EXHIBIT 10.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
THE SHAREHOLDER[S] SIGNATORY HERETO
AND
KAYDON CORPORATION
DATED AS OF JANUARY 7, 2005
TABLE OF CONTENTS
Article I Definitions............................................................................................1
Article II Purchase and Sale.....................................................................................8
2.1 Purchase and Sale........................................................................................8
2.2 Purchase Price...........................................................................................8
2.3 Purchase Price Adjustment................................................................................8
Article III Closing and Deliveries..............................................................................10
3.1 Closing.................................................................................................10
3.2 Deliveries by Sellers...................................................................................10
3.3 Deliveries by Buyer.....................................................................................11
3.4 Escrow..................................................................................................12
Article IV Representations and Warranties of Sellers............................................................12
4.1 Organization of the Company and Subsidiary; Qualification; Capitalization...............................12
4.2 Authority; No Violation or Consent......................................................................13
4.3 No Subsidiaries or Investments..........................................................................13
4.4 Financial Statements....................................................................................14
4.5 No Undisclosed Liabilities..............................................................................15
4.6 Conduct of Business in Ordinary Course..................................................................15
4.7 Real Estate and Tangible Personal Properties; Title.....................................................16
4.8 Intellectual Property...................................................................................17
4.9 Environmental Matters...................................................................................20
4.10 Insurance...............................................................................................21
4.11 Labor Matters...........................................................................................22
4.12 Employee Benefit Plans..................................................................................24
4.13 Material Contracts......................................................................................26
4.14 Legal Proceedings, Etc..................................................................................28
4.15 Permits.................................................................................................28
4.16 Taxes...................................................................................................28
4.17 Transactions with Shareholders, Officers, Directors, Etc................................................30
4.18 Brokers.................................................................................................31
4.19 Inventory...............................................................................................31
4.20 Accounts Receivable; Accounts Payable...................................................................31
4.21 Suppliers...............................................................................................31
4.22 Customers...............................................................................................31
4.23 Effect of Transaction...................................................................................32
4.24 Compliance with Laws....................................................................................32
4.25 Absence of Certain Commercial Practices.................................................................32
4.26 No Competing Business; Total Assets.....................................................................33
4.27 Warranties; Product Liability...........................................................................33
4.28 Bank Accounts...........................................................................................33
4.29 No Material Misstatements or Omissions..................................................................33
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Article V Representations and Warranties of each Seller.........................................................34
5.1 Authority, Validity and Effect; No Conflicts, Required Filings and Consents.............................34
5.2 Title to Shares.........................................................................................34
5.3 Filtration Systems, Inc.................................................................................35
5.4 Broker..................................................................................................35
5.5 Taxes...................................................................................................35
Article VI Representations and Warranties of Buyer..............................................................35
6.1 Organization............................................................................................35
6.2 Authority Relative to this Agreement....................................................................35
6.3 Consents and Approvals; No Violation....................................................................36
6.4 Litigation..............................................................................................36
6.5 Investment Intent.......................................................................................36
6.6 No Brokers..............................................................................................36
Article VII Covenants of the Parties............................................................................37
7.1 Further Assurances......................................................................................37
7.2 Cooperation in Litigation...............................................................................37
7.3 Noncompetition, Nonsolicitation and Nondisparagement....................................................37
7.4 Section 338(h)(10) Election.............................................................................38
7.5 Taxes...................................................................................................39
7.6 Appointment of Sellers' Representative..................................................................40
7.7 Company Employees.......................................................................................41
7.8 Federal Tax on Deposit..................................................................................43
Article VIII Indemnification....................................................................................43
8.1 Indemnification by Sellers..............................................................................43
8.2 Indemnification by Buyer................................................................................44
8.3 Definition of Losses and Legal Expenses.................................................................44
8.4 Third Party Claims......................................................................................44
8.5 Procedure Relating to Other Claims......................................................................45
8.6 Subrogation.............................................................................................45
8.7 Limitations On Indemnification Obligations..............................................................46
8.8 Payment for Indemnity Claims............................................................................46
8.9 Survival................................................................................................46
Article IX Miscellaneous........................................................................................47
9.1 Construction and Interpretation.........................................................................47
9.2 Expenses................................................................................................48
9.3 Notices.................................................................................................48
9.4 Assignment..............................................................................................49
9.5 Entire Agreement........................................................................................50
9.6 Counterparts............................................................................................50
9.7 Governing Law...........................................................................................50
9.8 Severability............................................................................................51
9.9 Third Parties...........................................................................................51
9.10 Consent to Jurisdiction and Service of Process..........................................................51
9.11 Schedules...............................................................................................51
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of January
7, 2005, is by and among each of the individuals signatory hereto who owns
capital stock (the "Shares") in Purafil, Inc., a Georgia company (the "Company")
or in Purafil Europa B.V. ("Subsidiary") (each, a "Seller" and collectively,
"Sellers") and Kaydon Corporation, a Delaware corporation ("Buyer").
BACKGROUND
A. The Company and Subsidiary are engaged in the design,
manufacture, and sales of gas-phase air filtration chemicals
and systems for industrial and commercial facilities
throughout the world (the "Business").
▇. ▇▇▇▇▇▇▇ are owners of all of the outstanding Shares of the
Company or Subsidiary.
▇. ▇▇▇▇▇▇▇ desire to sell to Buyer, and Buyer desires to purchase
from Sellers, all of the Shares upon the terms set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
subject to the terms and conditions set forth herein, Sellers and Buyer hereby
agree as follows:
ARTICLE I DEFINITIONS
For purposes of this Agreement:
"2002 FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.4(A).
"2003 FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.4(A).
"2004 FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.4(A).
"ACTION" or "ACTIONS" means any lawsuit, legal proceeding,
administrative enforcement proceeding or arbitration proceeding before any
Governmental Authority.
"AFFILIATE" means with respect to any Person, any Person that directly
or indirectly controls, is controlled by or is under common control with such
Person.
"AGREEMENT" has the meaning set forth in the preamble.
"AUDITED FINANCIAL STATEMENTS" has the meaning set forth in SECTION
4.4(A).
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"BONUS PLANS" has the meaning set forth in SECTION 4.12(C).
"BUSINESS" has the meaning set forth in the preamble.
"BUSINESS DAY" means any day other than a Saturday, Sunday or a day on
which national banks are authorized or obligated by Law or executive order to
close.
"BUYER" has the meaning set forth in the preamble.
"BUYER 401(K) PLAN" has the meaning set forth in SECTION 7.7(B).
"BUYER PLANS" has the meaning set forth in SECTION 7.7(C)(I).
"BUYER INDEMNIFIED PARTIES" has the meaning set forth in SECTION 8.1.
"BUYER WELFARE PLANS" has the meaning set forth in SECTION 7.7(C)(II).
"BV STATEMENTS" has the meaning set forth in SECTION 4.4(A).
"CASH" OR "CASH EQUIVALENTS" means the fair market value (expressed in
United States dollars) of all cash and cash equivalents, including marketable
securities and short term investments.
"CLOSING" has the meaning set forth in SECTION 3.1.
"CLOSING DATE" has the meaning set forth in SECTION 3.1.
"COBRA" has the meaning set forth in SECTION 4.12(D).
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY 401(K) PLAN" has the meaning set forth in SECTION 7.7(B).
"COMPANY EMPLOYEES" has the meaning set forth in SECTION 4.11(E).
"CONSENT" means any consent, approval, authorization, qualification,
waiver, registration or notification required to be obtained from, filed with or
delivered to a Governmental Authority or other Person in connection with the
consummation of the transactions provided for herein.
"CONTRACTS" means all contracts, leases, licenses, and other agreements
(including any amendments and other modifications thereto), whether oral or
written.
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"CURRENT ASSETS" has the meaning set forth in SECTION 2.3(A).
"CURRENT LIABILITIES" has the meaning set forth in SECTION 2.3(A).
"DEBT" means all liabilities and obligations, including principal,
interest, fees, penalties and expenses, relating to or arising from (i)
indebtedness of the Company or Subsidiary for borrowed money, whether or not
secured, including obligations under leases required to be capitalized under
GAAP, (ii) obligations of the Company or Subsidiary evidenced by bonds, notes,
debentures, letters of credit or similar instruments, (iii) obligations of the
Company or Subsidiary under conditional sale, title retention or similar
agreements or arrangements creating an obligation of the Company or Subsidiary
with respect to the deferred purchase price of property (other than customary
trade credit), (iv) interest rate and currency obligation swaps, ▇▇▇▇▇▇ or
similar arrangements, (v) all obligations of the Company or Subsidiary to
guarantee any of the foregoing types of obligations on behalf of any Person
other than the Company or Subsidiary, (vi) any bank overdraft accounts and (vii)
all obligations of another Person secured by any asset or right of the Company
or Subsidiary.
"DECEMBER 2004 FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 7.5(D).
"DEBT AGREEMENTS" means all agreements of the Company and Subsidiary
under which either has any liability for Debt.
"EMPLOYEE PLANS" has the meaning set forth in SECTION 4.12(A).
"EMPLOYEES" has the meaning set forth in SECTION 7.7(A).
"ENVIRONMENT" means soil, surface waters, groundwater, land, stream
sediments, surface or subsurface strata, and ambient air.
"ENVIRONMENTAL CLAIM" means any claims, suits, actions, proceedings,
judgments, obligations, liabilities, fines, penalties, costs, damages or
expenses (including reasonable attorney and consulting fees) arising under or
relating to any Environmental Condition on or affecting the Real Property or the
operations thereon.
"ENVIRONMENTAL CONDITION" means the presence of any Hazardous Materials
in the soils, surface water or groundwater in, on, under or migrating from or to
the Real Property, any failure by the Company or Subsidiary to comply with
Environmental Laws or Permits issued or required under Environmental Laws, and
any liabilities or obligations under Environmental Laws arising out of or
relating to the activities of the Company or Subsidiary.
"ENVIRONMENTAL LAW" means all Laws relating to the protection of the
Environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
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"ESCROW AGENT" means ▇.▇. ▇▇▇▇▇▇ Trust Company, National Association.
"ESCROW AGREEMENT" means an agreement by and among the Escrow Agent,
Sellers' Representative and Buyer substantially in the form of Exhibit A
attached hereto.
"ESCROW FUNDS" means $4,150,000.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FILTRATION SYSTEMS" means Filtration Systems, Inc., a Georgia
corporation.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 4.4(A).
"GAAP" means for the Company financial statements, United States
generally accepted accounting principles applied on a consistent basis, and for
Subsidiary financial statements, Netherlands generally accepted accounting
principles applied on a consistent basis.
"GENERAL ENFORCEABILITY EXCEPTIONS" has the meaning set forth in
SECTION 5.1(A).
"GOVERNMENTAL AUTHORITY" means any government or political subdivision,
whether federal, state, local or foreign, or any agency or instrumentality of
any such government or political subdivision, or any federal, state, local or
foreign court or arbitrator.
"HAZARDOUS MATERIAL" means any pollutant, toxic substance, including
asbestos and asbestos-containing materials, hazardous waste, hazardous material,
hazardous substance, contaminant, petroleum, radiation and radioactive materials
and polychlorinated biphyenyls as defined in or regulated by any Environmental
Law.
"HIPAA" has the meaning set forth in SECTION 4.12(D).
"IMMIGRATION ACT" has the meaning set forth in SECTION 4.11(K).
"INDEMNIFICATION CAP" has the meaning set forth in SECTION 8.7(B).
"INDEMNIFICATION DEDUCTIBLE CAP" has the meaning set forth in SECTION
8.7(A).
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 8.3.
"INDEMNIFYING PARTY" has the meaning set forth in SECTION 8.3.
"INTELLECTUAL PROPERTY" means any and all (i) patents and patent
applications; (ii) trademarks, service marks, trade names, brand names, trade
dress, slogans, logos and Internet domain names, together with the goodwill of
the business(es) symbolized by each of these; (iii) inventions, discoveries,
ideas, processes, formulae, designs, models, industrial designs, know-how,
confidential information, proprietary information and trade secrets, whether or
not patented
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or patentable; (iv) copyrights, writing and other copyrightable works and works
in progress, databases, website content and software; (v) other intellectual
property rights and foreign equivalent or counterpart rights and forms of
protection of a similar or analogous nature or having similar effect in any
jurisdiction throughout the word; (vi) registrations and application for
registration of any of the foregoing; (vii) databases; (viii) renewals,
extensions, continuations, divisionals, reexaminations or reissues or equivalent
or counterpart of any of the foregoing in any jurisdiction throughout the world,
that are owned by the Company or Subsidiary; and (ix) the right to bring suit
and collect damages for all past infringements for each of the foregoing,
including all rights to ▇▇▇ and seek recovery for damages, attorneys' fees and
costs, and any and all equitable remedies, including injunctive relief.
"INTERIM ACCOUNTING PRINCIPLES" has the meaning set forth in Section
2.2(a).
"INTERIM FINANCIAL STATEMENTS" has the meaning set forth in SECTION
4.4(A).
"INTERNAL 2004 FINANCIAL STATEMENTS" has the meaning set forth in
SECTION 4.4(C).
"IRS" has the meaning set forth in SECTION 4.12(B).
"LAW" means any law, statute, code, ordinance, regulation or rule of
any Governmental Authority.
"LEGAL EXPENSES" has the meaning set forth in SECTION 8.3.
"LIENS" means any security interest, mortgage, lien, option, pledge or
other encumbrance.
"LOSS" OR "LOSSES" has the meaning set forth in SECTION 8.3.
"MATERIAL ADVERSE EFFECT" means, with respect to the Company,
Subsidiary, Sellers or Buyer, as applicable, any change, occurrence or
development that has a material adverse effect on the business, operations,
results of operations, condition (financial or otherwise) or prospects of such
party, or that would prevent or delay the consummation of the transactions
contemplated hereby; provided, however, that "Material Adverse Effect" shall not
be deemed to include the impact of (a) changes in Laws of general applicability
or interpretations thereof by courts or Governmental Authorities, (b) changes in
GAAP or regulatory accounting principles, or (c) actions and omissions of the
Company or Subsidiary taken with the written consent of Buyer in contemplation
of the transactions contemplated by this Agreement.
"MATERIAL CONTRACTS" has the meaning set forth in SECTION 4.13(A).
"NET WORKING CAPITAL" has the meaning set forth in SECTION 2.3(A).
"NORMAL WORKING CAPITAL" has the meaning set forth in SECTION 2.3(A).
