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EXHIBIT 2
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STOCK PURCHASE AGREEMENT
for the
ACQUISITION
of
CENTRAL ENGINEERING COMPANY, a Minnesota corporation
by
▇▇▇▇ INDUSTRIES, INC., a Wisconsin corporation
Dated as of October 31, 1997
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TABLE OF CONTENTS
RECITALS..........................................................................1
DEFINITIONS.......................................................................1
SECTION 1. PURCHASE AND SALE OF THE SHARES.........................5
1.1 Purchase and Sale.......................................5
1.2 Payment of Purchase Price...............................5
SECTION 2. THE CLOSING.............................................6
2.1 Place and Date..........................................6
2.2 Taking of Necessary Action..............................6
SECTION 3. OTHER AGREEMENTS........................................6
3.1 Expenses........................................6
3.2 Noncompetition; Confidentiality.................6
3.3 Shareholders' Representative....................7
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
........................................................8
4.1 Organization....................................8
4.2 Capital Structure...............................8
4.3 Subsidiaries....................................8
4.4 Authority; No Violation.........................8
4.5 Corporate Documents.............................9
4.6 Consents and Approvals..........................9
4.7 Financial Statements............................9
4.8 No Undisclosed Liabilities......................9
4.9 Inventory......................................10
4.10 Accounts.......................................10
4.11 No Adverse Change..............................10
4.12 Litigation.....................................12
4.13 Title; Use and Condition of Assets; Machinery and
Equipment..............................................12
4.14 Real Property..................................13
4.15 Intellectual Property Rights...................13
4.16 Licenses for Third Party Software..............14
4.17 Contracts, Leases and Commitments..............14
4.18 Warranties.....................................16
4.19 Customers......................................16
4.20 Tax Matters....................................17
4.21 Employee Relations.............................19
4.22 Employee Benefit Plans.........................20
(i)
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4.23 Health, Safety, Employment and
Environmental Matters..............................25
4.24 Records and Customer Lists.........................26
4.25 Insurance..........................................26
4.26 Compliance with Laws...............................27
4.27 No Misrepresentation...............................28
4.28 Brokers............................................28
4.29 Dividends..........................................28
4.3 Bank Accounts......................................28
4.31 Transactions with Related Parties..................28
SECTION 5. PERSONAL REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS.......................................29
5.1 Title to Stock.....................................29
5.2 Investment Intent..................................29
5.3 Authorization; Capacity; Enforceability............30
5.4 No Violation or Conflict...........................30
5.5 Litigation.........................................31
5.6 Government Approvals...............................31
5.7 No Pending Acquisitions............................31
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER............31
6.1 Organization.......................................31
6.2 Capital Structure..................................31
6.3 Authority..........................................31
6.4 Consents and Approvals.............................32
6.5 Litigation.........................................32
6.6 Brokers............................................32
6.7 Annual Report......................................32
6.8 Buyer Common Stock.................................32
6.9 No Knowledge of Misrepresentations or Omissions....33
6.10 Contracts..........................................33
SECTION 7. 7.1 COVENANTS..........................................33
Best Efforts.......................................33
SECTION 8. CONDITIONS TO CLOSING..............................34
8.1 Conditions to Obligations of Buyer.................34
8.2 Conditions to Obligations of the Shareholders......37
SECTION 9. TERMINATION........................................40
9.1 Termination........................................40
9.2 Effect of Termination..............................40
SECTION 10. INDEMNITY..........................................41
(ii)
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10.1 Indemnity by Shareholders..........................41
10.2 Indemnity by Buyer.................................42
10.3 Exceptions for Indemnified Damages.................42
10.4 Termination of Indemnification Obligations.........44
10.5 Exclusive Remedy...................................44
10.6 Tax Matters........................................44
SECTION 11. MISCELLANEOUS......................................44
11.1 Expenses...........................................44
11.2 Survival of Representations and Warranties.........44
11.3 Parties in Interest................................45
11.4 Notices............................................45
11.5 Waivers............................................45
11.6 Governing Law......................................46
11.7 Integration; Amendment and Termination.............46
11.8 Paragraph and Other Headings.......................46
11.9 Counterparts.......................................46
11.10 No Impairment......................................46
11.11 Schedules..........................................46
11.12 Legal Proceedings..................................46
Annex A Employment and Non-Compete Agreement for ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Annex B Form of Escrow Agreement
Annex C Facilities Purchase and Sale Agreements
SCHEDULES
1.1 Chiltern Hills Assets and Liabilities sold to ▇▇▇▇ ▇▇▇▇▇▇▇
1.2 Payment to Shareholders
4.2 Capital Structure and Shareholders
4.4 Authorization
4.8 Liabilities
4.9 Intangible Assets
4.9 Inventory
4.10 Accounts Receivable
4.11 Adverse Changes
4.12 Litigation
4.13 Title to Assets; Personal Property
4.14 Real Property
4.15 Intellectual Property
4.16 Software Licenses
4.17 Material Contracts
4.18 Warranties; Warranty Claims
(iii)
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4.19 Customers
4.20 Tax Matters
4.21 Employee Matters
4.22 Employee Benefit Plans
4.23 Health, Safety, Employment and Environmental Matters
4.25 Insurance
4.27 Financial Information
4.29 Dividend
4.30 Bank Accounts
4.31 Transactions with Related Parties
6.4 Buyer Consents and Approvals
10.1 Guaranteed Accounts
(iv)
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 31st day of October,
1997, by and among ▇▇▇▇ Industries, Inc., a Wisconsin corporation ("Buyer") and
the shareholders (the "Shareholders") of Central Engineering Company, a
Minnesota corporation (the "Company"). This Stock Purchase Agreement, together
with all exhibits and schedules hereto, as amended from time to time, is
hereinafter referred to as the "Agreement."
RECITALS
WHEREAS, the Company and its wholly-owned subsidiaries, Cenco Europe,
Inc. ("C Europe"), a Minnesota corporation and Central Engineering
International Co., a Virgin Islands corporation ("C Engineering" and together
with C Europe, the "Subsidiaries") are principally engaged in the business of
manufacturing engine test cell and associated ground support equipment (the
"Business");
WHEREAS, Buyer desires to acquire the Company and its Subsidiaries
through the purchase of all of the issued and outstanding capital stock of the
Company.
NOW THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions, and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
DEFINITIONS
The following capitalized terms when used herein shall have the
meanings specified:
"Accounts" shall mean the accounts receivable, notes receivable, and
similar rights of the Company and, unless the context otherwise requires, its
Subsidiaries.
"Affiliate" shall mean a person or entity which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, the other entity or person in question.
"Average Closing Price of Buyer's Common Stock" shall mean $3.00 per
share of Buyer's Common Stock.
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"Business" shall have the meaning set forth in first paragraph of
Recitals.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banks in the State of Wisconsin are authorized or permitted to be
closed in observance of a legal holiday.
"Buyer" shall mean ▇▇▇▇ Industries, Inc., a Wisconsin corporation.
"Buyer's Common Stock" shall mean shares of common stock, $.001 par
value of Buyer.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.A. Section 9601,
et seq., and the rules, regulations and orders promulgated thereunder.
"Chiltern Hills" shall mean the program developed by ▇▇▇▇ ▇▇▇▇▇▇▇ and
the assets and liabilities identified in the Transfer Agreement dated September
29, 1997, between the Company and the Chiltern Hills Company and listed on
SCHEDULE 1.1.
"Class A" shall mean shares of Class A Common Stock, $.10 par value,
of the Company.
"Class B" shall mean shares of Class B Common Stock, $.10 par value,
of the Company.
"Closing" shall have the meaning set forth in Section 2.1.
"Closing Date" shall have the meaning set forth in Section 2.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
"Company" shall mean Central Engineering Company, a Minnesota
corporation and, unless the context otherwise requires, its Subsidiaries.
"Contracts" shall have the meaning set forth in Section 4.17.
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"Employment Agreement" shall mean the Employment and Noncompete
Agreement between the Company and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in substantially the form
attached as ANNEX A.
"Environmental Laws" shall mean all Laws in effect on or prior to the
Closing Date (including, without limitation, CERCLA), regulations, and written
and binding policies by a governmental agency (foreign, federal, state, or
local) relating to the protection of the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata), including, without limitation, Laws and regulations
relating to Environmental Releases or threatened Environmental Releases of
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials.
"Environmental Release" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
"ERISA Affiliate" shall mean a trade or a business, whether or not
incorporated, that is required to be aggregated with the Company for employee
benefit purposes under Internal Revenue Code Sections 414(b), (c), (m), and/or
(o) or the regulations promulgated thereunder.
"Escrow Agent" shall mean First Trust National Association,
Minneapolis, Minnesota, or such other person or entity mutually acceptable to
Buyer and the Shareholders' Representative.
"Escrow Agreement" shall mean the Escrow Agreement dated as of the
date hereof among Buyer, the Shareholders' Representative and the Escrow Agent
and attached as ANNEX B.
"Expenses" shall have the meaning set forth in Section 3.1.
"Facilities" shall mean the land, buildings, fixtures, structures, and
improvements out of which the Business is operated, located in the St. ▇▇▇▇▇▇▇
Industrial Park, Minneapolis, Minnesota, and owned, directly or indirectly, by
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and his Affiliates.
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"Facilities Purchase Agreement" shall mean the purchase and sale
agreements relating to the Facilities to be entered into by and among Buyer and
Ole Investments a general partnership and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as the case may be,
in the form of ANNEX C attached hereto.
"Financial Statements" shall mean the consolidated financial
statements of the Company and its Subsidiaries for the years ended June 30,
1997, 1996 and 1995, reported upon by McGladrey & ▇▇▇▇▇▇, LLP, independent
auditors.
"Closing Balance Sheet" shall mean a consolidated balance sheet of the
Company (exclusive of all assets and liabilities relating to Chiltern Hills
which were previously sold for cash to ▇▇▇▇ ▇▇▇▇▇▇▇ pursuant to the Transfer
Agreement) dated as of September 30, 1997, prepared as described in Section
3.3. hereof.
"GAAP" shall mean United States generally accepted accounting
principles, applied on a basis consistent with past practice.
"Hazardous Materials" shall mean: (a) any waste, hazardous waste,
pollutant, contaminant, or hazardous or toxic substance as specified, listed,
identified, or defined as of the Closing Date in (i) the Resource Conservation
and Recovery Act, 42 U.S.C.A. Section 6901, et seq., and the rules, regulations
and orders promulgated thereunder; (ii) CERCLA; (iii) the Clean Water Act, 33
U.S.C. 1251, et seq., and the rules, regulations and orders promulgated
thereunder; (iv) the Clean Air Act, 42 U.S.C. 7401, et seq., and the rules,
regulations and order promulgated thereunder; (v) the Toxic Substances Control
Act, 15 U.S.C. 2601, et seq., and the rules, regulations and orders promulgated
thereunder; (vi) the Hazardous Materials Transportation Act, 49 U.S.C. 1801, et
seq., and the rules, regulations and orders promulgated thereunder; (vii) the
Occupational Safety and Health Act, 29 U.S.C. 651 et seq., and the rules,
regulations and orders promulgated thereunder; and (viii) any other applicable
U.S. federal, state, local, or other statutes or Laws, and the rules,
regulations, and orders promulgated thereunder; (b) asbestos; (c) formaldehyde;
(d) polychlorinated biphenyls; (e) radioactive materials; and (f) waste oil and
other petroleum products.
"Holdback Amount" shall mean the sum of $400,000 to be held out of the
Purchase Price paid by Buyer at Closing and paid pursuant to Section 1.2.
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"Intellectual Property Rights" shall mean (i) patent rights and
rights, title and interest in and to all letters patent or applications for
letters patent, industrial models, industrial designs, ▇▇▇▇▇ patents, patents
of importation, utility models, certificates of invention and other government
issued or granted indicia of invention ownership including any reissue,
division, continuation or continuation-in-part applications throughout the
world; (ii) rights, title and interest in and to trade secrets and trade secret
rights arising under the common law, state law, federal law and laws of foreign
countries; (iii) copyright rights, and other literary property and author
rights whether or not copyrightable; and rights, title and interest in and to
all copyrights, copyright registrations, certificates of copyright and
copyrighted interests throughout the world; (iv) mask work rights including
mask work registration rights and mask work registrations throughout the world;
(v) rights, title and interest in and to all know-how and show-how whether or
not protectable by patent, copyright or trade secret law, or as a registered
mask work; and (vi) trademarks, trade names and service marks, whether
registered or arising under the common law, state law, federal law and laws of
foreign countries and all registrations thereof and interests therein
throughout the world and all associated goodwill.
"Inventory" shall mean all of the Company's and its Subsidiaries'
inventories of useable raw materials and supplies, work in process, and
finished goods which are resalable at normal prices and discounts in the
ordinary course of business.
"June 30, 1997 Balance Sheet" shall mean the consolidated balance
sheet of the Company and its Subsidiaries as of June 30, 1997.
"Knowledge of the Company" shall mean actual knowledge of the officers
of the Company or any knowledge which any such officer should have by virtue of
his or her position with or relationship to the Company or knowledge from
operating and managing the Business. For purposes of this provision, officers
will mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, E.L. Tell, ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
"Knowledge of the Shareholders" shall mean actual knowledge of any
Shareholder and any knowledge which any Shareholder should have by virtue of
his or her position with or relationship to the Company.
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"Law" shall mean any federal, state, local, or other law, rule,
regulation, or governmental requirement or restriction of any kind, including
any rules, regulations and orders promulgated thereunder and any final orders,
decrees, written and binding policies, consents or judgments of any regulatory
agencies, courts or other Persons.
"Leased Assets" shall mean all items of personal or real property
which the Company and/or its Subsidiaries lease, which items are listed on
SCHEDULE 4.17 hereto.
