EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
ITEQ, INC.,
AMEREX INDUSTRIES, INC.
AND
AI ACQUISITION CORP.
FEBRUARY 9, 2001
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS........................................................1
1.1 Definitions......................................................1
1.2 Certain Interpretive Matters.....................................8
ARTICLE II SALE AND PURCHASE OF ASSETS.......................................9
2.1 Purchased Assets.................................................9
2.2 Excluded Assets.................................................11
2.3 Nonassignable Contracts, Leases and Permits.....................12
ARTICLE III ASSUMPTION OF LIABILITIES.......................................13
3.1 Liabilities Assumed by Purchaser................................13
3.2 Liabilities Not Assumed by Purchaser............................13
ARTICLE IV PURCHASE PRICE AND CLOSING PAYMENTS..............................14
4.1 Purchase Price..................................................14
4.2 Estimated Closing Working Capital...............................14
4.3 Post-Closing Purchase Price Adjustment..........................14
4.4 Adjustments to Purchase Price...................................16
4.5 Allocation of Purchase Price....................................16
ARTICLE V CLOSING AND CLOSING DELIVERIES....................................17
5.1 The Closing.....................................................17
5.2 Deliveries of Seller............................................17
5.3 Deliveries by Purchaser.........................................18
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER.........................18
6.1 Representations and Warranties of the Stockholder and Seller....18
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................31
7.1 Corporate Existence and Power...................................31
7.2 Corporate Authorization; Enforceability.........................32
7.3 Governmental Authorization......................................32
7.4 Non-Contravention...............................................32
7.5 Litigation......................................................32
7.6 Finders' Fees...................................................33
ARTICLE VIII CERTAIN COVENANTS..............................................33
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TABLE OF CONTENTS
(continued)
PAGE
8.1 Conduct of Business of Seller...................................33
8.2 Exclusive Dealing...............................................34
8.3 Review of Seller; Confidentiality...............................34
8.4 Reasonable Best Efforts.........................................35
8.5 Employees and Benefit Plans.....................................35
8.6 Books and Records...............................................38
8.7 Bulk Transfer Laws..............................................39
8.8 Collection of Payments..........................................39
8.9 Use of Names....................................................39
8.10 Further Assurances..............................................39
8.11 Insurance.......................................................40
8.12 Certain Tax Matters.............................................40
ARTICLE IX CONDITIONS TO CLOSING............................................40
9.1 Conditions to Obligations of Purchaser..........................40
9.2 Conditions to Obligations of Seller.............................41
ARTICLE X SURVIVAL; INDEMNIFICATION.........................................42
10.1 Survival........................................................42
10.2 Indemnification.................................................42
10.3 Procedures......................................................43
10.4 Payment and Treatment of Indemnification Payments...............44
10.5 Reassignment of Accounts Receivable.............................44
10.6 Indemnification and Special Procedures for Warranty Claims......45
ARTICLE XI MISCELLANEOUS....................................................45
11.1 Termination.....................................................45
11.2 Notices.........................................................46
11.3 Amendments and Waivers..........................................47
11.4 Expenses........................................................47
11.5 Successors and Assigns..........................................48
11.6 No Third-Party Beneficiaries....................................48
11.7 Governing Law...................................................48
11.8 Risk of Loss....................................................48
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TABLE OF CONTENTS
(continued)
PAGE
11.9 Public Announcements............................................48
11.10 Jurisdiction....................................................48
11.11 Counterparts....................................................49
11.12 Table of Contents; Headings.....................................49
11.13 Entire Agreement................................................49
11.14 Severability; Injunctive Relief.................................49
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of February 9, 2001, by and among
ITEQ, INC., a Delaware corporation (the "STOCKHOLDER"), AMEREX INDUSTRIES INC.,
a Delaware corporation and wholly owned subsidiary of the Stockholder
("SELLER"), and AI ACQUISITION CORP., a Delaware corporation ("PURCHASER") and
wholly owned subsidiary of BENETECH, INC., an Illinois corporation.
RECITALS
A. Seller is in the dust management and pollution control business and,
among other things, designs, manufacturers, engineers, repairs, services and
installs air filtration, gas cleaning and heat recovery systems (the
"BUSINESS").
B. Purchaser wishes to purchase from Seller, and Seller wishes to sell to
Purchaser, all of the assets, properties and rights of Seller (other than the
Excluded Assets), subject to the Assumed Liabilities, upon the terms and
conditions of this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere herein, the
following terms, as used herein, have the following meanings:
"ACCOUNTANTS" has the meaning set forth in Section 4.3(b).
"ACCOUNTS RECEIVABLE" has the meaning set forth in Section 2.1(a)(v).
"AFFILIATE" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by or under common control with the first
Person and, if such first Person is an individual, any member of the immediate
family (including parents, spouse and children) of such individual and any trust
whose principal beneficiary is such individual or one or more members of such
individual's immediate family and any Person who is controlled by any such
member or trust. For the purposes of this Agreement, "CONTROL," when used with
respect to any Person, means the possession, directly or indirectly, of the
power to (a) vote 10% or more of the securities having ordinary voting power for
the election of directors (or comparable positions) of such Person or (b) direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGREEMENT" means this Asset Purchase Agreement, as the same may be
amended from time to time in accordance with the terms hereof.
"{intentionally omitted} LICENSING AGREEMENT" means the {intentionally
omitted} License Agreement by Seller and {intentionally omitted}.
"ANCILLARY AGREEMENTS" means the Employment Agreement, the Non-Competition
Agreement and all other instruments, certificates, bills of sale and other
agreements entered into by Seller in connection with the consummation of the
transactions contemplated by this Agreement.
"ASSIGNED CONTRACTS" has the meaning set forth in Section 2.1(a)(iv).
"ASSUMED LIABILITIES" has the meaning set forth in Section 3.1(b).
"BALANCE SHEET DATE" means October 31, 2000.
"BENEFIT PLAN" means any employee benefit plan within the meaning of
Section 3(3) of ERISA, and any other plan, program, agreement, arrangement,
policy, contract, commitment or scheme, written or oral, statutory or
contractual, that provides for compensation or benefits, including any deferred
compensation, executive compensation, bonus or incentive plan, any cafeteria
plan or any holiday or vacation plan or practice.
"BULK TRANSFER LAWS" has the meaning set forth in Section 8.7.
"BUSINESS" has the meaning set forth in Recital A.
"BUSINESS DAY" means a day that is not a Saturday, Sunday or a day on
which commercial banking institutions located in New York City, New York or
Houston, Texas are authorized or required to close.
"CAP" has the meaning set forth in Section 10.2(a).
"CAPITALIZED LEASE OBLIGATIONS" means, for any applicable period, the
obligations of such Person that are required to be classified and accounted for
as capital lease obligations under GAAP, together with all obligations to make
termination payments under such capitalized lease obligations.
"CAPITAL STOCK" means (a) with respect to any Person that is a
corporation, any and all shares, interests, participation or other equivalents
(however designated and whether or not voting) of corporate stock, including the
common stock of such Person and (b) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"CASH AND CASH EQUIVALENTS" means all available cash and cash equivalents
of Seller, including marketable securities.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 ▇.▇.▇.▇▇.▇▇. 9601, ET SEQ., as amended.
"CLOSING" has the meaning set forth in Section 5.1.
"CLOSING CASH CONSIDERATION" has the meaning set forth in Section 4.1.
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"CLOSING DATE" has the meaning set forth in Section 5.1.
"CLOSING DATE BALANCE SHEET" has the meaning set forth in Section 4.3(a).
"CLOSING STATEMENT" has the meaning set forth in Section 4.3(a).
"CLOSING WORKING CAPITAL BALANCE" has the meaning set forth in Section
4.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"CONSTITUENT OF CONCERN" means any substance defined as a hazardous
substance, hazardous waste, hazardous material, pollutant or contaminant by any
Environmental Law, any petroleum hydrocarbon and any degradation product of a
petroleum hydrocarbon, asbestos, PCB or similar substance, the generation,
recycling, use, treatment, storage, transportation, Release, disposal or
exposure of or to which is subject to regulation under any Environmental Law.
"CONTRACTS" has the meaning set forth in Section 6.1.11(a).
"COVENANT PERIOD" means the period commencing on the date of this
Agreement and terminating on the expiration of the Covenant Period contained in
the Non-Competition Agreement.
"DAMAGES" has the meaning set forth in Section 10.2(a).
"DIRECT CLAIM" has the meaning set forth in Section 10.3(c).
"EMPLOYMENT AGREEMENT" means the employment, confidentiality and
non-competition agreement between Purchaser and Kindred in the form of EXHIBIT A
hereto.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, citations, summonses,
notices of non-compliance or violation, requests for information, investigations
or proceedings relating in any way to the Release of Constituents of Concern or
any Environmental Law, including (a) Environmental Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (b)
Environmental Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from an alleged injury or threat of injury to
human health and safety or the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to the
environment which has resulted or could reasonably be expected to result in a
material loss, liability, cost or expense to Seller.
"ENVIRONMENTAL LAW" means any Law, administrative interpretation,
administrative order, consent decree or judgment, relating to the environment,
human health and safety, including CERCLA, and any state and local counterparts
or equivalents.
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"ENVIRONMENTAL PERMITS" means all Permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor thereto.
"ERISA AFFILIATE" means any Person that, together with Seller, would be
considered a single employer within the meaning of Section 4001 of ERISA or
Section 414 of the Code.
"ESTIMATED CLOSING WORKING CAPITAL BALANCE" has the meaning set forth in
Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning set forth in Section 2.2.
"EXCLUDED RECEIVABLES" means the Company's Wheeling-Pittsburgh and
Ameristeel receivables in amounts of $165,000, in the aggregate, as of the date
hereof.
"FINANCIAL STATEMENT PRINCIPLES" has the meaning set forth in Section
4.3(a).
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign governmental or
regulatory agency, authority, bureau, commission, department, official or
similar body or instrumentality thereof, or any governmental court, arbitral
tribunal or other body administering alternative dispute resolution.
"INDEBTEDNESS" means with respect to any Person, at any date, without
duplication, (a) all obligations of such Person for borrowed money, including
all principal, interest, premiums, fees, expenses, overdrafts and penalties with
respect thereto, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of the property or services, except
trade payables incurred in the Ordinary Course of Business, (d) all obligations
of such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (e) all Capitalized Lease
Obligations, (f) all other obligations of a Person which would be required to be
shown as indebtedness on a balance sheet of such Person prepared in accordance
with GAAP, and (g) all indebtedness of any other Person of the type referred to
in clauses (a) to (f) above directly or indirectly guaranteed by such Person or
secured by any assets of such Person, whether or not such Indebtedness has been
assumed by such Person.
"INDEMNIFIED PARTY" has the meaning set forth in Section 10.3(a).
"INDEMNIFYING PARTY" has the meaning set forth in Section 10.3(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service ▇▇▇▇, trade
name, product designation, logo, slogan, invention, patent, trade secret,
copyright, know-how, proprietary design or process, computer software and
database, Internet address or domain name (including
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any registrations or applications for registration or renewal of any of the
foregoing), research in progress, or any other similar type of proprietary
intellectual property right, in each case which is used or held for use or
otherwise necessary in connection with the conduct of the Business.
"INTEREST EXPENSE" means, with respect to Seller, for any applicable
period, the sum of, without duplication, (a) the aggregate of the interest
expense (net of interest income) of Seller during such period determined in
accordance with GAAP and (b) the interest component of Capitalized Lease
Obligations paid, accrued and/or scheduled to be paid or accrued by Seller
during such period as determined in accordance with GAAP.
"INVENTORY" means raw materials, works in progress and finished goods
inventory.
"IRS" means the Internal Revenue Service.
"KINDRED" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"LAW" means any federal, foreign, state or local statute, law, rule,
regulation, ordinance, code, permit or license.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own, subject to a Lien, any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise) or results of operations
of Seller or the Business; PROVIDED, HOWEVER, that in no event will any of the
following constitute a Material Adverse Effect: (i) any effects, changes,
events, circumstances, developments or conditions generally affecting the
industry in which Seller operates or arising from general business or economic
conditions, (ii) any effects, changes, events, circumstances, developments or
conditions resulting from any change in Law or GAAP, which affect generally
entities like Seller, or (iii) any effect from compliance by Seller with the
terms of this Agreement.
"MONTHLY FINANCIAL STATEMENTS" means (a) the unaudited monthly balance
sheets of Seller at the end of each calendar month beginning January 1, 1999
through and including the date of this Agreement (other than November 30, 2000),
together with the related monthly statements of earnings and (b) the unaudited
monthly balance sheets of Seller at the end of each calendar month beginning
with the month this Agreement is executed that are required to be delivered
through the Closing Date pursuant to Section 8.4(b), together with the related
monthly statements of earnings.
"NET WORKING CAPITAL" means the difference between (i) the sum of Accounts
Receivable (excluding the Excluded Receivables and amounts due from employees of
the Business in an aggregate amount exceeding $2,000 and less a reserve for
doubtful accounts), Inventory (less a reserve for excess or obsolete inventory),
costs in excess of ▇▇▇▇▇▇▇▇ (including any long-term portion) and applicable
prepaid expenses included in the Purchased Assets and (ii) the sum of
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accounts payable, accrued expenses, reserves and allowances and ▇▇▇▇▇▇▇▇ in
excess of costs (including any long-term portion) included in the Assumed
Liabilities; PROVIDED, HOWEVER, that the year 2000 bonuses payable to the
persons listed on SCHEDULE 3.1(A)(IV) shall be fixed at $0.00 in the aggregate.
"NON-COMPETITION AGREEMENT" means the non-competition agreement between
Purchaser and the Stockholder in substantially the form of EXHIBIT B hereto.
"ORDER" means any judgment, injunction, judicial or administrative order
or decree.
"ORDINARY COURSE OF BUSINESS" means, with respect to any Person, the
ordinary course of business of such Person, consistent with such Person's past
practice and custom, including, with respect to any category, quantity or dollar
amount, term and frequency of payment, delivery, accrual, expense or any other
accounting entry.
"PERMIT" has the meaning set forth in Section 6.1.14(b).
"PERMITTED LIEN" means (a) mechanics' Liens, workmen's Liens, carriers'
Liens, repairmen's Liens, landlord's Liens or other like Liens arising or
incurred in the Ordinary Course of Business in respect of obligations that are
included in the Assumed Liabilities that are not overdue, (b) statutory Liens
for Taxes, assessments and other similar governmental charges that are not
overdue, (c) Liens incurred or deposits made to secure the performance of bids,
contracts, statutory obligations, surety and appeal bonds incurred in connection
with the Business and in the Ordinary Course of Business by Seller, or (d) Liens
that arise under zoning, land use and other similar imperfections of title that
arise in the Ordinary Course of Business and that, in the aggregate, could not
reasonably be expected to materially affect the value, use or marketability of
the property subject thereto.
"PERSON" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust or other entity or organization or
Governmental Authority.
"POST-CLOSING TAX PERIOD" means any Tax period (or portion thereof) ending
after the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) that
ends on or before the Closing Date.
"PRO FORMA WORKING CAPITAL CALCULATION" has the meaning set forth in
Section 4.3.
"PURCHASE PRICE" has the meaning set forth in Section 4.1.
"PURCHASED ASSETS" has the meaning set forth in Section 2.1(a).
"PURCHASER" has the meaning set forth in the introductory paragraph of
this Agreement.
"REAL PROPERTY" has the meaning set forth in Section 6.1.15(b).
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"REFERENCE BALANCE SHEET" means the balance sheet of Seller as of October
31, 2000, attached hereto as SCHEDULE 2.