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"OFF BALANCE SHEET ARRANGEMENT" means any transaction, agreement or
other contractual arrangement to which an entity unconsolidated with the Company
or Subsidiary is a party, under which the Company or Subsidiary has: (i) any
obligation under a guarantee; (ii) a retained or contingent interest in assets
transferred to an unconsolidated entity or similar arrangement that serves as
credit, liquidity or market risk support to such entity for such assets; (iii)
any obligation, including a contingent obligation, under a contract that would
be accounted for as a derivative instrument; or (iv) any obligation, including a
contingent obligation, arising out of a variable interest in an unconsolidated
entity that is held by, and material to, the Company or Subsidiary, where such
entity provides financing, liquidity, market risk or credit risk support to, or
engages in leasing, hedging or research and development services with, the
Company or Subsidiary.
"ORDER" means any order, judgment, ruling, injunction, assessment,
award, decree or writ of any Governmental Authority.
"OSHA" has the meaning set forth in SECTION 4.11(M).
"PAYOFF LETTERS" means the letters provided by the lenders or other
holders of Debt in connection with the repayment of the Debt as contemplated by
this Agreement.
"PERMITS" means any license, permit, authorization, certificate of
authority, qualification or similar document or authority that has been issued
or granted by any Governmental Authority.
"PERSON" means any individual, sole proprietorship, partnership,
corporation, limited liability company, joint venture, unincorporated society or
association, trust or other legal entity or any Governmental Authority.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.2(A).
"REAL PROPERTY" means all of the Company's and Subsidiary's interests
in real property, in fee, leaseholds and subleaseholds, purchase options,
easements, licenses, rights to access, rights of way, all buildings and other
improvements thereon, and other interests in real property currently used in the
business or operations of the Company and Subsidiary.
"RELEASE" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing or
dumping of a Hazardous Material into the Environment.
"REVIEWING ACCOUNTANT" has the meaning set forth in SECTION 2.3(C).
"SECTION 338 ELECTION" has the meaning set forth in SECTION 7.4(A).
"SECTION 338 ELECTION TAXES" has the meaning set forth in SECTION
7.4(D).
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"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" OR SELLERS" has the meaning set forth in the preamble.
"SELLERS' KNOWLEDGE" means the knowledge that ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇ or Meridith Christianson or any officer of Subsidiary has or would have
based upon reasonable inquiry of the employees of the Company and Subsidiary who
have responsibility for the matter in question and of the Company's or
Subsidiary's counsel and independent accountants and upon a reasonable review of
the Company's and Subsidiary's books and records relating to the matter in
question.
"SELLER'S NOTICE" has the meaning set forth in SECTION 2.3(B).
"SELLERS' REPRESENTATIVE" is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
"SHARES" means all of the capital stock of the Company and Subsidiary
owned by Sellers.
"SUBSIDIARY" has the meaning set forth in the preamble.
"TANGIBLE PROPERTY" has the meaning set forth in SECTION 4.7(B).
"TAX" OR "TAXES" means any federal, state, local or foreign income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value-added (or similar), transfer, franchise, profits, license,
withholding, payroll, employment, unemployment, social security, disability,
estimated, excise, severance, stamp, occupation, premium, property,
environmental (including taxes under Code ss.59A) or windfall profit tax,
custom, duty or other tax of any kind whatsoever (including any interest,
penalty, or addition thereto) imposed by any Taxing Authority, whether disputed
or not and including any obligation to indemnify or otherwise assume or succeed
to the Tax liability of any other Person.
"TAXING AUTHORITY" means any Governmental Authority responsible for the
administration or imposition of any Tax.
"TAX RETURNS" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"WORKING CAPITAL REPORT" has the meaning set forth in SECTION 2.3(B).
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ARTICLE II PURCHASE AND SALE
2.1 Purchase and Sale. Upon and subject to the terms and conditions of
this Agreement, Sellers shall sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall purchase from Sellers, as of and with effect from the
close of business on the Closing Date, the Shares, constituting all of the
issued and outstanding shares of the capital stock of the Company and Subsidiary
owned by Sellers. Sellers shall deliver to Buyer the stock certificates, as
applicable, representing all of the Shares, with duly executed and notarized
stock powers or other evidence of transfer attached in proper form for transfer,
free and clear of all Liens, and Buyer shall purchase and acquire all of the
Shares and shall pay and deliver the Purchase Price (as defined in Section
2.2(a) hereof) to Sellers and take the other actions described in this ARTICLE
II.
2.2 Purchase Price.
(a) Subject to the adjustment set forth in Section 2.3, in full
consideration for the transfer of all Shares, at the Closing, Buyer shall pay to
Sellers $41,500,000, (i) plus $1,500,000 (ii) minus the aggregate amount
outstanding under Debt Agreements, and (iii) minus the Escrow Funds (such net
amount, the "Purchase Price"), by means of a wire transfer of immediately
available funds to an account designated in writing by the Sellers'
Representative on Exhibit D. Set forth on Schedule 2.2(a) is a complete and
accurate listing of all Sellers, Shares held by each Seller and allocation of
the Purchase Price to each Seller.
(b) At the Closing, Buyer shall (i) on behalf of the Company, cause
the Debt to be repaid in full to the party or parties entitled thereto pursuant
to the Payoff Letters, and (ii) pay the Escrow Funds into an escrow account to
be held by the Escrow Agent in accordance with the terms of the Escrow
Agreement.
2.3 Purchase Price Adjustment. A post-closing adjustment to the
Purchase Price shall be made as follows:
(a) The Purchase Price assumes that the Company's Net Working Capital
(as defined below) as of the close of business on the Closing Date will total
$3,750,000 (the "Normal Working Capital"). For purposes of this Agreement, Net
Working Capital shall be determined in accordance with the accounting principles
utilized in the preparation of the Interim Financial Statements (as defined
below) (the "Interim Accounting Principles"), consistent with past practices
(except as set forth on Exhibit B) and the Normal Working Capital. "Net Working
Capital" shall mean the sum of Current Assets less Current Liabilities as set
forth on Exhibit B. "Current Assets" shall mean the current assets of the
Company and Subsidiary as set forth on a balance sheet prepared in accordance
with Interim Accounting Principles, excluding (i) Cash and Cash Equivalents
which cannot be documented to Buyer's satisfaction are unrestricted, freely
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transferable, not subject to offset, and fully available to Buyer on the Closing
Date without the inconvenience of payment of any additional surcharges, taxes or
penalties of any kind other than costs associated with the exchange of currency,
if applicable, and (ii) Federal Tax on deposit. "Current Liabilities" shall mean
the current liabilities of the Company and Subsidiary as set forth on a balance
sheet prepared in accordance with Interim Accounting Principles, excluding Debt.
A physical inventory was taken by the Buyer at which representatives of Buyer
and the Sellers were present on January 3, 2005.
(b) Not later than thirty (30) days after the Closing Date, Buyer shall
cause to be prepared and delivered to the Sellers' Representative a report
setting forth the Net Working Capital as of the close of business on the Closing
Date (the "Working Capital Report"). Sellers, acting through the Sellers'
Representative, shall have thirty (30) days from the date the Working Capital
Report is received by the Sellers' Representative to review such report and
provide Buyer with written notice of any objections thereto and the basis for
such objections (the "Seller's Notice"). During such thirty (30) day period,
Buyer shall provide the Sellers' Representative with reasonable access to the
Company's and Subsidiary's accounts and records during normal business hours. If
Buyer does not receive the Seller's Notice, the Working Capital Report shall be
deemed accepted for all purposes of this Agreement; any item which is not
identified in the Seller's Notice shall be deemed accepted by the Sellers'
Representative for all purposes of this Agreement. Buyer and the Sellers'
Representative shall work together in good faith to resolve their differences as
identified in the Seller's Notice within the thirty (30) days following the
delivery of Seller's Notice.
(c) If Buyer and the Sellers' Representative fail to reach a mutually
agreeable determination with respect to the Working Capital Report within the
thirty (30) days following the delivery of Seller's Notice, then the disputed
item(s) shall be submitted to KPMG, LLP (the "Reviewing Accountant") for
resolution. Buyer and the Sellers' Representative shall direct the Reviewing
Accountant to resolve such item(s) within thirty (30) days of submission or as
soon thereafter as is practicable. The Reviewing Accountant's determination
shall be final and binding on Buyer and the Sellers' Representative, and
judgment on such determination may be entered in any court having jurisdiction.
Buyer and Sellers shall each be responsible for 50% of the fees and expenses of
the Reviewing Accountant. Any agreement as to the Net Working Capital shall be
in writing and signed by or on behalf of Buyer and by the Sellers'
Representative, on behalf of Sellers.
(d) To the extent that the Net Working Capital is less than the Normal
Working Capital, the Purchase Price shall be reduced by the amount of such
shortfall and the deficiency, together with interest thereon at the rate earned
on the Escrow Funds, shall be paid to Buyer from the Escrow Funds within three
(3) Business Days after the Net Working Capital is determined in accordance with
this Section 2.3.
(e) In the event that the Net Working Capital exceeds the Normal
Working Capital, then the Purchase Price shall be increased by the amount of
such excess. Buyer shall
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pay to the Sellers' Representative the amount of such excess in Net Working
Capital together with interest thereon at the rate earned on the Escrow Funds
within three (3) Business Days after the Net Working Capital is determined in
accordance with this Section 2.3.
ARTICLE III CLOSING AND DELIVERIES
3.1 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall occur on the date of this Agreement, which date
shall be referred to in this Agreement as the "Closing Date" and the Closing
shall be deemed to be effective as of the close of business on the Closing Date.
All proceedings to be taken and all documents to be executed and delivered by
all parties at the Closing will be deemed to have been taken and executed
simultaneously and no proceedings will be deemed to have been taken nor
documents executed or delivered until all have been taken, executed and
delivered.
3.2 Deliveries by Sellers. At the Closing, Sellers shall deliver or
cause to be delivered to Buyer the following items:
(a) The stock certificates or other evidence representing the
Shares, with duly executed and notarized stock powers or other evidence of
transfer attached in proper form for transfer free and clear of all Liens;
(b) The Payoff Letters reflecting all outstanding Debt and any
necessary Uniform Commercial Code termination statements or other releases as
may be reasonably required to evidence the satisfaction of the Debt arising
under the Debt Agreements;
(c) Any necessary Uniform Commercial Code termination statements or
other releases as may be reasonably required to evidence the satisfaction of all
Liens;
(d) The articles of incorporation of the Company and of Filtration
Systems certified as of the most recent practicable date by the Georgia
Secretary of State and the equivalent governing instruments of Subsidiary
certified as of the most recent practicable date by the applicable authority in
the jurisdiction of organization or incorporation; provided, however, that in
the event such documents are certified on a date more than 30 days prior to
Closing, Sellers shall provide evidence at Closing satisfactory to Buyer that
such documents have been updated (orally or otherwise) to a date no more than 15
days prior to Closing;
(e) A certificate of the Georgia Secretary of State as to the good
standing of the Company and of Filtration Systems as of the most recent
practicable date and a certificate as to the good standing (or equivalent
documentation) of Subsidiary as of the most recent practicable date from the
applicable authority in the jurisdiction of organization or incorporation;
provided, however, that in the event such certifications are certified on a date
more than 30 days prior to Closing, Sellers shall provide evidence at Closing
satisfactory to Buyer that such certifications have been updated (orally or
otherwise) to a date no more than 15 days prior to Closing;
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(f) Original corporate record books and stock record books of the
Company, Filtration Systems and Subsidiary;
(g) A counterpart to the Escrow Agreement, duly executed by
Sellers' Representative;
(h) Evidence of receipt of all Consents required to consummate the
transactions contemplated hereby;
(i) A certificate of the Secretary of the Company, given by the
Secretary on behalf of the Company and not in the Secretary's individual
capacity, certifying as to the bylaws of the Company and as to the resolutions
of the Board of Directors of the Company ratifying prior actions and authorizing
this Agreement and the transactions contemplated hereby;
(j) Documents evidencing the sale of the Mini ▇▇▇▇▇▇ automobile to
and purchase by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at the book value of such automobile;
(k) Written resignations or other documentation evidencing the
resignation of directors and officers of the Company, Filtration Systems and
Subsidiary who are listed on Schedule 3.2(k);
(l) Evidence satisfactory to the Buyer regarding the assignment to
and assumption by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of the lease agreements listed on Schedule
3.2(l);
(m) Employment agreements for key employees identified on Schedule
3.2(m);
(n) A survey of the Real Property;
(o) To the extent not provided prior to the Closing, copies of
powers of attorney executed by each Seller who is not individually executing
this Agreement properly conferring such power of execution on Sellers'
Representative; and
(p) Evidence satisfactory to the Buyer regarding the transfer by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ of all of the outstanding equity interest in Filtration Systems,
Inc. to the Company free and clear of any Liens.
3.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver the
following items:
(a) The Purchase Price paid to the Sellers' Representative in
accordance with Section 2.2(a);
(b) Amounts owed under the Debt Agreements in accordance with the
Payoff Letters;
11
(c) The Escrow Funds to the Escrow Agent;
(d) A certificate of the Secretary of Buyer, given by the Secretary
on behalf of Buyer and not in the Secretary's individual capacity, certifying as
to the resolutions of the Board of Directors of Buyer authorizing this Agreement
and the transactions contemplated hereby; and
(e) A counterpart to the Escrow Agreement, duly executed by Buyer
and the Escrow Agent.
3.4 Escrow. At the Closing, Buyer shall deposit by wire transfer of
immediately available funds the Escrow Funds into escrow to be held in
accordance with the terms of the Escrow Agreement in substantially the form
attached to this Agreement as Exhibit A. To the extent that amounts are to be
paid by Sellers to Buyer pursuant to this Agreement, such amounts shall be paid
from the Escrow Funds pursuant to the terms of the Escrow Agreement.
Disbursement of all or any of the Escrow Funds shall be governed by the terms of
the Escrow Agreement.
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer that the
following representations and warranties are true and correct.
4.1 Organization of the Company and Subsidiary; Qualification;
Capitalization.
(a) The Company, Filtration Systems and Subsidiary are
corporations, and are duly organized, validly existing and in good standing
under the laws of each respective jurisdiction of incorporation. The Company and
Subsidiary are duly qualified to do business, and in good standing, in each
jurisdiction in which the character of the properties owned or leased by it or
in which the conduct of its business requires it to be so qualified as set forth
on Schedule 4.1(a). No business other than the solicitation of sales is
conducted in states other than those states in which the primary facilities of
the Company and Subsidiary are located, including activities of any sales
representative on behalf of the Company or Subsidiary. Neither the Company nor
Subsidiary has used any assumed name or has done business under any name other
than its formal name at any time during the five years prior to the date of this
Agreement.
