EXHIBIT 10.27
AGREEMENT OF SALE AND
PURCHASE OF STOCK
INDEX
1. Sale of Shares.....................................................................1
1.1 Sale of Shares............................................................1
2. Purchase Price.....................................................................1
2.1 Purchase Price Computation................................................1
2.2 Adjustments to Purchase Price.............................................2
2.3 Date of Closing...........................................................3
3. Representations and Warranties of Sellers, ▇▇▇▇▇▇▇▇▇ and the Company...............4
3.1 Organization and Authority; Valid and Binding Agreement...................4
3.2 Capital Structure; List of Shareholders...................................4
3.3 Subsidiaries and Affiliates...............................................5
3.4 Non-Contravention.........................................................5
3.5 Consents and Approvals....................................................5
3.6 Financial Statements......................................................5
3.7 Events Subsequent to Most Recent Fiscal Year End..........................6
3.8 Liabilities...............................................................7
3.9 Legal Compliance..........................................................8
3.10 Litigation................................................................8
3.11 Contracts.................................................................8
3.12 Tax Matters...............................................................8
3.13 Intellectual Property.....................................................9
3.14 Real Property............................................................11
3.15 Tangible Assets..........................................................12
3.16 Accounts Receivable......................................................12
3.17 Inventory................................................................12
3.18 Employees................................................................12
3.19 Insurance................................................................13
3.20 Environmental Matters....................................................13
3.21 Labor Relations; Compliance..............................................16
3.22 Employee Benefits........................................................16
3.23 Brokerage................................................................19
3.24 Permits..................................................................19
3.25 Bank Accounts and Powers of Attorney.....................................19
3.26 Computer Hardware and Software; Embedded Controls........................19
3.27 Reliance.................................................................21
3.28 No Misrepresentation.....................................................21
4. Representations and Warranties of Purchaser.......................................21
4.1 Organization and Authority; Valid and Binding Agreement..................22
4.2 Non-Contravention........................................................22
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4.3 Consents and Approvals...................................................22
4.4 No Violation.............................................................23
4.5 Adequate Resources.......................................................23
4.6 Brokerage................................................................23
4.7 Reliance.................................................................23
4.8 No Misrepresentation.....................................................23
5. Action to be Taken by the Parties Prior to the Date of Closing....................23
5.1 Best Efforts.............................................................23
5.2 Notices and Consents.....................................................23
5.3 The Company's Records and Operations.....................................23
5.4 Preserve Accuracy of Representations and Warranties......................24
5.5 Conduct of Business......................................................24
5.6 Public Announcements.....................................................25
6. Additional Agreements of the Parties..............................................25
6.1 Confidentiality..........................................................25
6.2 HSR Act..................................................................26
6.3 Transaction Expenses.....................................................27
6.4 Exclusive Dealing........................................................27
6.5 Deposited Funds..........................................................28
7. Conditions Precedent to Obligations of the Parties................................29
7.1 Conditions Precedent to Obligations of Purchaser.........................29
7.2 Conditions Precedent to Obligations of the Company and Sellers...........32
8. Tax Matters. .....................................................................33
8.1 Allocation of Liability of Taxes.........................................33
8.2 Preparation and Filing of Tax Returns....................................34
8.3 Tax Controversies, Assistance and Cooperation............................34
8.4 Section 338(h)(10) Election..............................................35
8.5 Tax Filings..............................................................35
9. Indemnification...................................................................36
9.1 Survival of Representations and Warranties...............................36
9.2 Indemnification Obligation of the Parties................................36
9.3 Contractual Statute of Limitations; No Tolling; Claims Procedure.........38
9.4 Matters Involving Third Parties..........................................38
9.5 Basket Amounts...........................................................39
9.6 Post Closing Indemnification.............................................40
9.7 Losses Net of Insurance..................................................40
9.8 Treatment of Indemnification Payments....................................40
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10. Environmental Matters.............................................................40
10.1 Environmental Indemnification............................................40
10.2 Written Notice and Limitations...........................................41
10.3 Control..................................................................41
10.4 Other....................................................................41
11. Termination of Agreement..........................................................42
11.1 Termination of Agreement.................................................42
11.2 Effect of Termination....................................................42
12. Miscellaneous.....................................................................43
12.1 Notices..................................................................43
12.2 Governing Law, Jurisdiction and Forum Selection..........................43
12.3 Further Assurances.......................................................44
12.4 No Waiver of Remedies....................................................44
12.5 Entire Agreement.........................................................44
12.6 Amendment................................................................44
12.7 Assignment, Successors and No Third-Party Rights.........................44
12.8 Severability.............................................................45
12.9 Section Headings, Construction...........................................45
12.10 Counterparts.............................................................45
12.11 Exhibits and Schedules...................................................45
12.12 Bulk Sales...............................................................45
12.13 Defined Terms............................................................45
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AGREEMENT OF SALE AND
PURCHASE OF STOCK
THIS AGREEMENT, made this 31st day of March, 2000 (the "Date of
Closing"), between ACR Industries, Inc., a Michigan corporation ("Company"),
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee under Revocable Living Trust Agreement of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ dated March 8, 1989, as amended ("▇▇▇▇▇▇▇▇▇ Trust"), ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, Trustee under ACR Stock Trust Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ dated March 27, 1989, as amended ("ACR Stock Trust") (the
▇▇▇▇▇▇▇▇▇ Trust and the ACR Stock Trust are hereinafter collectively referred to
as "Sellers"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, an individual residing in the State of
California ("▇▇▇▇▇▇▇▇▇"), and Triumph Group Acquisition Corp., a Delaware
corporation ("Purchaser").
WITNESSETH:
WHEREAS, the Company is engaged in the business of manufacturing,
assembling, and supplying gears, gear boxes, transmissions and geared systems to
the aerospace industry; and
WHEREAS, Sellers, together with the shareholders joining in the
execution of this Agreement and who are identified on Schedule 3.2 (a "Joining
Shareholder" and, collectively, the "Joining Shareholders"), own one hundred
(100%) percent of the issued and outstanding capital stock of the Company; and
WHEREAS, Sellers and the Joining Shareholders desire to sell to
Purchaser, and Purchaser desires to purchase from Sellers and the Joining
Shareholders all of the issued and outstanding capital stock of the Company
pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, IT IS AGREED:
1. SALE OF SHARES.
1.1 SALE OF SHARES. On the Date of Closing, as defined herein,
and subject to the terms and conditions of this Agreement and in reliance upon
the representations and warranties contained in this Agreement, Sellers and the
Joining Shareholders agree to sell, transfer, assign and deliver to Purchaser,
and Purchaser agrees to purchase from Sellers and the Joining Shareholders, all
rights, title and interest in and to one hundred (100%) percent of the issued
and outstanding capital stock of the Company ("Shares").
2. PURCHASE PRICE.
2.1 PURCHASE PRICE COMPUTATION. The aggregate total purchase
price payable by Purchaser to Sellers and the Joining Shareholders for the
Shares shall be Forty-Nine Million and 00/100 Dollars ($49,000,000.00) subject
to adjustment as provided in Section 2.2 ("Purchase Price") payable as follows:
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2.1.1 Cash in the amount of Forty-Six Million and 00/100
Dollars ($46,000,000.00) shall be paid by Purchaser to Sellers and the Joining
Shareholders in accordance with Schedule 2.1.1) on the Date of Closing, subject
to adjustment as set forth in Section 2.2 ("Closing Cash"), which Closing Cash
will be disbursed in the manner set forth in Schedule 2.1.1;
2.1.2 One Million and 00/100 Dollars ($1,000,000.00) of the
Purchase Price shall be held back and retained by Purchaser for a period of
twelve (12) months from the Date of Closing ("Hold Back Amount") subject to the
terms and conditions set forth in Section 9.2.2; and
2.1.3 The balance of the Purchase Price, I.E. Two Million and
00/100 Dollars ($2,000,000.00), shall be paid in two (2) equal annual
installments of One Million and 00/100 Dollars ($1,000,000.00) each with the
first such payment, together with all accrued interest thereon, due on the
second anniversary of the Date of Closing and the second installment, together
with all accrued interest thereon, shall be paid on the third anniversary of the
Date of Closing. The balance of the Purchase Price described in this Section
2.1.3, shall be paid with interest at the rate of seven (7%) percent per annum
and shall be evidenced by the Promissory Note of the Purchaser executed and
delivered to the Sellers at closing in the same form as Schedule 2.1.3.
2.2 ADJUSTMENTS TO PURCHASE PRICE. The Purchase Price described in
Section 2.1 hereof shall be subject to adjustment in accordance with the
following:
2.2.1 Sellers shall cause to be prepared and delivered to
Purchaser at least three (3) business days prior to the Date of Closing, an
estimate as of the Date of Closing of the balance sheet of the Company
("Estimated Closing Balance Sheet") prepared on a basis consistent with the form
and content of the balance sheet dated September 30, 1999 attached hereto as
Schedule 2.2.1 (the "Bid Balance Sheet") and in accordance with generally
accepted accounting principles consistently applied ("GAAP"). The Closing Cash
portion of the Purchase Price described in Section 2.1.1 shall be decreased by
one dollar for each dollar that the Net Operating Assets (calculated in the same
manner as the Net Operating Assets were determined to be $14,016,168 in the Bid
Balance Sheet) as set forth on the Estimated Closing Balance Sheet are less than
the Net Operating Assets as set forth on the Bid Balance Sheet and shall be
increased by one dollar for each dollar that such computation of the Net
Operating Assets as set forth on the Estimated Closing Balance Sheet is greater
than as set forth on the Bid Balance Sheet.
2.2.2 Within ninety (90) days of the Date of Closing,
Purchaser shall deliver to the Sellers an estimate as of the Date of Closing of
the balance sheet of the Company prepared on a basis consistent with the form
and content of the Bid Balance Sheet and in accordance with GAAP (the "Final
Closing Balance Sheet") and a calculation of the Final Net Operating Assets. The
Closing Cash paid at closing in accordance with Section 2.1.1 shall then be
further decreased by one dollar for each dollar that the Final Net Operating
Assets are less than the Net Operating Assets as set forth on the Estimated
Closing Balance Sheet and shall be further increased by one dollar for each
dollar that the Final Net Operating Assets are greater than the Net Operating
Assets as set forth on the Estimated Closing Balance Sheet.
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2.2.3 In the event that Sellers dispute the calculation of the
Final Net Operating Assets, Sellers shall notify Purchaser in writing of such
dispute and the basis therefor within ten (10) days of Sellers' receipt of the
Final Closing Balance Sheet and the parties shall attempt to resolve such
dispute within the thirty (30) days succeeding the date of such notice. In the
event the parties are unable to resolve such dispute within such period, Sellers
shall submit their position in writing and the parties shall (i) retain as
arbitrator from such independent accounting firm as may be mutually agreed upon
by Purchaser and Sellers to review such matters; and (ii) request such
arbitrator to act as promptly as practicable in accordance with rules to be
established by Purchaser, the Sellers and such arbitrator to resolve all such
disputed matters. The parties shall be required to make payment as described in
Section 2.2.4 below of any amounts not disputed at the time of or prior to
commencement of any arbitration; provided, however, the obligation of the
parties to pay any amount disputed shall be deferred pending receipt of the
arbitrator's decision with respect to such disputed amount. The decision of the
arbitrator shall be issued in writing to Purchaser and Sellers and the Final
Closing Balance Sheet shall be deemed adjusted to reflect the arbitrator's
decision. The arbitrator's decision shall be final, non-appealable and binding
on Purchaser and Sellers, and the fees and expenses of the arbitrator shall be
paid one-half by Purchaser and one-half by Sellers. If the arbitrator determines
that the Net Operating Assets as of the Date of Closing are different than the
amount set forth on the Estimated Closing Balance Sheet, Purchaser or Sellers,
as the case may be, shall pay any such difference within ten (10) days after
receipt of the arbitrator's determination.
2.2.4 In the event Purchaser is required pursuant to either
Section 2.2.2 or Section 2.2.3 above to pay any sum to Sellers, such sum shall
be paid in cash within, as applicable, ten (10) days following Sellers' receipt
of the Final Closing Balance Sheet or ten (10) days following the arbitrator's
decision, as the case may be, by wire transfer of immediately available funds of
each Sellers' and the Joining Shareholders' Pro Rata Share of such sum to each
Sellers' and the Joining Shareholders' bank account designated by each such
Seller and the Joining Shareholder. In the event Sellers and the Joining
Shareholders are required pursuant to either Section 2.2.2 or Section 2.2.3
above to pay any sum to Purchaser, Sellers shall pay such sum within ten (10)
days following the later of Sellers' receipt of the Final Closing Balance Sheet
or the arbitrator's decision, as the case may be, by wire transfer of
immediately available funds to Purchaser's bank account as designated by notice
to Sellers at the time of delivery of the Final Closing Balance Sheet; provided,
however, that if Purchaser does not receive such amount or any portion thereof
within such ten (10) day period, Purchaser shall be entitled to withdraw such
unpaid amount from the Holdback Amount and to setoff against the Promissory Note
described in Section 2.1.3.
2.3 DATE OF CLOSING. The closing of the transactions contemplated by
the terms of this Agreement ("Closing") shall be held at the offices of Sellers'
attorneys, Kotz, Sangster, ▇▇▇▇▇▇▇ & ▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at 9:00 a.m., EST, on March 31, 2000 ("Date of
Closing"). On the business day immediately preceding the Date of Closing,
Purchaser and Sellers may conduct a pre-closing at the same location as the
Closing, commencing at 9:00 a.m., EST (or on such other date or time as agreed
between the parties) ("Pre- Closing"), at which Pre-Closing each party shall
present for review by the other party copies in execution form of all documents
required to be delivered by such party at the Closing.
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS, ▇▇▇▇▇▇▇▇▇ AND THE
COMPANY. Sellers, ▇▇▇▇▇▇▇▇▇ and the Company, jointly and severally, in all
material respects represent and warrant to Purchaser that the statements
contained in this Section 3 are true, correct and complete as of the date of
this Agreement and will be true, correct and complete as of the Date of Closing
(as though made then and as though the Date of Closing were substituted for the
date of this Agreement throughout this Section 3), except as otherwise disclosed
in the Schedules accompanying this Agreement and initialed by the parties. If
any matter or circumstance is covered by more than one representation and
warranty, only the matter specified shall apply, and those which are more
general shall not apply to such matter or circumstance:
3.1 ORGANIZATION AND AUTHORITY; VALID AND BINDING AGREEMENT.
3.1.1 The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Michigan
with full corporate power and authority to conduct its business as presently
conducted, and to own, lease and operate its assets now owned, leased or used by
it. The Company is duly qualified and in good standing in each jurisdiction
disclosed in Schedule 3.1.1., which are the only jurisdictions in which such
qualification is required by law and in which the failure so to qualify would
have a material adverse effect on the properties, business, prospects, results
of operations and financial condition of the Company ("Material Adverse
Effect").
3.1.2 The Company and Sellers have full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform their obligations hereunder. Without limiting the
generality of the foregoing, the Company's board of directors and shareholders
have duly authorized the execution, delivery and performance of this Agreement
by the Company.
3.1.3 This Agreement is, and each other agreement or
instrument of the Company contemplated hereby, when executed and delivered by
the Company in accordance with the terms thereof, will be the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms subject to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting creditors' rights generally, from time to
time in effect, and to general principles of equity.
