ASSET PURCHASE AGREEMENT
Between
AMTECH SYSTEMS, INC.
and
P.R. HOFFMAN MACHINE PRODUCTS CORPORATION
and
JOHN R. KRIEGER
TABLE OF CONTENTS
Section Page
1. Sale and Delivery of the Assets............................................................... 1
1.1 Delivery of the Assets...................................................... 1
1.2 Further Assurances.......................................................... 3
1.3 Purchase Price.............................................................. 3
1.4 Assumption of Liabilities; Etc.............................................. 4
1.5 Allocation of Purchase Price and Assumed Liabilities........................ 5
1.6 The Closing................................................................. 5
1.7 Post Closing Adjustments; Financial Statement Delivery
Obligations; Schedule Update Requirement.................................... 5
1.8 Post-Closing Earn-out Payments.............................................. 7
2. Representations of the Seller and the Stockholder............................................. 8
2.1 Organization................................................................ 8
2.2 Capitalization of the Seller................................................ 9
2.3 Authorization............................................................... 9
2.4 Ownership of the Assets..................................................... 9
2.5 Financial Statements........................................................ 10
2.6 Absence of Undisclosed Liabilities.......................................... 10
2.7 Litigation.................................................................. 10
2.8 Insurance................................................................... 11
2.9 Inventory................................................................... 11
2.10 Fixed Assets................................................................ 11
2.11 Leases...................................................................... 11
2.12 Change in Financial Condition and Assets.................................... 12
2.13 Tax Matters................................................................. 12
2.14 Accounts Receivable......................................................... 12
2.15 Books and Records........................................................... 12
2.16 Contracts and Commitments................................................... 13
2.17 Compliance with Agreements and Laws......................................... 14
2.18 Employee Relations.......................................................... 15
2.19 Absence of Certain Changes or Events........................................ 16
2.20 Customers................................................................... 16
2.21 Suppliers................................................................... 17
2.22 Bank Accounts............................................................... 17
2.23 Prepayments and Deposits.................................................... 17
2.24 Trade Names and Other Intangible Property................................... 17
2.25 Employee Benefit Plans...................................................... 17
2.26 Environmental Matters....................................................... 21
2.27 Acquired Assets Complete.................................................... 21
2.28 Regulatory Approvals........................................................ 22
2.29 Indebtedness to and from Officers, Directors and Shareholders............... 22
2.30 Powers of Attorney and Suretyships.......................................... 22
2.31 Disclosure.................................................................. 22
3. Representations of the Buyer.................................................................. 22
3.1 Organization and Authority.................................................. 22
3.2 Capitalization of the Buyer................................................. 22
3.3 Authorization............................................................... 23
3.4 Regulatory Approvals........................................................ 23
3.5 Disclosure.................................................................. 23
3.6 SEC Filings................................................................. 23
4. Access to Information; Public Announcements................................................... 23
4.1 Access to Management, Properties and Records................................ 24
4.2 Confidentiality............................................................. 24
4.3 Public Announcements........................................................ 24
5. Pre-Closing Covenants of the Seller........................................................... 25
6. Best Efforts to Obtain Satisfaction of Conditions............................................. 25
7. Conditions to Obligations of the Buyer........................................................ 25
7.1 Continued Truth of Representations and Warranties of the Seller;
Compliance with Covenants and Obligations................................... 25
7.2 Corporate Audit; Delivery of Financial Statements........................... 25
7.3 Governmental Approvals...................................................... 25
7.4 Consents of Lenders, Lessors and Other Third Parties........................ 25
7.5 Adverse Proceedings......................................................... 26
7.6 Opinion of Counsel.......................................................... 26
7.7 Board of Directors and Shareholder Approval................................. 26
7.8 The Assets.................................................................. 26
7.9 Employment Contracts........................................................ 26
7.10 Assignment of Insurance Policies............................................ 26
7.11 Cash Available for Working Capital Purposes................................. 26
7.12 Trade Payables.............................................................. 26
7.13 Engineer's Report........................................................... 26
7.14 Tax Lien Certificate........................................................ 27
7.15 Closing Deliveries.......................................................... 27
8. Conditions to Obligations of the Seller....................................................... 28
8.1 Continued Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations................................... 28
8.2 Corporate Proceedings....................................................... 28
8.3 Governmental Approvals...................................................... 28
8.4 Consents of Lenders, Lessors and Other Third Parties........................ 28
8.5 Adverse Proceedings......................................................... 28
8.6 Opinion of Counsel.......................................................... 28
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8.7 Employment Contract......................................................... 28
8.8 Registration Rights Agreement............................................... 29
8.9 Sublease Agreement.......................................................... 29
8.10 General Liability Insurance................................................. 29
8.11 Closing Deliveries.......................................................... 29
9. Indemnification............................................................................... 30
9.1 By the Buyer and the Seller and the Stockholder............................. 30
9.2 Limits on Indemnification................................................... 30
9.3 Claims for Indemnification.................................................. 31
9.4 Defense by Indemnification Party............................................ 31
9.5 Payment of Indemnification Obligation....................................... 31
9.6 Survival of Representations; Claims for Indemnification..................... 32
10. Post-Closing Agreements....................................................................... 32
10.1 Proprietary Information..................................................... 32
10.2 No Solicitation or Hiring of Former Employees............................... 33
10.3 Non-Competition Agreement................................................... 33
10.4 Sharing of Data............................................................. 33
10.5 Use of Name................................................................. 34
10.6 Cooperation in Litigation................................................... 34
10.7 Repurchase of Accounts Receivable........................................... 34
10.8 Product Claims and Returns.................................................. 36
11. Transfer and Sales Tax........................................................................ 36
12. Brokers and Expenses.......................................................................... 37
13. Notices....................................................................................... 37
14. Successors and Assigns........................................................................ 38
15. Entire Agreement; Amendments; Attachments..................................................... 38
16. Bulk Sales Laws............................................................................... 38
17. Legal Fees.................................................................................... 38
18. Governing Law................................................................................. 38
19. Section Headings.............................................................................. 38
20. Severability.................................................................................. 39
21. Counterparts.................................................................................. 39
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Exhibits
A - Registration Rights Agreement
B - Instrument of Assumption of Liabilities
C - Opinion of McNees, Wallace & Nurick
D - Bill of Sale
E - Opinion of Squire, Sanders & Dempsey L.L.P.
F - Employment Agreement
G - Sublease Agreement
I - Certificate of No Adverse Conditions
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Schedules to be provided by the Seller
- --------------------------------------
1.1(b) - Excluded Assets
1.4 - Assumed Liabilities
1.5 - Allocation of the Purchase Price
2.3 - Third Party Consents
2.4 - Encumbrances and Permitted Encumbrances
2.6 - Undisclosed Liabilities
2.7 - Litigation
2.8 - Insurance
2.9 - Inventory
2.10 - Fixed Assets
2.11 - Leases
2.12 - Changes in Financial Condition
2.13 - Tax Matters
2.14 - Accounts Receivable
2.15 - Contracts
2.17 - Permits
2.18 - Employee Relations
2.19 - Certain Changes or Events
2.20 - Customer List
2.21 - Suppliers
2.23 - Prepayments and Deposits
2.24 - Intangible Property
2.25 - Employee Plans
2.28 - Regulatory Approvals
2.29 - Affiliated Indebtedness
2.30 - Powers of Attorney and Suretyships
7.15(i) - Excluded Consents
Schedules to be provided by the Buyer
- -------------------------------------
3.3 - Third Party Consents
7.9 - Employment Contracts
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ASSET PURCHASE AGREEMENT
------------------------
Agreement made as of the 1st day of July, 1997 between Amtech Systems,
Inc., an Arizona corporation with its principal office at 131 South Clark,
Tempe, Arizona 85281 or its wholly-owned subsidiary (the "Buyer"), and P.R.
Hoffman Machine Products Corporation, a Delaware corporation with its principal
office at 1517 Commerce Avenue, Carlisle, Pennsylvania 17013 (the "Seller"), and
John R. Krieger whose residential address is 4 Hall Drive, Dillsburg,
Pennsylvania 17019, the sole stockholder of Seller (the "Stockholder").
Preliminary Statement
---------------------
The Buyer desires to purchase, and the Seller and Stockholder desire to
sell, substantially all of the assets and business of the Seller, for the
consideration set forth below and the assumption of certain of the Seller's
liabilities set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets.
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of
this Agreement, at the closing of the transactions contemplated by this
Agreement (the "Closing"), the Seller shall sell, transfer, convey, assign and
deliver to the Buyer, and the Buyer shall purchase from the Seller, the
following properties, assets and other claims, rights and interests:
(i) all inventories of raw materials,
work in process, finished goods, office supplies, maintenance supplies,
packaging materials, spare parts and similar items of the Seller (collectively,
the "Inventory") which exist on the Closing Date (as defined below);
(ii) all accounts, accounts receivable,
notes and notes receivable payable to the Seller existing on the Closing Date,
including any security held by the Seller for the payment thereof, but excluding
any account, account receivable, note or note receivable payable by any
affiliate (as such term is defined in the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder) of Seller ("Affiliate") to
the Seller (the accounts, accounts receivable, notes and notes receivable,
including any related security therein, to be transferred to the Buyer pursuant
hereto are collectively referred to herein as the "Accounts Receivable");
(iii) all prepaid expenses, petty cash,
deposits, bank accounts and other similar assets of the Seller existing on the
Closing Date, including the cash represented by such assets;
(iv) all rights of the Seller under the
contracts, agreements, leases, licenses and other instruments set forth on
Schedule 2.16 attached hereto (collectively, the "Contract Rights");
(v) all of the Seller's (or, in the
case of the Sublease Agreement, the Buyer's) right, title and interest in and to
all leases, subleases, franchises, licenses, permits, easements and
rights-of-way which are appurtenant to real property related to the Leases
identified in Schedule 2.11 attached hereto (collectively the "Real Property");
(vi) all books, records and accounts,
correspondence, goodwill and recorded knowledge relating to the Assets and the
business of Seller, production records, technical, accounting, manufacturing and
procedural manuals, customer, vendor and distributor lists, employment records,
warranty records, sales and marketing literature, studies, reports or summaries
relating to any environmental conditions or consequences of any operation,
present or former, as well as all studies, reports or summaries relating to any
environmental aspect or the general condition of the Assets, and any
confidential information which has been reduced to writing relating to or
arising out of the business of the Seller;
(vii) all rights of the Seller under
express or implied warranties from the suppliers of the Seller;
(viii) the motor vehicles and other
rolling stock owned by the Seller on the Closing Date;
(ix) all of the machinery, equipment,
tools, production reels and spools, numerically controlled programs, internally
developed and purchased software, tooling, dies, production fixtures,
maintenance machinery and equipment, furniture, leasehold improvements and
construction in progress owned by the Seller on the Closing Date whether or not
reflected as capital assets in the accounting records of the Seller
(collectively, the "Fixed Assets");
(x) all of the Seller's right, title
and interest in and to all intangible property rights, including but not limited
to inventions, discoveries, trade secrets, processes, formulas, know-how, United
States and foreign patents, patent applications, trade names, including the name
"P.R. Hoffman Machine Products Corporation" or any derivation thereof,
trademarks, trademark registrations, applications for trademark registrations,
copyrights, copyright registrations, owned or, where not owned, used by the
Seller in its business and all licenses and other agreements to which the Seller
is a party (as licensor or licensee) or by which the Seller is bound relating to
any of the foregoing kinds of property or rights to any "know-how" or disclosure
or use of ideas (collectively, the "Intangible Property");
(xi) all of Seller's right, title and
interest in and to the insurance policies set forth on Schedule 2.8 attached
hereto; and
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(xii) except as specifically provided
in Subsection 1.1(b) hereof, all other assets, properties, claims, rights and
interests of the Seller which exist on the Closing Date, of every kind and
nature and description, whether tangible or intangible, real, personal or mixed.
(b) Notwithstanding the provisions of paragraph (a)
above, the assets to be transferred to the Buyer under this Agreement shall not
include those assets listed on Schedule 1.1(b) attached hereto (the "Excluded
Assets").
(c) The Inventory, Accounts Receivable, Contract
Rights, Real Property, Fixed Assets, Intangible Property and other properties,
assets and business of the Seller described in paragraph (a) above, other than
the Excluded Assets, shall be referred to collectively as the "Assets."
1.2 Further Assurances. At any time and from time to time
after the Closing, at the Buyer's request and without further consideration, the
Seller promptly shall execute and deliver such instruments of sale, transfer,
conveyance, assignment and confirmation, and take such other action, as the
Buyer may reasonably request to more effectively transfer, convey and assign to
the Buyer, and to confirm the Buyer's title to, all of the Assets, to put the
Buyer in actual possession and operating control thereof, to assist the Buyer in
exercising all rights with respect thereto and to carry out the purpose and
intent of this Agreement.