"Lien" shall mean, with respect to any asset: (a) any mortgage,
pledge, lien, charge, claim, restriction, reservation, condition, easement,
covenant, lease, encroachment, title defect, imposition, security interest or
other encumbrance of any kind whether imposed by Law, by contract or otherwise;
and (b) the interest of a vendor or lessor under any conditional sale
agreement, financing lease or other title retention agreement relating to such
asset.
"Material Change" shall have the meaning set forth in Section 4.11.
"Person" shall mean a natural person, corporation, limited liability
company, limited liability partnership, association, joint stock company,
trust, partnership, government entity, agency or branch or department thereof,
or any legal entity.
"Purchase Price" shall have the meaning set forth in Section 1.2.
"Shareholders' Representative" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
"Shareholders" shall mean the holders of Class A or Class B Shares as
of the Closing.
"Taxes" shall have the meaning set forth in Section 4.20(a).
"Third Party Software" shall have the meaning set forth in Section
4.16.
SECTION 1. PURCHASE AND SALE OF THE SHARES.
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1.1 Purchase and Sale. At the Closing, and upon all of the terms
and subject to all of the conditions of this Agreement, the Shareholders shall
sell, assign, convey, and deliver to Buyer, and Buyer shall purchase and accept
from the Shareholders, all of the Class A and Class B issued and outstanding
shares of the Company. Certificates for said Class A and Class B shares shall
be delivered to Buyer free and clear of all claims and Liens, and shall be
properly endorsed for transfer to Buyer. Said purchase and sale shall be
deemed to be effective as of the Closing.
1.2 Payment of Purchase Price. The purchase price for the Class A
and Class B shares shall be $6,473,216 (the "Purchase Price"), paid as follows:
(a) At Closing, Buyer shall deliver to the Shareholders'
Representative certificates representing 250,000 shares of Buyer's Common Stock
issued in the names of the Shareholders and in the amounts set forth on
Schedule 1.2.
(b)$5,723,216, less the Holdback Amount, shall be paid at Closing. Payment
shall be made by wire transfer to an account designated in writing by the
Shareholders' Representative. Such amount shall be allocated to each
Shareholder as set forth on Schedule 1.2.
(c) The Holdback Amount shall be paid to the Escrow Agent at
Closing to be held, invested and disbursed pursuant to the terms of the Escrow
Agreement. On June 30, 1998, the Escrow Agent shall deliver to the
Shareholders' Representative, by wire transfer or other reasonable method
selected by the Shareholders' Representative, the amount remaining in the
account established to hold the Holdback Amount, unless at that time there
exists any claim which has been made by Buyer and which remains outstanding, in
which case an amount equal to the claimed amount shall be retained by the
Escrow Agent and the remaining net amount distributed to the Shareholders'
Representative.
SECTION 2.THE CLOSING
2.1 Place and Date. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, P.L.L.P. at 10:00 a.m. on October 31, 1997, or such other place
and/or time as Buyer and the Company may agree upon in writing (the "Closing
Date") for the
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purpose of confirming the satisfaction, or if permissible, waiver of the
conditions set forth in Section 8 hereof.
2.2 Taking of Necessary Action. Each of the parties shall use its
best efforts to take all such action as may be necessary or appropriate to
effectuate the transactions contemplated hereby.
SECTION 3. OTHER AGREEMENTS
3.1 Expenses. The Shareholders shall pay, or make provision for,
all expenses of the Shareholders relating to the transactions contemplated in
this Agreement ("Expenses"), which Expenses shall include without limitation
all out-of-pocket costs, fees and expenses of counsel, accountants, brokers,
consultants, investment bankers, financial advisors, and other third parties
engaged by the Company or the Shareholders in connection with: (i) the
negotiation, preparation, execution, delivery and performance of this
Agreement; and (ii) the other Closing responsibilities of the Shareholders or
the Company prior to Closing.
3.2 Noncompetition; Confidentiality.
(a) The Shareholders acknowledge that: (i) the Business
connections, customers, customer lists, marketing, production, manufacturing,
sales techniques, procedures, operations, and other Intellectual Property
Rights and aspects of the Business which are to be acquired by Buyer hereunder
have been established and maintained by the Shareholders and the Company at
great expense to the extent protected as confidential information and trade
secrets, and are of great value; and (ii) Buyer and the Company would suffer
great loss and injury if the information were disclosed or used in any way to
the detriment of Buyer and the Company. Therefore, the Shareholders shall not,
directly or indirectly, use or disclose, or cause or allow to be used or
disclosed, to Buyer's and the Company's detriment, any secret, confidential, or
proprietary information relating to the Business. The foregoing limitation
shall not apply to any confidential or proprietary information which has been
voluntarily disclosed to the public by Buyer or the Company before or after the
Closing, independently developed and disclosed by others, or otherwise enters
the public domain through lawful means, not in violation of the provisions of
this Section.
(b) The Shareholders shall not make or publish any disparaging
remarks about Buyer, the Company, or the Business as
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long as the Company continues the Business, and shall not induce, encourage, or
cause any such customer or supplier to terminate doing business with the
Company. The Buyer shall not make or publish any disparaging remarks about the
Shareholders.
3.3 Shareholders' Representative.
(a) Each of the Shareholders has irrevocably constituted and
appointed ▇▇▇▇▇ ▇▇▇▇▇▇▇, and ▇▇. ▇▇▇▇▇▇▇ has accepted such appointment, as
their agent and attorney-in-fact with full power of substitution and revocation
to do any and all things and execute any and all documents on his or her behalf
which may be necessary, convenient, or appropriate to facilitate the
consummation of the transactions contemplated by this Agreement, including but
not limited to: (i) amendments to this Agreement, provided that no amendment
shall materially adversely affect the rights of any one Shareholder relative to
any other Shareholders; (ii) execution of documents and certificates pursuant
to this Agreement; (iii) receipt of payments under or pursuant to this
Agreement and disbursement thereof to the Shareholders; (iv) receipt and
forwarding of notices and communications pursuant to this Agreement; (v)
negotiation and compromise of any Holdback and indemnity claims made by Buyer
hereunder; and (vi) payment of fees and expenses incurred on behalf of the
Shareholders in connection with this Agreement.
(b) The Buyer shall be fully protected in dealing with ▇▇. ▇▇▇▇▇▇▇
under this Agreement and may rely upon the authority of ▇▇. ▇▇▇▇▇▇▇ to act as
the Shareholders' Representative. Any payments or delivery of payments by the
Buyer to ▇▇. ▇▇▇▇▇▇▇ under this Agreement for the benefit of the Shareholders
shall be considered payments by the Buyer to the Shareholders. The appointment
of ▇▇. ▇▇▇▇▇▇▇ is coupled with an interest and is irrevocable by any
Shareholder in any manner or for any reason, unless written revocation is
personally delivered to ▇▇. ▇▇▇▇▇▇▇ and the Buyer on or prior to the time that
action on behalf of the Shareholders is taken or payments or deliveries are
made, in which case such revocation shall only apply to actions taken or
proposed to be taken after receipt of such notice. This power of attorney
shall not be affected by the death, disability, or incapacity of any
Shareholder.
(c) If at any time there is no Person acting as Shareholders'
Representative for any reason, the Shareholders holding a majority interest in
the Class A and Class B shares shall
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choose a Person to act as Shareholders' Representative under this Agreement.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ represents and warrants to Buyer that as of the date
hereof:
4.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Minnesota,
and has the requisite corporate power and authority to own, lease and operate
its properties and to transact the Business as it is now being conducted, holds
all material licenses or permits to conduct the Business, and is duly qualified
or licensed to do business and is in good standing in each place and
jurisdiction where the nature of the business conducted by it or the ownership,
lease or operation of its properties requires a license or qualification except
where the failure to be so qualified or licensed would not have a material
adverse effect upon the Company.
4.2 Capital Structure. The Company's authorized capital consists
of: (i) 100,000 shares of Class A, of which 15,450 shares are issued and
outstanding; and (ii) 1,000,000 shares of Class B, of which 75,390 shares are
issued and outstanding and collectively held by the Shareholders shown on
SCHEDULE 4.2. All the outstanding shares of Class A and Class B are, and at
the Closing will be, duly and validly issued, fully-paid and nonassessable and
free of any preemptive rights in respect thereof. There are not now
outstanding: (i) options, warrants, subscription agreements, commitments,
conversion or other rights which obligate to the Company to issue or sell any
capital stock or other security of the Company; (ii) any securities convertible
into or exchangeable for shares of such stock; or (iii) any other agreements or
commitments of any kind for the issuance of additional shares of capital stock
or options, warrants or other securities of the Company. No shares of Class A
or Class B of the Company are held in treasury by the Company. Except as
provided in SCHEDULE 4.2, there are no agreements to which the Company is a
party or of which it or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ are otherwise aware restricting the
transfer of the Class A and/or Class B, or affecting the rights of any holder
of such shares with respect thereto. There are no rights on the part of any
holder of any securities of the Company or its Subsidiaries to put such
securities to the Company or its Subsidiaries for purchase, redemption or
otherwise.
4.3 Subsidiaries. The Company has no direct or indirect
subsidiaries other than C. Europe and C. Engineering.
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Each Subsidiary is duly organized, validly existing and in good standing under
the laws of the State of Minnesota or Virgin Islands, as the case may be, and
has all requisite corporate power and authority to own its assets and
properties, and to carry on its business as now being conducted. The
Subsidiaries are duly qualified to do business and in good standing in all
jurisdictions where failure to be so qualified would have a material adverse
effect on the business, operations or financial condition of such corporation.
The Company owns beneficially and of record all outstanding shares of capital
stock of its Subsidiaries.
4.4 Authority; No Violation. No corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby by the Shareholders. The execution, delivery
and performance by the Shareholders of this Agreement and the consummation of
the transactions contemplated hereby by the Shareholders is not prohibited by,
and does not conflict with or violate any provision of or result in any breach
or default of (or give rise to any right of termination, cancellation or
acceleration under) (i) any judgment, writ, order, injunction, decree, statute,
ordinance, rule or regulation applicable to the Company or its Subsidiaries or
any of their assets, (ii) except as provided in Schedule 4.2, the Articles of
Incorporation or Bylaws of the Company and its Subsidiaries, or (iii) except as
set forth on SCHEDULE 4.4, any material note, mortgage, Lien, indenture or any
other evidence of indebtedness or security therefor, lease, contract, license,
purchase or other commitment or any other agreement to which the Company or its
Subsidiaries is a party or by which either is bound, and has not resulted and
will not result in the creation or imposition of any Lien, security interest or
encumbrance in favor of any third party on any of the Company's and/or its
Subsidiaries' assets. No representation is given concerning the execution,
delivery or performance by the Company of the agreements attached hereto as
Annexes.
4.5 Corporate Documents. The Company has furnished to Buyer for
its examination (i) true, correct and complete copies of the Articles of
Incorporation and Bylaws of each of the Company and its Subsidiaries, and (ii)
the minute books of the Company and its Subsidiaries containing records of all
proceedings, consents, actions and meetings of the shareholders and board of
directors of the Company and its Subsidiaries, and no amendments to such
documents have been made or authorized.
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4.6 Consents and Approvals. The execution, delivery and
performance of this Agreement will not require any consent, waiver, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority.
4.7 Financial Statements. Except as set forth on SCHEDULE 4.7,
the Financial Statements, including the notes thereto, have been prepared in
conformity with GAAP consistently applied throughout the periods indicated,
present fairly the financial position of the Company and its Subsidiaries at
the respective dates of the balance sheets included in the financial
statements, and the results of operations of the Business for the respective
periods indicated, are in accordance with the books and records of the Company
and its Subsidiaries regarding the Business, and do not omit to state or
reflect any material fact concerning the Business required to be stated or
reflected therein in accordance with GAAP. The Closing Balance Sheet has been
prepared in conformity with GAAP consistently applied and fairly presents the
financial position of the Company and its Subsidiaries at September 30, 1997.
4.8 No Undisclosed Liabilities. Except as set forth on SCHEDULE
4.8, to the Knowledge of the Company, as of September 30, 1997, the Company and
its Subsidiaries have no liabilities or obligations (absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise) other than as disclosed on
the consolidated balance sheet as of that date (and notes thereto) contained in
the financial statements or liabilities set forth in this Agreement or the
Schedules hereto. Except as set forth on SCHEDULE 4.8, since June 30, 1997,
neither the Company nor its Subsidiaries has incurred any liabilities or
obligations (absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise) except liabilities incurred in the ordinary course of business
consistent with past practice.
4.9 Inventory. The quantity of the Inventory on the Closing Date
will be adequate for, but will not materially exceed levels appropriate to, the
operation of the Business as currently conducted by the Company.
4.10 Accounts. The Accounts of the Company reflected in the
Closing Balance Sheet and all the Accounts arising after such date are valid
and genuine and arose from bona fide transactions in the ordinary course of the
Business and have been recorded in accordance with the Company's and its
Subsidiaries' historical
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revenue recognition policy. Except as set forth on SCHEDULE 4.10 hereto, no
Account has been assigned or pledged to any other Person and no defense or set
off to any such Account has been asserted by the Account obligor. To the
Knowledge of the Company, (i) the allowance for doubtful accounts and other
related reserves for the Company's Accounts set forth in the Closing Balance
Sheet is adequate, except as provided in SCHEDULE 4.10, and in accordance with
the historical accounting practices of the Company, and, (ii) except as
provided in SCHEDULE 4.10, all of the Accounts of the Company on hand at the
Closing, net of such allowance for doubtful accounts and other related
reserves, are and will be good and collectible in due course. No Account
previously collected is subject to any claim of a third party, including
preference claims under bankruptcy laws.
4.11 No Adverse Change. Except as disclosed on SCHEDULE 4.11,
since June 30, 1997, there has been no material adverse change, to the
Knowledge of the Company, in the assets, liabilities, customer relations or
vendor relations, prospects, operations or condition, financial or otherwise,
of the Company and its Subsidiaries or the Business from that reflected in the
June 30, 1997 Balance Sheet and the Closing Balance Sheet, other than changes
in the ordinary course of business consistent with past practice which have not
materially adversely affected any of the Company's assets or materially
increased any of the liabilities (actual or contingent) of the Business.