"REFERENCE FINANCIAL STATEMENTS" means the balance sheets of Seller as
December 31, 1998 and 1999, together with the related statements of income for
the periods then ended, and the Reference Balance Sheet, together with the
related statement of income for the ten-month period then ended, all of which
are attached hereto as SCHEDULE 3.
"REFERENCE MONTHLY FINANCIAL STATEMENTS" has the meaning set forth in
Section 6.1.7(b).
"REFERENCE WORKING CAPITAL BALANCE" means $1,135,000.
"RELEASE" means any release, spill, emission, discharge, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment (including ambient air, surface water, groundwater and surface
or subsurface strata) or into or out of any property, including the movement of
Constituents of Concern through or in the air, soil, surface water, groundwater
or property.
"RETAINED LIABILITIES" has the meaning set forth in Section 3.2(b).
"RETURNS" has the meaning set forth in Section 6.1.9(a)(i).
"SELECTED PURCHASER REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 7.1 (Corporate Existence
and Power), 7.2 (Corporate Authorization; Enforceability), 7.3 (Governmental
Authorization) and 7.4 (Non-Contravention).
"SELECTED STOCKHOLDER AND SELLER REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 6.1.1 (Corporate Existence
and Power), 6.1.2 (Corporate Authorization; Enforceability), 6.1.3 (Governmental
Authorization), 6.1.4 (Non-Contravention; Consents), 6.1.5 (Capitalization),
6.1.15(a) and the first three sentences of (b) (Properties; Sufficiency of
Assets), 6.1.17 (Environmental Matters) and 6.1.26 (Finders' Fees).
"SELLER" has the meaning set forth in the introductory paragraph of this
Agreement.
"SELLER DESIGNATED EMPLOYEES" has the meaning set forth in Section 8.5(a).
"SELLER EMPLOYMENT AGREEMENTS" means the four employment or letter
agreements set forth in items (1) through (4) of SCHEDULE 4 hereto.
"SELLER OFFICE SUBLEASE" means the Sublease, dated March 12, 1999, between
the Athlete's Foot Group Inc. and Seller relating to the subleased premises
located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, a copy of which is
attached hereto as SCHEDULE 5.
"SELLER PROPERTY" means any real property and improvements at any time
owned, leased, used, operated or occupied (whether for storage, disposal or
otherwise) by Seller.
"STOCKHOLDER" has the meaning set forth in the introductory paragraph of
this Agreement.
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"SUBSIDIARY" means, with respect to any Person, (a) any corporation 50% or
more of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person, directly or indirectly
through Subsidiaries, and (b) any partnership, limited liability company,
association, joint venture, trust or other entity in which such Person, directly
or indirectly through Subsidiaries, is either a general partner, has a 50% or
greater equity interest at the time or otherwise owns a controlling interest.
"TAX" means (a) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, AD VALOREM, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by Seller,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any Taxing
Authority, (b) any liability of Seller for the payment of any amounts of any of
the foregoing types as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability of Seller for payment of such amounts was
determined or taken into account with reference to the liability of any other
Person, and (c) any liability of Seller for the payment of any amounts as a
result of being a party to any Tax-Sharing Agreements or with respect to the
payment of any amounts of any of the foregoing types as a result of any express
or implied obligation to indemnify any other Person.
"TAX-SHARING AGREEMENTS" means all existing Tax-sharing agreements or
arrangements (whether or not written) that are binding on Seller.
"TAXING AUTHORITY" means any Governmental Authority having jurisdiction
over the assessment, determination, collection or other imposition of any Tax.
"THIRD-PARTY CLAIM" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this Agreement or
who or which is not an Affiliate of any party to this Agreement.
"TRANSFER" has the meaning set forth in Section 2.1(a).
1.2 CERTAIN INTERPRETIVE MATTERS. (a) When a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such reference will be to
an Article or Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. Whenever the words, "include," "includes" or "including"
are used in this Agreement, they will be deemed to be followed by the words
"without limitation." The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. All terms defined in this
Agreement have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. All references to "$" or dollar
amounts will
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be to lawful currency of the United States of America. Any agreement, instrument
or statute defined or referred to herein or in any agreement or instrument that
is referred to herein means such agreement, instrument or statute as from time
to time amended, modified or supplemented, including (in the case of agreements
or instruments) by waiver or consent and (in the case of statutes) by succession
of comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to its
permitted successors and assigns. Each of the Schedules will apply only to its
corresponding Section or subsection of this Agreement. Each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP. To the extent the term "day" or "days" is used, it will mean calendar
days unless referred to as a "Business Day."
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) (i) All references to the "knowledge of Seller" or to words of similar
import will be deemed to be references to the actual knowledge of one or more of
the officers or directors of Seller or the Stockholder whose names are listed on
SCHEDULE 1.2(C)(I) and will include such knowledge as such officers or directors
would have had after due inquiry of the responsible employees of Seller, the
Stockholder and their respective counsel and accountants and (ii) all references
to the "knowledge of Purchaser" or to words of similar import will be deemed to
be references to the actual knowledge of one or more of the officers or
directors of Purchaser or its Affiliates whose names are listed on SCHEDULE
1.2(C)(II) and will include such knowledge as such officers or directors would
have had after due inquiry of the responsible employees of Purchaser and its
counsel and accountants.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 PURCHASED ASSETS. (a) At the Closing, Seller will sell, assign,
transfer, convey and deliver ("TRANSFER"), free and clear of all Liens (except
Permitted Liens), whether legal or equitable, to Purchaser, and Purchaser will
purchase and accept from Seller on the terms and subject to the conditions
hereinafter set forth, all of the assets, properties, rights and interests
owned, claimed, used or held by Seller to the extent existing as of the Closing
Date, other than the Excluded Assets (all of such assets, properties, rights and
interests being hereinafter collectively referred to as the "PURCHASED ASSETS"),
including all right, title and interest of Seller in:
(i) the personal property described in SCHEDULE 2.1(A)(I), together
with the fixtures, furnishings, furniture, equipment, motor vehicles,
tools, supplies, spare parts, computers, printers, software, files, books,
records, and all other tangible personal property owned or leased by
Seller, wherever located, or acquired by Seller in connection with the
conduct of the Business between the date hereof and the Closing Date or
used by Seller in connection with the conduct of the Business;
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(ii) the leases of real property described in SCHEDULE 6.1.15(B),
together with all rights thereunder to all leasehold improvements thereon
and all easements, rights-of-way, transferable licenses and permits and
other appurtenances thereof;
(iii) all Inventory, wherever located, including inventories of
work-in-process, stores and supplies of Seller held in connection with the
conduct of the Business;
(iv) all Contracts (other than to the extent that such contracts
relate to Retained Liabilities or Excluded Assets), commitments, leases,
purchase orders, contracts to purchase raw materials, contracts for
services and supplies, contracts to supply or sell products and all of the
other agreements (whether written or oral) of Seller relating to the
Business, including those Contracts set forth or required to be set forth
in SCHEDULE 6.1.11(A) but excluding the {intentionally omitted} Licensing
Agreement and the Seller Employment Agreements (collectively, the
"ASSIGNED CONTRACTS");
(v) all accounts and notes receivable (including billed and
unbilled) ("ACCOUNTS RECEIVABLE") and all notes receivable of Seller
relating to the conduct of the Business;
(vi) all Intellectual Property Rights of Seller;
(vii) all licenses, Permits, registrations, and authorizations of
Seller;
(viii) all books and records of Seller relating to the Purchased
Assets and the Assumed Liabilities, including all customer and supplier
files and lists, sales information, equipment maintenance and warranty
information, operating manuals, all correspondence with any customers,
suppliers, employees or Governmental Authority, all personnel records
related to the Seller Designated Employees, and any other reports,
promotional materials, marketing studies, plans and documents prepared by
or on behalf of Seller related to the Business, including data stored
electronically, but excluding the corporate books and records listed as
Excluded Assets;
(ix) except as described in Section 2.2(b), all prepaid claims,
prepaid expense items and deferred charges, credits, advance payments,
security and other deposits made by Seller to any other Person relating to
the Purchased Assets or the conduct of the Business, in each case other
than to the extent relating to the Retained Liabilities or Excluded
Assets;
(x) all third-party indemnities where Seller is an indemnified party
and the proceeds afforded thereby, in each case other than to the extent
relating to the Retained Liabilities or Excluded Assets;
(xi) all rights of Seller to manufacturers' warranties and
indemnities with respect to any Purchased Asset;
(xii) the right to use the names set forth in SCHEDULE 2.1(A)(XII),
and all variants thereof;
(xiii) the goodwill of Seller;
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(xiv) all telephone and facsimile numbers (together with all other
similar numbers), electronic mail addresses and web sites of Seller;
(xv) all rights of Seller pertaining to any causes of action,
lawsuits, judgments, claims, demands, counterclaims, set-offs or defenses
Seller may have with respect to the Assumed Liabilities or any of the
Purchased Assets, except to the extent relating to the Retained
Liabilities or Excluded Assets;
(xvi) amounts due in respect of any advances or loans to, or notes
receivable from, any employee of Seller; and
(xvii) except for the Excluded Assets, all other assets, properties
and rights of every kind and nature of Seller or in which Seller has an
interest on the Closing Date, known or unknown, fixed or unfixed, accrued,
absolute, contingent or otherwise, whether or not specifically referred to
in this Agreement, that, in each case, relate to the Business.
(b) In confirmation of the foregoing sale, assignment and transfer, Seller
will execute and deliver to Purchaser at the Closing such bills of sale and
other instruments of assignment and Transfer as Purchaser may reasonably deem
necessary or desirable.
2.2 EXCLUDED ASSETS. Anything in this Agreement to the contrary
notwithstanding, the following assets of Seller (the "EXCLUDED ASSETS"), each to
the extent existing on the Closing Date, are being retained by Seller and will
not be included in the Purchased Assets:
(a) Cash and Cash Equivalents (in excess of Cash required for Seller to
satisfy the requirements of Section 4.2);
(b) prepaid federal income Tax deposits;
(c) amounts due in respect of any advances or loans to, or notes
receivable from, any shareholder or Affiliate of Seller;
(d) all books and records of Seller relating to the Excluded Assets or
Retained Liabilities, including the corporate charter, related organizational
documents and minute books and Tax Returns of Seller;
(e) all rights of Seller pertaining to any causes of action, lawsuits,
judgments, claims, demands, counterclaims, set-offs or defenses Seller may have
solely with respect to the Retained Liabilities or any of the Excluded Assets;
(f) the {intentionally omitted} Licensing Agreement and all drawings,
specifications or information provided {intentionally omitted} to Seller
pursuant to the {intentionally omitted} Licensing Agreement;
(g) all assets listed in SCHEDULE 2.2(G) in possession of Seller but owned
by third parties;
(h) all policies of insurance, binders, fidelity, surety or similar bonds
and the coverage afforded thereby, except as contemplated under Section 8.11;
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(i) all rights of the Seller to refund of Taxes paid by Seller;
(j) any rights or claims of the Seller against, or amounts due to Seller
from, its Affiliates (including Stockholder); and
(k) the rights of Seller under this Agreement and under any Ancillary
Agreement to which it is a party and the proceeds payable to Seller pursuant to
this Agreement.
2.3 NONASSIGNABLE CONTRACTS, LEASES AND PERMITS. In the case of any
Purchased Assets constituting Contracts, leases or Permits that are not by their
terms assignable or that require the consent of a third party in connection with
the Transfer by Seller, Seller will use its commercially reasonable best efforts
to obtain or cause to be obtained in writing prior to the Closing Date any
consents necessary to convey the benefits thereof. Purchaser will assist Seller
in such manner as may be reasonably requested in connection therewith, including
by (i) participating in discussions and negotiations with all persons or
entities with the authority to grant or withhold such consent, (ii) substituting
Benetech, Inc. ("BENETECH"), to the extent permitted under Benetech's credit
agreements or other contracts, for the Stockholder as the corporate guarantor
with respect to Purchaser's assumed obligations under the Seller Office
Sublease, and (iii) being responsible for any incidental telephone
long-distance, delivery, mailing, travel, lodging and employee time expenses
associated with either of clauses (i) or (ii); PROVIDED, HOWEVER, that, except
with respect to these specified activities, such assistance will not be deemed
to require any expenditure of money on the part of Purchaser, whether before or
after the Closing Date. If the consent of any third party is not obtained prior
to the Closing Date and the Closing occurs notwithstanding the failure to obtain
such consent, Seller will use its commercially reasonable best efforts to assist
Purchaser in such manner as may reasonably be requested by Purchaser for the
purpose of obtaining such consent promptly, including by (a) participating in
discussions and negotiations with all persons or entities with the authority to
grant or withhold such consent and (ii) being responsible for any incidental
telephone long-distance, delivery, mailing, travel, lodging and employee time
expenses associated with clause (i); PROVIDED, HOWEVER, that, except with
respect to these specified activities, such assistance will not be deemed to
require any expenditure of money or financial accommodation on the part of
Seller or the Stockholder after the Closing Date. During such period in which
the applicable Contract, lease or Permit is not capable of being assigned to
Purchaser due to the failure to obtain any required consent, Seller will make
such arrangements as may be necessary to enable Purchaser to receive all the
economic benefits under such Contract, lease or Permit accruing on and after the
Closing Date (including, to the extent permissible, through a sub-contracting,
sub-licensing, sub-participation or sub-leasing arrangement, or an arrangement
under which Seller would enforce such Contract, lease or Permit for the benefit
of Purchaser, with Purchaser, to the extent permissible, assuming Seller's
executory obligations and any and all rights of Seller against the other party
thereto). If the approval of the other party to such Contract, lease or Permit
is obtained, such approval will, as between Seller and Purchaser, constitute a
confirmation (automatically and without further action of the parties) that such
Contract, lease or Permit is assigned to Purchaser as of the Closing Date, and
(automatically and without further action of the parties) that the liabilities
with respect to such Contract, lease or Permit are, subject to the terms of this
Agreement, assumed as of the Closing Date.
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ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 LIABILITIES ASSUMED BY PURCHASER. (a) Subject to Section 3.2, at the
Closing, Purchaser will assume, as of the Closing Date, and will subsequently
pay, honor and discharge when due and payable and otherwise in accordance with
their terms, (i) all liabilities and obligations of Seller (other than the
Retained Liabilities) arising under the terms of the Assigned Contracts, but
only to the extent not delinquent or otherwise accrued (but only to the extent
such accruals are included in the Closing Working Capital Balance); PROVIDED,
HOWEVER, that Purchaser will assume warranty obligations up to the amount set
forth in SCHEDULE 6.1.25, (II) all liabilities of a type included under the
caption "Current Liabilities" in the Pro Forma Working Capital Calculation (but
only to the extent they are included in the Closing Working Capital Balance),
(iii) and any obligations described on SCHEDULE 3.1(A)(III) arising upon the
acceptance by a customer of the Business of an open bid described on SCHEDULE
3.1(A)(III), and (iv) the obligation to pay the calendar year 2000 bonuses to
the persons, in the amounts (less applicable payroll taxes and withholdings
required by law) and on the dates set forth in each case in SCHEDULE 3.1(A)(IV);
PROVIDED, HOWEVER, that Purchaser will not assume or be responsible for any such
liabilities or obligations (a) of the type listed in EXHIBIT C as
"Compensation," "Progress ▇▇▇▇▇▇▇▇," "Intercompany Payable (Ceilcote),"
"Intercompany Payable (ITEQ)," "Income Taxes Payable," "Deferred Income Taxes,"
"Other Current Liabilities" or "Current Maturities of Long-Term Obligations" or
for cash overdrafts or (b) from any breach or default by Seller under any
Assigned Contract, all of which liabilities and obligations will constitute
Retained Liabilities. Notwithstanding anything to the contrary contained in this
Agreement or any document delivered in connection herewith, Purchaser's
obligations in respect of the Assumed Liabilities will not extend beyond the
extent to which Seller was obligated in respect thereof and will be subject to
Purchaser's right to contest in good faith the nature and extent of any
liability or obligation.
