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EXHIBIT 2.01
STOCK PURCHASE AGREEMENT
between
WATERLINK, INC.
"Purchaser"
and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
and
LaSALLE NATIONAL BANK,
not in its individual or corporate capacity,
but solely as Trustee of the
HYCOR CORPORATION EMPLOYEE
STOCK OWNERSHIP TRUST
"Sellers"
CONCERNING THE ACQUISITION OF
ALL OF THE OUTSTANDING SHARES OF
HYCOR CORPORATION
September 30, 1997
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TABLE OF CONTENTS
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PAGE
ARTICLE I PURCHASE PRICE OF SHARES; MANNER OF PAYMENT........................................2
1.1 PURCHASE PRICE OF THE SHARES..........................................................2
1.2 MANNER OF PAYMENT.....................................................................2
1.3 EARN-OUT..............................................................................3
ARTICLE II REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ▇▇▇▇▇▇▇▇............................6
2.1 ORGANIZATION AND STANDING.............................................................6
2.2 CONFLICTS; CONSENTS...................................................................6
2.3 CAPITAL STOCK.........................................................................7
2.4 TITLE TO SHARES; INVESTMENTS OF THE CORPORATION.......................................7
2.5 OUTSTANDING OPTIONS AND WARRANTS......................................................7
2.6 BUSINESS RELATIONS....................................................................8
2.7 REAL PROPERTY.........................................................................8
2.8 TITLE TO AND CONDITION OF ASSETS......................................................9
2.9 FINANCIAL STATEMENTS.................................................................10
2.10 ABSENCE OF CERTAIN CHANGES..........................................................10
2.11 ABSENCE OF UNDISCLOSED LIABILITIES..................................................12
2.12 TAXES...............................................................................12
2.13 INDEBTEDNESS TO OFFICERS, DIRECTORS AND SHAREHOLDERS................................14
2.14 [ARTICLES] [CERTIFICATE] OF INCORPORATION AND [BYLAWS] [REGULATIONS]................14
2.15 CORPORATE MINUTES...................................................................14
2.16 BROKERAGE AND FINDER'S FEES.........................................................14
2.17 ACCOUNTS RECEIVABLE.................................................................14
2.18 EMPLOYMENT MATTERS..................................................................14
2.19 NO DEFAULTS.........................................................................15
2.20 MATERIAL CONTRACTS..................................................................15
2.21 PURCHASE ORDERS.....................................................................16
2.22 INDEBTEDNESS........................................................................16
2.23 LITIGATION..........................................................................16
2.24 INSURANCE...........................................................................17
2.25 TRANSACTIONS WITH OFFICERS, ETC.....................................................17
2.26 EMPLOYEES...........................................................................17
2.27 TRADEMARKS, COPYRIGHTS AND SIMILAR MATTERS..........................................18
2.28 EMPLOYEE BENEFIT PLANS AND OTHER PLANS..............................................19
2.29 ENVIRONMENTAL MATTERS...............................................................21
2.30 BANK ACCOUNTS.......................................................................25
2.31 COMPLIANCE WITH LAWS................................................................25
2.32 POWERS OF ATTORNEY..................................................................26
2.33 LICENSES AND RIGHTS.................................................................26
2.34 SCHEDULE OF GOVERNMENT REPORTS......................................................26
2.35 PRODUCTS............................................................................26
2.36 CASUALTY OCCURRENCES................................................................26
2.37 INVENTORY...........................................................................27
2.38 CAPITAL EXPENDITURE PLANS...........................................................27
2.39 MATERIAL MISSTATEMENTS OR OMISSIONS.................................................27
2.40 EMPLOYMENT AGREEMENT................................................................27
2.41 LEASE...............................................................................27
2.42 INVESTMENT LETTER...................................................................27
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ARTICLE II A REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ESOP.........................27
2.1A CONFLICTS; CONSENTS.................................................................27
2.2A TITLE TO SHARES; INVESTMENTS OF THE CORPORATION.....................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER.....................................28
3.1 ORGANIZATION.........................................................................28
3.2 CAPITALIZATION.......................................................................28
3.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.....................29
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS................................................29
3.5 SEC REPORTS AND FINANCIAL STATEMENTS.................................................30
3.6 ABSENCE OF CERTAIN CHANGES...........................................................31
3.7 NO DEFAULT...........................................................................31
ARTICLE IV CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER.................................31
4.1 REPRESENTATIONS TRUE.................................................................31
4.2 ALL CONSENTS OBTAINED................................................................32
4.3 PERFORMANCE AND OBLIGATIONS..........................................................32
4.4 RECEIPT OF DOCUMENTS BY PURCHASER....................................................32
4.5 NO LITIGATION........................................................................33
4.6 EMPLOYMENT AGREEMENT.................................................................33
4.7 DELIVERY OF BOOKS AND RECORDS........................................................33
4.9 REAL PROPERTY LEASE..................................................................33
4.10 INVESTMENT LETTER...................................................................33
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS....................................33
5.1 REPRESENTATIONS TRUE.................................................................33
5.2 RECEIPT OF DOCUMENTS BY SELLERS......................................................33
5.3 NO LITIGATION........................................................................34
5.4 REAL PROPERTY LEASE..................................................................34
5.5 EMPLOYMENT AGREEMENT.................................................................35
5.6 BONUS PLAN...........................................................................35
ARTICLE VI CLOSING..........................................................................35
ARTICLE VII TERMINATION OF AGREEMENT........................................................35
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; DISPUTES..........36
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...........................................36
8.2 SELLERS' INDEMNIFICATION.............................................................36
8.3 DEFENSE OF CLAIM.....................................................................38
8.4 PURCHASER'S INDEMNIFICATION..........................................................38
8.5 INDEMNIFICATION BASKET...............................................................39
8.6 LIMITATION ON INDEMNIFICATION........................................................39
ARTICLE X ASSIGNMENT, THIRD PARTIES, BINDING EFFECT.........................................39
ARTICLE X ASSIGNMENT, THIRD PARTIES, BINDING EFFECT.........................................39
ARTICLE XI EXPENSES.........................................................................40
ARTICLE XII NOTICES.........................................................................40
ARTICLE XIII REMEDIES NOT EXCLUSIVE.........................................................41
ARTICLE XIV NON-COMPETITION.................................................................42
14.1 NON-COMPETITION AGREEMENT...........................................................42
14.2 DISCLOSURE OF CONFIDENTIAL INFORMATION..............................................43
ARTICLE XV MISCELLANEOUS....................................................................43
15.1 COUNTERPARTS........................................................................43
15.2 CAPTIONS AND SECTION HEADINGS.......................................................43
15.3 WAIVERS.............................................................................44
15.4 RIGHT OF INSPECTION.................................................................44
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15.5 AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS............................................44
15.6 ENTIRE AGREEMENT....................................................................44
15.7 GOVERNING LAWS......................................................................44
15.8 KNOWLEDGE...........................................................................44
15.9 PRESS RELEASES......................................................................44
15.10 RELEASE OF GUARANTY................................................................45
15.10 ESOP PLAN TRUSTEE..................................................................45
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made this 30th day of
September, 1997, among Waterlink, Inc., a Delaware corporation ("Purchaser"),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") and LaSalle National Bank, not in its individual
or corporate capacity, but solely as Trustee of the Hycor Corporation Employee
Stock Ownership Trust (the "ESOP", and together with ▇▇▇▇▇▇▇▇, collectively
referred to herein as "Sellers"), the shareholders of Hycor Corporation, a
Delaware corporation (the "Corporation").
R E C I T A L S:
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A. Sellers own all the issued and outstanding shares of capital stock of
the Corporation.
B. On the terms and subject to the conditions of this Agreement, and
subject to the performance by the parties of their respective obligations under
this Agreement, Sellers desire to sell, and Purchaser desires to purchase, all
of the issued and outstanding shares of capital stock of the Corporation at the
Closing (as hereinafter defined) for the purchase price described in Article I
of this Agreement.
NOW, THEREFORE, Purchaser and Sellers, intending to be legally bound,
agree as follows:
ARTICLE I
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PURCHASE PRICE OF SHARES; MANNER OF PAYMENT
-------------------------------------------
1.1 PURCHASE PRICE OF THE SHARES. On the terms and subject to the
conditions of this Agreement, the Sellers shall, with all transfer taxes of any
kind prepaid, convey, assign and transfer to Purchaser at the Closing all of the
Shares (as defined in Section 2.3), free and clear of all liens, charges,
security interests, adverse claims, pledges, encumbrances and demands
whatsoever. Purchaser shall purchase all of the Shares for an aggregate purchase
price of Fifteen Million Five Hundred Thousand Dollars ($15,500,000.00) plus the
Earn-Out Payments (as defined below), if any (the "Purchase Price"). The
Purchase Price will be paid to Sellers in the manner set forth in Section 1.2
below.
1.2 MANNER OF PAYMENT. The Purchase Price will be paid as follows:
(a)Cash in the amount of Seven Million Six Hundred and
Thirty-Three Thousand Dollars ($7,633,000.00) will be paid to ▇▇▇▇▇▇▇▇ at
the Closing, and cash in the amount of Four Million Eight Hundred and
Sixty-Seven Thousand Dollars ($4,867,000.00) will be paid to the ESOP at
the Closing, in each case by wire transfer to an account designated by
each of ▇▇▇▇▇▇▇▇ and the ESOP, as applicable.
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(b) At the Closing, Purchaser will issue to ▇▇▇▇▇▇▇▇ Purchaser's
subordinated convertible promissory note (the "Subordinated Note") in the
form of EXHIBIT "A" to this Agreement, dated as of the Closing Date and
payable to ▇▇▇▇▇▇▇▇ in the aggregate principal amount of Two Million Two
Hundred and Fifty Thousand Dollars ($2,250,000.00), which will be
convertible into shares of Common Stock of Purchaser, par value $.001 per
share ("Purchaser Common Stock") at $4.00 over the closing price of the
Purchaser Common Stock on the New York Stock Exchange Inc. ("NYSE") on
the Trading Day (as defined in Section 8.2) prior to the Closing Date.
(c) The maximum number of shares of Purchaser Common Stock having
an aggregate value of not more than Seven Hundred and Fifty Thousand
Dollars ($750,000.00), valued at the closing price of the Purchaser
Common Stock on the NYSE on the Trading Day prior to the Closing Date, to
be issued to ▇▇▇▇▇▇▇▇ as soon as practicable after the Closing Date. In
addition, to the extent that the closing price of the Purchaser Common
Stock on the NYSE on January 30, 1998 is less than the closing price of
the Purchaser Common Stock on the NYSE on the Trading Day prior to the
Closing Date by more than twenty percent (20%), Purchaser will issue to
▇▇▇▇▇▇▇▇, ▇▇ soon as practicable after January 30, 1998, a number of
additional shares of Purchaser Common Stock such that the aggregate value
of such shares, together with the shares of Purchase Common Stock to be
delivered pursuant to the preceding sentence, will have an aggregate
value of Seven Hundred and Fifty Thousand Dollars ($750,000.00) on
January 30, 1998.
(d) Subsequent to the Closing, Purchaser will pay to Sellers the
Earn-Out Payments referred to in Section 1.3 below, if any, in the
maximum amount of One Million Dollars ($1,000,000). Purchaser shall pay
▇▇▇▇▇▇▇▇ 68.6% of any such Earn-Out Payment, and shall pay the ESOP the
remaining 31.4%.
1.3 EARN-OUT.
(a) In addition to the payments referred to in Section 1.2 above
and with respect to Purchaser's fiscal year ending September 30, 1998
(the "Earn-Out Period"), Purchaser shall pay to Sellers the aggregate
amount set forth below (the "Earn-Out Payment") based on the adjusted
earnings before interest and taxes ("Adjusted EBIT") (as more fully
defined below) of the Corporation. The Earn-Out Payment, if any, shall be
paid to Sellers within fifteen (15) days following the completion of the
audited financial statements for the Earn- Out Period. Upon paying the
Earn-Out Payment, Purchaser shall deliver to each of the Sellers, (i) the
Corporation's financial statements covering the respective fiscal year
during the Earn-Out Period, and (ii) a statement setting forth the
computation and amount of Adjusted EBIT for the Earn-Out Period (the
"Earn-Out Statement").
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(b) "Adjusted EBIT" for any period of determination shall mean the
earnings before interest (expense or income) and federal, state and local
income taxes of any nature whatsoever of the Corporation and determined
as if the Corporation was an independent corporate entity whether or not
it is subsequently merged into another entity or other businesses or
assets not relating to the Corporation are operated or acquired by the
Corporation, determined in accordance with generally accepted accounting
principals consistently applied, from period to period, based on the
Financial Statements (defined below) at the Closing. Adjusted EBIT for
the Earn-Out Period shall be determined in a manner consistent with the
Financial Statements as defined in Section 2.9 herein. In determining
Adjusted EBIT for purposes of this Section 1.3, no effect shall be given
to (i) expenses allocated by Purchaser or any other direct or indirect
parent corporation of the Corporation unless such expenses (A) are
comparable to and replace expenses incurred by the Corporation prior to
the Closing or (B) are incurred for sales, marketing, product development
or similar purposes which provide commensurate benefits to the
Corporation's operations, (ii) expenses incurred in connection with new
projects or ventures outside the normal course of business, (iii)
expenses incurred as a result of long-term investments made by the
Corporation during the Earn-Out Period, or (iv) goodwill expenses,
depreciation or amortization resulting from the purchase of the Shares
hereunder. In determining Adjusted EBIT for purposes of this Section 1.3,
the Corporation shall receive credit for all sales by the Corporation
within Purchaser's affiliated group at the Corporation's historical
margins for such sales. In determining Adjusted EBIT for purposes of this
Section 1.3, the parties shall deduct any amounts owed to Purchaser
pursuant to Article VIII hereof at the time of such calculation. In
addition, for purposes of calculating Adjusted EBIT, the President of the
Corporation may adjust the amounts of any vacation or warranty accruals
with respect to the Earn-Out Period, so long as such adjustments are done
in accordance with generally accepted accounting principals. It is the
intent of the parties that Adjusted EBIT, determined for purposes of
computing the Earn-Out Payments, be an equitable measurement of the
performance of the business of the Corporation being acquired hereby,
without giving effect to extraordinary revenues and expenses associated
with the operation of such business by Purchaser after the Closing, and
giving effect to the manner in which the business of the Corporation was
conducted prior to the Closing, and each party agrees to cooperate in
good faith toward the determination of Adjusted EBIT in a manner
consistent with such intent.