1.3 Purchase Price. As consideration for the Assets, Amtech
Systems, Inc. will pay Seller as follows:
(a) The cash purchase price for the Assets shall be
Two Million Two Hundred Thousand Dollars ($2,200,000), subject to the
adjustments provided in Subsection 1.7 hereof (the "Cash Purchase Price"). The
Cash Purchase Price shall be payable at the Closing in immediately available
funds.
(b) At the Closing Buyer shall issue to Seller or its
assign an amount of unregistered shares of $.01 par value common stock of Amtech
Systems, Inc. equal to the maximum number of shares that Buyer can issue at a
recorded cost of $65,000 (the "Shares"). The consideration to be delivered
pursuant hereto is hereafter referred to as the "Additional Purchase Price." The
actual number of Shares to be issued by Buyer shall be computed by dividing
$65,000 by the average of the closing price per share of Buyer's common stock on
the NASDAQ SmallCap Market for the ten trading days prior to the Closing Date
adjusted by a thirty-five percent (35%) discount.
(c) During the five-year period following the Closing
Date, Buyer shall pay to Seller up to $2,000,000 of additional consideration
subject to an earn-out, subject to the adjustments, if any, set forth in Section
1.8 hereof. The earn-out is limited to a five-year term or aggregate payments of
$2,000,000, whichever occurs first. The first earn-out year shall commence on
October 1, 1997, and shall continue until September 30, 1998, so as to coincide
with Buyer's fiscal year. Following the completion of the audit of Buyer and its
consolidated subsidiaries following the conclusion of each fiscal year during
the earn-out, Seller shall be
3
entitled to receive from Buyer 50% of pre-tax net income (as described in
Section 1.8) generated by the Assets (which term, for purposes of this Section
1.3(c), shall also include any assets subsequently acquired by Buyer for use in
the business of Seller as such operations are conducted following the Closing
Date; and provided, however, that pre-tax net income shall not include any
pre-tax net income or losses attributable to or derived from the assets of any
business acquired by the Buyer subsequent to April 23, 1997 and combined with
the business of Seller (hereinafter "Seller's Business")) during such fiscal
year in excess of $800,000. At least 35% of the earn-out consideration shall be
payable in cash or in registered shares of common stock (the "Registered
Shares") of Buyer, at the option of Buyer, and the remainder shall be payable in
unregistered shares of common stock or cash, at the option of Buyer. For
purposes of determining the number of shares of common stock to be issued as
payment for any earn-out amount, the per share value shall be the average of the
closing price per share of Buyer's common stock on the NASDAQ SmallCap Market
(or any other exchange on which Buyer's common stock is then quoted or listed)
for the ten trading days immediately preceding the payment date of the earn-out
consideration. To the extent recognized under the Code (as defined in Section
2.25), the parties to this Agreement agree to value the aforementioned shares
for tax reporting purposes with reference to the restrictions imposed, if any,
under applicable securities laws.
(d) Any shares of common stock issued by the Buyer
pursuant to subsections (b) and (c) above, excluding the Registered Shares,
shall be (i) subject to a lock-up restricting transferability for a period of
two years from the date of issuance, and certificates representing the shares
shall bear a legend referencing such lock-up, and (ii) shall have piggyback
registration rights exercisable after the expiration of the two-year lock-up
period as set forth in a registration rights agreement substantially in the form
attached hereto as Exhibit A (the "Registration Rights Agreement"), which
Registration Rights Agreement shall be executed and delivered by the Buyer and
the Seller at the Closing.
1.4 Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall execute and
deliver an Instrument of Assumption of Liabilities (the "Instrument of
Assumption") substantially in the form attached hereto as Exhibit B, pursuant to
which it shall assume and agree to perform, pay and discharge the following
liabilities, obligations and commitments of the Seller (the "Assumed
Liabilities"):
(i) All trade accounts payable and
accrued expenses reflected on the unaudited balance sheet of the Seller as of
May 31, 1997, previously delivered to the Buyer (the "May 31, 1997 Balance
Sheet"), less any payments made from May 31, 1997 to the Closing Date or any
reductions in accrued expenses, and less any accounts payable of the Seller to
any Affiliate (excluding, however, rental payments due from Seller to PRH
Properties);
(ii) All other trade accounts payable
and accrued operating liabilities of the Seller incurred in the ordinary course
of business of the Seller (payroll, payroll taxes, commissions and royalties)
from May 31, 1997 to the Closing Date and set forth on Schedule 1.4 hereto,
other than any liabilities of the Seller to any Affiliate
4
(excluding, however, rental payments due from Seller to PRH Properties) and
accounts payable that are contingent or are not fixed in amount as of the
Closing Date;
(iii) All obligations of the Seller for
unfunded pension plan liabilities after the Closing under the employee pension
plan set forth on Schedule 1.4 attached hereto which liabilities become due and
payable after the Closing Date, and all other obligations arising with respect
to such pension plan after the Closing Date that relate to the assumption by the
Buyer of such plan and the administration thereof;
(iv) All obligations of the Seller
under that certain collectively bargained union contract dated November 2, 1996
between Seller and United Automobile, Aerospace and Agriculture Implement
Workers of America (UAW) and its Local 1443, a copy of which is attached to
Schedule 1.4 attached hereto; and
(v) All obligations of the Seller under
contracts, leases, purchase orders and other agreements set forth on Schedule
2.16 (except subparagraphs 2.16(a)(i) and (a)(vi) set forth thereon)) or
otherwise arising in the ordinary course of Seller's business that, in the
aggregate, do not exceed $2,500.
(b) The Buyer shall not at the Closing assume or
agree to perform, pay or discharge, and the Seller shall remain unconditionally
liable for, all obligations, liabilities and commitments, fixed or contingent,
of the Seller other than the Assumed Liabilities.
1.5 Allocation of Purchase Price and Assumed Liabilities. The
aggregate amount of the Purchase Price and the Assumed Liabilities shall be
allocated among the Assets as set forth on Schedule 1.5 attached hereto. Such
allocation shall be subject to adjustment to the extent that the Purchase Price
is adjusted pursuant to Subsections 1.7 or 1.8 hereof in the manner specified in
such Subsections.
1.6 The Closing. The Closing shall take place at the law
offices of McNees, Wallace & Nurick, 100 Pine Street, Harrisburg, Pennsylvania
at 9:00 a.m., Eastern Daylight time, on July 1, 1997 or at such other place,
time or date as may be mutually agreed upon in writing by the parties hereto.
The transfer of the Assets by the Seller to the Buyer shall be deemed to occur
at 12:01 a.m., Eastern Daylight time, on the date of the Closing (the "Closing
Date").
1.7 Post Closing Adjustments; Financial Statement Delivery
Obligations; Schedule Update Requirement. The Cash Purchase Price set forth in
Subsection 1.3(a) hereof shall be subject to adjustment after the Closing Date
as follows:
(a) As promptly as possible following the Closing
Date, but in no event later than 30 days following the Closing Date, the Seller
shall prepare (i) a balance sheet of its assets and liabilities as of the
Closing Date certified to be true and accurate by duly authorized officers of
the Seller (the "June 30, 1997 Balance Sheet"), and (ii) the related statements
of income and cash flows of the Seller for the six-month period ended June 30,
1997 (collectively, including the June 30, 1997 Balance Sheet, the "June 30,
1997 Financial Statements"). The
5
June 30, 1997 Financial Statements shall be prepared in accordance with
generally accepted accounting principles applied consistently with the Audited
Financial Statements (as defined in Section 2.5), without any adjustments
applicable solely as a result of the acquisition of the Assets by the Buyer on
the Closing Date, and shall be reviewed by Seller's independent public
accountants, Arthur Andersen LLP (the "Accountants"). The fees and expenses of
the Accountants arising in connection with the matters described in this Section
1.7(a) shall borne equally by the Buyer and the Seller.
(b) The June 30, 1997 Balance Sheet delivered
pursuant to paragraph (a) above shall be accompanied by a statement prepared by
the Seller setting forth the sum, if any, by which the aggregate net book value
(consistent with GAAP) of (x) the Assets minus (y) the Assumed Liabilities, in
each case as shown on the June 30, 1997 Balance Sheet (the "Net Adjusted Book
Value"), is greater than, or less than, $2,038,000 (such difference, if any,
herein referred to as the "Net Asset Adjustment"), together with the
calculations showing the basis for the determination of such sum.
(c) In the event that the Buyer disputes the June 30,
1997 Balance Sheet or the calculation of the Net Adjusted Book Value or the Net
Asset Adjustment, the Buyer shall notify the Seller in writing (the "Dispute
Notice") of the amount, nature and basis of such dispute, within 30 calendar
days after delivery of the June 30, 1997 Balance Sheet. In the event of such a
dispute, the parties hereto shall first use their best efforts to resolve such
dispute among themselves. If the parties are unable to resolve the dispute
within 15 calendar days after delivery of the Dispute Notice, the dispute shall
be submitted to Ernst & Young LLP or such other independent public accounting
firm as the parties shall mutually agree upon (the "Additional Accountants") for
resolution. The Additional Accountants shall use their best efforts to resolve
the dispute within 30 days after submission. The determination of the Additional
Accountants as to the resolution of any dispute shall be binding and conclusive
upon all parties hereto. All determinations pursuant to this paragraph (c) shall
be in writing and shall be delivered to the parties hereto. Any award made
pursuant to this Subsection 1.7 may be entered in and enforced by any court
having jurisdiction thereover and the parties hereby consent and commit
themselves to the jurisdiction of the courts of the State of Arizona for
purposes of the enforcement of any such award.
(d) The fees and expenses of the Additional
Accountants arising in connection with the resolution of disputes pursuant to
paragraph (c) above shall be borne equally by the Buyer and the Seller.
(e) Immediately upon the earlier of the expiration of
the 30-day period for giving the Dispute Notice if no Dispute Notice is given or
the acceptance by the Buyer of the June 30, 1997 Balance Sheet and the
calculation of the Net Asset Adjustment, or immediately upon the resolution of
disputes, if any, pursuant to paragraph (c) above, the amount of the Net Asset
Adjustment, if positive, shall be added to, and if negative, shall be deducted
from, the Cash Purchase Price (as so adjusted, the "Adjusted Cash Purchase
Price") as follows:
If the Adjusted Cash Purchase Price is less than the original Cash Purchase
Price, the deficiency, together with interest thereon at the rate of 8% per
annum from the Closing Date to the payment
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of such deficiency, shall be promptly paid by the Seller to the Buyer in
immediately available funds. If the Adjusted Cash Purchase Price is greater than
the original Cash Purchase Price, the excess, together with interest thereon at
the rate of 8% per annum from the Closing Date to the date of payment of such
excess, shall be promptly paid by the Buyer to the Seller in immediately
available funds.
(f) If the Cash Purchase Price is adjusted pursuant
to paragraph (e) above, the allocation thereof among the Assets as set forth on
Schedule 1.5 attached hereto shall be appropriately modified to reflect
increases or decreases in the various asset categories which give rise to such
adjustments. Any disputes concerning such changes in allocation shall be
resolved in accordance with the procedures set forth in paragraph (c) above and
the expenses incurred in connection therewith shall be borne in the manner
specified in paragraph (d) above.
(g) Concurrently with the delivery by the Seller to
the Buyer of the June 30, 1997 Financial Statements pursuant to this Section
1.7, the Seller shall have provided the Buyer with a true, correct and complete
list and amount, as of the Closing Date, of:
(i) the Inventory;
(ii) the Fixed Assets;
(iii) the Accounts Receivable, including an aging
thereof;
(iv) the trade accounts payable and accrued
liabilities assumed pursuant to Subsection
1.4(a)(i) and (ii) hereof;
(v) all unfilled customer orders; and
(vi) all shipments made during the period from
May 31, 1997 to the Closing Date,
none of which information shall be materially different from the information
supplied by the Seller as of May 31, 1997 on Schedules 2.9, 2.10, 2.14 and 2.20
attached hereto except for those changes that occur in the ordinary course of
Seller's business.
1.8 Post-Closing Earn-out Payments. The earn-out payments set
forth in Subsection 1.3(c) hereof shall be determined, paid and, if necessary,
adjusted as follows:
(a) Within 30 days following completion of the audit
of Buyer and its consolidated subsidiaries each fiscal year, but in no event
later than 120 days after the end of such fiscal year, the Buyer shall prepare
statements of income and financial condition relating to the Assets as of the
earn-out year end, certified to be true and accurate by a duly authorized
officer of the Buyer (the "Earn-out Statement"). The Earn-out Statement shall be
prepared in accordance with generally accepted accounting principles applied
consistently with the Buyer's
7
past practice. Pre-tax net income generated by the Seller's Business shall be
determined before deductions for (i) interest for indebtedness other than new
indebtedness related to the operation of the Assets (excluding indebtedness
relating to the acquisition of the Assets), (ii) state and federal income taxes,
(iii) stepped-up depreciation as a result of the acquisition of the Assets, (iv)
amortization of goodwill or other intangibles arising solely from purchase
accounting and (v) allocation of Buyer's home office corporate overhead not
related to the Assets.
