STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 30th day of January,
1997, by and between Formtek, Inc., a Delaware corporation ("Purchaser"); and
Xxxxxxx Xxxx Trust dated 8/16/91, Xxxxxx Xxxxxx, Xxxxxx Xxxx, Xxxxxx Xxxxxxxxxx,
Xxxxx Xxxxx and Xxxxx Xxxxxx ("Sellers") who own all of the issued and
outstanding capital stock (the "Stock") of Hill Engineering, Inc., an Illinois
corporation (the "Company"). The Purchaser and Sellers are sometimes
collectively referred to herein as the "Parties", and either one of the Parties
is sometimes referred to as a "Party".
WITNESSETH
WHEREAS, Sellers are the beneficial and record owners of the
Stock as set forth in Schedule 3.3 attached hereto;
WHEREAS, the Company is engaged in the business of designing,
manufacturing, fabricating, assembling, and selling tools, dies and related
machinery and equipment (the "Business");
WHEREAS, the Company retains and owns all such assets, goodwill, properties
and contractual and other rights necessary to conduct the Business (the
"Assets");
WHEREAS, each of Sellers and the Company are domiciled in
the State of Illinois; and
WHEREAS, Purchaser desires to purchase One Hundred Sixty-Two (162) shares
of the Stock (the "Shares") from Sellers as set forth in Schedule 3.3 attached
hereto, and Sellers desire to sell such Shares to Purchaser, upon the terms and
condition specified in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and of other good and valuable consideration, the Parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE OF THE SHARES
Sellers hereby agree to sell, assign, transfer, and convey to Purchaser at
the Closing (defined below), for the consideration set forth and payable in
accordance with the provisions of Article II of this Agreement, all of Sellers'
rights, title, and interest in and to the Shares, free and clear of all liens,
encumbrances and adverse charges of any nature. At the Closing, Sellers shall
deliver to Purchaser certificates representing the Shares validly endorsed in
blank or accompanied by executed stock powers with respect to such Shares.
ARTICLE II
PURCHASE PRICE
2.1 Consideration. Subject to the terms and conditions set forth herein,
Purchaser hereby agrees to pay to Sellers at the Closing, as consideration for
the purchase of the Shares and for Sellers' covenants contained herein, the
amount of Five Million One Hundred Forty-One Thousand, Seventy and 00/100
Dollars ($5,141,070.00) in cash or other current funds.
2.2 Payment of Purchase Price. On the Closing Date,
Purchaser shall pay the Purchase Price as follows:
(a) the amount of One Hundred Fifty Three Thousand Four
Hundred Fifty and 00/100 Dollars ($153,450.00) to the account of
Xxxxxxxx Venture Group, Inc. ("HVG"), Sellers' business valuation
consultant for the transaction;
(b) the amount of Four Thousand One Hundred Fifty and 00/100 Dollars
($4,150.00) to the account of Wolf & Company, LPP ("Wolf"), Sellers' accountant
for the transaction;
(c) the amount of Fifty Thousand and 00/100 Dollars
($50,000.00) to the account of Childress, Eshoo, Xxxxxxxx & Xxxx,
Ltd. ("CEW&Z"), Sellers' attorneys for the transaction;
(d) the amount of Fifteen Thousand Four Hundred and 00/100 Dollars
($15,400.00) to the account of the Company to reimburse it for the payment of
the expenses or liabilities of the Shareholders to be paid at Closing;
(e) the amount of Three Hundred Thousand Dollars ($300,000) to Chicago
Title Insurance Company the "Escrow Agent") pursuant to that certain escrow and
disbursement agreement (the "Escrow Agreement") substantially in the form of
Exhibit 2.2 attached hereto; and
(f) the balance of the Purchase Price to the individual accounts of
each of the Sellers in respect of their individual percentage interest in the
Shares as set forth in Schedule 3.3 attached hereto (the "Ownership
Percentage").
2.3 Transfer of Funds. All amounts of Purchase Price payable under this
Agreement shall be wired according to the instructions provided in writing to
Purchaser by the intended recipient of such funds as assembled into Schedule 2.3
attached hereto.
ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF SELLERS
All representations and warranties contained herein shall survive the
Closing until such time(s) as stated in Article XVI, and none shall merge into
any Closing document. Sellers represent and warrant the following as of the date
of this Agreement and of the Closing Date (as defined in Article IX below):
3.1 Corporate Organization. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Illinois.
The Company has full corporate power and authority to own, lease and operate its
properties and to carry on and conduct the Business and is in good standing and
is duly qualified to transact business as a foreign corporation in all states in
which the nature of the Business or the Assets require it to be qualified.
3.2 Authority and Non-Contravention. Each of Sellers has the full power,
authority and capacity to enter into, execute, deliver and perform this
Agreement and all Exhibits to which it is a party. The execution, delivery and
performance of this Agreement and such Exhibits, and the consummation of all
transactions contemplated herein and therein, have been duly authorized by all
necessary action of Sellers. This Agreement and such Exhibits, when executed and
delivered by Sellers, shall be valid and binding obligations of Sellers,
enforceable against them in accordance with the terms hereof and thereof,
subject to bankruptcy, insolvency and other similar laws affecting the rights of
creditors generally and except that the remedies of specific performance,
injunction and other forms of mandatory equitable relief may not be available.
Except for approvals of governmental authorities, neither the execution and
delivery of this Agreement nor the execution and delivery of the certificates
and documents set forth as Exhibits hereto nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with or violate
any provision of the Articles of Incorporation or Bylaws of the Company, (ii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to Sellers or the Company or the
Business or by which any of their assets are affected, or (iii) conflict with or
result in any breach or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination or cancellation of, or accelerate the performance required
by or maturity of, or result in the creation of any security interest, lien,
charge or encumbrance on any of Sellers' or the Assets pursuant to any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, permit,
license, franchise, lease, contract, or other instrument or obligation to which
Sellers or the Company is a party or by which any of their assets are bound or
affected. Neither Sellers nor the Company are required to submit any notice,
declaration, report or other filing or registration with any governmental or
regulatory authority or instrumentality, and no approvals or non-objections are
required to be obtained or made by Sellers or the Company in connection with the
execution, delivery or performance by Sellers of this Agreement or any Exhibit
or the consummation of the transactions contemplated hereby or thereby.
3.3 Authorized Capitalization. The Company is an Illinois corporation
having authorized capital stock consisting of: 1000 shares of voting common
stock, of which 172 are issued and outstanding and 1000 shares of non-voting
common stock, of which 6 shares are issued and outstanding. Schedule 3.3
attached hereto sets forth all persons or entities owning shares of any class of
the Stock, as well as the amount and nature of the Stock held by each such
person or entity. There are no outstanding options, puts, calls or warrants to
acquire any of the Stock. The Shares constitute 162 out of 178 issued and
outstanding shares of the Stock. All of the Shares are validly issued, fully
paid and nonassessable and are owned of record and beneficially by Sellers in
their individual Ownership Percentage, free and clear of any liens, claims,
options, encumbrances or restrictions of any nature whatsoever. There are no
agreements, arrangements, convertible rights or other rights (vested or
contingent) to acquire any of the Stock, and no such agreements, arrangements,
convertible rights or other rights (vested or contingent) to acquire any of the
Stock will be issued, entered into, or granted prior to the Closing Date without
the prior written approval of the Purchaser. Sellers have the absolute and
indefeasible right, power and capacity to sell, assign and deliver the Shares to
Purchaser, and have good, marketable and indefeasible title to the Shares, free
and clear of all liens, claims, options, encumbrances or restrictions of any
nature whatsoever.
3.4 Operation of the Company's Business. The Company owns and retains all
of the Assets, tangible or intangible, contractual, license and leasehold rights
necessary (i) to operate the Business, and (ii) to utilize the Assets and
contractual, license and leasehold rights in the same manner as they
historically have been used. With the exception of those Assets used in the
Business pursuant to license and leasehold rights in favor of the Company and
disclosed to Purchaser, all of the Assets used in the Business are owned by the
Company, and none are owned by any other party.
3.5 Financial Statements. Attached hereto as Schedule 3.5 is the balance
sheet and the income statement of the Company for the years ended December 31,
1994 and 1995 ("Reviewed Financial") and the interim period ended September 30,
1996, and a balance sheet for the period ended December 31, 1996 ("Unreviewed
Financials"). The Reviewed Financials and Unreviewed Financials shall be
collectively referred to as Financial Statements. The Reviewed Financials are
materially complete and have been prepared from the books and records kept by
the Company and are materially accurate in presenting the properties, assets,
liabilities, financial position and condition of the Company as of their
respective dates. The results of operations set forth in the Reviewed Financials
are materially accurate. The Reviewed Financials to Seller's knowledge have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis. The Unreviewed Financials to Seller's knowledge have been
prepared from the books and records of the Company and reflect the properties,
assets, liabilities, financial position, results of operations, and consolidated
financial condition of the Company and of their respective dates in a manner
consistent with past practices.
3.6 Assets. The Company has good and marketable title to all of the Assets
(except for Third Party Software, for which the Company has valid and
enforceable licenses), and except as set forth in Schedule 3.6 attached hereto,
free and clear of all mortgages, options, leases, covenants, conditions,
agreements, liens, security interests, adverse claims, restrictions, charges,
encumbrances or rights of others. There exists no restriction on the use or
transfer of any of the Assets. The portion of the Assets that are tangible are
in good operating condition and repair, ordinary wear and tear excepted, and are
satisfactory for the purposes for which the Assets are being used in Business.
3.7 Compliance with Laws. The operation of the Business and the use of the
Assets are in material compliance with all applicable laws, ordinances, rules
and regulations, including but not limited to Federal, state, local
environmental, work place safety and employee benefits laws, regulations and
rules (collectively the "Laws"). The Company has all requisite licenses, permits
and certificates from Federal, state and local governmental authorities as may
be necessary to conduct the Business and to own and operate the Assets, and such
permits are valid and in full force and effect and will not be terminated or
adversely affected by the consummation of the transactions contemplated hereby.
Sellers and the Company have not received any notice alleging any violations by
the Company of any Laws, or of investigations or audits of the Company initiated
by governmental, regulatory or administrative agencies, and, to the knowledge of
the Company, no allegations or investigations are pending or have been
threatened.
3.8 Employee Benefit Plans
3.8.1 Except as set forth on Schedule 3.8.1 attached hereto, with
respect to all employees and former employees of the Company, neither the
Company nor any ERISA Affiliate (as defined below) of the Company presently
maintains, contributes to or has any liability under:
(a) any bonus, incentive compensation, profit sharing,
retirement, pension, group insurance, death benefit, group health, medical
expense reimbursement, cafeteria, dependent care, stock option, stock purchase,
stock appreciation rights, savings, deferred compensation, consulting, severance
pay or termination pay, vacation pay, life insurance, welfare or other employee
benefit or fringe benefit plan, program or arrangement;
(b) any plan, program or arrangement which is an "employee
pension benefit plan" as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or an "employee
welfare benefit plan" as such term is defined in Section 3(1) of ERISA.
For purposes of this Agreement, "ERISA Affiliate" shall mean each person (as
defined in Section 3(9) of ERISA) that, together with the Company (or any person
whose liabilities the Company has assumed or is otherwise subject to), currently
or in the past would be treated as a single employer under section 4001(b) of
ERISA or that would be deemed to be a member of the same "controlled group"
within the meaning of section 414(b), (c), (m) and (o) of the Internal Revenue
Code of 1986, as amended (the " Code"). The plans, programs and arrangements set
forth on Schedule 3.8.1 are herein referred to as the "Employee Benefit Plans."
