STOCK PURCHASE AGREEMENT
BY AND AMONG
BCAM INTERNATIONAL, INC.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
AND
▇▇▇▇▇ ▇▇▇▇▇▇
TABLE OF CONTENTS
ARTICLE 1 PURCHASE AND SALE OF SHARES. . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale of Sellers Shares. . . . . . . . . . . . . . . . . 1
ARTICLE 2 PURCHASE PRICE AND TERMS OF PAYMENT. . . . . . . . . . . . . . . 1
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Cash Purchase Price Adjustment - Inventory . . . . . . . . . . . . . 2
2.3 Cash Purchase Price Adjustment - Taxes . . . . . . . . . . . . . . . 3
ARTICLE 3 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4 OBLIGATIONS AT CLOSING . . . . . . . . . . . . . . . . . . . . . 4
4.1 Obligations of Shareholders at Closing . . . . . . . . . . . . . . . 4
4.2 Obligations of Purchaser at Closing. . . . . . . . . . . . . . . . . 5
4.3 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.4 Full Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS . . . . . . . . . 6
5.1 Organization and Good Standing of Seller . . . . . . . . . . . . . . 6
5.2 Capacity to Execute Agreement and Enforceability . . . . . . . . . . 7
5.3 Effect of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 Capitalization and Ownership of Capital Stock. . . . . . . . . . . . 7
5.5 Government and Other Consents. . . . . . . . . . . . . . . . . . . . 7
5.6 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 No Subsidiaries or Investments . . . . . . . . . . . . . . . . . . . 8
5.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 8
5.9 Title to Properties; Encumbrances. . . . . . . . . . . . . . . . . . 9
5.10 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.11 Business Practices . . . . . . . . . . . . . . . . . . . . . . . . .10
5.12 Officers, Directors and Key Employees. . . . . . . . . . . . . . . .10
5.13 Employment Arrangements. . . . . . . . . . . . . . . . . . . . . . .10
5.14 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . .10
5.15 Contracts and Liabilities. . . . . . . . . . . . . . . . . . . . . .11
5.16 Operation of Drew. . . . . . . . . . . . . . . . . . . . . . . . . .13
5.17 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . .15
5.18 Related-Party Transactions . . . . . . . . . . . . . . . . . . . . .15
5.19 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . .16
5.20 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
5.21 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . .17
5.22 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . .18
5.23 Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . . .19
5.24 Permits, Licenses, Compliance with Laws. . . . . . . . . . . . . . .19
5.25 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
i
5.26 Consigned Merchandise. . . . . . . . . . . . . . . . . . . . . . . .20
5.27 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . .20
5.28 Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
5.29 Product Liability. . . . . . . . . . . . . . . . . . . . . . . . . .20
5.30 Banks, Safe Deposit Boxes; Powers of Attorney. . . . . . . . . . . .20
5.31 Material Information; Full Disclosure. . . . . . . . . . . . . . . .21
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER. . . . . . . . . . .21
6.1 Organization and Good Standing of Purchaser. . . . . . . . . . . . .21
6.2 Authorization of Agreement and Enforceability. . . . . . . . . . . .21
6.3 Effect of Agreement. . . . . . . . . . . . . . . . . . . . . . . . .21
6.4 Government and Other Consents. . . . . . . . . . . . . . . . . . . .22
6.5 Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.6 Material Information; Full Disclosure. . . . . . . . . . . . . . . .22
6.7 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
6.8 ▇▇▇▇▇▇▇▇ Common Shares . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE 7 COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . .23
7.1 Conduct of the Business Prior to Closing . . . . . . . . . . . . . .23
7.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
7.3 Non Union Pension Plan . . . . . . . . . . . . . . . . . . . . . . .27
7.4 Drew's 1996 Financial Statements . . . . . . . . . . . . . . . . . .27
7.5 Covenant Relating to Books and Records . . . . . . . . . . . . . . .27
ARTICLE 8 CONDITION PRECEDENT TO CLOSING . . . . . . . . . . . . . . . . .28
8.1 Conditions Precedent to Purchaser's Obligations. . . . . . . . . . .28
8.2 Conditions Precedent to the Selling Shareholders' Obligations. . . .29
ARTICLE 9 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . .30
9.1 Indemnification by Shareholders. . . . . . . . . . . . . . . . . . .30
9.2 Indemnification by Purchaser . . . . . . . . . . . . . . . . . . . .31
9.3 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . .31
9.4 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
9.5 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE 10 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.2 Sales, Transfer and Documentary Taxes, etc . . . . . . . . . . . . .33
10.3 Survival of Representations and Warranties . . . . . . . . . . . . .33
10.4 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . .33
10.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
ii
10.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
10.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
10.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
10.13 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . .35
10.14 No Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . .35
10.15 Construction of Agreement. . . . . . . . . . . . . . . . . . . . . .35
iii
STOCK PURCHASE AGREEMENT
AGREEMENT ("Agreement"), made as of the 20th day of March, 1997, by and
among BCAM INTERNATIONAL, INC., ("Purchaser") a New York corporation with its
principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
("Purchaser"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), residing at ▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ ("Shyjka" and together with ▇▇▇▇▇▇▇▇, the
"Shareholders" or "Selling Shareholders") residing at ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇. Purchaser and Shareholders are sometimes referred to
collectively herein as the "Parties" and individually as a "Party."
WITNESSETH:
WHEREAS, each of the Shareholders is the record and beneficial owner of
eight hundred fifty-four and 91445/100000 (854.91445) shares of the Common
Stock, without par value (all such one thousand seven hundred nine and
82890/100000 (1,709.82890) shares hereafter called the "Sellers Shares") of DREW
SHOE CORPORATION, an Ohio corporation ("Drew" or the "Corporation"), which
shares constitute all of the issued and outstanding shares of capital stock of
Drew; and
WHEREAS, Purchaser desires to purchase the Sellers Shares from the
Shareholders and the Shareholders desire to sell Sellers Shares to Purchaser,
upon the terms and conditions set forth in this Agreement, so that, following
consummation of the transaction contemplated hereby, Purchaser shall be the
record and beneficial owner of the Sellers Shares, which constitute all of the
issued and outstanding shares of capital stock of Drew.
NOW, THEREFORE, in consideration of the premises and of the representations
and warranties, covenants and agreements hereinafter contained, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SELLERS SHARES
1.1 Purchase and Sale of Shares. Subject to and upon the terms and
conditions set forth in this Agreement at the Closing (as hereinafter defined),
each of the Shareholders shall sell, assign, transfer and deliver the Sellers
Shares and all right, title and interest therein to Purchaser free and clear of
all liens, claims, encumbrances and restrictions of any kind, and Purchaser
shall purchase the Sellers Shares from the Shareholders.
ARTICLE 2
PURCHASE PRICE AND TERMS OF PAYMENT
2.1 Purchase Price. In consideration of the sale, assignment, transfer and
delivery of the Sellers Shares by the Shareholders and all right, title and
interest therein to Purchaser, and in reliance upon the representations,
warranties, covenants and agreements made herein by the Shareholders to
Purchaser, Purchaser agrees to pay Shareholders at Closing the purchase price
("Purchase Price") of Four Million Six Hundred Eighty-Four Thousand ($4,684,000)
Dollars, as follows:
(a) to deliver to Shareholders the sum of Four Million Three Hundred
Thousand and 00/100 ($4,300,000.00) Dollars ("Cash Purchase Price") by wire
transfer or good certified check drawn on New York Clearing House funds, and
(b) to deliver to ▇▇▇▇▇▇▇▇ the additional sum of Three Hundred Thousand
($300,000) Dollars in the form of no par value common stock ("▇▇▇▇▇▇▇▇ Common
Shares") of the Purchaser. The number of ▇▇▇▇▇▇▇▇ Common Shares to be delivered
shall be determined by dividing into Three Hundred Thousand ($300,000) Dollars
the average of the closing bid and asked prices of the Purchaser's common stock
in the over-the-counter market for the ten trading days preceding the Closing.
(c) to deliver to each of the Shareholders a promissory note (collectively
the "Note") in the face amount of Forty-Two Thousand ($42,000) Dollars) (total
Eight-Four Thousand ($84,000) Dollars) in the form annexed hereto as Exhibit A.
2.2 Cash Purchase Price Adjustment - Inventory.
(a) The Cash Purchase Price shall be adjusted at Closing ("Inventory
Adjustment") to reflect the difference between:
(i) the pre-audit inventory (exclusive of any inventory valuation reserve
or adjustments reflecting physical inventories taken at certain retail stores
prior to December, 1996) on Drew's books as of December 31, 1996 determined on a
basis consistently applied throughout the calendar year 1996; and
(ii) the extended physical inventory (exclusive of any inventory valuation
reserve except as deemed required by Deloitte & Touche LLP) at December 31, 1996
as audited by Deloitte & Touche LLP, Drew's independent auditors, and determined
on a basis consistent with prior years and methodology applied throughout 1996.
(b)1. If the inventory determined in (ii) above is less than the inventory
determined in (i) above by less than $500,000, then the purchase price shall be
adjusted upward by fifty percent of the difference.
2. If the inventory as determined in (ii) above exceeds the inventory as
determined in (i) above, the purchase price shall be adjusted upward by $250,000
plus fifty percent of the positive difference in the two inventory values. If
the inventory as determined in (i) above exceeds the inventory as determined in
(ii) above by more than $500,000 but less than $1,000,000, then the purchase
price shall be adjusted downward by fifty percent of the difference. To the
extent that the difference exceeds $1,000,000, the purchase price shall be
adjusted downward by 100% of the difference in excess of $1,000,000. This
adjustment is in addition to the fifty percent adjustment for the difference
between $500,000 and $1,000,000.
2
(c) Any adjustment to the Cash Purchase Price shall be equally divided
between ▇▇▇▇▇▇▇▇ and Shyjka.
