SHARE PURCHASE AGREEMENT
Relating to the Acquisition of
RFL Electronics, Inc.
by
SL Industries, Inc.
Dated: April 1, 1999
TABLE OF CONTENTS
Page
----------------------------------------------------------------------------------------------------------------------------
INTRODUCTION .............................................................................................................1
BACKGROUND ...............................................................................................................1
TERMS AND CONDITIONS......................................................................................................1
1. Definitions.............................................................................................1
2. Sale and Purchase of the Shares.........................................................................5
2.1 Sale and Purchase of the Shares.......................................................5
2.2 Default by any Shareholder at the Closing.............................................6
2.3 Post-Closing Adjustment...............................................................6
(A) Preparation of Closing Date Balance Sheet............................6
(B) Resolution of Disputes...............................................6
(C) Determination of Closing Net Book Value..............................7
(D) Adjustment of Purchase Price; Payment................................7
2.4 Payment...............................................................................7
3. Closing.................................................................................................8
3.1 Closing Date..........................................................................8
3.2 Deliveries............................................................................8
3.3 Termination...........................................................................8
4. Representations and Warranties of the Shareholders......................................................8
4.1 Organization and Standing.............................................................9
4.2 Capitalization and Share Ownership....................................................9
4.3 Authority and Binding Effect.........................................................10
4.4 Validity of Contemplated Transactions................................................10
4.5 Restrictions.........................................................................10
4.6 Third-Party Options..................................................................10
4.7 Financial Statements.................................................................10
4.8 Books of Account; Returns and Reports; Taxes.........................................11
4.9 Undisclosed Liabilities..............................................................12
4.10 Accounts Receivable..................................................................12
4.11 Inventory............................................................................12
4.12 Title to Assets......................................................................12
4.13 All Tangible Assets..................................................................13
4.14 Condition of Assets..................................................................13
4.15 Real Property........................................................................13
(A) Title...............................................................13
(B) Zoning..............................................................13
(C) Utility Services....................................................13
(D) Access..............................................................13
(E) Assessments or Hazards..............................................14
(F) Eminent Domain......................................................14
(G) No Violations.......................................................14
(H) Improvements........................................................14
4.16 Contracts............................................................................14
4.17 Employees............................................................................16
4.18 Licenses.............................................................................17
4.19 Intellectual Property................................................................17
4.20 Compliance with Regulations and Court Orders.........................................18
4.21 Claims...............................................................................18
4.22 Insurance............................................................................18
4.23 Pension Plans; Employee Benefit Plans................................................19
(A) Disclosure..........................................................19
(B) Delivery of Disclosed Plans' Documents..............................20
(C) Compliance with Law.................................................20
(D) Tax or Civil Liability..............................................21
(E) Claims Liability....................................................22
(F) Fiduciary Appointments and Conduct..................................22
(G) Classification of Independent Contractors and Retention of
Leased Employees.....................................................................22
(H) Controlled Groups...................................................22
(I) Reporting and Disclosure............................................23
(J) Participant and Beneficiary Notifications...........................23
4.24 Transactions with Affiliates.........................................................23
4.25 Environmental Matters................................................................23
4.26 Additional Information...............................................................27
4.27 No Changes...........................................................................28
4.28 Year 2000 Compliance.................................................................30
4.29 Full Disclosure......................................................................31
5. Representations and Warranties of the Buyer............................................................31
5.1 Organization and Standing............................................................31
5.2 Authority and Binding Effect.........................................................31
5.3 Validity of Contemplated Transactions................................................31
5.4 Claims...............................................................................31
6. Conduct of Business Pending Closing....................................................................31
7. Survival of Representation and Warranties..............................................................34
8. Indemnification........................................................................................34
8.1 Indemnification Obligations..........................................................34
8.2 Method of Asserting Claims, Etc......................................................36
8.3 Insurance............................................................................37
8.4 Payment..............................................................................37
8.5 Shareholder Representative...........................................................38
8.6 Service of Process, Consent to Jurisdiction, Arbitration, Etc........................39
9. Conditions Precedent to Obligations of the Buyer.......................................................40
9.1 Representations True at Closing......................................................40
9.2 Performance by the Shareholders......................................................40
9.3 Balance Sheet........................................................................40
9.4 Certificates.........................................................................40
9.5 Form and Content of Documents........................................................40
9.6 Opinion of Counsel...................................................................40
9.7 Litigation Affecting Closing.........................................................40
9.8 No Claim Regarding Share Ownership or Sale Proceeds..................................41
9.9 Regulatory Compliance and Approvals..................................................41
9.10 Consents.............................................................................41
9.11 Due Diligence Review.................................................................41
9.12 Escrow Agreement.....................................................................41
9.13 Consents and Approvals...............................................................41
9.14 Ancillary Documents..................................................................41
9.15 Employment Agreement.................................................................41
9.16 Environmental Matters................................................................41
9.17 Insurance............................................................................42
9.18 Loan Notes...........................................................................42
10. Conditions Precedent to Obligations of the Shareholders................................................42
10.1 Buyer Representations True at Closing................................................42
10.2 Performance by the Buyer.............................................................42
10.3 Officer's Certificate................................................................42
10.4 Incumbency Certificate...............................................................42
10.5 Form and Content of Documents........................................................42
10.6 Opinion of Counsel...................................................................42
10.7 Litigation Affecting Closing.........................................................42
10.8 Regulatory Compliance and Approval...................................................42
10.9 Ancillary Documents..................................................................43
11. Miscellaneous..........................................................................................43
11.1 Buyer's Post-Closing Covenants.......................................................43
11.2 Payment of Expenses..................................................................43
11.3 Termination by Mutual Consent........................................................43
11.4 Termination for Breach...............................................................43
11.5 Brokers' and Finders' Fees...........................................................43
11.6 Assignment and Binding Effect........................................................44
11.7 Waiver...............................................................................44
11.8 Notices..............................................................................44
11.9 New Jersey Law to Govern.............................................................45
11.10 Remedies Not Exclusive...............................................................45
11.11 No Benefit to Others.................................................................45
11.12 Further Assurances...................................................................45
11.13 Contents of Agreement................................................................45
11.14 Section Headings and Gender..........................................................45
11.15 Disclosure Schedule and Exhibits.....................................................46
11.16 Cooperation..........................................................................46
11.17 Severability.........................................................................46
11.18 Counterparts.........................................................................46
Exhibits
--------
Exhibit A -- Shareholders
Exhibit B -- Form of Escrow Agreement
Exhibit C -- Form of Employment Agreement
SHARE PURCHASE AGREEMENT
INTRODUCTION
------------
This SHARE PURCHASE AGREEMENT is dated as of April 1, 1999. The parties
are those persons listed on Exhibit A (individually, each a "Shareholder" and
collectively, the "Shareholders"), being the owners of all of the issued and
outstanding shares of capital stock of RFL Electronics, Inc. (the "Company"),
and SL Industries, Inc. (the "Buyer"). The Company is a Delaware corporation and
the Buyer is a New Jersey corporation.
BACKGROUND
----------
The Shareholders own all of the issued and outstanding shares of
capital stock of the Company (the "Shares"), with each Shareholder owning the
number and type of Shares set forth after such Shareholder's name in column B of
Exhibit A. The Buyer desires to purchase from the Shareholders, and the
Shareholders desire to sell to the Buyer, all of the Shares in exchange for the
Purchase Price in accordance with the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:
TERMS AND CONDITIONS
--------------------
1. Definitions.
For convenience and brevity, certain terms used in various parts of
this Agreement are listed in alphabetical order and defined or referred to below
(such terms to be equally applicable to both singular and plural forms of the
terms defined).
"Acquisition" means the acquisition of all of the Shares by the Buyer
and all related transactions provided for in or contemplated by this Agreement
or any Exhibit hereto.
"Agreement" means this Share Purchase Agreement.
"Ancillary Documents" means each of the following documents: (i) the
Employment Agreement between the Buyer and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; (ii) the Escrow
Agreement; and (iii) the Noncompetition and Nonsolicitation Agreement among the
parties hereto.
"Assets" means all of the Company's and each Subsidiary's assets,
properties, business, goodwill and rights of every kind and description, real
and personal, tangible and intangible, wherever situated and whether or not
reflected on the Latest Year-End Balance Sheet or the Interim Balance Sheet.
1
"Bank Debt" means all indebtedness of the Company to Fleet Bank, N.A.,
which is the entire funded debt of the Company.
"Business" means the existing and prospective business, operations,
facilities and other Assets, financial condition, results of operations,
finances, markets, products, competitive position, raw materials and other
supplies, customers and customer relations and personnel of the Company and each
Subsidiary.
"Business Day" means any calendar day which is not a Saturday, Sunday
or public holiday under the laws of New Jersey.
"Buyer" means SL Industries, Inc., a New Jersey corporation.
"Claim Notice" is defined in Section 8.2(A).
"Closing" and "Closing Date" are defined in Section 3.1.
"Closing Date Balance Sheet" is defined in Section 2.3(A).
"Closing Net Book Value" is defined in Section 2.3(C).
"Closing Payment" shall mean the Purchase Price less the Contingent
Payment.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means RFL Electronics, Inc., a Delaware corporation.
"Contingent Payment" shall mean the aggregate amount of $1,000,000.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document, commitment, arrangement, undertaking, practice or
authorization that is or may be binding on any person or its property under
applicable law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state or local court or governmental or regulatory body or
authority that is binding on any person or its property under applicable law.
2
"Default" means (1) a default under or material breach of any Contract,
(2) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a default under or material breach of any
Contract, or (3) the occurrence of an event that with or without the passage of
time or the giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"Employee Benefit Plan" means (1) any pension plan, 401(k) plan,
profit-sharing plan, health or welfare plan, and any other employee benefit plan
(within the meaning of section 3(3) of ERISA) that is maintained or sponsored by
the Company or to which the Company contributes or for which the Company
otherwise has or may have any liability, contingent or otherwise, either
directly or as a result of an ERISA Affiliate, and (2) any other benefit
arrangement, obligation, or practice, whether or not legally enforceable, to
provide benefits, other than salary, as compensation for services rendered, to
one or more present or former employees, directors, agents, or independent
contractors, that is maintained or sponsored by the Company or to which the
Company contributes or for which the Company otherwise has or may have any
liability, contingent or otherwise, either directly or as a result of an ERISA
Affiliate, including, without limitation, employment agreements, severance
policies or agreements, executive compensation arrangements, incentive
arrangements, sick leave, vacation pay, salary continuation, consulting or other
compensation arrangements, workers' compensation, bonus plans, stock option,
stock grant or stock purchase plans, medical insurance, life insurance, tuition
reimbursement programs or scholarship programs, any plans subject to section 125
of the Code, and any plans providing benefits or payments in the event of a
change of ownership or control.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any person that, together with the Company, is
or was at any time treated as a single employer under section 414 of the Code or
section 4001 of ERISA and any general partnership of which the Company is or has
been a general partner. For purposes of the provisions of Section 4.23 hereof,
the term "Company" includes any ERISA Affiliate.
"Escrow Agent" means Mellon Bank, N.A..
"Escrow Agreement" means an escrow agreement among the Shareholder
Representative, the Buyer and the Escrow Agent substantially in the form of
Exhibit B.
"Escrow Fund" means the $1,000,000 in cash which is deposited with, and
held and disbursed by, the Escrow Agent in accordance with this Agreement and
the Escrow Agreement, together with the investment income thereon.
"GAAP" means United States generally accepted accounting principles
consistently applied.
3
"Intellectual Property" means Copyrights, Patents, Trademarks,
technology rights and licenses, computer software (including without limitation
any source or object codes therefor or documentation relating thereto), trade
secrets, franchises, know-how, inventions and any and all rights inherent
therein or appurtenant thereto.
"Interim Financial Statements," "Interim Balance Sheet" and "Interim
Balance Sheet Date" are defined in Section 4.7.
"IRS" means the Internal Revenue Service.
"Latest Year-End Balance Sheet" and "Latest Year-End Balance Sheet
Date" are defined in Section 4.7.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of or by any
person (other than endorsements of notes, bills and checks presented to banks
for collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute, contingent, matured, unmatured or other.
"Licenses" means licenses, franchises, permits, easements, rights and
other authorizations.
"Lien" means any mortgage, lien, security interest, pledge,
encumbrance, restriction on transferability, defect of title, charge or claim of
any nature whatsoever on any property or property interest.
"Lienholder" means the holder of or other person entitled to any
benefits arising under any Lien.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry
involving or affecting the Company or any Subsidiary, the Business, the Assets
or any Contracts to which the Company or any Subsidiary is a party or by which
it or any of the Assets or the Business may be bound or affected.
"Loan Notes" means those certain interest bearing promissory notes
issued by the Company to its Shareholders, the aggregate principal amount of
which are set forth on the financial statements of the Company.
"Notice Period" is defined in Section 8.2(A).
"Patents" means all patents and patent applications.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plans" means "employee pension benefit plans" as defined in
section 3(2) of ERISA.
"Permitted Liens" means liens for taxes not yet due and payable, and
the Liens listed on Schedule 4.16.
4
"Proportionate Interest" means, with respect to a Shareholder, the
percentage of Shares owned by such Shareholder in relation to the total number
of Shares owned by all Shareholders as set forth in Column C of Exhibit A
attached hereto.
"Purchase Price" shall mean the aggregate amount of $13,000,000, less
the sum of Bank Debt (including unpaid interest) and Loan Notes as of the
Closing Date (but only to the extent such sum of Bank Debt and Loan Notes is
greater than the Company's cash on hand as of the Closing Date), as adjusted in
accordance with Sections 2.3 and 2.4 hereof.