(b) The liabilities to be assumed by Purchaser pursuant to Section 3.1(a)
are hereinafter sometimes collectively referred to as "ASSUMED LIABILITIES."
3.2 LIABILITIES NOT ASSUMED BY PURCHASER. (a) Anything in this Agreement
to the contrary notwithstanding, Purchaser will not assume, cause to be assumed
or be deemed to have assumed, or in any way be liable or responsible for, any
liabilities or obligations of Seller, except as specifically provided in Section
3.1(a). Without limiting the generality or effect of the foregoing, Purchaser
will not assume, or be responsible or liable with respect to, any liabilities or
obligations of Seller or its Affiliates or their respective
predecessors-in-interest (except for the Assumed Liabilities), whether or not
arising out of or relating to the conduct of the Business or associated with or
arising from any of the Purchased Assets or any other rights, properties or
assets used in or associated with the Business at any time, and whether fixed or
contingent or known or unknown.
(b) All liabilities or obligations of Seller other than Assumed
Liabilities are hereinafter sometimes collectively referred to as the "RETAINED
LIABILITIES."
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ARTICLE IV
PURCHASE PRICE AND CLOSING PAYMENTS
4.1 PURCHASE PRICE. In consideration for the Transfer by Seller to
Purchaser of the Purchased Assets and the assumption by Purchaser of the Assumed
Liabilities, Purchaser will deliver to Seller at the Closing the aggregate
purchase price (as adjusted pursuant to this Article IV, the "PURCHASE PRICE")
in amount equal to $2,850,000 (such amount to be paid at the Closing in
accordance with the adjustments set forth in this Article IV, the "CLOSING CASH
CONSIDERATION"), payable in cash by wire transfer in immediately available funds
to one account designated in writing by Seller at least two days prior to the
Closing Date.
4.2 ESTIMATED CLOSING WORKING CAPITAL. Not less than two Business Days
prior to the Closing Date, Seller and Purchaser will prepare and agree on an
estimate of the Closing Working Capital Balance (the "ESTIMATED CLOSING WORKING
CAPITAL BALANCE") determined in accordance with Section 4.3, as if it were the
actual Closing Working Capital Balance, but based upon Seller's and Purchaser's
review of monthly and other financial information then available and inquiries
of personnel responsible for the preparation of the financial information
relating to the Seller in the ordinary course, all in accordance with the
policies, principles and methodologies set forth in EXHIBIT C attached hereto.
The Purchase Price (and the Closing Cash Consideration) will be decreased
dollar-for-dollar by the amount, if any, by which the Estimated Closing Working
Capital Balance, determined in accordance with Section 4.3, is less than the
Reference Working Capital Balance. Neither the Purchase Price nor the Closing
Cash Consideration shall be increased if the Estimated Closing Working Capital
Balance is more than the Reference Working Capital Balance.
4.3 POST-CLOSING PURCHASE PRICE ADJUSTMENT. (a) Within 60 days after
the Closing Date, Purchaser will prepare and deliver or cause to be prepared and
delivered to Seller a balance sheet of Seller as of the close of business on the
Closing Date (the "CLOSING DATE BALANCE SHEET") and a proposed statement of the
Net Working Capital of Seller prepared therefrom (the "CLOSING STATEMENT"), in
each case, without giving effect to the transactions described in this Agreement
to be consummated at the Closing. The Closing Date Balance Sheet and the Closing
Statement (i) will reflect, respectively, the financial position of Seller and
the components and calculation of the Net Working Capital of Seller in the
manner set forth in EXHIBIT C, in each case as of the Closing Date, (ii) will be
prepared and determined as of the Closing Date and on a basis consistent with
the policies, principles and methodology used in connection with the preparation
of the Reference Financial Statements and the Reference Balance Sheet; PROVIDED,
HOWEVER, that the amounts for year 2000 employee bonuses and for warranty
reserves will be the amounts set forth in the Estimated Closing Working Capital
Balance unless, with respect to warranty reserves, such amount is not calculated
in accordance with Seller's past practices, which is based on 0.75% of sales,
and (iii) will be subject to adjustment in accordance with the policies,
principles and methodology encompassed in the pro forma working capital
calculation set forth in EXHIBIT C (the "PRO FORMA WORKING CAPITAL CALCULATION")
(the policies, principles and methodology in clauses (ii) and (iii) being
referred to herein as the "FINANCIAL STATEMENT PRINCIPLES"). Notwithstanding
anything contained herein to the contrary, there will be no changes in reserve
or accrual policies of Seller between the Balance Sheet Date and the Closing
Date without the prior written consent of Purchaser. The Net Working Capital of
Seller as of the
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Closing Date determined in accordance with this Section 4.3 is referred to
herein as the "CLOSING WORKING CAPITAL BALANCE." In the event that the Financial
Statement Principles do not include any policies, principles or methodology
required to determine the Net Working Capital of Seller, then the Net Working
Capital of Seller will be determined on a basis in accordance with GAAP.
(b) If, within 30 days after the date of Purchaser's delivery of the
Closing Date Balance Sheet and the Closing Statement, Seller determines in good
faith that the Closing Date Balance Sheet and the Closing Statement have not
been prepared or determined in accordance with this Agreement, Seller will give
written notice to Purchaser within such 30 day period (i) setting forth Seller's
proposed changes to the Closing Date Balance Sheet as prepared by Purchaser and
the determination by Seller of the Closing Working Capital Balance and (ii)
specifying in reasonable detail Seller's basis for disagreement with Purchaser's
preparation and determination of the Closing Date Balance Sheet and the Closing
Working Capital Balance. The failure by Seller to so express disagreement and
provide such notice within such 30 day period will constitute the acceptance of
Purchaser's preparation of the Closing Date Balance Sheet and the computation of
the Closing Working Capital Balance. If Purchaser and Seller are unable to
resolve any disagreement between them with respect to the preparation of the
Closing Date Balance Sheet and the determination of the Closing Working Capital
Balance within 15 days after the giving of notice by Seller to Purchaser of such
disagreement, the items in dispute will be referred for determination to the
Atlanta, Georgia office of PriceWaterhouseCooper LLC (or, if they are unable or
unwilling to serve, another nationally recognized "Big 5" accounting firm not
affiliated with the Stockholder, Seller or Purchaser) (the "ACCOUNTANTS") as
promptly as practicable, but not later than five days after the expiration of
such 15 day period. Purchaser and Seller will use reasonable efforts to cause
the Accountants to render their decision as soon as practicable thereafter,
including by promptly complying with all reasonable requests by the Accountants
for information, books, records and similar items. The parties will instruct the
Accountants to make a determination as to each of the items in dispute or
affected by items in dispute (but only those items in dispute or affected by
items in dispute) (A) in writing, (B) as promptly as practicable after the items
in dispute have been referred to the Accountants (but in no event later than 30
days thereafter), and (C) in accordance with this Agreement (including EXHIBIT
C). The Accountants' determination will be conclusive and binding upon each of
the parties hereto. Nothing herein will be construed to authorize or permit the
Accountants to determine (i) any question or matter whatsoever under or in
connection with this Agreement, except the determination of what adjustments, if
any, must be made in one or more disputed items (or items affected thereby)
reflected in the Closing Date Balance Sheet and the Closing Statement delivered
by Purchaser in order for the Closing Working Capital Balance to be determined
in accordance with the provisions of this Agreement (including EXHIBIT C), or
(ii) a computation of the Closing Working Capital Balance that is not equal to
one of, or between, the Closing Working Capital Balances as determined by Seller
and by Purchaser. The fees and expenses of the Accountants will be paid by the
party against whom the majority of the matters (based on dollar amounts) are
determined. No party will disclose to the Accountants, and the Accountants will
not consider for any purpose, any settlement discussions or settlement offer
made by any party.
(c) During the period that Seller's advisors and personnel are conducting
their review of Purchaser's preparation of the Closing Date Balance Sheet and
determination of the Closing Working Capital Balance, Seller and its
representatives will have reasonable access during
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normal business hours to the work papers prepared by or on behalf of Purchaser
and its representatives in connection with Purchaser's preparation of the
Closing Statement and determination of the Closing Working Capital Balance;
PROVIDED, HOWEVER, that Seller will conduct such review in a manner that does
not unreasonably interfere with the conduct of the businesses of Purchaser or
result in substantial out-of-pocket costs to Purchaser. To the extent any such
work papers are in the control of Seller after the Closing Working Capital
Balance, Seller will grant Purchaser and its representatives reciprocal access
rights for the purpose of finalizing the preparation of the Closing Date Balance
Sheet and the determination of the Closing Working Capital Balance. Seller and
Purchaser agree in good faith to use all reasonable efforts to provide such
information and access described in this Section 4.3(c).
4.4 ADJUSTMENTS TO PURCHASE PRICE. (a) Upon the final determination of
the Closing Working Capital Balance, the parties shall make the following
adjustments:
(i) If the Closing Working Capital Balance exceeds the Estimated
Closing Working Capital Balance, then the Purchase Price will be increased
by, and Purchaser will pay to Seller, the amount of such difference;
PROVIDED, HOWEVER, that in no event will the Purchase Price, or the total
payment to Seller, exceed $2,850,000.
(ii) If the Closing Working Capital Balance is less than the
Estimated Closing Working Capital Balance, then the Purchase Price will be
decreased by, and Seller will pay to Purchaser, the amount of such
difference.
(b) Any payment in respect of an adjustment required to be made under
Section 4.4 will be made by Purchaser or Seller, as applicable, in cash by wire
transfer of immediately available funds to one account specified by Purchaser or
Seller, as applicable, in writing, prior to the date such payment is required to
be made hereunder. Such payment will be made on such of the following dates as
may be applicable: (i) if Seller shall have not objected to the preparation of
the Closing Date Balance Sheet and the determination of the Closing Working
Capital Balance, the earlier of (A) 35 days after delivery to Seller of the
Closing Date Balance Sheet and Closing Statement or (B) five days after Seller
has indicated that it has no objections to the preparation of the Closing Date
Balance Sheet and the determination of the Closing Working Capital Balance, or
(ii) if Seller shall have objected to the preparation of the Closing Date
Balance Sheet or the determination of the Closing Working Capital Balance by
Purchaser, within five days following final agreement or decision with respect
to the Closing Date Balance Sheet and the Closing Working Capital Balance as
provided in Section 4.3 and this Section 4.4.
4.5 ALLOCATION OF PURCHASE PRICE. Purchaser and Seller agree that (i) the
aggregate Purchase Price will be allocated among the Purchased Assets as set
forth in EXHIBIT D, (ii) any adjustments to the Purchase Price pursuant to this
Article IV will be allocated reasonably by Purchaser, as applicable, based on
the nature of the adjustment, to the relevant property, Inventory, Accounts
Receivable or the appropriate Assigned Contracts, (iii) they will file all Tax
returns and related forms (including Form 8594) in accordance with EXHIBIT D,
and (iv) they will not make any inconsistent statement or take any inconsistent
position on any Tax returns, in any refund claim or during the course of any IRS
or other tax audit. Each party will notify the other party if it receives notice
that the IRS proposes any allocation that is different from the allocation as
set forth in EXHIBIT D.
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ARTICLE V
CLOSING AND CLOSING DELIVERIES
5.1 THE CLOSING. The closing of the sale and purchase of the Purchased
Assets (the "CLOSING") will take place at the offices of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ &
▇▇▇▇▇ located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, at 10:00 a.m.,
Central Standard Time, three Business Days after satisfaction or waiver of the
conditions to Closing set forth in Article IX, unless the parties agree in
writing to change the Closing to another time, date or place. The date upon
which the Closing occurs is herein called the "CLOSING DATE." Notwithstanding
any other provision hereof, the Closing will be deemed effective for accounting,
tax and all other purposes as of 11:59 p.m., Central Standard Time, on the day
immediately preceding the Closing Date.
5.2 DELIVERIES OF SELLER. At the Closing, Seller will deliver to
Purchaser:
(i) such instruments of assignment, assumption and Transfer as
Purchaser may deem necessary or desirable to Transfer any of the Purchased
Assets, duly executed by Seller;
(ii) a certificate of the Chief Executive Officer of Seller
confirming Seller's compliance with the condition set forth in Section
9.1.1;
(iii) a certificate of Seller's Secretary or Assistant Secretary
certifying as to Seller's certificate of incorporation, bylaws or other
comparable documents and to the due adoption of resolutions adopted by its
Board of Directors and stockholders authorizing the execution of this
Agreement and each Ancillary Agreement to which it will be a party at
Closing and the taking of any and all actions deemed necessary or
advisable to consummate the transactions contemplated herein and therein;
(iv) the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, counsel to Seller, dated
the Closing Date, covering the matters set forth on EXHIBIT E, in a form
reasonably satisfactory to Purchaser;
(v) evidence or copies of the consents, approvals, orders,
qualifications or waivers required by any third party or Governmental
Authority to consummate the transactions contemplated by this Agreement
that are listed in SCHEDULE 5.2(V);
(vi) the Certificate of Amendment of Seller's Certificate of
Incorporation, dated the Closing Date and in proper form for filing with
the Secretary of State of the State of Delaware, changing Seller's name to
a name not similar to "AMEREX," "AMEREX INDUSTRIES" or any combination
thereof, together with all other documentation required to be filed in
other jurisdictions where Seller is qualified or licensed to do business
to reflect such name change;
(vii) each Ancillary Agreement required to be duly executed and
delivered by parties other than Purchaser or its Affiliates;
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(viii) a non-foreign person affidavit as required by Section 1445 of
the Code in substantially the form of EXHIBIT F hereto; and
(ix) such other documents and instruments as may be reasonably
required to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements and to comply with the terms hereof and thereof.
5.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser will deliver or
cause to be delivered to Seller:
(i) the Closing Cash Consideration by wire transfer of immediately
available funds to the account specified pursuant to Section 4.1;
(ii) a certificate of the President of Purchaser confirming
Purchaser's compliance with the condition set forth in Section 9.2.1;
(iii) each Ancillary Agreement required to be duly executed and
delivered by Purchaser or its Affiliates;
(iv) documents evidencing the assumption by Purchaser of the Assumed
Liabilities; and
(v) such other documents and instruments as may be reasonably
required to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements and to comply with the terms hereof and thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER
6.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND SELLER. The
Stockholder and Seller jointly and severally represent and warrant to Purchaser
as of the date hereof and the Closing Date as follows:
6.1.1 CORPORATE EXISTENCE AND POWER. Each of the Stockholder and Seller is
a corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. Seller has all corporate power required to carry
on the Business as now conducted. Seller is duly qualified to conduct business
as a foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Seller has heretofore
delivered to Purchaser true and complete copies of the certificate of
incorporation and bylaws of Seller, in each case as amended to date.
6.1.2 CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by the Stockholder and Seller of this Agreement and each of the
Ancillary Agreements to which it will be a party at the Closing are, and will be
at the Closing, within the Stockholder's and Seller's corporate powers and have
been duly authorized by the Stockholder
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and the board of directors of Seller and no other corporate action on the part
of the Stockholder or Seller is necessary to authorize this Agreement or any of
the Ancillary Agreements to which the Stockholder or Seller will be a party at
the Closing. This Agreement has been, and each of the Ancillary Agreements to
which the Stockholder or Seller will be a party at the Closing will have been,
duly executed and delivered by the Stockholder or Seller, as applicable.