3.8.2 With the exception of health care coverage as described in
Section 3.8.2, with respect to all employees and former employees of the
Company, neither the Company nor any ERISA Affiliate of the Company presently
maintains, contributes to or has any liability under any funded or unfunded
medical, health or life insurance plan or arrangement for present or future
retirees or present or future terminated employees except as required by the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA").
Neither the Company nor any ERISA Affiliate of the Company maintains or
contributes to a trust, organization or association described in any of Sections
501(c)(9), 501(c)(17) or 501(c)(20) of the Code.
3.8.3 Favorable determination letters have been received from the
Internal Revenue Service with respect to each Employee Benefit Plan (except the
Hill Engineering Flexible Benefit Plan effective 1/1/96 for which a
determination is pending and is hereby excluded from the applicable
representations in this Section 3.8.3) which is intended to comply with the
provisions of Section 401(a) of the Code, evidencing compliance with the
relevant provisions of the Tax Equity and Fiscal Responsibility Act of 1982, the
Tax Reform Act of 1984 and the Retirement Equity Act of 1984. Each such Employee
Benefit plan complies in form and in operation with the requirements of the Code
and meets the requirements of a "qualified plan" under Section 401(a) of the
Code. Additionally, amendments have been made to each such Employee Benefit Plan
for the Tax Reform Act of 1986 and subsequent legislation and regulations to the
extent they are required. A proper and timely application for a favorable
determination letter with respect to each such Employee Benefit Plan, as
amended, has been made with the Internal Revenue Service, and no unfavorable
responses have been received with respect to any such application from the
Internal Revenue Service.
3.8.4 With respect to each Employee Benefit Plan which is subject to
Title I of ERISA, neither the Company nor any ERISA Affiliate of the Company has
failed to comply with any of the applicable reporting, disclosure or other
requirements of ERISA and the Internal Revenue Code, and there has been no
"prohibited transaction" as described in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA.
3.8.5 To the best of Seller's knowledge, neither the Company nor any
ERISA Affiliate of the Company, nor any of their respective directors, officers,
employees or any other "fiduciary", as such term is defined in Section 3(21) of
ERISA, has any liability for failure to comply with ERISA or the Internal
Revenue Code for any action or failure to act in connection with the
administration or investment of the Employee Benefit Plans.
3.8.6 With respect to any Employee Benefit Plan which is subject to
Section 412 of the Code or Section 302 of ERISA, if any, there has been no
"accumulated funding deficiency" within the meaning of Section 302 of ERISA or
Section 412 of the Code (whether or not waived). With respect to the Employee
Benefit Plans, all applicable contributions and
premium payments for all periods ending prior to the Closing Date (including
periods from the first day of the then current plan year to the Closing Date)
have been made, and shall be made prior to the Closing Date in accordance with
past practice and, with respect to each Employee Benefit Plan subject to Title
IV of ERISA, the recommended contribution in the applicable actuarial report.
3.8.7 To the best of Sellers' knowledge, the actuarially determined
present value of all accrued benefits under each Employee Benefit Plan subject
to Title IV of ERISA (computed on a plan termination basis), if any, does not
exceed the fair market value of the assets of each such Employee Benefit Plan.
3.8.8 Neither the Company nor any ERISA Affiliate of the Company
presently maintains, contributes to or has any liability (including current or
potential withdrawal liability) with respect to any "multiemployer plan" as such
term is defined in Section 3(37) of ERISA.
3.8.9 Except as set forth on Schedule 3.8.9 attached hereto:
(a) The Company is not a party to any employment agreement,
whether written or oral, or agreement with change in control or similar
provisions, or collective bargaining agreement or contract with any labor union
relating to any employees or former employees of the Company;
(b) The Company does not have outstanding any loan or loans
to any current or former employees of the Company, nor has the Company
guaranteed such loans;
(c) No amount payable to an employee or former employee of
the Company will be an "excess parachute payment" which is non-deductible under
Section 28OG of the Code.
3.8.10 Neither the Company nor any ERISA Affiliate of the Company has
maintained an employee pension benefit plan that has been the subject of a
"reportable event," as that term is defined in Section 4043 of ERISA, as to
which notices would be required to be filed with the Pension Benefit Guaranty
Corporation ("PBGC"), or of any event requiring disclosure under Section 4063(a)
of ERISA. Neither the Company nor any ERISA Affiliate of the Company has
incurred any outstanding liability under Section 4062 of ERISA to the PBGC. All
premiums or other amounts due and payable to the PBGC have been paid. Neither
the Company nor any ERISA Affiliate of the Company has terminated any employee
pension benefit plan subject to Title IV of ERISA, and no proceeding by the PBGC
to terminate any employee pension benefit plan pursuant to Title IV of ERISA has
ever been instituted or (to Sellers' knowledge) threatened, no notice of any
such termination has been received and no condition exists which presents a
material risk of termination of an Employee Benefit Plan.
3.8.11 There is no pending or, to Sellers' knowledge, threatened legal
action, proceeding or investigation against or involving any Employee Benefit
Plan maintained by the Company or any ERISA Affiliate of the Company (other than
routine claims for benefits) and, to the Sellers' knowledge, there is no basis
for or fact which could give rise to any such legal action, proceeding or
investigation. Any bonding required with respect to the Employee Benefit Plans
in accordance with applicable provisions of ERISA has been obtained and is in
full force and effect.
3.8.12 There has been no act or acts which would result in a
disallowance of a deduction or the imposition of a tax pursuant to Section
4980B, or with regard to plan years beginning before December 31, 1988, Section
162(i) of the Code as in effect immediately prior to the enactment of the
Technical and Miscellaneous Revenue Act of 1988, or any regulations promulgated
thereunder, whether final, temporary or proposed. No event has occurred with
respect to which the Company or any ERISA Affiliate of the Company could be
liable for a tax imposed by any of Sections 4972, 4976,4977, 4979, 4980 or 4980B
of the Code, or for a civil penalty under Section 502(c) of ERISA.
3.8.13 With respect to each of the Employee Benefit Plans, Sellers and
the Company have delivered or will deliver within 30 days of closing to
Purchaser true and complete copies of: (i) the plan documents, including any
related trust agreements, insurance contracts or other funding arrangements, or
a written summary of the terms and conditions of the plan if there is no written
plan document; (ii) the most recent determination letter received from the
Internal Revenue Service; (iii) the most recent IRS Form 5500; (iv) the most
recent actuarial valuation; (v) the most recent financial statement; (vi) all
correspondence with the Internal Revenue Service, the Department of Labor and
the Pension Benefit Guaranty Corporation with respect to the past three plan
years other than IRS Form 5500 filings and PBGC premium payments; and (vii) the
most recent summary plan description.
3.9 No Material Change. There has been no material adverse change since
September 30, 1996 in the nature or prospects of the Company and the Business or
its condition (financial or otherwise), or properties, assets, liabilities
(actual or contingent), operations, or the manner of conducting the Business, or
from the condition, position or prospects of the Business as outlined in that
certain The Confidential Corporate Growth Memorandum prepared by Xxxxxxxx
Venture Group dated November 16, 1996 (the "Materials") other than changes in
the ordinary course of business which in the aggregate are not material and
adverse. Since September 30, 1996, there has been no event or condition of any
character which, either individually or in the aggregate, might reasonably be
expected to affect in a material adverse manner the business prospects,
operations, properties, assets, liabilities, earnings or financial condition of
the Company, the Business or the Assets. Since September 30, 1996 the Company
has not (i) declared or, directly or indirectly, paid any dividends or made any
other distributions or payments of any kind to its shareholders or partners
other than the agreed exceptions which include the value of the then existing
shareholder loans, the proceeds of the exercise of the stock option of Xx.
Xxxxxxxxxx for five shares, the cash surrender value of the life insurance, the
tax obligations of Sellers for their fourth quarter taxes and the value of the
automobile currently utilized in the Business by Xx. X. Xxxx, (ii) incurred any
indebtedness for borrowed money, other than in the ordinary course of business,
(iii) created or permitted to be created any liens, encumbrances, or adverse
charges of any nature on any of the Assets of the Company, (other than pursuant
to existing and disclosed liens) (iv) discharged, satisfied or paid, in whole or
in part, or permitted to be discharged, satisfied or paid, in whole or in part,
any obligation or liability (contingent or absolute) relating to the Business or
the properties of the Company, other than in the ordinary course of business, or
(v) waived or permitted to be waived any material right or claim of the Company.
From September 30, 1996 to the date of the Closing inclusive the activities of
the Company were conducted in the ordinary course of business.
3.10 Disposition of Assets. No Asset having a value in excess of $500 has
been disposed of since December 31, 1996.
3.11 Litigation. Other than as set forth on Schedule 3.11 attached hereto,
there are no claims, counterclaims, suits, orders, proceedings, actions, or
investigations pending, or notice of which has been received, or, to the
knowledge of Sellers, threatened against the Company, its assets, the Stock or
the Sellers with respect to the Shares or the Business. Neither Sellers nor the
Company nor any of its subsidiaries, directors, officers, employees or agents is
a plaintiff or defendant in any litigation or proceeding arising out of or
related to the Business other than as set forth in Schedule 3.11.
3.12 Agreements, Leases and Licenses. Schedule 3.12 attached hereto
accurately and completely sets forth all leases, licenses, contracts and other
material agreements to which the Company is a party or otherwise bound including
all amendments or modifications thereto (collectively the "Contracts"). Each of
the Contracts is valid, effective and enforceable in accordance with its terms.
The Company is not in material default under any of the Contracts and, to the
knowledge of Sellers, no other party to any of the Contracts is in default
thereunder. No event has occurred which with the passage of time or the giving
of notice or both would constitute a material default under any of the
Contracts. Each of the Contracts is appropriate in nature and scope to the
Business. Except as set forth on Schedule 3.12, each of the Contracts is valid,
binding and enforceable against the Company and each other party thereto in
accordance with its terms without any defenses, setoffs, counterclaims or
disputes of any nature and is in full force and effect. No purchase commitment
for materials, supplies, component parts or other items of inventory of the
Business to which the Company is a party is in excess of the ordinary, normal,
usual and current requirements of the business or at a price in excess of the
current reasonable market price. No Contract obligates the Company (i) to
provide products or services to third parties which the Company knows or has
reason to believe are at prices which would result in a net loss on the sale or
provision of such products or services, or which are pursuant to terms or
conditions it cannot reasonably expect to satisfy or fulfill in their entirety,
or (ii) to purchase or acquire services, information, products, inventory or
equipment in excess of the normal, ordinary, usual and current requirements of
the Business or at a price in excess of the current reasonable market price. The
Company has not waived any material right under any of the Contracts. The
Company is not a party to, nor are any of the Assets bound by, any agreement
that is materially adverse to the Business. Neither Sellers nor the Company has
received notice that any party to any of the Contracts intends to cancel or
terminate any contract or to exercise or not exercise any option under any
Contract.
3.13 Environmental and Health and Safety Matters
3.13.1 Set forth on Schedule 3.13.1 attached hereto is a true,
accurate and complete list of all real property owned or operated, currently or
previously, by the Company since its incorporation with the dates of ownership
or operation set forth (the "Property"). Those locations currently owned and
operated by the Company (the "Current Property") are noted on Schedule 3.13.1.