"Regulation" means any constitution, statute, law, treaty, principle of
common law, ordinance, regulation, order or rule of any federal, state, local or
other governmental agency or body or of any other type of regulatory body,
including, without limitation, those covering environmental, energy, safety,
health, transportation, bribery, recordkeeping, zoning, antidiscrimination,
antitrust, wage and hour, and price and wage control matters.
"Sellers' Knowledge" means the actual knowledge of, and knowledge that
should have been obtained by the management of the Company in the performance of
duties required by their respective positions at the Company.
"Shareholder Representative" is defined in Section 8.5.
"Shareholders" means the persons listed on Exhibit A, who are the
owners of all of the Shares.
"Shares" means 925,000 shares of the Common Stock of the Company which
constitutes all of the issued and outstanding capital stock of the Company.
"Subsidiary" means any entity listed on Schedule 4.1 and referred to in
Section 4.1 as a Subsidiary.
"Trademarks" means registered trademarks, registered service marks,
trademark and service ▇▇▇▇ applications and unregistered trademarks and service
marks.
2. Sale and Purchase of the Shares.
2.1 Sale and Purchase of the Shares. Subject to the post-Closing
adjustment set forth in Section 2.3 hereof and to Section 2.4 hereof and subject
also to the terms and conditions hereinafter set forth and on the basis of and
in reliance upon the representations, warranties, obligations and agreements set
forth herein, at the Closing each Shareholder shall sell to the Buyer and the
Buyer shall purchase from each Shareholder all of the Shares owned by such
Shareholder in exchange for the payment to such Shareholder of an amount equal
to the Purchase Price multiplied by such Shareholder's Proportionate Interest as
set forth after such Shareholder's name in column C of Exhibit A.
2.2 Default by any Shareholder at the Closing. Notwithstanding the
provisions of Section 2.1, if any of the Shareholders shall fail or refuse to
deliver any of the Shares as provided in Section 2.1, or if any of the
Shareholders shall fail or refuse to consummate the transactions described in
this
5
Agreement prior to or on the Closing Date, such failure or refusal shall not
relieve the other Shareholders of any obligations under this Agreement, and the
Buyer, at its option and without prejudice to its rights against any such
defaulting Shareholder, may either (1) acquire the remaining Shares which it is
entitled to acquire hereunder, or (2) refuse to make such acquisition and
thereby terminate all of its obligations hereunder. The Shareholders acknowledge
that the Shares are unique and otherwise not available and agree that in
addition to any other remedies, the Buyer may invoke any equitable remedies to
enforce delivery of the Shares hereunder, including, without limitation, an
action or suit for specific performance.
2.3 Post-Closing Adjustment.
(A) Preparation of Closing Date Balance Sheet. Within 45 days
after the Closing Date, (1) the Company shall prepare a balance sheet for the
Company as of the Closing Date (the "Closing Date Balance Sheet"). The Closing
Date Balance Sheet shall be prepared in accordance with GAAP, using the same
methods and criteria employed by the Company in connection with its preparation
of its Latest Year-End Balance Sheet to the extent such methods are consistent
with GAAP, and shall present fairly the Company's financial position as of the
Closing Date. Upon completion of the Closing Date Balance Sheet, copies thereof
shall promptly be provided to the Shareholder Representative.
(B) Resolution of Disputes. If the Shareholder Representative
shall notify the Buyer within 15 days after receipt of the Closing Date Balance
Sheet that he disputes any matter with respect to such Closing Date Balance
Sheet, then any such matters (the "Disputed Matters") shall be submitted to
arbitration in Philadelphia, Pennsylvania within 30 days after such notice
unless the parties agree in writing to extend such 30 day period in an attempt
to negotiate a settlement of such Disputed Matters. The arbitrator (the
"Arbitrator") shall be any one of the nationally recognized independent
accounting firms which is on the date hereof among the five largest such firms
(the "Big Five accounting firms") mutually agreed to by the Shareholder
Representative and the Buyer. Any reference herein to the Big Five accounting
firms shall be deemed to include a reference to any member or employee thereof
(who is a certified public accountant) which any such firm may designate as the
Arbitrator on its behalf. If within 20 days following the expiration of the
30-day period referred to above or any extension thereof the Shareholder
Representative and the Buyer shall have failed to agree upon the selection of
the Arbitrator or any such Arbitrator selected by them shall not have agreed to
perform the services called for hereunder, the Arbitrator shall thereupon be
selected in accordance with the rules of the American Arbitration Association,
with preference being given to any one of the Big Five accounting firms or any
member or employee thereof (who is a certified public accountant) which or who
may be willing to perform such services, other than any such firm which is then
employed by the Company or the Buyer or any affiliate thereof. The Arbitrator
shall consider only the Disputed Matters and the arbitration shall be conducted
in accordance with the rules of the American Arbitration Association then in
effect. The Arbitrator shall act promptly to resolve all Disputed Matters and
its decision with respect to all Disputed Matters shall be final and binding
upon the parties hereto and shall not be appealable to any court. The costs and
expenses of the Arbitrator shall be shared equally by the Shareholders and the
Buyer.
(C) Determination of Closing Net Book Value. The Purchase
Price has been determined on the assumption, and the parties have entered into
this Agreement with the reasonable
6
expectation, that the excess (the "Closing Net Book Value") of (1) the total
assets of the Company as of the Closing Date, over (2) the total liabilities of
the Company as of the Closing Date, will be $7,000,000. As used herein, the
terms "total assets" and "total liabilities" shall mean the aggregate amount of
all assets or liabilities, respectively, of the Company (whether classifiable in
accordance with GAAP as current or long-term) determined in accordance with GAAP
and applied on a basis consistent with the Latest Year-End Balance Sheet.
(D) Adjustment of Purchase Price; Payment. The Purchase Price
shall be decreased by the amount by which the Closing Net Book Value on the
Closing Date is less than $7,000,000. Within 15 days after receipt by the
Shareholder Representative of the Closing Date Balance Sheet, the Shareholders
shall pay the net amount of any decrease to the Purchase Price, as calculated in
accordance with this Section 2.3, to the Buyer in cash with interest from the
Closing Date to the date such difference is paid at a fluctuating rate per annum
which at all times shall be the lowest rate of interest generally charged from
time to time by Mellon Bank, N.A. and publicly announced by Mellon Bank, N.A. as
its so-called "prime rate"; provided, however, that if there are any Disputed
Matters, any payment finally determined to be due either by agreement or by
arbitration shall be made by the Shareholders within 10 days after such
determination, with interest as aforesaid. Each Shareholder shall pay Buyer a
pro rata share, based upon such Shareholder's Proportionate Interest as set
forth in column C of Exhibit A, of any such decrease to the Purchase Price.
2.4 Payment. The Closing Payment shall be paid to the Shareholders by
wire transfer of immediately available funds to an attorney's trust account (the
"S&F Account") designated in writing by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to the
Shareholders, to the Buyer at least three (3) days prior to Closing. The
Contingent Payment shall be released by the Escrow Agent and paid to the S&F
Account by wire transfer of immediately available funds upon the occurrence of:
(i) written confirmation by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. (after conducting a full audit
of the Company) that the Company's earnings before interest and taxes for the
twelve months ended March 31, 1999 equaled or exceeded $2,200,000; and (ii) a
final determination that the Closing Net Book Value is equal to or exceeds
$7,000,000.
3. Closing.
3.1 Closing Date. The Closing (the "Closing") of the sale and purchase
of the Shares shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, at 10:00 A.M. local time, on
April 30, 1999, or at such other time or place or on such other date as the
Buyer and the Shareholder Representative may agree to in writing. The date of
the Closing is hereinafter sometimes referred to as the "Closing Date."
3.2 Deliveries. At the Closing, subject to the provisions of this
Agreement, each Shareholder shall deliver to the Buyer, free and clear of all
Liens, the certificates for the Shares to be sold by such Shareholder in
negotiable form, duly endorsed in blank, or with separate notarized stock
transfer powers attached thereto and signed in blank, and any other documents
that are necessary to transfer to the Buyer good title to the Shares, in
exchange for (1) the delivery within ten (10) business days after Closing by
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. from the S&F Account to such Shareholder by check the
amount of the product of the Proportionate Interest of such Shareholder
multiplied by the remaining amount of the Closing Payment after deduction of the
fees and other payments set forth on Schedule 3.2
7
annexed hereto; and (2) the wire transfer or other delivery by the Buyer to the
Escrow Agent of the Contingent Payment, which latter amount shall be held and
eventually disbursed by the Escrow Agent in accordance with this Agreement and
the Escrow Agreement. At the Closing, the Shareholders will make available to
the Buyer the written resignations of all the directors and officers of the
Company and each Subsidiary effective as of the Closing except for such
directors and officers as the Buyer shall designate in writing, and shall cause
to be made available to the successor directors and officers all minute books,
stock record books, books of account, corporate seals, Contracts and other
documents, instruments and papers belonging to the Company and each Subsidiary
and shall cause full possession and control of all of the Assets and of all
other things and matters pertaining to the operation of the Business to be
transferred and delivered to the directors and officers elected to succeed the
resigned directors and officers of the Company and each Subsidiary. At the
Closing, the Shareholders shall also deliver to the Buyer, and the Buyer shall
deliver to the Shareholders, the certificates, opinions and other instruments
and documents referred to in Sections 9 and 10.
3.3 Termination. In the event that the Closing shall not have taken
place on or before May 30, 1999, or such later date as shall be mutually agreed
to in writing by the Buyer and the Shareholder Representative, all of the rights
and obligations of the parties under this Agreement shall terminate without
liability, except for liability in the event the Closing does not occur and this
Agreement terminates by reason of a default or breach by any party hereto.
4. Representations and Warranties of the Shareholders. The Shareholders hereby
severally represent and warrant to the Buyer that, except as set forth on the
Disclosure Schedules attached hereto, each of which exceptions shall
specifically identify the relevant subsection hereof to which it relates and
shall be deemed to be representations and warranties as if made hereunder:
4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Delaware,
having full power and authority to carry on the Business as it has been and is
now being conducted and to own, lease and operate the Assets. The Company and
each Subsidiary is duly qualified to do business and is in good standing in
every jurisdiction in which the Business or the character of the Assets requires
such qualification, except where the lack of such qualification would not have a
material adverse effect on the Company or the Subsidiaries, as the case may be,
all of which jurisdictions are disclosed in Schedule 4.1. Except for the
entities listed in Schedule 4.1 (the "Subsidiaries"), if any, the Company has no
subsidiaries and no stock or other equity or ownership interest (whether
controlling or not) in any corporation, association, partnership, joint venture
or other entity. The minute books of the Company and each Subsidiary are current
and contain correct and complete copies of all charter documents of the Company
and each Subsidiary, including all amendments thereto and restatements thereof,
and of all minutes of meetings, resolutions and other actions and proceedings of
its shareholders and board of directors and all committees thereof, duly signed
by the Secretary or an Assistant Secretary, and the stock record book of the
Company and each Subsidiary is also current, correct and complete and reflects
the issuance of all of the Shares to the Shareholders.
4.2 Capitalization and Share Ownership. The Company's authorized
capital stock consists solely of 999,000 shares of Common Stock. There are
925,000 shares of the Company's Common Stock presently outstanding (previously
defined as the "Shares"), which Shares are owned by the Shareholders
8
in the respective amounts set forth opposite their names in column B of Exhibit
A, free and clear of any Liens. All of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable, were not issued in violation
of the terms of any Contract binding upon the Company, and were issued in
compliance with all applicable charter documents of the Company and all
applicable federal and state securities or "blue sky" laws and regulations. No
equity securities of the Company, other than the Shares, are issued or
outstanding. There are, and have been, no preemptive rights with respect to the
issuance of the Shares. Schedule 4.2 sets forth a description of all of the
issued and outstanding equity securities of each of the Subsidiaries. The
Company owns of record and beneficially all of the issued and outstanding
capital stock of each Subsidiary free and clear of any Liens. All shares of such
capital stock have been duly authorized, validly issued, are fully paid and
nonassessable, were not issued in violation of the terms of any agreement or
other understanding and were issued in compliance with all applicable federal
and state securities or "blue sky" laws and regulations. Except as set forth in
Schedule 4.2, there are: (a) no existing Contracts, subscriptions, options,
warrants, puts, calls, demands, commitments or rights of any character to
purchase or otherwise acquire any capital shares or other securities of the
Company or any Subsidiary, whether or not presently issued or outstanding, from
any Shareholder, the Company or any Subsidiary, at any time, or upon the
happening of any stated event; (b) no outstanding securities of any Subsidiary
that are convertible into or exchangeable for capital shares or other securities
of the Company or any Subsidiary; (c) no Contracts, subscriptions, options,
warrants, calls, commitments or rights to purchase or otherwise acquire from any
Shareholder, the Company or any Subsidiary any such convertible or exchangeable
securities; and (d) no voting trust agreements or other agreements restricting
the voting, dividend rights or disposition of any of the Shares.
4.3 Authority and Binding Effect. Each Shareholder has the full power
and authority to execute, deliver and perform this Agreement and has taken all
actions necessary to secure all approvals required in connection therewith. The
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated will not contravene or violate the Certificate
of Incorporation or By-Laws of the Company or any Subsidiary. This Agreement
constitutes the legal, valid and binding obligation of each Shareholder,
enforceable against such Shareholder in accordance with its terms, subject to
bankruptcy, insolvency, moratorium or similar laws affecting the rights of
creditors generally or equitable principles generally applied.