Assuming the due execution and delivery by Purchaser of this Agreement and each
of the Ancillary Agreements to which the Stockholder or Seller will be a party
at the Closing, this Agreement constitutes, and each Ancillary Agreement to
which the Stockholder or Seller will be a party at the Closing will constitute
at the Closing, valid and binding agreements of the Stockholder and Seller, as
applicable, enforceable against each in accordance with their terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors' rights
generally and by general principles of equity (whether applied in a proceeding
at law or in equity).
6.1.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by the Stockholder and Seller of this Agreement and each Ancillary Agreement to
which the Stockholder or Seller will be a party at the Closing require no
consent, approval, order, authorization or action by or in respect of, or filing
with, any Governmental Authority.
6.1.4 NON-CONTRAVENTION; CONSENTS. Except as disclosed in SCHEDULE 6.1.4,
the execution, delivery and performance by the Stockholder and Seller of this
Agreement and each Ancillary Agreement to which the Stockholder or Seller will
be a party at the Closing, and the consummation of the transactions contemplated
hereby and thereby do not and will not at the Closing (a) violate the
certificate of incorporation or bylaws of either the Stockholder or Seller, (b)
violate any applicable Law or Order, (c) require any filing with or Permit,
consent or approval of, or the giving of any notice to, any Person (including
filings, consents or approvals required under any Permits of Seller or any
licenses to which Seller is a party), (d) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Seller or to a loss of any benefit to
which Seller is entitled under, any Contract, agreement or other instrument
binding upon Seller or any license, franchise, Permit or other similar
authorization held by Seller, or (e) result in the creation or imposition of any
Lien (other than Permitted Liens) on any asset of Seller.
6.1.5 CAPITALIZATION. Seller is a wholly owned subsidiary of the
Stockholder. All the outstanding shares of Capital Stock of Seller have been
validly issued to the Stockholder and are fully paid and nonassessable.
6.1.6 SUBSIDIARIES. Except as disclosed in SCHEDULE 6.1.6, Seller does not
own any Capital Stock or other equity or ownership or proprietary interest in
any corporation, partnership, association, trust, joint venture or other entity.
All activities that constitute the Business that are conducted by Seller, the
Stockholder or any of their Affiliates are conducted by and through Seller.
6.1.7 FINANCIAL STATEMENTS; OTHER FINANCIAL MATTERS. (a) Seller has
heretofore furnished Buyer with a true and complete copy of the Reference
Financial Statements which are attached hereto as SCHEDULE 3. Except as set
forth in SCHEDULE 6.1.7(A), the Reference Financial
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Statements have been derived from the books and records of Seller, have been
prepared in accordance with GAAP (except for, with respect to the Reference
Balance Sheet and the related statement of income, normal year-end adjustments
and, with respect to the Reference Financial Statements, the absence of notes to
such financial statements) and fairly present in all material respects the
financial position of Seller at the respective dates thereof and the results of
the operations of Seller for the periods indicated.
(b) Seller has also heretofore furnished Purchaser with a true and
complete copy of the Monthly Financial Statements described in clause (a) of the
definition thereof which are attached hereto as SCHEDULE 6. The (i) Monthly
Financial Statements for the period between the Balance Sheet Date and the date
hereof and (ii) the additional Monthly Financial Statements required to be
delivered pursuant to Section 8.4(b) (clauses (i) and (ii), collectively, the
"REFERENCE MONTHLY FINANCIAL STATEMENTS"), have been and, as to those Monthly
Financial Statements required to be delivered pursuant to Section 8.4(b), will
have been, prepared from the books and records of Seller, which are, and as to
those Reference Monthly Financial Statements required to be delivered pursuant
to Section 8.4(b), will be, complete and accurate in all material respects. The
Reference Monthly Financial Statements fairly represent and, as to those
Reference Monthly Financial Statements required to be delivered pursuant to
Section 8.4(b), will fairly represent, in each case, in all material respects
the financial position of Seller at the respective dates thereof and the results
of the operations of Seller for the respective periods then ended.
(c) Since the Balance Sheet Date, there have been no changes in Seller's
reserves or accruals (other than in the Ordinary Course of Business) or changes
in its material accounting policies.
(d) The books of account, minute books, stock record books and other
records of Seller, all of which have been made available to Purchaser, are
complete and correct in all material respects.
6.1.8 NO UNDISCLOSED LIABILITIES. There are no liabilities or any facts or
circumstances which could give rise to liabilities, whether accrued, contingent,
absolute, determined, determinable or otherwise, of Seller other than (a)
liabilities fully provided for in the Reference Financial Statements, (b)
liabilities specifically disclosed in SCHEDULE 6.1.8, and (c) other undisclosed
liabilities incurred since the Balance Sheet Date in the Ordinary Course of
Business which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6.1.9 TAX MATTERS. (a) Except as disclosed in SCHEDULE 6.1.9(A):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed by
or on behalf of Seller with any Taxing Authority with respect to any
Pre-Closing Tax Period (collectively, the "RETURNS") have, to the extent
required to be filed on or before the date hereof, been filed and, to the
extent required to be filed between the date hereof and the Closing Date,
will have been filed before the Closing, when due in accordance with all
applicable Laws and all Taxes owed by Seller (whether or not shown as due
and payable on the Returns that have been filed) have been timely paid or
will have been timely paid prior to the Closing Date, or
20
withheld (including withholding for independent contractors, consultants
and other employees) and remitted to the appropriate Taxing Authority, or
will have been timely withheld and remitted to the appropriate Taxing
Authority prior to the Closing Date, except where the failure to file any
such Return or to pay or withhold any such Tax could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse
Effect;
(ii) The Returns correctly reflect in all material respects, the
facts regarding the income, business, assets, operations, and activities
and status of Seller;
(iii) Any reserves established for Taxes with respect to Seller for
any Pre-Closing Tax Period (including any Pre-Closing Tax Period for which
no Return has yet been filed) reflected on the books of Seller are
adequate in accordance with GAAP;
(iv) Seller is not delinquent in the payment of any Tax or has
requested any extension of time within which to file any Return except for
extensions granted as a matter of right;
(v) Neither Seller nor any member of any affiliated, consolidated,
combined or unitary group of which Seller is or has been a member has
granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(vi) There is no action, suit, proceeding, audit or investigation
pending or, to the knowledge of Seller, threatened against or with respect
to Seller in respect of any Tax. Since January 1, 1997, no claim has been
made by any Taxing Authority in any jurisdiction in which Seller does not
file a Tax Return that it is or may be subject to taxation by that
jurisdiction and no such claim exists which has not been resolved by a
determination by such Taxing Authority that Seller is not so subject to
taxation;
(vii) Seller does not own any interest in real property in any
jurisdiction in which a Tax is imposed on the transfer of a controlling
interest in an entity that owns any interest in real property;
(viii) Neither Seller nor any other Person on behalf of Seller has
entered into any agreement or consent pursuant to Section 341(f) of the
Code;
(ix) There are no Liens for Taxes upon the assets of Seller, except
Liens for current Taxes not yet due; and
(x) Seller will not be required to include any adjustment in taxable
income for any Post-Closing Tax Period under Section 481(c) of the Code
(or any similar provision of the Tax Laws of any jurisdiction) as a result
of a change in method of accounting for a Pre-Closing Tax Period or
pursuant to the provisions of any agreement entered into with any Taxing
Authority with regard to the Tax liability of Seller for any Pre-Closing
Tax Period.
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(b) SCHEDULE 6.1.9(B) contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax imposed is properly payable by Seller in
connection with Seller's ownership or use of the Purchased Assets or conduct of
the Business.
6.1.10 ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 6.1.10,
since the Balance Sheet Date, Seller has conducted the Business in the Ordinary
Course of Business and there has not been any event, occurrence, development or
circumstances which (a) has had or which could reasonably be expected to have a
Material Adverse Effect or (b) would have constituted a violation of any
covenant of Seller hereunder (including Section 8.1) had such covenant applied
to it since the Balance Sheet Date. Since the Balance Sheet Date, there has not
occurred any damage, destruction or casualty loss (whether or not covered by
insurance) with respect to any of the Purchased Assets.
6.1.11 CONTRACTS. (a) Except as specifically disclosed in Schedule
6.1.11(a), Seller is neither a party to nor bound by any lease, agreement,
contract, commitment or other legally binding contractual right or obligation
(whether written or oral) (collectively, "CONTRACTS") that is of a type
described below:
(i) any lease (whether of real or personal property), including the
leases disclosed or required to be disclosed on SCHEDULE 6.1.15(B);
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that provides for aggregate payments
by Seller of $25,000 or more;
(iii) any sales, distribution or other similar agreement providing
for the sale by Seller of materials, supplies, goods, services, equipment
or other assets that provides for aggregate payments to Seller of $25,000
or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any Contract pursuant to which any third party has rights to own
or use any material asset of Seller, including any Intellectual Property
Right of Seller;
(vi) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise)
or granting to any Person a right of first refusal, first offer or other
right to purchase any of the Purchased Assets;
(vii) any agreement relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed or secured by any asset) other than accruals
recorded in the Ordinary Course of Business;
(viii) any license, franchise or similar agreement;
(ix) any agency, dealer, sales representative, marketing or other
similar agreement;
(x) any Contract that may not be terminated by Seller without
payment of penalty on less than 90 days' prior notice;
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(xi) any agreement with (A) any stockholder of Seller or any other
Affiliate of Seller or (B) any director or officer of Seller or with any
"associate" or any member of the "immediate family" (as such terms are
respectively defined in Rules 12b-2 and 16a-1 of the Exchange Act) of any
such director or officer;
(xii) any management service, consulting or any other similar type
of agreement;
(xiii) any warranty, guaranty or other similar undertaking with
respect to any contractual performance (or Seller's standard forms of any
of the foregoing) or agreement to indemnify any Person;
(xiv) any employment, deferred compensation, severance, bonus,
retirement or other similar agreement or plan in effect as of the date
hereof (including in respect of any advances or loans to any employees)
and entered into or adopted by Seller, including the Seller Employment
Agreements; or
(xv) any other agreement, commitment, arrangement or plan not made
in the Ordinary Course of Business of Seller that is material to Seller or
the Business.
(b) Each Contract disclosed in or required to be disclosed in SCHEDULE
6.1.11(A) is a valid and binding agreement of Seller and, to the knowledge of
Seller, each other party thereto, enforceable in accordance with its respective
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement of
creditors' rights generally and by general principles of equity (whether applied
in a proceeding at law or in equity). Neither Seller nor, to the knowledge of
Seller, any other party to any such Contract is in default or breach (with or
without due notice or lapse of time or both) in any material respect under the
terms of any such Contract. To the knowledge of Seller, there is no event,
occurrence, condition or act which, individually or in the aggregate, with the
giving of notice or the passage of time or both, or the happening of any other
event or condition, could reasonably be expected to become a material default or
event of default under any such Contract. Seller has delivered or made available
to Purchaser true and complete originals or copies of all Contracts disclosed in
or required to be disclosed in SCHEDULE 6.1.11(A).
(c) (i) except as described in SCHEDULE 6.1.11(C)(I), since {intentionally
omitted}, neither Seller nor the Stockholder nor any Affiliate of Seller or the
Stockholder nor any employee or agent of Seller or the Stockholder has been
provided with or used any drawings, specifications or information of
{intentionally omitted} or pursuant to the {intentionally omitted} Licensing
Agreement, (ii) to the knowledge of the Stockholder, except as described in
SCHEDULE 6.1.11(C)(II), neither Seller nor any employee, director or agent of
Seller has any drawings, specifications or information that were transferred to
{intentionally omitted} or its successors and assigns pursuant to the
{intentionally omitted}, and (iii) to the knowledge of the Stockholder, except
as described in SCHEDULE 6.1.11(C)(II), no manufacturing, sale or installation
of {intentionally omitted} (the "{INTENTIONALLY OMITTED} TECHNOLOGY") by Seller
prior to the date hereof was based on information received, acquired or derived
from the {intentionally omitted} Licensing Agreement or the {intentionally
omitted} or from information or technology transferred, directly or indirectly,
to {intentionally omitted}. Seller does not currently use {intentionally
omitted} Technology in any of its products.
23
6.1.12 INSURANCE COVERAGE. SCHEDULE 6.1.12 contains a list of all of the
insurance policies and fidelity bonds covering the assets, Business, operations,
employees, officers and directors of Seller. There is no material claim by
Seller pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and Seller has complied in all material respects with the terms and conditions
of all such policies and bonds. Such policies of insurance and bonds (or other
policies and bonds providing substantially similar insurance coverage) are in
full force and effect. Seller has no knowledge of any threatened termination of,
or premium increase with respect to, any of such policies or bonds. Since the
last renewal date of any insurance policy, there has not been any material
adverse change in the relationship of Seller with its respective insurers or the
premiums payable pursuant to such policies.
6.1.13 LITIGATION. (a) Except as disclosed in SCHEDULE 6.1.13(A), there is
no action, suit, investigation, arbitration or administrative or other
proceeding pending or, to the knowledge of Seller, threatened, against or
affecting Seller, the Purchased Assets or the Business before any court or
arbitrator or any Governmental Authority or which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement and any Ancillary Agreements to which Seller will
be a party at Closing. Seller does not know of any valid basis for any such
action, suit, investigation, arbitration or proceeding against or affecting the
Purchased Assets or the Business. Except as disclosed in SCHEDULE 6.1.13(A),
there are no outstanding judgments, orders, injunctions, decrees, stipulations
or awards (whether rendered by a court, administrative agency, arbitral body or
Governmental Authority) against Seller, the Purchased Assets or the Business.
(b) All claims, whether in contract or tort, for defective or allegedly
defective products or workmanship pending or, to the knowledge of Seller,
threatened, against Seller are listed or described on SCHEDULE 6.1.13(B).
6.1.14 COMPLIANCE WITH LAWS; PERMITS. (a) Except as described in SCHEDULE
6.1.14(A), Seller has complied with all Laws. Seller knows of no fact,
circumstance, condition or situation exists which, after notice or lapse of time
or both, would constitute noncompliance by Seller or give rise to any future
liability of Seller with respect to any Law heretofore or currently in effect.
Seller is not required to make any unusual expenditure to achieve or maintain
compliance with any Law. Neither the use, condition nor other aspect of any of
the Purchased Assets or other right, property or asset used in or associated
with the Business is or has been in violation of any applicable Law. Except as
set forth in SCHEDULE 6.1.14(A), Seller has not received notice of any violation
of any Law, or any potential liability under any Law, relating to the operation
of the Business or to any of its assets (including the Purchased Assets),
operations, processes, results or products, nor is Seller aware of any such
violation or potential liability. Seller is not aware of any present requirement
of any applicable Law which is due to be imposed on Seller or the Business that
is reasonably likely to increase the cost of complying with such Law.
(b) SCHEDULE 6.1.14(b) sets forth a list of each government or regulatory
license, authorization, permit, franchise, consent and approval (the "PERMITS")
issued and held by or on behalf of Seller or required to be so issued and held
to carry on the Business as currently conducted. Except as disclosed in SCHEDULE
6.1.14(B), Seller is the authorized legal holder of the
24
Permits and each Permit is valid and in full force and effect. Seller is not in
default under, and no condition exists that with notice or lapse of time or both
could constitute a default or could give rise to a right of termination,
cancellation or acceleration under, any material Permit held by Seller.
6.1.15 PURCHASED ASSETS; PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except for
inventory disposed of in the Ordinary Course of Business of Seller, Seller has
good title to, or in the case of leased property has valid leasehold interests
in, the Purchased Assets and all other property and assets (whether real or
personal, tangible or intangible) reflected in the Reference Balance Sheet or
acquired after the date thereof, free and clear of all Liens, except for
Permitted Liens and Liens disclosed in SCHEDULE 6.1.15(A).
