Execution
STOCK PURCHASE AGREEMENT
Dated July 8, 2002
Among
MOTOR PRODUCTS - OWOSSO CORPORATION,
MOTOR PRODUCTS - OHIO CORPORATION,
OWOSSO CORPORATION,
and
HATHAWAY MOTION CONTROL CORPORATION
TABLE OF CONTENTS
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ARTICLE I THE TRANSACTION.........................................................................................1
1.1. Sale and Purchase of Stock............................................................................1
1.2. Consideration and Payment.............................................................................1
1.3. Closing Time and Place................................................................................1
1.4. Deliveries and Proceedings at the Closing.............................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLER...............................................3
2.1. Corporate Existence and Power.........................................................................3
2.2. Capitalization........................................................................................4
2.3. Subsidiaries..........................................................................................4
2.4. Consents and Governmental Authorization...............................................................4
2.5. Authorization and Enforceability......................................................................5
2.6. Non-Contravention.....................................................................................5
2.7. Financial Statements..................................................................................6
2.8. No Undisclosed Material Liabilities...................................................................6
2.9. No Material Adverse Changes...........................................................................7
2.10. Taxes..............................................................................................9
2.11. No Pending Litigation or Proceedings..............................................................10
2.12. Material Contracts................................................................................11
2.13. Contract Compliance...............................................................................12
2.14. Compliance with Laws..............................................................................12
2.15. Environmental Compliance..........................................................................13
2.16. Assets............................................................................................15
2.17. Transactions with Related Parties.................................................................15
2.18. Compensation Arrangements; Bank Accounts..........................................................16
2.19. Labor Relations...................................................................................16
2.20. Insurance.........................................................................................17
2.21. Intellectual Property.............................................................................18
2.22. Employee Benefit Plans............................................................................20
2.23. Finders' Fees.....................................................................................23
2.24. Other Representations Regarding the Company's Assets and Liabilities..............................23
2.25. Significant Customers and Vendors.................................................................27
2.26. Backlog...........................................................................................28
2.27. Disclosure........................................................................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER..............................................................29
3.1. Organization and Good Standing.......................................................................29
3.2. Corporate Power and Authority........................................................................29
3.3. Due Authorization....................................................................................29
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3.4. Finders' Fees........................................................................................29
3.5. Investment Intent....................................................................................29
3.6. Consents and Governmental Authorization..............................................................29
3.7. Non-Contravention....................................................................................29
ARTICLE IV CONDITIONS TO CLOSING.................................................................................30
4.1. Conditions Precedent to Obligations of Buyer.........................................................30
4.2. Conditions Precedent to Obligations of Seller........................................................31
ARTICLE V TERMINATION OF AGREEMENT...............................................................................32
5.1. Grounds for Termination..............................................................................32
5.2. Effect of Termination................................................................................33
5.3. Deposit..............................................................................................33
ARTICLE VI TAX MATTERS...........................................................................................34
6.1. Additional Tax Definitions...........................................................................34
6.2. Tax Returns and Payments.............................................................................34
6.3. Adjustments..........................................................................................35
6.4. Indemnification......................................................................................36
6.5. Cooperation; Furnishing of Information...............................................................37
6.6. Record Retention.....................................................................................37
6.7. Code Section 338(h)(10) Election.....................................................................37
ARTICLE VII COVENANTS............................................................................................38
7.1. Conduct of Business..................................................................................38
7.2. No Solicitation, Confidentiality, Etc................................................................39
7.3. Necessary Consents...................................................................................39
7.4. Settlement of Certain Intercompany Transactions......................................................39
7.5. Noncompetition, Nonsolicitation and Confidentiality..................................................40
ARTICLE VIII INDEMNIFICATION.....................................................................................42
8.1. Survival.............................................................................................42
8.2. Indemnification......................................................................................42
8.3. Method of Asserting Claims...........................................................................44
8.4. Limitations; Exclusive Remedy; Maximum Indemnification...............................................45
ARTICLE IX MISCELLANEOUS.........................................................................................47
9.1. Notices..............................................................................................47
9.2. Succession and Assignment............................................................................48
9.3. Costs and Expenses...................................................................................48
9.4. Public Announcements.................................................................................48
9.5. Headings.............................................................................................48
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9.6. Counterparts.........................................................................................48
9.7. Amendment and Waiver.................................................................................49
9.8. Entire Agreement.....................................................................................49
9.9. Governing Law........................................................................................49
9.10. Specific Performance; Remedies....................................................................49
9.11. Selection of a Forum..............................................................................49
9.12. Absence of Third Party Beneficiary Rights.........................................................49
9.13. Time of Essence...................................................................................50
9.14. Pre-July 1, 2000 Workers Compensation.............................................................50
9.15. MAPICS Software...................................................................................50
9.16. Environmental Related Issues......................................................................50
9.17. Declaration of Restrictive Covenant; Due Care Documentation.......................................53
9.18. Purchase Option; Right of First Refusal...........................................................53
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Note
Exhibit C Financial Statements
Exhibit D Form of Declaration of Restrictive Covenant
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CERTAIN DEFINED TERMS
The following is a list of certain defined terms used in this Agreement.
Accounts Receivable.....................................................................Section 2.24(a)
Action..................................................................................Section 2.21(b)
Additional Transaction Documents........................................................Section 2.5
Adjustments.............................................................................Section 6.1
Affiliate...............................................................................Section 7.5(c)
Affiliated Group........................................................................Section 2.10(a)
Affiliation Year(s).....................................................................Section 2.10(a)
Agreement...............................................................................Preamble
Balance Sheet...........................................................................Section 2.7
Balance Sheet Date......................................................................Section 2.7
Benefit Arrangement.....................................................................Section 2.22(a)
blue sky................................................................................Section 2.4(b)
Business Day............................................................................Section 1.3
Buyer...................................................................................Preamble
Buyer Cap...............................................................................Section 8.4(b)
Buyer Company Damages...................................................................Section 8.2(a)
Buyer Company Persons...................................................................Section 8.2(a)
Buyer Deductible Amount.................................................................Section 8.4(b)
Cash Consideration......................................................................Section 1.2
Cap.....................................................................................Section 8.4(a)
CERCLA..................................................................................Section 2.15(a)
Change of Control.......................................................................Section 7.5(c)
Closing.................................................................................Section 1.3
Closing Date............................................................................Section 1.3
Code....................................................................................Section 2.10(a)
Company.................................................................................Preamble
Company Domain Name.....................................................................Section 2.21(b)
Company Securities......................................................................Section 2.2
Company Website.........................................................................Section 2.21(b)
Company Stock...........................................................................Background
Common Stock............................................................................Section 2.2
Consideration...........................................................................Section 1.2
Consolidated Returns....................................................................Section 2.10(a)
Damages.................................................................................Section 8.2(a)
Deductible Amount.......................................................................Section 8.4(a)
Design Defects..........................................................................Section 2.24(e)
Disclosure Schedules....................................................................Article II
Employee Plan...........................................................................Section 2.22(a)
Environment.............................................................................Section 2.15(a)
Environmental Laws......................................................................Section 2.15(a)
Environmental Permits...................................................................Section 2.15(a)
ERISA...................................................................................Section 2.22(a)
ERISA Affiliate.........................................................................Section 2.22(a)
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Excluded Cash...........................................................................Section 9.3
Financial Statements....................................................................Section 2.7
GAAP....................................................................................Section 2.7
Governmental Body.......................................................................Section 2.4
Hazardous Substance.....................................................................Section 2.15(a)
Indemnifying Parties....................................................................Section 8.2(b)
Indemnified Persons.....................................................................Section 8.2(b)
Interim Financials......................................................................Section 2.7
Inventory...............................................................................Section 2.24(c)
IRS.....................................................................................Section 6.1
Knowledge...............................................................................Section 2.1
Leased Real Property....................................................................Section 2.24(h)(ii)
Liabilities.............................................................................Section 2.8
Licensed Intellectual Property..........................................................Section 2.21(a)
Lien....................................................................................Section 1.4
Material Adverse Effect.................................................................Section 2.1(a)
MP Ohio.................................................................................Preamble
MP Ohio Common Stock....................................................................Section 2.2
MP Owosso...............................................................................Preamble
MP Owosso Common Stock..................................................................Section 2.2
Multiemployer Plan......................................................................Section 2.22(a)
Note....................................................................................Section 1.2
NREPA...................................................................................Section 2.15(c)
Occupational Safety and Health Law......................................................Section 9.15
Owned Intellectual Property.............................................................Section 2.21(a)
Owned Real Property.....................................................................Section 2.24(h)(i)
Permitted Liens.........................................................................Section 2.16
Person..................................................................................Section 2.1(a)
Post-Affiliation Year...................................................................Section 6.1
Previous Sales Effort Expenses..........................................................Section 9.3
Regulations.............................................................................Section 6.1
Related Party...........................................................................Section 2.17
Release.................................................................................Section 2.15(a)
Retiree Medical Plan....................................................................Section 2.22(m)
Securities Act..........................................................................Section 2.4(a)
Seller..................................................................................Preamble
Seller Damages..........................................................................Section 8.2(b)
Seller Persons..........................................................................Section 8.2(b)
Significant Customers...................................................................Section 2.25
Subsidiary..............................................................................Section 2.3
Tax.....................................................................................Section 2.10(a)
Taxes...................................................................................Section 2.10(a)
Tax Authority...........................................................................Section 2.10(a)
Tax Returns.............................................................................Section 2.10(a)
Term ...................................................................................Section 7.5(a)
Territory...............................................................................Section 7.5(a)
Third Party Claim.......................................................................Section 8.3(a)
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated July 8, 2002,
by and among Hathaway Motion Control Corporation, a Colorado corporation
("Buyer"), Motor Products - Owosso Corporation, a Delaware corporation ("MP
Owosso"), Motor Products - Ohio Corporation, a Delaware corporation ("MP Ohio,"
and together with MP Owosso, the "Company"), and Owosso Corporation, a
Pennsylvania corporation, and the sole stockholder of the Company ("Seller").
BACKGROUND
Seller owns all of the issued and outstanding shares of capital stock
of the Company (the "Company Stock"). Buyer desires to purchase, and Seller
desires to sell, the Company Stock on the terms and subject to the conditions
set forth in this Agreement.
TERMS
In consideration of the mutual representations, warranties and
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE TRANSACTION
1.1. Sale and Purchase of Stock. At the Closing referred to in Section
1.3 below, Seller will sell to Buyer, and Buyer will purchase from Seller, all
his or its shares of the Company Stock for the consideration set forth in
Section 1.2.
1.2. Consideration and Payment. In consideration of the sale and
transfer of the Company Stock pursuant to Section 1.1 above, Buyer shall pay to
Seller an aggregate amount in cash equal to $11,800,000.00 (the
"Consideration"). Upon the execution of this Agreement, Buyer shall deliver
$2,000,000.00 of the Consideration (the "Deposit") to Bank One, NA (with its
main office in Chicago, Illinois, hereinafter "Bank One, NA"), as "Escrow
Agent," to be held in escrow pursuant to the Escrow Agreement attached hereto as
Exhibit A. In accordance with Section 1.4(b), at the Closing, the Consideration
shall be delivered by Buyer to Seller as follows: (a) $9,500,000.00 in U.S.
currency via wire transfer of immediately available funds to the accounts
designated in writing by Seller (the "Cash Consideration"); and (b) $300,000.00
payable through delivery of Buyer's promissory note (the "Note") in said
principal amount in the form attached as Exhibit B, guaranteed by Hathaway
Corporation, parent of Buyer, and payable on the six month anniversary of the
Closing Date, and which shall be a source for the payment and discharge of any
indemnification obligation of Seller set forth in Article VIII; provided, that
the Note shall not be an exclusive source of recovery for such obligations. In
addition, in accordance with Section 1.4(d), at the Closing, the Deposit shall
be released from escrow and paid over to Seller.
1.3. Closing Time and Place. The consummation and closing of the
transactions contemplated under this Agreement (the "Closing") will take place
on the earlier of (a) the first Business Day following the date on which the
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Hathaway Power Sale occurs or (b) November 1, 2002 (unless earlier terminated
pursuant to Article V) at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel for the
Company and Seller, 3000 Two ▇▇▇▇▇ Square, 18th & Arch Streets, Philadelphia,
Pennsylvania, at 10:00 a.m., or at such other time, date or place as Buyer and
Seller shall mutually agree in writing. The date on which the Closing occurs is
sometimes referred to herein as the "Closing Date." "Business Day" means any
calendar day which is not a Saturday, Sunday or other day on which banks are
authorized to close in the Commonwealth of Pennsylvania. "Hathaway Power Sale"
means the date of the Closing under and as defined in that certain Asset
Purchase Agreement dated May 17, 2002 (the "Hathaway/Qualitrol Agreement") among
Qualitrol Power Products, LLC, ("Qualitrol Power"), ▇▇▇▇▇▇▇ UK Industries,
Limited ("▇▇▇▇▇▇▇"), (Qualitrol Power and ▇▇▇▇▇▇▇ are referred to individually
and collectively as "Qualitrol"), Hathaway Corporation and certain of its
Affiliates (Hathaway Corporation and such Affiliates are referred to
individually and collectively as "Hathaway").
1.4. Deliveries and Proceedings at the Closing. At the Closing:
(a) Deliveries by Seller. Seller will deliver or cause to be
delivered to Buyer, (1) free and clear of all Liens (as defined below) (other
than restrictions on transfer imposed by federal and state securities laws),
certificates for the Company Stock, together with duly executed share transfer
forms relating to such Company Stock, and (2) the documents and certificates
required to be delivered by Seller under Section 4.1.
(b) Deliveries by Buyer. Buyer will deliver to Seller the
documents and certificates required to be delivered by it under Section 4.2 and
the Consideration, including the Cash Consideration and Note.
(c) Deliveries by the Company. The company will deliver to
Buyer the documents and certificates required to be delivered by it under
Section 4.1.
(d) Release by Escrow Agent. Buyer and Seller shall direct the
Escrow Agent to release the Deposit to Seller.
(e) Other Deliveries. The closing certificates, opinions of
counsel and other documents required to be delivered at the Closing pursuant to
this Agreement will be exchanged.
As used in this Agreement, the term "Lien" means (a) any lien (including any
lien relating to Taxes (as that term is defined in Section 2.10 hereof)), pledge
or negative pledge, (b) any mortgage, deed of trust, security interest, charge
in the nature of a lien or security interest, (c) any title retention agreement,
right of first refusal, right of first purchase or other similar option, (d) any
conditional sale agreement, easement, right of way, variance or other real
estate declaration, or (e) any other transfer or other restriction, servitude or
other encumbrance or interest of another Person.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLER
The Company and Seller hereby, jointly and severally,
represent and warrant to Buyer as of the date of this Agreement (which
representations and warranties are to be repeated as a condition of Closing as
of the Closing Date (as though the Closing Date were then substituted for "the
date of this Agreement," "the date hereof" or similar terms throughout this
Article II)), subject in both instances to the disclosures set forth in the
disclosure schedules attached hereto (the "Disclosure Schedules"), as follows:
2.1. Corporate Existence and Power.
(a) MP Owosso and MP Ohio are corporations duly organized,
validly existing and in good standing under the laws of Delaware. The Company
has all requisite corporate power and authority to own, lease and operate its
properties and assets as now owned, leased and operated, and to carry on its
business as now being conducted. The Company is duly qualified to do business
and is in good standing as a foreign corporation in each of the states set forth
on Schedule 2.1(a) hereto, which are the only jurisdictions where the character
of the property owned, leased or operated by it or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect on the Company. To the Knowledge of the
Company and Seller, the Company has all governmental licenses, permits,
authorizations, consents and approvals required to carry on its business as
currently conducted, except for such governmental licenses, permits,
authorizations, consents and approvals which the failure to have obtained would
not have a Material Adverse Effect on the Company.
As used in this Agreement, "Material Adverse Effect," with respect to any
Person, means a material adverse effect or impact on the condition (financial or
otherwise), business, properties, assets, Liabilities (as that term is defined
in Section 2.8) (including contingent Liabilities), prospects, operations or
results of operations of such Person taken as a whole; provided, however, that a
Material Adverse Effect, as applied to the Company, shall not be deemed to have
occurred if such changes involve only (i) adverse changes in general economic
conditions or general changes in any of the principal markets served by the
Company, (ii) shortages or price changes relating to materials used or processed
by the Company or (iii) changes in applicable laws or in GAAP (as that term is
defined in Section 2.7). As used in this Agreement, the term "Knowledge" means,
with respect to the Company and Seller, the actual knowledge after due and
reasonable inquiry of ▇▇▇▇▇ Jury, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇ ▇▇▇▇▇. As used
in this Agreement, the term "Person" means any individual, corporation,
partnership, firm, joint venture, limited liability company, association,
joint-stock company, trust, unincorporated organization or Governmental Body (as
that term is defined in Section 2.4).
(b) The copies of the Company's certificates of incorporation
and by-laws, as amended to date, which have been delivered to Buyer, in each
case certified by the Company's respective Secretary, are true, correct and
complete and are in full force and effect, and the Company is not in default
under or in violation of any provision of its certificate of incorporation or
bylaws. The (i) minute books (which contain the records of all meetings of or
actions by the shareholders, the board of directors, and any committees of the
board of directors), copies of which have been delivered to Buyer by Seller, are
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correct and complete in all material respects and (ii) the stock certificate
books and stock records of the Company, copies of which have been delivered to
Buyer by Seller, are correct and complete. Set forth on Schedule 2.1(b) is a
list of the directors and officers of each Company.
(c) Seller is a corporation incorporated under the laws of the
Commonwealth of Pennsylvania and remains a subsisting corporation. Seller has
all requisite corporate power and authority to own or lease its properties and
assets now owned or leased.
