EXHIBIT 99.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 14th day of August, 2001, by
and between SMC CORPORATION, an Illinois corporation, hereinafter called
"Seller," R.G. XXX XXXXXX, hereinafter referred to as "Xxxxxx," and ALAMO GROUP
(SMC) INC., a Nevada corporation, hereinafter called "Buyer."
W I T N E S S E T H:
WHEREAS, Seller designs, develops, engineers, manufactures, assembles,
promotes, advertises, markets, merchandises, sells, and distributes a wide range
of heavy-duty equipment including, but not limited to, tractor-mounted equipment
including loaders, blades, buckets, trailers, power units, and related equipment
and, further, Seller manufactures and/or distributes related assemblies and
parts associated with all of such equipment, all of which business of Seller
(including activities associated therewith) is sometimes hereinafter referred to
as the "Business"; and
WHEREAS, Buyer desires to purchase from Seller substantially all of the
assets and assume certain designated liabilities of Seller associated therewith;
and
WHEREAS, Xxxxxx, being the owner of 93.21% of the issued and outstanding
capital stock of Seller, is an indirect beneficiary of this Agreement, and joins
with the Seller in executing this Agreement as herein provided; and
WHEREAS, the parties desire to enter into and execute this Agreement for
the purpose of setting forth the terms and conditions of the sale and purchase
contemplated herein.
NOW, THEREFORE, in consideration of the premises set forth above and the
mutual covenants and agreements set forth herein, the parties hereby agree as
follows:
1. ASSETS TO BE PURCHASED. On the Closing Date (as hereinafter defined),
Seller agrees to sell, transfer, assign, and deliver to Buyer, and Buyer agrees
to purchase and accept from Seller, subject to and upon the terms and conditions
contained herein, free and clear of any pledge, lien, option, security interest,
mortgage, claim, charge or other encumbrance of any kind
whatsoever, except as listed on SCHEDULE 5(C), all of the assets of Seller
(excluding the Retained Assets as hereinafter defined), of any kind, character,
or description, known or unknown, whether accrued, absolute, or otherwise, all
as they exist on the Closing Date, including without limitation: (a) All right,
title and interest of Seller in and to all of Seller's inventory, wherever
located, including raw material, work in process, and finished goods;
(b) All of Seller's accounts, accounts receivable, trade
receivables and notes receivable;
(c) All of Seller's real property, wherever situated including
land and buildings, improvements, fixtures thereon, easements,
rights-of-way, and other appurtenant rights thereto (such as
appurtenant rights in and to public streets);
(d) All of Seller's machinery, equipment, furniture, and supplies;
(e) All right, title and interest of Seller in and to all prepaid
rentals and other prepaid expenses, bonds and deposits
(including those for health insurance);
(f) All vehicles owned by Seller;
(g) All jigs, dies, tooling, drawings, blueprints, schematics, and
similar property owned by Seller, including those fabricated
by third parties on behalf of Seller and in the possession of
those third parties as of the Closing;
(h) All business records including all drawings, bills of
materials and lists, vendor agreements and lists, credit
files, sales records, warranty records, inventory records,
product literature and marketing studies;
(i) All licenses, permits, trade names, trademarks, patents, and
other intellectual property used in connection with the
Business of Seller, if any, including without limitation:
1) All goodwill associated therewith;
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2) All right, title, and interest in and to the names "SMC"
and "Xxxxxxxx"; and
3) All right, title and interest in and to the domain
name "www.smc/xxxxxxxx.xxx."
(j) Life insurance policies listed on SCHEDULE 1(J) attached
hereto and incorporated herein;
(k) All other books and records associated with the Business of
Seller (but excluding Seller's corporate minute books and
related corporate records of which Buyer shall be entitled to
retain photocopies);
(l) To the extent assignable, all rights of Seller under any
contracts, leases or other agreements listed on SCHEDULE
1(L) attached hereto and incorporated herein, including but
not limited to, that one certain Lease Agreement with Xxxxx
X. Xxxx, regarding property located at 000 Xxxx Xxxxxx
Xxxxx, Xxxxxx Xxxxxxx, Xxxxxxxxx, and that one certain
Lease Agreement with J & J Land Co., L.L.C., regarding
property located at 0000 Xxxx 0xx Xxxxxx, Xxxxx Xxxxx,
Xxxxx Xxxxxx (the "Leases") ; and
(m) All customer, distributor and supplier files and mailing
lists of the Seller.
All of the assets referenced above and being purchased under this Agreement are
collectively referred to herein as the "Assets." The Assets will not include,
and Buyer is not purchasing, those specified assets which are listed on SCHEDULE
1(M) attached hereto and incorporated herein (the "Retained Assets"), and which
Buyer agrees Seller may retain or distribute to its shareholders.
2. LIABILITIES TO BE ASSUMED BY BUYER. On the Closing Date, Buyer shall
assume, pay, perform, and discharge only those charges, debts, obligations,
contracts, agreements, and liabilities of Seller specifically referenced in
Section 2.1 below, and no others (the "Assumed Liabilities").
2.1 Buyer shall assume, pay, perform and discharge only the
following liabilities of Seller:
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(a) All liabilities of the Seller on the Closing Balance Sheet
(rather than in any notes thereto), except as set forth in
Section 2.2 hereof;
(b) Accounts payable as specified on the Closing Balance Sheet;
(c) Accrued bonuses, commissions, salaries, wages, vacation and
sick pay, as specified on SCHEDULE 2.1(C);
(d) Accrued payroll taxes;
(e) Accrued employee deductions;
(f) Claims for remedy of a defective product pursuant to an
existing warranty, but not Product Recall or Product Liability
Claims as specified in Section 2.2(h) and (i) hereof;
(g) Liabilities under certain real and personal property leases
and operating leases as specified on SCHEDULE 2.1(G) to the
extent such liabilities arise subsequent to the Closing Date;
(h) Agreement between United Electrical, Radio and Machine Workers
of America (UE) and its agent Local 1128, United Electrical,
Radio and Machine Workers of America and SMC Corporation (the
"Union Contract") dated April 23, 2001, to the extent
liabilities or claims arise pursuant to such Union Contract
subsequent to the Closing Date, with such liability assumed
only as to employees of Seller hired by Buyer, with such hire
decisions within the discretion of Buyer;
(i) All liabilities under the contracts, agreements and leases
listed on SCHEDULE 1(L) and SCHEDULE 5(U), including, without
limitation, purchase orders which are incurred in the Ordinary
Course of Business (as hereinafter defined), to the extent the
liabilities or claims arise subsequent to the Closing Date.
As used in this Agreement, "Ordinary Course of Business" shall mean the ordinary
course of business consistent with past custom and practice (including, where
appropriate, with respect to quantity and frequency).
2.2 LIABILITIES TO BE RETAINED BY SELLER. Seller shall retain all other
liabilities including without limitation the following (the "Retained
Liabilities"):
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(a) Taxes of any kind whatsoever due and payable prior to the
Closing Date including, without limitation, federal, foreign,
state, county, local, and other state taxes (plus penalties
and interest thereon, if any), and including taxes that relate
to the Business as operated by Seller prior to the Closing
Date which may not be due and payable prior to the Closing
Date; provided, however, that Buyer shall assume all accrued
payroll taxes;
(b) Any liability associated with environmental matters of any
kind whatsoever established as having arisen or occurred prior
to the Closing Date;
(c) Professional fees owed by Seller with regard to this
transaction and/or this Agreement; provided, however, that
Buyer shall assume all accrued professional fees to the extent
such accrual is reflected on the Closing Balance Sheet;
(d) Any liabilities owed by Seller to Seller's shareholders or its
affiliates; provided, however, that Buyer shall assume all
accrued liabilities to Seller's shareholders or its affiliates
as such accrual is reflected on the Closing Balance Sheet;
(e) Liabilities or obligations associated with the Retained
Assets;
(f) Any taxes of Seller of any kind whatsoever payable as a direct
result of the sale of Assets and assumption of Assumed
Liabilities contemplated by this Agreement;
(g) all interest-bearing debt owed by Seller and all net negative
cash balances of Seller;
(h) liabilities and damages associated with a Product Recall (as
defined in Section 13(h) hereof) issued within one year after
the Closing Date with respect to products manufactured and/or
sold by Seller prior to the Closing Date;
(i) liabilities and damages associated with a Product Liability
Claim (as defined in Section 13(h) hereof) with respect to
claims that arise or occur prior to the Closing Date;
(j) Any liability associated with any union grievances of any kind
whatsoever established as having arisen or occurred prior to
the Closing Date; and
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(k) Any unfunded pension plan liability established as having
arisen or occurred prior to the Closing Date.
3. PURCHASE PRICE. The total purchase price for the Assets shall be the
Assumed Liabilities plus Seven Million Twenty-Seven Thousand and No/100 Dollars
($7,027,000.00) (the "Purchase Price") adjusted as follows (the "Adjusted
Purchase Price"):
(a) In the event the Seller's Net Book Value exceeds Seven Million
Two Hundred Twenty-Seven Thousand Dollars ($7,227,000.00), the
Purchase Price shall be increased, dollar-for-dollar, by the
same amount for which Seller's Net Book Value exceeds the sum
of Seven Million Two Hundred Twenty-Seven Thousand Dollars
($7,227,000.00).
