyer of this Agreement and the other agreements and instruments to be executed
by Buyer hereunder will not require the consent, approval or authorization of
any other Person, entity or Governmental Authority.
17
Section 4.03 Issuance of Shares. Upon issuance of the Shares by Buyer,
the Shares will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of any lien, security interest, or other
encumbrance of any kind and free of any claim.
Section 4.04 Disclosure. No representation or warranty by Buyer in,
and no document, statement, certificate, opinion letter, schedule or exhibit to
be furnished or delivered to Seller pursuant to, this Agreement contains or will
contain any material untrue or misleading statement of fact or omits or will
omit any fact necessary to make the statements contained herein or therein not
materially misleading.
Section 4.05 Litigation. There is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of Buyer, threatened, against or
affecting the Buyer which would, or would be reasonably likely to, materially
impair the consummation of the transactions contemplated by this Agreement.
Section 4.06 Conflicts. The execution, delivery and performance of
this Agreement will not violate or result in a breach of any term of Buyer's
articles of incorporation or bylaws.
Section 4.07 Capitalization.
4.07(a) The authorized capital stock of Buyer consists of
45,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 14,804,000 shares are outstanding and 5,000,000 shares of
preferred stock, par value $.01 per share of which no shares are outstanding.
4.07(b) Except as set forth on Schedule 4.07(b), Buyer is not a
party to or bound by any option, call, warrant, conversion privilege or other
agreement obligating Buyer at present, at any future time, or upon occurrence of
any event to issue or sell any shares of Buyer Common Stock or other capital
stock of Buyer. Except as set forth on Schedule 4.07(b), Buyer is not a party to
any agreement obligating Buyer to register any of its securities with the U.S.
Securities and Exchange Commission (the "Commission") or any other governmental
agency, whether such registration obligation is presently existing or arises in
the future or upon the occurrence of an event.
Section 4.08 Exchange Act Reports. Buyer has filed with the Commission
all required reports, schedules, forms, proxy, registration and other statements
and other documents (collectively, the "SEC Documents"). As of the date of this
Agreement, the last SEC Document filed by Buyer was Buyer's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999. As of their respective filing
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act, or the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"), as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to the SEC Documents. As of their
respective filing dates, none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except to the
extent such statements have been modified or superseded by a later SEC Document
18
filed and publicly available prior to the Closing Date, the circumstances or
bases for which modifications or supersessions have not and will not
individually or in the aggregate result in any material liability or obligation
on behalf of Buyer under the Securities Act, the Exchange Act, the rules
promulgated under the Securities Act or the Exchange Act, or any federal, state
or local anti-fraud, blue sky, securities or similar laws.
Section 4.09 Financial Statements. The consolidated financial
statements of Buyer and its subsidiaries included in the SEC Documents comply as
to form in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto, have been prepared
in accordance with GAAP (except, in the case of unaudited statements, as
permitted by Form 10-Q of the Commission) applied on a consistent basis during
the periods involved (except as may be indicated in notes thereto) and fairly
present the consolidated financial position, assets and liabilities of Buyer and
its subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
Section 4.10 Absence of Certain Changes or Events. Except as disclosed
in the SEC Documents and except for this Agreement and the transactions
contemplated herein since March 31, 1999, Buyer and its subsidiaries have
conducted their businesses, in all material respects, only in the ordinary
course and in a manner consistent with past practice, and there have been no
events required to be reported or publicly disclosed since the Quarterly Report
filed on Form 10-Q for the quarter ended March 31, 1999, and no material changes
since the Annual Report filed on Form 10-K for the year ended December 31, 1998
(except as set forth in the Form 10-Q for the quarter ended March 31, 1999).
Without limiting the generality of the foregoing, since March 31, 1999, there
has not been: (i) any declaration, setting aside or payment of any dividends or
distributions in respect of the shares of Buyer's capital stock or, any
redemption, purchase or other acquisition of any of its securities, other than
the dividends by Buyer of $1,184,341 paid on March 29, 1999 and June 7, 1999 on,
or (ii) any grant or issuance of any Equity Securities of Parent or any of its
subsidiaries other than the options on 46,000 shares granted on April 6, 1999
and the options on 13,000 shares granted on May 18, 1999. "Equity Securities:
means, with respect to Buyer or any of its subsidiaries, as the case may be, (i)
any class or series of common stock, preferred stock or other capital stock,
whether voting or non-voting, (ii) any other equity securities issued by Buyer
or such subsidiary, as the case may be, whether now or hereafter authorized for
issuance by Buyer's or such subsidiary's, as the case may be, Certificate of
Incorporation, (iii) any debt, hybrid or other securities issued by Parent or
such subsidiary, as the case may be, which are convertible into, exercisable for
or exchangeable for any other Equity Securities, whether now or hereafter
authorized for issuance by Parent's or such subsidiary's, as the case may be,
Certificate of Incorporation, (iv) any equity equivalents (including, without
limitation, stock appreciation rights, phantom stock or similar rights),
interests in the ownership or earnings of Buyer or such subsidiary, as the case
may be, or other similar rights, (v) any written or oral rights, options,
warrants, subscriptions, calls, preemptive rights, rescission rights or other
rights to subscribe for, purchase or otherwise acquire any of the foregoing,
(vi) any written or oral obligation of Buyer or such subsidiary, as the case may
be, to issue, deliver or sell, any of the foregoing, (vii) any written or oral
obligations of Buyer or such subsidiary, as the case may be, to repurchase,
redeem or otherwise acquire any Equity Securities, and (viii) any bonds,
debentures, notes or other indebtedness of Buyer or such subsidiary, as the
19
case may be, having the right to vote (or convertible into, or exchangeable for
securities having the right to vote) on any matters on which the stockholders of
Buyer or such subsidiary, as the case may be, may vote.
Section 4.11 Reporting Company; Form S-3. Buyer is subject to the
reporting requirements of the Exchange Act and its Common Stock is registered
under Section 12 of the Exchange Act. Buyer is eligible to register for resale
for the account of the Seller shares of the Buyer's Common Stock on a
registration statement on Form S-3 under the Securities Act.
Section 4.12 Trading on Nasdaq. Buyer's Common Stock is authorized for
quotation on the Nasdaq National Market, and the trading in Buyer's Common Stock
on Nasdaq has not been suspended as of the date hereof and as of the Effective
Time.
ARTICLE V
COVENANTS AND AGREEMENTS OF SELLER AND SHAREHOLDERS
Seller and each Shareholder covenants and agrees with Buyer as follows:
Section 5.01 Negative Covenants. Pending and prior to the Closing,
Seller and Shareholders will not, without the prior written approval of Buyer,
do or agree to do any of the following:
5.01(a) Dispositions; Mergers. Sell, assign, lease, mortgage,
pledge or other transfer the Property and Improvements; or except in the
ordinary course of business consistent with Seller's past business practices,
sell, assign, lease, mortgage, pledge, or otherwise transfer, encumber, or
dispose of any of the Assets other than the Property and Improvements; or merge
or consolidate with or into any other entity or enter into any agreements
relating thereto if such merger or consolidation would effect a change of
control of the Assets.
5.01(b) Accounting Principles and Practices. Change or modify any
of Seller's accounting principles or practices or any method of applying such
principles or practices if such principles, practices or method relate to or
affect the Assets or the Business.