2.2. Capitalization. The authorized capital stock of MP Owosso consists
of 1,000 shares of common stock, $.01 par value per share (the "MP Owosso Common
Stock"). The authorized capital stock of MP Ohio consists of 1,000 shares of
common stock, $.01 par value per share (the "MP Ohio Common Stock," and together
with the MP Owosso Common Stock, the "Common Stock"). Schedule 2.2 sets forth,
as of the date hereof, all outstanding shares of each class of capital stock of
the Company. All outstanding shares of Company Stock have been duly authorized
and validly issued and are fully paid and nonassessable and are owned by Seller.
Except for the Company Stock, there are no outstanding (i) shares of capital
stock, other securities or phantom or other equity interests of the Company,
(ii) securities of the Company convertible into or exchangeable for shares of
capital stock or other securities of the Company or (iii) options, warrants or
other rights to acquire from the Company any capital stock, other securities or
phantom or other equity interests of the Company (the items in clauses (i), (ii)
and (iii) being referred to collectively as the "Company Securities"). There are
no outstanding obligations of the Company, actual or contingent, to issue or
deliver or to repurchase, redeem or otherwise acquire any Company Securities.
Except for a pledge of the Company Stock to in favor of Bank One, NA, as agent
for the benefit of itself and PNC Bank, National Association, which is to be
released as a condition of Closing, there are no existing rights of first
refusal, buy-sell arrangements, options, warrants, rights, calls, or other
commitments or restrictions of any character relating to any of the Company
Stock, other than restrictions on transfer imposed by the federal and state
securities laws.
2.3. Subsidiaries. The Company does not have any Subsidiaries or own
any capital stock, securities convertible into capital stock, or any other
equity security in any other corporation, partnership, limited partnership,
limited liability company, association, joint venture or other Person. For the
purposes of this Agreement, a "Subsidiary" of an entity shall mean a
corporation, limited liability company or other entity (i) more than 50% of
whose outstanding shares or securities (representing the right to vote for the
election of directors or other managing authority) are, or (ii) which does not
have outstanding shares or securities (as may be the case in a partnership,
limited liability company, joint venture or unincorporated association), but
more than 50% of whose ownership interest representing the right to make
decisions for such other entity is, now or hereafter owned or controlled,
directly or indirectly, by such entity.
2.4. Consents and Governmental Authorization. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby by the Company and Seller require no consent, approval or
action by or in respect of, or filing with, any third party or governmental
department, commission, board, body, agency, official or authority having
jurisdiction over the Company or its business as currently conducted or Seller
(each a "Governmental Body") other than:
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(a) compliance with any applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder;
(b) compliance with any applicable foreign or state securities
("blue sky") laws; and
(c) as set forth on Schedule 2.4 (which Schedule 2.4 sets
forth, with respect to leases, contracts, agreements and commitments required to
be set forth in Schedule 2.12, without limitation, such as are required pursuant
to the terms thereof).
2.5. Authorization and Enforceability. This Agreement and all other
agreements and instruments deliverable by Seller or the Company pursuant hereto
(collectively, the "Additional Transaction Documents") have been duly executed
and delivered by the Company and Seller and constitute the legal, valid and
binding obligations of them, enforceable against the Company and Seller in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
the rights and remedies of creditors generally, provided that no representation
or warranty is made as to the availability of any equitable or other specific
remedy upon any breach of this Agreement. Upon delivery to Buyer at the Closing
of certificates representing Seller's Company Stock in accordance herewith,
Buyer will acquire good and valid title to such Company Stock, free and clear of
all Liens (except for restrictions on transfer imposed by federal or state
securities laws).
2.6. Non-Contravention. The execution and delivery of this Agreement
and the Additional Transaction Documents do not, and the consummation of the
transactions contemplated by this Agreement and the Additional Transaction
Documents and the compliance with the terms, conditions and provisions of this
Agreement and the Additional Transaction Documents the Company and Seller, will
not (a) contravene any provision of the Company's or Seller's certificate of
incorporation or by-laws, as amended to date; (b) conflict with or result in a
breach of or constitute a default (or an event which might, with the passage of
time or the giving of notice or both, constitute a breach or default) under any
of the terms, conditions or provisions of any indenture, mortgage, deed of
trust, loan or credit agreement or any other agreement, instrument, license or
permit to which the Company or Seller is a party or by which any of them or any
of their assets may be bound or affected, or any judgment or order of any court
or Governmental Body, domestic or foreign, or any applicable law, rule or
regulation; (c) result in the creation or imposition of any Lien upon any of the
Company's assets or the Company Stock or give to others any interests or rights
therein; (d) result in a breach, termination maturation or acceleration of any
Liability or obligation of the Company or Seller (or give others the right to
cause such a breach, termination, maturation or acceleration); or (e) assuming
compliance with the matters referred to on Schedule 2.4, contravene or conflict
with or constitute a violation of any provision of any lease, contract,
agreement or commitment required to be set forth on Schedule 2.12 or any permit,
law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company or Seller, except for such contraventions, conflicts,
defaults, breaches, Liens, interests, rights, Liabilities or obligations which
are set forth on Schedule 2.6, none of which are material to the Company.
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2.7. Financial Statements. The Company or Seller has delivered to Buyer
the following financial statements (the "Financial Statements"):
(a) The Company's Audited Year End Financial Statements, which
are attached hereto as part of Exhibit C.
(b) The Company's unaudited internal consolidated statement of
operations and balance sheet prepared for the six (6) month period ended April
30, 2002 (the "Interim Financials"), which are attached hereto as part of
Exhibit C.
The Financial Statements now or when delivered, as the case may be: (i)
present fairly in all material respects the financial position of the Company as
of the dates thereof, and the results of its operations for the periods covered
thereby, after the elimination of all intercompany accounts and activities
between Seller and the Company, (ii) are in accordance with the books and
records of the Company (which books and records are complete and accurate in all
material respects) and (iii) have been prepared in accordance with generally
accepted accounting principles, as defined by the Financial Accounting Standards
Board ("GAAP") consistently applied, except as otherwise specified therein and
except that the Interim Financials do not have the necessary notes and other
disclosures and the Interim Financials are subject to normal year end
adjustments, which individually or in the aggregate will not be material. Since
the dates of the Financial Statements, there have been no material changes in
the accounting policies of the Company (including any changes in depreciation or
amortization policies or rates) and no revaluation of any of the assets by the
Company. Seller has delivered to Buyer true and complete copies of all
management letters, if any, relating to any audit or review of the financial
statements or books of the Company in respect of the fiscal years covered by the
Financial Statements, and all other letters or documentation, if any, relating
to the internal controls and/or other accounting practices of the Company. All
references in this Agreement to the "Balance Sheet" shall mean the balance sheet
of the Company as of April 30, 2002 included in the Interim Financials and all
references to the "Balance Sheet Date" shall mean April 30, 2002.
2.8. No Undisclosed Material Liabilities. To the Company's and Seller's
Knowledge, the Company has no material Liability of any nature, whether accrued,
absolute, or contingent, except for Liabilities that are (a) reflected or
reserved against on the Balance Sheet, (b) incurred in the ordinary course of
business since the Balance Sheet Date, (c) incurred in connection with or as a
result of the transactions contemplated by this Agreement (all of which shall be
paid by Seller as provided in Section 9.3) or (d) disclosed on Schedule 2.8
hereto. "Liabilities" means (a) all indebtedness (whether for borrowed money or
otherwise), Damages (as defined in Section 8.2(a) of this Agreement), Liens,
penalties, fines, costs, expenses and other liabilities or obligations, whether
direct or indirect, fixed or contingent (including any loss contingency),
accrued or unaccrued, liquidated or unliquidated, asserted or unasserted or
known or unknown, and (b) any guarantees, surety arrangements or endorsements
(other than endorsements for deposits or collection of checks in the ordinary
course of business) with respect to any of the Liabilities described in clause
(a) of any other Person, in any case whether or not the amount thereof is
currently ascertainable.
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2.9. No Material Adverse Changes. Since the Balance Sheet Date, the
Company has conducted its business in the ordinary course consistent with past
practice. Since the Balance Sheet Date, except as set forth on Schedule 2.9,
there has not been:
(a) any adverse change in the financial condition, assets,
Liabilities, operations, business or prospects of the Company as currently
conducted, except changes in the ordinary course of business which have not had
and, to the Company's and Seller's Knowledge, will not have a Material Adverse
Effect on the Company;
(b) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the properties or business of the Company as
currently conducted, which has had and, to the Company's and Seller's Knowledge,
will not have a Material Adverse Effect on the Company;
(c) any declaration, setting aside or payment of a dividend or
other distribution in respect of any of the capital stock of the Company, or any
direct or indirect redemption, purchase or other acquisition of any capital
stock of the Company or of any rights to purchase such capital stock or
securities convertible into or exchangeable for such capital stock;
(d) any increase in the salaries, bonuses, sales commissions,
fee arrangements or other compensation payable or to become payable to, or any
advance (excluding advances for business expenses in the ordinary course
consistent with past practices) or loan to, any officer, director, employee,
agent or stockholder of the Company (except normal annual merit increases made
in the ordinary course to non-officer employees), or any increase in, or any
addition to, other benefits (including without limitation any bonus, profit
sharing, severance, pension or other plan) to which any of its officers,
directors, employees, agents or stockholders may be entitled, or any payments to
any pension, retirement, profit-sharing, bonus, severance or similar plan except
payments made pursuant to the compensation arrangements disclosed on Schedule
2.18 hereto or the employee benefit plans disclosed on Schedule 2.22 hereto, or
any other payment of any kind to or on behalf of any such officer, director,
employee, agents or stockholder other than payment of base compensation and
reimbursement for reasonable business expenses in the ordinary course consistent
with past practices;
(e) any making or authorization of a capital expenditure in
excess of $50,000 for any single project or $100,000 in the aggregate;
(f) any sale, transfer or other disposition of any assets of
the Company (including to Seller), except sales or replacement of Inventory (as
that term is defined in Section 2.24(c)) in the ordinary course and, with
respect to Significant Customers (as defined below), at historical margins;
(g) any payment, discharge or satisfaction of any Liability by
the Company, other than the payment, discharge or satisfaction, in the ordinary
course of business, of Liabilities shown or reflected on the Balance Sheet or
incurred in the ordinary course of business since the Balance Sheet Date;
(h) any change by the Company in any method of accounting or
Tax practice, except for such changes as are required by reason of a concurrent
change in GAAP;
-7-
(i) any creation, incurrence, assumption or guarantee by the
Company of any Liabilities, except in the ordinary course of business consistent
with past practice, the Previous Sales Efforts' Expenses (as defined below) or
in conjunction with this Agreement and the transactions contemplated hereby or
any creation, incurrence, assumption or guarantee by the Company of any
indebtedness for money borrowed;
(j) any recapitalization or reorganization;
(k) any amendment or other change (or any authorization to
make such an amendment or change) to either Company's certificates of
incorporation or by-laws;
(l) any delay or postponement in the payment of accounts
payable or other Liabilities beyond stated, normal terms;
(m) any cancellation, compromise, settlement, release, waiver,
write-off or expensing any account or note receivable, right, debt or claim
involving more than $5,000 in the aggregate or acceleration of the collection of
any account or note receivable;
(n) any transaction by the Company outside the ordinary course
of business or any change, in any significant manner, in the way in which it
conducts its business;
(o) any contracts or agreements entered into, or any
commitments made, involving more than $50,000 individually or $100,000 in the
aggregate, or any acceleration, termination, delay, modification or cancellation
of any agreement, contract, lease or license (or series of related agreements,
contracts, leases and licenses) involving more than $50,000 individually or
$100,000 in the aggregate;
(p) any work interruptions, labor grievances, charges, or
claims filed or lodged with the Company or any court, Governmental Body or
arbitrator, including without limitations any charges filed with the National
Labor Relations Board, or any similar event or condition of any character;
(q) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any material property, right or assets of,
or securities or other interests in, any Person;
(r) any cancellation, or agreement to cancel, any indebtedness
or other amount owing to the Company, including without limitation any
indebtedness or obligation of Seller or any current or former officer, director,
employee, agent or stockholder of the Company or Seller or any affiliate
thereof.
(s) any breach, amendment, termination or non-renewal of any
lease, contract, agreement or commitment required to be set forth on Schedule
2.12;
(t) any incurrence, creation, or placement of any Lien on all
or any part of the Company's business or assets, or the allowance or permission
of the same;
-8-
(u) any loan by the Company to any Person, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(v) the commencement of or notice to or, to the Knowledge of
the Company, the threat of commencement of, any lawsuit or proceeding against or
investigation of the Company or its business or assets;
(w) any payment or transfer to or for the benefit of, or any
withdrawal of any assets of the Company by, Seller or any officer, director,
employee, agent or stockholder of the Company or Seller or any affiliate
thereof, other than payments (i) to officers and employees of their respective
normal salaries or wages payable in respect of such period, (ii) in respect of
Previous Sales Effort Expenses as expressly permitted by Section 9.3 or (iii)
Excluded Cash distributed to Seller; or
(x) any agreement or commitment to incur, take, enter into,
make or permit any of the matters described in clauses (a) through (w).
2.10. Taxes.
(a) Taxes Definitions. The following terms, as used herein,
have the following meanings:
"Affiliated Group" means the affiliated group of corporations (within
the meaning of Section 1504(a) of the Code) of which Seller is the common
parent, and of which the Company is and has been (since acquired by any member
thereof) a member.
"Affiliation Year(s)" means each taxable year or period applicable to
the Company ending on or before the Closing Date during which the Company was a
member of the Affiliated Group.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Consolidated Return(s)" means the consolidated United States Federal
income return(s) of the Affiliated Group.
"Taxes" means all federal, state, local, foreign net income,
alternative or add-on minimum tax, estimated, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, capital profits,
lease, service, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, environmental or windfall profit taxes,
customs, and duties, together with all interest, penalties, additions to tax and
additional amounts with respect thereto, and the term "Tax" means any one of the
foregoing Taxes.
"Tax Returns" means all returns, declarations, reports, claims for
refund, information statements and other documents required to be filed by the
parties relating to Taxes, including all schedules and attachments thereto, and
including all amendments thereof, and the term "Tax Return" means any one of the
foregoing Tax Returns.
-9-
"Tax Authority" means any governmental authority responsible for the
imposition of any Tax.
(b) Seller has timely filed all Consolidated Returns required
to be filed for all Affiliation Years, as well as all state and local Tax
Returns required to be filed on a consolidated basis for an Affiliation Year and
has timely paid all taxes owed which relate to such Affiliation Periods (whether
or not shown as due on such returns). Company has timely filed all other Tax
Returns required to be filed and has timely paid all Taxes owed (whether or not
shown as due on such returns), including, without limitation, all Taxes which
the Company is obligated to withhold for amounts paid or owing to employees,
creditors and third parties. All such Tax Returns were complete and correct in
all material respects.
(c) Neither Seller nor the Company is currently the
beneficiary of any extension of time within which to file any Tax Return, and
neither Seller nor the Company has waived any statute of limitation with respect
to any Tax or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(d) The Company has not been a member of a group filing a
consolidated federal income Tax Return, other than a group the common parent of
which was Seller, and the Company does not have any Liability for the Taxes of
any Person, other than Seller, under Treasury Regulation Section 1.1502-6 (or
any corresponding provision of state, local or foreign Tax law), as a transferee
or successor, by contract, or otherwise.
(e) There are no Liens for Taxes upon any of the assets of the
Company, other than for ad valorem Taxes that are not yet due and payable.
(f) The unpaid Taxes of the Company and Seller (to the extent
such taxes relate to the Company) did not, as of the Balance Sheet Date, exceed
the reserve for actual Taxes (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) as shown
on the Balance Sheet as of the Balance Sheet Date, and will not exceed such
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and Seller in filing
their Tax Returns.
(g) All Taxes which the Company has been required to collect
or withhold have been duly withheld or collected and, to the extent required,
have been paid to the proper Taxing Authority.
2.11. No Pending Litigation or Proceedings. Except as indicated on
Schedule 2.11, there are no actions, suits or proceedings pending or, to the
Company and Seller's Knowledge, threatened, at law or in equity, by or before
any court, Governmental Body or arbitrator (a) against the Company or any of its
assets or against the directors or officers of the Company with respect to their
role as an officer or director of the Company, nor to Seller's and Company's
Knowledge, is there any basis for any such action, or (b) adversely affecting
any Seller's Company Stock or Seller's rights thereto. There are presently no
outstanding judgments, decrees, injunction or orders of any court, Governmental
Body or arbitrator against or adversely affecting the Company or any of its
assets or its business as currently conducted or adversely affecting Seller's
Company Stock or Seller's rights thereto.