3.13.2 Except as set forth in Schedule 3.13.2 attached hereto, the
Company in its ownership and operation, as the case may be, of the Property have
been at all times and are in compliance with the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Superfund Amendments and Reauthorization Act, the Federal
Water Control Act, the Occupational Safety and Health Act, and all other
federal, state and local laws, regulations and ordinances, as amended, relating
to pollution, safety, health or protection of the environment, including,
without limitation, those relating to containment, emissions, discharges,
releases or threatened releases of industrial, toxic or hazardous substances,
materials or wastes or other pollutants, contaminates, petroleum products,
asbestos, polychlorinated biphenyls ("PCBs"), or chemicals (collectively,
"Hazardous Substances") into the environment (including without limitation,
ambient air, surface water, ground water, land surface or subsurface strata) or
otherwise relating to the manufacturing, processing, distribution, use,
treatment, labeling, storage, disposal, abatement, transport or handling of
Hazardous Substances (the "Environmental Laws").
3.13.3 The Company has obtained and is in full compliance with all
permits, licenses and other consents or authorizations which are required with
respect to the operation of the Business under the Environmental Laws, including
without limitation those that are required to (a) operate or install any
equipment or facilities and (b) generate, manufacture, formulate, store, treat,
handle, transport, discharge, emit or dispose of Hazardous Substances generated
by the Business, a true and complete list of which is included in Schedule
3.13.3.
3.13.4 To the best of Sellers' knowledge, there are polychlorinated
biphenyls (PCBs), Tetrachloroethylene (PCE), Trichlorethylene (TCE), or friable
and unencapsulated asbestos generated, used, treated, stored, maintained,
disposed of, or otherwise located on the Current Property. There are and were no
underground storage tanks whether or not excluded from regulation under
Environmental Laws used, stored, maintained, located on, out of service, closed,
abandoned, decommissioned or otherwise related to the Current Property. The
Company has removed and properly disposed of all used or other obsolete
materials regulated by Environmental Laws, including chemical or other hazardous
substances or wastes, generated by the Business.
3.13.5 Except as set forth in Schedule 3.13.2 of this Agreement, there
has been no "release" as defined in 42 U.S.C. 9601(22) or, to the knowledge of
Sellers, threat of a "release" of any Hazardous Substance on, from, over or
under any of the Property.
3.13.6 Except as set forth in Schedule 3.13.2 of this Agreement,
neither Sellers nor the Company have received notice that any of them have any
potential liability with respect to the contamination, investigation, or cleanup
of any site at which Hazardous Substances have been or have alleged to have been
generated, treated, stored, released, discharged, emitted, transported over or
disposed of, and there are no past or present (or, to the knowledge of Sellers,
future) events, facts, conditions or circumstances which may interfere with or
prevent compliance by the Business in accordance with the Environmental Laws, or
with any order, decree, judgment, injunction, notice or demand issued, entered,
promulgated or approved thereunder, or which may give rise to any common law or
other legal liability, including, without limitation, liability under any of the
Environmental Laws, or otherwise form the basis of any claim, action, demand,
suit, proceeding, hearing, notice of violation, study or investigation, based on
or related to the manufacture, process, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment of any Hazardous Substances by the
Company or a predecessor, as a result of any act or omission of the Company or a
predecessor.
3.13.7 Schedule 3.13.7 contains a true, correct and complete listing
of all Hazardous Substances used by the business of the Company in the conduct
of its operations since January 1, 1980, and the Company has available at its
place of Business a list of the methods used by the Company and any predecessor
(including, but not limited to, a list of past and present disposal or recycling
sites, waste haulers, and manifest numbers) since January 1, 1980 to dispose of
or recycle Hazardous Substances generated by the Company's operations.
3.13.8 To the best of Sellers' knowledge all of the Company's disposal
and recycling practices relating to Hazardous Substances have been accomplished
in accordance with all applicable Environmental Laws.
3.14 Intellectual Property. Schedule 3.14 lists all registered patents,
trademarks, service marks, tradenames and copyrights and all of the applications
thereof, that are owned by the Company and/or which are used in the Business.
The patents, trademarks, servicemarks, tradenames, copyrights, processes of
every kind and description, designs, know- how, formulae, shop rights, trade
secrets, and similar properties, as well as the registrations and applications
therefor, and the renewals thereof, (the "Intellectual Property"), are owned or
lawfully used by the Company. None of the Intellectual Property has been held or
stipulated to be invalid in any litigation or proceeding. The validity of the
Intellectual Property, and of the Company's rights to the Intellectual Property,
has not been questioned in any litigation or proceeding currently pending or
which, to the knowledge of Sellers, has been threatened, and there exists no
basis for a claim against the Company for infringement of any third party's
intellectual property. Neither Sellers nor the Company has received any notice
to the effect that any product it makes or sells, or the distribution or use by
it or another entity of any such product, or any services it performs in the
course of the Business, may infringe any trademark, service xxxx, tradename,
copyright, patent, trade secret, or similar legally protectable right of
another. All patentable inventions utilized or first reduced to practice in
connection with the Business or pursuant to or in connection with the employment
or engagement by the Company of individuals are the property of the Company. The
Company has not entered into and is not a party to any development, work for
hire, license or other agreement pursuant to which the Company has secured the
right or obligation to use, or granted others the right or obligation to use,
any trademarks, service marks, tradenames, copyrights, patents or knowhow
(except as set forth in Schedule 3.12 attached hereto).
3.15 Related Party Transactions. None of Sellers or any officer or director
of the Company or any affiliate thereof has, directly or indirectly, entered
into any transaction with the Company, except for any arrangements which are
specifically disclosed in the Financial Statements. For purposes of this Section
3.15 only, the term "affiliate" of the Company shall mean and include any
officer or director or shareholder of the Company or any person related to any
officer, director or shareholder of the Company by blood or by marriage, or any
corporation, partnership, proprietorship, trust or other entity in which such
officer or director or shareholder of the Company (or any spouse, ancestor or
descendant of the same) has more than a five percent (5%) legal or beneficial
interest, or any corporation, partnership, proprietorship, trust or other entity
which controls, is controlled by, or is under common control with, the Company.
3.16 Increases in Salaries and Wages. The Company has not, since September
30, 1996, paid any salaries, wages, bonus payments or any other benefits to its
employees at rates exceeding the respective rates paid to such employees which
were in effect thereat except for routine salary increases in the ordinary
course of business or pursuant to any Employee Benefit Plan.
3.17 Taxes. As to any Taxes (as defined in Section 12.1 below) imposed by
the Federal government, or any state government or any subdivision or
municipality thereof, or the government of any other country or political
subdivision thereof, including, without limitation, (i) taxes imposed on or
measured by income, (ii) taxes based on employment (including amounts withheld
from employees' compensation), and (iii) any property, franchise, or sales or
use tax, which, in each case, relates to or could cause a lien or encumbrance
upon any of the Assets, the Stock or the Business, the Company, and as
applicable, the Sellers, have timely, properly and lawfully filed all returns
and elections necessary to be filed and has paid in full the applicable taxes
(including any penalties, assessments and deficiencies in respect of such taxes)
due on such returns; and no claims for any unpaid taxes, interest or penalties
are being asserted by any governmental authority, for any period, against the
Company, the Stock or any Assets of the Company. The Company has not paid and is
not required to pay any income, excise or franchise taxes to any state or states
other than Illinois or Kentucky. The Company, and as applicable, the Sellers
have timely filed and paid all estimated taxes due on or prior to September 30,
1996, if any, and has made accruals on the Financial Statements for all taxes
due with respect to the period ended at the date of the Closing. The Company has
furnished Purchaser with true and complete copies of each of the Federal, state,
local and foreign income and excise tax returns, sales and use and franchise tax
returns, and any amendments thereto, of the Company, as they relate to taxable
periods since December 31, 1994, and the Company has made available to Purchaser
all reports of and communications from Internal Revenue Service agents and the
corresponding agents of other state, local and foreign governmental agencies who
have examined or intend to audit or examine the books and records of the Company
at any time including and since the commencement of the last IRS audit. No audit
or examination of the Company or the Stock by any taxing authority or agency is
now pending or currently in progress, nor has the Company received from any
taxing authority or agency any notice of such an audit or examination. The
Company has paid all deficiencies and altered all practices proposed as a result
of the audits and examinations. No waiver of any statute of limitations has been
given and is in effect in respect to the assessment of any taxes against the
Company. There are no outstanding agreements or waivers extending the statutory
period of limitation applicable to any return of the Company for any period with
respect to any tax. There are no tax sharing agreements or arrangements to which
the Company is now or ever has been a party. There are no deferred taxes payable
by the Company whether set forth on the Financial Statements or otherwise. None
of Sellers is a "foreign person" within the meaning of Section 1445(b)(2) of the
Internal Revenue Code.
3.18 Employee Wages, Salaries and Benefits. The Company has provided
Purchaser with an accurate list of all employees of the Company (whether
full-time, part-time or temporary), and the current rate of compensation for
each such employee (including a separate statement of bonuses and fringe
benefits). There is no liability for unpaid salary or wages, bonuses, vacation
time, or other employee benefits due or accrued, nor liability for withheld or
deducted amounts from employees' earnings, for the period ending on or
immediately prior to the Closing Date, including without limitation commission
payments to agents, representatives or employees except as listed in the
Financial Statements or in Schedule 3.8.1. There are no labor disputes, strikes,
work stoppages or other interruptions in service or performance pending or
threatened, and all relationships between the Company and its employees are
generally stable and satisfactory.
3.19 Insurance. The Company maintains in effect, and has at all times
maintained in effect, product liability insurance, motor vehicle and
comprehensive general liability insurance and workers' compensation insurance
covering the Business and fire and extended coverage insurance with respect to
the Property and the Assets. Schedule 3.19 attached hereto is a complete list of
all of the Company's insurance policies (including the amount of coverage and
exclusions thereunder) in effect at present and as to product liability and
comprehensive general liability, in effect since 1990. All such insurance
policies are owned solely and exclusively by the Company. To the best of
Sellers' knowledge no event has occurred that may enable an insurer to rescind,
revoke or cancel any such policies or to seek any additional or retroactive
premium, charge, fee or penalty.
3.20 Customer and Supplier Relationships: Warranty Claims. The Company has
not received any notice that any customer or supplier of the Company intends to
discontinue or materially alter the prices or terms of, or substantially
diminish, its relationship with the Company. Other than as set forth on Schedule
3.20, since December 31, 1996, there are no outstanding warranty claims against
the Company by any of its customers with respect to products sold or services
rendered by the Company.
3.21 Accounts Receivable and Notes Receivable. Except as set forth in
Schedule 3.21 attached hereto, the accounts receivable and notes receivable of
the Company, represent bona fide claims which the Company has against debtors
for sales, services or funds advanced arising on or before the Closing Date, are
not subject to counterclaims, setoffs or deductions of any kind other than trade
discounts, and are not subject to additional requirements of performance by the
Company. The aggregate amount of customer advance payments (i.e., payments in
excess of actual work performed or materials supplied as of the date of such
payment) received by the Company at or prior to December 31, 1996 with respect
to such accounts receivable are set forth in the Balance Sheet. Such receivables
have been recorded in accordance with the Company's historical revenue
recognition policy and have been collected or are collectable in accordance with
their terms at the full face amount.
