Exhibit 10.39
ASSET PURCHASE AGREEMENT
By and Among
▇▇▇▇▇▇ ACQUISITION CORP.,
▇▇▇▇▇▇ BEARING COMPANY, INC.,
and
THE SHAREHOLDERS OF
▇▇▇▇▇▇ BEARING COMPANY, INC.
Dated as of June 3, 1998
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") dated as of June 3,
1998 is by and among ▇▇▇▇▇▇ ACQUISITION CORP., a Delaware corporation ("Buyer"),
▇▇▇▇▇▇ BEARING COMPANY, INC., a Delaware corporation ("Seller") and THE
SHAREHOLDERS OF ▇▇▇▇▇▇ BEARING COMPANY, INC. (collectively, the "Shareholders").
R E C I T A L S
WHEREAS, Seller is engaged in the design, development, manufacture,
packaging and warehousing of pins, rollers and screw machine products and the
sale of such items to customers throughout the United States and Europe (the
"Business"); and
WHEREAS, the Shareholders are the holders of all of the outstanding
capital stock of Seller; and
WHEREAS, Seller desires to sell and transfer to Buyer substantially all
of its assets in consideration for the delivery by Buyer to Seller of the
Purchase Price (as defined herein) and on the terms and conditions set forth
herein; and
WHEREAS, Buyer desires to purchase from Seller substantially all of its
assets and assume certain of its liabilities on the terms and conditions set
forth herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows.
ARTICLE I.
DEFINITIONS
1.1. Index of Defined Terms. The following is an index of defined terms
utilized in this Agreement:
Defined Term Section Page
------------ ------- ----
1997 Balance Sheet 3.5.(a) 17
Adjusted February 28 Balance Sheet 3.5.(c) ^ 18
==
Affiliate 1.2 3
Agreement Preface 1
Allocation Statement 2.10 16
Annual Financials 3.5.(a) 17
Applicable Law 1.2 3
Assumed Contracts 2.3 9
Assumed Liabilities 2.3 9
Business Preface 1
Business Day 1.2 4
Business Secrets 10.2 40
Buyer Preface 1
Closing 2.6.(a) 13
Closing Date 2.6.(a) 13
Code 1.2 4
Effective Date 2.6.(b) 13
Employee 1.2 4
Environmental Claim 1.2 4
Environmental Condition 1.2 4
Environmental Laws 1.2 4
Equipment 2.1.(b) 7
ERISA 1.2 4
ERISA Affiliate 1.2 4
Excluded Assets 2.2 9
Excluded Liabilities 2.4 11
Excluded Product Warranty Claims 6.6 32
February 28 Balance Sheet 3.5.(a) 17
Financials 3.5.(a) 17
Fraud 1.2 4
GAAP 1.2 4
Governmental Authority 1.2 5
Indemnification Trigger Amount 8.1.(b)(i) ^ 34
==
Indemnified Party 8.3.(a) 35
Indemnifying Party 8.3.(a) 35
Indemnity Claim 8.3.(a) 35
Indemnity Limitation Exclusions 8.1.(b)(ii) 34
Indemnity Outside Date 8.5.(a) 38
Insurance Policies 3.23 25
Intellectual Property Rights 2.1.(i) 8
Interim Financials 3.5.(a) 17
Interim Period Excluded Liabilities 2.6.(b)(iii) 13
Interim Period 2.6.(b) 13
Interim Period Taxes 2.6.(b)(iv) ^ 14
==
Inventory 2.1.(c) 7
IRS 1.2 5
Knowledge 1.2 5
Liability 1.2 5
Lien 1.2 5
Losses 8.1.(a) 33
Material 1.2 5
Materiality Threshold 1.2 5
Party or Parties 1.2 5
Pension Plans 3.18.(a) 23
Permits 3.14.(a) 21
Permitted Liens 1.2 5
Person 1.2 6
Personal Property Leases 3.7 18
Plans 3.18.(a) 23
Proceedings 3.11 20
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Product 1.2 6
Purchase Price 2.7 14
Real Property 3.6.(a) 18
Receivables 2.1.(e) 8
Required Contractual Consent 3.14.(b) ^ 22
==
Required Consents 3.14.(b) ^ 22
==
Required Governmental Approval 3.14.(b) 21
Restricted Period 10.1 ^ 40
==
Restrictive Covenants 2.7 14
Scheduled Contracts 3.12 20
Scheduled Contract Date 3.12 20
Seller Preface 1
Seller Indemnity Cap 8.1.(c) 34
Seller Payments 2.4.(o) 12
Settlement Notice 8.3.(c)(ii) 37
Shareholders Preface 1
Surveys 5.2.(b) ^ 29
==
Tax 1.2 6
Tax Return 1.2 6
Third Party Claim 8.3.(b) ^ 36
==
Title Commitments 5.2.(a) 28
Title Company 5.2.(a) 28
Title Policies 5.2.(a) 28
Transaction Expenses 2.4.(c) 11
Transferred Assets 2.1 7
Transferred Employees 6.5.(a) 31
Transferred Receivables 3.24 25
Trigger Losses 8.1.(b)(i) 33
WARN 6.5.(c) ^ 32
==
Welfare Plans 3.18.(a) 23
1.2. General Defined Terms. As used herein, the following terms shall
have the meaning indicated:
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, directive, judgment, decree
or other requirement of any Governmental Authority (including any Environmental
Law) applicable for any reason whatsoever to such Person or any of its
Affiliates or Plan Affiliates or any of their respective properties, assets,
business operations, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's, consultant's or agent's
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activities on behalf of such Person or any of its Affiliates or ERISA
Affiliates).
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Employee" means any Person employed by Seller in connection with the
Business.
"Environmental Claim" means any claim, action, cause of action,
investigation or written notice by any Person alleging potential liability
(including, without limitation, potential liability for investigatory tests,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of (i) any Environmental
Condition, or (ii) any other circumstance forming the basis of any violation of
any Environmental Law.
"Environmental Condition" means a condition of the soil, surface
waters, groundwaters, stream sediments, air and similar environmental media both
on and off a property resulting from any activity, inactivity or operations
occurring on such property, that, by virtue of Environmental Laws, (i) requires
investigatory, corrective or remedial measures, and/or (ii) comprises a basis
for claims against, demands of and/or Liabilities of Seller or Buyer.
"Environmental Laws" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
guidelines, policies or requirements of any governmental authority regulating or
imposing standards of liability or of conduct respecting environmental concerns
as are now in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any Person means any other Person that, together
with such Person as of the relevant measuring date under ERISA, was or is
required to be treated as a single employer under Section 414 of the Code.
"Fraud" means any false representation of a material fact made with
knowledge of its falsity and with intent that it be acted on with injury to the
other.
"GAAP" means generally accepted accounting principles in the United
States applied on a consistent basis by Seller.
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"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"IRS" means the Internal Revenue Service.
"Knowledge", in the case of Seller, means the conscious awareness of
any one or more of the Shareholders. Knowledge, in the case of Buyer, means the
conscious awareness of any one or more of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable, convertible into money
or calculable or otherwise and whether or not the same is required to be accrued
on the financial statements of such Person and whether or not the same appears
on any Schedule to this Agreement.
"Lien" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
"Material", whether capitalized or not, when used to qualify a
representation, warranty, or covenant contained in this Agreement shall mean,
unless otherwise defined, as the case may be and to the extent that the context
so requires, either (i) that there is a reasonable probability under all the
circumstances and in view of the total mix of information available that a
reasonable Person, in the position relying thereon, would attach importance in
deciding whether to enter into and consummate this Agreement in accordance with
the specific terms contained herein; or (ii) that the magnitude of any
inaccuracy in, or noncompliance with, the representation, warranty or covenant
at issue is substantial enough to result in monetary liability or cost in excess
of $50,000 (the "Materiality Threshold") to the party to this Agreement for
whose benefit the representation, warranty or covenant is made.
"Party" or "Parties" refers to Buyer or Seller only.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested
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in good faith by appropriate proceedings; (ii) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other similar
Persons and other Liens imposed by Applicable Law incurred in the ordinary
course of business for sums not yet delinquent or being contested in good faith,
(iii) Liens relating to deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security or to secure the performance of leases, trade contracts or other
similar agreements; and (iv) other Liens set forth on Schedule 1.2 hereto.
Notwithstanding the foregoing, the following shall not be Permitted Liens: (a)
any Lien arising under the Code or ERISA with respect to the operation,
termination, restoration or funding of any Plan sponsored by, maintained by or
contributed to by Seller or any of its ERISA Affiliates or arising in connection
with any excise tax or penalty tax with respect to such Benefit Plan and (b) any
Lien arising under clause (i) or (ii) above that is the subject of a contest if
the underlying indebtedness constitutes an Assumed Liability hereunder except
and to the extent that the Taxes or sums in question are reflected as a
Liability on the Adjusted February 28 Balance Sheet.
"Person" means an individual, corporation, partnership, association,
trust, estate, joint-stock company, limited liability company, joint venture,
trust or other entity or organization, including a Governmental Authority.
"Product" means any product manufactured, processed, distributed,
shipped or sold by or for the account of the Seller in connection with the
Business.
"Tax" means all taxes imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income or gross
receipts tax, employment related tax (including employee withholding or employer
payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, severance tax, prohibited transaction tax,
premiums tax, occupation tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority
(domestic or foreign) responsible for the imposition of any such tax.
"Tax Return" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
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ARTICLE II.