-10-
2.12. Material Contracts. Except as set forth on Schedule 2.12, the
Company is not a party to, nor are it or its assets bound by, any written or
verbal lease, contract, agreement or commitment of the following types:
(a) mortgages, indentures, security agreements or other
agreements and instruments relating to the borrowing of money, the extension of
credit or the granting of Liens;
(b) employment or consulting agreements;
(c) non-compete, confidentiality or non-notification
agreements;
(d) union or other collective bargaining agreements;
(e) licenses of patent, trademark and other intellectual
property rights with respect to which the Company is either licensee or licensor
(other than "shrink-wrap" licenses for software generally available to the
public);
(f) any agreement, order or commitment for the purchase of
services, raw materials, supplies or finished products from any one supplier for
an amount in excess of $100,000;
(g) any agreement, order or commitment for the sale of
products or services for more than $100,000 to any single purchaser;
(h) any agreement, option or commitment relating to the sale
by the Company of any material asset, other than sales of Inventory (as that
term is defined in Section 2.24(c)) in the ordinary course of business at
historical margins;
(i) any agreement or commitment for capital expenditures in
excess of $50,000 for any single project or $100,000 in the aggregate for all
projects;
(j) any sales agency, manufacturer's representative and
distributorship agreement or other distribution or commission agreement with
third parties;
(k) any joint venture or partnership agreements;
(l) any lease agreement for personal property under which it
is either lessor or lessee where the aggregate payments during the term of the
lease would exceed $5,000;
(m) any lease agreements for real property;
(n) any agreement with Seller or with any of the Company's or
Seller's current or former shareholders, directors or officers or any relative
or affiliate thereof;
-11-
(o) any profit sharing, stock option, stock purchase, phantom
stock, stock appreciation, profit participation, deferred compensation,
severance or other plan or arrangement;
(p) any agreement under which the Company has advanced or
loaned any amount to any of its current or former shareholders, directors,
officers and employees, except for travel advances in the ordinary course of
business consistent with past practice;
(q) any agreement or commitment obligating the Company to meet
another party's unspecified requirements for goods or services or obligating it
to purchase an unspecified amount of goods or services based on another party's
ability to supply them;
(r) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Company;
(s) any agreement, commitment or order for the cleanup,
abatement or other actions in connection with any Hazardous Substance, the
remediation of any existing Environmental Liabilities, violation of any
Environmental Laws or relating to the performance of any Environmental audit or
study;
(t) any other lease, contract, agreement or commitment (or
group of related leases, contracts, agreements or commitments) the performance
of which involves consideration or Liabilities in excess of $10,000; or
(u) any other lease, contract, agreement or commitment
material to either Company or its financial condition, assets, Liabilities,
operations, prospects or business.
2.13. Contract Compliance. All leases, contracts, agreements and other
commitments referred to in subsection (a) through subsection (u) of Section 2.12
above are in full force and effect. True and complete copies of each such
written lease, contract, agreement or commitment, and written summaries setting
forth all material terms of each such oral lease, contract agreement or
commitment, have been delivered by Seller to Buyer. Except as disclosed on
Schedule 2.13, neither the Company nor, to the Company and Seller's Knowledge,
any other party thereto is in material default under any of the terms thereof
and no event has occurred that with the passage of time or the giving of notice
or both would constitute such a default by the Company, or to the Knowledge of
the Company and Seller, any other party under any provision thereof.
2.14. Compliance with Laws. Except as indicated on Schedule 2.14 and
set forth in Section 2.15:
(a) To the Company and Seller's Knowledge, the Company has all
material governmental licenses, permits, franchises, orders, approvals,
accreditations, written waivers and other authorizations (including, without
limitation, Environmental Permits (as herein defined)) as are necessary in order
to enable it to own its assets and conduct its business as currently owned and
conducted and to occupy and use its real and personal properties without
incurring any material Liability. To the Company and Seller's Knowledge, no
licenses, registration, filing, application, notice, transfer, consent,
approval, order, qualification, waiver or other action of any kind is required
-12-
by virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to avoid the loss of any rights pertaining
to any such license, permit, franchise, order, approval, accreditation, waiver
or authorization. To the Company and Seller's Knowledge, the Company is in
compliance in all material respects with the terms and conditions of all such
licenses, permits, franchises, orders, approvals, accreditations, waivers and
authorizations; and
(b) To the Company and Seller's Knowledge, the Company has
conducted and is conducting its business in compliance in all material respects
with applicable federal, state, local or foreign laws, statutes, ordinances,
regulations, rules or orders or other material requirements of any Governmental
Body or court or other tribunal relating to it (including, but not limited to,
any law (including but not limited to any Environmental Law), statute,
ordinance, regulation, rule, order or requirement relating to securities,
properties, business, products, advertising, sales, employment practices,
discrimination, immigration, terms and conditions of employment, wages and
hours, safety, occupational health and safety, health or welfare conditions
relating to premises occupied, employee benefits, plans and programs, product
safety and liability or civil rights). The Company is not now charged with, and,
to the Company and Seller's Knowledge, not now under investigation with respect
to any possible violation of any applicable law, statute, ordinance, regulation,
rule, order or material requirement relating to any of the foregoing in this
subsection (b) and, to the Company and Seller's Knowledge, the Company has filed
all material reports required to be filed with any Governmental Body.
2.15. Environmental Compliance.
(a) Environmental Definitions. The following terms, as used
herein, have the following meanings:
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, 42 U.S.C. ss.9601 et seq., as amended, and the
regulations promulgated thereunder, and court decisions in respect thereof, all
as shall be in effect at the time of this Agreement.
"Environment" means any and all environmental media, including, without
limitation, ambient air, surface water, ground water, drinking water supply,
land surface or subsurface strata.
"Environmental Laws" means any and all applicable federal, state and
local statutes, laws, regulations, ordinances, rules, orders, decrees, codes,
plans, permits, licenses, agreements, or governmental restrictions (including
common law), relating to public health, welfare, the Environment or to
emissions, discharges or the Release of any Hazardous Substance into the
Environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Substances
or the assessment, clean-up or other remediation thereof in effect at the time
of this Agreement with respect to the Owned Real Property and Leased Real
Property.
-13-
"Environmental Permits" means any and all governmental permits,
licenses, grants, agreements, authorizations, registrations or other
governmental approvals or restrictions issued or required under any
Environmental Laws.
"Hazardous Substance" means any material, chemical, compound, mixture,
solution, substance, waste, pollutant, or contaminant defined, listed,
classified or regulated under any Environmental Law.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing as
defined under and in violation of any Environmental Laws into the Environment
(including, without limitation, the abandonment or discarding of barrels,
containers or other closed receptacles containing any Hazardous Substance).
(b)Environmental Representations. Except as indicated on
Schedule 2.15 or disclosed in those certain environmental related documents
attached to such schedule, with respect to the Owned Real Property or Leased
Real Property:
(i) No pending or overtly threatened notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed, and no
investigation and/or review has been initiated, conducted or overtly threatened,
by any Governmental Body or any other Person, with respect to: (A) any alleged
violation by the Company of any Environmental Law; (B) any alleged failure by
the Company to have any Environmental Permit required under any Environmental
Law; or (C) any condition or circumstance arising from or relating to the Owned
Real Property or Leased Property, including without limitation, the presence or
release of Hazardous Substances on, to or from the Owned Real Property or the
Leased Real Property.
(ii) (A) To the Company and Seller's Knowledge, there
are not and have not been any underground storage tanks, active or abandoned,
located on the Owned Real Property or Leased Real Property; and (B) no Hazardous
Substance has been Released by the Company.
(iii) To the Company and Seller's Knowledge, the
Company has not transported or arranged for the transportation (directly or
indirectly) of any Hazardous Substance to any location which is listed or
proposed for listing on the National Priorities List promulgated pursuant to
CERCLA, or on any similar state list, or which is the subject of Federal, state
or local enforcement actions or other investigations which are reasonably likely
to lead to claims against Buyer, including, without limitation, claims for
clean-up costs, remedial work, damages to natural resources or for personal
injury claims, including, but not limited to, claims under CERCLA.
(iv) No oral or written notification of a Release or
threat of a Release of a Hazardous Substance has been filed by or on behalf of
the Company and no Owned Real Property or Leased Real Property is listed or, to
the Company and Seller's Knowledge, proposed for listing, on the National
Priorities List promulgated pursuant to CERCLA or on any similar state list of
sites requiring investigation or clean-up.
-14-
(v) There are no environmental Liens, and no
governmental actions have been taken or, to the Company and Seller's Knowledge,
are in process that could subject any of such assets to such liens.
(vi) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or for the
Company, or which are in the possession or control of the Company, that are not
attached to Schedule 2.15 as of the date hereof.
(vii) There are no asbestos, asbestos-containing
materials or presumed asbestos-containing materials in the Owned Real Property
or, to Seller's and the Company's Knowledge, the Leased Real Property.
2.16. Assets. Except for the Liens set forth on Schedule 2.16 (all of
which Liens other than Permitted Liens shall be terminated by Seller as of the
Closing), the Company has good and marketable title to, or the valid right to
use, all of its properties and assets, including the properties and assets
reflected in the Balance Sheet (except Inventory disposed of in the ordinary
course of business consistent with past practice at historical margins since the
Balance Sheet Date), free and clear of any Lien, except liens for Permitted
Liens. The assets owned or held under a right to use by the Company constitute
all of the real, personal and mixed assets and property, both tangible and
intangible, including intellectual property, which are being used or held for
use by the Company in the conduct of the business and operations of the Company,
consistent with historical and current practices. Each tangible asset material
to the Company's business has been maintained in accordance with historical
practice and is in good operating condition and repair (subject to normal wear
and tear).
"Permitted Liens" means (a) statutory Liens for current taxes,
assessments or other governmental charges not yet due and payable or the amount
or validity of which is being contested in good faith by appropriate
proceedings, to the extent such Liens in the aggregate do not exceed the
reserves therefore set forth on the Balance Sheet; (b) mechanics', carriers',
workers', repairers' and similar Liens arising or incurred in the ordinary
course of business, to the extent such Liens do not in the aggregate exceed
$50,000; (c) zoning, variances, easements, rights of way, entitlement and other
land use laws by Governmental Bodies, which individually or in the aggregate
when taken together with all other such items do not and will not materially
interfere with the ownership, use, value, operation or marketability of the
affected property; (d) deposits under workers compensation, unemployment
insurance, social security or similar laws, to the extent such deposits are
fully funded in accordance with applicable law; or (e) such other imperfections
of title or Liens which do not individually or in the aggregate when taken
together with all other such imperfections of title or Liens do not materially
interfere with the ownership, use, value, operation or marketability of the
affected property.
2.17. Transactions with Related Parties. A "Related Party" means
Seller, any of the officers or directors of the Company or of Seller, any
affiliate, associate or relative of Seller or of the Company, or any of their
respective officers or directors, or any business or entity in which Seller, the
Company or any affiliate, associate or relative of any such persons has any
direct or material indirect interest. since January 1, 2002 and except as
disclosed on Schedule 2.17, no Related Party has or has had:
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(a) borrowed money from, or loaned money to, the Company;
(b) any interest in any property or assets used by the Company
in its business as currently conducted; or
(c) engaged in any other transaction with the Company (other
than director or employment relationships).
Since January 1, 2002, no Liability of any Related Party to the Company has been
terminated, settled, compromised, reduced or forgiven. As of immediately prior
to the Closing, (a) all Liabilities of any Related Party to the Company shall be
paid in full in accordance with their terms and (b) effective as of immediately
prior to the Closing, the Company shall have no Liability to any Related Party.
2.18. Compensation Arrangements; Bank Accounts. Schedule 2.18 hereto
sets forth the following information:
(a) the names and current salaries and commissions, including
any bonuses, if applicable, of all present managers and employees of the Company
whose salary and commissions, including any bonuses, equal or exceed $50,000 per
annum, together with a statement of the remuneration paid by the Company to each
such person and to any director of the Company, during fiscal 2001; and
(b) the names and locations of all banks, trust companies,
savings and loan associations and other financial institutions at which Seller
maintains a lockbox account for the Company or the Company maintains safe
deposit boxes or accounts of any nature, the names of all persons authorized to
draw thereon, make withdrawals therefrom or have access thereto and the numbers
of all such safe deposit boxes or accounts.
2.19. Labor Relations.
(a) Schedule 2.19(a) sets forth a true and complete list of
(i) all directors of the Company, (ii) all officers (with offices held) of the
Company, (iii) all consultants and independent contractors retained by the
Company currently or during the last fiscal year who received during the last
fiscal year more than $50,000 in fees or payments and (iv) all employees of the
Company not set forth on Schedule 2.18, including each such employee's weekly
remuneration. Except as disclosed on Schedule 2.19(a), the Company is not a
party to any written or oral severance, employment or consulting agreement, or
any service agreement which required fees or payments during the prior or
current fiscal year of more than $50,000.
(b) Except as disclosed on Schedule 2.19(b), the Company is
not (and has not been) a party to, and none of its employees are (and have not
been) subject to, any collective bargaining agreement or other union contract,
and no other union organization efforts have been threatened, initiated or are
in progress with respect to any employees of the Company. The Company is not
engaged in, and has not been engaged during the four (4) years prior to the date
hereof in, any unfair labor practice, and there is not now, nor within the past
four (4) years has there been, any unfair labor practice complaint against the
Company pending or, to the Knowledge of Seller, threatened, before the National
Labor Relations Board or any other comparable foreign or domestic authority or
-16-
any workers' council. The Company is in compliance, and has complied during the
four (4) years prior to the date hereof, in all material respects with all
employment contracts, individual labor contracts, collective labor contracts and
similar agreements to the extent required by applicable domestic and foreign
laws, and the Company has delivered to Buyer prior to the date hereof true and
complete copies of all employment contracts, individual labor contracts,
collective labor contracts and similar agreements, whether written or oral, to
which the Company is a party. Except as set forth on Schedule 2.19(b), no
grievance or arbitration proceeding arising out of or under collective
bargaining agreements or employment relationships is pending, and to the
Knowledge of the Company and Seller, no claims therefore exist or have existed
or have been threatened during the four (4) years prior to the date hereof. No
labor strike, lock-out, slowdown, or work stoppage is or has been pending or, to
the Knowledge of the Company and Seller, threatened against or directly
affecting the Company. Except as set forth on Schedule 2.19(b), during the four
(4) years prior to the date hereof, the Company has not, to the Knowledge of the
Company and Seller, experienced any labor problems or disputes or any strikes,
claims of unfair labor practices or other collective bargaining disputes.
(c) The Company is not a party to any agreement that would
prevent the Company or its employees from operating the Company's business. The
Company has been during the four (4) years prior to the date of this Agreement,
and is, in compliance in all material respects with applicable federal, state
and local laws affecting employment and employment practices, including terms
and conditions of employment and wages and hours, and, except as set forth on
Schedule 2.19(c), there are no, and have not been during the past four (4) years
from the date hereof, any complaints against the Company pending or, to the
Knowledge of the Company and Seller, threatened before any Governmental Body.
(d) To the Knowledge of the Company and Seller, all persons
who are or were performing services for the Company during the four (4) years
prior to the date hereof and are or were classified as independent contractors
during the four (4) years prior to the date hereof do or did satisfy and have
satisfied the requirements of law to be so classified. The Company has fully and
accurately reported their compensation on IRS Forms 1099 or other applicable tax
forms for independent contracts when required to do so. The Company has not
received any notice, nor, to the Knowledge of the Company and Seller, is there
any reason to believe that any key employee of the Company or any group of
employees of the Company have any plans to terminate his, her or its employment
with the Company.
2.20. Insurance. Attached hereto as Schedule 2.20 is a complete list of
all policies of insurance covering the Company including, without limitation,
policies of life, fire, theft, workers' compensation, employee fidelity and
other casualty and liability insurance, environmental liability insurance and
business interruption insurance, and such policies are in full force and effect
and enforceable in accordance with their terms. With respect to each such
insurance policy: (a) none of the Company, Seller or, to the Company and
Seller's Knowledge, any other party to the policy, is in material breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a material breach or material default by the Company,
Seller or any other party to the policy, or permit termination, material
modification, or acceleration under the policy; and (b) to the Company and
Seller's Knowledge, no other party to the policy has repudiated any provision
-17-
thereof. There are no claims, actions, proceedings or suits arising out of or
based upon any of such policies nor, to the Company's and Seller's Knowledge,
does any basis for any such claim, action, suit or proceeding exist. All
premiums have been paid on such policies as of the date of this Agreement and
shall be paid on such policies through the Closing Date. The Company has been
covered during the five years prior to the date of this Agreement by insurance
in scope and amount equivalent to the policies of insurance set forth on
Schedule 2.20. All claims made during such five-year period with respect to any
insurance coverage of the Company are set forth on Schedule 2.20.
2.21. Intellectual Property.
(a) Schedule 2.21 sets forth a true and complete list and a
brief description of (i) each patent and patent application and each
registration or application for registration thereof and each trademark, service
▇▇▇▇, domain name and copyright registration or application for trademark,
service ▇▇▇▇, domain name or copyright registration, of all intellectual
property owned by the Company, and (ii) each pending or unregistered trademark
or service ▇▇▇▇ in use by the Company ("Owned Intellectual Property"), and,
except with respect to shrink wrap software and intellectual property available
to the general public, a true and complete brief description, including a
description of any license or sublicense thereof, of all intellectual property
licensed or sublicensed by the Company from a third party and all intellectual
property that a third party has authorized the Company to use ("Licensed
Intellectual Property"). Except as otherwise described on Schedule 2.21, in each
case where a registration or patent or application for registration or patent
listed on Schedule 2.21 is held by assignment, the assignment has been duly
recorded with the state or national Trademark Office from which the original
registration issued or before which the application for registration is pending.
Except as disclosed on Schedule 2.21, to the Company and Seller's Knowledge, the
rights of the Company in or to such Owned Intellectual Property or Licensed
Intellectual Property do not conflict with or infringe on the rights of any
other Person and the Company has not received any claim or written notice from
any Person to such effect. To the Company and Seller's Knowledge, neither the
existence nor the sale, license, lease, transfer, use, reproduction,
distribution, modification or other exploitation by the Company of any Owned
Intellectual Property, as the same is or was, or is currently contemplated to
be, sold, licensed, leased, transferred, used or otherwise exploited by the
Company, does, did or will (i) infringe on any intellectual property rights of
any Person, (ii) constitute a misuse or misappropriation of any intellectual
property rights of any other Person, or (iii) entitle any other Person to any
interest therein, or right to compensation from the Company by reason thereof.
