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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
September 30, 1997
LDM Technologies, Inc.
(Exact name of registrant as specified in its charter)
Michigan 333-21819 38-269-0171
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2500 Executive Hills Drive, Auburn Hills, Michigan 48326
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 858-2800
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Item 2. Acquisition or Disposition of Assets
On September 30, 1997 LDM Technologies, Inc., a Michigan corporation
("Registrant"), pursuant to the terms of a Stock Purchase Agreement dated
September 30, 1997 ("Agreement") filed as Exhibit 1 to this report on Form 8-K,
acquired from the various stockholders of Kenco Plastics, Inc., a Michigan
corporation, and Kenco Plastics, Inc., a Kentucky corporation (collectively,
the "Kenco Companies") all of the outstanding shares of capital stock of the
Kenco Companies (the "Kenco Acquisition"). At the same time and pursuant to
the Agreement, the Registrant purchased substantially all of the operating
assets of Narens Design & Engineering Co. ("Narens"), a Michigan corporation
("Narens Acquisition") consisting of plant, equipment and inventory.
The aggregate purchase price paid for the capital stock in the Kenco
Acquisition was $25,600,000 cash, subject to adjustment based on a closing date
balance sheet to be dated September 30, 1997, and the aggregate purchase price
paid for the assets in the Narens Acquisition was $1,900,000 cash. The funds
required for the purchase price were acquired by the Registrant under its
Senior Credit Facility with Bank America Business Credit, Inc., as agent, for
itself and a group of banks.
There was no material relationship between the stockholders of the Kenco
Companies and Narens and the Registrant or any of its affiliates, any director
or officer of the Registrant, or any associate of any such director or officer.
The Kenco Companies and Narens are engaged in the business of designing,
engineering and manufacturing blow molded plastic parts for automotive original
equipment manufacturers. The business and operations of the Kenco Companies and
Narens will be continued by the Registrant substantially as they were conducted
prior to the acquisitions.
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired: It is
impracticable to file the required financial statements for the
acquired businesses at the time this report on Form 8-K is filed.
The Registrant will file such financial statements by an amendment
on or before December 15, 1997.
(b) Pro forma financial information: It is impracticable to file
the required pro forma financial information at the time this
report on Form 8-K is filed. The Registrant will file such pro
forma financial information by an amendment on or before December
15, 1997.
(c) Exhibits
1. Stock Purchase Agreement among Registrant and the
various stockholders of Kenco Plastics, Inc., a Michigan
corporation, and Kenco Plastics, Inc., a Kentucky corporation,
and Narens Design & Engineering Co., a Michigan corporation,
dated September 30, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
LDM TECHNOLOGIES, INC.
By: Gary E. Borushko
-------------------------
Gary E. Borushko
Chief Financial Officer
Dated: October 14, 1997
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INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
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Exhibit 1 Stock Purchase Agreement
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EXHIBIT 1
STOCK PURCHASE AGREEMENT
Among
LDM Technologies, Inc., a Michigan corporation
("Buyer")
And
The Various Stockholders of Kenco Plastics, Inc.,
a Michigan corporation, and Kenco Plastics, Inc.,
a Kentucky corporation ("Sellers")
And
Narens Design & Engineering Co., a Michigan
corporation ("NDE")
September 30, 1997
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TABLE OF CONTENTS
1. Definitions
2. Purchase and Sale of Target Shares
(a) Basic Transaction
(b) Purchase Price
(c) The Closing
(d) Deliveries at the Closing
(e) Determination of Closing Balance Sheet Net Book Value
