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EXHIBIT 2.3
STOCK PURCHASE AGREEMENT
among
KAYDON CORPORATION,
a Delaware corporation,
and
the shareholders of
INDIANA PRECISION, INC.,
an Indiana corporation
Dated as of August 11, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I
PURCHASE AND SALE OF STOCK; CLOSING...............................................................................1
1.1. Purchase and Sale........................................................................................1
1.2. Purchase Price; Permitted Withdrawals....................................................................1
1.3. Closing; Payment of Preliminary Purchase Price...........................................................2
1.4. Closing Balance Sheet; Calculation of the Remainder of the Purchase Price................................2
1.5. Escrow...................................................................................................4
1.6. Certain Definitions......................................................................................4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS....................................................................5
2.1. Ownership of Shares; Organization of the Company; Qualification..........................................5
2.2. Authority; No Violation or Consent.......................................................................5
2.3. No Subsidiaries or Investments...........................................................................6
2.4. Financial Statements.....................................................................................6
2.5. No Undisclosed Liabilities...............................................................................6
2.6. Absence of Certain Changes or Events.....................................................................7
2.7. Real Estate and Tangible Personal Properties; Title......................................................7
2.8. Patents, Trademarks, Trade Names, Etc....................................................................8
2.9. Environmental Matters....................................................................................9
2.10. Insurance...............................................................................................12
2.11. Labor Matters...........................................................................................12
2.12. ERISA; Benefit Plans....................................................................................13
2.13. Certain Contracts and Arrangements......................................................................14
2.14. Legal Proceedings, Etc..................................................................................15
2.15. Governmental Authorizations and Regulations.............................................................16
2.16. Taxes...................................................................................................16
2.17. Transactions with Shareholders, Officers, Directors, Etc................................................17
2.18. Change in Control Agreements............................................................................17
2.19. Commissions.............................................................................................17
2.20. Inventory...............................................................................................17
2.21. Accounts and Notes Receivable...........................................................................17
2.22. Suppliers...............................................................................................17
2.23. Customers...............................................................................................17
2.24. Officers, Directors and Employees.......................................................................18
2.25. Effect of Transaction...................................................................................18
2.26. Compliance with Law.....................................................................................18
2.27. Absence of Certain Commercial Practices.................................................................18
2.28. No Competing Business...................................................................................19
2.29. Accuracy of Certain Information.........................................................................19
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................................19
3.1. Organization............................................................................................19
3.2. Authority Relative to this Agreement....................................................................19
3.3. Consents and Approvals; No Violation....................................................................19
3.4. Financing...............................................................................................20
ARTICLE IV
COVENANTS OF THE PARTIES.........................................................................................20
4.1. Conduct of Business of the Company......................................................................20
4.2. Access to Information...................................................................................21
4.3. Additional Financial Statements.........................................................................21
4.4. Consents................................................................................................21
4.5. Filings.................................................................................................22
4.6. No Shopping, Etc........................................................................................22
4.7. Furnishing Information; Announcements...................................................................22
4.8. Additional Agreements...................................................................................22
4.9. Notification of Certain Matters.........................................................................23
4.10. Tax Matters.............................................................................................23
4.11. Appointment of Shareholders' Representative.............................................................23
4.12. Termination of Profit Sharing Plan......................................................................25
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER...........................................................................25
5.1. Representations and Warranties; Agreements..............................................................25
5.2. Authorization; Consents.................................................................................25
5.3. Opinion of the Shareholders' Counsel....................................................................25
5.4. Absence of Litigation...................................................................................26
5.5. Non-Competition Agreement...............................................................................26
5.6. Other Deliveries........................................................................................26
5.7. Simultaneous Closings...................................................................................26
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS....................................................................27
6.1. Representations and Warranties; Agreements..............................................................27
6.2. Authorization; Consents.................................................................................27
6.3. Opinion of Purchaser's Counsel..........................................................................27
6.4. Simultaneous Closings...................................................................................27
ARTICLE VII
INDEMNIFICATION..................................................................................................28
7.1. Indemnification.........................................................................................28
7.2. Payment for Indemnity Claims............................................................................30
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ARTICLE VIII
MISCELLANEOUS....................................................................................................30
8.1. Termination.............................................................................................30
8.2. Survival................................................................................................31
8.3. Expenses................................................................................................31
8.4. Headings................................................................................................32
8.5. Notices.................................................................................................32
8.6. Assignment..............................................................................................32
8.7. Entire Agreement........................................................................................33
8.8. Modifications, Amendments and Waivers...................................................................33
8.9. Counterparts............................................................................................33
8.10. Governing Law...........................................................................................33
8.11. Accounting Terms........................................................................................33
8.12. Severability............................................................................................33
8.13. Specific Performance....................................................................................33
8.14. Third Parties...........................................................................................34
SIGNATURES.......................................................................................................35
INDEX OF DEFINED TERMS SECTION
1999 Financial Statements...........................................................................2.4(a)
30-Day Period.......................................................................................1.4(b)
Accountant's Determination..........................................................................1.4(c)
Agreement.........................................................................................Preamble
Arbitrating Accountants.............................................................................1.4(c)
Business Days .........................................................................................1.6
Calculated Amount...................................................................................1.2(a)
Calculated Amount Worksheet.........................................................................1.4(a)
Closing.............................................................................................1.3(a)
Closing Balance Sheet...............................................................................1.4(a)
Closing Date........................................................................................1.3(a)
Code...............................................................................................2.12(c)
Company...........................................................................................Preamble
Environmental Actions...............................................................................2.9(c)
Environmental Costs.................................................................................2.9(l)
Environmental Laws..................................................................................2.9(l)
Environmental Matter................................................................................2.9(l)
Environmental Permits...............................................................................2.9(l)
ERISA..............................................................................................2.12(c)
Escrow Agreement....................................................................................1.5(a)
Escrow Amount.......................................................................................1.5(a)
Final Determination Date............................................................................1.4(c)
FSC.................................................................................................1.2(a)
GAAP...................................................................................................1.6
Hazardous Waste.....................................................................................2.9(l)
HSR Act.............................................................................................2.2(e)
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Indemnified Party...................................................................................7.1(c)
Indemnifying Party..................................................................................7.1(c)
Intellectual Property..................................................................................2.9
Interim Financial Statements........................................................................2.4(b)
Key Employees..........................................................................................1.6
Leases.................................................................................................1.6
Legal Expenses......................................................................................7.1(c)
Lien...................................................................................................1.6
Losses..............................................................................................7.1(c)
Material Adverse Effect................................................................................1.6
Non-Competition Agreement..............................................................................5.6
Objection Notice....................................................................................1.4(b)
Ownership Percentages..............................................................................4.11(b)
Person.................................................................................................1.6
Plans..............................................................................................2.12(a)
Preliminary Purchase Price..........................................................................1.2(b)
Purchase Price......................................................................................1.2(a)
Purchaser.........................................................................................Preamble
Real Estate............................................................................................1.6
Regulated Substances................................................................................2.9(l)
Remainder of the Purchase Price.....................................................................1.2(b)
Required Consents......................................................................................4.4
Settlement Agreement................................................................................1.4(c)
Shares.................................................................................................1.1
Shareholders' Calculation of a Disputed Item........................................................1.4(d)
Shareholders' Representative.......................................................................4.11(a)
Shareholder and Shareholders......................................................................Preamble
Tangible Property...................................................................................2.7(a)
Taxes.................................................................................................2.16
Total Shareholder Percentage.......................................................................4.11(f)
SCHEDULES:
Schedule 1.6 -- Exceptions from GAAP
Schedule 2.1 -- Ownership of Shares
Schedule 2.6 -- Certain Changes or Events
Schedule 2.7 -- Properties; Title
Schedule 2.8 -- Intellectual Property
Schedule 2.9 -- Environmental Matters
Schedule 2.10 -- Insurance
Schedule 2.12 -- ERISA; Benefit Plans
Schedule 2.13 -- Certain Contracts and Arrangements
Schedule 2.17 -- Certain Transactions
Schedule 2.23 -- Customers
Schedule 2.24 -- Officers, Directors and Employees
Schedule 2.29 -- Accuracy of Certain Information
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Schedule 4.4 -- Required Consents
Schedule 5.3 -- Opinion of the Shareholders' Counsel
Schedule 6.3 -- Opinion of Purchaser's Counsel
EXHIBITS:
Exhibit A -- Form of Escrow Agreement
Exhibit B -- Form of Non-Competition Agreement
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of August
11, 2000 by and between KAYDON CORPORATION, a Delaware corporation
("Purchaser"), and XXXXXX X. XXXXXXXX, XXXXXXX X. XXXXXX and XXXXXX X. XXXXXX
(individually, "Shareholder" and collectively, the "Shareholders") owners of all
of the outstanding shares of INDIANA PRECISION, INC., an Indiana corporation
(the "Company"). Purchaser desires to purchase all of the outstanding shares of
the Company, and the Shareholders desire to sell all such shares to Purchaser on
the terms and conditions hereinafter set forth. Capitalized terms not otherwise
defined herein shall have the meanings given to them in Section 1.6 hereof.
In consideration of the premises and of the respective covenants and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK; CLOSING
1.1. Purchase and Sale. Upon and subject to the terms and conditions
hereof, the Shareholders will sell, convey, transfer, assign and deliver to
Purchaser and Purchaser will purchase from the Shareholders, as of and with
effect from the beginning of business on the Closing Date, Ten Thousand (10,000)
shares of common voting stock of the Company (the "Shares"), constituting all of
the Company's issued and outstanding capital stock.
1.2. Purchase Price; Permitted Withdrawals.
(a) The purchase price payable to the Shareholders for the Shares (the
"Purchase Price") shall be $9,000,000 plus an amount equal to the sum of fiscal
year 2000 pre-tax earnings of the Company determined in accordance with GAAP,
and fiscal year 2000 Foreign Sales Corporation ("FSC") commissions payable by
the Company, both from January 1, 2000 to the Closing Date (i.e. while 2000 FSC
commissions will not be separately calculable until the Company's tax returns
are prepared, the sum of 2000 pre-tax earnings and 2000 FSC commissions will be
calculable promptly following the Closing). The sum of fiscal year 2000 pre-tax
earnings and 2000 FSC commissions, as described in the preceding sentence, is
referred to as the "Calculated Amount."
(b) "Preliminary Purchase Price" means the sum of $9,000,000 plus 80%
of the Shareholders' estimate of the Calculated Amount. "Remainder of the
Purchase Price" means the Purchase Price minus the Preliminary Purchase Price.
(c) In January 2000 the Company paid a dividend out of 1999 earnings
in the amount of $600,000, and will pay prior to or at the Closing 1999 FSC
commissions in the amount of $85,851. These payments have been agreed to by
Purchaser, will not be considered to be a breach of any representation,
warranty, covenant, agreement or obligation of the Shareholders or the Company
hereunder, and will not be deducted from or otherwise adversely affect the
calculation of 2000 pre-tax earnings or the Purchase Price. Except as provided
in this Section 1.2, no other dividends or other shareholder distributions, and
no other FSC commissions, have been or will be paid from January 1, 2000,
through the Closing Date.
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1.3. Closing; Payment of Preliminary Purchase Price.
(a) Subject to the conditions set forth in this Agreement, the purchase
and sale of the Shares pursuant to this Agreement (the "Closing") shall take
place at the offices of Xxxxxx Xxxxxxx PLLC, 000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxx
Xxxxx, Xxxxxxxx, at 10:00 o'clock a.m., local time, on August 28, 2000, or at
such other time, place and date as shall be mutually agreed on by Purchaser and
the Sellers, but in no event later than September 15, 2000. The date on which
the Closing is to occur is herein referred to as the "Closing Date" and the
Closing shall be deemed to be effective as of the beginning of business on the
Closing Date.
(b) At the Closing, the Shareholders shall deliver to Purchaser
certificates evidencing ownership of the Shares, duly endorsed in blank or with
duly endorsed stock assignments separate from certificate, in each case with
signatures guaranteed by a member firm of the New York Stock Exchange or a
national banking association, and Purchaser shall pay the Preliminary Purchase
Price to the Shareholders by intrabank or wire transfer to a bank account
designated by the Shareholders upon two days' prior written notice to Purchaser,
less the Escrow Amount (as defined below).
1.4. Closing Balance Sheet; Calculation of the Remainder of the
Purchase Price.
(a) As promptly as practicable following the Closing Date, the
Shareholders, at their cost and expense, shall prepare in accordance with GAAP
and based on a physical inventory: (i) a balance sheet for the Company as of the
beginning of business on the Closing Date (the "Closing Balance Sheet"),
reflecting the financial position of the Company as of the Closing Date; and
(ii) a calculation of the Calculated Amount (which calculation is referred to as
the "Calculated Amount Worksheet"). During and after the preparation of the
Closing Balance Sheet and the Calculated Amount Worksheet and until the Final
Determination Date (as defined below), Purchaser (including the Company) and the
Shareholders shall each provide the other and their advisors with timely access
to the records of the Company, its accountants and the work papers, trial
balances and similar materials used in connection with the preparation of the
Closing Balance Sheet and Calculated Amount Worksheet. Notwithstanding the
foregoing, the Shareholders shall also have full and complete access after
Closing, at reasonable times and places, to the Company's accounting and
business records for the purposes of preparation or audit of their year 2000
income tax returns, or the audit of any prior year income tax return and for
purposes of fulfilling their indemnity obligations under Article VII.
(b) Following receipt of the Calculated Amount Worksheet, Purchaser
will have thirty (30) days (the "30-Day Period") to review such Worksheet. At or
before the end of the 30-Day Period, Purchaser will either (i) accept such
Worksheet in its entirety, or (ii) deliver to the Shareholders a written notice
(the "Objection Notice") setting forth Purchaser's calculation of the amount in
such Worksheet, in which case the difference between the Shareholders' and
Purchaser's calculations shall be deemed to be in dispute. The failure by
Purchaser to deliver the Objection Notice within the 30-Day Period shall
constitute Purchaser's acceptance of such Worksheet.
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(c) If Purchaser delivers an Objection Notice under Section 1.4(b) in a
timely manner, then, within a further period of ten (10) Business Days from the
end of the 30-Day Period, the parties and, if desired, their respective
accountants will attempt to resolve in good faith any disputed items and reach a
written agreement (the "Settlement Agreement") with respect thereto. Failing
such resolution, the unresolved disputed items will be referred for final
binding determination to an independent nationally-recognized firm of certified
public accountants mutually agreed upon by the Shareholders and Purchaser (the
"Arbitrating Accountants"). Such determination (the "Accountant's
Determination") shall be (i) in writing, (ii) furnished to the Shareholders and
Purchaser as soon as practicable after the items in dispute have been referred
to the Arbitrating Accountants, (iii) made in accordance with GAAP, and (iv)
nonappealable and incontestable by the Company, the Shareholders, Purchaser or
any of their respective officers, directors and shareholders, and not subject to
collateral attack for any reason. For purposes of this Section 1.4, the "Final
Determination Date," as to the Calculated Amount Worksheet, shall mean the
earliest to occur of (i) the 31st day following the receipt by Purchaser of the
Calculated Amount Worksheet if Purchaser shall have failed to deliver the
Objection Notice to the Shareholders within the 30-Day Period, (ii) the date on
which either the Shareholders or Purchaser gives the other a written notice to
the effect that such party has no objection to the other party's determination
of the Calculated Amount Worksheet, (iii) the date on which the Shareholders and
Purchaser execute and deliver a Settlement Agreement, (iv) the date as of which
the Shareholders and Purchaser shall have received the Accountant's
Determination, or (v) as to any undisputed portion of the Calculated Amount
Worksheet, the first date as of which the undisputed portion is identified.
