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Exhibit 10.11
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STOCK PURCHASE AGREEMENT
By and Between
HMI INDUSTRIES INC.
and
RHONE CAPITAL LLC
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Dated
December 17, 1997
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STOCK PURCHASE AGREEMENT
Table of Contents
Page
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ARTICLE I PURCHASE AND SALE OF SHARES
1.1 Sale and Purchase of Shares ................................ 1
1.2 Purchase Price ............................................. 2
1.3 Closing .................................................... 4
ARTICLE II POST-CLOSING ADJUSTMENTS
2.1 Adjustment of Purchase Price .............................. 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization, Standing and Authority of Seller ............ 8
3.2 Authorization ............................................. 8
3.3 No Violations, No Conflict ................................ 9
3.4 Consents .................................................. 9
3.5 Certificate of Incorporation, By-Laws and Regulations ..... 10
3.6 Outstanding Shares ........................................ 11
3.7 Ownership of Shares ....................................... 11
3.8 Authorized Shares ......................................... 11
3.9 Financial Statements ...................................... 11
3.10 Title to Assets ........................................... 12
3.11 Intellectual Property ..................................... 13
3.12 Real Property ............................................. 13
3.13 Contracts ................................................. 14
3.14 Accounts Receivable ....................................... 15
3.15 Inventory ................................................. 16
3.16 Litigation and Compliance with Laws ....................... 16
3.17 Defaults and Permits ...................................... 18
3.18 Insurance ................................................. 19
3.19 Environmental Matters ..................................... 19
3.20 Employee Benefit Plans .................................... 20
3.21 Employee Matters .......................................... 23
3.22 Taxes and Returns ......................................... 23
3.23 Absence of Material Changes ............................... 24
3.24 Broker's Commission or Finder's Fees ...................... 26
3.25 Vendors and Customers ..................................... 26
3.26 Accounts Payable .......................................... 27
3.27 Affiliate Transactions .................................... 27
3.28 Knowledge ................................................. 27
3.29 Disclosure ................................................ 28
3.30 Information in Proxy Statement ............................ 28
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization, Standing and Authority of Buyer .............. 28
4.2 Authorization .............................................. 29
4.3 No Conflict, No Violation .................................. 29
4.4 Consents ................................................... 30
4.5 Litigation ................................................. 30
4.6 Investment Intent .......................................... 31
4.7 Financing .................................................. 31
4.8 No Dealing with Affiliates ................................. 31
4.9 Broker's Commission or Finder's Fees ....................... 31
4.10 Information in Proxy Statement ............................. 32
ARTICLE V ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 Ordinary Course ............................................ 32
5.2 Access and Confidentiality ................................. 34
5.3 Preservation of and Access to Records ...................... 35
5.4 Regulatory and Other Authorizations ........................ 36
5.5 Further Assurances ......................................... 36
5.6 Agreements with Respect to Insurance ....................... 36
5.7 Employee and Employee Benefit Matters ...................... 37
5.8 Accounts Receivable and Inventory .......................... 39
5.9 Other Offers ............................................... 40
5.10 Restrictive Covenants ...................................... 41
5.11 Shareholder Approval; Proxy Statement ...................... 41
5.12 Proposed Liquidation, Distribution, Etc .................... 41
5.13 Payment to Profit Sharing Plan ............................. 42
5.14 Supplements to Schedules ................................... 42
ARTICLE VI CONDITIONS TO CLOSING
6.1 Seller's Conditions to Close ............................... 43
6.2 Buyer's Conditions to Close ................................ 44
ARTICLE VII THE CLOSING
7.1 Seller's Deliveries ........................................ 46
7.2 Buyer's Deliveries ......................................... 47
ARTICLE VIII INDEMNIFICATION
8.1 Indemnification by Buyer ................................... 48
8.2 Indemnification by Seller .................................. 49
8.3 Limitation on Indemnity .................................... 50
8.4 Indemnification Procedures ................................. 51
8.5 Environmental Matters ...................................... 53
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ARTICLE IX TAXES
9.1 Apportionment and Indemnification ....................... 57
9.2 Filing of Tax Returns ................................... 59
9.3 Section 338(h)(l0) Election ............................. 60
ARTICLE X TERMINATION
10.1 Termination ............................................. 61
10.2 Effect of Termination ................................... 61
ARTICLE XI MISCELLANEOUS
11.1 Expenses ................................................ 62
11.2 Public Disclosure ....................................... 62
11.3 Survival ................................................ 62
11.4 Governing Law ........................................... 62
11.5 Notices ................................................. 62
11.6 Assignment .............................................. 64
11.7 Section Headings ........................................ 64
11.8 Counterparts ............................................ 64
11.9 Amendment ............................................... 64
11.10 Waiver .................................................. 64
11.11 Miscellaneous ........................................... 65
SCHEDULES
EXHIBIT A - ESCROW AGREEMENT
ANNEX A - FORM OF OPINION OF COUNSEL TO SELLER
ANNEX B - FORM OF OPINION OF COUNSEL TO BUYER
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of December
17, 1997, by and between HMI Industries Inc., a Delaware corporation ("Seller"),
and Rhone Capital LLC, a Delaware limited liability company, and together with
its assigns, collectively, "Buyer").
Seller owns all of the issued and outstanding shares of common stock
(the "Shares") of Bliss Manufacturing Company, an Ohio corporation (the
"Company"). Subject to the terms and conditions stated herein, Seller wishes to
sell and Buyer wishes to purchase from Seller all of the Shares of the Company
owned by Seller which constitute 100% of the issued and outstanding shares of
the capital stock of the Company. The term "Business" shall mean the business
and operations conducted by the Company and ▇▇▇▇▇▇ Falls Holding Company, a
Delaware corporation ("Sub").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 SALE AND PURCHASE OF SHARES. On the terms and subject to the
conditions herein expressed and based on the representations, warranties,
covenants and agreements contained herein, Seller agrees to sell, assign,
transfer and convey to Buyer, and Buyer agrees to purchase, acquire and accept
from Seller at the Closing, as that term is hereinafter defined, all of Seller's
right, title and interest in and to the Shares.
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1.2 PURCHASE PRICE. (a) In consideration for the sale and transfer of
the Shares described in Section 1.1 above, at the Closing, Buyer shall deliver
(D to Seller an amount equal to $30,500,000 by wire transfer of immediately
available funds to Seller's account at Star Bank, N.A. and (b) to The Chase
Manhattan Bank or such other escrow agent reasonably agreeable to the parties
(the "Escrow Agent"), under an Escrow Agreement substantially in the form
attached hereto as EXHIBIT A (the "Escrow Agreement"), $1,000,000 (the "Escrow")
by wire transfer of immediately available funds to an interest bearing account
specified by the Escrow Agent (the amounts described in clauses (i) and (ii)
being referred to as the "Purchase Price"). Seller shall pay and distribute from
the portion of the Purchase Price that is delivered by Buyer to Seller at the
Closing the following closing payments: (x) $1,000,000 shall be paid to Liberty
Steel in accordance with the letter agreement between Seller and Liberty Steel
referred to in SCHEDULE 5.1 and (y) $500,000 shall be paid to the Company to
fund future employee benefits (the "Closing Payments"). The Purchase Price shall
be subject to post-closing adjustments in accordance with the procedures set
forth in Article II hereof.
(b) If Buyer delivers to Seller the Acceptance Notice referred to
in Section 2.1(d) or fails to deliver an Objection Notice (as defined below)
within the forty-five (45) day period required by Section 2.1(d), then, as soon
as practicable (but not more than two (2) business days) after final
determination of the Final Net Current Assets (as defined below), (j) in the
event the Final Net Current Assets are less than the Reference Net Current
Assets (as defined below), Seller and Buyer shall provide joint written
instructions to the Escrow Agent directing the Escrow Agent to remit to Buyer,
the amount by which the Reference Net Current Assets exceeds the Final Net
Current Assets (PROVIDED that, to the extent that such amount would reduce the
Escrow to less than $500,000, only an amount that
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would reduce the Escrow to $500,000 shall be paid to Buyer out of the Escrow and
Seller shall remit to Buyer the balance of such amount owed to Buyer pursuant to
this clause (i)), or (ii) in the event the Final Net Current Assets exceed the
Reference Net Current Assets, Buyer shall remit to Seller the amount by which
the Final Net Current Assets is greater than the Reference Net Current Assets.
Alternatively, if Buyer delivers to Seller the Objection Notice referred to in
Section 2.1(d), within two (2) business days after such delivery, (y) Seller and
Buyer shall provide joint written instructions to the Escrow Agent directing the
Escrow Agent to remit to Buyer the amount, if any, by which the undisputed
portion of the Final Net Current Assets is less than the Reference Net Current
Assets (PROVIDED that, to the extent that such amount would reduce the Escrow to
less than $500,000, only an amount that would reduce the Escrow to $500,000
shall be paid to Buyer out of the Escrow and Seller shall remit to Buyer the
balance of such amount owed to Buyer pursuant to this clause (y)), or (z) Buyer
shall remit to Seller the amount, if any, by which the undisputed portion of
the Final Net Current Assets is greater than the Reference Net Current Assets.
Within two (2) business days after the resolution of any dispute by the parties
or the Unrelated Accounting Firm (as defined below) relating to the Objection
Notice, Seller and Buyer shall provide joint written instructions to the Escrow
Agent directing the Escrow Agent to remit to Buyer (PROVIDED that, to the extent
that such amount would reduce the Escrow to less than $500,000, only an amount
that would reduce the Escrow to $500,000 shall be paid to Buyer out of the
Escrow and Seller shall remit to Buyer the balance of such amount owed to
Buyer), in the case where the portion of the Final Net Current Assets is less
than the Reference Net Current Assets, or Buyer shall remit to Seller, in the
case where the portion of the Final Net Current Assets is more than the
Reference Net Current Assets, the amount of any further adjustment required.
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(c) Any payment pursuant to Section 1.2(b) shall be made by certified
or bank cashier's check, or, at the recipient's option, by wire transfer of
immediately available funds.
1.3 CLOSING. The closing (the "Closing") of the transactions
contemplated hereby shall take place at the offices of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
L.L.P., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (or at
such other place as the parties may agree in writing), at 10:00 a.m. on March
15, 1998, or such other date mutually designated by Seller and Buyer, but in no
event later than five (5) business days after the date when each of the
conditions specified in Article VI has been fulfilled (or waived by the party
entitled to waive that condition). The date on which the Closing is held is
referred to in this Agreement as the "Closing Date." At the Closing, the parties
shall execute and deliver the documents referred to in Article VII.
ARTICLE H
POST-CLOSING ADJUSTMENTS
2.1 ADJUSTMENT OF PURCHASE PRICE. (a) The Purchase Price
shall be adjusted as follows:
(i) For purposes hereof, "Final Net Current Assets" shall mean the
current assets of the Business less the current liabilities of the Business, as
reflected in the Final Balance Sheet (as defined in Section 2.1(b)). "Reference
Net Current Assets" shall mean the current assets of the Business less the
current liabilities of the Business as reflected on the Reference Balance Sheet
(as defined in Section 3.9).
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(ii) If the amount of the Final Net Current Assets determined in
accordance with this Section 2.1 is less than the Reference Net Current Assets,
the Purchase Price shall be decreased by an amount equal to the difference
between the Final Net Current Assets and the Reference Net Current Assets.
(iii) If the amount of the Final Net Current Assets is greater than
the Reference Net Current Assets, the Purchase Price shall be increased by an
amount equal to the difference between the Final Net Current Assets and the
Reference Net Current Assets.
(b) The Final Net Current Assets shall be determined as of the close of
business on the day immediately preceding the day of the Closing (the
"Determination Time") on the basis of the balance sheet of the Business as of
the Determination Time (the "Final Balance Sheet"). The Final Balance Sheet
shall be prepared by Seller in accordance with generally accepted accounting
principles applied on a basis consistent with the principles used in the
preparation of the Reference Balance Sheet (the "Accounting Principles") and
shall be reported upon by Coopers & ▇▇▇▇▇▇▇ LLP ("C&L"). For purposes of
calculating the Purchase Price adjustment, any current assets and current
liabilities relating to (j) the adoption of FAS 106 and (ii) current or deferred
income tax shall be excluded from both the Reference Balance Sheet and the Final
Balance Sheet. Additionally, Seller and Buyer agree that the only amount to be
accrued for employee profit sharing and incentive compensation shall be at the
rate of $75,000 per month in the aggregate for each month commencing October 1,
1997 until the Final Balance Sheet date, PROVIDED that the accrual shall be pro
rata for any partial month. C&L shall hereinafter be referred to as the
"Auditor" . Seller shall be responsible for the fees and expenses of the
Auditor.