(b) The authorized and issued capital stock of the Company,
Filtration Systems and Subsidiary are set forth on Schedule 4.1(b). All issued
shares of such capital stock are validly issued and outstanding, fully paid and
nonassessable, and owned beneficially and of record by Sellers as set forth on
Schedule 4.1(b) (or by the Company with respect to the shares of Subsidiary and
of Filtration Systems set forth on Schedule 4.1(b)). Each Seller has good title
to such shares, free and clear of any and all Liens. There are no (a)
outstanding securities convertible or exchangeable into shares of capital stock
of the Company, Filtration Systems or Subsidiary; (b) options, warrants, calls,
subscriptions or other rights, agreements or commitments obligating the Company,
Filtration Systems or Subsidiary to issue, transfer or sell any shares of
12
capital stock; (c) voting trusts or other agreements or understandings to which
the Company, Filtration Systems or Subsidiary is a party or by which the
Company, Filtration Systems or Subsidiary is bound with respect to the voting,
transfer or other disposition of shares of capital stock; or (d) outstanding
contractual obligations of the Company, Subsidiary or any Seller to repurchase,
redeem or otherwise acquire any shares of capital stock of the Company,
Filtration Systems or Subsidiary.
4.2 Authority; No Violation or Consent.
(a) Neither the execution and delivery of this Agreement nor the
consummation by Sellers of the transactions contemplated herein, nor compliance
by the Company or Sellers with any of the provisions hereof, will (i) conflict
with or result in a breach of any provisions of the articles of incorporation or
organization, bylaws or similar organizational document of the Company or
Subsidiary, (ii) constitute or result in the breach of any term, condition or
provision of, or constitute a default under, or give rise to any right of
termination, cancellation or acceleration with respect to any Material Contract,
or result in the creation or imposition of a Lien upon any property or assets of
the Company, Filtration Systems or Subsidiary, or (iii) violate any Order or Law
applicable to the Company, Filtration Systems or Subsidiary or any of their
respective properties or assets.
(b) No Consent is required to be obtained by the Company or
Subsidiary for the consummation of the transactions contemplated in this
Agreement.
4.3 No Subsidiaries or Investments.
(a) Except for Filtration Systems and Subsidiary, neither the
Company nor Subsidiary beneficially owns, directly or indirectly, any
outstanding voting stock, membership interests, partnership interests or equity
of any other corporation, limited liability company, partnership or other
entity, nor is the Company or Subsidiary a party to or involved with any
partnership, joint venture, limited liability company or other entity in which
the Company or Subsidiary, directly or indirectly, has, or pursuant to any
agreement has or will have the right to acquire by any means, an interest or
investment representing an equity, profit or voting interest entitling the
Company or Subsidiary to vote for or appoint the management of such entity.
(b) Except as disclosed on Schedule 4.3(b), Filtration Systems (i)
has been inactive and has not conducted business operations since at least 1994;
(ii) does not currently own or have any interest in any assets; (iii) is not a
party to any agreement, contract or understanding, whether written or oral, and
(iv) has no 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 Filtration Systems is or may become liable, except for obligations under
the contracts identified in Schedule 4.3(b) (none of which arise out of a breach
of such contract). To the Sellers' Knowledge, there is no circumstance,
condition, event or arrangement existing at
13
Closing that will give rise after the date of this Agreement to any liabilities
of Filtration Systems (or to Buyer after completion of the transaction).
4.4 Financial Statements.
(a) Copies of the following financial statements have been
delivered to Buyer or have been made available to Buyer for its review: (i) the
audited combined financial statements and report of independent certified public
accountants of the Company and Subsidiary as of October 26, 2002 and October 27,
2001, together with the notes thereto (the "2002 Financial Statements"), (ii)
the audited combined financial statements and report of independent certified
public accountants of the Company and Subsidiary as of October 25, 2003 and
October 26, 2002, together with the notes thereto (the "2003 Financial
Statements"), (iii) the audited combined financial statements and report of
independent certified public accountants of the Company and Subsidiary as of
October 30, 2004 and October 25, 2003, together with the notes thereto (the
"2004 Financial Statements"), (iv) the audited financial statements of
Subsidiary and report of independent certified public accountants of Subsidiary
as of and for each of the years ended October 30, 2004, October 25, 2003,
October 26, 2002 and October 27, 2001, in each case, together with the notes
thereto (the "BV Statements"), (v) the unaudited combined balance sheet of the
Company and Subsidiary as of November 27, 2004, and the related unaudited
combined income statement for the one-month period then ended and the unaudited
combined balance sheet of the Company and Subsidiary as of October 30, 2004, and
the related unaudited combined income statement for the twelve-month period then
ended (collectively, the "Interim Financial Statements"), (the 2002 Financial
Statements, 2003 Financial Statements, 2004 Financial Statements, the BV
Statements, together with the Interim Financial Statements, are collectively the
"Financial Statements"; the 2002 Financial Statements, 2003 Financial
Statements, 2004 Financial Statements, the BV Statements, but not including the
Interim Financial Statements, are collectively the "Audited Financial
Statements").
(b) The Audited Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis and fairly present, in all
material respects, the financial position, results of operations, stockholders'
equity, and cash flows of the Company and Subsidiary, as of the dates and for
the periods indicated.
(c) Except as disclosed on Schedule 4.4(c), the internally prepared
unaudited combined balance sheet of the Company and Subsidiary as of October 30,
2004, and the related unaudited combined income statement for the twelve-month
period then ended (the "Internal 2004 Financial Statements") have been prepared
in accordance with GAAP applied on a consistent basis and fairly present, in all
material respects, the financial position and results of operations of the
Company and Subsidiary, as of the dates and for the periods indicated.
(d) The Interim Financial Statements have been prepared by
management in a manner and on a basis consistent with the accounting principles
and policies utilized by management in preparation of the Internal 2004
Financial Statements and fairly present, in all
14
material respects, the financial position and results of operations of the
Company and Subsidiary as of the dates and for the periods indicated.
(e) The Financial Statements are correct and complete and are
consistent with the books and records of the Company and Subsidiary, except as
set forth on Schedule 4.4(e).
(f) There are no Off Balance Sheet Arrangements effected by the
Company or Subsidiary.
(g) The Company and Subsidiary each maintain accurate books and
records reflecting their assets and liabilities and maintain proper and adequate
internal accounting controls which provide assurance that (i) transactions are
executed with management's authorization; (ii) transactions are recorded as
necessary to permit preparation of the combined financial statements of the
Company and Subsidiary and to maintain accountability for the Company's and
Subsidiary's combined assets; (iii) access to the Company's and Subsidiary's
assets is permitted only in accordance with management's authorization; (iv)
except as disclosed on Schedule 4.4(g), the reporting of the Company's and
Subsidiary's combined assets is compared with existing assets at regular
intervals; and (v) accounts, notes and other receivables and inventory are
recorded accurately, and proper adequate procedures are implemented to effect
the collection thereof on a current and timely basis.
4.5 No Undisclosed Liabilities. Neither the Company nor Subsidiary has
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 or Subsidiary is or may become liable, contingently or otherwise,
which are not reflected in the Financial Statements or disclosed in the notes
thereto, except those (i) which are of the type not required under GAAP to be
reflected in the Financial Statements, (ii) which were incurred in the ordinary
course of business after December 1, 2004, and are consistent with past
practices in nature and are individually and in the aggregate in an amount
consistent with the Financial Statements, or (iii) which are disclosed on
Schedule 4.5 to this Agreement. To the Sellers' Knowledge, there is no
circumstance, condition, event or arrangement existing at Closing that will give
rise after the date of this Agreement to any liabilities of the Company or
Subsidiary (or to Buyer after consummation of the transactions contemplated by
this Agreement), other than liabilities incurred in the ordinary course of
business.
4.6 Conduct of Business in Ordinary Course. Since January 1, 2004, (a)
the Company and Subsidiary have conducted their respective businesses and
operations in the ordinary course of business consistent with past practices
including, without limitation, as to the granting of terms of sale including
discounts and payment terms, collection of receivables, payment of accounts
payable and manufacture and shipment of inventory, except as set forth on
Schedule 4.6(a), (b) there has not been any change that has had a Material
Adverse Effect on the Company or Subsidiary, (c) there has not been any
declaration, setting aside or payment of any
15
dividend or other distribution (whether in cash, stock, property or any
combination thereof) in respect of any Company's or Subsidiary's capital stock
or any repurchase, redemption or other acquisition by any Company or Subsidiary
of any shares of capital stock or other equity interests of the Company or
Subsidiary, except as set forth on Schedule 4.6(c), (d) there has not been any
damage, destruction or casualty loss, whether covered by insurance or not, which
has a Material Adverse Effect on the Company or Subsidiary; (e) there has not
been any material change by the Company or Subsidiary in its accounting methods,
principles or practices, or internal controls; and (f) there has been no
acquisition or disposition of an asset or assets by the Company or Subsidiary
with an individual value in excess of $15,000 or an aggregate value in excess of
$50,000, except as set forth on Schedule 4.6(f).
4.7 Real Estate and Tangible Personal Properties; Title.
(a) Schedule 4.7(a) contains a complete and accurate description of
all the Real Property and of the Company's or Subsidiary's interest therein. The
Real Property listed on Schedule 4.7(a) comprises all real property interests
used in the conduct of the business and operations of the Company and Subsidiary
as now conducted. Except as disclosed on Schedule 4.7(a), neither the Company
nor Subsidiary currently owns or leases any real property nor has the Company or
Subsidiary previously owned or leased any real property.
(b) The buildings, facilities, machinery, equipment, molds,
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 or Subsidiary (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
repair and replacement in accordance with the Company's or Subsidiary's past
practices, (iii) are located at the Real Property except as disclosed on
Schedule 4.7(b), and (iv) are suitable for their current use and are currently
in use by the Company or Subsidiary, as applicable, in the operation of their
businesses in the ordinary course. The Tangible Property is free of any material
structural or engineering defects that would have a Material Adverse Effect.
(c) The Company and Subsidiary, as applicable, each have good,
valid and marketable fee simple title to all of the Real Property and to the
Tangible Property and all of the other assets reflected on the 2004 Financial
Statements as owned by the Company and Subsidiary, all of which are free and
clear of all Liens, other than (i) those set forth on Schedule 4.7(c), (ii)
those which do not, individually or in the aggregate, materially interfere with
the current or future use of the Real Property or Tangible Property or
materially detract from their value, (iii) 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 (iv) zoning, entitlement
and other land use and environmental regulations by governmental agencies. The
Company's buildings, improvements and conduct of its business does not encroach
upon any real property
16
rights of any Person, including any Governmental Authority, nor is any third
Person or any structure encroaching upon any of the Company's Real Property.
(d) The Real Property is currently zoned in the zoning category
which permits operation of such properties as now used, operated and maintained
for the operation of the Company's and Subsidiary's business, and none of the
Real Property nor its respective use is in violation of any Law, nor to the
Sellers' Knowledge is there a pending or threatened investigation regarding a
potential violation of any Law. The consummation of the transactions
contemplated herein will not result in a violation of any Law or the termination
(or required renewal) of any applicable zoning variance or Permit now existing.
The Real Property is not located on a flood plain.
(e) No portion of the Real Property or interest therein, including
access thereto or any easement benefiting such property, is subject to temporary
requisition of use by any Governmental Authority or has been condemned, or taken
in any proceeding similar to a condemnation proceeding, nor is there now pending
any condemnation, expropriation, requisition or similar proceeding against the
Real Property or any portion thereof. Neither the Company nor Subsidiary has
received any written notice that any such proceeding is contemplated, and, to
the Sellers' Knowledge, no such proceeding is currently being threatened or
contemplated.
(f) All utilities, including without limitation, power, gas,
electricity, sewer, water and telephone, enter the Real Property upon and are
operated through valid public or private easements and rights-of-way and all
excess surface water runoff or drainage from such property flows or runs off the
property through valid public or private easements and rights-of-way; all
installation, connection and hook up charges for such utilities have been paid
in full; all permits and approvals for use of such utilities have been obtained
from all Governmental Authorities or other entities regulating the use thereof;
and there is sufficient water, sewer, gas and electricity available to the Real
Property to properly service the intended use thereof.
(g) No Person (other than Buyer) has any right or option to acquire
the Real Property, or any part thereof, or any interest therein, from the
Company or Subsidiary. Neither the Company nor Subsidiary has entered into any
agreement with any Person granting the right to use, occupy or possess the Real
Property.
(h) The Company is not a "foreign person" within the meaning of
Section 1445(f) of the Code.
4.8 Intellectual Property.
(a) The Company, Filtration Systems or Subsidiary, owns or is licensed for, and
in any event possesses sufficient and legally enforceable rights with respect
to, all Intellectual Property that is or has been used or exploited in, or that
may be necessary to conduct
17
the business of the Company, Filtration Systems and Subsidiary as it is
presently conducted and is proposed to be conducted. Schedule 4.8(a) sets forth
for the Intellectual Property owned by the Company, Filtration Systems and
Subsidiary, and includes a complete and correct list or copy (where applicable)
of all (i) patents and patent applications, (ii) trademark and service ▇▇▇▇
registrations and applications therefor, (iii) material unregistered trademarks
and service marks, (iv) domain names, (v) copyright registrations and
applications therefor, (vi) material unregistered copyrights, and (vii) a
written description of all trade secrets or "know-how" indicating for each,
where applicable: (1) the jurisdiction, (2) the patent, registration, or
application number, (3) the date issued, and (4) the date filed. Sellers have
delivered to Buyer copies of all documentation which they, the Company,
Filtration Systems or Subsidiary possesses relating to each item set forth on
Schedule 4.8(a).
(b) With respect to each item of Intellectual Property owned by
Company, Filtration Systems and Subsidiary identified on Schedule 4.8(a), the
Company or Subsidiary, as applicable, possess 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 4.8(a) that the Company, Filtration
Systems or Subsidiary 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 by this Agreement, and (ii) has
not been breached by any party thereto.
(c) The Intellectual Property owned, licensed, used or exploited by
the Company, Filtration Systems and Subsidiary, is valid and subsisting, in full
force and effect, and has not been cancelled, expired, or abandoned. All
drawings for parts used to manufacture products sold by the Company and
Subsidiary are current and adequate to be used to manufacture such products. No
claim has been made, asserted, or threatened, or is pending against the Company,
Filtration Systems or Subsidiary based upon, challenging or seeking to deny or
restrict the use or exploitation by the Company, Filtration Systems or
Subsidiary of any of the Intellectual Property owned or licensed by the Company,
Filtration Systems or Subsidiary. None of the Intellectual Property owned,
licensed, used or exploited by the Company, Filtration Systems or Subsidiary is
the subject of (i) any patent interference, reissue, or reexamination proceeding
(ii) any trademark opposition or cancellation proceeding or (iii) or any other
action seeking to modify, restrict, or terminate the rights of the Company,
Filtration Systems or Subsidiary in the Intellectual Property. Except as
provided on Schedule 4.8(c), there are no actions that must be taken by the
Company, Filtration Systems or Subsidiary within 180 days of the Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications, certificates or responses to office
actions issued by the U.S. Patent and Trademark Office or a similar foreign
government agency for the purposes of obtaining, maintaining, perfecting, or
preserving or renewing any of the Intellectual Property.