(d) If an Accountant's Determination under Section 1.4(c) is at least
95% of the amount of the Shareholders' Calculation of a Disputed Item, then the
fees and expenses of the Arbitrating Accountants for such Accountant's
Determination of such disputed item shall be paid entirely by the Purchaser. If
an Accountant's Determination under Section 1.4(c) is at least 80% but less than
95% of the amount of the Shareholders' Calculation of a Disputed Item, then the
fees and expenses of the Arbitrating Accountants for such Accountant's
Determination of such disputed item shall be borne equally by the Shareholders
and Purchaser. If an Accountant's Determination under Section 1.4(c) is less
than 80% of the amount of the Shareholders' Calculation of a Disputed Item, then
the fees and expenses of the Arbitrating Accountants for such Accountant's
Determination of such disputed item shall be paid entirely by the Shareholders.
As used in this subsection 1.4(d), the "Shareholders' Calculation of a Disputed
Item" means the Shareholders' calculation after any attempted good faith
resolution with Purchaser, but prior to submission to the Arbitrating
Accountants, of the Calculated Amount.
(e) Upon the Final Determination Date for the Calculated Amount, the
Remainder of the Purchase Price, if a positive number, shall be paid by
Purchaser to the Shareholders within three (3) Business Days after the Final
Determination Date by intrabank or wire transfer to a bank account designated by
the Shareholders upon two days' prior written notice. If the Remainder of the
Purchase Price is a negative number, such amount (expressed as a positive
number) shall be paid by the Shareholders to the Purchaser within three (3)
Business Days after the Final Determination Date, by intrabank or wire transfer
to a bank account designated by Purchaser upon two days' prior written notice.
Interim payment(s) of a portion of the Remainder of the Purchase Price, based
upon
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the Final Determination Date for any undisputed portion of the Calculated
Amount, shall be made as provided in the preceding two sentences.
1.5. Escrow. At the Closing, $500,000 of the Purchase Price to be paid
to the Shareholders (the "Escrow Amount") shall be deposited into escrow by
Purchaser to be held in accordance with the terms of the Escrow Agreement in
substantially the form attached hereto as Exhibit A (the "Escrow Agreement"). To
the extent that amounts are to be paid by the Shareholders to Purchaser pursuant
to this Agreement, such amounts may be paid from the Escrow Amount pursuant to
the terms of the Escrow Agreement. Funds remaining in the Escrow Amount
following the satisfaction by Shareholders of their obligations to Purchaser, if
any, shall be released to the Shareholders according to the terms of the Escrow
Agreement.
1.6. Certain Definitions. For purposes of this Agreement:
"Business Days" means Monday through Friday, inclusive, but excluding
any day which is a federal legal holiday in the United States;
"GAAP" means generally accepted accounting principles, consistently
applied, except as provided on Schedule 1.6;
"Key Employees" means Xxxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxx
X. Xxxxxx.
"Leases" means any written or oral lease agreement under which the
Company leases real or tangible personal property, including any
equipments leases and capitalized leases.
"Lien" means any pledge, lien (including without limitation any Tax
lien), charge, claim, community property interest, condition, equitable
interest, encumbrance, security interest, mortgage, option, restriction
on transfer (including without limitation any buy-sell agreement or
right of first refusal or offer), forfeiture, penalty, equity or other
right of another person of every nature and description whatsoever;
"Material Adverse Effect" means any change in, or effect on, the
Company which is, or is reasonably likely to be, materially adverse to
the business, properties, results of operations, financial condition or
prospects of the Company taken as a whole, other than a change or
effect that is caused by or results from general economic conditions or
that affects generally the industry in which the Company operates; and
"Person" or "person" means an individual or any corporation,
partnership, joint venture, association, limited liability company,
trust, unincorporated organization, or other legal entity or a
government or governmental entity.
"Real Estate" means the lands described in Schedule 2.7 and all
appurtenances, improvements, buildings and fixtures thereto or thereon.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
The Shareholders jointly and severally represent and warrant to
Purchaser that the following representations and warranties are true and
correct:
2.1. Ownership of Shares; Organization of the Company; Qualification.
Each Shareholder owns of record and beneficially the shares of capital stock of
the Company listed on Schedule 2.1 hereto, free and clear of any lien,
encumbrance or claim. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Indiana, and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. The Company is
duly qualified or licensed to do business as a foreign corporation or entity and
is in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so qualified and in good
standing will not have a Material Adverse Effect.
2.2. Authority; No Violation or Consent. Each Shareholder has full
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each Shareholder and constitutes a valid and binding
agreement of each Shareholder, enforceable in accordance with its terms. The
execution and delivery of this Agreement, the consummation of the transactions
contemplated hereby and the compliance with the terms of this Agreement do not
and will not:
(a) conflict with or result in any breach of any provision of
any agreement or other instrument to which any Shareholder is a party
or by which he or any of his property may be bound;
(b) conflict with, result in a breach of any provision of,
constitute (with or without due notice or lapse of time or both) a
default under, result in the modification or cancellation of, or give
rise to any right of termination or acceleration in respect of, any
contract, agreement, commitment, understanding, arrangement or
restriction of any kind to which any Shareholder is a party;
(c) result in the creation of any Lien upon, or any Person
obtaining the right to acquire, any of the assets of the Company;
(d) violate or conflict with any law, ordinance, code, rule,
regulation, decree, order or ruling of any court or governmental
authority, to which the Shareholders or any of the assets of the
Company is subject;
(e) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except as
may be required to be in compliance with the provisions of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"); or
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(f) except for the Required Consents listed on Schedule 4.4,
require any consent of any Person to the execution, delivery or
performance of this Agreement or to the consummation of the
transactions contemplated hereby or to the operation of the Company
after the Closing Date substantially as operated prior thereto,
including (but not limited to) consents from parties to leases or other
agreements or commitments.
2.3. No Subsidiaries or Investments. The Company does not beneficially
own, directly or indirectly, any outstanding voting stock of any other
corporation, nor is the Company a party to or involved with any partnership,
joint venture, limited liability company or other entity in which it has, or
pursuant to any agreement will have, the right to acquire by any means, an
interest or investment representing an equity, profit or voting interest
entitling the Company to vote for or appoint the management of such entity.
2.4. Financial Statements.
(a) The Shareholders have previously furnished to Purchaser (i) the
unaudited balance sheet of the Company as of December 31, 1999, and (ii) the
related unaudited statement of operations and unaudited statement of retained
earnings of the Company for the fiscal year then ended. Such financial
statements are hereinafter referred to as the "1999 Financial Statements." The
balance sheet included in the 1999 Financial Statements presents fairly the
financial position of the Company, and the related statement of operations
included therein presents fairly the results of operations and for the fiscal
year then ended, in each case in accordance with GAAP.
(b) The Shareholders have previously furnished to Purchaser (i) a
balance sheet of the Company as of May 31, 2000, and (ii) a statement of
operations of the Company for the five-month period ended May 31, 2000. Such
financial statements are hereinafter referred to as the "Interim Financial
Statements." The Interim Financial Statements were prepared in conformity with
GAAP, except as noted therein, and fairly present (subject to normal year-end
adjustments) the financial position and results of operations of the Company for
the periods covered by such statements.
2.5. No Undisclosed Liabilities. To Shareholders' knowledge after
inquiry of the Key Employees, except as disclosed on any Schedule to this
Agreement, the Company does not have any liability or obligation, secured or
unsecured (whether known or unknown, asserted or unasserted, absolute, accrued,
contingent or otherwise, and whether due or to become due), nor is there any
such liability or obligation for which the Company is or may become liable,
contingently or otherwise, which is of the type required under GAAP to be
reflected in the financial statements but which is not reflected in the Interim
Financial Statements or disclosed in the notes thereto, except those which were
incurred in the ordinary course of business after May 31, 2000, and are
consistent with past practices in nature and are individually and in the
aggregate in an amount consistent with the Interim Financial Statements. The
Shareholders have no knowledge, after inquiry of the Key Employees, of any
circumstance, condition, event or arrangement that will hereafter give rise to
any liabilities of the Company, other than in the ordinary course of business.
2.6. Absence of Certain Changes or Events. Except as otherwise
expressly contemplated by this Agreement or described on Schedule 2.6, since
December 31, 1999, there has not been: (a)
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any Material Adverse Effect or; (b) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock, property or any
combination thereof) in respect of the Company's capital stock or any
repurchase, redemption or other acquisition by the Shareholders of any shares of
capital stock or other equity interests of the Company; (c) any damage,
destruction or casualty loss, whether covered by insurance or not, materially
adversely affecting the business, operations, financial condition or prospects
of the Company; or (d) any material change by the Company in accounting methods,
principles or practices.
2.7. Real Estate and Tangible Personal Properties; Title.
(a) Schedule 2.7 hereto lists any lease pursuant to which the Company
leases Real Estate as lessee or lessor. The buildings, facilities, machinery,
equipment (other than de-commissioned machinery and equipment in storage or held
for possible future use), furniture, leasehold and other improvements, fixtures,
vehicles, structures, any related capitalized items and other tangible property
material to the business or operations of the Company (the "Tangible Property")
(i) are in good operating condition and repair (normal wear and tear and
temporary service outages for repair or replacement excepted), (ii) have
received or are receiving through the date hereof repair and replacement in
accordance with the Company's past practices, (iii) are suitable for their
current use and are currently in use by the Company in the operation of its
businesses in the ordinary course (other than items awaiting or undergoing
repair, or de-commissioned machinery and equipment in storage or held for
possible future use). The Tangible Property is free of any material structural
or engineering defects that would have a Material Adverse Effect. The owner of
the factory building leased to the Company is currently undertaking significant
roof repairs and refurbishment of such building.
(b) The Company has good, valid and marketable title to the Tangible
Property and all of the other assets reflected on the Interim Financial
Statements, free and clear of all Liens other than (i) those listed on Schedule
2.7 hereto, (ii) Liens for current Taxes, assessments or governmental charges
not yet due or delinquent, (iii) those which do not, individually or in the
aggregate, materially interfere with the use of items of Tangible Property or
materially detract from their value, (iv) liens of mechanics, materialmen,
laborers, warehousemen, carriers and other similar common law or statutory liens
arising in the ordinary course of business which are not yet due and payable or,
if due and payable, have been adequately bonded and (v) environmental
regulations by governmental agencies. The Company is not in violation of any
local zoning or similar land use laws or governmental regulations, except where
such violation would not have a Material Adverse Effect. The Company is not in
violation of or in noncompliance with any covenant, condition, restriction,
order or easement affecting the Real Estate leased by the Company, except where
such violation or noncompliance would not have a Material Adverse Effect.
(c) The assets, rights and properties owned or leased by the Company
constitute all of the assets, rights and properties (i) used or held for use by
it, and (ii) reasonably necessary for the conduct of its business.
(d) Neither the whole nor any portion of the leaseholds held by the
Company is subject to any governmental decree or order to be sold or is being
condemned, expropriated or otherwise
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taken by any governmental authority, body or other Person with or without
payment of compensation therefor, nor, to the Shareholders' knowledge, has any
such condemnation, expropriation or taking been proposed.
2.8. Patents, Trademarks, Trade Names, Etc. The Shareholders have made
available to Purchaser the Company's files of all of its United States and
foreign patents, patent applications and invention disclosures. The Company owns
or has the right to use, pursuant to license, sublicense, agreement or
permission, all Intellectual Property (as defined below) necessary for the
operation of its business as presently conducted. The Company has not received
any charge, complaint, claim, demand or notice alleging any interference,
infringement, misappropriation or violation with or of any Intellectual Property
rights of a third party (including any claims that the Company must license or
refrain from using any Intellectual Property rights of a third party). To the
Shareholders' knowledge, the Company has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
rights of third parties and no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
rights of the Company. Schedule 2.8 hereto sets forth a complete and correct
list of (a) all United States and foreign patents and patent applications,
trademarks, trade names, service marks and copyrights owned by the Company, and
all licenses and other agreements relating thereto, and (b) all agreements
relating to third-party Intellectual Property that the Company are licensed or
authorized to use. With respect to each item of Intellectual Property owned by
the Company and identified on Schedule 2.8, the Company possesses all right,
title and interest in and to the item, free and clear of any Lien. With respect
to each item of Intellectual Property identified on Schedule 2.8 that the
Company is licensed or authorized to use, the license, sublicense, agreement or
permission covering such item (i) is legal, valid, binding, enforceable and in
full force and effect and will not be affected by consummation of the
transactions contemplated hereby, and (ii) has not been breached by any party
thereto. As used herein, "Intellectual Property" means all U.S. and foreign
patents, patent applications, inventions, trade secrets, know-how, registered or
unregistered trademarks, trade names, service marks (including the goodwill
associated therewith) and copyrights.
2.9. Environmental Matters.
(a) The Company holds all Environmental Permits necessary, to their
knowledge, to conduct its business as presently conducted. All such
Environmental Permits are in full force and effect and the Company has made all
appropriate filings and registrations where necessary for the issuance or
renewal of such Environmental Permits. Schedule 2.9 hereto lists (A) each
Environmental Permit now held, (ii) the governmental entity which has
jurisdiction with respect to such Environmental Permit, (iii) the entity which
is required to hold such Environmental Permit and (iv) the effective date and
duration of such Environmental Permit. The Company is in material compliance
with all terms and conditions of all such Environmental Permits and, to the
Shareholders' knowledge, all Environmental Laws.
(b) Except as set forth on Schedule 2.9, consummation of the
transactions contemplated hereby will not, to the Shareholders' knowledge,
require Purchaser or the Company to provide
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notice, obtain governmental approval or take any other actions in order to
enable Purchaser to continue to hold all Environmental Permits and to remain in
compliance with the terms and conditions of all Environmental Permits and all
Environmental Laws. The Shareholders have not obtained information from
regulatory agencies having jurisdiction or any other Person, which would lead a
reasonable Person with knowledge of the facts and circumstances to believe that
such Permits may not be issued, renewed, extended or reissued in due course and
as requested without material cost or penalty.
(c) Except as set forth on Schedule 2.9, there is not pending against
the Company any civil, criminal or administrative action, suit, summons,
citation, complaint, claim, notice of violation, demand, judgment, order, lien,
proceeding or hearing or any study, inquiry, proceeding or investigation
(collectively, "Environmental Actions"), based on or related to any
Environmental Permit or any Environmental Law or the presence, manufacture,
generation, processing, distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, arranging for transportation, treatment or
disposal, or handling, or the emission, discharge, release or threatened release
into the environment, of any Regulated Substance, nor to Shareholders'
knowledge, has any such Environmental Action been threatened within the last
five years.
(d) Except as set forth on Schedule 2.9, since January 1, 1996, the
Company has not manufactured, generated, processed, distributed, used, sold,
treated, recycled, received, stored, disposed of, transported, arranged for
transportation, treatment or disposal of, handled or conducted any other
activity involving, any Regulated Substance except in compliance in all material
respects with Environmental Laws and Environmental Permits.
(e) Except as set forth in Schedule 2.9, Shareholders know of no past
or present conditions, events, circumstances, facts, activities, practices,
incidents, actions, omissions or plans: (1) that will interfere with or prevent
continued material compliance by the Company with Environmental Laws and the
requirements of Environmental Permits, (2) that will give rise to any liability
or other obligation under any Environmental Laws that will require the Company
to incur any actual or potential Environmental Costs, or (3) that will form the
basis of any claim, action, suit, proceeding, hearing, investigation or inquiry
against or involving the Company based on or related to any Environmental Matter
or which will require the Company to incur any Environmental Costs.