(b) Seller owns no Real Property assets. SCHEDULE 6.1.15(B) sets forth a
list of all real property assets leased by Seller (the "REAL PROPERTY"). Seller
is a tenant or possessor in good standing thereunder (with a right of quiet
enjoyment therein) and all rents due under such leases have been paid. Neither
Seller nor, to the knowledge of Seller, any other party to any such lease is in
default or breach (with or without due notice or lapse of time or both) in any
material respect under the terms of any such lease. Seller is in peaceful and
undisturbed possession of the space and/or estate under each lease of which it
is a tenant. Seller has not received any notice of any appropriation,
condemnation or like proceeding, or of any violation of any applicable zoning
Law or Order relating to or affecting the Real Property, and to Seller's
knowledge, no such proceeding has been threatened or commenced. To Seller's
knowledge, each item of Real Property has adequate Utilities (as hereinafter
defined) of a capacity and condition to serve adequately such Real Property
(with due regard for the use to which such Real Property is presently being
put). For purposes of this Agreement, the term "UTILITIES" means all of the
following: water distribution and service facilities; sanitary sewers and
associated installations; storm sewers; storm retention ponds and other drainage
facilities; electrical distribution and service facilities; telephone, and
similar communication facilities; heating, ventilating, cooling and air
conditioning systems and facilities; natural gas distribution and service
facilities; fire protection facilities; garbage compaction and collection
facilities; and all other utility lines, conduit, pipes, ducts, shafts,
equipment, apparatus and facilities.
(c) The tangible property comprising the Purchased Assets for which value
has been assigned on the Reference Balance Sheet are in all material respects in
good repair and operating condition in accordance with Seller's general
maintenance policies (subject to normal maintenance requirements and normal wear
and tear excepted).
(d) Except as set forth in SCHEDULE 6.1.15(D), the Purchased Assets
constitute all of the assets used in connection with the Business and are
adequate to conduct the Business as currently conducted.
6.1.16 INTELLECTUAL PROPERTY. (a) SCHEDULE 6.1.16(A) sets forth a list of
all Intellectual Property Rights which are owned by Seller or which Seller is a
licensor or licensee, and all material licenses, sublicenses and other written
agreements as to which Seller or any of its Affiliates is a party and pursuant
to which any Person is authorized to use such Intellectual Property Right,
including the identity of all parties thereto.
25
(b) Except as disclosed in SCHEDULE 6.1.16(B):
(i) All of the Intellectual Property Rights necessary for or used in
the conduct of the Business are set forth in SCHEDULE 6.1.16(A).
(ii) The conduct of the Business by Seller as currently conducted
does not infringe upon any Intellectual Property Right of any third party.
There is no claim, suit, action or proceeding that is either pending or,
to the knowledge of Seller, threatened, that, in either case, involves a
claim of infringement by Seller of any Intellectual Property Right of any
third party, or challenging Seller's ownership, right to use, or the
validity of any Intellectual Property Right listed or required to be
listed in SCHEDULE 6.1.16(A). Seller has no knowledge of any basis for any
such claim of infringement and no knowledge of any continuing infringement
by any other Person of any of the Intellectual Property Rights listed or
required to be listed in SCHEDULE 6.1.16(A);
(iii) No Intellectual Property Right listed or required to be listed
in SCHEDULE 6.1.16(A) is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting the use thereof by Seller or
restricting the licensing thereof by Seller to any Person, other than with
respect to standard and customary restrictions associated with
commercially available third party software to which Seller has a valid
right to use in connection with the Business;
(iv) Seller has not entered into any agreement to indemnify any
other Person against any charge of infringement of any Intellectual
Property Right; and
(v) Seller has duly maintained all registrations for any
Intellectual Property Rights listed or required to be listed in SCHEDULE
6.1.16(A).
6.1.17 ENVIRONMENTAL MATTERS. (a) Except as disclosed in SCHEDULE
6.1.17(A):
(i) Seller has not, and to Seller's knowledge no other party has,
generated, recycled, used, treated or stored on, transported to or from,
or Released or disposed on, Seller Property any Constituents of Concern
or, to the knowledge of Seller, on any property adjoining or adjacent to
any Seller Property, except in compliance with Environmental Laws;
(ii) Seller has not disposed of Constituents of Concern from Seller
Property at any off-site facility except in compliance with Environmental
Laws;
(iii) Seller is in compliance in all material respects with
Environmental Laws and the requirements of Permits issued under such
Environmental Laws with respect to the Seller Property;
(iv) There are no pending or, to the knowledge of Seller, threatened
Environmental Claims against Seller or any Seller Property;
(v) Seller has no knowledge of any facts, circumstances, conditions
or occurrences regarding Seller's past or present business or operations
or with respect to any Seller
26
Property or any property adjoining any Seller Property that could
reasonably be expected to (i) form the basis of an Environmental Claim
against Seller or any of the Seller Property or assets or (ii) cause any
Seller Property or assets to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law;
(vi) To the knowledge of Seller, there are no underground storage
tanks or sumps located on any Seller Property or on any property that
adjoins or is adjacent to any Seller Property;
(vii) Neither Seller nor any Seller Property is listed or, to the
knowledge of Seller, proposed for listing on the National Priorities List
under CERCLA or CERCLIS (as defined in CERCLA) or on any similar federal,
state or foreign list of sites requiring investigation or clean-up and
Seller has not received any requests for information pursuant to 104(e) of
CERCLA or any state counterpart or equivalent;
(viii) Seller has obtained all required Environmental Permits and is
in compliance with the terms of each Environmental Permit in all material
respects. Except as set forth in SCHEDULE 6.1.17(A)(VIII), there are no
Environmental Permits of Seller that are nontransferable or require
consent, notification or other action to remain in full force and effect
following the consummation of the transactions contemplated hereby; and
(ix) Seller has no liability under any Environmental Law (including
an obligation to remediate any Environmental Condition whether caused by
Seller or any other Person).
(b) Seller has delivered or made available to Purchaser true and
complete copies of all environmental investigations, studies, audits,
tests, reviews or other analyses commenced or conducted by or on behalf of
Seller (or by a third party of which Seller has knowledge) in relation to
the current or prior business of Seller or any Seller Property.
(c) For purposes of this Section 6.1.17, the term "Seller"
(including the use of such term in the term "Seller Property") will
include any entity which is, in whole or in part, a predecessor of Seller.
6.1.18 PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 6.1.18(A) sets forth a
list of all Benefit Plans with respect to which Seller or any ERISA Affiliate
has or has had prior to the date hereof any obligation or liability or which are
or were prior to the date hereof maintained, contributed to or sponsored by
Seller or any ERISA Affiliate for the benefit of any current or former employee,
officer or director of Seller or any ERISA Affiliate. With respect to each
Benefit Plan subject to ERISA, Seller has delivered or made available to
Purchaser a true and complete copy of each such Benefit Plan (including all
amendments thereto) and a true and complete copy of each material document
(including all amendments thereto) prepared in connection with each such Benefit
Plan including (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, (iii) the most
recently filed IRS Form 5500 for each such Benefit Plan, if any, and (iv) the
most recent determination letter referred to in Section 6.1.18(d). Seller has no
express or implied
27
commitment to create, incur liability with respect to or
cause to exist any Benefit Plan or to modify any Benefit Plan, other than as
required by Law.
(b) Except as disclosed in SCHEDULE 6.1.18(B), none of the Benefit Plans
is a plan that is or has ever been subject to Title IV of ERISA, Section 302 of
ERISA or Section 412 of the Code. None of the Benefit Plans is a "multiemployer
plan" as defined in Section 3(37) of ERISA. Except as disclosed in SCHEDULE
6.1.18(B), none of the Benefit Plans provides for the payment of separation,
severance, termination or similar-type benefits to any person or provides for
or, except to the extent required by Law, promises retiree medical or life
insurance benefits to any current or former employee, officer or director of
Seller or any ERISA Affiliate.
(c) Except as disclosed in SCHEDULE 6.1.18(C), each Benefit Plan is in
compliance in all material respects with, and has always been operated in all
material respects in accordance with, its terms and the requirements of all
applicable Law, and Seller and the ERISA Affiliates have satisfied in all
material respects all of their statutory, regulatory and contractual obligations
with respect to each such Benefit Plan. No legal action, suit or claim is
pending or, to the knowledge of Seller, threatened with respect to any Benefit
Plan (other than claims for benefits in the ordinary course) and no fact or
event exists that could, individually or in the aggregate, reasonably be
expected to give rise to any such action, suit or claim.
(d) Except as disclosed in SCHEDULE 6.1.18(D), each Benefit Plan or trust
which is intended to be qualified or exempt from taxation under Section 401(a),
401(k) or 501(a) of the Code has received a favorable determination letter from
the IRS that it is so qualified or exempt, and, to the knowledge of Seller,
nothing has occurred since the date of such determination letter that would
adversely affect the qualified or exempt status of any Benefit Plan or related
trust.
(e) There has been no non-exempt prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Benefit Plan. Neither Seller nor any ERISA Affiliate has incurred any material
liability for any excise tax arising under the Code with respect to a Benefit
Plan and, to the knowledge of Seller, no fact or event exists which could,
individually or in the aggregate, reasonably be expected to give rise to such
liability.
(f) All material contributions, premiums or payments required to be made
with respect to any Benefit Plan have been made on or before their due dates.
For completed plan years of such Benefit Plans, all such contributions have been
fully deducted for income tax purposes and no such deduction has been challenged
or disallowed by any Governmental Authority, and, to the knowledge of Seller, no
fact or event exists which could give rise to any such challenge or
disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by Seller relating to, or change in
employee participation or coverage under, any Benefit Plan that would increase
materially the expense of maintaining such Benefit Plan above the level of the
expense incurred in respect thereto for the most recent fiscal year ended prior
to the date hereof.
(h) Except as disclosed in SCHEDULE 6.1.18(H) or in this Agreement or the
Ancillary Agreements, no employee or former employee of Seller will become
entitled to any bonus,
28
retirement, severance, job security or similar benefit or enhanced such benefit
(including acceleration of vesting or exercise of an incentive award) as a
result of the transactions contemplated by this Agreement.
6.1.19 AFFILIATE TRANSACTIONS. (a) Except as disclosed in SCHEDULE
6.1.19(a), there are no outstanding payables, receivables, loans, advances and
other similar accounts between Seller, on the one hand, and any of its
Affiliates, on the other hand, relating to the Business.
(b) Except as disclosed in SCHEDULE 6.1.19(B), to the knowledge of Seller,
no director, officer or employee of Seller possesses, directly or indirectly,
any ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
of Seller. Ownership of 2% or less of any class of securities of a Person whose
securities are registered under the Exchange Act will not be deemed to be an
ownership interest for purposes of this Section 6.1.19(b).
6.1.20 CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS. SCHEDULE 6.1.20 includes
a complete and correct list of (a) all customers of the Business who have made
aggregate purchases in excess of 5% of the total revenues of Seller to date in
calendar year 2000 and (b) all suppliers from whom Seller has purchased in
excess of $25,000 in equipment or supplies to date in calendar year 2000. The
relationships of Seller with such customers and suppliers and the employees of
Seller are good commercial working relationships and, except as disclosed in
SCHEDULE 6.1.20, none of such customers, suppliers or employees has canceled,
terminated or otherwise materially altered or notified Seller of any intention
to cancel, terminate or materially alter its relationship with Seller since the
Balance Sheet Date and, to the knowledge of Seller (but without regard to any
direct inquiry by Seller with any such customer, supplier or employee), there
will not be any such change as a result of the transactions contemplated by this
Agreement.
6.1.21 OTHER EMPLOYMENT MATTERS. (a) Seller is not a party to any labor or
collective bargaining agreement; there are no labor or collective bargaining
agreements which pertain to any Seller Designated Employee; and no Seller
Designated Employee is represented by any labor organization.
(b) No labor organization or group of Seller Designated Employees has made
a pending demand for recognition, there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
knowledge of Seller, threatened to be brought or filed with the National Labor
Relations Board or other labor relations tribunal, and there is no organizing
activity involving Seller pending or, to the knowledge of Seller, threatened by
any labor organization or group of Seller Designated Employees.
(c) There are no (i) strikes, work stoppages, slow-downs, lockouts or
arbitrations or (ii) grievances or other labor disputes pending or, to the
knowledge of Seller, threatened against or involving Seller.
(d) There are no complaints, charges or claims against Seller pending or,
to the knowledge of Seller, threatened to be brought or filed with any
Governmental Authority based
29
on, arising out of, in connection with, or otherwise relating to the employment
by Seller, of any Seller Designated Employee, including any claim for workers'
compensation.
(e) Seller is in material compliance with all Laws and Orders in respect
of employment and employment practices and the terms and conditions of
employment and wages and hours, and has not, and is not, engaged in any unfair
labor practice.
(f) SCHEDULE 6.1.21(F) contains a complete and accurate list of the
following information for each employee, officer or director of Seller,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable and any change in compensation
since the Balance Sheet Date; vacation accrued as of a recent date; and service
credited as of a recent date for purposes of vesting and eligibility to
participate under any pension, retirement, profit-sharing, thrift-savings,
deferred compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership), severance
pay, insurance, medical, welfare, or vacation plan or other Benefit Plan of
Seller; and all bonuses and any other amounts to be paid by Seller at or in
connection with the Closing.
(g) Except as set forth in SCHEDULE 6.1.21(G), to the knowledge of Seller,
no employee, officer or director of Seller is a party to, or is otherwise bound
by, any confidentiality, non-competition, proprietary rights agreement or
similar agreement that would affect (i) the performance of his or her duties as
an employee, officer or director or (ii) the ability of Purchaser to conduct the
Business after the Closing Date.
6.1.22 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 6.1.22, all of
the Accounts Receivable reflected on the Reference Balance Sheet (net of any
applicable reserves set forth on the Reference Balance Sheet) and all Accounts
Receivable which have arisen since the Balance Sheet Date (net of any additional
applicable reserves established since such date in the Ordinary Course of
Business of Seller) are valid and enforceable claims, and the goods and services
sold and delivered which gave rise to such Accounts Receivable were sold and
delivered in the Ordinary Course of Business. Except as set forth in SCHEDULE
6.1.22, such Accounts Receivable are subject to no defenses, offsets or recovery
in whole or in part by the Persons whose purchase gave rise to such Accounts
Receivable or by third parties and are fully collectible in the Ordinary Course
of Business without resort to legal proceedings, except to the extent of the
amount of the reserve for doubtful accounts reflected on the Closing Date
Balance Sheet.
6.1.23 INVENTORY. Except as set forth in SCHEDULE 6.1.23, all inventories
reflected on the Reference Balance Sheet (net of any applicable reserves set
forth on the Reference Balance Sheet) and all inventories which have been
acquired or produced since the Balance Sheet Date (net of any additional
applicable reserves established since such date in the Ordinary Course of
Business of Seller) are in good condition, conform in all material respects with
the applicable specifications and warranties of Seller, are not obsolete, and
are usable and salable in the Ordinary Course of Business. The values at which
such inventories are carried are consistent with the past business practices of
Seller.
6.1.24 ▇▇▇▇▇▇▇▇ IN EXCESS OF COSTS. The Reference Balance Sheet has
adequate reserves for liabilities for ▇▇▇▇▇▇▇▇ in excess of costs, and since the
Balance Sheet Date there have been no
30
▇▇▇▇▇▇▇▇ in excess of costs other than in the Ordinary Course of Business. The
Reference Balance Sheet includes all losses required to be included therein in
accordance with GAAP for all contracts the performance of which would result in
a loss to Seller.