(d) The consummation of the transactions contemplated by this
Agreement will not result in the termination or impairment of any of the
Intellectual Property owned by the
18
Company, Filtration Systems or Subsidiary and will not require the consent of
any Governmental Authority or third party in respect of such Intellectual
Property.
(e) Except as set forth on Schedule 4.8(e), there are no
settlements, forbearances to ▇▇▇, consents, judgments, or orders or similar
obligations which (i) restrict the rights of the Company, Filtration Systems or
Subsidiary to use any Intellectual Property, (ii) restrict the business of the
Company, Filtration Systems or Subsidiary in order to accommodate a third
party's Intellectual Property or (iii) permit third parties to use any
Intellectual Property owned by the Company, Filtration Systems or Subsidiary.
The Company, Filtration Systems and Subsidiary have not licensed or sublicensed
their rights in any Intellectual Property and no royalties, honoraria or other
fees are payable by the Company, Filtration Systems or Subsidiary for the use of
or right to use any Intellectual Property.
(f) To the extent indicated in Schedule 4.8(a), such Intellectual
Property has been duly registered in, filed in, or issued by, the offices
indicated in Schedule 4.8(a). In each case where a registration or patent or
application for registration or patent listed in Schedule 4.8(a) is held by
assignment, the assignment has been duly recorded with the governmental office
from which the original registration or patent issued or before which the
application for registration or patent is pending. The Company, Filtration
Systems and Subsidiary have fully complied with the patent marking requirements
of the U.S. Patent Act and corresponding marking requirements in foreign
jurisdictions and has at all times used other applicable designations (e.g.,
"(R)") for the Intellectual Property in accordance with the legal requirements
for such use and in such a manner as to prevent defenses of innocent
infringement of the Intellectual Property.
(g) Except as set forth on Schedule 4.8(g), none of the Company,
Filtration Systems or Subsidiary has received any notice of a claim and, to the
Sellers' Knowledge, there is no threatened claim, against the Company,
Filtration Systems or Subsidiary asserting that any of the Intellectual Property
infringes or violates the rights of any Person. None of the Company, Filtration
Systems or Subsidiary has within the last two years given any notice to any
Person asserting infringement by such Person of any of the Intellectual
Property.
(h) None of the following conflicts with or otherwise infringes or
misappropriates the rights or property of any third party: (i) the products or
services provided by the Company. Filtration Systems and Subsidiary, (ii) the
business conducted by the Company, Filtration Systems and Subsidiary, and (iii)
the use or exploitation of the Intellectual Property. No claim has been made,
asserted or threatened, or is pending against the Company, Filtration Systems or
Subsidiary alleging that any of (i), (ii) or (iii) conflict with or otherwise
infringe or misappropriate the rights or property of any third party.
(i) Schedule 4.8(i) identifies all disclosures of Intellectual
Property to third parties made pursuant to non-disclosure agreements that
protect the confidentiality of such Intellectual Property and restrict the use
of such Intellectual Property to an identified purpose.
19
Schedule 4.8(i) identifies those former and current employees and consultants of
the Company, Filtration Systems and Subsidiary who have executed agreements
relating to the assignment of any rights to Intellectual Property to the
Company. Each of the Company's, Filtration System's and Subsidiary's current and
former employees have acknowledged their obligations to maintain the
confidentiality of confidential information and to only use such information for
Company purposes by executing a written acknowledgment evidencing receipt of the
Company employee handbook or similar documentation and such obligations are
valid and enforceable under applicable Laws.
(j) With respect to each trade secret and "know-how" of the Company
and Subsidiary, the documentation relating to such trade secret and "know-how"
is current, accurate and sufficient in detail and content to identify and
explain it and to allow its full and proper use without reliance on the
knowledge or memory of any individual. The Company and Subsidiary have taken all
reasonable precautions to protect the secrecy, confidentiality and value of all
trade secrets and "know-how". The trade secrets and "know-how" are not part of
the public knowledge or literature and, to the Sellers' Knowledge, have not and
are not being used, divulged or appropriate either for the benefit of any person
or entity (other than the Company and Subsidiary) or to the detriment of the
Company and Subsidiary.
4.9 Environmental Matters.
(a) Except as set forth on Schedule 4.9(a), the Company and
Subsidiary are each in compliance with all Environmental Laws applicable to
their use of the Real Property.
(b) Neither the Company nor Subsidiary has generated, manufactured,
refined, transported, treated, stored, handled, disposed, transferred, produced
or processed any Hazardous Materials, except in compliance with all applicable
Environmental Laws and in a manner that would not give rise to liabilities or
obligations under Environmental Laws or the common law, and, as of the date of
this Agreement, there has been no Release of any Hazardous Material at, on, or
in, the vicinity of the Real Property, except in compliance with Environmental
Laws and in a manner that would not give rise to liability or obligations under
Environmental Laws or the common law.
(c) As of the date of this Agreement, neither the Company nor
Subsidiary has (i) received notice under the provisions of any Environmental
Law; (ii) received any request for information, demand letter, or formal
complaint or claim under any Environmental Law; or (iii) been subject to, or to
the Sellers' Knowledge threatened with, any governmental or citizen action with
respect to any Environmental Law.
(d) Except as set forth on Schedule 4.9(d), there currently are
effective all Permits required under any Environmental Law that are necessary
for the Company's and Subsidiary's activities and operations at the Real
Property. The Company and Subsidiary are and have been in compliance with all
such Permits; and, to the extent required by Environmental
20
Laws, the Company and Subsidiary have made or will make, prior to Closing,
timely and sufficient application for the extension, reissuance or renewal of
such Permits.
(e) All material expenses related to environmental liabilities and
compliance with Environmental Laws and Permits or authorizations required
hereunder accrued and recorded by the Company and Subsidiary on its books for
the 2002, 2003 and 2004 fiscal years are included in the Financial Statements.
(f) No underground storage tanks, polychlorinated byphenyls, or
friable asbestos materials now exist or, to the Sellers' Knowledge, have existed
on the Real Property.
(g) Sellers have provided Buyer with true and complete copies of
any environmental reports, correspondence to and from Governmental Authorities
and other documents in their possession or control that relate to Environmental
Claims, the Company's and Subsidiary's compliance with Environmental Laws and
Permits issued under Environmental Laws, or to the Environmental Condition of
the Real Property, and any other property on which the Company, Subsidiary or
any predecessor has conducted business.
(h) There are no facts, circumstances, conditions or occurrences
resulting from the Company's or Subsidiary's business, or to the Sellers'
Knowledge, any predecessor's conduct of business and, to the Sellers' Knowledge,
any other such facts, circumstances, conditions or occurrences, that could
reasonably be anticipated (i) to form the basis of an Environmental Claim or
other claim relating to Hazardous Materials, (ii) to interfere with or prevent
continued compliance by the Company and Subsidiary with Environmental Laws and
environmental Permits, or (iii) to cause the Real Property to be subject to any
restrictions on ownership or occupancy under any Environmental Law.
4.10 Insurance. Schedule 4.10 sets forth, as of the date of this
Agreement, all policies of insurance covering the Company and Subsidiary and
their respective businesses, including but not limited to director and officer
insurance, and indicates whether such policies are claims made or occurrence
based. All such policies are 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 paid and no notice of cancellation or 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. The insurance
policies to which the Company or Subsidiary is a party are sufficient for
compliance with all requirements of law and for all agreements to which the
Company or Subsidiary is a party. There are no outstanding claims by the Company
or Subsidiary under any such insurance policies except for routine claims under
worker's compensation and Employee Plans. Other than refusals or coverage
limitations relating solely to the general nature of the Company's or
Subsidiary's business operations, neither the Company nor Subsidiary has 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
21
insurance during the thirty-six (36) months immediately prior to the date of
this Agreement. The Company and Subsidiary have each timely and properly given
all notices required to have been given by the Company or Subsidiary to any
insurance company, and no insurance company has asserted in writing that any
claim is not covered by the applicable policy relating to such claim.
4.11 Labor Matters.
(a) The Company is not a party to or subject to any collective
bargaining agreements, and, as of the date hereof, to the Sellers' Knowledge, no
labor union or other collective bargaining unit represents or claims to
represent any of the Company's employees.
(b) There is no union campaign being conducted to solicit cards
from employees to authorize a union to request a National Labor Relations Board
certifications election with respect to the Company's employees.
(c) There are no unfair labor practice charges or complaints, or
any current union representation questions, involving employees or former
employees of the Company pending against the Company before the National Labor
Relations Board or similar foreign entity; there is no labor strike, lockout,
organized slowdown or organized work stoppage in effect or, to the Sellers'
Knowledge, threatened against the Company; and there has been no charge of
discrimination filed against or threatened against the Company with the Equal
Employment Opportunity Commission or similar governmental body.
(d) The Company hires temporary labor or other subcontract labor at
their facilities only through temporary employment agencies. No part-time
employee works more than 40 hours in any week.
(e) Schedule 4.11(e) sets forth the name, job title, and total
compensation (including bonuses, commissions or incentive compensation) for each
of the last two calendar years of each employee of the Company or Subsidiary as
of the date of this Agreement whose annual W-2 compensation for the calendar
year exceeded $50,000 (the "Company Employees"). Except for the Seller's
Representative and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, none of the Company Employees have notified
the Company or Subsidiary or have been notified by the Company or Subsidiary
that he or she will cancel, has canceled or otherwise will terminate such
employee's relationship with the Company or Subsidiary. None of the Company
Employees are subject to any secrecy or non-competition agreement or any other
agreement or restriction of any kind that would impede in any way the ability of
such employee to carry out fully all activities of such employee in furtherance
of the business or operations of the Company or Subsidiary.
(f) The Company has paid in full to each Company Employee all
wages, salaries, commissions, bonuses, benefits, and other compensation due to
such employees or otherwise arising under any policy, practice agreement, plan,
program, statute or other law. Neither the Company nor Subsidiary is liable for
any severance pay or other payments to any
22
employee or former employee arising from the termination of employment, and
neither the Company, Subsidiary nor the Buyer will have any liability under any
benefit or severance policy, practice, agreement, change-in-control or other
plan, or program which exists or arises, or may be deemed to exist or arise,
under any applicable law or otherwise, as a result of or in connection with the
transactions contemplated by this Agreement or as a result of the termination by
the Company or Subsidiary of any employee on or before the Closing Date.
(g) The Company is not liable for any post-retirement benefits to
any Company Employee or former employee.
(h) Schedule 4.11(h) sets forth the historical loss runs of all
workers' compensation claims in the past two (2) years with respect to the
Company together with a current loss run of workers' compensation claims.
(i) No Company Employee is on or subject to any layoff, short-term
or long-term disability, workers compensation claim or other leave of absence,
except as set forth on Schedule 4.11(i).
(j) The Company and Subsidiary have complied with applicable laws,
executive orders, rules and regulations relating to employment, civil rights and
equal employment opportunities, including, the Civil Rights Act of 1964, Title
VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, and Title I
of the American with Disabilities Act.
(k) The Company is and at all times during the past five (5) years
has been in compliance with the terms and provisions of the Immigration Reform
and control Act of 1986, (the "Immigration Act"). With respect to each
"employee" (as defined in 8 C.F.R. 274a.1(f)) of the Company and Subsidiary for
whom compliance with the Immigration Act is required, the Company or Subsidiary
has on file a true, accurate and complete copy of (i) each employee's Form I-9
(Employment Eligibility Verification Form), and (ii) all other records or
documents required to be retained pursuant to the Immigration Act. The Company
has not been cited, fined, or served with a Notice of Intent to Fine or with a
Cease and Desist Order, nor to the Sellers' Knowledge has any action or
administrative proceeding been initiated or threatened against the Company by
the Immigration and Naturalization Service by reason of any actual or alleged
failure to comply with the Immigration Act.
(l) The Company has given all notices required under COBRA to all
employees of the Company who were terminated or laid off on or prior to Closing.
(m) The Company's facility is maintained and operated in
substantial compliance with the Occupational Safety and Health Act of 1970
("OSHA") and any similar state statute, rule or regulation. During the past five
years, the Company has not been subject to an investigation by the U. S.
Department of Labor, litigation over compliance with such rules
23
and regulations or subject to any fine, penalty or citation relating to or
arising out of a violation or alleged violation of OSHA and any similar state
statute and such rules and regulations
4.12 Employee Benefit Plans.
(a) Schedule 4.12(a) sets forth a complete list of (i) all
"employee benefit plans," as defined in Section 3(3) of ERISA and (ii) all other
severance pay, salary continuation, club membership, stock option, welfare,
insurance, fringe benefit, retirement, pension, profit sharing or deferred
compensation plans, contracts, programs, funds, or arrangements of any kind to
which the Company or Subsidiary makes or is required to make payments,
transfers, or contributions in respect of Company Employees (all of the above
together with the Bonus Plans (as defined below) being hereinafter individually
or collectively referred to as "Employee Plan" or "Employee Plans,"
respectively).
(b) Copies of the following materials have been delivered or made
available to Buyer: (i) all current plan documents for each Employee Plan
(including any trust, insurance and/or other funding agreements) or, in the case
of an unwritten Employee Plan, a written description thereof, (ii) all
determination letters from the Internal Revenue Service ("IRS") with respect to
any of the Employee Plans, (iii) all current summary plan descriptions,
summaries of material modifications, annual reports, and summary annual reports,
and (iv) the Form 5500 for the most recent year for each Employee Plan.
(c) The Company maintains bonus plans and long term incentive plans
listed on Schedule 4.12(c) (the "Bonus Plans"). All obligations under such Bonus
Plans have been fully accrued for and are reflected on the 2004 Financial
Statements or Interim Financial Statements, as applicable.
(d) Each Employee Plan has been maintained, operated, funded and
administered in substantial compliance with its terms and any related documents
or agreements and in substantial compliance with all applicable laws, including,
without limitation, the provisions of ERISA, the Code and all notice and other
requirements of the Health Insurance Portability and Accountability Act of 1996
("HIPAA") and with obligations under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). Each applicable Employee Plan
has been and is currently in compliance with Section 404(c) of ERISA.