2.3 Cash Purchase Price Adjustment - Taxes.
(a) The Cash Purchase Price shall be adjusted at such time after the
Closing as Drew's December 31, 1996 financial statement audit is complete and
Drew's accountants, Deloitte & Touche LLP, have prepared Drew's federal and
state income tax returns for 1996, including the preparation of federal tax
forms K-1 for the Shareholders. The amount of income tax liability attributable
to the Shareholders from these tax returns shall be calculated pursuant to
Section 7.1(d). This income tax liability shall be compared to the cumulative
amounts previously distributed, with respect to 1996 taxable income, in
accordance with Section 7.1(d). If this income tax liability exceeds the
aggregate amount previously distributed to the Shareholders with respect to 1996
taxable income, then the Purchase Price shall be increased by the difference. If
this income tax liability is less than the aggregate amount previously
distributed to the Shareholders with respect to 1996 taxable income, then the
Purchase Price shall be reduced by the difference. The adjustment required by
this Section 2.1(c) shall be paid by Purchaser to the Shareholders, or by the
Shareholders to Purchaser, within thirty (30) days after the receipt of written
notification from Drew of such final determination. The Vice President - Finance
shall perform such calculations and Drew shall notify both Purchaser and the
Shareholders of his determination within thirty (30) days of the receipt of
Drew's 1996 federal and state income tax returns from its accountants. Such
determination of income taxes shall apply the methodology and be consistent with
past practices.
(b) The Cash Purchase Price shall be further adjusted at such time as
Drew's December 31, 1997 financial statement audit is complete and Drew's
accountants have prepared Drew's federal and state income tax returns for 1997,
including the preparation of federal tax forms K-1 for the Shareholders. The
amount of income tax liability attributable to the Shareholders from these tax
returns shall be calculated pursuant to Section 7.1(d). This income tax
liability shall be compared to the cumulative amounts previously distributed,
with respect to 1997 taxable income, in accordance with Section 7.1(d). If this
income tax liability exceeds the aggregate amount previously distributed to the
Shareholders with respect to 1997 taxable income, then the Purchase Price shall
be increased by the difference. If this income tax liability is less than the
aggregate amount previously distributed to the Shareholders with respect to 1997
taxable income, then the Purchase Price shall be reduced by the difference. The
adjustment required by this Section 2.1(d) shall be paid by Purchaser to the
Shareholders, or by the Shareholders to Purchaser, within thirty (30) days after
the receipt of written notification from the Vice President Finance of Drew of
such final determination. The Vice President - Finance shall perform such
calculations, and notify both Purchaser and the Shareholders of his
determination, within thirty (30) days of the receipt of Drew's 1997 federal and
state income tax returns from its accountants.
3
(c) The adjustments described in subsections 2.3(a) and 2.3(b) hereof
including distributions made pursuant to subsection 7.1(d) hereof are herein
called the "Income Tax Adjustment."
ARTICLE 3
CLOSING
Subject to Section 7.4 hereof, the closing of the transactions hereunder
(the "Closing") shall take place at the offices of Ruskin, Moscou, ▇▇▇▇▇ &
Faltischek, P.C., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, counsel to
Purchaser, on such business day prior to March 28, 1997, as Purchaser shall
notify Sellers at least five (5) days prior thereto. The day on which the
Closing actually takes place is herein sometimes referred to as the "Closing
Date."
ARTICLE 4
OBLIGATIONS AT CLOSING
4.1 Obligations of Shareholders at Closing. At Closing, Shareholders shall
deliver, or cause to be delivered, to Purchaser the following:
(a) valid stock certificates representing the Sellers Shares, duly endorsed
in blank at Closing by each of the Shareholders as to the Sellers Shares owned
by him;
(b) an employment agreement between Drew and ▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇
Employment Agreement"), duly executed by ▇▇▇▇▇▇▇▇ in the form annexed hereto as
Exhibit B;
(c) an employment agreement between Drew and Shyjka (the "Shyjka Employment
Agreement"), duly executed by Shyjka in the form annexed hereto as Exhibit C;
(d) a non-competition undertaking duly executed by ▇▇▇▇▇▇▇▇ in the form
annexed hereto as Exhibit D;
(e) a non-competition undertaking duly executed by Shyjka in the form
annexed hereto as Exhibit E;
(f) a true and complete copy of Drew's Articles of Incorporation (and any
amendments thereto), certified as of a recent date by the Secretary of State of
Ohio;
4
(g )a written opinion of Messrs. Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, counsel
for Shareholders, dated the Closing Date in the form annexed hereto as Exhibit F
("Shareholders Counsel Opinion");
(h) the resignation of ▇▇▇▇▇▇▇▇ and Shyjka as directors of Drew;
(i) an investment undertaking of ▇▇▇▇▇▇▇▇ with respect to the ▇▇▇▇▇▇▇▇
Common Shares in the form annexed hereto as Exhibit G; and
(j) any and all such other documents, agreements, certificates and
instruments required under this Agreement to be executed and/or delivered by
Shareholders to Purchaser; and
(k) agreement terminating the Close Corporation Agreement ("Close
Corporation Agreement") among ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ and ▇▇▇▇ dated December 31, 1986.
4.2 Obligations of Purchaser at Closing. At Closing, Purchaser shall
deliver, or cause to be delivered, to Shareholders the following:
(a) the sum of Two Million One Hundred Fifty Thousand ($2,150,000) Dollars
to ▇▇▇▇▇▇▇▇ by wire transfer or good certified check, subject to Inventory
Adjustment and Income Tax Adjustment;
(b )the sum of Two Million One Hundred Fifty Thousand ($2,150,000) Dollars
to Shyjka by wire transfer or good certified check, subject to Inventory
Adjustment and Income Tax Adjustment;
(c) the Notes each in the face amount of Forty-Two Thousand ($42,000)
Dollars;
(d) the ▇▇▇▇▇▇▇▇ Common Shares;
(e) the ▇▇▇▇▇▇▇▇ Employment Agreement, duly executed by Drew;
(f) the Shyjka Employment Agreement, duly executed by Drew;
(g )the Piggyback Registration Rights Agreement, a copy of which is annexed
hereto as Exhibit H ("Registration Rights Agreement");
(h) a certificate, dated the Closing Date, of the Secretary of Purchaser
certifying as true and correct the resolutions adopted by the Board of Directors
of Purchaser approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(i) a written opinion of Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C., counsel
for Purchaser dated the Closing Date in the form annexed hereto as Exhibit I
("Purchaser's Counsel Opinion");
5
(j) a certificate, dated the Closing Date, of the Secretary of Drew
certifying as true and correct the resolutions adopted by the Board of Directors
of Drew approving the execution and delivery of the ▇▇▇▇▇▇▇▇ Employment
Agreement, the Shyjka Employment Agreement, the ▇▇▇▇▇▇ Employment Agreement, the
Recchi Employment Agreement, the ▇▇▇▇▇▇▇▇ Employment Agreement and the ▇▇▇▇▇▇▇
Employment Agreement (the latter four of which agreements are described in
subsection 8.1(k) hereof; and
(k) any and all such other documents, agreements, certificates and
instruments required under this Agreement to be executed and/or delivered by
Purchaser, and all payments required to be made, pursuant to the terms and
provisions of this Agreement.
4.3 Further Assurances. At any time and from time to time after the
Closing, at Purchaser's request and without further consideration, Shareholders
will execute and deliver such other instruments of sale, transfer, assignment
and delivery and take such action as Purchaser may reasonably deem necessary or
desirable in order to more effectively transfer, assign and deliver to Purchaser
and to confirm Purchaser's title to the Sellers Shares.
4.4 Full Performance.
(a) This Agreement is subject to and conditioned upon full performance by
both ▇▇▇▇▇▇▇▇ and Shyjka and Purchaser shall have no obligation to purchase
Sellers Shares from one of the Shareholders if the other of them defaults in
performance hereunder. Similarly, Purchaser agrees that it will not purchase any
of the Sellers Shares without purchasing all of them.
(b) Delivery of the agreements, documents, funds and securities, as in this
Agreement provided, will take place as part of a simultaneous transaction, and
no event or action will be deemed complete until all of the events and actions
have occurred or have been duly waived by the party entitled to do so.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders, jointly and severally, represent and warrant to Purchaser as
follows:
5.1 Organization and Good Standing of Seller. Drew is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Ohio. Drew has all requisite corporate power and authority, licenses, permits
and franchises to own, lease and operate its properties and assets and to carry
on its business as currently conducted except where the failure to do so would
not have a material adverse effect on its business, properties or assets. Drew
is qualified and in good standing to do business as a foreign corporation in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on its business, properties or assets. There has heretofore been delivered to
Purchaser Schedule 5.1 which is a true and complete list of all states in which
Drew has qualified to do business.
6
5.2 Capacity to Execute Agreement and Enforceability. The Shareholders have
full power and capacity to execute, deliver and perform their obligations under
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Shareholders
and (assuming the valid execution and delivery of the Agreement by Purchaser)
constitutes a legal, valid and binding obligation of the Shareholders,
enforceable against them in accordance with its terms except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
and the application of general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
5.3 Effect of Agreement. Except as set forth on Schedule 5.3 heretofore
delivered to Purchaser by Shareholders, neither the execution, delivery and
performance of this Agreement by the Shareholders, nor the consummation by the
Shareholders of the transactions contemplated hereby will (a) conflict with or
result in a breach of any provision of the Articles of Incorporation or By-laws
of Drew, true and correct copies of which have heretofore been delivered to
Purchaser; (b) constitute or result in the breach of, conflict with or give rise
to a right of forfeiture, termination, cancellation or acceleration with respect
to, any term, condition or provision of, any note, bond, mortgage, indenture,
license or other contract or obligation to which Drew or the Shareholders are a
party or by which Drew or the Shareholders are subject, except for such
conflicts, breaches or defaults as to which written waivers or consents, which
are listed in Schedule 5.3 previously delivered to Purchaser, have been
obtained, or (c) violate any law, statute, regulation, judgment, order, writ,
injunction, or decree applicable to Drew or the Shareholders, its business,
properties or assets.
5.4 Capitalization and Ownership of Capital Stock. The presently
authorized, issued and outstanding shares of capital stock of Drew and the names
and addresses of the record and beneficial owners thereof are as set forth on
Schedule 5.4 heretofore delivered to Purchaser by Shareholders and certified as
true and correct by the President of Drew. Each of such persons is the lawful
record and beneficial owner of the number of shares set forth opposite his name,
free and clear of any liens, claims, encumbrances or restrictions of any kind.
Except for this Agreement and the Close Corporation Agreement, there are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities or other agreements or arrangements of any
character or nature whatsoever under which Drew or the Shareholders are or may
become obligated to issue, assign or transfer any shares of the capital stock of
Drew.
