EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 6, 1998
AMONG
NORTHWEST PIPE COMPANY
SOUTHWESTERN PIPE, INC.
P & H TUBE CORPORATION
AND
THE SHAREHOLDERS OF SOUTHWESTERN PIPE, INC.
AND P & H TUBE CORPORATION
TABLE OF CONTENTS
Page No.
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ARTICLE 1
Definitions and Principles of Interpretation..................... 1
1.1 Defined Terms.................................................... 1
1.2 Other Defined Terms.............................................. 7
1.3 Certain Rules of Interpretation.................................. 8
1.4 Exhibits and Schedules........................................... 8
1.5 Accounting Principles............................................ 8
ARTICLE 2
Sale and Purchase of Shares; Purchase Price Adjustment;
Payment of the Purchase Price................................... 9
2.1 Sale and Purchase................................................ 9
2.2 Purchase Price................................................... 9
2.3 Physical Inventory; Audit; Closing Balance Sheet................. 9
2.4 Purchase Price Adjustment........................................ 10
2.5 Payment of Purchase Price by Buyer............................... 11
ARTICLE 3
Closing......................................................... 12
3.1 Closing of Sale and Purchase..................................... 12
3.2 Deliveries by the Shareholders and the SP Companies.............. 12
3.3 Deliveries by Buyer.............................................. 13
ARTICLE 4
Representations and Warranties of the Shareholders............... 13
4.1 No Broker, Etc................................................... 13
4.2 Title to Shares.................................................. 13
4.3 Authorization; Enforceability.................................... 14
ARTICLE 5
Representations and Warranties of the SP Companies and the
Shareholders.................................................... 14
5.1 Organization and Qualification................................... 14
5.2 Capitalization................................................... 14
5.3 Subsidiaries..................................................... 15
5.4 Authority Relative to this Agreement............................. 15
5.5 Financial Statements............................................. 16
5.6 Absence of Certain Changes or Events............................. 17
5.7 Litigation....................................................... 18
5.8 Taxes............................................................ 18
5.9 Compliance with Permits, Applicable Laws and Agreements.......... 20
5.10 Employee Plans and Benefit Arrangements.......................... 20
5.11 Employee Contracts............................................... 23
5.12 Real Property.................................................... 23
5.13 Tangible Personal Property....................................... 24
5.14 Intangible Property.............................................. 24
5.15 Title to Assets.................................................. 25
5.16 Inventories and Receivables...................................... 26
5.17 Contracts........................................................ 26
5.18 Suppliers and Customers.......................................... 27
5.19 Products; Product Warranties..................................... 27
5.20 Environmental Matters............................................ 28
5.21 Transactions with Certain Persons................................ 29
5.22 Absence of Certain Payments...................................... 29
5.23 Records.......................................................... 29
5.24 Insurance........................................................ 30
5.25 Bank Accounts.................................................... 30
5.26 Directors, Officers and Managerial Employees..................... 30
5.27 No Broker, Etc................................................... 31
5.28 Other Negotiations............................................... 31
5.29 No Material Adverse Effect....................................... 31
5.30 No Untrue Statement or Omission.................................. 31
ARTICLE 6
Representations and Warranties of Buyer.......................... 32
6.1 Organization and Qualification................................... 32
6.2 Authority Relative to this Agreement............................. 32
6.3 No Broker, Etc................................................... 32
6.4 Securities Act Representations................................... 33
6.5 No Untrue Statement or Omission.................................. 33
ARTICLE 7
Tax Matters...................................................... 33
7.1 Tax Payment and Tax Return Filing Responsibilities............... 33
7.2 Tax Sharing and Indemnification.................................. 34
7.3 Cooperation...................................................... 35
ARTICLE 8
Additional Agreements and Covenants............................. 36
8.1 Access to Records and Personnel After Closing................... 36
8.2 Further Assurances.............................................. 36
8.3 Release of Obligations under Loan Agreement..................... 37
8.4 Patent Assignment............................................... 37
8.5 Noncompetition, Nonsolicitation and Confidentiality............. 37
ARTICLE 9
Survival and Indemnification.................................... 39
9.1 Survival........................................................ 39
9.2 Indemnification by the Shareholders............................. 40
9.3 Indemnification by Buyer........................................ 41
9.4 Notification and Defense of Claims or Actions................... 41
9.5 Use of Escrow Funds for Indemnification......................... 42
9.6 Reliance........................................................ 42
9.7 Purchase Price Adjustments...................................... 42
ARTICLE 10
General Provisions.............................................. 43
10.1 Expenses......................................................... 43
10.2 Public Announcements............................................. 43
10.3 Notices, Etc..................................................... 43
10.4 Attorneys' Fees.................................................. 44
10.5 Severability..................................................... 44
10.6 Remedies......................................................... 44
10.7 No Third-Party Beneficiaries..................................... 45
10.8 Governing Law.................................................... 45
10.9 Assignment and Binding Effect.................................... 45
10.10 Arbitration...................................................... 45
10.11 Shareholders' Representative..................................... 46
10.12 Entire Agreement................................................. 46
10.13 Counterparts..................................................... 46
10.14 Amendment........................................................ 46
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (hereinafter called "Agreement"), dated as of
March 6, 1998, among NORTHWEST PIPE COMPANY, an Oregon corporation ("Buyer"),
SOUTHWESTERN PIPE, INC., a Texas corporation ("Southwestern"), P&H TUBE
CORPORATION, a Texas corporation ("P&H Tube") (Southwestern and P&H Tube are
sometimes referred to herein individually as an "SP Company" and together as the
"SP Companies"), ▇▇▇▇▇ FAMILY INVESTMENTS PARTNERSHIP, LTD., ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, (together, the "Shareholders").
RECITALS
A. The Shareholders own 149,800 shares of common stock, par value
$.01 per share, of Southwestern (the "Southwestern Stock"), which shares
constitute all of the issued and outstanding shares of capital stock of
Southwestern.
B. The Shareholders own 224,700 shares of common stock, par value
$.01 per share, of P&H Tube (the "P&H Tube Stock"), which shares constitute all
of the issued and outstanding shares of capital stock of P&H Tube.
C. Buyer wishes to purchase the Southwestern Stock and the P&H Tube
Stock from the Shareholders and the Shareholders wish to sell the Southwestern
Stock and P&H Tube Stock to Buyer, in accordance with the terms and conditions
of this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, the parties hereby agree
as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF INTERPRETATION
1.1 DEFINED TERMS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate": As to any Person, any other Person which, directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person.
"Affiliated Group": An "affiliated group" as defined in Section
1504(a) of the Code.
"Authorized Representative": As to any Person, such Person's
officers, directors, employees, counsel and accountants.
"Business Records": All originals and copies of all operating data
and records of each of the SP Companies including, without limitation,
financial, accounting and bookkeeping books and records, customer complaint
files, product quality documentation, purchase and sale orders and invoices,
sales data, sales promotional data, advertising materials, marketing analyses,
past and present price lists, past and present customer service files, credit
files, warranty files, batch and product serial number records and files,
written operating methods and procedures, specifications, operating records and
other information related to the Tangible Personal Property, reference
catalogues, insurance files, personnel records and other records, on whatever
media, pertaining to the SP Companies, or to customers or suppliers of, or any
other Persons having contracts or other business relationships with, either of
the SP Companies.
"Buyer's Accountants": Coopers & ▇▇▇▇▇▇▇, LLP.
"Buyer's Disclosure Schedule": The disclosure schedule dated the date
of this Agreement, delivered by Buyer to the Shareholders and attached hereto.
"Claims Period": Except as otherwise specifically provided in Article
9, the period beginning on the Closing Date and ending on the second anniversary
of the Closing Date.
"Code": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
"Consent": Any consent, permission, approval or authorization of or
by any Person.
"Contract": Any written or oral contract, purchase or sale order,
real or personal property lease or sale agreement, Lien, promissory note, loan
agreement, guaranty or other agreement to which either of the SP Companies is a
party or by which either of the SP Companies is bound (other than the Employee
Contracts and the Minor Contracts) including, without limitation, all
distributor, sales representative and dealer agreements, joint venture and
teaming agreements, purchase and supply contracts, maintenance contracts,
license and royalty agreements, government contracts, partnering agreements,
indebtedness instruments, letters of credit, performance bonds, currency
contracts, agreements with respect to guaranties, suretyships, covenants not to
compete or solicit, confidentiality agreements and indemnification agreements,
purchase and all other contracts and agreements whatsoever, by or for the
benefit of either of the SP Companies, or by which either of the SP Companies is
bound, and all amendments relating to any of the foregoing.
"Corporate Records": For each of the SP Companies, the articles of
incorporation (including all amendments thereto), bylaws (including all
amendments thereto), minutes, unanimous written consents, resolutions, stock
records, stock transfer ledger, canceled certificates and other documents
customarily contained in corporate minute books.
2 - STOCK PURCHASE AGREEMENT
"Employee Contract": Any written or oral contract, agreement,
arrangement, policy, program, plan or practice (exclusive of any such contract,
agreement, arrangement, policy, program, plan or practice which is terminable
within thirty (30) days without liability to either of the SP Companies),
directly or indirectly providing for or relating to any employment, consulting,
remuneration, compensation or benefit, severance or other similar arrangement,
insurance coverage (including any self-insured arrangements), medical-surgical-
hospital or other health benefits, workers' compensation, disability benefits,
supplemental employment benefits, vacation benefits and other forms of paid or
unpaid leave, retirement benefits, tuition reimbursement, deferred compensation,
savings or bonus plans, profit-sharing, stock options, stock appreciation
rights, or other forms of incentive compensation or post-retirement compensation
or benefit, employment guarantee or security, or limitation on right to
discipline or discharge, or relating to confidentiality, nonsolicitation,
ownership of inventions, noncompetition or the like, which (i) is not an
Employee Plan, (ii) has been entered into or maintained, as the case may be, by
either of the SP Companies and (iii) covers any one or more Employee.
"Environmental Laws": All present federal, state and local laws
(whether under common law, statute, rule or regulation), Permits, and other
requirements of Governmental Authorities relating to the protection of human
health or the environment or to any Hazardous Materials. Such laws include,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act; Resource Conservation and Recovery Act; Clean Water Act; Clean
Air Act; Hazardous Materials Transportation Act; Toxic Substances Control Act;
Occupational Safety and Health Act; and their state and local counterparts.
"Environmental Liabilities": Any Loss suffered or incurred by Buyer
or the SP Companies by reason of, or in connection with, any of the conditions,
circumstances, processes or events described in any of the reports listed in
Schedule 5.20, provided that such Loss is suffered or incurred (i) in order to
comply with the requirements of Environmental Laws, (ii) in response to any
notice, order, investigation, requirement or Proceeding of any federal, state or
local regulatory agency or authority, (iii) in response to any third party
litigation or (iv) as a preventative measure that is designed to address, reduce
or mitigate a potential future Loss in a manner that is consistent with prudent
business practices and that has been approved in writing by the Shareholders'
Representative (or if not so approved, as determined through arbitration to be
necessary to address, reduce or mitigate a potential future Loss).
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder.
"ERISA Affiliates": Any trade or business, whether or not
incorporated, that is now or has at any time in the past been treated as a
single employer with either of the SP Companies under Section 414(b) or (c) of
the Code and the Treasury Regulations thereunder.
"Escrow Agent": Chase Bank of Texas, National Association.
3 - STOCK PURCHASE AGREEMENT
"Escrow Funds": The sum of $4,750,000 which shall be held by the
Escrow Agent and disbursed pursuant to the terms of the Escrow Agreement.
"GAAP": United States generally accepted accounting principles as
promulgated from time to time by the Financial Accounting Standards Board.
"Governmental Authority": Any United States federal, state or
municipal entity, any foreign government, and any political subdivision or other
executive, legislative, administrative, judicial, quasi-judicial or other
governmental department, commission, court, board, bureau, agency or
instrumentality, domestic or foreign.
"Hazardous Materials": Any and all hazardous, toxic or infectious
substances, materials or wastes and any other pollutant or contaminant as
defined or listed under any of the Environmental Laws, including, but not be
limited to, asbestos, petroleum or petroleum products, including crude oil and
any fraction thereof.
"Intangible Property": All intellectual property rights, including,
but not limited to, patents, patent applications, trademarks, trademark
applications and registrations, service marks, service ▇▇▇▇ applications and
registrations, tradenames, copyrights, licenses and customer lists, proprietary
processes, formulae, inventions, trade secrets, know-how, development tools and
other proprietary rights used by either of the SP Companies pertaining to any
product, software or service manufactured, marketed, licensed or sold by either
of the SP Companies in the conduct of its business or used, employed or
exploited, or available for use, in the development, manufacturing, licensing,
sale, marketing, distribution or maintenance thereof, and all documentation and
media constituting, describing or relating to the above, including, but not
limited to, manuals, memoranda, know-how, notebooks, software, records and
disclosures.
"Knowledge": As to any Person, that which such Person actually knows
or should know after reasonable investigation regarding the relevant matter and,
in the case of the Warranting Parties' Knowledge, that which ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇ actually know or should
know after reasonable investigation regarding the relevant matter.
"Lien": Any mortgage, pledge, lien, charge, encumbrance, security
interest or claim of
any kind.
"Litigation Liabilities": Any Loss suffered or incurred by Buyer or
the SP Companies by reason of, or in connection with, that certain action
generally described as Geape v. Southwestern Pipe, Inc. pending in the Circuit
Court of ▇▇▇▇▇▇ County, Maryland, Case No. 96-CA-33197 and any other claims or
actions related thereto.
"Loss": Any and all loss, damage, claim, obligation, liability,
penalty, cost, expense or other damage (including, without limitation,
reasonable attorney and other professional fees and
4 - STOCK PURCHASE AGREEMENT
costs and expenses incurred in investigating, preparing, defending against or
prosecuting any Proceeding).