4.4 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement by any Shareholder nor the consummation of the
transactions contemplated hereby will contravene or violate any Regulation or
Court Order which is applicable to the Company, any Subsidiary or any
Shareholder, or will result in a Default under, or require the consent or
approval of any party to, any Contract relating to the Business or the Assets or
to or by which the Company, any Subsidiary or any Shareholder is a party or
otherwise bound or affected, or require the Company, any Subsidiary or any
Shareholder to notify or obtain any License from any federal, state, local or
other court or governmental agency or body or from any other regulatory
authority.
4.5 Restrictions. None of the Company, any Subsidiary nor any
Shareholder is a party to any Contract or subject to any restriction or any
Court Order or Regulation which adversely affects the Company, any Subsidiary,
the Assets or the Business or affects or restricts the ability of the Company,
any Subsidiary or any Shareholder to consummate the Acquisition.
9
4.6 Third-Party Options. There are no existing Contracts, options,
commitments or rights with, to or in any third party to acquire the Company, any
Subsidiary, any of the Assets or any interest therein or in the Business.
4.7 Financial Statements. The Company and the Shareholders have
delivered to the Buyer (1) the Company's consolidated year-end balance sheets at
March 31, 1998 and each of the two preceding fiscal year-ends, (2) its related
consolidated statements of income and retained earnings for the fiscal years
then ended, and (3) all related notes and schedules, each of which have been
audited by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. All Liabilities of the Company and each
Subsidiary at March 31, 1998 required to be reflected or reserved for by GAAP
are fully reflected or reserved for in the Company's consolidated balance sheet
at March 31, 1998 (the "Latest Year-End Balance Sheet"). March 31, 1998 is
referred to as the "Latest Year-End Balance Sheet Date" in other parts of this
Agreement. In addition, the Company and the Shareholders have delivered to the
Buyer copies of the unaudited consolidated quarter-end balance sheets of the
Company and the Subsidiaries at each of June 30, 1998, September 30, 1998, and
December 31, 1998 and the related unaudited consolidated statements of income
and retained earnings for the quarters then ended. The Company and the
Shareholders have also delivered to the Buyer a copy of the unaudited
consolidated balance sheet of the Company and the Subsidiaries at January 31,
1999 and the related unaudited consolidated statement of income and retained
earnings for the period from the Latest Year-End Balance Sheet Date to January
31, 1999. January 31, 1999 is referred to as the "Interim Balance Sheet Date" in
other parts of this Agreement. All Liabilities of the Company and each
Subsidiary as of the Interim Balance Sheet Date required to be reflected or
reserved for by GAAP are fully reflected or reserved for in the Company's
consolidated balance sheet at the Interim Balance Sheet Date (the "Interim
Balance Sheet"). All of the financial statements referred to in this Section 4.7
were prepared in accordance with GAAP and, subject to any qualifications set
forth in the applicable notes and schedules, fairly and accurately present the
financial position and results of operations of the Company and its Subsidiaries
at the dates and for the periods covered and include all adjustments that are
necessary for a fair and accurate presentation of the information shown.
4.8 Books of Account; Returns and Reports; Taxes. The books of account
of the Company fairly and accurately reflect, in accordance with GAAP, (1) all
transactions relating to the Company and each Subsidiary and (2) all items of
income and expense, assets and liabilities and accruals relating to the Company
and each Subsidiary. Neither the Company nor any Subsidiary has engaged in any
transaction, maintained any bank account or used any corporate funds except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the Company. The Company and each
Subsidiary have duly filed all federal, state and local tax reports and returns
and all other reports and returns required to be filed by it pursuant to any
Regulation. The Company and each Subsidiary have duly made all deposits required
by law to be made with respect to employees' withholding taxes. The Company and
each Subsidiary have duly paid all taxes, duties and charges (including
penalties and interest thereon) when due, have duly accrued on their books of
accounts all taxes, duties and charges (including penalties and interest
thereon) payable by them, and the amounts established as provisions for taxes on
the Latest Year-End Balance Sheet and the Interim Balance Sheet are sufficient
for the payment of all taxes due as a result of activities which occurred during
periods covered by the Latest Year-End Balance Sheet and the Interim Balance
Sheet, respectively. Neither the Company nor any Subsidiary owes any tax
penalties or any interest thereon. Neither the Company nor any Subsidiary has
received any notice of assessment or deficiency or
10
proposed assessment from or by the IRS or any other taxing authority in
connection with its tax returns or reports and there is no pending tax
examination of or tax claim asserted against the Company, any Subsidiary or any
of the Assets. There is no tax lien on any of the Assets except for liens for
real estate taxes not yet due and payable. All federal or state income tax
returns filed by the Company or any Subsidiary have been audited by the relevant
tax authorities or are closed by the applicable statute of limitations for all
taxable years through March 31, 1995, and no agreement for the extension of time
or waiver of the statute of limitations for the assessment of any deficiency or
adjustment for any year is in effect. True and correct copies of all federal and
state income tax returns filed by the Company and each Subsidiary since March
31, 1996 have been delivered to Buyer.
4.9 Undisclosed Liabilities. Neither the Company nor any Subsidiary has
Liabilities except for:
(A) those Liabilities adequately and specifically set forth or
reserved for on the Latest Year-End Balance Sheet and not heretofore paid or
discharged;
(B) those Liabilities arising in the ordinary course of its
business consistent with past practice under any Contract specifically disclosed
on Schedule 4.16 (or not required to be disclosed because of the term or amount
involved); and
(C) those Liabilities incurred, consistent with past business
practice, in the ordinary course of its business since the Latest Year-End
Balance Sheet Date and not heretofore paid or discharged.
4.10 Accounts Receivable. All accounts receivable as set forth on the
Interim Balance Sheet or arising since the Interim Balance Sheet Date (1) have
arisen only in the ordinary course of business consistent with past practice for
goods sold and delivered or services performed and (2) are collectible in full
at the recorded amounts thereof (free of any, and subject to no, defenses,
setoffs or counterclaims) in the ordinary course of business (without resort to
Litigation or assignment to a collection agency), but in no event later than 90
days after the Closing Date, net of any allowance for doubtful accounts
reflected in the Interim Balance Sheet.
4.11 Inventory. The inventory as set forth on the Interim Balance Sheet
or arising since the Interim Balance Sheet Date was acquired and has been
maintained in accordance with the regular business practices of the Company and
each Subsidiary, except as set forth on Schedule 4.11, consists of new and
unused items of a quality and quantity usable or saleable in the ordinary course
of business of the Company or any Subsidiary consistent with past practice, and
is valued at reasonable amounts based on the ordinary course of business of the
Company within the past six months at prices equal to the lower of cost or
market value on a first-in-first-out basis. Except as disclosed in Schedule
4.11, none of such inventory is obsolete, unusable, slow-moving, damaged or
unsalable in the ordinary course of the Company's or any Subsidiary's business
consistent with past practice.
4.12 Title to Assets. The Company or a Subsidiary owns outright and has
good and marketable title to all of the Assets, including without limitation the
assets and properties set forth on the Interim Balance Sheet (except for such as
may have been disposed of in the ordinary course of business
11
since the Interim Balance Sheet Date), free and clear of all Liens, except
Permitted Liens. Except as set forth in Schedule 4.16, none of the Assets is
leased by the Company or any Subsidiary from any third party, whether affiliated
or unaffiliated with the Company.
4.13 All Tangible Assets. Schedule 4.13 sets forth accurate lists and
summary descriptions of all tangible Assets where the value of an individual
item exceeds $1000 or where an aggregate of similar items exceeds $1000, and of
all leases, Licenses and other Contracts to which the Company is a party or is
otherwise bound which relate in whole or in part to such Assets. In Schedule
4.13, the Assets listed have been grouped by type and assigned location. The
Assets listed on Schedule 4.13 constitute substantially all of the tangible
assets used in or necessary to the conduct of the Business as now operated and
as now anticipated to be operated.
4.14 Condition of Assets. All tangible assets and properties which are
part of the Assets are in good operating condition and repair and are usable in
the ordinary course of the Business consistent with past practice and conform in
all material respects to all applicable Regulations relating to their
construction, use and operation. There are no developments materially affecting
any such Asset which might curtail the present or future use thereof for the
purpose for which it was acquired. Except pursuant to leases described on
Schedule 4.16, no person other than the Company or the Subsidiaries owns any
vehicles, equipment or other tangible Assets situated on the facilities used by
the Company or any Subsidiary in the Business (other than immaterial items of
personal property owned by the Company's or any Subsidiary's employees) or
necessary to the operation of the Business as now conducted or as now
anticipated to be conducted.
4.15 Real Property.
(A) Title. All real property (including, without limitation,
all interests in and rights to real property) and improvements located thereon
which are owned by the Company are listed on Schedule 4.15 (the "Real
Property"). The Company does not lease any real property. The Company owns
outright, and has good and marketable title to, all of the Real Property, free
and clear of all Liens, except the defects, Liens, adverse claims and other
matters affecting the Company's title to or possession of the Real Property,
expressly set forth in Schedule B to the Commitment for Title Insurance (No.
TO990852 dated January 29, 1999) ("Title Report") attached as part of Schedule
4.15.
(B) Zoning. The Real Property is located within the I-P,
Industrial Park District, and is a preexisting nonconforming use.
(C) Utility Services. The water, electric, gas and sewer
utility services and the septic tank and storm drainage facilities currently
available to the Real Property are adequate for the present use of the Real
Property by the Company in conducting the Business, and, to the Sellers'
Knowledge, there is no condition which will result in the termination of the
present access from the Real Property to such utility services and other
facilities.
(D) Access. The Company has obtained all Licenses and
rights-of-way, including proof-of-dedication, over the Real Property or from
private parties, necessary to ensure vehicular and pedestrian ingress and egress
to and from the Real Property. There are no restrictions on entrance to or
12
exit from the Real Property to adjacent public streets and, to the Sellers'
Knowledge, no conditions which will result in the termination of the present
access from the Real Property to existing highways and roads.
(E) Assessments or Hazards. The Company has received no
notices, oral or written from any governmental body, that the assessed value of
the Real Property has been determined to be greater than that upon which county,
township or school tax was paid for the 1998 tax year applicable to each such
tax, or from any insurance carrier of the Company of fire hazards with respect
to the Real Property.
(F) Eminent Domain. The Company has received no notices, oral
or written, and, to the Sellers' Knowledge, has no reason to believe, that any
governmental body having jurisdiction over the Real Property intends to exercise
the power of eminent domain or a similar power with respect to all or any part
of the Real Property.
(G) No Violations. The Company has received no notices, oral
or written, from any governmental body, and, to the Sellers' Knowledge, has no
reason to believe, that the Real Property or any improvements erected or situate
thereon, or the uses conducted thereon or therein, violate any Regulations of
any governmental body having jurisdiction over the Real Property.
(H) Improvements. Other than as set forth on Schedule 4.15(H),
the improvements located on the Real Property are in good condition and are
structurally sound, and all mechanical and other systems located therein are in
good operating condition, subject to normal wear, and no condition exists
requiring material repairs, alterations or corrections.
4.16 Contracts.
(A) Schedule 4.16 sets forth a complete and accurate list, and
the Company has delivered to the Buyer true, correct and complete copies, of:
(1) all Employee Benefit Plans;
(2) all consents or approvals required under any
Contracts that are necessary for the Shareholders to complete the Acquisition or
to avoid a Default under such Contracts;
(3) all Contracts with any employee or consultant;
(4) all Contracts to sell or supply special orders in
excess of $10,000;
(5) all Contracts to sell goods to the United States
Government;
(6) all representative or sales agency Contracts or
employee leasing arrangements;
13
(7) all Contracts with any customer providing for a
volume refund, retrospective price adjustment, price guarantee or rebate
program;
(8) all commitments by the Company or any Subsidiary
to guarantee the obligations of others in connection with the Business or
commitment by others to guarantee the obligations of the Business;
(9) all equipment leases and all real property
leases;
(10) all mortgages, indentures, note debentures,
bonds, letter of credit agreements, surety agreements, loan agreements or other
commitments for the borrowing or lending of money relating to the Company or any
Subsidiary;
(11) all license, franchise, distributorship or other
agreements;
(12) all commitments or agreements for any capital
expenditure or leasehold improvement in excess of $10,000;
(13) the Company's and each Subsidiary's charter
documents and By-Laws;
(14) all written Contracts and other documents and
summaries of any material oral Contracts (including all amendments, supplements,
modifications or waivers currently in effect) described in this Agreement or in
any Disclosure Schedule; and
(15) any Contract which is material to the operations
of the Business and which is not otherwise required to be disclosed herein.
(B) None of the Company or any Subsidiary are a party to any:
(1) Contract limiting or restraining it from engaging
or competing in any lines or business with any person, firm, corporation or
other entity;
(2) material Contract not otherwise disclosed herein;
or
(3) mortgages, indentures, note debentures, bonds,
letter of credit agreements, surety agreements, loan agreements or other
commitments for the borrowing or lending of money relating to the Company or any
Subsidiary, which contain or impose prepayment penalties on the Company or any
Subsidiary.