5.5 Government and Other Consents. Except as set forth on Schedule 5.5
heretofore delivered by Shareholders to Purchaser, no consent, order,
authorization, qualification, or approval of, or exemption by, or filing with
any governmental, public, or regulatory body or authority is required in
connection with the execution, delivery and performance by the Shareholders of
this Agreement.
7
5.6 Books and Records. All financial, business and accounting books,
ledgers, accounts and official and other records relating to Drew have been
properly and accurately kept and completed in all material respects, and there
are no material inaccuracies or discrepancies of any kind contained or reflected
therein.
5.7 No Subsidiaries or Investments. Drew does not own capital shares or
other equity or ownership or proprietary interest in any corporation, limited
liability company, partnership, association, trust, joint venture or other
entity.
5.8 Financial Statements.
(a) The Shareholders have previously delivered to Purchaser copies of the
following financial statements of Drew (collectively, the "Financial
Statements"): (i) balance sheets dated as at December 31, 1993, December 31,
1994 and December 31, 1995 and the related statements of income and cash flow
for the respective twelve (12) months then ended, all of which have been audited
by Deloitte & Touche LLP, Drew's independent auditors, and (ii) unaudited
balance sheet ("Unaudited Balance Sheet") as at November 30, 1996 (the "Balance
Sheet Date") and unaudited statements of income for the eleven months then
ended. Each of the said balance sheets is hereafter called "Balance Sheet." The
Financial Statements correctly and completely in all material respects reflect
Drew's books and records, fairly present the financial position and results of
operations of Drew as of the dates and for the periods indicated and have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis.
(b) Except for such claims, debts and liabilities as are reflected or
reserved against on the applicable Balance Sheet, Drew does not have any
outstanding indebtedness for money borrowed and is not subject to any claims or
liabilities, contingent or otherwise as of the date of such Balance Sheet, (i)
other than obligations incurred in the ordinary course of business since the
date of such Balance Sheet, in amounts usual and normal, individually and in the
aggregate, and (ii) other than as may not have been required under GAAP to be
disclosed or reserved as contingencies as of the date of such Balance Sheet [but
which are referred to in Schedule 5.8(b) heretofore delivered to Purchaser by
the Shareholders.]
(c) Except as described in Schedule 5.8(c), all of the accounts receivable
(trade or otherwise) reflected in the applicable Balance Sheet, result from the
sale of inventory in the ordinary course of business and, subject to the reserve
therefor on the Balance Sheet, the Shareholders have no knowledge that such
accounts receivable are not collectible in full in the ordinary course of
business. Except as shown in the Financial Statements (including the footnotes
thereto), all such accounts receivable are owned by Drew free and clear of all
liens, claims, charges, encumbrances and other interests of third parties.
8
(d) Except as set forth in Schedule 5.8(d) heretofore delivered to
Purchaser since the Balance Sheet Date, there has not been any material adverse
change in the condition, financial or otherwise, of the business, assets,
properties, liabilities or results of operations of Drew, and no fact or
condition exists or to our knowledge has been threatened which might cause any
such change at any time in the future. Since the Balance Sheet Date, Drew has
conducted its business only in the ordinary course.
5.9 Title to Properties; Encumbrances. Other than as set forth in Schedule
5.9 heretofore delivered to Purchaser and certified as true and correct by the
President of ▇▇▇▇, ▇▇▇▇ does not own any real property or have any lease or
other interest in real property. Drew does not use any real estate or have an
interest in real estate, including, without limitation, any building, office,
plant, factory, retail store, warehouse, improvement or structure in connection
with its business other than as identified on Schedule 5.9. Except as disclosed
on Schedule 5.9, Drew has good title to all of its properties and assets,
including, without limitation, all of the properties and assets reflected in the
unaudited Balance Sheet (except for properties and assets sold since the Balance
Sheet Date in the ordinary course of business and consistent with past
practices), and all of the properties or assets purchased by it since the
Balance Sheet Date. Except as set forth on Schedule 5.9, none of such properties
or assets is subject to any mortgage, pledge, lien, security interest,
encumbrance or charge of any kind except (a) liens shown on the unaudited
Balance Sheet as securing specified liabilities or obligations with respect to
which no default exists; (b) liens arising in the ordinary course of business,
consistent with past practice since the Balance Sheet Date and liens arising by
operation of law or minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or materially impairs
the use of the property subject thereof, or materially impairs Drew's operations
and (c) liens for current taxes not yet due, or, if due, that are being
contested in good faith in the ordinary course of business as described on
Schedule 5.9 hereof. Except as disclosed on Schedule 5.9, Drew does not use in
its business any assets owned by a shareholder or affiliate of Drew. For
purposes of this Agreement, "affiliate" shall have the same meaning as it is
defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended.
5.10 Leases. Schedule 5.10 heretofore delivered to Purchaser and certified
as true and correct by the President of Drew, contains an accurate and complete
list and description of the terms of all leases to which Drew is a party (as
lessee or lessor), copies of which have been previously delivered to Purchaser.
Except as disclosed on Schedule 5.10, each lease set forth in Schedule 5.10 (or
required to be set forth in Schedule 5.10) is in full force and effect; all
rents and additional rents due to date on each such lease have been paid; in
each case, the lessee has been in peaceable possession since the commencement of
the original term of such lease and is not in default thereunder and no waiver,
indulgence or postponement of the lessee's obligations thereunder has been
granted by the lessor; and there exists no event of default or event,
occurrence, condition or act (including the purchase of the Sellers Shares
hereunder) which, with the giving of notice, the lapse of time or the happening
of any further event or condition, would become a breach under such lease.
Except as disclosed on Schedule 5.10, Drew has not violated any of the terms or
conditions under any such lease in any material respect which could give
landlord the right of termination thereof, and to the knowledge of the
Shareholders, all of the covenants to be performed by any other party under any
such lease have been fully performed.
9
5.11 Business Practices. Neither Drew nor the Shareholders have made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor have any of them taken
any action which would be in violation of the Foreign Corrupt Practices Act of
1977 or any anti-boycott or export laws.
5.12 Officers, Directors and Key Employees. Schedule 5.12 heretofore
delivered to Purchaser and certified as true and correct by the President of
Drew sets forth a complete and correct list of (i) the officers and directors of
Drew prior to the transaction contemplated by this Agreement; the name, position
and total compensation for 1996 and 1995, including bonuses, of each officer and
director of Drew, (ii) the name of each other employee, consultant, independent
contractor, agent or other representative of Drew who received $50,000 per annum
or more in any form of compensation from Drew since January 1, 1995, and (iii)
all wage or salary increases or bonuses received by any such person since the
Balance Sheet Date, and any accruals for or commitment or agreement by Drew to
pay such increases or bonuses. Except as set forth in Schedule 5.12, none of
such persons has, in writing or (to the knowledge of the Shareholders) verbally,
threatened, informed or otherwise indicated to Drew or either Shareholder or any
officer or director of Drew that he or she plans to cancel or otherwise
terminate his or her relationship with Drew for any reason, including, without
limitation, the consummation of the transaction contemplated hereby.
5.13 Employment Arrangements. Except as set forth in Schedule 5.13
heretofore delivered to Purchaser, Drew does not have any obligation, contingent
or otherwise, under any employment agreement, collective bargaining or other
labor agreement, any agreement containing severance or termination pay
arrangements, deferred compensation agreement, retainer or consulting
arrangement, pension or retirement plan, bonus or profit-sharing plan, stock
option or purchase plan or other employee contract or non-terminable (whether
with or without penalty) arrangement, group, life, health, medical or
hospitalization insurance plan or program or other employee or fringe benefit
plan, including vacation plans or programs and sick leave plans or programs
heretofore delivered to Purchaser and certified as true and correct by the
President of Drew, true and complete copies of which have heretofore been
delivered to Purchaser. Drew has performed in all material respects all of its
obligations required to be performed by it under all such agreements, plans and
arrangements, and to the best knowledge of Shareholders, no party thereto is in
breach of or in default or arrears under any of the provisions thereof.
5.14 Employee Relations. To the best knowledge of Shareholders, Drew is in
compliance with all Federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not and is not engaged in any unfair
labor practice. No unfair labor practice complaint against Drew is pending
before the National Labor Relations Board. Except as set forth in Schedule 5.14
heretofore delivered to Purchaser, no labor strike, picket, dispute, slowdown,
stoppage or other labor trouble has, within the previous five years, occurred or
is pending or, to the best knowledge of Shareholders, is threatened against or
involving Drew. No union representation question exists respecting the employees
of Drew. No grievance or any arbitration proceeding is pending, and to the best
knowledge of Shareholders, no claim with respect thereto has been asserted in
writing or, to the best knowledge of Shareholders, is threatened. No collective
bargaining agreement is currently being negotiated by Drew. Except as disclosed
on Schedule 5.14, no claim of discrimination or harassment is pending or, to the
best knowledge of Shareholders, threatened before the Equal Employment
Opportunity Commission, or any other judicial or administrative body or agency.
10
5.15 Contracts and Liabilities.
(a) Schedule 5.15 heretofore delivered to Purchaser and certified as true
and correct by the President of Drew, sets forth all of the following contracts,
commitments and obligations of, or which relate to the business of, Drew,
written or otherwise, which have a duration of at least one year or which
require the purchase or delivery of goods or services of the value of $100,000
or more, or to which it or its assets or properties are bound or subject which
are not listed in any Schedule described in this Agreement and delivered to
Purchaser, including, without limitation the following:
(i) contracts, commitments and other agreements with any current or former
officer, director, employee, independent contractor, consultant, agent or other
representative (including the Shareholders);
(ii) contracts and other agreements with any labor union or association
representing any employee;
(iii) contracts, commitments and other agreements for the sale of any of
its assets or properties other than in the ordinary course of business or for
the grant to any person of any preferential rights to purchase any of Drew's
assets or properties;
(iv) joint venture or other agreements involving sharing of profits or
joint ownership of assets or sharing of obligations or liabilities;
(v) contracts or other agreements under which Drew agrees to indemnify any
party or to share tax liability of or with any Party;
(vi) loan, indenture, factoring, credit line, security, collateral
assignment or pledge agreement, guaranty, subordination or similar type
agreements;
(vii) contracts, commitments and other agreements with customers or
suppliers for the sharing of fees, the rebating of charges or other similar
arrangements;
11
(viii) contracts, commitments and other agreements containing obligations
or liabilities of any kind to or with either of the Shareholders as such;
(ix) contracts and other agreements containing covenants of Drew not to
compete in any line of business or with any person in any geographical area (or
not to solicit or accept any business) or covenants of any other person not to
compete with Drew in any line of business or in any geographical area (or not to
solicit or accept any business);
(x) contracts and other agreements relating to the pending or consummated
acquisition by Drew of (a) the capital shares of any other person; or (b) any
operating business including the assumption of any lease and acquisition by
consignment of any inventory;
(xi) options for the purchase of any asset, tangible or intangible;
(xii) contracts and other agreements requiring the payment to any person of
an override, finders fee, referral fee or similar commission or fee;
(xiii) contracts and other agreements for the payment of fees or other
consideration to any officer or director of Drew or to any other entity in which
any of the foregoing has a direct or indirect interest;
(xiv) contracts and other agreements relating to the borrowing of money;
(xv) purchase orders, contracts and commitments for the purchase or sale of
any goods or services to or by Drew, except for those orders, contracts and
commitments which are less than $100,000 in amount or which cannot be canceled
at will by Drew without penalty or premium;
(xvi)other contracts or business arrangements which are not made in the
ordinary course of business;
(xvii) Close Corporation agreement among Shareholders and Drew;
(xviii) agreement, arrangements or understanding with any local, state or
federal agency or authority, including agencies administering medicare or
medicaid concerning payment or reimbursement to Drew or its designee from the
sale of any of its products or services; and
(xix) Indenture Agreement.