"Material Adverse Effect": An effect on the business, properties,
assets, condition (financial or otherwise), liabilities, operations or prospects
of one or both of the SP Companies in an amount in excess of $50,000.
"Minor Contracts": Any blanket inventory purchase order by either of
the SP Companies in an aggregate amount of less than $10,000 annually and of a
duration of less than one year, any other purchase or sale order by either of
the SP Companies under $10,000, and any agreements relating to office equipment,
production support equipment, maintenance, security or utilities, or other
contracts and agreements which, in the aggregate for all contracts and/or
agreements with any one Person, result in the incurrence of annual expenditures
by either of the SP Companies of less than $10,000.
"Order": Any judgment, writ, injunction, order, directive, ruling or
decree of any arbitrator or any court or other Governmental Authority.
"Permit": Any permit, license, franchise, consent, variance,
exemption, or approval issued or granted by, or authorization of, or filing,
registration, qualification, declaration or designation with, any Governmental
Authority.
"Person": Any individual or corporation, company, general
partnership, limited partnership, limited liability company, limited liability
partnership, trust, incorporated or unincorporated association, joint venture,
Governmental Authority or other entity of any kind.
"Preexisting Liabilities": Any Loss suffered or incurred by Buyer or
the SP Companies by reason of, or in connection with, any action or inaction on
or before May 3, 1997 of any Shareholder, SPAX Incorporated, a Delaware
corporation, Southwestern Pipe, Inc., a Delaware corporation, ▇▇▇▇▇▇
Corporation, a Texas corporation, SPI Acquisition Corp., a Texas corporation,
either of the SP Companies or any other Person to which either of the SP
Companies is or is deemed to be a successor in interest, whether directly or
indirectly (including, without limitation, by merger, under applicable
Environmental Laws or otherwise), including, without limitation, any liabilities
assumed by the SP Companies under ▇▇▇▇ of Sale and Assumption of Liabilities
agreements dated April 30, 1997 or otherwise in connection with the
reorganization effected pursuant to the Reorganization Agreement dated May 1,
1997 by and among SPAX Incorporated, Southwestern Pipe, Inc. and the
stockholders of SPAX Incorporated, but not including any liabilities disclosed
in the Financial Statements or the SP Companies' Disclosure Schedules.
"Proceeding": Any claim, suit, action, arbitration, investigation or
proceeding.
"Real Property": All real property now or in the past owned, leased
or occupied by either of the SP Companies or any other Person to which either of
the SP Companies is or is deemed to be a successor in interest, whether directly
or indirectly (including, without limitation, by
5 - STOCK PURCHASE AGREEMENT
merger, under applicable Environmental Laws or otherwise), or in which either of
the SP Companies or any such other Person has now or in the past had any
interest, together with (i) all buildings and improvements located thereon and
(ii) all rights, privileges, interests, easements, hereditaments and
appurtenances relating thereto.
"Release": Any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migration, dumping or
disposing into the environment of Hazardous Materials which violates
Environmental Laws or Permits.
"Relevant Insider": Any officer, director, manager or purchasing
agent of either of the SP Companies.
"Securities Act": The Securities Act of 1933, as amended.
"Shareholders' Disclosure Schedule": The disclosure schedule dated
the date of this Agreement, delivered by the Shareholders to Buyer and attached
hereto.
"SP Companies' Accountants": Deloitte & Touche LLP.
"SP Companies' Disclosure Schedule": The disclosure schedule dated
the date of this Agreement, delivered by the SP Companies to Buyer and attached
hereto.
"Subsidiary": As to any Person, any other Person of which at least
the majority of the equity or voting interests are owned, directly or
indirectly, by such first Person.
"Tangible Personal Property": All tangible personal property (other
than inventory) used to conduct the business of either of the SP Companies
including, without limitation, production and processing equipment, warehouse
equipment, computer hardware, furniture and fixtures, transportation equipment,
leasehold improvements, supplies and other tangible assets, together with any
transferable manufacturer or vendor warranties related thereto.
"Tax": Any income, excise, franchise, sales, use, transfer, gross
receipts, payroll, personal property, real property, occupancy or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
related addition to tax, interest or penalty thereon, of any Governmental
Authority.
"Tax Affiliate": With respect to any Person, any other Person that is
a member of the same Affiliated Group as such Person.
"Tax Period" or "Taxable Period": Any period prescribed by any
Governmental Authority for which a Tax Return is required to be filed or a Tax
is required to be paid.
"Tax Return": Any type of return or report required to be filed as a
result of any Tax, and any return or informational report required to be filed
under the Code including, but not limited to, IRS forms 941, 1099 and 5500.
6 - STOCK PURCHASE AGREEMENT
"Transaction": The execution, delivery and performance of this
Agreement and the other agreements contemplated hereby, including the sale and
purchase of the Southwestern Stock and P&H Tube Stock and the other actions
required in connection therewith.
1.2 OTHER DEFINED TERMS
Term Section
---- -------
Affected Employees 8.7
Audit 2.3.2
Benefit Arrangement 5.10.1
Buyer Introductory Paragraph
Buyer's Minimum Amount 9.3
Closing 3.1
Closing Balance Sheets 2.3.2
Closing Date 3.1
Closing Date Payment 2.5.2
COBRA 5.10.10
Current Real Property 5.12
Disclosing Party 9.6
Employee Plan 5.10
Employees 5.10.1
Escrow Agreement 3.2.2
Financial Statements 5.5.1
HSR Act 5.4.5
Indemnified Party 9.4
Indemnity Obligor 9.4
Insurance 5.24.1
Material Adverse Effect 5.1
Material Permits 5.9.1
Objection Notice 2.3.4
P&H Tube Introductory Paragraph
Purchase Price 2.2
Purchase Price Adjustment 2.4.1
Registered Intangible Property 5.14.1
Related Person 5.21
Shareholders Introductory Paragraph
Shareholders' Minimum Amount 9.2
Shareholders' Representative 2.3.4
Southwestern Introductory Paragraph
SP Companies Introductory Paragraph
Warranting Parties Article 5, first clause
7 - STOCK PURCHASE AGREEMENT
1.3 CERTAIN RULES OF INTERPRETATION
1.3.1 The name assigned to this Agreement and the section captions
used herein are for convenience of reference only and shall not affect the
interpretation or construction hereof. Unless otherwise specified, (a) the
terms "hereof," "herein" and similar terms refer to this Agreement as a whole
and (b) references herein to "Articles" or "Sections" refer to articles or
sections of this Agreement.
1.3.2 The use of words in the singular or plural, or with a
particular gender, shall not limit the scope or exclude the application of any
provision of this Agreement to such Person or Persons or circumstances as the
context otherwise permits.
1.3.3 Time is of the essence in the performance of the parties'
respective obligations.
1.3.4 Unless otherwise specified, all references to money amounts are
to U.S. currency.
1.4 EXHIBITS AND SCHEDULES
The exhibits and schedules to this Agreement, as listed below, are
incorporated by this reference into this Agreement:
Exhibit A - List of Shareholders
Shareholders' Disclosure Schedule
SP Companies' Disclosure Schedule
Buyer's Disclosure Schedule
Schedule 2.4.1 - Audited Financial Statements for the year
ended September 30, 1997 and Balance Sheets as of February 28, 1998
Exhibit 3.2.2 - Escrow Agreement
1.5 ACCOUNTING PRINCIPLES
All references, if any, to generally accepted accounting principles
means to GAAP and all accounting terms, if any, not otherwise defined in this
Agreement have the meanings assigned to them in accordance with GAAP.
8 - STOCK PURCHASE AGREEMENT
ARTICLE 2
SALE AND PURCHASE OF SHARES;
PURCHASE PRICE ADJUSTMENT;
PAYMENT OF THE PURCHASE PRICE
2.1 SALE AND PURCHASE
Subject to the terms and conditions of this Agreement, on the Closing
Date, the Shareholders shall sell the Southwestern Stock and the P&H Tube Stock
to Buyer and Buyer shall purchase the Southwestern Stock and the P&H Tube Stock
from the Shareholders.
2.2 PURCHASE PRICE
The term the "Purchase Price" means $40,148,220 in cash. The Purchase
Price shall be subject to adjustment by the Purchase Price Adjustment, if any.
2.3 PHYSICAL INVENTORY; AUDIT; CLOSING BALANCE SHEET
2.3.1 There shall be conducted by the SP Companies, Buyer and Buyer's
Accountants, in accordance with GAAP, a physical taking of the inventory of each
of the SP Companies commencing at 8:00 A.M., local time, on the Closing Date, at
all of the SP Companies' facilities, wherever located. With respect to any
inventory of the SP Companies located at any premises not owned or leased by
them, the SP Companies shall obtain from an appropriate representative of each
Person who is in possession of any such off-site inventory, written
certification as to the amount of such off-site inventory as of such date. The
valuation of inventory will be computed by Buyer's Accountants in accordance
with GAAP and with the practices and procedures and other methods (including,
without limitation, the method of computing overhead and other indirect expenses
to be applied to inventory) used in computing the value of inventory for
purposes of preparation of the Financial Statements (except to the extent
inconsistent with GAAP).
2.3.2 As promptly as possible after the Closing, Buyer's Accountants
shall conduct an audit (the "Audit") of the balance sheet of each of the SP
Companies as of the close of business on the Closing Date in accordance with
GAAP (the "Closing Balance Sheets"), which balance sheets shall be certified by
Buyer's Accountants as having been prepared in accordance with GAAP. For
purposes of the Audit, the aggregate "materiality" level shall be $50,000.
2.3.3 All expenses and fees incurred in preparing or in connection
with the Closing Balance Sheets (including, without limitation, all expenses and
fees of Buyer's Accountants incurred in connection with the conduct of the
physical inventory pursuant to this Section 2.3) shall be borne exclusively by
Buyer.
2.3.4 As promptly as reasonably practicable and, in any event, not
later than forty (40) days after the Closing Date, Buyer's Accountants shall
deliver to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the
9 - STOCK PURCHASE AGREEMENT
"Shareholders' Representative") the Closing Balance Sheets, together with their
report. If the Shareholders' Representative does not object in writing to the
Closing Balance Sheets within ten (10) days after delivery, such Closing Balance
Sheets shall automatically become final and conclusive; any such written
objection (the "Objection Notice") shall set out the reasons for the objection,
the amount in dispute (if determinable), and the basis for the calculation of
such amount (if determinable). In the event that the Shareholders'
Representative properly objects in writing to the Closing Balance Sheets within
said 10-day review period, the Shareholders' Representative and Buyer shall
promptly meet and endeavor to reach agreement as to the content of the Closing
Balance Sheets. If the Shareholders' Representative and Buyer agree in writing
on the content of the Closing Balance Sheets, such Closing Balance Sheets shall
become final and conclusive.
2.3.5 If Buyer and the Shareholders' Representative are unable to
settle any dispute with respect to the Closing Balance Sheets within ten (10)
days after the delivery by the Shareholders' Representative to Buyer of the
Objection Notice, the dispute shall be referred to arbitration by a single
arbitrator, if such parties can agree upon one arbitrator, or otherwise by three
arbitrators, of whom one shall be appointed by Buyer and one shall be appointed
by the Shareholders' Representative and the third shall be chosen by the first
two named arbitrators. The arbitration and the appointment of the arbitrator
shall, except to the extent provided for in this Section, be conducted in
Portland, Oregon in accordance with the commercial arbitration rules of the
American Arbitration Association. Buyer and the Shareholders' Representative
shall cooperate in completing any arbitration as expeditiously as possible and
the arbitrators may hire such experts as may appear to be appropriate. If a
single arbitrator is used, all of the costs and expenses of the arbitration
shall be borne equally by Buyer and the Shareholders or in such other manner as
the arbitrator may determine to be appropriate. If three arbitrators are used,
the costs and expenses of the third arbitrator and any experts engaged by such
arbitrator shall be borne equally by Buyer and the Shareholders and each such
party shall pay the costs and expenses of the arbitrator appointed by it. Each
arbitrator shall be an audit partner with a "Big Six" certified public
accounting firm other than the SP Companies' Accountants or Buyer's Accountants
or any other accounting firm merged or proposed to be merged with or otherwise
acquired by either the SP Companies' Accountants or Buyer's Accountants.
Arbitration under this Section 2.3 shall be in substitution for and precludes
the bringing of any Proceeding in any court in connection with any objection
made by Buyer pursuant to this Section.
2.3.6 The determination of the arbitrator(s) shall be made within
thirty (30) days after the date on which the dispute was referred to arbitration
and the determination of the arbitrator(s) shall be final and binding on all
parties. The Closing Balance Sheets and the Purchase Price shall be adjusted in
accordance with the determination of the arbitrator(s).
2.4 PURCHASE PRICE ADJUSTMENT
The Purchase Price set out in Section 2.2 shall be adjusted (the
"Purchase Price Adjustment") as follows: (i) the Purchase Price shall be
increased or decreased on a dollar-for-dollar basis by an amount equal to any
increase or decrease in the aggregate current assets of the SP Companies less
the aggregate current liabilities of the SP Companies, which shall be
10 - STOCK PURCHASE AGREEMENT
calculated in accordance with GAAP but shall exclude term debt, revolving debt
and interest payable, from the February 28, 1998 balance sheets to the Closing
Balance Sheets; and (ii) the Purchase Price shall be reduced on a dollar-for-
dollar basis by an amount equal to the total amount of accrued interest payable,
outstanding revolving debt, outstanding term debt and other long-term
liabilities reflected on the Closing Balance Sheets.