(f) Except as set forth in Schedule 2.9, there are no underground or
aboveground storage tanks, incinerators, surface impoundments or lagoons at, on,
under or within the Real Estate leased by the Company. Schedule 2.9 also lists
all underground or aboveground storage tanks, incinerators or surface
impoundments that, to Shareholders' knowledge were removed from or closed at any
such properties.
(g) The Company has not received any written notice or other
communication that it is or may be a potentially responsible person or otherwise
liable, nor to Shareholders' knowledge is the Company otherwise liable, in
connection with an Environmental Matter relating to any waste disposal site or
other location allegedly containing, used for, or resulting from the disposal
of, any Regulated Substances.
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(h) To the knowledge of Shareholders, since January 1, 1996, the
Company has not used any waste disposal or waste treatment site, or otherwise
disposed of or treated, transported for disposal or treatment, or arranged for
the transportation for disposal or treatment of, any Hazardous Waste to any
place or location in violation of any Environmental Laws. Since January 1, 1996,
the Company has not generated, stored, disposed of, transported to or arranged
for the transportation of any Hazardous Waste to a landfill or other facility,
except those which are listed on Schedule 2.9. The Company has not received, nor
are Shareholders aware of, any request for response action, administrative or
other order (or request therefor), judgment, complaint, claim, investigation,
request for information or other request for relief in any form relating to any
facility where Hazardous Waste generated or transported by the Company has been
or may have been handled, stored, disposed of, placed or located. Except as set
forth on Schedule 2.9, the Company has not been requested or required by any
governmental authority or any other person to perform any investigatory or
remedial activity or other action in connection with any Environmental Matter.
(i) Except as set forth in Schedule 2.9, to the knowledge of
Shareholders, there has been no release or other discharge by the Company at any
time of any Regulated Substances at, on, or about, under or within the Real
Estate currently leased, operated or controlled by the Company (other than
pursuant to and in accordance with Environmental Permits held by the Company).
The Real Estate is not and never has been listed on the United States
Environmental Protection Agency's National Priorities List, or any analogous
state listing.
(j) To the extent requested by Purchaser, the Company has provided to
Purchaser true, accurate and complete information in its possession or control
pertaining to all of the matters set forth in paragraphs (a) through (j) hereof,
including all documents and information pertaining to all environmental audits
or assessments prepared by or for the Company, any governmental entity or any
third party (including any financial institution) and including all reports of
environmental audits or assessments.
(k) The Real Estate is, to the Shareholders' knowledge, in substantial
compliance with all Environmental Laws.
(l) As used in this Section 2.9:
(i) "Environmental Laws" means any currently applicable
federal, state, local or foreign statutory or common law, and
any rule, regulation, code, plan, ordinance, order, decree,
judgment, permit, grant, franchise, concession, restriction,
agreement, requirement or injunction issued, entered,
promulgated or approved thereunder, relating to the
environment, including, without limitation, any law relating
to emissions, discharges, disseminations, releases or
threatened releases of Regulated Substances into the
environment (including, without limitation, air, surface
water, groundwater and land surface or subsurface), or
relating to the presence, manufacture, generation, processing,
distribution, use, sale, treatment, recycling, receipt,
storage, disposal, transport, arranging for transportation,
treatment of disposal, or handling of Regulated Substances;
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(ii) "Environmental Permits" means, collectively, permits,
consents, licenses, approvals, registrations, certifications
and authorizations required under Environmental Laws;
(iii) "Environmental Costs" means, without limitation, any
actual or potential cleanup costs, remediation, removal, or
other response costs (which without limitation shall include
costs to cause the Company to come into compliance with
Environmental Laws), investigation costs (including without
limitation fees of consultants, counsel, and other experts in
connection with any environmental investigation, testing,
audits or studies), fees, losses, liabilities or obligations
(including without limitation, liabilities or obligations
under any lease or other contract), payments, damages
(including without limitation any actual, punitive or
consequential damages under any statutory laws, common law
cause of action or contractual obligations or otherwise,
including without limitation damages (a) of third parties for
personal injury or property damage, or (b) to natural
resources), civil, administrative or criminal fines or
penalties, judgments and amounts paid in settlement arising
out of or relating to or resulting from any Environmental
Matter; and
(iv) "Environmental Matter" means any matter having a Material
Adverse Effect arising out of, relating to, or resulting from:
(a) any matters relating to emissions, discharges,
disseminations, releases or threatened releases, of Regulated
Substances into the air (indoor and outdoor), surface water,
ground water, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures in violation
of an Environmental Law, or (b) otherwise arising out of,
relating to, or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport,
handling, release or threatened release of Regulated
Substances in violation of an Environmental Law.
(v) "Hazardous Waste" means a solid waste, or combination of
solid wastes, which because of its quantity, concentration, or
physical, chemical, or infectious characteristics may (A)
cause, or significantly contribute to an increase in mortality
or an increase in serious irreversible, or incapacitating
reversible, illness; or (B) pose a substantial present or
potential hazard to human health or the environment when
improperly treated, stored, transported, or disposed of, or
otherwise managed.
(vi) "Regulated Substances" means any substance, compound or
material regulated by or pursuant to any Environmental Law;
2.10. Insurance. Schedule 2.10 hereto sets forth a listing and a brief
description of the type, amount of coverage and term of all policies of fire,
liability, worker's compensation and other forms of insurance owned or held by
and insuring the Company, each of which is in full force and effect. All
premiums with respect to such insurance policies covering all periods up to and
including the Closing Date have been or will be paid (other than retrospective
premiums which may be payable with respect to worker's compensation insurance
policies), and no notice of cancellation or
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termination has been received with respect to any such policy. Such policies are
valid, outstanding and enforceable and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. Except as set forth in Schedule 2.10: (i) the insurance policies to
which the Company is a party are sufficient for compliance with all requirements
of law and for all agreements to which the Company is a party; (ii) in the
reasonable judgment of the Company's management, provide adequate insurance
coverage for the assets and operations of the Company in light of present
insurance market conditions; (iii) there are no outstanding claims by the
Company under any such insurance policies except for routine claims under
worker's compensation and employee benefit plans; (iv) the Company has not been
refused any insurance with respect to its assets or operations nor has its
coverage been limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last 36 months;
and (v) all notices required to have been given by any of the Company to any
insurance company have been timely and duly given, and no insurance company has
asserted in writing that any claim is not covered by the applicable policy
relating to such claim.
2.11. Labor Matters. The Company is not a party to or subject to any
labor union or collective bargaining agreement. The Company is in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours,
and are not engaged in any unfair labor practice. There is not actually pending
or threatened against the Company (i) any labor strike, slowdown or work
stoppage or (ii) any material grievance or arbitration proceeding arising out of
or under any collective bargaining agreements, or (iii) any unfair labor
practice complaint against the Company before the National Labor Relations
Board. Since January 1, 1995, (x) no representation petition respecting the
employees of the Company has been filed with the National Labor Relations Board
of which the Company has notice, and (y) the Company has not experienced any
primary work stoppage or labor strike involving its employees.
2.12. ERISA; Benefit Plans.
(a) Schedule 2.12 contains a true and complete list of all
employment-related plans, including but not limited to, employment or consulting
agreements, collective bargaining and supplemental agreements, pension, profit
sharing, incentive, bonus, deferred compensation, retirement, stock option,
stock purchase, severance, medical and hospitalization, insurance, vacation,
salary continuation, sick pay, welfare, fringe benefit and other employee
benefit plans, contracts, programs, policies and arrangements, whether written
or oral, which the Company maintains or has maintained, or under which the
Company has or had any obligations with respect to any employee, now or at any
time during the five year period ending on the Closing Date (the "Plans").
(b) Except as set forth in Schedule 2.12, (1) the Company has no
unfunded liabilities in connection with any of the Plans; (2) all contributions,
premium payments and other payments due from the Company to or under such Plans
have been paid in a timely manner; and (3) all additional contributions, premium
payments and other payments due on or before the Closing Date shall have been
paid by that date.
(c) Except as set forth in Schedule 2.12, with respect to each of the
Plans:
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(i) each Plan has been established, maintained, funded and
administered in all material respects in accordance with its governing
documents, and all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), the Internal Revenue
Code of 1986, as amended (the "Code"), other applicable law, and all
regulations thereunder;
(ii) all disclosures to employees and all filings and other
reports relating to each such Plan and required (under ERISA, the Code,
other applicable law, including federal and state securities laws, and
all regulations thereunder) to have been made or filed on or before the
Closing Date have been or will be duly and timely made or filed by that
date;
(iii) there is no litigation, disputed claim (other than
routine claims for benefits), governmental proceeding, audit, inquiry
or investigation pending or, to the knowledge of the Company,
threatened with respect to any such Plan, its related assets or trusts,
or any fiduciary, administrator or sponsor of such Plan;
(iv) The Company has delivered to Purchaser true and complete
copies of the following: the current Plan document (including a written
description of all oral Plans), any amendments thereto, and the related
summary plan description, if any; each trust or custodial agreement and
each deposit administration, group annuity, insurance or other funding
agreement associated with each such Plan; for the last three Plan
years, the financial information or reports (including any FASB
required reports, if applicable), valuation reports, and/or actuarial
reports relating to each such Plan; all Internal Revenue Service and
other governmental agency rulings relating thereto, and all
applications for such rulings; and all filing and reports (including
the Annual Report Form 5500 series, if applicable) filed with any
governmental agency at any time during the three year period ending on
the Closing Date, along with all schedules and reports filed therewith;
(v) neither any such Plan nor any other person or entity has
engaged in a "prohibited transaction" (as defined in ERISA Section 406
or Code Section 4975) with respect to such Plan, for which no
individual or class exemption exists;
(vi) each Plan which is a "group health plan" (as defined in
Code Section 5000(b)(1))has complied and will comply at all times
(whether before, on, or after the Closing Date) in all respects with
the applicable requirements of ERISA Sections 601 and 602, Code Section
162(k) (through December 31, 1988) and Code Section 4980B (commencing
on January 1, 1989); and
(vii) no such Plan is an "employee welfare benefit plan" (as
defined in ERISA Section 3(1)) that provides benefits to or on behalf
of any person following retirement or other termination of employment
(except to the extent required by Code Section 4980B).
(d) Except as set forth in Schedule 2.12, with respect to each Plan
which is an "employee pension benefit plan" (as defined in ERISA Section 3(2)):
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(i) no event has occurred and no condition exists relating to
any such Plan that would subject the Company or Purchaser to any tax
under Code Sections 4972 or 4979, or to any liability under ERISA
Section 502;
(ii) to the extent applicable, no such Plan has experienced
any "accumulated funding deficiency" (as defined in Code Section 412),
whether or not waived, at any time;
(iii) no such Plan is subject to Title IV of ERISA; and
(iv) no such Plan is a "multiemployer plan" (as defined in
ERISA Section 3(37)).
(v) with respect to each Plan which is a "multiemployer plan"
(as defined in ERISA Section 3(37)), the Company has no knowledge such
that the foregoing representations would not also be true with respect
to such multiemployer plan; and the Company has delivered to Purchaser
data which accurately discloses its total contribution base units for
each of the last eight consecutive Plan years.
2.13. Certain Contracts and Arrangements. (a) Schedule 2.13 sets forth
a list of the following: (i) open purchase orders, purchase commitments, sales
orders and sales commitments greater than $100,000 entered into in the ordinary
course of business, (ii) current employment agreements, consulting agreements or
other employee or similar agreements with any employee of the Company and other
similar arrangements or understandings not terminable at the will of the Company
without penalty; (iii) each current indenture, mortgage, note, installment
obligation, agreement or other instrument relating to the borrowing of money in
excess of $50,000 by the Company or the guaranty of any obligation for the
borrowing of money in excess of $50,000 by the Company; (iv) each other current
contract, agreement, commitment, arrangement or understanding which is not
terminable by the Company on 30 or fewer days' notice at any time without
penalty and which involves the receipt or payment by the Company of more than
$50,000; (v) any current partnership, joint venture, shareholder or similar
agreement; (vi) any current guaranty, letter of credit, currency or interest
rate exchange or other derivative agreement, keep-well or similar instrument or
agreement; (vii) any current agreement containing non-competition or other
limitations restricting the conduct of the business of the Company; (viii) any
current manufacturer's representative agreement, broker's agreement,
distributorship or dealer agreement or other agreement relating to the sale or
distribution of products to or by persons or other retailers; (ix) any current
agreement with any manufacturer, supplier or customer with respect to discounts,
allowances, chargebacks, rebates or retroactive price adjustments; (x) any
current agreement entered into since January 1, 1996 (other than for the
purchase of machinery and equipment in the ordinary course of business),
relating to the acquisition or disposition of businesses, product lines or a
material amount of assets; or (xi) any current indemnification agreement with
any employee of the Company.
(b) All purchase orders and commitments and all sales orders and
commitments of the Company have been entered into in the ordinary course of
business consistent with past practices.
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(c) Except as set forth on Schedule 2.13, to Shareholders' knowledge,
no material default or alleged material default or any event which, with the
lapse of time or the election of any Person other than the Company, will become
a material default exists under any of the contracts, agreements, commitments,
arrangements or understandings which are required to be disclosed pursuant to
this Agreement. Each of such contracts, agreements, commitments, arrangements or
understandings is now valid, in full force and effect and enforceable in
accordance with its terms and the Company has fulfilled in all material
respects, or taken all action reasonably necessary to enable it to fulfill when
due, all its obligations under such contracts, agreements, commitments,
arrangements or understandings.
(d) The Company has provided to Purchaser copies of all of the
agreements and documents listed on Schedule 2.13.
2.14. Legal Proceedings, Etc. There is no claim, suit, action,
proceeding or investigation pending or, to Shareholders' knowledge, threatened
against the Company before any court or governmental or regulatory authority or
body, or any arbitral body, nor do the Shareholders know of any basis in fact
for any such claim, suit, action, proceeding or investigation. The Company is
not subject to any outstanding order judicial, writ, injunction or decree
whatsoever.
2.15. Governmental Authorizations and Regulations. There are no
licenses, permits or other governmental authorizations (other than Environmental
Permits) issued to the Company by any governmental authority or agency which are
necessary for the conduct of business by the Company or which are necessary to
enable the Company to use its corporate name or to own, lease, hold or use its
properties and assets. To the Shareholders' knowledge, the business of the
Company is being conducted in material compliance with all applicable licenses,
permits and other governmental authorizations.