(c) The Earn-Out Payment shall equal zero if Adjusted EBIT is less
than One Million Nine Hundred Thousand Dollars ($1,900,000.00). In the
event Adjusted EBIT equals or exceeds One Million Nine Hundred Thousand
Dollars ($1,900,000.00), then the Earn-Out Payment shall equal (i) Five
Hundred Thousand Dollars ($500,000.00) PLUS (ii) the amount by which
Adjusted EBIT exceeds One Million Nine Hundred Thousand Dollars
($1,900,000.00); PROVIDED, HOWEVER, that the maximum Earn-Out Payment to
be paid pursuant to this Section 1.3 shall be One Million Dollars
($1,000,000.00).
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In the event that Adjusted EBIT for the Earn-Out Period exceeds
Two Million Four Hundred Thousand Dollars ($2,400,000.00), then, in
addition to the Earn-Out Payment, Purchaser will grant options to
purchase an aggregate of Thirty Thousand (30,000) shares of Purchaser
Common Stock, to employees of the Corporation to be designated by the
President of the Corporation and agreed to by Purchaser's Compensation
Committee; provided, however, that at least 10,000 of such options shall
be granted to ▇▇▇▇▇▇▇▇. Such options would be granted as soon as
practicable after such concurrence by Purchaser's Compensation Committee
at the fair market value of Purchaser Common Stock on the date of grant,
all in accordance with the provisions of Purchaser's 1997 Omnibus
Incentive Plan and having such other provisions as such Compensation
Committee determines.
(d) Each of ▇▇▇▇▇▇▇▇ and the ESOP shall have thirty (30) days from
the date the Earn-Out Statement is received by Sellers to furnish
Purchaser with a letter requesting access to the books and records of the
Corporation necessary to compute Adjusted EBIT and upon receipt of such
request, Purchaser shall promptly make available such books and records
to Sellers. Sellers shall have thirty (30) days after such access is
granted to furnish Purchaser with a letter setting forth those items with
which they disagree and the reasons for each such disagreement. Sellers
and Purchaser shall promptly seek to reconcile any such disagreement. If
Sellers and Purchaser fail to reach an agreement within thirty (30) days
of receipt by Purchaser of such letter, then the independent accounting
firm of Peat Marwick, LLP ("KPMG") (subject to the sentence below) shall
be retained by Purchaser and Sellers to settle any remaining
disagreement, and the decision of said firm shall be final and binding on
all parties to this Agreement. In the event KPMG is unable to fulfill the
role for which it is retained pursuant to the preceding sentence, then
Sellers, on the one hand, and Purchaser, on the other hand, shall each
designate one (1) independent public accounting firm and the firms so
designated shall select an independent public accounting firm and the
decision of said firm shall be final and binding on all parties to this
Agreement. The fees of all accounting firms involved shall be paid by the
party which fails to prevail with respect to the dispute. For purposes of
this paragraph, in the event the amount of Adjusted EBIT as finally
determined is greater by more than ten percent (10%) than the amount of
Adjusted EBIT initially determined by Purchaser, Sellers shall be the
prevailing party. In all other cases, Purchaser shall be the prevailing
party. The payment of the portion of the Earn-Out Payment in dispute, if
any, or overpayment due to Purchaser, if any, as the case may be,
ultimately determined (pursuant to the procedures set forth in this
paragraph) to be due Sellers or Purchaser shall be made within fifteen
(15) days of such determination.
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ARTICLE II
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REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF ▇▇▇▇▇▇▇▇
------------------------------------------------------
▇▇▇▇▇▇▇▇ represents and warrants to, and agrees with, Purchaser as follows:
2.1 ORGANIZATION AND STANDING.
(a) Each of the Corporation and each of its subsidiaries (the
"Subsidiaries"), each of which is listed on the attached SCHEDULE 2.1, is
a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite
corporate or other power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority
and governmental approvals would not have a material adverse effect on
the Corporation and its Subsidiaries, taken as a whole. The Corporation
and each of its subsidiaries is duly qualified or licensed to do business
and in good standing 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 or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not have a
material adverse effect on the Corporation and its subsidiaries, taken as
a whole.
(b) Set forth on SCHEDULE 2.1 is a true and correct list of all
jurisdictions in which the Corporation and each Subsidiary is qualified
to do business as a foreign corporation in each jurisdiction where it
owns or leases property.
2.2 CONFLICTS; CONSENTS.
(a) Except as set forth on SCHEDULE 2.2, the execution, delivery
and consummation of this Agreement by ▇▇▇▇▇▇▇▇ (i) does not now and will
not, with the passage of time, the giving of notice or otherwise, result
in a violation or breach of, or constitute a default under, any term or
provision of any indenture, mortgage, deed of trust, lease, instrument,
order, judgment, decree, rule, regulation, law, contract, agreement or
any other restriction to which ▇▇▇▇▇▇▇▇ or the Corporation is a party or
to which ▇▇▇▇▇▇▇▇ is subject or bound or to which the Corporation or any
of its assets are subject or bound; (ii) will not result in the creation
of any lien or other charge upon any assets of the Corporation; and (iii)
will not result in any acceleration or termination of any loan or
security interest agreement to which the Corporation is a party or to
which the Corporation or any of its assets is subject or bound; in each
case except, individually or in the aggregate, where such default, lien,
charge, acceleration or termination would not have a material adverse
effect on the
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financial condition of the Corporation and its subsidiaries taken as a
whole, or on the ability of the parties to consummate the transactions
contemplated by this Agreement.
(b) Except as may be listed on SCHEDULE 2.2, no approval or
consent of any person, firm or other entity or governmental body is or
was required to be obtained by ▇▇▇▇▇▇▇▇, the ESOP, the Corporation or any
Subsidiary for the authorization of this Agreement or the consummation by
▇▇▇▇▇▇▇▇ and the ESOP of the transactions contemplated by this Agreement.
▇▇▇▇▇▇▇▇ is authorized to enter into this Agreement and consummate the
transactions contemplated hereby and upon the execution hereof, this
Agreement will constitute the legal, valid and binding obligation of
▇▇▇▇▇▇▇▇ enforceable against ▇▇▇▇▇▇▇▇ in accordance with its terms.
2.3 CAPITAL STOCK. The Corporation is authorized to issue 176,800
shares, 125,000 of which are designated as Common Stock, par value $0.10 per
share, of which 75,000 shares are issued and outstanding (the "Common Shares"),
50,000 of which are designated as Series A Preferred Stock, par value $0.01 per
share, of which 31,298.6315 shares are issued and outstanding (the "Preferred
Shares") (collectively, the "Shares"), and 1,800 of which are designated as
Series B Preferred Stock, par value $0.01 per share, none of which are issued
and outstanding. All the Shares are duly authorized, validly issued, fully paid
and nonassessable and were not issued in violation of preemptive or any other
rights, including any rights under any federal or state securities laws, of any
shareholder. The Corporation owns of record and beneficially with good and
marketable title thereto, free and clear of all liens, charges, security
interests, adverse claims, pledges, encumbrances and demands whatsoever, all of
the outstanding stock of each of the Subsidiaries.
2.4 TITLE TO SHARES; INVESTMENTS OF THE CORPORATION.
(a) All the Common Shares are owned by ▇▇▇▇▇▇▇▇ of record and
beneficially with good and marketable title thereto, free and clear of
all liens, charges, security interests, adverse claims, pledges,
encumbrances and demands whatsoever.
(b) Other than the capital stock of the Subsidiaries, the
Corporation has no direct or indirect equity, debt or other interest in
any entity, corporate or otherwise, or any right, warrant or option to
acquire any such interest.
2.5 OUTSTANDING OPTIONS AND WARRANTS. Except as set forth on SCHEDULE
2.5, other than the Preferred Shares, there are no subscriptions, options,
warrants, rights, puts, calls, commitments or agreements (respecting issuance,
redemption, repurchase, voting or otherwise) relating to, nor any outstanding
securities convertible into, any shares of capital stock or other equity
interest of the Corporation or any Subsidiary, or into any such convertible
securities, and neither ▇▇▇▇▇▇▇▇, the Corporation, any Subsidiary, nor to
▇▇▇▇▇▇▇▇'▇ knowledge, the ESOP, has agreed to issue, purchase, sell or transfer
any of same, except as provided in this Agreement.
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2.6 BUSINESS RELATIONS. Other than as set forth on SCHEDULE 2.6(a),
neither the Corporation nor any Subsidiary is required, in the ordinary course
of business, to provide any bonding or any other financial security arrangements
in connection with any transactions with any customers or suppliers. Neither
▇▇▇▇▇▇▇▇ nor the Corporation has received any notice of any disruption
(including, without limitation, delayed deliveries or allocations by suppliers)
in the availability of any materials or products used in the Corporation's
business and has no reason to believe that any such disruption will occur. There
are no sole source suppliers of goods, equipment or services used by the
Corporation (other than public utilities) with respect to which practical
alternative sources of supply are unavailable. Other than as set forth on
SCHEDULE 2.6(b), no single customer of the Corporation accounted for greater
than five percent (5%) of the Corporation's gross revenues for either the most
recently completed fiscal year or the portion of the current fiscal year ended
September 30, 1997.
2.7 REAL PROPERTY.
(a) SCHEDULE 2.7(a) is a true and complete list of (i) all real
property leases to which the Corporation or any Subsidiary is a party and
(ii) all options, deeds of trust, deeds of declaration, mortgages and
land contracts pursuant to or in which the Corporation or any Subsidiary
has any interest (collectively, the "Real Property"). ▇▇▇▇▇▇▇▇ has
furnished to Purchaser or its counsel true and complete copies of each
written contract and a written description of each oral contract relating
to the list set forth on SCHEDULE 2.7(a). Neither the Corporation nor any
Subsidiary owns any real property.
(b) With respect to the leased property comprising the Real
Property including all leasehold improvements (collectively, the "Leased
Property"), except as set forth on SCHEDULE 2.7(b):
(i) All leases are in writing and are duly executed and,
where required, witnessed, acknowledged and recorded to make them
valid and binding and in full force and effect for their full
term, and none have been modified, amended, sublet or assigned;
(ii) The rental set forth in each such lease is the
actual rental being paid, and there are no separate agreements or
understandings with respect to the same not set forth on SCHEDULE
2.7(b), and such rental represents the fair market value of such
Leased Property;
(iii) Where the Corporation is the lessee, the lessee
under each such lease has the full right to exercise any renewal
option and on due exercise will be entitled to enjoy the use of
the leased premises for the full term of such renewal option, and
such renewal option does not terminate on assignment of such
lease;
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(iv) There is no default by the Corporation or any other
party which affects the Leased Property;
(v) Where the Corporation is the lessee, on performance
by the lessee of the terms of each lease (all of which terms have
been fully performed by the lessee as of the date of this
Agreement and will have been fully performed as of the Closing
Date), the lessee has the full right to enjoy the use of the
premises demised for the full term of the lease without
disturbance by any other party, and there are no written or oral
contracts between the Corporation and any third party relating to
any claim by such third party of any right to all or any part of
the interest of the Corporation in any leasehold estate or
otherwise relating to the use and occupancy by the Corporation of
such estate;
(vi) Except as set forth on SCHEDULE 2.7(b), all
security deposits required by such leases have been made and have
not been refunded or returned, or their forfeiture claimed, in
whole or in part, by any lessor;
(vii) Where the Corporation is the lessee, all leasehold
improvements are in good operating or working condition and
repair, after taking into account ordinary wear and tear, and are
adequate for the operation of the business of the Corporation as
presently conducted. All contributions required to have been paid
by any lessor of property in respect of any leasehold improvements
have been paid;
(c) The Corporation will obtain from all lessors of any leasehold
interests comprising the Real Property a so-called "estoppel certificate"
(the "Estoppel Certificates") in the form attached as EXHIBIT "B" to this
Agreement.