3.22 Accounts Payable. The accounts payable of the Company represent bona
fide claims which creditors have against the Company for sales or services, are
not subject to counterclaims, setoffs or deductions by the Company, and are not
subject to additional requirements of performance due to the Company. All of the
accounts payable have been created pursuant to receipt of goods or services
conforming to the terms of purchase orders executed in favor of unrelated third
parties in the ordinary course of business.
3.23 Bonds; Guarantees. There are no bonds, guarantees, notes, sureties,
letters of credit, indebtedness or other similar credit agreements or debt
obligations that exist with respect to the Company, the Business or any of the
Assets except as set forth in Schedule 3.23 attached hereto. The Company is not
in default on the payment of any principal or interest on any indebtedness for
borrowed money, nor is the Company otherwise, to its knowledge, in default under
any indemnity, fidelity or contract bond or letter of credit, note, guarantee or
other credit agreement or debt obligation or instrument.
3.24 Absence of Undisclosed Liabilities. Except as specifically and
explicitly reserved against in the Financial Statements, the Company is not
subject to any material liability or financial obligation (direct or indirect,
absolute, contingent, accrued or otherwise), other than liabilities or financial
obligations arising in the ordinary course of business since September 30, 1996.
The Company is not in default with respect to any term or condition of any
indebtedness or liability (including any current or deferred trade payable).
Sellers know of no facts or circumstances which might reasonably serve as the
basis for any material liabilities or financial obligations with respect to the
Company or the Stock which are not disclosed pursuant to this Agreement. For
purposes of this Section 3.24, any individual liability, or all such liabilities
in the aggregate, are deemed to be material if the individual or aggregate value
is greater than $1,000.
3.25 Inventories. Any and all inventories of the Company reflected in the
Financial Statements, plus any replacements for such items acquired on or before
the Closing Date, and minus any such items sold or leased by the Company in the
ordinary course of business on or before the Closing Date, including the
physical count of the inventory taken December 23, 1996 at the Danville,
Kentucky facility of the Company and December 30, 1996 at the Villa Park,
Illinois facility of the Company (the "Inventories"), are properly valued in
accordance with generally accepted accounting principles consistently maintained
and applied except as set forth in Schedule 3.25 attached hereto, at (i) in the
case of raw material or purchased components the lower of acquisition cost or
market value on an item by item FIFO basis, or (ii) in the case of
work-in-progress and finished goods, the sum of the value of raw material and
purchased components, direct labor and factory burden applicable to such items,
which sum shall be calculated by reference to (a) raw materials and purchased
components valued at the lower of acquisition costs or market costs, (b) direct
labor valued at the Company's labor rates which are based on actual recorded
direct labor minutes multiplied by the average shop-wide, direct labor rate in
effect at December 31, 1996, and (c) standard factory burden expressed and
valued as a percentage of standard direct labor costs, for the respective
products, which percentage shall be those used by the Company as of December 31,
1996, adjusted to eliminate the cost of the (x) wages, fringe costs and expenses
of any engineering activities that are not directly related to application
engineering, (y) the wages, fringe costs and expenses of any sales, marketing
and service activities, and (z) any other costs, including general
administrative costs, inconsistent with generally accepted accounting principles
in the calculation of factory burden. Except for obsolete and slow-moving items
which have been fully written off and except for items sold in the ordinary
course of business, the Inventories consisted of and will, at the Closing Date,
consist of items of a quality and quantity currently usable and saleable in the
ordinary course of business without markdown or discount. With respect to
Inventories in the hands of suppliers for which the Company is committed as of
the date of this Agreement or as of the Closing Date, such inventory is
described in Schedule 3.25 attached hereto and is reasonably expected to be
usable in the ordinary course of business as the Business is presently being
conducted. All items included in the Inventories are the property of the
Company. No items are held by the Company on consignment from others. The
Inventories are free of defects and, to the extent that they consist of finished
or semi-finished goods, also comply with the specifications submitted by the
intended purchasers thereof pursuant to valid and non-cancelable purchase
orders.
3.26 Equipment and Manufacturing. The machinery, equipment, patterns,
tools, dies, jigs, fixtures, vehicles, trucks, furniture and other assets owned,
retained, used or held for use by the Company are complete and adequate for the
purpose of manufacturing the items made by the Company and for the purpose of
providing the services rendered by the Company in connection with the Business.
Schedule 3.26 sets forth all machinery and equipment used to conduct the
Business (the "Equipment"), and the Company's software and computer programs
used in its business, including any software or computer programs not
wholly-owned by the Company ("Third Party Software"). The engineering drawings,
specifications and manufacturing data possessed or owned by the Company are all
of such items that are necessary to manufacture the products presently being
manufactured by the Company and to provide the services rendered by the Company
in connection with the Business.
3.27 Charter Documents. The Company has delivered or made available to
Purchaser certified copies of its Articles or Certificate of Incorporation and
By-laws, each as amended to date, as well as copies of its minute books covering
the period from the date of the Company's incorporation to the date of this
Agreement. Such Articles or Certificate of Incorporation and Bylaws are
complete, correct and current. The minute books of the Company contain a
complete, correct and current record of all meetings and other corporate actions
of the stockholders and Board of Directors of the Company since the
incorporation of the Company.
3.28 Subsidiaries. There are no subsidiaries of the Company.
3.29 "S" Corporation Status. Since January, 1987, the Company has been
qualified as an "S" corporation within the meaning of Section 1361(a)(1) of the
Code (and under any comparable state law) and will be so qualified until the
Closing.
3.30 No Material Misrepresentations or Nondisclosures. Neither this
Agreement nor any Exhibit or Schedule attached hereto nor the Materials (as
defined in Section 3.9 above) contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. There is no fact not disclosed to
Purchaser by Sellers which adversely affects the Company, the Stock, the
Business or the Assets, or which in the future, as a result of existing material
facts whose impact has not yet been experienced, may (so far as Sellers can now
reasonably foresee) adversely affect the Company, the Stock, the Business or the
Assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
All representations and warranties contained herein shall survive the
Closing until such time(s) as stated in Article XVI, and none shall merge into
any Closing documents. Purchaser represents and warrants the following as of the
date of this Agreement and of the Closing Date:
4.1 Corporate Standing. Purchaser is a corporation organized, existing, and
in good standing under the laws of the State of Delaware. Purchaser has full
corporate authority to own, lease and operate its properties and businesses, and
is in good standing and is qualified to transact business as a foreign
corporation in all states in which the nature of its business or the properties
owned by it require it to be qualified.
4.2 Authority and Non-Contravention. Purchaser has the full corporate power
and authority to enter into, execute, deliver and perform this Agreement and all
Exhibits to which it is a party. The execution, delivery and performance of this
Agreement and such Exhibits, and the consummation of all transactions
contemplated herein and therein, have been duly authorized by all necessary
corporate action of Purchaser. This Agreement and such Exhibits, when executed
and delivered by Purchaser, shall be valid and binding obligations of Purchaser,
enforceable against it in accordance with the terms hereof and thereof, subject
to bankruptcy, insolvency and other similar laws affecting the rights of
creditors generally and except that the remedies of specific performance,
injunction and other forms of mandatory equitable relief may not be available.
Except for approvals of governmental authorities neither the execution and
delivery of this Agreement nor the execution and delivery of the certificates
and documents set forth as Exhibits hereto nor the consummation of the
transactions contemplated hereby or thereby will (i) conflict with or violate
any provision of the Articles or Certificate of Incorporation or By-laws of
Purchaser, (ii) conflict with or violate any law, rule, regulation, ordinance,
order, writ, injunction, judgment or decree applicable to Purchaser, or by which
any of Purchaser's assets are bound or affected, or (iii) conflict with or
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination or cancellation of, or accelerate the performance required
by or maturity of, or result in the creation of any security interest, lien,
charge or encumbrance on any of Purchaser's assets pursuant to any of the terms,
conditions or provisions of, any note, bond, mortgage, indenture, permit,
license, franchise, lease, contract, or other instrument or obligation to which
Purchaser is a party or by which any of its assets are bound or affected.
Purchaser is not required to submit any notice, declaration, report or other
filing or registration with any governmental or regulatory authority or
instrumentality and no approvals or non-objections are required to be obtained
or made by Purchaser in connection with the execution, delivery or performance
by Purchaser of this Agreement or the Exhibits or the consummation of the
transactions contemplated hereby or thereby.
4.3 Investment Intent. Purchaser is acquiring the Shares for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof.
4.4 Financing. As of the Closing, Purchaser will have the financial
capacity to perform its obligations under this Agreement.
ARTICLE V
COVENANTS OF THE SELLERS
Between the date of this Agreement and the Closing Date, Sellers shall, and
shall cause the Company to:
5.1 Management of the Company. Operate the Business in a prudent manner
consistent with past practices, and in the usual and ordinary course, and use
its best efforts to preserve the goodwill of suppliers, distributors, sales
representatives, customers, creditors and others having business relationships
with the Company, and shall safeguard and preserve the confidentiality of all
books, records and information relating to the Company in a prudent manner
consistent with past practices.
5.2 Accounting Practices. Refrain from making any change in the
accounting practices or procedures governing the Company and its financial
reporting.
5.3 Stock Restrictions. Refrain from delivering, pledging, encumbering,
selling, or otherwise disposing of any of the Shares, or issuing, redeeming or
repurchasing any shares of the Stock, or granting, issuing, selling, purchasing
or disposing of any option, warrant or right to acquire any shares of the Stock;
and refrain from making, paying, declaring or setting aside any dividend, or
making any distribution on account of any of the Shares. Not enter into, issue,
or grant any agreements, arrangements, warrants, calls, options, convertible
rights, splits, combinations, reclassifications or other rights (vested or
contingent) in respect of or to acquire any of the Stock.
5.4 Reorganization. Refrain from acquiring or agreeing to acquire by merger
or consolidation, purchase of capital stock or assets, or by any other manner,
any business, corporation, partnership or other business unit, division or
organization.
5.5 Maintaining Assets. Except as approved in advance by Purchaser,
maintain the fixed Assets in good condition, repair and working order, normal
wear and tear excepted; and refrain from (a) making or permitting any sales,
transfers or dispositions of any of the Assets (other than Inventory in the
ordinary course of business); (b) entering into any contracts (including
employment agreements), leases, or commitments (including the purchase of
capital assets), or any amendments or modifications to contracts, leases or
commitments existing at the date of this Agreement, involving the Business or
the Assets, other than those in the ordinary course of business, and other than
those that can be terminated without obligation or penalty at the Closing; (c)
taking or permitting any action or entering into or permitting any contract or
agreement prohibited by Section 3.9 of this Agreement; and (d) compromising any
claim of the Business.
5.6 Encumbrance of Assets. Refrain from mortgaging, pledging or subjecting
to any mortgage, pledge, lien, charge or other encumbrance any of the Assets
other than pursuant to existing liens disclosed to Purchaser or in the ordinary
course.
5.7 Compensation. Refrain from making or permitting any increase in the
compensation or benefits payable or to become payable to any of the directors,
officers, employees or agents of the Company, or making any new bonus payment or
arrangement or benefit to or with any of them, or hiring any additional
employees other than in the ordinary course of business.
5.8 Insurance. Have in effect and maintain at all times all insurance now
in force relating to the Company, the Business and the Assets.