2.16. Taxes. The Company has duly made an election pursuant to
Subchapter S of the Code and a comparable election to qualify for Subchapter S
status, if any, in the State of Indiana, and at all times since such election
has qualified as an "S Corporation", as defined in Section 1361(a)(1) of the
Code, for federal and Indiana tax purposes through the Closing Date. The Company
has duly filed (or caused to be filed) all returns of Taxes (as defined below)
required to be filed by it, and the Company has paid all Taxes for all periods
covered by such returns. Such returns of Taxes are true, correct and complete in
all material respects. No action or proceeding for the assessment or collection
of any Taxes is pending or, proposed against the Company, and no deficiency,
assessment or other claim for any Taxes has been asserted or made against the
Company that has not been fully paid. No issue has been raised by any Taxing
authority in connection with an audit or examination of any return of Taxes. The
Company has not taken any action that could jeopardize its federal or state "S
Corporation" status prior to the Closing Date. The Company has not agreed, nor
is it required, to include in income any adjustment pursuant to Section 481(a)
of the Code (or similar provisions of other law or regulations) by reason of a
change in accounting method or otherwise. There are no outstanding agreements or
waivers extending the applicable statutory periods of limitation for the
assessment or collection of Taxes for the Company for any period. The Company
has not, with regard to any of its assets or property, filed a consent to the
application of Section 341(f)(2) of the Code. All Taxes which the Company has
been required to collect or
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withhold have been duly withheld or collected and, to the extent required, have
been paid to the proper Taxing authority. The Company has not received any
reports or other written assertions by agents of any Taxing authority of any
deficiencies or other liabilities for Taxes with respect to taxable periods for
which the limitations period has not run. There is no contract, agreement, plan
or arrangement of the Company covering any person that, individually or
collectively, as a consequence of the transactions contemplated hereby, could
give rise to the payment of any amount that would not be deductible by Purchaser
by reason of Section 280G of the Code. The Company is not and never has been a
party to any tax allocation or tax sharing agreement. There are no liens or
encumbrances asserted by a governmental body as a result of the failure of the
Company to pay Taxes upon its assets. None of the Company's assets is subject to
a "safe harbor lease" under Section 168(f)(8) of the Code, as in effect
immediately prior to the Tax Equity and Fiscal Responsibility Act of 1982. As
used herein, "Taxes" shall mean all taxes, charges, fees, levies or other
assessments including, without limitation, income, excise, property, transfer,
payroll, withholding, employment, value added, capital, net worth, estimated,
sales, use and franchise taxes, imposed by the United States, or any state,
county, local or foreign government or subdivision or agency thereof, and
including any interest, penalties or additions attributable thereto, whether or
not disputed.
2.17. Transactions with Shareholders, Officers, Directors, Etc. Except
as disclosed on Schedule 2.17 hereto, and other than accrued but unpaid salary
due from the end of the last pay period and routine payment pursuant to Sections
2.12 or 2.13(a), there are no amounts owing from the Company to any present or
former stockholder, officer, director, member or employee of the Company, nor
are there any amounts owing from any such person to the Company, nor have there
been since December 31, 1999, or are there currently pending any transactions
between the Company and any such Person.
2.18. Change in Control Agreements. The Company is not a party to any
plan, agreement, contract, authorization or arrangement pursuant to which any
participant, beneficiary or party is or will become entitled to any benefit upon
a change of control of the Company.
2.19. Commissions. The Shareholders will pay or otherwise discharge,
and will indemnify and hold Purchaser harmless from and against and any and all
claims or liabilities for all brokerage fees, commissions and finder's fees
arising out of the sale of the Shares as contemplated by this Agreement which
are incurred by reason of any action taken by or on behalf of the Shareholders
or the Company, or any of its officers, directors, agents or employees.
2.20. Inventory. All the inventories of the Company are suitable,
usable and, in the case of finished goods and products, saleable at applicable
prices and, in the case of raw materials and work-in-process, properly valued
under GAAP at no less than the values reflected on the books of the Company, in
the ordinary course of business consistent with past practices for the purposes
for which intended, except to the extent written down or reserved against. The
Shareholders do not know of any adverse condition affecting a material source of
materials available to the Company.
2.21. Accounts and Notes Receivable. The accounts and notes receivable
of the Company (a) are bona fide accounts and notes receivable created in the
ordinary and usual course of business
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in connection with bona fide transactions and consistent with past practice, (b)
are outstanding as set forth on the aging schedules made available to the
Purchaser, and (c) are fully collectible when due at their face amounts.
2.22. Suppliers. No supplier of materials or services to the Company in
an amount in excess of $100,000 per year has during the last 12 months decreased
materially or, to the knowledge of the Shareholders, threatened to decrease or
limit materially, except upon the Company's request, its provision of services
or supplies to the Company. The Shareholders do not know of any termination,
cancellation or limitation of, or any material modification or change in, the
business relationships of the Company with any supplier of materials or services
in an amount in excess of $100,000 per year.
2.23. Customers. Schedule 2.23 sets forth a list of the 25 largest
customers of the Company in terms of sales during the fiscal year ended December
31, 1999. To the knowledge of the Shareholders, except as set forth on Schedule
2.23, there has not been any adverse change in the business relationships of the
Company with any customer identified on Schedule 2.23. Except for the customers
identified on Schedule 2.23, the Company did not have any customer which
accounted for more than 2% of the Company's sales during such fiscal year. To
the knowledge of the Shareholders, consummation of the transactions contemplated
by this Agreement will not adversely affect the relationship with any customer.
2.24. Officers, Directors and Employees. Schedule 2.24 sets forth (i)
the name and total calendar year 1999 compensation (including bonuses,
commissions or incentive compensation) of each officer and director of the
Company and (ii) the name and total calendar year 1999 compensation (including
bonuses, commissions or incentive compensation) of each other employee whose
aggregate compensation for federal income tax purposes during calendar year 1999
was in excess of $50,000. Except as disclosed on Schedule 2.24, none of the
Persons referred to in clause (i) or (ii) above has notified the Company or been
notified by the Company that he or she will cancel, have canceled, or otherwise
terminate such Person's relationship with the Company.
2.25. Effect of Transaction. To the knowledge of the Shareholders, no
creditor, employee or customer or other Person having a material business
relationship with the Company has informed the Company that such Person intends
to change the relationship because of the purchase and sale of the Shares, nor
do the Shareholders have knowledge of any such intent.
2.26. Compliance with Law. The operations of the Company have been
conducted at all times in all material respects in accordance with all
applicable laws, regulations and other requirements of all governmental
authorities having jurisdiction over the Company, including, without limitation,
all such laws, regulations and requirements relating to antitrust, consumer
protection, currency exchange, equal opportunity, health, occupational safety,
pension, securities and trading-with-the-enemy matters. The Company has not
received any notification of any asserted present or past failure by it to
comply with any such laws, rules, regulations or requirements. The Company has
all material licenses, permits, orders or approvals from governmental
authorities required for the conduct of its current activities, and is not in
material violation of any such license, permit, order or approval. All such
material licenses, permits, orders and approvals are in full force
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and effect and, to the knowledge of Shareholders, no suspension or cancellation
thereof has been threatened.
2.27. Absence of Certain Commercial Practices. The Company has not, and
no director, officer, agent, employee or other Person acting on behalf of the
Company has, in violation of federal or state law: (a) given or agreed to give
any gift or similar benefit of more than nominal value to any customer,
supplier, governmental employee or official or any other Person who is or may be
in a position to help or hinder the Company or assist in connection with any
proposed transaction, or (b) used any corporate or other funds for unlawful
contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to governmental officials or others
or established or maintained any unlawful or unrecorded funds. The Company has
not, and to Shareholders' knowledge, no director, officer, agent, employee or
other Person acting on behalf of the Company has, with respect to the Company,
accepted or received any unlawful contributions, payments, gifts, entertainment
or expenditures.
2.28. No Competing Business. Neither the Company nor any officer,
director or Shareholder of the Company has any direct or indirect equity
interest in any Person that competes with or conducts any business similar to
that of the Company, other than equity interests in such Persons that are listed
for trading on a national securities exchange or in the NASDAQ Stock Market and
which represent not more than 1% of the outstanding voting power of any such
Person.
2.29. Accuracy of Certain Information. In a letter dated October 5,
1999, the Shareholders delivered to Purchaser certain written information
describing and profiling the business of the Company and certain affiliated
corporations. There were no material statements or conclusions in such
information that were based upon or derived from information known to the
Shareholders to be false or misleading or which failed to take into account
material information regarding the matters reported therein. Except as described
on Schedule 2.29, any projections of revenues or profits included in such
information were based on historical performance, reasonable assumptions and
attainable sales at the time the projections were prepared. Except as described
on Schedule 2.29, to the knowledge of the Shareholders, since the date of
preparation of such projections through the Closing Date, there has not been any
material change in the requirements or demands of any customer of the Company or
the loss or threatened loss of any contract or program that would have
materially affected such financial projections.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Shareholders that the
following representations and warranties are true and correct:
3.1. Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
3.2. Authority Relative to this Agreement. Purchaser has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions
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contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Purchaser, and no other corporate
proceedings on the part of Purchaser are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby or thereby. This Agreement
has been duly and validly executed and delivered by Purchaser and this Agreement
constitutes a valid and binding agreement of Purchaser, enforceable against
Purchaser in accordance with its terms.
3.3. Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Purchaser nor the consummation of the transactions
contemplated hereby or thereby will (i) conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws of Purchaser, (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except in connection
with the HSR Act, (iii) assuming compliance with the HSR Act, violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Purchaser or
any of its assets, which violation would in the opinion of Purchaser impair in
any material respect its ability to consummate the transactions contemplated
hereby, (iv) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the material terms,
conditions or provisions of any note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which Purchaser is a
party or by which any of its properties or assets may be bound, or (v) violate
any order, judicial writ, injunction or decree, legislative statute, or
governmental agency rule or regulation applicable to Purchaser, or any of its
properties or assets.
3.4. Financing. Purchaser has sufficient funds available (through
existing credit arrangements or otherwise) to purchase the Shares and to pay all
fees and expenses related to the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS OF THE PARTIES
4.1. Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date of execution of this Agreement to the
Closing Date, the Shareholders will cause the Company to conduct its business
and operations in the ordinary and usual course of business and consistent with
past practices. Without limiting the generality of the foregoing, and except as
expressly contemplated in this Agreement, prior to the Closing Date, without the
prior written consent of Purchaser, the Company will not:
(a) create, incur or assume any indebtedness, including, obligations in
respect of capital leases, except for short-term borrowings for working
capital purposes that may be unsecured or secured;
(b) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other person or persons except in the ordinary
course of business consistent with past practices not exceeding
individually
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or in the aggregate $25,000; except that the Company may endorse
negotiable instruments in the ordinary course of business consistent
with past practices;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock or other equity interests, or issue,
pledge or sell any shares of its capital stock or other equity
interests or other securities convertible into, exchangeable for or
conferring the right to acquire shares of its capital stock or other
equity interests, or repurchase or redeem or otherwise acquire any
shares of its capital stock or other equity interests or such other
securities;
(d) (i) increase the rate or terms of compensation payable or to become
payable by the Company to its directors, officers or employees listed
on Schedule 2.24; or (ii) increase the rate or terms of any, or commit
itself to any additional, bonus, insurance, pension or other employee
benefit plan, payment or arrangement made to, for or with any such
directors, officers or employees;
(e) amend its Articles of Incorporation or Bylaws (or similar governing
documents), merge, consolidate or amalgamate with or into any other
Person, subdivide, combine or reclassify any shares of its capital
stock, equity interests or other securities;
(f) take or omit to take any action that would cause any of the
representations and warranties contained in Article II to be untrue; or
(g) buy or sell any futures contract, option or forward commitment
relating to commodities used as raw materials by the Company or enter
into any contract, agreement, arrangement or other understanding to do
any act prohibited by any of the foregoing provisions of this Section
4.1.
4.2. Access to Information. Between the date of this Agreement and the
Closing Date, the Shareholders, during ordinary business hours, will (i) give
Purchaser and its authorized representatives reasonable access to all books,
records (including, without limitation, all work papers and other documents of
the Company and its independent auditors, plants, offices and other facilities
and properties of the Company, (ii) permit Purchaser to make such inspections
thereof as Purchaser may reasonably request and (iii) cause the Company's
officers and advisors to furnish Purchaser with such financial and operating
data and other information with respect to the business and properties of the
Company as Purchaser may from time to time reasonably request. Any such
inspection or investigation shall be conducted in such a manner as not to
interfere unreasonably with the operation of the business of the Company. In
addition, the Company shall not be required to take any action which would
constitute a waiver of the attorney-client privilege and the Company need not
supply Purchaser with any information which the Company is under a legal
obligation not to supply.
4.3. Additional Financial Statements. As soon as reasonably practicable
after they become available, the Shareholders will furnish to Purchaser an
unaudited balance sheet and statement of operations of the Company, for each
interim monthly period subsequent to the date of
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this Agreement and prior to the Closing Date. Such financial statements will be
prepared in conformity with GAAP, except as noted therein and will fairly
present (subject to normal year-end audit adjustments) the financial position
and results of operations of the Company for the periods covered by such
statements.
4.4. Consents. Purchaser and the Shareholders will use their respective
best efforts to obtain consents of all Persons and governmental authorities
necessary to the consummation of the transactions contemplated by this Agreement
including, but not limited to, the consents specified on Schedule 4.4 (the
"Required Consents").
4.5. Filings. The Shareholders and Purchaser have filed with the United
States Federal Trade Commission and the Antitrust Division of the United States
Department of Justice pursuant to the HSR Act all requisite documents and
notifications in connection with the transactions contemplated by this
Agreement. Additionally, each of the Shareholders and Purchaser will file, or
cause to be filed, with any other federal, state or local governmental authority
all such other filings and submissions under laws and regulations applicable to
the Company and Purchaser, if any, as may be required for the consummation of
the transactions contemplated by this Agreement. The parties will coordinate and
cooperate with one another in exchanging such information and reasonable
assistance as may be requested in connection with all of the foregoing.
4.6. No Shopping, Etc. The Shareholders will not, and will cause each
of the Company's officers directors not to, directly or indirectly, through any
officer, director, agent or otherwise, solicit, initiate or encourage submission
of proposals or offers from any Person relating to any acquisition or purchase
of any equity interest in, or all or (other than in the ordinary course of
business consistent with past practices) a portion of, the assets of the Company
or any business combination with the Company, or participate in any negotiations
regarding, or furnish to any other Person any information with respect to, or
otherwise cooperate in any way with, assist, or participate in, facilitate or
encourage, any effort or attempt by any other Person to do or seek any of the
foregoing.
4.7. Furnishing Information; Announcements. The Shareholders and
Purchaser will, as soon as practicable after reasonable request therefor,
furnish to the other party all the information concerning the Company or the
Purchaser required for inclusion in any statement or application made to any
governmental or regulatory body in connection with the transactions contemplated
by this Agreement. Neither the Shareholders nor Purchaser shall issue any press
releases or otherwise make any public statement with respect to the transactions
contemplated hereby, without the prior consent of the other party hereto, except
as, in the reasonable judgment of the party determining to issue such press
release or make such public statement, is otherwise required by law or by any
stock exchange on which the shares of Purchaser are listed, and then only upon
prompt prior notice to the other party hereto at least 24 hours prior to making
any such press release or public announcement.
4.8. Additional Agreements. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use its best efforts, at its own
expense, to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this
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Agreement. If at any time after the Closing any further action is necessary to
carry out or perform a party's obligations under this Agreement, such party
shall take, at its own expense, such necessary action.
4.9. Notification of Certain Matters. Between the date hereof and the
Closing, the Shareholders and Purchaser will give prompt notice in writing of:
(i) any information which indicates that any representation and warranty
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which will
result, or has a reasonable prospect of resulting, in a Material Adverse Effect
or in the failure to satisfy a condition specified in Article V hereof, and
(iii) any notice or other communication from any third person alleging that the
consent of such third person is or may be required in connection with the
transactions contemplated by this Agreement. The Shareholders will confer on a
regular and frequent basis with one or more designated representatives of
Purchaser to report operational matters and to report the general status of
on-going operations, and will notify Purchaser of any emergency or other change
in the normal course of business or in the operation of the properties of the
Company and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving any property of the Company. As of the date of this
Agreement, Purchaser does not have any reason to believe that any representation
and warranty of the Shareholders contained herein was not true and correct as of
such date.