2.8 TITLE TO AND CONDITION OF ASSETS. Except as set forth on SCHEDULE
2.8, the Corporation and each Subsidiary owns and possesses all right, title and
interest in and to its assets, including, without limitation (i) valid and
subsisting leasehold interests in all leasehold estates comprising the Real
Property, and (ii) good and merchantable title to all properties and assets
other than the Real Property, in each case free and clear of all conveyances,
conditions, easements, liens, charges, security interests, adverse claims,
encumbrances, encroachments, reservations, easements, limitations, servitudes,
other title defects or restrictions of any nature. All tangible assets of the
Corporation and each Subsidiary are in the Corporation's or such Subsidiary's
possession or under its control, and to ▇▇▇▇▇▇▇▇'▇ knowledge, all material
equipment used by the Corporation and each Subsidiary is in good operating
condition and repair, subject only to routine maintenance, taking into account
ordinary wear and tear, and is fit and adequate for the purposes intended. The
Corporation and each Subsidiary enjoys peaceful and quiet possession of its
assets pursuant to or by all of the deeds, bills of sale, leases, licenses and
other agreements under which it is operating its business and
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such assets constitute all of the property or assets necessary to conduct the
business of the Corporation and each Subsidiary as now conducted.
2.9 FINANCIAL STATEMENTS. Prior to the date of this Agreement,
▇▇▇▇▇▇▇▇ has provided Purchaser with the financial statements of the Corporation
listed below (the "Financial Statements"):
(a) Reviewed Balance Sheets at March 31, 1995, 1996 and 1997;
(b) Reviewed Statement of Operations for the years ended March
31, 1995, 1996 and 1997; and
(c) Unaudited Balance Sheets as of August 31, 1997, and
Unaudited Statements of Operations for the five (5) months ending August
31, 1997.
To the best of ▇▇▇▇▇▇▇▇'▇ knowledge, no material modifications that
should be made to the Financial Statements in order for them to be in conformity
with generally accepted accounting principles. The Financial Statements (i)
present fairly in all material respects, the Corporation's and the Subsidiaries'
consolidated financial position, results of its operations and changes in
stockholder's equity and cash flows at and for the periods therein specified,
(ii) are true and complete, and (iii) are consistent with the books and records
of the Corporation and the Subsidiaries.
2.10 ABSENCE OF CERTAIN CHANGES. Since March 31, 1997, the Corporation
and the Subsidiaries have actively conducted their respective businesses in the
ordinary and regular course consistent with past practice. Since such date,
there has not been any material adverse change in the business, condition
(financial or otherwise), assets, liabilities, results of operations or
prospects of the Corporation and the Subsidiaries, taken as a whole. To
▇▇▇▇▇▇▇▇'▇ knowledge, there has not occurred any event or governmental
regulation or order which could cause such a change, nor, to ▇▇▇▇▇▇▇▇'▇
knowledge, is the occurrence of any such event, regulation or order threatened.
Except as set forth on SCHEDULE 2.10 or salary increases in the ordinary course
of business, without limiting the generality of the foregoing, since March 31,
1997, there has not been:
(a) Any increase made or promised in the compensation or other
remuneration payable or to become payable by the Corporation or any
Subsidiary to any of its employees, agents or partners;
(b) Any mortgage or pledge of, or any other lien, charge or
encumbrance of any kind, on any of the assets, tangible or intangible, of
the Corporation or any Subsidiary;
(c) Any sale or transfer of any assets, except for sales of
inventory in the ordinary course of business, or settlement, cancellation
or release of any indebtedness owing to the Corporation or any Subsidiary
or of any other claims of the Corporation or any Subsidiary;
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14
(d) Any sale, license, assignment or transfer by the
Corporation or any Subsidiary of any patents, trademarks, trade names or
other similar intangible assets;
(e) Any amendments or termination of any material contract,
agreement or license to which the Corporation or any Subsidiary is a
party or to which the Corporation or any Subsidiary or any of their
respective assets are subject or bound;
(f) Any commitment made (through negotiations or otherwise) or
any liability incurred to any labor organization by the Corporation or
any Subsidiary;
(g) Any payment, declaration or setting aside by the
Corporation or any Subsidiary of dividends or a return of capital or any
distribution by the Corporation or any Subsidiary of any cash or other
assets to any shareholder in redemption of or as the purchase price for
any of the Corporation's or any Subsidiaries' capital stock or equity or
in discharge or cancellation in whole or in part of any indebtedness
owing (whether in payment of principal, interest or otherwise) to any
shareholder, other than dividends payable to the ESOP pursuant to the
terms of the Preferred Stock;
(h) Any discharge or satisfaction by the Corporation or any
Subsidiary of any lien, encumbrance, obligation or liability (accrued,
absolute, fixed or contingent), other than those shown on the August 31,
1997 balance sheet of the Financial Statements that have been discharged
or satisfied in the ordinary course without acceleration and other than
those incurred and discharged in the ordinary course of business
consistent with past practice;
(i) Any institution by the Corporation or any Subsidiary of a
bonus, stock option, profit-sharing, pension plan or similar arrangement
or any changes in any such existing plans;
(j) Any incurrence by the Corporation or any Subsidiary
(whether discharged or not) of any obligation or liability (whether
accrued, absolute, fixed or contingent) other than current liabilities
incurred, and obligations entered into, in the ordinary course of
business consistent with past practice;
(k) Any adverse change in collection loss experience;
(l) Any material loss, damage or destruction to any of the
Corporation's or any Subsidiaries' properties (whether or not covered by
insurance) or any labor trouble;
(m) Any change in accounting principles or practices from those
utilized in the preparation of the Financial Statements.
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2.11 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
the August 31, 1997 balance sheet of the Financial Statements, or on SCHEDULE
2.11, to ▇▇▇▇▇▇▇▇'▇ knowledge, neither the Corporation nor any Subsidiary is
obligated for, nor are any of its assets or properties subject to, any
liabilities or adverse claims or obligations, absolute or contingent, except
those incurred in the ordinary course of business since August 31, 1997, and, to
▇▇▇▇▇▇▇▇'▇ knowledge, neither the Corporation nor any Subsidiary is in default
with respect to any terms or conditions of any material liability or obligation.
There are no facts known to ▇▇▇▇▇▇▇▇ that might reasonably serve as a basis, in
whole or in part, for any material liabilities or obligations not disclosed in
this Agreement, in the Financial Statements, or in the Schedules attached
hereto.
2.12 TAXES.
(a) The Corporation and each Subsidiary, has filed, and will
file, on a timely basis, all income, franchise, sales, property,
employment and other tax returns and reports of every nature whatsoever
required to be filed by it (including any consolidated or combined return
required to be filed by it and any affiliated person or entity)
accurately reflecting all taxes owing to the United States or any other
government or any government subdivision, state, local, or foreign, or
any other taxing authority ("Tax Returns"), and has paid in full or made
adequate provision in the Financial Statements for the payment of all
taxes (including penalties, additions to tax and interest) for which it
has or may have liability. All such Tax Returns are true, correct and
complete in all respects. ▇▇▇▇▇▇▇▇ has no knowledge of any unassessed tax
deficiency proposed or threatened against the Corporation or any
Subsidiary as a result of the operation of its business. There are no
liens on the Corporation's or any Subsidiaries' assets as a result of any
tax liabilities except for taxes not yet due and payable. There are, and
after the date of this Agreement will be, no tax deficiencies (including
penalties, additions to tax and interest) of any kind assessed against or
relating to the Corporation or any Subsidiary with respect to any taxable
period ending on or before the Closing Date. There are, and after the
date of this Agreement, will be no federal income tax deficiencies
assessed against the Corporation or any Subsidiary pursuant to Treasury
Regulations Section 1.1502-6. There are, and after the date of this
Agreement, will be no other tax deficiencies relating to Tax Returns
which include the Corporation or any Subsidiary for periods ending on or
before the Closing Date. As of the Closing, as to all tax periods, or
portions thereof, which end prior to, or include, the Closing Date for
which no Tax Returns are yet due, the liability of the Corporation and
each Subsidiary for taxes allocable to periods (or portions thereof)
ending on or before the Closing Date does not exceed the amount accrued
on the Financial Statements for such taxes. The liability of the
Corporation and each Subsidiary for taxes has not increased since March
31, 1997, except in the ordinary course of business.
(b) Neither the Corporation nor any Subsidiary is a party to
any action or proceeding by any governmental authority for the assessment
or collection of taxes, nor has
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any such event been asserted or threatened. Neither the Corporation nor
any Subsidiary has filed any consent of the type described under Section
341(f) of the Internal Revenue Code of 1986, as amended (the "Code"), nor
is it subject to any accumulated earnings penalties. Neither the
Corporation nor any Subsidiary has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could oblige it to make any payments that would not be
deductible under Section 280G of the Code. The Corporation and the
Subsidiaries were never a member of any unitary group for purposes of any
state income or franchise tax laws. Neither the Corporation nor any
Subsidiary has been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii).
(c) Except as set forth on SCHEDULE 2.12, there are no
outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local, or foreign Tax
Return of the Corporation or any Subsidiary for any period. Neither the
Internal Revenue Service nor any state, local or foreign taxing authority
has audited any tax return or report filed by the Corporation or any
Subsidiary.
(d) ▇▇▇▇▇▇▇▇ has furnished to Purchaser complete and correct
copies of all Tax Returns filed by the Corporation and each Subsidiary
for all taxable years beginning after December 31, 1994.
(e) ▇▇▇▇▇▇▇▇ has furnished to Purchaser complete and correct
copies of all audit reports (or portions thereof) received by ▇▇▇▇▇▇▇▇ or
the Corporation or any Subsidiary from the U.S. Treasury Department which
relate to the Corporation or any Subsidiary for any taxable period
beginning after December 31, 1991. ▇▇▇▇▇▇▇▇ has furnished to Purchaser
complete and correct copies of all audit reports (or portions thereof)
received by ▇▇▇▇▇▇▇▇ or the Corporation from any state, local or foreign
taxing authority, which relate to the Corporation for any taxable period
beginning after December 31, 1991.
(f) SCHEDULE 2.12 sets forth all tax elections made by the
Corporation and each Subsidiary, all adjustments under Section 481(a) of
the Code which will affect the taxes of Purchaser for all taxable years
which end on or after the Closing Date and all tax rulings or closing
agreements to which the Corporation or any Subsidiary is a party.
SCHEDULE 2.12 sets forth all jurisdictions in which the Corporation or
any Subsidiary has filed or will file state income or franchise tax
returns for each taxable period, or portion thereof, ending on or before
the Closing Date.
(g) There are no tax liens currently in existence with respect
to the Corporation or any Subsidiary. There are no tax sharing agreements
or similar arrangements in effect that include the Corporation or any
Subsidiary.
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2.13 INDEBTEDNESS TO OFFICERS, DIRECTORS AND SHAREHOLDERS. Except as
set forth on SCHEDULE 2.13, neither the Corporation nor any Subsidiary is
indebted to any of its shareholders, officers or directors (or to members of
their immediate families) in any amount whatsoever other than for salaries
payable or for expenses incurred on behalf of the Corporation or any Subsidiary
in the ordinary course of business.
2.14 CERTIFICATE OF INCORPORATION AND BYLAWS. True, accurate and
complete copies of the Certificate of Incorporation and Bylaws of the
Corporation and each Subsidiary, together with all amendments thereto, have been
delivered to Purchaser or its counsel.
2.15 CORPORATE MINUTES. ▇▇▇▇▇▇▇▇ has furnished or made available to
Purchaser and its counsel the corporate record books of the Corporation and each
Subsidiary and the same are accurate and complete and reflect all resolutions
adopted and all actions taken, authorized or ratified by the shareholders and
directors of the Corporation and each Subsidiary. Copies of all corporate
minutes of meetings held and of all written actions taken after the date of this
Agreement will be furnished to Purchaser promptly, and in all events, prior to
the Closing Date.
2.16 BROKERAGE AND FINDER'S FEES. Neither ▇▇▇▇▇▇▇▇ nor any affiliate,
officer, director or agent of the Corporation or any Subsidiary has incurred any
liability to any broker, finder or agent for any brokerage fees, finder's fees,
or commissions with respect to the transactions contemplated by this Agreement.
2.17 ACCOUNTS RECEIVABLE. ▇▇▇▇▇▇▇▇ has previously delivered to
Purchaser an aging schedule as of a date not more than thirty (30) days prior to
the date of this Agreement, which is true, correct and complete, of the accounts
receivables, both trade and non-trade, of the Corporation as of that date.
▇▇▇▇▇▇▇▇ will update the list as of a date not more than five (5) days prior to
the Closing Date. The reserves for doubtful receivables and uncollectible
accounts that will be reflected on the books of the Corporation as of the
Closing Date will not exceed two percent (2%) of the then aggregate accounts
receivable. Other than retainages, the accounts receivable as reflected on the
books of the Corporation as of the Closing Date, net of such reserves, will be
fully collectible in the ordinary course of business within one hundred and
twenty (120) days after the Closing Date or such other period of time per the
payment terms related to such account receivable, if different, as set forth on
such aging schedule, without resort to legal proceedings.
2.18 EMPLOYMENT MATTERS.
(a) Except as set forth on SCHEDULE 2.18, neither the
Corporation nor any Subsidiary is a party to, participant in, or bound
by, any collective bargaining agreement, union contract or employment,
bonus, deferred compensation, insurance, pension, profit sharing or
similar personnel arrangement, any stock purchase, stock option or other
stock plans or programs or any employee termination or severance
arrangement.
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(b) Except as set forth on SCHEDULE 2.18, the employment by
the Corporation or any Subsidiary of any person (whether or not there is
a written employment agreement) may be terminated for any reason
whatsoever not inconsistent with current law, without penalty or
liability of any kind other than accrued vacation pay.