(b) The Earn-out Statement delivered pursuant to
paragraph (a) above shall be accompanied by a statement prepared by the Buyer
setting forth the sum, if any, that Buyer owes to the Seller as earn-out
consideration pursuant to Section 1.3(c) (the "Earn-out Sum"), together with the
calculations showing the basis for the determination of such sum. In the event
Stockholder's employment with the Seller is terminated, whether voluntarily or
otherwise, Buyer shall provide Stockholder with access (at the principal
executive offices of the Buyer and during normal business hours) to such records
as Stockholder shall reasonably request to verify the accuracy of the Earn-out
Statement.
(c) In the event that the Seller disputes the
Earn-out Statement or the calculation of the Earn-out Sum, the Seller shall
notify the Buyer in writing (the "Earn-out Dispute Notice") of the amount,
nature and basis of such dispute, within 30 calendar days after delivery of the
Earn-out Statement. In the event of such a dispute, the parties hereto shall
first use their best efforts to resolve such dispute among themselves. If the
parties are unable to resolve the dispute within 45 calendar days after delivery
of the Earn-out Dispute Notice, the dispute shall be submitted to Additional
Accountants for resolution. The Additional Accountants shall use their best
efforts to resolve the dispute within 30 days after submission. The
determination of the Additional Accountants as to the resolution of any dispute
shall be binding and conclusive upon all parties hereto. All determinations
pursuant to this paragraph (c) shall be in writing and shall be delivered to the
parties hereto. Any award may pursuant to this Subsection 1.8 may be entered in
and enforced by any court having jurisdiction thereover and the parties hereby
consent and commit themselves to the jurisdiction of the courts of the State of
Arizona for purposes of the enforcement of any such award.
(d) The fees and expenses of the Additional
Accountants in connection with the resolution of disputes pursuant to paragraph
(c) above shall be borne equally by the Buyer and the Seller.
(e) Immediately upon the earlier of the expiration of
the 30-day period for giving the Earn-out Dispute Notice if no Earn-out Dispute
Notice is given or the acceptance by the Seller of the Earn-out Statement, or
immediately upon the resolution of disputes, if any, pursuant to paragraph (c)
above, the amount of the Earn-out Sum, if any, shall promptly be paid by the
Buyer to the Seller in a manner consistent with Section 1.3(c).
2. Representations of the Seller and the Stockholder. The Seller and
the Stockholder represent and warrant to the Buyer as follows:
8
2.1 Organization. The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and has all requisite power and authority (corporate and other)
to own its properties, to carry on its business as now being conducted, to
execute and deliver this Agreement and the agreements contemplated herein, and
to consummate the transactions contemplated hereby. The Seller is duly qualified
to do business and in good standing in all jurisdictions in which the ownership
of property or the character of its business requires such qualification.
Certified copies of the Certificate of Incorporation, Bylaws and Minutes of the
Seller, each as amended to date, have been previously delivered to the Buyer,
are complete and correct, and no amendments have been made thereto or have been
authorized since the date thereof. The Seller does not own any capital stock of
or other equity interest in any corporation, partnership or other entity.
2.2 Capitalization of the Seller. The Seller's authorized
capital stock consists of 1,000 shares of Common Stock, $1.00 par value, of
which 1,000 shares are issued and outstanding and held of record and
beneficially by the Stockholder. All of such shares have been duly and validly
issued and are fully paid and nonassessable.
2.3 Authorization. The execution and delivery of this
Agreement by the Seller, and the agreements provided for herein, and the
consummation by the Seller of all transactions contemplated hereby, have been
duly authorized by all requisite corporate and shareholder action. This
Agreement and all such other agreements and obligations entered into and
undertaken in connection with the transactions contemplated hereby to which the
Seller is a party constitute the valid and legally binding obligations of the
Seller, enforceable against the Seller in accordance with their respective
terms. The execution, delivery and performance by the Seller of this Agreement
and the agreements provided for herein, and the consummation by the Buyer of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Seller or the Assets; (b) violate
the provisions of the Certificate of Incorporation or Bylaws of the Seller; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Seller pursuant to, any indenture, mortgage, deed of
trust or other instrument or agreement to which the Seller is a party or by
which the Seller or any of its properties is or may be bound. Schedule 2.3
attached hereto sets forth a true, correct and complete list of all consents and
approvals of third parties that are required in connection with the consummation
by the Seller of the transactions contemplated by this Agreement.
2.4 Ownership of the Assets. Schedule 2.4 attached hereto sets
forth a true, correct and complete list of all claims, liabilities, liens,
pledges, charges, encumbrances and equities of any kind affecting the Assets
(collectively, the "Encumbrances"). The Seller is, and at the Closing will be,
the true and lawful owner of the Assets, and will have the right to sell and
transfer to the Buyer good, clear, record and marketable title to the Assets,
free and clear of all Encumbrances of any kind, except as specifically set forth
on Schedule 2.4 attached hereto (the "Permitted Encumbrances"). The delivery to
the Buyer of the instruments of transfer of ownership contemplated by this
Agreement will vest good and marketable title to the Assets in
9
the Buyer, free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of any kind or nature
whatsoever, except for the Permitted Encumbrances and the Permitted Exceptions.
2.5 Financial Statements.
(a) The Seller has previously delivered to the Buyer
audited balance sheets as of December 31, 1996 and December 31, 1995 (the
"Audited Balance Sheets") and the related statements of income, shareholders'
equity, retained earnings and cash flow of the Seller for the two years then
ended (collectively, including the Audited Balance Sheets, the "Audited
Financial Statements"). The Seller has also previously delivered to the Buyer
its May 31, 1997 Balance Sheet and the related statements of income,
shareholders' equity and retained earnings of the Seller for the five-month
period ended May 31, 1997 (collectively, the "May 31, 1997 Financial
Statements"). Except as set forth on Schedule 2.5 with respect to the May 31,
1997 Financial Statements, the Audited Financial Statements, the May 31, 1997
Financial Statements and the June 30, 1997 Financial Statements to be delivered
pursuant to Subsection 1.7 hereof (collectively, the "Financial Statements")
have been (or will be) prepared by the Seller in accordance with generally
accepted accounting principles applied consistently with that used in the
Audited Financial Statements and are certified without qualification by the
independent public accountants, in the case of the Audited Financial Statements,
and have been (or will be) certified by the Seller's President (who is also
acting as Seller's chief financial officer) and reviewed by the Accountants, in
the case of the June 30, 1997 Financial Statements and the May 31, 1997
Financial Statements.
(b) The Financial Statements fairly present, as of
their respective dates, the financial condition, retained earnings, assets and
liabilities of the Seller and the results of operations of the Seller's business
for the periods indicated; and with respect to the contracts and commitments for
the sale of goods or the provision of services by the Seller, the Financial
Statements contain and reflect adequate reserves, which are consistent with
previous reserves taken, for all reasonably anticipated material losses and
costs and expenses.
2.6 Absence of Undisclosed Liabilities. Except as and to the
extent (a) reflected and reserved against in the May 31, 1997 Balance Sheet, (b)
set forth on Schedule 2.6 attached hereto or (c) incurred in the ordinary course
of business after the date of the May 31, 1997 Balance Sheet and not material in
amount (except with respect to accounts payable and accrued expenses arising
subsequent to May 31, 1997, which, for purposes of this Section 2.6, shall not
be subject to the materiality limitation), either individually or in the
aggregate, the Seller does not have any liability or obligation, secured or
unsecured, whether accrued, absolute, contingent, unasserted or otherwise,
affecting the Assets. For purposes of this Subsection 2.6, "material" means any
amount in excess of $5,000 or amounts that, in the aggregate, exceed $10,000.
2.7 Litigation. Except as set forth on Schedule 2.7 attached
hereto, the Seller is not a party to, or to the Seller's best knowledge
threatened with, and none of the Assets are subject to, any litigation, suit,
action, investigation, proceeding or controversy before any court,
administrative agency or other governmental authority or any other claim or
dispute in excess
10
of $1,000 relating to or affecting the Assets or the business or condition
(financial or otherwise) of the Seller. The Seller is not in violation of or in
default with respect to any judgment, order, writ, injunction, decree or rule of
any court, administrative agency or governmental authority or any regulation of
any administrative agency or governmental authority.
2.8 Insurance. Schedule 2.8 attached hereto sets forth a true,
correct and complete list of all fire, theft, casualty, general liability,
workers compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies insuring the Assets or
business of the Seller and of all life insurance policies maintained for any of
its employees, specifying the type of coverage, the amount of coverage, the
premium, the insurer and the expiration date of each such policy (collectively,
the "Insurance Policies") and all claims made under such Insurance Policies
since January 1, 1994. True, correct and complete copies of all of the Insurance
Policies have been previously delivered by the Seller to the Buyer. The
Insurance Policies are in full force and effect and are in amounts and of a
nature which are adequate and customary for the Seller's business. All premiums
due on the Insurance Policies or renewals thereof have been paid and there is no
default under any of the Insurance Policies. Except as set forth on Schedule 2.8
attached hereto, the Seller has not received any notice or other communication
from any issuer of the Insurance Policies since January 1, 1994 canceling or
materially amending any of the Insurance Policies, materially increasing any
deductibles or retained amounts thereunder, or materially increasing the annual
or other premiums payable thereunder, and, to the best knowledge of the Seller,
no such cancellation, amendment or increase of deductibles, retainages or
premiums is threatened.
2.9 Inventory. Schedule 2.9 attached hereto sets forth a true,
correct and complete list of the Inventory as of May 31, 1997, including a
description and the book value thereof. Schedule 2.9, as updated pursuant to
Section 1.7(g) hereof, shall set forth a true, correct and complete list of the
Inventory as of the Closing Date, including a description and valuation thereof.
Such Inventory consists of items of a quality and quantity which are usable or
saleable without discount in the ordinary course of the business conducted by
the Seller. The value of all items of obsolete materials and of materials of
below standard quality has been written down to net realizable market value, and
the values at which such Inventory is carried reflect the inventory valuation
method of the Seller consistent with that used in the Audited Financial
Statements.
2.10 Fixed Assets. Schedule 2.10 attached hereto sets forth a
true, correct and complete list of all Fixed Assets as of May 31, 1997,
including a description and the book value thereof. Schedule 2.10, as updated
pursuant to Section 1.7(g) hereof, shall set forth a true, correct and complete
list of all Fixed Assets as of the Closing Date, including a description and
valuation thereof. Except as set forth on Schedule 2.10, all of the Fixed Assets
are in good operating condition and repair, normal wear and tear excepted, are
currently used by the Seller in the ordinary course of business and in the
production of products of the Seller and normal maintenance has been
consistently performed with respect to such Fixed Assets.
2.11 Leases. Schedule 2.11 attached hereto sets forth a true,
correct and complete list as of the date hereof of all leases of real property,
identifying separately each ground lease, to which the Seller or the Stockholder
is a party (the "Leases"). True, correct and
11
complete copies of the Leases, and all amendments, modifications and
supplemental agreements thereto, have previously been delivered by the Seller to
the Buyer. The Leases are in full force and effect, are binding and enforceable
against each of the parties thereto in accordance with their respective terms
and, except as set forth on Schedule 2.11, have not been modified or amended
since the date of delivery to the Buyer. No party to any Lease has sent written
notice to the other claiming that such party is in default thereunder, which
remains uncured. Except as set forth on Schedule 2.11 attached hereto, there has
not occurred any event which would constitute a breach of or default in the
performance of any material covenant, agreement or condition contained in any
Lease, nor has there occurred any event which with the passage of time or the
giving of notice or both would constitute such a breach or material default. The
Seller is not obligated to pay any leasing or brokerage commission relating to
any Lease and, except as set forth on Schedule 2.11 attached hereto, will not
have any enforceable obligation to pay any leasing or brokerage commission upon
the renewal of any Lease. No material construction, alteration or other
leasehold improvement work with respect to any of the Leases remains to be paid
for or to be performed by the Seller.