6.1.25 PRODUCT AND SERVICE WARRANTIES; DEFECTS; LIABILITY DEFECTS;
LIABILITY. Except as disclosed in SCHEDULE 6.1.25 and except as reflected in the
applicable warranty reserves set forth on the Reference Balance Sheet (or any
additional reserves established in the Ordinary Course of Business since the
Balance Sheet Date and included in Closing Working Capital Balance), each
product manufactured, sold, leased, delivered or installed or services performed
by Seller prior to the Closing has complied with and conformed to all applicable
federal, state, local or foreign laws and regulations, contractual commitments
and all applicable warranties of Seller. SCHEDULE 6.1.25 includes copies of the
standard terms and conditions of sale, lease, delivery or installation for the
products and services of Seller (containing applicable guaranty, warranty, and
indemnity provisions). Except as disclosed in SCHEDULE 6.1.25 and except as
reflected in the applicable reserves set forth on the Reference Balance Sheet
(or any additional reserves established in the Ordinary Course of Business since
the Balance Sheet Date and included in Closing Working Capital Balance), none of
such products or services is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.
The warranty reserves included in the Closing Working Capital Balance are
adequate to cover all future costs associated with warranties provided by Seller
for products manufactured, sold, leased, delivered or installed and services
performed by or on behalf of Seller prior to the Closing.
6.1.26 FINDERS' FEES. Except for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇ Capital
(whose fees and expenses will be paid by Seller), there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of Seller or the Stockholder who might be entitled to any fee
or other commission in connection with the transactions contemplated by this
Agreement or any of the Ancillary Agreements.
6.1.27 DISCLOSURE. None of (i) the information contained in the Schedules,
(ii) any other written information furnished to Purchaser by Seller under this
Agreement, or (iii) the representations and warranties of Seller contained in
this Agreement contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were or are made, not false or misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date hereof and the
Closing Date as follows:
7.1 CORPORATE EXISTENCE AND POWER. Purchaser is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Purchaser has all corporate power required to carry on its business
as now conducted. Purchaser is duly qualified to conduct business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified
31
or in good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Purchaser has heretofore delivered
to Seller true and complete copies of the certificate of incorporation and
bylaws of Purchaser, in each case as amended to date.
7.2 CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by Purchaser of this Agreement and each of the Ancillary Agreements
to which it will be a party at the Closing are, and will be at the Closing,
within Purchaser's corporate power and have been duly authorized by the board of
directors of Purchaser and no other corporate action on the part of Purchaser is
necessary to authorize this Agreement or any of the Ancillary Agreements to
which Purchaser will be a party at the Closing. This Agreement has been, and
each of the Ancillary Agreements to which Purchaser will be a party at the
Closing will have been, duly executed and delivered by Purchaser. Assuming the
due execution and delivery by the Stockholder and Seller of this Agreement and
each of the Ancillary Agreements to which Purchaser will be a party at the
Closing, this Agreement constitutes, and each Ancillary Agreement to which
Purchase will be a party at the Closing will constitute at the Closing, valid
and binding agreements of Purchaser, enforceable against Purchaser in accordance
with their terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
enforcement of creditors' rights generally and by general principles of equity
(whether applied in a proceeding at law or in equity).
7.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance by
Purchaser of this Agreement and each of the Ancillary Agreements to which
Purchaser will be a party at the Closing require no consent, approval, order,
authorization or action by or in respect of, or filing with, any Governmental
Authority.
7.4 NON-CONTRAVENTION. The execution, delivery and performance by
Purchaser of this Agreement and each Ancillary Agreement to which Purchaser will
be a party at the Closing do not and will not at the Closing (a) violate the
certificate of incorporation or bylaws or other similar constituent documents of
Purchaser, (b) violate any applicable Law or Order, (c) require any filing with
or Permit, consent or approval of, or the giving of any notice to, any Person
(including filings, consents or approvals required under any Permits of
Purchaser or any licenses to which Purchaser is a party), or (d) result in a
violation of or breach of, conflict with, constitute (with or without due notice
or lapse of time or both) a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of
Purchaser or to a loss of any benefit to which Purchaser is entitled under, any
Contract, agreement or other instrument binding upon Purchaser or any license,
franchise, Permit or other similar authorization held by Purchaser.
7.5 LITIGATION. There is no action, suit, investigation, arbitration or
administrative or other proceeding pending or, to the knowledge of Purchaser,
threatened against or affecting Purchaser or any of Purchaser's properties
before any court or arbitrator or any Governmental Authority which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement and the Ancillary Agreements to
which Purchaser will be a party at Closing. Purchaser does not know of any valid
basis for any such action, proceeding or investigation.
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7.6 FINDERS' FEES. There is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Purchaser who might be entitled to any fee or other commission in connection
with the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
ARTICLE VIII
CERTAIN COVENANTS
8.1 CONDUCT OF BUSINESS OF SELLER. During the period from the date of this
Agreement to the Closing Date, Seller will, and the Stockholder will cause
Seller to, conduct its operations only in the Ordinary Course of Business
(including managing its working capital in accordance with its past practice and
custom) and use its commercially reasonable best efforts to: (i) preserve intact
its business organizations, (ii) keep available the services of its officers and
employees, and (iii) maintain its relationships and goodwill with licensors,
suppliers, distributors, customers, landlords, employees, agents and others
having business relationships with Seller or the Business. Seller will confer
with Purchaser concerning operational matters of a material nature and report
periodically to Purchaser concerning the Business, operations and finances of
Seller. Without limiting the generality or effect of the foregoing, prior to the
Closing Date, except with the prior written consent of Purchaser or as
contemplated under this Agreement, Seller will not, and the Stockholder will
cause Seller not to:
(a) Change any salaries or other compensation of, or pay any bonuses to,
any current or former director, officer, employee or stockholder of Seller, or
enter into any employment, severance or similar agreement with any current or
former director, officer, stockholder or employee of Seller; PROVIDED, HOWEVER,
that the compensation of employees of Seller receiving annual compensation of
less than $50,000 may be changed in the Ordinary Course of Business of Seller;
(b) Adopt or increase any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other Benefit
Plan for or with any of its employees;
(c) Enter into any contract or commitment, except for contracts and
commitments entered into by Seller in the Ordinary Course of Business (and in
any case not exceeding the dollar amounts with respect to specified categories
of Contracts set forth in Section 6.1.11, except for Contracts to be entered
into upon the acceptance of open bids set forth in SCHEDULE 3(A)(III) for the
dollar amounts set forth therein);
(d) Modify or amend in any material respect or terminate any Contract
listed or required to be listed in SCHEDULE 6.1.11(A);
(e) Enter into any transaction or commitment relating to the assets or the
Business of Seller or cancel or waive any claim or right which, individually or
in the aggregate, could be material to Seller;
(f) Make any change in accounting methods or practices (including changes
in reserve or accrual policies);
33
(g) Sell, lease or otherwise dispose of any material asset or property;
(h) Create or assume any Lien, other than a Permitted Lien;
(i) Terminate or close any material facility, business or operation of
Seller;
(j) Cause or permit to occur any event, occurrence or omission which,
individually or together with other matters, could reasonably be expected to
have a Material Adverse Effect;
(k) Take any action that would cause any of the representations and
warranties made by Seller in this Agreement not to remain true and correct or
any of the conditions set forth in any subsection of Section 9.1 from being
satisfied;
(l) Settle, release or forgive any claim or litigation or waive any right
thereto that relates to any of the Purchased Assets or the Assumed Liabilities,
but excluding any such claim or right that relates solely to any Excluded Asset
or Retained Liability; or
(m) Agree to do any of the foregoing.
8.2 EXCLUSIVE DEALING. During the period from the date of this Agreement
to the earlier of the Closing Date and the termination of this Agreement in
accordance with its terms, Seller will not, and the Stockholder will cause
Seller not to, and neither Seller nor the Stockholder will authorize or permit
any stockholder of Seller or any of their respective Affiliates, or any officer
or director of Seller or any of their respective Affiliates, or any
representative of any of the foregoing (including financial advisors, investment
bankers, agents, attorneys, employees or consultants) to, take any action to,
directly or indirectly, encourage, initiate, solicit or engage in discussions or
negotiations with, or provide any information to any Person, or enter into any
agreement with any Person, other than Purchaser (and its Affiliates and
representatives), concerning any purchase of any Capital Stock of Seller or any
merger, asset sale or similar transaction involving Seller or that would
frustrate the purposes of this Agreement. Seller will disclose to Purchaser the
existence or occurrence of any proposal (written or oral) or contact which it or
any of its Affiliates or representatives described above may receive in respect
of any such transaction and the identity of the Person from whom such a proposal
or contact is received.
8.3 REVIEW OF SELLER; CONFIDENTIALITY. (a) Purchaser may, prior to the
Closing Date, directly or through its representatives, review the properties
(including the Purchased Assets), books and records of Seller and its financial
and legal condition to the extent it deems necessary or advisable to familiarize
itself with such properties and other matters. Seller will permit Purchaser and
its representatives to have reasonable access to the premises (including the
Purchased Assets) and to all the books and records of Seller and to cause the
officers, accountants and other representatives of Seller to furnish Purchaser
with such financial and operating data and other information with respect to the
Business and properties of Seller as Purchaser may from time to time reasonably
request. Seller will deliver or cause to be delivered to Purchaser such
additional instruments, documents and certificates as Purchaser may reasonably
request for the purpose of (i) verifying the information set forth in this
Agreement or on any Schedule attached hereto and (ii) consummating or evidencing
the transactions contemplated by this Agreement.
34
(b) Prior to the Closing, none of the Stockholder, Seller or Purchaser
will, or will permit any of its Affiliates to, without the prior written consent
of the other, disclose to any other Person (other than such Person's financing
sources, existing stockholders and such Person's directors, officers, employees,
advisors and other representatives that need to know) any proprietary,
non-public information of another party previously delivered or made available
to such other party in connection with the transactions contemplated hereby
(including the existence of and terms of this Agreement and the Ancillary
Agreements), other than to the extent required by applicable Law and upon the
advice of counsel. Each of the Stockholder, Seller and Purchaser will direct its
financing sources, stockholders, directors, officers, employees and
representatives to keep all such information in strict confidence; PROVIDED,
HOWEVER, that each such Person may disclose such information to the extent
required by Law and upon the advice of counsel.
8.4 REASONABLE BEST EFFORTS. (a) Seller and Purchaser will cooperate and
use their respective reasonable best efforts to take, or cause to be taken, all
appropriate actions, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable Laws to consummate and make effective the
transactions contemplated by this Agreement, including their respective
reasonable best efforts to obtain, prior to the Closing Date, all licenses,
Permits, consents, approvals, authorizations, qualifications and orders of
Governmental Authorities and parties to Contracts with Seller as are necessary
to consummate the transactions contemplated by the Agreement and to fulfill the
conditions to the sale contemplated hereby. The parties will pay or cause to be
paid all of their own fees and expenses contemplated by this Section, including
the fees and expenses of any broker, finder, financial advisor, legal advisor or
similar person engaged by such party. Notwithstanding any other provision
hereof, in no event will Purchaser or Seller or any of their respective
Affiliates be required to (a) enter into or offer to enter into any divestiture,
hold-separate, business limitation or similar agreement or undertaking in
connection with this Agreement or the transactions contemplated hereby, (b)
institute or defend any litigation or other legal proceeding, whether judicial
or administrative, including seeking to have any stay or temporary restraining
order vacated or reversed, or (c) except as contemplated by Section 2.3 hereof,
incur any liability or make any payment in connection with any consent or
approval required as a condition to Closing pursuant to Article IX in order to
consummate the transactions contemplated by this Agreement. Each of the parties
will notify and keep the other advised in reasonable detail as to such party's
efforts in complying with its obligations under this Section 8.4.
(b) Seller will, within ten Business Days after the end of the applicable
calendar month, deliver to Purchaser the Monthly Financial Statements described
in clause (b) of the definition thereof.
8.5 EMPLOYEES AND BENEFIT PLANS. (a) OFFERS OF EMPLOYMENT. SCHEDULE 8.5
lists, as of the date hereof, all persons (together with their respective
titles, current salaries and vacation accrued through the date hereof) who are
employees of Seller ("SELLER EMPLOYEES") (including those Seller Employees, if
any, on sick leave, short-term or long-term disability, workers' compensation,
vacation, leave of absence or military leave of absence). SCHEDULE 8.5 will be
updated on the Closing Date and will include any new Seller Employees who are
hired after the date hereof (and consented to in writing by Purchaser) and will
not include any Seller Employees no longer then employed by Seller. Purchaser
agrees to offer prior to or on the Closing Date employment to all Seller
Employees listed on such updated SCHEDULE 8.5. Such offers of
35
employment shall be on substantially the same economic terms as such employees
receive from Seller on the date hereof with respect to base salary and
commissions or hourly rate, as applicable. All Seller Employees who accept
Purchaser's offer of employment are referred to hereinafter as "SELLER
DESIGNATED EMPLOYEES." All Seller Employees who decline employment with
Purchaser are referred to hereinafter as "NON-SELLER DESIGNATED EMPLOYEES." Any
offers made pursuant thereto by Purchaser to Seller Employees on or before the
Closing Date may be offers conditioned by Purchaser on consummation of the
transactions contemplated hereby.
(b) EMPLOYEE BENEFITS.
(i) Except as expressly provided otherwise herein, coverage of all
Seller Designated Employees, their dependents and beneficiaries under any
Benefit Plan will in all respects terminate effective as of the Closing
Date, and Seller will cause the Seller Designated Employees to cease
actively participating in the Benefit Plans effective as of the Closing
Date except to the extent required by Section 4980B of the Code (Cobra) or
other applicable law. From and after the Closing Date, Seller will be and
remain responsible for any benefits due to the Seller Designated Employees
under the Benefit Plans and Purchaser will have no responsibility
whatsoever therefor. Seller will have no liability or responsibility for
any coverage or non-coverage of the Seller Designated Employees under
Purchaser's benefit plans. Purchaser will have no liability with respect
to any Non-Seller Designated Employees.
(ii) Except as provided in this Section 8.5, Seller will remain
liable for and continue to pay all medical, dental, vision and life
insurance plan expenses and benefits for each Seller Employee (including
the Seller Designated Employees) with respect to claims incurred or
attributable to any period, prior to the Closing Date in respect of such
Seller Employees or their covered dependents and all such expenses and
benefits for each Non-Seller Designated Employee with respect to claims
incurred on or after the Closing Date in respect of such Non-Seller
Designated Employees or their covered dependents. Purchaser will assume
and become liable for all medical, dental, vision and life insurance plan
expenses and benefits in respect to all Seller Designated Employees or
their covered dependents thereof in accordance with the terms of any
applicable employee benefit plan of Purchaser (or, at Purchaser's option,
any of its Affiliates) from and after their respective dates of hire by
Purchaser (the "HIRE DATE"). For purposes of this Section 8.5, a claim is
deemed to be incurred when the service(s) giving rise to such claim are
performed.
(iii) Seller will remain liable for and will pay all short-term
disability benefits payable to all Seller Designated Employees with
respect to any period commencing prior to the Closing Date in accordance
with the terms of any applicable employment benefit plan of Seller.
Purchaser will be liable for and will pay all short-term disability
benefits payable to all Seller Designated Employees with respect to any
period commencing on or after their respective Hire Dates thereof in
accordance with the terms of any applicable employee benefit plan of
Purchaser.