To the Company and Seller's Knowledge, none of the operations of the Company
(including any and all products and services of either Company) or their
respective businesses, as now or presently contemplated to be conducted, or
performance of any contract as it has been, or as is currently being, conducted,
infringes or, will infringe, upon any third party intellectual property.
(b) Except as disclosed on Schedule 2.21: (i) the Company is
the sole and exclusive owner of all the Owned Intellectual Property, free and
clear of any Lien and (ii) no claim, action, suit or inquiry, proceeding
("Action") has been made or, to the Company and Seller's Knowledge, asserted or
is pending or threatened against the Company either (A) based upon or
challenging the validity and/or enforceability of any of the Owned Intellectual
Property, or seeking to deny or restrict the use by the Company of any of the
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Owned Intellectual Property or (B) alleging that any services provided, or
products manufactured or sold by the Company are being provided, manufactured or
sold in violation of any patents or trademarks, or any other rights of any
Person, and (iii) to the Company and Seller's Knowledge, no third party is
infringing any of the Owned Intellectual Property. The Company owns or possesses
adequate licenses or other rights to use all Owned Intellectual Property
necessary or desirable to the conduct of its business as currently conducted.
Except as disclosed on Schedule 2.21, to the Company and Seller's Knowledge, no
Person is using any patents, copyrights, trademarks, service marks, domain
names, trade names, trade secrets or similar property that are confusingly
similar to the Owned Intellectual Property or that infringe upon the Owned
Intellectual Property or upon the rights of the Company therein. Except as
disclosed on Schedule 2.21, the Company has not granted any license or other
right to any other Person with respect to the Owned Intellectual Property.
Without limiting the generality of the foregoing paragraph: (i) Company
has duly registered the domain name of its site on the World Wide Web (the
"Company Domain Name") located at ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (the "Company Website"),
and is the sole and exclusive owner of and possesses all rights necessary to use
the Company Domain Name; (ii) Company has the right to operate the Company
Website and to use, market, develop, sell, license, display, distribute, publish
and transmit all information, content, software and other materials available at
the Company Website; and (iii) to the Company and Seller's Knowledge, none of
the Company Website, Company's operation thereof, the Company Domain Name or any
of the information, content, software or other materials available at any
Company Website infringes upon, violates or constitutes a misappropriation of
any Company's Proprietary Rights or other right of any other person or entity or
of any applicable law or regulation.
(c) The Company has made available to Buyer correct and
complete copies of all licenses and sublicenses for Licensed Intellectual
Property set forth on Schedule 2.21 and any and all ancillary documents
pertaining thereto (including, without limitation, all amendments, consents and
evidence of commencement dates and expiration dates). With respect to each of
such licenses and sublicenses:
(i) such license or sublicense, together with all
ancillary documents delivered pursuant to the first sentence of this Section
2.21(c), is, to the Company and Seller's Knowledge, is in full force and effect
with respect to the Company and, to the Company and Seller's Knowledge, with
respect to every other party thereto;
(ii) except as otherwise disclosed on Schedule 2.21,
with respect to each such license or sublicense: (A) the Company has not
received any notice of termination or cancellation under such license, (B) the
Company has not received any notice of a material breach or default under such
license or sublicense, which breach or default has not been cured, and (C) the
Company has not granted to any other Person any rights, adverse or otherwise,
under such license or sublicense;
(iii) except as otherwise disclosed on Schedule 2.21,
neither the Company, nor, to the Company and Seller's Knowledge, any other party
to such license or sublicense, is in breach or default in any material respect,
and no event has occurred that, with notice or lapse of time would constitute
such a breach or default or permit termination, modification or acceleration
under such license or sublicense; and
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(iv) except as set forth on Schedule 2.21, no actions
have been made or asserted or are pending or, to the Company and Seller's
Knowledge, threatened against the Company either (A) based upon or challenging
the validity and/or enforceability of any of the Licensed Intellectual Property,
or seeking to deny or restrict the use by the Company in any material respect of
any of the Licensed Intellectual Property or (B) alleging that any Licensed
Intellectual Property is being licensed, sublicensed or used in violation of any
patents or trademarks, or any other rights of any Person.
2.22. Employee Benefit Plans.(a) The following terms, as used herein,
having the following meanings:
"Benefit Arrangement" means each employment, severance or other similar
contract, arrangement or policy (written or oral) and each plan or arrangement
(written or oral) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits that (i) is not an Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
the Company or any of its ERISA Affiliates and (iii) covers any employee or
former employee of the Company.
"Employee Plan" means each "employee benefit plan," as such term is
defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA
and (ii) is maintained or contributed to by the Company or any of its ERISA
Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity that, together
with such entity, would be treated as a single employer under Section 414 of the
Code.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
(b) Schedule 2.22(b) lists each separate Employee Plan that
covers any employee of the Company, copies or descriptions of all of which have
previously been made available or furnished to Buyer. With respect to each
Employee Plan, the Company has provided the most recently filed Form 5500 and an
accurate summary description of such plan.
(c) Schedule 2.22(c) also includes a list of each Benefit
Arrangement of the Company, copies or descriptions of which have been made
available or furnished previously to Buyer.
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(d) Except as set forth on Schedule 2.22(d), none of the
Employee Plans or other arrangements listed on Schedule 2.22(d) covers any
non-United States employee or former employee of the Company.
(e) No "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any Employee
Plan. No "Fiduciary" (as defined in ERISA Section 3(21)) has any Liability for
breach of fiduciary duty or any other failure to act or comply in connection
with the administration or investment of the assets of any Employee Plan. No
action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets of any Employee Plan (other than
routine claims for benefits) is pending or, to the knowledge of the Company is
threatened. To the Company and Seller's Knowledge, there is no basis for any
such action, suit, proceeding, hearing or investigation.
(f) Neither the Company nor any ERISA Affiliate maintains or
contributes to a Multiemployer Plan or a "multiple employer plan" as defined in
Section 210 of ERISA and neither the Company nor any ERISA Affiliate has any
unsatisfied obligation to contribute or pay any withdrawal liability to any such
plan..
(g) Each Employee Plan that is subject to the provisions of
Title IV of ERISA is identified in Schedule 2.22(g) as the "Pension Plans." As
of the most recent valuation date for each Pension Plan, the fair market value
of the assets of each Pension Plan (including for these purposes any accrued but
unpaid contributions) exceeded the present value of all benefit liabilities, as
defined in ERISA Section 4001(a)(16), under each Pension Plan determined on a
termination basis using the assumptions that would be applied by the PBGC for a
plan terminating as of the date of this Agreement. No "accumulated funding
deficiency" (as defined in Code Section 412), has been incurred with respect to
any Pension Plan whether or not waived. Quarterly contributions under Code
Section 412(m) have been made as required for each Pension Plan and no notice to
the PBGC has been required under Code Section 412(n). No "reportable event" (as
defined in ERISA Section 4043), and no event described in ERISA Section 4062,
4063 or 4041 has occurred in connection with any Pension Plan, other than a
"reportable event" for which the 30-day advance notice requirement has been
waived under regulations published by the PBGC. No condition exists and no event
has occurred that could constitute grounds for the termination of any Pension
Plan under ERISA Section 4042. Neither the Company nor any ERISA Affiliate has
incurred any Liability under Title IV of ERISA arising in connection with the
termination of any plan covered or previously covered by Title IV of ERISA.
(h) No Employee Plan is maintained in connection with any
trust described in Code Section 501(c)(9).
(i) Except as set forth on Schedule 2.22(i), no Employee Plan
permits the investment of plan assets in qualifying employer securities, as
defined in ERISA Section 407(d)(5).
(j) Each Employee Plan which is a defined contribution plan
has complied in all material respects with the requirements of ERISA Section
404(c).
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(k) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code meets the requirements of Section 401(a) of the Code
as to form and, to the Knowledge of the Company and Seller, as to the operation
of the Employee Plan, and each trust forming a part thereof is exempt from tax
pursuant to Section 501(a) of the Code. The Company has furnished to Buyer
copies of the most recent Internal Revenue Service determination letters with
respect to each such Employee Plan. Each Employee Plan has been maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including but not limited to ERISA and
the Code, which are applicable to such Employee Plan.
(l) Each Benefit Arrangement has been maintained in material
compliance with its terms and, to the Company's and Seller's Knowledge, with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Benefit Arrangement.
(m) Except for the sole retiree medical plan listed in
Schedule 2.22(m) (the "Retiree Medical Plan"), there are no employee
post-retirement medical or health plans covering employees or former employees
(or the beneficiaries of employees or former employees) of the Company. The
Retiree Medical Plan can be terminated at any time. None of the Company, Seller,
nor any ERISA Affiliate of either has made any written or oral representation to
the Person that the Retiree Medical Plan will continue for any period of time or
that such Retiree Medical Plan will not be terminated during the lifetime of any
employee or former employee.
(n) No Tax under Section 4980B or Section 4980D of the Code
has been incurred with respect to any Employee Plan that is a group health plan,
as defined in Section 5000(b)(1) of the Code.
(o) There has been no amendment to, written interpretation of
or announcement (whether or not written) by the Company or any of its ERISA
Affiliates relating to, or change in employee participation or coverage under,
any Employee Plan or Benefit Arrangement that would increase materially the
expense of maintaining such Employee Plan or Benefit Arrangement above the level
of the expense incurred in respect thereof for the fiscal year ended prior to
the date hereof.
(p) Except as disclosed on Schedule 2.22(p), no employee of
the Company will become entitled to any material bonus, retirement, severance or
similar benefit or enhanced benefit solely as a result of the transactions
contemplated hereby.
(q) The Owosso Corporation 401(k) Savings Plan (the "Owosso
401(k) Plan") is sponsored by Seller and will continue to be sponsored by Seller
after the Closing. The Owosso 401(k) Plan will not be assumed or adopted by
Buyer, nor will Buyer accept any transfer of assets from the Owosso 401(k) Plan
in a trustee to trustee transfer (but direct rollovers of cash from the Owosso
401(k) Plan will be accepted by the Hathaway Corporation 401(k) Tax Advantaged
Investment Plan). The participation of MP Owosso and MP Ohio in the Owosso
401(k) Plan will cease as of the Closing.
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2.23. Finders' Fees. Except as set forth on Schedule 2.23, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Seller or the Company which might be
entitled to any fee or commission from Buyer, Seller or the Company upon
consummation of the transactions contemplated by this Agreement. Such fee or
commission shall be paid by Seller as of the Closing, and the Company shall have
no Liability (and no cash or other assets of the Company shall be used for) the
payment of such fee or commission.
2.24. Other Representations Regarding the Company's Assets and
Liabilities.
(a) Accounts Receivable. All of the trade accounts receivable
and any other similar right to receive payments arising out of sales made in the
ordinary course with respect to the Company's business (the "Accounts
Receivable") as of the Balance Sheet Date are reflected on the Balance Sheet.
The Accounts Receivable of the Company reflected on the Balance Sheet, and the
Accounts Receivable which are reflected in the books and records of the Company
and which have arisen from the period from the Balance Sheet Date to and
including the Closing Date (and such books and records accurately reflect in all
material respects all Accounts Receivable which have arisen during such period),
(i) have arisen or will arise solely in bona fide transactions by the Company in
the ordinary course of the operation of the business, (ii) represent or will
represent upon their creation, valid obligations due and owing to the Company,
except for (A) the reserves for doubtful accounts reflected in the Balance Sheet
(which reserves have been established in accordance with GAAP and consistent
with past practice of the Company) and (B) with respect to Accounts Receivable
arising after the Balance Sheet Date, the reserves for doubtful accounts
established on the Company's books and records in accordance with GAAP and in
the ordinary course of the Company's business consistent with past practice,
(iii) are or will be on the Closing Date enforceable in accordance with their
terms, and (iv) are not or will not be subject to any deduction, defense,
set-off or counterclaim, and further subject to normal allowances, deductions
and customary discounts consistent with past practices of the Company. Except as
set forth on Schedule 2.24(a), to the Knowledge of the Company and Seller, there
are no disputes between the Company and any account debtor with respect to any
Accounts Receivable and neither the Company nor Seller is aware of any such
account debtor's status or condition which could impair its ability to pay its
Accounts Receivable in accordance with their respective terms. Since October 28,
2001 the Company has not cancelled, compromised, settled, released, waived,
written-off or expensed any Accounts Receivable or accelerated the collection of
any Account Receivable.
(b) Accounts Payable. All of the accounts payable of the
Company (the "Accounts Payable") as of the Balance Sheet Date are reflected on
the Balance Sheet. The accounts payable of the Company reflected on the Balance
Sheet, and the accounts payable which are reflected in the books and records of
the Company and which have arisen from the period from the Balance Sheet Date to
the Closing Date (and such books and records accurately reflect in all material
respects all Accounts Payable which have arisen during such period), (i) have
arisen or will arise solely in bona fide transactions by the Company in the
ordinary course of the operation of the Company's business, (ii) represent upon
their creation, valid obligations due and owing by the Company and (iii) as of
the Balance Sheet Date were, and as of the Closing Date shall be, current in
accordance with their normal, stated terms except as provided on Schedule
2.24(b).
-23-
(c) Inventory. All of the finished goods, spare parts, work in
process, stock room inventory and raw material of whatever nature held for sale
(collectively, the "Inventory") of the Company as of the Balance Sheet Date is
reflected on its Balance Sheet, and all of such items of Inventory are, and all
items of Inventory owned by the Company as of the Closing Date will be, (i) of a
merchantable quality, subject to (A) reserves reflected in the Balance Sheet
(which reserves have been established in accordance with GAAP and consistent
with past practices of the Company) and (B), with respect to Inventory acquired
after the Balance Sheet Date, reserves established on the Company's books and
records in accordance with GAAP and in the ordinary course of the Company's
business consistent with past practices, and (ii) salable in the ordinary course
of the operation of the business at historical ▇▇▇▇-ups, except for damaged,
defective or obsolete Inventory, a reserve for which is set forth on the Balance
Sheet. The Company's Inventory is, and has been, consistently valued on the
books and records of the Company in accordance with GAAP, and such value
reflects write-downs for damaged, defective or obsolete Inventory to the extent
GAAP would so provide. Except as set forth on Schedule 2.24(c), the Company does
not hold any items of Inventory on consignment. All Inventory is located at the
Company's Owned Real Property or Leased Real Property (as those terms are
defined below in Section 2.24(i)(i) and 2.24(i)(ii), except for Inventory in
transit to or from the Company.
(d) Leasehold Improvements. Set forth on Schedule 2.24(d) is a
list of all leasehold improvements for each Leased Real Property. All leasehold
improvements are, and from the date hereof until the Closing Date will be, in
all material respects in reasonably good working order, repair and condition,
ordinary wear and tear excepted, and include all leasehold improvements,
fixtures and appurtenances necessary for the Company to operate the Company's
business as currently conducted. Except as set forth on Schedule 2.24(d), all of
the leasehold improvements are owned by the Company, and all of the movable
trade fixtures constituting part of the leasehold improvements may be removed at
any time by the Company from the Leased Real Property to which they are attached
without giving rise to a default by the Company, or an obligation on the part of
the Company to compensate the applicable landlord for any material diminution in
value of the Leased Real Property, other than the obligation to repair any
damage to the Leased Real Property caused by such removal.
(e) Product Warranties. Except as set forth in Schedule
2.24(e), the Company has not given or made any warranties to third parties with
respect to any products sold or services performed by it, except for warranties
arising by operation of law. Each of the products sold or services performed by
the Company conforms to all contractual agreements, all warranties made and all
warranties arising by operation of law; provided, however, that Seller's
Liability with respect to such representation shall be limited as set forth in
Section 8.2(a)(vii). There are no pending or, to the Knowledge of the Company
and Seller, threatened warranty claims, or legal proceedings relating to
warranty claims, whether on the basis of warranties offered by the Company,
warranties offered by any manufacturer of items of Inventory or otherwise
(collectively "Warranty Claims"), or any facts, events or circumstances which
have occurred, in either case which would result in a material claim, material
legal proceeding or material Liability on the part of the Company. Except as set
forth on Schedule 2.24(e), within the three (3) years preceding the date hereof,
no Warranty Claims have been made or, to the Knowledge of the Company and
Seller, threatened. To the Knowledge of the Company and Seller, there are no
design defects in any model or type of product or product specification of the
Company ("Design Defects"). There have been no mandatory or voluntary product
-24-
recalls with respect to any products of the Company, and there is no basis for
any such recall. The warranty reserves reflected on the Financial Statements
have been computed in accordance with GAAP, consistent with the Company's past
practices, and such reserves are adequate for all warranty claims relating to
products manufactured by the Company prior to the Closing Date.
(f) Product Liabilities. Schedule 2.24(f) attached hereto is a
true and complete summary of claims as of the date hereof under all product
warranty plans and product liability insurance policies relating to the Company
since October 29, 2000, other than claims that are or have been fully covered by
insurance (subject to policy deductibles). The Company is insured under policies
of insurance relating to product liability listed in Schedule 2.24(f) attached
hereto for and against any claim for damage to person or property based upon
defects in any product to the extent a claim is made during the policy period
subject to deductibles and other terms summarized therein. The Company or Seller
has provided notice of all such claims to its insurance carriers and, except as
set forth on Schedule 2.24(f) attached hereto, no insurance carrier has denied
coverage, reserved rights against the Company or otherwise interposed any
defense to coverage with respect to any such claims which is reasonably likely
to result in a material Liability or material loss to the Company.