5.9 Preserve Organization. Use its best efforts to preserve the business
organization of the Company intact, and to keep available the services of the
present officers and employees of the Company.
5.10 Access to the Records of the Company. Allow Purchaser, its
representatives, attorneys and accountants to continue to have reasonable access
to the records and files, audits, facilities and employees of the Company
relating to the Company, the Business and the Assets, as well as all information
relating to taxes, commitments, contracts, titles and financial condition of, or
otherwise pertaining to, the Company. The Company agrees to cause its
accountants and attorneys to cooperate with Purchaser and its accountants in
making available all financial information concerning the Company as is
requested, and Purchaser and its accountants shall have the right to examine all
working papers pertaining to the financial condition of the Company relating to
the Company, the Business and the Assets, provided that such examinations shall
be designed to cause minimal disruption to the Company, the Business and work
force, and in any event, shall be undertaken with reasonable prior notice and
during normal business hours of the Company.
5.11 Consents and Authorizations. Use its best efforts to obtain all
government authorizations and contractual and leasehold consents and permits
necessary to enable the consummation of all transactions contemplated hereby
without causing the discontinuation or termination of any permits or of any
contractual relationships maintained by the Company.
5.12 Fulfill Closing Conditions. Use its best efforts to take, or to cause
to be taken, all action reasonably necessary or appropriate to cause each of the
conditions set forth in Articles VII and VIII to be fulfilled on or prior to the
Closing Date.
5.13 Taxes. File and pay when due all federal, state, local and foreign
income, franchise and other taxes of the Company, including any taxes on or
arising out of this transaction. Refrain from taking any action to terminate or
revoke its "S" corporation election before the Closing Date.
5.14 Financial Reports. Provide Purchaser with (i) copies of any financial
statements prepared by the Company in the course of its business, to be provided
promptly after they become available; (ii) cumulative and monthly management
reports of the Business (including statements of revenues and expenses), to be
provided within 15 days following the end of each month; and (iii) written
notice immediately upon any significant change in the Business's prospects,
deviations from the ordinary course of business, or any other event that
represents a material adverse change in the prospects of the Business, or the
financial position or operations of the Company.
5.15 Certificate of Incorporation and By-Laws. Refrain from amending the
Articles or Certificate of Incorporation or By-Laws of the Company.
5.16 Damage or Destruction of Assets. Notify Purchaser immediately in the
event of any damage to or destruction of any of the material Assets.
5.17 No Shop. Refrain, and cause the Company's officers, directors,
employees, agents and Affiliates to refrain, from initiating or entering into
any negotiations or soliciting or discussing or encouraging (including by way of
furnishing non-public information) any offer or proposal regarding the sale,
direct or indirect, of any of the Shares; the sale, direct or indirect, of any
of the Assets (other than Inventory in the ordinary course of business); the
issuance of any of the Stock or any options, warrants, or rights to acquire
capital stock of the Company; or any merger, consolidation or similar
transaction involving the Stock or the Shares or any of the Assets; with any
party other than Purchaser or an Affiliate of Purchaser. The Seller shall
promptly notify Purchaser of any such proposal or offer, or any inquiry or
contact with any person with respect thereto, and the terms thereof.
5.18 Confidentiality. Continue, and cause the Company's officers,
directors, employees, agents and Affiliates to continue, to observe, perform,
and comply with that certain confidentiality agreement executed November 5,
1996, by the Company.
5.19 Plans. Refrain from modifying, canceling or establishing any Employee
Benefit Plan.
ARTICLE VI
COVENANTS OF PURCHASER
Between the date of this Agreement and the Closing Date, Purchaser shall:
6.1 Fulfill Closing Conditions. Use its best efforts to take, or cause to
be taken, all action reasonably necessary or appropriate to cause each of the
conditions set forth in Articles VII and VIII to be fulfilled on or prior to the
Closing Date.
6.2 Third Parties and Government Approvals. Use its best efforts to file
and obtain approval of all necessary documentation, and to obtain all necessary
approvals of third parties and of appropriate regulatory authorities, with
respect to the Proposed Transactions.
6.3 Confidentiality. Continue, and cause Purchaser's officers, directors,
employees, agents and Affiliates to continue, to observe, perform, and comply
with that certain confidentiality agreement executed November 8, 1996 by
Purchaser's parent and to which Purchaser became a party January 10, 1997.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING BY PURCHASER
Purchaser shall not be required to proceed on the Closing Date with the
proposed Transactions contemplated by this Agreement unless the following
conditions precedent shall have been fulfilled and satisfied, or shall have been
waived in writing by Purchaser:
7.1 Representations and Warranties. Each of the warranties and
representations of Sellers contained herein shall be true and correct as of the
date of this Agreement, and shall also be true and correct as of the Closing
Date as if then originally made.
7.2 Covenants. Sellers shall have complied with each of the covenants
required of them on or prior to Closing.
7.3 Sellers' and Officers' Certificate. Sellers shall have delivered to
Purchaser a certificate of Sellers, and a certificate of the President and Chief
Financial Officer of the Company, dated the Closing Date, certifying to the best
of the knowledge and belief of such persons and in such detail as Purchaser
reasonably requests to the accuracy of Sellers' representations and warranties
contained herein, and to the fulfillment of Sellers' covenants and to the
conditions precedent to Purchaser's obligations to consummate the transactions
contemplated by this Agreement ("Sellers' and Company Certificate").
7.4 Good Standing. Sellers shall have delivered to Purchaser a
certificate of good standing from the State of Illinois and a certificate of
authorization from the State of Kentucky for the Company.
7.5 Legal Opinion. Sellers shall have delivered to Purchaser a legal
opinion, in substantially the form attached hereto as Exhibit 7.5, from
Childress, Eshoo, Xxxxxxxx & Xxxx, counsel to Sellers ("Sellers' Opinion").
7.6 Governmental Approvals. Sellers, the Company and/or Purchaser, as the
case may be, shall have received all governmental and regulatory consents,
non-objections or permits from all Federal, state, local and foreign
governmental authorities necessary to permit Sellers, Purchaser, and the Company
to consummate the Proposed Transactions, and to enable the Company to conduct
the Business after the Closing Date in all material respects as the Company
conducted such Business on the date of this Agreement.
7.7 Material Adverse Change. There shall have been no material adverse
change (or changes which in the aggregate are materially adverse) since the date
hereof in the financial condition, results of operations, Assets, Business,
prospects or products and services provided by the Company, whether by reason of
change in government regulation or action or otherwise.
7.8 Bankruptcy. Neither the Company nor any of Sellers shall be the subject
of a petition for bankruptcy, reorganization or liquidation under the Federal
bankruptcy laws, or under state or foreign insolvency laws, nor shall an
assignment for the benefit of creditors or any similar protective proceeding or
act or event of bankruptcy have occurred.
7.9 Due Conveyance: Consents. The Shares, at Closing, will be conveyed
and assigned to Purchaser free and clear of all liens, charges, encumbrances and
third party adverse claims, and all necessary consents of other parties to the
contracts, agreements and licenses forming a part of the Business, shall have
been obtained without burdensome limitations or conditions.
7.10 Lawsuits. No action, suit or proceeding shall have been instituted or
threatened before a court, arbitration panel or governmental body with respect
to the Proposed Transactions, and no regulatory enforcement proceeding shall be
pending before any governmental agency or body with respect to the Proposed
Transactions.
7.11 Environmental Audit. The parties acknowledge hereby that an
environmental audit has been performed of the Current Property, the results of
which have been received. The Parties shall
split the cost of this audit.
7.12 Debt. At the Closing Date the Company shall have no debt, other than
trade debt, other accounts payable incurred in the ordinary course of business
and the debt set forth on the balance sheet at December 31, 1996, which forms
part of the Financial Statements.
7.13 Directors. Xx. X. Xxxx and Xx. Xxxxxx shall have resigned in writing
from the Board of Directors of the Company effective upon the Closing.
7.14 Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article VII is not fulfilled as of February 21, 1997, (the
"Non-Fulfillment Date"), Purchaser may, upon notice to the Company and on or
prior to the Closing Date, elect either (i) to waive the condition and proceed
to Closing; or (ii) not to consummate the Proposed Transactions and terminate
this Agreement without any further liability on the part of either of the
Parties.
7.15 Employment Agreements. Messrs. Xxxxxx Xxxx, Xxxxx Xxxxxx,
Xxxxx Xxxxx,and Xxxxxx Xxxxxxxxxx shall have executed and delivered employment
agreements on terms and conditions acceptable to Purchaser substantially in the
form of Exhibit 7.15 attached hereto.
7.16 Shareholder Agreement. Purchaser and those Sellers retaining any of the
Stock shall have executed and delivered, effective upon the Closing Date, a
shareholder agreement on terms and conditions acceptable to the Parties
substantially in the form of Exhibit 7.16 attached hereto.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
Sellers shall not be required to proceed on the Closing Date with the
transactions contemplated by this Agreement unless the following conditions
precedent shall have been fulfilled and satisfied, or shall have been waived in
writing by Sellers:
8.1 Representations and Warranties. Each of the representations and
warranties of Purchaser contained herein shall be true and correct as of the
date of this Agreement and shall be true and correct as of the Closing Date as
if then originally made.
8.2 Covenants. Purchaser shall have complied with each of the covenants
required of it on or prior to Closing.
8.3 Officers' Certificate. Purchaser shall have delivered to Sellers a
certificate of its President and Chief Financial Officer, dated the Closing
Date, certifying to the best of the knowledge and belief of such officers and in
such detail as Sellers reasonably request to the accuracy of Purchaser's
representations and warranties, and to the fulfillment of Purchaser's covenants
and of the conditions precedent to Sellers' obligations to consummate the
transactions contemplated by this Agreement ("Purchaser's Certificate").
8.4 Good Standing. Purchaser shall have delivered to Sellers a certificate
of good standing from the State of Delaware.
8.5 Legal Opinion. Purchaser shall have delivered to Sellers a legal
opinion, in substantially the form attached hereto as Exhibit 8.5, from
R. Xxxxx Xxxxx, general counsel of Purchaser
("Purchaser's Opinion").
8.6 Governmental Approvals. Sellers, Purchaser and/or the Company, as the
case may be, shall have received the any necessary governmental and regulatory
consents, non-objections or permits necessary to permit the Parties to
consummate the Proposed Transactions.
8.7 Bankruptcy. Neither Purchaser nor its parent shall be the subject of a
petition for reorganization or liquidation under the Federal bankruptcy laws, or
under state insolvency laws, nor shall an assignment for the benefit of
creditors or any similar protective proceeding or act or event of bankruptcy
have occurred.
8.8 Lawsuits. No action, suit or proceeding shall have been instituted or
threatened before a court, arbitration panel or governmental body with respect
to the Proposed Transactions, and no regulatory enforcement proceeding shall be
pending before any governmental agency or body with respect to the Proposed
Transactions.
8.9 Corporate Authorizations. There shall have been obtained, by means in
conformity with all applicable provisions of Delaware law, the approval of
Purchaser's Board of Directors to the Proposed Transactions.
8.10 Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article VIII is not fulfilled as of the Non-Fulfillment Date,
Sellers may, upon notice to Purchaser and on or prior to the Closing Date, elect
either (i) to waive the condition and proceed to Closing; or (ii) not to
consummate the Proposed Transactions and terminate this Agreement without any
further liability on the part of either of the Parties, except that the
foregoing shall not relieve either of the Parties from liability for damages
actually incurred as a result of breach of this Agreement.