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(c) Seller shall engage the Auditor to examine the Final Balance Sheet
and shall deliver to Buyer the Final Balance Sheet within sixty (60) days after
the Closing, together with a report of the Auditor thereon (j) setting forth the
amount of Final Net Current Assets reflected in the Final Balance Sheet, (ii)
stating that (y) the examination has been made in accordance with generally
accepted auditing standards as supplemented by the Accounting Principles, and
(z) the Final Balance Sheet has been prepared in conformity with the Accounting
Principles, and (iii) setting forth the amount of any required adjustment to the
Purchase Price pursuant to this Section 2.1. Buyer and Seller shall take such
actions as are necessary to cause the Auditor's audit of the Final Balance Sheet
to be performed expeditiously. During the period from the Closing Date until the
date of delivery of the Final Balance Sheet, Buyer shall give Seller, the
Auditor and other appropriate personnel such assistance and access to the assets
and books and records of the Company as Seller and the Auditor shall reasonably
request during normal business hours in order to enable them to prepare and
examine, respectively, the Final Balance Sheet. Price Waterhouse LLP or such
other independent accounting firm engaged by Buyer at Buyer's sole expense
(which shall not be the Unrelated Accounting Firm referred to below) ("Buyer's
Auditor") shall have the opportunity to observe the taking of the inventory of
the Business in connection with the preparation of the Final Balance Sheet, and
to examine the work papers, schedules and other documents prepared by Seller in
connection with its preparation of the Final Balance Sheet. Seller shall use its
reasonable efforts to cause the Auditor to permit Buyer and Buyer's Auditor to
examine the Auditor's work papers used in connection with its audit of the Final
Balance Sheet.
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(d) Within forty-five (45) days following the delivery of the Final
Balance Sheet and the related report of the Auditor, Buyer shall deliver to
Seller a notice of objection (an "Objection Notice") or a notice of acceptance
(an "Acceptance Notice") with respect to the Final Balance Sheet and related
Auditor's report. Such Final Balance Sheet and related Auditor's report shall be
final and binding on the parties if an Acceptance Notice is delivered to Seller
or if no Objection Notice is delivered to Seller within such forty-five (45) day
period. Any Objection Notice shall specify in reasonable detail the items on the
Final Balance Sheet disputed and shall describe in reasonable detail the basis
for the objection and all information in the possession of the objecting party
which forms the basis thereof, as well as the amount in dispute. If an Objection
Notice is given, the parties shall consult with each other with respect to the
objection. If the parties are unable to reach agreement within fifteen (15) days
after an Objection Notice has been given, any unresolved disputed items shall be
promptly referred to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP (the "Unrelated Accounting Firm"). The
Unrelated Accounting Firm shall be directed to render a written report on the
unresolved disputed issues with respect to the Final Balance Sheet as promptly
as practicable and to resolve only those issues of dispute set forth in the
Objection Notice. The resolution of the dispute by the Unrelated Accounting Firm
shall be final and binding on the parties. The fees and expenses of the
Unrelated Accounting Firm shall be borne equally by Seller and Buyer. Within two
(2) business days following the latest to occur of (D the delivery by Buyer of
an Acceptance Notice, (ii) the expiration of the 45-day objection period or
(iii) the receipt of the written report rendered by the Unrelated Accounting
Firm, Buyer and Seller shall direct the Escrow Agent to release to Seller from
the Escrow, in immediately available funds to Seller's account as specified in
Section 1.2(a) or as otherwise directed by Seller, an amount that, after making
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any payments from the Escrow to Buyer, would leave a remaining balance of
$500,000 in the Escrow Account.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer (which representations and
warranties shall survive the Closing to the extent provided in Section 11.3
hereof) that:
3.1 ORGANIZATION, STANDING AND AUTHORITY OF SELLER. Seller, the Company
and Sub are corporations duly organized, validly existing and in good standing
under the laws of the states indicated on SCHEDULE 3.1 and Seller has full
corporate power and authority to enter into and perform this Agreement, the
Escrow Agreement and the Stockholder Voting Agreement dated the date hereof
among Seller, the shareholders of Seller named therein and Buyer (the "Voting
Agreement"). Each of the Company and Sub is duly qualified to do business and is
in good standing in each jurisdiction in which the properties owned or leased by
it or the conduct of the Business requires such qualification, except where the
failure to be so qualified or in good standing would not have a material adverse
effect on the operations of the Business taken as a whole.
3.2 AUTHORIZATION. The execution, delivery and performance of each of
this Agreement, the Escrow Agreement and the Voting Agreement by Seller have
been duly authorized by all necessary corporate action of Seller, and this
Agreement and the Voting Agreement constitute and, when executed and delivered,
the Escrow Agreement will constitute the valid and binding obligation of Seller
enforceable against it in accordance with its terms, except to the extent
enforceability may be limited by bankruptcy, insolvency, reorganization,
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moratorium or other similar laws affecting the enforcement of creditors' rights
in general and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
3.3 NO VIOLATIONS, NO CONFLICT. Subject to receipt of the consents and
approvals listed in SCHEDULE 3.3, the execution, delivery and performance of
this Agreement, the Voting Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby by Seller will
not (j) violate or conflict with the certificates of incorporation or the
by-laws or regulations, as the case may be, of Seller, the Company or Sub, (ii)
conflict with, or result in the breach of, or termination of, or constitute a
default under (whether with notice or lapse of time or both), or accelerate or
permit the acceleration of the performance required by, any indenture, mortgage,
lien, lease, agreement, commitment or other instrument, or any order, judgment
or decree, to which Seller or the Company or Sub is a party or by which Seller
or the Company or Sub or any of their properties are bound, (iii) constitute a
violation of any law, regulation, order, writ, judgment, injunction or decree
applicable to Seller or the Company or Sub, or (iv) result in the creation of
any lien, charge or encumbrance upon the capital stock, properties or assets of
Seller or the Company or Sub, other than violations, conflicts, breaches,
terminations, accelerations and defaults specified in the foregoing clauses (ii)
and (iv) which could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Company or Sub or on Seller's
ability to perform its obligations under this Agreement, the Voting Agreement or
the Escrow Agreement.
3.4 CONSENTS. The only authorization, consent, approval or notice of
any federal, state, local or foreign regulatory body required to be obtained or
given or waiting period
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required to expire with respect to Seller in order that this Agreement, the
Voting Agreement or the Escrow Agreement and the transactions contemplated
hereby or thereby may be consummated by the Buyer and Seller is (a) notification
to the Federal Trade Commission and the Antitrust Division of the Department of
Justice pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976
and the rules promulgated thereunder (the "HSR Act", and such notification, an
"HSR Filing") and the expiration of the applicable waiting periods under the HSR
Act and (b) filings with the Pension Benefit Guaranty Corporation (the "PBGC"),
the Internal Revenue Service (the "IRS"), the Department of Labor (the "DOL")
and any other similar governmental entity with respect to the transfer of assets
and liabilities of Plans (as defined below). Except as disclosed in SCHEDULE 3.3
or 3.4, no consent or approval of any other party (other than any governmental
entity referred to above) is required to be obtained by Seller for the
execution, delivery or performance of this Agreement, the Voting Agreement or
the Escrow Agreement or the performance by Seller of the transactions
contemplated hereby and thereby, except where the failure to obtain any such
consent or approval would not prevent or delay the consummation of the
transactions contemplated hereby, or otherwise prevent Seller from performing
its obligations under this Agreement, the Voting Agreement or the Escrow
Agreement or would not, individually or in the aggregate, have a material
adverse effect on Seller or the Company or Sub.
3.5 CERTIFICATE OF INCORPORATION, BY-LAWS AND REGULATIONS. SCHEDULE 3.5
sets forth correct and complete copies of the certificates of incorporation, as
amended and restated from time to time, and the regulations and by-laws, as the
case may be, of the Company and Sub. SCHEDULE 3.5 sets forth a list of the
directors and officers of each of the Company and Sub.
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3.6 OUTSTANDING SHARES. The authorized capital stock of the Company and
Sub, the number of shares issued and outstanding and the shareholders of the
Company and Sub are set forth on SCHEDULE 3.6.
3.7 OWNERSHIP OF SHARES. The Shares of the Company and the outstanding
capital stock of Sub are owned by Seller and the Company, respectively,
beneficially and of record, free and clear of all liens, encumbrances or claims.
At the Closing, Seller will transfer and deliver to Buyer valid title to all of
the Shares, free and clear of any liens, claims, charges, pledges, security
interests, options or other legal or equitable encumbrances of any kind
(collectively "Claims"). Except for Sub and except as disclosed in SCHEDULE 3.7
hereto, the Company is neither the record nor beneficial holder of any capital
stock, membership interest in any limited liability company, partnership
interest or other similar interest or right to acquire any capital stock,
membership interest in any limited liability company, partnership interest or
other similar interest in any entity.
3.8 AUTHORIZED SHARES. All of the Shares of the Company and shares of
capital stock of Sub are duly authorized, validly issued, fully paid and
nonassessable. Except for this Agreement, there are no options or rights of any
kind to acquire any shares of any class of securities or any securities
convertible into or exchangeable for any capital stock of the Company or Sub.
3.9 FINANCIAL STATEMENTS. SCHEDULE 3.9 sets forth financial statements
including the balance sheet as of September 30, 1997 (the "Reference Balance
Sheet"), and the income statements for the fiscal years ended September 30,
1995, 1996 and 1997 for the Company and Sub (together with the Reference Balance
Sheet, the "Financial Statements"). SCHEDULE 3.9 sets forth certain items which
represent a combination of actual events and transactions
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that occurred in the year ended September 30, 1997. The Financial Statements
present fairly, in all material respects, the financial condition and results of
operations of the Company and Sub as of the dates and for the periods indicated
therein. Such Financial Statements were used in the preparation of Seller's
consolidated financial statements and were prepared in accordance with generally
accepted accounting principles and the Financial Statements were prepared in
accordance with past accounting practices applied consistently except as noted
in SCHEDULE 3.9. Since September 30, 1997, there has been no adverse change to
the business, assets, operations, properties, financial condition, liabilities,
or results of operations of the Company or Sub which change is material to the
Company and Sub taken as a whole (a "Material Adverse Change"). Except as set
forth in SCHEDULE 3.9 there has been no Material Adverse Change since September
30, 1997 involving the relationship or agreements with any customers, suppliers
or labor force of the Company. Except as reflected in the Financial Statements
or as set forth in SCHEDULE 3.9 or in any other Schedule to this Agreement, or
as incurred since September 30, 1997 in the ordinary course of business
consistent with past practice, there are no debts, obligations, guaranties of
obligations of others or liabilities (whether accrued, absolute, contingent or
otherwise) that would be required to be disclosed on a consolidated balance
sheet of the Company prepared under generally accepted accounting principles.
3.10 TITLE TO ASSETS. Each of the Company and Sub has good and
marketable title to all real and tangible personal property reflected on the
Reference Balance Sheet as currently owned and used in the operation of the
Business (excluding inventory and obsolete equipment that may have been sold in
the ordinary course of business consistent with past practice from September 30,
1997) and such property is free from all Claims, except for (j)
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liens for taxes not yet due and payable and similar liens arising by operation
of law in the ordinary course of business for which adequate reserves have been
made on the Company's balance sheets, (ii) such liens, charges, options or
encumbrances noted in the title report furnished to Buyer that individually or
in the aggregate do not materially affect the use of such assets in the Business
in accordance with Company's past practice or (iii) except as otherwise
described in SCHEDULE 3.10 to this Agreement.
The assets reflected on the Reference Balance Sheet constitute all
assets currently used or held for use in the Business, constitute all assets
necessary to continue to operate the Business consistent with current and
historical practice and, except as set forth in SCHEDULE 3.10 are in good
repair, working order and operating condition (subject to normal wear and tear).
The Company owns all of the rights, properties and assets used in and which are
necessary for the conduct of the Business as presently conducted.
3.11 INTELLECTUAL PROPERTY. Except for the logo set forth in SCHEDULE
3.11 neither the Company nor Sub owns or uses in the Business any patents,
patent applications, trade names, trademarks, services marks or other names,
logos or marks or any licenses, proprietary or other intellectual property
rights. The logo of the Company has not been registered. To Seller's knowledge,
such logo does not infringe on any rights owned or held by any other person.