(g) Certain Payments and Practices. Neither the Company nor
any of its shareholders, officers or directors, or to the Knowledge of the
Company and Seller, any of the Company's employees, has (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of what form, whether in
money, property, or services, (i) to obtain favorable treatment for the Company,
its business or contracts secured, (ii) to pay for favorable treatment for
business or contracts secured, (iii) to obtain special concessions or for
special concessions already obtained, or (iv) in violation of any legal
requirement, or (b) established or maintained any unrecorded fund or asset for
any of the foregoing or for any illegal or improper purpose or made any false or
artificial entries on its books which would be illegal or improper.
(h) Real Property.
(i) Schedule 2.24(h)(i) sets forth an accurate and
complete list and a brief description of all real property owned by the Company
(the "Owned Real Property") indicating whether MP Owosso or MP Ohio is the sole
owner thereof, and such Owned Real Property, including the buildings and
improvements thereon, is in good repair and operating condition, ordinary wear
and tear excepted. The Company has free and complete access to and over public
streets for ingress and egress to and from the Owned Real Property. Except for
the Mortgage (as defined on Schedule 2.12(a), which Mortgage will be released on
or prior to the Closing, the Company has, and on the Closing Date the Company
will have good, marketable, insurable and indefeasible fee simple title to the
Owned Real Property, free and clear of all Liens, conditions, exceptions or
reservations, except easements for utilities and for conditions, exceptions and
reservations which do not adversely affect the Company's operations. There are
no adverse rights of third parties or other parties in possession of all or any
part of the Owned Real Property. Except for the option granted in Section 9.18
of this Agreement, no party has been granted any license, lease, option to
purchase or other right relating to the use or possession of all or part of the
Owned Real Property. The Company and Seller have not received notice of, and
-25-
have no other Knowledge of information of, any pending or contemplated change in
any regulation or prior restriction applicable to the Owned Real Property, of
any pending or threatened judicial or administrative action, of any action
pending or threatened by adjacent landowners or other persons, or any pending or
contemplated condemnation or together governmental action, any of which could
result any material change in the condition of all or a part of the Owned Real
Property. All utilities that are required for the full and complete use of and
operation of the Owned Real Property, including without limitation, electricity,
natural gas, sanitary sewers, storm sewers and drainage, water, telephones and
similar systems, are at the Owned Real Property and in operating condition and
in a state of maintenance and repair appropriate for the use there of in the
ordinary and usual course of business by the Company, all easements or license
encumbering the Owned Real Property which will be required in connection with
such utilities have been granted. The use made of the Owned Real Property and
the Leased Real Property by the Company in the ordinary course of business (the
"Use") is a use allowed by right, without the requirement of a variance under
applicable zoning, building and fire laws and ordinances, and any other
agreements affecting such properties, including without limitation any
restrictive covenants (other than that restrictive covenant referred to in
Section 9.17 of this Agreement, and all consents, licenses, permits, approval
and certificates required for the Use have been issued to and paid for by the
Company and are in full force and effect. There are no improvements that
encroach on to the Owned Real Property or that protrude from the Owned Real
Property on to adjacent property.
(ii) Schedule 2.24(h)(ii) sets forth an accurate and
complete list and a brief description of all real property currently leased by
the Company (the "Leased Real Property") and the Company has made available to
Buyer accurate and complete copies of the leases and subleases for all such
Leased Real Property, all of which are listed on Schedule 2.24(h)(ii). With
respect to each such lease and sublease:
(A) it is a legal, valid, binding and
enforceable obligation of the Company and, to the Knowledge of the Company and
Seller, the other party thereto, and is in full force and effect, and will
continue in full force and effect on identical terms immediately following the
Closing;
(B) the Company has not violated in any
material respects the terms thereof and is not in default thereunder;
(C) to the Knowledge of the Company and
Seller, no other party thereto is in default under any such lease or sublease;
(D) no party has repudiated any provision
thereof in a writing delivered to the Company; and
(E) there are no material disputes, oral
agreements, or forbearance programs in effect with respect thereto.
(iii) Except as set forth in Schedule 2.24(h)(iii),
the Company has not received any notice of (A) any requirements by any insurance
company that has issued a policy covering any part of the Company's Owned Real
Property and/or Leased Real Property by any board of fire underwriters or other
-26-
body exercising similar functions, requiring any material repairs or work to be
done on any part of any of such Owned Real Property and/or Leased Real Property,
or (B) any defects or inadequacies in, on or about any part of the Company's
Owned Real Property and/or Leased Real Property that would, if not corrected,
result in the termination of insurance coverage or a material increase in the
cost thereof, and which, in either case, remains outstanding, except for any
requirement, defect or inadequacy, the existence of which is not reasonably
likely to have a Material Adverse Effect on the Company. To the Knowledge of the
Company and Seller, all public utilities, including water, electric sewage or
subsurface disposal systems, required for the normal operation of the business
of the Company as currently conducted, connect into the Company's Owned Real
Property and/or Leased Real Property through adjoining public highways or, if
they pass through adjoining private land, do so in all material respects in
accordance with valid permits and licenses, all installation and connection
charges due and payable with respect thereto have been paid in full or provided
for and all such utilities are sufficient in all material respects for the
operation of the Company's business as currently conducted and for the use and
enjoyment of the Owned Real Property and the Leased Real Property.
(iv) There are no pending or, to the Knowledge of the
Company and Seller, threatened condemnation, compulsory acquisition,
expropriation, or similar proceedings that would affect all or any portion of
the Company's Owned Real Property or Leased Real Property, except for any such
condemnation, acquisition, expropriation or other proceeding which is not
reasonably likely to have a Material Adverse Effect on the Company, or the use,
operation and enjoyment of the Owned Real Property and the Leased Real Property.
As of the Closing Date, no material assessments for public improvements will
have been made against any of the Company's Owned Real Property or Leased Real
Property which will not have been paid in full, except for any such assessments
the validity of which are contested in good faith by means of appropriate
proceedings. To the Knowledge of the Company and Seller, all utilities necessary
or desirable for the full and complete occupancy and Use of the Owned Real
Property and the Leased Real Property have been connected and are in good
operating order, and all charges therefore, including "tie in" charges have been
fully paid. To the Knowledge of the Company and Seller, no ordinance authorizing
the improvements, the cost of which would be assessed against any of the
Company's Owned Real Property or Leased Real Property is pending or proposed,
except for any such ordinance the existence of which would not result in a
Material Adverse Effect on the Company.
2.25. Significant Customers and Vendors.
(a) Schedule 2.25(a) is a true and correct list showing (i)
the twenty largest customers based on gross purchases from the Company during
(A) the twelve-month period ending on October 28, 2001 (the "Significant
Customers"), (B) the twelve-month period ending on October 29, 2000 and (C) the
five-month period ending on ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) the location of each of the
Significant Customers, (iii) all vendors and suppliers of either of the Company
who are the sole source of such supply where the parts supplied are not readily
available from another source (collectively, the "Sole Source Vendors") and (iv)
the location of each of the Sole Source Vendors.
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(b) Except as set forth on Schedule 2.25(b), since October 28,
2001, no Significant Customer or Sole Source Vendor has: (i) stopped or
indicated to the Company an intention to stop trading with or supplying the
Company consistent with Significant Customer's or Sole Source Vendor's past
practices, (ii) reduced, or indicated to the Company an intention to reduce, its
trading with or provision of goods or services to the Company from that
consistent with such Significant Customer's or Sole Source Vendor's past
practices or (iii) changed, or indicated to the Company an intention to change,
materially the terms and conditions on which it is prepared to trade with or
supply the Company from that consistent with such Significant Customer's or Sole
Source Vendor's past practices. To the Knowledge of the Company and Seller, no
Significant Customer or Sole Source Vendor is reasonably likely, as a result of
the transactions contemplated by this Agreement, to: (x) not trade with or
supply the Company, (y) reduce substantially its trading with or provision of
goods or services to the Company, or (z) change the terms and conditions on
which it is prepared to trade with or supply the Company. Neither the Company
nor Seller has any Knowledge of any facts, conditions or events which might give
rise to a claim by the Company against any Significant Customer or Sole Source
Vendor or any claim by a Significant Customer or Sole Source Vendor against the
Company.
2.26. Backlog. Schedule 2.26 lists all pending customer orders and
contracts as of June 17, 2002 (and such Schedule shall be updated for Closing to
a date within three (3) days of Closing). All such customer orders and contracts
were entered into in the ordinary course of business, consistent with past
practice.
2.27. Disclosure. Neither this Agreement, the Schedules hereto, any
document delivered pursuant to this Agreement, nor any document or information
provided to Buyer by the Company or Seller or any employee or agent thereof in
the course of Buyer's due diligence investigation and the negotiation of this
Agreement contain any untrue statement of any 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 known to the Company or Seller (other
than general economic or industry conditions or eventual technological
obsolescence of Company products) that is reasonably likely to have a Material
Adverse Effect, which has not been set forth in this Agreement or such
Schedules.
The identification of an item on one Schedule to this Agreement shall
apply only to such Schedule and the correspondingly numbered representation and
warranty and not to any other Schedule or representation and warranty. Seller
acknowledges that the fact that it has made disclosures pursuant to Article II
or the Schedules thereto of matters which result in Damages to Buyer shall only
apply to qualify the representation or warranty in respect of which each
Schedule disclosure is made and shall not otherwise relieve Seller of its
obligation pursuant to Article VIII of this Agreement to indemnify and hold
harmless Buyer from Damages as required by Article VIII.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
3.1. Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado.
3.2. Corporate Power and Authority. Buyer has full corporate power and
authority to make, execute, deliver and perform this Agreement and the
transactions contemplated hereby.
3.3. Due Authorization. The execution, delivery and performance of this
Agreement by Buyer have been duly authorized by all necessary corporate action
on the part of Buyer, and this Agreement constitutes the legal, valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws relating to or affecting the rights and remedies of creditors
generally, provided that no representation or warranty is made as to the
availability of any equitable or other specific remedy upon any breach of this
Agreement.
3.4. Finders' Fees. Except for fees payable to Blitzer, ▇▇▇▇▇▇▇▇▇ &
Company, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of Buyer which
might be entitled to any fee or commission from Seller or the Company upon
consummation of the transactions contemplated by this Agreement. Such fee or
commission shall be paid by Buyer as of the Closing, and Seller shall have no
Liability for the payment of such fee or commission.
3.5. Investment Intent.
(a) The Company Stock being purchased by Buyer is being
acquired for Buyer's own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof; and
(b) Buyer understands and agrees that (i) the Company Stock
has not been registered under the Securities Act, by reason of its issuance in a
transaction exempt from registration requirements of the Securities Act pursuant
to Section 4(2) thereof and (ii) the Company Stock must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or is exempt from such registration.
3.6. Consents and Governmental Authorization. Except as set forth on
Schedule 3.6, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby by Buyer require no
consent, approval or action by or in respect of, or filing with, any third party
or Governmental Body for which Buyer is responsible.
3.7. Non-Contravention. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated by this
Agreement and the compliance with the terms, conditions and provisions of this
Agreement by Buyer, will not (a) contravene any provision of Buyer's charter or
bylaws, as amended or (b) assuming compliance with the matters referred to in
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Section 3.6, contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree binding
upon or applicable to Buyer.
ARTICLE IV
CONDITIONS TO CLOSING
4.1. Conditions Precedent to Obligations of Buyer. The obligations of
Buyer to proceed with the Closing under this Agreement are subject to the
fulfillment prior to or at the Closing of the following conditions (any one or
more of which may be waived in whole or in part in writing by Buyer at Buyer's
option):
(a) Representations and Warranties. The representations and
warranties of the Company and Seller contained in Article II shall be true and
accurate in all material respects on and as of the Closing Date (except to the
extent a representation or warranty speaks specifically as of an earlier date
which representation and/or warranty shall have been true and accurate in all
material respects as of such earlier date) and the Company and Seller shall have
provided Buyer with a certificate executed by the Company and Seller, dated as
of the Closing Date, to such effect.
(b) Covenants. The Company and Seller shall have performed and
complied with all of their respective covenants contained herein on or before
the Closing Date (to the extent required to be performed on or prior to the
Closing Date), and Buyer shall receive a certificate to such effect signed by an
officer of the Company and Seller.
(c) Opinion of Company and Seller's Counsel. Buyer shall have
received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel for the Company and Seller an opinion
dated the date of the Closing in form and substance reasonably satisfactory to
Buyer.
(d) Required Consents. The Seller shall have obtained all
consents and approvals of third parties to the transactions contemplated hereby
on the part of the Company and Seller which are identified in Schedule 4.1(d)
required for the consummation of the transactions contemplated hereby.
(e) Litigation. No order of any court or Governmental Body
shall be in effect which restrains or prohibits the transactions contemplated
hereby or which would limit or adversely affect Buyer's ownership or control of
the Company or the business of the Company as currently conducted, and there
shall not have been threatened, nor shall there be pending, any such action or
proceeding, or any action or proceeding by or before any court or Governmental
Body (i) challenging any of the transactions contemplated by this Agreement or
seeking monetary relief by reason of the consummation of such transactions or
(ii) by any present or former owner of any capital stock or equity interest in
the Company (whether through a derivative action or otherwise) against the
Company or any officer, director or stockholder of the Company in his capacity
as such or (iii) which might have an adverse effect on the right of Buyer to own
the Company and conduct the business of the Company, and Buyer shall receive a
certificate to such effect signed by the Company and Seller.
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(f) Governmental Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expiration or
termination without objection of waiting periods imposed by, any competent
federal, state, local or foreign Governmental Body.
(g) Certified Documents. The Company shall have delivered to
Buyer at Closing a copy of its certificates of incorporation and by-laws, as
amended, as certified by the Secretary or an Assistant Secretary of Company, as
appropriate. Seller shall have delivered to Buyer a copy of resolutions adopted
by its board of directors authorizing the execution, delivery and performance of
this Agreement and the transactions contemplated hereby, as certified by a
Secretary or Assistant Secretary of Seller.
(h) Resignation of Officers and Directors. Seller shall have
delivered to Buyer copies of resignations delivered to the Company prior to the
Closing, but effective as of Closing, of the officers and directors of the
Company specified on Schedule 4.1(h).
(i) Prepayment of Cognovit Promissory Note. Seller shall have
delivered evidence to Buyer of the satisfaction in full, on behalf of MP Ohio,
all unpaid amounts outstanding under that certain Cognovit Promissory Note,
dated November 21, 1996 pursuant to the terms thereof and that certain related
Loan Agreement by and between MP Ohio and Cascade CDSC, Inc. dated of even date.
(j) Material Adverse Change. There shall have been no material
adverse change in the Company or its condition (financial or otherwise),
business, properties, assets, Liabilities, prospects, operations or results of
operations between the date of this Agreement and the Closing.
(k) Search Results. Buyer shall have received (i) UCC, Lien,
litigation and judgment searches (which searches shall be paid for by Buyer)
with respect to the Company, and (ii) evidence of termination by Seller and the
Company of all Liens (and of all related UCC financing statements, mortgages and
similar matters evidencing Liens) filed against the Company or any of its
assets, or payoff letter(s) from secured parties with respect to such Liens.
(l) [Intentionally deleted.]
(m) Employment Arrangements. Buyer shall have entered into
employment and noncompetition agreements with the persons identified on Schedule
4.1(m), on terms and conditions satisfactory to the parties thereto.
(n) Other Matters. Seller shall have delivered, or cause the
Company to deliver, to Buyer such other instruments, certificates and documents
as are reasonably requested by Buyer in order to consummate the transactions
contemplated by this Agreement, all in form and substance reasonably
satisfactory to Buyer.
4.2. Conditions Precedent to Obligations of Seller. The obligations of
Seller to proceed with the Closing hereunder are subject to the fulfillment
prior to or at the Closing of the following conditions (any one or more of which
may be waived in whole or in part in writing by Seller at Seller's option):
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(a) Representations and Warranties. The representations and
warranties of Buyer contained in Article III shall be true and accurate on and
as of the Closing Date (except to the extent a representation or warranty speaks
specifically as of an earlier date, which representation and/or warranty shall
have been true and accurate as of such earlier date) and Buyer shall have
provided Seller with a certificate executed by Buyer, dated as of the Closing
Date, to such effect.
(b) Covenants. Buyer shall have performed and complied with
all of its covenants contained herein on or before the Closing Date (to the
extent required to be performed on or prior to the Closing Date), and Seller
shall receive a certificate to such effect signed by an officer of Buyer.
(c) Opinion of Counsel for Buyer. Seller shall have received
from ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C., as counsel for Buyer, an opinion dated the date of
the Closing in form and substance reasonably satisfactory to Seller.
(d) Required Consents. Buyer shall have obtained all consents
and approvals of third parties to the transactions contemplated hereby on the
part of Buyer (including, without limitation, those disclosed on Schedule 3.6)
required for the consummation of the transactions contemplated hereby.
(e) Litigation. No order of any court or Governmental Body
shall be in effect which restrains or prohibits the transactions contemplated
hereby and there shall not have been threatened, nor shall there be pending, any
action or proceeding by or before any court or Governmental Body or arbitrator,
challenging any of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such transactions.
(f) Governmental Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expiration or
termination without objection of waiting periods imposed by, any competent
federal, state, local or foreign Governmental Body, necessary for the
consummation of the transactions contemplated by this Agreement shall have been
filed, occurred or been obtained.