3. Representations and Warranties Concerning the Transaction
(a) Representations and Warranties of the Sellers and NDE
(b) Representations and Warranties of the Buyer
4. Representations and Warranties Concerning the Target
(a) Organization, Qualification, and Corporate Power
(b) Capitalization
(c) Noncontravention
(d) Brokers' Fees
(e) Title to Assets
(f) Subsidiaries
(g) Financial Statements
(h) Events Subsequent to Most Recent Fiscal Year End
(i) Undisclosed Liabilities
(j) Legal Compliance
(k) Tax Matters
(l) Real Property
(m) Intellectual Property
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(n) Tangible Assets
(o) Inventory
(p) Contracts
(q) Notes and Accounts Receivable
(r) Powers of Attorney
(s) Insurance
(t) Litigation
(u) Product Warranty
(v) Product Liability
(w) Employees
(x) Employee Benefits
(y) Guaranties
(z) Environment, Health, and Safety Matters
(aa) Certain Business Relationships with the Target
(bb) Disclosure
5. Pre-Closing Covenants
(a) General
(b) Notices and Consents
(c) Operation of Business
(d) Preservation of Business
(e) Full Access
(f) Notice of Developments
(g) Exclusivity
6. Post-Closing Covenants
(a) General
(b) Litigation Support
(c) Transition
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(d) Confidentiality
(e) Sellers' Access to Information After the Closing
7. Conditions to Obligation to Close
(a) Conditions to Obligation of the Buyer
(b) Conditions to Obligation of the Sellers
8. Indemnification
(a) Indemnification by Sellers
(b) Indemnification by Buyer
(c) Environmental Indemnification
(d) Indemnification Procedures
(e) Disclosure of Knowledge of Incorrect Representations
(f) Survival of Representations and Warranties
(g) Exclusion of Other Representations
(h) Limitation and Conditions Applicable to Buyer
(i) Limitations Applicable to all Parties
(j) Remedies Exclusive
(k) Adjustment to Purchase Price
9. Tax Matters
(a) Section 33(h)(10) Election
(b) Tax Periods Ending on or Before the Closing Date
(c) Tax Periods Beginning Before and Ending After the Closing Date
(d) Cooperation on Tax Matters
(e) Tax Sharing Agreements
(f) Certain Taxes
(g) Allocation of Purchase Price
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10. Termination
(a) Termination of Agreement
(b) Effect of Termination
11. Miscellaneous
(a) Nature of Certain Obligations
(b) Press Releases and Public Announcements
(c) No Third-Party Beneficiaries
(d) Entire Agreement
(e) Succession and Assignment
(f) Counterparts and Facsimiles
(g) Headings
(h) Notices
(i) Governing Law
(j) Amendments and Waivers
(k) Severability
(l) Expenses
(m) Construction
(n) Incorporation of Exhibits, Annexes, and Schedules
(o) Paying Agent
(p) Specific Performance
(q) Submission to Jurisdiction
Exhibit A - List of Equipment to be Purchased by Target
Exhibit B - March 31, 1997 Balance Sheet
Exhibit C-1 and C-2 - Sales Representation Agreements
Exhibit D - Individuals to be Hired
Exhibit E - Form of Opinion of Counsel to the Buyer
Exhibit F - Form of Opinion of Counsel to the Sellers
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Exhibits G-1 to G-5 - Real Estate Leases
Exhibit G-6 - Real Property Sublease
Exhibit H - James Narens Employment Agreement
Exhibit I - Form Employment Agreement for Individuals listed on Exhibit D
Disclosure Schedule - Exceptions to Representations and Warranties Concerning
the Target
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EXECUTION DRAFT
9/30/97
STOCK PURCHASE AGREEMENT
This Agreement is entered into as of September 30, 1997, by and among LDM
Technologies, Inc, a Michigan corporation (the "Buyer"), the parties indicated
as "Stockholders" on the signature pages of this Agreement (individually a
"Seller" and collectively the "Sellers"), and Narens Design & Engineering Co.,
a Michigan corporation ("NDE"). The Buyer, the Sellers and NDE are referred to
collectively herein as the "Parties."
RECITALS:
A. The Sellers in the aggregate own all of the outstanding capital stock of
Kenco Plastics, Inc., a Michigan corporation ("Kenco Michigan"), and of
Kenco Plastics, Inc., a Kentucky corporation ("Kenco Kentucky")
(collectively the "Target").