2.12 Change in Financial Condition and Assets. Except as set
forth on Schedule 2.12 attached hereto, since May 31, 1997, there has been no
change which materially and adversely affects the business (as presently
conducted and as proposed to be conducted), properties, assets or condition
(financial or otherwise) of the Seller. The Seller has no knowledge of any
existing or threatened occurrence, event or development which, as far as can be
reasonably foreseen, could have a material adverse effect on the Seller or its
business (as presently conducted and as proposed to be conducted), properties,
assets or condition (financial or otherwise).
2.13 Tax Matters. The Seller has filed all federal, state and
local tax returns which are required to be filed and has paid all taxes,
interest, penalties, assessments and deficiencies which have become due or which
have been claimed to be due. The Seller is current in the payment of all income,
franchise, real estate, sales, use and withholding taxes and other employee
benefits, taxes or imposts. Except as set forth on Schedule 2.13 attached
hereto, no deficiencies have been asserted or assessed as a result of any audit
by the Internal Revenue Service or any state or local taxing authority and no
such deficiency or audit has been proposed or threatened.
2.14 Accounts Receivable. Schedule 2.14 attached hereto sets
forth a true, correct and complete list of all Accounts Receivable, including an
aging thereof as of May 31, 1997. Schedule 2.14, as updated pursuant to Section
1.7(g) hereof, shall set forth a true, correct and complete list of the Accounts
Receivable as of the Closing Date, including an aging thereof. All Accounts
Receivable arose out of the sales of inventory or services in the ordinary
course of business and are collectible in the face value thereof within five (5)
months of the date of invoice, using normal collection procedures, net of the
reserve for doubtful accounts as set forth thereon, which reserve is adequate
and was calculated in accordance with generally accepted accounting principles
consistently applied.
2.15 Books and Records. The general ledgers and books of
account of the Seller, all federal, state and local income, franchise, property
and other tax returns filed by the
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Seller, with respect to the Assets, and all other books and records of the
Seller are in all material respects complete and correct and have been
maintained in accordance with good business practice and in accordance with all
applicable procedures required by laws and regulations.
2.16 Contracts and Commitments.
(a) Schedule 2.16 attached hereto contains a true,
complete and correct list and description of the following contracts and
agreements, whether written or oral (collectively, the "Contracts"):
(i) all loan agreements, indentures,
mortgages and guaranties to which the Seller is a party or by which the Seller
or any of its property is bound;
(ii) all pledges, conditional sale or
title retention agreements, security agreements, equipment obligations, personal
property leases and lease purchase agreements relating to any of the Assets to
which the Seller is a party or by which the Seller or any of its property is
bound;
(iii) all contracts, agreements,
commitments, purchase orders or other understandings or arrangements to which
the Seller is a party or by which the Seller or any of its property is bound
which (A) involve payments or receipts by the Seller of more than $1,000 in the
case of any single contract, agreement, commitment, understanding or arrangement
under which full performance (including payment) has not been rendered by all
parties thereto or (B) which may materially adversely affect the condition
(financial or otherwise) or the properties, assets, business or prospects of the
Seller;
(iv) all collective bargaining
agreements, employment and consulting agreements, executive compensation plans,
bonus plans, deferred compensation agreements, pension plans, retirement plans,
employee stock option or stock purchase plans and group life, health and
accident insurance and other employee benefit plans, agreements, arrangements or
commitments to which the Seller is a party or by which the Seller or any of its
property is bound;
(v) all agency, distributor, sales
representative and similar agreements to which the Seller is party;
(vi) all contracts, agreements or other
understandings or arrangements between the Seller and any stockholder or
Affiliate of the Seller;
(vii) all leases, whether operating,
capital or otherwise, under which the Seller is lessor or lessee (excluding
leases relating to real property identified on Schedule 2.11);
(viii) all contracts, agreements and
other documents or information relating to past disposal of waste (whether or
not hazardous); and
13
(ix) any other material agreement or
contract entered into by the Seller.
(b) Except as set forth on Schedule 2.16 attached
hereto:
(i) each Contract is a valid and
binding agreement of the Seller, enforceable against the Seller in accordance
with its terms, and the Seller does not have any knowledge that any Contract is
not a valid and binding agreement of the other parties thereto;
(ii) the Seller has fulfilled all
material obligations required pursuant to the Contracts to have been performed
by the Seller on its part prior to the date hereof, and the Seller has no reason
to believe that it will not be able to fulfill, when due, all of its obligations
under the Contracts which remain to be performed after the date hereof;
(iii) the Seller is not in breach of or
default under any Contract, and no event has occurred which with the passage of
time or giving of notice or both would constitute such a default, result in a
loss of rights or result in the creation of any lien, charge or encumbrance,
thereunder or pursuant thereto;
(iv) to the best knowledge of the
Seller, there is no existing breach or default by any other party to any
Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute a default by such other party, result in a loss
of rights or result in the creation of any lien, charge or encumbrance
thereunder or pursuant thereto;
(v) the Seller is not restricted by any
Contract from carrying on its business anywhere in the world; and
(vi) the Seller has no written or oral
Contracts to sell products or perform services which are expected to be
performed at, or to result in, a loss.
(c) Except as set forth on Schedule 2.3 or Schedule
2.16, the continuation, validity and enforceability of each Contract will not be
affected by the transfer thereof to Buyer under this Agreement and all such
Contracts are assignable to Buyer without a consent.
(d) True, correct and complete copies of all
Contracts have previously been delivered by the Seller to the Buyer.
2.17 Compliance with Agreements and Laws. The Seller has all
requisite licenses, permits and certificates, including environmental, health
and safety permits, from federal, state and local authorities necessary to
conduct its business and own and operate its assets (collectively, the
"Permits"). Schedule 2.17 attached hereto sets forth a true, correct and
complete list of all such Permits, copies of which have previously been
delivered by the Seller to the Buyer. The Seller is not in violation of any law,
regulation or ordinance (including,
14
without limitation, laws, regulations or ordinances relating to building,
zoning, environmental, disposal of hazardous substances, land use or similar
matters) relating to its properties, the violation of which could have a
material adverse effect on the Seller or its properties. The business of the
Seller does not violate, in any material respect, any federal, state, local or
foreign laws, regulations or orders (including, but not limited to, any of the
foregoing relating to employment discrimination, occupational safety,
environmental protection, hazardous waste, conservation, or corrupt practices),
the enforcement of which would have a material and adverse effect on the results
of operations, condition (financial or otherwise), assets, properties, business
or prospects of the Seller. Except as set forth on Schedule 2.17 attached
hereto, the Seller has not since January 1, 1993 received any notice or
communication from any federal, state or local governmental or regulatory
authority or otherwise of any such violation or noncompliance.
2.18 Employee Relations.
(a) The Seller is in compliance in all material
respects with all federal, state and municipal laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor or employment practice, and there are no
arrears in the payment of wages, withheld income or social security taxes.
(b) Except as set forth on Schedule 2.18 attached
hereto:
(i) none of the employees of the Seller
is represented by any labor union;
(ii) there is no unfair labor or
employment practice complaint against the Seller pending before the National
Labor Relations Board, the Equal Employment Opportunity Commission or any state
or local agency;
(iii) there is no pending labor strike
or other material labor trouble affecting the Seller (including, without
limitation, any organizational drive);
(iv) there is no material labor
grievance pending against the Seller;
(v) there is no pending representation
question respecting the employees of the Seller; and
(vi) there are no pending arbitration
proceedings arising out of or under any collective bargaining agreement to which
the Seller is a party, or to the best knowledge of the Seller, any basis for
which a claim may be made under any collective bargaining agreement to which the
Seller is a party.
(c) Schedule 2.18 attached hereto sets forth a true,
correct and complete list of the Seller's current payroll, including the job
descriptions and salary or wage rates of each of its employees, showing
separately for each such person who received an annual
15
salary in excess of $60,000 the amounts paid or payable as salary and bonus
payments for the year ended December 31, 1996.
(d) For purposes of this Subsection 2.18, the term
"employee" shall be construed to include sales agents and other independent
contractors who spend a majority of their working time on the Seller's business.
2.19 Absence of Certain Changes or Events. Except as set forth
on Schedule 2.19 attached hereto, since May 31, 1997, the Seller has not entered
into any transaction which is not in the usual and ordinary course of business,
and, without limiting the generality of the foregoing, the Seller has not:
(a) Incurred any material obligation or liability for
borrowed money;
(b) Discharged or satisfied any lien or encumbrance
or paid any obligation or liability other than current liabilities reflected in
the May 31, 1997 Balance Sheet;
(c) Mortgaged, pledged or subjected to lien, charge
or other encumbrance any of the Assets;
(d) Sold or purchased, assigned or transferred any of
its tangible assets or canceled any debts or claims, except for inventory sold
and raw materials purchased in the ordinary course of business;
(e) Made any material amendment to or termination of
any Contract or performed any act or omitted to perform any act which would
cause the breach of any Contract;
(f) Suffered any losses, whether insured or
uninsured, and whether or not in the control of the Seller, in excess of $10,000
in the aggregate, or waived any rights of any value;
(g) Made any changes in compensation of its officers,
directors or employees;
(h) Authorized or issued recall notices for any of
its products or initiated any safety investigations;
(i) Received notice of any litigation, warranty claim
or products liability claims; or
(j) Made any material change in the terms, status or
funding condition of any Employee Plan, as defined in Subsection 2.25 hereof.
2.20 Customers. Schedule 2.20 attached hereto sets forth a
true, correct and complete list of the names and addresses of the ten largest
customers of the Seller and any
16
customers which accounted for more than 5% of the Seller's total sales in the
fiscal years ended December 31, 1996 and 1995. None of such customers has
notified the Seller that it intends to discontinue or curtail its relationship
with the Seller.
2.21 Suppliers. Schedule 2.21 attached hereto sets forth a
true, correct and complete list of the names and addresses of the ten suppliers
of the Seller which accounted for the largest dollar volume of purchases by the
Company for the fiscal years ended December 31, 1996 and 1995. None of such
suppliers has notified the Seller that it intends to discontinue its
relationship with the Seller or ration its products to the Seller.
2.22 Bank Accounts. Schedule 2.22 attached hereto contains a
true, correct and complete list of all bank accounts, investment accounts, money
market accounts, safe deposit boxes and similar accounts in the name of or
controlled by the Seller and the names of persons having access thereto.
2.23 Prepayments and Deposits. Schedule 2.23 attached hereto
sets forth all prepayments or deposits from customers for products to be
shipped, or services to be performed, after the Closing Date which have been
received by the Seller as of May 31, 1997.
2.24 Trade Names and Other Intangible Property.
(a) Schedule 2.24 attached hereto sets forth a true,
correct and complete list and, where appropriate, a description of, all
Intangible Property. True, correct and complete copies of all licenses and other
agreements relating to the Intangible Property have been previously delivered by
the Seller to the Buyer.
(b) Except as otherwise disclosed in Schedule 2.24
attached hereto, the Seller is the sole and exclusive owner of all Intangible
Property and all designs, permits, labels and packages used on or in connection
therewith. The Intangible Property owned by the Seller is sufficient to conduct
the Seller's business as presently conducted and, when transferred to the Buyer
pursuant to this Agreement, will be sufficient to permit the Buyer to conduct
the business of the Seller as presently conducted by the Seller. The Seller has
received no notice of, and has no knowledge of any basis for, a claim against it
that any of its operations, activities, products or publications infringes on
any patent, trademark, trade name, copyright or other property right of a third
party, or that it is illegally or otherwise using the trade secrets, formulae or
any property rights of others. The Seller has no disputes with or claims against
any third party for infringement by such third party of any trade name or other
Intangible Property of the Seller. The Seller has taken all steps reasonably
prudent to protect its right, title and interest in and to the Intangible
Property.
2.25 Employee Benefit Plans.
(a) Employee Plans. Schedule 2.25 attached hereto
contains a true, correct and complete list of all pension, benefit, profit
sharing, retirement, deferred compensation, welfare, insurance, disability,
bonus, vacation pay, severance pay and other similar plans, programs and
agreements, whether reduced to writing or not, other than any
17
"multiemployer plan" as such term is defined in Section 4001(a)(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), relating
to the Seller's employees, or maintained at any time since January 1, 1993 by
the Seller or by any other member (hereinafter, "Affiliate") of any controlled
group of corporations, group of trades or businesses under common control, or
affiliated service group (as defined for purposes of Section 414(b), (c) and
(m), respectively, of the Internal Revenue Code of 1986, as amended (the
"Code")) (the "Employee Plans") and, except as set forth on Schedule 2.25
attached hereto, the Seller has no obligations, contingent or otherwise, past or
present, under applicable law or the terms of any Employee Plan.