ARTICLE V
TERMINATION OF AGREEMENT
5.1. Grounds for Termination. This Agreement may be terminated in
writing at any time at or prior to the Closing, subject to Section 5.2, as
follows:
(i) by mutual written agreement of the Company,
Seller and Buyer;
(ii) by either (A) Seller or (B) Buyer, if there
shall be any law or regulation that makes the consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or Governmental Body having competent
jurisdiction; or
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(iii) if the Hathaway Power Sale occurs: (A) by
Buyer, if the Closing has not occurred and any of the conditions precedent to
Buyer's obligations to proceed with the Closing remain unfulfilled and not
waived by Buyer five business days following notice by Buyer to Seller of such
non-fulfillment and non-waiver given following consummation of the Hathaway
Power Sale, provided that such non-fulfillment was not the direct result of
Buyer's default of its obligations under this Agreement; or (B) by Seller, if
all of the conditions precedent to Buyer's obligations to proceed with the
Closing have been fulfilled or waived by Buyer and Seller is not in default of
its obligations under this Agreement, and the Closing has not occurred within
five business days of notice by Seller to Buyer to such effect given following
consummation of the Hathaway Power Sale; or
(iv) by Seller (upon 24 hours written prior notice to
Buyer) at any time from August 16, 2002 to November 1, 2002 if the affirmative
vote of the shareholders of Hathaway Corporation necessary to approve the
Hathaway Power Sale (the "Required Hathaway Vote") has not been obtained by 5:00
p.m., Denver, Colorado time, on August 15, 2002;
(v) by Seller or Buyer (upon 24 hours prior written
notice to the other party) at any time on or after November 1, 2002 if the
Required Hathaway Vote has not been obtained by 5:00 p.m., Denver, Colorado
time, on August 15, 2002; or
(vi) If the Required Hathaway Vote has been obtained
by 5:00 p.m., Denver, Colorado time, on August 15, 2002 and the Hathaway Power
Sale has not occurred by 5:00 p.m., Denver, Colorado time by the fifth business
day following the date of such vote:
(A) by Seller (upon 24 hours prior written
notice to Buyer) at any time from August 22, 2002 to November 1, 2002, or
(B) by Buyer or Seller at any time on or
after November 1, 2002.
5.2. Effect of Termination. If this Agreement is terminated as
permitted by Section 5.1, such termination shall be without Liability of either
party (or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other party to this Agreement; provided
that if such termination shall result from a willful breach or default by such
party of any of its representations or warranties contained in this Agreement or
from the willful failure of any party to fulfill a condition to the performance
of the obligations of another party or to perform a covenant of this Agreement
or from a willful breach by any party to this Agreement, such party shall be
fully liable for any and all Damages (as hereinafter defined) incurred or
suffered by the other parties as a result of such failure or breach. The
provisions of Sections 5.2 and 5.3 and Articles VIII and IX (except those
contained in Section 9.10 or Sections 9.14 through 9.18) shall survive any
termination hereof pursuant to Section 5.1.
5.3. Deposit. If this Agreement is terminated, the Deposit will be
distributed as follows, and Seller and Buyer shall so direct the Escrow Agent:
(i) paid to Buyer, if the Agreement was terminated
pursuant to Sections 5.1(i), (ii), (iii)(A) or (vi)(A);
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(ii) paid to Bank One, NA for the account of Seller,
if the Agreement was terminated pursuant to Sections 5.1(iii)(B), (v), or
(vi)(B) if the Hathaway Power Sale was not consummated due to Buyer's failure to
fulfill the conditions precedent to closing in Section 7.3(a), (b), (e), (g),
(i), (j) or (k) of the Hathaway / Qualitrol Agreement.
(iii) $300,000 (plus accrued interest) paid to Bank
One, NA for the account of Seller and $1,700,000 (plus accrued interest) paid to
Buyer, if the Agreement was terminated pursuant to Sections 5.1(iv) or (vi)(B)
if the Hathaway Power Sale was not consummated due to Qualitrol's breach of the
Hathaway/Qualitrol Agreement or due to the non-fulfillment of any of the
conditions precedent to closing in Section 7.1 (a) or 7.3(c), (d), (f) and (h)
of the Hathaway/Qualitrol Agreement.
ARTICLE VI
TAX MATTERS
6.1. Additional Tax Definitions. "Adjustments" means, with respect to
Taxes, a change in the amount or character of any item of income, gain, loss,
deduction or credit of the Company, including but not limited to changes thereto
attributable to: (w) amendment of returns; (x) deficiencies asserted by any
taxing authority; or (y) claims for refund, irrespective of whether such change
arises out of a voluntary act, or any audit, examination, proceeding or
litigation resulting from any of the foregoing events.
"IRS" means the Internal Revenue Service.
"Post-Affiliation Year" means any taxable year or period of the Company
beginning after the Closing Date.
"Regulations" means the U.S. Treasury Department Income Tax Regulations
in effect under the Code, as amended from time to time.
6.2. Tax Returns and Payments.
(a) [Intentionally deleted.]
(b) Fiscal 2002 Short Year Federal Return. Based upon the
information provided to it by Buyer or the Company pursuant to this subparagraph
(b), Seller shall prepare the pro forma federal income tax return of the Company
for the short taxable period ending on the Closing Date, and shall include the
taxable income or loss reflected in such pro forma return in the Consolidated
Return, and shall provide a copy of such pro forma return to Buyer. Based upon
the information so provided, such return shall be true and complete in all
material respects and shall be prepared in accordance with Section
1.1502-76(b)(2) of the Regulations. If a Code Section 338(h)(10) Election is
made pursuant to Section 6.7 below, such fiscal 2002 pro forma federal income
tax return will be prepared based on the allocation of the payment referred to
in Section 1.2, Consideration and Payment, among the assets of the Company
pursuant to subparagraph (b) of Section 6.7 below. No later than the one month
anniversary of the Closing Date, Buyer or the Company shall prepare and deliver
to Seller, a domestic tax package including such information and prepared in a
manner and in such form consistent with those delivered to Seller by the Company
in prior years.
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(c) [Intentionally deleted.]
(d) Fiscal 2002 Short Year State and Local Tax Returns. Seller
shall prepare all state and local income tax returns of the Company that are
required to be filed for the short taxable period ended on the Closing Date.
Buyer shall provide Seller a Power of Attorney solely for the purposes of
obtaining an extension of time as may be needed for such returns. Seller shall
provide Buyer with such return in proper form for filing no later than 30 days
before such returns are due. Seller shall consult with Buyer with respect to the
modifications to federal taxable income made by Seller in such state and local
income tax returns. Such returns shall be signed and timely filed by or caused
to be timely filed by Buyer.
(e) Post Closing Returns. Buyer shall prepare, sign and file
all tax returns, for any type of Tax, which returns are required to be filed for
all periods ending after the Closing Date, including state tax returns which
include the period October 28, 2001 through the Closing Date ("straddle
returns"), subject to Seller's review of such straddle returns. Buyer shall also
prepare, sign and file all local tax returns (whether for periods ending before
or after the Closing Date).
(f) Tax Liability of Buyer and the Company. As between the
parties, Buyer and the Company shall have the sole liability to timely pay to
the relevant taxing authority all Taxes which arise from: (x) any tax period
which begins after the Closing Date; and (y) any tax returns which Buyer is
required to file under subparagraph (e) of this Section 6.2.
6.3. Adjustments. (a) Adjustments to Post-Affiliation Year Returns. If
with respect to Consolidated Returns: (x) there is an Adjustment to any item
reported on a return filed with respect to the Company for a Post-Affiliation
Year that results in an increase in Taxes payable by Buyer or the Company; and
(y) such Adjustment results in a corresponding Adjustment to items reported on a
return filed with respect to Seller or any affiliate of Seller (including the
Company) for an Affiliation Year; and (z) the Taxes payable by or on behalf of
Seller (or such affiliate) with respect to the Company for such period are
reduced by such Adjustment (the "Seller Decrease"), then Seller shall pay to
Buyer or the Company, an amount equal to such increase in Taxes of Buyer or the
Company. The amount payable by Seller under this paragraph shall be limited to
Seller Decrease, plus interest calculated as under Code Section 6621, or
comparable interest from state and local authorities, with respect to such
Seller Decrease. Payment under this paragraph shall be made no later than five
Business Days after Seller Decrease is refunded to Seller or such affiliate or
is otherwise actually realized.
(b) Adjustments to Affiliation Year Returns. If, with respect
to Consolidated Returns: (x) there is an Adjustment to any item reported on a
return filed with respect to Seller or any affiliate of Seller (including the
Company) for an Affiliation Year that results in an increase in the Taxes
payable by Seller or an affiliate of Seller; and (y) such Adjustment results in
a corresponding Adjustment to items reported on a tax return filed with respect
to Buyer or any affiliate of Buyer (including the Company) for a
Post-Affiliation Year; and (z) the Taxes payable by or on behalf of Buyer (or
such affiliate) with respect to such Post-Affiliation period are reduced by such
Adjustment (the "Buyer Decrease"), then Buyer shall pay to Seller an amount
equal to such increase in Taxes of Seller or such affiliate. The amount payable
by Buyer under this paragraph shall be limited to Buyer Decrease, plus interest
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calculated as under pursuant to Code Section 6621, or comparable interest from
state or local authorities, with respect to such Buyer Decrease. Payment under
this paragraph shall be made no later than five Business Days after Buyer
Decrease is refunded to Buyer or such affiliate, or is otherwise actually
realized.
(c) Other Changes in Taxable Income. If with respect to a
Consolidated Return for an Affiliation Year: (x) the Company's taxable income is
determined (by Buyer or Seller with the agreement of the other that the change
is appropriate, or by the IRS) to be greater than its taxable income as
originally reported on such Consolidated Return (other than as a result of an
Adjustment described in subparagraph (a) or (b) above), the Company shall pay to
Seller an amount equal to the product of the increase in taxable income times
the maximum federal Tax rate for the applicable year (plus penalties and
interest); (y) the Company's taxable income is determined (by Buyer or Seller
with the agreement of the other that the change is appropriate, or by the IRS)
to be less than its taxable income as originally reported on such Consolidated
Return (other than as a result of an Adjustment described in subparagraphs (a)
or (b) above ) and Seller receives a cash refund for the Affiliated Group which
Seller determines in its sole discretion to be attributable to the Company,
Seller shall pay to Buyer an amount equal to the product of the reduction in
taxable income and the maximum federal Tax rate for the applicable year (plus
interest); (z) Payment pursuant to this subparagraph (iii) shall be made no
later than five (5) Business Days after Seller receives or otherwise actually
realizes a refund of or is assessed the additional tax.
(d) Notice of Adjustments by Seller. Seller shall promptly
notify Buyer of any IRS notice or revenue agent's report or equivalent state or
local tax authority notice received by Seller which could result in an
Adjustment giving rise to a liability of Buyer or the Company under this
Agreement. However, the failure to give such notice shall not relieve Buyer or
the Company from any liability that it may have hereunder, except to the extent
that such failure results in increased liability to Buyer or the Company arising
out of its obligations to pay Seller as provided in this Article VI. Seller
shall keep Buyer informed of developments regarding such notice or report and
shall consult with the Company or Buyer concerning the appropriate actions or
positions to be taken in such proceedings to the extent such developments: (x)
relate to any liability of Buyer or the Company to Seller under this Agreement,
or (y) could affect the liability of Buyer or the Company for Taxes in a
Post-Affiliation Year.
(e) Notice of Adjustments by Buyer and the Company. Buyer
shall promptly notify Seller of any IRS notice or revenue agent's report or
equivalent state or local tax authority notice received by Buyer or the Company
which could result in an Adjustment giving rise to a liability of Seller under
this Agreement. However, the failure to give such notice shall not relieve
Seller from any liability that it may have hereunder, except to the extent that
such failure results in increased liability to Seller arising out of its
obligations to pay Buyer. Buyer shall keep Seller informed of developments
regarding such report or notice to the extent such developments relate to any
liability of Seller to Buyer or the Company under this Agreement.
6.4. Indemnification. Seller agrees to pay and shall indemnify and hold
harmless the Company and Buyer from and against all Taxes, and Seller shall be
entitled to receive and retain all refunds of Taxes, in each case, only to the
extent attributable to the operations or assets of any member of the Affiliated
Group other than the Company and its subsidiaries.
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6.5. Cooperation; Furnishing of Information. The parties agree to
provide each other with such cooperation and information as may be reasonably
requested in connection with:
(i) the preparation or filing of any Tax return,
report, amended return or claim for refund with respect to Taxes;
(ii) the conduct of any audit; or
(iii) making any other computation or determination
required hereunder.
6.6. Record Retention. Seller and the Company shall retain all relevant
tax returns, schedules and workpapers, and all related material records or other
documents until the expiration of the statute of limitations (including
extensions) of the taxable years to which such returns and other documents
relate, but in any event for a period of not less than seven (7) years,
provided, however, that Seller is not required to retain any documents which
have been furnished to the Company or Buyer.
6.7. Code Section 338(h)(10) Election.
(a) Subject to subparagraph (b) below, Buyer and Seller shall
join in a Code Section 338(h)(10) Election with respect to the acquisition by
Buyer of the Company Stock. Seller shall execute IRS Form 8023 (or any
replacement form) allocating the Consideration in accordance with the
methodology set forth on Schedule 6.7(a), comply with all the requirements of
Code Section 338(h)(10) and Regulations promulgated thereunder, and take any
other action reasonably requested by Buyer in order to make and effectuate this
election. Other than as set forth in this Article VI, all Taxes arising as a
result of the Code Section 338(h)(10) Election are the responsibility of Seller.
(b) Notwithstanding the provisions of subparagraph (a) above,
in the event of a failure to make a Code Section 338(h)(10) Election, other than
a failure resulting from a breach by Seller of the provisions of this Section
6.7, Seller shall have no liability for any such Taxes resulting from any other
election made by Buyer pursuant to Code Section 338. Seller and Buyer shall
allocate the Consideration among the assets of the Company as of the Closing
Date as set forth on Schedule 6.7(a) for purposes of reporting the fair market
value of the assets of the Company for purposes of Code Section 338. On or
before the four month anniversary of the Closing Date, Buyer shall obtain and
deliver to Seller an appraisal of the machinery, equipment and other fixed
assets performed by an appraiser selected and paid by Buyer. Prior to fifth
month anniversary of the Closing Date, Buyer shall prepare and deliver to Seller
a schedule showing state apportionments of payroll, property and sales taxes for
the period October 29, 2001 through the Closing Date in a form consistent with
those schedules delivered to Seller by the Company in prior years.
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ARTICLE VII
COVENANTS
7.1. Conduct of Business.
(a) Interim Conduct of Business of Company. From the date
hereof until the Closing, the Company shall, and Seller shall cause the Company
to, operate its business as a going concern consistent with prior practice and
in the ordinary course of business. Without limiting the generality of the
foregoing, from the date hereof until the Closing, except for transactions
expressly approved in writing by Buyer, the Company shall not, and Seller shall
cause the Company to not:
(i) enter into or amend any employment, bonus,
severance or retirement contract or arrangement, or increase any salary or other
form of compensation payable or to become payable to any executive or employee
other than in the ordinary course of business consistent with prior practice;
(ii) purchase, lease, or otherwise acquire any real
estate or any interest therein;
(iii) declare, set aside, or pay any dividend or make
any other distribution with respect to any equity security;
(iv) merge or consolidate with or agree to merge or
consolidate with, or purchase or agree to purchase all or substantially all of
the assets of, acquire securities of, or otherwise acquire any Person;
(v) sell, lease, or otherwise dispose of or agree to
sell, lease or otherwise dispose of any of its assets, properties, rights, or
claims, whether tangible or intangible, except sales of Inventory in the
ordinary course of business and, with respect to Significant Customers, at
historical margins;
(vi) authorize for issuance, issue, sell, or deliver
any Company securities;
(vii) split, combine, or reclassify any class of
equity security or redeem or otherwise acquire, directly or indirectly, any of
its equity securities;
(viii) incur any Liability other than in the ordinary
course of business consistent with past practice;
(ix) place or permit to be placed any Lien on any of
its assets or properties, other than Permitted Liens arising in the ordinary
course of business;
(x) make or authorize any amendments or changes to
its charter or by-laws;
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(xi) accelerate Accounts Receivable or delay or
postpone payment of any accounts payable or other Liability;
(xii) abandon any material part of its business;
(xiii) make or change any material election in
respect of Taxes, adopt or change any accounting method in respect of Taxes,
enter into any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes;
(xiv) commence a lawsuit or any other proceeding,
other than for routine collection of bills; or
(xv) subject to Section 7.4, take or agree (in
writing or otherwise) to take any action which would make any of the
representations or warranties set forth in Section 2.9(c), (d), (e), (f), (g),
(h), (i), (j), (k), (l), (m), (n), (o), (q), (r), (s), (t), (u) or (w) untrue
without references to Schedule 2.9 for matters not on such Schedule as of the
date of this Agreement.
(b) Interim Conduct of Business of Buyer. From the date hereof
until the Closing, Buyer shall operate its business as a going concern
consistent with prior practice and in the ordinary course of business.
7.2. No Solicitation, Confidentiality, Etc. Seller and the Company
agree that, prior to July 30, 2002, neither the Company nor the Seller will (i)
solicit or negotiate with respect to any inquiries or proposals relating to (x)
the possible direct or indirect acquisition of the Company Stock or any other
equity security of the Company or of all or a portion of the assets or business
of the Company or (y) any merger, consolidation, joint venture or business
combination with the Company; or (ii) discuss or disclose either this Agreement
or other confidential information pertaining to the Company with any person
(except as may be required by law or except as may be required in connection
with the transactions contemplated by this Agreement to affiliates, officers,
directors, employees and agents of the Company or Seller) without the prior
written approval of Buyer. After July 30, 2002, for so long as the Closing has
not occurred, Seller may so solicit and negotiate with respect to any such
inquiries and proposals such transactions and discuss and disclose such
information.