3.2 CAPITAL STRUCTURE; LIST OF SHAREHOLDERS. The capital stock
of the Company consists of thirty thousand (30,000) shares of duly authorized
shares of One and 00/100 ($1.00) Dollar per share par value Class A Voting
common stock, sixty thousand (60,000) shares of duly authorized shares of One
and 00/100 ($1.00) Dollar per share par value Class B Non-Voting common stock,
of which nine hundred fifty-five (955) shares of Class A Voting common stock and
eight thousand five hundred ninety-two (8,592) shares of Class B Non-Voting
common stock are issued and outstanding. Except as otherwise set forth in
Schedule 3.2, there are no (i) outstanding securities of the Company or any
other entity which are convertible into or exchangeable for shares or other
securities of the Company; (ii) written or oral agreements, subscriptions,
options, warrants, calls, commitments, trusts (voting or otherwise) or rights of
any kind whatsoever granting to any
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person or entity, including but not limited to the parties hereto, any interest
in or the right to purchase or otherwise acquire from the Company or any other
entity, at any time or upon the happening of any event, any shares of the
Company, whether or not presently issued and outstanding; or (iii) any proxies,
agreements, or understandings with respect to the voting of the capital stock of
the Company. Attached hereto as Schedule 3.2 is a list of the shareholders of
the Company as of the date of this Agreement. Each of the shareholders owns the
number of shares set forth opposite their respective names on Schedule 3.2
Except as otherwise disclosed in Schedule 3.2, all of the issued and outstanding
shares of the capital stock of the Company are validly issued, fully paid,
non-assessable and are free and clear of all Claims, as defined herein, and
preemptive rights of any kind.
3.3 SUBSIDIARIES AND AFFILIATES. The Company does not own any
interest in or control any corporation, partnership, joint venture or other
business association or venture.
3.4 NON-CONTRAVENTION. Except as otherwise disclosed in
Schedule 3.4 attached hereto, the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not result in a
breach of any of the terms and provisions of, or will not constitute a default
under, or conflict with, (i) the Company's articles of incorporation or bylaws;
(ii) any judgment, decree, order or award of any court or tribunal in any
jurisdiction or any Governmental Authority or arbitrator against Sellers; or
(iii) any statute or law or any judgment, order, decree, rule or regulation of
any court of Governmental Authority or arbitrator ("Applicable Law") to which
Sellers are subject to or by which any of the Shares may be bound or affected.
In addition, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, (x) will conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Sellers are a party or by which Sellers are bound
or to which any of the Shares are subject or (y) result in the creation or
imposition of (or the obligation to create or impose) any Claim on any of the
Shares or assets of the Company.
3.5 CONSENTS AND APPROVALS. Except as otherwise disclosed in
Schedule 3.5 attached hereto, the consummation of the transactions contemplated
by the terms of this Agreement and the performance by Sellers and the Company of
this Agreement in accordance with its terms will not require notice to, or the
consent or approval of, any governmental or other regulatory authority or other
person, except for consents required under contracts to which the Company is a
party as disclosed in Schedule 3.5 or regulatory approvals or notices required
where the failure to obtain such consent or give such notice would not have a
Material Adverse Effect or affect the validity of the transfer of the Shares
pursuant to the terms of this Agreement.
3.6 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.6 is
(i) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇ audited balance sheets of the Company, and the related
statements of Shareholders equity, operations and cash flows of the Company for
the fiscal year ended March 31, 1999 ("1999 Financial Statement") and (ii) the
December 31, 1999 management-prepared interim unaudited balance sheet and income
statement for the Company (prepared on a basis consistent with the prior year's
unaudited statements), together with the notes thereto (such Schedule 3.6 items
hereinafter
5
collectively referred to as the "Financial Schedules"). The Financial Schedules
have been derived from the accounting books and records (which books and records
are correct and complete) of the Company and present fairly and accurately the
financial position and the results of operations of the Company on the basis
described in the notes thereto for the respective periods covered thereby. The
Financial Schedules (including the notes thereto) have, in each case, been
prepared in accordance with GAAP, in effect from time to time, applied on a
consistent basis throughout the periods covered thereby, or in the case of
unaudited statements, consistent with the prior year's statements, except as
otherwise provided in the Financial Schedules or Schedule 3.6. The Financial
Schedules are true, complete and correct in all material respects as of the
dates and for the periods indicated therein.
3.7 EVENTS SUBSEQUENT TO MOST RECENT FISCAL YEAR END. Except
as otherwise provided in this Agreement or disclosed in Schedule 3.7 attached
hereto, since the 1999 Financial Statement Date, the Company's business has been
conducted in the ordinary course consistent with past practices and there has
not been any material adverse change in the business, financial condition or
operations of the Company. Without limiting the generality of the foregoing,
since the 1999 Financial Statement Date:
3.7.1 The Company has not sold, leased, transferred,
or assigned any of the Company's assets, tangible or intangible, other than for
fair consideration in the ordinary course of the Company's business;
3.7.2 The Company has not entered into any material
agreement, contract, lease or license outside the ordinary course of the
Company's business;
3.7.3 The Company has not made any material capital
expenditure outside the ordinary course of the Company's business;
3.7.4 The Company has not issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligations outside the
ordinary course of the Company's business;
3.7.5 The Company has not delayed or postponed the
payment of accounts payable and other liabilities outside the ordinary course of
the Company's business;
3.7.6 The Company has not canceled, compromised,
waived, or released any right or claim outside the ordinary course of the
Company's business;
3.7.7 The Company has not granted any license or
sublicense to any Intellectual Property rights, as defined herein;
3.7.8 There has been no change made or authorized in
the articles of incorporation or bylaws of the Company;
6
3.7.9 The Company has not declared or set aside any
unpaid dividends (whether in cash or in stock);
3.7.10 The Company has not made any loan to, or
entered into any other transaction with, any of the Company's directors,
officers, and employees outside the ordinary course of the Company's business;
3.7.11 The Company has not granted any increase in
the base compensation of any of the Company's directors, officers, or employees
outside the ordinary course of the Company's business;
3.7.12 The Company has not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of the Company's
directors, officers, or employees;
3.7.13 The Company has not made any material change
in the employment terms of any of the Company's directors, officers, or
employees outside the ordinary course of the Company's business;
3.7.14 The Company has not suffered or incurred any
damage, destruction or loss (whether or not covered by insurance) which would
have a Material Adverse Effect;
3.7.15 The Company has not entered into or amended,
or agreed to enter into or amend, any other contract or other agreement or other
transaction material to the operations, prospects or financial condition of the
Company outside of the ordinary course of the Company's business;
3.7.16 The Company has not terminated, or agreed to
terminate, or failed to renew any contract or other agreement that has or could
reasonably be expected to have a Material Adverse Effect outside of the ordinary
course of the Company's business;
3.7.17 There has been no change in the accounting
methods used by the Company; and
3.7.18 There has been no agreement, whether oral or
written, by the Company to do any of the foregoing.
3.8 LIABILITIES. As of the 1999 Financial Statement Date, the
Company had no material direct or indirect indebtedness, liability, claim, loss,
damage, deficiency, obligation or responsibility, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise ("Liabilities") that were not fully or adequately
reflected or reserved against on the 1999 Financial Statement or described on
any Schedule except for liabilities incurred in the ordinary course of business
since the 1999 Financial Statement Date, none of which are material to the
Company and, as of the Date of Closing, the Company shall have no
7
Liabilities not reflected on the Final Closing Balance Sheet. Sellers and
▇▇▇▇▇▇▇▇▇ have no Knowledge of any circumstance, condition, event or arrangement
that may be reasonably expected to give rise hereafter to any Liabilities of the
Company except in the ordinary course of business of a nature and amount
consistent with past practices or as otherwise disclosed in Schedule 3.8
attached hereto.
3.9 LEGAL COMPLIANCE. Except as otherwise disclosed in any
Schedules attached hereto and to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, the Company
has complied with all applicable laws of Governmental Authority, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand or
notice has been filed or commenced against the Company alleging any failure to
comply.
3.10 LITIGATION. Except as otherwise disclosed in Schedule
3.10 attached hereto, there are no actions, suits, arbitrations, proceedings,
hearings, investigations, charges, complaints, claims, demands or notices
pending against nor, to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, threatened against,
the Company. Except as otherwise disclosed in Schedule 3.10, neither Sellers nor
the Company are in default with respect to any order, writ, injunction, decree
or demand of any Governmental Authority or arbitrator relating to the Company or
the Shares.
3.11 CONTRACTS. Schedule 3.11, attached hereto, correctly sets
forth all material contracts which the Company is a party, including all
amendments, modifications and waivers ("Contracts"). The copies of the Contracts
(including all amendments, modifications and waivers) previously delivered to
Purchaser are complete and correct. Each of the Contracts (including all
amendments, modifications and waivers) (i) is in full force and effect to the
extent of its terms without any amendment, modification or waiver not reflected
in the Contracts previously delivered to Purchaser, (ii) neither the Company,
nor to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, any third-party to such Contract is,
in default under any Contract where the breach or default would have a Material
Adverse Effect, (iii) the Company has not received any written notice of a
breach or default which would have a Material Adverse Effect, and (iv) to
Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, there is no reasonable basis for any claim
against the Company with respect to any Contract.
3.12 TAX MATTERS.
3.12.1 DEFINITIONS.
(i) "Tax" means any federal, state, local or
foreign income, gross receipts, licenses, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security
(including any social security charge or premium), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
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(ii) "Tax Return" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
3.12.2 REPRESENTATIONS AND WARRANTIES.
(i) The Company filed all Tax Returns that
it was required to file and as of the Date of Closing will have filed all Tax
Returns required to be filed on or prior to such date. All such Tax Returns were
and as of the Date of Closing will be correct and complete in all respects. All
Taxes due and payable by the Company (whether or not shown on any Tax Return)
have been paid and as of the Date of Closing will be paid. No claim has ever
been made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There are
no Claims on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(iii) There is no dispute or claim
concerning any Tax Liabilities of the Company either (x) claimed or raised by
any authority in writing or (y) as to which Sellers, ▇▇▇▇▇▇▇▇▇ or the Company
have knowledge based upon personal contact with any agent of such authority.
Attached hereto as Schedule 3.12 is a list of all federal, state, local, and
foreign income Tax Returns filed with respect to the Company that have been
audited, and it indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Purchaser correct and complete copies of all
federal income Tax Returns filed by the Company since fiscal year end 1995.
(iv) The Company: (w) has not waived any
statute of limitations with respect to Taxes or agreed to any extension of time
with respect to any assessment or deficiency of Tax; (x) is eligible to make a
Section 338 (h)(10) election for Federal and state Tax purposes; and (y) has
validly elected to be treated as an S Corporation and said election has not been
terminated, both for Federal and state Tax purposes; and (z) such election was
filed more than ten years prior to the date of this Agreement.
3.13 INTELLECTUAL PROPERTY.
3.13.1 Each patent, invention, disclosure, registered
trademark, trade name, registered copyright and registered service ▇▇▇▇, and any
patent application or applications for registration of the foregoing, and any
goodwill associated therewith, licensed third-party technology or know-how, and
trade secrets and know-how ("Intellectual Property") which are owned or used by
the Company immediately prior to the Date of Closing will be owned or available
for use by the Purchaser on identical terms and conditions immediately
subsequent to the Date of Closing.
9
3.13.2 The Company has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any rights of third
parties to any patents, copyrights, trademarks, trade names or service marks
and, the Company has not received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation or
violation.
3.13.3 Attached hereto as Schedule 3.13 is a list
which identifies each patent or registration which has been issued to the
Company with respect to any of its Intellectual Property, identifies each
pending patent application or application for registration which the Company has
made with respect to any proposed Intellectual Property, and identifies each
license, agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property (together with any
exceptions). The Company has delivered to Purchaser correct and complete copies
of all such patents, registrations, applications, licenses, agreements, and
permissions. With respect to each item of Intellectual Property required to be
identified on Schedule 3.13:
(i) Except as otherwise disclosed in
Schedule 3.13, the Company possesses all right, title and interest in and to the
Intellectual Property, free and clear of any Claim;
(ii) The Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree or ruling of any
Governmental Authority or arbitrator;
(iii) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to Sellers' or
▇▇▇▇▇▇▇▇▇'▇ Knowledge, is threatened which challenges the legality, validity,
enforceability, use or ownership of the Intellectual Property; and
(iv) The Company has not agreed to indemnify
any person for or against any interference, infringement, misappropriation, or
other conflict with respect to the Intellectual Property.
3.13.4 Attached hereto as Schedule 3.13 is a list
which identifies each item of Intellectual Property that any third party owns
and the Company uses pursuant to license, sublicense, agreement, or permission.
The Company has delivered to Purchaser correct and complete copies of all such
licenses, sublicenses, agreements, and permissions. With respect to each such
item of Intellectual Property required to be identified on Schedule 3.13:
(i) The license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(ii) The license, sublicense, agreement or
permission will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
10
(iii) To Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge,
no party to the license, sublicense, agreement, or permission is in breach or
default and no event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) To Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge,
no party to the license, sublicense, agreement or permission has repudiated any
provision thereof;
(v) To Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge,
the underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge or any Governmental
Authority or arbitrator; and
(vi) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to Sellers' or
▇▇▇▇▇▇▇▇▇'▇ Knowledge, is threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual Property.
3.14 REAL PROPERTY. The Company does not own any real property
used or held for use in connection with its business. Attached hereto as
Schedule 3.14 is a true, correct and complete list of all leases, subleases,
licenses and other agreements, including all amendments, modifications and
waivers ("Real Property Leases"), under which the Company uses or occupies or
has the right to use or occupy, now or in the future, any real property used in
its business (the land, buildings and improvements covered by such Real Property
Leases being referred to herein as the "Leased Real Property"). Sellers have
heretofore delivered or made available to Purchaser true and complete copies of
all of the Real Property Leases. Each of the Real Property Leases is in full
force and effect, all rents and other sums payable by the Company as tenant
thereunder and due prior to the date hereof have been paid and the Company is
not in breach or default thereunder which would have a Material Adverse Effect.
No termination event or condition or uncured default on the part of the Company
exists under any Real Property Lease; and, to Sellers' Knowledge, no event has
occurred and no condition exists which, with the giving of notice or the lapse
of time or both, would constitute such a breach or default which would have a
Material Adverse Effect or termination event or condition. The Company has not
received any written notice from its landlord or any third party relating to any
Real Property Lease or the Leased Real Property which is not disclosed on
Schedule 3.14. All of the land, buildings, structures, plants, facilities and
other improvements used in the manufacturing operations of the Company's
business are included in or on the Leased Real Property. Except as otherwise
disclosed in Schedule 3.14, the Leased Real Property (including all electrical,
mechanical and sewer installations) complies in all material respects with
applicable building, zoning and other similar laws, codes, ordinances, rules,
regulations and orders of Governmental Authorities. Sellers and ▇▇▇▇▇▇▇▇▇ have
no knowledge of any pending or anticipated change in any real property law which
would have a Material Adverse Effect upon the use, occupancy or operation of the
Leased Real Property or any part thereof. No dispute which would have a Material
Adverse Effect currently exists between the Company and any applicable
Governmental Authority with respect to the application of any real property law
to the Leased Real Property. To Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, no portion of
the Leased Real Property has suffered any material damage by fire or other
casualty which has not been heretofore completely repaired and restored to its
11
original condition. No portion of the Leased Real Property is located in a
special flood hazard area as designated by federal Governmental Authorities. The
Leased Real Property is supplied with utilities which are adequate to operate
the Company's business as currently conducted.