TRANSFER OF ASSETS
2.1. Transfer of Assets by Seller. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees to purchase from Seller
and Seller agrees to sell or cause to be sold to Buyer at the Closing all the
assets, properties, rights, licenses, permits, contracts, causes of action and
claims, of every kind and description as the same shall exist on the Effective
Date (other than the Excluded Assets), wherever located, whether tangible or
intangible, real, personal or mixed, that are used, owned by, leased by or in
the possession of Seller in connection with the Business, whether or not
reflected on the books and records of Seller, including all assets shown on the
Adjusted February 28 Balance Sheet (the collective assets, properties, rights,
licenses, permits, contracts, causes of action and claims to be transferred to
Buyer by Seller pursuant hereto are referred to collectively herein as the
"Transferred Assets") and including without limitation all right, title and
interest of Seller in, to, and under the following, in any and all such cases to
the extent used, owned by, leased by or in the possession of Seller in
connection with the Business on the Effective Date:
(a) all real property and leases, capitalized or operating, of, and
other interests in, real property, in each case together with all buildings,
structures, fixtures, building equipment, easements and improvements erected
thereon and appurtenances and rights and interests thereto including, without
limitation, the Real Property;
(b) all machinery, equipment, furniture, office equipment, computer
equipment (including all hardware and software), communications equipment,
vehicles, storage tanks, spare and replacement parts, fuel and other tangible
property (and interests in any of the foregoing) of Seller ("Equipment")
including, without limitation, the Equipment set forth on Schedule 2.1.(b)
hereto;
(c) all items of inventory, notwithstanding how classified in the
financial records of Seller, including all raw materials, purchased parts,
work-in-process, finished goods, supplies, spare parts and samples
(collectively, the "Inventory" );
(d) all contracts, agreements, options, leases, licenses, sales and
purchase orders, commitments and other instruments of any kind, whether written
or oral, to which Seller is a party on the Effective Date, including the
Scheduled Contracts;
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(e) all accounts receivable and notes receivable, together with any
unpaid interest or fees accrued thereon or other amounts due with respect
thereto, of Seller, and any security or collateral therefor, including
recoverable advances and deposits (collectively, the "Receivables");
(f) all prepaid charges and expenses of Seller, including any such
charges and expenses with respect to ad valorem taxes, leases and rentals and
utilities, but only to the extent Buyer shall obtain the benefit therefrom after
the Closing;
(g) all rights of Seller under any insurance policy (excluding life
insurance policies on the lives of any of the Shareholders);
(h) all of Seller's rights, claims, credits, causes of action or rights
of setoff against third parties relating to the Business or the Transferred
Assets, whether liquidated or unliquidated, fixed or contingent, including
claims pursuant to all warranties, representations and guarantees made by
suppliers, manufacturers, contractors and other third parties in connection with
products or services purchased by or furnished to Seller affecting any of the
Transferred Assets;
(i) all patents, trademarks, trade names (including the name "▇▇▇▇▇▇
Bearing" and all variations and derivatives thereof), trade styles, logos and
service marks and all applications and registrations therefor and licenses
thereof and all technical, processing, manufacturing or marketing information,
including new developments, inventions, know-how, processes, ideas and trade
secrets and documentation thereof (including related papers, blueprints,
drawings, chemical compositions, formulae, diaries, notebooks, specifications,
designs, methods of manufacture and data processing software) and all claims and
rights related thereto (collectively, the "Intellectual Property Rights");
(j) all tools, dies, jigs, molds, patterns, machinery and equipment,
whether owned or leased, whether in the possession of the Seller or vendors;
(k) all vehicles and rights under vehicle leases (excluding the lease
of the 1997 Mercedes);
(l) all rights under agreements with employees and others concerning
confidentiality and assignment of inventions;
(m) all information systems, programs, software and documentation
thereof (including all electronic data processing systems, program
specifications, source codes, logs, input data and report layouts and formats,
record file layouts, diagrams,
8
functional specifications and narrative descriptions, flow charts and other
related material);
(n) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by Seller, whether or not actually utilized by
Seller;
(o) all books, records, files and papers of Seller, whether in hard
copy or computer format, including books of account, invoices, engineering
information, sales and promotional literature, manuals and data, sales and
purchase correspondence, lists of present and former suppliers, personnel and
employment records of present and former employees, and documentation developed
or used for accounting, marketing, engineering, manufacturing or any other
purpose any time prior to the Effective Date, in any and all such cases to the
extent related to the Business (provided that Buyer is not purchasing any books
and records that Seller is prohibited by contract from disclosing (which such
books and records, and the Persons to whom the Seller is so restricted, are
summarized on Schedule 3.21 hereto));
(p) all lists of present customers and lists of former customers;
(q) all goodwill;
(r) all construction contracts and other contracts for the maintenance,
repair or improvement of the Real Property;
(s) all product designations used with respect to the Products; and
(t) except as specifically provided in Section 2.2, all other assets
and properties of Seller that exist on the Effective Date, whether tangible or
intangible, real or personal.
2.2. Excluded Assets. Buyer expressly understands and agrees that the
assets and properties set forth on Schedule 2.2 (the "Excluded Assets") shall be
excluded from the Transferred Assets and shall be retained by Seller. The
Excluded Assets shall include the "Federal Tax Deposit" and "prepaid insurance",
if any, each as reflected on the February 28 Balance Sheet.
2.3. Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Buyer agrees, effective at the time
of Closing, to assume and in due course perform, pay and discharge the following
Liabilities (the "Assumed Liabilities"):
9
(i) All of the Liabilities reflected on the Adjusted February
28 Balance Sheet; and
(ii) All Liabilities of Seller that arise following the
Effective Date (including in respect of the Interim Period) under or in
connection with contractual obligations created prior to the Effective
Date (the "Assumed Contracts"); provided that (A) the Assumed Contracts
shall include only (1) the Scheduled Contracts, (2) those contracts
that were entered into in the ordinary course of the Business but are
of such a de minimis nature that they are not Scheduled Contracts, and
(3) those contracts that were entered into in the ordinary course of
the Business following the Scheduled Contract Date; and (B) the
Liabilities assumed under this subsection (ii) shall not include (1)
monetary Liabilities relating to the period prior to the Effective Date
that were not included on the Adjusted February 28 Balance Sheet or (2)
Liabilities that arose from actions or omissions of the Seller prior to
the Effective Date (e.g. the following shall not constitute Assumed
Liabilities unless they were included as Liabilities on the Adjusted
February 28 Balance Sheet: (x) Liabilities arising by reason of a
default by Seller on or before the Effective Date under an Assumed
Contract, (y) Liabilities arising from a failure by Seller prior to the
Effective Date to take steps reasonably required in order to satisfy
obligations under the Assumed Contracts, and (z) Liabilities on account
of products or services produced or provided by Seller prior to the
Effective Date);
(iii) Notwithstanding anything contained herein to the
contrary, those Liabilities described on Schedule 2.3(iii) hereto (even
though such Liabilities were not included as such on the Adjusted
February 28 Balance Sheet) and any and all Liabilities incurred during
the Interim Period which arose in the normal course of Business (except
for any Liability incurred or arising during the Interim Period that is
of the nature set forth in subsections (a) through (o) of Section 2.4);
and
(iv) Those Liabilities related to indebtedness of ^ Seller for
borrowed money set forth on the Adjusted February 28 Balance Sheet.
2.4. Excluded Liabilities. Buyer does not hereby assume, and shall not
at any time hereafter (including on or after the Effective Date) become liable
for, any of the Liabilities of Seller or any of its Affiliates or any ERISA
Affiliate of any of
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the foregoing other than the Assumed Liabilities (the "Excluded Liabilities").
Without limiting the generality of the foregoing, the Excluded Liabilities shall
include any Liabilities of the Seller, howsoever arising and whether or not
known as the date hereof, that relate to the period prior to the Effective Date
that were not included as such on the Adjusted February 28 Balance Sheet or that
are not included as Assumed Liabilities within Section 2.3(ii) above. Further,
the Excluded Liabilities shall include, without limitation, the following
Liabilities:
(a) any Liability of any of Seller or any of its Affiliates or any
ERISA Affiliate of any of the foregoing whether currently in existence or
arising hereafter that is not attributable to, or that does not arise out of the
conduct of, the Business;
(b) any Liability whether presently in existence or arising hereafter
directly or indirectly relating to an Excluded Asset;
(c) any Liability whether currently in existence or arising hereafter
relating to fees, commissions or expenses owed to any broker, finder, investment
banker, accountant, attorney or other intermediary or advisor employed by Seller
or any of its Affiliates or their respective ERISA Affiliates in connection with
the transactions contemplated hereby or arising in connection herewith; or any
liability of Seller to employees of the Business in respect to any bonus or
other payment made in respect of, by reason of, or contingent on, the
transactions contemplated hereby; or any other fees and costs arising in
connection with the transaction (including, for example, transfer taxes) (all of
the Liabilities set forth in this subsection (c) are referred to as the
"Transaction Expenses");
(d) any Liability the existence of which constitutes, gives rise to, or
arises by reason of, a breach of any representation, warranty or covenant
hereunder;
(e) any contingent Liabilities of Seller related to any transactions by
Seller prior to the Effective Date except Liabilities that Buyer has expressly
agreed to assume pursuant to the terms of this Agreement and those Liabilities
listed on Schedule 2.4.(e);
(f) any Liability related to indebtedness of Seller for borrowed money
or capitalized leases, or the guarantee by Seller of the indebtedness of any
other Person, except as set forth on the Adjusted February 28 Balance Sheet or
on Schedule 2.4.(f) (including amounts owed to Valley American Bank);
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(g) any Liability of Seller arising under this Agreement;
(h) subject to Section 6.6 below, with respect to Products manufactured
on or prior to the Effective Date (and whether or not sold prior to the
Effective Date), any Liability arising out of, resulting from, or relating to
claims seeking return, replacement, and/or repair of such Products pursuant
either to (i) express product warranties extended by Seller prior to the Closing
Date or by Buyer after the Closing Date (provided that Buyer's warranties are no
more expansive than the warranties extended by Seller prior to the Closing Date)
or (ii) product warranties or obligations implied or provided by Applicable Law;
(i) with respect to Products manufactured on or prior to the Effective
Date (and whether or not sold prior to the Effective Date), any Liability
arising out of, resulting from, or relating to product liability claims;
(j) any Liability of Seller which serves as basis of any claim for
indemnification under Article VIII hereof;
(k) any Liability under contracts set forth on Schedule 2.4.(k);
(l) any Liabilities under contracts with, or indebtedness to,
Affiliates of Seller, except as set forth on Schedule 2.4.(l);
(m) any Liability under the Personal Property Leases and the Scheduled
Contracts which is not an Assumed Liability under Section 2.3(ii);
(n) any Liability of Seller relating to worker's compensation benefits,
whether arising or maturing prior to or after the Effective Date, but only for
incidents occurring prior to the Effective Date; and
(o) any Liability in respect of Seller Payments. For the purposes
hereof, the "Seller Payments" mean any direct or indirect payments made to or
for, or on behalf of, or Liabilities accrued on account of, any Shareholder,
regardless of how characterized, and regardless of the nature thereof, i.e.
whether as dividend, distribution, compensation, reimbursement or otherwise, to
the extent in excess of $96,000 in the aggregate: (i) in respect of the period
prior to the Effective Date to the extent not reflected as a Liability on the
Adjusted February 28 Balance Sheet, (ii) in respect of the Interim Period other
than pursuant to the Employment Agreement between Seller and ▇▇▇ ▇. ▇▇▇▇▇▇, or
(iii) interest attributable to indebtedness of the Seller to the Shareholders.
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2.5. Intentionally Omitted.
2.6. Closing.
(a) The closing (the "Closing") of the transactions contemplated by
this Agreement shall take place at the offices of ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ on the date hereof (the "Closing Date").
(b) The Seller and the Buyer agree that the Closing shall be effective
for all purposes as of the close of business on February 28, 1998 (the
"Effective Date"). Pursuant thereto, except as otherwise set forth herein, the
operations of the Business during the period between the Effective Date and the
Closing Date (the "Interim Period") shall be for the account of the Buyer.