3.12 REAL PROPERTY. SCHEDULE 3.12 sets forth a list of all real
property owned by the Company or Sub on the date of this Agreement which is
necessary to the conduct of the Business as presently conducted. Neither the
Company nor Sub leases any real property. With respect to the real property
owned by the Company or Sub and the improvements thereon, (i) neither the
Company nor Sub has received any written notice of condemnation
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proceedings pending or threatened against any portion thereof, (ii) such
property is not in violation of any zoning or building laws, except where such
violations would not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Change, (iii) such property does not violate any
restrictive covenants or encroach on any property owned by others, except where
such violations or encroachments would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change, and (ix) the
improvements thereon have been maintained in accordance in all material respects
with all applicable laws, ordinances, regulations and orders.
3.13 CONTRACTS. Except for this Agreement or any agreement contemplated
hereby, and agreements, contracts and commitments listed in SCHEDULE 3.13 (which
Schedule includes contracts entered into with key management personnel),
complete and correct copies or descriptions of which have previously been made
available to Buyer or included in the Schedules to this Agreement, neither the
Company nor Sub is a party to any written or oral:
(a) contract for the sale of goods or the purchase of inventory,
materials, supplies, services, equipment or any capital item or items
that involve a payment of more than $25,000 in one year or that cannot be
cancelled by the Company without penalty in less than six months from the
date of this Agreement;
(b) agreement, indenture or other instrument relating to the
borrowing of more than $25,000 or the guaranty of any obligation for the
borrowing of more than $25,000;
(c) lease of personal property, including capital leases,
involving a consideration of more than $25,000 and which has a term,
including renewal
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options exercisable by any party thereto, ending more than six (6) months
after the date of this Agreement;
(d) distribution, agency, sales representative, compensation,
labor or employment contract which is not terminable by the Company
without penalty upon notice of sixty (60) days or less;
(e) lease or agreement with an affiliated company;
(f) agreement or understanding regarding the disposition of any
stock or assets of the Company or Sub;
(g) noncompete agreements or other documents that will limit the
freedom of Buyer, the Company or Sub to compete in any line of business;
or
(h) any other agreement, contract or commitment that is material
to the Company or Sub or not made in the ordinary course of business
consistent with past practice.
Neither the Company nor Sub is in breach or default in any material respect
under any of the agreements, contracts or commitments set forth in SCHEDULE
3.13, except for such breaches or defaults as would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Change. All of the
agreements, contracts and commitments set forth in SCHEDULE 3.13 are in full
force and effect and enforceable against the Company or Sub, as the case may be,
except for such agreements, contracts and commitments as would not reasonably be
expected to have, singly or in the aggregate, a Material Adverse Change.
3.14 ACCOUNTS RECEIVABLE. All of the Company's accounts receivable that
are reflected in the Financial Statements have arisen in the ordinary course of
business consistent with past practice. The reserves for doubtful accounts
reflected on the Financial Statements
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20
were determined in accordance with generally accepted accounting principles
consistent with past practice and are reasonable in light of the Company's past
experience and expected future collections. Net accounts receivable less
allowances, as reflected in the Financial Statements, will be collectible in the
ordinary course of business consistent with past practice within 90 days after
the Closing Date.
3.15 INVENTORY. The inventory is of a quality and quantity usable and
saleable in the ordinary course of business of the Company consistent with past
practice, except for obsolete items or items below standard quality as to which
a provision determined in a manner consistent with the prior practice of the
Business has been made in the Financial Statements. The value of all inventory
items, including finished goods, work-in-process and raw materials, has been
recorded on the books of the Company as reflected in the Financial Statements at
the lower of cost (FIFO) (determined in accordance with generally accepted
accounting principles consistently applied and as set forth in the Reference
Balance Sheet, except as disclosed in SCHEDULE 3.15) or fair market value. As
the Business is currently conducted by the Company, net inventory after reserves
will be usable and saleable, with respect to work-in-process and finished goods,
within 90 days, and, with respect to raw materials, within six (6) months from
the Closing Date, except as disclosed in SCHEDULE 3.15.
3.16 LITIGATION AND COMPLIANCE WITH LAWS. (a) There are no judicial or
administrative actions, proceedings or investigations pending or, to Seller's
knowledge, threatened, that question the validity of this Agreement or any
action taken or to be taken by Seller or the Company in connection with this
Agreement. Except as set forth in SCHEDULE 3.16, there is no, and in the
preceding three years there has been no, action, claim, litigation, proceeding
or governmental investigation pending or, to Seller's knowledge,
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21
threatened, or any order, injunction or decree outstanding, against the Company
involving more than $25,000 individually or $100,000 in the aggregate and Seller
knows of no basis for any such action, claim, litigation, proceeding or
investigation.
(b) The Business is not affected by any present or, to the
knowledge of Seller, threatened strike, walkout, slowdown or other labor
disturbance except as described in SCHEDULE 3.16. All litigation required to be
disclosed by Seller under the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, for fiscal years 1993 and 1994 were
properly disclosed in Seller's periodic reports.
(c) Except as disclosed in SCHEDULE 3.16, (j) each of the Company
and Sub has complied and is in compliance with all laws, regulations, rules and
orders applicable to the Business (other than Environmental Laws (as defined in
Section 8.5)), including, without limitation, laws, rules, regulations, permits,
franchises, licenses, judgments and orders relating to occupational safety and
health ("OSHA Laws"), except where the failure to so be in compliance would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Change and (ii) to Seller's knowledge, there is no present condition
relating to the Company or Sub or the real property described in SCHEDULE 3.12
that would, individually or in the aggregate, reasonably be expected to result
in a Material Adverse Change for violation of any OSHA Laws or other federal,
state or local laws, rules, regulations, permits, franchises, licenses,
judgments and orders (other than Environmental Laws). Except as set forth on
SCHEDULE 3.16, neither the Company nor Sub is subject to any order, writ,
injunction or decree relating to the operations of the Business or affecting its
properties except where such orders, writs, injunctions or decrees would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Change.
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22
(d) Except as set forth in SCHEDULE 3.16, to Seller's knowledge,
(j) neither the Company nor Sub has violated or is in violation of any
requirements of any Environmental Laws, (ii) there are no present or past
conditions relating to the Company or Sub or relating to the real property
described in SCHEDULE 3.12 or any other real property owned or operated by the
Company or any of its present or past affiliates, or any real property or
surface or subsurface rivers or streams crossing or adjoining any such real
property, or any appurtenances to or improvements on any such real property,
that would, individually or in the aggregate, reasonably be expected to lead to
any material liability against, or have a Material Adverse Change for violation
of any Environmental Laws and (iii) each of the Company and Sub has operated the
real property described in SCHEDULE 3.12 and all appurtenances thereto and
improvements thereon and has received, handled, used, stored, treated, shipped
and disposed of all hazardous or toxic materials, substances and wastes (whether
or not on its properties or properties owned or operated by others) in
compliance with all applicable Environmental Laws.
3.17 DEFAULTS AND PERMITS. Except as disclosed in SCHEDULE 3.17, no
event of default has occurred under any agreement, contract or other instrument
relating to the Business to which the Company or Sub is a party, and, as of the
date hereof there does not exist thereunder any event or condition that, with or
without the lapse of time or the giving of notice, or both, would have a
material effect on the Business. Except as set forth in SCHEDULE 3.17 all
franchises, licenses, ordinances and permits material to and relating to the
Business are in full force and effect, no violations have been recorded in
respect thereof and no proceeding (not including any application for renewal) is
pending or, to Seller's knowledge, threatened which would have the effect of
revoking or materially limiting any such franchises,
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23
licenses, ordinances or permits. Except as set forth in SCHEDULE 3.17, the
Business has all franchises, licenses, ordinances and permits necessary to the
conduct of the Business as currently conducted, and which if not present, or not
in full force and effect, would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Change. Except as disclosed in SCHEDULE
3.17, this Agreement and the transactions contemplated by this Agreement will
not result in the denial of the application for renewal or the revocation,
nonrenewal or suspension of any franchise, license, ordinance or permit relating
to the Business or held by the Company or Sub and Seller knows of no basis for
any such denial, revocation, nonrenewal or suspension. A current list of such
material franchises, licenses, ordinances and permits is set forth on SCHEDULE
3.17 to this Agreement.
3.18 INSURANCE. SCHEDULE 3.18 sets forth a list of all material
policies of insurance pursuant to which the Company or Sub is insured and sets
forth the types and amounts of coverage under such policies. Neither the Company
nor Sub has received any notice of cancellation with respect to any such policy,
and, except as set forth in SCHEDULE 3.18, no claims are pending. SCHEDULE 3.18
sets out all claims made by or on behalf of the Company or Sub under any policy
of insurance during the past 12 months with respect to the Business. There are
no other claims asserted, and Seller knows of no basis for any such claims to be
asserted by the Company or Sub under any insurance policy. Insurance has been
maintained by or for the benefit of the Company and Sub without interruption
since July 1, 1990 of a type that is and has been not less than that generally
maintained by persons owning properties and engaging in operations similar to
those of the Company and Sub.
3.19 Environmental Matters. Except as set forth on SCHEDULE
3.19, (a)(i) neither the Company nor Sub has received since July 1, 1990, any
claim, action, cause of
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24
action, proceeding, investigation, request for information, notice or citation
(collectively, "Citation") from any governmental agency for noncompliance with
such agency's requirements with respect to air, water, ground or environmental
pollution pertaining to the Business and (ii) there are no pending or unresolved
Citations against the Company or Sub.
(b) Neither the Company nor Sub has received any Citation that it is
or may be potentially responsible with respect to any investigation or clean-up
of any threatened or actual release of any hazardous substance (as that or any
similar term is presently defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et
seq. ("CERCLA"), comparable state law or any other Environmental Law) or
petroleum products, regardless of whether such threatened or actual release took
place at any location owned, operated or leased by the Company or Sub (whether
or not prior to or during the Company's or Sub's ownership, operation or leasing
thereof) or elsewhere with respect to the Business.