Without limiting the generality of the foregoing, except as disclosed on
SCHEDULE 4.11 or the Closing Balance Sheet, since June 30, 1997, the Company
has not:
(a) entered into any transaction or agreement or incurred
any obligation or liability connected with the Business, other than
transactions in the ordinary course of business consistent with past practice;
(b) mortgaged, pledged or subjected to any pledge,
security interest, Lien or other encumbrance of any kind (except Liens for
taxes not yet due) any of the Company's or its Subsidiaries' assets;
(c) sold, assigned or otherwise transferred, or
authorized the sale, assignment or other transfer of, any of the Company's or
its Subsidiaries' assets, other than transactions in the ordinary course of
business consistent with past practice and other than the Chiltern Hills
assets;
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(d) suffered any damage, destruction or loss (whether or
not covered by insurance) affecting any of the Company's or its Subsidiaries'
assets or the Business;
(e) waived or relinquished any rights of substantial
value relating to the Company's or its Subsidiaries' assets or the Business or
the liabilities attributable to the Business without adequate consideration;
(f) amended in any respect adverse to the Company and/or
its Subsidiaries or the Business or terminated, orally or in writing, any
contract, agreement or order included in or relating to the assets or the
liabilities attributable to the Business, or received notice of amendment or
termination of any such contract, agreement or order;
(g) made or authorized any loan, borrowing, investment,
advance or guaranty (except advances or credits to customers, suppliers or
vendors in the ordinary course of business and except for travel advance to
employees), or made or authorized any capital expenditure of a material nature
which is inconsistent with past practices;
(h) made any change in the methods, price or terms of
sale of the products and services sold in the conduct of the Business other
than in the ordinary course of Business;
(i) cancelled or terminated or suffered the cancellation
or termination of any relationship with any material customer, supplier or
distributor or given or received any notice that any such relationship may be
cancelled or terminated;
(j) become a party to, settled or agreed to settle any
litigation, action or proceeding relating to the Business before any court,
arbitrator or governmental body;
(k) increased any compensation or other benefit payable
to current or former employees, consultants or independent contractors of the
Business other than in connection with customary periodic evaluations and in
accordance with past practice;
(l) suffered any change, event or condition which, in any
case or in the aggregate, had or may have a material adverse effect on the
condition (financial or otherwise), properties,
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assets, liabilities, or operations of the Company, its Subsidiaries or the
Business;
(m) paid or agreed to pay any brokerage, finder's fee,
taxes or other expenses in connection with, or incurred any severance pay
obligations by reason of, this Agreement or the transactions contemplated
hereby;
(n) made any change in accounting methods or practices
(including without limitation any change in depreciation or amortization
policies or rates);
(o) revalued any of the Company's or its Subsidiaries'
assets;
(p) accepted any cancellation of any of the debts or
claims of the Company or its Subsidiaries regarding the Business;
(q) taken any action or inaction which has caused or will
with notice, the passage of time or both, cause a material breach or default in
any contract, obligation, lease or license to which the Company and/or its
Subsidiaries is a party or by which the Company and/or the Company's or its
Subsidiaries' assets are bound;
(r) made any purchase commitment by or on behalf of the
Business in excess of the normal, ordinary and usual requirements of the
Business or at any price in excess of the then current market price or upon
terms and conditions more onerous than those usual and customary in the
industry;
(s) accelerated collection of any account receivable,
whether or not by offering a discount or other accommodation to its customers
or other debtors;
(t) hired or engaged any independent contractor to render
consulting or computer programming services to the Business including payments
in amounts which are inconsistent with past practices; or
(u) entered into any written or oral agreement or made
any commitment to take any action described in clauses (a) through (t) above.
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Each of the changes, events and actions described in this Section 4.11
shall herein be individually referred to as a "Material Change" and shall
collectively be referred to as "Material Changes."
4.12 Litigation. Except as set forth on SCHEDULE 4.12, there is no
pending or, to the Knowledge of the Company, currently threatened claim or
action, suit, arbitration, proceeding or, to the Knowledge of the Company,
investigation before any court, arbitrator or government commission or agency
against the Company or its Subsidiaries, nor, to the Knowledge of the Company,
is the Company aware of any basis for any of the foregoing. The Business is
not subject to the provisions of any order, writ, injunction, judgment or
decree of any court or governmental agency or instrumentality. Except as set
forth on SCHEDULE 4.12, there is no litigation against any third party by the
Company or its Subsidiaries. The matters set forth in SCHEDULE 4.12, except as
otherwise set forth therein, if decided adversely to the Company, will not
result in a material adverse change in the business, assets or financial
condition of the Company or the Business. The Company has furnished or made
available to Buyer copies of all relevant papers and documents relating to the
matters set forth in SCHEDULE 4.12.
4.13 Title; Use and Condition of Assets; Machinery and Equipment.
Except as set forth on SCHEDULE 4.13, the Company has good and marketable title
to all of its assets, free and clear of all mortgages, options, leases,
covenants, conditions, agreements, Liens, security interests, adverse claims,
restrictions, charges, encumbrances or rights of others. There exists no
restriction on the use or transfer of any of the Company's or its Subsidiaries'
assets and such assets conform in all material respects to all applicable laws
and regulations, and no notice of violation of any law or regulation relating
thereto has been received by the Company except as have been complied with in
all material respects. The Company's and its Subsidiaries' assets are in
reasonable operating condition and repair, ordinary wear excepted, and such
assets, other than leased assets (real and personal), constitute all of the
property now used in, and reasonably necessary for the conduct of, the Business
in the manner and to the extent presently conducted. Except as set forth on
SCHEDULE 4.13, all the Company's assets are located in the Facilities.
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No notice of any material violation of any building, zoning, or other Laws
relating to such assets, including the Facilities, or their use has been
received by the Company or its Subsidiaries.
4.14 Real Property. Neither the Company nor its Subsidiaries owns
any real property. True, correct and complete copies of all leases of the
Facilities and other real property used by the Company and its Subsidiaries
have been delivered to Buyer. Except as set forth on SCHEDULE 4.14:
(a) All the buildings, fixtures and leasehold
improvements used by the Company or its Subsidiaries in the Business are
located at the Facilities.
(b) To the Knowledge of the Shareholders and to the
Knowledge of the Company, all improvements located on, and the uses presently
made of, the Facilities and any other buildings in connection with the Business
comply in all material respects with (i) all applicable zoning, fire,
environmental, occupational safety and health standards established by law or
regulation and (ii) all applicable leases, contracts, commitments, licenses and
permits, and neither the Company nor its Subsidiaries is aware of any proposed,
pending or threatened change in any such codes, ordinances, standards, leases,
contracts, commitments, licenses or permits which would adversely affect the
Business or the Company's or its Subsidiaries' use of its property and assets.
(c) There are no brokerage or other leasing commissions
payable by the Company or its Subsidiaries in connection with the Facilities.
(d) Neither the Company nor its Subsidiaries has
experienced any material interruption in the delivery of adequate quantities of
any utilities (including, without limitation, electricity, natural gas, potable
water, water for cooling or similar purposes and fuel oil) or other public
services (including without limitation sanitary and industrial sewer service)
required by the Company or its Subsidiaries in the operation of the Business
during the past year. There are no known road disruptions which will regularly
limit access to the Facilities.
4.15 Intellectual Property Rights. The Company owns or has valid
licenses to all Intellectual Property Rights which are
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material to the operation of the Business as it presently is conducted.
Except as set forth on SCHEDULE 4.15, neither the Company nor its
Subsidiaries has granted any license or rights to any other Person or entity
with respect to any Intellectual Property Rights owned by the Company. To the
Knowledge of the Shareholders and to the Knowledge of the Company, neither the
Company nor its Subsidiaries is infringing upon or violating any Intellectual
Property Rights of any other Person or entity in the conduct of the Business.
Except as set forth on SCHEDULE 4.15, no royalty, commission, or payment of any
kind is due or could be due for the use of any product sold by the Company or
its Subsidiaries.
4.16 Licenses for Third Party Software. The software or computer
programs licensed from a third party ("Third Party Software") are presently
used by the Company or its Subsidiaries as licensee under the terms of said
licenses. All royalties due under said licenses have been paid or provided for
in the Company's books and records and, except as set forth on SCHEDULE 4.16,
there exists no material default under the terms of said licenses and no event
has occurred which, upon the passage of time or the giving of notice, or both,
would result in any material default or prevent the Company or its Subsidiaries
from exercising and obtaining the benefits of any options contained therein.
Each of the Company and its Subsidiaries, as appropriate, has all right, title
and interest of the licensee under the terms of said licenses, free of all
Liens, claims or encumbrances, all such licenses are valid and in full force
and effect and, except as set forth on SCHEDULE 4.16, each of the Company and
its Subsidiaries, as appropriate, is in compliance with the terms thereof.
There will be no default or basis for acceleration under any of said licenses
as a result of the transactions contemplated by this Agreement. Neither the
Company nor its Subsidiaries has received any notice of infringement, violation
or conflict with any Intellectual Property Rights of third parties with respect
to its use of any Third Party Software.
4.17 Contracts, Leases and Commitments.
(a)SCHEDULE 4.17 sets forth all contracts, agreements, orders
and commitments, written or oral, presently used by the Company and/or its
Subsidiaries or which are binding upon
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the Company or its Subsidiaries and which are material to the conduct of the
Business (the "Contracts"), and identifies below those Contracts which require
the approval or consent of a third party prior to the transactions contemplated
by this Agreement, including:
(1) Any purchase contract or purchase commitment, whether written
or oral, that continues (or an outstanding bid or proposal that if accepted
would continue) for a period of six months or more after the Closing or
involves $50,000 or more in remaining payments;
(2) (i) Any outstanding sales, license or service contract or
commitment which has a remaining term of six months or more after the
Closing or involves $50,000 or more in remaining payments to the Company
and/or its Subsidiaries or (ii) any outstanding oral sales, license or
service contract or commitment which was in effect at any time during the
past year and which involves or involved a value of $50,000 or more per
annum;
(3) Except for the Facilities, any outstanding lease under which
the Company and/or its Subsidiaries is a lessee or lessor of real or
personal property;
(4) Any written or oral agreement, or any other oral or written
agreement or employee policy that contains any severance or termination pay
liabilities or obligations or any other employee benefit provision,
including any agreement or arrangement providing for the payment of any
bonus or commission based on sales or earnings or any collective bargaining
agreement;
(5) Any written or oral agreement prohibiting or limiting the
ability of the Company and/or its Subsidiaries to engage in the Business or
any other Business or to compete with any Person;
(6) Any debt obligation for borrowed money, including guarantees
(including guarantees by way of acting as guarantor, surety, co-▇▇▇▇▇▇,
endorser, co-maker, indemnitor or otherwise) of or agreements to acquire,
any such debt obligation of others;
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(7) Any outstanding loan to any Person;
(8) Any outstanding powers of attorney; or
(9) Any contract (including any oral or written agreement) for the
acquisition of any other business or company.
True and complete copies of all written Contracts and written
summaries of all oral Contracts listed on SCHEDULE 4.17 have been furnished to
Buyer.
(b) With regard to the Contracts:
(1) Except as set forth on SCHEDULE 4.17, (i) no
event has occurred or is continuing which, upon the passage of
time or the giving of notice, or both, could constitute a
material default by the Company and/or its Subsidiaries with
respect to any Contract, and, to the Knowledge of the Company,
neither the Company nor its Subsidiaries is aware of any claim
of any such default having been made against the Company
and/or its Subsidiaries with respect to any Contract, and (ii)
neither the Company nor its Subsidiaries is aware of any event
which, upon the passage of time or the giving of notice, or
both, could constitute a material default by any other party
to any such Contract or could cause the acceleration of any
obligation of any other party thereto or the creation of a
Lien or encumbrance upon any of the Company's or its
Subsidiaries' assets.
(2) Except as set forth on SCHEDULE 4.17, each of
the Contracts is valid, binding and enforceable against the
Company and its Subsidiaries and, to the Knowledge of the
Company, each other party thereto in accordance with its terms
without any defenses, setoffs, counterclaims or disputes of
any nature and is in full force and effect.
(3) With respect to Contracts in process,
Schedule 4.17 lists each contract currently in penalty. To
the Knowledge of the Company, the Company is not aware of any
Contract in process which is reasonably likely to result in
material penalties being assessed against the Company.
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(c) No purchase commitment for materials, supplies,
component parts or other items of inventory of the Business to which the
Company and/or its Subsidiaries is a party is in excess of the ordinary,
normal, usual and current requirements of the Business or at a price in excess
of the reasonable market price. Except as set forth on SCHEDULE 4.17, to the
Knowledge of the Company, no Contract which relates to the Business obligates
the Company and/or its Subsidiaries (i) to provide products or services to
third parties which the Company and/or its Subsidiaries knows or has reason to
believe are bid at prices which it knew would result in a net loss on the sale
or provision of such products or services, or which are pursuant to terms or
conditions the Company does not expect to satisfy or fulfill in their entirety,
or (ii) to purchase or acquire services, information, Third Party Software,
inventory or equipment in excess of the normal, ordinary, usual and current
requirements of the Business or at a price in excess of the reasonable market
price at the time of Contract. Except as set forth in SCHEDULE 4.11 or 4.17,
neither the Company nor its Subsidiaries has waived any material right under
any Contract.
Except for the Employment and Noncompete Agreement of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and other Company employees to be executed at Closing and as set forth
in SCHEDULE 4.17 or SCHEDULE 4.22, there are no agreements, understandings,
instruments or proposed transactions involving amounts in excess of $2,500
between the Company or its Subsidiaries and any employee of the Business which
shall survive the Closing Date except travel advances.
Except for the Contracts listed on SCHEDULE 4.17, neither the
Company nor its Subsidiaries is a party to, nor are any of their assets bound
by, any agreement that is materially adverse to the Business. Except as set
forth in SCHEDULE 4.12, neither the Company nor its Subsidiaries has received
notice that any party to any of the Contracts intends to cancel or terminate
any Contract or to exercise or not exercise any option under any Contract.