(b) In the event Seller's Net Book Value is less than Seven
Million Two Hundred Twenty-Seven Thousand Dollars
($7,227,000.00), the Purchase Price shall be reduced,
dollar-for-dollar, by the same amount for which the sum of
Seven Million Two Hundred Twenty-Seven Thousand Dollars
($7,227,000.00) exceeds Seller's Net Book Value.
Seller's Financial Statement for the period ending December 31, 2000 (the
"December Financial Statement") is attached hereto as EXHIBIT "A". The December
Financial Statement includes a list in balance sheet format of assets being
purchased by Buyer and liabilities being assumed by Buyer. The parties hereto
agree and acknowledge that, as of the date of the December Financial Statement,
the net asset value of Seller is $6,747,516, which is the difference between the
assets and liabilities as reflected on the December Financial Statement. The
December Financial Statement has been prepared in accordance with Generally
Accepted Accounting Principles ("GAAP").
Within thirty (30) days after the Closing, Seller shall prepare and
deliver to Buyer an actual balance sheet of Seller as of the Closing prepared in
accordance with GAAP and on the same basis as the December Financial Statement
(the "Closing Balance Sheet"). Stated differently, the Closing Balance Sheet
shall include a list in balance sheet format of assets
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purchased by Buyer and liabilities to be assumed by Buyer resulting in a net
asset value of the acquisition. The Closing Balance Sheet shall also include
credits to Seller or Buyer, as the case may be, for post-Closing payroll
payments. As utilized herein, "Seller's Net Book Value" shall mean the
difference between the assets and liabilities of Seller as reflected on the
Closing Balance Sheet. Buyer, or its representatives, may accompany
representatives of Seller in making any necessary inventory tests and related
auditing procedures required for preparation of the Closing Balance Sheet. The
Buyer shall have the right at its own expense to review, or cause to be
reviewed, the Closing Balance Sheet, or any part thereof, for compliance,
accuracy, and/or completeness. Any such review shall be made in accordance with
GAAP. Any such review may include, but is not limited to, a review of the
adequacy of all reserves, including that for bad debt, receivables, warranty and
product liability, inventory, obsolescence practices (which must be in
accordance with the policy set forth at EXHIBIT "B" hereto), asset valuation and
cost of goods sold. Seller shall be responsible for payment of services rendered
by representatives it may hire to determine Seller's Net Book Value. Buyer shall
be responsible for payment of services rendered by Buyer and representatives of
Buyer associated with determining the Seller's Net Book Value. In the event
there is a dispute between the parties (or their respective representatives)
with respect to the determination of the Seller's Net Book Value, one
representative of each of the parties will negotiate in good faith to resolve
such dispute. In the event the dispute can be resolved within forty-five (45)
days of the Closing Date, such determination shall be final and binding on the
parties. In the event the dispute cannot be resolved, sums not in dispute with
respect to the determination of Seller's Net Book Value shall be paid when the
dispute is submitted to the arbitrator. In the event the dispute cannot be
resolved, the parties shall select a mutually agreeable third party to serve as
an arbitrator of the dispute. The arbitrator's determination, which must be made
within ninety (90) days of the Closing Date, shall be final and binding on the
parties. All professional costs incurred in
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utilizing such third-party arbitrator shall be equally shared between the Buyer
and the Seller. Acceptance of Seller's determination of Seller's Net Book Value
by Buyer, or resolution of any dispute arising between the parties with respect
thereto, shall be referred to as the "Resolution Date." Except as otherwise
expressly modified in this Agreement, said financial statements shall be
prepared in accordance with GAAP.
4. PAYMENT OF PURCHASE PRICE. The Adjusted Purchase Price shall be paid
as follows:
(a) Buyer shall pay cash to Seller of Six Million Nine Hundred
Twenty-Seven Thousand and No/100 Dollars ($6,927,000.00) on
the Closing Date;
(b) The sum of One Hundred Thousand Dollars ($100,000.00) shall be
deposited into escrow at Getty Abstract & Title Co., 000 Xxxxx
Xxxx Xxxxxx, Xxxxx Xxxxx, XX 00000, which escrow shall be
available to Buyer in the event of a claim for breach by
Seller of any warranty, representation, covenant, indemnity or
other obligation. A copy of the applicable escrow agreement is
attached hereto as EXHIBIT "C" and incorporated herein (the
"Escrow Agreement"). Buyer and Seller agree to split equally
the escrow fee associated with said escrow.
(c) In the event the Seller's Net Book Value exceeds
$7,227,000.00, Buyer shall pay to Seller, no later than
fifteen (15) days after the Resolution Date, a sum equal to
such excess. In the event the Seller's Net Book Value is less
than $7,227,000.00, Seller shall pay to Buyer, no later than
fifteen (15) days after the Resolution Date, a sum equal to
the deficiency. Any payments made pursuant to this
subparagraph shall not affect the escrow amount described
above. Payments made pursuant to this subparagraph shall
include interest at the annual percentage rate of five percent
(5%) from the closing date until paid.
5. SELLER. Seller and Xxxxxx, jointly and severally, hereby make the
representations and warranties set forth in this Section 5 to the Buyer. Seller
has delivered to the Buyer the Schedules to this Agreement referred to in this
Section 5 on the date hereof. Seller shall, from time to time through the
Closing Date, advise Buyer as to any change, amendment or supplement to the
Schedules which is necessary to reflect changes in the subject matter thereof
occurring
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through the Closing Date. Only upon the acceptance thereof by the Buyer, in
writing signed on behalf of the Buyer, shall any such change, amendment or
supplement be made to the appropriate Schedule.
(a) The Seller is duly organized, validly existing, and in good
standing under the laws of the State of Illinois. Seller has
no subsidiaries and owns no ownership interest, direct or
indirect, in any other entity.
(b) The Seller has all requisite power to own its properties
and carry on the Business as it is now being conducted.
(c) The Seller has good and marketable title to all of the Assets,
subject to no mortgages, security interests, liens, pledges,
conditional sale agreements, or encumbrances of any nature
whatsoever, except as set forth on SCHEDULE 5(C) attached
hereto and incorporated herein.
(d) Since December 31, 2000, there has not been:
1) any adverse change in the Seller's financial condition,
assets, liabilities, or business, including, to the
knowledge of Seller, changes to the markets it services,
other than changes in the Ordinary Course of Business,
except as otherwise has been disclosed on SCHEDULE
5(D)(1) attached hereto and incorporated herein;
2) any damage, destruction or loss, whether or not covered
by insurance, which would adversely affect the Assets or
the Business;
3) any amendment to the Seller's Certificate of
Incorporation or Bylaws, or equivalent documents, or
change to the character of its Business in any manner,
except as otherwise has been disclosed on Schedule
5(d)(3) attached hereto and incorporated herein;
4) any agreements, commitments or transactions except in
the Ordinary Course of Business;
5) except in the Ordinary Course of Business, any
incurrence or assumption, whether directly or by way of
any guarantee or otherwise, of any obligations or
liabilities;
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6) except in the Ordinary Course of Business, any
cancellation of debts, waiver of any claims or rights,
or sale, transfer, or other disposal of any of the
Assets;
7) disposal or lapse of any rights to the use of any
intellectual property including without limitation any
patents, copyrights, trademarks or service marks, or
disposal of or disclosure to any person other than the
Seller's employees or agents, any trade secret not
theretofore a matter of public knowledge;
8) any grant of any increase in compensation or payment, or
agreement to pay or accrue, any bonus, severance payment
or like benefit to or for the credit of any director,
officer, employee or other person, other than reasonable
increases that fall due on employee's anniversaries of
service;
9) any change in any accounting methods, principles or
practices of the Seller;
10) to the knowledge of the Seller, any adverse change in
relations with any customer or supplier;
11) any transaction, or any modification of or amendment to
any contract, agreement, arrangement, or commitment,
other than those in the Ordinary Course of Business; or
12) any agreement, whether in writing or otherwise, to take
any action the performance of which would change the
representations contained in this subparagraph 5(d) in
the future so that any such representation would not be
true in all material respects as of the Closing, except
as disclosed on the Schedules as updated as of the
Closing Date.
(e) The Seller has the full and unrestricted power, authority and
capacity to enter into this Agreement and the full and
unrestricted power, authority and capacity to carry out the
transactions contemplated hereby. This Agreement has been duly
and validly executed by Seller, and this Agreement constitutes
the legal, valid and binding agreement of the Seller,
enforceable in accordance with its terms.
(f) The Seller is not a party to nor in any way obligated under
any contract or other agreement relating to, and there are no
outstanding claims against
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Seller for the payment of, any broker's or finder's fee in
connection with the origin, negotiation, execution, or
performance of this Agreement.
(g) There has been no default in any respect to, and the Seller is
currently not in default under any contract, lease, agreement,
commitment, or undertaking to which the Seller is a party or
by which the Seller or the Assets are bound (excluding minor
technical defaults), which default would have a material
adverse affect on Seller or the Assets, nor has the Seller
waived any material right under any such contract, lease,
agreement, commitment, or undertaking.