(c) Except as set forth on SCHEDULE 2.18, there are no active,
pending or, to ▇▇▇▇▇▇▇▇'▇ knowledge, threatened administrative or
judicial proceedings under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the Fair Labor Standards Act, the
Occupational Safety and Health Act, the National Labor Relations Act or
any other foreign, federal, state or local law (including common law),
ordinance or regulation relating to employees of the Corporation or any
Subsidiary.
(d) There are no pending or, to ▇▇▇▇▇▇▇▇'▇ knowledge,
threatened, labor difficulties.
2.19 NO DEFAULTS. Neither the Corporation nor any Subsidiary is in
default (nor is any such default alleged to exist) under the terms of any
material written or oral contract, agreement, lease, license, mortgage, deed of
trust, note, guaranty, instrument or understanding (collectively, "Contracts")
to which it is a party or to which any of its assets, business or operations is
subject, nor, to ▇▇▇▇▇▇▇▇'▇ knowledge, is any condition or event threatened,
which, after notice or the passage of time, or both, would constitute a default
under any Contract. To ▇▇▇▇▇▇▇▇'▇ knowledge, no such default, condition or event
exists or is alleged to exist with respect to the performance of any obligation
of any other party to any of such Contracts.
2.20 MATERIAL CONTRACTS.
(a) SCHEDULE 2.20(a) is a true and correct list of each
Contract to which the Corporation or any Subsidiary is a party or by
which any of its assets, businesses or operations is bound or affected.
SCHEDULE 2.20(a) includes a description of any consents or approvals
required of third parties under the terms of such Contracts for the
consummation of the transactions contemplated by this Agreement. SCHEDULE
2.20(a) excludes any Contract that (i) may be canceled by the Corporation
or any Subsidiary on thirty (30) days' notice or less without incurring a
liability or obligation on the part of the Corporation or any Subsidiary
for such cancellation, or (ii) involves or is reasonably expected to
involve the payment of consideration having an aggregate value of less
than One Hundred Thousand Dollars ($100,000). A true, correct and
complete copy of each written, and a description of each oral, Contract,
so listed has been delivered to Purchaser or its counsel.
(b) SCHEDULE 2.20(b) is a true and correct list of each
Contract with a customer of the Corporation in excess of One Hundred
Thousand Dollars ($100,000) that contains provisions (i) providing for
payment terms to the Corporation or any Subsidiary of forty-five
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(45) days or greater, (ii) permitting the customer to retain any portion
of the purchase price for the products or services to be provided thereby
as security for warranty claims or for any other purpose, or (iii)
providing for liquidated or stipulated damages.
2.21 PURCHASE ORDERS. SCHEDULE 2.21 is a true and complete list of all
purchase orders under which the Corporation or any Subsidiary is or will become
obligated to pay any particular vendor an aggregate sum in excess of Twenty
Thousand Dollars ($20,000).
2.22 INDEBTEDNESS. As of the Closing Date, neither the Corporation nor
any Subsidiary will have indebtedness for borrowed money, other than (i) trade
payables, (ii) license fees incurred in the ordinary course of business, (iii)
up to Eight Hundred Thousand Dollars ($800,000.00) of indebtedness incurred in
connection with the Corporation's acquisition, through its Subsidiary, of the
assets of Thickener Technologies, Inc., a Texas corporation; and (iv)
outstanding letters of credit.
2.23 LITIGATION. SCHEDULE 2.23 is a true and complete list of all
administrative or judicial proceedings to which the Corporation or any
Subsidiary is a party or, to the knowledge of ▇▇▇▇▇▇▇▇, to which it is
threatened to be made a party which relate, directly or indirectly, to the
Corporation or any Subsidiary or any of their respective assets, including,
without limitation, proceedings that could affect title to or interests in the
assets. There is no action, suit, claim, demand, arbitration or other proceeding
or investigation, administrative or judicial, pending or, to the knowledge of
▇▇▇▇▇▇▇▇, threatened against or affecting the Corporation or any Subsidiary or
any of their respective assets, including, without limitation, any relating to
so-called product liability, which, if adversely determined or resolved, would
have an adverse effect on the business, assets, condition (financial or
otherwise), results of operations or prospects of the Corporation and its
Subsidiaries, taken as a whole, or any provisions of, or the validity of, or
rights under, any leases or other operating agreements, licenses, permits or
grants of authority of the Corporation or any Subsidiary. Neither ▇▇▇▇▇▇▇▇ nor
the Corporation nor any Subsidiary has received written notice that the
Corporation or any Subsidiary is the subject of any governmental investigation
and neither the Corporation nor any Subsidiary is subject to, nor is it or has
it been in default with respect to, any order, writ, injunction or decree of any
court, or of any federal, state, local or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
SCHEDULE 2.23 indicates which of the matters listed are covered by valid
insurance and the extent of such coverage.
2.24 INSURANCE. SCHEDULE 2.24 is a true and correct list of all the
policies of insurance covering the business, properties and assets of the
Corporation and each Subsidiary presently in force (including as to each (i)
risk insured against, (ii) name of carrier, (iii) policy number, (iv) amount of
coverage, (v) amount of premium, (vi) expiration date and (vii) the property, if
any, insured), indicating as to each whether it insures on an "occurrence" or a
"claims made" basis. All of the insurance policies set forth on SCHEDULE 2.24
are in full force and effect and all premiums, retention
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amounts and other related expenses due have been paid, and neither the
Corporation nor any Subsidiary has received any written notice of cancellations
with respect to any of the policies.
2.25 TRANSACTIONS WITH OFFICERS, ETC.
(a) SCHEDULE 2.25(a) is a true and correct list of the
ownership of the Corporation or any Subsidiary in any entity that has any
existing contractual relationship, oral or written, or other business
relationship with ▇▇▇▇▇▇▇▇.
(b) SCHEDULE 2.25(b) is a true and correct list of all
Contracts (oral or written), including, but not limited to, any loans
(other than those set forth on SCHEDULE 2.13 of this Agreement or not
required to be set forth thereon) or leases, to which the Corporation or
any Subsidiary is a party and to which any of the officers, directors or
other employees or shareholders of the Corporation or any Subsidiary, or
members of their immediate families or other corporations, partnerships
or other entities in which any of them has a material interest, is also a
party. SCHEDULE 2.25(b) includes a list of indebtedness of any such
person or entity to the Corporation or any Subsidiary.
(c) Except as set forth on SCHEDULE 2.25(c), neither the
Corporation nor any Subsidiary nor any officer, director, employee or
shareholder of the Corporation or any Subsidiary, nor members of their
immediate families or other corporations, partnerships or other entities
in which any of them has a material interest, has any direct or indirect
interest in any competitor, supplier or customer of the Corporation or
any Subsidiary or in any person, firm or entity from whom or to whom the
Corporation or any Subsidiary leases any property, or in any other
person, firm or entity with whom the Corporation or any Subsidiary
transacts business of any nature.
2.26 EMPLOYEES. SCHEDULE 2.26 is a true and correct list of all
employees of the Corporation or any Subsidiary whose annual rate of compensation
exceeds Fifty Thousand Dollars ($50,000), their accrued vacation and sick pay,
the nature of their duties and the date and amount of their last increase in
compensation. A true, correct and complete copy of each written employment
contract and a description of each oral employment agreement with any employee
has been delivered to Purchaser or its counsel. As used in this Agreement, the
term "employees" includes employees, salesmen, agents, sales representatives and
all other persons associated with the Corporation or such Subsidiary.
2.27 TRADEMARKS, COPYRIGHTS AND SIMILAR MATTERS.
(a) Except as set forth on SCHEDULE 2.27, during the five
years preceding the Closing Date, neither the Corporation nor any
Subsidiary has been charged with infringement or violation of any patent,
trademark, service ▇▇▇▇, trade name or copyright.
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Neither the Corporation nor any Subsidiary is using or has not in any way
made use of any patentable or unpatentable invention, or any confidential
information or trade secret, of any former employer of any present or
past employee of the Corporation or any Subsidiary. All patents,
trademarks, service marks, trade names and copyrights (the "Specified
Items"), and all applications or registrations (including those whose use
is limited to one or more states of the United States), owned or used by
the Corporation or any Subsidiary are listed on SCHEDULE 2.27 and, to the
extent indicated, have been duly registered in, filed in or issued by the
United States Patent Office or the corresponding agency or office of each
of such states. Except as indicated on SCHEDULE 2.27, the Corporation or
such Subsidiary is the sole and exclusive owner of, or has the sole and
exclusive right to use, the Specified Items, except for the rights of
licensees (whose names and addresses are listed on SCHEDULE 2.27). Except
as set forth on SCHEDULE 2.27, neither the Corporation nor any Subsidiary
uses any of the Specified Items by consent of any other party and the
same are free and clear of any attachments, liens, claims, encumbrances
or agreements. Except as listed on SCHEDULE 2.27, there are no claims or
demands of any other person, firm or corporation pertaining to any of the
Specified Items, and no proceedings have been instituted, are pending or,
to the knowledge of ▇▇▇▇▇▇▇▇, are threatened which challenge the right of
the Corporation or any Subsidiary in respect of any of the Specified
Items. None of the Specified Items infringes on, or, to the knowledge of
▇▇▇▇▇▇▇▇, is being infringed on by others, and none of the Specified
Items is subject to any outstanding order, decree, judgment, stipulation
or agreement restricting the scope of its use.
(b) The Corporation and each Subsidiary has valid rights to
use its corporate name. Neither the Corporation nor any Subsidiary uses
such name by consent of any other person or entity, and the Corporation
and each Subsidiary uses such name free and clear of any attachments,
liens, claims, encumbrances or agreements. There are no claims or demands
of any other person or entity pertaining to the use of the names and no
proceedings have been instituted or, to the knowledge of ▇▇▇▇▇▇▇▇, are
threatened, which challenge the right of the Corporation or any
Subsidiary in respect of such names; and the use of such names by the
Corporation or any Subsidiary does not infringe on or, to the knowledge
of ▇▇▇▇▇▇▇▇, are not being infringed on by others, and are not subject to
any outstanding order, decree, judgment, stipulation or agreement
restricting the scope of their use.
(c) True, correct and complete copies of all patents,
trademarks, service marks, trade names and copyrights, and of all related
applications or registrations, that are listed on SCHEDULE 2.27 have been
delivered to Purchaser or its counsel.
2.28 EMPLOYEE BENEFIT PLANS AND OTHER PLANS. Except for the plans or
arrangements listed on SCHEDULE 2.28 (hereinafter referred collectively to as
the "Plans" and individually as the "Plan"), the Corporation does not, directly
or indirectly, maintain, sponsor or have an obligation or liability with respect
to, any "employee benefit plan," as defined in Section 3(3) of the Employee
Retirement
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Income Security Act of 1974, as amended ("ERISA"), executive compensation or
incentive plan, bonus or severance arrangement, employment contract, collective
bargaining agreement, union contract, deferred compensation agreement, stock
purchase or incentive plan or arrangement, or other employee benefit plan or
arrangement. For the purposes of this Agreement, "Controlled Group" shall mean
▇▇▇▇▇▇▇▇, the Corporation and any trade or business, whether or not
incorporated, which is treated together with ▇▇▇▇▇▇▇▇ or the Corporation under
Section 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code.