4.10. Tax Matters. Between the date hereof and the Closing, the Company
shall file on a timely basis all Tax returns required to be filed. All such Tax
returns will be true, correct and complete when filed. The Company shall not
make any election or file any amended tax return reflecting any position that
could result in adverse tax consequences to Purchaser for any period beginning
on or after the Closing Date. Following the date hereof, the Company shall (a)
give Purchaser and its authorized representatives full access to the books and
records of the Company, and permit Purchaser to make copies thereof, to the
extent relating to the Tax liabilities of the Company, as Purchaser may
reasonably request, (b) permit Purchaser to make inspections thereof and (c)
cause the Company's advisors, including (without limitation) their auditors,
attorneys, financial advisors and other consultants, to furnish Purchaser with
such financial, Tax and other operating data and other information with respect
to the business and properties of the Company for periods ending before or
including the Closing Date as Purchaser may reasonably request with respect to
Taxes for purposes of preparing Tax returns and conducting proceedings relating
to Taxes.
4.11. Appointment of Shareholders' Representative. (a) Each of the
Shareholders hereby irrevocably appoints the Person designated from time to time
pursuant to Section 4.11(f) as its true and lawful attorney-in-fact, to act as
his representative (each, a "Shareholders' Representative") under this Agreement
and, as such, to act, as such Shareholder's agent (with full power of
substitution), to take such action on such Shareholder's behalf with respect to
all matters relating to this Agreement, the related documents and all
transactions herein and therein. Xxxxxx X.
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Xxxxxxxx hereby accepts his appointment as the initial Shareholders'
Representative and the authorization set forth above. The Shareholders'
Representative shall not have any duties or responsibilities except those
expressly set forth in this Agreement, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Agreement or shall otherwise exist against the Shareholders' Representative.
With respect to all other actions, the Shareholders' Representative shall only
take or authorize such actions approved orally or in writing by the Shareholders
holding a majority of the Securities.
(b) The Shareholders' Representative shall be entitled to rely, and
shall be fully protected in relying, upon any statements furnished to him by any
Shareholder or the Purchaser, or any other evidence deemed by the Shareholders'
Representative to be reliable, and the Shareholders' Representative shall be
entitled to act on the advice of counsel selected by him. The Shareholders'
Representative shall be fully justified in failing or refusing to take any
action under this Agreement unless he has received such advice or concurrence of
such other Shareholders as he deems appropriate or he has been expressly
indemnified to his satisfaction by the Shareholders appointing him severally,
according to their respective Ownership Percentages, as shown on Schedule 2.1,
against any and all liability and expense that the Shareholders' Representative
may incur by reason of taking or continuing to take any such action.
(c) The Shareholders' Representative shall be entitled to retain
counsel and to incur such expenses as the Shareholders' Representative deems to
be necessary or appropriate in connection with his performance of his
obligations under this Agreement, and all such fees and expenses (including
reasonable attorneys' fees and expenses) incurred by the Shareholders'
Representative shall be borne by the Shareholders pro rata according to their
respective Ownership Percentages.
(d) The Shareholders hereby agree to indemnify the Shareholders'
Representative (in its capacity as such) ratably according to their respective
Ownership Percentages against, and to hold the Shareholders' Representative (in
its capacity as such) harmless from, any and all losses of whatever kind which
may at any time be imposed upon, incurred by or asserted against the
Shareholders' Representative in such capacity in any way relating to or arising
out of his action or failures to take action pursuant to this Agreement or in
connection herewith in such capacity, provided that no Shareholder shall be
liable for the payment of any portion of such losses resulting solely from the
gross negligence or willful misconduct of the Shareholders' Representative. The
agreements in this Section 4.11(d) shall survive termination of this Agreement.
(e) To the extent this Agreement provides that the Shareholders shall
be jointly and severally liable to personally pay any cost, expense or other
liability, the Shareholders shall share such payment ratably in accordance with
their respective Ownership Percentages, and shall reimburse each other as
necessary to give effect to the intent of this provision.
(f) Xxxxxx X. Xxxxxxxx shall be the initial Shareholders'
Representative and shall serve as the Shareholders' Representative until the
earlier of his resignation or removal (with or without cause) by Shareholders
whose Ownership Percentages exceed, in the aggregate, 50% of the sum of the
Ownership Percentages of all Shareholders (such sum being referred to herein as
the "Total Shareholder Percentage"). Upon the resignation or removal of the
Shareholders' Representative,
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the Shareholders whose Ownership Percentages exceed, in the aggregate, 50% of
the Total Shareholder Percentage shall select a new Shareholders' Representative
who may resign, be removed or replaced in such a manner as the selecting
Shareholders agree. Each time a new Shareholders' Representative is appointed
pursuant to this Agreement, such Person shall accept such position in writing.
(g) The Shareholders whose Ownership Percentages exceed, in the
aggregate, 50% of the Total Shareholder Percentage shall notify the Purchaser of
each change of Shareholders' Representative. Until the Purchaser receives the
foregoing notice, it shall be entitled to assume that a prior Person acting as
the Shareholders' Representative is still the duly authorized Shareholders'
Representative.
4.12. Termination of Profit Sharing Plan. Prior to the Closing, the
Company shall have taken all action necessary to terminate the Indiana Precision
401(k) Profit Sharing Plan.
ARTICLE V
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser required to be performed by it at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by Purchaser as
provided herein except as otherwise required by applicable law:
5.1. Representations and Warranties; Agreements. Each of the
representations and warranties of the Shareholders contained in this Agreement
shall be true and correct as of the Closing. Each of the obligations of the
Shareholders required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, Purchaser shall have received a
certificate duly executed by each of the Shareholders, to the effect that the
conditions set forth in the preceding two sentences have been satisfied.
5.2. Authorization; Consents. Any filings required to be made in
connection with the transactions contemplated hereby, including the applicable
HSR filing, shall have been made and all applicable waiting periods with respect
to each such filing, including any extensions thereof, shall have expired or
been terminated. All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies required to consummate the transactions contemplated hereby,
and all other governmental, regulatory or third party consents or waivers shall
have been made or obtained. In addition, all consents of all Persons and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement including, but not limited to, the Required
Consents, shall have been obtained by the Shareholders.
5.3. Opinion of the Shareholders' Counsel. Purchaser shall have been
furnished with the opinion of counsel for the Shareholders dated the Closing
Date, in substance as set forth in Schedule 5.3 and in form reasonably
satisfactory to Purchaser and its counsel. In rendering the foregoing opinion,
such counsel may rely as to factual matters upon certificates or other documents
furnished
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by the Shareholders, by the officers and directors of the Company and by
government officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the
jurisdiction or jurisdictions in which they are admitted to practice, that they
are not admitted to the Bar in any other jurisdiction or experts in the law of
any other jurisdiction and that such opinions are limited to the law of the
jurisdiction or jurisdictions in which they are admitted to practice, the
corporate law of the jurisdiction in which the Company is incorporated, if
different, and federal laws.
5.4. Absence of Litigation. No order, stay, injunction or decree of any
court of competent jurisdiction shall be in effect (i) that prevents or delays
the consummation of any of the transactions contemplated hereby, (ii) that would
impose any material limitation on the ability of Purchaser effectively to
exercise full rights of ownership of the Shares or (iii) that would require the
divestiture by Purchaser, the Shareholders or the Company of shares of stock or
any business, assets or property of any of them, or that would impose any
material limitation on the ability of any of them to conduct its business or own
stock, assets or property. No action, suit or proceeding before any court or any
governmental or regulatory entity shall be pending (or threatened by any
governmental or regulatory entity), and no investigation by any governmental or
regulatory entity shall have been commenced (and be pending) (A) seeking to
restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement, (B) seeking to
require the divestiture by Purchaser or any Shareholder of shares of stock or
any business, assets or property of any of them, or to impose any material
limitation on the ability of any of them to conduct their business or own stock,
assets or property, or (C) seeking material damages in connection therewith
which Purchaser, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
5.5. Non-Competition Agreement. At or prior to the Closing, Purchaser
and Xxxxxx X. Xxxxxxxx shall execute and deliver a non-competition agreement in
substantially the form attached hereto as Exhibit B (the "Non-Competition
Agreement").
5.6. Other Deliveries. The Shareholders shall have delivered to
Purchaser the corporate record book, stock record book and corporate seal of the
Company and resignations and releases of each officer and director of the
Company, in form and substance satisfactory to Purchaser and its counsel and
such other documents and agreements as shall be sufficient to terminate, at or
promptly after the Closing, all of the Plans of the Company not previously
terminated.
5.7. Simultaneous Closings. Simultaneously with the Closing hereunder,
Purchaser and certain other corporations and/or limited liability companies
affiliated with one or more of the Shareholders must close the transactions
pursuant to which Purchaser shall acquire (a) substantially all of the assets of
Tridan International, Inc., an Illinois corporation, (b) substantially all of
the assets of Xxxxxxxx Technologies, Inc., a New Jersey corporation, and
Environmental Alloys, Inc., a Florida corporation and (c) the real estate owned
by Tridan, LLC, an Indiana limited liability company.
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ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of the Shareholders required to be performed by them at
the Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by the
Shareholders as provided herein, except as otherwise required by applicable law:
6.1. Representations and Warranties; Agreements. Each of the
representations and warranties of Purchaser contained in this Agreement shall be
true and correct as of the Closing. Each of the material obligations of
Purchaser required by this Agreement to be performed by it at or prior to the
Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Shareholders shall have received
a certificate, duly executed by an officer of Purchaser, to the effect that the
conditions set forth in the preceding two sentences have been satisfied.
6.2. Authorization; Consents. All corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by Purchaser. Any filings required to be made in connection with
the transactions contemplated hereby shall have been made and all applicable
waiting periods with respect to each such filing (including any extensions
thereof) shall have expired or been terminated.
6.3. Opinion of Purchaser's Counsel. Shareholders shall have been
furnished with the opinion of counsel of Purchaser, dated the Closing Date, in
substance as set forth in Schedule 6.3 and in form reasonably satisfactory to
the Shareholders and their counsel. In rendering the foregoing opinion,
Purchaser's counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of Purchaser and by government
officials, and upon such other documents and data as such counsel deems
appropriate as a basis for their opinions, and may specify the jurisdiction or
jurisdictions in which they are admitted to practice, that they are not admitted
to the Bar in any other jurisdiction or experts in the law of any other
jurisdiction and that such opinions are limited to the law of the jurisdiction
or jurisdictions in which they are admitted to practice, the corporate law of
the jurisdiction in which Purchaser is incorporated, if different, and federal
laws.
6.4. Simultaneous Closings. Simultaneously with the Closing hereunder,
Purchaser and certain other corporations and/or limited liability companies
affiliated with one or more of the Shareholders must close the transactions
pursuant to which Purchaser shall acquire (a) substantially all of the assets of
Tridan International, Inc., an Illinois corporation, (b) substantially all of
the assets of Xxxxxxxx Technologies, Inc., a New Jersey corporation, and
Environmental Alloys, Inc., a Florida corporation and (c) the real estate owned
by Tridan, LLC, an Indiana limited liability company.
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ARTICLE VII
INDEMNIFICATION
7.1. Indemnification. The parties shall indemnify each other as set
forth below:
(a) Subject to the limitations of Sections 7.1(g), 7.1(h) and 8.2,
Shareholders shall jointly and severally indemnify and hold harmless Purchaser,
its officers, directors, employees and agents, from and against any and all
Losses, hereinafter defined, arising out of, based upon or resulting from (i)
any material breach as of the Closing Date of any representation or warranty of
the Shareholders which is contained in or made pursuant to this Agreement, (ii)
any material breach or nonfulfillment by the Shareholders of any of their
covenants, agreements or other obligations contained in or made pursuant to this
Agreement or (iii) any Environmental Matter (whether or not disclosed on a
Schedule hereto). Any provision in this Agreement to the contrary
notwithstanding, Shareholders shall pay, indemnify and hold harmless Purchaser,
and its successors, from and against all liabilities for federal, state and
local income taxes attributable to taxable periods ending on or before the
Closing Date attributable to the income of the Company. For purposes of this
Section, the Closing Date shall be treated as the last day of a taxable period
whether or not the taxable period in fact ends on the Closing Date. For purposes
of this Section, and the calculation of any indemnity, interest, penalties or
additions to income tax accruing after the Closing Date with respect to a
liability for income taxes for which the Shareholders are required to indemnify
Purchaser shall be deemed to be attributable to a taxable period ending on or
before the Closing Date.
(b) Subject to the limitations of Sections 7.1(i) and 8.2, Purchaser
shall indemnify and hold harmless the Shareholders from and against any and all
Losses arising out of, based upon or resulting from (i) any material breach as
of the Closing Date of any representation or warranty of Purchaser which is
contained in or made pursuant to this Agreement, or (ii) any material breach or
nonfulfillment by the Purchaser of any of its covenants, agreements or other
obligations contained in or made pursuant to this Agreement.
(c) For purposes of this Section 7.1, "Losses" shall mean and include
damages, liabilities and claims, net of all Taxes and, to the extent that the
person that is obligated to provide such indemnification (an "Indemnifying
Party") maintains or has maintained liability insurance and such coverage is
applicable to the person entitled to indemnification (an "Indemnified Party"),
insurance benefits paid to or for the benefit or protection of the Indemnified
Party. Losses shall include, without limitation, all reasonable fees, costs and
expenses related thereto, including, without limitation, any and all of the
Indemnified Party's Legal Expenses. As used herein, "Legal Expenses" shall mean
the fees, costs and expenses reasonably incurred by the Indemnified Party in
investigating, preparing for, defending against or providing evidence, producing
documents or taking other action with respect to, any threatened or asserted
claim, prior to assumption of control of the defense of such claim by the
Indemnifying Party.
(d) Promptly after receipt of notice of the commencement of any action
or claim by a third party in respect of which the Indemnified Party may seek
indemnification hereunder, the Indemnified Party shall promptly notify each
Indemnifying Party. The Indemnifying Party shall be entitled to control the
defense of such action; provided, however, that:
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(i) the Indemnified Party shall be entitled to participate in
the defense of such action or claim and to employ counsel at its own
expense to assist in the handling of such action or claim;
(ii) the Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into any settlement
of such action or claim, or ceasing to defend against such action or
claim (with such approval not to be unreasonably withheld);
(iii) no Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such action or claim; and
(iv) the Indemnifying Party shall not be entitled to control
(but shall be entitled to participate at its own expense in the defense
of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any action or claim to the extent
the claim seeks an injunction, non-monetary or other equitable relief
against the Indemnified Party which, if successful, would materially
interfere with the business, operations, assets, condition (financial
or otherwise) or prospects of the Indemnified Party.
After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such action or claim, the
Indemnifying Party shall not be liable to such Indemnified Party hereunder for
any Legal Expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof. If the Indemnifying Party does not assume control of
the defense of such action or claim as provided in this Section 7.1(d), the
Indemnified Party shall have the right to defend such action or claim in such
manner as it may deem appropriate at the cost and expense of the Indemnifying
Party, and the Indemnifying Party will promptly reimburse the Indemnified Party
therefor in accordance with this Section 7.1. The reimbursement of fees, costs
and expenses required by this Section 7.1 shall be made by periodic payments
during the course of the investigations or defense, as and when bills are
received or expenses incurred.
(e) In the event that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Section 7.1, the Indemnifying
Party shall, upon payment of such indemnity in full, be subrogated to all rights
of the Indemnified Party and the Company with respect to the actions or claims
to which such indemnification relates.
(f) All indemnification or reimbursement payments required pursuant to
this Agreement shall be made net of all Taxes and, to the extent that the
Indemnifying Party maintains or has maintained liability insurance and such
coverage is applicable to the Indemnified Party, insurance benefits actually
received by the party to be indemnified or reimbursed. In the event that any
claim for indemnification asserted hereunder is, or may be, the subject of the
Indemnifying Party's liability insurance or other right to indemnification or
contribution from any third person, the Indemnified Parties expressly agree that
they shall promptly notify the applicable insurance carrier of any such
claim or loss and tender defense thereof to such carrier, and shall also
promptly notify any potential third party indemnitor or contributor which may be
liable for any portion of such losses or claims.