3.20 EMPLOYEE BENEFIT PLANS. SCHEDULE 3.20 sets forth (j) a list of
the employee pension benefit plans (as defined in section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) established and
maintained by the Company or with respect to which the Company is a
participating or contributing employer (the "Pension Plans"), (b) a brief
description of the employee benefit plans and arrangements with employees for
profit-sharing, stock ownership, stock purchase, stock option, phantom stock,
stock appreciation right, disability, death benefit, life insurance, medical,
hospitalization, disability, workers' compensation, supplemental unemployment,
vacations, severance pay, retirement, insurance or other employee benefits
maintained by the Company not set forth in the foregoing clause (i), and (iii) a
list containing a description of any other employment,
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25
consulting or severance contract, bonus program, incentive compensation
arrangement, deferred compensation arrangement, or employee or retiree benefits
maintained by the Company and not described in (i) or (ii) above (individually,
a "Plan"; collectively, the "Plans"). No employee of the Business is a
participant in any employee benefit plan or arrangement other than a Plan. The
Company has no liability (including, without limitation, any potential or
contingent liability under Title IV of ERISA) with respect to any employee
benefit plan, other than a Plan. Seller has delivered to Buyer true and complete
copies of (A) each Plan, (B) the summary plan description for each Plan, (C) the
latest annual report which has been filed with the IRS for each Plan for which
such filing was required, (D) the most recent IRS determination letter for each
Pension Plan, (E) copies of any report for the three most recent Plan years
showing compliance with discrimination rules under those of Code Sections
401(a), 401(k), 401(m), 419, 419A, 505, 501(c)(9), 105(h), 125 or 129 applicable
to such Plan, and (F) all correspondence with any governmental agency concerning
any audit, investigation, or controversy concerning any Plan. With respect to
Pension Plans: (a) no liability has been incurred by the Company to the PGBC or
the IRS or to the participants or beneficiaries thereof, other than claims for
Pension Plan benefits and other immaterial benefits in the ordinary course which
claims have been satisfied in full and each Pension Plan has been operated in
all material respects in accordance with its terms and with applicable law; (b)
no prohibited transaction, within the meaning of section 406 or 408 of ERISA,
has occurred with respect to any Pension Plan; (c) all governmental filings and
all disclosures and communications to participants and beneficiaries required to
be made pursuant to ERISA with respect to the Pension Plans and related trusts
have been made in a timely manner; (d) each Pension Plan is qualified within the
meaning of section 401(a) of the Internal Revenue Code
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of 1986, as amended (the "Code"), and each related trust is exempt from taxation
under section 501(a) of the Code and no event has occurred and no circumstance
exists that would adversely affect such qualification or exemption; (e) a
favorable determination letter has been received from the IRS with respect to
each Pension Plan; and (D no Pension Plan is a multiemployer plan (within the
meaning of section 3(37) of ERISA). No material liability, contingent or
otherwise, exists with respect to any Plan other than retiree welfare benefit
liabilities disclosed in SCHEDULE 5.7(a) which liabilities are accurately
reflected on such Schedule. No Plan is subject to the provisions of Section 412
of the Code or Part 3 of Subtitle B of Title I of ERISA. There are no actions,
claims, lawsuits or arbitrations (other than routine claims for benefits)
pending, or, to the knowledge of Seller, threatened, with respect to any Plan or
the assets of any Plan, and Seller has no knowledge of any facts which could
give rise to any such actions, claims, lawsuits or arbitrations (other than
routine claims for benefits). With respect to each Plan, all contributions and
insurance premiums paid by the Company are tax deductible. The Company has paid
all contributions (including employee salary reduction contributions) and all
insurance premiums that have become due and any such expense accrued but not yet
due has been properly reflected in the financial information furnished pursuant
to Section 3.9. Except as disclosed in SCHEDULE 5.7(a), no Plan provides or is
required to provide, now or in the future, health, medical, dental, accident,
disability, death or survivor benefits to or in respect of any person beyond
termination of employment with the Company, except to the extent required under
the state insurance law or under Part 6 of Subtitle B of Title I of ERISA and
under Section 4980(B) of the Code. No Plan covers any individual other than with
respect to periods of employment with the Company, other than spouses and
dependents of employees of the Company under health and child care Plans
-22-
27
disclosed to Buyer. The consummation of the transactions contemplated by this
Agreement will not entitle any employee of the Company to severance pay or
termination benefits for which Buyer or any of its affiliates (including the
Company) may become liable, or accelerate the time of payment or vesting or
increase the amount of compensation due to any such employee or former employee
of the Company for which Buyer or any of its affiliates (including the Company)
may become liable.
3.21 EMPLOYEE MATTERS. Except for the Bliss Manufacturing Employees
Association (the "Employee Association"), no other employee association or union
represents members of the Company's workforce. Set forth in SCHEDULE 3.21 is a
list of the members of the Employee Association. No controversies or disputes
are pending or, to Seller's knowledge, threatened between the Company and any of
its employees other than controversies and disputes with individual employees
arising in the ordinary course of business that would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Change.
3.22 TAXES AND RETURNS. All federal, state, county, local, foreign and
other income, franchise, gross receipts, sales and use, payroll, real and
personal property and other taxes and governmental charges, assessments and
contributions of the Company with respect to the Business or with respect to
which Buyer or the Company could have any liability, including interest and
penalties, as a result of being a member of a controlled, combined or affiliated
group of corporations ("Taxes") required to be paid, collected or withheld with
respect to all open years have been paid, collected or withheld and remitted to
the appropriate governmental agency except for (j) those Taxes which the Company
is contesting in good faith and (ii) accrued and unpaid Taxes as to which
appropriate reserves have been established by the
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Company ("Tax Reserves"). The Company has filed all tax returns and reports
required to be filed by it, or requests for extensions to file such returns or
reports have been timely filed and granted and have not expired, and all tax
returns and reports are complete and accurate in all material respects. No
requests for waivers of the time to assess any Taxes against the Company have
been granted or are pending, except for requests with respect to such taxes as
to which appropriate reserves have been established by the Company. SCHEDULE
3.22 sets forth the amount of Taxes that the Company is contesting in good faith
and the amount of Taxes not yet paid which are accrued to the extent not
specifically set forth in the Financial Statements. All tax returns required to
be filed by Seller with respect to Taxes have been filed in a timely manner, and
all Taxes reflected on such returns as being due have been paid. No election
under section 341(f) of the Code has been made to treat the Company as a
"consenting corporation." The Company has not been a United States real property
holding company within the meaning of section 897(c)(2) of the Code during the
period specified in section 897(c)(l)(A)(ii) of the Code. The Company is not a
party to a tax sharing or tax indemnity agreement or any other agreement of a
similar nature that remains in effect. The Company is not a party to any
contract that would result, separately or in the aggregate, in the requirement
to pay any "excess parachute payments" within the meaning of Section 2800 of the
Code. 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.
3.23 ABSENCE OF MATERIAL CHANGES. Except as has previously been
disclosed to Buyer, or as otherwise disclosed in Section 3.9 or SCHEDULE 3.23
hereof, since September 30, 1997, there has not been:
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29
(a) any material damage, destruction or other casualty loss to any
property material to the Business;
(b) any disposition by the Company or Sub of any asset other than
sales of inventory in the ordinary course of business, consistent with past
practice;
(c) except as set forth on SCHEDULE 3.23(c), any direct or indirect
redemption, purchase or other acquisition of, or any declaration, setting aside
or payment of any dividend or other distribution on or in respect of, any Shares
or any other securities of the Company or Sub;
(d) any obligation or liability (whether absolute, accrued,
contingent or otherwise, and whether due or to become due) incurred by the
Company or Sub, other than liabilities or obligations incurred in the ordinary
course of business, consistent with past practice;
(e) any change in the accounting methods or practices followed by
the Company or Sub or any change in depreciation or amortization policies or
rates theretofore adopted;
(f) any capital expenditure or commitment therefor in excess of
$25,000 for any single item or $50,000 in the aggregate for additions to
property, plant or equipment of the Company or Sub;
(g) any cancellation of any debts or claims owing to the Company or
Sub without the Company or Sub receiving consideration equal to the amount of
such debt or claim or any amendment, termination or waiver of any rights of
value to the business of the Company or Sub;
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30
(h) any write-down of the value of any inventory or other asset of
the Company or Sub or any write-off as uncollectible of any accounts or notes
receivable or any portion thereof, other than in the ordinary course of business
and consistent with past practice;
(i) amend, extend, terminate or waive any provision under any
employment or labor agreement or other agreement, except as required by law or
in accordance with the terms of such agreement and in the ordinary course of
business, consistent with past practice; or
(j) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Company (whether absolute, accrued,
contingent or otherwise, and whether due or to become due), except in the
ordinary course of business and consistent with past practice.
3.24 BROKER'S COMMISSION OR FINDER'S FEES. Neither Seller nor its
affiliates have entered into any agreement with any other party and are not
responsible for claims by any other party for brokerage or other commissions
related to this Agreement or the transactions contemplated hereby, except that
Seller has retained ▇▇▇▇▇▇▇▇ & Company Securities, Inc. ("McDonald") as Seller's
financial advisor and Seller is responsible for, and shall, indemnify Buyer
against, any obligations with respect to the fee of McDonald.
3.25 VENDORS AND CUSTOMERS. SCHEDULE 3.25 contains a complete and
correct list of the largest 20 vendors to the Company by dollar volume for the
year ended September 30, 1997 and a complete and correct list of the largest 20
customers of the Company by dollar volume for each of the three years ended
September 30, 1997. As of the date hereof, neither Seller nor the Company is
aware of any fact, circumstance or other matter on which to form a reasonable
belief that any vendor or customer intends to terminate or materially and
adversely
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31
modify any relationship with the Company (whether prior to or following the
consummation of the transactions contemplated by the Agreement).
3.26 ACCOUNTS PAYABLE. Set forth in SCHEDULE 3.26 is a complete and
correct list of all accounts payable of the Company as of November 30, 1997.
Such list sets forth with respect to each payable thereon the payee and the
invoice date. The accounts payable set forth in SCHEDULE 3.26 were incurred in
the ordinary course of business, consistent with past practice.
3.27 AFFILIATE TRANSACTIONS. Except as set forth in SCHEDULE 3.27, no
current or former director, officer, employee or shareholder of the Company or
any associate or affiliate (as defined in the rules promulgated under the
Securities Exchange Act of 1934, as amended) thereof, or any relative with a
relationship of not more remote than first cousin or spouse of any of the
foregoing, is presently, or during the 12-month period ending on the date hereof
has been (a) a party to any transaction with the Company or (b) the direct or
indirect owner of an interest in any corporation, firm, association or business
organization which is a present (or potential) competitor, supplier or customer
of the Company, nor does any such person receive income from any source other
than the Company which relates to the business of, or should properly accrue to,
the Company.
3.28 KNOWLEDGE. As used in this Article III, "knowledge", "know" or any
derivation thereof means the actual knowledge of the Company's currently elected
officers and what such persons should have known after making due inquiry into
the subject matter thereof with the Company's or Sub's management responsible
for oversight of such matters, and with respect to ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇▇▇▇ ▇▇▇▇▇▇▇, the actual
knowledge of each of such individuals as to the
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32
matters addressed in this Agreement, obtained in the normal course of their
respective duties, but without any further investigation or inquiry by any of
such individuals.
3.29 DISCLOSURE. No representation or warranty of Seller contained in
this Agreement, and no statement contained in any certificate, schedule, annex,
list or other writing furnished to Buyer pursuant hereto, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein in light of the circumstances under
which they were made, not misleading.
3.30 INFORMATION IN PROXY STATEMENT. None of the information supplied
by Seller or the Company or Sub for inclusion or incorporation by reference in
the Proxy Statement prepared in connection with a special meeting of Seller's
shareholders to approve this Agreement and the consummation of the transactions
contemplated hereby (the "Proxy Statement") will, at the date mailed to Seller's
shareholders and at the time of Seller's special shareholder meeting convened to
vote on this Agreement and the transactions contemplated hereby, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller (which representations and
warranties shall survive the Closing to the extent provided in Section 11.3
hereof) as follows:
4.1 ORGANIZATION, STANDING AND AUTHORITY OF BUYER. Rhone is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of
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33
Delaware and has full liability company power and authority to enter into and to
perform this Agreement, the Escrow Agreement and the Voting Agreement.
4.2 AUTHORIZATION. The execution, delivery and performance of each of
this Agreement, the Escrow Agreement and the Voting Agreement and the
consummation of the transactions contemplated hereby or thereby by Buyer have
been duly authorized by all necessary liability company action of Buyer,
including by Buyer's members, if required, and the Agreement and the Voting
Agreement constitute, and, when executed, the Escrow Agreement will constitute,
the valid and binding obligation of Buyer and will be enforceable against Buyer
in accordance with its terms, except to the extent enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights in general and subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3 NO CONFLICT. NO VIOLATION. The execution, delivery and performance
of this Agreement, the Voting Agreement and the Escrow Agreement by Buyer will
not: (j) violate or conflict with the certificate of formation, operating
agreement or other constitutive documents of Buyer; (ii) conflict with, or
result in the breach or termination of, or constitute a default under (whether
with notice or lapse of time or both), or accelerate or permit the acceleration
of the performance required by, any indenture, mortgage, lien, lease, agreement,
commitment or other instrument or any order, judgment or decree, to which Buyer
is a party or by which it or its properties are bound; (iii) constitute a
violation of any law, regulation, order, writ, judgment, injunction or decree
applicable to Buyer; or (iv) result in the creation of any lien, charge or
encumbrance upon the partnership interests, properties or assets of Buyer, other
than violations, conflicts, breaches, terminations, accelerations and defaults
-29-
34
specified in the foregoing clauses (ii) and (iv) which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
Buyer and on Buyer's ability to perform its obligations under this Agreement,
the Voting Agreement or the Escrow Agreement.
4.4 CONSENTS. The only authorization, consent, approval or notice of any
federal, state, local or foreign regulatory body required to be obtained or
given or waiting period required to expire with respect to Buyer in order that
this Agreement, the Voting Agreement or the Escrow Agreement and the
transactions contemplated hereby or thereby may be consummated by Buyer and
Seller is (a) an HSR Filing and the expiration of the applicable waiting periods
under the HSR Act and (b) filings with the PBOC, the IRS, the DOL and any other
similar governmental entity referred to above with respect to the transfer of
assets and liabilities of Plans. No consent or approval of any other party
(other than any governmental entity) is required to be obtained by Buyer for the
execution, delivery or performance of this Agreement, the Voting Agreement or
the Escrow Agreement or the performance by Buyer of the transactions
contemplated hereby or thereby, except where the failure to obtain any such
consent or approval would not prevent or delay the consummation of the
transactions contemplated hereby, or otherwise prevent Buyer from performing its
obligations under this Agreement, the Voting Agreement or the Escrow Agreement
or would not, individually or in the aggregate materially impair or delay the
consummation of the transactions contemplated hereby.