5.01(c) Additional Contracts. Other than in the ordinary course
of business, enter into contracts, leases, commitments, understandings,
licenses, or other agreements relating to or affecting the Assets or the
Business.
5.01(d) Breaches. Do or omit to do any act (or permit such action
or omission) which will cause a material breach of any Assumed Contract,
employment contract, or any other contract, understanding, commitment,
obligation, lease, license or other agreement to which Seller is a party or by
which Seller is bound and which relates to or affects the Assets or the
Business.
5.01(e) Actions Affecting Licenses or Contracts. Do or omit to do
any act which may jeopardize the validity or enforceability of or rights under
any material License, or any material lease or other contract, or which
materially diminishes the value thereof.
5.01(f) Accounts. Accelerate the collection of Accounts
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Receivable, or decelerate the payment of accounts payable inconsistent with past
practices.
5.01(g) Offers to Employees. Offer employment to any employees
that are involved regularly as consultants or otherwise in the Business as
currently conducted, other than for employment relating to the Business, or take
any action at any time to prevent or to discourage any such employee from
remaining employed in connection with the Business.
5.01(h) Solicitation. Take any action, either directly or
indirectly, through any Affiliate, or ▇▇▇▇ Products, or any agent or otherwise,
to solicit from, or discuss or explore with, any other Person or entity any
offer or pursue any expression of interest in or with respect to an acquisition,
combination or similar transaction involving the Assets or the Business.
5.01(i) Compensation. Increase in any manner the compensation of
any of the officers or other employees of Seller, except such increases as are
granted in the ordinary course of business in accordance with Seller's customary
historical practices (which will include normal periodic performance reviews and
related compensation and benefit increases).
Section 5.02 Affirmative Covenants. Pending and prior to the Closing
Date, Seller will, and Shareholders will cause Seller to:
5.02(a) Preserve Existence. Preserve Seller's corporate existence
and business organization intact, maintain its existing franchises and licenses,
and use its commercially reasonable efforts to preserve for Buyer its
relationships with suppliers, customers, employees and others having business
relations with Seller.
5.02(b) Normal Operations. Subject to the terms and conditions of
this Agreement, (i) carry on the Business, including without limitation, the
sale of services to customers, entering into other agreements, leases,
commitments or understandings in the usual and ordinary course of business
consistent with Seller's past business practices and with customary practices in
the industry; (ii) timely perform all obligations under the Assumed Contracts
and pay or otherwise satisfy all obligations relating to the Assets and the
Business as they come due and payable; (iii) maintain all of the Assets in
customary repair, order and condition; (iv) maintain its books of account,
records, and files in substantially the same manner as heretofore; (v) pay the
salary of and any and all other compensation due to all employees through the
Closing Date, (vi) expend the capital required to continue and maintain normal
operations, including capital expenditures for commitments as of the date of
this Agreement and for necessary expenditures from the date of this Agreement
through the Closing Date (which such commitments for capital expenditures as of
the date of this Agreement are set forth on Schedule 5.02(b)(vi)(A), which such
commitments for capital expenditures over $150,000 after the date of this
Agreement are set forth on Schedule 5.02(b)(vi)(B)), and (vii) notify Buyer
immediately of any material adverse change in or to the Assets or to the
Business, including but not limited to physical damage to or destruction of any
of the Assets, the termination of any Assumed Contract other than as a result of
the ending of its term, or the voluntary or involuntary termination of any
member of management or economic harm to the Business.
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5.02(c) Taxes. Pay or discharge when due and payable all tax
liabilities and obligations, including without limitation those taxes which
relate to the Assets or the Business, unless being contested in good faith.
Seller shall also reasonably (i) provide Buyer with such assistance as may
reasonably be requested by either of them in connection with the preparation of
any tax return, audit or other examination by any taxing authority or judicial
or administrative proceedings relating to liability for taxes, (ii) retain and
provide Buyer with any records or other information which may be relevant to
such tax return, audit or examination, proceeding or determination, and (iii)
provide Buyer with any final determination of any such audit or examination,
proceeding or determination that affects any amount required to be shown on any
return of Buyer for any period.
Without limiting the generality of the foregoing, Seller shall retain, for
seven (7) years, copies of all returns, supporting work schedules and other
records or information which may be relevant to such returns for all tax periods
or portions thereof ending before or including the Closing Date and shall not
destroy or otherwise dispose of any such records without first providing Buyer
with one hundred twenty (120) days notice for a reasonable opportunity to review
and copy the same. Nothing in this Section shall limit the obligations of Seller
set forth in Section 3.12.
5.02(d) [Intentionally Omitted]
5.02(e) [Intentionally Omitted]
5.02(f) Access. Give to Buyer and Buyer's representatives
reasonable access upon reasonable notice and at all reasonable times to be
mutually agreed upon to Seller's properties, books, records, contracts,
commitments, facilities, premises, and equipment and to Seller's officers and
employees, all of the foregoing to the extent that they relate to or affect the
Assets or the Business.
5.02(g) Other Information, Supplements to Schedules. Provide to
Buyer all such other information (including financial and operating information
and information regarding Seller's customers and suppliers) and copies of
documents, as Buyer may reasonably request, that relate to or affect the Assets
or the Business. Seller shall make reasonable efforts to, from time to time
prior to the Closing, and shall in any event no later than two (2) business days
prior to the Closing, supplement or amend the Schedules attached hereto with
respect to any matter hereafter arising or discovered by Seller, which, if
existing or occurring at the date of this Agreement, would have been required to
be set forth or described in such Schedules (collectively, the "Amended
Schedules"). Buyer shall have the right to approve any Amended Schedule in
accordance with Article 14.
5.02(h) Engineering Inspections. Prior to the Closing, permit
Buyer and Buyer's consulting engineers and other representatives, agents,
employees and independent contractors, at Buyer's expense, to conduct
engineering and other inspections of the Assets and the Seller's facilities in a
manner so as not to disrupt the operations of the Seller.
22
5.02(i) Insurance. Maintain in full force and effect through the
Closing Date all of Seller's existing casualty, liability, and other insurance
relating to or affecting the Assets or the Business in amounts not less than
those in effect on the date hereof.
5.02(j) Violations. Upon receiving notice or otherwise becoming
aware of any material violation relating to the Licenses, or relating to the
Assets or the Business, or any material violations under any other applicable
statutes, rules, regulations, or laws, promptly notify Buyer and, at Seller's
expense, take reasonable actions to cure all such violations prior to the
Closing Date.
5.02(k) Consents. Use reasonable efforts to obtain the Required
Consent, as defined in Section 7.02. Seller shall not be required to pay any
premiums or similar amounts to obtain any consent unless expressly required by
the terms of the subject agreement.
Section 5.03 Confidentiality. The fact and existence of this Agreement
and other agreements contemplated hereunder, the terms and conditions contained
herein, as well as the substance of any negotiations between the parties with
respect to the matters contemplated herein will be deemed confidential and will
not be disclosed to third parties, including without limitation, by means of a
press release, without the prior consent of Buyer unless otherwise required by
law.