3.15 TANGIBLE ASSETS. The Company has good and valid title to
all of the tangible assets reflected in the 1999 Financial Statement, except
those sold or otherwise disposed of since the 1999 Financial Statement Date in
the ordinary course of business consistent with past practice, free and clear of
all Claims, except (i) such as are disclosed in Schedule 3.15 attached hereto,
(ii) mechanic's, carrier's, workmen's, repairmen's or other like liens arising
or incurred in the ordinary course of business, (iii) liens for Taxes, and other
governmental charges which are not due and payable or which may thereafter be
paid without penalty, and (iv) other minor imperfections of title, restrictions
or encumbrances which do not, individually or in the aggregate, impair the
continued ownership, use and operation of the particular assets to which they
relate in the operation of the Company's business as currently conducted or as
contemplated to be conducted. Except as otherwise disclosed in Schedule 3.15,
the Company owns or leases all of the assets, taken as a whole, necessary for
the conduct of the Company's business as such business has been heretofore
conducted, and all such assets, taken as a whole, are being transferred to
Purchaser and are in a condition to conduct the Company's business as such
business is presently conducted.
3.16 ACCOUNTS RECEIVABLE. Schedule 3.16 contains a true and
complete list of all Accounts Receivable as of the Date of Closing. All of the
Accounts Receivable arose in BONA FIDE transactions and are valid obligations at
the full recorded amounts thereof in the Books and Records arising in the
ordinary course of the Business, net of an aggregate amount equal to reserves
for doubtful accounts and ▇▇▇▇-back items, as reflected in the Final Closing
Balance Sheet.
3.17 INVENTORY. Schedule 3.17 contains a true and complete
list of all Inventory as of the Date of Closing. The Inventory consists of items
which are merchantable and fit for the purposes intended and the quantity
thereof is at levels appropriate and adequate for Purchaser to conduct the
Business following the Date of Closing. The Inventory is carried in the Books
and Records at an amount that is not in excess of the lower of its cost or its
current fair market value on a LIFO method (with obsolescence reserve) and is
saleable at prices at least equal to the value thereof in the Books and Records.
3.18 EMPLOYEES.
3.18.1 Attached hereto as Schedule 3.18 is a complete
and accurate list of the following information for each employee of the Company,
including each employee on leave of absence or layoff status: name; job title;
current compensation paid or payable and any change in compensation since May
31, 1999; vacation accrued; and date of hire.
3.18.2 Except as otherwise disclosed in Schedule
3.18, no employee of the Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee and any
12
other person, that in any way materially adversely affects (i) the performance
of his or her duties as an employee of the Company, or (ii) the ability of the
Company to conduct its business.
3.19 INSURANCE. Attached hereto as Schedule 3.19 is a list of
the following information with respect to each insurance policy (including
policies providing fire, product liability, property, casualty, liability,
worker's compensation, vehicular and other coverage, and bond and surety
arrangements) to which the Company has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past three (3)
years: (i) the name, address, and telephone number of the agent, if known; (ii)
the name of the insurer, the name of the policyholder, and the name of each
covered insured; (iii) the policy number and the period of coverage; and (iv)
the scope (including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount of coverage. With respect to each
insurance policy currently in effect: (a) the policy is legal, valid, binding,
enforceable, and in full force and effect; (b) the policy will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (c)
neither the Company nor any other party to the policy is in breach or default
which would result in a Material Adverse Effect (including with respect to the
payment of premiums or the giving of notices) and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default or
permit termination, modification, or acceleration, under the policy; and (d) no
party to the policy has repudiated any provision thereof.
3.20 ENVIRONMENTAL MATTERS.
3.20.1 DEFINITIONS.
(i) "Contamination" means the uncontained
presence of Hazardous Substances at any property, or arising from any property,
which may require remediation or otherwise give rise to liability under any
applicable law.
(ii) "Environmental Laws" means all
environmental or health and safety statutes, ordinances, regulations, orders,
directives, decrees, permits, governmental approvals, contractual requirements
and requirements of common law concerning (1) activities relating to the
Business, (2) the properties or assets owned, leased or operated by or in
connection with the Business, (3) repairs or construction of any improvements,
(4) handling of any materials, (5) discharges into the air, soil, surface water
or ground water and (6) storage, treatment or disposal of any waste at or
connected with any activity at such properties.
(iii) "Environmental Lien" means any lien
against the property held by the United States under CERCLA or any Lien held by
any other Governmental Authority under any other Environmental Law.
(iv) "Hazardous Substances" means "hazardous
substances" or "pollutants or contaminants" as defined pursuant to CERCLA,
"regulated substances" within the meaning of Subtitle I of the Resource
Conservation and Liability Act, as amended, hazardous
13
substances as defined under any applicable state or local Environmental Laws,
petroleum or petroleum products, and any other substance considered toxic,
hazardous or a potential threat to human health or the environment under any
applicable Environmental Law, the presence of which has resulted or may result
in (1) an Environmental Lien, (2) a party incurring costs or liabilities, or (3)
a party being ordered or directed to investigate, remediate or otherwise respond
to a potential environmental threat posed by such substances.
3.20.2 REPRESENTATIONS AND WARRANTIES.
(i) Except as set forth in Schedule
3.20.2(i), the Company has conducted all activities of the Business in
compliance with, and all properties owned, leased or operated by the Company in
connection with the Business, comply with, all Environmental Laws. Except as set
forth in Schedule 3.20.2(i), the Company is not aware of any facts, events or
conditions relating to the facilities, properties or operations of the business
which would prevent, hinder or limit continued compliance with any Environmental
Laws.
(ii) Schedule 3.20.2(ii) sets forth a true
and complete list of the Permits required pursuant to any Environmental Law (the
"Environmental Permits") which have been obtained by the Company. Except as
noted in Schedule 3.20.2 (ii), all Environmental Permits are in full force and
effect and are not subject to any appeals or further proceedings or to any
unsatisfied conditions. No modification, suspension, rescission, relocation or
cancellation of any Environmental Permit it pending or, to Sellers' or
▇▇▇▇▇▇▇▇▇'▇ Knowledge, threatened, and no Environmental Permit will be canceled
or withdrawn, or otherwise adversely affected by the execution of this Agreement
or the consummation of the transactions contemplated hereby. Except as set forth
in Schedule 3.20.2(ii), Sellers have made or caused to have been made all
notifications and done all other things necessary to ensure that, following the
consummation of the transactions contemplated by this Agreement, all previously
issued Environmental Permits shall remain in full force and effect or shall be
reissued or amended to permit Purchaser to operate the Business.
(iii) Except as set forth in Schedule
3.20.2(iii), to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, no Contamination is present
or has emanated from or at any property now or previously owned, leased or
operated by the Company in connection with the Business. Except as set forth in
Schedule 3.20.2(iii), no property now owned, leased or operated by the Company
in connection with the Business is subject to any Environmental Lien. Except as
set forth in Schedule 3.20.2(iii), the Company has not incurred costs or
liabilities, or has been ordered to investigate, remediate or otherwise respond
to a potential environmental threat of Contamination in connection with the
Business.
(iv) Schedule 3.20.2(iv) sets forth a true
and complete list of all sites at or to which any waste generated by or on
behalf of the Company, or otherwise, in connection with any of its operations
has been transported, stored, treated or disposed and all arrangements for such
disposal. Except as set forth in Schedule 3.20.2(iv):
14
(a) the Company has not, in
connection with the Business, received (A) a request for information from any
Governmental Authority with respect to any discharge or removal of any Hazardous
Substance, or (B) other notice that is has been identified in any litigation,
administrative proceeding or investigation as a responsible party or a
potentially responsible party for any liability under any Environmental Law or
in connection with any Hazardous Substance;
(b) the Company has not filed any
notice under any federal, state or local law, regulation or order reporting a
release of Hazardous Substances in connection with the Business or any property
owned, leased or operated by the Business; and
(c) the Company has not entered
into any negotiations or agreements with any Person relating to any response
action or other cleanup or remediation of any Hazardous Substance.
(v) Except as set forth in Schedule
3.20.2(v), to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, no portion of any property
owned, leased or operated by the Company contains any of the following:
(a) polychlorinated biphenyls or
substances containing polychlorinated biphenyls;
(b) asbestos or materials
containing asbestos;
(c) urea formaldehyde foam
insulation;
(d) radon gas or the presence of
the radioactive decay products of radon in excess of an air concentration of
four picocuries per liter; or
(e) tanks presently or formerly
used for the storage of any Hazardous Substance or any other liquid or gas above
or below ground.
(vi) Except as noted in Schedule 3.20.2(vi),
no portion of any property owned, leased or operated by the Company constitutes
any of the following:
(a) a wetland or other "water of
the United States" for purposes of Section 404 of the Federal Clean Water Act or
any similar area regulated under any applicable state law;
(b) a floodplain or other flood
hazard area;
(c) a portion of the coastal zone
for purposes of the Federal Coastal Zone Management Act; or
15
(d) any other area, development of
which is specifically restricted under applicable law by reason of its physical
characteristics or prior use.
(vii) Except as noted in Schedule
3.20.2(vii), the Company has not, in connection with the Business, expressly
assumed or undertaken any liability or corrective or response action obligation
of any other Person relating to Environmental Laws.
(viii) Except as noted in Schedule
3.20.2(viii), Sellers are not aware of any costs that the Company expects the
Business will be likely to incur to achieve or maintain compliance with
Environmental Laws or to respond to Contamination.
3.21 LABOR RELATIONS; COMPLIANCE. The Company is not a party
to any collective bargaining or other labor contract. There is not presently
and, there is not threatened (i) any strike, picketing or work stoppage or (ii)
any proceeding against the Company relating to an alleged violation of any legal
requirement pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee of the Company with the National Labor
Relations Board, the Equal Employment Opportunity Commission, or any comparable
Governmental Authority.
3.22 EMPLOYEE BENEFITS.
3.22.1 DEFINITIONS.
(i) "ERISA" means the Employment Retirement
Income Security Act of 1974, as amended.
(ii) "ERISA Affiliate" means a member of a
"controlled group" of organizations within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
(iii) "Multiemployer Plan" means a
multiemployer plan within the meaning of Section 3(37(A)) of ERISA.
(iv) "Plan" means any welfare plan as
defined by ERISA, any pension plan as defined by Section 3(2) of ERISA, any
other retirement, severance, continuation pay, termination pay, bonus, stock
bonus, deferred compensation, insurance, vacation, personal leave, tuition
reimbursement, dependent care assistance, cafeteria plan or other plan, policy
or arrangement providing employee benefits (whether or not described in ERISA)
maintained by the Company or an ERISA Affiliate of the Company to which the
Company or any ERISA Affiliate contributes or is obligated to contribute for the
benefit of one or more employees of the Company.
3.22.2 REPRESENTATIONS AND WARRANTIES.
(i) Schedule 3.22.2(i) sets forth a true and
complete list of (1) the name, title, calendar year 1999 compensation, current
base salary and specific bonus plans or arrangement for each present employee of
the Company; (2) each collective bargaining, union or
16
other employee organization agreements; (3) each employment, advisory and
consulting agreement; (4) each employee confidentiality or other agreement
protecting proprietary processes, formulae or information; (5) each corporation
or other trade or business which is an ERISA Affiliate; and (6) each Plan.
Schedule 3.22.2(i) identifies as such all Plans, if any, which are (1) defined
benefit pension plans; (2) severance, continuation pay, termination pay, pension
or deferred compensation arrangements (including but not limited to any such
arrangements contained in an employment, advisory or consulting agreement),
other than pension plans qualified or intended to be qualified under Section
401(a) of the Code; and (3) Multiemployer Plans.
(ii) With respect to each Plan, Sellers
delivered to Purchaser true and complete copies of all current written documents
setting forth the terms and conditions of such Plan (or a written summary of
such terms in the case of an unwritten Plan) and, in the case of each Plan
subject to ERISA, copies of the plan document, the most current summary plan
description and any modifications thereto, the most recently filed Internal
Revenue Service Form 5500 (including attachments) and the most recent actuarial
valuation and report, as applicable, and other material related documents to
such Plan such as insurance contracts.
(iii) The acquisition by Purchaser of the
Shares will not, directly or indirectly, give rise to any withdrawal liability
or potential withdrawal liability on the part of Purchaser with respect to any
Multiemployer Plan in which the Company or an ERISA Affiliate participates or to
which the Company or an ERISA Affiliate has or has had any obligation to
contribute for the benefit of any such employees. Except as noted in Schedule
3.22.2(iii), the Company does not have any unfulfilled obligation to contribute
to any Multiemployer Plan or collectively bargained welfare plan. Neither the
Company nor any ERISA Affiliate has incurred any liability which arises from
either a complete or partial withdrawal (as defined in Section 4203 or 4205 of
ERISA, respectively) from any Multiemployer Plan that has not been discharged
and neither the Company nor any ERISA Affiliate has incurred a decline in
contributions to a Multiemployer Plan such that, if the current rate of
contributions continues, a 70% or greater decline in contributions will occur
within the next three plan years.
(iv) Neither the Company nor any ERISA
Affiliate maintains or contributes to, or has ever maintained or had an
obligation to contribute to, a Plan subject to Title IV or ERISA or the minimum
funding requirements under Section 412 of the Code. There does not exist any
condition, there has not occurred any event, and there has not been any
omission, with respect to the sponsorship, funding or administration of any
employee benefit plan, which has or could result in a Lien upon or claim with
respect to any of the assets or the liability of Purchaser for any contribution,
withdrawal liability, benefit, claim, settlement, Tax, penalty or payment of any
nature except liabilities for benefit claims and funding obligations payable in
the ordinary course of business. All contributions required to be made under the
terms of any Plan have been timely made in accordance with applicable law,
including without limitation, Labor Reg. Section 2510.3-102.
(v) Except as noted in Schedule 3.22.2(v),
each group health plan that provides health coverage to any present or former
employee of the Business has operated in material compliance with all
requirements of Sections 601 through 608 of ERISA and neither
17
Section 162(i)(2) and (k) of the Code and the regulations promulgated thereunder
(for years prior to 1989) or Section 4980B of the Code and the regulations
promulgated under former Section 162(i)(2) and (u) of the Code (for years after
1988), relating to the continuation of coverage under certain circumstances in
which coverage would otherwise cease ("COBRA"). Schedule 3.22.2(v) sets forth a
true and complete list of all current employees, and former employees since
January 1, 1997, of the Company and their respective beneficiaries who are
receiving or who are eligible to elect to receive such continuation coverage
under such group health plans pursuant to such provisions of ERISA and the Code.
(vi) Each Plan has at all times been
administered in material compliance with its terms, all applicable provisions of
ERISA (including the "Fiduciary responsibility" and "prohibited transaction"
rules thereof, the Code and other applicable laws, and each Plan intended to be
a qualified plan under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service which has not been
revoked. All applicable requirements under ERISA or the Code as to the filing of
reports, documents and notices regarding the Plans with the Department of Labor
and the Internal Revenue Service and the furnishing of such reports, documents
or notices on a timely basis to participants and beneficiaries on or prior to
the date hereof have been complied with in all material respects. There are no
active suits, governmental investigations or proceedings pending or threatened
against or concerning any Plan or against any fiduciary thereof respecting the
fiduciary's duties to the Plan or any trust under the Plan. There is no action
or claim (other than routine claims for benefits made in the ordinary course of
Plan administration) pending or threatened against or with respect to any Plan
and no facts exist which could give rise to any such actions or claims.
(vii) Except as noted in Schedule
3.22.2(vii), the Company has not carried on discussions regarding organization
with any labor union and there has not been any strike, work stoppage, labor
dispute or other labor trouble relating to employees of the Company, and, to
Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, there are no significant threats of work
stoppage or labor trouble by employees of the Company.
(viii) None of the Plans that are welfare
benefit plans within the meaning of Section 3(1) of ERISA provide for benefits
or coverage for any former or retire employee or their beneficiaries, except to
the extent required by COBRA. There is no VEBA maintained with respect to any
such welfare plan.