4.5 LITIGATION. There are no judicial or administrative actions,
proceedings or investigations pending or, to the best of Buyer's knowledge,
threatened, that question the validity of this Agreement or any action taken or
to be taken by Buyer in connection with this
-30-
35
Agreement. There is no, and has been no, action, claim, litigation, proceeding
or governmental investigation pending or, to the best of Buyer's knowledge,
threatened, or any order, injunction or decree outstanding, against Buyer that,
if adversely determined, would have a material adverse effect upon Buyer's
ability to perform its obligations under this Agreement.
4.6 INVESTMENT INTENT. Buyer is acquiring the Shares solely for the
purpose of investment and not with a view to, or for sale in connection with,
any distribution thereof. Buyer acknowledges that the Shares are not registered
under the Securities Act of 1933, as amended, and that such Shares may not be
transferred or sold except pursuant to the registration provisions of such Act
or pursuant to an applicable exemption therefrom and pursuant to state
securities laws and regulations as applicable.
4.7 FINANCING. Buyer has sufficient funds or has secured a firm
commitment from a third party or parties to provide sufficient funds to pay the
Purchase Price and related fees and expenses.
4.8 NO DEALING WITH AFFILIATES. Except as set forth on SCHEDULE 4.8,
Buyer has no agreement, commitment, understanding or arrangement, express or
implied, with any subsidiary or other affiliate of Seller, or with any person
employed thereby, other than such agreements as may be expressly contemplated by
this Agreement.
4.9 BROKER'S COMMISSION OR FINDER'S FEES. Buyer has not entered into any
agreement with any other party and is not responsible for any claims by any
other party for brokerage or other commissions related to this Agreement or the
transactions contemplated hereby, and shall indemnify Seller against, any
obligations with respect to any such fee.
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36
4.10 INFORMATION IN PROXY STATEMENT. None of the information supplied by
Buyer for inclusion or incorporation by reference in the Proxy Statement will,
at the date mailed to Seller's shareholders and at the time of Seller's special
shareholder meeting convened to vote on this Agreement and the transactions
contemplated hereby, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading.
ARTICLE
ADDITIONAL AGREEMENTS OF THE PARTIES
5.1 ORDINARY COURSE. From the date hereof until the Closing, except as
Buyer may, in its sole discretion, otherwise agree in writing, or except as set
forth in SCHEDULE 5.1, Seller shall cause the Company and Sub to conduct their
business in the ordinary course consistent with past practice, and neither the
Company nor Sub shall:
(a) borrow any sums or enter into any financial guarantees or
otherwise incur any indebtedness, including for the payment of trade
payables, other than in the ordinary course of business consistent with
past practice; PROVIDED THAT neither the Company nor Sub shall have any
obligation with respect to indebtedness for borrowed money or
guarantees with respect thereto; or
(b) make or authorize any compensation increase for any
employee of the Company or Sub whether such increase relates to base
compensation, commissions, bonuses, or benefits, or otherwise unless
such increase is consistent with the Company's prior practices with
regard to such increases and
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Buyer consents to such increases, except that, as set forth in SCHEDULE
5.1(b), the Company shall, immediately prior to the Closing, pay (j)
certain employees discretionary bonuses for fiscal 1997 in accordance
with past practice the aggregate amount of which bonuses shall not
exceed $300,000, (ii) amounts that shall become due and payable at the
time of the Closing under those contracts set forth in SCHEDULE 3.13
hereto; and (iii) up to $250,000 for a one-time cash bonus for
employees eligible for the Company's profit sharing plan, PROVIDED,
that any payments made pursuant to this clause (iii) shall reduce the
amount to be paid pursuant to Section 5.13; or
(c) except for the sale by the Company of inventory or
work-in-process and in the ordinary course of business consistent with
past practice, sell, assign, transfer, lease, mortgage, pledge or make
or cause to become subject to any Claim, any of the assets of the
Company or Sub; or
(d) enter into any agreement with respect to the Business
pursuant to which the aggregate obligation of the Company and Sub
subsequent to the date hereof may exceed $50,000 individually or in the
aggregate, and which is not terminable by the Company without penalty
upon 90 days' notice or less; or
(e) manage inventories and other supplies and parts other than
in the ordinary course of business consistent with past practice; or
(f) issue or sell any shares of its capital stock of any
class, or issue or sell any securities convertible into, or options
with respect to, or warrants to purchase or rights to subscribe to, any
shares of its capital stock of any class, nor make any commitment to
issue or sell any such shares or securities; or
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(g) except as may be disclosed on SCHEDULE 3.9, declare, pay
or set aside for payment any dividend, distribution or return of
capital in respect of its capital stock nor, directly or indirectly,
redeem, purchase or otherwise acquire any shares of its capital stock;
or
(h) settle or compromise any Tax liability; or
(i) without limiting the generality of the foregoing, take any
action or omit to take any action, which act or omission would result
in a breach of any of the representations or warranties set forth in
clauses (a) through (j) of Section 3.23; or
(j) otherwise enter into any transaction not in the ordinary
course of business.
5.2 ACCESS AND CONFIDENTIALITY. (a) Upon reasonable notice, Seller shall
afford Buyer and its representatives (including, without limitation, its
independent public accountants and counsel) reasonable access during regular
business hours from the date hereof until the Closing to any and all of the
premises, properties, contracts, books, records and data of or relating to the
Business and the Company and Sub, and Seller shall, and shall cause the Company
and Sub to furnish to Buyer during that period all documents and copies of
documents and information concerning the Business as Buyer reasonably may
request.
(b) From and after the Closing Date: (i) Seller shall permit Buyer, the
Company and their respective affiliates and representatives reasonable access,
during reasonable business hours and at Buyer's expense, to the relevant books
and records (including all relevant tax returns and related work papers) of
Seller in existence at the Closing Date relating to the Business or the Company
or Sub (ii) Seller shall provide such information to Buyer or the
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Company as it may reasonably request in connection with the Business prior to
the Closing Date; and (iii) Seller shall use its reasonable efforts to cause its
independent accountants to consult with Buyer and the Company, and an
independent auditor of Buyer or the Company, and to permit Buyer and the
Company, and an independent auditor of Buyer or the Company, to examine work
papers of such accountant of Seller relating to the Business or the Company or
Sub; PROVIDED that Seller shall not be required to maintain any records relating
to the Business for a period of more than five (5) years from the Closing.
(c) Buyer shall hold, and shall cause its representatives to hold, all
such information and documents and all other information and documents delivered
pursuant to this agreement confidential and, if the transactions contemplated by
this Agreement are not consummated for any reason, shall return to Seller all
such information and documents and any copies as soon as practicable and not
disclose any such information (that has not previously been disclosed by a party
other than Buyer, its affiliates or representatives) to any third party unless
required to do so pursuant to a request or order under applicable laws and
regulations or pursuant to a subpoena or other legal process. Buyer's
obligations under this Section shall survive the termination of this Agreement.
5.3 PRESERVATION OF AND ACCESS TO RECORDS. Buyer agrees that it shall
preserve and keep the records of the Company delivered to it hereunder for
period of five (5) years from the Closing, or for any longer period as may be
required by any governmental agency or ongoing litigation, and shall make such
records available to Seller and its affiliates as may be reasonably required by
Seller and its affiliates in connection with any legal proceedings against or
governmental investigations of Seller or its affiliates or in connection with
any tax examination of Seller or its affiliates. In the event Buyer wishes to
destroy such records after
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that time, it shall first give 90 days' prior written notice to Seller and
Seller shall have the right at its option, upon prior written notice given to
Buyer within said 90-day period, to take possession of said records within 180
days after the date of Seller's notice to Buyer hereunder.
5.4 REGULATORY AND OTHER AUTHORIZATIONS. The parties hereto shall use
their reasonable efforts to file within twenty (20) business days after the
receipt of the Phase II Study (as defined in Section 8.5(a)), HSR Filings and
documentary material that comply with the provisions of the HSR Act, and will
promptly file any additional information requested as soon as practicable after
receipt of the request. The parties hereto will not take any action that is
designed to have the effect of delaying, impairing or impeding the receipt of
any required approvals, including the consents referred to in Sections 3.3 and
3.4, and will use their reasonable efforts to secure such approvals as promptly
as possible.
5.5 FURTHER ASSURANCES. At any time and from time to time after the
Closing, the parties agree to cooperate with each other, to execute and deliver
such other documents, instruments of transfer or assignment, files, books and
records and do all such further acts and things as may be reasonably required to
carry out the transactions contemplated hereunder.
5.6 AGREEMENTS WITH RESPECT TO INSURANCE.
(a) Seller and Buyer acknowledge that the policies of insurance
applicable to the Business are not necessarily exclusive to the Business whereby
certain coverages and limits may be impaired by claims arising from other
companies currently or previously owned by Seller, by whom Seller is owned or
with whom Seller is otherwise affiliated. Except as otherwise disclosed in
Section 3.18 hereof, Seller makes no representations or warranties in respect of
any policy of insurance and shall not be responsible for any allocations,
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determinations as to coverage or lack thereof or any decision or interpretation
made by insurers or their agents with respect thereto.
(b) If, on or prior to the Closing Date, any property owned or leased by
the Company or Sub suffers any material damage, destruction or loss, Seller
shall surrender to Buyer (i) all insurance proceeds received by Seller or the
Company with respect to such damage or loss and (ii) all rights of Seller or the
Company with respect to any causes of action, whether or not litigation has
commenced on the Closing, in connection with such damage or loss.
5.7 EMPLOYEE AND EMPLOYEE BENEFIT MATTERS.
(a) EMPLOYEE BENEFIT OBLIGATIONS AND PLANS. On and after the Closing,
Seller shall have no liability whatever, except as provided for in Article VIII
hereof, for providing or causing the Company to provide employee welfare
benefits for the employees of the Company or fulfilling collective bargaining
agreement obligations or negotiations. Buyer agrees to cause the Company to
fulfill the collective bargaining obligations of the Company in accordance with
the Basic Labor Agreement effective as of September 1, 1995, between the Company
and the Employee Association (the "Collective Bargaining Agreement") during the
term thereof, and to cause the Company to maintain for no less than 12 months
after the Closing Date, employee welfare benefits, arrangements and commitments
to employees of the Company substantially comparable in the aggregate to those
currently in effect for such employees, PROVIDED, HOWEVER, that this sentence
shall under no circumstances confer upon any person not a party to this
Agreement the rights of a third party beneficiary of this Agreement.
Specifically, and not by way of limitation, Buyer shall cause the Company to
recognize employees' vacation time and sick leave accrued prior to the Closing
and to fulfill
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the Company's obligations existing at the date of the Closing under the employee
and retiree plans described in SCHEDULE 5.7(a).
(b) CONTINUED PLANS. (j) Subject to Section 3.20 and Article VIII
hereof, as of the Closing, Buyer shall cause the Company to be fully responsible
for the maintenance and administration of the Plans and for all expenses,
liabilities, and obligations with respect thereto arising on or after the
Closing.
(ii) Subject to Section 3.20 and Article VIII hereof, Buyer shall cause
the Company to be fully responsible and to indemnify and hold Seller harmless
for any and all liabilities, obligations, expenses, losses or taxes arising on
or after the Closing with respect to: (v) any and all benefits and claims for
benefits under any Plan; (w) compliance with the reporting and disclosure
requirements of the Code and ERISA for plan years occurring on and after the
Closing with respect to each Plan; (x) the minimum funding obligations under the
Code and ERISA with respect to any Plan for plan years ending after the Closing;
(y) the termination of any Plan that occurs after the Closing; and (z) any act
or omission of Buyer that adversely affects the qualification of any Plan under
section 401(a) of the Code for any year.
(c) EMPLOYER PLAN. With respect to the Pension Plans, Seller agrees to
cause the Company to make to such Pension Plans all contributions required to be
made with respect to the time period prior to the Closing in accordance with the
terms of the Collective Bargaining Agreement. Buyer agrees to cause to be made
to such Pension Plans all contributions required to be made with respect to the
time period beginning on the Closing in accordance with the terms of the
Collective Bargaining Agreement as long as such agreement remains in force.