(e) Each Employee Plan intended to be qualified under Section
401(a) of the Code has heretofore been determined by the IRS to be so qualified,
and nothing has occurred, whether by action or failure to act, which has
resulted in or could cause the loss of such qualification; and each trust
created thereunder has heretofore been determined by the IRS to be exempt from
tax under the provisions of Section 501(a) of the Code.
24
(f) (i) Neither the Company nor Subsidiary has any unfunded
liabilities in connection with any of the Employee Plans; (ii) all
contributions, premium payments and other payments due from the Company or
Subsidiary to or under such Employee Plans have been paid in a timely manner and
(iii) all additional contributions, premium payments and other payments due on
or before the Closing Date shall have been paid by that date.
(g) There is no litigation, disputed claim (other than routine
claims for benefits), governmental proceeding, audit, inquiry or investigation
pending, or to the Sellers' Knowledge, threatened, with respect to any Employee
Plan, its related assets or trusts, or any fiduciary, administrator or sponsor
of such Employee Plan.
(h) Neither any Employee Plan nor any other Person has engaged in a
"prohibited transaction," as defined in ERISA Section 406 or Code Section 4975,
with respect to such Employee Plan, for which no individual or class exemption
exists.
(i) None of the Company, Subsidiary or any affiliate (within the
meaning of ERISA Section 4001 or Code Section 414) has ever sponsored or had any
obligation with respect to, and no Employee Plan is currently (i) a single
employer plan that is subject to Title IV of ERISA, or (ii) an "employee welfare
benefit plan," as defined in Section 3(1) of ERISA, that provides benefits to or
on behalf of any person following retirement or other termination of employment
(except to the extent required by Section 4980B of the Code).
(j) Neither the Company nor Subsidiary has ever contributed to a
"Multi-Employer Plan" as defined in Section 3(3) of ERISA.
(k) Each Employee 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 or on the Closing Date) in all respects with the applicable requirements
of ERISA, the Code, and any applicable state law, including ERISA Sections 601
through 734, Code Sections 498B and 9801 through 9833 and all related
regulations thereunder.
(l) With respect to each Employee Plan which is an "employee
pension benefit plan" (as defined in ERISA Section 3(2)):
(i) no event has occurred and no condition exists relating to
any such Employee Plan that would subject the Company, Subsidiary or Buyer to
any tax under Code Sections 4972 or 4979, or to any liability under ERISA
Section 502;
(ii) to the extent applicable, no such Employee Plan has
experienced any "accumulated funding deficiency" (as defined in Code Section
412), whether or not waived, at any time;
(iii) no such Employee Plan is subject to Title IV of ERISA;
and
25
(iv) no such Employee Plan is a "multiemployer plan" (as
defined in ERISA Section 3(37)).
(m) The consummation of the transactions contemplated by this
Agreement will not:
(i) entitle any Company Employee or former employee of the
Company or Subsidiary to severance pay, unemployment compensation or similar
payment;
(ii) accelerate the time of any payment or vesting or increase
the amount of any compensation due to, or in respect of, any current or former
employee of the Company or Subsidiary; or
(iii) constitute or involve the breach of fiduciary
responsibility within the meaning of ERISA Section 502(l) or otherwise violate
Part 4 of Subtitle B of Title I of ERISA.
(n) Except as provided on Schedule 4.12(n), all employees of
Subsidiary participate only in government offered benefit plans.
4.13 Material Contracts.
(a) As of the date of this Agreement, the Company or Subsidiary is
a party to the following Contracts (whether written or oral) (the "Material
Contracts"):
(i) Contracts related to Employee Plans listed on Schedule
4.12(a);
(ii) Contracts related to insurance listed on Schedule 4.10;
(iii) The Intellectual Property agreements listed on Schedule
4.8(e);
(iv) The following Contracts set forth in Schedule 4.13(a)(iv):
(A) Each partnership, joint venture, joint development,
OEM or technology exchange agreement;
(B) Agreements limiting the right of the Company or
Subsidiary to engage in or compete with any Person in any business or in any
geographical area;
(C) Each sales representative agreement and each
distributor or reseller agreement;
(D) Each agreement under which the Company or Subsidiary
has conferred a power of attorney;
26
(E) Each Debt Agreement;
(F) Indemnification agreements with any director, officer
or other third party;
(G) Contracts which contain minimum purchase conditions or
requirements or other terms that restrict or limit the purchasing or selling
relationships of the Company, Filtration Systems or Subsidiary;
(H) Operating leases;
(I) Contracts relating to any outstanding commitment for
capital expenditures of the Company or Subsidiary in excess of $100,000;
(J) Any agreement under which payment is required for any
change of control in the Company or Subsidiary, or any agreement pursuant to
which any payment has been made since January 1, 2004 relating to any potential
change of control of the Company or Subsidiary;
(K) Nondisclosure agreements to which the Company or
Subsidiary is a party;
(L) Purchase and sale agreements under which
indemnification claims may still be made;
(M) Any other agreement that requires the Company or
Subsidiary to make payments equal to more than $15,000 per annum;
(N) Open purchase orders, purchase commitments, sales
orders and sales
commitments greater than $50,000 entered into in the ordinary course of
business;
(O) Current employment agreements, consulting agreements
or other employee or similar agreements with any employee of the Company or
Subsidiary and other similar arrangements or understandings not terminable at
the will of the Company or Subsidiary without penalty;
(P) Any current agreement with any manufacturer, supplier
or customer with respect to price commitments, surcharges, discounts,
allowances, chargebacks or refunds, rebates or retroactive price adjustments;
(Q) Any agreement pursuant to which the Company or
Subsidiary warehouses inventory; and
27
(R) Any current agreement entered into since January 1,
2004 (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.
(b) All purchase orders and commitments and all sales orders and
commitments of the Company and Subsidiary have been entered into in the ordinary
course of business consistent with past practices.
(c) No default or, to the Sellers' Knowledge, alleged default or
any event which, with the lapse of time or with the election of any Person other
than the Company or Subsidiary, could become a default exists under any Material
Contract. Each Material Contract is now valid, in full force and effect and
enforceable in accordance with its terms and the Company or Subsidiary, as
applicable, has fulfilled in all material respects, or taken all action
reasonably necessary to enable it to fulfill when due, all its obligations under
such Material Contracts. Notwithstanding the foregoing, each Material Contract
with a Person other than a Person located in the United States may be subject to
any overriding aspects of laws of jurisdictions outside of the United States,
however, in the past five years, no such Material Contract nor any term thereof
has been found to be unenforceable on such basis.
(d) Sellers have provided to Buyer copies of all of the agreements
and documents listed on Schedule 4.13(a) if written, or a written description of
the foregoing if oral.
4.14 Legal Proceedings, Etc. Except as set forth in Schedule 4.14,
there are no Actions pending, or, to the Sellers' Knowledge, overtly threatened
against or affecting the Company or Subsidiary with the amount in controversy in
excess of $10,000, which seeks injunctive or other equitable relief, which is
before or by any Governmental Authority or which would be expected to prevent
the consummation of the transactions contemplated hereby. Neither the Company
nor Subsidiary is subject to any Order.
4.15 Permits. Schedule 4.15 contains a complete list of all Permits
issued to the Company or Subsidiary that are currently used by the Company or
Subsidiary in connection with their respective businesses. Each of the Company
and Subsidiary are in compliance in all material respects with all such Permits,
all of which Permits are in full force and effect; provided that disclosure
regarding Permits issued under Environmental Laws is made pursuant to Section
4.9 of this Agreement.
4.16 Taxes.
(a) The Company has duly made an election pursuant to Subchapter S
of the Code and at all times since such election has qualified as an "S
corporation", as defined in Section 1361(a)(1) of the Code through the Closing
Date. Neither the Company, Filtration Systems nor Subsidiary has taken any
action that could jeopardize the tax classification of the
28
Company obtained pursuant to the S corporation election. Purafil Mfg. Co., Inc.,
a Georgia corporation which had been wholly owned by the Company, has been
administratively dissolved and has not conducted business of any kind whatsoever
since the Company's election pursuant to Subchapter S of the Code.
(b) The Company and Subsidiary have each filed all Tax Returns
required to be filed under applicable laws and regulations and have paid or
withheld all Taxes shown thereon as due and owing. All such Tax Returns were
correct and complete in all respects and all such Tax Returns were prepared in
substantial compliance with all applicable laws and regulations. Schedule
4.16(b) contains a complete and accurate list of all Taxing Authorities with
which the Company or Subsidiary is required to file Tax Returns.
(c) Neither the Company nor Subsidiary has agreed to any extension
or waiver of the statute of limitations applicable to any Tax Return, or agreed
to any extension of time with respect to any Tax assessment or deficiency, which
period (after giving effect to such extension or waiver) has not yet expired.
All Taxes due and owing by the Company or Subsidiary (whether or not shown on
any Tax Return) have been paid.
(d) Neither the Company nor Subsidiary is a party to any Tax
allocation or sharing agreement.
(e) The Company and Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with any amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or other
third party.
(f) There are no Liens for unpaid Taxes on the assets of the
Company or Subsidiary.
(g) As of the date of this Agreement, there is no Action currently
pending or, to the Sellers' Knowledge, threatened with respect to the Company or
Subsidiary in respect of any Tax.
(h) Neither the Company nor Subsidiary (i) has been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code
(other than a group the common parent of which is the Company), or (ii) has any
liability for Taxes of any Person (other than the Company and Subsidiary) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor, by contract, or otherwise.
(i) No deficiencies for any Tax have been proposed, asserted or
assessed in writing by any taxing authority against the Company or Subsidiary,
none of the Tax Returns of the Company or Subsidiary currently is being audited
nor has the Company or Subsidiary received written notice from any Taxing
Authority of any intention to open an audit.
29
(j) No claim has been made by a Taxing Authority in a jurisdiction
where the Company or Subsidiary does not file Tax Returns that it is or may be
subject to taxation by the jurisdiction.
(k) Neither the Company nor Subsidiary is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in the payment of (i) any "excess parachute payment" within
the meaning of Code Section 280G (or any corresponding provision of state, local
or foreign Tax law) and (ii) any amount that will not be fully deductible as a
result of Code Section 162(m) (or any corresponding provision of state, local or
foreign Tax law). Neither the Company nor Subsidiary has been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii).
(l) Except as disclosed on Schedule 4.16(l), neither the Company
nor Subsidiary will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (A) change in method
of accounting for a taxable period ending on or prior to the Closing date; (B)
"closing agreement" as described in Code ss.7121 (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (C) intercompany transaction or excess loss account
described in Treasury Regulations under Code ss.1502 (or any corresponding or
similar provision of state, local or foreign income Tax law); (D) installment
sale or open transaction disposition made on or prior to the Closing Date; or
(E) prepaid amount received on or prior to the Closing Date.
(m) None of the assets of the Company or Subsidiary 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 (or
comparable federal, state or foreign law or regulations).
(n) The Company or Subsidiary will not be liable for any Tax under
Section 1374 of the Code in connection with the deemed sale of the Company's
assets caused by the Section 338(h)(10) election contemplated by this Agreement.
Except as set forth on Schedule 4.16(n), the Company and Subsidiary each have
not, in the ten (10) years prior to the date of this Agreement (i) acquired
assets from another corporation in a transaction in which the tax basis for the
acquired assets was determined by reference to the tax basis of the acquired
assets in the hands of the transferor, or (ii) acquired shares of the capital
stock of any corporation which is a qualified Subchapter S subsidiary.
4.17 Transactions with Shareholders, Officers, Directors, Etc. Except
as disclosed on Schedule 4.17, and other than accrued but unpaid salary due from
the end of the last pay period, there are no amounts owing from the Company or
Subsidiary to any present or former shareholder, officer, director or employee
of the Company or Subsidiary, nor are there any amounts owing from any such
person to the Company or Subsidiary, nor have there been since
30
January 1, 2004, or are there currently pending any transactions between the
Company or Subsidiary and any such person.
4.18 Brokers. Except for SunTrust ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, no broker, finder
or similar agent has been employed by or on behalf of the Company or Subsidiary,
and no Person with which the Company or Subsidiary has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.
4.19 Inventory. All of the inventory of the Company and Subsidiary is
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 in the Financial
Statements in the ordinary course of business. There is no consigned inventory.
Except as disclosed in Schedule 4.19, all inventory of the Company and
Subsidiary is located at the Real Property.
4.20 Accounts Receivable; Accounts Payable.
(a) The accounts receivable reflected on the Financial Statements
(i) are bona fide accounts receivable created in the ordinary and usual course
of business in connection with bona fide transactions and consistent with past
practice, (ii) are outstanding as set forth on the aging schedules made
available to Buyer, and (iii) are fully collectible when due at their face
amounts, subject to reserves reflected on such Financial Statements.
(b) The accounts payable reflected on the Financial Statements (i)
are bona fide accounts payable created in the ordinary and usual course of
business in connection with bona fide transactions and consistent with past
practice, and (ii) are not past due, have not been discounted (other than in the
ordinary course of business), and have been paid in accordance with the past
practices of the Company or Subsidiary, as the case may be.
4.21 Suppliers. Schedule 4.21 sets forth a list of all of the suppliers
of materials and services to the Company and Subsidiary in amounts in excess of
$50,000 during the 12 months ended October 30, 2004. No such supplier has
decreased materially or, to the Sellers' Knowledge, threatened to decrease or
limit materially, its provision of services or supplies to the Company or
Subsidiary. To the Sellers' Knowledge, there has been no and there is currently
no threatened termination, cancellation or limitation of, or any material
modification or change in, the Company's or Subsidiary's business relationships
with any supplier of materials or services in an amount in excess of $50,000 per
year.
4.22 Customers. Schedule 4.22 sets forth a list of the 15 largest
customers of the Company and Subsidiary in terms of sales during the 12 months
ended October 30, 2004. To the Sellers' Knowledge and other than in the ordinary
course of business and consistent with past practices (including the periodic
bidding processes with regard to projects), there has been no
31
and there is currently no threatened termination, cancellation or limitation of,
or any material modification or change in, the Company's or Subsidiary's
business relationships with any customer accounting for revenues in an amount in
excess of $50,000 per year. Except as set forth on Schedule 4.22, neither the
Company nor Subsidiary has any customer which accounted for more than 5% of its
sales during such fiscal year.