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The Indemnified Parties agree to pursue, at the cost and expense of the
Indemnifying Party, such claims diligently and to reasonably cooperate, at the
cost and expense of the Indemnifying Party, with each applicable insurance
carrier and third party indemnitor or contributor.
(g) The Shareholders shall have no liability for indemnification with
respect to the matters described in this Section 7.1 or otherwise under this
Agreement unless and until, and only to the extent that the aggregate amount of
all Losses for which indemnification is sought from the Shareholders exceeds
$50,000.
(h) Notwithstanding any other provision of this Agreement to the
contrary, the Shareholders shall have no liability for indemnification with
respect to the matters described in this Section 7.1 or otherwise under this
Agreement to the extent that the amount of all payments made by the Shareholders
on account of Losses exceeds, or would exceed $500,000.
(i) Purchaser shall have no liability for indemnification with respect
to the matters described in this Section 7.1 or otherwise under this Agreement
unless and until, and only to the extent that, the aggregate amount of all
Losses for which indemnification is sought from Purchaser exceeds $50,000,
excluding however, payment of the Purchase Price or the Calculated Amount.
7.2. Payment for Indemnity Claims. Purchaser will, in the first
instance, have the right to receive from the Escrow Amount the amount of any
Losses incurred by Purchaser from any third-party claim or any claim against
the Shareholders under Section 7.1 that has been finally determined by agreement
or by a court of competent jurisdiction, as provided in the Escrow Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1. Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date
notwithstanding any requisite approval and adoption of this Agreement by the
Purchaser or the Shareholders:
(a) by mutual written consent duly authorized by the
Shareholders and the Board of Directors of the Purchaser; or
(b) by Purchaser or the Shareholders if any court or
Governmental Entity of competent jurisdiction shall have issued an
order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action is or
shall have become final and nonappealable; or
(c) by Purchaser, if Purchaser is not in material breach of
this Agreement and there shall have been a material breach of any of
the Shareholders' representations, warranties or covenants which breach
cannot be or has not been cured within ten (10) days
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36
following receipt of written notice of such breach; provided, however,
that if the breach is of such a nature that it can be cured, but cannot
be completely cured within such 10-day period, the Purchaser shall not
be entitled to terminate this Agreement if the Shareholders or the
Company shall have begun curing such breach within such 10-day period
and shall, with reasonable diligence and good faith, proceed to cure it
as promptly as practicable; or
(d) by the Shareholders, if Shareholders are not in material
breach of this Agreement and there shall have been a material breach of
any of Purchaser's representations, warranties or covenants which
breach cannot be or has not been cured within ten (10) days of the
receipt of written notice of such breach; provided, however, that if
the breach is of such a nature that it can be cured, but cannot be
completely cured within such 10-day period, the Shareholders shall not
be entitled to terminate this Agreement if the Purchaser shall have
begun curing such breach within such 10-day period and shall, with
reasonable diligence and good faith, proceed to cure it as promptly as
practicable; or
(e) by either the Purchaser or the Shareholders if the Closing
shall not have occurred on or before September 15, 2000.
8.2. Survival. All representations, warranties, covenants and
agreements contained in this Agreement, or in any Schedule, certificate,
document or statement delivered pursuant hereto, shall survive for a period of
18 months after the Closing Date, and shall be deemed to have been relied upon
and shall not be affected in any respect by the Closing, any investigation
conducted by any party hereto or by any information which any party may receive.
Notwithstanding the foregoing, the representations and warranties contained in
Section 2.9 shall survive until three years after the Closing Date and the
representations and warranties contained in Section 2.16 shall survive until the
expiration of the applicable statute of limitations (or extensions or waivers
thereof) relating to any such liability for Taxes. The liability of any party
under Article VII shall not terminate with respect to any claim, whether or not
fixed as to liability or liquidated as to amount, with respect to which such
party has been given written notice prior to the date on which it would
otherwise terminate.
8.3. Expenses. Each of the parties hereto shall pay their own fees and
expenses (including the fees of any attorneys, accountants, investment bankers
or others engaged by such party) in connection with this Agreement and the
transactions contemplated hereby whether or not the transactions contemplated
hereby are consummated.
8.4. Headings. Section headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
8.5. Notices. All notices or other communications required or permitted
hereunder shall be given in writing and shall be either delivered by hand or by
overnight courier (or by fax confirmed by one of such methods) as follows:
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If to the Shareholders:
c/o Xxxxxx X. Xxxxxxxx
000 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
With a copy to:
Henthorn, Harris, Xxxxxx & Xxxxxxxx
000 X. Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxxxxxx, Xxxxxxx 00000
Attention: J. Xxxxxx Xxxxxx
Fax: (000) 000-0000
If to Purchaser:
Kaydon Corporation
000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, President
Fax: (000) 000-0000
With a copy to:
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
as of the date so delivered or; provided, however, that any notice or
communication changing any of the addresses set forth above shall be effective
and deemed given only upon its receipt.
8.6. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, and the provisions of Article VII
hereof shall inure to the benefit of the indemnified parties referred to
therein; provided, however, that neither this Agreement nor any of the rights,
interests, or obligations hereunder may be assigned by any of the parties hereto
without the prior written consent of the other parties, except that this
Agreement and such rights, interests and obligations may be assigned by
Purchaser to a wholly owned direct or indirect subsidiary of Purchaser (provided
that Purchaser is not relieved of its obligations hereunder).
8.7. Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto) and the October 14, 1999, confidentiality agreement between the
Purchaser and the Company (among others) contain the entire agreement and
understanding of the parties with respect to the transactions contemplated
hereby and supersedes all prior or contemporaneous written or oral
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38
commitments, arrangements or understandings with respect thereto. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those expressly set
forth herein.
8.8. Modifications, Amendments and Waivers. At any time prior to the
Closing, to the extent permitted by law, (i) Purchaser and the Shareholders may,
by written agreement, modify, amend or supplement any term or provision of this
Agreement and (ii) any term or provision of this Agreement may be waived in
writing by the party which is entitled to the benefits thereof.
8.9. Counterparts. This Agreement may be executed with counterpart
signature pages or in two or more counterparts, all of which shall be considered
one and the same agreement and each of which shall be deemed an original.
8.10. Governing Law. This Agreement shall be governed by the laws of
the United States and the State of Indiana (regardless of the laws that might be
applicable under principles of conflicts of law) as to all matters including,
but not limited to, matters of validity, construction, effect and performance.
8.11. Accounting Terms. All accounting terms used herein which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP on the date hereof.
8.12. Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby and this Agreement will be construed and enforced as if
such invalid, illegal or unenforceable provisions had not been included herein.
To the extent permitted by applicable law, each party waives any provision of
law which renders any provision of this Agreement invalid, illegal or
unenforceable in any respect.
8.13. Specific Performance. Purchaser and the Shareholders recognize
that any breach of the terms of this Agreement may give rise to irreparable harm
for which money damages would not be an adequate remedy, and accordingly agree
that, in addition to other remedies, any nonbreaching party shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy as a remedy of money damages.
8.14. Third Parties. Nothing in this Agreement shall be deemed to be
for the benefit of, or enforceable by or on behalf of any party, including,
without limitation, any employee or former employee of the Company or any
dependent or beneficiary of any such employee, any labor union or other party or
organization, any obligee, owner or holder of any obligation or liability, other
than the parties to this Agreement and the Indemnified Parties.
[SIGNATURES APPEAR ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
KAYDON CORPORATION
By: /S/ XXXXX X. XXXXXXXX
--------------------------------
Xxxxx X. Xxxxxxxx, President
SHAREHOLDERS OF INDIANA PRECISION, INC.:
/S/ XXXXXX X. XXXXXXXX
------------------------------------
XXXXXX X. XXXXXXXX
/S/ XXXXXX X. XXXXXX
------------------------------------
XXXXXX X. XXXXXX
/S/ XXXXXXX X. XXXXXX
------------------------------------
XXXXXXX X. XXXXXX
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EXHIBIT A
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of August , 2000 (the "Escrow Agreement"),
by and among KAYDON ACQUISITION XIII, INC. ("Purchaser"), a Delaware
corporation, BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION, a national banking
association, as escrow agent ("Escrow Agent"), XXXXXX X. XXXXXXXX, XXXXXXX X.
XXXXXX and XXXXXX X. XXXXXX (collectively, the "Sellers"), as the shareholders
of Indiana Precision, Inc., an Indiana corporation (the "Company").
A. WHEREAS, the Purchaser has contemporaneously consummated the
acquisition of substantially all of the stock of the Company from the Sellers
pursuant to a Stock Purchase Agreement, dated as of August 11, 2000 (as
heretofore amended, modified or supplemented from time to time in accordance
with its terms, the "Stock Purchase Agreement"), among Sellers and the Purchaser
which provides inter alia that U. S. $500,000 shall be held in escrow subject to
the terms and conditions of this Escrow Agreement, from which amount Sellers
intend to provide indemnification to the Purchaser pursuant to the terms of the
Stock Purchase Agreement;
B. WHEREAS, the amount deposited in escrow pursuant to the terms of the
Stock Purchase Agreement is intended to be available to satisfy the claims for
indemnification of the Purchaser under the Stock Purchase Agreement;
C. WHEREAS, capitalized terms used herein and not otherwise defined
shall have the meaning given such terms in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereby agree as follows:
1. Delivery and Receipt of Funds: Designation of Representatives.
(a ) Pursuant to Section 1.5 of the Stock Purchase Agreement, Purchaser
has delivered to the Escrow Agent to be held under the terms and conditions set
forth herein, the sum of U.S. $500,000 in immediately available funds (such
funds as increased or decreased by any investments made hereunder or as
decreased by any disbursements made in accordance herewith are referred to as
the "Escrow Fund"). The Escrow Agent agrees to hold the Escrow Fund in
accordance with the terms of this Escrow Agreement.
(b) The Purchaser and any assignee of the Sellers shall each execute
and deliver to the Escrow Agent a certificate of incumbency substantially in the
form of Exhibit A hereto for the purpose of establishing the identity of the
representatives of the Purchaser and Sellers' assignee entitled to issue
instructions or directions to the Escrow Agent on behalf of each such party. In
the event of any change in the identity of such representatives, a new
certificate of incumbency shall be executed and delivered to the Escrow Agent by
the appropriate party. Until such time as the Escrow Agent shall receive a new
incumbency certificate, the Escrow Agent shall be fully protected in relying
without inquiry on any then current incumbency certificate on file with the
Escrow Agent.
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2. Investment; Earnings; Maintenance of Escrow Fund.
(a) Until disbursement of the entire Escrow Fund in accordance with the
terms hereof, the Escrow Agent will invest the monies deposited in the Escrow
Fund and any accumulated income earned thereon, as directed by the Sellers'
Representative, in one or more of the following:
(i) Direct obligations of and obligations fully
guaranteed by the United States of America, or any
agency thereof, the principal and interest of which
are guaranteed by the United States of America or its
agencies;
(ii) Participation under a revolving repurchase agreement
maintained by the Escrow Agent with other entities
relative to an agreement for the sale and repurchase
of obligations itemized in paragraph (i) above;
(iii) Any time deposit which is fully insured by the
Federal Deposit Insurance Corporation;
(iv) Commercial paper notes which, at the time of
investment, are rated in one of the two highest
credit ratings by Xxxxx'x Investors Service, Inc.
and/or Standard & Poor's Corporation;
(v) Certificates of deposit of any bank organized under
the laws of the United States;
(vi) Any money market fund (including money market funds
for which the Escrow Agent serves in an advisory
capacity and/or other money market funds with which
the Escrow Agent has an existing relationship), the
assets of which are any of those obligations itemized
in paragraphs (i) through (v) above; or
(vii) Any one or more of the following mutual funds:
Vanguard High-Yield Tax- Exempt Fund, Vanguard New
Jersey Tax-Exempt Money Market Fund, Vanguard New
Jersey Insured Long-Term Tax-Exempt Fund, Vanguard
500 Index Fund, Vanguard Prime Money Market or any
other Vanguard Group Mutual Fund as Sellers'
Representative shall designate with Purchaser's
written consent, which consent shall not be
unreasonably withheld.
The Escrow Agent shall make arrangements so that either (A) Sellers'
Representative (as designated in Section 19 below) shall be permitted to deal
directly with The Vanguard Group to transfer the Escrow Fund, or any portion of
it, between or among the above designated Vanguard mutual funds, provided that
in no event shall any portion of the Escrow Fund be released to Sellers or
invested except as otherwise provided herein, or (B) if such arrangements cannot
be made with The Vanguard Group, then the Escrow Agent shall designate a
specific employee or employees to receive change of fund investment instructions
from Sellers' Representative, which instructions shall be communicated to The
Vanguard Group prior to 4:00 p.m., Eastern Time, provided they are
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received by the Escrow Agent prior to 2:00 p.m. Absent direction from the
Sellers' Representative, the Escrow Agent shall invest the Escrow Funds in the
Vanguard High-Yield Tax-Exempt Fund, and the Escrow Agent shall use its best
efforts to open such Vanguard account in advance of the Closing Date, so that
the Escrow Fund can be wired to such Vanguard fund at the time of the Closing
under the Stock Purchase Agreement.
(b) Sellers shall be liable for and shall pay all taxes on the income
earned on the Escrow Fund and shall indemnify and hold Purchaser and the Escrow
Agent harmless therefrom. For fiduciary accounting purposes under this Escrow
Agreement, realized capital gains and losses shall be allocated to income and
the term "accumulated income" shall include such realized gains and losses.
Accumulated income on the Escrow Fund shall be distributed on a calendar quarter
basis to the Sellers, provided that the market value of the Escrow Fund (before
deduction for any pending and unpaid Claimed Amounts) shall not be reduced below
the Minimum Escrow Fund Amount specified in paragraph (c) below. Any loss
incurred as a result of an investment shall be borne by the Escrow Account.
(c) If at the end of each calendar month the market value of the Escrow
Fund shall have diminished below the applicable Minimum Escrow Fund Amount, then
an amount of accumulated income on the Escrow Fund sufficient to restore the
market value of the Escrow Fund to the applicable Minimum Escrow Fund Amount
shall be transferred by the Escrow Agent to become principal of the Escrow Fund
and shall thereafter no longer be available for distribution to the Sellers
until the next quarterly distribution of the accumulated income or the
termination and release of the Escrow Fund. The applicable "Minimum Escrow Fund
Amount" shall be as follows: for the period from August 28, 2000, through and
including August 27, 2001, $500,000; for the period from August 28, 2001,
through and including August 27, 2002, $333,000; for the period from August 28,
2002, through and including August 27, 2003, $166,000.
(d) The Escrow Agent is hereby authorized to execute purchases and
sales of permitted investments through the facilities of its own trading or
capital markets operations or those of any affiliated entity. The Escrow Agent
shall send statements to each of the parties hereto on a monthly basis
reflecting activity in the Escrow Account for the preceding month. Although the
Purchaser and Sellers each recognize that it may obtain a broker confirmation or
written statement containing comparable information at no additional cost, the
Purchaser and the Sellers hereby agree that confirmations of permitted
investments are not required to be issued by the Escrow Agent for each month in
which a monthly statement is rendered.
3. General Indemnity Obligation. The Escrow Fund shall be held by the
Escrow Agent as security for the indemnification obligation of Sellers under the
Stock Purchase Agreement. Purchaser may make a claim against the Escrow Fund for
any amounts for which Sellers may be so liable to Purchaser under the Stock
Purchase Agreement.