Subject to Article VIII hereof, Buyer shall cause the Company to indemnify
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Seller against all contributions required and liabilities assessed under such
Pension Plans after the Closing.
5.8 ACCOUNTS RECEIVABLE AND INVENTORY. Seller and Buyer agree that, with
respect to Sections 3.14 and 3.15 hereof, in the event that (j) (x) 90% of the
accounts receivable of the Company reflected on the Final Balance Sheet are not
collected within ninety (90) days after the Closing Date, at Buyer's option,
Buyer shall assign to Seller, and Seller shall purchase from Buyer, the
uncollected accounts receivable reflected on the Final Balance Sheet so that the
Company shall have received cash for 90% of the accounts receivable reflected on
the Final Balance Sheet and (y) the remaining 10% of the accounts receivable of
the Company reflected on the Final Balance Sheet are not collected within 180
days after the Closing Date, at Buyer's option, the Company shall assign to
Seller, and Seller shall purchase from Buyer, the uncollected accounts
receivable reflected on the Final Balance Sheet so that the Company shall have
received cash for such remaining 10% of the accounts receivable reflected on the
Final Balance Sheet; and (ii) the inventory of the Company reflected on the
Final Balance Sheet is not useable and saleable within, with respect to matters
disclosed on SCHEDULE 3.15, twelve months, with respect to all other
work-in-process and finished goods, 90 days, and, with respect to all other raw
materials, six (6) months, after the Closing Date, at Buyer's option, the
Company shall sell to Seller, and Seller shall purchase from the Company such
unuseable and unsaleable inventory. The purchase price for any such uncollected
accounts receivable or unuseable and unsaleable inventory, as the case may be,
shall be an amount equal to the amount reflected on the Final Balance Sheet for
such items, less applicable pro rated reserves.
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5.9 OTHER OFFERS. Until the termination of this Agreement, neither
Seller, the Company nor any of their respective affiliates will, nor will they
authorize the officers, directors, employees, representatives or other agents of
Seller, the Company or any of such affiliates to, directly or indirectly, (a)
take any action to solicit or initiate any Acquisition Proposal (as defined
below) or (b) engage in negotiations with, or disclose any nonpublic information
relating to the Company or Sub or afford access to the properties, books or
records of the Company or Sub to, any person that has advised the Company or
Seller or otherwise made known the fact that such person may be considering
making, or that has made, an Acquisition Proposal. The Company will promptly
notify Buyer orally and in writing after receipt of any Acquisition Proposal or
any notice that any person is considering making an Acquisition Proposal or any
request for nonpublic information relating to the Company or Sub or for access
to the properties, books or records of the Company or its Sub by any person that
has advised the Company or Seller or otherwise made known the fact that such
person may be considering making, or that has made, an Acquisition Proposal and
will promptly disclose to Buyer the status and details of any such Acquisition
Proposal, indication or request. Seller shall (j) immediately cease and cause to
be terminated as of the date of this Agreement any ongoing discussions or
negotiations with any third parties concerning an Acquisition Proposal and
direct such third parties to return to Seller all information received by them
from the Company or Seller or their respective representatives and (b) direct
and cause all of its representatives to cease engaging in the foregoing. For
purposes of this Agreement, "Acquisition Proposal" means any offer or proposal
for, or any written indication of interest in, a merger or other business
combination involving the Company or Sub or the acquisition of any significant
equity interest in, or a significant portion of the assets of, the
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Company or its subsidiary, other than the transactions with Buyer contemplated
by this Agreement.
5.10 RESTRICTIVE COVENANTS.
(a) For a period of three (3) years commencing on the Closing,
Seller shall not, directly or indirectly, solicit the employment of any employee
of the Company or Sub or induce any such employee to leave the employment of the
Company or Sub.
(b) To the extent permitted by law, for a period of five years from
and after the Closing Date, Seller shall not, and shall not permit any of its
subsidiaries or other affiliates to, directly or indirectly, conduct any
business competitive with the Company or Sub or assist others in engaging in any
such business.
5.11 SHAREHOLDER APPROVAL; PROXY STATEMENT. Seller will duly call, give
notice of, convene and hold a meeting of its shareholders for the purpose of
approving this Agreement and the transactions contemplated hereby. Seller will,
through its Board of Directors, recommend to its shareholders approval of this
Agreement and the transactions contemplated hereby. As promptly as practicable,
Seller shall prepare and file with the Securities Exchange Commission ("SEC")
the Proxy Statement. Seller shall use its reasonable efforts to cause the Proxy
Statement to be mailed to Seller's shareholders as promptly as practicable after
the date of this Agreement.
5.12 PROPOSED LIQUIDATION, DISTRIBUTION. Etc. Seller shall give Buyer
written notice, at least 30 days in advance, of the proposed liquidation,
distribution, sale, assignment, exchange or other transfer, in one transaction
or in a series of related transactions, of all or substantially all of the
property or assets of Seller or the dissolution of Seller.
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5.13 PAYMENT TO PROFIT SHARING PLAN. Subject to 5.1(b), Seller shall
make a contribution on or about the Closing to the Company's profit sharing plan
in an amount of up to $1,000,000 out of the portion of the Purchase Price that
is received by Seller from Buyer at the Closing pursuant to Section 1.2(a)
hereof, PROVIDED that any amount in excess of the liabilities reflected in the
Financial Statements shall not have any impact on the Purchase Price adjustments
described in Article II.
5.14 SUPPLEMENTS TO SCHEDULES. From time to time prior to the Closing
Date, Seller may amend or supplement the Schedules with respect to any matter
that, if existing or occurring at or prior to the Closing Date, would be
required to be set forth or described in any Schedule or that would be necessary
to complete or correct any information in any representation or warranty
contained in Article III, other than any matter that, to Seller's knowledge on
the date hereof, was required to be set forth or described in such Schedule or
otherwise necessary to render such representation or warranty true and correct
in all material respects on the date hereof. Each such amendment or supplement
shall be given effect for all purposes under or in connection with this
Agreement and the transactions contemplated hereby, other than for purposes of
determining the fulfillment of the conditions precedent set forth in Section
6.2(a) and Section 6.2(b); PROVIDED that Buyer's consummation of the Closing
shall constitute, without any further action on the part of Buyer, a waiver by
Buyer of its right to require satisfaction of the conditions precedent in
Section 6.2(a) and Section 6.2(b); provided further, that nothing set forth in
this Section 5.14 shall affect or limit in any way Seller's liability to Buyer
under this Agreement for a breach by Seller of any of Seller's covenants or
agreements set forth in this Agreement.
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ARTICLE VI
CONDITIONS TO CLOSING
6.1 SELLER'S CONDITIONS TO CLOSE. The obligations of Seller under this
Agreement are subject to the satisfaction at or prior to the Closing of each of
the following conditions, but compliance with any or all of such conditions may
be waived by Seller:
(a) The representations and warranties of Buyer contained in
Article IV shall be true and correct in all respects;
(b) Buyer shall have performed and complied with all of the
covenants and agreements in all material respects, including the
delivery of the documents specified in Section 7.2, and satisfied all
the conditions applicable to Buyer required by this Agreement, the
Escrow Agreement and the Voting Agreement to be performed or complied
with or satisfied by Buyer at or prior to the Closing;
(c) The applicable waiting periods under the HSR Act shall have
expired, and there shall be in effect no preliminary or permanent
injunction or other order of a court or governmental or regulatory
agency of competent jurisdiction directing that the transactions
contemplated herein, or any of them, not be consummated;
(d) Buyer shall have provided Seller evidence satisfactory to
Seller that Buyer shall have obtained the consents and approvals listed
in Section 4.4;
(e) The Escrow Agreement shall have been duly executed and
delivered by Buyer and the Escrow Agent; and
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(f) This Agreement and the transactions contemplated herein
shall have been adopted and approved by the holders of more than 50% of
the shares of common stock of Seller in accordance with applicable law
and the provisions of Seller's certificate of incorporation and by-laws.
6.2 BUYER'S CONDITIONS TO CLOSE. The obligations of Buyer under this
Agreement are subject to the satisfaction at or prior to the Closing of each of
the following conditions, but compliance with any or all of any such conditions
may be waived by Buyer:
(a) The representations and warranties of Seller contained in
Article III shall be true and correct in all respects;
(b) Seller shall have performed and complied with all the
covenants and agreements in all material respects, including the
delivery of the documents specified in Section 7.1, and satisfied all
the conditions applicable to Seller required by this Agreement, the
Escrow Agreement and the Voting Agreement to be performed or complied
with or satisfied by it at or prior to the Closing;
(c) The applicable waiting periods under the HSR Act shall have
expired, and there shall be in effect no preliminary or permanent
injunction or other order of a court or governmental or regulatory
agency of competent jurisdiction directing that the transactions
contemplated herein, or any of them, not be consummated;
(d) Since the date of this Agreement, there shall not have
occurred any Material Adverse Change or a material adverse change with
respect to Seller;
(e) The Phase II Study (as defined in Section 8.5(a)) shall have
been completed, Buyer shall have received a true and complete copy of
the written
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report prepared by the consultants regarding the Phase II Study and
Buyer shall be satisfied that the reasonably likely aggregate
Environmental Damages (as defined in Section 8.5 hereof) shall not
exceed $2 million; PROVIDED, HOWEVER, that this condition shall expire
ten (10) business days after receipt by Buyer of any such report on the
Phase II Study;
(f) Seller shall have provided Buyer evidence satisfactory to
Buyer that Seller and the Company shall have obtained the consents and
approvals listed in schedules 3.3 and 3.4;
(g) The Escrow Agreement shall have been duly executed by Seller
and the Escrow Agent;
(h) Seller shall have entered into a transitional services
agreement with the Company, in form and substance reasonably
satisfactory to Buyer, to provide to the Company and Sub administrative
services of the same nature and scope as presently provided, at no cost
to the Company or Sub, for a period of six (6) months from and after the
Closing Date; and
(i) This Agreement and the transactions contemplated herein
shall have been adopted and approved by the holders of more than 50% of
the shares of common stock of Seller in accordance with applicable law
and the provisions of Seller's certificate of incorporation and by-laws.
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ARTICLE VII
THE CLOSING
7.1 SELLER'S DELIVERIES. At the Closing, Buyer shall receive from Seller
the following documents:
(a) Copies of duly adopted resolutions of Seller's board of
directors and Seller's shareholders approving the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby, as required, certified by Seller's Secretary;
(b) A certificate of good standing as to the corporate status of
the Company from the Secretary of State of the State of Ohio and of Sub
from the Secretary of State of the State of Delaware;
(c) A complete and correct copy of the certificate of
incorporation of each of Seller, Company and Sub certified by the
Secretary of State of the State of Ohio or Delaware, as the case may be;
(d) A complete and correct copy of the by-laws or regulations of
Seller, the Company and Sub, each certified by the Secretary of Seller,
the Company or Sub, as the case may be;
(e) A certificate, dated the Closing Date, from Seller's and the
Company's Secretary to Buyer stating that Seller's, the Company's and
Sub's certificate of incorporation and regulations or by-laws, as the
case may be, have not been amended since the date hereof;
(f) A certificate, dated the Closing Date, of an appropriate
officer or agent of Seller with respect to the matters described in
Sections 6.2(a) and (b);
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(g) A certificate or certificates representing the Shares with
valid stock powers attached, together with the stock ledger of the
Company and Sub;
(h) A Certification of Non-Foreign Status under and in
accordance with Section 897 and Section 1445 of the Code;
(i) The resignations of all of the directors of the Company and
Sub;
(j) The resignations of all of the officers of the Company and
Sub;
(k) An opinion of Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., counsel to
Seller, with respect to the matters described on Annex A hereto;
(1) Seller shall have paid the Closing Payments specified in
Section 1.2; and
(m) Such other documents and certificates as Buyer may
reasonably request in connection with the consummation of the
transactions contemplated by this Agreement.