(ix) All insurance premiums have been paid
in full, subject only to normal retrospective adjustments in the ordinary
course, with regard to the Plans for plan or contract years ending on or before
the Date of Closing. With respect to periods from the close of the most recent
plan or contract year through the Date of Closing. With respect to periods from
the close of the most recent plan or contract year through the Date of Closing
with respect to the Plans, all insurance premiums due or payable through the
Date of Closing have been or will be paid in full, and no such premium is
overdue or in a grace period for late payment.
18
(x) All expenses and liability relating to
all of the Plans have been, and will on the Date of Closing be, fully and
properly accrued on the Books and Records and disclosed in accordance with GAAP
and in Plan financial statements.
(xi) Any fidelity bond required to be
obtained by the Company under ERISA with respect to any Plan has been obtained
and is in full force and effect.
(xii) The execution of this Agreement by
Sellers and the consummation of the transactions contemplated hereunder will
not, except as set forth in Schedule 3.22.2(xii), result in any obligation or
liability to any Plan, or to any employee or former employee of the Company.
3.23 BROKERAGE. Except for W.Y. ▇▇▇▇▇▇▇▇ & Company, which fee
shall be Seller's liability, neither Sellers nor the Company have made any
agreement or taken any other action which might cause anyone to become entitled
to a broker's or finder's fee or commission as a result of the Closing of the
transactions contemplated hereunder.
3.24 PERMITS. Attached hereto as Schedule 3.24 is a complete
list of all material Permits known by Sellers to be required for the ownership,
use, occupancy, operation or conduct of the Company's business and all such
Permits are in full force and effect. The Company has no Liabilities for
failures to obtain or comply with the same or comparable Permits with respect to
the Company's business as conducted by the Company in the past. Each material
Permit is presently valid and in full force and effect; no material violations
are or have been recorded in respect of any Permit; no proceeding is pending or,
to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, threatened to revoke, limit, negate or
allege a violation of any such Permit; and no such Permit has ever been revoked,
limited or negated or been, to Sellers' or ▇▇▇▇▇▇▇▇▇'▇ Knowledge, threatened
with such action. Except as otherwise disclosed on Schedule 3.24, or as
otherwise set forth on a Permit, each material Permit is transferable to
Purchaser upon Closing and, upon such transfer, it will be valid and in full
force and effect.
3.25 BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule 3.25
attached hereto lists (i) the name of each bank in which the Company has, with
respect to its business, an account or safe deposit box, the names of all
persons authorized to draw on such accounts or to have access to such safe
deposit boxes, and any contract, instrument, agreement, license, arrangement,
commitment or understanding relating to such accounts and safe deposit boxes,
and (ii) the names of all persons holding powers of attorney for the Company
with respect to its business and a statement of the terms of such power of
attorney.
3.26 COMPUTER HARDWARE AND SOFTWARE; EMBEDDED CONTROLS.
3.26.1 DEFINITIONS.
(i) "Database" means all data and other
information recorded, stored, transmitted and retrieved in electronic form by a
system or any component, whether located
19
on any component or components of a system or archived in storage media of a
type employed or used in conjunction with any component or system.
(ii) "Embedded Control" means an
microprocessor, microcontrol, smart instrumentation or other sensor, driver,
monitor, robotic or other device controlling a semiconductor, memory circuit,
BIOS, PROM or other microchip which performs some electronic or computer logic
function.
(iii) "Hardware" means all mainframes,
mid-range computers, personal computers, notebooks, servers, switches, printers,
modems, drives, peripherals and any component of any of the foregoing.
(iv) "Software" means all software owned,
developed, licensed or used, including (1) all modifications, enhancements,
fixes, updates, upgrades, bypasses and workarounds, (2) the source code and
object code for any of the foregoing and (3) all operating systems, bridgeware,
firmware, middleware and utilities.
(v) "Technical Information" means all
customer, dealer and supplier lists; serial number records; engineering,
manufacturing, design, installation and other technical drawings, specifications
and calculations; manufacturing and production processes and techniques;
research and development information; operating, maintenance and repair manuals
and instruction books; cost and estimating information, cost records, vendor
data and other business records (including without limitation, sales histories);
sales inquiries; consultant's reports; bills of material, test data and selected
test material samples; advertising and promotional literature, including
reproducible masters and all other commercial, sales, marketing and technical
data (including, but not limited to, data stored electronically or on other
format, together with rights under any third party licenses necessary to use
such data).
(vi) "Year 2000 Compliant" means, as applied
to any Software, Hardware, Databases, Embedded Controls or Products, that each
Component or Product (1) is designed (or has been modified) to be used prior to
or after January 1, 2000; (2) will operate without error arising from the
creation, recognition, acceptance, calculation, display, storage, retrieval,
accessing, comparison, sorting, manipulation, processing or other use of dates
or date-based, date dependent or date-related data, including but not limited
to, century recognition, day-of-the-year recognition, leap years, date values
and interfaces of date functionalities; and (3) will not be adversely affected
by the advent of the year 2000, the advent of the twenty-first century or the
transition of the twentieth century through the year 2000 and into the
twenty-first century. (vii) "Year 2000 Problem" means the possible inability of
an electronic device or computer hardware or software system or program to
operate after December 31, 1999 in substantially the same manner as it operates
on or prior to the date hereof.
20
3.26.2 REPRESENTATIONS AND WARRANTIES.
(i) Schedule 3.26.2(i) sets forth a true and
complete list of all (1) Hardware; (2) Software; (3) Databases; and (4) Embedded
Controls used by the Company in the operation and management of the Business
(including, without limitation, those related to the Business' facilities,
equipment, manufacturing processes, quality control activities, accounting and
bookkeeping records, record keeping activities and products sold to and/or
services rendered to customers); the susceptibility or exposure of each such
Hardware, Software, Databases and Embedded Controls to computer viruses or Year
2000 Problems; and the amount and nature of any expenses (capital or otherwise)
incurred or anticipated to be incurred by the Business in connection with
preventing or remedying Year 2000 Problems in any of such Hardware, Software,
Databases and Embedded Controls.
(ii) Except as set forth in Schedule
3.26.2(ii), the Company is not aware of any operating problems, including, but
not limited to, Year 2000 Problems, presently encountered or likely to be
encountered in the future in the use and operation of the Hardware, Software,
Databases and Embedded Controls. All Technical Information in electronic form
and all Software has been scanned for and cleaned of all computer viruses.
(iii) Except as set forth in Schedule
3.26.2(iii), the Company has not (1) received notice from any supplier,
customer, vendor or other entity with which the Company has a relationship, or
otherwise become aware of, Year 2000 Problems anticipated by such suppliers,
customers, vendors or other entities, or requiring the Company to undertake
actions outside the ordinary course of the Business to assist such suppliers,
customers, vendors or other entities in dealing with Year 2000 Problems, either
of which could have a material adverse effect on the Business; and (2) been
advised by its employees, independent public accountants or other consultants or
advisors or its banks or other financial intermediaries of any problem it should
anticipate or expenditures it is likely to incur relating thereto.
3.27 RELIANCE. The representations and warranties of Sellers
and the Company set forth in this Agreement are intended to be relied upon by
Purchaser and all agreements and covenants to be performed by Sellers on or
before the Date of Closing shall, except to the extent that performance thereof
shall have been waived in writing, have been duly performed in all respects.
3.28 NO MISREPRESENTATION. The representations and warranties
contained in subsections 3.1 through 3.27, inclusive, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained therein, in light of the circumstances in
which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to Seller that the statements contained in this Section
4 are true, correct, and complete as of the date of this Agreement and will be
true, correct and complete as of the Date of Closing (as though made then and as
though the Date of Closing were substituted for the date of this Agreement
throughout this Section 4), except as otherwise disclosed in the Schedules
accompanying this Agreement and
21
initialed by the parties. If any matter or circumstance is covered by more than
one representation and warranty, only the matter specified shall apply, and
those which are more general shall not apply to such matter or circumstance:
4.1 ORGANIZATION AND AUTHORITY; VALID AND BINDING AGREEMENT.
4.1.1 Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power and authority to conduct its business as presently
conducted, and to own, lease and operate its assets now owned, leased or used by
it.
4.1.2 Purchaser has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. Without limiting the generality of the foregoing, Purchaser's board
of directors and shareholders have duly authorized the execution, delivery and
performance of this Agreement by Purchaser.
4.1.3 This Agreement is, and each other agreement or
instrument of Purchaser contemplated hereby, when executed and delivered by
Purchaser in accordance with the terms hereof or thereof, will be the legal,
valid and binding agreement of Purchaser, enforceable against Purchaser in
accordance with its terms subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights generally,
from time to time in effect, and to general principles of equity.
4.2 NON-CONTRAVENTION. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
result in a breach of any of the terms and provisions of, or will constitute a
default under, or conflict with, (i) Purchaser's articles of incorporation or
bylaws, (ii) any judgment, decree, order or award of any Governmental Authority
or arbitrator against Purchaser, (iii) any Applicable Law to which Purchaser is
subject or by which any of the assets of Purchaser may be bound or affected. In
addition, neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any material agreement, contract, lease, license,
instrument, or other arrangement to which Purchaser is a party or by which
Purchaser is bound or to which any of the assets of Purchaser are subject.
4.3 CONSENTS AND APPROVALS. Except as otherwise disclosed in
Schedule 4.3 attached hereto, the consummation of the transactions contemplated
by the terms of this Agreement and the performance by Purchaser of this
Agreement in accordance with its terms will not require notice to, or the
consent or approval of, any Governmental Authority or other person, except for
consents required under contracts to which Purchaser is a party as disclosed in
Schedule 4.3 or regulatory approvals or notices required where the failure to
obtain such consent or give such notice would not have a Material Adverse Effect
or affect the validity of the transfer of the Shares pursuant to the terms of
this Agreement.
22
4.4 NO VIOLATION. There are no actions, suits, proceedings or
governmental investigations pending against nor, to the knowledge of Purchaser,
threatened against, Purchaser, and there is no mortgage, deed of trust, lease,
note, shareholders agreement, bond, indenture, other instrument or agreement,
license, permit, trust, custodianship or other restriction, that would prevent
or be violated by, or under which there would be a default as a result of, the
execution, delivery and performance by Purchaser of this Agreement or
consummating the transactions contemplated by this Agreement.
4.5 ADEQUATE RESOURCES. Purchaser has ready and timely access
to capital necessary to fund the Purchase Price and to close the transactions
contemplated by the terms of this Agreement within the time frame set forth in
this Agreement. Upon the closing of the transactions contemplated by the terms
of this Agreement, the Company will have adequate working capital resources in
order to conduct its Business consistent with past practices.
4.6 BROKERAGE. Purchaser has not made any agreement or taken
any other action which might cause anyone to become entitled to a broker's or
finder's fee or commission as a result of the transactions contemplated
hereunder.
4.7 RELIANCE. The representations and warranties of Purchaser
set forth in this Agreement shall be true in all respects and are intended to be
relied upon by Sellers and all agreements and covenants to be performed by
Purchaser on or before the Date of Closing shall, except to the extent that
performance thereof shall have been waived in writing, have been duly performed
in all respects
4.8 NO MISREPRESENTATION. The representations and warranties
contained in Subsections 4.1 through 4.7, inclusive, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained therein, in light of the circumstances in
which they were made, not misleading.
5. ACTION TO BE TAKEN BY THE PARTIES PRIOR TO THE DATE OF
CLOSING. The parties agree as follows during the period from the date of this
Agreement through the Date of Closing:
5.1 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties agree to use its fullest and best efforts to
take, or cause to be taken, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, including satisfaction, but not waiver, of the
conditions precedent set forth in Section 7 herein.
5.2 NOTICES AND CONSENTS. Each of the parties will give any
notices to, make any filings with, and use their best efforts to obtain any
authorizations, consents and approvals of Governmental Authorities in connection
with the matters referred to in Sections 3.5 and 4.3 herein.
5.3 THE COMPANY'S RECORDS AND OPERATIONS. The Company agrees
that it will, during the period from the date of this Agreement through the Date
of Closing, supply to Purchaser,
23
Purchaser's employees, agents, accountants, counsel and such other
representatives which Purchaser designates ("Purchaser's Agents"), such
information and documents concerning the business, operations and assets of the
Company as Purchaser shall reasonably request, and to permit Purchaser and
Purchaser's Agents to have full and reasonable access, during ordinary business
hours, to all of the Company's historical records, to its plant facilities and
manufacturing, sales and financial operations. The Sellers hereby agree that,
during the period from the date of this Agreement through the Date of Closing,
Purchaser and Purchaser's Agents shall have the right to interview and review
the information provided to Purchaser and Purchaser's Agents with such employees
of the Company as may be designated by the President of the Company during
normal business hours and in a manner which will not unreasonably disrupt the
operations of the Company's business. Purchaser shall not, and shall not permit
Purchaser's Agents to, meet with or discuss any matter with any employee,
customer or supplier of the Company except as provided by this Section. Sellers
and the Company shall not be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of any customer or would contravene any law, rule, regulation, order or
judgment. Sellers and the Company shall use their best efforts to obtain waivers
of any such restriction and in any event make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
5.4 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES.
Purchaser, the Company and Sellers shall each refrain from taking any action
which would render any representation or warranty contained in this Agreement
inaccurate as of the Date of Closing. Each party shall give prompt notice to the
other of (i) any action, suit or proceeding instituted or threatened against
such party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement, (ii) any breach of a representation
or warranty or Schedule of such party contained in this Agreement is not true
and correct in all material respects, (iii) any material errors or omissions
from the Schedules, or (iv) any failure of any party to comply with or satisfy
any covenant, agreement or condition to be complied with or satisfied by it
hereunder. Except as otherwise provided in Section 9 herein, nothing contained
in this Section or elsewhere shall be construed as relieving any party from
liability for breach of any representation or warranty or from any failure to
satisfy any covenant, agreement or condition.
5.5 CONDUCT OF BUSINESS. Sellers hereby agree to conduct its
business through the Date of Closing only in the Company's ordinary and usual
course, to continue normal policies and practices regarding suppliers and sales
customers, and to perform the Company's obligations under all contracts,
agreements and commitments consistent with past practices and in a manner which
would not cause a Material Adverse Effect to occur. Additionally, Sellers agree:
5.5.1 To cause the Company not to declare, set aside
or pay any dividend or make any distributions in respect of its common stock,
except for dividends or distributions required for the payment of accrued
estimated tax payments for the Company's shareholders; and
5.5.2 To cause the Company not to make any material
capital expenditures in excess of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00).
24
5.6 PUBLIC ANNOUNCEMENTS. Purchaser, the Company and Sellers
agree that they will consult with each other before issuing any press releases
or otherwise making any public statements with respect to this Agreement or the
transactions contemplated herein and shall not issue a press release or make any
public statement unless Purchaser, the Company and Sellers so agree, except as
may be required by law or allowed pursuant to the terms of this Agreement.
6. ADDITIONAL AGREEMENTS OF THE PARTIES.
6.1 CONFIDENTIALITY. In the course of the negotiation and
consummation of the transactions contemplated by the terms of this Agreement,
Purchaser may come into possession of information concerning the conduct or
affairs of the Company (the "Company Confidential Information"), and Sellers and
the Company may come into possession of information concerning the conduct or
affairs of Purchaser (the "Purchaser Confidential Information"). Accordingly,
the parties agree as follows:
6.1.1 At all times, whether before or after the Date
of Closing, and whether or not the transactions contemplated by the terms of
this Agreement close, Sellers and the Company will treat and hold as
confidential all Purchaser Confidential Information, refrain from using any
Purchaser Confidential Information except for purposes specifically contemplated
by this Agreement, and, at Purchaser's request, deliver to Purchaser or destroy
all tangible embodiments (and all copies) of any Purchaser Confidential
Information which are in such person's possession.