(C) All of the Contracts (including all Customer Contracts) to
which the Company or any Subsidiary is party or by which it or any of the Assets
is bound or affected are valid, binding and enforceable in accordance with their
terms, subject to bankruptcy, insolvency, moratorium or similar laws affecting
the rights of creditors generally or equitable principles generally applied. The
Company and each Subsidiary have fulfilled, or taken all action necessary to
enable it to fulfill when due, all of their obligations under each of such
Contracts. All parties to such Contracts have complied in all
14
material respects with the provisions thereof, no party is in Default thereunder
and no notice of any claim of Default has been given to the Company or any
Subsidiary. There are no provisions of, or developments materially affecting,
any such Contract which might prevent the Company or any Subsidiary from
realizing the benefits thereof whether before or after the completion of the
Acquisition. With respect to any of such Contracts that are leases, neither the
Company nor any Subsidiary has received any notice of cancellation or
termination under any option or right reserved to the lessor, or any notice of
Default, thereunder.
(D) Schedule 4.16 sets forth a true and complete list of (i)
all customers whose purchases exceeded 1% of the aggregate net sales of the
Company and all Subsidiaries during the twelve months ended on the Last Year-End
Balance Sheet Date, and (ii) the 20 largest suppliers by dollar volume of
purchases by the Company and all Subsidiaries and the aggregate dollar volume of
purchases by the Company and all Subsidiaries from such suppliers for such
period. None of such customers or suppliers has terminated or, to the Sellers'
Knowledge, intends to terminate or change significantly its relationship with
the Company or the Subsidiaries. Neither the Company nor any Subsidiary has
granted any unusual credit or other sales terms to the customers or others which
is not substantially in accordance with past practice. Except as set forth on
Schedule 4.16, there are no, and during the past two years there have not been
any disputes or controversies involving either, individually, more than $5,000,
or in the aggregate, more than $50,000, between the Company or any Subsidiary
and any customer or supplier. To the Sellers' Knowledge, the Company and all
Subsidiaries enjoy good working relationships under all arrangements and
agreements with their customers and suppliers. To the Sellers' Knowledge,
alternative sources of supply, on substantially similar terms and conditions,
exist for all material goods or services purchased by or supplied to the Company
and all Subsidiaries.
4.17 Employees. Schedule 4.17 sets forth the names and current annual
salary rates or current hourly wages of all present employees of the Company and
each Subsidiary, together with the average number of hours worked per week, the
date of the last salary increase, the date of commencement of employment of each
employee with the Company, each Subsidiary or its predecessor, and a summary of
salary, bonuses and other compensation, if any, paid or payable to each of such
persons for or in respect of that portion of the 1999 calendar year ending on
the Interim Balance Sheet Date. Schedule 4.17 also sets forth the earnings for
each of such employees as reflected on Form W-2 for the 1998 calendar year. No
officer or engineer of the Company or any Subsidiary is bound by a
noncompetition or confidentiality agreement with any person, company or entity
(other than the Company or any Subsidiary). Neither the Company nor any
Subsidiary has any collective bargaining agreements with any labor union or
other representative of employees. No strike, slowdown, picketing or work
stoppage by any union or other group of employees against the Company, any
Subsidiary or the Assets wherever located, and no secondary boycott with respect
to their products, lockout by them of any of their employees or any other
grievance or dispute or other occurrence, event or condition of a similar
character, has occurred or, to the Sellers' Knowledge, been threatened.
4.18 Licenses. Schedule 4.18 sets forth a complete list of all Licenses
used in the operation of the Business or otherwise held by the Company or any
Subsidiary. The Company and each Subsidiary own, possess or lawfully use in the
operation of their Business all Licenses which are necessary to conduct the
Business as now or previously conducted or to the ownership of the Assets, free
and clear of all Liens. Neither the Company nor any Subsidiary is in Default,
nor has it received any notice of any
15
claim of Default, with respect to any such License. Except as otherwise governed
by law, all such Licenses are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification procedures
or to pay any amounts other than routine filing fees and will not be adversely
affected by the completion of the Acquisition. No present or former Shareholder,
director, officer or employee of the Company or any Subsidiary, any affiliates
of any of them, or any other person, firm, corporation or other entity owns or
has any proprietary, financial or other interest (direct or indirect) in any
License which the Company or any Subsidiary owns, possesses or uses.
4.19 Intellectual Property.
(A) No employee of the Company or any Subsidiary is, or, to
the Sellers' Knowledge, is now expected to be, in default under any term of any
employment contract, agreement or arrangement relating to any Intellectual
Property or noncompetition arrangement, or any other Contract or any restrictive
covenant relating to the right of any such officer or employee to be employed by
the Company because of the nature of the business conducted or to be conducted
by the Company or relating to the use of any Intellectual Property of others,
and the continued employment of the Company's officers and employees does not
subject the Company to any liability resulting from such a violation. The
Intellectual Property of the Company was developed entirely by its employees
during the time they were employees only of the Company, and such Intellectual
Property does not include any inventions of the employees made prior to the time
such employees became employees of the Company nor any Intellectual Property of
any previous employer of such employee. Such Intellectual Property of the
Company constitutes "work made for hire" under United States copyright law.
(B) The Company owns or has a valid right to use the
Intellectual Property being used to conduct the business of the Company; and the
conduct of its business as now operated and as now anticipated to be operated
does not and, to the Seller's Knowledge, will not conflict with valid
Intellectual Property rights of others. The Company has not received any
communication alleging that the Company has violated or, by conducting its
business as proposed would violate any of the Intellectual Property rights of
any other person or entity. Except as set forth in Schedule 4.19, the Company
does not have any obligation to compensate any Person for the use of any such
Intellectual Property rights nor has the Company granted to any Person any
license, option or other rights to use in any manner any of the Intellectual
Property of the Company, whether requiring the payment of royalties or not.
(C) All Patents, Copyrights, Trademarks and computer software
used in the Business or owned by the Company are listed in Schedule 4.19.
(D) Except as set forth in Schedule 4.19, the computer
software of the Company included in the Intellectual Property functions as
intended, is in machine-readable form, contains all current revisions of such
software, is the only software used by the Company in the conduct of its
business, and shall accurately process date/time data (including but not limited
to calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, the years 1999 and 2000, and leap-year calculations.
16
4.20 Compliance with Regulations and Court Orders. Neither the Company
nor any Subsidiary is in violation of any Court Order or Regulation, and the
Assets have not been used or operated by the Company or any Subsidiary or any
other person or entity in violation of any Regulation or Court Order. All Court
Orders to which the Company or any Subsidiary is a party or subject are listed
in Schedule 4.20. The Company and each Subsidiary have made all filings or
notifications required to be made by them under any Regulations applicable to
the Company, any Subsidiary, the Business or the Assets. None of the Company,
any Subsidiary nor any officer, employee or agent of, nor any consultant to, the
Company or any Subsidiary has unlawfully offered, paid, or agreed to pay,
directly or indirectly, any money or anything of value to, or for the benefit
of, any individual who is or was a candidate for public office, or an official
or employee of any governmental or regulatory body or authority or an officer or
employee of any client, customer or supplier of the Company or any Subsidiary.
4.21 Claims. Except as set forth in Schedule 4.21, there is no
Litigation pending or, to the Sellers' Knowledge, threatened against the
Company, any Subsidiary, the Business or the Assets. No claim has been asserted
and no event has occurred that might result in Litigation against the Company,
any Subsidiary, the Business or the Assets. To the Sellers' Knowledge, there is
no reasonable basis for any such claim.
4.22 Insurance. Schedule 4.22 contains a true and complete description
of the insurance coverage applicable to the Company, any Subsidiary, the
Business and the Assets for the past three years, including amounts and lines of
coverage, loss experience history by line of coverage for the past three years,
and a description of all claims in excess of $10,000 for the past five years.
All insurance coverage applicable to the Company, any Subsidiary, the Business
and the Assets since January 1, 1994 has been provided by insurance companies
rated "A+" by Best. All insurance coverage applicable to the Company, any
Subsidiary, the Business and the Assets is in full force and effect, is valid,
binding and enforceable in accordance with its terms against the respective
insurers, insures the Company and each Subsidiary in reasonably sufficient
amounts against all risks usually insured against by persons operating similar
businesses or properties in the localities where such businesses or properties
are located and has been issued by insurers of recognized responsibility. There
is no Default under any such coverage nor has there been any failure to give
notice or present any claim under any such coverage in a due and timely fashion.
There are no outstanding unpaid premiums except in the ordinary course of
business and no notice of cancellation or nonrenewal of any such coverage has
been received. Except as disclosed in Schedule 4.22, there are no provisions in
such insurance policies for retroactive or retrospective premium adjustments.
Neither the Company nor any Shareholder knows or has reason to know of the
occurrence of any event which reasonably might form the basis of any claim
against the Company, any Subsidiary, the Business or the Assets or which might
materially increase the insurance premiums payable for any such coverage. All
products liability and general liability insurance policies maintained by the
Company and each Subsidiary since January 1, 1997 have been occurrence policies
and not claims-made policies. There are no outstanding performance bonds
covering or issued for the benefit of the Company or any Subsidiary.
4.23 Pension Plans; Employee Benefit Plans.
17
(A) Disclosure. Schedule 4.23 contains a complete and accurate
list of all Employee Benefit Plans.
(1) The plans marked on Schedule 4.23 as "Qualified
Plans" are the only Employee Benefit Plans that are intended to meet the
requirements of section 401(a) of the Code (a "Qualified Plan"). The Company has
never maintained or contributed to any other Qualified Plan. Each of the
Qualified Plans has been determined by the Internal Revenue Service to be
qualified under section 401(a) of the Code and exempt from tax under section
501(a) of the Code, and each such determination remains in effect and has not
been revoked. Nothing has occurred with respect to the design or operation of
any Qualified Plan that could cause the loss of such qualification or exemption
or the imposition of any liability, lien, penalty, or tax under ERISA or the
Code, and the Qualified Plans have been timely amended to comply with current
law.
(2) The Company does not sponsor, maintain or
contribute to, and has never sponsored, maintained or contributed to, or had any
liability with respect to, a Pension Plan or any employee benefit plan subject
to section 302 of ERISA, section 412 of the Code or Title IV of ERISA. None of
the Employee Benefit Plans is a multiemployer plan (as defined in section 3(37)
of ERISA). The Company does not contribute to, and has never contributed to or
had any other liability with respect to, a multiemployer plan.
(3) With respect to any Employee Benefit Plan that is
an employee welfare benefit plan (within the meaning of section 3(1) of ERISA),
(1) each welfare plan for which contributions are claimed as deductions under
any provision of the Code is in compliance in all material respects with all
applicable requirements pertaining to such deduction, (2) with respect to any
welfare benefit fund (within the meaning of section 419 of the Code) related to
a welfare plan, there is no disqualified benefit (within the meaning of section
4976(b) of the Code) that would result in the imposition of a tax under section
4976(a) of the Code, (3) any Employee Benefit Plan that is a group health plan
(within the meaning of section 4980B(g)(2) of the Code) complies, and in each
and every case has complied, in all material respects with all of the
requirements of section 4980B of the Code, ERISA, Title XXII of the Public
Health Service Act, the applicable provisions of the Social Security Act, the
Health Insurance Portability and Accountability Act of 1996, and other
applicable laws, and (4) no welfare plan provides health or other benefits after
an employee's or former employee's retirement or other termination of employment
except as required by section 4980B of the Code.
(B) Delivery of Disclosed Plans' Documents. With respect to
any Employee Benefit Plans disclosed on Schedule 4.23, true, correct, and
complete copies of all the following documents with respect to each Company
Plan, to the extent applicable, have been delivered to the Buyer: (1) all
documents constituting the Employee Benefit Plan, including but not limited to,
trust agreements, insurance policies, service agreements, and formal and
informal amendments thereto; (2) the three most recently filed Forms 5500 or
5500C/R and any financial statements attached thereto; (3) all IRS determination
letters for the Employee Benefit Plan; (4) the most recent summary plan
description and any amendments or modifications thereof; (5) written
descriptions of all non-written agreements relating to the Employee Benefit
Plan; (6) all reports submitted within the preceding three years by third-party
administrators, actuaries, investment managers, consultants, or other
independent contractors; (7) all notices that were issued within the preceding
three years by the IRS, Department of Labor, or any other
18
governmental entity with respect to the Employee Benefit Plan; (8) all
memoranda, minutes, resolutions and similar documents describing the manner in
which the Employee Benefit Plan is or has been administered or describing
corrections to the administration of a Employee Benefit Plan; and (9) all
employee manuals or handbooks containing personnel or employee relations
policies.
(C) Compliance with Law.
(1) The Company has no liability with respect to any
benefit plan or arrangement other than the Employee Benefit Plans. All Employee
Benefit Plans conform (and have at all times conformed in all material respects)
to the requirements of ERISA, the Code and all applicable laws. Each Employee
Benefit Plan has been maintained in accordance with its documents and with all
applicable provisions of the Code, ERISA and other applicable laws, including
federal and state securities laws.
(2) With respect to each Employee Benefit Plan, there has
occurred no non-exempt "prohibited transaction" (within the meaning of section
4975 of the Code or section 406 of ERISA) or breach of any fiduciary duty
described in section 404 of ERISA that could, if successful, result in any
liability, direct or indirect, for the Company or any stockholder, officer,
director, or employee of the Company.
(3) The Company has paid all amounts that the Company is
required to pay as contributions to the Employee Benefit Plans as of the last
day of the most recent fiscal year of each of the Plans; all benefits accrued
under any funded or unfunded Employee Benefit Plan will have been paid, accrued,
or otherwise adequately reserved in accordance with GAAP as of the Balance Sheet
Date; and all monies withheld from employee paychecks with respect to Employee
Benefit Plans have been transferred to the appropriate Plan in a timely manner
as required by applicable law.