Section 5.04 Employee Restrictions. For a period of six (6) months
following the Closing Date, neither Seller nor its Affiliates, nor ▇▇▇▇
Products, nor any equity owners thereof nor any business enterprise in which
Seller, its Affiliates, ▇▇▇▇ Products, or the respective equity owners thereof
hold a controlling interest as of the Closing Date (collectively, the
"Restricted Employers") will hire, without Buyer's prior consent, any
individuals who are employees of Buyer (or their respective Affiliates) as of
the date of determination and were employees of Seller as of the Closing Date
(collectively, the "Restricted Employees"); provided, however, that if Buyer
terminates any such employee, Seller shall have the option to offer employment
to such employee. For a period of two (2) years following the Closing Date, the
Restricted Employers shall not solicit for employment any Restricted Employees
without the prior written consent of Buyer.
Section 5.05 No Securities Trading. Seller and Shareholder acknowledge
that Buyer is a publicly-held company and dissemination of information
concerning this transaction or trading in the Buyer's stock by any party to this
transaction or any party receiving information from any party to this
transaction prior to public release could result in violation of the Securities
and Exchange Commission ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ regulations. Seller and Shareholders
agree not to disseminate any information concerning this transaction and agree
not to trade in the stock of Buyer if such actions would violate applicable
laws.
Section 5.06 Survey and Title Report.
5.06(a) Seller, at Buyer's sole cost and expense, will obtain, as
soon as practicable using all reasonable efforts, a current ALTA
on-the-ground/as built survey (collectively, the "Surveys" and each, a "Survey")
of the Property, prepared by licensed surveyors who are reasonably acceptable to
Buyer and Buyer's selected title company (the "Title
23
Company").
5.06(b) Seller, at Buyer's sole cost and expense, will obtain, as
soon as practicable using all reasonable efforts, a current preliminary title
report or title policy commitment issued by the Title Company for each parcel of
Property (collectively, the "Title Reports" and each, a "Title Report"),
describing such parcel, listing Buyer as the prospective named insured and
showing as the proposed policy amount an amount to be determined by Buyer.
Seller shall furnish to Buyer, at Buyer's sole cost and expense, a legible and
true copy of the Surveys, the Title Reports and all documents and other
instruments referenced in the Title Report.
5.06(c) As soon as is reasonably possible after the date of
receipt of the Survey, the Title Report and copies of all documents pertaining
to such Survey and Title Report as Buyer and/or Title Company may reasonably
require for each Property, Buyer and Buyer's attorney shall review the same and
notify Seller in writing of any, in Buyer's reasonable judgment, material
objections to the condition of the title or matters shown on the Survey or in
the Title Report ("Buyer's Objections"). As soon as is reasonably possible
following receipt of Buyer's notice, Seller shall rectify Buyer's Objections at
Seller's sole cost. The parties agree that, if necessary, the time of Closing
shall be extended accordingly.
5.06(d) If Seller does not or cannot rectify Buyer's Objections
within thirty (30) days after receipt of all Buyer's Objections, Buyer, at
Buyer's option, may: (i) waive such Buyer's Objections without remedy; (ii)
conduct the Closing and reduce the Purchase Price by the aggregate amount
allocated to the Property; or (iii) terminate this Agreement.
Section 5.07 Intentionally Omitted.
Section 5.08 Covenant Not to Compete. For a period of five (5) years
from and after the Closing Date, neither Seller nor Shareholders will engage
directly or indirectly, in any capacity, in any business that competes directly
or indirectly with the Business or any other business currently conducted by
Buyer, Seller or LLC; provided, however, that no owner of less than 5% of the
outstanding stock of any publicly traded corporation shall be deemed to engage
solely by reason thereof in any of its businesses. Notwithstanding the
foregoing, Seller and Shareholders shall be entitled to conduct the Business of
▇▇▇▇ Products, and in conducting such business neither Seller nor Shareholders
shall be deemed to have violated this Section 5.08.
Section 5.09 Cooperation. From the date hereof through the Closing
Date, Seller and Shareholders will work in good faith with Buyer to close the
transactions contemplated by this Agreement and will take all reasonable actions
required of them in order to satisfy the conditions to Closing set forth in
Section 7 of this Agreement.
24
ARTICLE VI
COVENANTS AND AGREEMENTS OF BUYER
Buyer covenants and agrees with Seller as follows:
Section 6.01 Corporate Action. Prior to the Closing, Buyer and Parent
shall take all partnership and corporate actions necessary to effectuate the
transactions contemplated by this Agreement and the agreements or instruments
called for hereunder.
Section 6.02 Employee Issues. Buyer agrees that the employees of
Seller specifically listed on Schedule 3.15 and those hired after June 30, 1999
in the ordinary course of business shall be offered employment with the LLC upon
the Closing Date. The parties expressly acknowledge that this Agreement is not
intended to create a contract between Buyer, Seller or any affiliated business
entity of either and that no employee of the Seller may rely on this Agreement
as the basis for any breach of contract claim against Buyer, Seller or any of
affiliated business entity of either. Neither Buyer nor Seller shall in any
manner be responsible or liable for administration or the payment of any benefit
under any plans maintained by the other party after Closing. Except as set forth
in Schedule 6.02, neither Buyer nor the LLC shall assume, maintain or continue
any Pension Plan, Welfare Plan or Other Plan of Seller or any of its Affiliates
following Closing. With respect to any Pension Plan, Welfare Plan or Other Plan
assumed by Buyer or the LLC following Closing as set forth in Schedule 6.02 (the
"Assumed Plans"), the parties acknowledge and agree that (i) Buyer or the LLC
shall only perform the duties and obligations of the employer-sponsor and plan
administrator following the Closing and that Seller shall remain liable
following Closing for any violations of applicable law or breaches of fiduciary
duty or other obligations (other than the Buyer's Health Plan Obligation and
Buyer's COBRA Obligation, defined below) that occurred (irrespective of when
known) with respect to such plans prior to Closing; and (ii) neither
Shareholders nor Seller shall be liable and neither Shareholders nor Seller
shall be deemed to assume any liability, following Closing, for any benefits or
coverage under such plans, or for any violations of applicable law or breaches
of fiduciary duty or other obligations that occur (irrespective of when known)
with respect to such plans on or after Closing. With respect to the group
medical and dental plan assumed by the LLC as set forth in Schedule 6.02, the
parties acknowledge and agree that (a) Buyer and the LLC shall pay and shall be
liable for any and all medical and dental expenses or other expenses and
liabilities payable in accordance with the terms of such plan that were incurred
prior to, on or after Closing (irrespective of whether or not a claim has been
made as of such time) (the "Buyer's Health Plan Obligation"); (b) neither Buyer
nor the LLC shall be liable for any medical or dental expenses or other expenses
and liabilities (including but not limited to third party administrative fees
and stop loss insurance premiums) incurred at any time under such plan with
respect to the employees of ▇▇▇▇ Products; (c) ▇▇▇▇ Products shall not be liable
for any medical or dental expenses or other expenses and liabilities (including
but not limited to third party administrative fees and stop loss insurance
premiums) incurred at any time under such plan with respect to employees of
Buyer or the LLC; (d) on and after the Closing, Buyer or the LLC, as the case
may be, shall provide COBRA coverage and benefits to one former employee and one
dependent of a former employee of Seller who are on COBRA coverage prior to the
Closing, and shall provide COBRA notice, coverage and benefits to the
individuals who, after Closing, are former employees of Seller who are hired by
the LLC (the "Transferred Employees") pursuant to the transactions contemplated
by this Agreement and who become entitled to such notice,
25
coverage or benefits (the "Buyer's COBRA Obligation"); (e) Seller shall obtain
alternative medical and dental coverage for the employees of ▇▇▇▇ Products prior
to Closing; and (f) Seller or ▇▇▇▇ Products, as applicable, shall provide the
required COBRA notice to the Transferred Employees with regard to their
termination of employment with Seller.