(b) Prohibited Transactions. Neither the Seller nor
any of its Affiliates, directors, officers, employees or agents, or any "party
in interest" or "disqualified person," as such terms are defined in Section 3 of
ERISA, and Section 4975 of the Code has, with respect to any Employee Plan,
engaged in or been a party to any nonexempt "prohibited transaction," as such
term is defined in Section 4975 of the Code or Section 406 of ERISA, in
connection with which, directly or indirectly, the Buyer or any of its
Affiliates, directors or employees or any Employee Plan or any related funding
medium could be subject to either a penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Code.
(c) Compliance. With respect to all Employee Plans,
the Seller and its Affiliates are in compliance with the requirements prescribed
by any and all statutes, orders or governmental rules or regulations currently
in effect, including, but not limited to, ERISA and the Code, applicable to such
Employee Plans. The Seller and its Affiliates have in all respects performed all
obligations required to be performed by them under, and is not in violation in
any respect of, and there has been no default or violation by any other party
with respect to, any of the Employee Plans. Except as set forth on Schedule 2.25
attached hereto: (i) none of the Employee Plans which are subject to Title IV of
ERISA has been or will be terminated in whole or in part within the meaning of
ERISA or the Code; (ii) no liability has been incurred to, nor has any event or
circumstance occurred, nor will any event or circumstance occur prior to the
Closing Date, which could result in such a liability being asserted by, the
Pension Benefit Guaranty Corporation ("PBGC") with respect to any Employee Plan
(other than the payment of annual premiums under Section 4007 of ERISA or
benefits payable in accordance with the terms of such Employee Plan); (iii) no
Employee Plan that is subject to Part 3 of Subtitle B of Title I of ERISA or
Section 412 of the Code, or both, incurred any "accumulated funding deficiency"
(as defined in ERISA), whether or not waived; (iv) neither Seller nor any
Affiliate has failed to pay any amounts due and owing as required by the terms
of any Employee Plan; (v) there has been no "reportable event" within the
meaning of Section 4043(b)(1)-(13) of ERISA (and PBGC Regulations thereunder),
or any event described in Section 4063(a) of ERISA, with respect to any Employee
Plan, other than as disclosed herein or on accompanying schedules; (vi) neither
Seller nor any Affiliate has failed to make any payment to an Employee Plan
required under Section 302 of ERISA nor has any lien ever been imposed under
Section 302(f) of ERISA; (vii) neither Seller nor any Affiliate has adopted an
amendment to any Employee Plan which requires the provision of security under
Section 307 of ERISA, (viii) the PBGC has not instituted any proceedings to
terminate an Employee Plan pursuant to Section 4042 of ERISA.
18
(d) Multiemployer Plans. Schedule 2.25 lists each and
every multiemployer plan to which Seller or its Affiliates contribute, are
required to contribute, or have ever been required to contribute. No
multiemployer plan listed in Schedule 2.25 is in "reorganization" (as defined in
Section 4241 of ERISA) or "insolvent" (as defined in Section 4245 of ERISA).
Neither Seller nor any Affiliate has withdrawn or is reasonably expected to
withdraw from a multiemployer plan in a complete or partial withdrawal which has
resulted or will result in "withdrawal liability," as defined for purposes of
Part I of Subtitle E of Part IV of ERISA, with respect to any such plan which
has not been satisfied in full. The Seller and its Affiliates have made all
contributions to any such plan as are required through the Closing Date under
the terms of any such plans or applicable statutes, regulations, rulings and
other applicable law; and no event has occurred, or can occur prior to the
Closing Date, which could give rise to any other liability (other than a
continuing obligation to contribute to such plan(s) under the terms of any
applicable collective bargaining agreements) on the part of the Seller or the
Buyer, or their Affiliates, officers, employees or directors with respect to
such plan(s).
(e) Retiree Benefits. Except as set forth in Schedule
2.25, no Employee Plan provides health or life insurance benefits for retirees.
No such plan contains any provisions, and no commitments or agreements exist,
which in any way would limit or prohibit the Buyer from amending any such plan
to reduce or eliminate such retiree benefits.
(f) Copies of Employee Plans and Related Documents.
The Seller has previously delivered to the Buyer true, correct and complete
copies of all Employee Plans which have been reduced to writing and written
descriptions of all Employee Plans which have not been reduced to writing, and
all agreements, including trust agreements and insurance contracts, related to
such Employee Plans, and the Summary Plan Description and all modifications
thereto for each Employee Plan communicated to employees. With respect to each
Employee Plan that is a "defined benefit plan," as such term is defined in
Section 3(35) of ERISA (the "Defined Benefit Plans"), true, correct and complete
copies of (i) the annual actuarial valuation reports for the last five years,
(ii) the Form 5500 and Schedule A or B thereto, or both, filed for the last five
years and (iii) any filings made with the Pension Benefit Guaranty Corporation,
Internal Revenue Service or Department of Labor, or any correspondence with or
from such agencies, regarding the termination of any such Defined Benefit Plan,
have been delivered to the Buyer.
(g) Qualifications. Each Employee Plan intended to
qualify under Section 401(a) of the Code has been determined by the Internal
Revenue Service to so qualify, and the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501(a). Each
Employee Plan which is a benefit plan intended to be exempt from tax under of
Section 501(c)(9) of the Code has been determined by the Internal Revenue
Service to be so exempt. Determination letters with respect to each such
Employee Plan have been previously delivered by the Seller to the Buyer, and
nothing has since occurred, or will occur prior to the Closing Date, which might
cause the loss of such qualification or exemption, no such Employee Plan has
been operated in a manner which would cause it to be disqualified in operation,
and all such Employee Plans have been administered in compliance with and
consistent with all applicable requirements of the Code and ERISA, including,
without limitation, all reporting, notice, and disclosure requirements.
19
(h) Funding Status, Etc.
(i) Except as set forth on Schedule
2.25, neither the Seller nor any corporation or trade or business (whether or
not incorporated) which would be treated as a member of the controlled group of
Seller under Section 4001(a)(14) of ERISA would be liable for (A) any amount
pursuant to Section 4062, 4063, 4064, 4068 or 4069 of ERISA if any of the
Employee Plans which are subject to Title IV of ERISA were to terminate or (B)
any amount pursuant to Section 4201 of ERISA if a complete or partial withdrawal
from any multiemployer plan listed on Schedule 2.25 occurred before the Closing.
Except as set forth on Schedule 2.25, all Employee Plans which are subject to
Title IV of ERISA have no unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA. There is no unpaid contribution due with respect to the
plan year of any such Defined Benefit Plan ended prior to the Closing Date, as
required under the minimum funding requirements of Section 412 of ERISA. The
Seller has paid the actuarial minimum recommended funding payment for the
quarterly period ended June 30, 1997 for any such Defined Benefit Plan, or has
accrued (or will accrue) for the same on the June 30, 1997 Balance Sheet.
(ii) With respect to each Employee Plan
which is a qualified defined contribution pension, profit-sharing or stock bonus
plan, as defined in the Code, all employer contributions accrued prior to the
Closing Date under the Plan terms and applicable law have been made by the
Seller.
(iii) With respect to Employee Plans
not described in clause (i) or (ii) above, all premiums or other payments
required by the terms of such plans or any group or individual insurance
policies and programs maintained by the Seller and covering any present or
former employees of the Seller with respect to all periods up to and including
the Closing Date have been fully paid or accrued. The Seller shall be
responsible for any welfare benefits not fully covered by third-party insurance
policies or programs relating to claims incurred by present or former employees
of the Seller on or before the Closing Date.
(i) Claims and Litigation. Except as set forth on
Schedule 2.25, there are no threatened other proceedings by present or former
employees of the Seller or its affiliates, plan participants, beneficiaries or
spouses of any of the above, the Internal Revenue Service, the PBGC, or any
other person or entity involving any Employee Plan including claims against the
assets of any trust, involving any Employee Plan, or any rights or benefits
thereunder, other than ordinary and usual claims for benefits by participants or
beneficiaries including claims pursuant to domestic relations orders.
(j) No Implied Rights. Nothing expressed or implied
herein shall confer upon any past or present employee of the Seller, his or her
representatives, beneficiaries, successors and assigns, nor upon any collective
bargaining agent, any rights or remedies of any nature, including, without
limitation, any rights to employment or continued employment with the Seller,
the Buyer, or any successor or affiliate.
(k) Transfer. The Seller shall take any actions as
may be necessary or appropriate under all applicable laws and the terms of the
Employee Plans to establish the
20
Buyer, or an affiliate of the Buyer, as having all rights and obligations with
respect to the pension plan assumed pursuant to Subsection 1.4 hereof,
including, without limitation, rights with respect to all annuity or insurance
contracts which form a part of any of such Employee Plan, together with all
other Employee Plan assets. The Seller shall obtain as of the Closing Date any
and all consents from trustees required to effect any transfer of any trust(s)
related to such assumed Employee Plan to such trustee(s) as may be appointed by
the Buyer.
(l) Schedule 2.25 attached hereto sets forth the
detailed procedures for assuming the pension plan pursuant to Subsection 1.4
hereof.
(m) Liabilities. Except as identified on Schedule
2.25 or in the May 31, 1997 Financial Statements or the June 30, 1997 Financial
Statements, the Buyer assumes no liabilities with respect to any Employee Plan
which liability relates to any period prior to June 30, 1997, including, without
limitation, any taxes, accrued vacation or sick pay (whether or not vested),
accrued vacation, sick and personal leaves, employee policies, employee benefit
claims or liability to the Pension Benefit Guaranty Corporation; provided,
however, that with respect to the period from May 31, 1997 to June 30, 1997
Buyer shall assume no liabilities with respect to any Employee Plan except with
respect to those items listed on the May 31, 1997 Financial Statements that have
changed subsequent thereto in the ordinary course of Seller's business.
2.26 Environmental Matters. The Seller is in compliance with
all statutes, regulations and ordinances relating to the protection of human
health and the environment including, without limitation, the Clean Water Act 33
U.S.C. U1251 et seq., the Resource Conservation and Recovery Act 42 U.S.C. U6901
et seq., the Clean Air Act 42 U.S.C. U7401 et seq., Toxic Substances Control Act
15 U.S.C. U2601 et seq., the Emergency Planning Community Right-to-Know Act 42
U.S.C. U11,001 et seq., the regulations developed pursuant to these statutes and
the corresponding state and local statutes, ordinances and regulations
(collectively, the "Environmental Laws"). The Seller has not released any
hazardous substance into the environment at any property owned, leased or used
in connection with the operation of the Assets or its business (the "Premises")
including, without limitation, any such release in the soil or groundwater
underlying the Premises, in violation of any Environmental Laws. There are no
asbestos, polychlorinated biphenyls or underground storage tanks located on the
Premises and the Seller has not released any asbestos, polychlorinated biphenyls
or materials stored in underground storage tanks located on the Premises,
including without limitation, petroleum or petroleum-based materials, in
violation of any Environmental Laws. The Seller has no knowledge of and has not
received notice of any violation or any potential violation of any environmental
statute or regulation nor has it any knowledge with respect to or been advised
of any claim or liability or any potential claim or liability pursuant to any
environmental statute or regulation brought by any governmental agency or
private party with respect to the Assets or the operation of its business.
2.27 Acquired Assets Complete. The Assets are, when utilized
by a labor force substantially similar to that employed by the Seller on the
date hereof, adequate to conduct the business operations currently conducted by
the Seller.
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2.28 Regulatory Approvals. All consents, approvals,
authorizations and other requirements prescribed by any law, rule or regulation
which must be obtained or satisfied by the Seller and which are necessary for
the execution and delivery by the Seller of this Agreement and the documents to
be executed and delivered by the Seller in connection herewith are set forth on
Schedule 2.28 attached hereto and have been, or will be prior to the Closing
Date, obtained and satisfied.
2.29 Indebtedness to and from Officers, Directors and
Shareholders. Except as set forth on Schedule 2.29 attached hereto, the Seller
is not indebted, directly or indirectly, to any person who is an officer,
director or shareholder of the Seller or any affiliate of any such person in any
amount whatsoever other than for salaries for services rendered or reimbursable
business expenses, all of which have been reflected on the Financial Statements,
and no such officer, director, shareholder or affiliate is indebted to the
Seller, except for advances made to employees of the Seller in the ordinary
course of business to meet reimbursable business expenses anticipated to be
incurred by such obligor.
2.30 Powers of Attorney and Suretyships. Except as set forth
on Schedule 2.30 attached hereto, the Seller has no general or special powers of
attorney outstanding (whether as grantor or grantee thereof) and has no
obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-signor, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity, except as endorser or
maker of checks or letters of credit, respectively, endorsed or made in the
ordinary course of business.
2.31 Disclosure. No representation or warranty by the Seller
in this Agreement or in any Exhibit hereto, or in any list, statement, document
or information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. The Seller has
disclosed to the Buyer all material facts pertaining to the transactions
contemplated by this Agreement.