ARTICLE IX
CLOSING
The actual consummation of the transactions contemplated by this Agreement
(the "Closing") shall take place on January 31, 1997 (the "Closing Date") at the
offices of the Company in Villa Park, Illinois or such other date or at such
other place as shall be otherwise agreed by the Parties hereto.
ARTICLE X
OBLIGATIONS AT THE CLOSING
10.1 Sellers' Obligations. At the Closing, Sellers shall deliver to
Purchaser:
10.1.1 Sellers' and the Company Certificate, or, if any representation
or warranty is untrue or incorrect, specifying the respect in which it is untrue
or incorrect or, if any such covenant is unfulfilled, specifying the respect in
which it is unfulfilled, or, if any such condition is unfulfilled, specifying
the respect in which it is unfulfilled;
10.1.2 Sellers' Opinion;
10.1.3 The certificates representing all of the Shares, together with
appropriate stock powers or forms of transfer in a form satisfactory to
Purchaser and executed by each of respective Sellers assigning such certificates
to Purchaser, free and clear of any liens, claims, options, encumbrances or
restrictions of any nature whatsoever.
10.2 Purchaser's Obligations. At the Closing Purchaser shall deliver
to Sellers or as instructed by Sellers:
10.2.1 Purchaser's Certificate, or, if any such representation or
warranty is untrue or incorrect, specifying the respect in which it is untrue or
incorrect, or, if any such covenant is unfulfilled, specifying the respect in
which it is unfulfilled, or, if any such condition is unfulfilled, specifying
the respect in which it is unfulfilled;
10.2.2 A copy of resolutions adopted by the Board of Directors of
Purchaser, certified by its Secretary, authorizing or ratifying the execution
and delivery of this Agreement and the performance by Purchaser of its
respective obligations hereunder;
10.2.3 Purchaser's Opinion;
10.2.4 Current funds in the amounts specified in Section 2.2.
ARTICLE XI
FURTHER COVENANTS OF SELLERS AND PURCHASER
Sellers and Purchaser shall, as described below, each perform the indicated
tasks designated to be performed by them:
11.1 Joint Notice. After the Closing, Sellers and Purchaser shall cooperate,
to the extent practicable and reasonable, in giving joint notice of the
consummated transactions to each customer, creditor, distributor, sales
representative and supplier of the Business.
11.2 Further Assurances. Sellers agree that, from time to time and without
further consideration, they will execute and deliver such further documents and
take such other action as Purchaser may require more effectively to transfer to
and vest in Purchaser and put Purchaser in possession of the Shares and all
right and interest in the Shares.
11.3 Contracts. If any of the Contracts require the consent of a third party
in order not to be discontinued or terminated due to the transfer of Shares
consummated hereunder, and such consent cannot be obtained prior to Closing
despite the Parties' best efforts, the Parties shall continue to use their best
efforts to obtain the third party's consent after the Closing Date.
ARTICLE XII
TAX MATTERS
12.1 Certain Definitions. For purposes of this Article XII, "Taxes" means
all federal, foreign, state or local net or gross income, gross receipts, sales,
use, ad valorem, value-added, franchise, withholding, "tollgate", payroll,
employment, excise, property or similar taxes, assessments, duties, fees, levies
or other governmental charges (including, without limitation, any liability for
taxes arising from a consolidated return and imposed by Treasury Regulations
section 1.1502-6) together with any interest thereon, penalties, additions to
tax or additional amounts with respect thereto and any interest in respect of
such penalties, additions or additional amounts, and "Carryforwards" means any
federal or state tax loss carryforwards, investment tax credits, and foreign tax
credits of the Company arising from taxable years or periods prior to the
Closing Date.
12.2 Tax Indemnification
12.2.1 Notwithstanding any other provision of this Agreement, Sellers
hereby agree to indemnify Purchaser against and hold it harmless from (i) all
liability for Taxes of the Company attributable to taxable years or periods
ending on or before the Closing Date and, in the case of taxable years or
periods beginning before and ending after the Closing Date, the portion of such
years or periods ending at the close of business on the Closing Date (the
"Pre-Closing Tax Period"), (ii) all liability whenever incurred for Taxes of
Sellers, and (iii) any liability resulting from a failure of any of Sellers to
fulfill their obligations under this Article XII.
12.2.2 Notwithstanding any other provision of this Agreement, Purchaser
hereby agrees to indemnify Sellers and hold them harmless from (i) any liability
for Taxes of the Company attributable to any taxable periods or portions thereof
commencing after the Pre-Closing Tax Period, and (ii) any liability resulting
from a failure of Purchaser to fulfill its obligations under this Article XII.
12.2.3 In addition to, and not in derogation of, the foregoing, in the
event that the amount of any Carryforward is reduced from the amount set forth
in Section 12.2 for any reason whatsoever, including, without limitation, as a
result of a final determination of taxable income for taxable periods ending on
or before the Closing Date, or as a result of any Adjustment (as defined in
Section 12.10.3), Sellers hereby agree to indemnify Purchaser against and hold
it harmless from any additional liability for Taxes that the Purchaser and/or
the Company incurs as a result of the reduction of the amount of such
Carryforward.
12.3 Closing of Taxable Period. Each of Purchaser and Sellers agree to cause
the Company to file all appropriate Federal, state, local and foreign tax
returns (the "Tax Returns") on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant taxing
authority will not accept a Tax Return filed on that basis.
12.4 Preparation and Filing of Tax Returns by Sellers. Sellers shall prepare
and timely file or shall cause the preparation and timely filing of all
appropriate Tax Returns (including reporting the sale of assets under Section
338(h)(10) as set forth in Section 12.17 below) that include, on a consolidated
or any other basis, the income of the Company for all periods ending on or
before the Closing Date for those jurisdictions which permit or require a short
period tax return ending as of the close of business on the Closing Date.
Purchaser will cooperate with Sellers in making available to them any records
necessary to enable them to comply with this Section 12.4. At the request of
Sellers, Purchaser shall cause the Company to grant a Power of Attorney to such
persons as Sellers may designate to file such Tax Returns in the name of the
Company.
12.5 Preparation and Filing of Tax Returns by the Company. Purchaser and/or
the Company shall prepare and timely file or shall cause the preparation and
timely filings of (i) all Tax Returns with those jurisdictions not allowing a
short period Tax Return ending as of the close of business on the Closing Date
and (ii) all other Tax Returns of any kind with respect to Company that are due
after the Closing Date (other than Tax Returns to be filed by Sellers pursuant
to Section 12.4). Sellers will cooperate with Purchaser and the Company in
making available to Purchaser any records necessary to enable Purchaser and the
Company to comply with this Section 12.5. For all tax periods commencing after
the Closing Date, Purchaser and the Company shall have responsibility for the
preparation and filing of all Tax Returns relating to the assets, operations and
income of the Company.
12.6 Payment of Taxes by Sellers Directly to Taxing Authorities. Except as
provided in Section 12.7, Sellers shall pay or cause to be paid all Taxes due
with respect to Tax Returns which they are required to file pursuant to Section
12.4.
12.7 Payment of Taxes by Sellers to Purchaser. With respect to any
jurisdiction which does not permit or require a short period Tax Return ending
as of the close of business on the Closing Date, Sellers shall compute or cause
to be computed the Tax liability which would be reflected on an Tax Return for
the Company for that jurisdiction for the period through and including the
Closing Date (as if such a short taxable period existed and a return was
permitted or requested in respect thereof), and Sellers shall pay such amount
(less any estimated tax payments paid prior to the Closing Date) to Purchaser or
the Company on or before the due date, including extensions for the payment of
taxes to such jurisdiction with respect to the Tax Return to be filed by
Purchaser and/or Company. In the event that the estimated tax payment paid prior
to the Closing Date exceeds the amount of tax to be paid by the Company on a tax
return required under this Section 12.7, Purchaser shall pay or cause to be paid
such excess to Sellers. Any tax credits and any exemptions, allowances or
deductions that are calculated on an annual basis, such as the deduction for
depreciation, shall be apportioned on a time basis.
12.8 Consolidated and Unitary Tax Returns. Sellers agree to permit Purchaser
to cause the Company to elect, where permitted by law, to carry forward any net
operating loss, net capital loss, charitable contribution or other item arising
after the Closing Date that would, absent such election, be carried back to a
taxable period of the Company ending on or before the Closing Date.
12.9 Cooperation in Preparing and Filing Returns. Sellers and Purchaser
shall, and Sellers and Purchaser shall cause the Company to, cooperate fully
with each other in connection with the preparation and filing of the Tax Returns
or other tax returns, including but not limited to the furnishing or making
available of records, books of account and any other information necessary for
the preparation of any tax returns. Purchaser shall, and Purchaser shall cause
the Company to, provide Sellers with completed Tax Returns or tax return
information packages for the Company including, but not limited to, all
supporting documentation as required in prior years within one hundred twenty
(120) days after the Closing Date, for taxable periods ending on or prior to or
including but not ending on the Closing Date. Sellers shall furnish Purchaser
with completed federal and state Tax Returns or with pro-forma returns for the
Company by the earlier of ninety (90) days after receipt of all information
required for the proper completion of such returns or on or before thirty (30)
days prior to the due date of such returns.
12.10 Intentionally Left Blank.
12.11 Transfer Taxes. Sellers shall be liable for any stock transfer,
conveyance, stamp and other taxes arising from the sale and transfer of the
Shares.
12.12 Negotiation, Settlement or Contest of Tax Disputes. Sellers and their
duly appointed representatives shall have the sole right to supervise or
otherwise coordinate any tax examination process and to negotiate, resolve,
settle or contest any asserted Tax deficiencies or assert and prosecute any
claim for refund of Taxes (a "Tax Claim") for taxable periods ending on or
before the Closing Date. In addition, Sellers shall be entitled to participate
at their expense in the defense of any Tax Claim relating to any year or period
that includes the Closing Date for which Sellers may be required to pay amounts
to Purchaser and/or the Company pursuant to this Article XII, and with the
written consent of Purchaser and/or the Company, and at the Sellers' sole
expense, may assume the entire defense of such Tax Claim. Purchaser shall not,
and shall not allow the Company to, settle any Tax Claim for a year or period
ending on or before the Closing Date or including the Closing Date without the
consent of Sellers (which shall not be unreasonably withheld) if, with respect
to such claim, Sellers would be required to pay amounts to Purchaser and/or the
Company pursuant to this Article XII.
12.13 Cooperation in Connection with Examinations. Purchaser shall, and
shall cause the Company to, give prompt notice to Sellers of the assertion of
any claim, or the commencement of any suit, action, proceeding, investigation or
audit with respect to any Tax Return for any period or portion thereof ending on
or before the Closing Date that includes the operations of the Company,
describing in reasonable detail the facts pertaining thereto and the amount or
an estimate of the amount of the liability arising therefrom. Sellers and
Purchaser shall, and the Purchaser shall cause the Company to, cooperate fully
in any such action by furnishing or making available records, books of account
or other materials or taking such other actions as may be necessary or helpful
for the defense against the assertions of any taxing authority as to any
consolidated, combined or separate Tax Return for such periods.