Section 6.03 Seller's Name. Buyer hereby grants Seller a royalty-free
license from and after the Closing to use the names "Industrial Molding
Corporation" and "IMC" for the limited purpose of winding up the Business under
such names; provided that, Seller will only use such names for the purpose of
winding up the Business under such names.
Section 6.04 Confidentiality. The fact and existence of this Agreement
and other agreements contemplated hereunder, the terms and conditions contained
herein, as well as the substance of any negotiations between the parties with
respect to the matters contemplated herein will be deemed confidential and will
not be disclosed to third parties, including without limitation, by means of a
press release, without the prior consent of Seller unless otherwise required by
law.
Section 6.05 Intentionally omitted.
Section 6.06 Cooperation. From the date hereof through the Closing
Date, Buyer will work in good faith with Seller to close the transactions
contemplated by this Agreement and will take all reasonable actions required of
them in order to satisfy the conditions to Closing set forth in Section 8 of
this Agreement.
Section 6.07 Exchange Act Reports and Rule 144. For two years
following the Closing, (i) Buyer will timely file all periodic reports required
under the Exchange Act, and (ii) Buyer shall not take any act, or fail to do any
necessary act, that renders resales under Rule 144 under the Securities Act
unavailable to Seller and Shareholders. Buyer covenants that, so long as it is
subject to the reporting requirements of the Exchange Act, it will file the
reports required to be filed by it under the Exchange Act so as to enable any
holder to sell the Shares pursuant to 144 under the Securities Act. In
connection with any sale, transfer or other disposition by any holder of the
Shares pursuant to Rule 144 under the Securities Act, Buyer shall cooperate with
such holder to facilitate the timely preparation and delivery of certificates
representing the Shares to be sold and not bearing the legend specified in
Section 3.20(d) or any Securities Act legend, and will remove such legends as
needed to complete such sale in a timely fashion.
Section 6.08 Registration Rights. Seller shall have registration
rights for the Shares as set forth in the Registration Rights Agreement to be
executed and delivered contemporaneously herewith.
Section 6.09 Books and Records. Buyer shall (i) provide Seller and
Shareholders with such assistance as may reasonably be requested by either of
them in connection with the preparation of any tax return, audit or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for taxes, (ii) retain and provide Seller and Shareholders
with any records or other information which may be relevant to such tax return,
audit or examination, proceeding or determination, and (iii) provide Seller and
26
Shareholders with any final determination of any such audit or examination,
proceeding or determination that affects any amount required to be shown on any
return of Seller and Shareholders for any period. Without limiting the
generality of the foregoing, Buyer and Parent shall retain, for seven (7) years,
copies of all returns supporting work schedules and other records or information
which may be relevant to such returns for all tax periods or portions thereof
ending before or including the Closing Date and shall not destroy or otherwise
dispose of any such records without first providing Seller and Shareholders with
one hundred twenty (120) days notice for a reasonable opportunity to review and
copy the same. In addition, after the Closing Buyer shall give Seller and
Seller's representatives reasonable access upon reasonable notice and at all
reasonable times to be mutually agreed upon to examine and make copies of any
and all records and documents pertaining to the Business being transferred to
Buyer pursuant to this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
The obligations of Buyer to purchase the Assets and to proceed with the
Closing are subject to the satisfaction (or waiver by Buyer, which may be
withheld for any reason) at or prior to the Closing of each of the following
conditions:
Section 7.01 Representations and Covenants. (i) The representations
and warranties of Seller and the Shareholders made in this Agreement or in any
agreement or instrument called for hereunder shall have been, to the extent
qualified by materiality, true and correct, and to the extent not qualified by
materiality, true and correct in all material respects, when made and on the
Closing Date as though such representations and warranties were made on and as
of the Closing Date; and (ii) Seller shall have performed and complied or shall
have caused the performance and compliance (A) with all covenants and agreements
that are qualified as to materiality and (B) in all material respects with all
covenants and agreements that are not qualified as to materiality and required
by this Agreement or any agreement or instrument called for hereunder to be
performed or complied with by Seller prior to the Closing.
Section 7.02 Consents. Seller shall have obtained prior to Closing
consent to the assignment to Buyer of the Ticona Celestran Consignment, Sales
and Security Agreement listed in Schedule 3.05(e) (the "Required Consent").
Section 7.03 Delivery of Documents. Seller shall have delivered to
Buyer all agreements, instruments and documents required to be delivered by
Seller to Buyer pursuant to Section 9.02.
Section 7.04 Legal Proceedings. No action or proceeding by or before
any Governmental Authority shall have been instituted or threatened (and not
subsequently dismissed, settled or otherwise terminated) which might restrain,
prohibit or invalidate the transactions contemplated by this Agreement or any
agreement or instrument called for hereunder.
Section 7.05 Intentionally Omitted.
27
Section 7.06 ▇▇▇▇ of Sale and Assignment and Assumption Agreement.
Seller shall have delivered a ▇▇▇▇ of Sale transferring the Assets to Buyer and
Buyer and Seller shall have entered an Assignment and Assumption Agreement.
Section 7.07 Absence of Material Change. The Assets shall not have
suffered a material adverse change since the date of the Interim Balance Sheet
and there shall have been no material adverse changes since such date in the
business, operations, prospects, condition (financial or otherwise), properties,
assets or liabilities relating to the Business, except changes contemplated by
this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
The obligations of Seller to sell, transfer, convey and deliver the Assets,
and to proceed with the Closing are subject to the satisfaction (or waiver by
Seller) at or prior to the Closing of each of the following conditions:
Section 8.01 Representations and Covenants. (i) The representations
and warranties of Buyer made in this Agreement or in any agreement or instrument
called for hereunder shall have been, to the extent qualified by materiality,
true and correct, and to the extent not qualified by materiality, true and
correct in all material respects, when made and on the Closing Date as though
such representations and warranties were made on and as of the Closing Date; and
(ii) Buyer shall have performed and complied or shall have caused the
performance and compliance (A) with all covenants and agreements that are
qualified as to materiality and (B) in all material respects with all covenants
and agreements that are not qualified as to materiality and required by this
Agreement or any agreement or instrument called for hereunder to be performed or
complied with by Buyer prior to the Closing.
Section 8.02 Delivery by Buyer. Buyer shall have delivered to Seller
the Purchase Price (as adjusted pursuant to Article 10), and all agreements,
instruments and documents required to be delivered by Buyer to Seller pursuant
to Section 9.03. Buyer shall have issued to Seller the Shares (as defined in
Section 2.04(c)) and delivered to Seller certificates representing the Shares.
Section 8.03 Legal Proceedings. No action or proceeding by or before
any Governmental Authority shall have been instituted or threatened (and not
subsequently dismissed, settled, or otherwise terminated) that might restrain,
prohibit, or invalidate the transactions contemplated by this Agreement or any
agreement or instrument called for hereunder, other than an action or proceeding
instituted or threatened by Seller.