(d) After receipt of the consents required under the
Contracts listed on SCHEDULE 4.17, to the Knowledge of the Company, no Contract
will be terminated or otherwise affected by the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
4.18 Warranties. All material warranty obligations are set forth
in the Contracts listed on SCHEDULE 4.17 or on SCHEDULE 4.18. Except as set
forth on SCHEDULE 4.18 or included in the
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estimated cost to complete account on the Company's financial records, on the
date hereof, there are no pending products liability, warranty or similar
claims involving more than $10,000 each, and neither the Company nor its
Subsidiaries has knowledge of any such threatened claim.
4.19 Customers. A true, correct and complete list of the names and
addresses of the fifteen (15) largest customers of the Company on a
consolidated basis by fiscal year 1997 sales volume has been delivered by the
Company to Buyer. Except as set forth in SCHEDULE 4.19, to the Company's
Knowledge, neither the Company nor its Subsidiaries is aware of any customer
appearing on such list that has ceased (or threatened to cease) doing business
with the Company or its Subsidiaries, or which will materially alter the amount
of business it is presently doing with the Company or its Subsidiaries or will
cease to (or has threatened to cease to) do business with Buyer after the
Closing on the same terms and conditions as it did business with the Company
and/or its Subsidiaries prior to Closing.
4.20 Tax Matters.
(a)Except as set forth in SCHEDULE 4.20, each of the Company
and its Subsidiaries has within the times prescribed by law filed all returns,
declarations, reports, estimates, information returns and statements and other
documents (the "Returns") required to be filed by or for the Company or its
Subsidiaries or the Business in respect of all federal, state, local and foreign
taxes, assessments and governmental charges of any kind whatsoever, whether
payable directly, by withholding or otherwise, including without limitation,
income, profits, premium, rent, occupation, property, license, excise, sales,
windfall profits, use, conveyance, customs, duties, value added, gross receipts,
franchise, ad valorem, intangibles, severance, transfer, employment,
payroll-related, withholding, stamp and estimated taxes, assessments and
governmental charges, together with any interest, penalties, additions to tax or
additional amounts imposed by any taxing authority with respect thereto
(collectively, "Taxes" or "Tax"), and the information contained in each such
Return is complete and accurate in all material respects.
(b) All Taxes attributable to the Business, the Employees
or the Company's or its Subsidiaries' assets that have become due have been
timely paid in full or fully reserved against in the Financial Statements.
Except for Taxes related to the
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transactions contemplated by this Agreement, the Company has established (and
until the Closing will establish) on its books and records reserves that are
adequate for the payment of all Taxes for periods prior to the Closing not yet
due and payable and there is no difference between the amounts of the book
basis and the tax basis of assets (net of liabilities) that are not accounted
for by an accrual on the books for income tax purposes.
(c) There are no pending audits, actions, proceedings or
to the Knowledge of the Company, investigations or claims relating to any
liability of the Business or the Company's or its Subsidiaries' assets in
respect of Taxes, and, to the Knowledge of the Company, there is no basis for
any such claim which is likely to result in a Tax liability being imposed with
respect to the Business, the Employees or the Company's or its Subsidiaries'
assets for any period prior to Closing.
(d) There are no Liens or encumbrances for Taxes upon the
Company's or its Subsidiaries' assets, except Liens or encumbrances for Taxes
not yet due. Each of the Company and its Subsidiaries has complied (and until
the Closing will comply) in all material respects with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
and 1442 of the Internal Revenue Code of 1986, as amended (the "Code"), or
similar provisions under any foreign laws) and has, within the time and in the
manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable law.
(e) Neither the Company nor its Subsidiaries has
requested any extension of time within which to file any Return, which Return
has not since been (or will not be) timely filed except that the Company will
obtain an extension of the filing date of its fiscal 1997 consolidated tax
return.
(f) Except as set forth in SCHEDULE 4.20 (which shall set
forth the type of Return, date filed, and date of expiration of the statute of
limitations), (i) the statute of limitations for the assessment of federal
income taxes has expired for all federal income tax returns of the Company and
its Subsidiaries for all periods through June 30, 1993, (ii) the statute of
limitations for the assessment of income Taxes has expired for all other
Returns of the Company and its Subsidiaries
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for periods ending prior to July 1, 1993, or those Returns have been examined
by the appropriate taxing authorities for all periods and (iii) no deficiency
for any Taxes has been proposed, asserted or assessed against the Company or
its Subsidiaries which has not been resolved and paid in full.
(g) There are no outstanding waivers or comparable
consents regarding the application of the statute of limitations with respect
to any Taxes or Returns that have been given by the Company or its
Subsidiaries.
(h) There are no federal, state, local or foreign audits
or other administrative proceedings or court proceedings presently pending with
regard to any Taxes or Returns.
(i) No power of attorney has been granted by the Company
or its Subsidiaries with respect to any matter relating to Taxes which is
currently in force.
(j) Neither the Company nor any Subsidiary is a party to
any agreement or arrangement (written or oral) providing for the allocation or
sharing of Taxes.
(k) Neither the Company nor any Subsidiary has
participated in or cooperated with (nor will the Company or its Subsidiaries
participate in or cooperate with prior to the Closing) an international boycott
within the meaning of Section 999 of the Code;
(l) Neither the Company nor any Subsidiary has filed (nor
will the Company or its Subsidiaries file prior to the Closing) a consent
pursuant to Section 341(f) of the Code or agree to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company or its
Subsidiaries.
(m) No property of the Company or its Subsidiaries is
property that the Company or its Subsidiaries or any party to this transaction
is or will be required to treat as being owned by another Person pursuant to
the provisions of Section 168(f)(8) of the Code (as in effect prior to
amendment by the Tax Reform Act of 1986) or is "tax-exempt use property" within
the meaning of Section 168 of the Code.
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(n) Neither the Company nor any Subsidiary is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Company or
any Subsidiary or as a result of the Tax Reform Act of 1986, and neither the
Company nor any Subsidiary has knowledge that the Internal Revenue Service has
proposed any such adjustment or change in accounting method.
(o) Neither the Company nor any Subsidiary has been a
United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(ii) of the Code.
(p) Neither the Company nor any Subsidiary is a party to
any agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(q) Neither the Company nor any Subsidiary is subject to
the provisions of Section 1503(d) of the Code.
(r) All transactions which could, if not adequately
disclosed, give rise to a penalty pursuant to Section 6662 of the Code were
adequately disclosed, (with respect to federal income tax the Returns not yet
filed but which will be filed before the Closing will be adequately disclosed)
on the relevant federal income tax returns.
4.21 Employee Relations.
(a) SCHEDULE 4.21 hereto is a true and complete list of
the names of all the Company's and its Subsidiaries' employees (the
"Employees") and consultants, including to the extent applicable, their titles,
rates of compensation and all other remuneration and perquisites granted to or
accrued on behalf of such Persons, together with the anticipated dates of such
Persons' next salary reviews.
(b) Except as set forth on SCHEDULE 4.21 attached hereto:
(i) None of the Employees is represented by any
labor union and there is no pending representation petition in respect
thereof; neither the Company nor its
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Subsidiaries is a party to any collective bargaining agreement;
(ii) There is no unfair labor practice complaint
pending against the Company or its Subsidiaries before the National
Labor Relations Board or any state or local agency;
(iii) There is no pending labor strike, work
stoppage, slow down, other labor trouble or interference with or
impairment of the Business affecting the Company or its Subsidiaries
(including, without limitation, any organizational drive);
(iv) There is no labor grievance pending against
the Company or its Subsidiaries;
(v) Neither the Company nor its Subsidiaries has
any outstanding commitment or agreement to effect any general wage or
salary increase for any of the Employees;
(vi) The employment of all Employees is terminable
at will without any penalties or severance obligations of any kind;
(vii) All sums due for employee compensation and
benefits and all vacation time owing any Employees have been duly and
adequately accrued on the consolidated accounting records of the
Company;
(viii) All Employees and consultants are either
United States citizens or resident aliens specifically authorized to
engage in employment in the United States in accordance with all
applicable laws;
(ix) To the Knowledge of the Company, no employee,
consultant, distributor, representative, advisor, salesman, agent,
customer or supplier of the Business will terminate his or its
employment or cease to do business with the Company after the
consummation of the transactions contemplated by this Agreement.
(x) No employee has executed nondisclosure and/or
confidentiality agreements.
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(xi) No employee, consultant, distributor,
representative, or Person has a "life of the part" or "life of the
customer" or any so-called "procuring cause" contract, understanding
or agreement, whether express or implied, with the Company or its
Subsidiaries. All sums due from the Company and its Subsidiaries to
any employee, consultant, distributor, representative, or Person for
any commissions for sales consummated prior to September 30, 1997,
have been duly and adequately accrued on the Closing Balance Sheet of
the Company.
4.22 Employee Benefit Plans. Except as set forth on SCHEDULE 4.22:
(a) Neither the Company nor its Subsidiaries nor any
ERISA Affiliate for the period since October 31, 1991, has established,
maintained or contributed or been required to contribute nor is it a party to,
any of the following (collectively, the "Company Plans"):
(i) Any employee pension benefit plan, as defined
in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), including (without limitation) any
multiemployer plan, as defined in Section 3(37) of ERISA;
(ii) Any employee welfare benefit plan, as defined
in Section 3(1) of ERISA;
(iii) Any bonus, deferred compensation, incentive,
restricted stock, stock purchase, stock option, stock appreciation
right, phantom stock, debenture, supplemental pension, profit-sharing,
royalty pool, commission or similar plan or arrangement;
(iv) Any written or oral plan, program, agreement,
policy, commitment, arrangement or any past practice relating to
severance or termination pay, whether or not published or generally
known;
(v) Any plan, program, agreement, policy,
commitment or other arrangement relating to the provision of any
benefit described in Section 3(1)(A) of ERISA to former employees or
directors or to their survivors, other than procedures intended to
comply with the
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continuation of health coverage requirements of Part 6 of Subtitle B of
Title I of ERISA;
(vi) Any other written or oral plan, program,
agreement, procedure, policy, commitment, understanding or arrangement
or any past practice relating to employee benefits, executive
compensation, fringe benefits, severance pay, terms of employment or
services as an independent contractor.
(b) The Company has provided to Buyer complete, accurate
and current copies of each of the following, to the extent they are currently
in effect or to the extent that any liability continues under a prior Plan:
(i) The text (including amendments and any other
written interpretations) of each of the Company Plans, to the extent
reduced to writing;
(ii) A description of all material elements of
each of the Company Plans, to the extent not previously reduced to
writing;
(iii) With respect to each Company Plan that is an
employee benefit plan (as defined in Section 3(3) of ERISA), the
following:
(A) The most recent summary plan description, as
described in Section 102 of ERISA;
(B) Any summary of material modifications that
has been distributed to participants or filed with
the U.S. Department of Labor, but that has not been
incorporated in an updated summary plan description
furnished under subparagraph (A) above; and
(C) The annual reports, as described in Section
103 of ERISA, for the most recent three plan years
for which an annual report has been prepared
(including all schedules and attachments and all
discrimination testing worksheets prepared in
connection with any such Plan).
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(iv) With respect to each Company Plan that is
intended to qualify under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the
"Code"), the most recent determination letter
concerning the plan's qualification under Section
401(a) of the Code, as issued by the Internal Revenue
Service;
(v) Any handbook, manual, policy statement or
similar written guidelines furnished to employees of
the Company or any ERISA Affiliate, excluding any
such item that has been superseded by any subsequent
handbook, manual, policy statement or similar written
guidelines;
(vi) All trust agreements, insurance contracts,
accounts or other documents which establish the
funding vehicle for any Company Plan;
(vii) The most recent actuarial reports or other
financial reports prepared in connection with any
Company Plan; and
(viii) Any investment management agreements,
administrative services contracts or other agreements
and documents relating to the ongoing administration
and investment of any Company Plan.
(c) With respect to each Company Plan that is an employee
benefit plan (as defined in Section 3(3) of ERISA) and that is subject to the
reporting, disclosure and record retention requirements set forth in Part 1 of
Subtitle B of Title I of ERISA and the regulations thereunder, each of such
requirements has in all material respects been fully met on a timely basis.
(d) With respect to each Company Plan that is an employee
benefit plan (as defined in Section 3(3) of ERISA) and that is subject to Part
4 of Subtitle B of Title I of ERISA, none of the following now exists or has
existed within the six-year period ending on the date hereof:
(i) Any act or omission constituting a material
violation of Sections 402, 403, 404 or 405 of ERISA which is not
exempted by applicable Department of Labor Regulations; or
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(ii) Any act or omission that constitutes a
material violation of Sections 406 and 407 of ERISA and is not
exempted by Section 408 of ERISA or that constitutes a material
violation of Section 4975(c) of the Code and is not exempted by
Section 4975(d) of the Code. Neither the Company, nor any ERISA
Affiliate, nor to the Company's Knowledge, any fiduciary or party in
interest (as those terms are defined in Section 3(21)(A) and 3(14) of
ERISA, respectively) has incurred, or reasonably expects to incur, on
account of any Company Plan, any liability for taxes under Code
Sections 4971, 4972, 4975, 4976, 4977, 4979, 4980 or 4980B, or for
penalties under ERISA Sections 502(c), (i) or (l), with respect to any
Company Plan; or
(iii) No officer, employee or director of the
Company or any of its ERISA Affiliates has committed a material breach
of any responsibility or obligation imposed upon fiduciaries by Title
I of ERISA with respect to any Company Plan.
(e) Each Company Plan that is intended to qualify under
Section 401(a) of the Code has at all times met, and currently meets, in all
material respects all requirements for qualification under Section 401(a) of
the Code and the regulations thereunder and the requirements of all applicable
laws, except to the extent that such requirements may be satisfied by adopting
retroactive amendments under Section 401(b) of the Code and the regulations
thereunder. Each such Company Plan has been administered in all material
respects in accordance with its terms and the applicable provisions of ERISA
and the Code and the regulations thereunder and to the Company's Knowledge no
matter exists which would adversely affect the qualified tax exempt status of
such Company Plan and any related trust.