2.5 PAYMENT OF PURCHASE PRICE BY BUYER
Buyer shall pay the Purchase Price and the Purchase Price Adjustment
as follows:
2.5.1 On the Closing Date, Buyer shall pay $35,398,220 in cash by
wire transfer to one or more accounts designated by the Shareholders'
Representative in writing not less than three (3) business days prior to the
Closing Date (the "Closing Date Payment"). The Closing Date Payment shall be
disbursed pursuant to the terms and conditions of that certain Agreement of
Shareholders dated of even date herewith by and among the Shareholders (the
"Shareholders' Agreement"), it being acknowledged and agreed that (i) Buyer
shall have no responsibility for payment to the Shareholders other than to make
payment to the account designated by the Shareholders' Representative, and (ii)
the Closing Date Payment shall not be disbursed to the Shareholders until the
earlier of (A) the payment of the Purchase Price Adjustment as described in
Section 2.5.3 or (B) the expiration of forty (40) days after the Closing Date,
in which event the Shareholders' Representative shall retain an amount
sufficient to cover any disputed amounts as contemplated by Section 2.3 of this
Agreement and shall be permitted to disburse the remainder of the Closing Date
Payment to the Shareholders in accordance with the Shareholders' Agreement.
2.5.2 On the Closing Date, Buyer shall deposit the Escrow Funds with
the Escrow Agent to be held and disbursed pursuant to the terms of the Escrow
Agreement.
2.5.3 Within ten (10) days after the completion of the Closing
Balance Sheets, Buyer or the Shareholders, as the case may be, shall pay to the
other the amount by which the Purchase Price, as adjusted by the Purchase Price
Adjustment, is greater or less than the sum of the Closing Date Payment and the
Escrow Funds. If the Purchase Price, as adjusted by the Purchase Price
Adjustment, is greater than the sum of the Closing Date Payment and the Escrow
Funds, Buyer shall pay such difference (without recourse to the Escrow Funds and
without respect to the Buyer's Minimum Amount) by wire transfer to an account
designated by the Shareholders' Representative in writing, such amount to be
disbursed pursuant to the terms and conditions of the Shareholders' Agreement,
it being acknowledged and agreed that Buyer shall have no responsibility for
payment to the Shareholders other than to make payment to such account. If the
Purchase Price, as adjusted by the Purchase Price Adjustment, is less than the
sum of the Closing Date Payment and the Escrow Funds, the Shareholders shall pay
such difference to Buyer (without recourse to the Escrow Funds and without
respect to the Shareholders' Minimum Amount) by wire transfer to an account
designated by Buyer in writing. If either party fails to pay any amount owing
to the other pursuant to this Section 2.5.3 within the specified ten-day period,
then the amount so owing shall be payable on demand and interest
11 - STOCK PURCHASE AGREEMENT
shall accrue on the unpaid amount from the date due until paid at the prime rate
of interest then charged by Buyer's primary financial institution, plus five
percent (5%) per annum, but not to exceed the maximum rate permitted by
applicable law.
ARTICLE 3
CLOSING
3.1 CLOSING OF SALE AND PURCHASE
Subject to the terms and conditions of this Agreement, the closing of
the sale and purchase of the Southwestern Stock and the P&H Tube Stock pursuant
to Article 2 hereof (the "Closing") shall take place at the offices of Ater
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP in Portland, Oregon, at 9:00 a.m. on March
6, 1998, or such earlier or later date as the parties may mutually agree upon in
writing (the "Closing Date").
3.2 DELIVERIES BY THE SHAREHOLDERS AND THE SP COMPANIES
At Closing, the Shareholders and the SP Companies shall, as
applicable, deliver to Buyer (and in the case of the Escrow Agreement referenced
below, to the Escrow Agent) the following:
3.2.1 The certificate or certificates representing the Southwestern
Stock and the P&H Tube Stock, duly endorsed in blank or with duly executed stock
powers attached;
3.2.2 Duly executed originals or counterparts of an Escrow Agreement
in substantially the form set forth in Exhibit 3.2.2 (the "Escrow Agreement");
3.2.3 A certified copy of the resolutions duly adopted by the Boards
of Directors of each of the SP Companies authorizing the Transaction;
3.2.4 The written resignations of all of the current officers and
members of the Boards of Directors of the SP Companies, in each instance
effective as of the Closing Date;
3.2.5 Good standing certificates as of a date not more than five (5)
days prior to the Closing Date issued by the Secretary of State (or other
appropriate Governmental Authority) of the state of incorporation of each of the
SP Companies, and of each state in which each of the SP Companies is qualified
to do business;
3.2.6 An affidavit executed by the Shareholders to the effect that
they are not a "foreign person" within the meaning of Section 1445 of the Code;
3.2.7 The original Corporate Records of each of the SP Companies; and
3.2.8 Such other agreements, documents, certificates and instruments
as Buyer may reasonably request.
12 - STOCK PURCHASE AGREEMENT
3.3 DELIVERIES BY BUYER
At the Closing, Buyer shall deliver the following:
3.3.1 To the Shareholders, the amount due the Shareholders in
accordance with Section 2.5.1;
3.3.2 To the Escrow Agent, the Escrow Funds due the Escrow Agent in
accordance with Section 2.5.2;
3.3.3 To the Shareholders and the Escrow Agent, duly executed
originals or counterparts of the Escrow Agreement;
3.3.4 To the Shareholders, a certified copy of the resolutions duly
adopted by the Board of Directors of Buyer authorizing the Transaction; and
3.3.5 Such other agreements, documents, certificates and instruments
as the Shareholders may reasonably request.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders severally represents and warrants to Buyer
that, except as set forth in the Shareholders' Disclosure Schedule, which
identifies exceptions by specific section references:
4.1 NO BROKER, ETC.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Transaction based
upon arrangements made by or on behalf of such Shareholder.
4.2 TITLE TO SHARES
The Shareholder is the record and beneficial owner of the shares of
Southwestern Stock and P&H Tube Stock in the amount set forth opposite such
Shareholder's name on Exhibit A attached hereto. The Shareholder has good,
valid and marketable title to the shares of Southwestern Stock and P&H Tube
Stock in the amount set forth opposite such Shareholder's name on Exhibit A
attached hereto, free and clear of all Liens, with full right and lawful
authority to sell and transfer such shares. Upon payment for the Southwestern
Stock and P&H Tube Stock as provided in Section 2.5, Buyer will acquire good,
valid and marketable title thereto, free and clear of all Liens.
13 - STOCK PURCHASE AGREEMENT
4.3 AUTHORIZATION; ENFORCEABILITY
This Agreement has been duly and validly executed and delivered by
such Shareholder and constitutes a valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court in which any such Proceeding may be
brought.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SP COMPANIES AND THE SHAREHOLDERS
Each of the Shareholders, Southwestern and P&H Tube (collectively, the
"Warranting Parties") jointly and severally represent and warrant to Buyer that,
except as set forth in the SP Companies' Disclosure Schedule, which identifies
exceptions by specific section reference:
5.1 ORGANIZATION AND QUALIFICATION
5.1.1 Southwestern is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and has the corporate
power to carry on its business as it is now being conducted and currently
proposed to be conducted. Southwestern is qualified to conduct business and is
in good standing in the states, countries and territories listed in Section 5.1
of the SP Companies' Disclosure Schedule. Southwestern is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a Material Adverse Effect.
5.1.2 P&H Tube is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and has the corporate
power to carry on its business as it is now being conducted and currently
proposed to be conducted. P&H Tube is qualified to conduct business and is in
good standing in the states, countries and territories listed in Section 5.1 of
the SP Companies' Disclosure Schedule. P&H Tube is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect.
5.2 CAPITALIZATION
5.2.1 The authorized capital stock of Southwestern consists of
1,000,000 shares of common stock, $.01 par value, of which 149,800 shares are
issued and outstanding as of the date hereof. All of the shares of Southwestern
Stock were duly authorized and validly issued,
14 - STOCK PURCHASE AGREEMENT
and are fully paid and nonassessable. No shares of Southwestern capital stock
are held in its treasury. As of the date hereof, there are no bonds, debentures,
notes or other evidences of indebtedness having the right to vote on any matters
on which Southwestern's shareholders may vote issued or outstanding. There are
no subscriptions, options, warrants, calls or other rights, agreements or
commitments outstanding which obligate Southwestern to issue, deliver, sell or
otherwise cause to become outstanding any of its capital stock or debt
securities, or which obligate Southwestern to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to Southwestern.
5.2.2 The authorized capital stock of P&H Tube consists of 1,000,000
shares of common stock, $.01 par value, of which 224,700 shares are issued and
outstanding as of the date hereof. All of the shares of P&H Tube Stock were
duly authorized and validly issued, and are fully paid and nonassessable. No
shares of P&H Tube's capital stock are held in its treasury. As of the date
hereof, there are no bonds, debentures, notes or other evidences of indebtedness
having the right to vote on any matters on which the shareholders of P&H Tube
may vote issued or outstanding. There are no subscriptions, options, warrants,
calls or other rights, agreements or commitments outstanding which obligate P&H
Tube to issue, deliver, sell or otherwise cause to become outstanding any of its
capital stock or debt securities, or which obligate P&H Tube to grant, extend or
enter into any such option, warrant, call or other such right, agreement or
commitment. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or similar rights with respect to P&H Tube.
5.3 SUBSIDIARIES
5.3.1 Neither Southwestern nor P&H Tube has any Subsidiaries, and
neither Southwestern nor P&H Tube has any equity investment or other ownership
interest in, and has not made advances in an amount in excess of $5,000 to, any
Person.
5.4 AUTHORITY RELATIVE TO THIS AGREEMENT
5.4.1 Each of the SP Companies has the corporate power to enter into
this Agreement and to carry out its obligations hereunder.
5.4.2 The Transaction and the execution and delivery of this
Agreement have been duly authorized by the Board of Directors of each of the SP
Companies. No other corporate proceedings on the part of either of the SP
Companies is necessary to authorize the Transaction.
5.4.3 This Agreement constitutes a valid and binding obligation of
each of the SP Companies, enforceable against them in accordance with its terms
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally, and except that
the availability of equitable remedies, including specific performance, is
subject to the discretion of the court in which any such Proceeding may be
brought.
15 - STOCK PURCHASE AGREEMENT
5.4.4 Neither the execution, delivery or performance of this
Agreement, or any other agreement relating hereto, or any other aspect of the
Transaction, will: (a) require any Consent of the shareholders of either of the
SP Companies; (b) conflict with, or violate any provision of, or constitute or
result in a breach or default (with or without notice, lapse of time or both) or
give rise to a right of termination, cancellation or acceleration of any
obligation or the loss of any material benefit, under (i) any charter or bylaw
of either of the SP Companies, or (ii) any indenture, loan document provision or
other Contract, Permit, Order, statute, law, ordinance, rule or regulation
applicable to either of the SP Companies or its properties or assets; or (c)
result in or require the imposition of any Lien with respect to, or upon, either
of the SP Companies or its properties or assets.
5.4.5 Except for filings and approvals required by the ▇▇▇▇-▇▇▇▇▇-
▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act"), no Permit
or Consent is necessary for the consummation by the SP Companies of the
Transaction.
5.5 FINANCIAL STATEMENTS
5.5.1 The Shareholders have previously furnished Buyer with true and
complete copies of (i) the audited consolidated financial statements of SPAX
Incorporated and subsidiaries as of and for the years ended September 30, 1993,
1994, 1995 and 1996, (ii) the unaudited combined financial statements of the SP
Companies as of and for the years ended September 30, 1993, 1994, 1995, 1996 and
1997, (iii) the pro forma summaries of revenues, cost of sales, and gross
profits of the SP Companies for the five years ended September 30, 1997 with the
review report thereon of the SP Companies' Accountants (iv) the audited
financial statements of each of the SP Companies as of September 30, 1997 and
for the period May 1, 1997 to September 30, 1997, and (v) the unaudited
financial statements of each of the SP Companies as of and for the months ended
October 31, 1997, November 30, 1997, December 31, 1997, January 31, 1998 and
balance sheets of each of the SP Companies as of February 28, 1998. The
financial statements covered by clauses (iv) and (v) are collectively referred
to in this Agreement as the "Financial Statements."
5.5.2 The Financial Statements are in accordance with the books and
records of the SP Companies and fairly present, in all material respects, the
consolidated financial position, results of operations and cash flows of the SP
Companies as of the dates and for the periods indicated, in each case in
conformity with GAAP, except as otherwise indicated in such Financial
Statements, and in the case of unaudited Financial Statements, subject to normal
year-end audit adjustments, the absence of footnotes and other disclosures
associated with an audited report. There are no adjustments that would be
required on audit of the unaudited Financial Statements that would, individually
or in the aggregate, have a Material Adverse Effect. The audited Financial
Statements provide fully for all material fixed and non-contingent liabilities
of the SP Companies and disclose or provide fully for all material contingent
liabilities of a type required to be disclosed or provided for in financial
statements in accordance with GAAP. All prepaid expenses, if any, included as
assets of the SP Companies represent payments theretofore made by the SP
Companies, the benefit and advantage of which may be obtained or enjoyed by the
SP Companies, as applicable, after the Closing Date.