(h) Buyer is not assuming any liability associated with an
activity which falls outside of the Ordinary Course of
Business.
(i) Seller is not infringing upon any patent, trademark, or
copyright belonging to any other person, except as expressly
set forth on SCHEDULE 5(I), attached hereto and incorporated
herein. Further, no claim of infringement is presently
pending, nor has any such claim been made against Seller with
respect to Seller's Business during the past five (5) years
except as set forth on SCHEDULE 5(I).
(j) Seller has no financing arrangements, other than standard
operating leases, which are not reflected in the Audited
Balance Sheet and related statements of income, stockholders'
equity and changes in cash flow. The standard operating leases
include, but are not limited to, mailing equipment, message
machines, fax machines, and vehicle leases, all of which are
disclosed on SCHEDULE 5(J).
(k) Except as set forth on SCHEDULE 5(K), no prior consent,
approval or authorization of, or declaration, filing or
registration with any party, domestic or foreign, is necessary
in connection with the execution and delivery of this
Agreement by the Seller, the performance of the obligations
hereunder, or the consummation of the transactions
contemplated hereby. Except as set forth on SCHEDULE 5(K),
neither the execution, delivery nor performance of this
Agreement in its entirety, nor the consummation of all of the
transactions contemplated hereby will (i) violate (with or
without the giving of notice or the passage of time), any law,
order, writ, judgment, injunction, award, decree, rule,
statute, ordinance or regulation applicable to the Seller or
the Assets, (ii) be in conflict with, result in a breach or
termination of any provision of, cause the acceleration of the
maturity of any debt or obligation pursuant to, constitute a
default (or give rise to any right of termination,
cancellation or
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acceleration, with or without the giving of notice or the
passage of time) under, or result in the creation of any
security interest, lien, charge or other encumbrance upon the
Assets or the Seller pursuant to any terms, conditions or
provisions of any contract, note, license, instrument,
indenture, mortgage, deed of trust or other agreement or
understanding or any other restriction of any kind or
character, to which the Seller is a party or by which any of
the Assets are subject or bound, (iii) give rise to any lien,
charge or other encumbrance on any of the Assets, or (iv)
conflict with or violate any provision of the certificate of
incorporation, bylaws or other equivalent documents of the
Seller. Except as set forth on SCHEDULE 5(K), there are no
proceedings pending or threatened against the company, Seller
or the Assets, at law or in equity or before or by any
foreign, federal, state, municipal or other governmental
court, department, commission, board, bureau, agency,
instrumentality or other person, which may result in liability
to the Buyer upon the consummation of the transactions
contemplated hereby or which would prevent or delay such
consummation.
(l) Seller has provided the Buyer with true and complete copies of
the December Financial Statement, Seller's audited balance
sheets as of December 31, 2000 (the "Audited Balance Sheet"),
December 31, 1999, 1998, and 1997, unaudited balance sheet as
of March 31, 2001, June 30, 2001, and July 27, 2001, and the
related statements of income, stockholders' equity and changes
in cash flows for the years then ended. All of the foregoing
balance sheets and the related statements of income,
stockholders' equity and changes in cash flows of Seller are
collectively referred to as "SMC Financial Statements." The
SMC Financial Statements (including the related notes thereto)
are true and accurate and present fairly the financial
position of Seller, respectively, as of the dates thereof and
the results of operations and changes in financial position of
Seller for the periods then ended, each in conformity with
GAAP. The accounting records underlying the SMC Financial
Statements accurately and fairly reflect, in all material
respects, the transactions of Seller. The December Financial
Statement reflects only a list of assets being purchased and
liabilities being assumed by Buyer, but does not include any
assets or liabilities being retained by Seller.
(m) Except as and to the extent (i) fully reflected or reserved
against on the Audited Balance Sheet, including the notes
thereto, (ii) for liabilities or obligations incurred in the
Ordinary Course of Business consistent with past practice
(both in nature and amount), or (iii) disclosed on SCHEDULE
5(M), the Seller has no liabilities or obligations of any
nature,
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including, without limitation, any liabilities resulting from
failure to comply with any apply law or regulation applicable
to the Seller or any tax liabilities due or to become due and
whether incurred in respect of or measured by the income or
sales of the Assets for any period.
(n) All trade accounts and trade notes receivable of the Seller
are listed on SCHEDULE 5(N) and represent or will represent
valid obligations arising from sales actually made in the
Ordinary Course of Business, and are or will be current and
collectible net of any reserve shown on the Audited Balance
Sheet.
(o) Except as disclosed on SCHEDULE 5(O), the inventory of the
Seller consists of: (i) manufactured and purchased parts and
finished goods, all of which are merchantable and fit for the
purpose for which they were procured or manufactured, and for
which the Seller has an inventory reserve which is adequate
based on historical or expected experience, and (ii) raw
materials and supplies and goods in process which are fit for
the purpose procured.
(p) SCHEDULE 5(P) sets forth a complete and accurate list of all
of the distributors and dealers for the Seller's products
indicating the specific product, existing contractual
arrangements(whether written or oral, and whether or not
legally binding or enforceable), with each such distributor or
dealer and the volume of products distributed. True, correct
and complete copies and/or descriptions of all existing dealer
agreements for the Seller's products, whether oral or written,
including any amendments or exceptions to such dealer
agreements, have been delivered to the Buyer. The Seller has
no knowledge that (and no knowledge of any facts which would
form the basis for a belief that (a) any distributor, dealer,
or customer representing more than three percent (3%) of any
of the Seller's sales during the 12 month period ending May
31, 2001, or (b) any vendor representing more than three
percent (3%) of any of the Seller's purchases during the 12
month period ending May 31, 2001, has notified the Seller,
orally or in writing, that such distributor, dealer, vendor,
or customer will not do business with the Purchaser on terms
and conditions which are not materially less favorable than
those upon which such distributor, dealer, vendor or customer
did business with the Seller prior to the Closing.
(q) Except as set forth on SCHEDULE 5(Q), there are no actions,
suits, claims, investigations, reviews or other proceedings
pending or, to the best knowledge of any of the Sellers,
threatened against the Company or involving any of the Assets,
at law or in equity or before or by any foreign, federal,
state, municipal, or other xxxxxxxxxxxx xxxxx, xxxxxxxxxx,
00
commission, board, bureau, agency, Governmental Authority, or
other person, instrumentality, firm, corporation or other
entity, or any board of arbitration or similar entity.
(r) Seller has filed all tax returns that it was required to file.
All such tax returns were correct and complete in all
respects. All taxes owed by the Seller (whether or not shown
on any tax return) have been paid. No claim has ever been made
by an authority in a jurisdiction where the Seller does not
file tax returns that it is or may be subject to taxation by
that jurisdiction. There are no security interests on any of
the Assets that arose in connection with any failure (or
alleged failure) to pay any tax. The Seller has withheld and
paid all taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholders or other third
party. Neither the Seller nor any director or officer (or
employee responsible for tax matters) of the Seller expects
any authority to assess any additional taxes for any period
for which tax returns have been filed. There is no dispute or
claim concerning any tax liability of the Seller either (i)
claimed or raised by any authority in writing or (ii) as to
which the stockholders, directors or officers (or employees
responsible for tax matters) of the Seller has knowledge based
upon personal contacts with any agent of such authority. The
Seller has delivered to the Buyer correct and complete copies
of all tax returns including federal income tax returns,
examination reports and statements of deficiencies assessed
against or agreed to by the Seller since December 31, 1997.
(s) With respect to all employee benefit plans in which employees
of the Seller participate the following are true and correct:
1) SCHEDULE 5(S)(I) lists each deferred compensation plan,
bonus and incentive arrangement, stock option plan,
restricted stock arrangement or plan, "cafeteria plan"
as described in Section 125 of the Tax Code, severance
agreement and any other "employee welfare benefit plan"
(as defined in Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and
each "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) maintained by the Seller or to
any commonly controlled entity within the meaning of
Section 414(b) of the Tax Code; or to which the Seller
or any commonly controlled entity within the meaning of
Section 414(b) of the Tax Code contributes or is
required to contribute and sets forth the amount of any
liability of the Seller or any commonly controlled
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entity within the meaning of Section 414(b) of the Tax
Code for contributions more than 30 days past due as of
the date hereof and as of the end of any subsequent
month ending prior to the Closing Date.
2) Neither the Seller nor any commonly controlled entity
within the meaning of Section 414(b) of the Tax Code has
maintained or contributed to within the last six years
any employee pension benefit plan which is a defined
benefit plan or a multiemployee pension plan under ERISA
ss. 3(37).
3) True and complete copies of each benefit plan identified
on SCHEDULE 5(S)(I), related trust agreements or annuity
contracts (or any other funding instruments), summary
plan descriptions and other written communications (or a
description of any oral communications) by the Seller to
its employees concerning the extent of benefits provided
under a benefit plan, the most recent determination
letter issued by the IRS with respect to each employee
pension benefit plan, and for the three most recent
years the Form 5500 and attached schedules for each such
benefit plan for which such Form 5500 is required to be
filed have been furnished to the Buyer.