(D) Tax or Civil Liability.
(1) The Company has not incurred any liability for any
excise, income or other taxes or penalties with respect to any Employee Benefit
Plan, and no event has occurred and no circumstance exists or has existed that
could give rise to any such liability.
(2) There are no pending or, to the Sellers' Knowledge,
threatened claims by or on behalf of any Employee Benefit Plans, or by or on
behalf of any participants or beneficiaries of any Employee Benefit Plans or
other persons, alleging any breach of fiduciary duty on the part of the Company
or any of its officers, directors or employees under ERISA or any applicable
law, or claiming benefit payments other than those made in the ordinary
operation of such plans, nor is there any basis for any such claim.
(3) No Employee Benefit Plan is presently under audit or
examination (nor has notice been received of a potential audit or examination)
by the IRS, the Department of Labor, or any other governmental entity, and no
matters are pending with respect to any Employee Benefit Plan under any IRS
program.
19
(4) No Employee Benefit Plan contains any provision or is
subject to any law that would prohibit the transactions contemplated by this
Agreement or that would give rise to any vesting of benefits, severance,
termination, or other payments or liabilities as a result of the transactions
contemplated by this Agreement, and no payments or benefits under any Employee
Benefit Plan or other agreement of the Company will be considered "excess
parachute payments" under section 280G of the Code. Except as disclosed in
Schedule 4.23, the Company has not declared or paid any bonus compensation in
contemplation of the transactions contemplated by this Agreement.
(5) The Company has made no plan or commitment, whether or
not legally binding, to create any additional Employee Benefit Plan or to modify
or change any existing Employee Benefit Plan. No statement, either written or
oral, has been made by the Company to any person with regard to any Employee
Benefit Plan that was not in accordance with the Employee Benefit Plan and that
could have an adverse economic consequence to the Company. All Company plans may
be amended or terminated without penalty by the Company at any time on or after
the Closing.
(E) Claims Liability. There is no action, claim or demand of
any kind (other than routine claims for benefits) which has been brought or, to
the Sellers' Knowledge, threatened, against any Employee Benefit Plan or the
assets thereof, or against any fiduciary of any such Plan.
(F) Fiduciary Appointments and Conduct. There has not occurred
any circumstances by reason of which the Company, any Subsidiary, any
Shareholder or the Buyer may be liable for:
(1) Appointment by the Company or any Subsidiary of any
person or entity as a fiduciary with respect to any Employee Benefit Plan where
such person or entity was legally disqualified from serving in such capacity;
(2) Failure by the Company or any Subsidiary to monitor
the performance of its appointees as fiduciaries with respect to any Employee
Benefit Plan or failure of the Company or any Subsidiary timely to replace any
such fiduciary whose performance failed to meet the standards imposed by ERISA
with respect to fiduciary duties; or
(3) Action taken by a fiduciary with respect to any
Employee Benefit Plan upon the direction of, or with the acquiescence of, the
Company or any Subsidiary.
(G) Classification of Independent Contractors and Retention of
Leased Employees. All persons classified by the Company as independent
contractors satisfy and have at all times satisfied the requirements of
applicable law to be so classified; the Company has fully and accurately
reported their compensation on IRS Forms 1099 when required to do so; and the
Company has no obligations to provide benefits with respect to such persons
under Employee Benefit Plans or otherwise. The Company does not employ and has
not employed any "leased employees" as defined in section 414(n) of the Code.
(H) Controlled Groups. None of the Company or the Subsidiaries
is presently or potentially liable with respect to any employee benefit plan
sponsored by any entity which, together with the Company or any Subsidiary, is a
member of a controlled group of corporations within the meaning
20
of section 414(b) of the Code, a group of trades or businesses under common
control within the meaning of section 414(c) of the Code, or an affiliated
service group within the meaning of section 414(m) of the Code, whether such
plan is a single employer plan, a multiple employer plan or a multiemployer
plan. Liability to which reference is made herein includes, but is not limited
to, liability for the underfunding of such plan, whether or not such plan is
terminated; liability for unamortized funding deficiencies (whether or not
waived); liability to or on account of any multiemployer plan under any
circumstances; penalties, late payment fees or taxes with respect to any plan or
the administration of any plan; or liability with respect to fiduciary conduct
in connection with any such plan.
(I) Reporting and Disclosure. The Company and each Subsidiary
have filed or caused to be filed on a timely basis each and every return,
report, statement, notice, declaration and other documents required by any
governmental agency with respect to each Employee Benefit Plan and all
reporting, disclosure, and notice requirements of ERISA, the Code and other
applicable laws have been fully and completely satisfied with respect to each
Employee Benefit Plan.
(J) Participant and Beneficiary Notifications. The Company and
each Subsidiary have delivered or caused to be delivered to every participant,
beneficiary and other party entitled to such material, all plan descriptions,
returns, reports, schedules, notices, statements and similar materials.
4.24 Transactions with Affiliates. Except as set forth in Schedule
4.24, no Shareholder or director or officer of the Company, any Subsidiary or
any member of his or her immediate family or any other of its, his or her
affiliates, owns or has an ownership interest in any corporation or other entity
that is or was during the last three years a party to, or in any property which
is or was during the last three years the subject of, Contracts, business
arrangements or relationships of any kind with the Company or any Subsidiary.
All disclosed transactions between the Company or any Subsidiary and any
Shareholder or any affiliate have been on substantially the same terms and
conditions as similar transactions between non-affiliated parties and are
properly recorded on the books and records of the Company.
4.25 Environmental Matters.
(A) For the purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 4.25:
(1) "Environment" means soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
(2) "Environmental, Health, and Safety Liabilities" mean
any cost, damages, expense, liability, obligation, or other responsibility
arising from or under any Environmental Law or Occupational Safety and Health
Law and consisting of or relating to:
(a) any environmental, health, or safety
matters or conditions (including on-site or off-site contamination, occupational
safety and health, and regulation of chemical substances or products);
21
(b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, claims,
demands and response, investigative, remedial, or inspection costs and expenses
arising under any Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment,
or other remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law (whether or not such
Cleanup has been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
(d) any other compliance, corrective,
investigative, or remedial measures required under Environmental Law or
Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
(3) "Environmental Law" means any Legal Requirement
that requires or relates to:
(a) advising appropriate authorities,
employees, and the public of intended or actual Releases of pollutants or
hazardous substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource extraction
or construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable
levels the Release of pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the
Release, or minimizing the hazardous characteristics of wastes that are
generated;
(d) assuring that products are designed,
formulated, packaged, and used so that they do not present unreasonable risks to
human health or the Environment when used or disposed of;
(e) protecting resources, species, or
ecological amenities;
(f) reducing to acceptable levels the risks
inherent in the transportation of hazardous substances, pollutants, oil, or
other potentially harmful substances;
(g) cleaning up pollutants that have been
released, preventing the threat of Release, or paying the costs of such clean up
or prevention; or
22
(h) making responsible parties pay private
parties, or groups of them, for damages done to their health or the Environment,
or permitting self-appointed representatives of the public interest to recover
for injuries done to public assets.
(4) "Facilities" means any real property, leaseholds,
or other interests currently or formerly owned or operated by the Company or any
Subsidiary or used in the Business.
(5) "Governmental Body" means any:
(a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign,
or other government;
(c) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise,
any administrative, executive, judicial, legislative, police, regulatory, or
taxing authority or power of any nature.
(6) "Hazardous Activity" means the distribution,
generation, handling, importing, management, manufacturing, processing,
production, refinement, Release, storage, transfer, transportation, treatment,
or use (including any withdrawal or other use of groundwater) of Hazardous
Materials in, on, under, about, or from the Facilities or any part thereof into
the Environment, and any other act, business, operation, or thing that increases
the danger, or risk of danger, or poses an unreasonable risk of harm to persons
or property on or off the Facilities, or that may affect the value of the
Facilities or the Assets.
(7) "Hazardous Materials" means any waste or other
substance that is listed, defined, designated, or classified as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
(8) "Person" means any individual, corporation
(including any non-profit corporation), general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
(9) "Release" means any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
23
(10) "Threat of Release" means a substantial
likelihood of a Release that may require action in order to prevent or mitigate
damage to the Environment that may result from such Release.
(B) Except as set forth in Schedule 4.25, the Company and each
Subsidiary is, and at all times has been, in full compliance with, and has not
been and is not in violation of or liable under, any Environmental Law. The
Company and each Subsidiary have no basis to expect and have not received any
actual or threatened order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or (ii) the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law, or of any actual or
threatened obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or any
other properties or assets (whether real, personal, or mixed) in which the
Company or Subsidiary has had an interest, or with respect to any property or
Facilities at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by the Company, Subsidiary or
any other Person for whose conduct it is or may be held responsible, or from
which Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(C) Except as set forth in Schedule 4.25, there are no pending
or, to the Sellers' Knowledge, threatened claims, Encumbrances, or other
restrictions of any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which the Company or any Subsidiary has or
had an interest.
(D) Except as set forth in Schedule 4.25, the Company and each
Subsidiary have no basis to expect, and neither they nor any other Person for
whose conduct they are or may be held responsible, has received any citation,
directive, inquiry, notice, order, summons, warning, or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company or any Subsidiary had an interest, or with respect to any
property or facility to which Hazardous Materials generated, manufactured,
refined, transferred, imported, used, or processed by the Company, any
Subsidiary, or any other Person for whose conduct it is or may be held
responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.
(E) Except as set forth in Schedule 4.25, there are no
Hazardous Materials present on or in the Environment at the Facilities or at any
geologically or hydrologically adjoining property, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated
into any structure therein or thereon. Neither the Company, any Subsidiary nor
any other Person for whose conduct they are or may be held responsible, nor, to
the Sellers' Knowledge, any other Person, has permitted or conducted, or is
aware of, any Hazardous
24
Activity conducted with respect to the Facilities or any other properties or
assets (whether real, personal, or mixed) in which the Company or any Subsidiary
has or had an interest except in full compliance with all applicable
Environmental Laws.
(F) Except as set forth in Schedule 4.25, there has been no
Release or Threat of Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials were or may
have been generated, manufactured, refined, transferred, produced, imported,
used, or processed from or by the Facilities, or from or by any other properties
and assets (whether real, personal, or mixed) in which the Company or any
Subsidiary has or had an interest, or to the Sellers' Knowledge, any
geologically or hydrologically adjoining property, whether by the Company, any
Subsidiary or any other Person.
(G) The Company has delivered to the Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by the Company or any Subsidiary pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company, any Subsidiary or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
(H) The Company has provided to the Buyer true and correct
copies of all permits, filings and related correspondence with, to or from any
Governmental Body regarding Hazardous Materials, Hazardous Activities, or
Environmental Law.
4.26 Additional Information. Schedule 4.26 contains accurate lists and
summary descriptions of the following:
(A) all accounts receivable of the Company and each Subsidiary
reflected on the Interim Balance Sheet, specifying in each case the account
debtor, the face amount of each receivable, and reconciling the aggregate value
of all accounts receivable as of the Interim Balance Sheet Date to the amount of
such category set forth on the Interim Balance Sheet;
(B) all accounts payable and accrued expenses of the Company
and each Subsidiary reflected on the Interim Balance Sheet, specifying in each
case the payee, the face amount of each payable, the age of each payable
regardless of classification on the balance sheet account, any defenses, setoffs
or counterclaims that may exist with respect thereto, and reconciling the
aggregate value of all accounts payable as of the Interim Balance Sheet Date to
the amount of such category set forth on the Interim Balance Sheet;
(C) the names of all present officers and directors of the
Company and each Subsidiary;
(D) the names and addresses of every bank and other financial
institution in which the Company or any Subsidiary maintains an account (whether
checking, savings or otherwise), lock box or safe deposit box, and the account
numbers and names of persons having signing authority or other access thereto;
25
(E) the names of all persons authorized to borrow money or
incur or guarantee indebtedness on behalf of the Company or any Subsidiary;
(F) the names of all persons holding powers of attorney from
the Company or any Subsidiary and a summary statement of the terms thereof; and
(G) all names under which the Company or any Subsidiary has
conducted any Business or which it has otherwise used during the last five
years.
4.27 No Changes. Except as set forth in Schedule 4.27, since the Latest
Year-End Balance Sheet Date, the Company and each Subsidiary have conducted
their businesses only in the ordinary course consistent with past practice.
Without limiting the generality of the foregoing sentence, except as set forth
in Schedule 4.27, since the Latest Year-End Balance Sheet Date, there has not
been:
(A) any event, condition, or state of facts, which,
individually or in the aggregate, has been or will be materially adverse to the
Company or any Subsidiary
(B) any change in the financial condition, assets,
liabilities, prospects, net worth, earning power or business of the Company or
any Subsidiary, except changes in the ordinary course of business, none of
which, individually or in the aggregate, has been or will be materially adverse
to the Company or any Subsidiary;
(C) any damage, destruction or loss, whether or not covered by
insurance, materially adversely affecting the properties, business or prospects
of the Company or any Subsidiary, or any material deterioration in the operating
condition of the Company's or any Subsidiary's assets;
(D) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of the Company's or any Subsidiary's assets,
tangible or intangible;
(E) any strike, walkout, labor trouble or any other new or
continued event, development or condition of any character which has or could
materially adversely affect the business, properties or prospects of the Company
or any Subsidiary;
(F) any declaration, setting aside or payment of a dividend or
other distribution in respect of any of the capital stock of the Company or any
Subsidiary, or any direct or indirect redemption, purchase or other acquisition
of any capital stock of the Company or any Subsidiary or any rights to purchase
such capital stock or securities convertible into or exchangeable for such
capital stock.