(iv) Seller will remain liable for and will pay all long-term
disability benefits payable to all Seller Employees with respect to any
disability incurred, reported and
36
acknowledged prior to the Closing Date, including any such benefits
payable to any Seller Designated Employee on short-term disability as of
the Closing in accordance with the terms of any applicable employment
benefit plan of Seller. Purchaser will be liable for and will pay all
long-term disability benefits payable to all Seller Designated Employees
with respect to any disability incurred on or after the respective Hire
Dates in accordance with the terms of any applicable employee benefit plan
of Purchaser.
(v) Subject to the provisions of clause (ii) above, Seller will be
responsible for any continuation of group health plan coverage required
under Section 4980B of the Code or Sections 601-608 of ERISA with respect
to a "qualifying event" (as defined in Section 4980B of the Code) incurred
by a Seller Employee or any dependent of a Seller Employee that qualifies
as a "qualified beneficiary" (as defined in Section 4980B of the Code) on
or prior to the Closing Date.
(vi) With respect to each Seller Designated Employee, Purchaser
will, to the extent permitted under Purchaser's employee benefit plan and
programs, recognize credit for prior service for such Seller Designated
Employee, to the same extent as recognized by Seller as of the date of
this Agreement, for purposes of determining eligibility for and level of
participation in all employee benefit plans and programs of Purchaser
offered to such Seller Designated Employee in connection with such
person's employment with Purchaser.
(c) 401(K) PLANS. Unless contrary to law as determined by counsel for
Seller, Seller's 401(k) Plan will be amended to the extent necessary to 100%
vest Seller Designated Employees in their account balances under such 401(k)
Plan and to permit Seller Designated Employees to receive an immediate
distribution of their account under such Plan within a reasonable period
following the Closing Date. Unless contrary to law, Purchaser's (or, at
Purchaser's option, any of its Affiliate's) 401(k) Plan (if any) will be amended
to accept rollovers of such distributions from Seller's 401(k) Plan for electing
Seller Designated Employees, to the extent such distributions are eligible for
rollover treatment under Section 402 of the Code. If in the opinion of counsel
for Seller, Seller's 401(k) Plan is not permitted to make immediate
distributions, Purchaser's (or, at Purchaser's option, any of its Affiliate's)
401(k) Plan will accept a direct trustee-to-trustee transfer of assets from
Seller's 401(k) Plan with respect to the Seller Designated Employees.
Notwithstanding any other provision hereof, as soon as practicable after the
Closing, the Stockholder will take all action necessary to correct under the IRS
Employee Plans Compliance Resolution System the operational defects identified
on SCHEDULE 6.1.18(D) with respect to the Seller's 401(k) Plan and will furnish
to Purchaser such confirmation as may reasonably be requested by Purchaser that
such defects have been corrected and that Seller's 401(k) Plan has at all times
continued to satisfy the qualification requirements of Section 401(a) and 401(k)
of the Code. Until such confirmation has been provided to Purchaser, Purchaser
will not be obligated to accept into any 401(k) plan or other qualified plan
sponsored by Purchaser or any Affiliate of Purchaser any benefits distributed to
distributed from Seller's 401(k) Plan to former employees of Seller or the
Stockholder.
(d) OTHER BENEFIT PLANS. With respect to any other Benefit Plans not
specifically addressed in this Agreement, including but not limited to pension
plans, deferred compensation plans, post-retirement plans, incentive plans,
bonus plans, equity-based compensation plans,
37
severance and fringe benefit plans, Seller will retain all liability therefor
and Purchaser will have no liability therefor, except for the bonuses set forth
on SCHEDULE 3.1(A)(IV), which are to be assumed by Purchaser.
(e) WORKERS' COMPENSATION. Seller will retain all liability for any
workers' compensation claims of Seller employees arising from or relating to any
injury, illness or condition incurred or existing prior to the Closing Date.
(f) TERMINATION OF SELLER EMPLOYMENT AGREEMENTS. On or prior to the
Closing Date, Seller shall present Resignation and Termination Agreements to the
employees covered by the Seller Employment Agreements for purposes of resigning
from all positions with Seller and terminating the Seller Employment Agreements
(including the termination of all obligations of Seller or the Stockholder
thereunder for severance payments or otherwise), subject to the Closing. For the
avoidance of doubt and without limiting the foregoing, Purchaser shall have no
liabilities or obligations, including without limitation any severance
obligations, to such employees under the Seller Employment Agreements.
(g) NO THIRD PARTY BENEFICIARIES. No third party benefits in favor of any
person, including the employees of Seller, will be created, implied or inferred
from the provisions of this Section 8.5.
8.6 BOOKS AND RECORDS. (a) From and after the Closing Date, Purchaser will
give Seller's representatives reasonable access to such documentation and
information and reasonable access to, and cause the cooperation of, employees of
Purchaser which Seller may reasonably require (i) to prepare and file Tax
Returns and to respond to any issues which may arise with respect to Taxes for
which Seller is responsible to the extent relating to the Purchased Assets or
Assumed Liabilities, (ii) with respect to any Retained Liabilities, (iii) to
defend any claim which Seller is required to defend pursuant to this Agreement
or in connection with the operation of the Business prior to the Closing Date,
and (iv) in connection with the preparation and audit of the Stockholder's
consolidated financial statements and related Form 10-K as of and for the year
ending December 31, 2000. Prior to the third anniversary of the Closing Date,
Purchaser will give Seller at least ten days' prior written notice of
Purchaser's intention to dispose of any books, records or other documentation
which are delivered to Purchaser under the terms of this Agreement. Seller will
have the opportunity to obtain possession, at its own expense, of any such
books, records or documentation as Seller may reasonably require prior to
Purchaser's disposition thereof prior to the third anniversary of the Closing
Date. In the absence of bad faith or willful misconduct, Purchaser will have no
liability arising out of or in connection with its retention and handling of
such records.
(b) From and after the Closing Date, Seller will give Purchaser's
representatives reasonable access to such documentation and information and
reasonable access to, and cause the cooperation of, employees of Seller which
Purchaser may reasonably require to (i) prepare and file Tax Returns and respond
to any issues which may arise with respect to Taxes for which Purchaser is
responsible to the extent relating to the Purchased Assets or Assumed
Liabilities or (ii) defend any claim which Purchaser is required to defend
pursuant to this Agreement or in connection with the operation of the Business
after the Closing Date. Prior to the third anniversary of the Closing Date,
Seller will give Purchaser at least ten days' prior written notice
38
of Seller's intention to dispose of any books, records or other documentation
which Seller is entitled to retain pursuant to this Agreement, and Purchaser
will have the opportunity to obtain possession, at its own expense, of any such
books, records or documentation as Purchaser may reasonably request prior to
Seller's disposition thereof prior to the third anniversary of the Closing Date.
In the absence of bad faith or willful misconduct, Seller will not have any
liability arising out of or in connection with its retention and handling of
such records.
(c) Information which is obtained by either party pursuant to this Section
8.6 will be kept confidential by such party; PROVIDED, HOWEVER, that in the
event the party or any of its representatives is requested or required pursuant
to applicable Law by any Governmental Authority to disclose any such
information, the party may do so after providing the other party with notice of
the request or requirement so that the other party may attempt, at its own
expense, to obtain a protective order. Each party will use reasonable efforts to
limit access to such information on a "need to know" basis. Neither party may
use information obtained from the other party pursuant to this subsection to
compete with the other party.
8.7 BULK TRANSFER LAWS. In consideration of the indemnity contained in
Section 10.2(a)(iv), Purchaser hereby waives compliance by Seller with the
provisions of any Laws of any jurisdiction relating to bulk transfers which may
be applicable in connection with the transfer of the Purchased Assets to
Purchaser ("BULK TRANSFER LAWS").
8.8 COLLECTION OF PAYMENTS. Following the Closing, (a) Seller will
promptly, and in any event, not later than seven days following receipt, forward
to Purchaser any payments received by Seller with respect to any of the
Purchased Assets, and any checks, drafts or other instruments payable to Seller
will, when so delivered, bear all endorsements required to effectuate the
transfer of the same to Purchaser, (b) Seller will promptly forward to Purchaser
any mail or other communications received by Seller relating to the Purchased
Assets or the Assumed Liabilities, (c) Purchaser will promptly, and in any
event, not later than seven days following receipt, forward to Seller any
payments received by Purchaser with respect to any of the Excluded Assets, and
any checks, drafts or other instruments payable to Purchaser shall, when so
delivered, bear all endorsements required to effect the transfer of the same to
Seller, and (d) Purchaser will promptly forward to Seller any mail or other
communications received by Purchaser relating to the Excluded Assets or the
Retained Liabilities.
8.9 USE OF NAMES. On and after the Closing Date, Seller and the
Stockholder will discontinue all use of the names and marks included in the
Intellectual Property Rights Transferred pursuant to this Agreement, including
the names "AMEREX" and "AMEREX Industries," alone or in any combination of any
words or marks confusingly similar thereto, and will as promptly as possible,
but in no event later than 30 days after the Closing Date, eliminate such names
from all signs, purchase orders, invoices, sales orders, packaging stock,
labels, letterheads, business cards, displays, signs, promotional materials,
manuals, shipping documents and other materials used by Seller or the
Stockholder.
8.10 FURTHER ASSURANCES. From time to time, as and when requested by
either party hereto, the other party will execute and deliver, or cause to be
executed and delivered, all such documents and instruments and will take, or
cause to be taken, all such further actions, as the
39
requesting party may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement.
8.11 INSURANCE. Seller will continue to carry and maintain in full force
and effect the insurance policies listed on SCHEDULE 6.1.12, or policies with
comparable coverage, to the Closing Date. Seller will implement and maintain and
cause Purchaser to be included as an additional insured on all such policies
designated on SCHEDULE 6.1.12 as "Discontinued Product Liability" from and after
the Closing Date with respect to claims made and reported to Seller and to
claims occurring with respect to products sold by Seller prior to the Closing
Date.
8.12 CERTAIN TAX MATTERS. (a) Any sales, use, transfer, vehicle transfer,
stamp, conveyance, value added or other similar Taxes that may be imposed by any
Governmental Authority, and all recording or filing fees, notarial fees and
other similar costs of Closing with respect to the purchase and sale of the
Purchased Assets or otherwise on account of this Agreement or the transactions
contemplated hereby, will be borne by Purchaser.
(b) Seller will cause to be included in its income Tax Returns for all
periods or portions thereof ending on or before the Closing Date, all revenue
and expense relating to the operations of the Business during such periods or
portions thereof. Seller will prepare and timely file or cause to be prepared
and timely filed all such Returns with the appropriate Governmental Entities.
Seller will make all payments of Tax shown to be due and owing in such Returns.
(c) Seller and Purchaser will (i) each provide the other with such
assistance as may reasonably be requested by any of them in connection with the
preparation of any Return, audit or other examination by any Taxing authority or
judicial or administrative proceedings relating to liability for Taxes, (ii)
each retain and provide the other with any records or other information that may
be relevant to such Return, audit or examination, proceeding or determination,
and (iii) each provide the other with any final determination of any such audit
or examination, proceeding or determination that affects any amount required to
be shown on any Return of the other for any period. In addition, Seller will
retain until the applicable statutes of limitations (including any extensions)
have expired copies of all Returns, supporting work schedules, and other records
or information that may be relevant to such Returns for all Tax periods or
portions thereof ending on or before or which include the Closing Date and will
not destroy or otherwise dispose of any such records without first providing
Purchaser with a reasonable opportunity to review and copy the same.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of Purchaser
to consummate the Closing are subject to the satisfaction (or waiver by
Purchaser) at or prior to the Closing of the following conditions:
9.1.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. (a) The
representations and warranties of Seller made in this Agreement shall be true
and correct in all material respects (or, if any such representation is
expressly qualified by "materiality," "Material Adverse Effect" or
40
words of similar import, then in all respects) as of the date hereof and as of
the Closing, as though made anew at and as of the Closing and (b) Seller shall
have performed and complied in all material respects with all terms, agreements
and covenants contained in this Agreement required to be performed or complied
with by Seller on or before the Closing Date.
9.1.2 NO INJUNCTION, ETC. No provision of any applicable Law and no
judgment, injunction, order or decree of any Governmental Authority shall be in
effect which shall prohibit the consummation of the Closing.
9.1.3 NO PROCEEDINGS. No action, suit or proceeding affecting the Business
or challenging this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby or seeking to prohibit, alter, prevent or
materially delay the Closing or seeking material damages shall have been
instituted or threatened by any Person.
9.1.4 DELIVERY OF DOCUMENTS. Each of the deliveries required by Section
5.2 shall have been made.
9.1.5 THIRD-PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals, waivers and Permits, if any, disclosed or required to be disclosed on
SCHEDULE 5.2(V) attached hereto shall have been received.
9.1.6 FINANCING. All conditions precedent to the closing of the financing
being obtained by Purchaser for the payment of the Closing Cash Consideration
shall have been completed, subject to Purchaser's satisfaction in its sole
discretion.
9.1.7 TERMINATION OF SECURITY INTERESTS. Seller shall have obtained
releases and other documentation reasonably requested by Purchaser in form and
substance reasonably satisfactory to Purchaser providing for the termination and
release of all Liens on the Purchased Assets.
9.1.8 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, no event
shall have occurred which, individually or in the aggregate, has had, or could
reasonably be expected to have, a Material Adverse Effect.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate the Closing are subject to the satisfaction (or waiver by Seller) at
or prior to the Closing of the following conditions:
9.2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER. The
representations and warranties of Purchaser made in this Agreement shall be true
and correct in all material respects (or, if any such representation is
expressly qualified by "materiality," "Material Adverse Effect" or words of
similar import, then in all respects) as of the date hereof and as of Closing,
as though made anew at and as of the Closing and (b) Purchaser shall have
performed and complied in all material respects with all terms, agreements and
covenants contained in this Agreement required to be performed or complied with
by Purchaser on or before the Closing Date.
9.2.2 NO INJUNCTION, ETC. No provision of any applicable Law and no
judgment, injunction, order or decree of any Governmental Authority shall be in
effect which shall prohibit the consummation of the Closing.
41
9.2.3 TERMINATION OF SELLER EMPLOYMENT AGREEMENTS. Seller shall have
received Resignation and Termination Agreements executed by each of the
employees that are parties to the Seller Employment Agreements as described in
Section 8.5(f).
9.2.4 CONSENT OF SENIOR LENDER. Stockholder shall have obtained consent
from its Senior Lender, Fleet Boston as Agent, as required under its senior
credit facility.
9.2.5 DELIVERY OF DOCUMENTS. Each of the deliveries required by Section
5.3 shall have been made.
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. The representations and warranties of the parties contained
in this Agreement or in any certificate or other writing delivered pursuant
hereto or in connection herewith will survive the Closing for 18 months;
PROVIDED, HOWEVER, that (i) the representations and warranties contained in
Section 6.1.9 (Tax Matters) shall survive until 180 days after the expiration of
the applicable statute of limitations covered thereby (after giving effect to
any waiver, mitigation or extension thereof granted by Seller) and (ii) the
Selected Stockholder and Seller Representations and Warranties will survive the
Closing indefinitely. Notwithstanding the immediately preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement will survive the time at which it would otherwise terminate
pursuant to the immediately preceding sentence if written notice of the
inaccuracy or breach thereof giving rise to such right of indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time; PROVIDED, HOWEVER, that the applicable representation or warranty will
survive only with respect to the particular inaccuracy or breach specified in
such written notice. All covenants and agreements of the parties contained in
this Agreement will survive the Closing indefinitely. The representations and
warranties will not be affected or reduced as a result of any investigation or
knowledge of Purchaser.