4) No employee welfare benefit plan provides for continuing
benefits or coverage for any participant, beneficiary or
former employee after such participant's or former
employee's termination of employment except as may be
required by Section 4980B of the Tax Code and Sections
601-608 of ERISA.
5) All of the benefit plans identified on SCHEDULE 5(S)(I)
and any related funding instruments comply, and have
complied in the past, both as to form and operation with
the provisions of ERISA, the Tax Code and with all other
applicable laws, rules and regulations.
6) There are no claims pending with respect to, or under,
any benefit plan identified on SCHEDULE 5(s)(i) other
than routine claims for plan benefits, and there are no
disputes or litigation pending or threatened with
respect to any such plans.
7) Except as otherwise set forth on SCHEDULE 5(S)(VII),
neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby
will (i) result in any payment
15
to be made by the Buyer or Seller (including, without
limitation, severance, unemployment compensation, golden
parachute (defined in Section 280G of the Tax Code), or
otherwise) becoming due to any current or former
employee or other service provider of the Seller or any
vesting or increase in the amount of compensation due
any such employee or service providers; or (ii) increase
any benefits otherwise payable under any Benefit Plan.
8) There has been no amendment to, written interpretation
or announcement (whether or not written) by the Seller,
or any ERISA Affiliate relating to, or change in
participation or coverage under, the Employee Plans
which would increase the expense of maintaining such
plan above the level of expense incurred with respect to
that plan for the most recent fiscal year included in
the SMC Financial Statements.
9) There are no unfunded pension or similar liabilities
regarding any employee of the Seller. All pension plans
and other benefit plans have been fully funded, and
there are no undisclosed pending claims, audits, or
investigations, and such plans have at all times been
administered in compliance with all applicable laws
(including, without limitation, ERISA).
(t) Except as disclosed on SCHEDULE 5(T), the Seller is not a
party to any oral or written contracts or agreements granting
benefits or rights to any employees or any collective
bargaining agreement or to any conciliation agreement with the
Department of Labor, the Equal Employment Opportunity
Commission or any federal, state or local agency which
requires equal employment opportunities or affirmative action
in employment. There are no unfair labor practice complaints
pending against the Seller before the National Labor Relations
Board and no similar claims pending before any similar state,
local or foreign agency. There is no activity or proceeding of
any labor organization (or representative thereof) or employee
group to organize any employees of the Seller, nor any
strikes, slowdowns, work stoppages, lockouts, or, to the
Seller's knowledge, threats thereof, by or with respect to any
such employees. The Seller is in compliance with all
applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and
hours, and the Seller is not engaged in any unfair labor
practice.
16
(u) SCHEDULE 5(U) sets forth (i) an accurate and complete
description in all material respects of all leases, subleases,
purchase orders, firm purchase orders, licenses, commitments,
contracts, term sheets and agreements (whether written or
oral, and whether or not legally binding or enforceable) (a)
involving performance of services or delivery of goods or
materials by the Seller of an amount or value in excess of
$10,000 over its term, (b) involving performance of services
or delivery of goods or materials to the Seller of an amount
or value in excess of $25,000 over its term or (c) that is
terminable by the Seller or the other party upon less than
thirty (30) days notice, and (ii) a description of all current
business arrangements with material customers or material
suppliers for which no written contract or other agreement
exists (collectively, the "Contracts"). SCHEDULE 5(U) provides
reasonably complete details concerning such Contracts,
identifying among other things, the parties to the Contract,
the nature of the Contract, and the amount of the remaining
commitment of the Seller thereunder. The Seller has delivered
to the Buyer true and correct copies or, in the case of oral
contracts or business arrangements, descriptions of all
Contracts in all material respects. Each of the Contracts are
legal, valid and binding obligations of the Seller and, to the
knowledge of the Seller, the other parties to such Contracts,
enforceable by the Seller in accordance with their terms and
are in full force and effect. Except as described in SCHEDULE
5(U), all rent and other payments by the Seller under the
Contracts are current, there are no existing defaults by the
Seller under the Contracts, and no termination, condition or
other event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any
other event) would constitute a default or a basis for force
majeure or other claim of excusable delay or non-performance
thereunder by any of the Seller or, to the knowledge of the
Seller, the other parties to such Contracts. Other than
incidental changes in the ordinary course of business, there
are no renegotiations of, or attempts to renegotiate, or
outstanding rights to renegotiate, any amounts paid or payable
to the Seller under current or completed Contracts with any
person having the contractual or statutory right to demand or
require such renegotiation, and no such person has made
written demand for such renegotiation. SCHEDULE 5(U) sets
forth a true, correct and complete list of the identities of
any person whose consent or approval is required and the
matter, agreement or contract to which such consent relates in
connection with the transfer, assignment or conveyance by the
Seller of any of the Assets.
(v) 1) Except as set forth on SCHEDULE 5(V), the Seller is
not in default with respect to nor in violation (and has
not been in violation of
17
during the five-year period prior to the date hereof) of
any legal requirement or governmental authorization,
except which would not reasonably be expected to have an
adverse effect. The consummation of the transactions
contemplated by this Agreement will not constitute a
default or violation under any legal requirement or
governmental authorization applicable to the Seller,
except which would not reasonably be expected to have an
adverse effect.
2) Set forth in SCHEDULE 5(V)(II) are all the governmental
authorizations held by the Seller on the date hereof,
which constitute all of the governmental authorizations
necessary to permit the Seller to own, operate, use, and
maintain the Assets in the manner in which they are now
operated and maintained and to conduct the Business as
now being conducted. All required filings with respect
to such governmental authorizations have been timely
made and all required applications for renewal thereof
have been timely filed.
(w) 1) SCHEDULE 5(W)(1) contains an accurate and complete
description in all material respects of all policies of
property, fire and casualty, product liability, workers'
compensation, liability and other forms of insurance
owned or held by the Seller and, except as set forth on
SCHEDULE 5(W)(1), the Seller has had similar insurance
in force for at least the last five years.
2) Except as set forth on SCHEDULE 5(W)(2), the Seller has
not received (i) any notice of cancellation of any
policy described in subparagraph 5(w)(2) hereof or
refusal of coverage thereunder, (ii) any notice that any
issuer of such policy has filed for protection under
applicable bankruptcy or other insolvency laws or is
otherwise in the process of liquidating or has been
liquidated, (iii) any other indication that such
policies are no longer in full force or effect or that
the issuer of any such policy is no longer willing or
able to perform its obligations thereunder; or (iv)
notice that a claim is being handled under a
"reservation of rights" provision by any insurance
carrier.
3) The Seller does not currently have, nor in the past five
years has had, any fidelity bonds.
18
(x) 1) SCHEDULE 5(X) sets forth a correct and complete list
and summary description in all material respects of (i)
all federal, state and foreign grants, registrations and
applications existing or outstanding with respect to
intellectual property owned by the Seller, (ii) all
license agreements relating to intellectual property to
which the Seller is a party (excluding licenses with
respect to off-the-shelf software, each with a cost of
less than $1,000), (iii) all trademarks, trade names,
service names, service marks, and any applications for
any of the foregoing, and (iv) all other material items
of intellectual property not otherwise included in the
foregoing clauses (i)-(iii). The Seller has provided the
Buyer with true, correct and complete copies and/or
descriptions of all of the items listed on SCHEDULE
5(X).
2) The Seller owns or has the right to use pursuant to
license, sublicense, agreement or other permission all
identified intellectual property (collectively the
"INTELLECTUAL PROPERTY RIGHT"). The consummation of the
transactions contemplated by this Agreement will not
adversely effect the Intellectual Property Right owned
or used by the Seller and being sold or transferred to
the Buyer.
3) The intellectual properties are valid and subsisting and
not unenforceable in whole or part, and the Seller has
sole and full title to all owned intellectual property,
free and clear of all claims, liens, encumbrances,
mortgages, licenses (either as licensee or licensor),
including claims or rights of employees, agents,
consultants or other parties involved in the development
or creation of such intellectual properties, and no
other person has or shall have any claim of ownership
with respect to the intellectual properties whatsoever.
4) Seller is not currently in receipt of any notice of any
violation of the rights of any other Person with respect
to any intellectual property, or has conducted any acts
of unfair competition.
5) To the knowledge of the Seller, no other person is
infringing any intellectual property rights of the
Seller.
6) The Seller shall keep confidential and not disclose to
any third party any trade secrets among the intellectual
property, except such of said trade secrets as now are
or hereinafter become published or
19
otherwise generally available to the public other than
through the direct or indirect actions of the Seller.
(y) Without in any manner limiting any other representations and
warranties set forth in this Agreement and except as set forth
in SCHEDULE 5(Y):
1) The Seller is not in violation of, nor has violated, nor
has been or is in non-compliance with, any Environmental
Laws (as hereinafter defined). For the purposes hereof,
"Environmental Laws" shall mean any and all laws,
statutes, ordinances, rules, regulations, orders, or
determinations of any governmental authority pertaining
to the environment in effect on the date of this
Agreement and in effect at such time in any and all
jurisdictions in which the Seller operates, including,
without limitation, the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"), the Federal Water
Pollution Control Act, as amended, the Resource
Conservation and Recovery Act, as amended ("RCRA"), the
Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, comparable state and
local laws and other material environmental protection
laws in effect on the date of this Agreement.