(G) any increase in the salaries or other compensation payable
or to become payable to, or any advance (excluding advances for ordinary
business expenses) or loan to, any officer, director, employee or shareholder of
the Company or any Subsidiary (except normal annual merit increases made in the
ordinary course of business and consistent with past practice), or any increase
in, or any addition to, other benefits (including without limitation any bonus,
profit-sharing, pension or other plan) to which any of its or their officers,
directors, employees or shareholders may be entitled, or any payments to any
pension, retirement, profit-sharing, bonus or similar plan except payments in
the ordinary course of
26
business and consistent with past practice made pursuant to the employee benefit
plans described in Schedule 4.23, or any other payment of any kind to or on
behalf of any such officer, director, employee or shareholder (other than
payment of base compensation and reimbursement for reasonable business expenses
in the ordinary course of business), or any adoption of or change in any
Employee Benefit Plans defined) or labor policy;
(H) any making or authorization of any capital expenditures in
excess of $10,000;
(I) any cancellation or waiver of any right material to the
operation of the Company's or any Subsidiary's business or any cancellation or
waiver of any debts or claims of substantial value or any cancellation or waiver
of any debts or claims against any related party;
(J) any sale, transfer, lease or other disposition of any
assets of the Company or any Subsidiary, except sales of assets in the ordinary
course of business;
(K) any payment, discharge or satisfaction of any liability or
obligation (whether accrued, absolute, contingent or otherwise) by the Company
or any Subsidiary, other than the payment, discharge or satisfaction, in the
ordinary course of business, of liabilities or obligations shown or reflected on
the Latest Year-End Balance Sheet or incurred in the ordinary course of business
since the Latest Year-End Balance Sheet Date;
(L) any adverse change or any threat of any adverse change in
the Company's or any Subsidiary's relations with, or any loss or threat of loss
of, the Company or any Subsidiary suppliers, clients or customers which,
individually or in the aggregate, has been or will be materially adverse to the
Company or any Subsidiary;
(M) any write-offs as uncollectible of any notes or accounts
receivable of the Company or any Subsidiary or write-downs of the value of any
assets or inventory by the Company or any Subsidiary other than in immaterial
amounts or in the ordinary course of business consistent with past practice and
at a rate no greater than during the twelve months ended on the Latest Year-End
Balance Sheet Date;
(N) any change by the Company or any Subsidiary in any method
of accounting or keeping its books of account or accounting practices;
(O) any creation, incurrence, assumption or guarantee by the
Company or any Subsidiary of any obligations or liabilities (whether absolute,
accrued, contingent or otherwise and whether due or to become due), except in
the ordinary course of business, or any creation, incurrence, assumption or
guarantee by the Company or any Subsidiary of any indebtedness for money
borrowed;
(P) any payment, loan or advance of any amount to or in
respect of, or the sale, transfer or lease of any properties or assets (whether
real, personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any "Related Party" (as hereinafter
defined), except for (i) directors' fees and (ii) compensation to the officers
and employees of any Company or any Subsidiary at rates not exceeding the rates
of compensation disclosed on Schedule 4.17
27
hereto (as used herein, a "Related Party" means any Shareholder, any of the
officers or directors of the Company or any Subsidiary, any affiliate, associate
or relative of any Shareholder, the Company or any Subsidiary, or any of their
respective officers or directors, or any business or entity in which any
Shareholder, the Company or any Subsidiary or any affiliate, associate or
relative of any such person has any direct or material indirect interest);
(Q) any disposition of or failure to keep in effect any rights
in, to or for the use of any patent, trademark, service ▇▇▇▇, trade name or
copyright, or any disclosure to any person not an employee or other disposal of
any trade secret, process or know-how; or
(R) any transaction, agreement or event outside the ordinary
course of the Company's or any Subsidiary's business or inconsistent with past
practice.
4.28 Year 2000 Compliance. The Company and each Subsidiary have each
taken all action reasonably necessary to assess the risk that the computer
applications it uses in its business may be unable to accurately process
date/time data (including but not limited to calculating, comparing, and
sequencing) from, into, and between the twentieth and twenty-first centuries,
the years 1999 and 2000, and leap-year calculations. The Company and all
Subsidiaries are in the process of taking all remedial action necessary to avoid
such risk and expect to complete such action on or before September 30, 1999. To
Sellers' Knowledge, after due inquiry, no third party with which the Company or
any Subsidiary has any material contractual relationship has identified any
similar risk in its own computer applications which it is not properly
addressing or which, if not properly addressed, would be likely to have a
material adverse effect on the business, financial condition or operations of
the Company or any Subsidiary.
4.29 Full Disclosure. There are and will be no materially misleading
misstatements in any of the representations and warranties made by the
Shareholders in this Agreement or in any of the certificates and instruments
delivered or to be delivered by the Company, any Subsidiary or any Shareholder
pursuant to this Agreement, including (without limitation) in the Disclosure
Schedules hereto, and the Shareholders have not omitted to state any fact
necessary to make such representations and warranties not materially misleading.
5. Representations and Warranties of the Buyer. The Buyer hereby represents and
warrants to the Company and the Shareholders as follows:
5.1 Organization and Standing. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of New Jersey,
having all requisite corporate power and authority to perform its obligations
under this Agreement.
5.2 Authority and Binding Effect. The Buyer has the corporate power and
authority to execute, deliver and perform this Agreement and has taken all
actions necessary to secure all approvals required in connection therewith. The
execution, delivery and performance of this Agreement by the Buyer has been duly
authorized by all necessary corporation action. This Agreement constitutes the
legal, valid and binding obligation of the Buyer, enforceable against it in
accordance with its terms.
28
5.3 Validity of Contemplated Transactions. Neither the execution and
delivery of this Agreement by the Buyer nor the consummation of the transactions
contemplated hereby by the Buyer will contravene or violate any Regulation or
Court Order which is applicable to the Buyer, or the Certificate of
Incorporation or By-Laws of the Buyer, or will result in a Default under any
Contract to which the Buyer is a party or by which it is otherwise bound.
5.4 Claims. There is no litigation pending or, to the Buyer's
knowledge, threatened against the Buyer that challenges or may have the effect
or preventing, delaying or making illegal, or otherwise interfering with, this
Agreement or any of the Ancillary Documents or any of the transactions
contemplated hereby or thereby.
6. Conduct of Business Pending Closing. Until the Closing Date, except as may be
approved by the Buyer in writing or as otherwise expressly provided in this
Agreement the Shareholders shall cause the Company and each Subsidiary to:
(A) operate the Business only in the ordinary course and in
substantially the same manner as it has been operated in the past and not sell
any of the Assets except for sales from inventory in the ordinary course of
business;
(B) not issue, repurchase or redeem or commit to issue,
repurchase or redeem, any shares of its capital stock, any options or other
rights to acquire such stock or any securities convertible into or exchangeable
for such stock;
(C) not declare or pay any dividend on, or make any other
distribution with respect to, the Shares;
(D) not (1) incur any amount of long or short-term debt for
money borrowed, (2) guarantee or agree to guarantee the obligations of others,
(3) indemnify or agree to indemnify others, or (4) incur any other Liability
other than those incurred in the ordinary course of business consistent with
past practice;
(E) keep in full force and effect insurance covering the
Company, any Subsidiary, the Assets and the Business comparable in amount and
scope of coverage to that now maintained;
(F) maintain the tangible Assets in their present condition
and good working order, ordinary wear and tear excepted;
(G) use its best efforts to retain the Company's and each
Subsidiary's employees and maintain the Business so that such employees will
remain available to the Company and each Subsidiary on and after the Closing
Date and to maintain existing relationships with suppliers, customers and others
having business dealings with the Company or any Subsidiary and otherwise to
preserve the goodwill of the Business so that such relationships and goodwill
will be preserved on and after the Closing Date;
(H) not amend its Certificate of Incorporation or By-Laws;
29
(I) not merge with or into any other corporation or sell,
assign, transfer, pledge or encumber any part of the Assets or agree to do any
of the foregoing;
(J) not enter into any Contract that is material, nor permit
any amendment or termination of any material Contract;
(K) not waive any rights of value or rights that would
otherwise accrue to the Company after the Closing Date;
(L) except for discretionary bonuses of not more than $100,000
in the aggregate, unless consistent with past practice and in the ordinary
course of business, not increase the salaries of, or make any bonus or similar
payments to or establish or modify any Employee Benefit Plans for, any of the
Company's directors, officers or employees or enter into or modify any
employment, consulting or similar Contracts with any such persons or agree to do
any of the foregoing;
(M) continue to maintain all Employee Benefit Plans in
accordance with applicable Regulations, and ensure that no Employee Benefit
Plan, nor any trust related thereto, shall be amended or terminated prior to the
Closing Date, except for any such amendment as may be required to comply with
applicable Regulations;
(N) collect its accounts receivable in the ordinary course of
business consistent with past practice;
(O) pay its accounts payable in the ordinary course of
business consistent with past practice and not fail to pay or discharge when due
any Liabilities;
(P) use its best efforts to help the Shareholders complete the
Acquisition and obtain the satisfaction of the conditions specified in Section
9;
(Q) promptly notify the Buyer of any Default, the threat or
commencement of any Litigation, or any development that occurs before the
Closing that could in any way materially affect the Company, any Subsidiary, the
Assets or the Business;
(R) use its best efforts to obtain any consents or approvals
required under any Contracts (including Customer Contracts) or otherwise that
are necessary to complete the Acquisition or to avoid a Default under any such
Contracts;
(S) comply with all Regulations applicable to it and to the
conduct of its business;
(T) provide the Buyer with such financial and other reports of
the Business as may be reasonably requested;
(U) not make any capital expenditure commitments in excess of
$10,000;
30
(V) (1) give to the Buyer's officers, employees, counsel,
accountants and other representatives free and full access to and the right to
inspect, during normal business hours, all of the Assets, records, Contracts
(including Customer Contracts) and other documents relating to the Business, (2)
permit them to consult with the officers, employees, accountants, counsel and
agents of the Company or any Subsidiary for the purpose of making such
investigation of the Company, any Subsidiary, the Business and the Assets as the
Buyer shall desire to make, provided that such investigation shall not
unreasonably interfere with the Company's or any Subsidiary's business
operations, and (3) furnish to the Buyer all such documents and copies of
documents and records and information with respect to the Company's and each
Subsidiary's affairs and copies of any working papers relating thereto as the
Buyer shall from time to time reasonably request; and
(W) promptly disclose to the Buyer in writing any information
set forth in the Disclosure Schedules hereto which no longer is correct and any
information of the nature of that set forth in the Disclosure Schedules which
arises after the date hereof and which would have been required to be included
in the Disclosure Schedules if such information had obtained on the date hereof.
7. Survival of Representation and Warranties. All of the representations,
warranties, covenants and agreements made by each party in this Agreement or in
any attachment, Exhibit, the Disclosure Schedules, certificate, document or list
delivered by any such party pursuant hereto or in connection with the
Acquisition shall survive the Closing and each party hereto (taking the
Shareholders as a single party) shall be entitled to rely upon the
representations and warranties of the other party set forth in this Agreement
for a period of fifteen (15) months after the Closing Date, except that: (i) all
representations and warranties contained in Section 4.25 hereof shall survive
the Closing until the date on which the Company shall have received written
notification from the New Jersey Department of Environmental Protection
("NJDEP") that the remediation required under Administrative Consent Order dated
10/29/92 and 11/12/92, as amended, is completed, (ii) all representations and
warranties regarding taxes shall survive the Closing for the period of the
applicable statute of limitations plus any extensions or waivers thereof, and
(iii) any such representation or warranty as to which a claim (including without
limitation a contingent or potential claim) shall have been asserted during the
survival period shall continue in effect with respect to such claim until such
claim shall have been finally resolved or settled.
8. Indemnification.
8.1 Indemnification Obligations.
(A) The Shareholders, severally in proportion to their
respective Proportionate Interests (each, an "indemnifying party") shall
indemnify and hold harmless the Buyer, and the Buyer (another "indemnifying
party") shall indemnify and hold harmless the Shareholders, from, against and in
respect of any and all damages, losses, deficiencies, liabilities, costs and
expenses ("Losses") resulting from, relating to or arising out of any (1)
misrepresentation, (2) breach of warranty, or (3) non-fulfillment of any
agreement or covenant on the part of such indemnifying party or parties
hereunder.