10.2 INDEMNIFICATION. (a) Seller and the Stockholder will jointly and
severally indemnify, defend and hold harmless Purchaser and its officers,
directors, employees, affiliates, stockholders and agents, and the successors to
the foregoing (and their respective officers, directors, employees, affiliates,
stockholders and agents) against any and all liabilities, damages and losses,
including diminution in value of the Business to Purchaser, and, but only to the
extent asserted in a Third-Party Claim, punitive damages, and all costs or
expenses, including reasonable attorneys' and consultants' fees and expenses
incurred in respect of Third-Party Claims or claims between the parties hereto
("DAMAGES"), incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by Seller in Article VI to be
true and correct as of the date of this Agreement and as of the Closing Date as
if made anew at and as of the Closing Date, (ii) the breach of any covenant or
agreement made or to be performed by Seller or the Stockholder pursuant to this
Agreement, (iii) any Retained Liabilities, and (iv) any claims under any Bulk
Transfer Laws, PROVIDED, HOWEVER, that Seller will not be liable under clause
(i) of this Section 10.2(a) (other than with respect to a breach of any of the
Selected Stockholder and Seller Representations and Warranties (other than
Section 6.1.17)) unless the aggregate amount of Damages exceeds $100,000 (the
"BASKET") and then from the first dollar to
42
the full extent of such Damages; PROVIDED, FURTHER, that Seller's liability
under clause (i) of this Section 10.2(a) (i) will not exceed, in the aggregate,
an amount equal to $2,850,000 (as such amount may be adjusted as provided in
Section 10.6, the "Cap") and (ii) will be reduced to the extent such breach or
failure was corrected in the Closing Date Balance Sheet in favor of the
Purchaser for purposes of computing the adjustment to the Purchase Price set
forth in Sections 4.3 and 4.4 and not otherwise taken into account in
determining the Reference Working Capital Balance.
(b) Purchaser will indemnify, defend and hold harmless Seller, the
Stockholder and their respective officers, directors, employees, affiliates,
stockholders and agents and the successors to the foregoing (and their
respective officers, directors, employees, affiliates, stockholders and agents)
against Damages incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by Purchaser in Article VII to be
true and correct as of the Closing Date, (ii) the breach of any covenant or
agreement made or to be performed by Purchaser pursuant to this Agreement, or
(iii) any Assumed Liabilities.
10.3 PROCEDURES. (a) If any Person who or which is entitled to seek
indemnification under Section 10.2 (an "INDEMNIFIED PARTY") receives notice of
the assertion or commencement of any Third-Party Claim against such Indemnified
Party with respect to which the Person against whom or which such
indemnification is being sought (an "INDEMNIFYING PARTY") is obligated to
provide indemnification under this Agreement, the Indemnified Party will give
such Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 20 days after receipt of such written notice of such
Third-Party Claim. Such notice by the Indemnified Party will describe the
Third-Party Claim in reasonable detail, will include copies of all available
material written evidence thereof and will indicate the estimated amount, if
reasonably estimable, of the Damages that have been or may be sustained by the
Indemnified Party. The Indemnifying Party will have the right to participate in,
or, by giving written notice to the Indemnified Party, to assume, the defense of
any Third-Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel (which will be reasonably satisfactory to the
Indemnified Party), and the Indemnified Party will cooperate in good faith in
such defense.
(b) If, within 20 days after giving notice of a Third-Party Claim to an
Indemnifying Party pursuant to Section 10.3(a), an Indemnified Party receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third-Party Claim as provided in the last
sentence of Section 10.3(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third-Party Claim
within ten days after receiving written notice from the Indemnified Party or if
the Indemnified Party reasonably believes the Indemnifying Party has failed to
take such steps or if the Indemnifying Party has not undertaken fully to
indemnify the Indemnified Party in respect of all Damages relating to the
matter, the Indemnified Party may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs and expenses paid or incurred in
connection therewith; PROVIDED, HOWEVER, that the Indemnifying Party shall not
be liable for the costs and expenses of more than one counsel for all
Indemnified Parties in any one jurisdiction. Without the prior written consent
of the Indemnified Party, the Indemnifying Party will not enter into any
settlement of any Third-
43
Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified Party
is not entitled to indemnification hereunder, or which provides for injunctive
or other non-monetary relief applicable to the Indemnified Party, or does not
include an unconditional release of all Indemnified Parties. If a firm offer is
made to settle a Third-Party Claim without leading to liability or the creation
of a financial or other obligation on the part of the Indemnified Party for
which the Indemnified Party is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnified Party to that effect. If the
Indemnified Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third-Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third-Party Claim will not exceed the amount of
such settlement offer. The Indemnified Party will provide the Indemnifying Party
with reasonable access during normal business hours to books, records and
employees of the Indemnified Party necessary in connection with the Indemnifying
Party's defense of any Third-Party Claim which is the subject of a claim for
indemnification by an Indemnified Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages which does not
result from a Third-Party Claim (a "DIRECT CLAIM") will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 20 days after the Indemnified Party becomes aware of such
Direct Claim. Such notice by the Indemnified Party will describe the Direct
Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have a period of 20 days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such 20 day period, the Indemnifying Party will be deemed to have
rejected such claim, in which event the Indemnified Party will be free to pursue
such remedies as may be available to the Indemnified Party on the terms and
subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified
information in any notice as provided in Section 10.3(a), 10.3(b) or 10.3(c)
will not affect the rights or obligations of any party hereunder, except and
only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise materially prejudiced
as a result of such failure.
10.4 PAYMENT AND TREATMENT OF INDEMNIFICATION PAYMENTS. All indemnifiable
Damages under this Agreement will be paid in cash in immediately available
funds. All Indemnifiable Damages payable by Seller or Stockholder under this
Article X shall be net of amounts actually recovered by Purchaser or its
Affiliates under any insurance policy. Any amount paid by the Stockholder or
Seller or Purchaser under Section 10.2 will be treated as a capital
contribution, on the one hand, and/or an adjustment to the Purchase Price on the
other hand. From and after the Closing, the rights to indemnification under this
Article X shall be an Indemnified Party's exclusive and sole remedy for matters
covered under this Article X.
10.5 REASSIGNMENT OF ACCOUNTS RECEIVABLE. In the event of a claim for
indemnification by Purchaser as result of a breach of the representations or
warranties regarding the collection of
44
Accounts Receivable, Purchaser shall, upon receipt from Seller of a payment
equal to the amount of such Accounts Receivable, assign or reassign to Seller
such Account(s) Receivable (including any retention or holdback) that is subject
to the claim for indemnification, and thereafter, Seller and its Affiliates
shall have the right to collect such Account(s) Receivables in such manner as it
deems appropriate.
10.6 INDEMNIFICATION AND SPECIAL PROCEDURES FOR WARRANTY CLAIMS. In the
event of any warranty claim after the Closing Date (the "POST-CLOSING WARRANTY
CLAIM") which, without the Basket, would have given rise to a claim for
indemnification by Purchaser as a result of a breach of a representation or
warranty contained in Section 6.1.25, Purchaser shall provide Seller and the
Stockholder with written notice (the "WARRANTY NOTICE") of such claim setting
forth in reasonable detail the nature of the Post-Closing Warranty Claim and an
estimate of the cost to satisfy the claim. Within five business days after
receipt of the Warranty Notice, Seller or the Stockholder shall have the right,
but not the obligation, to elect in writing to Purchaser (the "SELLER WARRANTY
ELECTION") to pay Purchaser in cash the Warranty Amount (as defined below) (or,
if Purchaser is not required to perform the warranty work as described below, a
third party reasonable satisfactory to Purchaser at the rate charged by such
third party) for the warranty work required to satisfy the Post-Closing Warranty
Claim. If the Seller Warranty Election is timely made by Seller or the
Stockholder, the Warranty Amount relating to such Post-Closing Warranty Claim
will not be applied to reduce the Basket in determining Purchaser's right to
indemnification under this Article X, but shall reduce the Cap set forth in
Section 10.2, and all payments due to Purchaser (or the third party, if
applicable) shall be paid by Seller or the Stockholder in cash within ten
business days after the receipt by Seller or the Stockholder of the invoice
associated with such warranty work. If the Seller Warranty Election is not made
within such five-day period, Seller and the Stockholder shall be deemed to not
have elected to pay the Warranty Amount relating to such Post-Closing Warranty
claim, and Purchaser shall first apply the Warranty Amount against the Basket,
and if such Warranty Amount, collectively with all other Damages, exceeds the
Basket, Purchaser may pursue its indemnification rights under this Article X.
Purchaser shall perform all warranty work relating to the Business after the
Closing Date, whether or not it gives rise to an indemnification claim by
Purchaser under this Article X, provided that such warranty work does not
significantly interfere or disrupt Purchaser's operation of the Business, and
shall charge Seller and the Stockholder at the labor rates set forth in SCHEDULE
10.6, plus Purchaser's cost for any materials used, plus 12% (the "WARRANTY
AMOUNT").
ARTICLE XI
MISCELLANEOUS
11.1 TERMINATION.
(a) This Agreement may be terminated at any time prior to the Closing:
(i) By the mutual written consent of Purchaser and Seller;
45
(ii) By Purchaser, if there has been a material violation or breach
by Seller or the Stockholder of any covenant, representation or warranty
contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of Purchaser at the Closing, and such
violation or breach has not been waived by Purchaser or, in the case of a
covenant breach, cured by Seller within ten days after written notice
thereof from Purchaser;
(iii) By Seller, if there has been a material violation or breach by
Purchaser of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligations of Seller at the Closing, and such violation or breach has not
been waived by Seller or, in the case of a covenant breach, cured by
Purchaser within ten days after written notice thereof from Seller;
(iv) By Purchaser or Seller if the transactions contemplated hereby
have not been consummated by February 28, 2001; PROVIDED, HOWEVER, that
(i) neither Purchaser nor Seller will be entitled to terminate this
Agreement pursuant to this Section 11.1(a)(iv) if such Person's breach of
this Agreement has prevented the consummation of the transactions
contemplated hereby; or
(v) By Purchaser pursuant to Section 11.8(b).
(b) In the event that this Agreement is terminated pursuant to Section
11.1(a), all further obligations of each party hereto under this Agreement
(other than pursuant to Sections 11.4 and 8.3(b), which will continue in full
force and effect) will terminate without further liability or obligation of any
party to the other party hereunder; provided, HOWEVER, that no party will be
released from liability hereunder for any (i) failure of such party to have
performed its obligations hereunder prior to such termination or (ii)
misrepresentation made by such party prior to such termination of any matter set
forth herein.
11.2 NOTICES. All notices and other communications required or permitted
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or when
dispatched by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) or one business day after having been dispatched by a
nationally recognized overnight courier service to the appropriate party at the
address specified below:
(a) If to Purchaser to:
AI Acquisition Corp.
c/o Benetech, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with copies to:
46
SKM Growth Investors
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
(b) If to Seller or the Stockholder, to:
ITEQ, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
11.3 AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by Law.
11.4 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, except as otherwise expressly provided for herein,
the parties will pay or cause to be paid all of their own fees and expenses
incident to this Agreement and in preparing to consummate and in consummating
the transactions contemplated hereby, including the fees and expenses of any
broker, finder, financial advisor, investment banker, legal advisor or similar
person engaged by such party.
47
11.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No party may assign, delegate or otherwise transfer any
of its rights or obligations under this Agreement (including any transfer by way
of merger or operation of law) without the consent of each other party hereto;
PROVIDED, HOWEVER, that Purchaser may assign its rights and obligations under
this Agreement to a wholly-owned Affiliate of Purchaser, it being understood
that such assignment will not relieve Purchaser from its obligations hereunder.
Any assignment in violation of the preceding sentence will be void AB INITIO.
11.6 NO THIRD-PARTY BENEFICIARIES. Except as provided in Article X and
Section 11.5, this Agreement is for the sole benefit of the parties hereto and
their permitted successors and assigns, and nothing herein expressed or implied
will give or be construed to give to any Person, other than the parties hereto
and such permitted successors and assigns, any legal or equitable rights
hereunder.
11.7 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the Laws that
might otherwise govern under principles of conflict of laws thereof.
11.8 RISK OF LOSS. (a) From the date hereof through the Closing Date, all
risk of loss or damage to the Purchased Assets will be borne by Seller.
(b) If, before the Closing Date, all or any material portion of the
Purchased Assets is damaged or destroyed by fire or other casualty, Seller will
notify Purchaser promptly in writing of such fact. If Seller has not agreed to
cure such damage or destruction or make a fair and equitable adjustment to the
Purchase Price within 30 calendar days after its occurrence to the sole
satisfaction of Purchaser, then Purchaser may terminate this Agreement pursuant
to Section 11.1(a)(v).
11.9 PUBLIC ANNOUNCEMENTS. From the date hereof until the Closing Date,
Seller and Purchaser will consult with each other before issuing, or permitting
any agent or Affiliate to issue, any press releases or otherwise making or
permitting any agent or Affiliate to make any public statements with respect to
this Agreement and the transactions contemplated hereby.
11.10 JURISDICTION. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in the courts
of the State of Delaware and the federal courts of the United States of America
located in such State. Each of the parties (i) consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding, (ii) irrevocably waives, to the fullest
extent permitted by Law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum, (iii) will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court, and (iv) will not bring any action relating to this Agreement or any of
the transactions contemplated by this Agreement in any other court. Process in
any such suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the
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jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 11.2 will be
deemed effective service of process on such party.
11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
11.12 TABLE OF CONTENTS; HEADINGS. The table of contents and headings in
this Agreement are for convenience of reference only and will not control or
affect the meaning or construction of any provisions hereof.
11.13 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) and the Ancillary Agreements constitute the entire agreement
among the parties with respect to the subject matter of this Agreement. This
Agreement (including the Schedules and Exhibits hereto) and the Ancillary
Agreements supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof of this
Agreement.
11.14 SEVERABILITY; INJUNCTIVE RELIEF. (a) If any provision of this
Agreement or the application of any such provision to any Person or circumstance
is held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, the remainder of the provisions of this Agreement (or the
application of such provision in other jurisdictions or to Persons or
circumstances other than those to which it was held invalid, illegal or
unenforceable) will in no way be affected, impaired or invalidated, and to the
extent permitted by applicable Law, any such provision will be restricted in
applicability or reformed to the minimum extent required for such provision to
be enforceable. This provision will be interpreted and enforced to give effect
to the original written intent of the parties prior to the determination of such
invalidity or unenforceability.
(b) The parties acknowledge and agree that the provisions of Sections 8.2
and 8.3(b) are reasonably necessary to protect the legitimate interests of
Purchaser, its Affiliates and their businesses and Seller, its Affiliates and
their businesses (in the case of Section 8.3(b) only) and that any violation of
Sections 8.2 or 8.3(b) will result in irreparable injury to Purchaser and its
Affiliates (or Seller and its Affiliates, in the case of Section 8.3(b) only),
the exact amount of which will be difficult to ascertain and the remedies at Law
for which will not be reasonable or adequate compensation to Purchaser and its
Affiliates (or Seller and its Affiliates, in the case of Section 8.3(b) only)
for such a violation. Accordingly, Seller agrees that if it violates any of the
provisions of Section 8.2 or 8.3(b), and Purchaser agrees that if it violates
any of the provisions of Section 8.3(b), in addition to any other remedy
available at Law or in equity, Purchaser (or Seller, in the case of Section
8.3(b) only) will be entitled to seek specific performance or injunctive relief
without posting a bond, or other security, and without the necessity of proving
actual damages.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
AI ACQUISITION CORP.
By:/S/ F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
Name: F. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, III
Title: President
ITEQ, INC.
By:/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President, Chief Executive
Officer and Secretary
AMEREX INDUSTRIES, INC.
By:/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Secretary
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