Without limiting the generality of the foregoing:
(i) all assets acquired during the Interim Period of a nature
similar to the Transferred Assets shall be deemed owned by Buyer from
the outset,
(ii) all net cash created during the Interim Period (i.e.
after satisfying Liabilities described in (iii) below (but excluding
any cash paid in respect of the Purchase Price)) shall be for the
account of Buyer and shall be transferred to Buyer at the Closing,
(iii) Buyer shall be responsible for all Liabilities incurred
or arising consistent with past practices respecting the Business
during the Interim Period (including interest on account of all
indebtedness of Seller for borrowed money (including to the
Shareholders) set forth on the Adjusted February 28 Balance Sheet)
except for any Liability incurred or arising during the Interim Period
that is of the nature set forth in subsections (a) through (o) of
Section 2.4; pursuant thereto, Buyer shall have no responsibility for,
and Seller shall remain obligated to satisfy, or, as the case may be,
reimburse Buyer for all payments made during the Interim Period in
respect of, Liabilities incurred ^, arising or paid during the Interim
Period of the nature described in subsections (a) through (o) of
Section 2.4 (the "Interim Period Excluded Liabilities"), and
(iv) Buyer shall be responsible for the payment of any state
or federal income taxes paid or payable on account of the income of the
Business in respect of the Interim Period to the extent such income is
effectively for the account of Buyer pursuant to this Section 2.6
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(the "Interim Period Taxes") and Buyer shall hold Seller and the
Shareholders harmless from any such Interim Period Taxes and any
associated costs or expenses; provided that (A) Seller and the
Shareholders shall not file any tax returns respecting the income of
the Business, or otherwise calling for the payment of Interim Period
Taxes, without Buyer's prior written approval and (B) Buyer shall have
the right to control the defense of any claims for Interim Period Taxes
asserted by any taxing authorities against Seller or the Shareholders.
2.7. Purchase Price. The aggregate purchase price for the Transferred
Assets and the consideration for the agreements contained in Article X below
(the "Restrictive Covenants") shall be the sum of the following (the "Purchase
Price"), it being understood, however, that the Purchase Price is based, inter
alia, upon the accuracy of the representations and warranties set forth in
Article III:
(a) ^ $9,445,315 reduced by the amount, if any, of Excluded Liabilities
that were paid during the Interim Period (regardless of when incurred), and
(b) The assumption by the Buyer of the Assumed Liabilities.
2.8. Payment of Purchase Price. The entire Purchase Price shall be paid
in cash by wire transfer of immediately available funds; provided that $500,000
thereof shall be deposited in escrow pursuant to Section 8.1.(d) below.
2.9. Closing Deliveries.
(a) At the Closing, the Seller and the Shareholders shall deliver to
Buyer:
(i) consents to assignment to Buyer of the Employment
Agreements between Seller and ▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇.
▇▇▇▇▇▇;
(ii) an opinion of counsel from ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.,
counsel to Seller;
(iii) UCC-11 searches with respect to the Transferred Assets;
(iv) a payoff letter and releases from Valley American Bank
and Trust Company;
14
(v) UCC-3 termination statements, mortgage terminations and
other Lien releases with respect to Liens filed against the Business or
the Transferred Assets (other than the Permitted Liens), including,
without limitation, UCC-3 termination statements from Norwest Bank
Indiana, N.A.;
(vi) patent, trademark and copyright assignments, in form and
substance satisfactory to Buyer, effecting the transfer of the patents,
trademarks and copyrights included in the Transferred Assets;
(vii) assignments (with lessor's consents thereto) of
leasehold interests in an leased real or personal property included in
the Transferred Assets;
(viii) vehicle titles and valid assignments thereof for each
vehicle included in the Transferred Assets;
(ix) general warranty deeds granting to Buyer good and
marketable title to the Real Property (subject only to covenants and
conditions contained in the Title Policies) together with, to the
extent the same are held by Seller, all rights, privileges, easements
and appurtenances thereto, and all affidavits, governmental forms and
other documents required in connection therewith to convey such title
to Buyer subject only to Permitted Liens;
(x) a ▇▇▇▇ of sale and such other documents of assignment,
transfer and conveyance as Buyer shall reasonably request to transfer
all right, title and interest of Seller in and to the Transferred
Assets, free and clear of all Liens (other than Permitted Liens) to
Buyer;
(xi) a consent to assignment to Buyer of the Consignment
Agreement by and between Seller and Paragon Electric, Inc.; and
(xii) the disclosure document required to be delivered to
Buyer in accordance with the Indiana Responsible Party Transfer Law.
(b) At the Closing, Buyer shall deliver to Seller and the Shareholders:
(i) the Purchase Price, in accordance with Section 2.8;
15
(ii) an Indiana ^ General Sales Tax Exemption Certificate
(Form ST-105) with respect to the purchase of the Inventory; and
(iii) an opinion of counsel from ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇,
counsel to Buyer.
(c) At the Closing, Buyer shall satisfy the indebtedness described on
Schedule 2.9.(c) hereto.
2.10. Purchase Price Allocation. The consideration for the Business and
the Transferred Assets shall be allocated by Buyer and Seller pursuant to
Schedule 2.10 hereto. Such allocation shall be used for all purposes, including
preparation and filing of IRS Form 8594 with respect to the transactions
contemplated hereby (the "Allocation Statement"). Buyer and Seller shall report
the tax consequences of the transactions contemplated by this Agreement in a
manner consistent with the Allocation Statement and shall not take any position
inconsistent therewith.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES AS TO SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated herein, Seller represents and warrants
to Buyer as follows. It is agreed by Buyer and Seller that throughout this
Agreement Seller's statements in any form are based only on the Knowledge of the
Shareholders except for Sections 3.1, 3.2, 3.4, 3.5, 3.8 and 3.11.
3.1. Existence and Power; Capital Stock.
(a) Seller is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware and has all corporate
power and all governmental licenses, authorizations, consents and approvals
required to carry on the Business as now conducted and to own and operate the
Business as now owned and operated. Seller is qualified to conduct business and
in good standing in each jurisdiction where the nature of its activities in
connection with the conduct of the Business requires it to be so qualified.
(b) The Shareholders are the legal and beneficial owners of all of the
issued and outstanding capital stock of Seller.
3.2. Authorization. The execution, delivery and performance by Seller
of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within Seller's corporate powers and have been duly
authorized by all necessary
16
corporate action on the part of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes the legal, valid and binding
agreement of Seller, enforceable against Seller in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and subject to
general principles of equity.
3.3. Governmental Authorization. The execution, delivery and
performance by Seller of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than any actions,
consents, approvals or filings which have been obtained.
3.4. Non-Contravention. The execution, delivery and performance by
Seller of this Agreement do not and will not (a) contravene or conflict with the
Certificate of Incorporation or Bylaws of Seller, true and correct copies of
which have been delivered to Buyer by Seller, (b) contravene or conflict with or
constitute a violation of any provision of any Applicable Law binding upon or
applicable to Seller, the Business or any of the Transferred Assets, (c)
constitute a default under or give rise to any right of termination,
cancellation or acceleration of, or to a loss of any benefit to which Seller is
entitled under, any material contract or any Permit or similar authorization
relating to the Business or included in any of the Transferred Assets or by
which any of the Transferred Assets may be bound, or (d) result in the creation
or imposition of any Lien on any Transferred Asset, other than Permitted Liens.
3.5. Financial Statements; Undisclosed Liabilities .
(a) Attached hereto as Schedule 3.5.(a) are true and complete copies of
(i) the audited balance sheet of Seller as at November 30, 1997 (the "1997
Balance Sheet") and as at November 30, 1995 and 1996 and the related audited
statements of income and statements of cash flows for the years ended November
30, 1995, 1996 and 1997 (collectively, the "Annual Financials") and (ii) the
unaudited balance sheet of Seller as at February 28, 1998 (the "February 28
Balance Sheet") and the related unaudited statement of income and of cash flows
for the three months ended February 28, 1998 (collectively, the "Interim
Financials" and, together with the Annual Financials, the "Financials").
(b) The Financials have been prepared based on the books and records of
Seller. Except for variations in treatment for tax reporting purposes, the books
and records upon which the Financials were based (i) constitute the sole such
books and records maintained by the Seller and account for all of the financial
transactions of the Seller (in all such cases irrespective of
17
whether such books and records are maintained in accordance with GAAP) and (ii)
are the books and records to which the Buyer was provided access during its
diligence process.
(c) The balance sheet set forth on Schedule 3.5.(c) (the "Adjusted
February 28 Balance Sheet") reflects those adjustments to the February 28
Balance Sheet agreed upon by Seller and Buyer. There are no Excluded Assets
reflected on the Adjusted February 28 Balance Sheet.
(d) Attached hereto as Schedule 3.5.(d) are true and correct copies of
internally prepared monthly balance sheets and statements of income for the
period January 1, 1995 through February 28, 1998.
3.6. Real Property.
(a) Schedule 3.6.(a) sets forth a true and complete list of all real
property owned by Seller in connection with the Business (the "Real Property")
such list setting forth the location of each parcel of Real Property, the record
owner thereof, the acreage and a brief description of the nature of the
activities of Seller on such Real Property.
(b) Except as set forth in Schedule 3.6.(b), (i) there are no current
leases, subleases, options or other agreements, granting to any third person the
right to purchase or lease the Real Property and (ii) there are no written or
oral agreements to permit third persons to use or occupy the Real Property.
3.7. Leased Personal Property. Schedule 3.7 sets forth a true and
complete list of all personal property leases or licenses (i) to which Seller is
a party or by which Seller is bound, (ii) that are related to the Business and
(iii) that provide for annual payments by Seller in excess of Five Thousand
Dollars ($5,000) or that contain other affirmative material obligations that
cannot be terminated by Seller within 30 days (the "Personal Property Leases")
entered into in connection with the Business. With respect to the Personal
Property Leases, except as set forth on Schedule 3.7, there exist no defaults by
Seller, or, to the Knowledge of Seller, any default or threatened default by any
lessor or third party thereunder, that has affected or could reasonably be
expected to materially affect the rights and privileges thereunder of Seller.
Except as set forth on Schedule 3.7, all Personal Property Leases to which
Seller is a party or by which it is bound may be assigned, transferred and
conveyed to Buyer without default, penalty or modification thereof.
18
3.8. Sufficiency of and Title to the Transferred Assets.
(a) Seller has the right to sell, assign, transfer and convey, and upon
consummation of the transactions contemplated by this Agreement, will have sold,
assigned, transferred and conveyed, to Buyer all of the Transferred Assets free
and clear of all Liens, except for Permitted Liens.
(b) Except as set forth on Schedule 3.8.(b), the Transferred Assets,
taken as a whole, are in such operating condition and repair so Seller is able
to meet all requirements of the Business as presently conducted.
(c) The Business is a going concern, and, with the transfer of the
Transferred Assets to Buyer pursuant to this Agreement, Buyer will have all
assets necessary to operate the Business as presently conducted.
(d) Except as set forth in Schedule 3.8.(d), Seller either owns the
entire right, title and interest in, to and under, or has the legally
enforceable right to use all Transferred Assets.