(B) Notwithstanding anything herein to the contrary, the
Shareholders, severally in proportion to their respective Proportionate
Interests, shall also indemnify and hold harmless the Buyer
31
and each person who controls the Buyer within the meaning of the Securities Act
of 1933, as amended, and each officer and director of the Buyer and any such
controlling person, at all times after the date hereof from and against:
(1) any claim by any former shareholder of the
Company or any Subsidiary involving the transactions contemplated hereby or any
prior transaction involving any shares of capital stock of the Company, any
Subsidiary or any predecessor corporation; and
(2) without limiting the generality of anything
contained in this Section 8.1, any and all damages, losses, deficiencies,
liabilities, costs and expenses of, or claims against, the Buyer, resulting
from, relating to or arising out of the business, operations or assets of the
Company or any Subsidiary prior to the Closing Date or the actions or omissions
of the Company's or any Subsidiary's officers, directors, shareholders,
employees or agents prior to the Closing Date, (including, without limitation,
any liability relating to, and any claim which arises out of or is based upon,
negligence, strict liability, or any express or implied representation,
warranty, agreement or guarantee made by or on behalf of the Company or any
Subsidiary, or alleged to have been made by or on behalf of the Company or any
Subsidiary, or which is imposed or asserted to be imposed on the Company or any
Subsidiary by operation of law, in connection with any product designed, used,
rented, sold, manufactured, shipped or installed by or on behalf of the Company
or any Subsidiary, or for any service performed by or on behalf of the Company
or any Subsidiary, in any case prior to the Closing Date and irrespective of the
date that any claim, suit or other cause of action related to any of the
foregoing is filed or otherwise instituted against the Company or any
Subsidiary; provided, however, that the foregoing shall not apply to the
Liabilities of the Company disclosed on the Disclosure Schedules or referred to
in Section 4.9(A) through (C)); and
(3) any and all costs, judgments, claims, actions at
law or in equity, interest charges and reasonable attorneys' fees with respect
to any cause of action or proceeding, by any participant or dependent or
beneficiary of any participant, arising out of or by reason of the sponsorship
by the Company or any Subsidiary of any Employee Benefit Plan or Pension Plan
prior to the Closing Date.
(C) Each indemnifying party or parties hereto will indemnify
and hold harmless the indemnified party or parties hereto from, against and in
respect of any and all actions, suits, proceedings, demands, assessments,
judgments, costs (including attorneys' fees) and legal and other expenses
incident to any of the foregoing or to the enforcement of this Section 8.
(D) Except for claims for indemnification relating to
environmental matters for which the Company has been indemnified by Anite
Networks Ltd. (formerly Cray Electronics, Ltd.) ("Anite"), in no event will the
indemnifying party or parties be directly liable (that is, liable for claims not
paid by insurance) for an aggregate amount exceeding one hundred thousand
dollars ($100,000); provided, however, that the Buyer shall be entitled to
indemnification directly from the Shareholders for any and all Losses
indemnified by the Shareholders hereunder (subject to the limitations set forth
in this Section 8.1(D)) before attempting to collect under the insurance policy
identified in Section 8.3; provided further, however, that the Buyer will not be
entitled to indemnification from the Shareholders for any Losses reimbursed
under such insurance policies. In addition, in regard to environmental matters
for
32
which the Company is entitled to be indemnified by Anite, the Buyer shall first
expend reasonable efforts in attempting to collect from Anite before being
entitled to indemnification directly from the Shareholders, and, in any event,
the Buyer shall not be entitled to indemnification from the Shareholders for any
Losses reimbursed by Anite. The aggregate maximum liability of the Shareholders
in respect of environmental matters for which the Company is entitled to be
indemnified by Anite (but the Losses are not indemnified by Anite) shall not
exceed $500,000. In regard to environmental matters for which the Company is not
entitled to be indemnified by Anite, the Buyer will be entitled only to
indemnification from the Shareholders, subject to the limitation of $100,000 set
forth in this Section 8.1(D).
(E) Notwithstanding anything to the contrary in this
Agreement, the Buyer shall not be entitled to indemnification until all Losses
exceed in the aggregate $100,000 (the "Threshhold Amount"); provided, however,
that upon such Losses exceeding the Threshhold Amount, Buyer shall be entitled
to indemnification for the full amount of its Losses, subject to the limitations
set forth in Section 8.1(D) hereof.
8.2 Method of Asserting Claims, Etc. All claims for indemnification
under this Section 8 shall be asserted and resolved as follows:
(A) In the event that any claim or demand for which the
Shareholders would be liable to the Buyer hereunder is asserted against or
sought to be collected by a third party, the Buyer shall promptly notify the
Shareholder Representative of such claim or demand, specifying the nature of
such claim or demand and the amount or the estimated amount thereof to the
extent then feasible (which estimate shall not be conclusive of the final amount
of such claim or demand) (the "Claim Notice"). The Shareholder Representative
shall have 10 days from its receipt of the Claim Notice (the "Notice Period") to
notify the Buyer (1) whether or not the Shareholders dispute their liability to
the Buyer hereunder with respect to such claim or demand, and (2) if they do not
dispute such liability, whether or not they desire, at their sole cost and
expense, to defend the Buyer against such claim or demand; provided, however,
that the Buyer is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading which it shall deem necessary or
appropriate to protect its interests. In the event that the Shareholder
Representative notifies the Buyer within the Notice Period that the Shareholders
do not dispute such liability and desire to defend against such claim or demand,
then except as hereinafter provided, the Shareholder Representative shall have
the right to defend by appropriate proceedings, which proceedings shall be
promptly settled or prosecuted to a final conclusion in such a manner as to
avoid any risk of the Buyer becoming subject to liability for any other matter.
If the Buyer desires to participate in, but not control, any such defense or
settlement it may do so at its sole cost and expense. If, in the reasonable
opinion of the Buyer, any such claim or demand involves an issue or matter which
could have a materially adverse effect on the business, operations, assets,
properties or prospects of the Business or any division of the Buyer or an
affiliate of the Buyer, the Buyer shall have the right to control the defense or
settlement of any such claim or demand, and its reasonable costs and expenses
thereof shall be included as part of the indemnification obligations of the
Buyer hereunder. If the Shareholder Representative disputes the Shareholders'
liability with respect to such claim or demand or elects not to defend against
such claim or demand, whether by not giving timely notice as provided above or
otherwise, then the amount of any such claim or demand, or, if the same be
contested by the Shareholder Representative or by the Buyer (but the Buyer shall
not have any obligation to contest any such claim or demand), then that portion
thereof as to which such defense is
33
unsuccessful, shall be conclusively deemed to be a liability of the Shareholders
hereunder (subject, if the Shareholder Representative has timely disputed
liability, to a determination that the disputed liability is covered by these
indemnification provisions).
(B) In the event that the Buyer should have a claim against
the Shareholders hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the Buyer
shall promptly send a Claim Notice with respect to such claim to the Shareholder
Representative. If the Shareholder Representative does not notify the Buyer
within the Notice Period that he disputes such claim, the amount of such claim
shall be conclusively deemed a liability of the Shareholders hereunder.
(C) All claims for indemnification made by the Shareholders
under this Agreement shall be asserted and resolved under the procedures set
forth above in this Section 8.2 by substituting, as appropriate, "the Buyer" for
"Shareholders" and "Shareholder Representative" and "Shareholders" or
"Shareholder Representative", as appropriate, for "the Buyer."
(D) Nothing herein shall be deemed to prevent any indemnified
party from making a claim hereunder for potential or contingent claims or
demands provided the Claim Notice sets forth the specific basis for any such
potential or contingent claim or demand and the estimated amount thereof to the
extent then feasible and the indemnified party has reasonable grounds to believe
that such a claim or demand will be made.
8.3 Insurance. Except for claims for indemnification relating to
representations and warranties regarding environmental matters, the
Shareholders' obligations pursuant to Section 8.1 hereof shall be secured in
part by an insurance policy, in form and substance satisfactory to the Buyer, in
its sole discretion, issued by Federal Insurance Company, a division of Chubb &
Son (the "Issuer") in the amount of four million dollars ($4,000,000) (the
"Policy"). The Company shall be the sole named insured under the Policy. Prior
to the Closing hereunder, the Shareholders shall pay in full all premiums
charged by the Issuer for the Policy.
8.4 Payment.
(A) In the event that any party is required to make any payment
under this Section 8, such party shall promptly pay, or cause to be paid to, the
indemnified party the amount so determined. If there should be a dispute as to
the amount or manner of determination of any indemnity obligation owed under
this Section 8, the party from which indemnification is due shall nevertheless
pay when due such portion, if any, of the obligation as shall not be subject to
dispute. The difference, if any, between the amount of the obligation ultimately
determined as properly payable under this Section 8 and the portion, if any,
theretofore paid shall bear interest at the lowest rate of interest generally
charged from time to time by Mellon Bank, N.A. and publicly announced by such
bank as its so-called "prime rate." Upon the payment in full of any claim,
either by setoff or otherwise, the party or entity making payment shall be
subrogated to the rights of the indemnified party against any person, firm,
corporation or other entity with respect to the subject matter of such claim.
34
(B) Subject to the limitations set forth in Section 8.1(D) hereof
and the provisions of Section 11.10 hereof, any items as to which the Buyer is
entitled to payment under this Section 8 shall be paid to the Buyer from the
Escrow Fund held by the Escrow Agent, to the extent that funds held under the
Escrow Agreement are sufficient to pay such items. If the funds held under the
Escrow Agreement are insufficient to pay any such item in full, the payment of
such item as to which the Buyer is entitled to payment under this Section 8 and
which is not able to be paid from the Escrow Fund shall be the several
obligation of the Shareholders and the Shareholders shall make full and prompt
payment of any and all such items to the Buyer.
8.5 Shareholder Representative.
(A) The Shareholders irrevocably make, constitute and appoint
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ as their agent (the "Shareholder Representative") and
authorize and empower him to fulfill the role of Shareholder Representative
hereunder for a period of seven (7) years after the Closing Date. If a
Shareholder Representative should resign, die or become incapacitated, its or
his successor shall be appointed within 30 days of his resignation, death or
incapacity by a majority of the Shareholders, and such successor either shall be
a Shareholder or shall otherwise be acceptable to the Buyer. The choice of a
successor Shareholder Representative appointed in any manner permitted above
shall be final and binding upon all of the Shareholders. The decisions and
actions of any successor Shareholder Representative shall be, for all purposes,
those of a Shareholder Representative as if originally named herein.
(B) Each Shareholder has made, constituted and appointed and by the
execution of this Agreement hereby irrevocably makes, constitutes and appoints
the Shareholder Representative as such person's true and lawful attorney in fact
and agent, for such person and in such person's name, (1) to receive all Claim
Notices and all other notices and communications directed to such Shareholder
under this Agreement and to take any action (or to determine to take no action)
with respect thereto as he may deem appropriate as effectively as such
Shareholder could act for himself or herself, including without limitation, the
settlement or compromise of any dispute or controversy, (2) to execute and
deliver all instruments and documents of every kind incident to the foregoing,
including, but not limited to, the certificates identified in Section 9.4
hereof, and (3) to represent each such Shareholder's interests in any
arbitration or other judicial or extrajudicial proceeding arising out of or in
connection with this Agreement, to all intents and purposes and with the same
effect as such Shareholder could do personally, and each such Shareholder hereby
ratifies and confirms as his or her own act, all that the Shareholder
Representative shall do or cause to be done pursuant to the provisions hereof.
Each Shareholder hereby declares that the foregoing powers are coupled with an
interest and shall be irrevocable. All Claim Notices and all other notices and
communications directed to Shareholders under this Agreement shall be given to
the Shareholder Representative.
(C) The death or incapacity of any Shareholder shall not terminate
the authority and agency of the Shareholder Representative.
(D) The Shareholders hereby agree to indemnify the Shareholder
Representative and to hold it or him harmless against any loss, liability or
expense incurred without grossly negligent conduct or bad faith on the part of
the Shareholder Representative and arising out of or in connection
35
with his duties as Shareholder Representative, including the costs and expenses
incurred by such Shareholder Representative in defending against any claim of
liability in connection herewith.
8.6 Service of Process, Consent to Jurisdiction, Arbitration, Etc.
(A) Each Shareholder irrevocably consents to the service of
any process, pleading, notices or other papers by the mailing of copies thereof
by registered, certified or first class mail, postage prepaid, to the
Shareholder Representative at such person's address set forth herein, or by any
other method provided or permitted under New Jersey law.
(B) Each Shareholder irrevocably and unconditionally consents
to the Buyer's right to enforce any arbitration award or judgment confirming
such award, including a default judgment, in any court, including courts located
outside of the United States. The Buyer shall be entitled to attorney's fees and
expenses in relation to any such action to enforce any arbitration award or
obtain or enforce any judgment (including, but not limited to, a default
judgment).
(C) Except as set forth in Section 2.3(B) hereof, all disputes
arising out of or in connection with this Agreement, including any question
regarding its existence, validity or termination, which cannot be resolved
amicably between the parties, shall be resolved exclusively through binding
arbitration by a single arbitrator, who shall be a recognized expert in contract
interpretation and commercial transaction, to be conducted in London, England
under the rules of the London Court of International Arbitration, provided that
the arbitrator is mutually acceptable to the parties. In the event that the
parties are unable to agree upon a single arbitrator, the arbitration shall be
submitted to a panel of three arbitrators, who shall be selected as follows:
each party shall each appoint one arbitrator, and the two arbitrators selected
by the parties shall select the third arbitrator, who shall be an impartial
person. Should any of the arbitrators appointed die, resign, refuse or become
unable to act before a decision is given, the vacancy shall be filled by the
method set forth in this Section 8.6(C) for the original appointment.
Notwithstanding any provision in the rules of the London Court of International
Arbitration to the contrary, in rendering a decision hereunder, the
arbitrator(s) shall strictly enforce the terms of this Agreement. The arbitrator
shall apply New Jersey law.
(D) Each Shareholder irrevocably and unconditionally agrees
and consents that in any arbitration or other judicial or extrajudicial
proceeding arising out of or in connection with this Agreement, any argument,
claim, demand, defense, excuse, prayer for relief, or other legal position that
is or may be asserted or maintained by any Shareholder, shall be asserted or
maintained only by the Shareholder Representative, and, if not asserted or
maintained by the Shareholder Representative, shall be irrevocably waived by
each Shareholder.