With respect to each Plan identified on SCHEDULE 2.28:
(a) All applicable ERISA and Code requirements with respect to
such Plan as to the filing of reports, documents and notices with the
Secretary of Labor, the Pension Benefit Guaranty Corporation, and the
Secretary of the Treasury, or the furnishing of such documents to
participants or beneficiaries, have been complied with in all respects by
such Plan or its administrators;
(b) No member of the Controlled Group, Plan, fiduciary of such
Plan or administrator of such Plan, has taken any action, or failed to
take any action, which action or failure could subject the Corporation,
or any employee of the Corporation to any liability for breach of any
fiduciary duty, or for any prohibited transaction (as defined in Section
4975 of the Code), with respect to or in connection with such Plan;
(c) There are no actions, suits or claims pending (other than
routine claims for benefits) or threatened against such Plan, the
Corporation, ▇▇▇▇▇▇▇▇, or against any fiduciary of such Plan;
(d) Such Plan, the fiduciaries of such Plan, Controlled Group
members and administrators of such Plan have at all times complied with
applicable requirements of ERISA, the Code, and any other applicable law
(including the Health Maintenance Organization Act of 1973, as amended)
governing such Plan, and such Plan has at all times been properly
administered in accordance with all such requirements of law and in
accordance with its terms to the extent consistent with all such
requirements of law;
(e) The Plan is not a "multiemployer plan" as described in
Section 3(37) of ERISA or Section 414(f) of the Code, nor is it subject
to Title IV of ERISA;
(f) All bonding required by applicable provisions of ERISA with
respect to the Plan has been obtained and is in full force and effect;
(g) No trust associated with the Plan has earned any
"unrelated business taxable income" (as such term is defined in Section
512 of the Code and the regulations thereunder) or "unrelated debt
financed income" (as such term is defined in Section 514 of the Code and
regulations thereunder);
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(h) If the Plan is an "employee pension benefit plan" (as
defined in ERISA Section 3(2)), the Plan and its associated trust
complies with the applicable provisions of the Code (including, but not
limited to, Code Sections 401(a), 401(a)(4), 410(b), 401(a)(26) and
501(a)), has received a favorable determination letter from the Internal
Revenue Service stating that the Plan qualifies under Section 401(a) and
that the associated trust, if any, qualifies under Section 501(a), has
been timely amended (and the amendment has been submitted to the Internal
Revenue Service for a favorable determination letter) with respect to
changes required by the Tax Equity and Fiscal Responsibility Act of 1982,
the Retirement Equity Act of 1984 and the Tax Reform Act of 1984 and is
being maintained in accordance with the changes required by the
previously described Acts, the Tax Reform Act of 1986 and the Omnibus
Budget Reconciliation Act of 1987, and subsequent legislation and
regulations;
(i) The Plan has not incurred any "accumulated funding
deficiency," as defined in Section 301(a)(2) of ERISA whether or not
waived;
(j) The Plan does not (i) provide for non-terminable or
non-alterable medical benefits for employees, dependents or retirees or
(ii) provide any benefits for any person upon or following retirement or
termination of employment except as otherwise required by Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code (herein
collectively referred to as "COBRA"), and then only to the extent the
person pays the "applicable premium" (as defined in Code Section
4980B(f)(4)) for such coverage;
(k) No events or changes have occurred or are expected to
occur with respect to the Plan that would cause an increase in the cost
of providing the benefits under the Plan;
(l) Full payment has been made of all amounts which ▇▇▇▇▇▇▇▇,
the ESOP, the Corporation or other member of the Controlled Group, is
required, under applicable law or under the Plan, to have paid as a
contribution or a benefit for the plan years of the Plan ended prior to
the date hereof. All contributions required to be made by, and all other
liability of, the Corporation with respect to the Plan for the periods
covered by the Financial Statements shall have been set forth on the
appropriate Financial Statement. Benefits under the Plan are as
represented and have not been increased subsequent to the date as of
which documents have been provided;
(m) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or officer
of the Corporation to severance pay, unemployment compensation or any
other payment, (ii) accelerate the time of payment or vesting under the
Plan, (iii) increase the amount of compensation due any such employee or
officer, (iv) except as specifically set forth herein, directly or
indirectly cause the Corporation to transfer or set aside any assets to
fund or otherwise provide for the benefits under the Plan
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for any current or former employee, officer or director, or (v) result in
any non-exempt prohibited transaction described in ERISA Section 406 or
Code Section 4975;
(n) ▇▇▇▇▇▇▇▇ has delivered or caused to be delivered to
Purchaser or Purchaser's counsel true and correct copies of the following
with respect to the Plan:
(i) A copy of the Plan and amendments thereto to the
date hereof;
(ii) A copy of each trust agreement and insurance
contract pertaining to the investment of the assets, if any, of
the Plan or the payment of benefits thereunder, including all
amendments to such documents to the date hereof;
(iii) The most recent determination letter issued by the
Internal Revenue Service with respect to the Plan for which a
determination letter has been issued and any pending determination
letter request with respect to the Plan;
(iv) The three (3) most recent Internal Revenue Service
Form 5500 series annual return/reports, including all applicable
Schedules and audited financial statements, filed with respect to
the Plan; and
(v) A copy of the latest summary plan description
(within the meaning of Section 10(a)(1) of ERISA) for the Plan and
each summary of material modifications (within the meaning of
Section 101(b)(2) of ERISA) thereto, each of which has been
provided to employees and filed with the Department of Labor.
2.29 ENVIRONMENTAL MATTERS.
(a) Definitions. For purposes of this Section 2.29:
(i) "Contaminant" means hazardous substances as that
term is defined in the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 ET SEQ.,
as amended ("CERCLA"), and any other individual or class of
pollutants, contaminants, toxins, chemicals, substances, wastes
or materials in their solid, liquid or gaseous phase, defined,
listed, designated, regulated, classified or identified under any
Environmental Law (defined below). This definition of Contaminant
includes asbestos and asbestos-containing materials, petroleum or
petroleum-based products or derivatives thereof, radioactive
materials, flammable explosives and polychlorinated biphenyls.
(ii) "Environmental Laws" means all applicable foreign,
federal, state and local laws, rules, regulations, codes, policies
and ordinances, and binding
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determinations, orders, permits, licenses, injunctions, writs,
decrees or rulings of any governmental or judicial authority,
relative to or that govern or purport to govern air quality, soil
quality, water quality, wetlands, natural resources, solid waste,
hazardous waste, hazardous or toxic substances, pollution or the
protection of public health, human health or the environment,
including, but not limited to, CERCLA, the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the
Safe Drinking Water Act (42 U.S.C. Section 201 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET
SEQ.) ("RCRA"), the Clean Air Act (42 U.S.C. Section 7401 ET
SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601
ET SEQ.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 ET SEQ.), and the Occupational Safety and
Health Act of 1970 (29 U.S.C. Section 651 ET SEQ.), as each of
these laws are amended from time to time and any analogous or
related statutes and regulations whether currently in existence
or hereafter enacted.
(iii) "Release" means any release, spill, emission,
leaking, pumping, pouring, emptying, disposing, injection,
deposit, discharge, dispersal, leaching, or migration into any
media, whether soil, surface water, ground water, building
interior or components, air or any combination of the foregoing,
and the movement of any Contaminant through any media, and
including the abandonment or discarding of barrels, containers and
other receptacles containing any Contaminant.
(iv) "Remedial Action" means any action to: (i)
investigate, study, clean up, remove, treat, dispose of or in any
other way address any Contaminant, including, but not limited to,
risk assessments and pilot treatment or feasibility studies; (ii)
prevent the Release or threatened Release, or minimize the further
Release of any Contaminant; and (iii) bring the existing
operations of the Corporation or any of its Subsidiaries in full
compliance with Environmental Laws.
(b) Except as set forth on SCHEDULE 2.29(b):
(i) Since the date of the Environmental Reports (as
defined in Section 2.29(g)), except as set forth thereon, the
Corporation and, to ▇▇▇▇▇▇▇▇'▇ knowledge, the Real Property are,
and at all times have been, in full compliance with all
Environmental Laws. Prior to the date of the Environmental
Reports, to ▇▇▇▇▇▇▇▇'▇ knowledge, except as set forth on the
Environmental Reports, the Corporation and the Real Property have
been in full compliance with all Environmental Laws.
(ii) Neither the Corporation nor any of its Subsidiaries,
affiliates, predecessors, agents, licensees, tenants or subtenants
has caused or allowed any
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Contaminant to be used, manufactured, handled, generated, treated,
stored, accumulated, placed, processed or Released in its
operations, on or off-site of any of the Real Property or any real
property owned, leased or otherwise used at any time by the
Corporation or any person or entity for whose conduct the
Corporation is or may be held responsible ("Former Property");
(iii) None of the Corporation nor any of the Real
Property or Former Property are the subject of any notice, order,
decree or agreement, whether written or oral, regarding any
Remedial Action or the Release, threatened Release or presence of
any Contaminants;
(iv) None of the Corporation nor any of the Real
Property or Former Property nor, to the knowledge of ▇▇▇▇▇▇▇▇, any
person or entity for whose conduct the Corporation may be held
responsible, are subject to any contingent liability in connection
with any Remedial Action or the Release, threatened Release, or
presence of any Contaminants; and
(v) to the knowledge of ▇▇▇▇▇▇▇▇, no portion of the
Real Property is or at any time was a "wetland" (as such term is
defined in 33 C.F.R. Section 328.3) and the Corporation has not
performed, caused or permitted to be performed any activities that
would have in any way filled, destroyed, eliminated, altered,
obstructed, disturbed, interfered with or otherwise affected any
"wetlands" in violation of any Environmental Laws.
(c) Except as set forth on SCHEDULE 2.29(c):
(i) the Corporation has obtained all environmental,
health and safety licenses, permits, authorizations, consents,
approvals, exemptions, registrations and certificates required
under all applicable Environmental Laws ("Environmental Licenses")
and made all notifications and filings necessary for the current
use of the Real Property and for full operation of the business of
the Corporation;
(ii) all such Environmental Licenses are in full force
and effect, in good standing and the Corporation has made all
notifications, filings and applications for renewal of such
Environmental Licenses on a timely basis, where necessary;
(iii) the Corporation and, to the knowledge of ▇▇▇▇▇▇▇▇,
the Real Property are, and at all times have been, in full
compliance with the terms and conditions of all Environmental
Licenses; and
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(iv) ▇▇▇▇▇▇▇▇ has no knowledge of any fact or facts
which would render invalid or require a material alteration in any
Environmental License currently in effect with respect to the
Corporation, the Real Property or otherwise held or used in the
operations of the Corporation.
(d) To the knowledge of ▇▇▇▇▇▇▇▇, there is not now nor has
there ever been on, in or under the Real Property or any Former Property:
(i) any generation, processing, treatment, storage,
recycling, disposal or arrangement therefor, of any "hazardous
waste" as that term is defined under RCRA, and any regulation
promulgated under RCRA, or any state equivalent;
(ii) any aboveground or underground storage tanks or
surface impoundments;
(iii) any asbestos or asbestos-containing material; or
(iv) any PCBs in any hydraulic oils, transformers,
capacitors or other electrical equipment.
(e) SCHEDULE 2.29(e) identifies all written communications
between the Corporation and any governmental authority or third party
arising under or relative to Environmental Laws, including any orders,
notices of violation, warning letters or requests for information with
respect to the Corporation, Real Property, or any Former Property.
(f) Except as set forth on the Environmental Reports, to
▇▇▇▇▇▇▇▇'▇ knowledge, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which
have given or may give rise to any liability or otherwise form the basis
of any claim, suit, action, demand, proceeding, penalty, fine, hearing,
notice of violation, directive or requirement to undertake any Remedial
Action under any Environmental Law, common law or otherwise, relating to
the Corporation or any of its subsidiaries, affiliates and predecessors
or any person or entity for whose conduct the Corporation is or may be
held responsible, the Real Property or any Former Property.
(g) The Corporation has provided to Purchaser true and
complete copies of all reports, audits, assessments, studies, analyses,
data, correspondence, summaries, maps, photographs, tests and monitoring
results (completed or uncompleted) in the possession of, initiated by or
authorized by the Corporation, its subsidiaries or affiliates or
requested or ordered by any governmental authority pertaining to any
Environmental Law, Contaminant or human health and safety at or involving
the Corporation, the Real Property or any Former
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Property (the "Environmental Reports"). Each of the Environmental Reports
is identified on SCHEDULE 2.29(g).
(h) All Contaminants removed from the Real Property or any
Former Property have been handled, transported, transferred, stored,
treated, recycled, received and disposed of in full compliance with all
Environmental Laws.
(i) SCHEDULE 2.29(i) identifies all waste disposal, treatment
and storage facilities and transporters and persons or entities which
have arranged for the disposal of Contaminants which are presently used
by or which previously have been used by or arranged for use by the
Corporation or any person or entity for whose conduct the Corporation is
or may be held responsible at any time in the operation of the business
of the Corporation or otherwise for disposal of Contaminants.
(j) No application, report, Environmental License,
notification or other document filed with or furnished to any
governmental authority regarding the Corporation, the Real Property or
any Former Property contains any material omissions, inaccuracies or
false or misleading statements.
2.30 BANK ACCOUNTS. SCHEDULE 2.30 is a true and correct list of the
name of each bank, savings and loan, or other financial institution in which the
Corporation or any Subsidiary has an account or safe deposit box, the names of
all persons authorized to draw on each account or to have access to each box,
the number of signatures required to be given for a withdrawal and a description
of the type of account.
2.31 COMPLIANCE WITH LAWS. The Corporation and each Subsidiary has
complied with all laws, regulations, rules and orders of any governmental
department or agency or any other commission, board, agency or instrumentality,
federal, state or local, or other requirements of law affecting its business and
operations and is not in default under or in violation of any provision of any
federal, state or local law, regulation, rule or order, except, in any case,
where such noncompliance or default would not have a material adverse effect, in
the aggregate, on the business or financial condition of the Corporation and its
Subsidiaries, taken as a whole. The provisions of this Section 2.31 do not
pertain to Environmental Laws.
2.32 POWERS OF ATTORNEY. Neither the Corporation nor any Subsidiary has
given any power of attorney (irrevocable or otherwise) that is presently in
effect to any person or entity for any purpose.
2.33 LICENSES AND RIGHTS. The Corporation and each Subsidiary possess
all franchises, licenses, easements, permits and other authorizations from
governmental or regulatory authorities and from all other persons or entities
that are necessary to permit it to engage in its business as
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29
presently conducted in and at all locations and places where it is presently
operating. Such franchises, licenses, permits and other authorizations are
listed on SCHEDULE 2.33.
2.34 SCHEDULE OF GOVERNMENT REPORTS. SCHEDULE 2.34 is a true and
correct list, and ▇▇▇▇▇▇▇▇ has furnished to Purchaser or its counsel complete
copies of all reports, if any, filed since December 31, 1993, by the Corporation
or any Subsidiary with the Department of Labor, Equal Employment Opportunity
Commission, Federal Trade Commission, Department of Justice, Occupational Safety
and Health Administration, Internal Revenue Service (other than tax returns and
standard forms relating to compensation or remuneration of employees),
Environmental Protection Agency, Securities and Exchange Commission or Pension
Benefit Guarantee Corporation, or any similar state agency.
2.35 PRODUCTS.
(a) Except as set forth on SCHEDULE 2.35, to ▇▇▇▇▇▇▇▇'▇
knowledge, the products sold by the Corporation and its Subsidiaries
conform to and meet or exceed the standards required by all applicable
laws, ordinances and regulations now in effect.