7.3. Necessary Consents. Buyer, the Company and Seller shall use
reasonable best efforts (i) to obtain the third party consents identified on
Schedule 4.1(d) or as otherwise as may be necessary or appropriate for the
consummation of the transactions provided for herein and (ii) to accomplish the
satisfaction of the conditions precedent to Closing contained in Section 4.1 (in
the case of the Company and Seller) and Section 4.2 (in the case of Buyer) on or
prior to the Closing Date.
7.4. Settlement of Certain Intercompany Transactions. Immediately prior
to Closing, Seller shall, and shall cause the Company and any other affiliates
of Seller to, forgive any and all intercompany indebtedness and terminate any
intercompany transactions between Seller or any such affiliate other than the
Company, on the one hand, and the Company, on the other hand; provided, however,
that no cash or other assets of the Company shall be transferred to Seller in
connection therewith.
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7.5. Noncompetition, Nonsolicitation and Confidentiality.
(a) Seller Noncompete. As further consideration for the
purchase and sale of the Company Stock and other transactions contemplated by
this Agreement, Seller shall not, and Seller shall cause each of its Affiliates
not to, until the first to occur of a Change of Control of Seller or a period of
five (5) years following the Closing Date (the "Term"), for any reason
whatsoever, directly or indirectly, for itself or on behalf of or in conjunction
with any other Person:
(i) engage anywhere in the world (the "Territory")
(A) in selling, manufacturing, distributing or marketing a stand-alone motor
that could replace or is reasonably likely to replace any motor product of the
Company existing on the Closing Date or any improvement thereto or replacement
of such improved motor or (B) in serving as an independent contractor,
consultant, adviser, sales representative or otherwise to any business engaged
in any activities prohibited by clause (A);
(ii) call upon or solicit any Person who is, at that
time, or that has been, within two (2) years prior to that time, a customer of
the Company within the Territory for the purpose of soliciting or selling
products or services in competition with the Company within the Territory; or
(iii) call upon, solicit, or hire away any Person who
is, at that time, or has been, within six (6) months prior to that time, within
the Territory, an employee, contractor, subcontractor, independent consultant,
sales representative or vendor of the Company for the purpose or with the intent
of enticing such employee, contractor, subcontractor, independent sales
representative or vendor away from the Company.
(b) Company Nonsolicitation. As further consideration for the
purchase and sale of the Company Stock and other transactions contemplated by
this Agreement, from and after the Closing Date the Company shall not, nor shall
any of its then Affiliates, for any reason whatsoever, directly or indirectly,
for itself or theirselves or on behalf of or in conjunction with any other
Person during the first to occur of the third anniversary of the Closing Date or
a Change of Control of the Company:
(i) utilize the Stature Electric, Inc. customer list
known to certain employees of the Company to call upon or solicit any Person who
is, on the Closing Date, or that has been, within two (2) years prior to the
Closing Date, a customer of Stature Electric, Inc. for the purpose of soliciting
or selling products or services in competition with Stature Electric, Inc.; or
(ii) call upon, solicit, or hire away any Person who
is, at that time, or has been, within six (6) months prior to that time, within
the Territory, an employee, contractor, subcontractor, independent consultant,
sales representative or vendor of Stature Electric, Inc. for the purpose or with
the intent of enticing such employee, contractor, subcontractor, independent
sales representative or vendor away from Stature Electric, Inc.
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(c) For the purposes of this Section 7.5, "Affiliate" means
(A) any Person, that directly or indirectly through one or more entities,
controls or is controlled by or is under common control with, another Person or
(B) any director, officer, director, partner, member, manager or trustee of such
Person or (C) any Person who is an officer, director partner, member, manager or
trustee of any Person described in Clauses (A) and (B) of this sentence. As used
herein, "controls," "control" and "controlled" means the possession, direct or
indirect, of the power to direct the management and policies of a Person,
whether through the ownership of 50% or more of the voting interest of such
Person or otherwise. The term "Change of Control" means (A) the merger of Seller
with a non-Affiliate of Seller or the merger of the Company with a non-Affiliate
of the Company, as the case may be or (B) the sale by the shareholders of Seller
of all or substantially all of the outstanding capital stock of Seller in a
single transaction or series of related transactions to a non-Affiliate of
Seller, or the sale by the shareholders of the Company of all or substantially
all of the outstanding capital stock of the Company in a single transaction or
series of related transactions to a non-Affiliate of the Company, as the case
may be.
(d) The parties agree that the covenants in this Section 7.5
impose a reasonable restraint on Seller and the Company in light of the
activities and business of Buyer and the Company on the one hand, and Seller on
the other hand, on the date of the execution of this Agreement and the current
plans of Buyer, the Company and Seller.
(e) The covenants in this Section 7.5 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time, or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent to which the court deems
reasonable, and the Agreement shall thereby be reformed.
(f) All of the covenants in this Section 7.5 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of Seller against Buyer or the
Company or Buyer against Seller, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer or Seller
of such covenants. The parties expressly acknowledge that the terms and
conditions of this Section 7.5 are independent of the terms and conditions of
any other agreements entered into in connection with this Agreement. It is
specifically agreed that in the periods set forth in this Section 7.5 during
which the agreements and covenants of Seller and Buyer made in this Section 7.5
shall be effective and shall be computed by excluding from such computation any
such time during which Seller or Buyer or any of their Affiliates is found by a
court of competent jurisdiction to have been in violation of any provision of
this Section 7.5. The covenants contained in Section 7.5 shall not be affected
by any breach of any other provision hereof by any party hereto and shall have
no effect if the transactions contemplated by this Agreement are not
consummated.
(g) Each of the parties hereto hereby agree that the covenants
set forth in this Section 7.5 are a material and substantial part of the
transactions contemplated by this Agreement, supported by adequate
consideration.
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ARTICLE VIII
INDEMNIFICATION
8.1. Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any certificate, agreement or other writing
delivered pursuant to this Agreement or in connection with this Agreement shall
survive the Closing for a period of eighteen (18) months, except that the
representations and warranties set forth in Section 2.10 shall survive until
expiration of the applicable statute of limitations, the representations and
warranties set forth in Sections 2.1, 2.2, 2.5, 2.6(a), 2.6(c) (with respect to
Liens on or other interests or rights in the Company's assets or the Company
Stock), 2.16 (to the extent it relates to issues of title), 2.21 (to the extent
it relates to issues of title), 3.1, 3.2, 3.3 and 3.7(a) shall survive without
termination, and the representations and warranties set forth in Section 2.15
shall not survive Closing. The covenants and agreements of the parties hereto
contained in this Agreement or in any certificate, agreement or other writing
delivered pursuant hereto or in connection herewith (a) to be performed prior to
Closing shall survive the Closing for a period of eighteen (18) months and (b)
to be performed after the Closing shall survive without termination.
Notwithstanding the preceding sentence, any representation, warranty, covenant
or agreement in respect of which indemnity may be sought under Section 8.2 shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof giving rise to such
right to indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time; provided, however that such
representation, warranty, agreement or covenant shall survive until, but only
for the purposes of, the resolution of such claim.
8.2. Indemnification.
(a) Seller shall indemnify the Company, the Buyer, and their
respective employees, officers, directors and stockholders (other than Seller)
(the "Buyer Company Persons") in respect of, and hold Buyer Company Persons
harmless against, any and all Damages (as hereinafter defined) (the "Buyer
Company Damages"):
(i) for the applicable survival period, resulting
from, relating to or constituting any misrepresentation or breach of any
representation or warranty of the Company or Seller contained in this Agreement,
or in any certificate, agreement or other writing to which Seller is a party
delivered pursuant to this Agreement;
(ii) for the applicable survival period, resulting
from, relating to or constituting any failure to perform any covenant or
agreement of the Company or Seller contained in this Agreement or in any
certificate, agreement or other writing to which Seller is a party delivered
pursuant to this Agreement;
(iii) resulting from, relating to or constituting any
failure of Seller to have, and to convey to Buyer at Closing, good and valid
title to all of the issued and outstanding Company Stock, free and clear of all
Liens (except for restrictions on transfer imposed by federal and state
securities laws);
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(iv) resulting from, relating to or constituting any
claim by a stockholder or former stockholder of the Company or any other Person
seeking to assert, or based upon: (A) ownership or rights to ownership of any
shares of Company Stock or of any other Company Securities; (B) any rights of a
stockholder, including any option, dissenter's or preemptive rights or rights to
notice or to vote; (C) any rights under the certificate of incorporation or
by-laws of the Company, or (D) any claim that his, her or its shares were
wrongfully repurchased by the Company;
(v) resulting from, relating to or constituting any
claim by a former or current director, officer, employee, agent or fiduciary of
the Company or Seller or of a right to indemnification or contribution from the
Company with respect to actions, omissions or matters relating to the
pre-Closing period as a result of rights under the certificate of incorporation
or by-laws of the Company, any agreement between such Person and the Company or
applicable legal requirement;
(vi) [Intentionally deleted.]
(vii) (A) resulting from relating to or constituting
any Liability for product warranty or product liability claim for products sold
by the Company prior to Closing, and (B) resulting from any Design Defects for
products sold by the Company during the three (3) month period immediately
following the Closing, which are in the aggregate in excess of the reserves
therefore set forth on the Balance Sheet;
(viii) [Intentionally deleted];
(ix) for a period of eighteen (18) months following
the Closing, resulting from, relating to or constituting a Liability of the
Company at the Closing which is not (A) reflected on the Balance Sheet, (B)
incurred in the ordinary course of the Company's business between the Balance
Sheet Date and the Closing Date or (C) identified on any Schedule to this
Agreement; or
(x) incident to the enforcement of this Section
8.2(a).
For purposes of this Agreement, "Damages" shall mean and include any
and all debts, obligations and other Liabilities, monetary damages, fines, fees,
penalties, interest obligations, deficiencies, Liens, losses and expenses
(including without limitation amounts paid in settlement, interest, court costs,
costs of response (including, without limitation, removal and remediation
costs), costs of investigators, fees and expenses of attorneys, accountants,
financial advisors and other experts, and other expenses of litigation) actually
incurred or actually suffered by an Indemnified Person (as hereinafter defined)
or any affiliates thereof.
Notwithstanding anything to the contrary in this Agreement, no claim
for indemnification may be made under this Agreement against Seller for any
Known Contamination, Environmental Liabilities or Liabilities for Unknown
Contamination other than pursuant to Section 9.16.
(b) Buyer shall indemnify Seller, and the Company with respect
to clause (ii) below if this Agreement is terminated pursuant to Article V, and
their employees, officers, directors and stockholders as applicable (the "Seller
Persons"), in respect of, and hold Sellers Persons harmless against, any and all
Damages (the "Seller Damages"):
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(i) for the applicable survival period, resulting
from, relating to, or constituting any misrepresentation, breach of any
representation or warranty, or failure to perform any covenant or agreement of
Buyer contained in this Agreement or in any other certificate, agreement or
other writing to which Buyer is a party delivered pursuant to this Agreement or
in connection with this Agreement;
(ii) any Damages caused by the subsurface
investigational activities of Buyer's environmental consultant performed at, on
or in the Owned Real Property before or after the Closing Date; and
(iii) incident to the enforcement of this Section
8.2(b).
(c) For purposes of this Agreement, "Indemnified Person(s)"
shall refer to both Buyer Company Persons and Seller Persons, as applicable; and
"Indemnifying Parties" shall refer to both Seller and Buyer, as applicable.
8.3. Method of Asserting Claims.
(a) The Indemnified Person shall give prompt written
notification to the Indemnifying Party of the commencement of any action, suit
or proceeding relating to a third party claim for which the indemnification
pursuant to this Article VIII may be sought (the "Third Party Claim"); provided,
however, that the failure to provide such notice shall not release the
Indemnifying Party from any obligations under this Article VIII except to the
extent such Indemnifying Party is materially prejudiced by such failure and
shall not relieve such Indemnifying Party from any other obligation or liability
that it may have to any Indemnified Person otherwise than under this Article
VIII.
(b) Any Indemnifying Party shall have the right, at its sole
cost and expense, to defend the Indemnified Person against the Third Party Claim
with counsel of its choice reasonably satisfactory to the Indemnified Person so
long as (i) the Indemnifying Party notifies the Indemnified Person in writing
within 10 days after the Indemnified Person has given notice of the Third Party
Claim that the Indemnifying Party shall indemnify the Indemnified Person from
and against the entirety of any Damages the Indemnified Person may suffer
resulting from, arising out of, relating to or caused by the Third Party Claim,
(ii) the Indemnifying Party provides the Indemnified Person with evidence
reasonably acceptable to the Indemnified Person that the Indemnifying Party
shall have the financial resources to defend against the Third Party Claim and
fulfill its indemnification obligations hereunder, (iii) the Third Party Claim
involves only money damages and does not seek an injunction or other equitable
relief, (iv) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Person, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Person, and (v) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently. If the Indemnifying Party does not assume control of the defense or
settlement of any Third Party Claim in the manner described above, it shall be
bound by the results obtained by the Indemnified Person with respect to the
Third Party Claim.
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(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8.3(b) above, (i)
the Indemnified Person may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (ii) the
Indemnified Person shall not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably) and (iii)
the Indemnifying Party shall not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Person (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 8.3(b) above
is or becomes unsatisfied, however, (i) the Indemnified Person may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Person need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (ii) the
Indemnifying Party shall reimburse the Indemnified Person promptly and
periodically for the actually incurred costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (iii) the
Indemnifying Party shall remain responsible for any Damages the Indemnified
Person may suffer resulting from, arising out of, relating to or caused by the
Third Party Claim to the extent provided in this Section 8.3.
(e) In the event that the Indemnifying Party exercises the
right to undertake any such defense against any such Third Party Claim as
provided above, the Indemnified Person shall cooperate with the Indemnifying
Party in such defense and make available to the Indemnifying Party, at the
Indemnifying Party's expense, all witnesses, pertinent records, materials and
information in the Indemnified Person's possession or under the Indemnified
Person's control relating thereto as is reasonably required by the Indemnifying
Party. Similarly, in the event the Indemnified Person is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Indemnifying Party shall cooperate with the Indemnified Person in such defense
and make available to the Indemnified Person, at the Indemnifying Party's
expense, all such witnesses, records, materials and information in the
Indemnifying Party's possession or under the Indemnifying Party's control
relating thereto as is reasonably required by the Indemnified Person. The party
controlling such defense shall keep the other party advised of the status of
such Third Party Claim and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto.
8.4. Limitations; Exclusive Remedy; Maximum Indemnification.
(a) Notwithstanding anything to the contrary herein, except
with respect to claims (i) based either on fraud, misrepresentation, a breach of
Sections 2.5, 2.6(c) (with respect to Liens on or other interests or rights in
the Company's assets or the Company Stock), 2.10, 2.16 (to the extent it relates
to issues of title, without limitation, including title to the Owned Real
Property) or 2.21 (to the extent it relates to issues of title), or (ii)
pursuant to Sections 8.2(a)(ii), (iii), (iv), (v), (vii), or (ix), the aggregate
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Liability of Seller for Buyer Company Damages resulting from a breach of a
representation or warranty of the Company or Seller contained in Article II
shall not exceed, in the aggregate, One Million Dollars ($1,000,000) ("Cap"). No
indemnification payment by Seller with respect to any Buyer Company Damages
otherwise payable pursuant to this Article VIII solely in respect of Section
8.2(a)(ix) or a breach of any representation or warranty of the Company or
Seller contained in Article II (other than of Sections 2.5, 2.6(c) (with respect
to Liens on or other interests or rights in the Company's assets or the Company
Stock) 2.10, 2.16 (to the extent it relates to issues of title, without
limitation, including title to the Owned Real Property) or 2.21 (to the extent
it relates to issues of title)) shall be payable until such time as all such
Buyer Company Damages shall, in the aggregate, exceed more than $250,000 (the
"Deductible Amount"), and thereafter claims hereunder for such Buyer Company
Damages may be brought only for amounts in excess of such Deductible Amount up
to but not exceeding the Cap. For purposes of clarification, it is understood
and agreed that Buyer Company Damages pursuant to Sections 8.2(a)(ii), (iii),
(iv), (v) or (vii) shall be payable from the first dollar and shall not be
subject to, nor included in, the Deductible Amount. Notwithstanding anything to
the contrary, except with respect to claims based either on fraud or intentional
misrepresentation, this Article VIII shall be the exclusive remedy of Buyer
Company Persons for claims resulting from or relating to any breach of any
representation or warranty of the Company or Seller contained in Article II.
(b) Notwithstanding anything to the contrary herein, except
with respect to claims based on fraud or misrepresentation, the aggregate
Liability of Buyer in connection with the indemnification of Seller Persons
pursuant to this Article VIII for Seller Damages resulting from a
misrepresentation or breach of a representation or warranty under Article III
shall in no event exceed, in the aggregate, One Million Dollars ($1,000,000)
(the "Buyer Cap"). No indemnification payment by Buyer with respect to any
Seller Damages otherwise payable pursuant to this Article VIII shall be payable
until such time as all Seller Damages shall, in the aggregate, exceed more than
$100,000 (the "Buyer Deductible Amount"), and thereafter claims hereunder for
Seller Damages may be brought only for amounts in excess of such Buyer
Deductible Amount up to but not exceeding the Buyer Cap.
(c) For purposes of determining whether there has been a
breach of any representation, warranty, covenant or agreement contained in this
Agreement (other than those in Section 2.27) and the amount of Buyer Company
Damages resulting from a breach thereof, such representations, warranties,
covenants and agreements shall be deemed to be made without any qualifications
or limitations as to knowledge or materiality and the words "Knowledge,"
"knowledge," "Material Adverse Effect," "material" and words of similar import,
and any phrases containing such words or words of similar import, shall be
deemed deleted from such representations, warranties, covenants or agreements
(other than those in Section 2.27).