4.23 Effect of Transaction. To the Sellers' Knowledge, no supplier,
employee or customer or other Person having a material business relationship
with the Company or Subsidiary has informed the Company or Subsidiary that such
Person intends to change the relationship because of the purchase and sale of
the Shares, nor, to the Sellers' Knowledge, does any such supplier, employee,
customer or other Person have such intent. No key customer or other Person
having a material business relationship with the Company or Subsidiary has
informed the Company or Subsidiary that such customer or Person intends to
change the relationship because of the transactions contemplated hereby, nor, to
the Sellers' Knowledge, does any such customer or Person have such intent. To
the Sellers' Knowledge, the consummation of the transactions contemplated by
this Agreement will not adversely affect the relationship with any customer.
4.24 Compliance with Laws. Except with respect to compliance with
Environmental Laws, which is addressed in Section 4.9 or compliance with certain
laws governing Employee Plans, which is addressed in Section 4.12, other than as
provided on Schedule 4.24, the Company and Subsidiary:
(a) are in material compliance with all Laws and Orders applicable
to its business or employees conducting its business; and
(b) have received no notification or any communication from any
Governmental Authority within the past two years (i) asserting that the Company
or Subsidiary is not in compliance with any Law, or (ii) threatening to revoke
any Permit owned or held by the Company or Subsidiary.
4.25 Absence of Certain Commercial Practices. None of the Company,
Subsidiary, any director, officer, agent, employee or other person acting on
behalf of the Company or Subsidiary has in violation of any 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 Subsidiary or assist in
connection with any proposed transaction, which gift or similar benefit, if not
given in the past, might have adversely affected the business or prospects of
the Company or Subsidiary, or which, if not continued in the future, might
adversely affect the business or prospects of the Company or Subsidiary, 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. Neither the Company, Subsidiary, nor any director,
officer, agent, employee or other
32
person acting on behalf of the Company or Subsidiary has, accepted or received
any unlawful contributions, payments, gifts, entertainment or expenditures. The
Company and Subsidiary maintain such books, records and accounts of transactions
and maintain a system of internal accounting controls sufficient to meet the
applicable requirements of the Foreign Corrupt Practices Act.
4.26 No Competing Business; Total Assets. No Seller, nor any officer or
director of the Company or Subsidiary, has any direct or indirect equity
interest in any Person that competes with or conducts any business similar to
that of the Company or Subsidiary. No Seller nor any officer or director of the
Company or Subsidiary owns any assets (tangible or intangible) used in the
conduct of the Business anywhere in the world.
4.27 Warranties; Product Liability. Schedule 4.27 contains a complete
and accurate list of any express warranties given by the Company or Subsidiary
covering or relating to any of its products or services, including those related
to warranty obligations. Neither the Company nor the Subsidiary provides any
express or other warranty with regard to equipment media refills. Schedule 4.27
also contains a complete and accurate list of the claims experience of the
Company and Subsidiary with respect to warranty and product liability claims
against the Company or Subsidiary for the last two years. All costs related to
warranty, product and customer service claims against, or expenses incurred by
the Company and Subsidiary are reflected in the Financial Statements. There are
no liabilities of the Company or Subsidiary, fixed or contingent, asserted and
arising out of or based upon incidents occurring on or before the date of this
Agreement with respect to:
(a) any product liability or any similar claim that relates to any
of the products sold by the Company or Subsidiary to others;
(b) the delivery of faulty service by the Company or Subsidiary;
(c) any claim (whether or not covered by insurance) against the
Company or Subsidiary for the breach of any express or implied product warranty,
or any similar claim that relates to any product sold or service delivered by
the Company or Subsidiary;
(d) any recall or investigation of any product sold by the Company
or Subsidiary.
4.28 Bank Accounts. Schedule 4.28 sets forth a complete and correct
list of each account with any bank, trust company, securities broker or other
financial institution with which the Company or Subsidiary has any account and
all safe deposit boxes maintained by the Company or Subsidiary, the identifying
numbers or symbols thereof, and the name of each person authorized to draw
thereon or to have access thereto.
4.29 No Material Misstatements or Omissions. Neither this Agreement nor
any schedules, exhibits or other documents to be furnished to Buyer pursuant
hereto will contain any
33
untrue statement of a material fact or omit to state a material fact necessary
to make the factual statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each Seller severally represents and warrants to Buyer as follows:
5.1 Authority, Validity and Effect; No Conflicts, Required Filings and
Consents.
(a) Seller has all requisite power and authority or capacity to
enter into and perform its obligations under this Agreement and to consummate
the transactions contemplated herein, and this Agreement has been duly executed
and delivered by Seller pursuant to all necessary authorization and is the
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as limited by (a) applicable bankruptcy,
reorganization, insolvency, moratorium or other similar Laws affecting the
enforcement of creditors' rights generally from time to time in effect, and (b)
the availability of equitable remedies (regardless of whether enforceability is
considered in a proceeding at Law or in equity) (collectively (a) and (b)
together, the "General Enforceability Exceptions").
(b) Seller represents and warrants that all persons executing this
Agreement on behalf of said party (i) have full authority to do so, (ii) are not
bound by any agreement, or under any other disability, which would prevent them
from doing so, and (iii) if they are individuals, are of legal age.
(c) Neither the execution and delivery of this Agreement by Seller,
nor the consummation by Seller of the transactions contemplated herein, nor
compliance by Seller with any of the provisions hereof, will (i) conflict with
or result in a breach of any provisions of any operating agreement, certificate
of incorporation, bylaws or similar organizational document of Seller (if not an
individual), (ii) constitute or result in the breach of any term, condition or
provisions of, or constitute a default under any contract or agreement to which
such Seller is a party, or (iii) violate any Order or Law applicable to such
Seller or any of their respective properties or assets.
(d) No Consent is required to be obtained by Seller for the
consummation by Seller of the transactions contemplated in this Agreement.
(e) This Agreement has been duly and validly executed and delivered
by Seller and constitutes a valid and binding agreement of Seller in accordance
with its terms, except as limited by the General Enforceability Exceptions.
5.2 Title to Shares. Seller owns the Shares free and clear of all Liens
as set forth on Schedule 4.1(b) and upon the consummation of the transactions
contemplated hereby, Seller will
34
transfer good and valid title to such Shares to Buyer free and clear of all
Liens. Schedule 4.1(b) reflects all of the shares owned by such Seller in the
Company or Subsidiary.
5.3 Filtration Systems, Inc. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ owns all of the
outstanding equity interests in Filtration Systems, Inc. free and clear of all
Liens, and upon the consummation of the transactions contemplated hereby,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall transfer good and valid title to such equity interests to
the Company free and clear of all Liens. Such transfer will not (i) conflict
with or result in a breach of any provisions of any operating agreement,
certificate of incorporation, bylaws or similar organizational document of
Filtration Systems, Inc., the Company, or the Subsidiary, (ii) constitute or
result in the breach of any term, condition or provisions of, or constitute a
default under any contract or agreement to which Filtration Systems, Inc., the
Company, or the Subsidiary is a party, (iii) violate any Order or Law applicable
to Filtration Systems, Inc., the Company, or the Subsidiary or any of such
entity's respective properties or assets; or (iv) violate the tax classification
of the Company obtained pursuant to the S corporation election.
5.4 Broker. Except for SunTrust ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, no broker, finder or
similar agent has been employed by or on behalf of Seller, and no Person with
which Seller has had any dealings or communications of any kind is entitled to
any brokerage commission, finder's fee or any similar compensation, in
connection with this Agreement or the transactions contemplated hereby.
5.5 Taxes. No Seller has taken any action that could jeopardize the tax
classification of the Company obtained pursuant to the S corporation election.
If Seller is not a resident of Georgia, such Seller has executed an agreement,
for all periods ending on or prior to the Closing Date, in which such Seller
agrees to pay Georgia income tax on their proportionate part of the
corporation's Georgia taxable income under Section 48-7-21(b)(7)(8) of the
Georgia Income Tax Act and Regulations 560-7-3-06(6).
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers that the following
representations and warranties are true and correct.
6.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
6.2 Authority Relative to this Agreement. Buyer has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement have been duly and validly authorized by the Board of
Directors of Buyer, and no other corporate proceedings on the part of Buyer are
necessary to authorize this Agreement or to consummate the transactions
contemplated
35
by this Agreement or thereby. This Agreement has been duly and validly executed
and delivered by Buyer and this Agreement constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
subject to the General Enforceability Exceptions.
6.3 Consents and Approvals; No Violation.
(a) Neither the execution and delivery of this Agreement by Buyer,
nor the consummation by Buyer of the transactions contemplated herein, nor
compliance by Buyer with any of the provisions hereof, will (i) conflict with or
result in a breach of any provisions of the articles or certificate of
incorporation or by-laws or equivalent organizational documents of Buyer, (ii)
constitute or result in the breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation or
imposition of any Lien upon, any property or assets of Buyer or, pursuant to any
note, bond, mortgage, indenture, license, agreement, lease or other instrument
or obligation to which it is a party or by which it or any of its properties or
assets may be subject, and that would, in any such event, have a Material
Adverse Effect on Buyer, or (iii) violate any Order or Law applicable to Buyer
or any of its properties or assets.
(b) No Consent is necessary for the consummation by Buyer of the
transactions contemplated in this Agreement.
6.4 Litigation. There are no Actions pending or, to Buyer's knowledge,
overtly threatened against or affecting Buyer at law or in equity, or before or
by any Governmental Authority that would adversely affect Buyer's performance
under this Agreement or the consummation of the transactions contemplated
hereby.
6.5 Investment Intent. The Shares are being purchased by Buyer for its
own account and not with the view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
and the rules and regulations promulgated thereunder. Buyer acknowledges that it
is informed as to the risks of the transactions contemplated hereby and of
ownership of the Shares. Buyer acknowledges that the Shares have not been
registered under the Securities Act or the Exchange Act or any state or foreign
securities laws and that the Shares may not be sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of unless such sale, transfer,
offer, pledge, hypothecation or other disposition is pursuant to the terms of an
effective registration statement under the Securities Act and are registered
under any applicable state or foreign securities laws or pursuant to an
exemption from registration under the Securities Act or the Exchange Act and any
applicable state or foreign securities laws.
6.6 No Brokers. No broker, finder or similar agent has been employed by
or on behalf of Buyer, and no Person with which Buyer has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation, in connection with this Agreement or the
transactions contemplated hereby.
36
ARTICLE VII COVENANTS OF THE PARTIES
7.1 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties agrees to use its commercially reasonable
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 Agreement.
7.2 Cooperation in Litigation. If the Company, Subsidiary, Sellers or
Buyer shall require the participation of officers and employees employed by the
other to aid in the defense or settlement of litigation or claims by third
parties, and so long as there exists no conflict of interest between the
parties, the parties shall use their commercially reasonable efforts to make
such officers and employees available to participate in such defense, provided
that the party requiring the participation of such officers or employees shall
pay all reasonable out-of-pocket costs, charges and expenses arising from such
participation.
7.3 Noncompetition, Nonsolicitation and Nondisparagement.
(a) Noncompetition. For a period of five (5) years after the
Closing Date, each Seller agrees that it shall not, anywhere in the world in
which the Company, Subsidiary or Buyer is currently engaged in the Business,
directly or indirectly invest in, own, manage, operate, finance, control,
advise, render services to or guarantee the obligations of any Person engaged in
or planning to become engaged in the Business; provided, however, that Sellers
may in the aggregate purchase or otherwise acquire up to (but not more than)
three percent (3%) of any class of the securities of any Person (but may not
otherwise participate in the activities of such Person) if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Exchange Act.
(b) Nonsolicitation. For a period of five (5) years after the
Closing Date, no Seller shall directly or indirectly:
(i) solicit the business of any Person who is a customer of
Buyer;
(ii) cause, induce or attempt to cause or induce any customer,
supplier, licensee, licensor, franchisee, employee, consultant or other business
relation of Buyer to cease doing business with Buyer, to deal with any
competitor of Buyer or in any way interfere with its relationship with Buyer;
(iii) cause, induce or attempt to cause or induce any customer,
supplier, licensee, licensor, franchisee, employee, consultant or other business
relation of the Company or Subsidiary on the Closing Date or within the year
preceding the Closing Date to cease doing business with Buyer, to deal with any
competitor of Buyer or in any way interfere with its relationship with Buyer; or
37
(iv) hire, retain or attempt to hire or retain any employee or
independent contractor of Buyer or in any way interfere with the relationship
between Buyer and any of its employees or independent contractors.
(c) Nondisparagement. After the Closing Date, no Seller will
disparage the Company, Buyer or any of Buyer's Affiliates, stockholders,
directors, officers, employees or agents.
(d) Modification of Covenant. If a final judgment of a court or
tribunal of competent jurisdiction determines that any term or provision
contained in Section 7.3(a) through (c) is invalid or unenforceable, then the
parties agree that the court or tribunal will have the power to reduce the
scope, duration or geographic area of the term or provision, to delete specific
words or phrases or to replace any invalid or unenforceable term or provision
with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision. This
Section 7.3 will be enforceable as so modified after the expiration of the time
within which the judgment may be appealed. This Section 7.3 is reasonable and
necessary to protect and preserve Buyer's legitimate business interests and the
value of the Company and Subsidiary and to prevent any unfair advantage
conferred on Sellers.
7.4 Section 338(h)(10) Election.
(a) Sellers and Buyer agree that they shall jointly make or cause
to be made the election under Section 338(h)(10) of the Code on Form 8023 (and
any corresponding election under state or local law where available) with
respect to the Company and Subsidiary as a result of the purchase of the Shares
under this Agreement (the "Section 338 Election"). Sellers will include any
income, gain, loss, deduction or other tax items resulting from the Section 338
Election on their Tax returns to the extent required by applicable law. Sellers
also shall pay any Tax imposed on the Company or Subsidiary attributable to
making the Section 338 Election, including (i) any Tax imposed under Code
Section 1374, (ii) any Tax imposed under Reg. Section 1.338(h)(10)-1T and
(d)(5), or (iii) any state, local or foreign Tax imposed on the Company's or
Subsidiary's gains.