(b) SCHEDULE 2.35 contains a written statement accurately
describing the Corporation's and its Subsidiaries' sales' warranties and
customer service policies and any recurring warranty problems. Except as
set forth on Schedule 2.35, none of the Corporation or any of its
Subsidiaries have any outstanding contracts or proposals that depart in
any material respect from the warranty and customer service policy and
practice described in such Schedule. Except as may be listed on SCHEDULE
2.35, no claims of customers or others based on an alleged or admitted
defect of material, workmanship or design or otherwise in or in respect
of any of the Corporation's products are presently pending or, to the
knowledge of ▇▇▇▇▇▇▇▇, threatened other than product warranty claims in
the aggregate not in excess of Fifty Thousand Dollars ($50,000) plus the
reserve set forth on the August 31, 1997 Financial Statements.
2.36 CASUALTY OCCURRENCES. SCHEDULE 2.36 is a true and correct list of
occurrences of which the Corporation or ▇▇▇▇▇▇▇▇ has knowledge during the last
five (5) years of damages to persons or property involving any defects or
alleged defects in any of the Corporation's or any of its Subsidiaries' products
or their respective designs. All such occurrences are fully and adequately
covered by paid-for insurance.
2.37 INVENTORY. Except as set forth on SCHEDULE 2.37, the inventories
of the Corporation and its Subsidiaries consist only of items of a quality and
quantity usable and saleable in the ordinary course of business, consistent with
past practice and do not include any item of inventory which has previously been
written off by the Corporation. The value at which the inventories are carried
on the
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Corporation's books reflects the lower of cost (on a LIFO basis) or estimated
net realizable market value, and is based on quantities determined by physical
count.
2.38 CAPITAL EXPENDITURE PLANS. SCHEDULE 2.38 sets forth a capital
expenditure program of the Corporation for the next twelve (12) months.
2.39 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties made by ▇▇▇▇▇▇▇▇ in this Agreement, the documents and agreements
contemplated hereby or the Schedules hereto (collectively, the "Documents"),
contain or will contain any untrue statement of a material fact, or omit or will
omit to state a material fact necessary to make the statements of fact contained
therein not misleading.
2.40 EMPLOYMENT AGREEMENT. ▇▇▇▇▇▇▇▇ shall enter into an employment
agreement with the Corporation (the "▇▇▇▇▇▇▇▇ Employment Agreement") in
substantially the form of EXHIBIT "C" to this Agreement.
2.41 LEASE. ▇▇▇▇▇▇▇▇ shall cause Highway 41, L.L.C., an Illinois
limited liability company, to enter into an Amendment to Lease (the "Amended
Lease") in substantially the form of EXHIBIT "D" to this Agreement.
2.42 INVESTMENT LETTER. ▇▇▇▇▇▇▇▇ shall deliver an Investment Letter in
substantially the form of EXHIBIT "E" to this Agreement.
ARTICLE II A
------------
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE ESOP
------------------------------------------------------
The ESOP represents and warrants to, and agrees with, Purchaser as
follows:
2.1A CONFLICTS; CONSENTS.
(a) The execution, delivery and consummation of this Agreement
by the ESOP does not now and will not, with the passage of time, the
giving of notice or otherwise, result in a violation or breach of, or
constitute a default under, any term or provision of any indenture,
mortgage, deed of trust, lease, instrument, order, judgment, decree,
rule, regulation, law, contract, agreement or any other restriction to
which the ESOP is a party or bound.
(b) Except as may be listed on SCHEDULE 2.2, no approval or
consent of any person, firm or other entity or governmental body is or
was required to be obtained by the
-27-
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ESOP for the authorization of this Agreement or the consummation by the
ESOP of the transactions contemplated by this Agreement. The ESOP is
authorized to enter into this Agreement and consummate the transaction
contemplated hereby and upon the execution hereof, this Agreement will
constitute the legal, valid and binding obligation of the ESOP
enforceable against the ESOP in accordance with its terms.
2.2A TITLE TO PREFERRED SHARES. All of the Preferred Shares are owned
of record by the ESOP, with good and marketable title thereto, free and clear of
all liens, charges, security interests, adverse claims, pledges, encumbrances
and demands whatsoever, except to the extent provided in the Hycor Corporation
Employee Stock Ownership Plan (the "ESOP Plan"). All of the Preferred Shares are
owned beneficially by the participants of the ESOP Plan.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser warrants and represents to, and agrees with, Sellers as
follows:
3.1 ORGANIZATION. Each of Purchaser and its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and governmental approvals would not have a material
adverse effect on Purchaser and its subsidiaries, taken as a whole. Purchaser
and each of its subsidiaries is duly qualified or licensed to do business and in
good standing 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 or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on Purchaser and its subsidiaries, taken as a whole.
3.2 CAPITALIZATION. The authorized capital stock of Purchaser consists
of 40,000,000 shares of Purchaser Common Stock and 10,000,000 shares of
Preferred Stock, par value $.001 per share (the "Purchaser Preferred Stock"). As
of the date hereof, (i) 11,760,731 shares of Purchaser Common Stock are issued
and outstanding, (ii) no shares of Purchaser Preferred Stock are issued and
outstanding, (iii) options and warrants to purchase 1,675,300 shares of
Purchaser Common Stock have been granted and are outstanding, (iv) three (3)
Convertible Subordinated Notes, each in the principal amount of Four Million
Three Hundred Twenty-Six Thousand Six Hundred Sixty-Seven Swedish Krona (SEK
4,326,667), convertible into Purchaser Common Stock, is issued and outstanding,
and (v) the Subordinated Note, are issued and outstanding. All of the
outstanding shares of Purchaser's capital stock are duly authorized, validly
issued, fully paid and nonassessable. Except as set forth above, there are no
bonds, debentures, notes or other indebtedness having voting
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rights (or convertible into securities having such rights) ("Purchaser Voting
Debt") of Purchaser issued and outstanding. Except as set forth above and except
for transactions contemplated by this Agreement, (i) there are no shares of
capital stock of Purchaser authorized, issued or outstanding and (ii) there are
no existing options, warrants, calls, preemptive rights, subscriptions or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of Purchaser or any
of its subsidiaries, obligating Purchaser or any of its subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Purchaser Voting Debt of, or other equity interest in,
Purchaser or any of its subsidiaries or securities convertible into or
exchangeable for such shares or equity interests or obligations of Purchaser or
any of its subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, convertible security, agreement, arrangement
or commitment.
3.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.
Purchaser has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by Purchaser of this Agreement and the consummation by
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by its Board of Directors and no other corporate action or
proceedings on the part of Purchaser are necessary to authorize the execution
and delivery by Purchaser of this Agreement and the consummation by Purchaser of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Purchaser, and, assuming this Agreement constitutes valid and
binding obligations of Sellers, constitutes valid and binding obligations of
Purchaser, enforceable against it in accordance with its terms. The shares of
Purchaser Common Stock that may be issued pursuant to this Agreement, upon
issuance in accordance with the provisions of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth on
SCHEDULE 3.4, and except for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Securities Exchange Act of 1934 (the "Exchange Act") and the Securities Act of
1933 (the "Securities Act") and the NYSE, neither the execution, delivery or
performance of this Agreement by Purchaser nor the consummation by Purchaser of
the transactions contemplated hereby nor compliance by Purchaser with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or By-laws of Purchaser, (ii) require
any filing with, or permit, authorization, consent or approval of, any
governmental entity, including, without limitation, any filing required by the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR Act")
(except, with the exception of any authorization, consent or approval required
by the HSR Act, where the failure to obtain such permits, authorizations,
consents or approvals or to make such filings would not have a material adverse
effect on Purchaser and its subsidiaries, taken as a whole, or would not, or
would not be reasonably likely to, materially impair the ability of Purchaser to
consummate the transactions
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33
contemplated hereby or fulfill its obligations hereunder), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, lease, license, contract, agreement or other instrument or
obligation to which Purchaser or any of its subsidiaries is a party or by which
any of them or any of their properties or assets may be bound or (iv) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Purchaser, any of its subsidiaries or any of their properties or assets, except
in the case of clauses (iii) and (iv) for violations, breaches or defaults which
would not have a material adverse effect on Purchaser and its subsidiaries,
taken as a whole, or would not, or would not be reasonably likely to, materially
impair the ability of Purchaser to consummate the transactions contemplated
hereby.
3.5 SEC REPORTS AND FINANCIAL STATEMENTS. Purchaser has filed with the
Securities and Exchange Commission (the "SEC"), and has heretofore made
available to Sellers, true and complete copies of, all forms, reports,
schedules, statements and other documents filed or required to be filed by it
and its subsidiaries since May 23, 1997 under the Exchange Act or the Securities
Act (as such documents have been amended since the time of their filing,
collectively, the "Purchaser SEC Documents"). As of their respective dates or,
if amended, as of the date of the last such amendment, the Purchaser SEC
Documents, including, without limitation, any financial statements or schedules
included therein (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder.
Each of the consolidated financial statements included in the Purchaser SEC
Documents have been prepared from, and are in accordance with, the books and
records of Purchaser and/or its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles in the applicable
jurisdiction applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position and the consolidated results of
operations and cash flows (and changes in financial position, if any) of
Purchaser and its consolidated subsidiaries as at the dates thereof or for the
periods presented therein.
3.6 ABSENCE OF CERTAIN CHANGES. Except to the extent disclosed in the
Purchaser SEC Documents filed prior to the date of this Agreement, from
September 30, 1996 through the date of this Agreement, there has not occurred
(i) any events, changes, or effects (including the incurrence of any liabilities
of any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a material
adverse effect on Purchaser and its subsidiaries; (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) with respect to the equity interests of Purchaser or
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34
of any of its subsidiaries other than regular quarterly cash dividends,
distributions or payments on account of indebtedness paid by subsidiaries to
Purchaser or a subsidiary of Purchaser; or (iii) any change by Purchaser or any
of its subsidiaries in accounting principles or methods, except insofar as may
be required by a change in generally accepted accounting principles in the
applicable jurisdiction.
3.7 NO DEFAULT. The business of Purchaser and its subsidiaries is not
being conducted in default or violation of any term, condition or provision of
(a) its respective Articles of Incorporation or By-laws or similar
organizational documents, (b) any lease, license, contract, agreement or other
instrument or obligation to which Purchaser or any of its subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
and which involves the payment or receipt of money in excess of Two Hundred
Fifty Thousand Dollars ($250,000.00) or One Million Dollars ($1,000,000.00) in
the aggregate, or (c) any federal, state, local or foreign law, statute,
regulation, rule, ordinance, judgment, decree, order, writ, injunction,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to Purchaser or any of its subsidiaries,
excluding from the foregoing clauses (b) and (c), defaults or violations that
would not have a material adverse effect on Purchaser and its subsidiaries,
taken as a whole, or would not, or would not be reasonably likely to, materially
impair the ability of Purchaser to consummate the transactions contemplated
hereby or satisfy its obligations hereunder. No investigation or review by any
governmental entity with respect to Purchaser or any of its subsidiaries is
pending or, to the best knowledge of Purchaser, threatened, nor to the best
knowledge of Purchaser, has any governmental entity indicated an intention to
conduct the same.
ARTICLE IV
----------
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
------------------------------------------------
The obligations of Purchaser under this Agreement are, at its option,
subject to satisfaction of the following conditions at or prior to the Closing
Date:
4.1 REPRESENTATIONS TRUE. The representations and warranties of
Sellers contained in this Agreement are true, complete and accurate in all
material respects on and as of the Closing Date to the same extent and with the
same force and effect as if made on such date, except as affected by the
transactions contemplated under this Agreement.
4.2 ALL CONSENTS OBTAINED. All necessary approvals or consents
required to be obtained by ▇▇▇▇▇▇▇▇, the ESOP or the Corporation have been
obtained from all local, state and federal departments and agencies, from all
other commissions, boards, agencies and from any other person or entity whose
approval or consent is necessary to consummate the transactions contemplated
under
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this Agreement including, without limitation, such consents as may be listed or
required to be listed on SCHEDULE 2.2.
4.3 PERFORMANCE AND OBLIGATIONS. Sellers have duly performed all
obligations, covenants and agreements undertaken by Sellers in this Agreement
and have complied with all terms and conditions applicable to Sellers under this
Agreement to be performed and complied with on or before the Closing Date.
4.4 RECEIPT OF DOCUMENTS BY PURCHASER. Purchaser has received:
(a) a certificate executed by ▇▇▇▇▇▇▇▇ certifying as to the
fulfillment of the matters contained in Sections 4.1, 4.2, 4.3 and 4.5 of
this Article;
(b) a true and correct copy of the Corporation's Certificate
of Incorporation, certified by the Secretary of State of Delaware as of a
date not more than seven (7) days prior to the Closing Date, and a true
and correct copy of the Corporation's Bylaws certified by the Secretary
of the Corporation as of the Closing Date;
(c) a written opinion from counsel for ▇▇▇▇▇▇▇▇ and the
Corporation, dated as of the Closing Date, addressed to Purchaser,
satisfactory to Purchaser and its counsel in form and substance.
(d) a written opinion of counsel for the ESOP Plan, in form and
substance reasonably acceptable to Purchaser and its counsel;
(e) the resignations of such officers and directors of the
Corporation as may be requested by Purchaser;
(f) certificates representing all of the Shares, with stock
powers covering such shares duly endorsed in blank;
(g) a general release of all claims of ▇▇▇▇▇▇▇▇ against the
Corporation, in the form of EXHIBIT "F" to this Agreement;
(h) a certificate of the ESOP in the form of EXHIBIT "G"
attached hereto; and
(i) the Estoppel Certificate or the representations contained
in the Amended Lease.