ARTICLE IX
THE CLOSING
Section 9.01 Closing. The Closing hereunder shall be on July 6, 1999
(the "Closing Date"), to be effective on July 4, 1999 at 7:00 a.m. (the
"Effective Time"), at the offices of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ LLP at ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, or at such other time and place as the
parties may mutually agree, and in any event not later than August 15, 1999.
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Section 9.02 Delivery by Seller. At or before the Closing, Seller
shall deliver to Buyer:
9.02(a) Transfer Instruments. A Special Warranty Deed conveying
fee simple title to the Property --------------------- subject to no exceptions
other than the Permitted Encumbrances, and all other agreements, assignments and
other instruments of transfer, dated prior to or as of the Closing Date, fully
executed, and, where applicable, recordable in the appropriate public records,
in form sufficient to transfer to Buyer title to the Assets of the quality
required under the terms of this Agreement and reasonably satisfactory to
counsel to Buyer.
9.02(b) Additional Items.
(i) as may be reasonably requested by Buyer, copies of all
personnel records of any employee listed on Schedule 3.15;
(ii) certificate of good standing of Seller dated within
twenty (20) days of the Closing Date from its state of incorporation;
(iii) wire transfer instructions regarding delivery of the
cash portion of the Purchase Price;
(iv) ▇▇▇▇ of Sale and Assignment and Assumption Agreement;
(v) FIRPTA Affidavit;
(vi) all other documents, instruments and writings required
to be delivered to Buyer at Closing under the terms of this Agreement; and
(vii) an affidavit relating to mechanic's liens and parties
in possession, and such other certificates, instruments or documents as Buyer
may reasonably request in order to effectuate and document the transactions
contemplated hereby.
9.02(c) Consents. The Required Consent.
9.02(d) [Intentionally Omitted]
9.02(e) Certified Resolutions. A copy of the resolutions of the
Board of Directors and shareholders of Seller, certified by the Secretary or any
Assistant Secretary of Seller as being correct and complete and then in full
force and effect, authorizing the execution, delivery and performance of this
Agreement, and of the agreements or instruments called for hereunder, and the
consummation of the transactions contemplated hereby and thereby;
9.02(f) Certificates.
(i) The certificate of Seller signed by the respective
authorized officers thereof certifying that (A) the representations and
warranties of Seller made herein were, to the extent qualified by
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materiality, true and correct, and to the extent not qualified by materiality,
true and correct in all material respects when made and on the Closing Date as
though such representations and warranties were made on and as of the Closing
Date; and (B) Seller has performed and complied or has caused the performance
and compliance (1) with all covenants and agreements that are qualified as to
materiality and (2) in all material respects with all covenants and agreements
that are not qualified as to materiality and required by this Agreement or any
agreement or instrument called for hereunder to be performed or complied with by
Seller prior to the Closing;
(ii) The certificate of the Shareholders signed by each
Shareholder certifying that (A) the representations and warranties of
Shareholders made herein were, to the extent qualified by materiality, true and
correct, and to the extent not qualified by materiality, true and correct in all
material respects when made and on the Closing Date as though such
representations and warranties were made on and as of the Closing Date; and (B)
Shareholders has performed and complied or has caused the performance and
compliance (1) with all covenants and agreements that are qualified as to
materiality and (2) in all material respects with all covenants and agreements
that are not qualified as to materiality and required by this Agreement or any
agreement or instrument called for hereunder to be performed or complied with by
Shareholders prior to the Closing; and
(iii) A certificate signed by the respective authorized
officers of Seller as to the incumbency of the appropriate officers thereof.
9.02(g) Title Policy. An ALTA policy of title insurance, issued
at Buyer's sole cost and expense, regarding the Property, insuring fee title to
such Property (the "Title Policy") subject to no exceptions other than the
Permitted Encumbrances or the title company's written commitment to furnish the
Title Policy.
Section 9.03 Deliveries by Buyer. At the Closing, Buyer shall deliver
to Seller:
9.03(a) Payments. The Purchase Price in the amount (as adjusted
as provided in this Agreement) and in the manner set forth in Sections 2.03 and
2.04.
9.03(b) Additional Items.
(i) all other documents, instruments and writings required
to be delivered to Seller at Closing under the terms of this Agreement; and
(ii) the legal opinion of counsel to Buyer regarding the
validity of the issuance of the Shares to Seller, the enforceability of this
Agreement against Buyer and Parent, and such other matters as Seller's counsel
shall reasonably request, all in form and substance reasonably satisfactory to
Seller's counsel;
(iii) certificates of good standing of Buyer dated within
twenty (20) days of the Closing Date from its state of incorporation; and
(iv) such other certificates, opinions, instruments or
documents as Seller may reasonably request of Buyer in order to effectuate and
document the transactions contemplated hereby.
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9.03(c) Certified Resolutions. A copy of the resolutions of the
Board of Directors of Buyer, certified as being correct and complete and then in
full force and effect, authorizing the execution, delivery and performance of
this Agreement, and of the agreements or instruments called for hereunder, and
the consummation of the transactions contemplated hereby and thereby.
9.03 (d) Officers' Certificates.
(i) A certificate of Buyer signed by an authorized officer
certifying that (A) the representations and warranties of Buyer made herein
were, to the extent qualified by materiality, true and correct, and to the
extent not qualified by materiality, true and correct in all material respects
when made and on the Closing Date as though such representations and warranties
were made on and as of the Closing Date; and (B) Buyer has performed and
complied or has caused the performance and compliance (1) with all covenants and
agreements that are qualified as to materiality and (2) in all material respects
with all covenants and agreements that are not qualified as to materiality and
required by this Agreement or any agreement or instrument called for hereunder
to be performed or complied with by Buyer prior to the Closing; and
(ii) a certificate signed by an authorized officer of each
of Buyer and Parent as to the incumbency of the appropriate officers of Buyer.
ARTICLE X
POST-CLOSING ADJUSTMENT
Section 10.01 Closing Balance Sheet. Seller shall prepare and deliver
to Buyer within 30 days after the Closing a closing balance sheet on a basis
consistent with Seller's December 31, 1998 Adjusted Balance Sheet (the "Closing
Balance Sheet"). Notwithstanding the foregoing, the Closing Balance Sheet shall
include Seller's prorated share of all applicable real and ad valorem personal
property taxes, assessments, and any other property taxes on the Assets and the
Business for the tax year in which the Closing occurs; and if the amount of such
taxes or assessment for the tax year including the Closing is not determinable,
an amount shall be prorated on the basis of the taxes or assessment for the
preceding year.
Section 10.02 Increase or Decrease in Net Assets. The Purchase Price
set forth in Section 2.03 shall be decreased or increased, as appropriate, after
the Closing Date by the amount by which, as of the Closing Date, Seller's total
assets (excluding cash) less total liabilities (excluding interest bearing debt)
as reflected on the Closing Balance Sheet are less than or greater than Seller's
total assets (excluding cash) less total liabilities (excluding interest bearing
debt) as reflected on Seller's December 31, 1998 Adjusted Balance Sheet attached
as Exhibit B, (such difference being the "Post-Closing Adjustment"). Seller
shall calculate the Post-Closing Adjustment and deliver its calculation of the
Post-Closing Adjustment to Buyer with the Closing Balance Sheet. Except as
provided in Section 10.03, Buyer and Seller, as the case may be, shall pay the
Post-Closing Adjustment to the other party within 10 business days of Buyer's
receipt of the Post-Closing Balance Sheet and Seller's calculation of the
Post-Closing Adjustment.