3.9. Affiliates. Except as set forth in Schedule 3.9, neither Seller
nor any principal stockholder of Seller or any officers or directors of Seller
(or any immediate family member of any such officer or director):
(a) now has or at any time subsequent to November 30, 1995, had, either
directly or indirectly, an equity or debt interest in any Person which furnishes
or sells or during such period furnished or sold services or products to Seller
(other than legal, accounting and consulting services) or purchases or during
such period purchased from Seller any goods or services, or otherwise does or
during such period did business with Seller of a material nature or amount;
provided, however, that neither Seller, nor any stockholder of Seller nor any of
Seller's officers and directors or other Affiliates shall be deemed to have such
an interest solely by virtue of the ownership of less than one percent (1%) of
the outstanding voting stock or debt securities of any publicly held company,
the stock or debt securities of which are traded on a national stock exchange or
quoted on the National Association of Securities Dealers Automated Quotation
System; or
(b) now is or at any time subsequent to November 30, 1995, was, a party
to any contract, commitment or agreement relating to the Business to which
Seller is or during such period was a party or under which Seller is or was
obligated or bound or to which any of their respective properties may be or may
have been subject, other than through Seller.
19
3.10. Inventory. As of the Effective Date, (a) that portion of the
Inventory comprised of finished goods: (i) has been acquired or manufactured in
the ordinary course of business, in accordance with Seller's normal inventory
practices; (ii) is free of any material defect or deficiency in design, material
or workmanship; (iii) is in merchantable and undamaged condition and, where
applicable, meets customer specifications, and (b) that portion of the Inventory
comprised of raw materials and work in process, when manufactured into finished
goods, will satisfy all of the representations set forth in subsection (a)
above.
3.11. Litigation. Except as disclosed on Schedule 3.11, (i) there are
no actions, suits, hearings, arbitrations, proceedings (public or private) or
governmental investigations that have been brought by or against any
Governmental Authority or any other Person (collectively, "Proceedings") pending
and for which Seller has received service of process, or, to Seller's Knowledge,
threatened, against or affecting the Business or any of the Transferred Assets
or which seek to enjoin or rescind the transactions contemplated by this
Agreement or otherwise prevent Seller from complying with the terms and
provisions of this Agreement; and (ii) there are no existing orders, judgments
or decrees of any Governmental Authority affecting any of the Transferred Assets
or the Business.
3.12. Contracts.
Schedule 3.12 sets forth a complete list of all written contracts,
commitments and obligations of Seller as of May 20, 1998 (the "Scheduled
Contract Date") that are in connection with the Business and are of the nature
described in (a) through (f) below (collectively with the Leases and the
Employment Agreements, the "Scheduled Contracts"):
(a) each contract between Seller and (A) each present or former Seller
Employee, (B) any supplier of services or products to Seller whose dollar volume
of sales to Seller exceeded Ten Thousand Dollars ($10,000) in 1997, and (C) any
Person in which the aggregate payments made or to be made to Seller under such
contract exceeded Ten Thousand Dollars ($10,000) in 1997;
(b) each other agreement or arrangement of Seller that (A) requires the
payment or incurrence of Liabilities or the rendering of services by Seller,
subsequent to the date of this Agreement of more than Ten Thousand Dollars
($10,000) and (B) cannot be terminated by Seller within 30 days;
(c) all contracts relating to, and evidences of or guarantees of, or
providing security for, indebtedness for borrowed money or the deferred purchase
price of property (whether incurred, assumed, guaranteed or secured by any
asset);
20
(d) all partnership, joint venture or other similar contracts,
arrangements or agreements;
(e) to the extent that any of the following provide for annual payments
by Seller in excess of Ten Thousand Dollars ($10,000) and cannot be terminated
by Seller within 30 days, all license, distribution, commission, marketing,
agent, franchise, technical assistance or similar agreements relating to or
providing for the marketing and/or sale of the products or services to which
Seller is a party or by which Seller is otherwise bound; and
(f) all other contracts, commitments and obligations that are not in
the ordinary course of the Business.
3.13. Customers.
No customer of Seller has communicated to Seller that it will cease
doing business with Buyer after, or as a result of, the consummation of any
transactions contemplated hereby except as listed on Schedule 3.13. Buyer
acknowledges that, subject to the foregoing, Seller is making no guarantees
respecting the quantity or quality of sales that Buyer will be able to make
after the Closing.
3.14. Permits; Required Consent.
(a) Schedule 3.14.(a) sets forth all material approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities and all other Persons
necessary for the operation of the Transferred Assets or the Business in
substantially the same manner as currently operated or affecting or relating in
any way to the Business, but other than normal course approvals, permits and the
like that are general in nature and not specific to the Business, the
Transferred Assets or the Real Property (the "Permits").
(b) Schedule 3.14.(b) lists (i) each governmental or other
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval") required
under Applicable Law to be obtained by Seller by virtue of the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby to avoid the loss of any material Permit or otherwise, and (ii) each
contract with respect to which the consent of the other party or parties thereto
must be obtained by Seller by virtue of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby to avoid
the invalidity of the transfer of such contract, the termination thereof, a
breach or default thereunder or any other change or modification to the terms
thereof (each, a "Required Contractual Consent" and collectively with the
Required Governmental Approvals, the "Required Consents").
21
(c) Except as set forth in Schedule 3.14.(a) or Schedule 3.14.(b) each
Permit is valid and in full force and effect in all material respects and,
assuming the related Required Consents have been obtained prior to the Closing
Date, are or will be transferable by Seller (to the extent transferable under
Applicable Law), and assuming the related Required Consents have been obtained
prior to the Closing Date, none of the Permits will be terminated or become
terminable or impaired in any material respect as a result of the transactions
contemplated hereby.
3.15. Compliance with Applicable Laws.
(a) Except as set forth in Schedule 3.15, to the Knowledge of Seller,
the operation of the Business by Seller and the condition of the Transferred
Assets have not violated or infringed, and do not violate or infringe, any
Applicable Law, or any order, writ, injunction or decree of any Governmental
Authority. Seller has corrected all violations of Applicable Law that have been
identified as such by any Governmental Authority or by any Person employed by or
retained by Seller.
(b) Seller has not received notice of any violations or alleged
violations of any Applicable Law (i) that remains unresolved as of the date
hereof or (ii) that was received within the past twelve (12) months except to
the extent that any such violation has been corrected with no adverse
consequences to the Business that would be binding on the Buyer after the
Closing.
(c) Seller has complied in all respects with the provisions of the
Indiana Responsible Property Transfer Law, including the delivery to Buyer of
the disclosure document required thereby.
3.16. Employee Information.
(a) Schedule 3.16.(a) contains the names and addresses of all employees
of Seller, the job designations of each such employee, and the compensation paid
to each such employee and the basis thereof, presently and for calendar year
1997. If Buyer obtains the written consent of an employee, Seller will also
tender to the Buyer information concerning any disciplinary proceeding or action
taken with respect to any such employees, including without limitation any
information concerning positive drug tests; provided that Buyer shall be
responsible for satisfying any claims made against Seller based upon Buyer's
misuse of any such information.
(b) Schedule 3.16.(b) sets forth (i) all outstanding written employment
agreements or commitments to which Seller is a party or by which Seller is
bound, and (ii) all outstanding written consulting, retainer or service
agreements or arrangements for
22
rendition of services to Seller or to which Seller is a party and by which
Seller is bound.
3.17. Labor Matters.
There are no labor or collective bargaining units applicable to Seller,
or with respect to which Seller is otherwise bound. Attached hereto as Schedule
3.17 is a description of any formal or informal organization efforts, whether or
not successful, related to Seller since January 1, 1996, together with a
description of Seller's response thereto.
3.18. Employee Benefit Plans.
(a) Schedule 3.18 is a copy (or description, as the case may be) of all
employee benefit plans, programs, practices, or arrangements, written or
unwritten, (including but not limited to programs including pensions, profit
sharing, stock options, incentives, bonuses, vacations, severance, disability,
hospitalization, medical insurance, life insurance, and the like) currently in
existence under which Seller or any subsidiary or any other organization of
Seller which is a member of a controlled group of organization (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code), has any obligations in
respect of, or that otherwise cover, any of the current or former employees of
Seller or their beneficiaries, other than salary or wages (the "Plans"), which
list includes, but is not limited to each employee welfare plan ("Welfare
Plans") within the meaning of Section 3(1) of ERISA and each employee pension
benefit plan within the meaning of Section 3(2) of ERISA ("Pension Plans"). For
purposes of this Section (v), the term "Pension Plans" shall include any
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) The Welfare Plans and Pension Plans have been administered in
compliance with applicable laws, including ERISA, in all material respects, and
all necessary governmental approvals for the Plans have been obtained.
(c) As of the Closing Date, Seller will have performed all obligations
in form and in operation required to be performed by it as of such date under
the Plans and will not be in default under or in violation of any of the Plans,
and Seller has no Knowledge of any material violation or default by any other
party with respect to the Plans.
3.19. Intellectual Property.
(a) Schedule 3.19.(a) sets forth a complete and correct list of each
patent, patent application and docketed invention, trademark, trade name,
trademark or trade name registration or application, copyright or copyright
registration or application for
23
copyright registration, and each license or licensing agreement for any of the
foregoing relating to any Transferred Asset or held by Seller with respect to
the Business.
(b) Except as disclosed in Schedule 3.19.(b), Seller has not during the
three years preceding the date of this Agreement been a party to any Proceeding,
nor to the Knowledge of Seller is any Proceeding threatened as to which there is
a reasonable possibility of a determination adverse to Seller that involved or
may involve a claim of infringement by any Person (including any Governmental
Authority) of any Intellectual Property Right. Except as disclosed in Schedule
3.19.(b) no Intellectual Property Right 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. The use of
the Intellectual Property Rights does not conflict with, infringe upon or
violate any patent, patent license, patent application, trademark, trade name,
trademark or trade name registration, copyright, copyright registration, service
▇▇▇▇, brand ▇▇▇▇ or brand name or any pending application relating thereto, or
any trade secret, know-how, programs or processes, or any similar rights, of any
Person.
3.20. Advisory Fees. There is no investment banker, broker, finder or
other intermediary or advisor that has been retained by or is authorized to act
on behalf of Seller or its Affiliates who might be entitled to any fee,
commission or reimbursement of expenses from Buyer or any of its Affiliates upon
consummation of the transactions contemplated by this Agreement.
3.21. Disclosure of Business Secrets to Others; Non-Competition
Agreements.
(a) Schedule 3.21.(a) attached hereto sets forth a true and complete
list of all persons or entities (other than current employees, directors and
shareholders of Seller and Buyer or Governmental Authorities with regulatory
authority) to which, to Seller's Knowledge, Seller has disclosed any
confidential, proprietary or other similar non-public information respecting the
Business or the Transferred Assets during the last five (5) years, including the
name and address of each such person, a description of the information disclosed
to each such person and a copy of any non-disclosure or other agreement executed
by such person with respect to the disclosed information unless subject to a
confidentiality agreement prohibiting such disclosure by Seller.
(b) Except as set forth on Schedule 3.21.(b), no contracts, agreements
or arrangements of any kind, whether written or oral, currently exist to which
Seller is a party and which (i) restrict any person or entity from engaging in
the Business or from
24
competing with Seller, or (ii) which restrict Seller from engaging in the
Business or from competing with any other person or entity.
3.22. Environmental Matters.
(a) To Seller's Knowledge, there exists no Environmental Condition at
the Real Property.
(b) Seller has not received any Environmental Claim based on an
Environmental Condition.