3. Representations of the Buyer. The Buyer represents and warrants to
the Seller as follows:
3.1 Organization and Authority. The Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Arizona, and has requisite power and authority (corporate and other) to
own its properties and to carry on its business as now being conducted. The
Buyer has full power to execute and deliver this Agreement and the Instrument of
Assumption of Liabilities and to consummate the transactions contemplated hereby
and thereby. Certified copies of the Articles of Incorporation and the Bylaws of
the Buyer, as amended to date, have been previously delivered to the Seller, are
complete and correct, and no amendments have been made thereto or have been
authorized since the date thereof.
3.2 Capitalization of the Buyer. On the date hereof, the
Buyer's authorized capital stock consists of 200,000,000 shares of capital
stock, divided into 100,000,000 shares
22
of Common Stock, $.01 par value ("Common Stock"), of which approximately
4,167,318 shares are issued and outstanding, and 100,000,000 shares of preferred
stock, none of which are outstanding. All of the outstanding shares of capital
stock of the Buyer have been and on the Closing Date will be duly and validly
issued and are, or will be, fully paid and nonassessable.
3.3 Authorization. The execution and delivery of this
Agreement by the Buyer, and the agreements provided for herein, and the
consummation by the Buyer of all transactions contemplated hereby, have been
duly authorized by all requisite corporate action. This Agreement and all such
other agreements and written obligations entered into and undertaken in
connection with the transactions contemplated hereby constitute the valid and
legally binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms. The execution, delivery and performance
of this Agreement and the agreements provided for herein, and the consummation
by the Buyer of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's Certificate of Incorporation or Bylaws; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Buyer pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which it or its properties is a party
or by which the Buyer is or may be bound. Schedule 3.3 attached hereto sets
forth a true, correct and complete list of all consents and approvals of third
parties that are required in connection with the consummation by the Buyer of
the transactions contemplated by this Agreement.
3.4 Regulatory Approvals. Except for certain filings with the
Securities and Exchange Commission, all consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been, or will be prior
to the Closing Date, obtained and satisfied.
3.5 Disclosure. No representation or warranty by the Buyer in
this Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant hereto by the Buyer, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading.
3.6 SEC Filings. The Buyer has previously delivered to the
Seller true, correct and complete copies of all filings made by the Buyer with
the Securities and Exchange Commission since July 1, 1996.
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4. Access to Information; Public Announcements
4.1 Access to Management, Properties and Records.
(a) From the date of this Agreement until the Closing
Date, the Seller shall afford the officers, attorneys, accountants and other
authorized representatives of the Buyer free and full access upon reasonable
notice and during normal business hours to all management personnel, offices,
properties, books 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
management, business, properties and affairs of the Seller, and the Buyer shall
be permitted to make abstracts from, or copies of, all such books and records.
The Seller shall furnish to the Buyer such financial and operating data and
other information as to the Assets and the business of the Seller as the Buyer
shall reasonably request.
(b) If the Buyer, at its option and expense, prior to
the Closing Date, elects to have a report or reports prepared by an engineer or
other professional selected by the Buyer, certifying that the real property
facilities where the Seller operates the Assets (the "Real Estate") complies
with all applicable federal, state and local environmental and wetlands laws,
rules and regulations and that there is not now, and never has been,
manufacture, storage, or disposal of hazardous wastes at the Real Estate in
violation of said laws, rules and regulations, the Seller shall cooperate with
such engineer or professional to the extent necessary to prepare such reports,
including, without limitation, providing such engineer or professional access to
the Real Estate and necessary records, and arranging interviews with employees
of the Seller.
(c) The Seller shall authorize the release to the
Buyer of all files pertaining to the Seller, the Assets or the business or
operations of the Seller held by any federal, state, county or local
authorities, agencies or instrumentalities.
4.2 Confidentiality. All information not previously disclosed
to the public or generally known to persons engaged in the respective businesses
of the Seller or the Buyer which shall have been furnished by the Buyer or the
Seller to the other party in connection with the transactions contemplated
hereby or as provided pursuant to this Section 4 shall not be disclosed to any
person other than their respective employees, directors, attorneys, accountants
or financial advisors or other than as contemplated herein. In the event that
the transactions contemplated by this Agreement shall not be consummated, all
such information which shall be in writing shall be returned to the party
furnishing the same, including, to the extent reasonably practicable, all copies
or reproductions thereof which may have been prepared, and neither party shall
at any time thereafter disclose to third parties, or use, directly or
indirectly, for its own benefit, any such information, written or oral, about
the business of the other party hereto.
4.3 Public Announcements. The Buyer and the Seller agree not
to disclose the existence or contents of this Agreement and the transactions
contemplated hereby to any person other than their respective officers,
directors, senior employees and professional advisors on a need-to-know basis
except to the extent that disclosure may be required by applicable laws. In that
regard, the Buyer will make a press release upon the signing by the parties of
the Agreement, provided that such press release shall be subject to the Seller's
prior approval not
24
to be unreasonably withheld. Except as required by law, the Seller agrees not to
issue any press release or make any public statement regarding the subject
matter hereof without the prior written consent of the Buyer, and thereafter
only a press release issued in a form reasonably satisfactory to the Buyer. The
Seller acknowledges (i) the Buyer's status as a publicly traded reporting
company, (ii) that the existence and contents of this Agreement and the
discussions and transactions contemplated hereby may constitute material,
non-public information under the Federal securities laws, and (iii) the
necessity of exercising the foregoing measures in order to accommodate the Buyer
in its public reporting responsibilities.
5. Pre-Closing Covenants of the Seller. [Intentionally deleted.]
6. Best Efforts to Obtain Satisfaction of Conditions. The Seller and
the Buyer covenant and agree to use their best efforts to obtain the
satisfaction of the conditions specified in this Agreement.
7. Conditions to Obligations of the Buyer. The obligations of the Buyer
under this Agreement are subject to the fulfillment, at the Closing Date, of the
following conditions precedent, each of which may be waived in writing in the
sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the
Seller; Compliance with Covenants and Obligations. The representations and
warranties of the Seller shall be true on and as of the Closing Date as though
such representations and warranties were made on and as of such date, except for
any changes permitted by the terms hereof or consented to in writing by the
Buyer. The Seller shall have performed and complied with all terms, conditions,
covenants, obligations, agreements and restrictions required by this Agreement
to be performed or complied with by it prior to or at the Closing Date.
7.2 Corporate Audit; Delivery of Financial Statements. An
audit of the financial statements of the Seller for the years ended December 31,
1996 and 1995 shall have been completed by the Accountants and delivered to the
Buyer at least three business days prior to the Closing Date and shall be
satisfactory to the Buyer and sufficient to permit the Buyer to report the
financial condition and results of operation of the Seller and the Assets in
compliance with SEC regulations applicable to the Buyer. The Seller shall have
delivered to the Buyer the May 31, 1997 Financial Statements and such financial
statements shall have been prepared in accordance with generally accepted
accounting principles applied consistently with past practice and shall have
been certified by the Seller's President (who is also acting as Seller's chief
financial officer) and reviewed by the Accountants.
7.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Seller of the transactions contemplated
by this Agreement and the operation of the Seller's business by the Buyer shall
have consented to, authorized, permitted or approved such transactions.
7.4 Consents of Lenders, Lessors and Other Third Parties. The
Seller shall have received all requisite consents and approvals of all lenders,
lessors and other third parties
25
whose consent or approval is required in order for the Seller to consummate the
transactions contemplated by this Agreement, including, without limitation,
those set forth on Schedule 2.3 attached hereto.
7.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of the Buyer to own or use the Assets after the Closing.
7.6 Opinion of Counsel. The Buyer shall have received an
opinion of McNees, Wallace & Nurick, counsel to the Seller, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit C, and as to
such other matters as may be reasonably requested by the Buyer or its counsel.
7.7 Board of Directors and Shareholder Approval and Corporate
Proceedings. The shareholders of the Seller shall have duly authorized the
transactions contemplated by this Agreement. All corporate and other proceedings
required to be taken on the part of the Seller to authorize or carry out this
Agreement and to convey, assign, transfer and deliver the Assets shall have been
taken.
7.8 The Assets. Except for the Permitted Encumbrances and the
Permitted Exceptions, at the Closing the Buyer shall receive good, clear, record
and marketable title to the Assets, free and clear of all liens, liabilities,
security interests and encumbrances of any nature whatsoever.
7.9 Employment Contracts. On or prior to the Closing Date, the
Buyer shall have executed an employment contract with John R. Krieger upon
substantially the terms set forth in Schedule 7.9 attached hereto.
7.10 Assignment of Insurance Policies. On or prior to the
Closing Date, the Seller shall have cooperated with and/or assisted the Buyer
with respect to obtaining insurance policies extending warranty or products
liability coverage to the Seller for products manufactured by the Seller prior
to the Closing Date or for claims made on or prior to the Closing Date.
7.11 Cash Available for Working Capital Purposes. On the
Closing Date, the Seller will have available cash for working capital purposes
of not less than that reflected on the May 31, 1997 Balance Sheet, which cash
will be transferred to the Buyer pursuant to the terms of this Agreement.
7.12 Trade Payables. On the Closing Date, the Seller will not
have obligations, exceeding those obligations reflected on the May 31, 1997
Balance Sheet in the aggregate, to suppliers and vendors of goods and services
and other trade creditors.
7.13 Engineer's Report. On or prior to the Closing Date, the
Buyer shall have received the engineer's report referred to in Subsection 4.1(b)
hereof.
26
7.14 Tax Lien Certificate. On or prior to the Closing Date,
the Seller shall have obtained and delivered to the Buyer tax lien certificates
from all jurisdictions in which Assets are located and which provide such tax
lien certificates.
7.15 Closing Deliveries. The Buyer shall have received at or
prior to the Closing each of the following documents:
(a) a bill of sale substantially in the form attached
hereto as Exhibit D;
(b) such instruments of conveyance, assignment and
transfer, in form and substance satisfactory to the Buyer, as shall be
appropriate to convey, transfer and assign to, and to vest in, the Buyer, good,
clear, record and marketable title to the Assets;
(c) all technical data, formulations, product
literature and other documentation relating to the Seller's business, all in
form and substance satisfactory to the Buyer;
(d) such contracts, files and other data and
documents pertaining to the Assets or the Seller's business as the Buyer may
reasonably request;
(e) the general ledgers and books of account of the
Seller, and all federal, state and local income, franchise, property and other
tax returns filed by the Seller with respect to the Assets since January 1,
1994;
(f) such certificates of the Seller's officers and
such other documents evidencing satisfaction of the conditions specified in
Section 7 as the Buyer shall reasonably request;
(g) a certificate of the Secretary of State of the
State of Delaware as to the legal existence and good standing (including tax) of
the Seller in Delaware;
(h) certificates of the Secretary of the Seller
attesting to the incumbency of the Seller's officers, respectively, the
authenticity of the resolutions authorizing the transactions contemplated by the
Agreement, and the authenticity and continuing validity of the charter documents
delivered pursuant to Subsection 2.1;
(i) except with respect to those lessors set forth on
Schedule 7.15(i), estoppel certificates from each lessor from whom the Seller
leases real or personal property consenting to the assumption of such lease by
the Buyer and representing that there are no outstanding claims against the
Seller under any such lease;
(j) Cross-Receipt executed by the Buyer and the
Seller;
(k) the Sublease Agreement, together with
satisfactory evidence to the Buyer reflecting the consent of PRH Properties to
such Sublease Agreement;
27
(l) the Registration Rights Agreement;
(m) the Certificate of No Adverse Conditions in the
form of Exhibit I attached hereto; and
(n) such other documents, instruments or certificates
as the Buyer may reasonably request.
8. Conditions to Obligations of the Seller. The obligations of the
Seller under this Agreement are subject to the fulfillment, at the Closing Date,
of the following conditions precedent, each of which may be waived in writing at
the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the
Buyer; Compliance with Covenants and Obligations. The representations and
warranties of the Buyer in this Agreement shall be true on and as of the Closing
Date as though such representations and warranties were made on and as of such
date, except for any changes consented to in writing by the Seller. The Buyer
shall have performed and complied with all terms, conditions, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
8.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.
8.3 Governmental Approvals. All governmental agencies,
departments, bureaus, commissions and similar bodies, the consent, authorization
or approval of which is necessary under any applicable law, rule, order or
regulation for the consummation by the Buyer of the transactions contemplated by
this Agreement shall have consented to, authorized, permitted or approved such
transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The
Buyer shall have received all requisite consents and approvals of all lenders,
lessors and other third parties whose consent or approval is required in order
for the Buyer to consummate the transactions contemplated by this Agreement,
including, without limitation, those set forth on Schedule 3.3 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before
any court or other governmental body shall have been instituted or threatened by
any governmental body or person whatsoever which shall seek to restrain,
prohibit or invalidate the transactions contemplated by this Agreement or which
might affect the right of the Seller to transfer the Assets.