(f) There are no actions, suits, proceedings,
investigations or hearings pending with respect to any Company Plan, or to the
Company's Knowledge, any claims (other than claims for benefits arising in the
ordinary course of a Company Plan) threatened against or with respect to any
Company Plan or any ERISA Affiliate which would result in any material
liability, and there are no facts known to the Company or any of its ERISA
Affiliates which could reasonably give rise to any such actions, suits,
proceedings, investigations, hearings or claims.
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(g) Each employee welfare benefit plan, as defined in
Section 3(1) of ERISA, to the extent applicable, has satisfied in all material
respects and continues to satisfy the material requirements of Sections 419,
419A and 4980B of the Code.
(h) All contributions, premiums or other payments due
from the Company Shareholders, the Company or any ERISA Affiliate to (or under)
any Company Plan on or prior to September 30, 1997 have been fully paid or
adequately provided for on the Closing Balance Sheet. All accruals with respect
to Company Plans (including, where appropriate, proportional accruals for
partial periods) have been made in accordance with prior practices.
(i) Each Company Plan materially complies, in form and
operation, with all applicable statutes, laws and regulations, including but
not limited to ERISA and the Code and all applicable requirements of (i) the
Age Discrimination in Employment Act of 1967, as amended, and the regulations
thereunder, (ii) Title VII of the Civil Rights Act of 1964, as amended, and the
regulations thereunder, and (iii) the health care continuation provisions of
Part 6 of Subtitle B of Title I of ERISA and any applicable state law.
(j) Except with respect to matters described in the
Employment Agreement to be signed at Closing, no payment made to any employee,
officer, director or independent contractor of the Company or its Subsidiaries
(the "Recipient") pursuant to any employment contract, severance agreement or
other arrangement (the "Golden Parachute Payment") will be nondeductible by the
Company or its Subsidiaries because of the application of Sections 280G and
4999 of the Code to the Golden Parachute Payment, nor will the Company or its
Subsidiaries be required to compensate any Recipient because of the imposition
of an excise tax (including any interest or penalties related thereto) on the
Recipient by reason of Sections 280G and 4999 of the Code.
(k) With respect to any Company Plan that is an employee
pension benefit plan, as defined in Section 3(2) of ERISA: (i) neither the
Company nor any ERISA Affiliate has incurred any "accumulated funding
deficiency" (within the meaning of ERISA Section 302 or Code Section 412(a)),
whether or not waived; (ii) no "reportable event" (within the meaning of ERISA
Section 4043), which is not exempted from reporting by applicable regulations,
has occurred with respect to any Company Plan subject to the minimum funding
requirements of Code Section 412; (iii) no Company Plan
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subject to Title IV of ERISA has terminated within the six year period ending
on the date hereof, termination proceedings have not been instituted or
threatened by the Company, any ERISA Affiliate or the Pension Benefit Guaranty
Corporation or any other party, nor is the Company aware of any condition that
would cause the termination of any Company Plan, which may result in liability
of the Company or an ERISA Affiliate under Sections 4062 or 4064 of ERISA or
Code Section 412, or imposition of a lien on the property of the Company or an
ERISA Affiliate under ERISA Section 4068; (iv) the current value of all assets
under each Company Plan equals or exceeds the value of all benefit liabilities,
as defined in ERISA Section 4001(a)(16), with respect to that Company Plan; and
(v) all insurance premiums, including premiums to the Pension Benefit Guaranty
Corporation, have been timely paid in full with respect to any such Company
Plan for plan years or other applicable policy periods ending on or before
closing.
(l) During the six year period immediately preceding this
Agreement, neither the Company nor any of its ERISA Affiliates has (i) ceased
operations at a facility so as to become subject to the provisions of ERISA
Section 4062(e), (ii) entered into any transaction a principal purpose of which
was to evade or avoid pension liability or which otherwise could be subject to
the provisions of ERISA Section 4069, (iii) withdrawn as a substantial employer
so as to become subject to the provisions of ERISA Section 4063, (iv) ceased
making contributions on or before the date of this Agreement to any Company
Plan subject to the provisions of ERISA Section 4064(a) to which such entity
made (or was obligated to make) contributions during any of the six years prior
to the date of this Agreement, (v) failed to make a payment or required
installment to any Company Plan so as to become subject to the requirements of
ERISA Section 302(f), or (vi) adopted an amendment to a Company Plan so as to
become subject to the requirements of ERISA Section 307.
(m) There has been no withdrawal by Company or any of its
ERISA Affiliates from any "multiemployer plan" within the meaning of ERISA
Section 3(37), within the past six years which could have any material adverse
effect on Company or any Company Plan.
(n) The fiduciaries and administrators of each Company
Plan have at all times complied with all material applicable provisions of law
(including without limitation the provisions of ERISA and the Code) in
operating and dealing with
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each Company Plan, except where the failure to comply would not have a material
adverse effect on the Company
(o) No Company Plan, nor to the Company's Knowledge, any
administrator or fiduciary of any Company Plan or the Company or any ERISA
Affiliate has any material liability under any provision of ERISA or any other
applicable law by reason of any communication or failure to communicate with
respect to or in connection with any Company Plan, or any filing or failure to
file with any government entity.
(p) No Company Plan, nor to the Company's Knowledge, any
administrator or fiduciary of any Company Plan or the Company or any ERISA
Affiliate has any material liability to any Company Plan participant,
beneficiary or other Person under any provision of ERISA or any other
applicable law by reason of any payment of benefits or other amounts or failure
to pay benefits with respect to or in connection with any Company Plan. There
are no material liabilities of any Company Plan of any nature, whether accrued,
absolute, contingent or otherwise, existing, or which may hereafter arise out
of any event occurring on or prior to September 30, 1997 or out of any act or
failure to act on the part of the Company, any ERISA Affiliate, any fiduciary
of any Company Plan or any employee or other agent of any of them on or prior
to September 30, 1997, except as and to the extent and in the amounts reflected
in the Closing Balance Sheet, or as to any funded Company Plan, in the
financial statements of such Company Plan. Neither the Company nor any ERISA
Affiliate is delinquent or in arrears on other amounts owed to or with respect
to any contributions under any Company Plan.
(q) Except to the extent required by Law, to the
Company's Knowledge, the consummation of the transactions contemplated by the
Agreement will not (i) give rise to any liability or obligation of the Company
pursuant to any Company Plan, including but not limited to, the payment of
severance pay or benefits, (ii) accelerate the time of payment or vesting or
increase the amount of compensation due under any Company Plan, (iii) except as
described in any Employment Agreement to be signed at Closing, cause any
individual to accrue or receive additional benefits, service or accelerated
rights to payment of benefits under any Company Plan, or (iv) directly or
indirectly cause the Company or any ERISA Affiliate to transfer or set aside
any assets to fund or otherwise provide for benefits for any individual.
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4.23 Health, Safety, Employment and Environmental Matters. Except
as set forth in SCHEDULE 4.23:
(a) The Company, its Subsidiaries and the Business are in
compliance in all material respects with all federal, state, local and foreign
health and occupational safety laws and all federal, state, local and foreign
laws related to employment and employment practices, compensation and benefits,
which are applicable to the conduct of the Business.
(b) Except as set forth on SCHEDULE 4.23, the Company,
its Subsidiaries and the Business are in compliance with the terms and
conditions of all environmental permits, licenses, and other authorizations
required under applicable laws relating to pollution of the environment the
noncompliance with which would have a material adverse effect on the Business.
All such permits, licenses and other authorizations are described on SCHEDULE
4.23.
(c) To the Knowledge of the Company, the Company, its
Subsidiaries and the Business are in compliance in all material respects with
all applicable federal, state, local and foreign laws relating to emissions,
discharges, and releases of Hazardous Materials into the environment and the
generation, treatment, storage, transportation and disposal of hazardous
wastes, including, without limitation, any applicable provisions of the
Resource Conservation and Recovery Act of 1976 or CERCLA, the noncompliance
with which would have a material adverse effect on the Business.
(d) To the Knowledge of the Company, there are no
conditions at, on, under or related to, the Facilities which pose a significant
hazard to human health or the environment, whether or not in compliance with
law, and there has been no production, use, treatment, storage, transportation
or disposal by the Company or any Subsidiary of any Hazardous Substance on the
premises or elsewhere in violation of Environmental Laws nor any release or
threatened release by the Company or any Subsidiary of any Hazardous Substance,
pollutant or contaminant. Except as set forth on SCHEDULE 4.23, to the
Knowledge of the Company, no Hazardous Substance is now or ever has been stored
by the Company or any Subsidiary on the Premises in underground tanks, pits or
surface impoundments. To the Knowledge of the Company, there are no
asbestos-containing materials incorporated into the buildings or interior
improvements that are part of either the Facilities or the Company's or its
Subsidiaries' assets, nor is there any electrical
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transformer, fluorescent light fixture with ballasts containing PCBs or other
PCB Item, as defined at 40 C.F.R. Section 761.3, on the Facilities or among
the Company's or its Subsidiaries' assets.
(e) Set forth on SCHEDULE 4.23 is a list of all
environmental audits, environmental risk assessments and site assessments in
the Company's possession or control relating to the Facilities or the Business.
True and correct copies of each of the foregoing reports have been provided by
the Company to Buyer.
4.24 Records and Customer Lists. The records and customer
lists of the Company and its Subsidiaries relating to the Business are in all
material respects complete and correct, and have been maintained in accordance
with good business practices.
4.25 Insurance. SCHEDULE 4.25 sets forth (i) all primary,
excess and umbrella policies of general liability, fire, workers' compensation,
products liability, completed operations, employers, liability, health, bonds
and other forms of insurance providing insurance coverage to the Company and
its Subsidiaries, including the name of insurer, limits of liability, per
occurrence and annual aggregate, if any, or combined single limit as
applicable; and (ii) all claims and lawsuits in excess of $50,000 made or filed
during the last two years with respect to the Business of the Company which
have been paid or settled. The Company has made available to Buyer true,
complete and correct copies of all such policies. With respect to all such
policies, all premiums currently payable or previously due and payable with
respect to all periods up to and including the Closing have been paid and no
notice of cancellation or termination has been received with respect to any
such policy. All such policies are valid, outstanding and enforceable
policies. Such policies are sufficient for compliance with all requirements of
law and of all agreements to which the Company or its Subsidiaries is a party
and will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. SCHEDULE 4.25 also identifies all
risks which the Company or its Subsidiaries have designated as being
self-insured. Except as set forth in SCHEDULE 4.25, neither the Company nor
its Subsidiaries has been refused any insurance with respect to the Business of
the Company and its Subsidiaries nor has its coverage been limited, by any
insurance carrier to which it has applied for such insurance or with which it
has carried insurance during the last five years. Each notice which has been
required to be delivered by the Company with respect to any insured claim has
been given to the appropriate insurer on
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a timely basis. Neither the Company nor its Subsidiaries has received any
notice of default or cancellation with respect to any policy of insurance.
4.26 Compliance with Laws. The Company and its
Subsidiaries have all material requisite licenses, permits and certificates,
including environmental, health and safety permits, from foreign, federal,
state and local governmental authorities necessary to conduct the Business and
own and operate their assets (collectively, the "Permits"). The Permits are
valid and in full force and effect and will not be terminated or otherwise
materially adversely affected by the consummation of the transactions
contemplated hereby. Except as disclosed in SCHEDULE 4.23, neither the Company
nor its Subsidiaries is in violation of any law, rule, regulation or ordinance
(including, without limitation, laws, rules, regulations or ordinances relating
to building, zoning, environmental protection, disposal of hazardous
substances, land use or similar matters) relating to the Business, its assets
or properties, the violation of which could have a material adverse effect on
the Business or the Company's or its Subsidiaries' assets or properties. The
Company's and its Subsidiaries' conduct of the Business does not violate, in
any material respect, any federal, state, local or foreign laws, regulations or
orders (including, but not limited to, any of the foregoing relating to
employment, wages, hours, employment discrimination, occupational safety,
Environmental Laws, hazardous waste (as defined in the Resource Conservation
and Recovery Act, as amended, and the regulations adopted pursuant thereto),
conservation or corrupt practices, the enforcement of which could have a
material adverse effect on the results of operations, condition (financial or
otherwise), assets, properties or prospects of the Company, its Subsidiaries or
the Business. The Company and its Subsidiaries each has filed all material
returns, reports and other documents and furnished all information required or
requested by any federal, state, local or foreign governmental agency and all
such returns, reports, documents and information are true and complete in all
material respects regarding the Business. Neither the Company nor its
Subsidiaries is engaged in any unfair labor practice or discriminatory
employment practice and, except as set forth on SCHEDULE 4.26, no complaint of
any such practice against the Company or its Subsidiaries has been filed or, to
the Knowledge of the Company, threatened to be filed with or by the National
Labor Relations Board, the Equal Employment Opportunity Commission or any other
administrative agency, federal or state, that regulates labor or employment
practices, nor has any grievance been filed or, to
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the Knowledge of the Company, threatened to be filed against the Company or its
Subsidiaries by any Employee pursuant to any collective bargaining or other
employment agreement to which the Company or its Subsidiaries is a party. Each
of the Company and its Subsidiaries is in compliance in all material respects
with all applicable federal and state laws and regulations regarding
occupational safety and health standards and has received no complaint from any
federal or state agency or regulatory body alleging material violations of any
such laws or regulations.
4.27 No Misrepresentation. The representations and warranties of
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ contained herein or in the Financial Statements, schedules,
and exhibits attached hereto do not, and on the Closing Date will not to the
Knowledge of the Company, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made herein or
therein, in light of the circumstances under which made, not misleading. ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ has not willfully or recklessly withheld from Buyer knowledge of any
event, condition or fact which may adversely and materially affect the
Business. To the Knowledge of the Company, the statements set forth in
SCHEDULE 4.27 are accurate in all material respects.