B. This Agreement contemplates a transaction in which (i) the Buyer will
purchase from the Sellers, and the Sellers will sell to the Buyer, all of
the outstanding capital stock of the Target in return for cash, and (ii)
the Buyer will purchase from NDE, and NDE will sell to the Buyer,
substantially all of NDE's operating assets in return for cash.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages,
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dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees, including court costs
and reasonable attorneys' fees and expenses. Notwithstanding the foregoing
definition, when used with reference to amounts recoverable as the result of
any breach of a representation, warranty or covenant contained in this
Agreement or any other document or agreement to be delivered hereunder,
"Adverse Consequences" shall not include amounts recoverable solely as lost
profits or punitive damages.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of
state, local or foreign law.
"Buyer" has the meaning set forth in the preface above.
"Cleanup Activity" means any environmental site assessment, study,
analytical work, cure, fines, penalties or costs associated with any consent
decree or administrative order, investigation, remediation, monitoring, or
other action related to Hazardous Substances or Hazardous Materials required
under the Environmental, Health, and Safety Requirements.
"Closing" has the meaning set forth in Section 2(c) below.
"Closing Date" has the meaning set forth in Section 2(c) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means any information concerning the businesses
and affairs of the Target that is not already generally available to the
public.
"Controlled Group of Corporations" has the meaning set forth in Code
Section 1563.
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"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan,
(b) qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(1).
"Environmental, Health, and Safety Requirements" shall mean all applicable
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all applicable judicial and
administrative orders and determinations, and all contractual obligations of or
relating to Target concerning public health and safety, worker health and
safety, and pollution or protection of the environment, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or
cleanup of any hazardous materials, substances or wastes, chemical substances
or mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or
radiation, each as amended and as now in effect.
"Environmental Liabilities" means any and all Adverse Consequences,
including but not limited to reasonable legal, accounting, consulting,
engineering and other expenses, arising out of, relating to, or resulting from,
the presence, generation, use, handling, transport, recycling, reclamation,
disposal, treatment, storage, or Release of any Hazardous Substances or
Hazardous Materials or the failure or alleged failure to comply with any
Environmental, Health, and Safety Requirements.
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"Equipment" means the new equipment as shown on Exhibit A to be purchased
by the Target and proposed to be financed through Banc One.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Debt" means any interest bearing debt of the Target other than
amounts due in the future attributable to equipment leases or for the purchase
of Equipment.
"Financial Statement" has the meaning set forth in Section 4(g) below.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Hazardous Substances" or "Hazardous Materials" include (i) oil or other
petroleum products, (ii) "hazardous wastes" as defined by the Resource
Conservation and Recovery Act ("RCRA"), as amended, 42 U.S.C. Section 6901 et
seq., or any similar applicable state or local law, regulation, ordinance, or
order, (iii) "hazardous substances" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), as amended,
42 U.S.C. Section 9601 et seq., or any similar applicable state or local law,
regulation, ordinance, or order, and (iv) any other pollutant, contaminant,
chemical, or substance defined or regulated as of the Closing Date as hazardous
or toxic by any applicable Environmental, Health, and Safety Requirements.
"Indemnitor" has the meaning set forth in Section 8(d) below.
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"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
trade secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies
and tangible embodiments thereof (in whatever form or medium).
"Knowledge" of a Person means actual knowledge of such Person after
reasonable investigation, or, in the case of a corporation, of the officers of
such corporation, after reasonable investigation.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Material Adverse Effect" means, with respect to a Person, an effect which
(i) has any adverse effect on such Person's results of operations or financial
condition, or (ii) adversely affects such Person's ability to consummate the
transactions contemplated by this Agreement.
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
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"Most Recent Financial Statements" has the meaning set forth in Section
4(g) below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 4(g)
below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 4(g)
below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity
and frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Real Property" means all real property and interests in real property
directly or indirectly owned in fee or leased by Target or NDE that primarily
relate to or are used primarily in connection with Target's business.