(b) Except as set forth in Schedule 5.15, all such contracts are valid,
binding and enforceable and in full force and effect except to the extend that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or similar laws of general
application relating to or affecting the enforcement of the rights of creditors
and the application of general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Except as set forth
in Schedule 5.15, Drew is not in default which would give rise to a right of
termination by the other party under any such contract and, to the best
knowledge of Shareholders, there have been no claims of default and there are no
existing factors or conditions which with the passage of time or giving of
notice or both would constitute such a default or in any case in which such
default would give rise to a right of termination by the other party thereto or
which would result in any material cost, expense or penalty to Drew.
12
(c) Shareholders have delivered to Purchaser complete and correct copies of
all of the written contracts and documents constituting commitments set forth on
Schedule 5.15.
5.16 Operation of Drew. Except as provided on Schedule 5.16 heretofore
delivered to Purchaser and certified as true and correct by the President of
Drew, since the Balance Sheet Date, Drew has conducted its business and
operations only in the ordinary and usual course of business, consistent with
past practices, has (i) reasonably preserved intact its business, (ii) made a
good faith effort to maintain its relationships with all customers and
suppliers, and (iii) used commercially reasonable efforts to keep available the
services of its officers and employees. Except as set forth on Schedule 5.16,
since the Balance Sheet Date, Drew has not:
(a) amended its Articles of Incorporation or By-Laws or merged with or into
or consolidated with any other person, subdivided or in any way reclassified any
of its shares of capital stock or changed or agreed to change in any manner the
rights of any shares of its capital stock or the character of Drew;
(b) issued or sold or purchased, or issued options or rights to subscribe
to, or entered into any contracts or commitments to issue or sell or purchase,
any shares of its capital stock or any other securities;
(c) entered into or amended any employment agreement, entered into or
amended any agreement with any labor union or association representing any
employee, adopted, entered into, or amended any employee benefit plan, or made
any change in the actuarial methods or assumptions used in funding any defined
benefit pension plan, or made any change in the assumption or factors used in
determining benefit equivalencies thereunder;
(d) incurred any indebtedness for borrowed money;
(e) declared or paid any dividends or declared or made any other
distributions of any kind to its shareholders, or made any direct or indirect
redemption, retirement, or any purchase or other acquisition of any shares of
its capital stock or any other securities convertible into shares of its capital
stock;
13
(f) reduced its cash or short-term investments or their equivalents, other
than to meet cash needs arising in the ordinary course of business, consistent
with past practices;
(g) made any change in its accounting methods or practices or made any
change in depreciation or amortization policies or rates adopted by it;
(h) changed in any material respect any of its business policies in any
respect, including, without limitation, advertising, marketing, pricing,
purchasing, credit, personnel, sales, returns, budget or product acquisition
policies;
(i) except in the ordinary course of business, consistent with past
practices, made any wage or salary increase or paid any bonus, or increase any
direct or indirect compensation, for or to any of its officers, directors,
employees, consultants, agents or other representatives, or any accrual for or
commitment or agreement to make or pay the same;
(j) made any loan, advance or guarantee to any of its shareholders,
officers, directors, employees, consultants, agents or other representatives
(other than travel advances made in the ordinary course of business), or made
any other loan, advance or guarantee otherwise than in the ordinary course of
business;
(k) made any payment or commitment to pay any severance or termination pay
to any of its officers, directors, employees, consultants, agents or other
representatives, other than payments or commitments to pay persons other than
officers, directors or shareholders made in the ordinary course of business;
(l) except in the ordinary course of business; entered into any lease (as
lessor or lessee); sold, abandoned or made any other disposition of any of its
assets or properties; granted or suffered any lien or other encumbrance on any
of its assets or properties; entered into or amended any contract or other
agreement to which it is a party, or by or to which it or its assets or
properties are bound or subject, or pursuant to which it agrees to indemnify any
party or to refrain from competing with any party;
(m) except in the ordinary course of business, incurred or assumed any
liability;
(n) made any acquisition of all or any part of the assets, properties,
capital shares or business of any other person;
14
(o) paid, directly or indirectly, any liabilities or obligations before the
same became due in accordance with its terms or otherwise than in the ordinary
course of business or consistent with prior practice or deferred the payment of
any liability or obligation;
(p) suffered or incurred any damage, destruction or loss (whether or not
covered by insurance) which materially adversely affected the business,
properties or assets of Drew;
(q) collected or billed any accounts receivable in advance of the dates on
which payments were due other than in the ordinary course of business or
consistent with prior practice;
(r) gave or agreed to give any of its customers any discounts or special
payment terms or arrangements which were not consistent with prior practice or
which were outside the ordinary course of business;
(s) other than in the ordinary course of business, made any change in the
type, nature or composition of its products, or made any change relating to its
charges, commissions or other changes or terms for its products;
(t) terminated or failed to renew, or received any information, written or
otherwise, threatening to terminate or not to renew, any contract or other
agreement that materially affects the assets, properties, business, operations
or condition (financial or otherwise) of Drew; or
(u) except in the ordinary course of business, entered into any other
contract, agreement or transaction.
5.17 Insurance Policies. Schedule 5.17 heretofore delivered to Purchaser
and certified as true and correct by the President of Drew, contains a complete
and correct list and description of all insurance polices with respect to the
business, properties, assets and employees of Drew. Such policies are in full
force and effect. No notice of cancellation, expiration or non-renewal of any
such policy has been received by Drew and Drew does not know of the existence of
any cause for such termination.
5.18 Related-Party Transactions. Except as disclosed in Schedule 5.18
heretofore delivered to Purchaser and certified as true and correct by the
President of Drew, none of Drew, the Shareholders, nor any person controlling,
controlled by or under common control with any of the foregoing or any relative
or spouse of any of the foregoing has any interest, financial or otherwise, in
any business, corporate or otherwise (the value of which equals or exceeds
$2,000 per annum), which is a party to, or has an interest in any property which
is the subject of, or has business relationships or arrangements of any kind
with Drew, including, without limitation, any customer, supplier, competitor, or
potential competitor or lessor.
15
5.19 Compliance with ERISA.
(a) Schedule 5.19 heretofore delivered to Purchaser and certified as true
and correct by the President of Drew, sets forth a complete and correct list of
all "employee pension benefit plans" and "employee welfare benefit plans" as
defined respectively in Sections 3(2) and 3(i) of ERISA, including
"multiemployer plans" as defined in Section 3(37) of ERISA, and any other
pension, profit sharing, retirement, deferred compensation, vacation, severance,
disability, hospitalization, medical insurance or other employee benefit plan or
program, if any, which Drew or any other entity which constitutes part of a
"controlled group" (within the meaning of Section 4001(b) of ERISA and/or
Sections 414(b)-(o) of the Code and the Treasury Regulations proposed
thereunder) which Drew maintains or to which Drew has any present or future
obligation to contribute (collectively, the "Drew Plans"). Shareholders have
caused Drew to deliver to Purchaser true and complete copies of all Drew Plans
(including other instruments relating thereto), if any, as they may have been
amended to the date hereof, embodying, relating to or summarizing the Drew
Plans. Shareholders have made available to Purchaser, where applicable, the most
recent annual report (Form 5500) filed (including audited financial statement)
and the most recent summary plan description with respect to each Drew Plan.
(b) Other than those employee pension benefit plans set forth on Schedule
5.19, Drew maintains no "employee pension benefit plan" as defined in ERISA
Section 3(2) for the benefit of Drew's employees and has maintained no such plan
during any part of the past five (5) years.
(c) Drew has no current obligation, nor has Drew ever in the past had any
obligation, to contribute to any "multiemployer" plan, as defined in Section
3(37) of ERISA.
(d) Drew is in compliance in all material respects with the requirements
prescribed by any and all statutes, orders, governmental rules or regulations
applicable to the Drew Plans and all reports and disclosures relating to the
Drew Plans required to be filed with or furnished to governmental agencies,
participants or beneficiaries prior to the date of this Agreement have been
filed in accordance with applicable law.
(e) There are no actions, audits, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Shareholders,
threatened, against any of the Drew Plans or any fiduciary of any of the Drew
Plans or against the assets of any of the Drew Plans.
(f) The consummation of the transactions contemplated hereby will not
accelerate any liability under any of the benefit plans because of an
acceleration of any rights or benefits to which employees or any of them may be
entitled thereunder.
(g) With respect to any Drew Plan that is an "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA ("Drew Welfare Plan") (i) each
such Drew Welfare Plan, the contributions to which are claimed as a deduction
under any provision of the Code, is in compliance in all material respects with
all applicable requirements pertaining to such deduction, (ii) with respect to
any "welfare benefit fund" within the meaning of Section 419 of the Code that
comprises part of a Drew Welfare Plan, there is no disqualified benefit within
the meaning of Section 4976(a) of the Code, (iii) any such Drew Welfare Plan
that is a "group health plan" within the meaning of Section 5000(b)(1) of the
Code meets all of the requirements of Section 4980B(f) of the Code.