7.2 BUYER'S DELIVERIES. At the Closing, Seller shall have received from
Buyer the following documents:
(a) Copies of duly adopted resolutions of Buyer's member, if
required, approving the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, as required,
certified by an appropriate officer of Buyer;
(b) A certificate of good standing as to the limited liability
company status of Buyer from the Secretary of State of the State of
Delaware;
(c) A complete and correct copy of the certificate of formation
of Buyer certified by the Secretary of State of the State of Delaware;
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(d) A complete and correct copy of the operating agreement or
similar governing agreement of Buyer certified by an appropriate officer
of Buyer;
(e) A certificate, dated the Closing Date, of a principal
officer of Buyer with respect to the matters described in Sections
6.1(a) and (b);
(f) Evidence satisfactory to Seller of the wire transfer by
Buyer to Seller of $30,500,000;
(g) An opinion of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, counsel to Buyer, with
respect to matters described on Annex B hereto; and
(h) Such other documents and certificates as Seller may
reasonably request in connection with the consummation of the
transactions contemplated by this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY BUYER. From and after the Closing, Buyer shall,
without any further responsibility or liability of or recourse to Seller or its
affiliates or any of Seller's or its affiliates' directors, shareholders,
beneficiaries, officers, employees, agents, consultants, representatives,
successors or assigns (collectively, the "Seller Indemnified Parties"),
absolutely and irrevocably indemnify, defend and hold harmless the Seller
Indemnified Parties from and against any and all losses, liabilities,
obligations, damages (whether actual or punitive), deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements) (individually, a "Loss"; collectively, "Losses") of any of
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the foregoing persons, after netting any related tax benefit realized or to be
realized by such persons, arising from, asserted against or associated with:
(a) a breach of any representation or warranty made by Buyer in
this Agreement, the Escrow Agreement or the Voting Agreement;
(b) the failure to perform any covenant, obligation or agreement
of Buyer made herein, the Escrow Agreement or the Voting Agreement; or
(c) any and all actions, suits, proceedings, demands, judgments,
costs and legal and other expenses incident to any of the matters
referred to in clauses (a) through (b) of this Section 8.1.
8.2 INDEMNIFICATION BY SELLER. From and after the Closing, Seller shall,
without any further responsibility or liability of or recourse to Buyer or its
affiliates or any of Buyer's or its affiliates' directors, shareholders,
partners, members, beneficiaries, officers, employees, agents, consultants,
representatives, successors or assigns (collectively, the "Buyer Indemnified
Parties"), absolutely and irrevocably indemnify, defend and hold harmless the
Buyer Indemnified Parties from and against any and all Losses of any of the
foregoing persons after netting any related tax benefit realized or to be
realized by such persons, arising from, asserted against or associated with:
(a) a breach of any representation or warranty made by Seller in
this Agreement, the Escrow Agreement or the Voting Agreement; or
(b) failure to perform any covenant, obligation or agreement of
Seller made herein, the Escrow Agreement or the Voting Agreement; or
(c) the business formerly conducted by the Company regarding the
manufacture of metal vacuum cleaner tubular components and the sale of
such
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business, including (without limitation) any and all obligations under
the Asset Purchase Agreement and the Supply Transition Agreement, each
dated as of August 27, 1997, between the Company and H-P Products, Inc.;
or
(d) any product sold by the Company or Sub or any product
processed or manufactured by the Company or Sub but not yet sold by the
Company or Sub prior to the Closing;
(e) in connection with the Company's classification of the
different inventory valuation method adopted by the Company, as
described in Schedules 3.9, 3.15 and 3.23, as a change in method rather
than a change in principle; or
(f) any and all actions, suits, proceedings, demands, judgments,
costs and legal and other expenses incident to any of the matters
referred to in clauses (a) through (e) of this Section 8.2; or
8.3 LIMITATION ON INDEMNITY. Except with respect to the representations
and warranties contained in Sections 3.1, 3.6, 3.7 and 3.8 hereof or claims
arising out of fraud (collectively, "Excluded Claims"), liability for which
shall be unlimited, Seller's, on the one hand, and Buyer's, on the other hand,
maximum aggregate liability under Section 8.1 or 8.2, as the case may be, shall
in no event exceed Five Million Dollars ($5,000,000). No claim for
indemnification under Section 8.1 or Section 8.2 may be made more than two years
after the Closing; PROVIDED, HOWEVER, that (j) claims regarding Excluded Claims
may be made at any time after the Closing and (ii) if prior to two years after
the Closing, any claim for indemnity hereunder shall have been made and such
claim shall not have been finally resolved or disposed of at such date, such
claim shall in no way be prejudiced or impaired by the passage of time and any
representation or warranty that is the basis for such claim shall continue to
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survive as to such claim and shall remain a basis for indemnity until such claim
is finally resolved or disposed of.
8.4 INDEMNIFICATION PROCEDURES. The obligation to indemnify under
Sections 8.1, 8.2 and 8.5 is conditioned upon receiving from the party seeking
indemnification (the "Indemnified Party") written notice of the assertion or
institution of a claim arising from or related to any Loss ("Claim") after the
Indemnified Party has actual knowledge of such a Claim, PROVIDED that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its indemnification obligation under this
Agreement except to the extent that such failure results in a lack of notice to
the Indemnifying Party and the Indemnifying Party is materially prejudiced as a
result of such failure to give notice. Upon written unqualified acknowledgement
of its indemnification obligations with respect to a third-party Claim, the
party from whom indemnification is sought (the "Indemnifying Party") shall have
the absolute right, in its sole discretion and expense, to elect to defend,
contest, settle or otherwise protect against any such Claim with legal counsel
reasonably acceptable to the Indemnified Party; PROVIDED that the relief sought
in any such Claim is for money damages only and the Indemnified Party reasonably
determines that the Indemnifying Party has the financial resources to pay such
damages; and PROVIDED FURTHER that the Indemnifying Party shall not settle or
compromise any Claim without the consent of the Indemnified Party, which consent
to settlement or compromise shall not be unreasonably withheld. If the
Indemnifying Party conducts such defense, the Indemnified Party shall have the
right, but not the obligation, to participate, at its own expense, in the
defense thereof through counsel of its own choice and shall have the right, but
not the obligation, to assert any and all cross-claims or counterclaims it may
have. The Indemnified Party shall, and shall
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cause its affiliates to, at the cost of the Indemnifying Party, at all times
cooperate in all reasonable ways with, make their relevant files and records
available for inspection and copying by, and make their employees available or
otherwise render reasonable assistance to the Indemnifying Party in its defense
of any action being indemnified hereunder. In the event the Indemnified Party,
without the prior consent of the Indemnifying Party (which consent shall not be
unreasonably withheld), makes any settlement with respect to any Claim, the
Indemnifying Party shall not be bound to such settlement. In the event the
Indemnifying Party fails timely to defend, contest or otherwise protect against
any suit, action, investigation, claim or preceding related to a Claim,
Indemnified Party shall have the right, but not the obligation, to defend,
contest, assert crossclaims, or counterclaims or otherwise protect against the
same and may make any compromise or settlement thereof and recover and be
indemnified for the entire cost thereof from the Indemnifying Party including,
without limitation, legal expenses, disbursements and all amounts paid as a
result of such suit, action, investigation, claim, proceeding, crossclaim or
counterclaim or compromise or settlement thereof, and provided, further, if the
Indemnified Party should incur any such expense, the Indemnifying Party shall
pay the Indemnified Party's interest incurred on all such amounts, from the date
incurred by the Indemnified Party through the date of payment by the
Indemnifying Party, at a rate per annum equal to the publicly announced base
interest rate of Citibank, N.A., in New York City, in effect from time to time,
which rate shall change as and when such base interest rate shall change.
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8.5 ENVIRONMENTAL MATTERS.
(a) Upon the signing of this Agreement, (j) Seller shall cause the
Company to conduct Phase II environmental testing (the "Phase II Study"),
including soil and ground water sampling, on the premises owned or leased by the
Company and such adjacent areas with respect to which the Company or Sub might
reasonably be expected to have liability, and Seller shall make, or shall cause
the Company to make, available to Buyer all data collected and reports prepared
in connection with the Phase II Study, or (ii), at Buyer's option, Seller shall
perform an analysis, which may be based on existing data (to the extent existing
data is sufficient for such purpose), to determine if any contaminants which
might reasonably be expected to be found would not present unreasonable risks to
health or the environment under continued industrial use of the property. The
Phase II Study shall be conducted by environmental consultants reasonably
acceptable to Buyer, and the scope of work in the Phase II Study shall be
reasonably acceptable to Buyer. Buyer and its representatives shall have the
right to observe the Company's environmental consultants during the course of
their on-site examination of the relevant properties, review the findings of
such consultants and discuss with the Company, Seller and their respective
representatives, including such environmental consultants, the nature of the
study and the findings therefrom. Seller shall cause the Company to use its
reasonable efforts to make such environmental consultants available to the Buyer
for such purpose. Seller shall be solely responsible for providing any required
notifications under any federal, state or local law, regulation, standard,
order, decree, rule, ordinance, permit, franchise, license or judgment now
existing or hereafter developing, relating to protection of health, safety or
the environment, including without limitation CERCLA and the Solid Waste
Disposal Act, 42 U.S.C. Section 6901 ET SEQ. (such laws, regulations,
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standards, orders, decrees, rule, ordinance, permit, franchise, license or
judgment, collectively, "Environmental Laws").
(b)(i) Subject to Section 8.5(d)(vii), this Section 8.5(b) governs the
allocation between the Seller Indemnified Parties, on the one hand, and the
Buyer Indemnified Parties and the Company and Sub (collectively, the "Buyer
Environmental Indemnitees"), on the other hand, of Environmental Damages to any
Buyer Indemnified Party, the Company or Sub arising from or in connection with
(A) the operations of the Business or of any predecessor-in-interest of the
Company or Sub on or prior to the Closing, (B) any environmental condition
existing as of the Closing (including any future spreading of contamination
existing at such time) on any real property owned or leased by the Company or
Sub and on any property adjacent to such owned or leased real property,
PROVIDED, that the Environmental Damages do not result from acts or omissions of
Buyer after the Closing (whether or not caused by the Company or Sub), (C) in
response to a claim, demand, investigation or inquiry made against any Buyer
Environmental Indemnitee by any third party, including any governmental
authority or agency, or (D) to correct or remediate any environmental condition
as required by authority or any Environmental Law or a governmental authority or
agency, to achieve compliance with any Environmental Law. For the purpose of
this Agreement, "Environmental Damages" shall mean any and all Losses,
including, without limitation, costs of investigation, attorneys and
consultants, analysis, cleanup, containment or other environmental remediation,
actually incurred by any Buyer Environmental Indemnitee in connection with any
matter described in any of clauses (A) through (D) above.
(ii) With respect to any Environmental Damages pursuant to which a
claim is made by any Buyer Environmental Indemnitee against Seller: (a) before
or on the
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second anniversary of the Closing, Seller shall indemnify and hold Buyer
harmless to the extent of 90% of such Environmental Damages and Buyer shall pay
for 10% of such Environmental Damages; (b) after the second anniversary but
before or on the third anniversary of the Closing, Seller shall indemnify and
hold Buyer harmless to the extent of 80% of such Environmental Damages, and
Buyer shall pay for 20% of such Environmental Damages; (c) after the third
anniversary but before or on the fourth anniversary of the Closing, Seller shall
indemnify and hold Buyer harmless to the extent of 70% of such Environmental
Damages, and Buyer shall pay for 30% of such Environmental Damages; (d) after
the fourth anniversary but before or on the fifth anniversary of the Closing,
Seller shall indemnify and hold Buyer harmless to the extent of 60% of such
Environmental Damages, and Buyer shall pay for 40% of such Environmental
Damages; or (e) after the fifth anniversary but before or on the seventh
anniversary of the Closing, Seller shall indemnify and hold Buyer harmless to
the extent of 50% of such Environmental Damages, and Buyer shall pay for 50% of
such Environmental Damages.
(c) No claim for indemnification made pursuant to this Section 8.5
may be made more than seven years after the Closing; PROVIDED that if prior to
seven years after the Closing, any claim for indemnity under this Section 8.5
shall have been made and such claim shall not have been finally resolved or
disposed of at such date, such claim shall in no way be prejudiced or impaired
by the passage of time and the obligations of Seller under this Section 8.5 with
respect to such claim shall continue to survive as to such claim and shall
remain a basis for indemnity until such claim is finally resolved or disposed
of.
(d) It is further agreed as follows:
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(i) The parties hereto agree to act in good faith in undertaking
work to address environmental matters that give rise to a claim for
indemnification hereunder with a view toward avoiding unnecessary costs.