4.5 NO LITIGATION. No suit, action, or other proceeding is threatened
or pending before any court or governmental agency in which it will be or it is
sought to restrain or prohibit or to obtain
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material damages or relief in connection with this Agreement or the consummation
of this Agreement, or which is likely to materially and adversely affect the
value of the business or assets of the Corporation.
4.6 EMPLOYMENT AGREEMENT. ▇▇▇▇▇▇▇▇ has entered into the executive
employment agreement (the "Employment Agreement") in the form of EXHIBIT "H" to
this Agreement.
4.7 DELIVERY OF BOOKS AND RECORDS. ▇▇▇▇▇▇▇▇ has delivered or made
available to Purchaser all books and records of the Corporation relating to or
reasonably required for the operation of the business of the Corporation,
including, without limitation, copies of all Contracts, financial and accounting
records, files and records relating to employees, and all related
correspondence.
4.8 [INTENTIONALLY DELETED].
4.9 REAL PROPERTY LEASE. Highway 41, L.L.C. has entered into the
Lease.
4.10 INVESTMENT LETTER. Purchaser has received the Investment Letter
from ▇▇▇▇▇▇▇▇.
ARTICLE V
---------
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
----------------------------------------------
The obligations of Sellers under this Agreement are, at the option of
Sellers subject to satisfaction of the following conditions at or prior to the
Closing Date:
5.1 REPRESENTATIONS TRUE. The representations and warranties of
Purchaser contained in this Agreement are true, complete and accurate in all
material respects on and as of the Closing Date to the same extent and with the
same force and effect as if made on such date, except as affected by the
transactions contemplated under this Agreement.
5.2 RECEIPT OF DOCUMENTS BY SELLERS. Sellers have received:
(a) the Purchase Price as provided in Section 1.1;
(b) certificates representing the number of shares of Purchaser
Common stock described in Section 1.2(c), above;
(c) a certificate executed by the Chief Financial Officer of
Purchaser certifying as to the fulfillment of the matters contained in
Section 5.1 of this Article;
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(d) a written opinion from counsel for Purchaser, dated as of
the Closing Date, addressed to Sellers, satisfactory to Sellers and their
counsel in form and substance, to the effect that:
(i) Purchaser is duly incorporated, validly existing
and is in good standing under the laws of the State of Delaware,
has full corporate power and authority to carry on its business as
and where, to the knowledge of such counsel, such business is now
conducted, and to own or lease and operate its properties at and
where, to the knowledge of such counsel, such properties are now
owned or leased and operated by it;
(ii) Purchaser has all requisite corporate power to
execute, deliver and carry out its obligations under this
Agreement and the execution, delivery and performance of this
Agreement by Purchaser have been duly authorized by all requisite
corporate action;
(iii) The execution and delivery of this Agreement and
the consummation of the transactions contemplated under this
Agreement by Purchaser are not in conflict with the Certificate of
Incorporation or By-Laws of Purchaser; and
(iv) Each of this Agreement and the Subordinated Note
constitutes the legal, valid, and binding obligation of Purchaser,
and is enforceable against Purchaser in accordance with its terms;
(e) certified copies of resolutions duly adopted by the Board
of Directors of Purchaser approving this Agreement and the transactions
contemplated under it; and
(g) a registration rights agreement (the "Registration Rights
Agreement") in the form of EXHIBIT "I" attached hereto.
5.3 NO LITIGATION. No suit, action, or other proceeding is threatened
or pending before any court or governmental agency in which it will be or it is
sought to obtain material damages from Seller in connection with this Agreement
or the consummation of this Agreement.
5.4 REAL PROPERTY LEASE. Purchaser has entered into the Lease.
5.5 EMPLOYMENT AGREEMENT. The Corporation has entered into the
Employment Agreement with ▇▇▇▇▇▇▇▇ and granted the stock options required to be
granted thereunder.
5.6 BONUS PLAN. The Corporation has adopted the Bonus Plan, attached
hereto substantially in the form of EXHIBIT "J".
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ARTICLE VI
----------
CLOSING
-------
The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Wildman, Harrold, ▇▇▇▇▇ & ▇▇▇▇▇,
Chicago, Illinois, on September 30, 1997 at 10:00 a.m. Chicago time, or on such
other date mutually agreeable to the parties (the "Closing Date"). If the
Closing has not taken place by such date by reason of failure of fulfillment of
any condition or conditions contained in this Agreement, then the non-fulfilling
party may, by written notice to the other party, extend the Closing Date for a
period of fourteen (14) days to permit fulfillment of such condition or
conditions. Unless the parties otherwise agree in writing, if the Closing has
not occurred prior to October 31, 1997, then this Agreement will be deemed to
have been terminated and abandoned, subject to the legal rights and remedies of
either party arising out of the other party's breach of any of the provisions of
this Agreement. The parties will in good faith use all reasonable efforts to
achieve the Closing.
ARTICLE VII
-----------
TERMINATION OF AGREEMENT
------------------------
This Agreement and the transactions contemplated under it may be
terminated and abandoned at any time prior to the Closing Date (unless otherwise
specified below):
(a) by mutual consent in writing of Purchaser and Sellers;
(b) by Purchaser if there has been a material misrepresentation
or breach of warranty in the representation and warranties of Sellers
made under this Agreement;
(c) by Purchaser if all or a material portion of the
Corporation's assets have been materially damaged or destroyed before the
Closing;
(d) by Purchaser if any of the Real Property has been taken, in
whole or in part, by eminent domain or by conveyance in lieu of eminent
domain;
(e) by Purchaser, if any of the conditions contained in
Article IV, or by Sellers, if any of the conditions contained in Article
V, respectively, have not been fulfilled in all respects in each case at
or prior to the Closing Date.
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Any termination pursuant to this Article VII will not affect the
obligations of the parties under Article XI or Section 15.4 below, and will be
without prejudice to the terminating party's legal rights and remedies by reason
of any breach of this Agreement occurring prior to such termination.
Notwithstanding anything in this Agreement to the contrary, if, on the Closing
Date, Purchaser (i) has complied with all of the conditions to Closing contained
in Article V, (ii) has notified Sellers of its intention to consummate the
transactions contemplated under this Agreement, and (iii) is ready and able to
pay Sellers the Purchase Price and furnishes evidence to that effect to Sellers,
and if the Closing does not then occur due to the refusal of Sellers to so
consummate the transactions contemplated under this Agreement, Purchaser will be
entitled to specifically enforce the terms of this Agreement in a court of
competent jurisdiction, it being acknowledged that monetary damages due
Purchaser in such case cannot be adequately determined at law.
ARTICLE VIII
------------
SURVIVAL OF REPRESENTATIONS
---------------------------
AND WARRANTIES; INDEMNIFICATION; DISPUTES
-----------------------------------------
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding the
Closing of the transactions contemplated under this Agreement, or any
investigation made by or on behalf of Sellers or Purchaser, the representations
and warranties of ▇▇▇▇▇▇▇▇ and Purchaser contained in this Agreement or in any
certificate, Schedule, chart, list, letter, compilation or other document
furnished or to be furnished pursuant to this Agreement, will survive the
Closing and continue with full force and effect until December 31, 1998, except
that (i) the representations and warranties of ▇▇▇▇▇▇▇▇ contained in Sections
2.4, 2.12 and 2.28 with respect to title to Shares, tax matters and employee
benefit matters shall survive for so long as any applicable statute of
limitations has not expired, been suspended or been waived or extended, and for
thirty (30) days thereafter, and (ii) the representations and warranties of
▇▇▇▇▇▇▇▇ contained in Section 2.29 with respect to environmental matters shall
survive for a period of five (5) years from the Closing Date. However, as to any
breach of, or misstatement in, any such representation or warranty as to which
Purchaser has filed a claim against ▇▇▇▇▇▇▇▇ on or prior to the expiration of
the applicable period, as above set forth, the same will continue to survive
beyond said period, but only as to the matters contained in such claim.
8.2 ▇▇▇▇▇▇▇▇'▇ INDEMNIFICATION. ▇▇▇▇▇▇▇▇ shall indemnify and save
harmless Purchaser and its subsidiaries, shareholders, directors, officers,
employees and agents from any and all costs, expenses, losses, damages and
liabilities incurred or suffered, directly or indirectly, by any of them
(including, without limitation, reasonable legal fees and expenses) resulting
from or attributable to (a) the breach of, or misstatement in, any one or more
of the representations or warranties of ▇▇▇▇▇▇▇▇ made in or pursuant to this
Agreement, (b) any claims, demands, suits, investigations, proceedings or
actions by any third party containing or relating to allegations that, if true,
would
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constitute a breach of, or misstatement in, any one or more of the
representations or warranties of ▇▇▇▇▇▇▇▇ made in or pursuant to this Agreement,
or (c) any defect in any product manufactured, shipped or installed by the
Corporation prior to the Closing. At the sole option of ▇▇▇▇▇▇▇▇, any of
▇▇▇▇▇▇▇▇'▇ liability under this Section 8.2 may be discharged by (i) set-off
against amounts due to ▇▇▇▇▇▇▇▇ pursuant to the Subordinated Note; (ii) in the
event the Subordinated Note is no longer outstanding, re-payment of ▇▇▇▇▇▇▇▇'▇
Purchaser Common Stock to Purchaser; or (iii) payment of cash; in the amount of
such liability. In the event all or any portion of liability incurred under this
Section 8.2 is satisfied by payment in the form of Purchaser Common Stock, such
payment shall be valued at the Fair Market Value (as defined below in this
Section) of such Purchaser Common Stock at the time such liability is
discharged.
For purposes of this Section 8.2, "Fair Market Value" means, in respect
of any share of Purchaser Common Stock as of any time, (A) if the applicable
Purchaser Common Stock shall not then be Publicly Traded, the fair market value
per share of the Purchaser Common Stock as at such date as determined by an
appraisal of such Purchaser Common Stock by an appraiser mutually acceptable to
Purchaser and Sellers or (B) if Purchaser Common Stock are then Publicly Traded,
the average of the reported last sales prices of such Purchaser Common Stock for
the thirty (30) consecutive Trading Days commencing forty (40) Trading Days
before the date in question. The reported last sales price for each day shall be
the reported last sales price, regular way (and if no such sales take place on
any day, such day shall not be a Trading Day), as reported on the NYSE Composite
Tape or, if the applicable Purchaser Common Stock are not listed or admitted to
trading on the NYSE at such time, in the principal consolidated or composite
transaction reporting system on the principal national securities exchange on
which such Purchaser Common Stock are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the NASDAQ
National Market or, if such security is not quoted on the NASDAQ National
Market, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked prices for
the security on each such day shall not have been reported through NASDAQ, the
average of the bid and asked prices for such date as furnished by any NYSE
member firm regularly making a market in such security selected for such purpose
by the Board of Directors of Purchaser. As used herein, the term "Trading Day"
means a day on which the NYSE, each national securities exchange on which the
applicable Purchaser Common Stock are listed and the NASDAQ National Market are
open for business. Purchaser Common Stock shall be considered to be "Publicly
Traded" as of any date if on such date such Purchaser Common Stock is listed for
trading on a national securities exchange or traded in the over-the-counter
market and quoted in an automated quotation system of the National Association
of Securities Dealers, Inc.
8.3 DEFENSE OF CLAIM. If Purchaser has received actual notice of any
claim asserted or any action or administrative or other proceeding commenced in
respect of which claim, action or proceeding indemnity properly may be sought
against ▇▇▇▇▇▇▇▇ pursuant to this Agreement, Purchaser will give notice in
writing to ▇▇▇▇▇▇▇▇. Within fifteen (15) days after the earlier of (i) receipt
of such notice or (ii) receipt of actual notice by ▇▇▇▇▇▇▇▇ from sources other
than Purchaser,
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▇▇▇▇▇▇▇▇ may give Purchaser written notice of his election to conduct the
defense of such claim, action or proceeding at its own expense. If ▇▇▇▇▇▇▇▇ has
given Purchaser such notice of election to conduct the defense, ▇▇▇▇▇▇▇▇ may
conduct the defense at his expense, but Purchaser will nevertheless have the
right to participate in the defense, but such participation will be solely at
the expense of Purchaser, without a right of further reimbursement. If ▇▇▇▇▇▇▇▇
has not so notified Purchaser in writing (within the time above provided) of his
election to conduct the defense of such claim, action or proceeding, Purchaser
may (but need not) conduct (at ▇▇▇▇▇▇▇▇'▇ expense) the defense of such claim,
action or proceeding. Purchaser may at any time notify ▇▇▇▇▇▇▇▇ of Purchaser's
intention to settle, compromise or satisfy any such claim, action or proceeding
(the defense of which ▇▇▇▇▇▇▇▇ has not previously elected to conduct) and may
make such settlement, compromise or satisfaction (at ▇▇▇▇▇▇▇▇'▇ expense) unless
▇▇▇▇▇▇▇▇ notifies Purchaser in writing (within seven (7) days after receipt of
such notice of intention to settle, compromise or satisfy) of his election to
assume (at his sole expense) the defense of any such claim, action or proceeding
and promptly take appropriate action to implement such defense. Any settlement,
compromise or satisfaction made by Purchaser, or any such final judgment or
decree entered in, any claim, action or proceeding defended only by Purchaser,
regardless of the amount or terms, will be deemed to have been consented to by,
and will be binding on, ▇▇▇▇▇▇▇▇ as fully as though he alone had assumed the
defense and a final judgment or decree had been entered in such proceeding or
action by a court of competent jurisdiction in the amount of such settlement,
compromise, satisfaction, judgment or decree. If ▇▇▇▇▇▇▇▇ has elected under this
Section 8.3 to conduct the defense of any claim, action or proceeding, then
▇▇▇▇▇▇▇▇ will be obligated to pay the amount of any adverse final judgment or
decree rendered with respect to such claim, action or proceeding. If ▇▇▇▇▇▇▇▇
elects to settle, compromise or satisfy any claim, action or proceeding defended
by them, the cost of any such settlement, compromise or satisfaction will be
borne entirely by ▇▇▇▇▇▇▇▇ and may be made only with the consent of Purchaser,
such consent not to be unreasonably withheld. Purchaser and ▇▇▇▇▇▇▇▇ will use
all reasonable efforts to cooperate fully with respect to the defense of any
claim, action or proceeding covered by this Section 8.3. Notwithstanding
anything to the contrary herein, ▇▇▇▇▇▇▇▇ shall not have the right to assume the
defense of any claim, action or proceeding relating to a breach of Section 2.12
hereof, but shall have the right to elect to jointly participate with Purchaser
in the defense of any such claim, action or proceeding (but only to the extent
such claim, action or proceeding does not relate to a consolidated or combined
return of Purchaser) by giving written notice of such election within the time
limits described in the second sentence of this Section 8.3.