16
(h) Except as disclosed on Schedule 5.19 hereto or as may be required under
Section 4980B(f) of the Code, Drew has no obligation to any retired or former
employee under any disability (long or short term), hospitalization, medical,
dental or life insurance plans (whether insured or self-insured) or other
employee welfare benefit plan as defined in ERISA Section 3(1) which is
maintained by Drew.
5.20 Tax Matters.
Filing of Tax Returns; Payment of Taxes; No Audits, Investigations or
Claims.
(a) Shareholders have heretofore delivered to Purchaser true, complete and
correct copies of all Federal, state and local tax returns filed by Drew for
each of the three (3) immediately preceding taxable years of Drew ended December
31, 1995, any statement of audit adjustments applicable thereto and all Federal,
state and local returns of estimated taxes filed during 1996. Drew has duly and
timely filed all federal, state, local and other tax and information returns
required to be filed by it with regard to any income, sales, use, gross
receipts, property, employment and other taxes, charges, levies or other
assessments related to its business, properties or assets, and has duly paid in
full or made adequate provision for all taxes and other charges shown as due on
such returns or which otherwise have been accrued or have become due prior to
the date hereof whether or not shown on any such return. Drew has received no
written notice of any claim or claims for additional taxes which are claimed to
be due from it by Federal, state, local or foreign taxing authorities in
connection with such reports or returns. There are no liens for Federal, state,
local or foreign taxes, assessments or government charges or levies upon any of
Drew's properties or assets. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any income tax or
other return of Drew for any period and there are not, nor have there been, any
audits of Drew by any Federal, state or local governmental tax authority and no
notice of any audit has been received by Drew.
(b) Shareholders have filed all personal federal and state income tax
returns through 1995 and have paid all income taxes shown as due thereon.
5.21 Intellectual Property. Schedule 5.21 heretofore delivered to Purchaser
and certified as true and correct by the President of Drew, contains a list of
all Intellectual Property ("Intellectual Property") of Drew. To the best
knowledge of the Shareholders, Drew has full ownership right, title and interest
in and to the Intellectual Property and the Intellectual Property constitutes
valid and enforceable rights of Drew. Except as set forth in Schedule 5.21, Drew
has not received any notice and has no reason to believe that the validity of
the Intellectual Property or Drew's interest therein can be or is being
challenged by any third party. Drew has not heretofore granted any licenses or
conveyed any other rights or interests to any of the Intellectual Property. To
the best knowledge of the Shareholders, the operation of Drew as currently
conducted does not infringe upon any patents or other intellectual property
rights of any third party.
17
5.22 Environmental Matters.
(a) Except as set forth on Schedule 5.22 heretofore delivered to Purchaser,
Drew has not received any notice from any governmental agency or private or
public entity advising that it is potentially responsible for response costs or
other costs with respect to a release or threatened release of any Hazardous
Substance. No administrative, civil or criminal actions, including without
limitation third-party actions for personal injury or property damage, are
pending or to the best knowledge of Shareholders, threatened against Drew or its
properties with respect to Environmental Laws or related to the business of
Drew. No judgements, consent orders, consent decrees, stipulations, or other
restrictions have been entered or applied with respect to Environmental Laws or
related to the business, properties or assets of Drew. Except as set forth on
Schedule 5.22 heretofore delivered to Purchaser, Drew neither received nor is
aware of any governmental orders, notifications, notices of violation, or
requests for information relating to environmental or health and safety
conditions at or related to the business, properties or assets of Drew, nor are
the Shareholders aware of any past (within the preceding five years) or current
violations of any Environmental Law related to the business, properties or
assets of Drew or of environmental conditions related to the business,
properties or assets of Drew.
(b For purposes of this Agreement, (i) "Environmental Laws" shall mean
statute, law, ordinance or regulation of any federal, state, county, local or
foreign governmental authority relating to the environment, including air, water
or noise pollution, emissions or discharges, the environment, public health,
employee health, safety or welfare, land use or the production, processing,
distribution, use, storage, labeling, handling, transportation, treatment or
disposition of any Hazardous Substance; and (ii) "Hazardous Substance" shall
mean asbestos, paints, solvents, ureaformaldehyde, polychlorinated biphenyls,
nuclear fuel or material, chemicals, waste products, radioactive material,
explosives, known carcinogens, biologic or organic products, petroleum products
and by-products and other dangerous, toxic, infectious or hazardous pollutants,
contaminants, chemicals, materials, wastes or substances listed or identified
in, or regulated by, any Environmental Laws.
18
(c) The sale and delivery of the Sellers Shares are not subject to review
or approval by any State of municipal authority with respect to compliance by
Drew with applicable "Environmental Laws."
5.23 Product Warranty. Each product manufactured, sold, or delivered by
Drew has been in conformity with all applicable contractual commitments and all
express and implied warranties, and Drew does not have any liability (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Drew giving rise to
any liability of Drew) for replacement or repair thereof or other damages in
connection therewith. Drew maintains adequate reserves against product warranty
claims including product returns and allowances. No product manufactured, sold,
or delivered by Drew is subject to any guaranty, warranty, or other indemnity
beyond the applicable standard terms and conditions of sale. Schedule 5.23
heretofore delivered to Purchaser and certified by the President of Drew
includes copies of the standard terms and conditions of sale for Drew
(containing applicable guaranty, warranty, and indemnity provisions).
5.24 Permits, Licenses, Compliance with Laws. Drew has all permits,
licenses, orders, consents and approvals (collectively "Permits") of federal,
state, local or foreign governmental or regulatory bodies that are required in
order to permit Drew to carry on its business as currently conducted except to
the extent that the failure to have the same would not have a materially adverse
effect on Drew. Schedule 5.24 heretofore delivered to Purchaser and certified as
true and correct by the President of Drew, sets forth a correct and complete
list of all such Permits, all of which are in full force and effect, and which
will automatically remain in full force and effect immediately after
consummation of the transactions contemplated by this Agreement, and no
suspension or cancellation of any of them is, to the best knowledge of
Shareholders, threatened, and no cause exists for such suspension or
cancellation. The business of Drew has been and is being conducted in accordance
and in compliance with all applicable federal, state, local or foreign laws,
codes, ordinances, rules and regulations except that failure of compliance had
not and will not have a materially adverse effect on Drew.
5.25 Litigation.
(a) Except as set forth in Schedule 5.25 heretofore delivered to Purchaser,
there is no claim, action, suit, proceeding, arbitration, investigation or
inquiry pending before any federal, state, local, or other court or
governmental, administrative, or self-regulatory body or agency, or any private
arbitration tribunal, or to the best knowledge of Shareholders, threatened
against Drew relating to the business of Drew, any of the properties or assets
of Drew or the transactions contemplated by this Agreement; nor to the best
knowledge of Shareholders, is there any basis for any such claim, action, suit,
proceeding, arbitration, investigation or inquiry. Drew is not in default under
any order, license, regulation or demand of any federal, state or local, or
other court or governmental, administrative or self-regulatory body or agency
provided that the existence of such default has not and will not have a
materially adverse effect on Drew.
19
(b Except as set forth in Schedule 5.25, there are no judgements, pending
lawsuits or pending claims by Drew against any third party.
(c) Shareholders and Drew have directed counsel to Shareholders hereinafter
named to disclose to Shareholders all pending claims against Drew or the
Shareholders relating to Drew about which such counsel has been consulted.
5.26 Consigned Merchandise. Drew has within its custody and control items
of merchandise ("Consigned Merchandise") received in connection with the
purchase by Drew of businesses at various retail locations, all as listed on
Schedule 5.26 hereof. Schedule 5.26 is a true and correct list by location of
such Consigned Merchandise at December 31, 1996. Drew does not have title to
such Consigned Merchandise, nor is it reflected in the inventories of Drew shown
on the applicable Balance Sheet. There has been no reduction in the quantity of
Consigned Merchandise other than through sales which have been reported to the
consignor and the Consigned Merchandise at the respective locations is in the
same condition as received from the consignor.
5.27 Notes and Accounts Receivable. Except as set forth in Schedule 5.27
hereof, all notes and accounts receivable of Drew shown on the Balance Sheet and
all notes and accounts receivable acquired or arising after the Balance Sheet
Date have arisen in the ordinary course of business and have been collected or
are collectible in the aggregate recorded amounts thereof, less the applicable
reserves set up on the books of Drew.
5.28 Broker. No broker, finder, agent or other intermediary has acted on
behalf of the Shareholders or Drew or otherwise assisted in bringing about the
transactions contemplated by this Agreement and no broker, finder, agent or
other intermediary is entitled to any commission or finder's fee in respect
thereof based in any way on agreements, understandings or arrangements with or
the conduct of Drew or the Shareholders.
5.29 Product Liability. Except as set forth in Schedule 5.29 heretofore
delivered to Purchaser, Drew has no liability and to the best knowledge of
Shareholders, there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
Drew giving rise to any liability arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, or delivered by Drew for which there is not adequate
available insurance.
5.30 Banks; Safe Deposit Boxes; Powers of Attorney. Shareholders have
heretofore delivered to Purchaser a true and correct schedule 5.30 setting forth
(i) the name of each bank in which Drew has an account or safe deposit box and
the names of all persons authorized to draw thereon or to have access thereto,
and (ii) the names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from Drew and a
summary of the terms thereof.
20
5.31 Material Information; Full Disclosure.
(a) This Agreement and any other certificate, document, agreement or
information furnished (including, without limitation, any schedule hereto) or to
be furnished pursuant to this Agreement by the Shareholders to Purchaser does
not contain and will not contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statement
herein or therein not misleading.
(b) For purposes of this Agreement, knowledge by either Shareholder of an
event, fact or circumstance shall be deemed to be knowledge by both Shareholders
thereof.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Shareholders as follows:
6.1 Organization and Good Standing of Purchaser. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York. Purchaser has all requisite corporate power and authority to
make the representations, warranties and agreements made hereunder, to own,
lease and operate its properties and assets and to carry on its business as
currently conducted, to execute and deliver this Agreement and to perform its
obligations under this Agreement.
6.2 Authorization of Agreement and Enforceability. Purchaser has full
corporate power and authority to execute and deliver this Agreement of even date
herewith between Drew and each of the Shareholders and to perform its
obligations hereunder. This Agreement has been duly and validly authorized,
executed and delivered by Purchaser and (assuming the valid execution and
delivery of the Agreement by Shareholders) constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws of general application relating to or affecting the
enforcement of the rights of creditors and the application of general principles
of equity (regardless of whether enforcement is sought in a proceeding at law or
in equity).