16 - STOCK PURCHASE AGREEMENT
5.5.3 The SP Companies do not have any liabilities or obligations
(absolute, accrued, contingent or otherwise), which are material to the SP
Companies and which are not disclosed or provided for in the Financial
Statements, other than (i) liabilities and obligations incurred between January
31, 1998 and the date hereof in the ordinary course of the business of the SP
Companies, consistent with past practice and (ii) except as otherwise disclosed
in Section 5.5.3 of the SP Companies' Disclosure Schedule. There is no basis
for any such liability against either of the SP Companies, whether absolute,
accrued, contingent or otherwise, which is or would have a Material Adverse
Effect, not reflected in the Financial Statements.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
Since September 30, 1997, there has not been:
5.6.1 any material adverse change in the business, financial
condition, liabilities (net of any corresponding increase in assets), results of
operations or, to the Warranting Parties' Knowledge, prospects of either of the
SP Companies, other than changes in laws or regulations of general applicability
and general economic conditions;
5.6.2 any damage, destruction or loss, whether covered by insurance
or not, materially and adversely affecting the financial condition, properties
or businesses of either of the SP Companies;
5.6.3 any declaration, payment or setting aside for payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to the capital stock of either of the SP Companies or any direct or indirect
redemption, purchase or other acquisition of any shares of capital stock of
either of the SP Companies;
5.6.4 any increase in the compensation of or granting of bonuses
payable or to become payable by either of the SP Companies to any officer or
Employee whose 1997 fiscal-year compensation (salary plus bonus) exceeded
$50,000, other than annual increases or bonuses consistent with the past
practices or pursuant to the terms and provisions of the Employee Contracts and
not exceeding, for any such officer or Employee, ten percent (10%) of such
officer's or Employee's 1997 fiscal-year compensation;
5.6.5 any accrual or arrangement for or payment by either of the SP
Companies of severance bonuses or special compensation of any kind to any
director, officer or Employee;
5.6.6 any capital expenditures by either of the SP Companies, or
commitments therefor, aggregating more than $10,000;
5.6.7 any sale or other transfer by either of the SP Companies of any
material tangible or intangible asset, any granting of a Lien relating to any
such material asset, any lease of real property or equipment, or any
cancellation of any debt or claim, except in the ordinary course of business;
17 - STOCK PURCHASE AGREEMENT
5.6.8 any incurrence by either of the SP Companies of any obligation
or liability (absolute or contingent), except current obligations and
liabilities incurred in the ordinary course of business in amounts and on terms
consistent with past practices;
5.6.9 any material change in accounting methods or principles or any
revaluation of any of the assets of either of the SP Companies (including,
without limitation, any change in depreciation or amortization policies or
rates);
5.6.10 any amendment or termination of any Contract or Permit to
which either of the SP Companies is a party, except in the ordinary course of
business;
5.6.11 any loan by either of the SP Companies to any Person or
guaranty by either of the SP Companies of any loan;
5.6.12 any waiver or release of any material right or claim of either
of the SP Companies, except in the ordinary course of business;
5.6.13 any commencement or notice or, to the Warranting Parties'
Knowledge, threat of commencement of any Proceeding against or investigation of
either of the SP Companies;
5.6.14 any claim of wrongful discharge or other unlawful labor
practice or action involving either of the SP Companies; or
5.6.15 to the Warranting Parties' Knowledge, any other event or
condition of any character that has or might reasonably have a Material Adverse
Effect;
5.7 LITIGATION
There is no Proceeding pending or, to the Warranting Parties'
Knowledge, threatened against either of the SP Companies, nor is there any Order
outstanding against either of the SP Companies.
5.8 TAXES
5.8.1 Each of the SP Companies has duly filed all Tax Returns with
the proper Governmental Authority, and all such Tax Returns were correct and
complete in all material respects.
5.8.2 Each of the SP Companies has paid or accrued in full all Taxes
required to be paid or accrued for all Tax Periods, before such payment became
delinquent; no deficiencies have been or, to the Warranting Parties' Knowledge,
will be assessed with respect thereto for any such period through the Closing
Date; and no notice of deficiency or assessment with respect to the Company has
been received.
18 - STOCK PURCHASE AGREEMENT
5.8.3 All Taxes which the SP Companies have been required to collect
or withhold have been duly collected or withheld and, to the extent required
when due, have been or will be duly paid to the proper Governmental Authority.
5.8.4 None of the Tax Returns which include or should have included
the SP Companies have been examined by any Governmental Authority; the
Warranting Parties have no Knowledge of any pending audits of such Tax Returns;
there are no claims which have been or, to the Warranting Parties' Knowledge,
may be asserted relating to such Tax Returns; and no notice of audit or
examination with respect to such Tax Returns has been received.
5.8.5 Neither of the SP Companies is a party to any Tax sharing
agreement or similar arrangement with any other party.
5.8.6 There are no federal, state, local or foreign Tax Liens upon
any of the properties or assets of either of the SP Companies, and there are no
unpaid Taxes which are or could become a Lien on the properties or assets of
either of the SP Companies, except for current Taxes not yet due and payable.
5.8.7 There have been no waivers or extensions of any statute of
limitations by either of the SP Companies with respect to any Governmental
Authority responsible for assessing or collecting Taxes.
5.8.8 Correct and complete copies of all Tax Returns which include
the SP Companies have been provided to Buyer.
5.8.9 Neither of the SP Companies has agreed or been required to make
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise, except for adjustments under Section 481(a)
which have been fully recognized on or before the Closing Date.
5.8.10 Neither of the SP Companies has participated in an
international boycott within the meaning of Section 999 of the Code.
5.8.11 Neither of the SP Companies is a foreign person as defined in
Section 1445 of the Code.
5.8.12 Neither of the SP Companies has, and neither has had, a
permanent establishment in any foreign country, as defined in any applicable tax
treaty or convention between the United States and such foreign country.
5.8.13 Neither of the SP Companies has any income from any joint
venture, partnership or other arrangement or contract that could be treated as a
partnership for federal income Tax purposes, on which either of them would be
required to report and pay Taxes.
19 - STOCK PURCHASE AGREEMENT
5.9 COMPLIANCE WITH PERMITS, APPLICABLE LAWS AND AGREEMENTS
5.9.1 Each of the SP Companies holds all Permits, the failure of
which to hold would have a Material Adverse Effect (the "Material Permits").
The SP Companies' Disclosure Schedule sets forth a true and complete list of all
Material Permits. Each of the SP Companies is in compliance with the terms of
the Material Permits, except for such failures to comply which, individually or
in the aggregate, would not have a Material Adverse Effect.
5.9.2 The business of each of the SP Companies is being conducted in
compliance with all laws, ordinances and regulations of all Governmental
Authorities (including, but not limited to, laws pertaining to employment and
employment practices, terms and conditions of employment, wages and hours,
safety, health, fire prevention and other matters), except for possible
violations which individually or in the aggregate do not and would not have a
Material Adverse Effect.
5.9.3 Neither of the SP Companies is in default (or in a circumstance
which, with notice or lapse of time, or both, would constitute a default) under
any agreement or instrument to which either of the SP Companies is a party,
whether or not such default has been waived, except for any such default which,
alone or in the aggregate with other such defaults, would not have a Material
Adverse Effect.
5.9.4 The provisions of this Section shall not be construed or
applied to narrow or otherwise restrict the scope of any other representations
and warranties in this Article 5.
5.10 EMPLOYEE PLANS AND BENEFIT ARRANGEMENTS
5.10.1 The SP Companies' Disclosure Schedule sets forth a true and
complete list of all the following: (i) each "employee benefit plan," as such
term is defined in Section 3(3) of ERISA (each an "Employee Plan"), and (ii)
each other plan, program, policy, contract or arrangement providing for bonuses,
pensions, deferred compensation, stock or stock-related awards, severance pay,
salary continuation or similar benefits, hospitalization, medical, dental or
disability benefits, life insurance or other employee benefits, or compensation
to or for any current or former officers, directors, employees, agents, or
independent contractors of either of the SP Companies ("Employees") or any
beneficiaries or dependents of any Employee, whether or not insured or funded,
(A) pursuant to which either of the SP Companies has any material liability or
(B) constituting an employment or severance agreement or arrangement with any
officer or director of either of the SP Companies (each, a "Benefit
Arrangement"). The SP Companies have used their reasonable efforts to provide to
Buyer with respect to each Employee Plan and Benefit Arrangement: (i) a true and
complete copy of all written documents, including amendments, comprising such
Employee Plan or Benefit Arrangement or, if there is no such written document,
an accurate and complete description of such Employee Plan or Benefit
Arrangement; (ii) all Form 5500s or Form 5500-Cs (including all schedules
thereto), if applicable; (iii) the most recent financial statements and
actuarial reports, if any; (iv) the summary plan description currently in effect
and all material modifications thereof, if any; and (v) the most recent IRS
determination letter, if any; and (vi) filings with the Department of
20 - STOCK PURCHASE AGREEMENT
Labor, including, but not necessarily limited to, "top hat" filings pursuant to
Department of Labor Regulation Section 2520.104-23, if any. Any such Employee
Plans and Benefit Arrangements not so provided are not material to either of the
SP Companies.
5.10.2 (i) The SP Companies have established and maintained in all
material respects each Employee Plan and Benefit Arrangement in accordance with
its terms and in material compliance with all applicable laws, including, but
not limited to, ERISA and the Code; and (ii) to the Warranting Parties'
Knowledge, any third party trustee has complied in all material respects in the
maintenance of each Employee Plan and Benefit Arrangement with all applicable
laws and requirements. To the Warranting Parties' Knowledge, neither of the SP
Companies nor any of their Employees, nor, to the Knowledge of the Warranting
Parties, any other disqualified Person or party-in-interest with respect to any
Employee Plan, has engaged directly or indirectly in any "prohibited
transaction" or "party-in-interest" transaction as such terms are defined in
Section 4975 of the Code or Section 406 of ERISA, with respect to which either
of the SP Companies could have or has any material liability.
5.10.3 The SP Companies have no Employee Plan that is subject to
Title IV of ERISA and have had no ERISA Affiliate at any time since their
inception.
5.10.4 There are no pending or, to the Warranting Parties' Knowledge,
threatened Proceedings by any Employees or plan participants or the
beneficiaries, spouses or representatives of any of them, against any Employee
Plan or Benefit Arrangement, the assets held thereunder, the trustee of any such
assets, or either of the SP Companies relating to any of the Employee Plans,
other than ordinary and usual claims for benefits by participants or
beneficiaries. Furthermore, there are no pending, or to the Warranting Parties'
Knowledge, threatened Proceedings by any Governmental Authority against any
Employee Plan or Benefit Arrangement, the trustee of any assets held thereunder,
or either of the SP Companies relating to any of the Employee Plans or Benefit
Arrangements.
5.10.5 No Employee Plan has been the subject of an IRS or Department
of Labor audit. There are no pending Proceedings or, to the Warranting Parties'
Knowledge, threatened Proceedings in which the "qualified" status of any
Employee Plan is at issue and in which revocation of the determination letter
has been threatened. Each such Employee Plan has not been amended or operated,
since the receipt of the most recent determination letter, in a manner that
would materially adversely affect the "qualified" status of the Employee Plan.
No distributions have been made from any of the Employee Plans that would
violate in any material respect the restrictions under Treas. Reg. Section
1.401(a)(4)-5(b). To the Knowledge of the Warranting Parties, there has been no
termination, partial or otherwise, as defined in Section 411(d) of the Code and
the regulations thereunder, of any Employee Plan.
5.10.6 Each of the SP Companies has made all required contributions
under each Employee Plan on a timely basis or, if not yet due, adequate accruals
therefor have been provided for in the Financial Statements.
21 - STOCK PURCHASE AGREEMENT
5.10.7 The Transaction (either alone or together with any additional
or subsequent events) does not constitute an event under any Employee Plan,
Benefit Arrangement or individual Employee Contract, that may result in any
payment (whether of severance pay or otherwise), restriction or limitation upon
the assets of any Employee Plan or Benefit Agreement, acceleration of payment or
vesting, increase in benefits or compensation, or required funding, with respect
to any Employee, or the forgiveness of any loan or other commitment of any
Employee.
5.10.8 To the Warranting Parties' Knowledge, no amounts paid or
payable by either of the SP Companies to or with respect to any Employee will
fail to be deductible for federal income tax purposes by reason of Section 280G
of the Code.
5.10.9 No Employees and no beneficiaries or dependents of Employees
are or may become entitled under any Employee Plan or Benefit Arrangement to
post-employment welfare benefits of any kind, including, without limitation,
death or medical benefits, other than coverage mandated by Section 4980B of the
Code.
5.10.10 The Employee Plans that are group health plans (as defined
for the purposes of Section 4980B of the Code and Part 6 of Subtitle B of Title
I of ERISA, and all regulations thereunder (such provisions of law and
regulations are hereinafter referred to as "COBRA")) have complied in all
material respects at all times during the past three (3) years with requirements
of COBRA to provide health care continuation coverage to qualified beneficiaries
who have elected, or may elect to have, such coverage. The SP Companies and
their agents who administer any of the Employee Plans or Benefit Arrangements,
have complied in all material respects at all times during the past three (3)
years with the notification and written notice requirements of COBRA. There are
no pending or, to the Warranting Parties' Knowledge, threatened Proceedings by
any current Employee, former Employee, participant or beneficiary, dependent or
representative of any such person, involving the failure of any Employee Plan or
Benefit Arrangement or of any other group health plan ever maintained by either
of the SP Companies to comply with the health care continuation coverage
requirements of COBRA.
5.10.11 There are no agreements with, or pending petitions for
recognition of, a labor union or an association as the exclusive bargaining
agent for any of the Employees of either of the SP Companies; no such petitions
have been pending at any time within two years of the date of this Agreement,
and, to the Warranting Parties' Knowledge, there has not been any organizing
effort by any union or other group seeking to represent any Employees of either
of the SP Companies as their exclusive bargaining agent at any time within two
years of the date of this Agreement. There are no labor strikes, work stoppages
or other labor matters, other than routine grievance matters, now pending or, to
the Warranting Parties' Knowledge, threatened against either of the SP
Companies.
22 - STOCK PURCHASE AGREEMENT
5.11 EMPLOYEE CONTRACTS
Each of the SP Companies has provided Buyer with copies of all
Employee Contracts for the current Employees. All of the Employees are "at-
will" employees, and no Employees have oral or written employment agreements
with either of the SP Companies.