6.1.2 If the transactions contemplated by the terms
of this Agreement close, then at all times after the Date of Closing, Sellers
will treat and hold as confidential all Company Confidential Information,
refrain from using any Company Confidential Information except for purposes
specifically contemplated by this Agreement, and, at the Company's request,
deliver to the Company or destroy all tangible embodiments (and all copies) of
any the Company Confidential Information which are in such person's possession.
6.1.3 At all times before the Date of Closing, and if
the transactions contemplated by the terms of this Agreement do not close, then
at all other times, Purchaser will treat and hold as confidential all Company
Confidential Information, refrain from using any Company Confidential
Information for any reason whatsoever, including to compete with the Company
except for purposes specifically contemplated by this Agreement, and, at
Company's request, deliver to the Company or destroy all tangible embodiments
(and all copies) of any Company Confidential Information which are in
Purchaser's possession.
6.1.4 At all times before the Date of Closing, and if
the transactions do not close, then at all other times, Purchaser agrees not to
initiate or maintain contact (except for those contacts made in the ordinary
course of its business with the Company) with any officer, director or employee
of the Company regarding its business, operations, prospects or finances,
without the express advance written permission of the President of the Company.
Unless otherwise agreed to by the President of the Company, (i) all
communications regarding the transactions contemplated by the terms of this
Agreement, (ii) all requests for additional information, (iii) all requests for
facility
25
tours or management meetings, and (iv) all discussions or questions regarding
any matter described herein will be submitted or directed only to the President
of the Company and in a manner suitable to preserve such confidentiality. At all
times before the Date of Closing, and if the transactions contemplated by the
terms of this Agreement do not close, then at all other times, Purchaser agrees
not to employ, hire or retain the services of any employees of the Company.
6.1.5 This Section 6.1 will not apply to any
information which is generally available to the public (other than by reason of
any disclosure which constitutes or is the result of a breach of this Section
6.1). If any party is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that party will notify the party whose Confidential Information is
protected promptly of such request or requirement so that the protected party
may seek an appropriate protective order or waive compliance with the provisions
of this Section 6.1. If, in the absence of such a protective order or waiver,
any party, on the advice of counsel, is compelled to disclose any Confidential
Information to any Governmental Authority, the disclosing party will use his/its
best efforts to ensure that such disclosure is limited to Confidential
Information which is so required to be disclosed and obtain an order or other
assurance that confidential treatment will be accorded to any Confidential
Information disclosed.
6.1.6 The parties hereby acknowledge and agree that
any breach of the terms and conditions of this Section 6.1 may cause immediate,
immeasurable and permanent damage to the Company, that due to the nature of the
harm which may be caused, an adequate remedy at law may not be easily
determined, and as a result, the terms and provisions contained herein for the
protection of the Company shall be specifically enforceable in any court of
competent jurisdiction and that this provision in no way relieves any breaching
party for liability to the Company for any actual or consequential damages to
the Company as a result of such breach.
6.1.7 Purchaser shall indemnify and hold Sellers and
the Company harmless from and against any and all Loss resulting from claims
suffered or incurred by Company, arising out of or resulting from Purchaser's or
Purchaser's Agents' disclosure or use of Company Confidential Information in a
manner which would be a breach of the terms and conditions of this Section 6.1.
6.2 HSR ACT.
6.2.1 Sellers will, and will cause Company to, (i)
take promptly all actions necessary to make the filings required of the Sellers
and Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇
"▇▇▇ ▇▇▇"), (▇▇) comply at the earliest practicable date with any request for
additional information received by Sellers or the Company from the Federal Trade
Commission or the Department of Justice pursuant to the HSR Act and (iii)
cooperate with Purchaser in connection with Purchaser's filing under the HSR Act
and in connection with resolving any investigation or other inquiry concerning
the transactions contemplated by the terms of this Agreement which are commenced
by either the Federal Trade Commission or the Department of Justice.
26
6.2.2 Purchaser will (i) take promptly all actions
necessary to make the filings required of Purchaser under the HSR Act, (ii)
comply at the earliest practicable date with any request for additional
information received by Purchaser from the Federal Trade Commission or the
Department of Justice pursuant to the HSR Act and (iii) cooperate with Sellers
and Company in connection with Sellers' and Company's filing under the HSR Act
and in connection with resolving any investigation or other inquiry concerning
the transactions contemplated by the terms of this Agreement which are commenced
by either the Federal Trade Commission or the Department of Justice.
6.3 TRANSACTION EXPENSES. Purchaser shall be responsible for
all costs and expenses incurred by Purchaser in connection with the negotiation,
preparation and closing of the transactions contemplated by the terms of this
Agreement. Sellers shall be responsible for all costs and expenses, including
attorney, accounting and brokerage related fees disclosed in Section 3.23,
incurred by Sellers and the Company in connection with the negotiation,
preparation and closing of the transactions contemplated by the terms of this
Agreement (hereinafter collectively referred to as "Seller Closing Fees"), and
said Seller Closing Fees shall be paid by the Company in full on or before the
Date of Closing. In the event the transactions contemplated by the terms of this
Agreement close, then the Company shall pay (i) all transfer, sales, use and
other Taxes imposed by reason of the transactions contemplated by this Agreement
and (ii) all stamp and recording taxes, fees and expenses, settlement fees,
escrow fees and other miscellaneous closing fees or costs associated therewith.
6.4 EXCLUSIVE DEALING. Between the date of signing of this
Agreement and the Date of Closing, no Seller will:
6.4.1 solicit or initiate discussions or engage in
negotiations with any Person other than Purchaser (whether or not such
discussions are initiated by such Seller), with respect to the possible
acquisition of the Company, the Business, the Shares or the assets of the
Company by such Person (whether by merger, purchase of capital stock, purchase
of assets, consolidation or otherwise);
6.4.2 provide any information with respect to the
Company, the Business, the Shares or the assets of the Company to any Person
other than Purchaser relating to the possible acquisition of the Company, the
Business, the Shares or the assets of the Company by such Person (whether by
merger, purchase of capital stock, purchase of assets, consolidation or
otherwise) other than Purchaser, its agents, representatives and advisors who
have or need to know such information for the purposes of this transaction, and
the Company and Sellers; or
6.4.3 enter into a transaction with any Person other
than Purchaser concerning the possible acquisition of the Company, the Business,
the Shares or the assets of the Company by such Person (whether by merger,
purchase of capital stock, purchase of assets, consolidation or otherwise).
27
6.5 DEPOSITED FUNDS.
6.5.1 RCO ENGINEERING, INC. The parties acknowledge
that in connection with a certain litigation between, among others, the Company
and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (as defendants) and RCO Engineering, Inc. (as plaintiff),
pending in the State of Michigan, Macomb County Court as Case No. 93-404-CE: (a)
the plaintiffs deposited with the Macomb County Circuit Court Clerk (the
"Clerk")Two Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars in an
interest bearing account (such $250,000.00 and the interest accrued thereon
through the date of the Clerk's release of the funds is hereinafter referred to
as the "Deposited Amount"); (b) the Macomb County Circuit Court (the "Court")
awarded the Deposited Amount in connection with mediation sanctions and ordered
the Deposited Funds to be deposited with the Clerk; (c) the Court's order
specified that the Deposited Funds be disbursed following the final appellate
disposition of the appeal from the orders and/or judgment in the case. Purchaser
hereby acknowledges and agrees that the Deposited Amount is not being purchased
hereunder and that all right, title and interest to the Deposited Amount is and
shall remain with Sellers. Purchaser hereby agrees to cause the Company to
transfer, sell and assign any interest the Company may have to Sellers. Sellers
confirm that the Deposited Amount is not included on the Bid Balance Sheet and
the parties acknowledge that the Deposited Amount will not be included in the
Estimated Closing Balance Sheet or the Final Closing Balance Sheet. The Company
shall join in and agree to any action in such Court which may be required to
release the Deposited Amount to Sellers upon final appellate adjudication.
6.5.2 S-CORPORATION DEPOSIT. Purchaser agrees to
cause the Company to complete, execute and file the appropriate documents with
the Internal Revenue Service by May 15, 2000 in order to request a refund of the
S-Corporation Deposit as described herein. The Seller represents that, as of
March 31, 2000, the S-Corporation Deposit is in the amount of One Million Seven
Hundred Thirty Thousand, Nine Hundred Thirty-One and 00/100 ($1,730,931.00)
Dollars (the "Sellers' S-Corporation Deposit"). On or before May 15, 2000, the
Company will make an additional S-Corporation Deposit as may be required to
maintain the March 31 fiscal year end of the Company, which additional
S-Corporation Deposit is estimated to be approximately $500,000 (the "Company's
S-Corporation Deposit"). Purchaser hereby releases any claim of right, title or
interest to the Sellers' S-Corporation Deposit and Seller hereby releases any
claim of right, title or interest to the Company's S-Corporation Deposit. Upon
filing for the refund of the S-Corporation Deposit, Purchaser will provide
Sellers with copies of all documents filed with the Internal Revenue Service.
Purchaser shall further cause the Company to notify Sellers upon receipt of the
refund of the S-Corporation Deposit and to tender to Sellers payment, in cash or
its equivalent, of the Sellers' S-Corporation Deposit, or the portion thereof
refunded, immediately upon receipt thereof (without the right of set-off or
counterclaim of any nature whatsoever); PROVIDED that the Company shall only be
obligated to tender such payment of the Sellers' S-Corporation Deposit, or the
portion thereof refunded, in the event such refund is received by the Company
and such payment shall be limited to the amount of any refund received.
28
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES.
7.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The
obligations of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the delivery of the following documents or the
fulfillment of the following conditions on or prior to the Date of Closing (any
one or more of which may be waived in whole or in part by Purchaser if such
waiver is in writing and signed by an authorized officer of Purchaser):
7.1.1 REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company and Sellers contained in this
Agreement, and the statements of the Company and Sellers contained on the
Schedules hereto or in any other agreement, instrument or certificate delivered
by the Company and Sellers pursuant to this Agreement shall be true and correct
in all material respects on and as of the Date of Closing, with the same force
and effect as though such representations and warranties had been made on, as of
and with reference to such date.
7.1.2 PERFORMANCE AND COMPLIANCE. The Company and
Sellers shall have obtained the consents listed on Schedule 3.5 and shall have
performed in all material respects all of the agreements, covenants, obligations
and conditions and complied in all material respects with all of the provisions
required by this Agreement to be performed or complied with by the Company and
Sellers on or before the Date of Closing.
7.1.3 ASSETS INTACT. There shall not have been any
(i) taking or condemnation for any public or quasi-public purpose or use by any
competent authority or by any rights of eminent domain of any material portion
of the assets of the Company, or (ii) any material damage, destruction, or loss
of any kind from any cause of any material portion of the assets of the Company.
7.1.4 NO ACTIONS, SUITS OR PROCEEDINGS. No action,
suit or proceeding shall be pending, or to Sellers' Knowledge, threatened,
before or by any Governmental Authority to restrain, prohibit or obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.1.5 SATISFACTORY INSTRUMENTS OF TRANSFER. All
instruments and documents required on the Company's or Sellers' part to
effectuate and consummate the transactions contemplated hereby shall be
delivered to Purchaser and shall be in form and substance reasonably
satisfactory to Purchaser.
7.1.6 NO CLAIMS. No Claim shall be made or threatened
by any person asserting that such person (i) is the holder or the beneficial
owner of, or has the right to acquire or to obtain beneficial ownership of, any
stock of, or any other voting, equity, or ownership interest in, the Company, or
(ii) is entitled to all or any portion of the Purchase Price payable for the
Shares.
29
7.1.7 NO MATERIAL ADVANCE CHANGE. There shall be no
Material Adverse Effect, and there shall be no event or circumstances that shall
cause to exist a Material Adverse Effect, and Sellers shall have no knowledge
that a Material Adverse Effect is threatened.
7.1.8 SELLERS' CLOSING DOCUMENTS. Sellers shall
deliver or shall cause to be delivered to Purchaser the following documents on
or prior to the Date of Closing:
(i) Certificates representing the Shares,
duly endorsed (or accompanied by duly executed assignments separate from
certificate) for transfer to Purchaser;
(ii) A Covenant Not to Compete and
Non-Disclosure Agreement in the form of Schedule 7.1.8(ii), attached hereto,
executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
(iii) An Amendment to the Lease in the form
of Schedule 7.1.8(iii), attached hereto;
(iv) A certificate executed by the Company
and the Sellers representing and warranting to Purchaser that (x) the Sellers'
representations and warranties contained in this Agreement were accurate in all
respects as of the date of this Agreement and are accurate in all respects as of
the Date of Closing as if made on the Date of Closing, and (y) Sellers have
performed all obligations required to be performed by them on or prior to the
Date of Closing;
(v) The resignation of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as
an officer and director of the Company, as well as the resignation of any other
officers and directors of the Company that Purchaser requests;
(vi) Certificates of the Secretary or
Assistant Secretary of the Company attesting to the incumbency of the respective
officers executing this Agreement and the other certificates and agreements
delivered by the Company at Closing;
(vii) A Certificate of Good Standing for the
Company issued by the State of Michigan not more than five (5) days prior to the
Date of Closing and from such other states, if any, where the Company is
qualified to do business, to the effect that the Company is in good standing in
the State of Michigan and is authorized to do business in the State of Michigan
as of the date of such Certificate of Good Standing;
(viii) The pay-off statements and UCC-3
termination statements and/or mortgage satisfaction pieces releasing and
terminating any liens and security interests on the Assets and the Shares
identified on Schedule 7.1.8(viii) attached hereto;
(ix) Purchaser shall have received a receipt
letter from each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇. ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ (collectively, the "Employees") evidencing receipt and satisfaction of
the payment of all incentive or bonus payments to each of them by the Company in
the aggregate amount of Eight Hundred Twenty Thousand and
30
00/100 Dollars ($820,000.00) pursuant to those certain Incentive Agreements
dated as of December 23, 1999 between the Company and each of the Employees and
pursuant to Paragraphs 7 and 8 of those certain employment letters dated as of
December 23, 1999 between the Company and each of the Employees;
(x) A certificate executed by the Secretary
or Assistant Secretary of the Company attesting to the fact that all necessary
corporate actions and other proceedings to be taken by the Company in connection
with the transactions contemplated by the terms of this Agreement have been
accomplished;
(xi) Purchaser shall have received a
certificate signed by the Company and Sellers certifying compliance by the
Company and Sellers with the provisions of Section 7.1.1;
(xii) Purchaser shall have received an
opinion dated as of the Date of Closing from Seller's counsel in the form of
Schedule 7.1.8(xii) attached hereto;
(xiii) A Joinder to Agreement of Sale and
Purchase of Stock in the form of Schedule 7.1.8(xiii) attached hereto;
(xiv) A letter agreement with respect to The
Economic Development Corporation of the Township of Macomb loan in the form of
Schedule 7.1.8 (xiv) hereto;
(xv) Purchaser shall have received a copy of
the Company's S- Corporation election as filed with the Internal Revenue Service
or such other evidence satisfactory to Purchaser that the Company is an
S-Corporation under the Code; and
(xvi) All other documents, certificates,
assignments, agreements and other instruments as, in the opinion of Purchaser or
its counsel, are reasonably necessary to consummate the transactions
contemplated by this Agreement.