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Section 10.03 Buyer Review of Post-Closing Adjustment.
(a) Following Receipt by Buyer of the Post-Closing Balance Sheet and
of Seller's calculation of the Post-Closing Adjustment, Buyer may accept or
reject Seller's calculation. Buyer shall have 15 business days to notify Seller
that it rejects Seller's calculation of the Post-Closing Adjustment. If Buyer
does not notify Seller of its rejection of Seller's calculation within such 15
business day period, Buyer will be deemed to have accepted Seller's calculation
of the Post-Closing Adjustment.
(b) If Buyer timely notifies Seller of its rejection of Seller's
calculation of the Post-Closing Adjustment and Seller and Buyer do not, after a
good faith attempt, reach agreement with regard to the amounts to be paid under
this Section, Seller and Buyer will submit the dispute for resolution to a
nationally recognized certified public accountant which is mutually acceptable
to both parties (the "Arbitrator"). Notwithstanding the submission of any
dispute to an Arbitrator, Buyer on the one hand and Seller on the other hand
agree to pay any amounts required to be paid under this Article 10 which are not
the subject of a bona fide dispute. Promptly, but not less than twenty (20) days
after its acceptance as Arbitrator, the Arbitrator will determine, those and
only those issues in dispute. The Arbitrator will be instructed to resolve such
issues in a manner consistent with GAAP, consistently applied, and the purposes
and intent of the Agreement. The Arbitrator's determination will be conclusive
and binding on the parties. Each party will bear its own costs and the costs of
the Arbitrator will be shared equally by the parties.
ARTICLE XI
RISK OF LOSS
The risk of loss or damage by fire or other casualty or cause or
condemnation of the Assets until the Effective Time shall be upon Seller. In the
event such loss or damage shall not be restored, replaced, or repaired as of the
Effective Time, Buyer shall, at its option, either:
(a) proceed with the Closing and receive all insurance or condemnation
proceeds to which Seller would be entitled as a result of such loss or damage;
provided, however, that if such proceeds do not equal the loss and the loss is
less than $500,000 in the aggregate, the Purchase Price shall be reduced at
Closing by an amount equal to such deficiency, or
(b) terminate this Agreement, in which event no party hereunder shall
have any further liability to any other party hereunder (except for Sections
5.03 and 6.04, which shall survive such termination).
ARTICLE XII
SURVIVAL; INDEMNIFICATION
Section 12.01 Survival of Seller's and Shareholders' Representations.
Except as otherwise specified, the representations and warranties made by Seller
and the Shareholders in this Agreement or pursuant hereto shall survive the
Effective Time for a period of eighteen (18) months (except for the
representations and warranties in (a) Section 3.12 (Tax Matters), which shall
survive the Effective Time until the applicable
32
statute of limitations expires, (b) Section 3.13 (Employee Benefit Plans), which
shall survive the Effective Time until the applicable statute of limitations
expires, and (c) Section 3.14 (Environmental Matters), which shall survive the
Effective Time for a period of three (3) years), and all representations and
warranties shall survive and shall be unaffected by (and shall not be deemed
waived by) any investigation, audit, appraisal, or inspection at any time made
by or on behalf of Buyer. Any breach of any representation or warranty by Seller
constituting fraud on the part of Seller shall survive indefinitely.
Section 12.02 Indemnification by Seller and the Shareholders. Subject
to the conditions and provisions of Section 12.05, Seller and the Shareholders,
jointly and severally, agree to pay and to indemnify, defend and hold harmless
the Buyer Indemnitees from and against any and all demands, claims, complaints,
actions or causes of action, suits, proceedings, investigations, arbitrations,
assessments, losses, damages, liabilities, costs and expenses, including, but
not limited to, interest, penalties and reasonable attorneys' fees and
disbursements, asserted against, imposed upon or incurred by the Buyer
Indemnitees, directly or indirectly (hereinafter a "Loss" or "Losses"), by
reason of or resulting from (a) any misrepresentation or breach of the
representations and warranties of Seller or the Shareholders contained in or
made pursuant to this Agreement; (b) any noncompliance with any covenants,
agreements or undertakings of Seller or the Shareholders contained in or made
pursuant to this Agreement; (c) without limiting any of the foregoing, each of
the matters described or which were required to have been described on Schedule
3.03.; (d) without limiting the generality of the foregoing, any violation of
law or breach of fiduciary duty or other obligation (other than Buyer's Health
Plan Obligation and Buyer's COBRA Obligation) with respect to any plan or
arrangement assumed by Buyer or LLC pursuant to Section 6.02 that occurred prior
to the Effective Time, or (e) any environmental liability arising out of,
relating to, or resulting from operations of the Business or the Assets prior to
the Effective Time, regardless of whether the matter is described or disclosed
on Schedule 3.14(c), provided that any claim for indemnification under this
Section 12.02(e) must be made on or prior to July 4, 2002. In the event of any
indemnification of Buyer pursuant to this Section 12.02, Buyer shall be
entitled, in addition to its rights and remedies at law or in equity as set
forth in Section 12.06, to deduct the amount of such indemnification from any
payment due or otherwise made or to be made to Seller or the Shareholders in
connection with this Agreement or the transactions contemplated hereby.
Section 12.03 Survival of Buyer's and Parent's Representations. The
representations and warranties made by Buyer and Parent in this Agreement or
pursuant hereto shall survive the Effective Time for a period of eighteen (18)
months, and shall also survive and shall be unaffected by (and shall not be
deemed waived by) any investigation, audit, appraisal or inspection at any time
made by or on behalf of Seller.
Section 12.04 Indemnification by Buyer and Parent. Subject to the
conditions and provisions of Section 12.05, Buyer and Parent, jointly and
severally, hereby agree to pay and to indemnify, defend and hold harmless the
Seller Indemnitees from and against all demands, claims, complaints, actions,
suits, proceedings, investigations, arbitrations, or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including, but
not limited to, interest, penalties and reasonable attorneys' fees and
disbursements, asserted against, imposed upon or incurred by a Seller
Indemnitee, directly or indirectly (hereinafter a "Loss" or "Losses"), by reason
of or resulting from (a) any misrepresentation or breach of the representations
and warranties of Buyer contained in or made pursuant to this Agreement; (b) any
noncompliance by
33
Buyer with any covenants, agreements or undertakings of Buyer contained in or
made pursuant to this Agreement; (c) without limiting the generality of the
foregoing, any violation of law or breach of fiduciary duty or other obligation
with respect to any plan or arrangement assumed by Buyer or LLC pursuant to
Section 6.02 that occurs on or after the Effective Time; or (d) any
environmental liability arising out of, relating to, or resulting from
operations of the Business or the Assets on or after the Effective Time.
Section 12.05 Conditions of Indemnification for Third Party Claims.
The obligations and liabilities of Seller and the Shareholders, and of Buyer and
Parent, hereunder with respect to their respective indemnities pursuant to this
Article 12 resulting from any Claim by third parties, shall be subject to the
following terms and conditions:
12.05(a) The party seeking indemnification (the "Indemnified
Party") must give the other party or parties, as the case may be (the
"Indemnifying Party"), notice of any such Claim promptly after the Indemnified
Party receives notice thereof; provided, however, that any failure to give such
notice will not be deemed a waiver of any rights of the Indemnified Party except
to the extent the rights of the Indemnifying Party are actually and materially
prejudiced by such failure.