Without in any manner limiting the generality of subparagraph
(1) above and except as disclosed in the environmental reports
provided to Buyer by Seller or commissioned by Buyer in
conjunction with its due diligence review:
(i) Except in compliance with Environmental Laws
(including, without limitation, by obtaining necessary
environmental permits), no Materials of Environmental
Concern (as hereinafter defined) have been used,
generated, extracted, mined, beneficiated, manufactured,
stored, treated, or disposed of, or in any other way
released (and no release is threatened) by the Seller or
transferred or transported by the Seller or on its
behalf, and no Materials of Environmental Concern have
been generated, manufactured, stored or treated or
disposed of, or in any other way released (and no
release is threatened), by any person on property owned,
operated, or occupied by the Seller. As used herein,
"Materials of Environmental Concern" mean any hazardous
substances, pollutants, or contaminants (including,
without limitation, oil, petroleum substances, petroleum
wastes, radioactive
20
material, hazardous wastes, toxic substances, asbestos
or materials containing asbestos) or any other waste
substance or material as so defined pursuant to any
environmental law;
(ii) The Seller is not now, and will not be in the
future, as a result of the operation or condition of the
Business on or prior to the Closing Date, subject to
any: (a) contingent liability in connection with any
release or threatened release of any Materials of
Environmental Concern into the environment; (b)
reclamation, decontamination or remediation requirements
under environmental laws, or any reporting requirements
related thereto; or (c) consent order, compliance order
or administrative order relating to or issued under any
environmental law;
(iii) There are no environmental claims pending
or, to the knowledge of the Seller, threatened against
the Seller, or any of their properties (whether owned,
occupied or operated), and, to the knowledge of the
Seller, there is no basis for any such environmental
claims;
(iv) The Seller has all permits, licenses,
registrations, identification numbers, applications,
consents, variances, notices of intent, and other
authorizations necessary to comply with requirements of
environmental laws governing the Seller and/or the
Business; the Seller has all environmental and pollution
control equipment necessary for compliance with all
environmental laws (including, without limitation, for
compliance with all applicable environmental permits)
and operation of the Business as presently conducted;
and the Seller is in compliance with all terms and
conditions of such required environmental permits and
will be in such compliance after the consummation of the
transactions herein contemplated;
(v) The Seller has not been named as a potentially
responsible party under, and no property owned, operated
or occupied by the Seller at any time has been nominated
or identified as a facility which is subject to an
existing or potential claim under CERCLA or comparable
environmental laws, and no such property is subject to
any lien arising under environmental laws;
(vi) The Seller has not received any notice of any
release or threatened release of Materials of
Environmental
21
Concern, nor of any violation of, noncompliance with, or
remedial obligation under, environmental laws or
environmental permits, relating to the ownership, use,
maintenance, or operation of any property, nor is there
any basis for any of the foregoing, nor has the Seller
voluntarily undertaken remediation or other
decontamination or cleanup of any facility or site or
entered into any agreement for the payment of costs
associated with such activity;
(vii) There are no present or past events,
conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or
prevent continued compliance by the Seller with
requirements of Environmental Laws or which may give
rise to any common law or statutory liability under
Environmental Laws or form the basis of an environmental
claim against the Buyer or the Assets;
(viii) There are no obligations, undertakings or
liabilities arising out of or relating to Environmental
Laws which the Seller has agreed to, assumed or
retained, by contract (whether written or oral, and
whether enforceable or unenforceable) or otherwise;
(ix) The Seller has filed all notices,
notifications, financial security, waste management
plans, or applications which are required to be obtained
or filed for the operation of the Business or the use or
operation of any real property;
(x) The Seller is in compliance with all other
applicable limitations, restrictions, conditions,
schedules and timetables contained in environmental laws
or contained in any plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or
approved thereunder; and
(xi) No current Business facility (or equipment
thereon) contains any asbestos-containing materials or
polychlorinated biphenyls in any form, nor do they use
prohibited or restricted refrigerants, nor are there any
wetland areas or other land subject to restricted
development under environmental laws.
(xii) There are no underground storage tanks
located on the real estate currently occupied by Seller,
and all remediation regarding removal of prior
underground storage tanks located on
22
the real property currently or presently occupied by
Seller has been in accordance with all applicable laws.
(z) Except as set forth on SCHEDULE 5(Z), the buildings, plants,
structures and equipment leased or owned by the Seller are
structurally sound with no known defects, are in good
operating condition and repair and are adequate for the uses
to which they are being put, and none of such buildings,
plants, structures or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs
that are not material in nature or cost.
(aa) Each product manufactured, sold, leased, or delivered by the
Seller has been in material conformity with all applicable
federal, state, local or, to Seller's knowledge foreign laws
and regulations, contractual commitments and all express and
implied warranties, and the Seller has no liability (and there
is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim,
or demand giving rise to any liability) for replacement or
repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set
forth on the face of the Audited Balance Sheet (rather than in
any notes thereto). Except as disclosed on SCHEDULE 5(AA), no
product manufactured, sold, leased, or delivered by the Seller
is subject to any guaranty, warranty, or other indemnity
beyond the applicable standard terms and conditions of sale or
lease. SCHEDULE 5(AA) includes copies of the standard terms
and conditions of sale or lease for the Seller (containing
applicable guaranty, warranty, and indemnity provisions). The
Seller has no liability (and, to the knowledge of the Seller
and Xxxxxx, there is no basis for any present or future
action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to
any liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of
any product manufactured, sold, leased, or delivered by the
Seller and there has been no inquiry or investigation made in
respect thereof by any person including any governmental or
administrative agency other than such liability for which the
Seller has obtained insurance coverage (after taking into
effect deductibles under applicable insurance policies).
(bb) As of the date hereof and at Closing, Xxxxxx owns 93.21% of
the issued and outstanding stock of Seller and Xxxxxxx X.
Xxxxxx owns 6.79% of the issued and outstanding stock of
Seller.
23
(cc) All actions necessary to authorize the execution, delivery and
performance of this Agreement by Seller and the consummation
by Seller of the transactions contemplated herein have been
duly and validly taken.
(dd) No representation or warranty by the Seller or Xxxxxx in this
Agreement, nor any statement, summary, exhibit or schedule
furnished to the Buyer by the Seller or Xxxxxx under and
pursuant to, or in anticipation of this Agreement, contains or
will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(ee) Except as expressly provided herein, Seller makes no further
representations or warranties of any kind, nature or
description with respect to the assets or business, whether
expressed or implied, including, but not limited to, any
warranties of merchantability or fitness for a particular
purpose with respect to the assets to be conveyed to Buyer and
Seller hereby disclaims the same.
6. REPRESENTATIONS OF BUYER. Buyer hereby represents and warrants as
follows:
(a) Buyer is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada.
(b) Buyer has all requisite corporate power to close pursuant to
the terms of this Agreement, and has taken all action required
by law, its certificate of incorporation, its by-laws, or
otherwise, in order to authorize the execution and delivery of
this Agreement and closing hereunder.
(c) Buyer has the funds (or has available firm credit-worthy
financial institutions to provide the funds) required to pay
the Purchase Price and consummate the transactions
contemplated herein.
(d) On or before December 31, 2001, Buyer will pay accrued bonuses
as specified on the Closing Balance Sheet.
7. CLOSING. The closing of this Agreement (the "Closing") shall take place
at the offices of Tiger Corporation located at 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxx Xxxxxx 00000, at 11:59 o'clock p.m., South Dakota time, on August
14, 2001, or such other place or date
24
as the parties may approve in writing; provided, however, that the Closing shall
not occur later than August 31, 2001 (the "Closing Date"). At the Closing, (i)
the Seller will deliver to the Buyer the various certificates, instruments, and
documents referred to in Section 14 below; (ii) the Seller will execute,
acknowledge (if appropriate), and deliver to the Buyer (A) the deed relating to
the Sioux Falls, South Dakota manufacturing facility in the form attached hereto
as EXHIBIT "D", (B) assignments of purchased leases, permits, intellectual
property, contracts, (C) such other instruments of sale, transfer, conveyance,
and assignment as the Buyer and its counsel may reasonably request relating to
the Assets; (D) the Escrow Agreement; and (E) the Assignment and Assumption
Agreement in the form attached hereto as EXHIBIT "E"; (iii) the Buyer will
execute, acknowledge (if appropriate), and deliver the Assignment and Assumption
Agreement, the certificates referred to in Section 15 below, and the Escrow
Agreement; (iv) the Seller will execute, acknowledge (if appropriate) and
deliver the Xxxx of Sale in the form attached hereto as EXHIBIT "F"; (v) Getty
Abstract & Title Company, Inc. (the "Title Company") shall issue to Buyer a
South Dakota Standard Form Owner Policy of Title Insurance, as applicable, in
the amount of $936,000.00, which contains only exceptions agreed to and accepted
by Buyer, with the premium for such policy paid in full by Seller prior to
Closing; and (vi) the Buyer will deliver to the Seller the consideration
specified in Section 4 hereof.