7.1.9 ESTOPPEL CERTIFICATES. Purchaser shall have
received a current estoppel certificate from the lessor under each Real Property
Lease stating (i) that such Real Property Lease is in full force and effect and
has not been amended, modified or supplemental other than as set forth on
Schedule 3.14 herein, (ii) that such rent and other sums and charges payable
under such Real Property Lease are current and sets forth the date through which
payments have been made, (iii) the amount of any tenant security or other
similar deposit held by or on behalf of such lessor under such Real Property
Lease, (iv) that no notice of default on the part of the Company or termination
notice has been served under such Real Property Lease that remains outstanding,
(v) no uncured default or termination event or condition exists under such Real
Property Lease and that no event has occurred or condition exists that, with the
giving of notice or the lapse of time or both, would constitute such a default
or termination event or condition, and (vi) that the consummation of the
transactions contemplated by the terms of this Agreement will not constitute a
default under such Real Property Lease or grounds for the termination thereof or
for the exercise of any other right or remedy adverse
31
to the interests of the tenant thereunder. Each estoppel certificate shall
otherwise be in a form reasonably satisfactory to Purchaser.
7.1.10 DUE DILIGENCE INVESTIGATION. The results of
Purchaser's due diligence investigation, including but not limited to, the
Environmental Investigation, shall have been satisfactory to Purchaser.
7.1.11 NONDISTURBANCE. The Company shall have
received nondisturbance agreements in customary form from each lender who has a
mortgage on the Leased Real Property.
7.1.12 CUSTOMER REVIEW. Purchaser shall have received
reasonable assurances from the Company's major customers to the effect that such
customers will continue their respective business relationship with the Company
at levels comparable with past practice and consistent with the Company's
current projections. For purposes hereof, "major customers" shall mean GE
Aircraft Engines, Allied Signal/Honeywell and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Helicopter
Systems.
7.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
SELLERS. The obligations of the Company and Sellers to consummate the
transactions contemplated by this Agreement shall be subject to the delivery of
the following documents or the fulfillment of the following conditions on or
prior to the Date of Closing (any one or more of which may be waived in whole or
in part by the Company and Sellers if such waiver is in writing and signed by
Sellers and an authorized officer of the Company):
7.2.1 REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Purchaser contained in this Agreement, and the
statements of Purchaser contained on the Schedules hereto or in any other
agreement, instrument or certificate delivered by Purchaser pursuant to this
Agreement shall be true and correct in all material respects on and as of the
Date of Closing, with the same force and effect as though such representations
and warranties had been made on, as of and with reference to such date.
7.2.2 PERFORMANCE AND COMPLIANCE. Purchaser shall
have obtained the consents listed on Schedule 4.3 and shall have performed in
all material respects all of the agreements, covenants, obligations and
conditions and complied in all material respects with all of the provisions
required by this Agreement to be performed or complied with by Purchaser on or
before the Date of Closing.
7.2.3 NO ACTIONS, SUITS OR PROCEEDINGS. No action,
suit or proceeding shall be pending, or to Purchaser's knowledge, threatened,
before or by any Governmental Authority to restrain, prohibit or obtain damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.2.4 SATISFACTORY INSTRUMENTS OF TRANSFER; PURCHASE
PRICE. All instruments and documents required on Purchaser's part to effectuate
and consummate the transactions contemplated hereby shall be delivered to
Sellers and shall be in form and substance reasonably
32
satisfactory to Sellers and its counsel. Purchaser shall have delivered to
Sellers the Purchase Price in the form and amount required pursuant to the terms
of Section 2.1 herein.
7.2.5 PURCHASER'S CLOSING DOCUMENTS. Purchaser shall
deliver or shall cause to be delivered to Sellers the following documents on the
Date of Closing:
(i) A certificate executed by Purchaser to
the effect that (x) each of the Purchaser's representations and warranties in
this Agreement were accurate in all respects as of the date of this Agreement
and are accurate in all respects as if made on the Date of Closing, and (y) the
Purchaser has performed all obligations required to be performed by it on or
prior to the Date of Closing.
(ii) A certificate executed by the Secretary
or Assistant Secretary of Purchaser attesting to the fact that all necessary
corporate actions and other proceedings to be taken by Purchaser in connection
with the transactions contemplated by the terms of this Agreement have been
accomplished.
(iii) Sellers shall have received a
Certificate of Good Standing certified by the State of Delaware and dated not
less than five (5) days prior to the Date of Closing, and from such other
states, if any, where Purchaser is qualified to do business, to the effect that
Purchaser is in good standing in the State of Delaware and is authorized to do
business in said state as of the date of said Certificate of Good Standing.
(iv) Seller shall have received a
certificate signed by Purchaser with respect to compliance by Purchaser with the
provisions of Section 7.2 herein.
(v) The Company and Sellers shall have
received an opinion dated as of the Date of Closing from Purchaser's counsel in
the form of Schedule 7.2.5(v) attached hereto.
8. TAX MATTERS.
8.1 ALLOCATION OF LIABILITY OF TAXES.
8.1.1 SELLERS LIABLE FOR TAXES IN PRE-CLOSING PERIOD
(EXCEPT THOSE RELATING TO SECTION 338(h)(10) ELECTION). Except as set forth in
Section 8.1.3 herein, Sellers shall be liable for, and shall indemnify, defend
and hold Purchaser harmless from and against, any and all Taxes imposed on the
Company or Sellers or any of the assets, operations or activities of the
Company, and any Taxes imposed by any Governmental Authority upon an audit
without limitation, related or attributable to any Pre-Closing Period.
8.1.2 PURCHASER LIABLE FOR TAXES IN POST-CLOSING
PERIOD. Purchaser shall be liable for, and shall indemnify, defend and hold
harmless Sellers from and against any Taxes imposed on Sellers and the Company
or any of the assets, operations or activities of the Company or its successors
related or attributable to any Post-Closing Period.
33
8.1.3 SPECIAL PROVISIONS REGARDING SECTION 338(H)(10)
ELECTION. Notwithstanding anything contained in Section 8.1.1 herein to the
contrary, Purchaser expressly acknowledges and agrees that it shall be
responsible for, and shall indemnify, defend and hold Sellers harmless from and
against the Incremental Taxes caused by the Section 338(h)(10) Election, which
Incremental Taxes will be paid by Purchaser at the time of the filing of the tax
return with respect to such Section 338(h)(10) Election, which tax return will
be subject to review by Purchaser prior to its filing.
8.2 PREPARATION AND FILING OF TAX RETURNS. Sellers shall have
the right and obligation to timely prepare and file, and cause to be timely
prepared and filed, when due any Tax Return that is required to include the
operations, ownership, assets or activities of the Company for any period ending
on or prior to the Date of Closing, including, without limitation, all final
returns of the Company and all returns related to the deemed asset sale and
deemed liquidation of the Company under Treasury Regulation Sections
1.338(h)(10)-T(d)(3) and (4). Purchaser shall have the right and obligation to
prepare and file, with Seller's reasonable assistance, any Tax Return for any
period ending after the Date of Closing.
8.3 TAX CONTROVERSIES, ASSISTANCE AND COOPERATION.
8.3.1 NOTICE. In the event any Tax Authority informs
either of Sellers, on the one hand, or Purchaser, on the other, of any notice of
proposed audit, claim, assessment or other dispute concerning an amount of Tax
with respect to which the other party may be liable, the party so informed shall
promptly notify the other party of such matter. Such notice shall contain
factual information (to the extent known) describing any asserted Tax liability
in reasonable detail and shall be accompanied by copies of any notice or other
documents received from any Tax Authority with respect to such matter. Each
party, at its own expense, with reasonable cooperation from the other party and
subject to the conditions of Section 8.3.2 herein will manage, negotiate and
resolve, its own audits, claims, assessments or disputes.
8.3.2 CONSENT TO SETTLEMENT. Purchaser and Sellers
shall not agree to settle or permit the settlement of any Tax liability or
compromise any claims with respect to a Tax, which settlement or compromise may
materially affect the liability for a Tax (or right to a Tax benefit) of the
other party, without such other party's prior consent, which consent shall not
be unreasonably withheld. Neither Purchaser nor Sellers shall make, revoke or
amend any Tax election or amend any Tax Return of the other party, without such
other party's consent which may affect the other party's liability for a Tax or
right to a Tax benefit. Purchaser shall promptly notify Sellers of any third
party claims relating to the reporting, assessment or payment of any such Tax
relating to any period ending on or before the Date of Closing or including the
Date of Closing (and Sellers shall be entitled to meaningful participation in
any settlement discussions or negotiations relating to any such third party
claims).
8.3.3 ASSISTANCE AND COOPERATION. Sellers, on the one
hand, and Purchaser or the Company, on the other, shall cooperate with each
other and with each other's agents, including accounting firms and legal
counsel, in connection with Tax matters relating to the Company,
34
including (i) preparation and filing of Tax Returns; (ii) determining the
liability and amount of any Tax due or the right to any amount of any refund of
Tax (iii) examinations of Tax Returns; and (iv) any administrative or judicial
proceeding in respect of a Tax assessed or proposed to be assessed. Such
cooperation shall include each party making all information and documents in its
possession relating to the Company available to the other party. The parties
shall retain all Tax Returns, schedules and work papers, and all material
records or other documents relating thereto, for at least ten (10) years from
the date of creation, but in no event will such documents be discarded until the
expiration of the applicable statute of limitations (including, to the extent
notified by any party, any extension thereof) of the Tax Period to which such
Tax Returns and other documents and information relate. Each of the parties
shall also make available to the other party, as reasonably required and
available personnel (including officers, directors, employees and agents)
responsible for preparing, maintaining, and interpreting information and
documents relevant to Taxes, and personnel reasonably required as witnesses or
for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes.
8.4 SECTION 338(h)(10) ELECTION.
8.4.1 Purchaser may make an election under Section
338(g) of the Code (and any comparable election under state, local or foreign
tax law) with respect to the Company. With respect to the purchase and sale of
the Shares under this Agreement ("Stock Purchase Transaction"), Purchaser and
Sellers may make a Section 338(h)(10) Election with respect to the acquisition
of the Company by Purchaser. Purchaser and Sellers shall cooperate fully with
each other in the making of the Section 338(h)(10) Election. In particular,
Purchaser shall be responsible for the preparation and filing of all Tax Returns
and forms (collectively the "Section 338 Forms") required under Applicable Tax
Law to be filed in connection with making the Section 338(h)(10) Election.
Sellers shall deliver to Purchaser, within sixty (60) days prior to the date the
Section 338 Forms are required to be filed, such documents and other forms as
reasonably requested by Purchaser to properly complete the Section 338 Forms.
Purchaser and Sellers shall report the Stock Purchase Transaction consistent
with the Section 338(h)(10) Election and shall take no position contrary thereto
or inconsistent therewith in any Tax Return, or in any discussion with or any
proceeding, before any Taxing Authority or other governmental body or otherwise.
8.4.2 The "ADSP (aggregate deemed sale price)" (as
defined in and required to be allocated pursuant to Section 338(h)(10) of the
Code) shall be allocated with respect to the Stock Purchase Transaction in
accordance with Schedule 8.4.2. In the event that any such allocation is
disputed by any Taxing Authority, the party receiving notice of such dispute
shall promptly notify and consult with the other party hereto concerning
resolution of such dispute and such dispute shall be settled or compromised by
the Purchaser or Sellers with the consent of the Sellers and Purchaser, which
consent shall not be unreasonably withheld. Purchaser shall cause the Company to
comply with this Section 8.4.
8.5 TAX FILINGS. Sellers shall, on a timely basis, prepare (in
a manner consistent with prior practice and this Agreement), execute and file on
behalf of the Company: (i) the federal income Tax Returns to be filed on behalf
of the Company for the period ending as of the close of
35
business on the Date of Closing which will include the gain or loss resulting
from the "deemed sale" and "deemed liquidation" that will occur (pursuant to
Treasury Regulation Section 1.338(h)(10)- T(d)(3) and (4) by reason of the
Purchaser's and Sellers' 338(h)(10) Election); and (ii) any corresponding state
and local income Tax Returns required to be filed on behalf of the Company for
the period ending as of the close of business on the Date of Closing. The
Purchaser shall cooperate with Sellers in connection with the preparation and
filing of such returns by making the books, records and personnel of the Company
available to Sellers and taking such action as Sellers may reasonably request.
The Purchaser shall have the right to review and approve such returns prior to
filing.
9. INDEMNIFICATION.
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties set forth in this Agreement and in any other
document delivered in connection with the closing of the transactions
contemplated by the terms of this Agreement shall survive the Closing for a
period of two (2) years (regardless of any investigation made by any party
hereto or on its behalf); except for the following representations and
warranties specifically identified in Sections 9.1.1 and 9.1.2 herein which
shall survive the Closing and shall continue in full force and effect:
9.1.1 For a period equal to the applicable statute of
limitations in the case of representations and warranties contained in Section
3.12 herein; and
9.1.2 Perpetuity, in the case of representations and
warranties contained in Sections 3.1 and 3.2 herein;.
9.2 INDEMNIFICATION OBLIGATION OF THE PARTIES:
9.2.1 INDEMNIFICATION OBLIGATIONS OF THE SELLERS,
▇▇▇▇▇▇▇▇▇ AND THE COMPANY. Sellers and ▇▇▇▇▇▇▇▇▇ shall indemnify Purchaser in
respect of, and save and hold Purchaser harmless against and pay on behalf of or
reimburse Purchaser as and when incurred, any Loss with respect to the Company
which any Purchaser suffers, sustains or becomes subject to as a result of, in
connection with, relating or incidental to or by virtue of, without duplication,
the following; provided, however, that Sellers and ▇▇▇▇▇▇▇▇▇ shall not have any
liability hereunder if Purchaser fails to notify Sellers and ▇▇▇▇▇▇▇▇▇ of such
liability in accordance with Section 9.3 herein:
(i) Subject to the survival provisions of
Section 9.1 herein, any misrepresentation or breach of any representation or
warranty by Sellers, ▇▇▇▇▇▇▇▇▇ or the Company set forth in this Agreement or any
Schedule, certificate or other instrument, agreement or document furnished to
Purchaser by Sellers pursuant to any of the transactions contemplated by the
terms of this Agreement;
(ii) Litigation commenced in the Circuit
Court for the County of Macomb, State of Michigan, captioned RCO ENGINEERING,
INC. V. ACR INDUSTRIES, INC., ET. AL., Case No. 93-304-CE; and
36
(iii) Subject to the survival provisions of
Section 9.1 herein, any non- fulfillment or breach of any covenant or agreement
of Sellers set forth in this Agreement and any and all other agreements,
instruments, certificates and other documents furnished to Purchaser by Sellers
pursuant to any of the transactions contemplated by the terms of this Agreement.
(iv) Any obligation or liability of any
nature (including any indemnity obligation) of the Company to its former
shareholder ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
(v) Any liability for Taxes as contemplated
by Section 8.1.1.
(vi) Except as expressly provided in Section
10 with respect to the Company's current facility at ▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the "Macomb Facility"), any failure by the Company to
comply with or have complied with any Environmental Laws, or from any
Contamination resulting from the Company's operation of the Business or present
at, threatening or emanating from any property which the Business has owned,
leased or operated and attributable in any way to actions occurring or
conditions existing prior to the Date of Closing.
(vii) Any liability or obligation to GE
Aircraft Engines ("GEAE") or its successors or assigns arising out of the
Company's sale of bearings to GEAE prior to the Date of Closing.
9.2.2 OFFSET RIGHT. In satisfaction of any
indemnification obligation of the Sellers, Purchaser shall first, recover
amounts to the extent available from the Holdback Amount and only to the extent
such assets are insufficient to satisfy such indemnification obligations,
second, recover amounts which would otherwise be payable by way of offset
against the Promissory Note described in Section 9.2.2; provided, however, to
the extent that all amounts have been distributed from the Holdback Amount or
otherwise offset against the Promissory Note, then the Sellers will nonetheless
remain liable for Indemnification under Section 9.2.