5.12 REAL PROPERTY
5.12.1 The SP Companies' Disclosure Schedule contains a true,
complete and correct list of the Real Property. As applicable (i) each of the
SP Companies has title to the Real Property currently owned by it, (ii) each of
the SP Companies enjoys peaceful and undisturbed possession of the Real Property
currently leased by it, (iii) the interests of the SP Companies in the Real
Property currently owned, leased or occupied by either of the SP Companies
("Current Real Property") are not subject to any commitment for sale or use by
any Person other than the SP Companies, (iv) the interests of the SP Companies
in the Current Real Property are not subject to any Lien or legal impediment
which in any material respect interferes with or impairs the value,
transferability or present and continued use thereof in the usual and normal
conduct of business of the SP Companies, (v) no labor has been performed or
material furnished on behalf of or at the request of either of the SP Companies
for the Real Property for which a mechanic's or materialman's Lien or Liens, or
any other Lien, has been or could be claimed by any Person on such interest in
the Current Real Property in an amount in excess of $10,000, and (vi) the SP
Companies use of the Current Real Property is in compliance in all material
respects with all applicable zoning, building code and other laws.
5.12.2 There are no condemnation or eminent domain Proceedings
pending or, to the Knowledge of the Warranting Parties, contemplated or
threatened, against the Current Real Property or any part thereof, and the
Warranting Parties have no Knowledge of any desire of any Governmental Authority
to take or use the Current Real Property or any part thereof. There are no
existing or, to the Knowledge of the Warranting Parties, contemplated or
threatened, general or special assessments affecting the SP Companies' interests
in the Current Real Property or any portion thereof. Neither of the SP
Companies has received notice of any pending or threatened Proceeding before any
Governmental Authority which relates to the ownership, maintenance, use or
operation of such company's interest in the Real Property, nor do the Warranting
Parties have Knowledge of any fact which might give rise to any such Proceeding.
5.12.3 To the actual knowledge of the Warranting Parties, the
buildings and improvements on the Current Real Property (including, without
limitation, the heating, air conditioning, mechanical, electrical and other
systems used in connection therewith) are in a reasonable state of repair, have
been reasonably well maintained and are reasonably free from infestation by
termites, other wood destroying insects, vermin and other pests. There are no
repairs or replacements exceeding $50,000 in the aggregate for all Current Real
Property or $10,000 for any single repair or replacement which are currently
planned or which, to the actual knowledge of the Warranting Parties, should be
made as of the Closing Date in order to maintain said buildings and improvements
in a reasonable state of repair.
23 - STOCK PURCHASE AGREEMENT
5.12.4 The buildings, structures and improvements on each parcel of
the Current Real Property lie entirely within the boundaries of the Current Real
Property as specified in the applicable legal description set forth in the
Company Disclosure Schedule, and no structures of any kind encroach on such Real
Property.
5.12.5 Each parcel of the Current Real Property has unencumbered
access to adequate electric, gas, water, sewer and telephone lines, all of which
are adequate for the uses to which such property is currently devoted by the SP
Companies.
5.13 TANGIBLE PERSONAL PROPERTY
5.13.1 The SP Companies' Disclosure Schedule lists, for each of the
SP Companies, each item of Tangible Personal Property owned by such company
having an original book value in excess of $10,000, and the SP Companies'
Disclosure Schedule lists, for each of the SP Companies, each item of Tangible
Personal Property leased by such company (other than individual leases of office
equipment having an annual rental of less than $10,000).
5.13.2 The Tangible Personal Property constitutes substantially all
tangible personal property necessary to conduct the business of each of the SP
Companies as currently being conducted. All of the Tangible Personal Property is
located at the Current Real Property and there is no Tangible Personal Property
located at any of the Current Real Property which is not owned or leased by the
SP Companies other than minor personal effects of Employees.
5.13.3 To the actual knowledge of the Warranting Parties, the
Tangible Personal Property is, in all material respects, in reasonable working
order and adequate for its intended use, ordinary wear and tear excepted. There
are no repairs or replacements exceeding $50,000 in the aggregate for all
Tangible Personal Property or $10,000 for any single item of Tangible Personal
Property which are currently planned by the SP Companies or which, to the actual
knowledge of the Warranting Parties, should be made as of the Closing Date in
order to maintain the Tangible Personal Property in reasonable working order.
5.14 INTANGIBLE PROPERTY
5.14.1 The SP Companies' Disclosure Schedule contains a true, correct
and complete list, for each of the SP Companies, of: (i) United States federal,
state and foreign grants, registrations and applications existing or outstanding
with respect to the Intangible Property owned by such company, including,
without limitation, all applicable grants, registration, application or serial
numbers and other filing or recording information and all expiration dates
pertaining thereto (the "Registered Intangible Property"); (ii) all license
agreements relating to Intangible Property to which such company is a party; and
(iii) all other trademarks, tradenames and service marks which constitute
Intangible Property.
5.14.2 (i) The Registered Intangible Property is owned
exclusively by the SP Companies and, to the actual knowledge of the Warranting
Parties, is used exclusively by one of the SP Companies, (ii) the Registered
Intangible Property is free and clear of all Liens,
24 - STOCK PURCHASE AGREEMENT
(iii) there is no pending or, to the Warranting Parties' Knowledge, threatened
Proceeding by or before any Governmental Authority alleging any infringement or
other violation of any right of any third Person in or to the Intangible
Property, (iv) there is not now, and there has not been during the past five
years, any asserted claim of infringement or other violation of any other
intellectual property right of any third Person resulting from the conduct of
either of the SP Companies, and the Warranting Parties have no Knowledge that
any such infringement or violation exists or will be alleged, (v) the Warranting
Parties have no actual knowledge of any activity by any third Person which does
or might constitute an infringement or other violation of the rights of the SP
Companies in or to any Intangible Property, (vi) neither of the SP Companies has
entered into any license, consent, indemnification, forbearance to ▇▇▇,
settlement agreement or cross-licensing arrangement with any Person relating to
the Intangible Property or any intellectual property right of any third Person,
other than software licenses entered into in the ordinary course of business and
having an aggregate value less than $2,500, (vii) there are no agreements
relating to and materially affecting any Intangible Property of either of the SP
Companies or the use or ownership thereof, including, without limitation,
license agreements, confidentiality and non-disclosure agreements, assignments
or agreements to assign, development agreements, settlement agreements and other
related agreements; and (viii) the Warranting Parties are unaware of any
information which would materially adversely affect any of the Intangible
Property or render any of the Intangible Property invalid or unenforceable.
5.14.3 The Intangible Property constitutes all intangible property
necessary and sufficient to operate the business of the SP Companies as
currently conducted. The consummation of the transactions contemplated hereby
will not result in the loss or impairment of either of the SP Companies' rights
in the Intangible Property. No shareholder or Employee of either of the SP
Companies owns, directly or indirectly, in whole or in part, any rights in any
of the Intangible Property. Each of the SP Companies has the right to use its
corporate name, as now used, and, each tradename or assumed name under which it
conducts its business as currently conducted. No Person has asserted to either
of the SP Companies or, to the Knowledge of the Warranting Parties, threatened
to assert to either of the SP Companies, any claim or made any demand to the
right to such company's corporate name or any such tradename or assumed name or
the right to use any such name, and no Proceeding is pending or threatened,
which challenges the right of such member with respect thereto. To the
Warranting Parties' actual knowledge, no other Person is using any such names as
a corporate name, tradename or assumed name.
5.15 TITLE TO ASSETS
Each of the SP Companies has good and indefeasible title to all of its
assets as described in the most recent balance sheet contained in the Financial
Statements and in the SP Companies' Disclosure Schedule, free and clear of all
Liens, except as otherwise set forth in the SP Companies' Disclosure Schedule.
25 - STOCK PURCHASE AGREEMENT
5.16 INVENTORIES AND RECEIVABLES
5.16.1 The inventories of each of the SP Companies at September 30,
1997 and February 28, 1998 are shown, respectively, on the balance sheets at
September 30, 1997 and February 28, 1998 referred to in Section 5.5. Such
inventories and the inventories acquired by each of the SP Companies subsequent
to the date of such balance sheets consist of items of a quality and quantity
usable and salable in the normal course of each such Company's business and not
in excess of its reasonable requirements. To the Knowledge of the Warranting
Parties, the values of obsolete materials and materials below standard quality
have been written down on its books of account to realizable market value, or
adequate reserves have been provided therefor in accordance with GAAP. All items
included in such inventories are owned by each such SP Company, except for sales
made subsequent to the date of such balance sheets in the ordinary course of
business, for all of which either the purchaser has made full payment or the
purchaser is obligated to make payment and such obligation is an asset of the SP
Companies in accordance with GAAP. To the Knowledge of the Warranting Parties,
all inventories of raw materials and finished goods are carried on the September
30, 1997 and February 28, 1998 balance sheets referred to in Section 5.5 and are
carried on the books at the lower of cost (last in-first out) or market. The
inventories are not in excess of reasonable requirements.
5.16.2 All receivables of each of the SP Companies shown on the
balance sheets at September 30, 1997 and February 28, 1998 referred to in
Section 5.5 arose in the ordinary course of business, and, to the Knowledge of
the Warranting Parties, the aggregate amounts thereof are collectible at the net
recorded value thereof, and are carried at values determined in accordance with
GAAP. Each of the SP Companies has established reserves for doubtful accounts
only in accordance with GAAP and to the extent reflected in the Financial
Statements. To the Knowledge of the Warranting Parties, none of the receivables
of the SP Companies is subject to any stated claim of offset, recoupment, setoff
or counterclaim, and the Warranting Parties have no Knowledge of any facts or
circumstances that would give rise to any such claim. To the Knowledge of the
Warranting Parties, no receivables are contingent upon the performance by either
of the SP Companies of any obligation or contract. No agreement for deduction
or discount has been made with respect to any of such receivables.
5.16.3 No agreement or commitment has been made with or to any
customer by either of the SP Companies to provide price or payment concessions
to such customer in any future sale or sales to such customer.
5.17 CONTRACTS
5.17.1 The SP Companies' Disclosure Schedule contains a true and
correct list of the Contracts, except in the case of purchase or sale orders
which are listed as of the close of business on February 23, 1998. True and
correct copies of all of the Contracts (other than purchase or sale orders) have
been delivered to Buyer. Each of the Contracts is valid, binding and
enforceable by each of the SP Companies which is a party to such Contract in
accordance with its terms. None of the Contracts is subject to termination
except in accordance with its terms or except as provided by applicable law.
26 - STOCK PURCHASE AGREEMENT
5.17.2 Each of the Contracts is in full force and effect, all fees,
rents, royalties and other payments due thereunder are current, neither of the
SP Companies nor, to the Warranting Parties' Knowledge, any other party is in
material default thereunder or in material breach thereof, and neither of the SP
Companies has sought or obtained any waiver of or under any provision of any
Contract, including without limitation, any waiver from any lender or other
creditor of any term, condition or default under any Contract (other than
waivers obtained which have no continuing Material Adverse Effect). There exists
no event or occurrence, condition or act which constitutes or, with the giving
of notice, the lapse of time or the happening of any future event or condition,
would become, a material default by either of the SP Companies or, to the
Warranting Parties' Knowledge, any other party under any of the Contracts. The
Warranting Parties have no Knowledge of any threatened default under any of the
Contracts.
5.17.3 Neither of the SP Companies is a party to any Contract which:
(i) was not entered into in the ordinary course of business; (ii) requires any
such SP Company to make any capital expenditure in excess of $10,000, or (iii)
has a term of greater than one year (other than Contracts which are cancelable
without penalty in sixty (60) days or less).
5.18 SUPPLIERS AND CUSTOMERS
To the Warranting Parties' Knowledge, no substantial supplier or
customer (who accounted for more than 10% of aggregate fiscal 1997 annual
purchases or more than 10% of aggregate fiscal 1997 annual revenues, as the case
may be, of either of the SP Companies) intends to terminate its relationship
with such SP Company; nor do any of the Warranting Parties have Knowledge that
any material problem or dispute with any supplier or customer exists. To the
Knowledge of the Warranting Parties, each of the SP Companies has good business
relationships with its suppliers and customers. To the Warranting Parties'
Knowledge consummation of the Transaction will not disrupt any existing
relationships with any supplier or customer of the SP Companies.
5.19 PRODUCTS; PRODUCT WARRANTIES
5.19.1 A form of each product warranty relating to products
manufactured or sold by each of the SP Companies at any time preceding the date
of this Agreement is attached to or set forth in the SP Companies' Disclosure
Schedule.
5.19.2 The SP Companies' Disclosure Schedule sets forth, for each of
the SP Companies, a true and complete list, of (i) all products manufactured,
marketed or sold by the SP Companies that have been recalled, withdrawn or
subject to a warranty claim (whether voluntarily or otherwise) and (ii) to the
Warranting Parties' Knowledge, all Proceedings (whether completed or pending)
seeking the recall, withdrawal, warranty claim, suspension or seizure of any
product sold by either SP Company.
5.19.3 The Warranting Parties have no Knowledge of any material
defect in design, materials, manufacture or otherwise in any products
manufactured, distributed or sold by either
27 - STOCK PURCHASE AGREEMENT
of the SP Companies, or any defect in repair to, or replacement of, any such
products, which defect could give rise to any Material Adverse Effect.
5.19.4 The average annual cost of all product repairs and
replacements performed by each of the SP Companies, including repairs and
replacements prior to customer acceptance, does not exceed $50,000.
5.19.5 Except as provided in any of the standard product warranties
described in this Section or as otherwise required by law, neither of the SP
Companies has sold any products or services which are subject to an extended
warranty beyond twelve (12) months and which warranty has not yet expired.
5.20 ENVIRONMENTAL MATTERS
5.20.1 To the Knowledge of the Warranting Parties, each of the SP
Companies, and each of the SP Companies' assets, properties and operations are
now and at all times have been in compliance in all material respects with all
applicable Environmental Laws. There has been and is no Release or, to the
Warranting Parties' Knowledge, threatened Release of any Hazardous Material at,
on, under, in, to or from any of the Real Property which relates to either of
the SP Companies' operations and activities at the Real Property which would
have a Material Adverse Effect. Neither of the SP Companies has received any
notice of alleged, actual or potential responsibility for, or any Proceeding
regarding, the presence, Release or threatened Release of any Hazardous Material
at any location, whether at the Real Property or otherwise, which Hazardous
Materials were allegedly manufactured, used, generated, processed, treated,
stored, disposed or otherwise handled at or transported from the Real Property.