At any time and from time to time after the Closing, at the request of
Buyer and without further consideration, except as stated below, the Seller
will, execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such action as Buyer may reasonably
determine is necessary to transfer, convey and assign to Buyer, and to confirm
Buyer's title to or interest in the Assets, to put Buyer in actual possession
and operating control thereof and to assist Buyer in exercising all rights with
respect thereto.
8. INDEMNIFICATION BY SELLER AND X. X. XXXXXX. Seller and X. X. Xxxxxx
shall, jointly and severally, and at their sole cost and expense, defend,
indemnify, and hold harmless the Buyer
25
and its directors, officers, heirs, successors, and assigns (the Buyer and all
such other persons and entities are collectively referred to herein as the
"Buyer's Indemnified Persons"), against and in respect of any and all loss,
damage, or expense (including reasonable attorneys fees) caused by or arising
out of or resulting from:
(a) All federal, foreign, state, county, and local taxes,
including without limitation, income taxes, corporate
franchise taxes, payroll taxes, sales taxes and ad valorem
taxes of Seller arising on or before the Closing Date and any
taxes not accrued on the Closing Balance Sheet (including
penalties and interest);
(b) All federal, state, and local income taxes of any kind
whatsoever (including penalties and interest) of X. X. Xxxxxx
arising on or before the Closing Date including taxes
associated with the sale of the Assets and assumption of the
Assumed Liabilities hereunder;
(c) Any Hazardous Discharge or environmental liability established
as having arisen or occurred prior to the Closing Date. (For
the purpose of this Agreement, Hazardous Discharge will be
defined as any discharge of Materials of Environmental
Concern);
(d) Any breach or default in the performance by the Seller of any
covenant or agreement of the Seller contained in this
Agreement;
(e) Any breach of warranty or inaccurate, misleading, or erroneous
representation made by the Seller herein, in any schedule,
annex, or exhibit attached or delivered by or on behalf of the
Seller pursuant hereto; and
(f) Any liabilities of the Seller or the Business other than
the Assumed Liabilities.
In the event Buyer believes Seller is obligated to provide indemnification in
this Section 8, Buyer must give written notice to Seller within sixty (60) days
of Buyer obtaining information indicating that Seller may be obligated to
provide indemnification hereunder, including in said notice a copy of such
claim, process, or pleading, if any, received by the Buyer so as to give the
26
Seller the opportunity, at Seller's election, to contest and to defend any such
liability. No delay in providing notice to the indemnifying party shall void the
indemnity as long as the indemnifying party is not jeopardized by the delay.
Buyer may, but shall not be obligated to, contest any such liability. If Buyer
elects to contest any such liability, Seller shall be entitled to participate in
such contest. If Buyer elects not to contest such alleged liability, or to
terminate its participation in any such contest, Buyer shall make available to
Seller such books, records, and other documents and matters in its possession
which are necessary to contest the alleged liability and to the proper defense
of such alleged liability.
9. INDEMNIFICATION BY BUYER. Buyer shall, at its sole cost and expense,
defend, indemnify, and hold harmless Seller and X. X. Xxxxxx against and in
respect of any and all loss, damage, or expense (including reasonable attorneys
fees) caused by or arising out of or resulting from: (a) All of the Assumed
Liabilities;
(b) Any Hazardous Discharge or environmental liability arising or
occurring after the Closing Date (excluding any Hazardous
Discharge or environmental liability caused by Seller);
(c) Any breach or default in the performance by the Buyer of any
covenant or agreement of the Buyer contained in this
Agreement; and
(d) Any breach of warranty or inaccurate, misleading, or erroneous
representation made by the Buyer herein, in any schedule,
annex or exhibit attached or delivered by or on behalf of the
Buyer pursuant hereto.
In the event Seller believes Buyer is obligated to provide indemnification in
this Section 9, Seller must give written notice to Buyer within sixty (60) days
of Seller obtaining information indicating that Buyer may be obligated to
provide indemnification hereunder, including in said notice a copy of such
claim, process, or pleading, if any, received by the Seller so as to give the
Buyer the opportunity, at Buyer's election, to contest and to defend any such
liability. No delay
27
in providing notice to the indemnifying party shall void an indemnity as long as
the indemnifying party is not jeopardized by the delay. Seller may, but shall
not be obligated to, contest any such liability. If Seller elects to contest any
such liability, Buyer shall be entitled to participate in such contest. If
Seller elects not to contest such alleged liability, or to terminate its
participation in any such contest, Seller shall make available to Buyer such
books, records, and other documents and matters in its possession which are
necessary to contest the alleged liability and to the proper defense of such
alleged liability.
10. LIMITATIONS ON LIABILITY. Seller and Xxxxxx, jointly and severally,
shall be required to provide indemnification to the Buyer's Indemnified Persons
only in the event and to the extent that the aggregate amount of indemnification
liability of Seller and/or Xxxxxx exceeds $20,000 (the "Threshold Amount"), and
then for the entire amount of liability and not just the amount in excess of the
Threshold Amount. In the absence of willful or knowing fraud, and except as
otherwise set forth herein, collectively the Seller and Xxxxxx'x aggregate
indemnification liability hereunder shall be limited to a maximum amount of
$500,000, plus the amount remaining in escrow pursuant to the Escrow Agreement
at the time a claim for which indemnification is made hereunder (the "Cap").
Notwithstanding the foregoing, the Threshold Amount shall not apply to (a)
Product Recall matters with respect to products manufactured and/or sold by
Seller prior to the Closing Date; or (b) any items which should have been
included on the Closing Balance Sheet. Further notwithstanding the foregoing,
the Cap or the Threshold Amount shall not apply to: (i) claims against the
Seller and/or Xxxxxx for willful or knowing fraud; (ii) any environmental
matters; (iii) any tax matters; or (iv) any Product Liability Claims with
respect to claims arising or occurring prior to the Closing Date.
11. EMPLOYMENT OF X.X. XXXXXX. Effective as of the Closing Date, Buyer
shall employ X.X. Xxxxxx pursuant to the terms and conditions of that certain
Employment Agreement in the form attached hereto as EXHIBIT "G" (the "Employment
Agreement").
28
12. COVENANT NOT TO COMPETE. At the Closing, X. X. Xxxxxx and the Seller
shall enter into the Non-Competition and Confidentiality Agreement, set forth at
EXHIBIT "H" (the "Non-Competition and Confidentiality AGREEMENT"), with Buyer,
for which $50,000.00 of the Adjusted Purchase Price shall be allocated.
13. COVENANTS OF THE SELLER. The Seller covenants with the Buyer that:
(a) CONDUCT OF BUSINESS. From the date of this Agreement to the
Closing Date, the Seller has and will cause the business of
the Seller to be operated only in the ordinary course, and in
particular, the Seller has not or will not, without the prior
written consent of the Buyer:
1) cancel or permit any insurance to lapse or terminate,
unless renewed or replaced by like coverage;
2) change its Certificate of Incorporation or by-laws;
3) be in default under any material contract, agreement,
commitment or undertaking of any kind, the default of
which would have a material and adverse effect on it,
its properties or the Business;
4) violate or fail to comply with all laws applicable to it
or its properties or business, the violation of which
would have a material and adverse effect on it or its
properties or business;
5) commit any act, permit the occurrence of any event or
suffer the existence of any condition of the type
described in SECTION 5(D) hereof;
6) enter into any contract, agreement or other commitment
other than in the Ordinary Course of Business;
7) fail to maintain and repair the assets of the Seller in
accordance with good standards of maintenance and as
required in any leases or other agreements pertaining
thereto;
8) fail to duly and timely file all reports of federal,
state, foreign, local and other authorities and promptly
pay all federal, state, foreign and local tax
assessments and governmental charges lawfully levied or
assessed upon it or its properties or upon any part
thereof,
29
except taxes or charges being contested in good faith by
appropriate proceedings and for which adequate
provisions have been made, and duly observe and conform
to all lawful requirements of any governmental authority
relating to its properties or to the operation and
conduct of its business and all covenants, terms and
conditions upon or under which any of its properties are
held;
9) enter into or assume any mortgage, pledge, conditional
sale or other title retention agreement, lien,
encumbrance or charge of any kind upon any of its
properties or assets whether now owned or hereafter
acquired, or create or assume any obligation for
borrowed money, or make any loans or advances to or
assume, guarantee, endorse or otherwise become liable
with respect to the obligations, stock or dividends of
any person, firm, association or corporation, or sell,
lease, abandon or otherwise dispose of any of its real
property or any machinery, equipment or other operating
property, or any patent, trademark, trade name, brand
name, copyright (or pending application for any patent,
trademark or copyright), invention, process, know-how,
formula, trade secret, if any, or other intangible
asset;
10) create or acquire any subsidiary or make any investments
in any corporation, association, partnership, firm,
joint venture or other business organization or
enterprise; or
11) merge, consolidate or agree to merge or consolidate with
or into any other corporation or business entity.