3.23. Insurance. Schedule 3.23 sets forth a complete and correct list
of all material insurance policies of any kind currently in force with respect
to the Business (the "Insurance Policies"), including "occurrence based"
liability policies regardless of the periods to which they relate. Schedule 3.23
sets forth for each Insurance Policy the type of coverage, the name of the
insureds, the insurer, the premium, the expiration date, the period to which it
relates, the deductibles and loss retention amounts and the amounts of coverage.
3.24. Receivables. Schedule 3.24 sets forth an accurate, correct and
complete aging of all Receivables of the Business as of February 28, 1998. All
outstanding Receivables, to the extent constituting Transferred Assets (the
"Transferred Receivables") are due and valid claims against account debtors for
goods or services delivered or rendered, and shall, to Seller's Knowledge, be
collectible in the ordinary course of business and are subject to no defenses,
offsets or counter-claims. All Transferred Receivables arose in the ordinary
course of business. To Seller's Knowledge, no Transferred Receivables are
subject to prior assignment, claim, lien or security interest. To Seller's
Knowledge, no Transferred Receivable is owed by an account debtor which is
insolvent or the subject of any bankruptcy or insolvency proceedings of any kind
or of any other pending proceeding or action which may have a material adverse
effect on the business of such account debtor. Seller has not incurred any
liabilities to customers in respect of the Transferred Receivables for discounts
(other than for prompt payment), returns, promotional allowances or otherwise.
Subject to the foregoing, Buyer acknowledges that nothing contained herein
constitutes a guarantee by Seller of the collectibility of the Transferred
Receivables.
3.25. Products.
(a) All products manufactured, processed, distributed, shipped or sold
by Seller in connection with the Business and any services rendered by it have
been in conformity with all applicable contractual commitments and all express
or implied warranties.^
25
(b) Schedule 3.25.(b), sets forth an accurate, correct and complete
statement of all written warranties, warranty policies, service and maintenance
agreements of the Business. The product warranty and return experience for the
three (3) years ended November 30, 1997 and interim period through the date
hereof is set forth on Schedule 3.25.(b).
(c) Schedule 3.25.(c) sets forth an accurate, correct and complete list
and summary description of all existing claims, duties, responsibilities,
liabilities or obligations arising from or alleged to arise from any injury to
person or property as a result of the ownership, possession or use of any
product manufactured or sold by Seller in connection with the Business prior to
the Closing Date. Except as set forth in Schedule 3.25.(c), the Business will
not be subject to any claim, expense, liability or obligation arising from any
injury to person or property as a result of ownership, possession or use of any
product manufactured, processed, distributed, shipped or sold prior to the
Closing Date.
3.26. Seller's Insurance. Included within Schedule 3.23 is a list of
all comprehensive general liability and worker's compensation insurance
coverages as in effect since January 1, 1995. All such policies provide coverage
for occurrences during the period of coverage, irrespective of when claims are
made thereunder.
3.27. Material Disclosures. To Seller's Knowledge, no statement,
representation or warranty made by Seller in this Agreement or in any
certificate, statement, list, schedule or other document furnished or to be
furnished to Buyer hereunder contains, or when so furnished will contain, any
untrue statement of a material fact, or fails to state, or when so furnished
will fail to state, a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
3.28. Buyer Acknowledgement. Buyer hereby acknowledges and agrees that
it is not relying upon any representations or warranties other than those
specifically set forth in this Article III, whether written or oral, and
howsoever otherwise communicated. Pursuant thereto, the Buyer acknowledges and
agrees that it is acquiring the Transferred Assets pursuant hereto free of any
representations and warranties other than those specifically set forth herein.
26
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated herein, Buyer hereby represents and
warrants to Seller that:
4.1. Organization and Existence. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all corporate power and authority to enter into this
Agreement and consummate the transactions contemplated hereby. Buyer is duly
qualified to do business and in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary to carry on its business as now conducted.
4.2. Corporate Authorization. The execution, delivery and performance
by Buyer of this Agreement and the consummation by Buyer of the transactions
contemplated hereby are within the corporate powers of Buyer and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes a legal, valid and binding agreement of Buyer, enforceable
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity.
4.3. Governmental Authorization. The execution, delivery and
performance by Buyer of this Agreement require no action by, consent or approval
of, or filing with, any Governmental Authority other than as set forth in this
Agreement.
4.4. Non-Contravention. The execution, delivery and performance by
Buyer of this Agreement does not (a) contravene or conflict with the Certificate
of Incorporation or Bylaws of Buyer, or (b) assuming compliance with the matters
referred to in Section 4.2, contravene or conflict with or constitute a
violation of any provision of any Applicable Law binding upon or applicable to
Buyer.
4.5. Advisory Fees. There is no investment banker, broker, finder or
other intermediary or advisor that has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee, commission or reimbursement
of expenses from Seller or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
4.6. Litigation. There is no Proceeding pending against, or to the
Knowledge of Buyer, threatened against or
27
affecting, Buyer before any court or arbitrators or any governmental body,
agency or official that in any matter challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.
4.7. Material Disclosure. To Buyer's Knowledge, no statement,
representation or warranty made by Buyer in this Agreement or in any
certificate, statement, list, schedule, or other document furnished or to be
furnished to Seller hereunder contains, or when so furnished will contain, any
untrue statement of a material fact, or fails to state, or when so furnished
will fail to state, a material fact necessary to make the statements contained
herein or therein, in light of the circumstances in which they are made, not
misleading.
ARTICLE V.
COVENANTS OF SELLER
5.1. Access to Information; Additional Information
.
After the Closing, Seller shall provide Buyer with such of Seller's
historic books and financial records as Buyer may require in order for Buyer to
comply with its disclosure obligations under applicable securities laws.
5.2. Title Commitment and Survey.
(a) Seller has delivered to Buyer a commitment for an Owner's Title
Insurance Policy (the "Title Commitments") issued by Chicago Title Insurance
Company (the "Title Company"), in the form set forth on Schedule 5.2.(a). At the
Closing, Seller will deliver to Buyer the title insurance policies covered by
the Title Commitments (the "Title Policies"). In lieu of a policy the Title
Company may issue a "▇▇▇▇ up commitment" indicating that the Title Company's
requirements have been satisfied and that a policy consistent with the Title
Commitments will be issued promptly following the Closing. Such title insurance
policies shall (i) be in the amounts set forth on Schedule 5.2.(a) (which
amounts, however, shall not be binding for the purpose of allocating the
Purchase Price), (ii) be issued by the Title Company, (iii) show in Schedule A
thereof the approved survey description of such Real Property and each easement
appurtenant thereto, with the standard printed exceptions deleted, and otherwise
show in Schedule B thereof only the Permitted Liens, and (iv) shall be
accompanied by the endorsements listed on Schedule 5.2.(a) and contain such
endorsements as may reasonably be requested by Buyer with Buyer to bear the
costs associated with any such endorsements.
28
(b) Seller has delivered a current ALTA boundary survey of each Parcel
of Real Property (the "Surveys") certified to Buyer and the Title Company (and
such other persons as Buyer may require) by a registered land surveyor or
engineer in the form attached hereto as Schedule 5.2.(b) (which Surveys are
acceptable to Buyer).
5.3. Taxes.
(a) All sales, value added, use and other Taxes imposed in connection
with or measured by the sale of the Transferred Assets shall be borne by Seller.
Real property transfer Taxes imposed in connection with the sale of the
Transferred Assets shall be borne by the party named in the law providing for
such transfer Tax and, if no such party is named, by Seller.
(b) Seller agrees that no new elections with respect to Taxes or any
changes in current elections with respect to Taxes affecting the Transferred
Assets shall be made after the date of this Agreement without the prior written
consent of Buyer.
(c) Buyer, on the one hand, and Seller and the Shareholders, on the
other hand, shall (i) provide to each other such assistance as may reasonably be
requested in connection with the preparation of any Tax Return relating to the
Business and the conduct of any audit or other examination by any taxing
authority or in connection with judicial or administrative proceedings relating
to any liability for Taxes relating to the Business, (ii) retain all records or
other information that may be relevant to the preparation of any Tax Returns
relating to the Business, or the conduct of any audit or examination, or other
tax proceeding relating to the Business, and (iii) retain all relevant
documents, including prior year's Tax Returns relating to the Business,
supporting work schedules and other records or information that may be relevant
to such returns and shall not destroy or otherwise dispose of any such records
without the prior written consent of the other party.
(d) Seller shall provide Buyer with a FIRPTA certificate or similar
document in order to relieve Buyer of any obligations to withhold any portion of
the Purchase Price.
(e) Pursuant to Section 1445(b)(2) of the Code, Seller shall furnish
Buyer an affidavit stating under penalty of perjury Seller's United States
taxpayer identification number and that Seller is not a foreign person.
5.4. Right to Corporate Name.
(a) Seller hereby acknowledges and agrees that it is transferring its
entire interest in the tradename "▇▇▇▇▇▇ Bearing Company" or any variation or
derivation thereof containing the name
29
"▇▇▇▇▇▇ Bearing". Seller shall not at any time claim any right, title or
interest to such name.
(b) Effective on the Closing Date, Seller shall take all necessary
action to change the corporate name of Seller in its state of incorporation and
all states in which it is authorized to transact business on the Closing Date,
to a name that does not contain any words similar or reasonably likely be
confused with any words in the "▇▇▇▇▇▇ Bearing Company, Inc." name or any use by
Buyer thereof.
ARTICLE VI.
COVENANTS OF ALL PARTIES
6.1. Further Assurances. Subject to the terms and conditions of this
Agreement, each party will use all reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary or
desirable under Applicable Law to consummate the transactions contemplated by
this Agreement. Buyer and Seller agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Following the Closing, Buyer shall make the employees and records of the
Business reasonably available to Seller during normal business hours (at no
charge to Seller other than for out of pocket expenses incurred by Buyer for
items such as photocopying or travel) for the purposes of providing accounting
information reasonably required by Seller, providing testimony or information in
connection with any legal proceeding or for any other appropriate purpose
arising out of Seller's ownership and operation of the Business.
6.2. Certain Filings. The parties hereto shall cooperate with one
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any action,
consent, approval or waiver from any party to any contract is required or
reasonably appropriate, in connection with the consummation of the transactions
contemplated by this Agreement. Subject to the terms and conditions of this
Agreement, in taking such actions or making any such filings, the parties hereto
shall furnish information required in connection therewith and seek timely to
obtain any such actions, consents, approvals or waivers.
6.3. Intentionally Omitted.
6.4. Bulk Sales Laws. Buyer waives compliance by Seller with the
provisions of (i) Indiana's Department of Revenue
30
Bulk Sales Law and (ii) all applicable provisions of Article 6 of the Uniform
Commercial Code as adopted in any state relating to bulk sales. Seller shall
indemnify Buyer for any taxes owed to the State of Indiana arising out of
Seller's failure to comply with the notification requirement referred to in the
preceding sentence.