"Release" includes any and all migration (which originates at any of the
Real Property), releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing, or dumping, of
any Hazardous Substances or Hazardous Materials.
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"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Requisite Sellers" means all of the Sellers holding an interest in the
Target Shares as set forth in Section 4(b) of the Disclosure Schedule.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanics', materialmens', and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business
and not incurred in connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Target" has the meaning set forth in the preface above.
"Target Share" means any share of the common stock of the Target.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property,
sales, use,
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transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d) below.
2. Purchase and Sale of Target Shares.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, the Buyer agrees to purchase, for the consideration specified below
in this Section, the following: (i) from each of the Sellers, and each of the
Sellers agrees to sell to the Buyer, all of his or its Target Shares, and (ii)
from NDE, and NDE agrees to sell to the Buyer, the assets listed in Section
2(a) of the Disclosure Schedule.
(b) Purchase Price. The Buyer agrees to pay to the Sellers at the Closing
Twenty-Seven Million Five Hundred Thousand and no/100 Dollars ($27,500,000)
(the "Purchase Price") by delivery of cash payable by wire transfer or delivery
of other immediately available funds. The portions of the Purchase Price that
shall be allocated to NDE is $1,900,000 (the "NDE Price") and to the Target
Shares is $25,600,000 (the "Target Price"). The Target Price shall be
allocated among the Sellers in proportion to their respective holdings of
Target Shares as set forth in Section 4(b) of the Disclosure Schedule. The
Parties agree that (i) the Target will use its cash to pay all of its Financial
Debt prior to Closing, and (ii) the Target will distribute all cash in excess
of Five Hundred Thousand and no/100 Dollars ($500,000.00) after payment of all
Financial Debt to Target's shareholders prior to Closing. The Purchase Price
is based on the March 31, 1997 balance sheet prepared by Target, a copy of
which is attached hereto as Exhibit B. The Target Purchase Price will be
subject to adjustment, either upwards or downwards, on a dollar-for-dollar
basis, based on the following steps and procedures:
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(i) The net book value of Target on March 31, 1997 has been
determined to be $19,164,667.
(ii) It shall be adjusted by applying cash to all Financial Debt.
Financial Debt on March 31, 1997 was (1,120,611 + 782,259) = $1,902,870.
This adjustment shall have no effect on net book value.
(iii) After the application of cash to retire Financial Debt the
cash balance would be(3,497,227 - 1,902,870) = $1,594,357. The net book
value would then be reduced by all cash in excess of $500,000. This
would reduce the net book value by $1,094,357 leaving an adjusted pro
forma book value of (19,164,667 - 1,094,357) = $18,070,310.
(iv) This revised book value of $18,070,310 will then be compared to
the closing balance sheet net book value adjusted exactly as in steps
(i), (ii) and (iii) above to determine whether it is more or less than
$18,070,310. The Target Purchase Price of $25,600,000 shall be adjusted
upward if the closing balance sheet net book value as adjusted shall
exceed $18,070,310, and correspondingly reduced if it shall be less than
$18,070,310.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Seller's counsel
in Detroit, Michigan, commencing at 10:00 a.m. local time on September 30,
1997, subject to the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as the Buyer and the Requisite
Sellers may mutually determine (the "Closing Date"). The Closing shall be
effective as of the close of business on the Closing Date.
(d) Deliveries at the Closing. At the Closing, (i) the Sellers will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the Sellers
the various certificates, instruments, and documents referred to in Section
7(b) below, (iii) each of the Sellers will deliver to the Buyer stock
certificates representing all of his or its Target Shares,
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endorsed in blank or accompanied by duly executed assignment documents, and
(iv) the Buyer will deliver to the Paying Agent, on behalf of NDE and each of
the Sellers, the consideration specified in Section 2(b) above.
(e) Determination of Closing Balance Sheet Net Book Value.