9.2.3 INDEMNIFICATION OBLIGATIONS OF THE PURCHASER.
Purchaser shall indemnify Sellers in respect of, and save and hold Sellers
harmless against and pay on behalf of or reimburse Sellers as and when incurred,
any Loss which Sellers suffer, sustain or become subject to as a result of, in
connection with, relating or incidental to or by virtue of, without duplication
the following; provided, however, that Purchaser shall not have any liability
hereunder if Sellers fail to notify Purchaser of such liability in accordance
with Section 9.3 herein:
(i) Subject to the survival provisions of
Section 9.1 herein, any misrepresentation or breach of any representation or
warranty by Purchaser set forth in this Agreement or any Schedule, certificate
or other instrument, agreement or document furnished to Seller by Purchaser
pursuant to any of the transactions contemplated by the terms of this Agreement;
and
(ii) Subject to the survival provisions of
Section 9.1 herein, any non- fulfillment or breach of any covenant or agreement
of Purchaser set forth in this Agreement and any and
37
all other agreements, instruments, certificates and other documents furnished by
Sellers to Purchaser pursuant to any of the transactions contemplated by the
terms of this Agreement.
(iii) Any liability for Taxes as
contemplated by Section 8.1.2 and for Incremental Taxes as contemplated by
Section 8.1.3.
(iv) Any liability for actions taken by the
Purchaser relating to the operations of the Company following the Closing.
9.3 CONTRACTUAL STATUTE OF LIMITATIONS; NO TOLLING; CLAIMS
PROCEDURE. Notwithstanding anything contained in Section 9.1 herein to the
contrary, any claim brought pursuant to the terms of Section 9.2.1(iii) and
9.2.3(ii) must be made on or before the first (1st) anniversary of the Date of
Closing . Any such claims made thereafter shall be null and void, regardless of
when the facts purportedly giving rise to such claims were actually discovered
or with reasonable diligence should have been discovered. It is the intent of
the parties that this Section 9.3 shall serve as a contractual statute of
limitations with no tolling period permitted. If any claim for breach of any
covenant, obligation, representation or warranty contained herein shall be
asserted against any party, the party seeking indemnification ("Indemnified
Party") shall promptly notify, in writing, the party from whom indemnification
is sought ("Indemnifying Party"), stating the amount claimed to be due and
payable or an estimate of the claim if contingent or unliquidated, the basis of
the claim and the provision or provisions of this Agreement under which such
claim is asserted. Any notice hereunder shall be accompanied by copies of any
documents relied on by any claimant and furnished to the Indemnified Party.
Within thirty (30) calendar days after receipt of such notice, the Indemnifying
Party shall by written notice either (i) concede liability in whole as to the
amount claimed in such notice; (ii) deny liability in whole as to such amount;
or (iii) concede liability in part and deny liability. If the Indemnified Party
and Indemnifying Party are unable to resolve any difference over said liability
or the amount thereof, any action brought in respect of such claim shall be
subject to the provisions of Section 12.2 of this Agreement, subject to the
limitations contained in this Section 9.
9.4 MATTERS INVOLVING THIRD PARTIES.
9.4.1 If any third party shall notify the Company,
Sellers or Purchaser, as the case may be (the "Indemnified Party"), with respect
to any matter (a "Third Party Claim") which may give rise to a claim for
indemnification against the Company, Sellers or Purchaser, as the case may be
(the "Indemnifying Party"), then the Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing: provided, however, that no delay on the
part of the Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.
9.4.2 The Indemnifying Party will have the right to
defend the Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (i) either the
Indemnifying Party notifies the Indemnified Party in writing, within fifteen
38
(15) days after the Indemnified Party has given notice of the Third Party Claim,
that the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any loss the Indemnified Party may suffer resulting
from, arising out of, or caused by the Third Party "Claim," or in the event the
Indemnifying Party has indemnification coverage through its insurance carrier,
the Indemnifying Party tenders the Third-Party Claim to such insurance carrier
in writing within ten (10) days after the Indemnified Party has given notice of
a Third-Party Claim, and the Indemnified Party is provided with notice from the
insurance carrier, in writing, without any reservation of rights, that the
insurance carrier will provide legal representation and undertake coverage,
within thirty (30) days of such tender, (ii) the Indemnifying Party provides the
Indemnified Party with evidence acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder, (iii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief, (iv) settlement of, or an adverse judgment with respect
to, the Third Party Claim is not, in the good faith judgment of the Indemnified
Party, likely to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnified Party, and (v) the Indemnifying
Party conducts the defense of the Third Party Claim actively and diligently.
9.4.3 So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with Section 9.4.2 hereof,
(i) the Indemnified Party may retain separate counsel at its sole cost and
expense and participate in the defense of the Third Party "Claim," and the
Indemnifying Party shall provide the Indemnified Party and/or its counsel with
necessary information, including documents and pleadings, and further the
Indemnifying Party and the Indemnified Party shall enter into a joint defense
agreement, if necessary, to preserve the attorney privilege, (ii) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (iii)
the Indemnifying Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).
9.4.4 In the event any of the conditions in Section 9.4.2 hereof is or becomes
unsatisfied, (i) the Indemnified Party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner it may deem appropriate (and the Indemnified Party
need not consult with, or obtain any consent from, the Indemnifying Party in
connection therewith), (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the costs of defending against
the Third Party Claim (including actual attorneys' fees and expenses), and (iii)
the Indemnifying Party will remain responsible for any Loss the Indemnified
Party may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in this
Section 9.
9.5 BASKET AMOUNTS. Sellers shall not be obligated to pay any
Loss which a Purchaser suffers, sustains, or becomes subject to as a result of,
in connection with, relating or incidental to or by virtue of, without
duplication, any breach of the representations and warranties set forth in
Section 9.1 unless such Loss is a Material Loss, as that term is defined herein,
and until such time as all Material Losses, in the aggregate, exceed the sum of
Two Hundred Fifty Thousand and 00/100 ($250,000.00) Dollars ("Basket Amount"),
whereupon Sellers shall be obligated to pay
39
in full the entire amount of all Material Losses, including the Basket Amount.
For purposes of this Section 9.5, the term "Material Loss" shall be defined as
any single Loss which exceeds the sum of Five Thousand and 00/100 ($5,000.00)
Dollars. Notwithstanding anything contained herein to the contrary, in no event
shall Sellers be required to make any indemnification payments pursuant to the
terms of Sections 9.2.1(i) or (iii) herein, in the aggregate, in excess of Two
Million and 00/100 ($2,000,000.00) Dollars ("Ceiling Amount"); provided,
however, that any indemnification payments required to be made by Sellers
pursuant to the terms of Sections 9.2.1(i) and (iii) herein as a result of any
misrepresentation or breach by Sellers of any representation or warranty set
forth in Sections 3.1 and/or 3.2 herein or as a result of any liability or
obligation arising under Sections 9.2.1(ii) or 9.2.1(iv)-(vii) shall not be
restricted by the Ceiling Amount or the Basket Amount.
9.6 POST CLOSING INDEMNIFICATION. Notwithstanding the
contractual statute of limitations set forth in Section 9.1 herein, Purchaser
agrees, for a period of five (5) years from the Date of Closing, that it shall
not cause to be amended, altered or in any way changed or permit to be amended,
altered or changed the articles of incorporation or by-laws of the Company in
any manner which adversely affects the rights to indemnification by any
shareholder of the Company or any director, officer of employee of the Company
who served in such capacity on or prior to the Date of Closing. The Company
further agrees to maintain, if any, directors' and officers' liability insurance
for five (5) years from the Date of Closing in form and the extent of coverage
currently in effect for the Company. The Company further agrees that it shall
cause any successor of the Company to be bound by the provisions contained in
this Section 9.6. The agreements contained in this Section 9.6 shall survive the
Closing of the transactions contemplated herein for a period of five (5) years
from the Date of Closing.
9.7 LOSSES NET OF INSURANCE. The amount of any and all Losses
under Section 9.2 shall be determined net of any amount actually recovered by
Purchaser under insurance policies, indemnities or other reimbursement
arrangements with respect to such Losses. Each party hereby waives, to the
extent permitted under its applicable insurance policies, any subrogation rights
that it or their insurer may have with respect to any indemnifiable Losses.
9.8 TREATMENT OF INDEMNIFICATION PAYMENTS. Amounts paid to or
on behalf of Purchaser or Sellers as indemnification hereunder shall be treated
as adjustments to the consideration paid by Purchaser pursuant to the terms of
this Agreement.
10. ENVIRONMENTAL MATTERS.
10.1 ENVIRONMENTAL INDEMNIFICATION. From and after the Date of
Closing, and subject to the limitations set forth elsewhere in this Section, the
Sellers, shall indemnify, defend and hold harmless the Purchaser, from and
against all losses, obligations, suits, demands, claims, actions or causes of
action, assessments, damages, liabilities, costs and expenses (collectively
"liabilities"), asserted against, resulting to, imposed upon or incurred by the
Purchaser, by reason of or resulting from (i) the release or threat of release
prior to the Date of Closing of Contamination at or from the Macomb Facility;
(ii) the release of Contamination resulting from the use of pipes, tanks or
other equipment constituting part of the Business that leaked before and/or were
leaking at the Macomb Facility as of the Date of Closing; and (iii) violations
by the Sellers (in respect of the Company's
40
operation of the Business at the Macomb Facility) of any applicable
Environmental Law (including Environmental Permits) prior to or at the time of
the Closing Date.
10.2 WRITTEN NOTICE AND LIMITATIONS. Indemnification shall be
available under this Section only with respect to those specific environmental
claims of the type described in Section 10.1 above, for which the Purchaser has
provided written notice to the Sellers on or prior to the date which is five (5)
years from the Date of Closing and Sellers liability for any indemnity under
this Section shall be limited to the amount of $7,000,000.00.
10.3 CONTROL.
10.3.1 The Sellers shall have the right to control
the management of an investigation or remediation of Hazardous Substances with
respect to any real property that is subject to indemnification pursuant to this
Section. The Seller must notify the Purchaser, within thirty (30) days of
receipt of notice of the Purchaser's claim for indemnification for such matter,
that (1) it intends to undertake said responsibility or (2) more information is
needed from the Purchaser before the Seller can reasonably determine that the
Purchaser's claim is subject to indemnification pursuant to this Section. The
Purchaser shall promptly respond to such requests for information (to the extent
such information is reasonably available to the Purchaser) and, within thirty
(30) days of receipt of such information, the Seller shall notify the Purchaser
as to whether it shall undertake the investigation and remediation. Prior to a
timely determination by the Seller that it will undertake investigation and
remediation pursuant to this Section, the Purchaser shall take only those
actions necessary to comply with applicable Environmental Laws, the requirements
of governmental authorities or address conditions that pose an immediate and
acute environmental or health risk. 10.3.2 The Seller shall comply with all
applicable laws, including all applicable Environmental Laws, with respect to
its performance pursuant to this Section. The Purchaser may, at its own expense,
hire its own consultants, attorneys or other professionals to monitor the
investigation or remediation, including any field work undertaken by the Seller
and the Seller shall provide the Purchaser with the results of all such field
work. Notwithstanding the above, the Purchaser shall not take any actions that
shall unreasonably interfere with the Sellers performance of the investigation,
remediation and/or containment. The Seller shall undertake any such work
required herein in a manner designed to minimize any disruption, to the greatest
extent possible, with the conduct of operations at the property. The Purchaser
shall allow the Seller reasonable access to conduct any of the work contemplated
herein and shall fully cooperate with the Seller in the performance of the
investigation, remediation or containment, including, but not limited to,
providing the Seller with reasonable access to employees and documents as
necessary to conduct the cleanup.
10.4 OTHER. The Seller's obligation to indemnify, defend and
hold harmless the Purchaser for the matters addressed in this Section shall be
limited to those matters as to which the Purchaser provides the Seller with
written notice (such notice to be in conformance with other relevant provisions
of this Agreement and to contain, to the extent available, reasonable details of
the matter for which indemnification is sought) of said claim. The remedies
provided in this Section shall be the exclusive remedies to the Purchaser for
any claim which, with respect to conditions at
41
the Macomb Facility, asserts either a breach of representation or warranty of
Section 3.20 of this Agreement or some other claim pursuant to any Environmental
Law.
11. TERMINATION OF AGREEMENT.
11.1 TERMINATION OF AGREEMENT. This Agreement may be
terminated at any time prior to the Closing:
11.1.1 By mutual written agreement of Purchaser, the
Company and Sellers.
11.1.2 If any of the conditions precedent set forth
in Section 7 hereof have not been fulfilled.
11.1.3 Purchaser may terminate this Agreement by
giving written notice to the Company and Sellers at any time prior to the Date
of Closing in the event the Company or Sellers have breached any material
representation, warranty, or covenant contained in this Agreement in any
material respect, Purchaser has notified the Company and Sellers of the breach,
and the breach has continued without cure for a period of ten (10) days after
the notice of breach.
11.1.4 The Company and/or Sellers may terminate this
Agreement by giving written notice to Purchaser at any time prior to the Date of
Closing in the event Purchaser has breached any material representation,
warranty, or covenant contained in this Agreement in any material respect, the
Company and/or Sellers have notified Purchaser of the breach, and the breach has
continued without cure for a period of ten (10) days after the notice of breach.
11.1.5 By either Purchaser, the Company or Sellers if
the Closing shall not have occurred on or before March 31, 2000 unless such
failure to close shall be due to a breach of this Agreement by the party seeking
to terminate the Agreement pursuant to this Section.
11.1.6 If a federal or state court of competent
jurisdiction shall permanently enjoin the consummation of the transactions
contemplated hereby and such injunction shall be final and nonappealable.
11.2 EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided herein, this Agreement shall forthwith become null
and void and there shall be no liability on the part of any party hereto (or any
of their respective officers, directors or affiliates); provided, however, that
nothing contained in this Section shall relieve any party from liability for any
breach of this Agreement which occurred prior to the date of termination of this
Agreement in which case any liability of either party shall be limited to the
actual out-of-pocket costs incurred by the non- breaching party with respect to
this Agreement.
42
12. MISCELLANEOUS.
12.1 NOTICES. All notices, consents, waivers and other
communications given or made pursuant to this Agreement or the transactions
contemplated hereby must be in writing and shall be deemed to have been duly
given or made as of the date delivered if delivered personally (with written
confirmation of receipt), or mailed by registered or certified mail (postage
prepaid, return receipt requested) or deposited for delivery with a
nationally-recognized overnight courier. (with receipt acknowledged). Notices
shall be addressed as follows or to such other address of the party to whom the
same is directed shall have specified in conformity with the foregoing:
If to the ▇▇▇▇▇▇▇▇▇ Trust or the
ACR Stock Trust: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee
17140 El Mirador
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Kotz, Sangster, ▇▇▇▇▇▇▇ and ▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to the Company: ACR Industries, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Kotz, Sangster, ▇▇▇▇▇▇▇ and ▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
If to Purchaser: Triumph Group Acquisition Corp.
Four Glenhardie Corporate Center
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
Vice President and General Counsel
Triumph Group, Inc.
Four Glenhardie Corporate Center
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
12.2 GOVERNING LAW, JURISDICTION AND FORUM SELECTION. This
Agreement shall be governed by, construed and enforced in accordance with the
laws of the State of Michigan
43
without giving effect to any choice or conflict of law provisions or rules that
may cause the application of the laws of any jurisdiction other than those of
the State of Michigan
12.3 FURTHER ASSURANCES. The parties agree (i) to furnish upon
request by one party to the other such further information, (ii) to execute and
deliver to each other such other documents, and (iii) to do such other acts and
things, as one party may reasonably request from each other for the purpose of
carrying out the intent of this Agreement, the documents referred to in this
Agreement and the transactions contemplated hereby.