(ii) Environmental Damages shall be limited to damages directly
related to rectifying the environmental matter to the minimum extent (A)
satisfactory to the governmental authority or agency with responsibility for
such matter or (B) that a prudent business owner would, in its reasonable
business judgment, consider reasonably necessary, in light of prior use of the
properties and facilities of the Company and demonstrated unreasonable risks
associated with the environmental conditions. Each party agrees that, except as
required by Environmental Law or a governmental authority or agency or in
accordance with the preceding sentence, it shall not by voluntary or
discretionary action, accelerate the timing, or increase the cost, of any
obligations of the party under this Section 8.5.
(iii) At Buyer's election, Buyer shall have the right to control
and manage all discussions with third parties and all proceedings and activities
regarding the satisfaction and discharge of any Environmental Damages, and
planning or performing any work at such property, PROVIDED that Seller shall
have the right, at its expense, to participate in all such discussions and all
proceedings and activities.
(iv) If Seller is required to investigate, clean up or otherwise
address Environmental Damages, Buyer shall give Seller and its authorized
representatives and agents reasonable access to the Company's property, all
natural materials (including without limitation, water, dirt, clay and related
materials) on such property and all equipment,
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facilities and utilities on such property, all subject to this Section 8.5.
Seller shall make commercially reasonable efforts to avoid interfering with
operations of the Business.
(v) Buyer will take all reasonable measures to reduce the cost
of any required remediation, including, without any limitation, permitting
Seller to file on or prior to Closing a deed permanently restricting use of the
Company's property for commercial or industrial purposes, PROVIDED that Buyer
will take such reasonable measures commensurate with existing zoning with
respect to adjacent property.
(vi) The party performing the remedial or other work relating to
Environmental Damages shall keep the other party regularly advised of any
studies, reports, correspondence or other significant documents relating to the
project, and shall, to the extent practicable, provide the other party with
reasonable advance notice of any planned activities.
(vii) If Environmental Damages are attributed to transactions or
occurrences that take place before and after the Closing Date and to which both
Seller and a Buyer Environmental Indemnitee have contributed, Seller's liability
hereunder shall be further apportioned on a reasonable basis, taking into
account, in addition to other relevant factors, the degree of contribution on
the part of Seller and such Buyer Environmental Indemnitee before and after the
Closing Date.
ARTICLE IX
TAXES
9.1 APPORTIONMENT AND INDEMNIFICATION. (a) Seller and Buyer agree that
the Company will be included in the consolidated federal income Tax return and
the combined Tax return for Ohio and any other state, where permitted, in which
Tax returns are filed by the Company or its parent for the period from September
30, 1997 through the Closing. Prior
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to the Closing, the Company shall not increase the Tax Reserves other than in
the ordinary course of business.
(b) Seller shall indemnify and hold Buyer harmless against any and
all Taxes of Seller and its affiliates and the Company for any taxable year or
period ending on or before the Closing, and the portion of any such Taxes for
any taxable year or period beginning before and ending after the Closing that is
attributable to the portion of such year or period prior to the Closing, in
either case, however, only to the extent such Taxes exceed the Tax Reserves, and
Seller shall be entitled to all refunds of such Taxes. In determining the Taxes
attributable to any year or period prior to the Closing, the books and records
of the Company will be closed as of the Closing, in accordance with Seller's
past practices, and the taxable income of the Company attributable to the
portion of the year or period prior to the Closing will be determined from such
closed books and records.
(c) Buyer shall indemnify and hold Seller harmless against any and
all Taxes relating to the Company, or any affiliated group of which the Company
becomes a member, after the Closing for any taxable year or period beginning on
or after the Closing, and the portion of any such Taxes for any taxable year or
period beginning before and ending after the Closing that is attributable to the
portion of such year or period beginning after the Closing Date (determined in
the manner parallel to that described in Section 9.1(b) above), and Buyer shall
be entitled to all refunds of such Taxes.
(d) Any payment by Seller or Buyer under this Section 9.1 will be
treated for Tax purposes as an adjustment to the Purchase Price.
(e) Whenever it is necessary for purposes of this Article IX to
determine the Tax liability of a taxable entity for a taxable year or period
that begins before and ends after a prescribed date, the determination shall be
made by apportioning the total Tax liability in the
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manner described in Section 9.1(b) and (c) above, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis.
9.2 FILING OF TAX RETURNS.
(a) Seller shall file or cause to be filed when due all returns in
respect of Taxes of the Company for taxable years or periods ending before or on
the Closing. Seller shall be responsible for the audits of such returns.
(b) Buyer shall file or cause to be filed when due all returns in
respect of Taxes of the Company for taxable years or periods ending after the
Closing. Buyer shall be responsible for the audits of such returns and shall be
entitled to receive from Seller reimbursement for any payment that it makes in
connection with the settlement or other disposition of such proceeding, to the
extent such Taxes exceed the Tax Reserves.
(c) Buyer and Seller agree to furnish or cause to be furnished to
each other, upon request, as promptly as practicable, such information
(including access to books and records) and assistance relating to the Company
and the Business as is reasonably necessary for preparation of and filing of any
return, for the preparation for any audit, and for the prosecution or defense of
any claim, suit or proceeding relating to any proposed adjustment. Buyer and
Seller shall cooperate with each other in the conduct of any audit or other
proceedings involving the Company or any other entity with which they may be
consolidated or combined for any Tax purposes and Buyer and Seller shall each
execute and deliver such powers of attorney and other documents as are necessary
to carry out the intent of this Section 9.2; PROVIDED, that Buyer shall have the
right to control the resolution of such audit or settlement of proceedings for
which Buyer is to bear the cost of any resulting Tax, interest or penalties;
and, PROVIDED, FURTHER, that Seller shall have the right to control the
resolution of
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such audit or settlement of proceedings for which Seller is to bear the cost of
any resulting Tax, interest or penalties.
9.3 SECTION 338(H)(10) ELECTION.
(a) Buyer shall be responsible for and prepare, and Buyer and Seller
shall sign and deliver, timely and irrevocable elections under section 33 8(h)(
10) of the Code and, if permissible, similar elections under any applicable
state and local income tax laws. Each of Seller and Buyer shall report the
transaction consistent with such elections under section 33 8(h)( 10) of the
Code or any similar state or local tax provision (the "Elections") and shall
take no position contrary thereto unless and to the extent required to do so
pursuant to a determination (as defined in section 1313(a) of the Code or any
similar state or local tax provision). Seller shall pay, and indemnify the
Company and Buyer for, any and all Taxes that result from any of the Elections
that is properly prepared and filed; provided, however, that Seller shall not
pay nor indemnify the Company or the Buyer for any Taxes resulting from, or
otherwise be responsible for any consequences of, an invalid, ineffective, or
untimely Election.
(b) Each of Seller and Buyer shall execute at Closing any and all
forms necessary to effectuate the Elections (including, without limitation, IRS
Form 8023-A and any similar forms under applicable state and local income tax
laws (the "Section 338 Forms")). Each of Seller and Buyer shall cause the
Section 338 Forms to be duly executed by an authorized person and shall duly and
timely file the Section 338 Forms in accordance with applicable Tax laws and the
terms of this Agreement.
(c) Each of Seller and Buyer agrees to allocate the Aggregate Deemed
Sale Price (as defined under applicable Treasury Regulations) of the assets of
the Company as set forth in SCHEDULE 9.3. Each of Seller and Buyer will reflect
such allocation in all applicable
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tax returns filed by any of them, including but not limited to the Section 338
Forms. Each of Seller and Buyer shall not take a position before any taxing
authority or otherwise (including in any tax return) inconsistent with such
allocation unless and to the extent required to do so pursuant to a
determination (as defined in Section 1313(a) of the Code or any similar state or
local law).
ARTICLE X
TERMINATION
10.1 TERMINATION. Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated only (a) by the mutual written
consent of the parties to this Agreement, (b) by Buyer or Seller if, for any
reason, the Closing has not occurred prior to April 30, 1998 or (c) by Buyer in
the event that the condition set forth in Section 6.2(e) with respect to
Environmental Damages would not be satisfied as of the Closing; PROVIDED that if
the failure to close by such date is due to Buyer's or Seller's breach of this
Agreement, such party shall not be entitled to terminate this Agreement.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, other
than with respect to the Buyer's obligations under Section 4.9, Seller's
obligations under Section 3.24 and Buyer's and Seller's obligations under
Section 11.1, this Agreement shall thereafter become void and have no effect,
and without any liability on the part of any party or its shareholders,
directors or officers in respect thereof, except that nothing herein will
relieve any party from liability for any breach of this Agreement.
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ARTICLE XI
MISCELLANEOUS
11.1 EXPENSES. Unless otherwise indicated, the parties shall bear their
own respective expenses (including, but not limited to, all compensation and
expenses of counsel, financial advisors, consultants, actuaries and independent
accountants) incurred in connection with the preparation and execution of this
Agreement and consummation of the transactions contemplated hereby.
11.2 PUBLIC DISCLOSURE. Each of the parties hereto hereby agrees that,
except as and to the extent required to comply with the requirements of
applicable law, no press releases or similar public announcement or
communication will be made or caused to be made concerning the execution, terms
or performance of this Agreement unless specifically approved in advance by all
parties. The parties shall consult with one another prior to making any press
release or announcement required to be disclosed by law and shall use their
reasonable efforts to reach agreement on any such press release or announcement.
11.3 SURVIVAL. Subject to the provisions of Sections 5.2, 5.3 and 5.10
and Article VIII hereof, the representations, warranties, covenants and
agreements made by the parties pursuant to this Agreement shall survive the
Closing for a period of two (2) years.
11.4 GOVERNING LAW. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with the law of, the State of Ohio without giving effect to the provisions
thereof relating to conflicts of law.
11.5 NOTICES. All notices, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed given upon (a)
delivery in person, (b) confirmation of receipt of telex or telecopier
transmission, (C) confirmed delivery by a standard overnight carrier or (d) when
mailed by registered or certified service, postage
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prepaid, return receipt requested, on the expiration of the fifth business day
thereafter, addressed to the respective parties at the following addresses or
such other address as shall be specified by like notice):
(a) If to Seller:
HMI Industries Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
with a copy to:
Squire, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) If to Buyer:
Rhone Capital LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. Oroos
M. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
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11.6 ASSIGNMENT. This Agreement may not be assigned, by operation of or
otherwise, except that Buyer may assign its rights under this Agreement in whole
or in part, as collateral security to parties providing financing to Buyer or
the Company in connection with the transactions contemplated hereby and to one
or more affiliates of Buyer which will take title to the Shares and will assume
all obligations of Buyer hereunder; PROVIDED, HOWEVER, that in such event, Buyer
will remain fully liable for the fulfillment of all such obligations, and except
that this Agreement shall be binding upon any assignee, transferee or successor
to all or substantially all of the business of Seller.
11.7 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
11.9 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
11.10 WAIVER. At any time prior to the Closing, the parties hereto may
(a) extend the time for the performance of any of the obligations or other acts
of the others parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered pursuant hereto and
(C) waive compliance with any of the agreements of conditions contained herein.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
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11.11 MISCELLANEOUS. This Agreement (including the SCHEDULES, Exhibit A,
Annexes A and B and the Voting Agreement and the other documents and instruments
referred to herein): (a) constitutes the entire agreement and supersedes ail
prior agreements and understandings, both written and oral, among the parties,
with respect to the subject matter hereof, including, without limitation, any
transaction between or among the parties hereto, and Seller and Buyer hereby
release each other from any claims which Seller and Buyer may now or hereafter
have under any Environmental Law; PROVIDED, HOWEVER, that this Section 11.11
shall not release Buyer and Seller from their respective obligations under
Article VIII of this Agreement; (b) is not intended to confer upon any other
persons, including, but not limited to, employees of Seller or the Company, any
rights or remedies hereunder except as specifically provided in Section 5.2(b)
or 5.10 or Article VIII; and (e) in case any provision in this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby. Seller agrees to use its best efforts to cause stockholders of Seller
that together own or control a majority of Seller's outstanding common stock to
execute, within two business days after the date hereof, the Stockholder Voting
Agreement in the form of Exhibit B attached to this Agreement (the "Stockholder
Voting Agreement"). Notwithstanding anything to the contrary set forth in this
Agreement, in the event Seller fails to cause all of such stockholders to
execute the Stockholder Voting Agreement within such two business day period, by
notice to Seller within two business days thereafter, Buyer may terminate this
Agreement and have no further obligation to Seller hereunder.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed as of the date first above written.
RHONE CAPITAL LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
HMI INDUSTRIES INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President
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