(i) Within thirty (30) days after the Closing Date, Sellers shall deliver
to Buyer a balance sheet of the Target as of the Closing Date (the "Closing
Date Balance Sheet"), which balance sheet shall be prepared in accordance with
GAAP and accounting principles applied on a basis consistent with those
historically employed by the Target, but after giving effect to the repayment
of Financial Debt and the distribution of excess cash contemplated in Section
2(b) above. Buyer shall cause the Target to permit Sellers to use the
employees of the Target, and to grant Sellers and its representatives
reasonable access to the books and records of the Target, to enable Sellers to
prepare the Closing Date Balance Sheet. The Closing Date Balance Sheet so
presented by the Sellers shall reflect the closing balance sheet net book value
and adjustment to the Purchase Price, as contemplated under Section 2(b)(iv)
above.
(ii) Within 45 days after Buyer's receipt of the Closing Date Balance
Sheet, Buyer shall cause its independent public accountants, Ernst & Young LLP
("EY"), to audit the Closing Date Balance Sheet and to deliver to Sellers and
Buyer an audit report thereon (the "Audit Report"); such audit shall be
conducted in accordance with generally accepted auditing standards and the
financial statements shall be prepared in accordance with generally accepted
accounting principles applied on a basis consistent with those historically
employed by the Target and after giving effect to the repayment of Financial
Debt and the distribution of excess cash as contemplated in Section 2(b) above.
Sellers shall have 15 business days after receipt of the Audit Report to
review such Audit Report. To facilitate such review, Buyer shall cause EY to
provide access to its work papers and other information, and to provide
reasonable cooperation, to Sellers and Seller's representatives.
(iii) In the event Sellers do not provide written objection to Buyer
pursuant to which they shall have disputed any portion of the Audit Report
within 15 business days after their receipt thereof, or if Sellers shall have
given Buyer written acceptance of the Audit Report prior to the expiration of
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such 15 business day period, then, in either of such event, the Purchase Price
shall be adjusted in accordance with clause (v) below.
(iv) In the event Sellers provide written objection to Buyer to the Audit
Report within 15 business days of their receipt thereof, which objection shall
specify in reasonable detail the nature of the dispute, (A) the Purchase Price
shall be adjusted in accordance with clause (v) below to the extent of the
undisputed amount shown to be owing pursuant to the Audit Report and (B) the
Parties shall use their best efforts to attempt to resolve the disputed portion
of the Audit Report. If any such dispute cannot be resolved within 15 business
days after Buyer's receipt of Seller's written objection, the dispute shall be
referred to an independent firm of certified public accounts (or, if Buyer and
Sellers cannot agree on a firm to serve in such capacity, Buyer and Sellers
shall each select a firm and such firms shall, together, select a third firm)
(the "Arbitrator"), which shall act as an arbitrator and shall issue its report
as to the disputed information within sixty (60) days after such dispute is
referred to the Arbitrator. Each of the parties hereto shall bear all costs
and expenses incurred by it in connection with such arbitration, except that
the fees and expenses of the Arbitrator hereunder shall be borne equally by
Sellers and Buyer. This provision for arbitration shall be specifically
enforceable by the Parties, and the decision of the Arbitrator in accordance
with the provisions hereof shall be final and binding and there shall be no
right of appeal therefrom.
(v) Any adjustment to the Purchase Price determined pursuant to the
foregoing, shall be paid by the appropriate Party within five (5) business days
after Sellers' acceptance of the Audit Report or the resolution of any dispute
with respect thereto (whether by the Parties or the Arbitrator), together with
interest thereon from the Closing Date to the date of payment at the per annum
rate equal to the rate announced by NBD Bank as its prime rate as of the close
of business on the Closing Date. Such payment shall be made by bank wire
transfer of immediately available funds to an account designated by Buyer or
the Paying Agent, as the case may be, prior to the date of payment.
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3. Representations and Warranties Concerning the Transaction.
(a) Representations and Warranties of the Sellers and NDE. Each of the
Sellers and NDE represents and warrants to the Buyer that the statements
contained in this Section 3(a) are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3(a)) with respect to himself or itself.