4.28 Brokers. All negotiations relative to this Agreement and the
transactions contemplated herein have been carried out by the Shareholder
Representative and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ directly with Buyer, without the
intervention of any broker, finder, investment banker or other Person on behalf
of the Company in such a manner as to give rise to any claim by any such Person
for any finder's fee, brokerage commission or similar payment except amounts
payable to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, which shall be paid by the Shareholders.
4.29 Dividends. Except as set forth on SCHEDULE 4.29, since June
30, 1997, the Company and its Subsidiaries has not declared or paid any
dividend or other distribution nor has it made, directly or indirectly, any
payment or other distribution of any nature whatsoever to any of the
Shareholders except for regular salary payments for services rendered and the
reimbursement for ordinary and necessary business expenses.
4.30 Bank Accounts. SCHEDULE 4.30 hereto describes all checking
accounts, savings accounts, custodial accounts, certificates of deposit, safety
deposit boxes, money market accounts or other similar accounts (collectively,
"Cash Accounts")
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maintained by the Company. The signatories identified on SCHEDULE 4.30
constitute the only signatories with respect to such accounts. The Company
represents and warrants that it will have at least $2 million in its cash
accounts as of Closing.
4.31 Transactions with Related Parties. Except as set forth on
SCHEDULE 4.31 hereto or as otherwise disclosed herein or in the Schedules
hereto, the Company and its Subsidiaries are not a party to any transaction or
proposed transaction, including, without limitation, the purchase or sale of
raw materials or finished goods, the furnishing of services or the borrowing or
lending of money, with any Company director, officer or employee, or any Person
or entity who is an affiliate of any Shareholder or any such director, officer
or employee of the Company. Except as set forth on SCHEDULE 4.31 hereto, no
Shareholder or any director, officer or employee of the Company, nor any of
their affiliates, own or have any ownership interest in any corporation or
other entity which is in competition with the Company or which is engaged in a
related or similar business to that of the Company, and none of such Persons,
or any of their affiliates, have entered into any agreement, commitment or
understanding contemplating such ownership or ownership interest.
SECTION 5. PERSONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants to Buyer, severally
and not jointly, and only to the extent such representations and warranties
relate specifically to such Shareholder, that:
5.1 Title to Stock. Each of the Shareholders is the record holder
and beneficial owner of his or her shares of Class A and/or Class B, has good
and marketable title to his or her shares of Class A and/or Class B, free and
clear of any Lien, and has the absolute right to sell his or her shares in
connection with the transactions contemplated herein.
5.2 Investment Intent.
(a) Each Shareholder has sufficient knowledge and
experience in financial and business matters to enable it to evaluate the
merits and risks of the transactions contemplated by this Agreement or has
relied for advice on a qualified purchase
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representative as defined in Rule 501 under the Securities Act of 1933, as
amended.
(b) Each Shareholder has been given access to information
requested by such Shareholder regarding Buyer, including the opportunity to ask
questions of and receive answers from the officers of Buyer concerning the
present and proposed activities of Buyer and to obtain the information which
such Shareholder deems necessary or advisable in order to evaluate the merits
and risks of the transactions contemplated by this Agreement, and each
Shareholder has made his or her own independent investigation of Buyer and the
merits and risks of the transactions contemplated by this Agreement.
(c) Each Shareholder is acquiring the Buyer's Common
Stock for his or her own account, for investment purposes, and not with a
present view to resale or for distribution of all or any portion of the Buyer's
Common Stock.
(d) Each Shareholder understands that the Buyer's Common
Stock has not been, and will not be, registered under the Securities Act of
1933, as amended, as of the Closing or under any state securities Laws, is
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, a "stop transfer" order will be
placed on the certificates representing shares of Buyer's Common Stock issued
hereunder, and such certificates will bear a legend in substantially the
following form, as well as any other legend that may be required by applicable
Law:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933
ACT"), OR THE SECURITIES LAWS OF ANY STATE (THE "STATE LAWS"), BUT
HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS THEREFROM. NO TRANSFER
OF THESE SECURITIES OR ANY INTEREST THEREIN MAY BE MADE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT AND
THE APPROPRIATE STATE LAWS, UNLESS THE ISSUER HAS RECEIVED AN OPINION
OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE SUCH
REGISTRATION.
(e) Each Shareholder further represents that:
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(i) Such Shareholder has been provided with the information
specified in Rule 502(b)(2)(ii)(B) and (C) under the Securities Act of 1933 as
amended, and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and risks inherent in holding the
Buyer's Common Stock;
(ii) Such Shareholder has not been offered the Buyer's Common
Stock by any form of general advertising or general solicitation; and
(iii) Such Shareholder is able to bear the economic risk and
lack of liquidity inherent in holding the Buyer's Common Stock.
5.3 Authorization; Capacity; Enforceability. Each Shareholder has
the legal capacity to execute, deliver and perform this Agreement and all of
the documents and instruments required by this Agreement to be executed and
delivered by such Shareholder. This Agreement is, and the other documents and
instruments required hereby will be, when executed and delivered by such
Shareholder, the valid and binding obligations of such Shareholder, enforceable
in accordance with their respective terms.
5.4 No Violation or Conflict. The execution, delivery and
performance of this Agreement by each Shareholder:
(a) does not and will not conflict with or violate,
breach, constitute a default under, or give rise to a right of termination or
acceleration of an obligation under any contract, Law, judgment, order or
decree to which such Shareholder is a party or by which such Shareholder is
bound; and/or
(b) will not result in the creation of any right or Lien
against or with respect to the Company's Stock or any of such Shareholder's
assets or properties.
5.5 Litigation. There are no actions, suits or proceedings
pending or, to the Knowledge of any Shareholder, proposed or threatened,
against any Shareholder by any Person which question the legality, validity or
propriety of the transactions contemplated by this Agreement.
5.6 Government Approvals. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
governmental or regulatory authority is
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required in connection with the execution, delivery and performance of this
Agreement by the Shareholders.
5.7 No Pending Acquisitions. Except for this Agreement, no
Shareholder is a party to or bound by any agreement, undertaking or commitment
with respect to any transaction described below:
(a) a merger, share exchange, consolidation,
reorganization, combination or similar transaction involving the Company;
(b) a purchase, lease or other acquisition of all or any
portion of the assets of, or any equity interest (or any option, warrant or
securities convertible into any equity interest) in, the Company.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company as follows:
6.1 Organization. Buyer is a corporation duly organized, validly
existing under the laws of the State of Wisconsin and Buyer has the requisite
corporate power and authority to own and use its properties and enter into the
transactions contemplated by this Agreement.
6.2 Capital Structure. The authorized number of shares of Buyer
is 100,000,000 shares of Common Stock, par value $.001 per share; 21,668,804
shares are issued and outstanding (as of October 30, 1997); and 500 authorized
shares of Preferred Stock, none of which are issued and outstanding. All the
shares are validly issued, fully-paid and nonassessable except to the extent
provided by Wis. Stats. Section 180.0622(2)(b).
6.3 Authority. The execution, delivery and performance of this
Agreement and the further documents, instruments and agreements referred to or
provided for herein by Buyer have been duly authorized by all necessary
corporate action on the part of Buyer. Buyer has all requisite corporate power
to execute, deliver and perform this Agreement and the further documents,
instruments and agreements referred to or provided for herein, and the
performance by Buyer of this Agreement and the further documents, instruments
and agreements referred to or provided for herein is not prohibited by and does
not violate any provision of or result in the breach of (i) any judgment, order
or decree applicable to
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Buyer, or (ii) the articles of incorporation or bylaws of Buyer and (iii) any
material note, mortgage, Lien, indenture to which the Company is a party. This
Agreement has been duly executed and delivered by Buyer and, assuming due
execution and delivery by the Shareholders, is a valid and legally binding
obligation of Buyer enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally.
6.4 Consents and Approvals. Neither the execution and delivery of
this Agreement by Buyer, the consummation by Buyer of the transactions
contemplated hereby nor compliance by Buyer with any of the provisions hereof
will (i) require any consent, waiver, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
except for filings as may be required under the Securities Laws; (ii) result in
a default (or give rise to any right or termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any
indenture, mortgage, note, lien, license, government registration, contract,
lease, agreement or other instrument or obligation to which Buyer is a party or
by which Buyer or any of their assets may be bound; or (iii) violate any order,
writ, judgment, injunction, decree, statute, ordinance, rule or regulation
applicable to Buyer or any of their assets.
6.5 Litigation. There is no claim, action, suit or proceeding
pending before any court, commission, agency, arbitrator or government agency
against Buyer or any threatened against Buyer which would adversely affect the
validity or enforceability of this Agreement.
6.6 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by Buyer directly with
the Company, without the intervention of any broker, finder, investment banker
or other Person on behalf of Buyer other than ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company (the fees
of which will be paid by Buyer), in such a manner as to give rise to any claim
by any such Person against the Company for any finder's fee, brokerage
commission or similar payment.
6.7 Annual Report. Buyer has delivered to the Shareholder
Representative Buyer's Annual Report for the year ended December 31, 1996 and
its quarterly report for the quarter ended June 30, 1997. As of their
respective filing dates, such Annual Report and quarterly report did not
contain any untrue statement of
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a material fact or, to the knowledge of Buyer, omit to state any fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements contained in such Reports have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods indicated and fairly present the financial position of the Buyer as of
the respective dates thereof and the results of its operations for the
respective periods indicated. Since December 31, 1996, there has not been any
material adverse change in the financial condition or the results of operations
of the Buyer, except as disclosed in securities filings and reports to
shareholders.
6.8 Buyer Common Stock. The Buyer's Common Stock to be delivered
to the Shareholders pursuant to this Agreement (i) have been duly authorized,
validly issued, fully paid and non-assessable and will be delivered free and
clear of all Liens (except to the extent provided by Wis. Stats. Section
180.0662(2)(b) and as noted on the stock certificates); and (ii) have been
issued pursuant to valid exemptions from the registration requirements of the
Securities Act of 1933, as amended, and applicable state securities laws.
6.9 No Knowledge of Misrepresentations or Omissions. Buyer has
not in bad faith failed to inform the Shareholders that the Buyer has knowledge
that (i) the representations and warranties of the Shareholders in this
Agreement and the Schedules hereto are not true and correct in all material
respects; (ii) the Schedules to this Agreement contain material errors; or
(iii) there are material omissions from the Schedules to this Agreement.
6.10 Contracts. Upon Closing, Buyer agrees to be bound by and
assume those Contracts listed on Schedule 4.17 which by their terms require
such assumption to avoid a default thereunder resulting from the consummation
of the transactions contemplated by this Agreement. Buyer shall also provide
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ all reasonable assistance and cooperation after Closing to
obtain the release of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ from all liabilities under performance
bonds of the Company.
SECTION 7. COVENANTS
7.1 Best Efforts. Subject to the terms and conditions herein
provided, each of the parties to this Agreement agrees to
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use its best efforts to take, or cause to be taken, all action, and to do, or
cause to be done as promptly as practicable, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement. If at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, including the execution of additional instruments,
the each of the parties to this Agreement and their officers and directors as
appropriate, shall take all such necessary action.
SECTION 8. CONDITIONS TO CLOSING
8.1 Conditions to Obligations of Buyer. The obligations of Buyer
under this Agreement are subject to the fulfillment at or prior to the Closing
of each of the following conditions, each of which may be waived in writing in
the sole discretion of Buyer.
(a) Representations and Warranties. Each of the
representations and warranties made by the Shareholders in this Agreement, the
schedules or exhibits hereto, or any written statement delivered to Buyer
hereunder shall be true and correct in all material respects as made, as of the
Closing Date, and the Shareholders shall have performed and complied in all
respects with all agreements and covenants required by this Agreement to be
performed, satisfied or complied with them prior to or at the Closing.
(b) Government Order, Injunction. No court, domestic or
foreign, shall have entered an injunction or other similar order enjoining
consummation of the transactions provided for herein, and no action or
proceeding shall have been threatened or instituted and remain pending before a
court or other governmental body by any governmental agency or public authority
to restrain or prohibit the transactions contemplated by this Agreement, nor
shall any governmental agency have notified any party to this Agreement that
consummation of the transactions contemplated herein would constitute a
violation of the laws of the United States and that it intends to commence
proceedings to restrain the consummation of the transactions contemplated
hereby unless such agency shall have withdrawn such notice prior to the
Closing.
(c) Government Consents. All consents, approvals,
authorizations or orders of, or filings with, any governmental
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agency required for the consummation of the transactions contemplated herein
shall have been obtained or made.
(d) Required Consents. The Company and its Subsidiaries
shall have obtained consents to proceed with the transactions contemplated by
this Agreement under those Contracts identified in SCHEDULE 4.17.
(e) No Adverse Change. No change shall have occurred or
be threatened which, and Buyer shall not have become aware of any fact that,
would reasonably be expected to have a material adverse effect on the Company's
or its Subsidiaries' assets or the Business.
(f) Employment and Other Agreements. The Buyer shall
have entered into an employment and noncompetition agreement with ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ in substantially the form attached as ANNEX A and the agreements to
purchase the Facilities in substantially the form attached as ANNEX C.
(g) Opinion of Counsel for the Shareholders. Buyer shall
have been furnished with an opinion of ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, P.L.L.P., counsel
for the Shareholders, substantially to the effect that:
(1) Each of the Company and its Subsidiaries is a
corporation validly existing and in good standing, and has the
requisite corporate power and authority to own and use its properties
and to transact the Business as it is now being conducted.
(2) The execution, delivery and performance of
this Agreement and the Escrow Agreement by the Shareholders have been
duly authorized and approved by all requisite corporate and
Shareholder action of the Company, and this Agreement and the Escrow
Agreement have been duly and validly executed and delivered by the
Shareholders in accordance with their terms and constitute valid and
binding obligations of the Shareholders, enforceable against them in
accordance with their terms except as the enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or similar laws generally affecting the rights of
creditors.