8.6 Opinion of Counsel. The Seller shall have received an
opinion of Squire, Sanders & Dempsey L.L.P., counsel to the Buyer, dated as of
the Closing Date, in substantially the form attached hereto as Exhibit E, and as
to such other matters as may be reasonably requested by the Seller or its
counsel.
28
8.7 Employment Contract and Hiring. On or prior to the Closing
Date, the Buyer shall have executed and delivered an Employment Contract with
John R. Krieger upon substantially the terms set forth in Schedule 7.9 attached
hereto. In addition, the Buyer hereby agrees to offer employment to
substantially all of the Seller's employees, to assume the Seller's obligations
under its union contract and pension plan, and to recognize the past service of
Seller's employees in those instances where Buyer has a policy that takes into
account the prior service of an employee. Further, Buyer agrees to grant to each
transferred employee, in accordance with such policies, the number of vacation
and sick days for fiscal 1997 equal to the transferred employee's unused
vacation and sick days in 1997 accrued in the June 30, 1997 Financial
Statements. Except as is provided in Section 1.4, Buyer is under no obligation
to adopt or continue any Employee Plan; and shall not be an adopting employer
under any Employee Plan or otherwise responsible for the payment of any benefits
under any Employee Plan.
8.8 Registration Rights Agreement. On or prior to the Closing
Date, the Buyer shall have executed and delivered a Registration Rights
Agreement with the Seller or the Stockholder upon substantially the terms set
forth in Exhibit A attached hereto.
8.9 Sublease Agreement. On or prior to the Closing Date, the
Buyer shall have executed and delivered a Sublease Agreement with the
Stockholder relating to the Real Estate upon substantially the terms set forth
in Exhibit G attached hereto.
8.10 General Liability Insurance. The Seller shall have
received assurances from the Buyer that the Buyer has obtained general liability
insurance covering Seller's business in the aggregate amount of $6 million
through primary and umbrella insurance policies. Such insurance shall, among
other things, insure against product liability claims relating to products of
Seller that were shipped prior to the Closing and shall name the Stockholder as
an additional insured. Buyer shall keep such insurance in force until the
earlier of December 31, 1999 or at such time as all of its obligations under
this Agreement have been fulfilled. This Section 8.10 shall not be construed to
restrict Buyer's ability to change insurance carriers subsequent to the Closing
so long as the same level of coverage described above is maintained.
8.11 Closing Deliveries. The Seller shall have received at or
prior to the Closing each of the following documents:
(a) such certificates of the Buyer's officers and
such other documents evidencing satisfaction of the conditions specified in this
Section 8 as the Seller shall reasonably request;
(b) a certificate of the Secretary of State of the
State of Arizona as to the legal existence and good standing (including tax) of
the Buyer in Arizona;
(c) a certificate of the Secretary of the Buyer
attesting to the incumbency of the Buyer's officers, the authenticity of the
resolutions authorizing the transactions contemplated by this agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Subsection 3.1;
29
(d) Instrument of Assumption of Liabilities executed
by the Buyer and accepted by the Seller;
(e) payment of the Cash Purchase Price and the
Additional Purchase Price;
(f) cross receipt executed by the Buyer; and
(g) such other documents, instruments or certificates
as the Seller may reasonably request.
9. Indemnification.
9.1 By the Buyer and the Seller and the Stockholder. The
Buyer, on the one hand, and the Seller and the Stockholder, jointly and
severally on the other hand, hereby indemnifies and holds harmless the other
party against all claims, damages, losses, liabilities, costs and expenses
(including, without limitation, settlement costs and any legal, accounting or
other expenses for investigating or defending any actions or threatened actions)
reasonably incurred by the Buyer or the Seller and the Stockholder in connection
with each and all of the following:
(a) Any breach by the indemnifying party of any
representation or warranty in this Agreement;
(b) Any breach of any covenant, agreement or
obligation of the indemnifying party contained in this Agreement or any other
agreement, instrument or document contemplated by this Agreement;
(c) Any misrepresentation contained in any statement,
certificate or schedule furnished by the indemnifying party pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement;
and
(d) Any violation by the Seller of, or any failure by
the Seller to comply with, any law, ruling, order, decree, regulation or zoning,
environmental or permit requirement applicable to the Seller, the Assets or its
business, whether or not any such violation or failure to comply has been
disclosed to the Buyer, including any costs incurred by the Buyer (i) in order
to bring the Assets into compliance with environmental laws as a consequence of
noncompliance with such laws on the Closing Date or (ii) in connection with the
transfer of the Assets.
9.2 Limits on Indemnification. The Seller and Stockholder will
not be liable for any matter described in this Section 9 (hereinafter referred
to as a "Loss" or the "Losses") unless and until the aggregate amount of all
such Losses exceeds $20,000 (the "Basket Amount"); provided, however, that
unpaid Accounts Receivable shall be excluded from the Basket Amount and shall
remain subject to the repurchase obligations set forth in Section 10.7; and
provided further, that claims made pursuant to Section 10.8 shall be subject to
a separate
30
limitation as set forth in such paragraph. Thereafter, the Seller and the
Stockholder shall be liable for the amount of such Losses in excess of $20,000
and shall pay such excess to Buyer in immediately available funds. If the
aggregate of all such Losses exceeds $40,000, the Seller and the Stockholder
shall thereupon pay Buyer the Basket Amount in immediately available funds. In
no event shall the Seller and the Stockholder be liable for any Losses pursuant
to this Section 9 in excess of the consideration received by the Seller and the
Stockholder described in Section 1.2, as adjusted pursuant to Section 1.7.
9.3 Claims for Indemnification. Whenever any claim shall arise
for indemnification hereunder, the party seeking indemnification (the
"Indemnified Party") shall promptly notify the party from whom indemnification
is sought (the "Indemnifying Party") of the claim and, when known, the facts
constituting the basis for such claim. In the event of any such claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceedings by a third party, the notice to the Indemnifying Party shall
specify, if known, the amount or an estimate of the amount of the liability
arising therefrom. The Indemnified Party shall not settle or compromise any
claim by a third party for which it is entitled to indemnification hereunder
without the prior written consent of the Indemnifying Party, which shall not be
unreasonably withheld, unless suit shall have been instituted against it and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Subsection 9.3 of this Agreement.
9.4 Defense by Indemnification Party. In connection with any
claim giving rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this Agreement, the
Indemnifying Party at its sole cost and expense may, upon written notice to the
Indemnified Party, assume the defense of any such claim or legal proceeding if
it acknowledges to the Indemnified Party in writing its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within 30 days after the date such claim is made, (a) the
Indemnified Party may defend against such claim or litigation, in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving notice of the same to the Indemnifying Party, on such
terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying
Party shall be entitled to participate in (but not control) the defense of such
action, with its counsel and at its own expense. If the Indemnifying Party
thereafter seeks to question the manner in which the Indemnified Party defended
such third party claim or the amount or nature of any such settlement, the
Indemnifying Party shall have the burden to prove by a preponderance of the
evidence that the Indemnified Party did not defend or settle such third party
claim in a reasonably prudent manner.
9.5 Payment of Indemnification Obligation. The Seller and the
Stockholder hereby agree that any claim for indemnification by the Buyer under
this Section 9 or under any other provision of this Agreement may, at the
Buyer's option, be set off against the Buyer's obligation to make earn-out
payments pursuant to Sections 1.3(c) and 1.8; provided, however, that Buyer
shall pay such set off amounts into an escrow account mutually agreeable to
Buyer and the Stockholder until such time as the indemnification claim is
resolved in full. Any interest
31
earned on such escrow account shall inure to the benefit of the party prevailing
on the matter. All indemnification by the Buyer or the Seller and the
Stockholder hereunder (to the extent not satisfied in the manner specified in
the preceding sentence) shall be effected by payment of cash or delivery of a
cashier's or certified check in the amount of the indemnification liability. In
the event the Buyer shall receive insurance proceeds pursuant to an unexpired
insurance policy of Seller or Buyer, as the case may be, with respect to a
matter Buyer is seeking indemnification hereunder, any amount required to be
paid by the Seller and the Seller Stockholder pursuant to such indemnification
obligation shall be net of any such insurance proceeds. In the event Buyer makes
a claim on its insurance policy relating to a Loss for which Seller has an
indemnification obligation pursuant to this Section 9, Seller shall pay any
increase in insurance premiums resulting directly and proximately from such
claim by Buyer on such insurance policy for a period of thirty (30) months
following such increase; provided, however, that in no event shall such amount
exceed the original claim for indemnification. Buyer shall provide Seller with
such documentation relating to such increase as shall be reasonably necessary to
establish the amount of such increase attributable to the claim.
9.6 Survival of Representations; Claims for Indemnification.
All representations and warranties made by the parties herein or in any
instrument or document furnished in connection herewith shall survive the
Closing and any investigation at any time made by or on behalf of the parties
hereto. Further, Buyer's covenant in Section 8.10 shall survive the Closing for
the period specified therein. All such representations and warranties shall
expire on December 31, 1999, except for claims, if any, asserted in writing
prior to such date, which shall survive until finally resolved and satisfied in
full; provided, however, that the representations and warranties of the Seller
and the Stockholder made pursuant to (i) Section 2.13 shall survive forever or
until all applicable statutory limitation periods have expired, taking into
account any extensions of such periods, and (ii) Sections 2.26 and 9.1(d) shall
survive for a period of ten (10) years following the Closing Date; and provided,
further, that the limitations on survival shall not apply to any breach of this
Agreement resulting from any wilful or knowing misrepresentation or omission or
fraud. All claims and actions for indemnity pursuant to this Section 9 for
breach of any representation or warranty shall be asserted or maintained in
writing by a party hereto on or prior to December 31, 1999, the referenced
statutory period or ten (10) year period, as the case may be.
10. Post-Closing Agreements.
The Seller and the Stockholder agree that from and after the Closing
Date:
10.1 Proprietary Information.
(a) The Seller shall hold in confidence, and use its
best efforts to have all of its officers, directors and personnel hold in
confidence, all knowledge and information of a secret or confidential nature
with respect to the business of the Seller and shall not disclose, publish or
make use of the same without the consent of the Buyer, except to the extent that
such information shall have become public knowledge other than by breach of this
Agreement by the Seller.
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(b) The Seller agrees that the remedy at law for any
breach of this Subsection 10.1 would be inadequate and that the Buyer shall be
entitled to injunctive relief in addition to any other remedy it may have upon
breach of any provision of this Subsection 10.1.
10.2 No Solicitation or Hiring of Former Employees. Except as
provided by law, for a period of three years after the Closing Date, the Seller
shall not solicit any person who was an employee of the Seller on the Closing
Date to terminate his employment with the Buyer or to become an employee of the
Seller or hire any person who was such an employee on the date hereof or on the
Closing Date.
10.3 Non-Competition Agreement.
(a) For a period of three years after the Closing
Date, neither the Seller nor any Affiliate thereof shall (i) manufacture, market
or sell any product which has the same or substantially the same form, function
and primary application as any existing or proposed product manufactured by the
Seller on or prior to the Closing Date or (ii) engage in any business
competitive with the business of the Seller as conducted on the date hereof or
on the Closing Date, in the United States or any other country in which the
Seller conducted its business during the two years prior to the Closing Date.
(b) The parties hereto agree that the duration and
geographic scope of the non-competition provision set forth in this Subsection
10.3 are reasonable. In the event that any court determines that the duration or
the geographic scope, or both, are unreasonable and that such provision is to
that extent unenforceable, the parties hereto agree that the provision shall
remain in full force and effect for the greatest time period and in the greatest
area that would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective. The Seller agrees that damages are an inadequate remedy for any
breach of this provision and that the Buyer shall, whether or not it is pursuing
any potential remedies at law, be entitled to equitable relief in the form of
preliminary and permanent injunctions without bond or other security upon any
actual or threatened breach of this non-competition provision.
10.4 Sharing of Data.
(a) The Seller shall have the right for a period
commencing on the Closing Date and ending on April 20, 2003, to have reasonable
access to such books, records and accounts, including financial and tax
information, correspondence, production records, employment records and other
similar information as are transferred to the Buyer pursuant to the terms of
this Agreement for the limited purposes of concluding its involvement in the
business of the Seller prior to the Closing Date and for complying with its
Obligations under applicable securities, tax, environmental, employment or other
laws and regulations. The Buyer shall have the right for a period of three years
following the Closing Date to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records which are retained
33
by the Seller pursuant to the terms of this Agreement to the extent that any of
the foregoing relates to the business of the Seller transferred to the Buyer
hereunder or is otherwise needed by the Buyer in order to comply with its
obligations under applicable securities, tax, environmental, employment or other
laws and regulations.