(i) Organization of NDE. NDE is duly organized, validly existing,
and in good standing under the laws of the State of Michigan.
(ii) Authorization of Transaction. The Sellers and NDE have full
power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform his or its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of the Sellers, and NDE, enforceable in accordance with its
terms and conditions. The Sellers and/or NDE need not give any notice
to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate
the transactions contemplated by this Agreement, except as required under
the Hart-Scott-Rodino Act.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which such Seller or
NDE is subject or any provision of its charter or bylaws, or (B) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which such Seller or
NDE is a party or by which he or it is bound or to which any of his or
its assets is subject, except for any such event which would not
reasonably be expected to result in a Material Adverse Effect.
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<PAGE> 19
(iv) Brokers' Fees. Neither the Seller nor NDE has any Liability or
obligate to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(v) Target Shares. Such Seller holds of record and owns
beneficially the number of Target Shares set forth next to his or its
name in Section 4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities,
claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the
Seller to sell, transfer, or otherwise dispose of any capital stock of
the Target (other than this Agreement). The Seller is not a party to any
voting trust, proxy, or other agreement or understanding with respect to
the voting of any capital stock of the Target. The Persons indicated as
"Stockholders" on the signature pages of this Agreement own all of the
outstanding stock of the Target.
(b) Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Sellers and to NDE that the statements contained in this
Section 3(b) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3 (b)).
(i) Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
state of Michigan. The Buyer is duly authorized to conduct business and
is in good standing under the laws of each jurisdiction where such
qualification is required.
(ii) Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding
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<PAGE> 20
obligation of the Buyer, enforceable in accordance with its terms and
conditions. The Buyer need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated
by this Agreement, except as required under the Hart-Scott-Rodino Act.
(iii) Noncontravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws, or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject,
except for any such event which would not reasonably be expected to
result in a Material Adverse Effect.
(iv) Brokers' Fees. The Buyer has no Liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller
could become liable or obligated.
(v) Investment. The Buyer is not acquiring the Target Shares with a
view to or for sale in connection with any distribution thereof within
the meaning of the Securities Act. The Buyer acknowledges that it has
received, or has had access to, all information which it considers
necessary or advisable to enable it to make a decision concerning its
purchase of the Target Shares, and possesses such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment hereunder. The Buyer
acknowledges that Seller has advised it that, in connection with this
transaction, the Target Shares have not been registered under the
Securities Act of 1933, as amended, or the securities act of any state.
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<PAGE> 21
4. Representations and Warranties Concerning the Target. The Sellers
represent and warrant to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing, Date were substituted for the date of this Agreement throughout
this Section 4), except as set forth in the disclosure schedule delivered by
the Sellers to the Buyer on the date hereof and initialed by the Parties (the
"Disclosure Schedule"). Nothing in the Disclosure Schedule shall be deemed
adequate to disclose an exception to a representation or warranty made herein,
however, unless the Disclosure Schedule identifies the exception with
particularity and describes the relevant facts in detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 4.
(a) Organization, Qualification, and Corporate Power. Each of the Target
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. Each of the Target is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Each of the Target has full
corporate power and authority and all licenses, permits, and authorizations
necessary to carry on the businesses in which it is engaged and in which it
presently proposes to engage and to own and use the properties owned and used
by it, Section 4(a) of the Disclosure Schedule lists the directors and officers
of each of the Target. The Sellers have delivered to the Buyer correct and
complete copies of the charter and bylaws of each of the Target (as amended to
date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of each of
the Target are correct and complete. None of the Target is in default under or
in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of Kenco Michigan
consists of 10,000 shares of common stock, of which 10,000 shares are issued
and outstanding. The entire
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authorized capital stock of Kenco Kentucky consists of 10,000 shares of common
stock, of which 10,000 shares are issued and outstanding. All of the issued
and outstanding Target Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective Sellers
as set forth in Section 4(b) of the Disclosure Schedule. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Target. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
the Target.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of the Target is subject or any
provision of the charter or bylaws of any of the Target, or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which any of the Target is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except for any
such event which would not reasonably be expected to result in a Material
Adverse Effect. None of the Target needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except as required under the
Hart-Scott-Rodino Act.