5.20.2 Neither of the SP Companies has received any notice of any
Proceeding by any Person alleging any actual or threatened injury or damage to
any Person, property, natural resource or the environment arising from or
relating to the presence, Release or threatened Release of any Hazardous
Materials at, on, under, in, to or from the Real Property or in connection with
any operations or activities thereat, or at, on, under, in, to or from any other
property. To the Knowledge of the Warranting Parties, neither the Real Property
nor any operations or activities thereat is or has been subject to any
Proceeding, Order or Lien relating to any applicable Environmental Laws.
5.20.3 There are no underground storage tanks presently located at
the Real Property and there have been no Releases of any Hazardous Materials
from any underground storage tanks or related piping at the Real Property which
would have a Material Adverse Effect. To the Knowledge of the Warranting
Parties, there are no PCBs located at, on or in the Real Property and there is
no asbestos or asbestos-containing material located at, on or in the Real
Property, except in compliance with Environmental Laws.
28 - STOCK PURCHASE AGREEMENT
5.21 TRANSACTIONS WITH CERTAIN PERSONS
No Relevant Insider, nor any Person related to any Relevant Insider by
blood or marriage, nor any corporation, partnership, trust or other entity in
which any such Person has a substantial interest as a shareholder, officer,
director, trustee, partner or otherwise, or any Affiliate of any of the
foregoing (each, a "Related Person"), is presently or at any time since May 3,
1997 has been a party to any material transaction (other than normal
compensation arrangements for Employees and reimbursements of expenses in
connection with such Employees' duties with the SP Companies) of either of the
SP Companies, including, without limitation, any contract, agreement or other
arrangement (A) providing for the furnishing of material services to or by, (B)
providing for the rental or sale of real or personal property to or from, or (C)
otherwise requiring payments of an amount in excess of $500 annually to or from
(other than for services as Employees) such Related Person. No Relevant Insider
is related to any other Relevant Insider by blood or marriage. There is no
outstanding amount in excess of $500 owing (including, without limitation,
pursuant to any advance, note or other indebtedness instrument) from either of
the SP Companies to any Related Person or from any Related Person to either of
the SP Companies. Each of the Related Person transactions set forth in the SP
Companies' Disclosure Schedule, if any, was entered into between the SP
Companies and the Related Person on an arms length basis on terms no less
favorable than could be obtained from an unrelated third party.
5.22 ABSENCE OF CERTAIN PAYMENTS
To the Warranting Parties' Knowledge, neither of the SP Companies nor
any of their Employees or other Persons acting on their behalf, nor any
Affiliate of any of the foregoing, has with respect to either of the SP
Companies, (i) engaged in any activity, prohibited by the United States Foreign
Corrupt Practices Act of 1977 or any other similar law, regulation or Order of
any Governmental Authority or (ii) without limiting the generality of the
preceding clause (i), used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to officials of any Governmental
Authority. To the Knowledge of the Warranting Parties, neither of the SP
Companies nor any of their shareholders, Employees or other Persons acting on
behalf of any of them, or any Affiliate of any of the foregoing, has accepted or
received any unlawful contributions, payments, gifts or expenditures.
5.23 RECORDS
5.23.1 The Business Records of the SP Companies have been maintained
and preserved in accordance with sound business practices, have been made
available to Buyer for review and will be in the possession of each of the SP
Companies, respectively, at the Closing.
5.23.2 Complete and correct copies of the Corporate Records of each
of the SP Companies have been delivered to Buyer as part of the SP Companies'
Disclosure Schedule. The minutes of each of the SP Companies contain a complete
and accurate record of those meetings and significant actions of shareholders
and directors, and of any executive committee
29 - STOCK PURCHASE AGREEMENT
or other committee of the shareholders or board of directors, for which minutes
were prepared or for which actions were approved by unanimous written consent
and for which no meetings were held. The stock records of each of the SP
Companies are complete and accurate and contain a complete and accurate record
of all share transactions from the date of its incorporation.
5.24 INSURANCE
5.24.1 The SP Companies' Disclosure Schedule contains a complete and
accurate list of (i) all current policies or binders of fire, product liability,
automobile liability, general liability, worker's compensation and other forms
of insurance (showing as to each policy or binder the carrier, policy numberand
expiration dates) maintained by each of the SP Companies and relating to each of
the SP Companies' properties and assets or personnel (collectively, the
"Insurance") and (ii) all other "occurrence" basis insurance policies maintained
by each of the SP Companies at any time with respect to the business of the SP
Companies.
5.24.2 All of the Insurance is sufficient for compliance in all
material respects with all requirements of applicable law and of all contracts
to which the SP Companies are parties. Neither of the SP Companies is in
default in any material respect under any of the Insurance, and neither of the
SP Companies has failed to give any notice or to present any claim under any of
the Insurance in a due and timely fashion. To the Knowledge of the Warranting
Parties, there are no facts upon which any insurer might be justified in
reducing coverage or increasing premiums more than is normal or customary on any
of the existing Insurance. No notice of cancellation, termination, reduction in
coverage or increase in premium (other than reductions in coverage or increases
in premiums in the ordinary course) has been received with respect to any of the
Insurance, and all premiums with respect to any of the Insurance have been
timely paid.
5.24.3 Neither of the SP Companies has experienced claims in excess
of current Insurance coverage, and the Insurance is in full force and effect. To
the Knowledge of the Warranting Parties, there will be no retrospective
insurance premiums or charges on or with respect to any of the Insurance for any
period or occurrence prior to the Closing Date.
5.25 BANK ACCOUNTS
The SP Companies' Disclosure Schedule contains (i) a true, complete
and correct list of all bank accounts and safe deposit boxes maintained by each
of the SP Companies and all persons entitled to draw thereon, to withdraw
therefrom or with access thereto, (ii) a description of all lock box
arrangements for each of the SP Companies, (iii) a true, complete and correct
list of all powers of attorney executed by each of the SP Companies.
30 - STOCK PURCHASE AGREEMENT
5.26 DIRECTORS, OFFICERS AND MANAGERIAL EMPLOYEES
The SP Companies' Disclosure Schedule lists all directors, officers
and managerial employees of each of the SP Companies, showing their names,
positions, current annual base compensation, current fringe benefits and, for
the most recently completed fiscal year, bonuses.
5.27 NO BROKER, ETC.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Transaction based
upon arrangements made by or on behalf of either of the SP Companies.
5.28 OTHER NEGOTIATIONS
Except for the Transaction, there is no existing commitment or offer
by any Shareholder or either of the SP Companies to sell all or a significant
part of the assets of either of the SP Companies, and there are no pending
negotiations for the sale of all or a substantial part of the assets of either
of the SP Companies.
5.29 NO MATERIAL ADVERSE EFFECT
To the Knowledge of the Warranting Parties, except as disclosed in the
SP Companies' Disclosure Schedule, there does not exist any fact or circumstance
which, alone or together with another fact or circumstance, could reasonably be
expected to result in a Material Adverse Effect.
5.30 NO UNTRUE STATEMENT OR OMISSION
No representation or warranty made by the Warranting Parties contained
in this Agreement and no statement by the Warranting Parties and/or any
Authorized Representatives of the Warranting Parties contained in any
certificate, list, exhibit or other instrument specified in this Agreement,
including without limitation the SP Companies' Disclosure Schedule, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
5.31 NO OTHER REPRESENTATIONS.
Neither of the SP Companies nor any Shareholder makes any
representations or warranties, express or implied, of any nature whatsoever
except as specifically set forth in this Agreement.
31 - STOCK PURCHASE AGREEMENT
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Shareholders that, except as set
forth in Buyer's Disclosure Schedule, which identifies exceptions by specific
section references:
6.1 ORGANIZATION AND QUALIFICATION
Buyer is a corporation duly organized and validly existing under the
laws of the State of Oregon and has the corporate power to carry on its business
as it is now being conducted.
6.2 AUTHORITY RELATIVE TO THIS AGREEMENT
6.2.1 Buyer has the corporate power to enter into this Agreement and
all of the documents and agreements contemplated hereby and to carry out its
obligations hereunder.
6.2.2 The Transaction has been duly authorized by Buyer's Board of
Directors. No other corporate proceedings on the part of Buyer are necessary to
authorize the Transaction.
6.2.3 This Agreement constitutes a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court in which any such Proceeding may be brought.
6.2.4 No Permit or Consent is necessary for the consummation by Buyer
of the Transaction.
6.2.5 Neither the execution, delivery or performance of this
Agreement, or any other agreement relating hereto, or any other aspect of the
Transaction, will: (a) require any Consent of the shareholders of Buyer; (b)
conflict with, or violate any provision of, or constitute or result in a breach
or default (with or without notice, lapse of time or both) or give rise to a
right of termination, cancellation or acceleration of any obligation or the loss
of any material benefit, under (i) any charter or bylaw of Buyer; or (ii) any
indenture, loan document provision or other Contract, Permit, Order, statute,
law, ordinance, rule or regulation applicable to Buyer or its properties or
assets; or (c) result in or require the imposition of any Lien with respect to,
or upon, Buyer or its properties or assets.
6.3 NO BROKER, ETC.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Transaction based
upon arrangements made by or on behalf of Buyer.
32 - STOCK PURCHASE AGREEMENT
6.4 SECURITIES ACT REPRESENTATIONS
Buyer (i) understands that the Southwestern Stock and the P&H Tube
Stock have not been, and will not be, registered under the Securities Act, or
under any state securities laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not involving any public offering,
(ii) is acquiring the Southwestern Stock and the P&H Tube Stock solely for its
own account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
the SP Companies and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding the
Southwestern Stock and the P&H Tube Stock, (v) is able to bear the economic risk
and lack of liquidity inherent in holding the Southwestern Stock and the P&H
Tube Stock, and (vi) is an Accredited Investor as defined in Regulation D under
the Securities Act of 1933, as amended.
6.5 NO UNTRUE STATEMENT OR OMISSION
No representation or warranty made by Buyer contained in this
Agreement and no statement of Buyer and/or any Authorized Representative of
Buyer contained in any certificate, list, exhibit or other instrument specified
in this Agreement, including without limitation Buyer's Disclosure Schedule,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
6.6 NO OTHER REPRESENTATION.
The Buyer makes no representations or warranties, expressed or
implied, of any nature whatsoever except as specifically set forth in this
Agreement.
ARTICLE 7
TAX MATTERS
7.1 TAX PAYMENT AND TAX RETURN FILING RESPONSIBILITIES
7.1.1 Taxes on Sale of Shares
The Shareholders shall be solely responsible for, and shall timely
pay, all Taxes related to the ownership of the Southwestern Stock and the P&H
Tube Stock and the sale of the Southwestern Stock and the P&H Tube Stock to
Buyer, including, without limitation, applicable interest and penalties.
33 - STOCK PURCHASE AGREEMENT
7.1.2 Buyer's Tax Return Filing Responsibilities
(a) Buyer shall be responsible for, and shall timely file, all Tax
Returns of the SP Companies that are required to be filed after the Closing Date
(taking into account extensions) other than the Tax Returns for which the
Shareholders are responsible under Section 7.1.3(a).
(b) With respect to any Tax Return to be filed by Buyer for a Taxable
Period beginning on or before the Closing Date, Buyer shall deliver, at least 10
days prior to the earlier of the actual filing date or the due date for filing
of such Tax Return (including extensions), to the Shareholders a statement
setting forth the amount of Tax for which the Shareholders are responsible
pursuant to this Agreement, and copies of such Tax Return. The Shareholders
shall have the right to review such Tax Return and, in the case of Tax Returns
that relate to periods ending on or before the Closing Date, to direct Buyer to
make any changes to such Tax Returns for which there is a reasonable basis.
7.1.3 The Shareholders' Tax Return Filing Responsibilities
(a) The Shareholders shall be responsible for, shall prepare or cause
to be prepared, and shall timely file or cause to be timely filed, all Tax
Returns of the SP Companies that are required to be filed for Taxable Periods
ending on or before the Closing Date (taking into account extensions).
(b) The Shareholders shall deliver to Buyer a copy of each Tax Return
prepared by or on behalf of the SP Companies for which the Shareholders are
responsible to file under this Section 7.1.3 within 10 days prior to the earlier
of the actual filing date or the due date for filing such Tax Return (including
extensions). Buyer shall have the right to review each such Tax Return and to
direct the Shareholders to make any changes to each such Tax Return for which
there is a reasonable basis.
7.2 TAX SHARING AND INDEMNIFICATION
7.2.1 Taxable Periods Ending on or Before the Closing Date
The Shareholders shall be liable for, shall pay or cause to be paid,
and shall indemnify and hold the SP Companies and Buyer, and all of their
respective directors, officers, employees and agents, harmless from: (a) any
unaccrued Taxes with respect to the SP Companies for any Tax Period ending on or
before the Closing Date; and (b) that portion of the Shareholders' liability
determined under Section 7.2.3.
34 - STOCK PURCHASE AGREEMENT
7.2.2 Taxable Periods Commencing after the Closing Date
Buyer shall be liable for, shall pay or cause to be paid, and shall
indemnify and hold the Shareholders harmless from: (a) Taxes with respect to
the SP Companies for any Taxable Period commencing after the Closing Date; and
(b) that portion of Buyer's liability determined under Section 7.2.3.