12.05(b) The Indemnifying Party shall have the right to undertake
(and with respect to the matters described in Schedule 3.03, shall undertake to
the extent requested by Buyer), by counsel or other representatives of its own
choosing, the defense of such Claim.
12.05(c) If the Indemnifying Party shall elect not to undertake
such defense (except with respect to the matters described in Schedule 3.03), or
within a reasonable time after notice of any such Claim from the Indemnified
Party shall fail to defend in a reasonable manner, the Indemnified Party (upon
further written notice to the Indemnifying Party) shall have the right to
undertake the defense, compromise or settlement of such Claim, by counsel or
other representatives of its own choosing, on behalf of and for the account and
risk of the Indemnifying Party (subject to the right of the Indemnifying Party
to assume defense of such Claim at any time prior to settlement, compromise or
final determination thereof).
12.05(d) Anything in this Section 12.05 to the contrary
notwithstanding, if there is a reasonable probability that a Claim may
materially and adversely affect the Indemnified Party other than as a result of
money damages or other money payments, (i) the Indemnified Party shall have the
right, at its own cost and expense, to participate in the defense, compromise or
settlement of the Claim, (ii) the Indemnifying Party shall not, without the
Indemnified Party's written consent, settle or compromise any Claim or consent
to entry of any judgment which does not include as an unconditional term thereof
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from all liability in respect of such Claim, and (iii) in the event that
the Indemnifying Party undertakes defense of any Claim, the Indemnified Party,
by counsel or other representative of its own choosing and at its sole cost and
expense, shall have the right to consult with the Indemnifying Party and its
counsel or other representatives concerning such Claim and the Indemnifying
Party and the Indemnified Party and their respective counsel or other
representatives shall cooperate with respect to such Claim.
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Section 12.06 Limitations. No party hereunder shall be responsible
with respect to any Loss or Losses as to which another party is otherwise
entitled to indemnity under this Article 12 unless and until the cumulative
total of all Losses suffered by the Indemnified Party exceed or is reasonably
expected to exceed $100,000.00, and thereafter only in excess of such amount
(this limitation shall not apply, however to any claim under this section
related to a breach of Section 3.12 or Articles 15 or 16); and further provided
that the maximum liability of Seller and the Shareholders, as a group, under
this Section shall be $13,000,000.00. The indemnity provided by this Article 12
shall be the exclusive remedy for any Loss, except that all parties to this
Agreement shall retain such rights and remedies as they may have under
applicable anti-fraud provisions of state and federal securities laws, but
subject to the specific dollar thresholds mentioned in the preceding sentence.
Section 12.07 Duty to Mitigate. Each party to this Agreement shall act
reasonably and in good faith to mitigate any Loss arising out of or related to
an indemnifiable claim pursuant to this Article 12. No party to this Agreement
otherwise entitled to indemnification under this Agreement shall be indemnified
pursuant to this Agreement to the extent that such party's Losses are increased
or extended by the willful misconduct, violation or law, or bad faith of such
party. Without limitation of the foregoing, Buyer shall use all commercially
reasonable efforts to collect all Accounts Receivable when due.
Section 12.08 Accounts Receivable. In the event that either Seller or
Shareholders are required to indemnify any of the Buyer Indemnitees as a result
of any breach of the representations and warranties contained in Section 3.05(f)
("Accounts Receivable") due to any Accounts Receivable being uncollectable,
Seller and Shareholders shall be deemed to have purchased from Buyer Indemnitees
all such Accounts Receivable dollar for dollar, and Seller and Shareholders
shall thereafter assume and have the right to exercise all available legal
remedies to collect such Accounts Receivable, including without limitation the
right to file legal actions to collect such debts.
ARTICLE XIII
TERMINATION
This Agreement may be terminated prior to the Closing only as follows: (i)
at any time by the mutual consent of Seller and Buyer; (ii) by Buyer, upon a
breach of any representation, warranty, covenant or agreement on the part of
Seller or upon the failure to fulfill any of the conditions set forth in this
Agreement in either case which has a material adverse effect on Buyer or Parent;
(iii) Seller, upon a breach of any representation, warranty, covenant or
agreement on the part of Buyer set forth in this Agreement in either case which
has a material adverse effect on Seller or any of the Shareholders; or (iv) by
either Seller or Buyer if the Closing shall not have occurred before August 15,
1999.
In the event of the termination of this Agreement as provided in this
Section, this Agreement shall become null and void and there shall be no
liability on the part of Seller or Buyer, except that the provisions of Section
5.03 and Articles 15, 16 and 17 shall survive such termination. If this
Agreement is terminated other than by the mutual consent of the parties, then
the parties that are in compliance with their obligations under this Agreement
shall be entitled to exercise and pursue all rights and remedies available to it
or them hereunder, at law, in equity or
35
otherwise, and shall be entitled to recover from the other party or parties all
of its or their out-of-pocket expenses incurred in connection with or relating
to the negotiation, preparation, execution and delivery of this Agreement.
ARTICLE XIV
ADDITIONAL ACTIONS AND DOCUMENTS; AMENDMENTS TO SCHEDULES
Each of the parties hereto agrees that it will, at any time, prior to, at
or after the Closing Date, take or cause to be taken such further actions, and
execute, deliver and file or cause to be executed, delivered and filed such
further documents and instruments, and obtain such consents, as may be necessary
or reasonably requested in connection with the consummation of the sale
contemplated by this Agreement or in order to fully effectuate the purposes,
terms and conditions of this Agreement. The Schedules or Exhibits attached to
this Agreement may be amended or supplemented prior to Closing only by mutual
agreement of the parties and either party may refuse to agree to any proposed
change for any reason whatsoever.
ARTICLE XV
BROKERS
Seller represents to Buyer that it has not engaged, or incurred any unpaid
liability (for any brokerage fees, finders' fees, commissions or otherwise) to,
any broker, finder or agent in connection with the transactions contemplated by
this Agreement, except for such liability Seller has to Ernst & Young LLP, or
any of their members or representatives, which liability shall be satisfied by
Seller, and not by Buyer. Buyer represents to Seller that Buyer has not engaged,
or incurred any unpaid liability (for any brokerage fees, finders' fees,
commissions or otherwise) to, any broker, finder or agent in connection with the
transactions contemplated by this Agreement except for such liability Buyer has
to ▇▇▇▇▇▇▇▇▇▇▇▇▇ Collet & Company, Inc., or any of their members or
representatives which liability shall be satisfied by Buyer, and not by Seller.
Seller agrees to indemnify Buyer, and Buyer agrees to indemnify Seller, against
any claims asserted against the other for any such fees or commissions by any
Person purporting to act or to have acted for or on behalf of the indemnifying
party including those named above. Notwithstanding any other provision of this
Agreement, this representation and warranty shall survive the Closing without
limitation.
ARTICLE XVI
EXPENSES
Except as otherwise provided herein, each party hereto shall pay its own
expenses incurred in connection with this Agreement and in the preparation for
and consummation of the transactions provided for herein. Notwithstanding the
foregoing, Buyer shall pay all costs of transferring the Property.