(b) ACCESS TO INFORMATION. From and after the date of this
Agreement, the Seller shall give to the Buyer, its counsel,
accountants, engineers and other representatives, subject to
prior notice, full and free access to all the properties,
books, contracts, commitments and records of the Seller so
that the Buyer may have full opportunity to make such
investigation as it shall desire to make of the affairs of the
Seller. Any such investigation shall not affect the
representations and warranties of the Seller contained in this
Agreement. Any such investigation shall be made at reasonable
times and Buyer shall take all steps reasonably possible to
mitigate disruption to Seller's business and personnel. The
Seller shall cooperate with the Buyer, its representatives and
counsel in the preparation of any documents or other material
which may be required by any governmental agency. In addition,
the Seller shall deliver to
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the Buyer updated information included or to be included in
any Schedule or other document delivered to the Buyer, to the
extent any such information has changed since the date of
delivery thereof.
(c) PRESERVATION OF BUSINESS ORGANIZATION. The Seller shall use
its best efforts to preserve its business organization to keep
available to the Buyer the services of the employees of the
Seller and to preserve for the Buyer existing relationships
with all suppliers, customers and others having business
relations with the Seller.
(d) TRADE SECRETS. The Seller recognizes that it has and will have
access to certain confidential information, trade secrets,
processes, formulae and know-how that are valuable, special
and unique assets of the Seller's business, and the Seller
will not, and will use its best efforts to ensure that the
employees and agents of the Seller do not, use or divulge to
any person, firm, corporation, association or other entity,
for any purpose or reason whatsoever, any confidential
information, trade secrets, processes, formulae or know-how
relating to the business or properties of the Seller. In the
event of a breach or a threatened breach by the Seller of the
provisions of this SUBPARAGRAPH (D), the Buyer shall be
entitled to injunctive and other relief restraining the Seller
from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting
the Buyer from pursuing any other legal or equitable remedies
available to them.
(e) COOPERATION BETWEEN ACCOUNTANTS. The Seller shall direct their
accountants to cooperate fully with the Buyer and its
accountants, in a smooth transition of accounting issues,
including reasonable access to the work papers of Seller's
accountants as they relate to tax and audit work performed
with regard to the Seller.
(f) COMPLIANCE WITH CONDITIONS. The Seller shall use its best
efforts to bring about the satisfaction of the conditions to
the obligations of the Buyer specified in SECTION 14 hereto.
(g) NOTICES AND CONSENTS ASSIGNMENT OF INDEBTEDNESS. The Seller
will give any notices to third parties, and the Seller will
use its best efforts to obtain any third party consents, that
are required to transfer the Assets to Buyer.
(h) PRODUCT RECALL AND PRODUCT LIABILITY CLAIMS. As used herein, a
"Product Liability Claim" shall mean any claim made by any
person and the claim arises out of an alleged defect in any
product and causing bodily injury, death or property damage.
As used herein, a "Product Recall" shall mean
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voluntary or mandatory action carried out by the Buyer or any
other person the purpose of which is to remove from commerce
any product, or any component thereof, when there is reason to
believe the product or component is defective and that,
because of such defect, the product may not be safe or may not
perform as intended. Buyer shall determine whether a Product
Recall is necessary with respect to products manufactured
and/or sold by Seller prior to the Closing Date. In the event
of a Product Recall, Buyer shall have sole determination of
the manner in which such Product Recall shall be conducted.
Seller shall cooperate with Buyer to identify and locate any
products which are subject to a Product Recall. In the event
Seller disagrees with Buyer's decision on whether a Product
Recall is necessary, the Seller may refer the matter to
arbitration to be conducted by the American Arbitration
Association and held in Seguin, Texas. A single arbitrator
shall be agreed upon by the parties or, if the parties cannot
agree upon an arbitrator within fifteen (15) days, then the
parties agree that a single arbitrator shall be appointed by
the American Arbitration Association. The decision of the
arbitrator shall be binding. In the event the arbitrator
determines that a Product Recall conducted by Buyer was not
necessary, Seller shall not be liable for the costs associated
with such Product Recall.
(i) ASBESTOS ABATEMENT. Prior to Closing, the Phase I and Phase II
reports regarding the real property located at 000 X. 0xx
Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxx which real property is
owned by Seller and being sold to Buyer hereunder, revealed
certain questionable levels of asbestos in an approximately
1,200 square foot area of the office space on the real
property. The Seller agrees to pay for proper removal and
abatement of the asbestos.
(j) SELLER'S EMPLOYEES. Seller shall terminate all of its
employees as of the Closing Date. Seller shall not make any
representations to Seller's employees assuring them of
continuing employment by Buyer after the Closing. As of the
Closing Date, Buyer shall extend an offer of employment to at
least 75% of Seller's existing workforce. Except for the
Assumed Liabilities, Buyer shall not assume any of Seller's
debts or other obligations to Seller's employees, including
without limitation, any obligations for unpaid salaries,
wages, taxes, accrued vacation or other benefits.
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14. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of the Buyer
under this Agreement shall, at the option of the Buyer, be subject to the
following conditions, unless waived in writing by the Buyer:
(a) THE SELLER'S REPRESENTATIONS AND WARRANTIES TRUE AT Closing.
The Buyer shall not have discovered any error, misstatement or
omission in the representations and warranties made by the
Seller in SECTION 5 hereof; the representations and warranties
made by the Seller in this Agreement shall be true on and as
of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such
date; each and all of the agreements and covenants of the
Seller to be performed or complied with on or before the
Closing Date pursuant to the terms hereof shall have been
performed or complied with by the Closing Date; and the Seller
shall have delivered to the Buyer certificates dated the
Closing Date to all such effects.
(b) OPINION OF COUNSEL FOR THE SELLER. The Buyer shall have
received an opinion of Xxxxxxxx & Xxxxxxxx, Ltd., counsel for
the Seller, dated the Closing Date, in the form attached
hereto as EXHIBIT "I" and made a part hereof.
(c) NO DAMAGE OR DESTRUCTION. Prior to the Closing, there shall
not have occurred any casualty to any facility, property,
equipment or inventory owned or used by the Seller as a result
of which either the monetary amount of damage or destruction
aggregates more than $50,000, or $20,000 if such loss is not
completely covered by valid, existing insurance underwritten
by responsible insurers. Additionally, there shall have been
no changes in the business, properties or operations of the
Seller since December 31, 1999, which would have an adverse
effect on the value of its business.
(d) ABSENCE OF RESTRAINT. No order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or
transactions in connection herewith shall have been entered
and, on the Closing Date, there shall not be any pending or
threatened litigation in any court, or any proceeding by or
before any governmental commission, board or agency, with a
view to seeking to restrain or prohibit consummation of the
transactions contemplated hereby or in which divestiture,
rescission or significant damages are sought in connection
with the transactions hereby, and no investigation by a
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governmental agency shall be pending or threatened which might
result in any such litigation or other proceeding.
(e) OFFICER'S CERTIFICATE. The Seller shall have furnished to the
Buyer a certificate dated the Closing Date signed by the
President or a Vice President of the Seller to the effect that
the conditions set forth above in this SECTION 14 insofar as
they relate to the Seller have been satisfied.
(f) NON-COMPETITION AND CONFIDENTIALITY AGREEMENT. The Seller and
Xxxxxx shall have executed and delivered to the Buyer the
Non-Competition and Confidentiality Agreement.
(g) EMPLOYMENT AGREEMENT. Xxxxxx shall have executed and delivered
to the Buyer the Employment Agreement.
(h) ESCROW AGREEMENT. Seller shall have executed and delivered to
the Buyer the Escrow Agreement.
(i) PHASE I ENVIRONMENTAL REPORTS. The Buyer shall pay for,
receive and approve Phase I and Phase II Environmental
Property Assessments with regard to the real property occupied
by Seller; provided, however, $1,000.00 shall be paid by
Seller as partial payment for the Phase II Environmental
Property Assessment. Such assessments shall be dated within
thirty (30) days of the Closing Date and shall be prepared by
parties acceptable to the Buyer.
(j) BOARD APPROVAL. The transactions referenced in the Agreement
shall be approved by the Board of Directors of the Buyer.
(k) COMPLETION OF DUE DILIGENCE. The Buyer shall complete its due
diligence investigation of the Seller and the Business to the
satisfaction of the Buyer.
(l) THIRD PARTY CONSENTS. The Seller shall have obtained consent
to assignment of the Leases to Buyer from the landlord under
the Leases and any other consents the Buyer deems necessary.
15. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of the Seller
under this Agreement shall, at the option of the Seller, be subject to the
following conditions, unless waived in writing by the Seller:
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(a) THE BUYER'S REPRESENTATIONS AND WARRANTIES TRUE AT Closing.
The Seller shall not have discovered any error, misstatement
or omission in the representations and warranties made by the
Buyer in SECTION 6 hereof; the representations and warranties
made by the Buyer in this Agreement shall be true on and as of
the Closing Date with the same effect as though such
representations and warranties had been made on and as of such
date; each and all of the agreements and covenants of the
Buyer to be performed or complied with on or before the
Closing Date pursuant to the terms hereof shall have been
performed or complied with by the Closing Date; and the Buyer
shall have delivered to the Seller a certificate dated the
Closing Date to all such effects.
(b) ABSENCE OF RESTRAINT. No order to restrain, enjoin or
otherwise prevent the consummation of this Agreement or
transactions in connection herewith shall have been entered
and, on the Closing Date, there shall not be any pending or
threatened litigation in any court, or any proceedings by or
before any governmental commission, board or agency, with a
view to seeking to restrain or prohibit consummation of the
transactions contemplated hereby or in which divestiture,
recission or significant damages are sought in connection with
the transactions contemplated hereby, and no investigation by
any governmental agency shall be pending or threatened which
might result in any such litigation or other proceeding.