6.5. Employees and Employee Benefit Matters.
(a) Effective as of the Closing Date, Buyer may, but shall not be
obligated to, offer employment to some of Seller's employees who are actively at
work immediately prior to the Closing Date, subject to Buyer's right to
terminate the employment of any such employees at any time and for any reason in
its sole discretion. It is specifically understood that (i) Buyer shall have no
obligation to hire any of the Seller's employees and (ii) no rights or
entitlements shall vest in favor of any third party (including any of Seller's
employees) by virtue of this Agreement. Any employees so hired are hereinafter
referred to as "Transferred Employees". Buyer shall identify all such
Transferred Employees to Seller within ten (10) days following the Closing.
(b) Buyer agrees to assume responsibility to the Transferred Employees
for the payment of any accrued wages, salaries, commissions, vacation pay, sick
pay, severance obligations and any other employee benefit or entitlement of any
kind or nature whatsoever accrued or accruing to such employees pursuant to any
employee benefit plan, fund, program, contract (oral or written), policy or
arrangement arising by reason of any Applicable Law or any agreement that Seller
may have with any such Transferred Employees, all to the extent arising in
respect of or relating to the period prior to the Effective Date, but only if,
and to the extent, (i) accrued on the Adjusted February 28 Balance Sheet, or
(ii) disclosed in one or more of the Schedules hereto. Nothing contained herein
shall create any rights in favor of any Transferee Employee beyond rights to
which they were otherwise entitled pursuant to any such Applicable Law or
agreement.
Seller shall be responsible to satisfy, and/or to reimburse Buyer on
account of, any claims made by any Transferred Employees against Buyer for
severance pay, unfair or unlawful termination, continued entitlement to benefits
beyond termination and the like in the event of, and regardless of the
circumstances of, Buyer's termination of the employment of any Transferred
Employees following the Closing, to the extent that any such claims relate to,
or otherwise arise on account of, or are calculated in whole or in part by
reference to, the period prior to the Effective Date. Seller shall retain the
right to challenge any such claims made by Transferred Employees, and Buyer
shall continue to be liable for claims arising from the period after the
Effective Date.
31
(c) Seller shall terminate all of its employees (other than those
identified on Schedule 6.5.(c)) and, subject to subsection (b) above, shall be
responsible for all of the consequences thereof. Seller shall be responsible for
compliance with, and prior to the Closing shall complete, all Applicable Laws
respecting the effect of the transactions contemplated by this Agreement and by
any agreement or document contemplated hereby on any of its employees including,
without limitation, the Worker Adjustment and Retraining Notification Act, 29
U.S.C. ss. 2101, et seq. ("WARN"). Seller agrees that it will not take any
action which causes the notice provisions of WARN to be applicable to the
transactions contemplated by this Agreement.
6.6. Product Warranty Claims. In the event of any Liability arising out
of, resulting from, or relating to claims seeking return, replacement, and/or
repair of any Products manufactured on or prior to the Effective Date (and
constitute finished goods as of the Effective Date) pursuant either to (i)
express Product warranties extended by Seller prior to the Closing or Buyer
after the Closing Date (provided that Buyer's warranties are no more expansive
than the warranties extended by Seller prior to the Closing Date), or (ii)
Product warranties or obligations implied or provided by applicable law
(together, the "Excluded Product Warranty Claims") with respect to any such
Products, the following shall apply and, pursuant thereto, the following shall
represent Buyer's sole recourse on account of a breach by Seller of the
representations set forth in Section 3.25.(a) unless occasioned by Fraud by
Seller:
(a) Buyer shall satisfy any such Excluded Product Warranty Claims in
the ordinary course of business in a manner consistent with Seller's past
practices; provided that Buyer shall keep Seller apprised of any such Excluded
Product Warranty Claims and its responses thereto and shall in any event permit
Seller at least fifteen (15) days following notice of any such Claim to respond
and settle such Claim without adverse effect on Buyer's relationship with such
customer (such that no such settlement shall be made by Seller without Buyer's
consent, which consent will not be unreasonably withheld), and
(b) Seller shall, within fifteen (15) days of presentment of a written
summary thereof, reimburse Buyer one hundred percent (100%) of the costs
incurred by Buyer in connection therewith to the extent in excess of Fifty
Thousand Dollars ($50,000); provided that Seller shall have no responsibility
hereunder on account of any such Excluded Product Warranty Claims caused solely
by any work performed by Buyer on
the underlying Products; and provided further that the Seller shall have no
responsibility to Buyer for any claims made hereunder beyond the Indemnity
Outside Date; and provided, further, that Seller shall have no liability under
this subparagraph (b) on account of any
32
Excluded Product Warranty Claims made by Roller Bearing Company of America or
any of its Affiliates.
ARTICLE VII.
INTENTIONALLY OMITTED
ARTICLE VIII.
INDEMNIFICATION
8.1. Indemnity by Seller.
(a) Seller hereby agrees to indemnify and to hold Buyer harmless from
and against any and all actual financial injuries, losses, expenses, fees,
penalties, demands, claims, actions, causes of action, judgments, assessments,
damages, obligations, liabilities and reasonable costs of every nature and
description (collectively, "Losses"), and shall pay Buyer on demand the full
amount of any such Losses relating to, arising out of, or resulting from (i) any
inaccuracy in any representation, or the breach of any warranty, covenant or
other agreement, made by Seller in connection with this Agreement or any other
written agreement, document or certificate delivered in connection with the
Closing; (ii) any failure by Seller duly to perform or observe any term,
provision or covenant in this Agreement or any other written agreement, document
or certificate delivered in connection herewith; (iii) any of Seller's
obligations to its creditors for which Buyer may become responsible as a matter
of law by reason of the parties' failure to comply with the provisions of any
applicable bulk sales laws; (iv) any Excluded Liability; and (v) any Interim
Period Excluded Liability.
By way of further clarification of the foregoing subsections (iii),
(iv) and (v), this indemnification shall apply to all of Seller's liabilities or
obligations arising or relating to the period prior to the Effective Date that
are not expressly assumed by Buyer hereunder, whether or not known as of the
Effective Date, whether or not asserted prior to the Effective Date, whether or
not the circumstances giving rise to such indemnification continue following the
Effective Date, and whether or not Buyer would become liable for any such
matters by operation of law or otherwise.
(b) (i) Seller shall have no responsibility to Buyer with respect to
any single claim for indemnification pursuant to this Section 8.1 unless and
until the Losses in respect of such claim exceed Fifty Thousand Dollars
($50,000) (the "Indemnification Trigger Amount"); provided that, (A) for the
33
purposes of calculating the Indemnification Trigger Amount, claims associated
with related items shall be accumulated and treated as a single claim, (B) once
the Losses in respect of such claim exceed the Indemnification Trigger Amount,
Seller's indemnification obligations in respect of such claim shall apply to the
entire amount of such Losses (all Losses incurred in respect of claims for which
the Indemnification Trigger Amount is exceeded, including the first $50,000 of
Losses as to each such claim, being the "Trigger Losses") and (C) in determining
the amount of Losses in respect of any claim, the Materiality Threshold, if
applicable to the underlying claim, shall not be applied, i.e., the Seller shall
not under any circumstances be entitled to the benefits of both the Materiality
Threshold and the Indemnification Trigger Amount; and
(ii) Seller shall not be required to indemnify Buyer with respect to
any Losses claimed for indemnification pursuant to this Section 8.1 unless and
until the aggregate amount of all Trigger Losses exceeds One Hundred Thousand
Dollars ($100,000) and then to the extent it exceeds $100,000 and then only to
the extent of the Trigger Losses, at which ▇▇▇▇ ▇▇▇▇▇▇'▇ indemnification
obligations shall apply to all claims for which Buyer is entitled to
indemnification hereunder ^(but only if the Losses as to each claim exceed the
Indemnification Trigger Amount); provided, however, that notwithstanding (i) or
(ii) Seller shall be liable for all claims by Buyer, regardless of amount,
arising out of any of the following (the "Indemnity Limitation Exclusions") (A)
Fraud by Seller, or (B) a claim hereunder on account of (x) Transaction
Expenses, (y) Seller Payments or (z) Interim Period Excluded Liabilities in the
nature of Transaction Expenses or Seller Payments.
(c) Notwithstanding anything contained herein or elsewhere to the
contrary, the liability of the Seller pursuant to this Section 8.1 shall be
limited to Five Hundred Thousand Dollars ($500,000) (the "Seller Indemnity
Cap"); provided, however, that the Seller Indemnity Cap shall not apply to any
Loss arising in respect of any Indemnity Limitation Exclusions.
(d) In order to fund the satisfaction by Seller of any indemnification
claims for which it may become responsible hereunder, the ^ Buyer shall deposit
(out of the Purchase Price) the sum of Five Hundred Thousand Dollars ($500,000)
in escrow at the Closing with Valley American Bank pursuant to an escrow
agreement in the form attached hereto as Exhibit A. Such escrow amount shall be
deposited in an interest bearing account with interest payable to Seller.
(e) By their signatures to this Agreement, the Shareholders hereby
agree, severally (and not jointly), to be responsible for, and to indemnify
Buyer in respect of, any and all Losses incurred by the Buyer in respect of any
Indemnity Limitation Exclusions. Pursuant thereto, the liability of the
Shareholders
34
hereunder shall be shared among them pro rata to the percentages set forth on
Schedule 8.1.(e).
(f) Irrespective of any other clause in this Agreement, the Buyer's
sole recourse for a violation by Seller or Shareholders of any provision of this
Agreement (except for any violation of Article X which shall not be so limited)
shall be pursuant to this Paragraph 8.1.
8.2. Indemnity By Buyer. (a) Buyer hereby agrees to indemnify and to
hold Seller harmless from and against any and all Losses of any kind or nature
whatsoever, and shall pay Seller on demand the full amount of any such Losses
(as defined in Paragraph 8.1 above) relating to, arising out of or resulting
from (i) any inaccuracy in any representation, or the breach of any warranty,
covenant or other agreement made by Buyer in this Agreement; (ii) any failure by
Buyer duly to perform or observe any term, provision, covenant or agreement
hereof or contained herein to be performed or observed by Buyer, including,
without limitation, any failure by Buyer to satisfy the Assumed Liabilities
after the Effective Date; (iii) any matter or thing relating to the conduct of
Buyer's business after the Effective Date, except for any event, transaction,
condition, occurrence or situation arising out of, relating to, or resulting or
continuing from the period prior to the Effective Date, or for which Seller and
Shareholders are obligated to indemnify Buyer hereunder; and (iv) any of the
Assumed Liabilities.
(b) Buyer shall not be required to indemnify Seller with respect to any
Losses claimed for indemnification pursuant to this Section 8.2 unless and until
the aggregate amount of all Losses claimed against Buyer exceeds One Hundred
Thousand Dollars ($100,000); provided, however, that Buyer shall be liable for
all claims by Seller, regardless of amount, arising out of the Fraud of Buyer or
Buyer's failure to satisfy the Assumed Liabilities or the Interim Period Taxes.