6.3 Effect of Agreement. Neither the execution, delivery and performance of
this Agreement by Purchaser, nor the consummation by Purchaser of the
transactions contemplated hereby will (a) conflict with or result in a breach of
any provision of Purchaser's Certificate of Incorporation or By-Laws, (b)
constitute or result in the breach of, conflict with or give rise to a right of
termination, cancellation or acceleration with respect to, any term, condition
or provision of, any note, bond, mortgage, indenture, license or other contract
or obligation to which Purchaser is a party or by which it or any of its
properties or assets may be bound, except for such conflicts, breaches or
defaults as to which written waivers or consents have been obtained, or (c)
violate any law, statute, regulation, judgment, order, writ, injunction, or
decree applicable to Purchaser or any of its properties or assets.
21
6.4 Government and Other Consents. No consent, order, authorization,
qualification, or approval of, or exemption by, or filing with any governmental,
public, or regulatory body or authority is required in connection with the
execution, delivery and performance by Purchaser of this Agreement.
6.5 Broker. No broker, finder, agent or other intermediary has acted on
behalf of Purchaser or otherwise assisted in bringing about the transactions
contemplated by this Agreement and no broker, finder, agent or other
intermediary is entitled to any commission or finder's fee in respect thereof
based in any way on agreements, understandings or arrangements with or the
conduct of Purchaser.
6.6 Material Information; Full Disclosure. This Agreement and any other
certificate, document, agreement or information furnished (including, without
limitation, any schedule hereto) or to be furnished pursuant to this Agreement
by the Purchaser to the Shareholders does not contain and will not contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statement herein or therein not misleading.
6.7 SEC Filings.
(a) Purchaser has filed and made available to the Shareholders all forms,
reports and documents required to be filed by Purchaser with the Securities and
Exchange Commission ("SEC") since January 1, 1995 (collectively, the
"Purchaser's SEC Reports"). The Purchaser's SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
the case may be; and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Purchaser's SEC Reports or necessary
in order to make the statements in such Purchaser's SEC Reports, in the light of
the circumstances under which they were made, not misleading.
(b) Since the date of filing of the last Purchaser's SEC Report, there has
not been any material adverse change in the assets, liabilities, financial
condition or results of operations of Purchaser.
22
6.8 ▇▇▇▇▇▇▇▇ Common Shares. The ▇▇▇▇▇▇▇▇ Common Shares to be delivered to
▇▇▇▇▇▇▇▇ pursuant to subsection 2.1(b) hereof when delivered will be validly
issued, fully paid and non-assessable.
ARTICLE 7
COVENANTS AND AGREEMENTS
7.1 Conduct of the Business Prior to Closing. Except as set forth in
Schedule 7.1 heretofore delivered to Purchaser by Shareholders, the Selling
Shareholders, jointly and severally covenant and agree that, except as otherwise
consented to in writing by Purchaser, pending the Closing:
(a) The business of Drew will be conducted only in the ordinary course.
(b) No change will be made in the Articles of Incorporation or by-laws of
Drew.
(c) No change will be made in the authorized or issued capital stock of
Drew, nor shall any additional shares, or any rights, warrants or options
relating thereto, be issued.
(d) Except as set forth in Schedule 7.1(d) previously delivered to
Purchaser, no dividend or other distribution or payment will be declared, set
aside, paid or made on or in respect of the capital stock of Drew nor will Drew
directly or indirectly redeem, retire, purchase or otherwise acquire any of such
stock. Notwithstanding any other provision of this Agreement, Drew may declare
and pay distributions prior to the Closing in an amount equal to the highest
marginal federal individual income tax rate (39.6%), plus the highest Ohio
individual income tax rate (7.004%), multiplied by the total taxable income
reported by Drew to the Shareholders (on their respective federal tax forms K-1
and Drew's form 1120s, Schedule K) for (i) the tax year ended December 31, 1996,
and (ii) the tax year ended the day immediately prior to Closing, on a
cumulative basis (net of prior distributions related to the Shareholders' income
taxes for such tax years). The amount of these distributions is to be determined
in good faith by Drew's Vice President - Finance in consultation with Drew's
accountants, Deloitte & Touche LLP.
(e) Drew will use its best efforts to preserve the business organization of
Drew intact, to keep available to Purchaser the services of the present
officers, employees, distributors and agents of Drew and to preserve for
Purchaser the good will of suppliers, customers and others having business
relations with Drew and keep in force all contracts, agreements or arrangements
in existence on the date hereof.
(f) No increase will be made in the compensation or rate of compensation or
commissions payable or to become payable by Drew to any director, officer,
salaried employee earning $30,000 per annum or more, salesman, distributor or
agent, nor will there be made any general increase in compensation or rate of
compensation payable or to become payable to hourly employees or salaried
employees earning less than $7,500 per annum ("general increase" shall mean any
increase generally applicable to a class or group of employees and shall not
include increases granted to individual employees for merit, length of service,
change in position or responsibility or other reasons applicable to specific
employees and not generally to a class or group thereof), nor will any employee
be hired at a salary in excess of $30,000 per annum, and no bonus, profit
sharing or other extraordinary compensation will be paid by Drew and no employee
benefit arrangements of any kind will be adopted or entered into, or be amended,
modified or changed in any respect.
23
(g) No contract, agreement, obligation, lease, license or commitment or
extension or amendment of the same will be entered into or assumed by or on
behalf of Drew, except for normal and ordinary contracts, agreements or
commitments not involving payments or receipts by Drew of more than $100,000 in
the case of any single commitment for the purchase of raw materials, supplies or
other products or utilities or for the sale of products; nor will Drew enter
into, permit to be imposed or assume any lien, encumbrance, mortgage,
conditional sale or other title retention agreement, pledge, or charge of any
kind upon any of its properties or assets whether now owned or hereafter
acquired, or create or assume any obligation for borrowed money, or make any
loan or advance to or assume, guarantee, endorse or otherwise become liable with
respect to the obligations, stock or dividends of any person, firm, association,
corporation or business organization, or purchase or otherwise acquire any
stocks, bonds or other securities of, or any proprietary interest in, any
person, firm, association, corporation or business organization, or sell, lease,
abandon, assign, transfer, license or otherwise dispose of any real property,
machinery, equipment or other operating properties, patent, trademark, trade
name, brand name or copyright (or pending application for any patent, trademark
or copyright), invention, process, know-how, formula, trade secret or other
intangible asset.
(h) Drew will not merge, amalgamate or consolidate with any other
corporation or acquire all or substantially all of the stock or the business or
assets of any other person, firm, association, corporation or business
organization except those previously contracted and as are disclosed in Schedule
5.15 hereof.
(i) All buildings, offices, shops and other structures and all machinery,
equipment, tools, dies, fixtures, motor vehicles and other properties owned or
leased by Drew (whether under its control or the control of others) will be kept
and maintained in good operating condition and repair.
(j )Drew will duly and timely file all reports or returns required to be
filed with federal, state, local, foreign, state, local, foreign and other
authorities and will promptly pay all federal, state, local and foreign taxes,
assessments and governmental charges lawfully levied or assessed upon it or any
of its properties, and will duly observe and conform to all lawful requirements
of any governmental authority relative to any of its properties or to the
operation and conduct of its business and to all terms and conditions upon or
under which any of the properties are held. Except as set forth on Schedule
7.1(j), Drew will not enter into any agreements, waivers or other arrangements
providing for an extension or time with respect to the filing of any tax returns
or the payment or assessment of any tax or deficiency; provided that Drew may
contest in appropriate proceedings any and all such taxes and assessments which
may be contested in good faith and for which adequate provision has been made.
24
(k) No change will be made affecting the banking and safe deposit
arrangements and powers of attorney referred to in Section 5.31 hereof, no new
bank accounts or safe deposit boxes will be opened and no new powers of attorney
will be granted.
(l) Drew will continue to maintain in full force and effect all policies of
insurance now in effect or renewals thereof, will take out such additional
insurance as may be reasonably requested by Purchaser and will give all notices
and present all claims under all policies of insurance in due and timely
fashion. Notwithstanding the foregoing, Drew shall have the right to substitute
policies of insurance of equal amount and coverage provided that notice hereof
together with copies of such new policies is promptly delivered to Purchaser.
(m) From and after the date hereof, Drew will give to Purchaser's counsel,
accountants, investment bankers, commercial bankers and consultants, full access
during normal business hours throughout the period prior to the Closing to
Drew's plants, offices, properties, books, contracts, commitments, records and
affairs for purposes of inspection and audit and will provide, without cost or
expense, copies of all documents and information concerning the properties and
affairs of Drew as Purchaser may reasonably request. Drew will also give to (i)
engineers and other representatives of Purchaser reasonable access at reasonable
times during normal business hours to each of Drew's plants; and (ii)
Purchaser's accountants the opportunity to examine Deloitte & Touche LLP's audit
workpapers with respect to the audits for 1995 and 1996.
(n)(i) Shareholders shall give Purchaser and its representatives the right
to inspect all premises owned or leased by Drew (the "Premises") (including the
taking of soil, water and other samples), at Purchaser's expense, to determine
the existence of pollutants including, without limitation, asbestos, hazardous
materials or so-called BTX compounds. If any pollutants are suspected or found
or if a Phase II study shall be recommended and is completed by Purchaser,
Purchaser shall deliver a copy of its inspection report and Phase II study to
the Shareholders. If Purchaser, in its sole discretion, shall determine that the
aforesaid conditions at the Premises are materially adverse as to create
substantial future financial risk to Purchaser or Drew following Closing, then
Purchaser shall have the right, at its option, upon notice to the Shareholders,
to cancel this Agreement whereupon this Agreement shall be null and void and of
no further force or effect. Purchaser's sole remedy in respect of the foregoing
is limited to the right of cancellation set forth therein.