4. Claims. At any time that the Purchaser makes a claim against Sellers
under Article VII of the Stock Purchase Agreement (a "Claim"), Purchaser shall
notify (a "Claim Notice") the Escrow Agent and Sellers' Representative in
writing of any such Claim (identifying such Claim with reasonable specificity),
and stating the basis for the Claim and the amount or estimated amount
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thereof (the "Claimed Amount"). On the 45th day after the Escrow Agent has
received a Claim Notice, unless it receives a Dispute Notice from Sellers'
Representative pursuant to Section 5 hereof (in which case such Claim shall be
resolved as provided in Section 5 hereof), the Escrow Agent shall deliver to
Purchaser out of the Escrow Fund cash equal in amount to the Claimed Amount.
5. Dispute of Claim. Sellers shall have the right to dispute any
Claimed Amount by giving concurrently to the Escrow Agent and to Purchaser,
prior to the forty-fifth (45th) day after delivery to Sellers' Representative of
any Claim Notice from Purchaser, written notice (a "Dispute Notice") that they
dispute the matters set forth in such Claim Notice either with respect to the
validity or the amount of the Claim in question or on the basis that the
deficiency, liability or obligation in question is not properly chargeable as a
claim under the Stock Purchase Agreement. Such Dispute Notice shall include the
basis and amount, with reasonable specificity, of the dispute. If such Dispute
Notice covers less than the full Claimed Amount, Sellers' Representative shall
state in the Dispute Notice the amount of the Claimed Amount as to which Sellers
agree that Purchaser should be paid out of the Escrow Fund, and such portion of
the Claimed Amount shall be promptly paid by the Escrow Agent to Purchaser. The
Escrow Agent shall have no obligation to determine the sufficiency of any such
Dispute Notice or Claim Notice. Upon receipt of any such Dispute Notice from the
Sellers' Representative, the Escrow Agent shall take no action with respect to
the amounts in dispute except: (a) upon the joint written instructions of both
Purchaser and Sellers' Representative; or (b) ten (10) days after receipt by
Escrow Agent of written notice (the "Order Notice") from either Purchaser or
Sellers' Representative that the dispute has been resolved by a final order,
decree or judgment (from which no further appeal may be taken) of a court of
competent jurisdiction, which Order Notice shall be accompanied by a copy of any
such order, decree or judgment certified by the Clerk (or equivalent officer) of
such court and by an opinion of counsel stating that the time for appeal
therefrom has expired and no appeal has been perfected. A copy of such Order
Notice shall concurrently be given by the party giving the Order Notice to the
other parties hereunder. Upon receipt of joint instructions described in clause
(a) above, Escrow Agent shall make payment out of the Escrow Fund in accordance
therewith, and ten (10) days after receipt by Escrow Agent of an Order Notice
described in clause (b) above, Escrow Agent shall make payment out of the Escrow
Fund in accordance with the order, decree or judgment referenced therein and
attached thereto.
6. Partial Distribution, Termination and Release of Escrow Fund.
(a) On August 28, 2001, the Escrow Agent shall determine the aggregate
of all pending and unpaid Claimed Amounts as of that date and, shall pay to
Sellers out of the Escrow Fund $167,000 less 50% of the aggregate of such
pending and unpaid Claimed Amounts; provided, however, that if 50% of the
aggregate of such pending and unpaid Claimed Amounts are greater than $167,000,
then all the assets in the Escrow Fund shall be retained in the Escrow Fund and
the Escrow Agent shall not make any payments to Sellers out of the Escrow Fund
until otherwise permitted under this Escrow Agreement. In the event after August
27, 2001, but before August 28, 2002, any claim is resolved, by Order Notice or
by joint written instructions of Purchaser and Sellers, in an amount less than
the full Claimed Amount, then the Escrow Agent shall within ten (10) days pay to
Sellers out of the principal of the Escrow Fund such amount as will bring the
prior payment under this paragraph (a) up to $167,000 less 50% of the aggregate
of the remaining pending
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and unpaid Claimed Amounts; provided, however, that if 50% of the aggregate of
the remaining pending and unpaid Claimed Amounts are equal to or greater than
$167,000, then no distribution shall be made under this sentence.
(b) On August 28, 2002, the Escrow Agent shall determine the aggregate
of all pending and unpaid Claimed Amounts as of such date and as soon as
practicable after making such determinations shall pay to Sellers such amount as
will leave in the Escrow Fund the sum of $167,000 plus 50% of the aggregate of
such pending and unpaid Claimed Amounts. In the event after August 27, 2002, but
before August 28, 2003, any Claim is resolved, by Order Notice or by joint
written instructions of Purchaser and Sellers, in an amount less than the full
Claimed Amount, then the Escrow Agent shall within ten (10) days pay to Sellers
such amount as will leave in the Escrow Fund the sum of (i) $167,000 plus (ii)
50% of the aggregate of the remaining pending and unpaid Claimed Amounts.
(c) On August 28, 2003, the Escrow Agent shall determine the aggregate
of all pending and unpaid Claimed Amounts as of such date and as soon as
practicable after making such determination shall pay to Sellers the remaining
balance of the Escrow Fund, including accumulated income, less such aggregate of
pending and unpaid Claimed Amounts. Any amount or amounts retained after August
28, 2003, pursuant to this Escrow Agreement on account of the pending and unpaid
Claimed Amounts shall continue to be held in accordance with this Escrow
Agreement until a final disposition thereof is made in accordance with this
Escrow Agreement.
(d) Upon receipt of a letter, in a form substantially similar to that
attached hereto as Exhibit B, signed by the Purchaser and Sellers'
Representative, the Escrow Agent agrees to sell the Permitted Investments and to
pay the full balance and proceeds of the Escrow Account as the Purchaser and
Sellers shall direct.
7. Liquidation of Investments. The Escrow Agent shall liquidate any
investments in the Escrow Fund necessary to provide funds in order to make any
payments required by this Escrow Agreement in accordance with written
instructions given to it by the Sellers' Representative with regard to the
priority of investments to be so liquidated. If the Sellers' Representative
fails to give the Escrow Agent such written instructions, the Escrow Agent shall
use its discretion in liquidating sufficient investments to pay any amounts due
hereunder in a timely manner.
8. Concerning the Escrow Agent. Notwithstanding any provision contained
herein to the contrary, the Escrow Agent, including its officers, directors,
employees and agents, shall:
(a) not be held liable for any action taken or omitted under this
Escrow Agreement so long as it shall have acted in good faith and without gross
negligence;
(b) have no responsibility to inquire into or determine the
genuineness, authenticity, or sufficiency of any securities, check, or other
documents or instruments submitted to it in connection with its duties
hereunder;
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(c) be entitled to deem the signatories of any documents or instruments
submitted to it hereunder as being those purported to be authorized to sign such
documents or instruments on behalf of the parties hereto and shall be entitled
to rely upon the genuineness of the signatures of such signatories without
inquiry and without requiring substantiating evidence of any kind;
(d) be entitled to refrain from taking any action contemplated by this
Escrow Agreement in the event that it becomes aware of any disagreement between
the parties hereto as to any facts or as to the happening of any contemplated
event precedent to such action;
(e) have no responsibility or liability for any diminution in value of
any assets held hereunder which may result from any investment or reinvestment
made in accordance with any provision which may be contained herein;
(f) be entitled to compensation for its services hereunder as per
Exhibit C attached hereto and for reimbursement of its out-of-pocket expenses
including, but not by way of limitation, the reasonable fees and costs of
attorneys or agents which it may find necessary to engage in performance of its
duties hereunder, to be paid in full by Purchaser, except that any sales loads,
fees or transaction charges assessed by The Vanguard Group ("Vanguard Charges")
shall be paid out of the Escrow Fund;
(g) be entitled to set off and apply the Escrow Fund against any fees
and expenses to which the Escrow Agent is entitled hereunder and which are due
and owing, but only after the Escrow Agent has given notice requesting payment
thereof to Sellers' Representative and Purchaser and such fees and expenses
remain unpaid for 60 days following the date of receipt by Sellers'
Representative and Purchaser of such notice. The Escrow Agent shall promptly
notify Sellers' Representative and Purchaser after any such setoff and
application made by the Escrow Agent, and Purchaser shall promptly reimburse the
Escrow Fund for the amount of such setoff, except that Sellers shall promptly
reimburse the Escrow Fund for the amount of such setoff where such setoff is
incurred due to Vanguard Charges;
(h) be under no obligation to invest the deposited funds or the income
generated thereby until it has received a U.S. Internal Revenue Service Form W-9
(or W-8, if applicable) from Sellers;
(i) be, and hereby is, jointly and severally indemnified and saved
harmless by the other parties hereto from all loss, costs, and expenses,
including attorney's fees, which may be incurred by it as a result of its
involvement in any litigation arising from the performance of its duties
hereunder, provided that such litigation shall not have resulted from any action
taken or omitted by it and for which it shall have been adjudged to have acted
in bad faith or to have been grossly negligent; such indemnification shall
survive termination of this Escrow Agreement and the resignation or removal of
the Escrow Agent pursuant to Section 10 hereof until extinguished by any
applicable statute of limitation. As between Sellers and Purchaser, each shall
be responsible for one-half of such indemnification obligations;
(j) in the event any dispute shall arise between the parties with
respect to the disposition or disbursement of any of the assets held hereunder,
be permitted to interplead all of the assets held
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hereunder into a court of competent jurisdiction, and thereafter be fully
relieved from any and all liability or obligation with respect to such
interpleaded assets. The other parties further agree to pursue any redress or
recourse in connection with such a dispute, without making the Escrow Agent a
party to same unless required by applicable law;
(k) only have those duties as are specifically provided herein, which
shall be deemed purely ministerial in nature;
(l) neither be responsible for, nor chargeable with knowledge of, the
terms and conditions of any other agreement, instrument, or document between the
other parties hereto, in connection herewith, including, without limitation, the
Stock Purchase Agreement and shall be required to act only pursuant to the terms
and provisions of this Escrow Agreement. This Escrow Agreement sets forth all
matters pertinent to the escrow contemplated hereunder and no additional
obligations of the Escrow Agent shall be implied from the terms of this Escrow
Agreement or any other agreement;
(m) use the federal employer identification number of GHK, LLC, the
Sellers' successor-in-interest (00-0000000), as the taxpayer identification
number for all investments of the Escrow Fund and, to the extent applicable, for
Form 1099 or Schedule K-1 reporting purposes, until such times as the Sellers'
Representative shall notify the Escrow Agent of a different taxpayer
identification number;
(n) have the right, but not the obligation, to consult with counsel of
choice and shall not be liable for action taken or omitted to be taken by Escrow
Agent either in accordance with the advice of such counsel or in accordance with
any opinion of counsel to the Purchaser and Sellers addressed and delivered to
the Escrow Agent;
(o) have the right to perform any of its duties hereunder through
agents, attorneys, custodians or nominees. Any banking association or
corporation into which the Escrow Agent may be merged, converted or with which
the Escrow Agent may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Escrow Agent shall be a party,
or any banking association or corporation to which all or substantially all of
the corporate trust business of the Escrow Agent shall be transferred, shall
succeed to all the Escrow Agent's rights, obligations and immunities hereunder
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding; and
The immunities and protection and right to indemnification listed in
this Section 8, together with the Escrow Agent's right to compensation, shall
survive the termination of this Agreement and the Escrow Agent's resignation or
removal.
9. Notices. Any request, direction, notice, or other communication
required or permitted to be made or given by any party hereto shall be in
writing and shall be delivered by hand or by overnight commercial courier
service, (or by facsimile transmission confirmed by one of such methods), to the
addresses and facsimile numbers noted below (or to such other addresses and
7
47
facsimile numbers as a party may designate as to itself by notice to the other
parties in accordance with this Section 9).
(a) in the case of Sellers:
Xxxxxx X. Xxxxxxxx, Seller's Representative
000 Xxxxxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxxxx 00000
Facsimile: (000) 000-0000
with a courtesy copy to:
J. Xxxxxx Xxxxxx
Henthorn, Harris, Xxxxxx & Xxxxxxxx
000 X. Xxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
(b) In the case of Purchaser:
Kaydon Acquisition XIII, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with courtesy copy to:
Xxxx X. Xxxxxxxxxx
Xxxxxx Xxxxxxx PLLC
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(c) In the case of the Escrow Agent:
Bank One, Trust Company, National Association
000 Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Low
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10. Resignation or Removal of Escrow Agent. The Escrow Agent may resign
as such following the giving of thirty (30) days' prior written notice to the
other parties hereto. Similarly, the Escrow Agent may be removed and replaced
following the giving of thirty (30) days' prior joint written notice to the
Escrow Agent by the other parties hereto. In either event, the duties of the
8
48
Escrow Agent shall terminate (30) thirty days after receipt of such notice (or
as such earlier date as may be mutually agreed by all parties hereto); and the
Escrow Agent, after it has been paid all the fees, costs and expenses to which
it is entitled hereunder (including the costs of transferring the monies or
assets in its possession), shall then deliver the balance of the monies or
assets then in its possession to a successor Escrow Agent as shall be jointly
appointed by the Purchaser and the Seller's Representative, as evidenced by a
written notice filed with the Escrow Agent or to a successor Escrow Agent
appointed pursuant to the next paragraph.
If the Purchaser and the Seller's Representative are unable to agree
upon a successor Escrow Agent or shall have failed to appoint a successor Escrow
Agent prior to the expiration of thirty (30) days following receipt of the
notice of resignation or removal, the Escrow Agent may petition any court of
competent jurisdiction for the appointment of a successor Escrow Agent or for
other appropriate relief; and, any such resulting appointment shall be binding
upon all the parties hereto.
Upon acknowledgment by any successor Escrow Agent of the receipt of the
balance of the monies or assets, in escrow, the Escrow Agent shall be fully
released and relieved of all duties, responsibilities and obligations under this
Escrow Agreement.
11. Entire Agreement: Modification. This Escrow Agreement constitutes
the entire understanding among the parties with respect to the subject matter
hereof and shall supersede any prior or contemporaneous agreement or
understanding, oral or written, with respect to the subject matter hereof. No
modification or amendment of this Escrow Agreement shall be valid unless the
same is in writing and is signed by Sellers and the Purchaser and consented to
by the Escrow Agent.
12. Joint Direction. Notwithstanding anything contained herein to the
contrary, Purchaser and Sellers' Representative may jointly direct the Escrow
Agent, in writing, to perform any action contemplated herein, and upon receipt
of such joint direction, the Escrow Agent shall act in compliance therewith and
have no liability to Purchaser, Sellers or any third party beneficiary for such
act.
13. Applicable Law. This Escrow Agreement shall be construed in
accordance with and governed by the laws of the State of Michigan without giving
effect to any applicable principles of conflicts of laws.
14. Counterparts. This Escrow Agreement may be executed with
counterpart signature of pages or in one or more counterparts, each of which
shall be deemed an original, but all which together shall constitute one and the
same instrument.
15. Invalid Clause. If any term, covenant, condition or provision of
this Escrow Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the provisions hereof shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated thereby.
16. Binding Effect. This Escrow Agreement shall be binding upon and
inure to the benefit of, the heirs, administrators, executors, successors and
assigns of the parties hereto.
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49
17. Recitals. The recitals to this Escrow Agreement are incorporated
herein as part of this Escrow Agreement.
18. Assignment by Sellers. Sellers shall have the right, upon written
notice to Purchaser and the Escrow Agent, to assign all of Sellers' rights,
interests and obligations under this Agreement, including all rights in and to
the Escrow Fund to a successor limited liability partnership, limited liability
company or other entity designated by Sellers.