12.14 Assignment of Tax Refunds. Purchaser shall, and shall cause the
Company to, assign to Sellers all Tax refunds, including interest, relating to
the Company with respect to any taxable year or period ended as of or prior to
the close of business on the Closing Date, and, with respect to any taxable year
or period that includes the Closing Date, the portion of such year or period
ending on and including the Closing Date. Purchaser shall, and shall cause the
Company to, pay over to Sellers promptly upon receipt all such refunds received
directly by any of them.
12.15 Record Retention. Sellers and Purchaser shall retain, and cause the
Company to retain, full and complete records for all tax periods which remain
subject to audit by action of statute or waiver for all periods or portions
thereof through and including the Closing Date. To the extent that such records
are currently maintained in both a hard copy and an electronic media format, the
Parties agree to cause both such types of records that pertain to the income or
operations of the Company prior to the close of business on the Closing Date to
be retained by Company and not to be destroyed without prior written approval of
Sellers or Purchaser, as the case may be. The Parties agree to cause the Company
to enter into such record retention agreements as may be requested by the
Internal Revenue Service with respect to all tax periods ending on or prior to
the Closing Date.
12.16 Termination of Tax Allocation Agreement. Any tax allocation agreement
or arrangement with respect to the Company that may have been entered into by
Sellers or its affiliates on the one hand and the Company on the other hand
shall be terminated as of the Closing Date, and no payments that are owed by or
to the Company pursuant thereto shall be of effect or enforceable, except that
any provision in such tax allocation agreement to provide information regarding
attributes or characteristics of the Company relevant to the determination of
any Taxes to the Company upon departure from the consolidated group of which
Sellers were a member shall be carried out by, and enforceable against, Sellers
or as provided for in such tax allocation agreement.
12.17 Section 338(h)(10) Election
(a) Sellers and Purchaser agree to execute Internal Revenue Service
Form 8023-A and to jointly and timely file an election under Section 338(h)(10)
of the Internal Revenue Code (the "Code"), and any comparable election, under
applicable state or local tax laws that provide for an election comparable to a
Code Section 338(h)(10) election, with respect to the purchase of the Shares.
Sellers and Purchaser shall cooperate fully with each other to take all
necessary and appropriate actions to accomplish the completion and filing of
such election in accordance with the provisions of Treasury Regulations Section
1.338(h)(10)-l and the provision of applicable state or local tax laws and
regulations.
(b) When the joint election is made under Section 338(h)(10) of the
Code with respect to the purchase of the Shares, Purchaser and Sellers agree
that the Purchase Price reflects the fair market value of the assets of the
Company deemed sold pursuant to such election and the Purchase Price shall be
allocated among the assets as set forth in Schedule 12.17 (the "Purchase Price
Allocation"). Purchaser agrees to report or cause the Company to report, and the
Sellers agree to report, the deemed sale of the Company's assets in a manner
consistent with the Purchase Price Allocation issued pursuant to this Section
12.17.
(c) Sellers and Purchaser each acknowledge that each has
independently consulted with its own respective tax advisors concerning the tax
consequences of an election under Section 338(h)(10) of the Code, and neither
Party shall have any recourse against the other with respect to the actual tax
effects thereof under this Agreement.
(d) Sellers and Purchaser agree that the obligations specified in this
Section 12.17 shall be modified as necessary to reflect adjustments to the
Purchase Price, if any, and such adjustments shall be made pursuant to the
provisions of Treasury Regulations section 1.338(b)-3T, as well as other
relevant provisions of Section 338 of the Code and the regulations thereunder.
Moreover, Purchaser shall prepare revisions to Schedule 12.17 hereto to reflect
such adjustments and shall timely forward such revised schedule to Sellers.
Purchaser and Sellers further agree to timely make all filings as may be
required by any or all of them by any relevant taxing jurisdictions to reflect
such adjustments and to file all tax returns in a manner consistent with such
adjustments.
(e) In addition to their obligations under the foregoing subsections,
Sellers and Purchaser shall, and Sellers and Purchaser shall cause the Company
and their Affiliates to, cooperate fully with each other in connection with the
preparation and filing of all Tax Returns relating to the Company, including but
not limited to the furnishing or making available of records, books of account
and any other information necessary for the preparation of such tax returns.
(f) Without limiting the effect of this Section 12.17, if no joint
election is made under Section 338(h)(10) of the Code with respect to the
purchase of the Shares through the acts or omissions of Purchaser, Purchaser
shall be liable for and hereby agrees to indemnify Sellers for any and all
liability for Taxes imposed on Sellers attributable, directly or indirectly, to
any elections made by Purchaser pursuant to Section 338(g) of the Code.
(g) Purchaser shall attach Internal Revenue Service Form 8023-A,
executed by Sellers and Purchaser, to the Company's federal income tax return
for the taxable year which ends on the Closing Date its Federal income tax
return for the taxable year which begins immediately after the Closing Date.
Purchaser shall attach Internal Revenue Service Form 8023-A, executed by Sellers
and Purchaser, to its Federal income tax return for the taxable year which
includes the Closing Date. In the event that a joint election is made under
Section 338(h)(10) of the Code with respect to the purchase of the Shares,
Purchaser and Sellers agree that the Purchase Price reflects the fair market
value of the assets of the Company deemed sold pursuant to such election and the
Purchase Price shall be allocated among the assets as set forth in Schedule
12.17 hereto (the "Purchase Price Allocation"). Buyer also agrees to report or
cause the Company to report, and the Sellers agree to report, the deemed sale of
the Company's assets in a manner consistent with the Purchase Price Allocation
issued pursuant to this Section 12.17.
(h) In the event that any of Sellers fails to take any action required
under this Section 12.17 or breaches any covenant hereof, Sellers shall be
liable for and hereby agree to indemnify Purchaser for any and all liability for
Taxes imposed on Purchaser or the Company attributable, directly or indirectly,
thereto.
12.18 Survival. All rights and obligations provided for in this Article XII
shall remain in force notwithstanding any other provision of this Agreement,
except in the event of termination of this Agreement pursuant to Section 7.14 or
Section 8.10.
12.19 Priority of Article. In the event of a conflict between the provisions
of this Article XII and any other provision of this Agreement, the provisions of
this Article XII shall control.
ARTICLE XIII
COVENANTS AGAINST COMPETITION
In partial consideration of the Purchase Price paid for the Shares by
Purchaser and for other good and sufficient consideration:
13.1 Each of Sellers agrees not to engage, directly or indirectly, as a
proprietor, stockholder, partner, employee, independent contractor or otherwise
in competition with the Business or the business of Purchaser or its Affiliates
during the Noncompetition Period (as hereinafter defined) in any market where
the Company is then conducting the Business; provided, however, this covenant
shall not apply to Messrs. Xxxxxxxxxx, Xxxxx and/or Xxxxxx in the event that
they are terminated by the Company without cause; and in the event Xx. X. Xxxx
is terminated by the Company without cause, this covenant shall apply only for a
period of one year thereafter.
13.2 Sellers agree not to do any of the following during the Noncompetition
Period in any market where the Company is then conducting the Business: (i)
directly or indirectly solicit or otherwise contact any present or past
customers of the Company, for itself or any other person, firm or corporation,
for the purpose of obtaining business in competition with the Business; (ii)
directly or indirectly solicit, interfere with or endeavor to entice away from
the Company any employees, sales representatives, or distributors; or (iii)
directly or indirectly solicit, interfere with or endeavor to entice away from
the Company any person, firm or corporation dealing or doing business with the
Company. Each of Sellers agrees not to do any of the following at any time after
the Closing Date: (a) directly or indirectly make use of any know-how relating
to the Business's technology or any intellectual property rights of the Company;
or (b) take any actions that in any manner are detrimental to the Company or the
Business. Nothing in this Article XIII shall prohibit Sellers or any of their
Affiliates from ownership of an equity interest not greater than 5% of any class
of securities in a publicly held company engaged in a business in competition
with Purchaser, its Affiliates, or with the Company.
13.3 Except as set forth in Section 13.1 above, for purposes of this
Agreement, the "Noncompetition Period" shall mean the period beginning at
Closing and ending on the second anniversary of the Closing.
13.4 Without waiving the Purchaser's rights to monetary damages, all Parties
to this Agreement acknowledge that the breach of the obligations contained in
this Article would result in substantial but indeterminable harm, that the
restraints imposed are reasonable, that there is no adequate remedy at law for a
breach of such obligations, and therefore, that injunctive relief, specific
performance or other equitable remedies are appropriate to enforce the
obligations undertaken in this Article XIII. In the event that a court finds
that the terms of this covenant not to compete are so broad as to be unlawful
and unenforceable, the Parties further agree that a reformation of the terms of
this Article XIII may be appropriate in order to protect the value of the
Company as a going concern, the value of the Shares being conveyed pursuant to
this Agreement, and the value of the covenant set forth in this Article XIII,
and to provide for the enforceability of the obligations contained in this
Article XIII to the fullest extent permitted by law.
ARTICLE XIV
EXPENSES WITH RESPECT TO TRANSACTION
Except as otherwise set forth in this Agreement, Sellers agree that they
will pay all fees, costs and expenses incurred by them in connection with this
transaction and the closing thereof, including, without limitation, the fees and
expenses of their attorneys, accountants and other persons, and no portion
thereof shall be paid by Purchaser. Purchaser agrees that it will pay all fees,
costs and expenses incurred by it in connection with this transaction and the
closing thereof, including, without limitation, the fees and expenses of its
attorneys, accountants and other persons, and no portion thereof shall be paid
by Sellers. Notwithstanding the foregoing, Sellers and Purchaser shall share
equally any fees of filings required to be made to governmental agencies in
connection with the Proposed Transactions.
ARTICLE XV
BROKERS
Each of the Parties hereby agrees to indemnify and save and hold harmless
the other Party, its shareholders, directors and officers from and against any
and all claims, losses, damages, costs or expenses of any kind or character
(including attorneys' fees) arising out of or resulting from any agreement,
arrangement or understanding alleged to have been made by such party with any
broker or finder in connection with this Agreement or the Proposed Transactions.
ARTICLE XVI
INDEMNIFICATION
16.1 Mutual Indemnification
16.1.1 Notwithstanding any other provisions of this Agreement, from and
after the Closing, each of Sellers, severally, and the successors and assigns of
any of them, hereby indemnifies Purchaser, its Affiliates, successors and
assigns, and agrees to hold Purchaser, its Affiliates, successors and assigns,
harmless from all Losses (as hereinafter defined) resulting from (i) a breach by
Sellers of any representation, warranty, covenant or agreement under this
Agreement or the Closing documents, subject to the provisions set forth in
Sections 16.1.7 and 16.1.8 of this Agreement or (ii) any liabilities arising at
or prior to the Closing, or any events occurring at or prior to the Closing
giving rise to liability (whether such liabilities or events were known, unknown
or could not be known by Sellers at or prior to the Closing), relating to the
Shares.
16.1.2 From and after the Closing Date, Purchaser, on behalf of its
Affiliates and its successors and assigns, hereby indemnifies Sellers, their
heirs, executors, successors and permitted assigns, and agrees to hold Sellers,
their heirs, executors, successors and permitted assigns, harmless from all
Losses resulting from (i) a breach by Purchaser of any representation, warranty,
covenant or agreement under this Agreement or the Closing documents, or (ii) any
liabilities arising after the Closing Date relating to the Shares.
16.1.3 As used in this Agreement, the term "Indemnifying Party" shall
mean the person or persons against whom a party (the "Indemnified Party") makes
a claim for indemnification hereunder.