(d) Brokers' Fees. None of the Target has any Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement. Sellers will be solely
responsible for any fees payable to their investment advisor, Donaldson, Lufkin
& Jenrette Securities Corporation.
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<PAGE> 23
(e) Title to Assets. The Target has good and marketable title to, or a
valid leasehold interest in, the personal properties and assets used by them,
located on their premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Balance Sheet. Title matters relating to the
Real Property and the Target's leasehold interest therein shall be governed by
Section 4(l) of this Agreement.
(f) Subsidiaries. There are no Subsidiaries of the Target.
(g) Financial Statements. Target has previously delivered to the Buyer
the following financial statements (collectively the "Financial Statements"):
(i) audited balance sheets and statements of income, changes in stockholders'
equity, and cash flow as of and for the fiscal years ended December 31, 1994,
December 31, 1995, and December 31, 1996 (the "Most Recent Fiscal Year End")
for the Target; and (ii) unaudited combined balance sheets and statements of
income, changes in stockholders' equity, and cash flow (the "Most Recent
Financial Statements") as of and for the six months ended June 30, 1997 (the
"Most Recent Fiscal Month End") for the Target. The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, present
fairly in all material respects the financial condition of the Target as of
such dates and the results of operations of the Target for such periods, and
are consistent with the books and records of the Target (which books and
records are correct and complete in all material respects).
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, or results of operations of any of
the Target. Without limiting the generality of the' foregoing, since that
date:
(i) none of the Target has sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
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(ii) excluding purchase orders for raw materials, none of the Target
has entered into any agreement, contract, lease for personal property, or
license (or series of related agreements, contracts, leases, and
licenses) either involving more than $25,000 or outside the Ordinary
Course of Business;
(iii) no party (including any of the Target and its Subsidiaries)
has accelerated, terminated, modified, or canceled any agreement,
contract, lease, or license (or series of related agreements, contracts,
leases, and licenses) involving more than $250,000 to which any of the
Target is a party or by which any of them is bound;
(iv) none of the Target has imposed any Security Interest upon any
of its assets, tangible or intangible;
(v) none of the Target has made any capital expenditure (or series
of related capital expenditures) either involving more than $50,000 in
the aggregate or outside the Ordinary Course of Business (other than with
regard to the Equipment and Novatec dryer to be installed in the Corunna,
Michigan plant, with respect to which approximately $59,000 remains
outstanding);
(vi) none of the Target has made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions);
(vii) none of the Target has issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or capitalized lease obligation either involving more
than $250,000 singly or $500,000 in the aggregate;
(viii) none of the Target has delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
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<PAGE> 25
(ix) none of the Target has canceled, compromised, waived, or
released any right or claim (or series of related rights and claims);
(x) none of the Target has granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of any of the Target;
(xii) none of the Target has issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) none of the Target has declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock other than (A) distributions to cover
the Seller's Subchapter S corporation income tax liabilities with respect
to the Target's operations, and (B) as contemplated in Section 2(b)
above;
(xiv) none of the Target has experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property having a net
book value in excess of $250,000;
(xv) none of the Target has made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) none of the Target has entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms
of any existing such contract or agreement;
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(xvii) none of the Target has granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business (other than increases consistent with past
practice);
(xviii) none of the Target has adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(xix) none of the Target has made any other change in employment
terms for any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xx) none of the Target has made or pledged to make any charitable
or other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving any of the Target which would reasonably be expected
to result in a Material Adverse Effect; and
(xxii) none of the Target has committed to any of the foregoing.