8.4 PURCHASER'S INDEMNIFICATION. Purchaser covenants and agrees to
indemnify and save harmless Sellers from any and all costs, expenses, losses,
damages and liabilities incurred or suffered by Sellers (including reasonable
legal fees and costs) resulting from or attributable to the breach of, or
misstatement in, any one or more of the representations or warranties of
Purchaser made in or pursuant to this Agreement to the same extent as provided
in Clauses (a) and (b) of Section 8.2, and in the same manner as provided in
Section 8.3, of this Article VIII.
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8.5 INDEMNIFICATION BASKET.
(a) Any of the foregoing notwithstanding, no party will have
any right to indemnification unless and until and only to the extent that
the aggregate damages indemnifiable by the indemnifying party exceed Two
Hundred and Fifty Thousand Dollars ($250,000.00).
(b) Any liability arising from Seller's breach of Section 2.2
and 2.2A hereof shall not be subject to the limitation contained in
Sections 8.5(a) or 8.6, and shall be recoverable from the first dollar.
(c) Notwithstanding any disclosure, the Seller shall, subject
to paragraph (a) hereof, indemnify Purchaser for any costs, expenses,
losses, damages and liabilities arising from matters disclosed in the
Environmental Reports.
8.6 LIMITATION ON INDEMNIFICATION. Any of the foregoing notwithstanding, the
aggregate indemnification obligation of ▇▇▇▇▇▇▇▇ pursuant to this Article VIII
shall not exceed Five Million Dollars ($5,000,000.00), and the aggregate
indemnification of Purchaser pursuant to this Article VIII shall not exceed
Five Million Dollars ($5,000,000). Such limitation shall not apply to
indemnities arising from violations of Section 2.2, 2.2A, 2.12 and 2.29.
ARTICLE IX
----------
[INTENTIONALLY DELETED]
ARTICLE X
---------
ASSIGNMENT, THIRD PARTIES, BINDING EFFECT
-----------------------------------------
The rights under this Agreement are not assignable nor are the duties
delegable by a party without the written consent of the other party first having
been obtained, and any attempted assignment or delegation without such consent
will be null and void; provided, however, that Purchaser's rights to
indemnification hereunder shall be assignable to its senior lender, subject to
any defenses and rights of set-off that Sellers may have hereunder. Nothing
contained in this Agreement is intended to convey upon any person or entity,
other than the parties hereto and their successors in interest and permitted
assigns, any rights or remedies under or by reason of this Agreement unless
expressly stated. All covenants, agreements, representations and warranties of
the parties contained in this Agreement are binding on and will inure to the
benefit of Purchaser, on the one hand and Sellers, on the other, and their
respective successors and permitted assigns.
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ARTICLE XI
----------
EXPENSES
--------
Purchaser, on the one hand, and Sellers, on the other, will bear their
own respective expenses, including, without limitation, counsel and accountants'
fees, in connection with the preparation and negotiation of, and transactions
contemplated under, this Agreement, provided, however, that upon the Closing,
the Corporation shall bear and pay up to a maximum of One Hundred Fifty-Seven
Thousand Five Hundred Dollars ($157,500.00) of such expenses of Sellers.
ARTICLE XII
-----------
NOTICES
-------
All notices, requests, demands and other communications under this
Agreement must be in writing and will be deemed duly given, unless otherwise
expressly indicated to the contrary in this Agreement, (i) when personally
delivered, (ii) upon receipt of a telephonic facsimile transmission with a
confirmed telephonic transmission answer back, (iii) three (3) days after having
been deposited in the United States mail, certified or registered, return
receipt requested, postage prepaid, or (iv) one (1) business day after having
been dispatched by a nationally recognized overnight courier service, addressed
to the parties or their permitted assigns at the following addresses (or at such
other address or number as is given in writing by either party to the other) as
follows:
To Purchaser: Waterlink, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, President and Chief
Executive Officer
With a copy to: Benesch, Friedlander,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇
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To Sellers: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
c/o Hycor Corporation
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: 847/473-0477
and
LaSalle National Bank, not in its
individual or corporate capacity,
but solely as Trustee of the
Hycor Corporation Employee
Stock Ownership Trust
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: 312/904-2236
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇
With a copy to: Wildman, Harrold, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: 312/201-2555
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and
Seyfarth ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: 312/269-8869
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
ARTICLE XIII
------------
REMEDIES NOT EXCLUSIVE
----------------------
No remedy conferred by any of the specific provisions of this Agreement
is intended to be exclusive of any other remedy, and each and every remedy will
be cumulative and will be in addition
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to every remedy given under this Agreement or now or subsequently existing, at
law or in equity, by statute or otherwise. The election of any one or more
remedies by Purchaser or Sellers will not constitute a waiver of the right to
pursue other available remedies.
ARTICLE XIV
-----------
NON-COMPETITION
---------------
14.1 NON-COMPETITION AGREEMENT.
(a) For a period of five (5) years from and after the Closing
Date, but as to clauses (iv) and (v) at any time after the Closing Date,
▇▇▇▇▇▇▇▇ will not, directly or indirectly:
(i) engage in, carry on, be employed by or have any
interest in a business substantially similar to the business as
carried on by the Corporation or any of its Subsidiaries on the
Closing Date;
(ii) enter into, engage in, or be employed by or consult
with any business in competition with the Corporation or any of
its Subsidiaries on matters substantially similar to the business
as carried on by the Corporation or any of its Subsidiaries on the
Closing Date;
(iii) employ, assist in employing or otherwise associate
in business with any present, former or future employee of the
Corporation or any of its Subsidiaries now or subsequently
existing until a period of at least two (2) years has expired
since such employee was employed by the Corporation;
(iv) induce any person who is a present or future
employee, officer, agent or affiliate of the Corporation or any of
its Subsidiaries now or subsequently existing to terminate the
relationship; and
(v) induce any supplier or any other party with whom
the Corporation or any of its Subsidiaries does business to refuse
to do business with the Corporation or such Subsidiary on as
favorable terms as previously done with the Corporation.
The prohibitions in clauses (i) and (ii) will apply only to any place or
location in which Purchaser or any of its subsidiaries or affiliates currently
does business or is actively contemplating doing business. ▇▇▇▇▇▇▇▇ acknowledges
that the length of time and geographic restriction pertaining to all
prohibitions in this Subsection (a) both are reasonable and necessary for the
legitimate protection of Purchaser's business and interests.
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(b) ▇▇▇▇▇▇▇▇ expressly agrees and understands that the remedy
at law for any breach by ▇▇▇▇▇▇▇▇ of this Article XIV will be inadequate
and that the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, it is acknowledged that
upon adequate proof of ▇▇▇▇▇▇▇▇'▇ violation of this Article XIV,
Purchaser will be entitled, among other remedies, to immediate injunctive
relief and may obtain a temporary restraining order restraining any
threatened or further breach. Nothing in this subsection (b) will be
deemed to limit Purchaser's remedies at law or in equity for any breach
by ▇▇▇▇▇▇▇▇ of any of the provisions of this Agreement which may be
pursued or availed of by Purchaser.
(c) In the event any court of competent jurisdiction
determines that the specified time period or geographical area set forth
in this Section 14.1 is unreasonable, arbitrary or against public policy,
then a lesser time period or geographical area that is determined by the
court to be reasonable, non-arbitrary and not against public policy may
be enforced.
(d) In the event ▇▇▇▇▇▇▇▇ violates any legally enforceable
provision of this Section 14.1 as to which there is a specific time
period during which ▇▇▇▇▇▇▇▇ is prohibited from taking certain actions or
engaging in certain activities, then, in such event the violation will
toll the running of the time period from the date of the violation until
the violation ceases.
14.2 DISCLOSURE OF CONFIDENTIAL INFORMATION. Except as may be required
by law or necessary in connection with any dealings with any public agency or
authority, from and after the Closing Date, Sellers will not disclose,
disseminate, divulge, discuss, copy or otherwise use or suffer to be used, in
competition with, or harmful to the interests of, the Corporation or any of its
Subsidiaries, any information (written or oral), documents, lists or other data
of or respecting any aspect of the business being acquired by Purchaser from
Sellers under this Agreement.
ARTICLE XV
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MISCELLANEOUS
-------------
15.1 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original but all of which
together will constitute one and the same document.
15.2 CAPTIONS AND SECTION HEADINGS. Captions and section headings are
for convenience only, are not a part of this Agreement and may not be used in
construing it.
15.3 WAIVERS. Any failure by any of the parties to comply with any of
the obligations, agreements or conditions set forth in this Agreement may be
waived by the other party or parties,
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but any such waiver will not be deemed a waiver of any other obligation,
agreement or condition contained herein.
15.4 RIGHT OF INSPECTION. From and after the date of this Agreement to
the Closing Date, Sellers will give to Purchaser and its counsel, accountants
and other representatives, full access during normal business hours to the
offices, properties, agreements, records and affairs of the Corporation, and
will furnish copies of all Contracts and other instruments as Purchaser or its
counsel may reasonably request. Such investigation will not affect the
warranties and representations of Sellers under this Agreement. All such
information will be treated confidentially and will be used only for the
purposes intended. If the transactions contemplated under this Agreement do not
take place, all documents and other property of the Corporation or Sellers will
be returned and all disclosures and information given to Purchaser as
contemplated under this Agreement will be treated as confidential and not
disclosed to others unless disclosed publicly by Sellers or other third parties
without fault on the part of Purchaser, or unless otherwise required by law.
15.5 AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS. Each of the parties
agrees to cooperate in the effectuation of the transactions contemplated under
this Agreement and to execute any and all additional documents and to take such
additional action as is reasonably necessary or appropriate for such purposes.
15.6 ENTIRE AGREEMENT. This Agreement, including any certificate,
schedule, exhibit or other document delivered pursuant to its terms, constitutes
the entire agreement between the parties. There are no verbal agreements,
representations, warranties, undertakings or agreements between the parties, and
this Agreement may not be amended or modified in any respect, except by a
written instrument signed by the parties to this Agreement.
15.7 GOVERNING LAWS. This Agreement is to governed by and construed in
accordance with the internal laws of the State of Illinois, without regard to
the conflicts of laws principles of the State of Illinois.
15.8 KNOWLEDGE. All references to "knowledge" or "best knowledge" of a
party, or "known to" a party means the actual knowledge of a party after
reasonable inquiry.
15.9 PRESS RELEASES. Prior to the Closing, neither party will issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated under this Agreement
without the prior consent of the other party first obtained; provided, however,
that nothing in this Agreement will prohibit either party from issuing or
causing publication of any press release or public announcement to the extent
that such party determines, on advice of counsel, that such action is required
by law, in which case the party making such
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determination will, if practicable under the circumstances, use reasonable
efforts to allow the other party reasonable time to comment on such release or
announcement in advance of its issuance.
15.10 RELEASE OF GUARANTY. On or prior to December 31, 1997, ▇▇▇▇▇▇▇▇
will cause the Corporation to be released from its obligations under the
Guaranty dated March 21, 1996 delivered by the Corporation in favor of Shriners
Hospitals for Crippled Children, a wholly charitable Colorado corporation.
15.11 ESOP PLAN TRUSTEE. Purchaser shall not elect, nominate or insert
any replacement trustee for the ESOP Plan which is not an institution of similar
experience, expertise or qualifications as the existing trustee for the ESOP
Plan.
* * * * *
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
WATERLINK, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------------
Its: Chief Financial Officer
-----------------------------------------------------
"PURCHASER"
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Hycor Corporation Employee Stock
Ownership Trust
By LaSalle National Bank, not in its
individual or corporate capacity, but solely
as Trustee of the Hycor Corporation
Employee Stock Ownership Trust
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------------------
Its: Vice President
-----------------------------------------------------
"SELLERS"
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