(b) The Seller and the Buyer agree that from and
after the Closing Date they shall cooperate fully with each other to facilitate
the transfer of the Assets from the Seller to the Buyer and the operation
thereof by the Buyer.
10.5 Use of Name. The Seller agrees not to use the name "P.R.
Hoffman Machine Products" or any derivation thereof after the Closing Date in
connection with any business whether or not related to, competitive with, or an
outgrowth of, the business conducted by the Seller on the date hereof.
10.6 Cooperation in Litigation. Each party hereto will fully
cooperate with the other in the defense or prosecution of any litigation or
proceeding already instituted or which may be instituted, hereafter against or
by such party relating to or arising out of the conduct of the business of the
Seller prior to or after the Closing Date (other than litigation arising out the
transactions contemplated by this Agreement). The party requesting such
cooperation shall pay the out-of-pocket expenses (including legal fees and
disbursements) of the party providing such cooperation and of its officers,
directors, employees and agents reasonably incurred in connection with providing
such cooperation, and will, if requested, reimburse the party providing such
cooperation for such party's time spent in such cooperation and the reasonable
salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
10.7 Repurchase of Accounts Receivable.
(a) For the period commencing on the Closing Date and
ending on November 30, 1997 (the "Collection Period"), the Buyer shall use its
reasonable efforts to collect the Accounts Receivable. The Buyer may, but shall
not be obligated to, use a collection agency or commence legal actions in
connection with such collection efforts. Promptly after the expiration of the
Collection Period, the Buyer shall give notice to the Seller designating those
Accounts Receivable in excess of $2,500 which have not been collected as of the
end of the Collection Period and which the Buyer wishes the Seller to purchase.
Within ten days after receipt of such notice from the Buyer, the Seller shall
purchase (without recourse to the Buyer) such designated Accounts Receivable
then remaining unpaid for a purchase price equal to the face amount thereof.
(b) Upon the Seller's repurchase of any unpaid
Account Receivable pursuant to this Subsection 10.7, (i) the Buyer shall
promptly deliver to the Seller any tangible evidence of such Account Receivable
then in the possession of the Buyer or under its control, and (ii) the Seller
shall be entitled to such customary and reasonable actions as it deems necessary
or desirable in order to collect such unpaid Account Receivable; provided, that
the Seller shall consult with the Buyer prior to taking any collection action
which might reasonably
34
be expected to jeopardize the Buyer's relationship with such customer. The Buyer
will, from time to time after such repurchase, execute and deliver to the Seller
such instruments and other documents as the Seller may reasonably request to
assist the Seller in its collection efforts.
(c) In the event that any payment received by the
Buyer during the Collection Period is remitted by a customer which is indebted
under both Accounts Receivable and an account receivable arising out of the sale
of inventory in the ordinary course of business after the Closing Date (a "New
Receivable"), such payments shall first be applied to the Accounts Receivable
due from such customer and the balance remaining after payment in full of all
Accounts Receivable due from such customer shall be applied to the New
Receivable; provided, however, that (i) with respect to any Account Receivable
being contested or disputed by the payor thereof, no portion of the amount in
dispute shall be deemed to have been collected by the Buyer in respect of the
Account Receivable due from such customer (unless otherwise directed by the
customer) until all amounts owed by such customer to the Buyer for New
Receivables have been paid or such dispute has been resolved, whichever occurs
first (it being understood that undisputed amounts of Accounts Receivable shall
be applied in accordance with the priorities set forth above in this Subsection
10.7) and (ii) the foregoing priorities shall not apply to sums received by the
Buyer which are specifically identified by the customer as being tendered in
payment of a New Receivable. The Buyer agrees not to induce any customer to
identify any payment as being in respect of a New Receivable, except in the
event the Buyer reasonably determines to sell to said customer on a C.O.D. basis
only.
(d) The Buyer will cooperate, at the Seller's
expense, with the Seller in collecting any Accounts Receivable which are
repurchased by the Seller pursuant to this Subsection 10.7; provided, however,
that the foregoing shall not require the Buyer to be a party to any action
brought by the Seller to collect such Accounts Receivable.
(e) The Buyer agrees to furnish to the Seller within
15 days after the end of each month during the Collection period a statement
setting forth the Accounts Receivable collected during such month and a trial
balance of the uncollected Accounts Receivable showing the aging thereof as of
the end of such month.
(f) The Seller hereby authorizes the Buyer to open
any and all mail addressed to the Seller (if delivered to the Buyer) if received
on or after the Closing Date and hereby grants to the buyer a power of attorney
to endorse and cash any checks or instruments made payable or endorsed to the
Seller or its order and received by the Buyer.
(g) The Seller agrees that it will forward promptly
to the Buyer any monies, checks or instruments received by the Seller after the
Closing Date with respect to the Accounts Receivable, except with respect to
those Accounts Receivable which are repurchased by the Seller pursuant to this
Subsection 10.7.
(h) Any sums received by the Buyer in respect of
Accounts Receivable (and so identified by the relevant account debtor) after
their repurchase by the Seller pursuant to Subsections 10.7(a) hereof shall be
promptly transmitted by the Buyer to the Seller. In addition, if receipt by the
Buyer of unidentified sums of money from an account debtor who
35
owes any Account Receivable repurchased by the Seller pursuant to Subsections
10.7(a) hereof results in such account debtor having an aggregate credit balance
with the Buyer, the Buyer shall promptly transmit to the Seller an amount of
money equal to the lesser of (a) such aggregate credit balance or (b) the
remaining of all Accounts Receivable which have been repurchased by the Seller
and are payable by such account debtor to the Seller.
(i) Seller's obligation to repurchase unpaid Accounts
Receivable, under this Section 10.7 may be satisfied by Buyer out of a holdback
and/or setoff against monies or stock otherwise payable to Seller pursuant to
Sections 1.3(c) and 1.8 hereof if not promptly paid by Seller in cash or
delivery of a cashiers or bank check.
10.8 Product Claims and Returns. Seller shall be responsible
for customer claims relating to services rendered by Seller prior to the Closing
Date, and customer claims relating to, or returns of, products (which term for
purposes of this Section 10.8 shall mean those products where there is
sufficient evidence to reflect the date of shipment thereof) of Seller which (a)
were sold and shipped or otherwise provided by the Seller prior to the Closing
Date, (b) were in the finished goods inventory of the Seller as of the Closing
Date, or (c) were work in process and more than fifty percent (50%) completed by
the Closing Date. If a customer makes a claim or seeks a return and, in the
judgment of the Buyer, the claim or return is proper, Buyer shall replace or
repair, as the case may be, the services rendered or product purchased at the
Buyer's then generally prevailing prices and labor rates. Such repairs and
returns for the twelve (12) calendar months following the date of this Agreement
shall be compared to the greater of $40,000 or the product of .008 times the
gross sales of Seller for such period (the "Threshold Amount"). If the actual
repairs and returns for such twelve (12) month period is lower than the greater
of $40,000 or the product of .008 times the gross sales of Seller for such
period, then Seller shall have no obligation to reimburse Buyer for any amounts
pursuant to this Section 10.8. If the actual repairs and returns for such twelve
(12) month period exceeds the greater of $40,000 or the product of .008 times
the gross sales of Seller for such period, then Buyer shall determine and advise
Seller of the aggregate amount of such claims and returns and Seller shall
promptly reimburse Buyer for the amounts thereof in excess of the Threshold
Amount. Seller's obligation to reimburse Buyer for amounts pursuant to this
Section 10.8 shall expire on June 30, 1998, except for claims, if any, asserted
in writing prior to such date, which shall survive until finally resolved and
satisfied in full.
11. Transfer and Sales Tax. Notwithstanding any provisions of law
imposing the burden of such taxes on the Seller or the Buyer, as the case may
be, the Seller shall be responsible for and shall pay (a) all sales, use and
transfer taxes, and (b) all governmental charges, if any, upon the sale or
transfer of any of the Assets hereunder. If the Seller shall fail to pay such
amounts on a timely basis, the Buyer may pay such amounts to the appropriate
governmental authority or authorities, and the Seller shall promptly reimburse
the Buyer for any amounts so paid by the Buyer.
36
12. Brokers and Expenses. Except as otherwise provided in this
Agreement, each party shall bear its own expenses incurred in connection
herewith in the transactions contemplated hereby; provided, however, the parties
agree that they will equally split the costs and expenses incurred in connection
with the Accountant's preparation of the Audited Financial Statements. The Buyer
acknowledges that it shall be responsible for fees owing to its investment
banker, B.C. Capital Corp., in connection herewith. The Seller acknowledges that
it shall be responsible for fees owing to its financial advisor, The Geneva
Companies and affiliates, in connection herewith. Other than the foregoing, the
parties hereto agree that no other person or entity is or will be entitled to
any brokerage, finder's or similar fees in connection herewith.
13. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or sent by
facsimile, federal express, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties may have
given notice:
To the Seller: P.R. Hoffman Machine Products Corporation
1517 Commerce Avenue
Carlisle, Pennsylvania 17013
Attention: John R. Krieger
Fax: (717) 796-2132
With a copy to: McNees, Wallace & Nurick
100 Pine Street
P.O. Box 1166
Harrisburg, Pennsylvania 17108-1166
Attention: W. Jeffry Jamouneau, Esq.
Fax: (717) 237-5300
To the Buyer: Amtech Systems, Inc.
131 South Clark
Tempe, Arizona 85281
Attention: J. S. Whang
Fax: (602) 968-3763
With copies to: Squire, Sanders & Dempsey L.L.P.
40 North Central Avenue
Suite 2700
Phoenix, Arizona 85004
Attention: Christopher D. Johnson,
Esq.
Fax: (602) 253-8129
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or via
facsimile (with machine confirmation); or (b) three business days after being
sent, if sent by registered or certified mail.
37
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Buyer and the Seller may not assign their respective
obligations hereunder without the prior written consent of the other party;
provided, however, that the Buyer may assign this Agreement, and its rights and
obligations hereunder, to a wholly-owned subsidiary. Any assignment in
contravention of this provision shall be void. No assignment shall release the
Buyer from any obligation or liability under this Agreement. Buyer acknowledges
that Seller is adopting a plan of complete liquidation and dissolution to be
effective upon the Closing.
15. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits
hereto, and all agreements and instruments to be delivered by the parties
pursuant hereto represent the entire understanding and agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
oral and written and all contemporaneous oral negotiations, commitments and
understandings between such parties. The Buyer and the Seller, by the consent of
their respective Boards of Directors, or officers authorized by such Boards, may
amend or modify this Agreement, in such manner as may be agreed upon, by a
written instrument executed by the Buyer and the Seller.
(b) If the provisions of any Schedule or Exhibit to
this Agreement are inconsistent with the provisions of this Agreement, the
provision of the Agreement shall prevail. The Exhibits and Schedules attached
hereto or to be attached hereafter are hereby incorporated as integral parts of
this Agreement.
16. Bulk Sales Laws. Except for the indemnity provided by Seller
pursuant to Section 9, Buyer and Seller waive compliance with any applicable
bulk sales laws.
17. Legal Fees. In the event that legal proceedings are commenced by
the Buyer against the Seller, or by the Seller against the Buyer, in connection
with this Agreement or the transactions contemplated hereby, the party or
parties which do not prevail in such proceedings shall pay the reasonable
attorneys' fees and other costs and expenses, including investigation costs,
incurred by the prevailing party in such proceedings.
18. Governing Law and Venue. This Agreement shall be governed by and
construed in accordance with Pennsylvania law. Notwithstanding the foregoing
choice of law, the parties expressly agree that any controversy, dispute,
litigation or claim arising out of the subject matter of this Agreement and the
transactions contemplated hereby shall be brought or commenced only in a federal
or state court located in Maricopa County, Arizona. The parties agree to be
subject to the personal jurisdiction of the federal and/or state courts situated
in Maricopa County, Arizona and agree that a claim of forum non-conveniens shall
not be a defense to an action initiated in such venues.
19. Section Headings. The section headings are for the convenience of
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
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20. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
(Corporate Seal) SELLER:
ATTEST: P.R. HOFFMAN MACHINE PRODUCTS
CORPORATION
By:
- ---------------------------------- --------------------------------
Secretary John R. Krieger
Its President
(Corporate Seal) BUYER:
ATTEST: AMTECH SYSTEMS, INC.
By:
- ---------------------------------- --------------------------------
Secretary J.S. Whang
Its President
STOCKHOLDER:
-----------------------------------
John R. Krieger
40