(c) OFFICER'S CERTIFICATE. The Buyer shall have furnished to the
Seller a certificate dated the Closing Date signed by the
President or a Vice President of the Buyer to the effect that
the conditions set forth above in this SECTION 15 insofar as
they relate to the Buyer have been satisfied.
16. AGREEMENT TO STAND STILL. Seller agrees that, from the date of
execution hereof, it shall not, directly or indirectly, negotiate with any party
other than Buyer for the sale of its Business or any part thereof. In the event
Closing does not occur hereunder, Buyer agrees that Seller may immediately
commence negotiations with parties other than Buyer regarding the sale of its
business.
17. DEFAULT. In the event of the failure of either party to comply with
any of the terms and provisions of this Agreement or any agreement associated
herewith, the non-defaulting party
35
may give the defaulting party written notice of such default and the defaulting
party shall have fifteen (15) days from the date of such notice within which to
correct and fully cure such default. If such default has not been corrected
prior to the end of said notice period, the non-defaulting party may exercise
all remedies available to it at law or in equity. The parties agree that the
defaulting party shall pay to the non-defaulting party, on demand, all
reasonable costs and expenses, including attorneys' fees, incurred by the
non-defaulting party by reason of a default by the other party or in connection
with enforcing any rights and remedies available to non-defaulting party.
18. ADDITIONAL AGREEMENTS AND MISCELLANEOUS. The parties hereby agree to
the following:
(a) ENVIRONMENTAL INVESTIGATION.
1) Buyer and its consultants, agents and representatives,
shall have the right at its sole expense, to the same
extent that the Seller has such right, but not the
obligation or responsibility, to inspect any real
property owned, occupied or operated by the Seller and
the Seller agrees to permit the Buyer and its
consultants, agents and representatives to inspect said
real property, including, without limitation, conducting
asbestos surveys and sampling, environmental assessments
and investigation, and other environmental surveys and
analyses including soil and ground sampling at any time.
Buyer shall notify the Seller prior to any physical
inspections of property.
2) Seller shall make available to the Buyer and its
consultants, agents and representatives all documents
and other material relating to environmental conditions
of the property or compliance with, or liability under
any environmental laws, including, without limitation,
the results of other environmental inspections and
surveys. Seller shall permit all engineers and
consultants who prepared or furnished such reports to
discuss such reports and information with the Buyer.
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(b) MISCELLANEOUS AGREEMENTS AND CONSENTS . Subject to the terms
and conditions of this Agreement, the Buyer and the Seller
agree to use commercially reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all
things necessary, proper, or advisable under applicable laws
and regulations to consummate and make effective, as soon as
practicable after the date hereof, the transactions
contemplated by this Agreement. The parties hereto agree that
they will use their best good faith efforts to secure all
third-party or regulatory approvals necessary to consummate
the transactions provided for herein and to satisfy the other
conditions to Closing contained herein.
(c) PUBLIC ANNOUNCEMENT . Except to the extent public disclosure
is required by law, the timing and content of any
announcements, press releases or other public statements
concerning this Agreement will occur upon, and be determined
by, the mutual consent of the parties.
(d) CONFIDENTIALITY . Without the express written consent of all
of the parties hereto, each of the parties hereto agrees to
maintain in confidence and not disclose to any other person
the terms of the transactions contemplated herein or the
information delivered in connection with the proposed due
diligence investigation, other than disclosures required to
obtain the approvals for the transactions contemplated hereby,
disclosures to those professionals and advisors who have a
need to know, disclosures of information already available to
the public or any other disclosures required by applicable
law. In the event that any of the parties is at any time
requested or required (by oral questions, interrogatories,
request for information or documents, subpoena or other
similar process) to disclose any information supplied to it in
connection with this transaction, such party agrees to provide
the other parties hereto prompt notice of such request so that
an appropriate protective order may be sought and/or such
other party may waive the first party's compliance with the
terms of this Section 18.
(e) BENEFIT. This Agreement shall bind the parties hereto and
shall inure to and be binding upon their respective legal
representatives, successors, heirs and assigns.
(f) ENTIRE AGREEMENT; WAIVER. This instrument contains the entire
agreement of the parties and supersedes all prior written and
oral agreements. It may not be changed orally but only by an
agreement in writing signed by the party against whom the
enforcement of any waiver, change, modification, extension or
discharge is sought. A waiver of any term or provision shall
37
not be construed as a waiver of any other term or provision or
as a waiver of subsequent performance of the same provision of
this Agreement.
(g) SEVERABILITY. The parties agree that if any part, term,
paragraph or provision of this Agreement is in any manner held
to be invalid, illegal, void or in any manner unenforceable,
or to be in conflict with any law of the State of Texas, then
the validity of the remaining portions or provisions of this
Agreement shall not be affected, and such part, term paragraph
or provision shall be construed and enforced in a manner
designed to effectuate the intent expressed in this Agreement
to the maximum extent permitted by law.
(h) ASSIGNMENT. Except as otherwise provided in this Agreement,
this Agreement is made for the personal benefit of the parties
hereto, and neither party may assign this Agreement, or any
part thereof, or delegate any duty or obligation imposed by
this Agreement without the express written consent of the
other party hereto.
(i) CAPTIONS. The captions and titles utilized in this Agreement
are for convenience of reference only, and shall not be deemed
to define or limit any of the terms, conditions or provisions
of this Agreement.
(j) GOVERNING LAW; FORUM. THIS AGREEMENT AND ALL OBLIGATIONS
CREATED HEREUNDER OR REQUIRED TO BE CREATED HEREBY SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.
(k) NOTICES. All notices required to be given by this Agreement
shall be made in writing either by (i) personal delivery to
the party requiring notice and securing a written receipt; or
(ii) mailing notice in the United States mail to the last
known address of the party requiring notice, by certified
mail, return receipt requested. The effective date of the
notice shall be the date of the written receipt or on the date
of the return receipt, as applicable. The refusal of a party
to accept a certified mail letter shall be treated as the
delivery of the letter as the date of refusal.
(l) PROFESSIONAL FEES. Unless otherwise specified, any and all
attorney's fees, accountant's fees, and other expenses
incurred by either party in connection with the contemplated
transaction will be borne by the party that incurs the
expense.
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(m) SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Except as
otherwise provided herein, all representations, warranties,
covenants and agreements made in this Agreement, or in any
Exhibit or Schedule delivered in connection herewith, shall
survive the Closing for a period of two (2) years, regardless
of any investigations or inquiries made by Buyer, Seller or
Xxxxxx, or any of their respective representatives. The
representations and warranties made by the Seller and Xxxxxx
in Sections 5(a), 5(b), 5(c) and 5(e) hereof and regarding
environmental matters, product liability and product recall
matters shall survive the Closing indefinitely.
Notwithstanding the foregoing, all representations,
warranties, covenants and agreements made regarding tax
matters (and all indemnification obligations of Stockholders
relating thereto as set forth in Paragraph 9 hereof) shall
survive the Closing until the expiration of the applicable
statute of limitation, plus any extension thereto, plus an
additional ninety (90) days. Further notwithstanding the
foregoing, any claims against the Stockholders for fraud shall
survive the Closing until the expiration of the applicable
statute of limitations, plus any extension thereto, plus an
additional ninety (90) days. All claims based upon the
representations, warranties, covenants or agreements in this
Agreement, or in any Exhibit or Schedule delivered in
connection herewith, must be made prior to the relevant
termination date as set forth in this Paragraph 18(m). All
representations, warranties, covenants and agreements shall
survive to the extent a claim based on a representation,
warranty, covenant or agreement in this Agreement, or in any
Exhibit or Schedule delivered in connection herewith, is made
on or prior to the relevant termination date set forth in this
Paragraph 18(m), until such claim is finally resolved.
(n) ACCESS. Subsequent to the Closing Date, Buyer shall, at
Seller's expense, permit Seller, from time to time, to inspect
and copy such books of account and other records of Seller and
to utilize the services of Buyer's or Seller's employees, all
as may be necessary or convenient to enable Seller to prepare
and file tax returns. Until the seventh anniversary of the
Closing Date, Buyer shall not and shall not permit Seller,
without the prior written consent of Seller or its successors
in interest, to destroy or dispose of any such records. In the
event Buyer desires to dispose of such records prior to the
expiration of the seven year period, at Seller's election,
Buyer will destroy the records or forward the records to
Seller. Notwithstanding any of the foregoing, no covenant
contained in this paragraph 18(n) on the part of Buyer is
tended to, and nothing herein shall be construed to, benefit
or confer any rights upon any person, firm or corporation
other than Seller.
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on
the day and year first above written.
SMC CORPORATION
By: _____________________________________
R. G. "Rob" Xxxxxx, its President
_________________________________________
R. G. "Rob" Xxxxxx, Individually
ALAMO GROUP (SMC) INC.
By:______________________________________
Xxxxxx X. Xxxxxxxx, President
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