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(3) The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby by the Shareholders does not and will not, with or without the
giving of notice or the lapse of time, or both, (i) conflict with any
terms or provisions of the respective Articles of Incorporation or
By-laws of the Company or its Subsidiaries; (ii) to our knowledge,
result in a breach of, or constitute a default under, result in the
termination or modification of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon
any of the properties of the Company or its Subsidiaries pursuant to
any indenture, mortgage, deed of trust, contract, license, commitment
or other agreement or instrument known to us after reasonable inquiry,
to which the Company or its Subsidiaries is a party or by which any of
the Company's or its Subsidiaries' properties are bound or affected;
(iii) violate any law, rule or regulation; (iv) violate any judgment,
order or decree known to us after reasonable inquiry, of any
government or governmental agency, instrumentality or court, domestic
or foreign, having jurisdiction over the Company or its Subsidiaries
or any of their properties or business; or (v) result in a breach,
termination or lapse of the Company's or its Subsidiaries' necessary
corporate power and authority to own or lease and operate its
properties and to conduct its business as it presently is being
conducted.
(4) The Company's authorized capital consists of:
(i) 100,000 Class A shares, of which, to our knowledge, 15,450 shares
are issued and outstanding; and (ii) 1,000,000 shares of Class B
shares, of which, to our knowledge, 75,930 are issued and
outstanding, and counsel has no reason to believe that such shares are
not duly and validly issued, fully-paid and nonassessable and free of
any preemptive rights.
(5) To our knowledge, no consent, approval,
authorization or order of, or filing with, any governmental agency in
the United States is required and remains to be done on the part of
the Company or its Subsidiaries in order for the transactions
contemplated by this Agreement to be consummated.
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(6) Except as disclosed in this Agreement
(including the schedules and exhibits hereto), said counsel for the
Company has no knowledge of:
(i) any claim, action, suit or
proceeding pending before any court, arbitrator or government
agency against the Company or its Subsidiaries or threatened
against the Company or its Subsidiaries which would affect the
validity or enforceability of this Agreement or the Escrow
Agreement, or which might reasonably be expected to have a
material adverse effect on the Business; or
(ii) any governmental investigations or
suits with respect to any of the transactions contemplated
herein.
(h) Closing Deliveries. The Buyer shall have received at
or prior to the Closing the following documents:
(1) a certificate of the Secretary of State of
the State of Minnesota and the appropriate Virgin Islands
authority as to the legal existence and good standing of the
Company and its Subsidiaries in Minnesota and the Virgin
Islands, as the case may be;
(2) certificate of the Secretary or Assistant
Secretary of the Company attesting to the authenticity and
continuing validity of the articles, documents and bylaws
delivered pursuant hereto;
(3) estoppel certificates from the lessor of each
item of property listed on SCHEDULE 4.14 hereto representing
that there are no outstanding claims against the Company or
its Subsidiaries under such lease other than for accrued rent
not yet due and payable;
(4) certificates of appropriate governmental
officials in each state in which the Company and its
Subsidiaries is required to qualify to do business as a
foreign corporation as to the due qualification and good
standing of the Company and its Subsidiaries in each such
jurisdiction;
(5) all minute books, stock books and records;
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(6) a copy of the Employment and Noncompete
Agreement duly executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and other Company
employees;
(7) a copy of each Facilities purchase and sale
agreement, duly executed;
(8) resignations of directors; and
(9) such other certificates of the Company's and
its Subsidiaries' officers and such other documents, to be in
form and substance reasonably satisfactory to the Buyer,
evidencing satisfaction of the conditions of this Section 8.1
as the Buyer shall reasonably request.
8.2 Conditions to Obligations of the Shareholders. The
obligations of the Shareholders under this Agreement are subject to the
fulfillment at or prior to the Closing of each of the following conditions,
each of which may be waived in writing at the sole discretion of the Company.
(a) Representations and Warranties. Each of the
representations and warranties made by Buyer in this Agreement shall be true
and correct in all material respects as made on the date hereof and Buyer shall
have performed and complied in all respects with all agreements and conditions
required by this Agreement to be performed or complied with by it prior to or
at the Closing.
(b) Government Order, Injunction. No court, domestic or
foreign, shall have entered and maintained in effect an injunction or other
similar order enjoining consummation of the transactions provided for herein,
and no action or proceeding shall have been instituted and remain pending
before a court or other governmental body by any governmental agency or public
authority to restrain or prohibit the transactions contemplated by this
Agreement, nor shall any governmental agency have notified any party to this
Agreement that consummation of the transactions contemplated hereby would
constitute a violation of the laws of the United States and that it intends to
commence proceedings to restrain the consummation of the transactions
contemplated hereby unless such agency shall have withdrawn such notice prior
to the Closing Date.
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(c) Government Consents. All consents, approvals,
authorizations or orders of or filings with any governmental agency required
for consummation of the transactions contemplated herein shall have been
obtained or made.
(d) No Adverse Change. Since September 30, 1997 there
shall not have been any material change in the assets, liabilities, employee
relations, customer relations or vendor relations, prospects, operations or
condition, financial or otherwise, of the Buyer's business from that reflected
in the financial statements for the fiscal quarter then ended, other than
changes in the ordinary course of business consistent with past practice which
have not materially adversely affected Buyer's assets or materially increased
the liabilities (actual or contingent) of the Buyer's business other than
borrowings incurred in connection with the transactions contemplated by this
Agreement.
(e) Litigation. There shall not be any pending action,
suit, arbitration, proceeding or investigation before any court, arbitrator or
government commission or agency against the Buyer which, if decided adversely
to the Buyer, would result in a material adverse change in the business, assets
or financial condition of the Buyer or its business.
(f) Compliance with Laws. The Buyer shall not be in
violation of any material law, rule, regulation or ordinance (including,
without limitation, laws, rules, regulations or ordinances relating to
building, zoning, environmental protection, disposal of hazardous substances,
land use or similar matters) relating to its business, its assets or
properties, the violation of which could have a material adverse effect on its
business or assets.
(g) No Misrepresentation. The representations and
warranties of the Buyer contained herein or in the schedules, annexes and
exhibits attached on the Closing Date shall not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made herein or therein, in light of the circumstances under which
made, not misleading.
(h) Employment and Other Agreements. The Buyer shall
have entered into an employment and noncompetition agreement with ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ in the form of ANNEX A and the agreements to purchase the Facilities
and shall have paid the total $2,000,000 required under the Facilities purchase
agreements.
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(i) Opinion of Counsel for Buyer. The
Shareholders shall have been furnished with an opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇,
counsel for Buyer, substantially to the effect that:
(1) Buyer is a corporation validly existing
in the State of Wisconsn
(2) performance of The execution, delivery
and by this Agreement and the Escrow Agreement Buyer
have been duly authorized and approved by all
requisite corporate and shareholder action of Buyer,
and this Agreement and Escrow Agreement have been duly
and validly executed and delivered by Buyer in
accordance with their terms and constitute valid and
binding obligations of Buyer, enforceable against it
in accordance with their terms except as the
enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or
similar laws generally affecting the rights of
creditors.
(3) The execution, delivery and
performance of this Agreement and the consummation of
the transactions contemplated hereby by Buyer does
not and will not, with or without the giving of
notice or the lapse of time, or both, (i) conflict
with any terms or provisions of Buyer's Articles of
Incorporation or Bylaws; (ii) to our knowledge,
result in a breach of, or constitute a default under,
or result in the termination or modification of, or
result in the creation or imposition of any Lien,
security interest, charge or encumbrance upon any
other properties of Buyer pursuant to any indenture,
mortgage, deed of trust, contract, license,
commitment or other agreement or instrument known to
us after reasonable inquiry, to which Buyer is a
party or by which any of Buyer's properties are bound
or affected; (iii) violate any law, rule or
regulation; (iv) violate any judgment, order or
decree known to us after reasonable inquiry, of any
government or governmental agency, instrumentality or
court, domestic or foreign, having jurisdiction over
Buyer or any of its properties or Business; or (v)
result in the breach, termination or lapse of Buyer's
necessary
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corporate power and authority to own or lease and
operate its properties and to conduct its business
as it presently is being conducted.
(4) Buyer's Common Stock to be delivered
to the Shareholders pursuant to this Agreement (i)
have been duly authorized, validly issued, full paid
and non-assessable, and will be delivered free and
clear of all Liens subject to the personal liability
imposed on the shareholders by Section 180.0622(2) of
the Wisconsin Business Corporation Law, as judicially
interpreted, for debts owing to employees for
services performed. Although Section 180.0622(2) of
the Wisconsin Business Corporation Law provides that
such personal liability of shareholders shall be "to
an amount equal to the par value of shares owned by
them respectively, and to the consideration for which
their shares without par value was issued," the
Wisconsin Supreme Court, by a split decision without
a written opinion, has affirmed a judgment holding
shareholders of a corporation liable under Section
180.40(6) (the predecessor to Section 180.0622(2))
for unpaid employee wages up to the consideration
paid for their par value shares rather than the
shares' lower stated par value.
Local 257 of Hotel and Restaurant
Employees and Bartenders International Union
▇. ▇▇▇▇▇▇ Street East Dinner Playhouse, Inc., 126
Wis. 2d 284, 375 N.W.2d 664 (1985) (affirming the
1983 decision of the Circuit Court for Dane County,
Wisconsin in Case No. 82-CV-0023).
(5) To our knowledge, no consent,
approval, authorization or order of, or filing with,
any governmental agency in the United States is
required and remains to be done on the part of Buyer
in order for the transactions contemplated by this
Agreement to be consummated.
(6) We have no knowledge of: (i) any
claim, action, suit or proceeding before any court,
arbitrator or government agency against Buyer or
threatened against Buyer which would affect the
validity or enforceability of this Agreement or the
Escrow Agreement, or which might reasonably be
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expected to have a material adverse effect on Buyer's
business; or (ii) any governmental investigations or
suits with respect to any of the transactions
contemplated herein.
(j) Closing Deliveries. The Shareholders shall have received at or prior
to the Closing the following:
(i) a certificate of the Secretary of
State of the State of Wisconsin as to the legal
existence and status of the Buyer in Wisconsin;
(ii) a certificate of the Secretary of
each of the Buyer attesting to the incumbency of
their respective officers, the authenticity of the
resolutions authorizing the transactions contemplated
by this Agreement;
(iii) Employment and Noncompete with ▇▇▇▇▇
▇▇▇▇▇▇▇;
(iv) Escrow Agreement;
(v) Purchase Price and Buyer Common
Stock;
(vi) such other certificates of the
officers of the Buyer and such other documents
evidencing satisfaction of the conditions specified
in this Section 8.2 as the Shareholders'
Representative shall reasonably request.
(i)Guarantees. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall have been released from
all liabilities under all written guarantees of bank debt and Buyer shall have
provided substitute guarantees for the performance bond of the Company.
SECTION 9. TERMINATION
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing notwithstanding approval thereof by the Shareholders or by
the Buyer:
(a) By the mutual written consent of Buyer and the
Shareholders' Representative; or
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(b) By Buyer or the Shareholders' Representative if,
without fault of the terminating party, the Closing shall not have occurred on
or before November 15, 1997; or
(c) By Buyer or the Shareholders' Representative if any
court of competent jurisdiction or other governmental body shall have issued,
enacted, entered, promulgated or enforced an order, judgment, decree,
injunction, restraining order or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated hereby and
such judgment, order, decree, injunction, restraining order, ruling or other
action shall have become final and nonappealable.
9.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1 hereof, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders other than the
provisions of this Section 9. Nothing contained in this Section 9.2 shall
relieve any party from liability for any breach of this Agreement.
SECTION 10. INDEMNITY
10.1 Indemnity by Shareholders.
(a) From and after the Closing Date, the Shareholders, by
approving this Agreement, hereby agree that they shall, jointly and severally,
indemnify and hold Buyer harmless from and against, and shall defend promptly
Buyer from and reimburse Buyer for, any and all losses, damages, costs,
expenses, liabilities, obligations, and claims of any kind (including, without
limitation, reasonable attorneys' fees and other costs and expenses)
("Damages") which Buyer may at any time suffer or incur, or become subject to,
as a result of or in connection with any of the following:
(i) any breach of this Agreement or inaccuracy of
any of the representations and warranties made by the Shareholders in
or pursuant to this Agreement;
(ii) any failure by the Shareholders to carry out,
perform, satisfy, and discharge any of their or its covenants,
agreements, undertakings, liabilities, or obligations under this
Agreement;
(iii) any operating or administrative expenses that
should have been accrued on the Closing Balance Sheet in accordance
with GAAP consistently applied in excess of $25,000 provided that this
specified indemnification provision shall lapse on December 31, 1997;
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(iv) any claim, cost, or expense in excess of
$20,000 for any breach of the representations at Section 4.17(b)(3).
(b) Buyer shall promptly notify the Shareholders of any
claim, demand, action, or proceeding for which indemnification will be sought
under this Agreement and, if such claim, demand, action, or proceeding is a
third party claim, demand, action, or proceeding, the Shareholders shall have
the right at their expense to assume the defense thereof using counsel
reasonably acceptable to Buyer. Buyer shall have the right to participate, at
its own expense, with respect to any such third party claim, demand, action, or
proceeding. In connection with any such third party claim, demand, action, or
proceeding, the parties shall cooperate with each other and provide each other
with access to relevant books and records in their possession. No such third
party claim, demand, action, or proceeding shall be settled without the prior
written consent of the party seeking indemnification and the Shareholders.
Notwithstanding anything herein to the contrary, if a firm written offer is made
to settle any such third party claim, demand, action, or proceeding and Buyer
refuses to consent to such settlement, then: (i) the Shareholders shall be
excused from, and Buyer shall be solely responsible for, all further defense of
such third party claim, demand, action, or proceeding; and (ii) the maximum
liability of the Shareholders relating to such third party claim, demand,
action, or proceeding shall be the amount of the proposed settlement if the
amount thereafter recovered from Buyer on such third party claim, demand,
action, or proceeding is greater than the amount of the proposed settlement.