12.4 NO WAIVER OF REMEDIES. The rights and remedies of each
party in connection with this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power,
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (i) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the party; (ii) no waiver that may be given by a party will be applicable
except in the specific instance for which it is given; and (iii) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such
party or of the right of the party giving such notice or demand to take further
action with or without notice or demand.
12.5 ENTIRE AGREEMENT. This Agreement, along with all of the
Schedules and exhibits, and any and all documents referred to in this Agreement
and executed and delivered pursuant to the terms of this Agreement on the Date
of Closing, constitute the entire agreement between the parties hereto and
supersede all prior agreements and understandings, both written and oral,
between the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement or statement of intention has been
made by either party which is not set forth in this Agreement or such other
documents described herein, and neither party shall be bound by, or be liable
for, any alleged representation, promise, inducement or statement of intention
not set forth therein.
12.6 AMENDMENT. This Agreement, and all of the documents
referred to in this Agreement, may not be amended or modified except by an
instrument in writing signed by the parties.
12.7 ASSIGNMENT, SUCCESSORS AND NO THIRD-PARTY RIGHTS. Neither
party may assign any of its rights under this Agreement without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of each party. Nothing expressed
or referred to in this Agreement will be construed to give any person other than
the parties to this Agreement any legal or equitable right, remedy, or claim
under or with respect to this Agreement. There are no third-party beneficiaries
to this Agreement. This Agreement and all of
44
its provisions and conditions are for the sole and exclusive benefit of the
parties and their respective successors and assigns.
12.8 SEVERABILITY. If any term or other provision of this
Agreement is held invalid, illegal or unenforceable, whether in its entirety or
in part, by any court of competent jurisdiction, all of the other terms or
provisions of this Agreement will remain in full force and effect. Upon a
determination that any term or other provision is invalid, illegal or
unenforceable, each party hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner such that the transactions contemplated hereby
are fulfilled to the greatest extent possible.
12.9 SECTION HEADINGS, CONSTRUCTION. The headings contained in
this Agreement are provided for convenience only and will not affect the
construction or interpretation of this Agreement. All references to "Section",
"Sections" or Paragraph" refer to the corresponding Section, Sections or
Paragraph of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms. The parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
12.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
12.11 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
referred to herein are hereby incorporated by reference and made a part hereof.
12.12 BULK SALES. The Purchaser hereby waives compliance with
any applicable bulk sales or transfer law.
12.13 DEFINED TERMS. All capitalized words or expressions used
in this Agreement (including the Schedules and exhibits hereto) shall have the
meanings specified under Schedule 12.13 herein, such meanings to be equally
applicable to both singular and plural forms of the term defined.
45
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties effective on the date specified below, as of the date first
written above.
WITNESSES: SELLERS:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee under
Revocable Living Trust Agreement of ▇▇▇▇▇
Dated: March 31, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ dated March 8, 1989, as
--------------------------- amended
Dated: /s/ March 31, 2000
----------------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee Under ACR
Stock Trust Agreement of ▇▇▇▇▇
Dated: March 31, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ dated
--------------------------- March 27, 1989, as amended
Dated: /s/ March 31, 2000
----------------------------------
ACR INDUSTRIES, INC., a Michigan
corporation
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------- -------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Chairman of
the Board and President
Dated: March 31, 2000 Dated: March 31, 2000
--------------------------- ----------------------------------
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------- -----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Dated: March 31, 2000 Dated: March 31, 2000
--------------------------- ----------------------------------
46
PURCHASER:
TRIUMPH GROUP ACQUISITION CORP.
a Delaware corporation,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇ ▇. Ill
---------------------------------- -------------------------------------
Dated: March 31, 2000 Dated: March 31, 2000
--------------------------- ----------------------------------
47
JOINDER
Each of the undersigned Joining Shareholders joins in the execution of
this Agreement solely for the purposes of (1) the sale of that Joining
Shareholder's Shares to Purchaser and thereby establishing that Joining
Shareholder's right to payment hereunder; and (2) to represent and warrant to
Purchaser, individually and not jointly and severally, that the Shares set forth
opposite that Joining Shareholder's name on Schedule 3.2 are owned by that
Joining Shareholder free and clear of all Claims.
Dated: March 31, 2000 /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------- -------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Trustee of the Revocable
Living Trust Agreement of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
dated March 22, 2000
Dated: March 31, 2000 /s/ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------- ---------------------------------------------
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Trustee of the
Revocable Living Trust Agreement of ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, dated March 22, 2000
Dated: March 31, 2000 /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------- -------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Trustee of the
Revocable Living Trust Agreement of ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇▇, dated September 10, 1999
Dated: March 31, 2000 /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------- -------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Trustee of the
Revocable Living Trust Agreement of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, dated July 8, 1999
48
SCHEDULE 12.13
DEFINITIONS
"ACCOUNTS RECEIVABLE" means all combined accounts and notes receivable of the
Company arising from the Business, including intercompany receivables for
products shipped or sold by the Business to the Company or an Affiliate of the
Company.
"ACR STOCK TRUST" shall have the meaning ascribed to such term in the
introduction paragraph of this Agreement.
"AFFILIATE" means with respect to any Person, any Person who controls, is
controlled by or is under common control with, the designated entity. Ownership,
directly or indirectly, of 20% or more of the voting stock or other equity
interest of a Person shall be deemed to constitute control.
"AGREEMENT" shall have the meaning ascribed to such term in the introduction
paragraph of this Agreement.
"APPLICABLE LAW" shall have the meaning ascribed to such term in Section 3.4.
"APPLICABLE TAX LAW" shall mean any laws of any nation, state, region, province,
locality, municipality or other jurisdiction relating to Taxes, including
regulations of any governmental entity or political subdivision of such
jurisdiction duly charged with interpreting such laws.
"ASSETS" means all of the assets, properties and rights of every kind and
description, real, personal and mixed, tangible and intangible, wherever
situated of the Company.
"BASKET AMOUNT" shall have the meaning ascribed to such term in Section 9.5.
"BID BALANCE SHEET" shall have the meaning ascribed to such term in Section
2.2.1.
"▇▇▇▇▇▇▇▇▇ TRUST" shall have the meaning ascribed to such term in the
introduction paragraph of this Agreement.
"BOOKS AND RECORDS" means all combined books of account and other financial
records of the Company relating to the Business.
"BUSINESS" means the Company's business of supplying gears, gear boxes,
transmissions and geared systems to the aerospace industry.
1
"CEILING AMOUNT" shall have the meaning ascribed to such term in Section 9.5.
"CLAIM" means any and all liens, mortgages, charges, claims, liabilities,
options, debts, security interests, secured claims, encroachments, restrictive
covenants, easements, servitudes, leases, options, rights of first refusal,
title defects and other encumbrances of any kind or nature whatsoever, whether
or not contingent, liquidated, disputed or known.
"CLERK" shall have the meaning ascribed to such term in Section 6.5.
"CLOSING" shall have the meaning ascribed to such term in Section 2.3.
"CLOSING CASH" shall have the meaning ascribed to such term in Section 2.1.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall have the meaning ascribed to such term in the introduction
paragraph of this Agreement.
"COMPANY CONFIDENTIAL INFORMATION" shall have the meaning ascribed to such term
in Section 6.1.
"CONFIDENTIAL INFORMATION" shall have the meaning ascribed to such term in
Section 6.1.5.
"CONTAMINATION" shall have the meaning ascribed to such term in Section
3.20.l(i).
"CONTRACTS" shall have the meaning ascribed to such term in Section 3.11.
"COURT" shall have the meaning ascribed to such term in Section 6.5.
"DATABASE" shall have the meaning ascribed to such term in Section 3.26.1(i).
"DATE OF CLOSING" shall have the meaning ascribed to such term in Section 2.3.
"DEPOSITED AMOUNT" shall have the meaning ascribed to such term in Section 6.5.
"EMBEDDED CONTROL" shall have the meaning ascribed to such term in Section
3.26.1(ii).
"EMPLOYEES" shall have the meaning ascribed in Section 7.1.8(ix).
"ENVIRONMENTAL LAWS" shall have the meaning ascribed to such term in Section
3.20.1(ii).
"ENVIRONMENTAL LIEN" shall have the meaning ascribed to such term in Section
3.20.1(iii).
2
"ENVIRONMENTAL PERMITS" shall have the meaning ascribed to such term in Section
3.20.2(ii).
"ESTIMATED CLOSING BALANCE SHEET" shall have the meaning ascribed to such term
in Section 2.2.1.
"FINANCIAL SCHEDULES" shall have the meaning ascribed to such term in Section
3.6.
"FINAL CLOSING BALANCE SHEET" shall have the meaning ascribed to such term in
Section 2.2.2.
"GAAP" shall have the meaning ascribed to such term in Section 2.2.1.
"GOVERNMENTAL AUTHORITY" means the government of the United States, any state or
political subdivision thereof, any foreign country and any entity exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government.
"HSR ACT" shall have the meaning ascribed to such term in Section 6.2.1.
"HARDWARE" shall have the meaning ascribed to such term in Section 3.26.1(iii).
"HAZARDOUS SUBSTANCES" shall have the meaning ascribed to such term in Section
3.20.1(iv).;
"HOLDBACK AMOUNT" shall have the meaning ascribed to such term in Section 2.1.2.
"INCREMENTAL TAX" shall mean any Taxes attributable to the Section 338(h)(10)
Election (including, without limitation, any recapture under Code Section
1245 and any LIFO inventory recapture under Code Section 1363, but not
including any Taxes on built-in gains under Code Section 1374) which reduce
Sellers' after-tax cash proceeds from the sale of the Shares pursuant to the
transactions contemplated by the terms of this Agreement to an amount less
than that amount determined by subtracting: (x) the Taxes that would have
been imposed on the amount of gain calculated to be the difference between
the Closing Cash and the tax basis, as computed for U.S. Income Tax purposes,
of Sellers in all of their Shares if the Section 338(h)(10) Election had not
been made (such amount as computed in this subparagraph (x) reflects the Tax
liability which the Sellers would have incurred in a stock sale transaction
without the Section 338(h)(10) Election) from (y) the Closing Cash. In the
event that the Purchaser and Sellers cannot agree which Taxes are
attributable to the Section 338(h)(10) Election or which Taxes would have
been imposed on Sellers if the Section 338(h)(10) Election had not been made,
the parties will retain an Accounting Firm to make such determinations. The
determinations of such Accounting Firm shall be dispositive. For purposes of
computing "Incremental Taxes," Sellers shall provide to Purchaser the
computations of the tax basis which Sellers' determined for their Shares.
Purchaser shall have the right to review such computations and all supporting
schedules and other information related thereto.
"INDEMNIFIED PARTY" shall have the meaning ascribed to such term in Section
9.3.
3
"INDEMNIFYING PARTY" shall have the meaning ascribed to such term in Section
9.3.
"INTELLECTUAL PROPERTY" shall have the meaning ascribed to such term in Section
3.13.1.
"INVENTORY" means all raw materials inventory, work-in-process inventory,
finished goods inventory and spare parts inventory, together with all
manufacturing supplies and boxing, labeling and other shipping materials and, to
the extent permitted by law, an assignment of all related manufacturer or
fabricator warranties, guarantees and indemnities.
"JOINING SHAREHOLDER" shall have the meaning ascribed to such term in the
"Whereas" clauses of this Agreement.
"KNOWLEDGE" means, with respect to the Company, the actual knowledge without
independent investigation of the Company's management employees who shall be
defined as those employees listed on Schedule 11.4(a), and with respect to
Sellers, the actual knowledge without independent investigation of ▇▇▇▇▇▇▇▇▇ and
the Company.
"LEASED REAL PROPERTY" shall have the meaning ascribed to such term in Section
3.14.
"LIABILITIES" shall have the meaning ascribed to such term in Section 3.8.
"LIENS" means all mortgages, liens, pledges, charges, security interests, title
retention or security agreements, claims, restrictions, leases, options, rights
of first offer or first refusal, confidentiality or secrecy agreements,
noncompetition agreements, defects in title and other encumbrances.
"LOSS" means any liability, demand, claim, action, cause of action,
investigation, damage, deficiency, tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all interest,
penalties, actual attorneys' fees, and associated costs and expenses, including
those relating to the enforcement of the terms of this Agreement, but excluding
consequential damages, lost profits or punitive damages.
"MACOMB FACILITY" shall have the meaning ascribed in Section 9.2.1(vi).
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to such term in
Paragraph 3.1.1.
"NET OPERATING ASSETS" shall be calculated in the manner described in Section
2.2.1.
"1999 FINANCIAL STATEMENT" shall have the meaning ascribed to such term in
Section 3.6.
"1999 FINANCIAL STATEMENT DATE" shall mean March 31, 1999.
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"PERMITS" shall mean any and all federal, state and local governmental licenses,
consents, approvals, authorizations, registrations, franchises, Certificates of
Occupancy, and permits, including, without limitation, those relating to (i) air
emissions, (ii) water discharges, (iii) solid or liquid waste disposal of
Hazardous Materials and (iv) other environmental, health and safety matters.
"PERSON" shall mean an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, limited
liability company or any other entity of whatever nature.
"PRE-CLOSING" shall have the meaning ascribed to such term in Section 2.3.
"PRE-CLOSING PERIOD" shall mean, with respect to the Company, any Tax Period
ending on or before the Date of Closing.
"PROMISSORY NOTE" shall have the meaning ascribed to such term in Section 2.1.3.
"PRO RATA SHARE" means the Joining Shareholders' percentage ownership of the
Shares on the Date of Closing set forth on Schedule 3.2.
"PURCHASE PRICE" shall have the meaning ascribed to such term in Section 2.1.
"PURCHASER" shall have the meaning ascribed to such term in the introduction
paragraph of this Agreement.
"PURCHASER CONFIDENTIAL INFORMATION" shall have the meaning ascribed to such
term in Section 6.1.
"PURCHASER'S AGENTS" shall have the meaning ascribed to such term in Section
5.3.
"REAL PROPERTY LEASES" shall have the meaning ascribed to such term in Section
3.14.
"S-CORPORATION DEPOSIT" shall have the meaning ascribed to such term in Section
7.1.8(xv).
"SECTION 338(h)(10) ELECTION" shall have the meaning ascribed to such term in
Section 8.1.3.
"SECTION 338 FORMS" shall have the meaning ascribed to such term in Section
8.4.1.
"SELLERS" shall have the meaning ascribed to such term in the introduction
paragraph of this Agreement.
"SELLERS CLOSING FEES" shall have the meaning ascribed to such term in Section
6.3.
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"SHARES" shall have the meaning ascribed to such term in Section 1.1.
"SOFTWARE" shall have the meaning ascribed to such term in Section 3.26.1(iv).
"STOCK PURCHASE TRANSACTION" shall have the meaning ascribed to such term in
Section 8.4.1.
"TAX AUTHORITY" shall mean, with respect to any Tax, any governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Taxes for such entity or subdivision,
including any governmental or quasi-governmental entity or agency that imposes,
or is charged with collecting, social security or similar charges or premiums.
"TAX" OR "TAXES" shall have the meaning ascribed to such term in Section
3.12.1(i).
"TAX PERIOD" shall mean, with respect to any Tax, the period for which the Tax
is reported as provided under Applicable Tax Laws.
"TAX RETURN" shall have the meaning ascribed to such term in Section 3.12.1(ii).
"TECHNICAL INFORMATION" shall have the meaning ascribed to such term in Section
3.26.1(v).
"THIRD PARTY CLAIM" shall have the meaning ascribed to such term in Section
9.4.1.
"YEAR 2000 COMPLIANT" shall have the meaning ascribed to such term in Section
3.26.1(vi).
"YEAR 2000 PROBLEM" shall have the meaning ascribed to such term in Section
3.26.1(vii).
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