9. Conditions Precedent to Obligations of the Buyer. Subject to waiver as set
forth in Section 11.9, the obligations of the Buyer under this Agreement are
subject to the fulfillment prior to or at the Closing of each of the following
conditions:
9.1 Representations True at Closing. The representations and warranties
of the Shareholders set forth in Section 4 shall be true and correct on the
Closing Date with the same effect if made at that
36
time, without giving effect to any supplement or revision to the Disclosure
Schedule made after the date hereof.
9.2 Performance by the Shareholders. The Shareholders shall have
performed and satisfied all agreements and conditions which each of them is
required by this Agreement to perform or satisfy prior to or on the Closing
Date.
9.3 Balance Sheet. The Company shall have delivered a balance sheet,
prepared in accordance with GAAP, using the same methods and criteria employed
by the Company in connection with its preparation of its Latest Year-End Balance
Sheet to the extent such methods are consistent with GAAP, which presents fairly
and accurately the Company's financial position as of a date prior to and as
close as practicable to the Closing Date, which date in no event shall be more
than seven (7) days prior to the Closing Date.
9.4 Certificates. The Buyer shall have received certificates from the
Shareholder Representative dated the Closing Date certifying in such detail as
the Buyer may reasonably request that each of the conditions described in
Sections 9.1, 9.2, and 9.3 has been fulfilled.
9.5 Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the
Shareholders shall be reasonably satisfactory to the Buyer.
9.6 Opinion of Counsel. The Buyer shall have received the written
opinion dated the Closing Date of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel for the
Shareholders, in form and substance reasonably satisfactory to the Buyer.
9.7 Litigation Affecting Closing. No Court Order shall have been issued
or entered which would be violated by the completion of the Acquisition. No
person who or which is not a party to this Agreement shall have commenced or
threatened to commence any Litigation seeking to restrain or prohibit, or to
obtain substantial damages in connection with, this Agreement or the
transactions contemplated by this Agreement and no Litigation shall be pending
against the Company or any Subsidiary.
9.8 No Claim Regarding Share Ownership or Sale Proceeds. No person who
or which is not a party to this Agreement shall have made or threatened to make
any claim that such person is the holder or the beneficial owner of, or has the
right to acquire or to obtain beneficial ownership of, any Shares, or that such
person is entitled to all or any portion of the Purchase Price payable for the
Shares.
9.9 Regulatory Compliance and Approvals. The Buyer shall be satisfied
that all approvals required under any Regulations to carry out the Acquisition
shall have been obtained and that the parties shall have complied with all
Regulations applicable to the Acquisition.
9.10 Consents. The Shareholders or the Company shall have delivered to
the Buyer all consents required to be obtained in connection with the
Acquisition in order to avoid a Default under any Contract (including any
Customer Contract) to or by which the Company or any Subsidiary is a
37
party or may be bound. Each of the foregoing must be free from burdensome
restrictions and conditions not applicable to the Company or any Subsidiary
prior to the date of this Agreement.
9.11 Due Diligence Review. The Buyer shall have completed and be
satisfied with its confidential and nondisclosed review of the business,
management, finances and accounts receivable of the Company and each Subsidiary.
9.12 Escrow Agreement. The Buyer, the Shareholder Representative, and
the Escrow Agent shall have entered into the Escrow Agreement.
9.13 Consents and Approvals. The Shareholders and the Company shall
have obtained all consents and approvals necessary to complete the Acquisition
and related transactions.
9.14 Ancillary Documents. Each entity other than the Buyer which is a
party to any of the Ancillary Documents shall have executed and delivered such
of the Ancillary Documents as it is a party thereto.
9.15 Employment Agreement. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ shall have entered into
an Employment Agreement substantially in the form attached hereto as Exhibit C.
9.16 Environmental Matters. Prior to the Closing, the Company shall
apply for an amendment to the existing Remediation Agreement with NJDEP for the
Company's facility on Powerville Road in Boonton. In any such Remediation
Agreement, the Company shall pay for and be identified as the sole party
responsible for: 1) compliance with the Remediation Agreement after Closing; and
2) obtaining ISRA Clearance after the Closing. In addition, the Company shall
maintain the financial assurance or remediation funding source required by NJDEP
under the Remediation Agreement.
9.17 Insurance. The Shareholders shall have paid in full all premiums
charged by the Issuer for the Policy.
9.18 Loan Notes. The Company shall have paid in full the Loan Notes.
10. Conditions Precedent to Obligations of the Shareholders. Subject to waiver
as set forth in Section 11.6, the obligations of the Shareholders under this
Agreement are subject to the fulfillment prior to or at the Closing of each of
the following conditions:
10.1 Buyer Representations True at Closing. The representations and
warranties of the Buyer set forth in Section 5 shall be true and correct on the
Closing Date with the same effect as if made at that time.
10.2 Performance by the Buyer. The Buyer shall have performed and
satisfied all agreements and conditions which it is required by this Agreement
to perform or satisfy prior to or on the Closing Date.
38
10.3 Officer's Certificate. The Shareholders shall have received a
certificate from an appropriate officer of the Buyer dated the Closing Date
certifying in such detail as the Shareholders may reasonably request that each
of the conditions described in Sections 10.1 and 10.2 has been fulfilled.
10.4 Incumbency Certificate. The Shareholders shall have received a
certificate of the Secretary or an Assistant Secretary of the Buyer dated the
Closing Date certifying to the incumbency of the officers of the Buyer signing
for it and as to the authenticity of their signatures.
10.5 Form and Content of Documents. The form and content of all
documents, certificates and other instruments to be delivered by the Buyer shall
be reasonably satisfactory to the Shareholders.
10.6 Opinion of Counsel. The Shareholders shall have received the
written opinion dated the Closing Date of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel
for the Buyer, in form and substance reasonably satisfactory to the
Shareholders.
10.7 Litigation Affecting Closing. No Court Order shall have been
issued or entered which would be violated by the completion of the Acquisition.
No person who or which is not a party to this Agreement shall have commenced or
threatened to commence any Litigation seeking to restrain or prohibit, or to
obtain substantial damages in connection with, this Agreement or the
transactions contemplated by this Agreement.
10.8 Regulatory Compliance and Approval. The Shareholders shall be
satisfied that all approvals required under any Regulations to carry out the
Acquisition shall have been obtained and that the parties have complied with all
Regulations applicable to the Acquisition.
10.9 Ancillary Documents. The Buyer shall have executed and delivered
each of the Ancillary Documents to which it is a party.
11. Miscellaneous.
11.1 Buyer's Post-Closing Covenants.
(A) The Buyer covenants to cause the Company to maintain and
keep in effect for a period of three (3) years after the Closing Date the
Company's 401(k) and Profit Sharing Plan upon such terms as are in effect on the
Closing Date; provided, however, that the Company's discretionary contribution
for each of such years shall not exceed ten percent (10%) of the total
compensation paid to participants.
(B) The Buyer covenants to cause the Company to retain and
operate its business under the name RFL Electronics Inc. for a period of three
(3) years after the Closing Date.
11.2 Payment of Expenses. Each of the Shareholders and the Buyer will
pay all legal, accounting and other fees and expenses which such party incurs in
connection with this Agreement and the transactions contemplated hereby, and
none of the expenses of the Shareholders shall be paid by the Company or any
Subsidiary or out of any of the Assets. However, if this Agreement is terminated
39
pursuant to Section 11.3 or if the failure to satisfy a condition of Closing
arises out of the breach, existing at the time of the execution of this
Agreement, of a representation or warranty contained in this Agreement, the
party terminating this Agreement shall be entitled to receive from the breaching
party or parties the expenses of the terminating party incurred between the date
of this Agreement and the date of termination.
11.3 Termination by Mutual Consent. This Agreement may be terminated at
any time on or prior to the Closing Date by mutual consent of the Shareholders
and the Buyer.
11.4 Termination for Breach. The Buyer may terminate its obligations
under this Agreement at any time prior to the Closing Date if the Shareholders
or the Company shall have breached any of their representations, warranties or
other obligations under this Agreement in any material respect. The Shareholders
may likewise terminate their obligations under this Agreement at any time prior
to the Closing Date if the Buyer shall have breached any of its representations,
warranties or other obligations under this Agreement in any material respect.
Such termination may be effected by written notice from either the Buyer or the
Shareholders, as appropriate, citing the reasons for termination and shall not
subject the terminating party to any liability for any valid termination.
11.5 Brokers' and Finders' Fees. The Shareholders as a group and the
Buyer each to the other represents and warrants that all negotiations relative
to this Agreement have been carried on by them directly without the intervention
of any person, firm, corporation or other entity who or which may be entitled to
any brokerage fee or other commission in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby, except
for EGL Holdings, Inc. (in the case of the Shareholders) and Acquest
International L.P. (in the case of the Buyer). The Shareholders as a group and
the Buyer shall indemnify and hold the Buyer or any affiliate of it harmless
against any and all claims, losses, liabilities or expenses which may be
asserted against any of them as a result of any dealings, arrangements or
agreements by the Shareholders with EGL Holdings, Inc. or any other such person,
firm, corporation or other entity. The Buyer shall indemnify and hold the
Shareholders or any affiliate of them harmless against any and all claims,
losses, liabilities or expenses which may be asserted against any of them as a
result of any dealings, arrangements or agreements by the Buyer with Acquest
International L.P. or any other such person, firm, corporation or other entity.
11.6 Assignment and Binding Effect. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other parties. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the heirs, executors, legal representatives, successors and
assigns of the Shareholders and by the successors and assigns of the Buyer.
11.7 Waiver. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
executed by such party.
11.8 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally to the address set forth
below (to the attention of the person identified below) or sent by telegram or
by registered or certified mail, postage prepaid, as follows:
40
If to Buyer, to:
SL Industries, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ -- ▇▇▇▇▇ ▇-▇▇▇
▇▇. ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
With required copies to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
If to Shareholders:
to their addresses set forth on Exhibit A hereto
With required copies to:
the Shareholder Representative at his or its address set forth
on Exhibit A hereto and:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
or to such other address as the addressee may have specified in a notice duly
given to the sender and to counsel as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
given as of the date so delivered or telegraphed or, if mailed, three business
days after the date so mailed.
11.9 New Jersey Law to Govern. This Agreement shall be governed by and
interpreted and enforced in accordance with the substantive laws of New Jersey.
11.10 Remedies Not Exclusive. Nothing in this Agreement shall be deemed
to limit or restrict in any manner other rights or remedies that any party may
have against any other party at law, in equity or otherwise.
11.11 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and the Company and their heirs, executors, legal
representatives, successors and assigns, and they shall not be construed as
conferring and are not intended to confer any rights on any other persons.
41
11.12 Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
11.13 Contents of Agreement. This Agreement, together with any
documents referred to herein, sets forth the entire agreement of the parties
hereto with respect to the transactions contemplated hereby. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto,
and no claimed amendment, modification, termination or waiver shall be binding
unless in writing and signed by the party against whom or which such claimed
amendment, modification, termination or waiver is sought to be enforced.
11.14 Section Headings and Gender. All section headings and the use of
a particular gender are for convenience only and shall in no way modify or
restrict any of the terms or provisions hereof. Any reference in this Agreement
to a Section, Exhibit or Schedule shall be deemed to be a reference to a
Section, Exhibit or Schedule of this Agreement unless the context otherwise
expressly requires.
11.15 Disclosure Schedule and Exhibits. All attachments, Exhibits and
Disclosure Schedules referred to herein are intended to be and hereby are
specifically made a part of this Agreement. An item disclosed in a Disclosure
Schedule in response to one Section of this Agreement shall not be deemed
disclosed in response to any other Section unless otherwise specifically
provided in this Agreement.
11.16 Cooperation. Subject to the provisions hereof, the parties hereto
shall use their best efforts to take, or cause to be taken, such action, to
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments and to do, or cause to be done, all things necessary,
proper or advisable under the provisions of this Agreement and under applicable
law to consummate and make effective the transactions contemplated by this
Agreement.
11.17 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
11.18 Counterparts. This Agreement may be executed in two or more
counterparts, each of which is an original and all of which together shall be
deemed to be one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together shall have been executed and
delivered by all of the parties. It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts.
42
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
Witnesses: THE SHAREHOLDERS
Berrylands Nominees, Ltd.
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Name:
Title:
Close Securities Limited
_______________________ /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: Managing Director
The ▇▇▇▇▇ ▇▇▇▇ Pension Trust
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Name:
Title:
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Katy Arthur
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ Brain and ▇▇▇▇▇ ▇▇▇▇▇▇▇, as
Trustees of ▇▇▇▇▇ Brain's Children's Trust
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ Brain and ▇▇▇▇▇ ▇▇▇▇▇▇▇, as
Trustees of ▇▇▇▇▇ Brain's Grandchildren's Trust
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Alsion Brain
43
_______________________ /s/ ▇▇▇▇▇ Brain
----------------------------------------
▇▇▇▇▇ Brain
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ Broad
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Finoa M. E. ▇▇▇▇▇▇▇ as Custodian for
Guy W. E. ▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Fiona M. E. ▇▇▇▇▇▇▇ as Custodian
for ▇▇▇▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Fiona M. E. ▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Grant ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
Nandraney Devi Haggith
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
44
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇ ▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ Spurway
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇ ▇▇▇▇▇ Tough
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇ Brain, under power of attorney
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
-----------------------------------------------
Yi-▇▇▇▇ ▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
45
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorny
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
------------------------------------------------
▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇, III
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
_______________________ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, under power of attorney
-------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇ INDUSTRIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President and Chief Executive Officer
46