10.2 Indemnity by Buyer.
(a) From and after the Closing Date, Buyer hereby agrees
that it shall indemnify and hold the Shareholders harmless from and against,
and shall defend promptly the Shareholders from and reimburse the Shareholders
for, any and all Damages which the Shareholders may at any time suffer or
incur, or become subject to, as a result of or in connection with any of the
following:
(i) any misrepresentation or breach of any
representations and warranties made by Buyer in or pursuant to this
Agreement;
(ii) any failure by Buyer to carry out, perform,
satisfy and discharge any of their covenants, agreements,
undertakings, liabilities, or obligations under this Agreement;
(iii) except for matters for which the Shareholders
must indemnify Buyer, the ownership and operation of the Company and
the Business after the Closing;
(iv) any guarantees disclosed to Buyer in writing
by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ of bank debt of the Company prior to the Closing
or any guarantees of performance bonds of the Company with respect to
the Contracts listed on SCHEDULE 4.17.
(b) The Shareholders shall promptly notify Buyer of any
claim, demand, action, or proceeding for which indemnification will be sought
under this Section 10.2 of this
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62
Agreement and, if such claim, demand, action, or proceeding is a third party
claim, demand, action, or proceeding, Buyer will have the right at their
expense to assume the defense thereof using counsel reasonably acceptable to
the Shareholders. The Shareholders shall have the right to participate, at
their own expense, with respect to any such third party claim, demand, action,
or proceeding. In connection with any such third party claim, demand, action,
or proceeding, the parties shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No such
third party claim, demand, action, or proceeding shall be settled without the
prior written consent of the Shareholders and Buyer. Notwithstanding anything
herein to the contrary, but subject to the limitations in Section 10.3, if a
firm written offer is made to settle any such third party claim, demand,
action, or proceeding and the Shareholders refuse to consent to such
settlement, then: (i) Buyer shall be excused from, and the Shareholders shall
be solely responsible for, all further defense of such third party claim,
demand, action, or proceeding; and (ii) the maximum liability of Buyer relating
to such third party claim, demand, action, or proceeding shall be the amount of
the proposed settlement if the amount thereafter recovered on such third party
claim, demand, action, or proceeding is greater than the amount of the proposed
settlement.
10.3 Exceptions for Indemnified Damages.
(a) Notwithstanding the provisions of Section 10.1,
Damages under 10.1(a)(i) or (ii) for which Buyer is entitled to indemnification
shall not include the first $125,000 of Damages. In addition, Damages for
which Buyer is entitled to indemnification shall not include any individual
Damage which is less than $1,000 or Damages to the extent a specific reserve
(as described below) has been established on the Closing Balance Sheet. The
Company has established special reserves of $40,000 each for Jobs 1077 and 1129
and $10,000 for Job 1061 (or a total of $90,000).
(b) Notwithstanding the provisions of Section 10.1,
Damages for which the Buyer is entitled to indemnification pursuant to Section
10.1 shall not exceed $4,500,000.
(c) Any proceeds from insurance paid to the Buyer or the
Company as a direct result of any fact, event or circumstances requiring
indemnity pursuant to Section 10.1 shall constitute a credit which shall be
offset against the total Damage (before the application of Section 10.3(a)
herein).
(d) Any Damages calculated for purposes of Section 10.1
shall be calculated taking into account any offsetting federal, state, local or
foreign tax benefits realized because of such Damage to Buyer or the Company.
(e) The limitations set forth in this Section 10.3 shall
not apply to any Damages resulting from the breach by a Shareholder of the
representations and warranties in Section 5.
(f) The Shareholders may, at their option, pay any
Damages in cash or Buyer's Common Stock, valued at the Average Closing Price of
Buyer's Common Stock for each of the trading days in the 30 calendar days
ending three days prior to payment.
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(g) Notwithstanding the liability of the Shareholders
hereunder as joint and several, the liability of each Shareholder to indemnify
the Buyer from a breach of a representation or warranty under Section 5 shall
be several and not joint and limited as to each Shareholder in proportion to
the total purchase price received by such shareholder considering the total
purchase price received by all Shareholders hereunder.
(h) Notwithstanding any other provision in this
Agreement, the accounts listed on SCHEDULE 10.1 (the "Guaranteed Accounts")
will be collected by the Company on or before June 29, 1998, or the Buyer will
have the right on June 30, 1998 to assign the Guaranteed Account, in whole or
in part, to the Shareholders and receive the uncollected amount first from the
Holdback Amount and, if necessary, then directly from the Shareholders. The
Buyer agrees that any funds received from the customer on that particular
contract will be first assigned to the accounts listed on SCHEDULE 10.1 and
used to reduce the outstanding receivables listed on SCHEDULE 10.1. The Buyer
agrees to allow Shareholders to review the books and records of the Company at
the Shareholders' expense, in order to confirm that amounts have been allocated
properly. If any Guaranteed Accounts are assigned to the Shareholders on June
30, 1998, Buyer agrees to prepare such documents, to be in a form and substance
reasonably satisfactory to the Shareholders, to assign the rights to the
Guaranteed Accounts to the Shareholders for collection. At all times while any
Guaranteed Account shall be outstanding, Buyer and the Company will cooperate
in all reasonable respects with ▇▇▇▇▇ ▇▇▇▇▇▇▇ in any manner reasonably
requested by him to assist in the collection of such Accounts subsequent to
Closing. In addition, ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall be permitted to do whatever is
reasonably deemed necessary to collect such Accounts, including devoting such
reasonable time as he deems appropriate to such collection efforts while he is
an employee of the Company. Through June 30, 1998 ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall take no
action in collecting the Guaranteed Accounts which he reasonably believes would
have a material adverse effect on the Company.
10.4 Termination of Indemnification Obligations. On March 31,
1999, the parties shall be released from the agreements of indemnification
contained in this Section 10 in respect of any claims which shall not have been
made prior to such date; provided that claims for breach of Section 5 shall
continue until the expiration of all statute of limitations applicable to such
claims. Such agreements of indemnification shall remain effective in respect
of claims made in writing by giving notice as provided in Section 11.4 prior to
such date until such claims are finally determined or satisfied in full.
10.5 Exclusive Remedy. The enforcement of the agreements of
indemnification contained in this Section 10 shall be, after the date hereof,
the exclusive remedy of the parties hereto for any breach of any warranty,
representation or term hereof or any certificate delivered pursuant to this
Agreement, whether sounding in tort, contract or otherwise, and the parties
hereto waive all remedies otherwise available to such parties save only
remedies which by law may not be waived; provided that this section shall not
limit or restrict any of Buyer's remedies for fraud by the Shareholders or any
of the Shareholders' remedies for fraud by Buyer.
10.6 Tax Matters. In the event that any taxing authority conducts
an audit to determine the amount of any Taxes of the Company or any Subsidiary
for any period ending on or before the Closing Date, or asserts any tax
liability for such period, the Shareholders' Representative
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shall have the exclusive authority to direct, compromise or contest such audit
or asserted tax liabilities as he shall, in his sole discretion, deem proper.
In such event, Buyer and the Company shall cause the Company or the respective
Subsidiary to empower (by power of attorney or such other documentation as may
be appropriate) Shareholders' Representative or his designee to represent such
Company or Subsidiary in any audit or administrative or judicial proceeding
insofar as such audit or proceeding involves any asserted liability for Taxes
for the period specified above. Notwithstanding the foregoing, the
Shareholders' Representative shall keep the Company fully informed regarding
the audit or asserted tax liability described above. Without the consent of
the Shareholders' Representative, not to be unreasonably withheld, Buyer shall
not, and shall cause the Company and each Subsidiary not to, amend any federal,
state or local income tax return where such amendment is made after the Closing
and the effect thereof is to increase materially any income taxes payable by
the Company or any Subsidiary for any period on or prior to the Closing.
SECTION 11. MISCELLANEOUS
11.1 Expenses. Each party shall bear and pay its own expenses and
those of its affiliates arising in connection with the transactions
contemplated by this Agreement.
11.2 Survival of Representations and Warranties. The
representations, warranties and covenants made by the parties hereto in this
Agreement and in the schedules and exhibits hereto or in any certificate or
document delivered pursuant hereto shall survive the Closing, any investigation
made at any time with respect thereto, for the period of time set forth in
Section 10.4.
11.3 Parties in Interest. This Agreement shall inure to the
benefit of and be binding upon the Company, the Shareholders, and Buyer; except
as otherwise expressly provided herein, nothing in this Agreement, express or
implied, is intended to confer any rights or benefits on any third party.
Neither the Company, the Shareholders, nor Buyer shall have the right to assign
this Agreement without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed, provided that Buyer may
assign its rights and obligations hereunder to any other subsidiary of Buyer,
except that no such assignment shall relieve Buyer of its obligations
hereunder.
11.4 Notices. All notices, requests, consents, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in Person, by cable, telegram or telex, or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to Buyer: ▇▇▇▇ Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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With a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to the Company: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
or the Shareholders One Meadowlark Lane
(prior to the ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Closing)
With a copy to: ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
provided, however, that if either party shall have designated a different
address by notice to the other, then to the last address so designated.
11.5 Waivers. Waiver by any party of any breach of or failure to
comply with any provision of this Agreement by the other party shall not be
construed as, or constitute, a continuing waiver of any such provision, or a
waiver of any other breach of, or failure to comply with, any other provision
of this Agreement.
11.6 Governing Law. This Agreement shall be construed and enforced
in accordance with and governed by the internal laws of the State of Michigan.
11.7 Integration; Amendment and Termination. This Agreement
(including the schedules, annexes and exhibits hereto) constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof. This Agreement may not be amended or
terminated, nor may any condition or term hereof be waived, orally, but only by
an instrument in writing duly executed by the parties hereto or, in the case of
a waiver, by the party otherwise entitled to performance. Except as expressly
agreed to in writing at the Closing, the parties agree that neither has made
any representations, warranties, covenants or undertakings other than as
expressly provided for in the Agreement, schedules and annexes hereto.
11.8 Paragraph and Other Headings. The paragraph and other
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, faxed or otherwise, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
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11.10 No Impairment. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force and effect
without being impaired or invalidated in any way.
11.11 Schedules. Disclosure of information on one Schedule with
respect to any representation or warranty hereto shall be deemed to be
disclosure of such information with respect to all representations and
warranties as set forth in this Agreement, provided such disclosure is
sufficiently adequate to inform the Buyer of its relevance to such other
representation or warranty.
11.12 Legal Proceedings. If a dispute arises between the parties
relating to this Agreement or any of the other agreements to be delivered
hereunder, the parties agree to use the following procedure prior to either
party pursuing other available remedies:
(a) In the event Buyer proposes to make any claim for
indemnification under Section 10.2 of this Agreement, it shall deliver a
certificate signed by the President or any Vice President of Buyer (the
"Officer's Certificate") to the Shareholders' Representative, which Officer's
Certificate shall state that Buyer has suffered, paid or properly accrued
liabilities, damages, losses or expenses or anticipates liability for claims in
the aggregate stated amount to which such party is entitled to indemnification
pursuant to this Agreement and shall specify in reasonable detail each
individual item of damage, loss, expense or other claim included in the amount
so stated, the date such item was suffered, paid or properly accrued, the basis
for any anticipated liability and the nature of the misrepresentation, breach
of warranty, agreement or claim to which each such item is related.
(b) If within 15 days of receipt of the Officer's Certificate, in
the event that the Shareholders' Representative objects in writing to the
reimbursement of Buyer in respect of any claim or claims made in an Officer's
Certificate, the Shareholders' Representative and Buyer shall, within the
ten-day period beginning as of the date of the receipt by Buyer of such written
objection, attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. A meeting shall be held between
the parties, attended by individuals with decision-making authority regarding
the dispute, in an attempt in good faith to negotiate a resolution of the
dispute. If the Buyer and the Shareholders' Representative shall so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and, with respect to matters for which claims can be made against the
Holdback Amount, if available, shall be furnished to the Escrow Agent. The
Escrow Agent shall be entitled to rely on any such memorandum and to make
distributions from the Holdback Amount in accordance with the terms thereof.
(c) If, within 30 days after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, they will jointly appoint
a mutually acceptable neutral Person not Affiliated with either of the parties
(the "neutral"), seeking assistance in such regard from the Center for Public
Resources if they have been unable to agree upon such appointment within 40
days from the initial meeting. The fees of the neutral shall be shared
equally by the parties.
(d) In consultation with the neutral, the parties will select or
devise an alternative dispute resolution procedure ("ADR") by which they will
attempt to resolve the dispute, and a time and place for the ADR to be held,
with the neutral making the decision as to the procedure, and/or
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place and time (but unless circumstances require otherwise, not later than 60
days after selection of the neutral) if the parties have been unable to agree
on any of such matters within 20 days after initial consultation with the
neutral.
(e) The parties agree to participate in good faith in the ADR to its
conclusion as designated by the neutral. If the parties are not successful in
resolving the dispute through the ADR, then the parties may agree to submit the
matter to binding arbitration or a private adjudicator, or either party may seek
an adjudicated resolution through the appropriate court. Nothing in this
Section 11.12 shall restrict a party's right to file an action with an
appropriate court if such party determines such action be necessary at the time
due to the implication of any statute of limitations.
(f) In the event legal proceedings through the courts are commenced to
enforce the parties' respective rights and obligations herein, each party shall
be responsible to pay for its own related costs and expenses, including
reasonable legal fees, incurred with respect to said legal proceedings.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the date first above written.
▇▇▇▇ Industries, Inc.,
a Wisconsin corporation
By:_________________________________________
Title:______________________________________
____________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, for and on behalf of
himself as a Shareholder.
For, and on behalf of the following Shareholders,
pursuant to authority under certain Irrevocable
Power of Attorney dated October __, 1997:
L. ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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