ARTICLE XVII
NOTICES
All notices, demands, requests, or other communications which may be or are
required to be given or made by any party to any other party pursuant to this
Agreement shall be in writing and shall be hand delivered, mailed by first-class
registered or certified mail, return receipt
36
requested, postage prepaid, delivered by a nationally recognized overnight air
courier, or transmitted by facsimile transmission addressed as follows:
(i) If to Buyer:
NN Ball & Roller, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Rock ▇. ▇▇▇▇, President
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇, Esq.
(ii) If to Seller or Shareholders:
▇▇▇▇▇▇▇ Capital Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Esq.
or such other address as the addressee may indicate by written notice to the
other parties.
Each notice, demand, request, or communication which shall be given or made in
the manner described above shall be deemed sufficiently given or made for all
purposes upon the earlier of (i) such time as it is actually delivered to the
addressee (with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a fax) a receipt confirmation being deemed
conclusive but not exclusive evidence of such delivery), or (ii) such time as
delivery is refused by the addressee upon presentation.
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ARTICLE XVIII
WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement shall impair any
such right, power or privilege or be construed as a waiver of any default or any
acquiescence therein except as provided herein. No single or partial exercise of
any such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
ARTICLE XIX
BENEFIT AND ASSIGNMENT
Except as hereinafter specifically provided in this Section, no party
hereto shall assign this Agreement, in whole or in part, whether by operation of
law or otherwise, without the prior written consent of Seller (if the assignor
is Buyer) or Buyer (if the assignor is Seller or Shareholders); and any
purported assignment contrary to the terms hereof shall be null, void and of no
force and effect. In no event shall any assignment by Seller of its rights and
obligations under this Agreement, whether before or after the Closing, release
Seller from its liabilities hereunder. Notwithstanding the foregoing, Buyer (or
any assignee of Buyer permitted by this sentence) may assign this Agreement and
any and all rights hereunder, in whole or in part, to any entity that controls,
is controlled by, or is under common control with Buyer.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns as permitted
hereunder. No Person other than the parties hereto is or shall be entitled to
bring any action to enforce any provision of this Agreement against any of the
parties hereto, and the covenants and agreements set forth in this Agreement
shall be solely for the benefit of, and shall be enforceable only by, the
parties hereto or their respective successors and assigns as permitted
hereunder.
ARTICLE XX
[Intentionally Omitted.]
ARTICLE XXI
ENTIRE AGREEMENT; AMENDMENT
This Agreement, including the Schedules and Exhibits hereto and the other
instruments and documents referred to herein or delivered pursuant hereto, and
that certain Confidentiality Agreement dated as of April 1, 1999, between Buyer
and Seller, contain the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless set
38
forth in writing and duly executed by the party against whom enforcement of the
amendment, modification or discharge is sought.
ARTICLE XXII
SEVERABILITY
If any part of any provision of this Agreement or any other agreement,
document or writing given pursuant to or in connection with this Agreement shall
be invalid or unenforceable under applicable law, such part shall be ineffective
to the extent of such invalidity or unenforceability only, without in any way
affecting the remaining parts of such provisions or the remaining provisions of
said agreement.
ARTICLE XXIII
HEADINGS
The headings of the sections and subsections contained in this Agreement
are inserted for convenience only and do not form a part or affect the meaning,
construction or scope thereof.
ARTICLE XXIV
GOVERNING LAW
This Agreement, the rights and obligations of the parties hereto, and any
claims or disputes relating thereto, shall be governed by and construed under
and in accordance with the whole laws of the State of Tennessee, including the
choice of law rules thereof.
ARTICLE XXV
SIGNATURE IN COUNTERPARTS
This Agreement may be executed in any number of counterparts, none of which
need contain the signatures of all parties, each of which shall be deemed to be
an original, and all of which taken together constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
39
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first above written.
▇▇▇▇▇▇▇ CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, f/b/o ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, f/b/o ▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
NN BALL & ROLLER, INC.
By: /s/ Rock ▇. ▇▇▇▇
Name: Rock ▇. ▇▇▇▇
Title: President
40
Exhibit A
Seller's December 31, 1998 Adjusted Balance Sheet
NN Ball & Roller, Inc.
Industrial Molding Corp
Adjusted Balance Sheet
12/31/98
Schedule A
Adjusted Industrial
Industrial Molding Adjustments Molding ▇▇▇
▇▇▇
------------------------------------------------------------
Assets
Current Assets
Cash & equivalents $ - $ -
Trade accounts receivable 4,498,397 (66,296) 4,432,101
Inventories 2,856,506 2,856,506
Prepaid expenses 77,430 77,430
------ ------
Total current assets 7,432,333 7,366,037
Property, plant & equipment
Buildings 5,164,371 5,164,371
Furniture & fixtures 1,906,106 1,906,106
Machinery & equipment 13,994,404 13,994,404
---------- ----------
21,064,881 21,064,881
Less Accumulated depreciation (13,114,882) (13,114,882)
----------- -----------
7,949,999 7,949,999
Land 481,940 481,940
Construction in progress 127,822 127,822
Total property, plan & equipment 8,559,761 8,559,761
--------- ---------
Note receivable less current portion - -
Other 810,535 (685,535) 125,000
------- -------- -------
Total Assets 16,802,629 16,050,798
========== ==========
Liabilities
Current Liabilities:
Outstanding checks $ 124,971 $ 124,971
Unearned revenue - customer deposits 144,100 144,100
Accounts payable 729,643 729,643
Accrued payroll & payroll taxes 355,911 30,435 386,346
Accrued accounts payable 1,655,391 (850,941) 804,450
Accrued taxes 175,718 175,718
------- -------
Total current liabilities 3,185,734 2,365,228
========= =========
The following schedules to the Asset Purchase Agreement have been omitted.
However, the Company agrees to furnish supplementally a copy of any omitted
schedule to the Commission upon request.
LIST OF SCHEDULES:
Schedule l(a) Property
Schedule l(b) Leases of Property and Improvements
Schedule 1(d) Fixtures and Personal Property
Schedule 1(e) Inventory and Supplies
Schedule l(f) Licenses
Schedule 1(h) Assumed Contracts
Schedule l(i) Deposits and Prepaid Expenses
Schedule l(j) Vehicles
Schedule 1(l) Computer Software and Customer Information
Schedule 1(x) Permitted Encumbrances
Schedule 2.01 Excluded Assets
Schedule 2.02 Current Liabilities
Schedule 2.05 Seller's Tax Basis
Schedule 3.03 Litigation, Orders, Judgments and Decrees
Schedule 3.04(a) Financial Statements
Schedule 3.05(e) Required Consents
Schedule 3.07 Intellectual Property
Schedule 3.11 Conflicts With Agreements and Laws
Schedule 3.12 Tax Audits
Schedule 3.13(a) Pension Plans, Welfare Plans and Other Plans
Schedule 3.14(c) Environmental Matters
Schedule 3.14(c)(iv) Underground Storage Tanks or Piping
Schedule 3.14(c)(v) Environmental Permits and Licenses
Schedule 3.15 Employees
Schedule 3.16 Insurance
Schedule 3.18 Customer Relationships
Schedule 4.07(b) Parent Capitalization
Schedule 5.02(b)(vi)(A) Capital Expenditure Commitments at Execution
Schedule 5.02(b)(vi)(B) Capital Expenditure Commitments between
Execution and Closing
Schedule 6.02 Employee Issues