16.1.4 The Indemnified Party shall give written notice to the
Indemnifying Party (and so long as the escrow shall exist under the Escrow
Agreement to the Escrow Agent) of any claim or event known to it which does or
may give rise to a claim by the Indemnified Party against the Indemnifying Party
based on this Agreement, stating the nature and basis of said claims or events
and the amounts thereof, to the extent known. Such notice shall be given in
accordance with Article XVII hereof. The giving of such notice shall be a
condition precedent to any liability of the Indemnifying Party hereunder. Such
notice shall be given reasonably promptly, but the fact that the Indemnified
Party failed to give notice with reasonable promptness shall not defeat a claim
made pursuant hereto except to the extent that the Indemnifying Party can
establish that it has been injured by such delay.
16.1.5 In the event of any claim, action, suit or proceeding made or
brought by third parties against the Indemnified Party, the Indemnified Party
shall give written notice as described in Section 16.1.4 above of such claim,
action, suit or proceeding with a copy of the claim, process and all legal
pleadings with respect thereto. After notification, the Indemnifying Party shall
participate in, and jointly with any other Indemnifying Party similarly
notified, assume the defense thereof, with counsel reasonably satisfactory to
such Indemnified Party at the time of such assumption. The Indemnified Party
shall have the right to employ its own counsel and such counsel may participate
in such action, but the fees and expenses of such counsel shall be at the
expense of the Indemnified Party, when and as incurred, unless (1) the
employment of counsel by such Indemnified Party has been authorized by the
Indemnifying Party, or (2) the Indemnifying Party shall not in fact have
employed counsel to assume the defense of such action reasonably satisfactory to
the Indemnified Party at the time of the Indemnifying Party's assumption of the
defense. If clause (2) of the preceding sentence shall be applicable, then
counsel for the Indemnified Party shall have the right to direct the defense of
such claim, action, suit or proceeding on behalf of the Indemnified Party. The
Indemnified Party and the Indemnifying Party, as the case may be, shall be kept
fully informed of such claim, action, suit or proceeding at all stages thereof
whether or not such party is represented by its own counsel.
16.1.6 As used in this Agreement, "Losses" means any and all claims,
demands, costs, losses, damages and liabilities. The term "Losses" includes
reasonable attorneys' fees and costs incurred in the investigation and defense
of a claim, demand, cost, loss or liability, provided however that the term
"Losses" does not include remuneration to the Indemnified Party's employees for
time spent investigating or litigating any claim or demand. With respect to
environmental matters, the term Losses also includes hazardous substances
removal, remedial activity or response action required by any Environmental Law,
required by judicial order or approved settlement or by order of or agreement
with any governmental authority, or requested by or for Sellers, or their
Affiliates.
16.1.7 The representations and warranties of Sellers set forth in
Article III of this Agreement shall survive closing for 14 months from the
Closing Date except Sections 3.1, 3.2 and 3.3 shall survive closing forever, and
Sections 3.5, 3.7, 3.8, 3.11, 3.13, 3.14, 3.17, 3.20, 3.24, 3.29 and 3.30 shall
survive for 36 months from the Closing Date. The covenants of the Sellers set
forth in Article V, VI, VII, VIII and X of this Agreement shall not survive the
Closing. The representations and warranties of the Purchaser set forth in
Sections 4.1 and 4.2 shall survive Closing forever, that set forth in Section
4.3 shall survive for a period of 36 months from the Closing Date and that set
forth in Section 4.4 shall not survive the Closing.
16.1.8 To partially secure the indemnities of Sellers, whose liability
thereof shall be several, and not joint, and in proportion to the percentage of
the shares of Stock each has sold, the Purchaser shall withhold Three Hundred
Thousand Dollars ($300,000) of the Purchase Price as an escrow account to be
held for a maximum period of thirty-six (36) months, and subject to the Escrow
Agreement attached hereto as Exhibit 2.2. No payment for indemnification shall
be made by the Sellers until the first such claim (the "Triggering Claim")
(which when added to the aggregate amount of all prior claims) exceeds the
amount of Twenty-Five Thousand Dollars ($25,000); provided, however, no claims
made prior to the Triggering Claim shall thereby become payable. So long as
sufficient Escrowed Funds remain under the Escrow Agreement, Purchaser shall
seek indemnification thereunder to satisfy its Losses under this Agreement.
16.2 Remedies Cumulative. All rights and remedies existing under this
Agreement are cumulative with, and not exclusive of, (i) each other, and (ii)
any rights or remedies otherwise available.
ARTICLE XVII
NOTICES
17.1 Notice. All notices and other communications required to be given under
the terms of this Agreement or which any of the Parties may desire to give
hereunder shall be in writing and delivered personally or sent by express
delivery, or by facsimile, or by registered or certified mail, with proof of
receipt, postage and expenses prepaid, return receipt requested, addressed as
follows:
(a) As to Purchaser, addressed to:
Formtek, Inc,
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn.: Xxxx X. Xxxx, President
Fax: (000) 000-0000,
with a copy to:
R. Xxxxx Xxxxx, Esq.
Formtek, Inc,
000 Xxxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000;
or to such other address or addresses and to the attention of such other person
or persons as Purchaser may from time to time designate in writing to Seller;
(b) As to Sellers, addressed as set forth in Exhibit 3.3 attached
hereto, or to such other address or addresses and to the attention of such other
person or persons as each or any of Sellers may from time to time designate in
writing to Purchaser.
17.2 Receipt of Notice. Any notice given in accordance with this Article
XVII shall be deemed to have been given when delivered personally, or when
received if sent via express delivery, facsimile, or registered or certified
mail, return receipt requested.
ARTICLE XVIII
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
This Agreement shall become effective when executed and delivered by
Purchaser and Sellers, and shall be binding in all respects upon the respective
successors and permitted assigns of each of the Parties hereto. No Party hereto
may assign this Agreement in whole or in part without first obtaining the
written consent of the other Party, except that Purchaser may assign its rights
and obligations under this Agreement to one or more Affiliates so long as
Purchaser remains responsible for its performance hereunder.
ARTICLE XIX
ANNOUNCEMENT OF TRANSACTION
Subject to the provisions of Section 11.1, no party hereto shall make a
public announcement of any of the transactions contemplated by this Agreement
without approval of the other Party, unless required by law or by applicable
stock exchange requirements, and in any event such person shall provide notice
accompanied by a copy of all proposed announcements to the other Party. Nothing
in this Agreement shall be construed to inhibit Sellers or Purchaser from
communicating with their employees regarding this Agreement, so long as Sellers
or Purchaser, as the case may be, use their best efforts to make such employees
comply with the confidentiality obligations contained in Section 5.18 of this
Agreement.
ARTICLE XX
COMPLETENESS OF AGREEMENT
This Agreement and the Schedules and Exhibits hereto and Closing documents
represent the entire contract between the Parties with respect to the subject
matter hereof and supersede all offers, proposals, statements, representations
and agreements with respect to the subject matter hereof, including but not
limited to that certain letter of intent dated January 10, 1997. The terms and
conditions of that certain Confidentiality Agreement referenced in Section 5.18
of this Agreement shall not survive the Closing of this Agreement. The Exhibits
and Schedules hereto and the Closing documents are incorporated herein by
reference, and shall be deemed to be included in any reference to this
Agreement. This Agreement may not be amended except by action of each of the
Parties hereto set forth in an instrument in writing signed on behalf of each of
the Parties hereto.
ARTICLE XXI
CAPTIONS
The captions to the Articles and Sections contained in this Agreement are
for reference only, do not form a substantive part of this Agreement and shall
not restrict nor enlarge any substantive provision of this Agreement.
ARTICLE XXII
APPLICABLE LAW
This Agreement, the Schedules and Exhibits, and all other documents given in
connection herewith, shall be construed in accordance with the laws of the State
of Illinois without regard to the principles of conflicts of laws.
ARTICLE XXIII
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any claim, suit, action, or proceeding between Purchaser and any of Sellers
relating to this Agreement; or relating to any document, instrument, or
agreement delivered pursuant hereto, referred to herein, or contemplated hereby;
or in any other manner arising out of or relating to the transactions
contemplated by or referenced in this Agreement, shall be commenced and
maintained exclusively in the United States District Court for the Northern
District of Illinois, or, if that Court lacks jurisdiction over the subject
matter, in a state court of competent subject-matter jurisdiction sitting in
DuPage County, Illinois. Purchaser and each of Sellers hereby submit themselves
unconditionally and irrevocably to the personal jurisdiction of such courts.
Purchaser and Sellers further agree that venue shall be in DuPage County,
Illinois. Purchaser and Sellers irrevocably waive any objection to such personal
jurisdiction or venue including, but not limited to, the objection that any
claim, suit, action, or proceeding brought in DuPage County, has been brought in
an inconvenient forum. Purchaser and Sellers irrevocably agree that process
issuing from such courts may be served on them, either personally or by
certified mail, return receipt requested, at the addresses given in Article XVII
hereof; and Purchaser and Sellers further irrevocably waive any objection to
service of process made in such manner and at such addresses, including without
limitation any objection that service in such manner and at such addresses is
not authorized by the local or procedural laws of Illinois.
ARTICLE XXIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be considered an original but all of which shall constitute but one and
the same Agreement by and among the Parties.
ARTICLE XXV
NO THIRD PARTY BENEFICIARY
This Agreement is intended to inure to the benefit of Purchaser and Sellers
only; and no third party shall have any rights, express or implied, by reason of
this Agreement.
ARTICLE XXVI
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
26.1 Waiver. Any of the Parties may:
26.1.1 Extend in writing the time for the performance of any of
the obligations herein contained to be performed for the benefit of such party;
26.1.2 Waive in writing any inaccuracies in the representations
and warranties made to it contained in this Agreement or any Exhibit or Schedule
hereto or any certificate or certificates delivered by another party to this
Agreement;
26.1.3 Waive in writing the failure in performance of any of
the conditions herein expressed for its benefit; and
26.1.4 Waive in writing compliance with any of the covenants
herein contained for its benefit.
26.2 Effect of Waiver. No such waiver or extension shall be valid unless in
writing and signed by the party granting the waiver or extension, and no such
waiver or extension shall be construed to excuse or mitigate any subsequent
breach or violation of this Agreement not specifically covered by such waiver.
ARTICLE XXVII
SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
not affect the other provisions hereof, and the Agreement shall be construed in
all respects as if such invalid or unenforceable provisions were omitted.
Furthermore, upon the request of any party hereto, the Parties to this Agreement
shall add, in lieu of such invalid or unenforceable provisions, provisions as
similar in terms to such invalid or unenforceable provisions as may be possible
and legal, valid and enforceable.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as
of the day and year first above written.
Purchaser: FORMTEK, INC.,
a Delaware corporation
By:_/s/ X. XXXXX DEWEY__________
R. Xxxxx Xxxxx
Senior Vice President
Sellers:
XXXXXXX XXXX TRUST dated 8/16/91
Xxxxxxx Xxxx, Trustee
XXXXXX XXXXXXXXXX
By: /s/ Xxxxxx Xxxxxxxxxx
XXXXXX XXXX
By: /s/ Xxxxxx Xxxx
XXXXX XXXXX
B: /s/ Xxxxx Xxxxx
XXXXXX XXXXXX
By: /s/ Xxxxxx Xxxxxx
XXXXX XXXXXX
By: /s/ Xxxxx Xxxxxx