25
(ii) If prior to Closing any of the Premises shall be affected by a
discharge, dispersal, release or escape onto, over or beneath the Premises,
whether sudden and accidental or over the course of time, which may be deemed by
any governmental or public authority having or asserting jurisdiction to be an
environmental hazard of any nature or which may require the development or
implementation of a remedial program (collectively and individually "Hazardous
Materials"), Shareholders shall promptly give notice to Purchaser which shall
contain detailed information about such hazard and remedial program, information
as to the nature and extent of Drew's insurance coverage, if any, and the cost
to be incurred by Drew above available insurance coverage. If Purchaser, in its
sole discretion, shall determine that the aforesaid conditions at the Premises
are materially adverse as to create substantial future financial risk to
Purchaser or Drew following Closing, then Purchaser shall have the right, at its
option, upon notice to the Shareholders, to cancel this Agreement whereupon this
Agreement shall be null and void and of no further force or effect. Purchaser's
sole remedy in respect of the foregoing is limited to the right of cancellation
set forth therein.
(o) Shareholders shall give Purchaser and its representatives the right to
inspect the Premises for engineering, mechanical, electrical, plumbing, sewage
and structural deficiencies, at Purchaser's expense. If Purchaser, in its sole
discretion, shall determine that the aforesaid conditions at the Premises are
materially adverse as to create substantial future financial risk to Purchaser
or Drew following Closing, then Purchaser shall have the right, at its option,
upon notice to the Shareholders, to cancel this Agreement whereupon this
Agreement shall be null and void and of no further force or effect. Purchaser's
sole remedy in respect of the foregoing is limited to the right of cancellation
set forth therein.
(p) To fund the Purchase Price and to obtain expansion capital, the
Purchaser intends to offer its securities in a private placement through its
investment bankers. Shareholders undertake and agree to make themselves
available following execution of the Agreement to discuss Drew with investment
bankers and prospective investors in the private placement. Notwithstanding the
foregoing, Purchaser can provide no assurance that such private placement will
be completed. If such private placement is not completed by March 28, 1997 then
either Purchaser or Shareholders upon notice to the other party shall have the
right to cancel this Agreement whereupon such Agreement shall be null and void
and of no further force or effect.
(q) At or prior to Closing, Drew will purchase additional key person life
insurance insuring the lives of ▇▇▇▇▇▇▇▇ (up to an aggregate of $4 million) and
Shyjka (up to an aggregate of $1 million) and each of ▇▇▇▇▇▇▇▇ and Shyjka agree
to complete such insurance applications and submit to physical examinations if
required, to procure such insurance. ▇▇▇▇▇▇▇▇ and Shyjka represent that they
have no knowledge of any cause that would prevent the purchase of such life
insurance.
(r )Drew shall have the right to pay a bonus (up to $7,700 each) consistent
with prior bonuses of this nature to each of the Shareholders who are officers
to facilitate the repayment of certain obligations paid by Drew for the officers
and shall deduct payroll taxes and the amount of the obligations owed to Drew
and remit a net payroll check of $0 to such Shareholders.
26
7.2 Consents. Except as set forth on Schedule 7.2 heretofore delivered to
Purchaser by Shareholders, Shareholders covenant and agree to procure consents
of persons having leases or other contracts with Drew, which consents are
necessary to prevent such leases or other contracts from being in default as a
result of the purchase of Sellers Shares.
7.3 Non Union Pension Plan. Shareholders covenant and agree in regard to
Drew's existing defined benefit Pension Plan ("Non Union Plan") to execute and
deliver to Purchaser immediately prior to Closing, an agreement in form and
substance reasonably satisfactory to counsel to the Purchaser executed by all
necessary parties to enable Drew to immediately discontinue, (i) accruing
additional benefits, (ii) adding additional participants and, (iii) if
permissible, making additional contributions under the Non Union Plan and to
delay payment under the Plan to Shyjka for five (5) years following Closing.
Shareholders shall also use best efforts, together with Purchaser, following
execution of this Agreement, to extend the commencement date for payment of
vested benefits to ▇▇▇▇▇ ▇▇▇▇▇▇.
7.4 Drew's 1996 Financial Statements. Shareholders covenant and agree to
promptly deliver to Purchaser by March 15, 1997, or as soon thereafter as they
shall become available, the financial statements of Drew consisting of a Balance
Sheet at December 31, 1996 and Statements of Income and Cash Flow for the year
then ended, audited by Deloitte & Touche LLP. If delay shall occur in the
delivery of such financial statements beyond March 15, 1997, Purchaser shall
have the right to delay the Closing beyond March 28, 1997 by an equal amount of
time.
7.5 Covenant Relating to Books and Records. Purchaser hereby covenants and
agrees that in the event that Drew becomes subject to an audit by the Internal
Revenue Service or any state taxing authority, Purchaser will cooperate with the
Shareholders and make available to the Shareholders and their representatives
the books and records of Drew and/or copies thereof (at Shareholders' expense).
27
ARTICLE 8
CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions Precedent to Purchaser's Obligations. All obligations of
Purchaser under this Agreement are subject, at Purchaser's option, to the
fulfillment, prior to or at the Closing, of each of the following conditions:
(a) All representations and warranties contained in this Agreement and in
any statement (including financial statements), deed, certificate, schedule or
other document delivered pursuant hereto or in connection with the transactions
contemplated hereby, shall be true and accurate in all material respects as of
the date when made and shall be deemed to be made again at and as of the time of
the Closing and shall then be true and accurate in all material respects.
(b) The Selling Shareholders shall each have performed and complied with
all covenants, agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
(c) Each of the Selling Shareholders shall have delivered to Drew a
certificate dated the date of Closing, certifying to the fulfillment of the
conditions set forth in Section 8.1(a) and 8.1(b) hereof.
(d) Selling Shareholders have caused to be delivered to Purchaser
Shareholders Counsel Opinion dated the date of the Closing.
(e) All actions, corporate proceedings, instruments, and documents required
to carry out this Agreement, or incidental thereto, and all other related legal
matters, shall have been approved by Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C.,
counsel for Purchaser.
(f) The Selling Shareholders shall have delivered to Purchaser, or caused
to be delivered to Purchaser, executed employment agreements and non-competition
undertakings in the forms annexed hereto as Exhibits B, Exhibit C, Exhibit D and
Exhibit E.
(g No suit, action, investigation, inquiry or proceeding by any
governmental body, or other legal or administrative proceeding shall have been
instituted or threatened which questions the validity or legality of this
Agreement or any of the transactions contemplated hereby, or which seeks to
enjoin the consummation thereof.
(h) Selling Shareholders shall have delivered to Purchaser resignations of
▇▇▇▇▇▇▇▇ and Shyjka as directors of Drew.
28
(i)(i) Bank One shall have waived any default under its existing loan
agreement with Drew resulting from the transaction contemplated hereby, (ii)
Deloitte & Touche LLP shall deliver to Purchaser an opinion that the financial
statement of Drew based upon its December 31, 1996 audit, will not result in a
default under the Bank One loan agreement, a copy of which has heretofore been
delivered to Purchaser, and (iii) Ernst & Young LLP shall deliver to Purchaser a
preliminary pro forma balance sheet as of December 31, 1996, giving effect to
the purchase of Sellers Shares hereunder accompanied by its opinion
substantially to the effect that on the basis thereof Drew would not be in
default under the Bank One loan agreement.
(j) Drew shall have entered into employment agreements in form and
substance satisfactory to Purchaser with the following persons currently
employed by Drew, as follows: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
(k) Drew shall have delivered to Purchaser actuarial reports relating to
the Drew Plans providing that there has not been a material reduction in the
assets covered by either of the Drew Plans since December 31, 1995 as would give
rise to a liability of Drew that would have a material adverse effect upon the
financial condition of Drew.
8.2 Conditions Precedent to the Selling Shareholders' Obligations. All
obligations of the Selling Shareholders under this Agreement are subject, at the
Selling Shareholders' option, to the fulfillment, prior to or at the Closing, of
each of the following conditions:
(a) All representations and warranties of Purchaser contained in this
Agreement and in any statement (including financial statements), certificate,
schedule, or other document delivered pursuant hereto or in connection with the
transactions contemplated hereby shall be true and accurate in all material
respects as of the date when made and shall be deemed to be made again at the
time of the Closing and shall then be true and accurate in all material
respects.
(b) Purchaser shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be performed or complied
with by it prior to or at the Closing.
(c) Purchaser shall have delivered to Selling Shareholders a certificate
dated the date of closing, certifying the fulfillment of the conditions set
forth in Section 8.2(a) and 8.2(b) hereof.
(d) All actions, corporate proceedings, instruments, and documents required
to carry out this Agreement or incidental thereto, and all other related legal
matters, shall have been approved by Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇, counsel
for Selling Shareholders.
29
(e) The Employment agreements to each of ▇▇▇▇▇▇▇▇ and Shyjka shall have
been duly executed and delivered by Drew.
(f) The Shyjka Stock Option Agreement shall have duly executed and
delivered by Purchaser.
(g) The Registration Rights Agreement shall have been duly executed and
delivered by Purchaser.
(h) The aggregate unpaid principal balance of certain debentures currently
in the amount of $911,712, together with interest to the Closing, shall be paid
in full against receipt by Purchaser of such debentures duly endorsed in blank
with signature guarantee by a bank or New York Stock Exchange member firm. In
addition, Purchaser shall pay $51,500 as a premium required by the Shareholders
to be paid to the debenture holders in five (5) equal annual installments of
$10,300, without interest, commencing on the anniversary date of the Closing.
(i) Delivery of the Notes duly executed by Purchaser.
(j) Purchaser shall have caused to be delivered to selling Shareholders
Purchasers Counsel Opinion dated the date of Closing.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Shareholders. The Shareholders, jointly and
severally, agree that, notwithstanding the Closing, the sale of the Sellers
Shares provided for herein and regardless of any investigation at any time made
by or on behalf of Purchaser or of any information Purchaser may have in respect
thereof, the Shareholders, jointly and severally, will indemnify and hold
Purchaser and Drew harmless from and against any damage, liability, loss or
deficiency (including, without limitation, reasonable attorneys' fees and other
costs and expenses incident to any suit, action or proceeding) arising out of or
resulting from: (a) any inaccuracy in any representation or the breach of any
warranty made by the Shareholders herein or in any agreement, instrument or
document delivered pursuant to this Agreement, (b) any failure of the
Shareholders duly to perform or observe any term, provision, covenant,
agreement, or condition herein or in any agreement, instrument or document
delivered pursuant to this Agreement on the part of Shareholders to be performed
or observed, and (c) any liability or obligation arising with respect to Drew's
assets or the conduct of the Drew business prior to the Closing except as
hereafter disclosed hereunder including any Schedule hereafter delivered to
Purchaser in accordance with this Agreement. Notwithstanding anything herein to
the contrary, neither Purchaser nor Drew may bring a claim for indemnification
under this Section if the applicable statute of limitations with respect to such
claim has expired.