8.3. Procedure for Satisfaction of Indemnity Claims. The obligations
and liabilities of each indemnifying party hereunder shall be subject to the
following terms and conditions:
(a) A party hereto who is responsible for indemnifying the other party
against any matter pursuant to this Agreement is referred to as the
"Indemnifying Party", and the other party claiming indemnity is referred to as
the "Indemnified Party." Any claim for indemnification made pursuant to this
Article VIII is sometimes referred to as an "Indemnity Claim."
(b) The Indemnified Party shall give prompt written notice to the
Indemnifying Party of any Indemnity Claim after learning of the existence
thereof; provided, however, that the
35
failure to provide such prompt notice shall in no event impair the rights of the
Indemnified Party or limit the obligations of the Indemnifying Party hereunder
except to the extent that such failure has a material adverse effect on the
ability of the Indemnifying Party adequately to defend such claim. In the event
of a claim brought by a third party (a "Third Party Claim") which might give
rise to an Indemnity Claim by the Indemnified Party, such notice of the
Indemnity Claim shall state the nature and basis of said Indemnity Claim and the
amount thereof, to the extent known. In the event of any other Indemnity Claim,
including one for an alleged breach or misrepresentation hereunder, such notice
shall state the nature and basis thereof, the amount of the asserted damages,
and the method by which such alleged damages were calculated; provided, however,
that the Indemnified Party shall in all events have the right subsequently to
revise the basis for such Indemnity Claim and the amount of damages asserted as
well as the method by which such damages are calculated.
(c) In the event of a Third Party Claim:
(i) Provided that the Indemnifying Party (1) first irrevocably
admits in writing to the Indemnified Party that such claim is one in
respect of which the Indemnifying Party is obligated to indemnify the
Indemnified Party hereunder, and (2) has adequately evidenced to the
Indemnified Party its ability to satisfy such claim, the Indemnifying
Party shall be entitled to contest and to assume the defense of the
claim at the Indemnifying Party's expense, and further provided that it
utilizes reputable counsel reasonably satisfactory to the Indemnified
Party. Should the Indemnifying Party give notice to the Indemnified
Party of the Indemnifying Party's election to assume the contest or
defense as aforesaid, then the Indemnifying Party shall be obligated
promptly to defend such claim. The Indemnified Party shall, at the
Indemnifying Party's expense, make available to the Indemnifying Party
and its attorneys, accountants or other duly designated agents all
books and records of the Indemnified Party relating to any such action,
suit or proceeding, and the parties hereto agree to render to each
other such assistance (at the expense of the Indemnifying Party) as
they may reasonably require of each other in order to ensure the proper
and adequate contest or defense of any such action, suit or proceeding.
The Indemnified Party shall be entitled, with counsel selected by the
Indemnified Party, to participate in (but not to control), at its own
expense, the defense of any claim or litigation which the Indemnifying
Party has, in accordance with the provisions of this subsection (i),
elected to defend, and to be kept fully informed of the
36
status thereof at all stages, including the right to receive, at the
Indemnifying Party's expense, copies of all pleadings and other
material papers in connection with such claim or litigation.
The Indemnifying Party shall not settle any Third Party Claim
without the consent of the Indemnified Party unless (1) the
Indemnifying Party fully indemnifies the Indemnified Party for all
Losses in connection with such settlement of such claim, (2) there
is no finding or admission of any violation of Law by the
Indemnified Party not agreeing to the settlement, and (3) the relief
granted in connection therewith requires no action on the part of,
and has no economic or other effect on, the Indemnified Party.
(ii) If the defense of a Third Party Claim is not assumed by
the Indemnifying Party as provided in subsection (i) above, then the
Indemnified Party may (to the extent that the Indemnified Party
determines to do so in its sole discretion) conduct any such proceeding
as it deems appropriate, and may take whatever action it deems
necessary or appropriate to resolve or settle such claim or dispute,
but shall in no event have any obligation to defend any such claim or
proceeding or to appeal any adverse finding or determination or to
defend the appeal by any other party to a favorable determination, it
being understood and agreed that any actions taken or omitted with
respect to the foregoing shall not avoid, reduce or mitigate the
Indemnifying Party's liability hereunder. The Indemnifying Party shall
nevertheless, at its own expense, make available to the Indemnified
Party and its attorneys and accountants all books and records of the
Indemnifying Party relating to such proceedings or litigation, and
shall render to the Indemnified Party such assistance as may be
reasonably requested by the Indemnified Party.
The Indemnifying Party shall be entitled, with counsel selected by it,
to participate in (but not to control), at its own expense, the defense of any
claim or litigation which the Indemnifying Party has not elected to defend in
accordance with the provisions of subsection (i) above.
The Indemnified Party shall not settle any Third Party Claim without
first giving notice of the proposed settlement to the Indemnifying Party (the
"Settlement Notice"). The Indemnifying Party shall have the right, exercisable
within three (3) Business Days following receipt of the Settlement Notice, to
instruct the Indemnified Party not so to settle such Third Party Claim, provided
that, in such event, the Indemnifying Party shall be required to
37
assume the defense of any such Third Party Claim subject to and in accordance
with the provisions and prerequisites of subsection (i) above (including those
set forth in the first sentence thereof); provided that the Indemnified Party
shall be entitled to settle such Third Party Claim regardless of the
instructions of the Indemnifying Party to the contrary if the Indemnifying Party
is unable or fails to satisfy the requirements set forth in clauses (1) and (2)
contained in the first sentence of subsection (i) above.
8.4. Satisfaction of Indemnity Claims. In the event Buyer shall assert
an Indemnity Claim pursuant to Section 8.1 hereof against Seller, Buyer may not
obtain satisfaction of any such claim by way of set-off against any amounts
owing by Buyer to Seller.
8.5. Survival of Representations and Warranties and Covenants.
The representations, warranties and covenants contained in this
Agreement shall survive as follows:
(a) Except as otherwise provided in Section 8.5.(b), (c) or
(d), all representations, warranties and covenants shall expire on the
first anniversary of the Closing Date (the "Indemnity Outside Date").
(b) Notwithstanding Section 8.5.(a), the representations,
warranties and covenants of Seller and Buyer as an Indemnifying Party
shall survive the Closing Date until the second anniversary of the
Closing with respect to any Fraud by Seller or Buyer, as the case may
be.
(c) Notwithstanding Section 8.5.(a), the representations,
warranties and covenants of Seller and the Shareholders set forth in
Sections 3.1, 3.2, 3.3 and 3.4 shall survive without expiration; and
the representations and warranties of Buyer set forth in Sections 4.1,
4.2, 4.3 and 4.4 shall survive without expiration.
(d) Notwithstanding Section 8.5.(a), the covenants of Seller
and Shareholders as set forth in Sections 5.1, 5.3, 5.4, 6.1, 6.2, 6.4
and 6.5 and Article X shall survive without limitations as to time.
Any cause of action for breach of a representation or warranty contained herein
shall expire and terminate unless the party claiming that such breach occurred
delivers to the other party written notice and a reasonably detailed explanation
of the alleged breach on or before 5:00 P.M., New York City time, on the date on
38
which such representation or warranty expires pursuant to this Section 8.5.
8.6. Interest. The Indemnifying Party, shall pay the Indemnified Party
interest at the per annum rate publicly announced from time to time by Citibank,
N.A. as its prime rate (or reference rate) in effect from time to time plus two
percent (2%), compounded quarterly, for any indemnifiable Loss from the date
such indemnifiable Loss was actually paid and notice given to Seller by the
Indemnified Party until paid in full by the Indemnifying Party (or otherwise
satisfied).
8.7. Payments. All sums payable by any party pursuant to this Article
VIII shall be paid free and clear of all deductions or withholdings, unless
otherwise required by law.
8.8. No Limitation. The representations, warranties and covenants of
Seller and the Shareholders contained in this Agreement shall not be limited in
any respect by or on account of (a) any facts and circumstances known or which
should have been known by Buyer or its agents, attorneys or other advisors as a
result of any due diligence investigations undertaken by Buyer on or before the
Closing or otherwise or (b) by any disclosure made by Seller to Buyer, except as
set forth on the Schedules hereto; provided that (i) the Buyer hereby represents
and warrants that to its Knowledge, there exist no violations by Seller of any
of the representations and warranties set forth in Article III above, and Buyer
shall have no recourse against Seller or the Shareholders for any violation of
any such representations and warranties of which it has Knowledge on the date
hereof; and (ii) Buyer hereby acknowledges and agrees that it has had a complete
opportunity to perform such due diligence respecting the Transferred Assets and
the Business as it deemed necessary and appropriate; and that, to Buyer's
Knowledge, the Seller has provided Buyer with full and unlimited access to all
information, facilities and personnel as may be necessary in order for Buyer to
perform such diligence.
ARTICLE IX.
INTENTIONALLY OMITTED
39
ARTICLE X.
NON-COMPETITION, NON-DISCLOSURE, NON-SOLICITATION
10.1. Non-Competition. For a period of five (5) years from the date
hereof (the "Restricted Period"), neither Seller nor any Shareholder shall
engage, directly or indirectly, in the Business. By way of further definition
and explanation of the foregoing, and without limiting the generality of the
foregoing restriction, during such Restricted Period, neither Seller nor any
Shareholder shall devote any time or attention to acquiring, managing,
operating, joining, controlling, participating or becoming financially
interested in, or being connected with (in any capacity, whether as a partner,
stockholder, investor, consultant, independent contractor, agent, representative
or otherwise), or providing any direct or indirect financial assistance to, any
person, corporation, firm, business, partnership, or other entity which is
engaged, directly or indirectly, in the Business. Nothing contained herein,
however, shall prohibit Seller or any Shareholder from acquiring and owning, for
investment purposes only, up to one percent (1%) of the outstanding equity
securities of an entity engaged in the Business if such equity securities of any
such entity are available to the general public on a national securities
exchange.
10.2. Non-Disclosure. Seller and each Shareholder hereby acknowledge,
covenant and agree that, from and after the date hereof and without regard to
time, it/he will hold any and all items constituting Business Secrets
communicated or transmitted to, or otherwise obtained by, it/him in strictest
confidence; and neither Seller nor any Shareholder shall, regardless of the
reason therefor, directly or indirectly make use of, exploit, disclose or
divulge any Business Secrets to any other person or entity (except to the extent
such information is required to be submitted to any federal, state or local
governmental agent or to any third party pursuant to subpoena or other court
process), or make any false statement or otherwise commit any act (including
contacting any customers of the Business) that could in any way be injurious or
detrimental to Buyer's use of the Transferred Assets, including without
limitation its image, business or customer relations.
For the purposes hereof, "Business Secrets" shall mean all information
and materials pertaining to Seller's Business or the Transferred Assets,
including, without limitation, customer information, Seller's business methods,
policies, procedures, techniques, sales and marketing strategies, financial
statements, sales and gross profit data, employee and independent contractor
rosters and profiles, pricing and cost data, contract information, know-how and
all other information relating to or dealing with the Business or the
Transferred Assets. Furthermore, the term Business Secrets shall apply to any of
the foregoing, whether or not in
40
written form and whether or not Seller has possession of such writings.