19. Appointment of Sellers' Representative.
(a) The Sellers hereby irrevocably appoint the person designated from
time to time pursuant to Section 19(f) as their true and lawful
attorney-in-fact, to act as their representative ("Sellers' Representative")
under this Escrow Agreement and, as such, to act, as Sellers' agent (with full
power of substitution), to take such action on such Sellers' behalf with respect
to all matters relating to this Escrow Agreement, the Stock Purchase Agreement
and all transactions herein and therein. Xxxxxx X. Xxxxxxxx hereby accepts his
appointment as the initial Sellers' Representative and the authorization set
forth above. The Sellers' Representative shall not have any duties or
responsibilities except those expressly set forth in this Escrow Agreement, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Escrow Agreement or shall otherwise exist
against the Sellers' Representative. With respect to all other actions, the
Sellers' Representative shall only take or authorize such actions approved
orally or in writing by the Sellers or their assignee.
(b) The Sellers' Representative shall be entitled to rely, and shall be
fully protected in relying, upon any statements furnished to him by any Seller,
Sellers' assignee or the Purchaser, or any other evidence deemed by the Sellers'
Representative to be reliable, and the Sellers' Representative shall be entitled
to act on the advice of counsel selected by him. The Sellers' Representative
shall be fully justified in failing or refusing to take any action under this
Escrow Agreement unless he has received such advice or concurrence of the
Sellers, or their assignee, as he deems appropriate or he has been expressly
indemnified to his satisfaction by the Sellers, or their assignee, against any
and all liability and expense that the Sellers' Representative may incur by
reason of taking or continuing to take any such action.
(c) The Sellers' Representative shall be entitled to retain counsel and
to incur such expenses as the Sellers' Representative deems to be necessary or
appropriate in connection with his performance of his obligations under this
Escrow Agreement, and all such fees and expenses (including reasonable
attorneys' fees and expenses) incurred by the Sellers' Representative shall be
borne by the Sellers or their assignee.
(d) The Sellers hereby agree to indemnify the Sellers' Representative
(in his capacity as such) ratably according to their interests in the Escrow
Fund against, and to hold the Sellers' Representative (in his capacity as such)
harmless from, any and all losses of whatever kind which may at any time be
imposed upon, incurred by or asserted against the Sellers' Representative in
such capacity in any way relating to or arising out of his action or failures to
take action pursuant to this Escrow Agreement or in connection herewith in such
capacity, provided that no Seller or Sellers'
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50
assignee shall be liable for the payment of any portion of such losses resulting
solely from the gross negligence or willful misconduct of the Sellers'
Representative. The agreements in this Section 19(d) shall survive termination
of this Escrow Agreement.
(e) To the extent this Escrow Agreement provides that the Sellers shall
be jointly and severally liable to personally pay any cost, expense or other
liability, the Sellers, or their respective assignee(s), shall share such
payment ratably in accordance with their respective interests in the Escrow
Fund, and shall reimburse each other as necessary to give effect to the intent
of this provision.
(f) Xxxxxx X. Xxxxxxxx shall be the initial Sellers' Representative and
shall serve as the Sellers' Representative until the earlier of his resignation
or removal (with or without cause) by action of the Sellers' or their assignee.
Upon the resignation or removal of the Sellers' Representative, the Sellers or
their assignee shall select a new Sellers' Representative who may resign, be
removed or replaced in the same manner as the initial Sellers' Representative.
Each time a new Sellers' Representative is appointed pursuant to this Escrow
Agreement, such Person shall accept such position in writing.
(g) The Sellers or their assignee shall notify the Purchaser and Escrow
Agent of each change of Sellers' Representative. Until the Purchaser and Escrow
Agent receive the foregoing notice, they shall be entitled to assume that a
prior person acting as the Sellers' Representative is still the duly authorized
Sellers' Representative.
20. Attachment of Escrow Fund; Compliance with Legal Orders. In the
event that any escrow property shall be attached, garnished or levied upon by
any court order, or the delivery thereof shall be stayed or enjoined by an order
of a court, or any order, judgment or decree shall be made or entered by any
court order affecting the property deposited under this Agreement, the Escrow
Agent is hereby expressly authorized, in its sole discretion, to obey and comply
with all writs, orders or decrees so entered or issued, which it is advised by
legal counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or complies with any
such writ, order or decree it shall not be liable to any of the parties hereto
or to any other person, firm or corporation, by reason of such compliance
notwithstanding such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.
21. Tax Matters.
(a) Reporting of Income. The Escrow Agent shall report to the Internal
Revenue Service, as of each calendar year-end, and to the Purchaser and Sellers'
Representative, as applicable, all income earned from the investment of any sum
held in the Escrow Account as and to the extent required under the provisions of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder (the "Code").
(b) Preparation and Filing or Tax Returns. Sellers or their
successor-in-interest shall be required to prepare and file any and all income
or other tax returns applicable to the Escrow Account with the Internal Revenue
Service and all required state or local departments of revenue
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51
in all years in which income is earned, as and to the extent required under the
provisions of the Code.
(c) Payment of Taxes. Any taxes payable on income earned from the
investment of any sums held in the Escrow Account shall be paid by Sellers or
their successor-in-interest whether or not the income was distributed by the
Escrow Agent during any particular year as and to the extent required under the
provisions of the Code.
(d) Unrelated Transactions. The Escrow Agent shall have no
responsibility for the preparation and/or filing of any tax or information
return with respect to any transaction, whether or not related to the Agreement,
that occurs outside the Escrow Account.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the day and year first above written.
-------------------------------
XXXXXX X. XXXXXXXX
-------------------------------
XXXXXXX X. XXXXXX
-------------------------------
XXXXXX X. XXXXXX
KAYDON ACQUISITION XIII, INC.
By:
-------------------------------
Xxxxx X. Xxxxxxxx, President
BANK ONE, TRUST COMPANY, NATIONAL
ASSOCIATION, as Escrow Agent
By:
-------------------------------
Name:
-----------------------------
Title:
------------------------------
-------------------------------------
XXXXXX X. XXXXXXXX,
as Sellers' Representative
13
53
EXHIBIT A
CERTIFICATE OF INCUMBENCY
The undersigned, ,of , hereby certifies that the
following named officers are duly appointed, qualified and acting in the
capacity set forth opposite his/her name, and the following signature is the
true and genuine signature of said officer.
Name Title Signature
----------------------- ----------------------- -----------------------
----------------------- ----------------------- -----------------------
Such officers are hereby authorized to furnish the Escrow Agent with
directions relating to any matter concerning this Escrow Agreement and the funds
and/or property held pursuant thereto.
IN WITNESS WHEREOF, has caused this Certificate
of Incumbency to be executed by its officer duly authorized this
day , 2000.
KAYDON CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
---------------------------
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54
EXHIBIT B
,2000
----------------------
Bank One Trust Company, National Association
000 Xxxxxxxx Xxxxxx, Xxxxx X00-0000
Xxxxxxx, Xxxxxxxx 00000
Attention: Corporate Trust Services Division/Xxxxx Low
Re: Escrow Account No. among Kaydon Corporation (the
"Purchaser"), a Delaware corporation, Bank One Trust Company, National
Association, as Escrow Agent (the "Escrow Agent"), Xxxxxx X. Xxxxxxxx,
Xxxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxx (collectively, the "Sellers")
and Xxxxxx X. Xxxxxxxx, as Seller's Representative.
Please sell all investments held in the Escrow Account and distribute the full
balance and proceeds thereof by (wire transfer) (cashier's check) to
[If wire transfer - name of bank, bank's ABA number and customer's account
number for credit or as shall otherwise direct].
Very truly yours,
-----------------------------------------
By:
--------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
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EXHIBIT C
SCHEDULE OF FEES
ACCEPTANCE FEE: $1,000.00
For time devoted to review of drafts of escrow agreement, negotiations
and consultations with principals and attorneys, attendance at closing,
establishing procedures and records, opening of the account and report set-up.
This fee is due and payable at closing.
ANNUAL ADMINISTRATION: $2,500.00 per year, or portion thereof, payable in
advance.
Covers: account administration, review of any required compliance
certificates, maintenance of records, contacts and correspondence , responding
to auditors, etc. This fee is billed annually in advance and is due and payable
at closing.
ACTIVITY CHARGES:
A. Additional Cash Deposits: $10.00 each
B. Cash Disbursements: $20.00 each by check/ $25.00 each by wire
C. Investment Transactions: $70.00 per acquisition or disposal, plus any special
fees charged by the Vanguard Group (no transaction
charges for One Group Fund transactions)
D. Deposit or Withdrawal of Securities or Documents:
$70.00 per deposit or withdrawal of each distinctive
document or security on each occasion.
EXTRAORDINARY SERVICES:
At rates in effect from time to time, as shall be determined on the
basis of time, effort and responsibility for services provided beyond
the scope of those listed.
OUT-OF-POCKET EXPENSES:
Escrow Agent shall be entitled to reimbursement for its out-of-pocket
expenses incurred, including, but not limited to: registered or
certified postage, courier costs, travel and lodging, and amounts paid
to attorneys and agents, when required
MISCELLANEOUS:
All fees are subject to reasonable adjustment as changes in laws,
procedures, and costs of doing business demand. Escrow Agent's fees are
subject to modification should subsequent review disclose unanticipated
duties, conflicts of interest, environmental or credit standard
deficiencies. If the transaction fails to close for reasons beyond Bank
One Trust Company, N.A.'s control, we reserve the right to charge a fee
not to exceed the amount of the Acceptance Fee.
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EXHIBIT B
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (the "Agreement") is made as of August
, 2000, by and among XXXXXX X. XXXXXXXX ("Xxxxxxxx"), KAYDON CORPORATION, a
Delaware corporation ("Kaydon"), KAYDON ACQUISITION XI, INC., a Delaware
corporation ("Acquisition XI"), KAYDON ACQUISITION XII, INC., a Delaware
corporation ("Acquisition XII"), KAYDON ACQUISITION XIII, INC., a Delaware
corporation ("Acquisition XIII") and INDIANA PRECISION, INC., an Indiana
corporation ("Indiana Precision").
Acquisition XI and Acquisition XII are wholly-owned subsidiaries of
Kaydon and have on this date completed the acquisition of two separate
businesses that were operated by corporations (the "Sellers") that were owned
principally by Xxxxxxxx. In addition, Acquisition XIII has on this date acquired
all of the voting stock of Indiana Precision, a majority of which stock was
previously owned by Xxxxxxxx. As a condition to the completion of such
acquisitions, Xxxxxxxx and Kaydon have agreed to enter into this Agreement.
Acquisition XI, Acquisition XII, Acquisition XIII and Indiana Precision are
hereafter referred to as the "Kaydon Subsidiaries". In consideration of the
compensation payable hereunder and for other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledged by each party),
the parties agree as follows:
1. Confidentiality and Non-Competition. Xxxxxxxx acknowledges that as
the owner of shares in the voting stock of the Sellers and Indiana Precision, he
has had access to information relating to the businesses of the Kaydon
Subsidiaries that has not been disclosed to third parties ("Confidential
Information") that may include, without limitation, trade secrets and know-how,
computer programs, the names and addresses of customers and suppliers and their
particular business requirements and the names and addresses of employees, the
disclosure of which Confidential Information to competitors of the Kaydon
Subsidiaries, or to the general public would be highly detrimental to the best
interests of the Kaydon and the Kaydon Subsidiaries. Xxxxxxxx further
acknowledges and agrees that the right to maintain confidential the Confidential
Information constitutes a proprietary right that Kaydon and the Kaydon
Subsidiaries are entitled to protect. Accordingly, Xxxxxxxx covenants and agrees
with the Kaydon and the Kaydon Subsidiaries that:
(a) he will not disclose any Confidential Information to any
person nor will he use the same for any purposes other than
those advancing the interests of Kaydon and the Kaydon
Subsidiaries at any time during the two-year period commencing
on the date hereof;
(b) he will not (without the prior written consent of Kaydon), at
any time during the two- year period commencing on the date
hereof, either individually or in partnership or jointly or in
conjunction with any person as principal, agent, shareholder
or in any other manner whatsoever, carry on or be engaged in
or be concerned with or interested in or advise, lend money
to, guarantee the debts or obligations of or permit his name
or any part thereof to be used or employed by any person
engaged in or concerned with or interested in any business
anywhere in the United States of America which is involved in
the manufacture of solder, heat transfer coil making
equipment or machined molds for plastic closures (the
"Competitive Businesses");
57
provided, however, that the foregoing covenant shall not act
to prevent Xxxxxxxx from becoming solely a stockholder in a
corporation that is engaged in a Competitive Business if the
stock of such other corporation is listed for trading on a
national securities exchange or the Nasdaq Stock Market and if
the amount of shares owned by Xxxxxxxx does not exceed 5% of
the total outstanding voting stock of such corporation; and
(c) he will not (without the prior written consent of Kaydon) at
any time during the two-year period commencing on the date
hereof:
(i) contact, for the purpose of soliciting any
Competitive Business any person or entity who is a
customer of such Kaydon Subsidiary; or
(ii) initiate contact with any employee or executive of
any Kaydon Subsidiary for the purpose of offering him
or her employment with any person or entity.
2. Compensation. As consideration for the foregoing agreement not to
compete with the Kaydon Subsidiaries, Kaydon agrees to pay to Xxxxxxxx the sum
of Five Thousand Dollars ($5,000) per annum, in a lump sum on the date hereof
and on the first anniversary of the date of this Agreement.
3. Severability. If any covenant or provision herein is determined to
be void or unenforceable in whole or in part, it shall not be deemed to affect
or impair the validity of any other covenant or provision, and subsections 1(a),
(b) and (c) and clauses 1(c)(i) and (ii) are each declared to be separate and
distinct covenants. Xxxxxxxx hereby agrees that all restrictions in Section 1
are reasonable and valid and all defenses to the strict enforcement thereof by
the Purchaser are hereby waived by Xxxxxxxx.
4. Enforceability. Xxxxxxxx acknowledges that a violation of any of the
provisions of Section 1 will result in immediate and irreparable damage to the
Purchasers and to Kaydon, and agrees that, in the event of such violation, any
Purchaser or Kaydon shall, in addition to any other rights to relief, be
entitled to equitable relief by way of temporary or permanent injunction and to
such other relief as any court of competent jurisdiction may deem just and
proper. If Xxxxxxxx is in breach of any of such restrictions, the running of the
period of proscription shall be stayed and shall recommence upon the date
Xxxxxxxx ceases to be in breach thereof, whether voluntarily or by injunction.
5. Applicable Law. This Agreement shall be construed, interpreted and
enforced in accordance with, and the respective rights and obligations of the
parties shall be governed by, the laws of the State of New Jersey and the
federal laws of the United States applicable therein and each party hereby
irrevocably and unconditionally submits to the exclusive jurisdiction of the
courts of such state and all courts competent to hear appeals therefrom.
IN WITNESS WHEREOF this Agreement has been executed by the parties
hereto.
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-------------------------------
Xxxxxx X. Xxxxxxxx
KAYDON CORPORATION
By:
-----------------------------
Its:
-----------------------------
KAYDON ACQUISITION XI, INC.
By:
-----------------------------
Its:
----------------------------
KAYDON ACQUISITION XII, INC.
By:
-----------------------------
Its:
----------------------------
KAYDON ACQUISITION XIII, INC.
By:
-----------------------------
Its:
----------------------------
INDIANA PRECISION, INC.
By:
-----------------------------
Its:
----------------------------
3