7.2.3 Taxable Periods Commencing before the Closing Date and Ending
After the Closing Date
Each of the SP Companies shall close its books and records as of the
Closing Date. The Shareholders, the SP Companies and Buyer will, to the extent
permitted by applicable law, elect with the relevant Governmental Authority to
close the Taxable Periods of the SP Companies as of the Closing Date. In any
case where applicable law does not permit the SP Companies to close their
Taxable Periods as of the Closing Date, Taxes for such Taxable Periods shall be
allocated between the Shareholders and Buyer as follows: (a) with respect to
Taxes based on income, the Shareholders shall be responsible for all Taxes on
income of the SP Companies attributable to operations prior to the Closing Date
for which accruals are not reflected in the Closing Balance Sheet, (b) with
respect to Taxes based on sales or similar transactions and ad valorem Taxes,
Buyer shall be responsible for all such Taxes other than Taxes attributable to
sales or property ownership prior to the Closing Date for which accruals are not
reflected in the Closing Balance Sheet, and (c) with respect to any other Taxes
not described in (a) or (b) above, based on a method mutually acceptable to the
Shareholders and Buyer.
7.2.4 Refunds and Tax Benefits.
Any tax refunds that are received by Buyer or either of the SP
Companies, and any amounts credited against tax to which the Buyer or either of
the SP Companies become entitled, that relate to Tax Periods or portions thereof
ending on or before the Closing Date shall be for the account of the
Shareholders, and Buyer shall pay over to the Shareholders as additional
Purchase Price any refund or the amount of any such credit within fifteen (15)
days after receipt or entitlement thereto. In addition, to the extent that a
claim for refund or a proceeding results in a payment or credit against tax by a
taxing authority to the Buyer or either of the SP Companies of any accrued tax
liability on the Closing Balance Sheet, Buyer shall pay such amount to the
Shareholders as additional Purchase Price within fifteen (15) days after receipt
or entitlement thereto.
7.3 COOPERATION
The Shareholders and Buyer shall reasonably cooperate, and shall cause
their respective Tax Affiliates, officers, employees, agents, auditors, and
representatives reasonably to cooperate, in preparing and filing all Tax Returns
(including amended returns and claims for refund), including maintaining and
making available to each other all records necessary in connection with Taxes
and in resolving all disputes and audits with respect to all Taxable Periods
relating to Taxes. Buyer shall notify the Shareholders within 15 days of
receipt of any federal
35 - STOCK PURCHASE AGREEMENT
or state taxing agency audit of or assessment against either of the SP Companies
involving any tax year or Tax Period in which the Shareholders were shareholders
of the SP Companies. The Shareholders shall have the right to participate in the
defense of such audit or assessment and the same shall not be settled without
the prior written approval of the Shareholders.
ARTICLE 8
ADDITIONAL AGREEMENTS AND COVENANTS
8.1 ACCESS TO RECORDS AND PERSONNEL AFTER CLOSING
8.1.1 For a period of six (6) years after the Closing Date, the
Shareholders and their Authorized Representatives shall have reasonable access
to all books and records of the SP Companies, and to all Employees having
Knowledge with respect thereto, to the extent that such access may reasonably be
required by the Shareholders in connection with matters relating to matters as
to which the Shareholders are required to provide indemnification under this
Agreement. Such access shall be provided at no cost to the Shareholders upon
receipt of reasonable advance notice and during normal business hours, provided
such access does not unduly disrupt the SP Companies' normal business
operations. The Shareholders shall be solely responsible for any costs or
expenses incurred by the Shareholders pursuant to this Section.
8.1.2 For a period of six (6) years after the Closing Date, Buyer and
its Authorized Representatives shall have reasonable access to all of the books
and records relating to the SP Companies which the Shareholders or any of their
Authorized Representatives may retain after the Closing Date. Such access shall
be afforded by the Shareholders and their Authorized Representatives upon
receipt of reasonable advance notice and during normal business hours. Buyer
shall be solely responsible for any costs and expenses incurred by it pursuant
to this Section.
8.2 FURTHER ASSURANCES
Each party will cooperate in good faith with each other party and will
take all appropriate action and execute any agreement, instrument or other
writing of any kind which may be reasonably necessary or advisable to carry out
and confirm the transactions contemplated by this Agreement (including, but not
limited to, obtaining Consents from any Person from whom a Consent is not
obtained on or before the Closing).
36 - STOCK PURCHASE AGREEMENT
8.3 RELEASE OF OBLIGATIONS UNDER LOAN AGREEMENT
Immediately after the SP Companies pay off all outstanding
indebtedness of such companies under that certain Amended and Restated Loan and
Security Agreement dated July 1, 1997 (the "Loan Agreement"), the Shareholders
shall cause the SP Companies to be released from any and all liability or
obligations under the Loan Agreement.
8.4 PATENT ASSIGNMENT
Promptly after the Closing Date, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") will
execute and deliver all documents necessary to effect an assignment to P&H Tube
of all rights, title and interest that ▇▇▇▇▇ may have in United States Patent
No. 5,040,831.
8.5 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY
8.5.1 ▇▇▇▇▇ acknowledges that, on and after the Closing Date, Buyer
will continue to conduct the Business previously conducted by the SP Companies.
In order to protect Buyer, and Buyer's investment in the SP Companies, it is
necessary that ▇▇▇▇▇ refrain from direct or indirect competition with Buyer and
the SP Companies.
8.5.2 ▇▇▇▇▇ agrees that, for a period of five (5) years from the
Closing Date, ▇▇▇▇▇ shall not, and ▇▇▇▇▇ shall cause his Affiliates not to, (a)
Compete with Buyer or the SP Companies in the Restricted Territory; (b) employ
or Solicit the employment of any Person who is employed by the SP Companies at
the date of this Agreement or who was employed by the SP Companies within the
past twelve (12) months; (c) directly or indirectly canvass or Solicit business
in competition with the Business from any Person who during the past three (3)
years shall have been a customer of the SP Companies, or from any Person which
▇▇▇▇▇ has reason to believe might in the future become a customer of the SP
Companies as a result of marketing efforts, contacts or other facts and
circumstances of which ▇▇▇▇▇ has Knowledge; (d) willfully dissuade or discourage
any Person from using, employing or conducting business with Buyer or the SP
Companies; (e) use or disclose to any Person, directly or indirectly, any
information concerning the names, addresses and telephone numbers of the
employees, suppliers or customers of the SP Companies; (f) Solicit or in any
manner attempt to induce or encourage any Person to leave the employment of the
SP Companies or cease or reduce their business or commercial relationship with
the SP Companies; (g) disrupt or interfere with, or seek to disrupt or interfere
with, the business or contractual relationship between either of the SP
Companies and any supplier who during the past three (3) years shall have
supplied components, materials or services to Buyer or the SP Companies; and (h)
aid any other Person in doing anything described in this Section.
8.5.3 As used in this 8.5:
(a) the term "Business" means the manufacture, distribution or
sale of any products being sold by the SP Companies or Northwest Pipe Company as
of the date of this Agreement.
37 - STOCK PURCHASE AGREEMENT
(b) the term "Compete" means to engage or attempt to engage in
the Business or any other business activity which is the same as, or
substantially similar to or directly or indirectly competitive with, the
Business, or to directly or indirectly:
(i) have any financial interest in;
(ii) join, operate, control or participate in, or be
connected as an agent, trustee, independent contractor, partner,
shareholder or other equity owner of (except as holder of not more
than one percent of the outstanding partnership units, stock or other
equity of any class of a limited partnership, corporation or other
Person, the units, stock or other equity of which is actively publicly
traded);
(iii) provide services in any capacity to those
participating in the ownership, management, operation or control of;
or
(iv) act as a consultant or subcontractor to, any Person
engaged or attempting to engage in the Business or any other business
activity which is the same as, or substantially similar to or directly
or indirectly competitive with, the Business;
(c) the term "Restricted Territory" means the United States,
Canada and Mexico; and
(d) the term "Solicit" includes, without limitation, (1) responding
to requests for proposals and invitations for bids; (2) initiating contacts with
customers or prospects for the purpose of advising them that the Person making
the solicitation is available for business which is competitive with the
Business, and (3) participating in joint ventures or teaming agreements or
acting as a consultant or subcontractor or employee of others who directly
solicit business prohibited by this Section 8.5.
8.5.4 ▇▇▇▇▇ agrees that the territorial, time and other limitations
contained in this Section 8.5 are reasonable and properly required for the
adequate protection of the business and affairs of Buyer and the SP Companies,
and in the event that any one or more of such territorial, time or other
limitations is found to be unreasonable by a court of competent jurisdiction,
▇▇▇▇▇ agrees to submit to the reduction of these territorial, time or other
limitations to such an area, period or otherwise as the court may determine to
be reasonable. In the event that any limitation under this Section 8.5 is found
to be unreasonable or otherwise invalid in any jurisdiction, in whole or in
part, ▇▇▇▇▇ acknowledges and agrees that such limitation shall remain and be
valid in all other jurisdictions.
8.5.5 The Shareholders have had access to, and have gained knowledge
with respect to the Business and the SP Companies, and the related trade
secrets, financial results and information, processes and techniques, plans,
research, designs, concepts, methods of doing business and information
concerning customers and suppliers, and other valuable and confidential
information, which is not generally known to the public (the "Confidential
Information"). The
38 - STOCK PURCHASE AGREEMENT
parties acknowledge that unauthorized disclosure or misuse of the Confidential
Information following the date of this Agreement may cause irreparable damage to
Buyer and the SP Companies. The parties also agree that covenants by the
Shareholders not to make unauthorized disclosures of the Confidential
Information are essential to the growth and stability of the SP Companies.
Accordingly, each Shareholder agrees that such Shareholder shall not use or
disclose directly or indirectly or cause or permit to be used or disclosed any
Confidential Information to any Person other than Buyer or the SP Companies.
8.5.6 Nothing in Section 8.5.5 shall prevent the Shareholders from
using or disclosing any such Confidential Information as counsel to the
Shareholders advises must be used or disclosed in connection with ongoing
litigation or pursuant to applicable law or in the course of a defense of a
claim assumed by ▇▇▇▇▇ as an Indemnity Obligor pursuant to Section 9.4, notice
of which disclosure shall be promptly delivered to Buyer.
8.5.7 Each Shareholder acknowledges that Buyer and the SP Companies
may suffer damages incapable of ascertainment in the event the provisions of
this Section 8.5 are breached and that they may be irreparably damaged in the
event that the provisions of this Section 8.5 are not enforced. Therefore,
should any dispute arise with respect to the breach or threatened breach of any
provision of this Section 8.5, each Shareholder agrees and consents that, in
addition to any and all other remedies available to Buyer, an injunction or
restraining order or other equitable relief may be issued or ordered by a court
of competent jurisdiction restraining any breach or threatened breach of any
provision of this Section 8.5.
ARTICLE 9
SURVIVAL AND INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
9.1.1 All representations and warranties by the Shareholders and the
SP Companies contained in this Agreement shall survive the Closing Date for the
duration of the Claims Period.
9.1.2 All covenants and agreements by the Shareholders and the SP
Companies contained in this Agreement including, without limitation, the
indemnification obligations contained in this Article, shall survive the Closing
Date until fully performed or discharged.
9.1.3 All representations and warranties by Buyer contained in this
Agreement shall survive the Closing Date for the duration of the Claims Period.
9.1.4 All covenants and agreements by Buyer contained in this
Agreement including, without limitation, the indemnification obligations
contained in this Article, shall survive the Closing Date until fully performed
or discharged.
39 - STOCK PURCHASE AGREEMENT
9.1.5 Except for any remedy of specific performance or any other
equitable remedy (excluding an equitable remedy involving the payment of money
damages) to which any party may be entitled, and except in the case of fraud or
any action required to enforce the indemnification provisions of this Agreement,
the indemnification provisions set forth in this Article 9 shall provide the
sole and exclusive rights and remedies under which a party to this Agreement may
assert a claim against another party with respect to (i) any and all breaches of
any representation or warranty contained herein made to the party asserting the
claim, (ii) any and all breaches of covenants contained herein made to such
party under this Agreement, or (iii) any other claim, action, demand, loss,
cost, expense, liability, including environmental liabilities, penalty or other
damage relating to or arising out of this Agreement.
9.2 INDEMNIFICATION BY THE SHAREHOLDERS
9.2.1 The Shareholders, jointly and severally, hereby agree, except
in the case of any breach of, or inaccuracy in, any representation or warranty
by a Shareholder as set forth in Article 4, in which case each Shareholder
hereby severally agrees, to defend, indemnify and hold harmless Buyer and the SP
Companies from, against and in respect to any Loss suffered or incurred by Buyer
or the SP Companies by reason of (i) a breach of, or inaccuracy in, any
representation or warranty by the Shareholders or the SP Companies contained in
this Agreement, (ii) the nonfulfillment of any covenant or agreement by the
Shareholders or the SP Companies contained in this Agreement, (iii) all
Proceedings incident to any of the foregoing. Any claim for indemnification
pursuant to this Section 9.2.1 must be initiated during the Claims Period.
9.2.2 The Shareholders, jointly and severally, hereby agree, to
defend, indemnify and hold harmless Buyer and the SP Companies from, against and
in respect to (i) any and all Litigation Liabilities, (ii) any and all
Preexisting Liabilities, and (iii) any and all Environmental Liabilities. The
amount for which the Shareholders shall be liable for Environmental Liabilities
shall not be subject to the Shareholders Minimum Amount and shall not exceed
$2,500,000. The Shareholders shall be liable on a dollar for dollar basis for
the first $1,750,000 of Environmental Liabilities and shall be liable for one
half of each dollar of Environmental Liabilities in excess of $1,750,000 up to a
maximum aggregate liability of $2.5 million. Any claim for indemnification with
respect to Preexisting Liabilities must be initiated during the Claims Period.