(b) As soon after the Closing Date as is practicable and in any
event not later than 30 days after the Closing Date, the Buyer shall complete a
final Form 8023 (and all required attachments) and any similar forms required to
be filed in order to effect the Section 338 Election under state or local law
and shall present such forms to the Sellers' Representative for approval (which
approval shall not be unreasonably withheld or delayed) promptly after their
completion. For purposes of the Section 338 Election, the aggregate amount of
(i) the Purchase Price, as adjusted pursuant to Section 2.3, and (ii) the
liabilities of the Company or Subsidiary shall be allocated to the assets of the
Company and Subsidiary for all purposes (including tax and financial accounting
purposes) in a manner consistent with the methodology set forth on Exhibit C. If
there is a dispute concerning the application of such methodology to the final
Section 338 Election forms, Buyer and the Sellers' Representative shall attempt
to resolve such dispute and if
38
they have not done so within thirty days prior to any filing deadline, all
unresolved items shall be submitted to the Reviewing Accountants for resolution
in accordance with such methodology. The parties shall direct the Reviewing
Accountants to resolve the dispute within twenty days of submission or as soon
thereafter as practicable. The Reviewing Accountants' determination shall be
final and binding on the parties, and judgment on such determination may be
entered in any court having jurisdiction. Sellers, jointly and severally, and
Buyer shall each be responsible for one-half of the fees and expenses of the
Reviewing Accountants under this Section.
(c) Sellers shall cooperate with Buyer in filing such election
forms and Buyer shall take any other actions that are necessary for making or
perfecting the elections and Buyer shall execute the Form 8023 and such other
applicable election forms.
(d) Buyer and Sellers shall report all transactions pursuant to
this Agreement consistent with the Section 338 Election, except where required
otherwise by applicable state law, and shall take no position contrary thereto
unless required to do so pursuant to a "determination" within the meaning of
Section 1313 of the Code. Sellers shall pay any and all Taxes attributable to
the making of the Section 338 Election ("Section 338 Election Taxes") and shall
indemnify Buyer and the Company or Subsidiary, as the case may be, against any
Loss (as defined in Section 8.3) relating to such Taxes.
(e) The parties agree that a violation of the provisions of this
Section 7.4 is a proper subject of injunctive relief.
7.5 Taxes.
(a) Sellers' Representative shall prepare or cause to be prepared
and file or cause to be filed all Tax Returns for state or federal income Taxes
for the Company and Subsidiary for all periods ending on or prior to the Closing
Date which are filed after the Closing Date and shall pay all Taxes shown as due
thereon. Sellers' Representative shall permit Buyer to review and comment on
each such Tax Return described in the preceding sentence prior to filing.
(b) Buyer shall prepare and file all Tax Returns for Taxes (other
than income Taxes as provided in Section 7.5(a)) for the Company and Subsidiary
for all periods ending on or prior to the Closing Date which are filed after the
Closing Date and shall pay all Taxes shown as due thereon; provided that Sellers
shall reimburse Buyer for any Taxes of the Company and Subsidiary with respect
to such periods within fifteen (15) days after payment by Buyer or the Company
and Subsidiary of such Taxes to the extent such Taxes are not reflected in the
reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the Working Capital Report.
(c) Buyer, Sellers, the Company and Subsidiary shall cooperate
fully and provide any necessary information, as and to the extent reasonably
requested by the other party, in connection with the filing of Tax Returns
pursuant to this Section 7.5 and any audit, litigation
39
or other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder. Sellers agree (A) to retain all books and records with respect to Tax
matters pertinent to the Company and Subsidiary relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Buyer or Sellers, any extensions
thereof) of the respective taxable period, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other party so requests, the Company and
Subsidiary or Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
(d) With respect to the Tax Returns to be prepared by Seller's
Representative pursuant to Section 7.5(a), Buyer shall, as soon as reasonably
available in the ordinary course of business, deliver to Sellers' Representative
the unaudited combined balance sheet of the Company and Subsidiary as of
December 31, 2004, and the related unaudited combined income statement for the
two-month period then ended (the "December 2004 Financial Statements"). In no
event shall Buyer deliver the December 2004 Financial Statements later than 10
Business Days following the last Business Day of such period. The information
reflected on such December 2004 Financial Statements shall not, however, be
deemed in any respect to provide information or evidence in connection with the
preparation of the Closing Working Capital Report and Buyer and Sellers'
Representative acknowledge that such December 2004 Financial Statements when
initially provided shall be preliminary in nature and subject to change.
(e) Buyer and Sellers further agree, upon request, to use their
best efforts to obtain any certificate or other document from any governmental
authority or any other Person as may be necessary to mitigate, reduce, or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
7.6 Appointment of Sellers' Representative.
(a) Each of the Sellers hereby irrevocably appoints the Sellers'
Representative as its true and lawful attorney-in-fact, to act as his, her or
its representative under this Agreement and, as such, to act, as such Seller's
agent (with full power of substitution), to take such action on such Seller's
behalf with respect to all matters relating to this Agreement and the related
documents and all transactions contemplated by this Agreement and the related
documents. All actions taken on Sellers' behalf by the Sellers' Representative
shall be binding and enforceable on and against Sellers and each of their
respective beneficiaries, heirs, personal representatives, successors and
assigns and Buyer shall be entitled to rely, and shall be fully protected in
relying, upon any actions taken, or statements made, by the Sellers'
Representative as the representative and agent of all of Sellers.
40
(b) The Sellers' Representative designated herein accepts the
appointment as the initial Sellers' Representative and the authorization set
forth in this subsection. The Sellers' 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 Sellers' Representative.
(c) The Sellers' Representative shall be entitled to rely, and
shall be fully protected in relying, upon any statements furnished to him by any
Seller or Buyer, 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 Agreement unless
he has received such advice or concurrence of such other Sellers as he deems
appropriate or he has been expressly indemnified to his satisfaction by Sellers
appointing him severally, according to their respective ownership percentages of
the Shares, against any and all liability and expense that the Sellers'
Representative may incur by reason of taking or continuing to take any such
action.
(d) 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 the performance of their obligations under
this Agreement, and all such fees and expenses (including reasonable attorneys'
fees and expenses) incurred by the Sellers' Representative shall be borne by
Sellers pro rata according to their respective ownership percentages of the
Shares.
(e) To the extent this Agreement provides that Sellers shall be
jointly and severally liable to personally pay any cost, expense or other
liability, Sellers shall share such payment ratably in accordance with their
respective ownership percentages of the Shares, and shall reimburse each other
as necessary to give effect to the intent of this provision.
(f) The Sellers' Representative shall serve until the earlier of
his resignation, death or legal incapacity. Upon the resignation, death or legal
incapacity of the Sellers' Representative the Sellers holding a majority of the
non-voting stock of the Company as of the date of this Agreement shall select a
new Sellers' Representative who may resign, be removed or replaced in such a
manner as the selecting Sellers agree. Each time a new Sellers' Representative
is appointed pursuant to this Agreement, such Person shall accept such position
in writing.
(g) The selecting Sellers shall notify Buyer of each change of
Sellers' Representative. Until Buyer receives the foregoing notice, it shall be
entitled to assume that the prior Person acting as the Sellers' Representative
is still the duly authorized Sellers' Representative.
41
7.7 Company Employees.
(a) Offers of Employment. Effective as of the Closing Date, Buyer
shall cause the Company to continue the employment of each Company Employee
other than those listed on Schedule 7.7 ("Employees") at a comparable base
salary or at comparable base wages as in effect immediately prior to the Closing
Date. Nothing in this Agreement shall require the Buyer to continue to employ
any of the Employees, or to maintain the compensation of any Employee at any
particular level, for any specified period following the Closing Date or prevent
the Buyer from terminating any of the Employees after the Closing Date.
(b) Individual Account Plans. Each Employee who is a participant in
the Purafil, Inc. 401(k) Profit Sharing Plan ("Company 401(k) Plan"), shall, at
the option of Buyer, either continue to participate in the Company 401(k) Plan
or become eligible to participate in the Kaydon Corporation Employee Stock
Ownership & Thrift Plan or equivalent ("Buyer 401(k) Plan") as soon as
practicable after the Closing Date. If the Company 401(k) Plan is terminated,
the Company shall permit each Employee to elect a direct rollover of the portion
of his or her account balance that is eligible for rollover under a Company
savings program to the Buyer 401(k) Plan. The Buyer shall cause the Buyer 401(k)
Plan to accept the direct rollover of the Employees' benefits in cash and, if
applicable, promissory notes that are not accelerated from the Company 401(k)
Plan.
(c) Employee Benefits.
(i) The Buyer shall, at its option, either maintain Company
employee benefit plans in effect as of the Closing Date or extend to each
Employee existing Buyer employee benefit plans (the "Buyer Plans") that provide
benefits to such Employee comparable to those benefits provided by Buyer to its
similarly situated employees immediately prior to the Closing Date. Nothing in
this Agreement shall require the Buyer to maintain the benefits of any Employee
at any particular level for any specified period following the Closing Date. The
Buyer shall cause the Company to give full credit for each Employee's period of
service with the Company prior to the Closing Date under any Buyer Plan in which
any Employee is eligible to participate for all purposes, including, but not
limited to, entitlement for holidays, sick days, vacations, severance, waiting
periods and vesting; provided that the Buyer is not required to give past
service credit for benefit accrual purposes under any qualified plan that is a
defined benefit pension plan sponsored by the Buyer.
(ii) The Buyer shall, at its option, either maintain Company
welfare benefit plans in effect as of the Closing Date or extend to each
Employee existing Buyer welfare benefit plans (the "Buyer Welfare Plans") that
provide benefits to such Employee comparable to those benefits provided by Buyer
to its similarly situated employees immediately prior to the Closing Date. In
the event the Buyer elects to extend to Employees the Buyer Welfare Plans, for
purposes of each Buyer Welfare Plan providing medical benefits to any Employee,
the Buyer shall cause all pre-existing condition exclusions and actively-at-work
requirements of such plans to be waived for such Employee and his or her covered
dependents (other than waiting periods that are already in effect with respect
to such Employees and dependents under the Company's
42
plans that have not been satisfied as of the Closing Date). With respect to
Buyer Welfare Plans in which benefits are subject to co-payments, deductibles or
similar thresholds, the Buyer or one of its Affiliates will take any and all
required actions necessary to give full credit for all co-payments and
deductibles satisfied prior to the Closing Date in the same plan year as if
there had been a single continuous employer.
7.8 Federal Tax on Deposit. Buyer covenants and agrees to pay to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ any Federal Tax on deposit as of the close of business on the
Closing Date. Such amount shall be paid no later than ten (10) Business Days
following the date Buyer receives a refund of any such Federal Tax.
7.9 Survey. Buyer shall obtain a current ALTA survey of the owned Real
Property as soon as practicable and in any event, not later than ninety (90)
days after the Closing Date. Buyer and Seller shall use commercially reasonable
efforts to resolve to their mutual satisfaction the items set forth in items 3,
4 and 5 of Schedule 8.1(f) and if so resolved as to any item, such item shall be
deemed deleted from Schedule 8.1(f) (without any impact on Sellers' obligations
under Section 8.1(a)). Buyer and Seller agree, however, that as to any of such
items 3, 4 or 5 of Schedule 8.1(f) as to which they do not reach a mutual
resolution, such item shall remain on Schedule 8.1(f).
ARTICLE VIII INDEMNIFICATION
8.1 Indemnification by Sellers. Subject to the limitations of Section
8.7, Sellers, jointly and severally, shall indemnify and hold harmless Buyer,
its officers, directors, employees and agents (collectively, the "Buyer
Indemnified Parties"), from and against any and all Losses (as defined in
Section 8.3), arising out of, based upon or resulting from:
(a) any breach of any representation or warranty of Sellers which
is contained in or made pursuant to this Agreement;
(b) any breach or nonfulfillment by Sellers of any of their
covenants, agreements or other obligations contained in or made pursuant to this
Agreement;
(c) any Loss arising out of (i) any failure to pay Taxes pursuant
to the Section 338 Election contemplated by Section 7.4, (ii) any Tax liability
pursuant to Section 7.5(b), (iii) any corporate-level Tax resulting from or
related to the transactions disclosed on Schedule 4.16(n); or (iv) any liability
arising out of any defect in the Company's classification as an "S corporation"
under the Code;
(d) any Loss resulting from any claim brought by a Seller in
connection with the transactions contemplated by this Agreement, including, but
not limited to, claims with respect to distribution of the Purchase Price or
authorization of the transactions contemplated by this Agreement;
43
(e) any Loss arising out of those liabilities under Environmental
Laws identified on Schedule 4.9; and
(f) any Loss arising out of the matters identified on Schedule
8.1(f).
8.2 Indemnification by Buyer. Subject to the limitations of Section
8.7, Buyer shall indemnify and hold harmless Sellers from and against any and
all Losses (as defined in Section 8.3) arising out of, based upon or resulting
from:
(a) any breach of any representation or warranty of Buyer which is
contained in or made pursuant to this Agreement; and
(b) any breach or nonfulfillment by Buyer of any of its covenants,
agreements or other obligations contained in or made pursuant to this Agreement;
8.3 Definition of Losses and Legal Expenses. For purposes of this
Article VIII, "Loss" or "Losses" shall mean and include damages, liabilities and
claims by or to the person entitled to indemnification (an "Indemnified Party"),
including all reasonable fees, costs and expenses related thereto, including any
and all of the Indemnified Party's Legal Expenses. As used in this Agreement,
"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 person that is obligated to provide such indemnification
(an "Indemnifying Party").
8.4 Third Party Claims.
(a) 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 under this Agreement, the Indemnified Party shall promptly
notify the Indemnifying Party, or in the case of a Seller as an Indemnifying
Party, for purposes of this Section 8.4, the Sellers' Representative. The
Indemnifying Party shall be entitled to control the defense of such action;
provided, however, that:
(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 (with such approval not to be unreasonably
withheld) prior to appointing counsel;
44
(iii) 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);
(iv) 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
(v) 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 in the judgment of the Indemnified Party materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party.
(b) 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 of any such action or claim. If the
Indemnifying Party does not assume control of the defense of such action or
claim as provided in this Section, then 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 for such costs and expenses in
accordance with this Article VIII.
8.5 Procedure Relating to Other Claims. In the event that any
Indemnified Party should have a claim under Article VIII that does not involve a
claim by a third party being asserted against or sought to be collected from the
Indemnified Party, the Indemnified Party shall deliver notice of such claim with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to notify the Indemnifying Party shall not relieve any liability under
this Article VIII, except to the extent that the ability to defend such claim or
demand shall have been actually prejudiced as a result of such failure. If the
Indemnifying Party disputes the liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute and, if not resolved through
negotiations, such dispute shall be resolved in accordance with the terms of
this Agreement.
8.6 Subrogation. If the Indemnifying Party shall be obligated to
indemnify the Indemnified Party pursuant to this Agreement, then the
Indemnifying Party shall, upon payment of such indemnity in full, be subrogated
to all rights of the Indemnified Party with respect to the actions or claims to
which such indemnification relates.