(d) Notwithstanding anything to the contrary herein, Seller
shall not be liable for Buyer Damages relating to any individual claim that
Buyer could have asserted against Seller pursuant to Section 8.2(a)(i) for a
misrepresentation or breach of representation or warranty or pursuant to Section
8.2(a)(ii) for a failure to perform a covenant or agreement prior to the Closing
if Buyer had actual knowledge of such misrepresentation, breach of
representation or warranty or failure to perform a covenant or agreement at the
Closing Date.
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ARTICLE IX
MISCELLANEOUS
9.1. Notices. All notices, requests for other communications to be
given by any party to the other parties hereunder shall be in writing and shall
be deemed to be properly given when personally delivered, telecopied or sent by
commercial courier service (such as Federal Express) or, if mailed, three (3)
days after being sent by prepaid first class U.S. mail, either certified or
registered, to the addresses set forth below or to such other addresses as the
parties may otherwise designate from time to time in writing:
(a) If to Buyer, to:
Hathaway Motion Control Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, President
With a required copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: B. ▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(b) if to the Company, to:
Motor Products - Owosso\Ohio Corporation
▇.▇. ▇▇▇ ▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
(c) if to Seller, to
Owosso Corporation
The Triad Building
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: President
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With a required copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP 3000 Two ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Telecopier
No. ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, Esquire
9.2. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party to this Agreement may assign either
this Agreement or any of its rights, interests or obligations hereunder without
the prior written approval of the other parties hereto.
9.3. Costs and Expenses. The Buyer shall bear its own expenses
(including without limitation, investment banking, financial advisory fees,
counsel fees and accounting fees) relating to the transactions contemplated
under this Agreement. All expenses and Liabilities (including without
limitation, legal, accounting, financial advisory or related consulting fees) of
the Company or Seller (a) incurred in connection with the Company's or Seller's
efforts to sell (regardless of how structured) the Company or all or
substantially all of its assets to any Person other than Buyer ("Previous Sales
Effort Expenses") shall be borne by Seller to the extent not actually paid by
the Company prior to the Closing out of cash of the Company which would have
been dividended or distributed to Seller prior to the Closing ("Excluded Cash")
and (b) relating to the transactions contemplated by the Agreement shall be
borne by Seller.
9.4. Public Announcements. The parties agree to consult with each other
before issuing any press release or making any public statement with respect to
this Agreement or the transactions contemplated hereby and, except as may be
required by applicable law, will not issue any such press release or make any
such public statement prior to such consultation.
9.5. Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Agreement, nor shall they affect its meaning,
construction or effect.
9.6. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument.
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9.7. Amendment and Waiver. This Agreement may be amended, and Buyer and
Seller may, (a) extend the time for the performance of any of the obligations of
any other party, (b) waive any inaccuracies in representations by any other
party, (c) waive compliance by any other party with any of the agreements
contained herein and performance of any obligations by such other party, and (d)
waive the fulfillment of any condition that is precedent to the performance by
such party of any of its obligations under this Agreement. To be effective, any
such amendment must be in writing and be signed by Buyer and Seller and any
waiver must be in writing and signed by the person waiving such right or
obligation.
9.8. Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, each of which is hereby incorporated herein, set forth all of the
promises, covenants, agreements, understandings, representations and warranties
between the parties hereto with respect to the subject matter hereof, and
supersede all prior and contemporaneous promises, covenants, agreements,
understandings, representations and warranties among the parties hereto or
inducements or conditions, express or implied, oral or written with respect to
the subject matter hereof.
9.9. Governing Law. This Agreement, including the validity hereof and
the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of Colorado applicable to
contracts made and to be performed entirely in such state (without giving effect
to the conflicts of laws provisions thereof).
9.10. Specific Performance; Remedies. Each party hereto acknowledges
that the other party will be irreparably harmed and that there will be no
adequate remedy at law for any violation by such party of any of its covenants
or agreements contained in this Agreement, including, without limitation, the
noncompetition and confidentiality obligations set forth in Section 7.5. It is
accordingly agreed that, in addition to any other remedies which may be
available upon the breach of any such covenants or agreements, each party hereto
shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the
covenants and agreements contained in this Agreement.
9.11. Selection of a Forum. EACH PARTY HERETO AGREES THAT IT SHALL
BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF OR RELATED
TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS
AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN
THE FEDERAL DISTRICT COURT FOR THE STATE OF COLORADO (THE "CHOSEN COURT") AND
(A) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURT, (B)
WAIVES ANY OBJECTION TO LAYING OF VENUE IN ANY SUCH ACTION OR PROCEEDINGS IN THE
CHOSEN COURT, (C) WAIVES ANY OBJECTION THAT THE CHOSEN COURT IS AN INCONVENIENT
FORUM OR DOES NOT HAVE JURISDICTION OVER ANY PARTY HERETO, AND (D) AGREES THAT
SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE
EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH THIS AGREEMENT.
9.12. Absence of Third Party Beneficiary Rights. Except as expressly
set forth in Article VIII, no provision of this Agreement is intended, nor will
be interpreted, to provide or to create any third party beneficiary rights or
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any other rights of any kind in any client, customer, affiliate, officer,
director, employee or agent of any party hereto or any other Person, other than
the parties hereto.
9.13. Time of Essence. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
9.14. Pre-July 1, 2000 Workers Compensation. Buyer acknowledges that
commencing July 1, 2002, the Company switched its workers compensation insurance
coverage to the Michigan Workers Compensation Fund (the "Michigan Workers
Compensation Insurance"). Following Closing, the Buyer shall cause the Company
to utilize separately procured workers compensation insurance coverage and
terminate the Michigan Workers Compensation Insurance. Thereafter, any refund in
respect of the Michigan Workers Compensation Insurance shall be paid promptly by
the Company to Seller and any deficient or assessment in respect thereof shall
be paid by Seller to the Company.
9.15. MAPICS Software. As of the Closing Date, Buyer acknowledges that
no portion of Seller's license for its MAPICS ERP software ("MAPICS License")
will be assigned to Buyer or the Company on the Closing Date and that Seller
shall use commercially reasonable efforts to provide or cause to be provided to
Buyer and the Company following the Closing, to the extent permitted by law, the
benefits currently being provided to the Company under the MAPICS License at no
charge (i) until October 1, 2002, or (ii) such period of time as Buyer or the
Company may require to negotiate its own MAPICS ERP license or transition to
another enterprise resource planning software program, whichever occurs first.
9.16. Environmental Related Issues.
(a) Company Post Closing Environmental Activities for Known
Contamination.
(i) Storm Water Ditch Sources. As soon as is
reasonably practicable after Closing, the Company shall, at its cost, endeavor
to monitor and, if required, mitigate or eliminate, in its reasonable judgment,
the sources of Hazardous Substances that may exist as of the Closing Date which
are identified in those certain reports of Environmental Resources Management
set forth in part (b)(vi) of Schedule 2.15 (the "ERM Reports") that could be
contributing contaminants to that certain drainage ditch situated on the Owned
Real Property, north of the main operations building and east of the parking lot
and generally running west to east, as more particularly described in the ERM
Reports (the "Storm Water Ditch"), by undertaking such actions as the Company
deems reasonably necessary to monitor and, if required, mitigate or eliminate,
any such sources. As soon as the Company has completed these actions to Buyer's
satisfaction, Buyer shall notify Seller that the Company has completed its
efforts under this Section 9.16(a)(i).
(ii) Other Known Contaminants. The Company shall
undertake the following additional activities to remediate the presence of
Hazardous Substances that may exist at the Owned Real Property as of the Closing
Date which are identified in the ERM Reports: (1) if required, remediate, remove
or otherwise cleanup any Hazardous Substance-impacted soils in the drum storage
area; and (2) plug any and all drains, and seal any and all cracks in the cement
flooring, in the area of the TCE Degreasing Area (as defined in the ERM
Reports).
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(b) Remediation of Ditch Located On Owned Real Property;
Notification of Offsite Migration. Seller covenants and agrees that, upon
receipt of notice from the Buyer that the Company has completed its efforts
under Section 9.16(a)(i), Seller shall promptly undertake the excavation,
removal and off-site disposal of soils in the Storm Water Ditch area necessary
to meet applicable industrial clean-up criteria and Groundwater/Surface Water
Interface ("GSI") criteria as specified in the Michigan Department of
Environmental Quality ("MDEQ") regulations pursuant to NREPA Part 201 and
consistent with the soil verification procedures set forth in MDEQ's Soil
Verification Guidance, on a one-time only basis (the "Ditch Remediation").
Seller shall develop a plan for the Ditch Remediation which it will submit for
Buyer's reasonable approval, which plan shall specify in reasonable detail a
scope of work and a good faith estimate of the time and expenses of each stage
of the Ditch Remediation and whether modifications to the restrictive covenant
described in Section 9.17 are necessary to obtain closure approval from MDEQ if
the parties determine such approval is desirable (the "Work Plan"). Seller shall
have sole responsibility for and control over the Ditch Remediation except for
the allocation of deposits, costs and expenses as set forth below. The Company,
if after Closing, or Buyer, if before Closing, shall be responsible to pay the
first $50,000 in the aggregate of all deposits, costs and expenses related to
the Ditch Remediation in accordance with the Work Plan, and shall promptly
furnish to the independent environmental contractors engaged by Seller any and
all deposits requested by such contractors in connection with the Ditch
Remediation and pay all invoices for such work promptly upon presentation of
such invoices to the Company, all in accordance with the Work Plan. All
deposits, costs and expenses related to the Ditch Remediation in excess of
$50,000 shall be shared one half each by the Company, if after Closing, or
Buyer, if before Closing, and Seller. The Company, upon Closing, hereby grants
Seller and its authorized agents, employees and independent contractors rights
of ingress, egress and regress to the Owned Real Property, to the extent
reasonably necessary to implement and complete the sampling and ditch
remediation required to complete the Ditch Remediation. Seller further
undertakes to complete such Ditch Remediation within the time period specified
in the Work Plan described above, subject to securing requisite governmental
approvals and permits, if any, to force majeure events and offsite access to the
extent necessary to complete the Ditch Remediation; provided, however, that
Seller shall undertake all actions reasonably necessary to obtain such
approvals, permits and access, including payment of reasonable access fees or
charges if necessary. To the extent required by law, Seller shall provide
appropriate notice to the MDEQ and any other Governmental Body or Person that
Hazardous Substances have migrated from the Owned Real Property to adjacent real
property.
(c) Seller's Indemnification Regarding Unknown Environmental
Liabilities.
(i) Seller shall indemnify the Buyer, the Company,
and their respective employees, officers, directors and shareholders in respect
of, and hold the Buyer, the Company and their respective employees, officers,
directors and shareholders harmless against, any and all Damages, resulting
from, relating to or constituting any Liability for (1) the off-site migration
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of any Hazardous Substance from the Owned Real Property to the extent such
migration resulted from activities or conditions in, on or under the Owned Real
Property prior to the Closing Date, (2) the arrangement for disposal or
treatment or the arrangement with a transporter for transport for disposal or
treatment, or the transportation, by or on behalf of the Company, prior to the
Closing Date, of any Hazardous Substance from the Owned Real Property, or (3)
any Unknown Contamination; provided that for purposes of clause (3), Damages
shall not include the cost and expenses incurred in performing any environmental
investigation undertaken by or on behalf of Buyer or any third party on or after
the date of this Agreement, except for those activities required pursuant to
judicial or administrative mandate. "Unknown Contamination" as used in this
Agreement means the presence of Hazardous Substances discovered after Closing at
the Owned Real Property that are not Known Contamination. "Known Contamination"
as used in this Agreement means the presence of Hazardous Substances at the
Owned Real Property in areas which are identified in the ERM Reports and at the
concentrations (or at concentrations not materially greater than those)
identified in the ERM Reports.
(ii) Notwithstanding anything to the contrary herein,
Seller shall have no responsibility for and no claim for indemnification may be
made under this Agreement by Buyer against Seller for any Known Contamination
Environmental Liabilities, including under Section 8.2(a) above, other than
pursuant to this Section 9.16, and provided further that no claim for
indemnification may be made under this Agreement (a) to the extent, but only to
the extent, that the Buyer or the Company takes action which exacerbates any
environmental condition existing at the Owned Real Property as of the date of
Closing; or (b) if Buyer uses the Owned Real Property for other than industrial
purposes. "Known Contamination Environmental Liabilities" as used in this
Agreement means any Liability arising from or under any Environmental Law
relating to the Known Contamination.
(d) Post-Closing Environmental Compliance Obligations and
Environmental Investigations.
(i) Prior to the Closing Date, the Company at the
request and sole cost and expense of Buyer, and after the Closing Date, the
Company, at its sole cost and expense, shall take all actions required to comply
with the terms and conditions of that certain consent order between the Company
and MEDQ, dated January 19, 2001, and bearing AQD No. 3-2001, SRN: H2781, to
comply with or obtain any other order or permit issued or required to be issued
to the Company by any federal, state, or local unit of government prior to or
after the Closing Date to operate its business as currently conducted and
otherwise to undertake any actions as may be required to bring the Company into
compliance with all Environmental reporting obligations identified in the ERM
Reports. Seller shall be responsible for any fines and penalties imposed on the
Company by reason of non-compliance with Environmental Laws, including, without
limitation, any such orders or permits or reporting obligations, to the extent
such non-compliance relates to periods prior to the Closing Date.
(ii) After the Closing Date, Buyer shall not, and
shall not permit the Company, directly or through others, to conduct
environmental investigations (other than monitoring and compliance auditing) on
the Owned Real Property unless Buyer or the Company believes in good faith it is
required to do so under or in connection with applicable Environmental Laws, by
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a financial institution in conjunction with a financing transaction, in
conjunction with a plant expansion or repair/improvement activity, in
conjunction with the sale or lease of the Owned Real Property or for a similar
reason in the ordinary course of the Company's business.
(e) Seller's Indemnification Regarding Leased Real Property.
Seller shall indemnify the Buyer, the Company and their respective employees,
officers, directors and shareholders in respect of, and hold the Buyer, the
Company and their respective employees, officers, directors and shareholders
harmless against, any and all Damages or Liabilities under Environmental Laws
resulting from or, relating to the Company's occupation of or activities
conducted on the Leased Real Property prior to the Closing Date.
9.17. Declaration of Restrictive Covenant; Due Care Documentation.
(a) On or prior to the Closing Date, Buyer and Seller will
agree upon, and the Company will declare and record with Shiawassee County
Register of Deeds, a restrictive covenant on the Owned Real Property in
substantially the form set forth as Exhibit D hereto (it being understood that
Buyer must examine and obtain advice with respect to the statutory provisions of
paragraphs 1, 3 and 4 of such Exhibit); provided, however, that if the Company
is unable to make such declaration and recordation on or prior to the Closing
Date, Buyer shall cause the Company to make such declaration and recordation as
soon as practicable thereafter.
(b) As soon as is reasonably practicable after Closing, the
Company, at its sole cost, shall have an environmental consultant prepare due
care documentation, consistent with the requirements of Part 201 of NREPA,
including but not limited to sections 107a and 114 thereof, that addresses (a)
the proper management of soils and groundwater at the Owned Real Property that
are impacted with hazardous substances and (b) operations at the Owned Real
Property that may affect the impacted soils and groundwater at the Owned Real
Property.
9.18. Purchase Option; Right of First Refusal.
(a) Purchase Option. The Company hereby grants Seller a
purchase option ("Purchase Option") to purchase the Option Property (hereinafter
defined). The Purchase Option may be exercised by Seller by giving written
notice ("Exercise Notice") to the Company of its exercise of the Purchase Option
(the date of such Exercise Notice being referred to herein as the "Option
Exercise Date").
(b) Option Property. The Option Property consists of
approximately a 50 foot wide strip of land east of the main building on the
Owned Real Property boarding the Eastern property line and running from ▇▇▇▇▇▇▇
Road at the South to the railroad tracks on the North ("Option Property").
(c) Option Period. Seller's Purchase Option shall remain
effective for the period ("Option Period") commencing on the Closing Date and
terminating ten (10) years after the Closing Date.
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(d) Closing Obligations. Within 30 days of the Option Exercise
Date, there shall an Option Closing, at which time the Company shall: (A)
execute and deliver to Seller a deed sufficient to transfer all right, title and
interest in and to the Option Property then currently held by the Company, free
and clear of any Liens other than Liens existing against the Option Property
prior to the Closing of the transactions contemplated in this Agreement, duly
executed and acknowledged by the Company in proper recordable form, granting to
Seller good and marketable title of record to the Option Property which is the
subject of the Option Closing.
(e) Transfer Taxes; Cost Allocation. All transfer taxes
associated with Seller's purchase of the Option Property shall be paid by
Seller. All lienable charges shall be paid by the Company prior to closing, net
of any items pursuant to which Seller is required to indemnify the Buyer Company
Persons under this Agreement. All other closing costs shall be borne by the
parties in the manner which is customary for the Shiawassee County area, except
that each party shall be responsible for all other transaction costs incurred by
such party, including without limitation fees for legal counsel, consulting fees
and brokerage claims.
(f) Right of First Refusal. In the event the Company receives
a written offer from a third party ("Offeror") to purchase the Option Property
prior to the expiration of the Option Period, the Company shall provide Seller
with written notice of such offer within five (5) days of the Company's receipt
of same. The Company hereby grants Seller the right to elect to purchase the
Option Property in accordance with the terms and conditions set forth in this
Section 9.18.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
HATHAWAY MOTION CONTROL
CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President, Hathaway Corporation
MOTORS PRODUCTS -
OWOSSO CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Vice President
MOTOR PRODUCTS -
OHIO CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Vice President
OWOSSO CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: President and CEO
stock purchase agreement signature page
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