30
9.2 Indemnification by Purchaser. The Purchaser agrees that,
notwithstanding the Closing, the sale of the Sellers Shares provided for herein
and regardless of any investigation at any time made by or on behalf of
Shareholders or of any information Shareholders may have in respect thereof, the
Purchaser will indemnify and hold Shareholders harmless from and against any
damage, liability, loss or deficiency (including, without limitation, reasonable
attorneys' fees and other costs and expenses incident to any suit, action or
proceeding) arising out of or resulting from: (a) any inaccuracy in any
representation or the breach of any warranty made by the Purchaser herein or in
any agreement, instrument or document delivered pursuant to this Agreement, and
(b) any failure of the Purchaser duly to perform or observe any term, provision,
covenant, agreement, or condition herein or in any agreement, instrument or
document delivered pursuant to this Agreement on the part of Purchaser to be
performed or observed. Notwithstanding anything herein to the contrary,
Shareholders may not bring a claim for indemnification under this Section if the
applicable statute of limitations with respect to such claim has expired.
9.3 Limitation of Liability. None of the Parties shall assert any claim for
indemnification under Sections 9.1 or 9.2 unless the aggregate amount of all
claims of such party against the other party under this Agreement, on a
cumulative basis, exceeds Fifty Thousand ($50,000) Dollars, in which case the
indemnification shall be for that aggregate amount in excess of $50,000. Under
no circumstances shall the liability of the Shareholders in the aggregate
pursuant to this Article 9 exceed Four Million Six Hundred Thousand ($4,600,000)
Dollars as adjusted pursuant to Sections 2.3 and 2.4 hereof.
9.4 No Waiver. No failure or delay on the part of Purchaser in exercising
any right, power or remedy under this Agreement, or available to Purchaser at
law or in equity shall operate as a waiver of such right, power or remedy, nor
shall any single or partial exercise of any such right, power or remedy preclude
any or further exercise thereof or the exercise of any other right, power or
remedy available to Purchaser. Subject to the limitations of Section 9.3, the
remedies provided in this Agreement are cumulative and not exclusive of any
remedies available to any Party at law or equity.
9.5 Third Party Claims.
(a) In case of the assertion in writing of any claim initiated or asserted
by any person, firm, governmental authority or corporation other than Purchaser
or any affiliate of Purchaser (a "Third Party Claim") against Drew or the
commencement of any litigation asserting a Third Party Claim which may give rise
to any indemnification obligation of Shareholders (each an "Indemnitor") to
Purchaser or Drew under the provisions of this Article, Purchaser shall give
notice thereof as provided hereunder as promptly as practicable after
Purchaser's receipt of such written assertion or the commencement of such
litigation unless the failure to give such notice would not materially prejudice
Shareholders, such notice to be given by Purchaser not later than would
materially prejudice Shareholders if they chose to defend such litigation as
hereinafter provided. If Indemnitor demonstrates to Purchaser that Indemnitor
will be able to pay the full amount of potential liability in connection with
31
any Third Party Claim, Indemnitor may at its sole cost and expense, upon written
notice given to Purchaser within fifteen (15) days after its receipt of
Purchaser's notice under this Section 9.5, assume the defense, with counsel
reasonably satisfactory to Purchaser, of any such Third Party Claim or
litigation, provided that Indemnitor admits in writing to Purchaser its
liability solely as between it and Purchaser with respect to all material
elements thereof. If Indemnitor assumes the defense of any such claim or
litigation, the obligations of Indemnitor hereunder as to such claim or
litigation shall be limited to taking all steps necessary in the defense or
settlement thereof and to holding Purchaser harmless from and against any and
all losses, liabilities, expenses and damages caused by or arising out of any
settlement approved by Indemnitor or any judgment in connection with such claim
or litigation, and Purchaser shall make available or cause to be made available
to Indemnitor such books and records in Drew's possession as Indemnitor may
reasonably require in connection with such defense. Except with the express
prior written consent of Purchaser, Indemnitor shall not consent to the
settlement or entry of any judgment arising from any such claim or litigation
which in each case does not include as an unconditional term thereof the giving
by the claimant or plaintiff, as the case may be, to Purchaser of an
unconditional release from all liability in respect thereof unless Indemnitor
shall have actually paid the full amount of any such settlement or judgment.
Purchaser shall be entitled to be consulted about (but not control) the defense
of, and receive copies of all pleadings and other material papers in connection
with, any such claim or litigation. If Indemnitor does not assume the defense of
any such claim or litigation, Purchaser may defend the same in such manner as it
may deem appropriate, including but not limited to settling such claim or
litigation after giving reasonable notice of the same to Indemnitor on such
terms as Purchaser may deem appropriate, and Indemnitor will promptly reimburse
Purchaser in accordance with the provisions of this Section 9.5, provided that
Purchaser furnish Indemnitor with copies of all pleadings and other material
documents in connection with any such claim or litigation and that Indemnitor is
consulted about (albeit not in control of) such litigation. Anything contained
in this Section 9.5 to the contrary notwithstanding, (i) Indemnitor shall not be
entitled to assume the defense of any such claim or litigation if the Third
Party Claim seeks an order, injunction or other equitable relief against
Purchaser which, if successful, might materially interfere with, or adversely
affect, the operation of its business by Purchaser or Drew; and (ii) Purchaser
or Drew may defend any Third Party Claim to which Purchaser or Drew may have a
defense or counterclaim which Indemnitor is not entitled to assert to the extent
necessary to assert and maintain such defense or counterclaim provided that
Purchaser provide or cause to be provided to Indemnitor copies of all pleadings
and other material documents in connection with any such claim or litigation and
that Indemnitor is consulted about (albeit not in control of) such litigation.
(b) In case of the assertion in writing of any Third Party Claim or the
commencement of any litigation asserting a Third Party Claim which may give rise
to any obligation of Purchaser to Shareholders under the provisions of this
Section, Shareholders shall have the rights, duties and obligations of Purchaser
under Section 9.5 and Purchaser shall have the right, duties and obligations of
Shareholders.
32
ARTICLE 10
GENERAL
10.1 Expenses. Shareholders shall cause Drew to pay their counsel,
accountants and other advisors' fees and expenses arising in connection with the
negotiation and preparation of this Agreement, the consummation of the
transactions contemplated hereby and the preparation of the Shareholders tax
returns for 1996 and 1997. The counsel and accounting fees shall be limited to
$60,000 and $75,000, respectively.
10.2 Sales, Transfer and Documentary Taxes, etc. Shareholders shall pay all
sales, transfer and documentary taxes, if any, due as a result of the sale of
the Sellers Shares to Purchaser and all other fees applicable to Shareholders
directly relating to the transfer of the Sellers Shares to Purchaser.
10.3 Survival of Representations and Warranties. Each of the Parties
covenants and agrees that all of the representations warranties, covenants, and
agreements set forth in this Agreement shall survive the Closing for two and one
half (2 1/2) years except that:
(a) the representation in subsection 5.1 as it related to due organization
in Ohio and the entire representations in subsections 5.2 and 5.4 will survive
without limitation, and
(b) the representation in subsection 5.20 will survive for the period of
the applicable statute of limitations.
None of the representations and warranties shall be merged into any instruments
of transfer or other documents delivered by any of the Parties at Closing or at
any other time.
10.4 No Third Party Beneficiaries. Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the Parties or their
respective heirs, successors and assigns any rights, remedies, obligations, or
other liabilities under or by reason of this Agreement.
10.5 Notices. All notices permitted or required under this Agreement shall
be in writing and shall be either (a) delivered by personal service, (b)
delivered by courier service, (c) telecopied and confirmed immediately in
writing by a copy mailed by registered or certified mail, postage prepaid,
return receipt requested, or (d) sent by certified or registered mail, postage
prepaid, return receipt requested, to the parties hereto at their addresses set
forth below or at such other addresses which may be designated in writing by the
parties:
33
If to ▇▇▇▇▇▇▇▇ to:129 ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(▇▇▇)▇▇▇-▇▇▇▇
If to Shyjka to:112 ▇. ▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser to:BCAM International, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:Ruskin, Moscou, ▇▇▇▇▇ & Faltischek, P.C.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Such notices shall be effective upon receipt in the case of personal or courier
service or telecopier delivery and on the third (3rd) day after posting in the
U.S. mail.
10.6 Entire Agreement. This Agreement (including the Schedules hereto)
supersedes all prior agreements and understandings, oral and written, between
the parties with respect to the subject matter, and this Agreement constitutes
the entire agreement of the parties with respect to the subject matter hereof.
10.7 Headings. The article, section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original,
and all of which together shall be deemed to be one and the same instrument.
34
10.9 Governing Law. This Agreement shall be construed as to both validity
and performance and governed by and enforced in accordance with the laws of the
State of Ohio, without giving effect to the choice of law principles.
10.10 Severability. If any term, covenant, condition, or provision of this
Agreement or the application thereof to any circumstance shall be invalid or
unenforceable to any extent, the remaining terms, covenants, conditions, and
provisions of this Agreement shall not be affected and each remaining term,
covenant, condition, and provision of this Agreement shall be valid and shall be
enforceable to the fullest extent permitted by law. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
10.11 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by all Parties.
10.12 Assignment. None of the Parties shall assign its rights or
obligations under this Agreement without the prior written consent of the other
Parties, except that Purchaser may assign this Agreement to any Affiliate of
Purchaser without the consent of Shareholders.
10.13 Successors and Assigns. The covenants, agreements, and conditions
contained or granted shall be binding upon and shall inure to the benefit of
Purchaser and Shareholders and their respective heirs, successors and permitted
assigns.
10.14 No Joint Venture. The Parties, by entering into this Agreement and
consummating the transactions contemplated in this Agreement, shall not be and
shall not be considered a partner or joint venturer of one another.
10.15 Construction of Agreement. This Agreement was negotiated at arm's
length by the Parties and their respective counsel. This Agreement shall not be
construed as having been "drafted" by any one Party and shall not be construed
against any Party as a drafting party.
35
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
BCAM INTERNATIONAL, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------
▇▇▇▇▇ ▇▇▇▇▇▇
36
E-4