45
8.7 Limitations On Indemnification Obligations. The obligations of the
parties to make indemnification payments pursuant to Section 8.1 and Section 8.2
are limited as follows:
(a) Sellers shall have no liability for indemnification unless and
until, and only to the extent that, the aggregate amount of all Losses for which
indemnification is sought by Buyer exceeds $250,000 (the "Indemnification
Deductible Cap");
(b) Sellers shall have no liability for indemnification to the
extent that the amount of all payments made by Sellers on account of Losses
exceeds $4,150,000 (the "Indemnification Cap");
(c) Buyer shall have no liability for indemnification unless and
until, and only to the extent that, the aggregate amount of all Losses for which
indemnification is sought by Seller exceeds the Indemnification Deductible Cap;
and
(d) Buyer shall have no liability for indemnification to the extent
that the amount of all payments made by Buyer on account of Losses exceeds the
Indemnification Cap.
Notwithstanding anything to the contrary in this Agreement, the
Indemnification Deductible Cap and the Indemnification Cap shall not apply to
(i) any breach by Sellers of the representations and warranties in Section 4.1
(Organization of the Companies; Qualification; Capitalization.), Section 4.2
(Authority; No Violation or Consent), Section 4.3 (No Subsidiaries or
Investments), Section 4.16(a) (Taxes-Subchapter S) Section 4.17 (Transactions
with Shareholders, Officers, Directors, Etc.) and Section 4.18 (Brokers), (ii)
any breach by a Seller of the representations and warranties in Article V
(Representations and Warranties of each Seller), (iii) any liability resulting
from fraud, or (iv) any liability arising pursuant to Section 8.1(c), (d), (e),
or (f) of this Agreement; provided further, however, that for purposes of any
indemnification claim arising under Section 8.1(e), an "Indemnification Cap"
shall apply but shall be deemed to be $10,000.
8.8 Payment for Indemnity Claims. Subject to the limitations of
Sections 8.7 and 8.9, if applicable, Buyer will have the right to receive the
amount of any Losses incurred by Buyer from any third-party claim or any claim
against Sellers under Section 8.1 that has been finally determined by agreement
or by a court of competent jurisdiction from the Escrow Funds, as provided in
the Escrow Agreement. The term "Escrow Funds" for purposes of this Article VIII
shall mean the Escrow Fund decreased by (A) any releases of the Escrow Fund
pursuant to the terms of the Escrow Agreement; and (B) the fees and expenses of
the Escrow Agent under the Escrow Agreement. With respect to Losses which are
not subject to the Indemnification Cap, the Sellers shall remain jointly and
severally liable for any such Losses.
8.9 Survival.
(a) Except as otherwise set forth in this Agreement, the
representations, warranties, covenants and agreements contained in this
Agreement, or in any Schedule,
46
certificate, document or statement delivered pursuant to this Agreement, shall
survive until eighteen (18) months following 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 or by any information which
any party may receive.
(b) Notwithstanding the foregoing, the representations and
warranties of Sellers contained in (x) Section 4.1 (Organization of the
Companies; Qualification; Capitalization.), Section 4.2 (Authority; No Violation
or Consent), Section 4.3 (No Subsidiaries or Investments), Section 4.17
(Transactions with Shareholders, Officers, Directors, Etc.) and Section 4.18
(Brokers) and (y) Article V (Representations and Warranties of each Seller)
shall survive indefinitely after the Closing Date, and (ii) the representations
and warranties of Sellers contained in Section 4.9 (Environmental Matters),
Section 4.12 (Employee Benefit Plans) and Section 4.16 (Taxes) shall survive
until the expiration of the applicable statute of limitations (or extensions or
waivers thereof). The liability of any party under Article VIII 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.
(c) Except as set forth in Articles IV and V, no representations,
warranties or guarantees have been, are being or will be made by Sellers as to
the quality, condition, character, size, quantity, type, earnings, revenues,
expenses, suitability or value of the Business or the Shares and ALL
REPRESENTATIONS, WARRANTIES OR GUARANTEES IMPLIED OR OTHERWISE CREATED UNDER ANY
APPLICABLE LAW, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, ARE EXPRESSLY DISCLAIMED BY SELLERS; provided that the
foregoing shall not be deemed to limit any claim by Buyer for fraud.
ARTICLE IX MISCELLANEOUS
9.1 Construction and Interpretation. The parties have participated
jointly in the negotiation and drafting of this Agreement. If an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. In addition:
(a) Each definition in this Agreement includes the singular and the
plural, and references to any gender include the other gender where appropriate.
(b) Any reference to any federal, state, local or foreign statute
or law shall be deemed to also to refer to all rules and regulations promulgated
under such statute or law, unless the context requires otherwise. References to
any statute or regulation mean such statute or regulation as amended at the time
and include any successor legislation or regulation.
47
(c) The word "including" means "including, but not limited to." The
word "or" is not exclusive. The headings to the Articles and Sections are for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement.
(d) Unless otherwise provided for in this Agreement, references to
Articles, Sections, Exhibits and Schedules mean the Articles, Sections, Exhibits
and Schedules of this Agreement. The Exhibits and Schedules are incorporated by
reference into and shall be deemed a part of this Agreement.
(e) All references to dollar amounts in this Agreement shall be
references to United States Dollars unless otherwise provided.
(f) In computing any time period provided for in this Agreement,
the first day of the time period shall not be counted but the last day of the
time period shall be counted. Any action required to be taken on a particular
day must be taken before 5:00 p.m., Eastern Time on that day.
(g) All accounting terms used in this Agreement which are not
expressly defined in this Agreement shall have the respective meanings given to
them in accordance with GAAP on the date of this Agreement.
9.2 Expenses. Except as otherwise provided for in this Agreement (i)
Buyer shall pay its own fees and expenses (including the fees of any attorneys,
accountants, environmental consultants or others engaged by Buyer), and (ii)
Sellers shall pay their own fees and expenses (including the fees of any
attorneys, accountants, investment bankers, environmental consultants or others
engaged by such Sellers), incurred in connection with this Agreement and the
transactions contemplated by this Agreement, whether or not such transactions
are consummated. After the Closing, Sellers, jointly and severally, shall be
obligated to reimburse the Company and Subsidiary for the entire amount of any
such fees and expenses that are not paid at or prior to the Closing Date. Such
obligations shall survive indefinitely after the Closing, shall not be subject
to any of the limitations set forth in Article VIII, and shall not be counted
toward any caps set forth in Article VIII.
9.3 Notices. All notices or other communications required or permitted
under this Agreement shall be sufficiently given if in writing and (a) hand
delivered, including delivery by courier services, (b) sent by facsimile with
confirmation or (c) sent by certified mail, return receipt requested, postage
prepaid addressed to the recipient at the address stated below, or to such other
address as the party concerned may substitute by written notice to the other.
48
If to the Sellers:
c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax:
------------------
With a copy to:
▇▇▇▇▇▇ & Bird
One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer:
Kaydon Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All notices hand delivered will be deemed received on the day of
delivery. All notices forwarded by certified mail, return receipt
requested, will be deemed received on the date two (2) days (excluding
Saturdays, Sundays and legal holidays when the U.S. mail is not
delivered) immediately following the date of deposit in the U.S. mail;
except, however, if the signed return receipt indicating the date upon
which the notice was actually received is a different date, in which
case the date that such notice was received will be deemed to be the
date that the return receipt is signed. Addresses may be changed by
giving notice of such change in the manner provided herein. Unless and
until such written notice is received, the last address given will be
deemed to continue in effect for all purposes.
9.4 Assignment. This Agreement and all of the provisions of this
Agreement shall be binding upon and inure to the benefit of all parties and
their respective successors and permitted
49
assigns, and the provisions of Article VIII of this Agreement 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 under
this Agreement may be assigned by any of the parties without the prior written
consent of the other parties, except that Buyer may assign this Agreement and
such rights, interests and obligations to a wholly owned direct or indirect
subsidiary of Buyer (provided that such assignment shall not relieve Buyer of
its obligations under this Agreement).
9.5 Entire Agreement.
(a) This Agreement, including any and all documents referenced
herein as constituting continuing and effective agreements between or among any
party and other parties or their representatives, contains the entire agreement
and understanding between the parties with respect to the subject matter herein
identified and merges and integrates any and all previous and contemporaneous
implied agreements (in fact or law), negotiations, representations, covenants,
promises, conditions, and understandings made by or between the parties
concerning such matters, including those made by or between the representatives
of one party to another party or its representatives. In this regard, the
parties expressly acknowledge that, in entering into this Agreement, they are
not relying, nor have they relied, upon any previous or contemporaneous implied
agreements (in fact or in law), negotiations, representations, covenants,
promises, conditions, or understandings, either oral or written, by another
party or its representatives that is not expressly set forth in the terms of
this Agreement. Moreover, the parties further acknowledge that, except for the
representations expressly set forth in this Agreement, in entering into this
Agreement, they are not relying, and have not relied, upon the accuracy of any
other representation concerning the subject matter hereof which another party or
their representatives may have made prior to, or contemporaneously with, this
Agreement, and they fully assume the risk that any such representation may have
been, or is, inaccurate, in part or in full.
(b) The parties represent that they understand the contents of this
Agreement, they have had the opportunity to consult with independent counsel,
and they execute this Agreement without coercion on the part of anyone, as their
own free act and deed.
9.6 Counterparts. This Agreement may be executed with counterpart
signature pages or in two or more counterparts (including facsimile
transmissions of such signature pages), all of which shall be considered one and
the same agreement and each of which shall be deemed an original.
9.7 Governing Law. This Agreement shall be governed by the laws of the
United States and the State of Michigan (regardless of the laws that might be
applicable under principles of conflicts or choice of law) as to all matters
including matters of validity, construction, effect and performance. Any action
involving this Agreement shall be brought and maintained solely
50
in a court of the State of Michigan or a federal court sitting in the Eastern
District of Michigan, Southern Division.
9.8 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 in this
Agreement. 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.
9.9 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 any
employee or former employee of the Company or Subsidiary, any dependent or
beneficiary of any such employee, any organization, any obligee, owner or holder
of any obligation or liability, other than the parties and any Indemnified
Party.
9.10 Consent to Jurisdiction and Service of Process. Except as
otherwise provided in this Agreement, the parties hereto hereby submit to the
jurisdiction of the courts of Michigan or the courts of the United States
District Court located in the State of Michigan in respect of the interpretation
and enforcement of the provisions of this Agreement and any related agreement,
certificate or other document delivered in connection herewith and hereby waive,
and agree not to assert, any defense in any action, suit or proceeding for the
interpretation or enforcement of this Agreement and any related agreement,
certificate or other document delivered in connection herewith, that they are
not subject thereto or that such action, suit or proceeding may not be brought
or is not maintainable in such courts or that this Agreement may not be enforced
in or by such courts or that their property is exempt or immune from execution,
that the suit, action or proceeding is brought in an inconvenient forum, or that
the venue of the suit, action or proceeding is improper. Service of process with
respect thereto may be made upon Buyer or Sellers by mailing a copy thereof by
registered or certified mail, postage prepaid, to such party at its address as
provided in Section 9.3 hereof.
9.11 Schedules
(a) The disclosures in the Schedules must relate only to the
representations and warranties in the Section of this Agreement to which they
expressly relate and not to any other representation or warranty in this
Agreement except with respect to any disclosure on a particular Schedule which,
as of the Closing Date, includes information in such detail as would make it
readily apparent to a reasonable Person that such disclosure also relates to
another specific representation or warranty. The content of the documents
referenced in Schedule 4.9, Schedule 4.12, and Schedule 4.13 is deemed
incorporated by reference into such Schedules as if attached thereto.
51
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Schedules (other than an exception
expressly set forth as such in the Schedules with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
* * * * * * * * * * * * * * * * *
52
The parties executed this Stock Purchase Agreement as of the day and
year first above written.
KAYDON CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President-
Corporate Development and Treasurer
SELLERS
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as
attorney-in-fact
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as
attorney-in-fact
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as
attorney-in-fact
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as
attorney-in-fact
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ as
attorney-in-fact
[Signatures Continue on Following Page]
53
SELLERS' REPRESENTATIVE
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
54
EXECUTION COPY
TABLE OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Normal Working Capital
Exhibit C Purchase Price Allocation
Exhibit D Designated Account
SCHEDULES
Schedule 2.2(a) Seller Purchase Price Allocation
Schedule 3.2(k) Directors' and Officers' Resignations
Schedule 3.2(l) Assumed Leases
Schedule 3.2(m) Employment Agreements
Schedule 4.1(a) Jurisdiction Qualifications
Schedule 4.1(b) Capitalization
Schedule 4.3(b) Filtration Systems, Inc.
Schedule 4.4(c) Internal 2004 Financial Statements
Schedule 4.4(e) Books and Records
Schedule 4.4(g) Assets and Liabilities Books and Records
Schedule 4.5 Undisclosed Liabilities
Schedule 4.6(a) Conduct of Business in Ordinary Course
Schedule 4.6(c) Distributions to Shareholders
Schedule 4.6(f) Asset Purchases
Schedule 4.7(a) Real Property
Schedule 4.7(b) Tangible PersonalProperty
Schedule 4.7(c) Liens
Schedule 4.8(a) Intellectual Property
Schedule 4.8(c) Actions to Be Taken Within 180 Days
Schedule 4.8(e) Intellectual Property Settlements, Consents, Judgments, etc.
Schedule 4.8(g) Intellectual Property Claims
Schedule 4.8(i) Non-Disclosure Agreements
Schedule 4.9(a) Environmental Matters
Schedule 4.9(d) Environmental Permits
Schedule 4.10 Insurance
Schedule 4.11(e) Company Employees
Schedule 4.11(h) Workers' Compensation
Schedule 4.11(i) Layoffs, Disability, Leaves of Absence and Other Claims
Schedule 4.12(a) Employee Benefit Plans
Schedule 4.12(c) Bonus Plans
Schedule 4.12(n) Subsidiary Employees
Schedule 4.13(a)(iv) Material Contracts
Schedule 4.14 Legal Proceedings
Schedule 4.15 Permits
Schedule 4.16(b) Taxing Authorities
Schedule 4.16(l) Income or Deduction Modifications
Schedule 4.16(n) Share and Asset Acquisitions
Schedule 4.17 Transactions with Shareholders, Officers, Directors, Etc.
Schedule 4.19 Consigned Inventory
Schedule 4.21 Suppliers
Schedule 4.22 Customers
Schedule 4.24 Compliance with Laws
Schedule 4.27 Warranties; Product Liability
Schedule 4.28 Bank Accounts
Schedule 7.7(a) Excluded Employees
Schedule 8.1(f) Indemnification by Sellers
THE REGISTRANT AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED EXHIBIT OR
SCHEDULE TO THE COMMISSION UPON REQUEST.
56