The Claims Period shall not apply to any claim for indemnification with respect
to Litigation Liabilities and such a claim may be initiated at any time. Any
claim for indemnification with respect to Environmental Liabilities must be
initiated on or before the third anniversary of the Closing Date. Promptly
after the third anniversary of the Closing Date, Buyer and the Shareholders
shall meet and endeavor to agree on the amount required to resolve any
outstanding claims for indemnification for Environmental Liabilities
("Environmental Accrual"), and the balance of the Environmental Liabilities Fund
(as defined in the Escrow Agreement) in excess of any such agreed Environmental
Accrual, if any, shall be paid to the Shareholders by the Escrow Agent. If
Buyer and the Shareholders cannot so agree, the parties shall submit their
dispute to arbitration pursuant hereto, and following a determination by
arbitration of the Environmental Accrual, the balance of the Environmental
Liabilities Fund in excess of any such arbitrated Environmental Accrual, if any,
shall be paid to the Shareholders.
40 - STOCK PURCHASE AGREEMENT
9.2.3 The Shareholders shall be liable under this Section 9.2 to the
extent that the aggregate amount of the Losses incurred by reason of the matters
described in this Section 9.2 exceeds $300,000 (the "Shareholders Minimum
Amount"), and the aggregate amount payable by the Shareholders as
indemnification pursuant to this Section 9.2 shall be limited to 50% of the
Purchase Price as adjusted by the Purchase Price Adjustment. Notwithstanding
the foregoing, the limitations set forth in the preceding sentence shall not
apply to any claim for indemnification with respect to Litigation Liabilities or
to any claim for indemnification with respect to any Loss suffered or incurred
by Buyer or the SP Companies (i) by reason of any breach of, or inaccuracy in,
the representations and warranties contained in Section 4.2 or (iii) by reason
of fraud. The amount payable by the Shareholders under this Section 9.2 shall
be net of any insurance proceeds recovered by Buyer or the SP Companies in
connection with the facts giving rise to Buyer's right to indemnification.
9.3 INDEMNIFICATION BY BUYER
Buyer hereby agrees to defend, indemnify and hold harmless the
Shareholders from, against and in respect of any Loss suffered or incurred by
the Shareholders by reason of (i) a breach of, or inaccuracy in, any
representation or warranty by Buyer contained in this Agreement, or (ii) the
nonfulfillment of any covenant or agreement by Buyer contained in this
Agreement, and (iii) all Proceedings incident to any of the foregoing. Buyer
shall be liable under clauses (i), (ii) and (iii) of the preceding sentence to
the extent that the aggregate amount of the Losses incurred by reason of the
matters described in such clauses exceeds $300,000 ("Buyer's Minimum Amount").
9.4 NOTIFICATION AND DEFENSE OF CLAIMS OR ACTIONS
9.4.1 As used in this Section, any party seeking indemnification
pursuant to this Section is referred to as an "Indemnified Party" and any party
from whom indemnification is sought pursuant to this Section is referred to as
an "Indemnity Obligor." An Indemnified Person which proposes to assert the
right to be indemnified under this Article shall, pursuant to the notice
provisions of this Agreement, submit a written demand for indemnification
setting forth in summary form the facts as then known which form the basis for
the claim for indemnification.
9.4.2 With respect to claims based on actions by third parties, an
Indemnified Party shall, within twenty (20) days after the receipt of notice of
the commencement of any Proceeding against it in respect of which a claim for
indemnification is to be made against an Indemnity Obligor, notify the Indemnity
Obligor in writing of the commencement of such Proceeding, enclosing a copy of
all papers served; provided, however, that the failure to so notify the
Indemnity Obligor of any such Proceeding shall not relieve the Indemnity Obligor
from any liability which it may have to the Indemnified Party, except to the
extent that the Indemnity Obligor is prejudiced thereby. Thereafter, the
Indemnified Party shall deliver to the Indemnity Obligor, within twenty (20)
days after receipt by the Indemnified Party, copies of all further notices
relating to such claim.
41 - STOCK PURCHASE AGREEMENT
9.4.3 If a third-party claim is made for which an Indemnified Party
is entitled to indemnification pursuant to this Article, the Indemnity Obligor
will be entitled to participate in the defense of such claim and, if it so
chooses, and provided that it acknowledges its obligation to indemnify the
Indemnified Party, to assume primary responsibility for the defense of such
claim with counsel selected by the Indemnity Obligor and not reasonably objected
to by the Indemnified Party. Should the Indemnity Obligor assume the defense of
such claim, the Indemnity Obligor will not be liable to the Indemnified Party
for any legal expenses subsequently incurred by the Indemnified Party in
connection with the defense of such claim.
9.4.4 If the Indemnity Obligor assumes the defense of a third-party
claim as set forth in Section 9.4.3, then (i) in no event will an Indemnified
Party admit any liability with respect to, or settle, compromise or discharge,
any such claim without the Indemnity Obligor's prior written consent and (ii)
each Indemnified Party shall be entitled to participate in, but not control, the
defense of such claim with its own counsel at its own expense. If the Indemnity
Obligor does not assume the defense of any such claim, an Indemnified Party may
defend such claim in a manner as it may deem appropriate (including, but not
limited to, settling such claim, after giving twenty (20) days prior written
notice of such settlement to the Indemnity Obligor, on such terms as the
Indemnified Party may deem appropriate).
9.4.5 In the event that any claim for indemnification is made with
respect to any third-party claim pursuant to this Article, (i) the party
assuming primary responsibility for the defense of such claim shall at all times
keep the other party informed as to the status of such claim and (ii) the party
not primarily responsible for the defense of such claim shall cooperate fully
with the other party in connection with such defense.
9.5 USE OF ESCROW FUNDS FOR INDEMNIFICATION
In the event that Buyer is entitled to indemnification from the
Shareholders pursuant to Section 9.2, Buyer shall first seek payment from
available Escrow Funds in accordance with the terms and conditions of the Escrow
Agreement.
9.6 RELIANCE
No disclosure by any party ("Disclosing Party") to this Agreement nor
any investigation made by or on behalf of another party with respect to the
Disclosing Party shall be deemed to affect the other party's reliance on the
respective representations and warranties contained in this Agreement and shall
not effect a waiver of that party's rights to indemnity as herein provided for
the breach of any of said representations and warranties.
9.7 PURCHASE PRICE ADJUSTMENTS
Notwithstanding anything in this Agreement to the contrary, the
Shareholders shall not have any liability pursuant to this Article 9 for any
Loss if and to the extent that Buyer has already been compensated for the same
Loss through a reduction in the Purchase Price pursuant to the operation of
Section 2.4.
42 - STOCK PURCHASE AGREEMENT
ARTICLE 10
GENERAL PROVISIONS
10.1 EXPENSES
The Shareholders shall bear all expenses incurred by the Shareholders
and the SP Companies in connection with the Transaction, including the fees and
expenses of any attorneys, accountants, investment bankers, brokers, finders or
other intermediaries or other Persons engaged by the Shareholders or the SP
Companies. Buyer shall bear all expenses incurred by Buyer in connection with
the Transaction, including the fees and expenses of any attorneys, accountants,
investment bankers, brokers, finders or other intermediaries or other Persons
engaged by Buyer.
10.2 PUBLIC ANNOUNCEMENTS
To the extent reasonably requested by any party, each party will
consult with and provide reasonable cooperation to the others in connection with
the issuance of any press release or other public announcements describing the
Transaction.
10.3 NOTICES, ETC.
All notices, requests, demands or other communications required by or
otherwise with respect to this Agreement shall be in writing and shall be deemed
to have been duly given to any party when delivered personally (by courier
service or otherwise), when delivered by facsimile and confirmed by return
facsimile, or seven days after being mailed by first-class mail, postage prepaid
and return receipt requested in each case to the applicable addresses set forth
below:
IF TO THE SHAREHOLDERS WITH A COPY TO:
OR THE SP COMPANIES
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇
6307 Toledo Liddell, Sapp, Zivley, Hill & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
43 - STOCK PURCHASE AGREEMENT
IF TO BUYER: WITH A COPY TO:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
President Ater Synne ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP
Northwest Pipe Company ▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: 503-226-0079
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as such partry shall have designated by notice so given
to each other party.
10.4 ATTORNEYS' FEES
If a Proceeding is filed by any party to enforce this Agreement or
otherwise with respect to the subject matter of this Agreement, the prevailing
party or parties shall be entitled to recover reasonable attorneys' fees
incurred in connection with such Proceeding as fixed by the trial court, and if
any appeal is taken from the decision of the trial court, reasonable attorneys'
fees as fixed by the appellate court.
10.5 SEVERABILITY
If any one or more of the provisions contained in this Agreement shall
be invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall not be in any
way impaired.
10.6 REMEDIES
10.6.1 In addition to any other remedies which Buyer may have under
this Agreement, the Shareholders hereby agree that Buyer and the SP Companies
shall each have the right to have all obligations, undertakings, agreements,
covenants and other provisions of this Agreement specifically performed by the
Shareholders and that subject to any provisions of this Agreement relating to
venue, Buyer shall have the right to obtain an order or decree of such specific
performance in any of the courts of the United States or of any state or other
political subdivision thereof.
10.6.2 Subject to Section 9.1.6, all rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any right, power or remedy by any party shall not preclude
the simultaneous or later exercise of any other such right, power or remedy by
such party.
44 - STOCK PURCHASE AGREEMENT
10.7 NO THIRD-PARTY BENEFICIARIES
Subject to Section 10.9.3 below, this Agreement is not intended to be
for the benefit of and shall not be enforceable by any Person who or which is
not a party hereto.
10.8 GOVERNING LAW
This Agreement and all disputes hereunder shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Oregon, without regard to principles of conflict of laws.
10.9 ASSIGNMENT AND BINDING EFFECT
10.9.1 Buyer shall have the right to assign this Agreement, in whole
or in part, to any Affiliate of Buyer or to designate any of its Affiliates (to
the extent permitted by law) to receive directly the Shares or to exercise any
of the rights of Buyer, or to perform any of its obligations. Except as provided
in the preceding sentence, the Shareholders, the SP Companies and Buyer shall
not assign this Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of the other parties hereto, and
any such assignment contrary to the terms hereof shall be null and void and of
no force and effect. In no event shall the assignment by the Shareholders, the
SP Companies or Buyer of its respective rights or obligations under this
Agreement, whether before or after the Closing, release the Shareholders, the SP
Companies or Buyer from its respective liabilities and obligations hereunder.
10.9.2 Buyer shall notify the Shareholders at least three (3)
business days prior to the Closing in whose name the certificates representing
the Southwestern Stock and the P&H Tube Stock are to be transferred, if other
than Buyer. Prior to or upon delivery of such certificates, such Affiliate
shall execute and deliver to Buyer, the Shareholders and the SP Companies
representations, warranties and covenants substantially to the effect as set
forth in Section 6.5 hereof.
10.9.3 Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
10.10 ARBITRATION
Except as otherwise provided in this Agreement, all claims, disputes
and other matters in question between the parties to this Agreement arising out
of or in any way relating to this Agreement or the breach thereof shall be
determined by arbitration in Portland, Oregon in accordance with the rules of
the American Arbitration Association then in effect unless the parties mutually
agree in writing to waive this provision. Notice of demand for arbitration
shall be filed in writing with the other party or parties to this Agreement and
with the American Arbitration Association in Portland, Oregon. The demand shall
be made within reasonable time after the claim, dispute or other matter in
question has arisen. In no event shall the demand for
45 - STOCK PURCHASE AGREEMENT
arbitration be made after the date when the institution of legal or equitable
proceedings based upon such claim, dispute or other matter in question would be
barred by this Agreement or by the applicable statute of limitations. The
arbitration shall be before a single arbitrator mutually agreed upon by the
parties who shall interpret this Agreement in accordance with the internal laws
of the State of Oregon. In the event that the arbitrator cannot be mutually
agreed upon, such arbitrator shall be selected in accordance with the rules of
the American Arbitration Association. The opinion of the arbitrator shall be
made in writing and mailed to each party within 30 days after the date in which
the dispute was referred to arbitration and the determination of the
arbitrator(s) shall be final and binding on all parties. All of the costs and
expenses of the arbitration shall be borne equally by Buyer and the SP Companies
or in such other manner as the arbitrator may determine to be appropriate.
10.11 SHAREHOLDERS' REPRESENTATIVE
Each of the Shareholders hereby appoints ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ to act as the
agent and attorney-in-fact of such Shareholder in consummating the transactions
contemplated by this Agreement, for the receipt of any notices pursuant hereto
and for the execution and delivery for and on behalf of such Shareholder of any
waivers, agreements, papers, instruments and other instruments as such agent and
attorney-in-fact deems necessary or appropriate in connection with the
transactions contemplated hereby. Buyer is hereby authorized to rely on the
action of such agent and attorney-in-fact as the act of each such Shareholder.
This appointment shall be coupled with an interest and shall be irrevocable and
binding in all respects upon each of the Shareholders and his, her or its
respective successors, assigns, heirs and personal representatives.
10.12 ENTIRE AGREEMENT
This Agreement (including the exhibits and schedules hereto and the
documents and instruments referred to herein) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
10.13 COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies,
each signed by less than all, but together signed by all, the parties hereto.
10.14 AMENDMENT
This Agreement may be amended only by an instrument in writing signed
on behalf of each of the parties hereto.
46 - STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties set forth below.
BUYER: NORTHWEST PIPE COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
SOUTHWESTERN: SOUTHWESTERN PIPE, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
P&H TUBE: P&H TUBE CORPORATION
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
SHAREHOLDERS: ▇▇▇▇▇ FAMILY INVESTMENT
PARTNERSHIP, LTD.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, General Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Individually
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
SHAREHOLDERS: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
EXHIBIT A
SOUTHWESTERN PIPE, P&H TUBE CORPORATION
SHAREHOLDER INC. COMMON STOCK COMMON STOCK
----------- ------------------ --------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇......................... 80,190 120,285
▇▇▇▇▇ Family Investments Partnership.... 38,610 57,915
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇........................ 3,600 5,400
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇....................... 5,000 7,500
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇....................... 4,000 6,000
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇...................... 3,400 5,100
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇........................ 5,000 7,500
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇...................... 10,000 15,000
------- -------
TOTAL 149,800 224,700