10.3. Non-Solicitation of Customers. During the Restricted Period,
neither Seller nor any Shareholder shall, on its/his own behalf, or for the
benefit of any other person or entity, for any reason, accept any business with
respect to the Business from, or interfere in any manner with the Buyer's
business relationship with, any present or former customer of the Business.
Without limiting the generality of the foregoing, neither Seller nor any
Shareholder shall solicit or induce, or attempt to solicit or induce, any
business with respect to the Business (directly or indirectly through any person
or entity) from any customer, regardless of the purpose. Furthermore, nothing
contained in this Section 10.3 shall be construed to infer that Seller or any
Shareholder is retaining any rights to or in respect of, any customer list, any
customer information or any other Business Secrets for direct or indirect use
after the expiration of the Restricted Period, it being understood that pursuant
to this Agreement Buyer is acquiring all of Seller's rights thereto without
limitation as to time or otherwise.
10.4. Non-Solicitation of Employees. During the Restricted Period,
neither Seller nor any Shareholder shall solicit or induce, or attempt to
solicit or induce (directly or indirectly through any person or entity), for
employment, any employee, agent, consultant or other representative of Buyer.
10.5. Obligation for Employees' Actions. Seller hereby assigns to Buyer
any cause of action or other claim that Seller may have against any present or
former employee, agent, representative or independent contractor where such
claim is based upon such Person's disclosure or use for his own benefit of any
Business Secrets, and Seller will, at Buyer's cost and expense, cooperate with
Buyer, as reasonably requested by Buyer, in the prosecution of such claim.
10.6. Remedies. Seller and each Shareholder acknowledge and agree that
the agreements and covenants contained in this Article X are of a unique and
valuable nature and may, if breached, result in irreparable damage to Buyer that
may not be readily susceptible to monetary valuation; and, accordingly, in the
event of the breach of any covenant or agreement contained in this Article X,
Buyer shall be entitled to seek and obtain injunctive or other equitable relief,
in addition to any other remedies provided by law or equity, in furtherance of
the enforcement thereof. In no event shall the amount or value of any
consideration paid or given by Buyer for the covenants and agreements contained
in this Article X, or otherwise in connection with this Agreement, be used to
determine the scope or extent of damages suffered by Buyer in
41
the event of a breach by Seller or any Shareholder of such covenants and
agreements.
10.7. ^ Intentionally Omitted.
10.8. Individual Liabilities. The Buyer hereby agrees that its recourse
against the Shareholders on account of a violation by any Shareholder of any
provisions of this Article X shall be individual in nature and any such recourse
shall be limited to the Shareholder committing such violation.
ARTICLE XI.
MISCELLANEOUS
11.1. Notices. Any notice, request, instruction or other communication
to be given hereunder by any party to another shall be given by hand delivery,
certified or registered mail (return receipt requested) or by overnight express
service, addressed to the respective party or parties at the following
addresses:
If to Seller or any Shareholder:
^ c/o ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
^ Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Attorney at Law
Suite 2601
One IBM Plaza
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer:
▇▇▇▇▇▇ Acquisition Corp.
c/o Roller Bearing Company of America, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
42
▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: C. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address or addresses as any party may designate to the others
by like notice as hereinabove set forth. Any notice given hereunder shall be
deemed given and received on the date of hand delivery, or three (3) days after
deposit with the United States Postal Service, or one (1) day after delivery to
an overnight express service for next day delivery, as the case may be.
11.2. Intentionally Omitted.
11.3. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if and
only if such amendment or waiver is in writing and signed, in the case of an
amendment, by all parties hereto, or in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent occurrence. No failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall 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 shall be cumulative and not exclusive of
any rights or remedies provided by law; provided, however, that damages shall be
subject to such limitations as are set forth herein.
11.4. Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
11.5. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. No party hereto may assign either this Agreement or any of
its rights, interests or obligations hereunder without the prior written
approval of each other party, except that Buyer may assign any and all of its
right, interests and obligations hereunder as security for obligations to its
lenders and except that Buyer may assign its rights under this
43
Agreement to an Affiliate; provided that Buyer shall not be released from any of
its obligations hereunder by reason of such assignment.
11.6. Governing Law. This Agreement shall be construed in accordance
with and governed by the internal laws (without reference to choice or conflict
of laws) of the State of Illinois.
11.7. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other parties hereto.
11.8. Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral between the parties with respect to the
subject matter of this Agreement. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
11.9. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.10. Severability. If any provision of this Agreement, or the
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the date
this Agreement was executed or last amended.
11.11. Construction.
(a) The language used in this Agreement will be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against either party. Any reference
to any Applicable Law shall be deemed also to refer to all rules and regulations
promulgated thereunder unless the context requires otherwise. Whenever
44
required by the context, any gender shall include any other gender, the singular
shall include the plural and the plural shall include the singular. The words
"herein," "hereof," "hereunder," and words of similar import refer to the
Agreement as a whole and not to a particular section. Whenever the word
"including" is used in this Agreement, it shall be deemed to mean "including
without limitation," "including, but not limited to" or other words of similar
import such that the items following the word "including" shall be deemed to be
a list by way of illustration only and shall not be deemed to be an exhaustive
list of applicable items in the context thereof.
(b) The parties hereto intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or covenant
relating to the same subject matter (regardless of the relative levels of
specificity) that the party has not breached shall not detract from or mitigate
the fact that the party is in breach of the first representation, warranty or
covenant.
11.12. Arbitration of Claims.
(a) Except as otherwise provided elsewhere in this Agreement, any
dispute or difference between or among the parties arising out of this Agreement
or the transactions contemplated hereby Indemnifying Party under Article VIII
which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided. Within ten (10) days of a demand for
arbitration, or within such other time period as the parties may agree the
Indemnitee and the Indemnifying Party shall each designate one arbitrator.
Within ten (10) Business Days after the appointment of the two arbitrators, the
two arbitrators shall designate a third arbitrator mutually acceptable to them
who has substantial professional experience with regard to corporate legal
matters. If the arbitrator chosen by the Indemnitee and the arbitrator chosen by
the Indemnifying Party fail to agree upon the third arbitrator within such ten
(10) Business Day period, the third arbitrator shall be appointed by the
American Arbitration Association as soon as practicable and shall be a certified
public accountant who is not affiliated with any party in interest to such
arbitration and who has substantial professional experience with regard to
corporate legal matters.
(b) The three arbitrators shall consider the dispute at issue in
Chicago, Illinois at a mutually agreed upon time within thirty (30) days (or
such longer period as may be acceptable to the Indemnitee and the Indemnifying
Party) of the designation of the arbitrators. The arbitrator shall not have the
authority to modify any term or provision of this Agreement. The arbitration
45
proceeding shall be held in accordance with the rules for commercial arbitration
of the American Arbitration Association in effect on the date of the initial
request by the Indemnitee or Indemnifying Party, as the case may be, that gave
rise to the dispute to be arbitrated (as such rules are modified by the terms of
this Agreement or may be further modified by mutual agreement of the Indemnitee
and Indemnifying Party or at the direction of the arbitrators) and shall include
an opportunity for the parties to conduct discovery in advance of the
proceeding, which discovery may be limited by rules established by the
arbitrators. Notwithstanding the foregoing, the Indemnitee and Indemnifying
Party agree that they will attempt and they intend that they and the arbitrators
should use their best efforts in that attempt, to conclude the arbitration
proceeding and have a final decision from the arbitrators within ninety (90)
days from the date of selection of the arbitrators; provided, however, that the
arbitrators shall be entitled to extend such 90-day period one or more times to
the extent necessary for such arbitrators to place a dollar value on any claim
that may be unliquidated. The arbitrators shall immediately deliver a written
decision with respect to the dispute to each of the parties, who shall promptly
act in accordance therewith. Each Indemnitee and Indemnifying Party to such
arbitration agrees that any decision of the arbitrators shall be final
conclusive and binding, absent fraud or manifest error, and that they will not
contest any action by any other party thereto in accordance with a decision of
the arbitrators, except if such factors are present. It is specifically
understood and agreed that any party may enforce any award rendered pursuant to
the arbitration provisions of this Section 11.12 by bringing suit in any court
of competent jurisdiction.
(c) All fees, costs and expenses (including attorneys' fees and
expenses) incurred by the party that prevails in any such arbitration commenced
pursuant to this Section 11.12 or any judicial action or proceeding seeking to
enforce the agreement to arbitrate disputes as set forth in this Section 11.12
or seeking to enforce any order or award of any arbitration commenced pursuant
to this Section 11.12 may be used against the party or parties that do not
prevail in such arbitration in such manner as the arbitrators or the court in
such judicial action, as the case may be, may determine to be appropriate under
the circumstances (but subject to such limitations as are set forth in Article
VIII hereof). All costs and expenses attributable to the arbitrators shall be
allocated among the parties to the arbitration in such manner as the arbitrators
shall determine to be appropriate under the circumstances.
11.13. Third Party Beneficiaries. No provision of this Agreement shall
create any third party beneficiary rights in any Person, including any employee
of Buyer or employee or former
46
employee of Seller or any Affiliate thereof (including any beneficiary or
dependent thereof).
47
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed by an authorized officer as of the day and year
first above written.
BUYER: SHAREHOLDERS:
▇▇▇▇▇▇ ACQUISITION CORP.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Seller:
▇▇▇▇▇▇ BEARING COMPANY, INC.
/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
▇▇▇▇ ▇▇▇▇▇▇
48
Schedules List
Schedule # Brief Description
---------- -----------------
1.2 Permitted Liens
2.1.(b) Equipment
2.2 Excluded Assets
2.3(iii) Assumed Liabilities
2.4.(e) Contingent Liabilities
2.4.(f) Liabilities due to indebtedness and
Capitalized Leases
2.4.(k) Liabilities under Contract
2.4.(l) Liabilities under Contract with, or
indebtedness to, Affiliates
2.9.(c) Indebtedness
2.10 Purchase Price Allocation
3.5.(a) Financial Statements
3.5.(c) Adjusted February 28 Balance Sheet
3.5.(d) Monthly Balance Sheets
2.1 Transferred Assets
3.6.(a) Real Property owned
3.6.(b) Third Party Rights to Real Property
3.7 Personal Property Leases or Licenses
3.8.(b) Transferred Assets in Disrepair
3.8.(d) Transferred Assets subject to Third
Party rights
3.9 Affiliates
3.11 Litigation
3.12 Contracts
3.13 Customers Terminating Relationships
3.14.(a) Permits
3.14.(b) Required Consents
3.15 Applicable Laws
3.16.(a) Employees
3.16.(b) Employment, Retainer, Consulting or
Service Agreements
3.17 Labor Organizations
3.18.(a) Employee Benefit Plans
3.19.(a) Intellectual Property
3.19.(b) Intellectual Property Infringements
3.21.(a) Disclosure of Business Secrets to
Others
3.21.(b) Non-Competition Agreements
3.23 Insurance
3.24 Receivables
3.25.(a) Product Warranties
3.25.(c) Product Liabilities
5.2.(a) Title Insurance
5.2.(b) Survey of Parcels of Real Estate
6.5.(c) Employees not Terminated
8.1.(e) Proportionate Liability of Shareholders
49