(i) Undisclosed Liabilities. None of the Target has any undisclosed
Liability which is required to be reflected in the Financial Statements in
accordance with GAAP, except for Liabilities which have arisen after the Most
Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
(j) Legal Compliance. To the Knowledge of the Sellers, since January 1,
1995, (i) each of the Target has complied in all material respects with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder)
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of federal, state, local, and foreign governments (and all agencies thereof),
and (ii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced by any
governmental agency and remains outstanding against any of them alleging any
failure so to comply; provided that the foregoing shall not apply to those laws
covered under Sections 4(k), (x) or (z) hereof.
(k) Tax Matters. To the Knowledge of Sellers (except that the
representations and warranties set forth in clause (vii) of this Section will
not be so qualified), and except as set forth in Section 4(k) of the Disclosure
Schedule:
(i) Each of the Target has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by any of the Target (whether or not
shown on any Tax Return) have been paid, except where the failure to file
such Tax Returns or to pay such Taxes would not reasonably be expected to
result in a Material Adverse Effect. None of the Target currently is the
beneficiary of any extension of time within which to file any Tax Return.
No material claim has ever been made by an authority in a jurisdiction
where any of the Target does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of any of the Target that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) Each of the Target has withheld and paid all material Taxes
required to have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor, stockholder,
or other third party.
(iii) There is no pending dispute or claim concerning any Tax
Liability of any of the Target either (A) claimed or raised by any
authority in writing, or (B) as to which any of the Sellers has Knowledge
based upon personal contact with any agent of such authority.
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Section 4(k)(iii) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to any of the
Target for taxable periods ended on or after December 31, 1994, indicates
those Tax Returns that have been audited, and indicates those Tax Returns
that currently are the subject of audit. The Sellers have delivered to
the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by any of the Target from and after 1994.
(iv) None of the Target has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) None of the Target has filed a consent under Code Section 341(f)
concerning collapsible corporations. None of the Target has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Code Section 280G. No
withholding is required under Code Section 1445(a). None of the Target
is a party to any Tax allocation or sharing agreement. None of the
Target (A) has been a member of an Affiliated Group filing a consolidated
federal income Tax Return (other than a group the common parent of which
was the Target), or (B) has any Liability for the Taxes of any Person
(other than any of the Target) under Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) [RESERVED]
(vii) The Target has been a validly electing S corporation within
the meaning of Code Section 1361 at all times since January 1, 1987 and
Target will be an S corporation up to and including the Closing Date.
(l) Real Property.
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(i) Section 4(l)(i) of the Disclosure Schedule lists and describes
briefly all Real Property utilized by the Target and/or owned or leased
or subleased from KVYN Realty Limited Partnership, an affiliate of
certain of the Sellers ("KVYN"). Except for Target's corporate offices
located on premises leased by Narens Associates, Inc., no other Real
Property utilized by the Target is owned or leased by any of the Sellers
or affiliates of any of the Sellers. With respect to each such parcel of
owned Real Property:
(A) the Sellers have delivered to the Buyer a complete copy of
the title policy or other title work with regard to such Real
Property in the possession of KVYN or any of the Sellers (the
"Title Work");
(B) KVYN is the owner of such Real Property and is not aware
of any material encumbrance or other title defect to such Real
Property other than as disclosed on the applicable Title Work;
(C) to the Knowledge of the Sellers, the legal description for
the parcel contained in the deed thereof describes such parcel
fully and adequately, the buildings and improvements are located
within the boundary lines of the described parcels of land, are not
in violation of applicable setback requirements, zoning laws, and
ordinances (and none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), and do not encroach on
any easement which may burden the land, and the land does not serve
any adjoining property for any purpose inconsistent with the use of
the land, and the property is not located within any flood plain or
subject to any similar type restriction for which any permits or
licenses necessary to the use thereof have not been obtained;
(D) to the Knowledge of the Sellers, all facilities have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the ownership or
operation thereof and are being operated and
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maintained in all material respects in accordance with applicable
laws, rules, and regulations;
(E) there are no leases, subleases or licenses, written or to
the Knowledge of the Sellers, oral, granting to any party or
parties the right of use or occupancy of any portion of the parcel
of Real Property, other than leases in favor of the Target and
easements, user rights or other interests shown on the applicable
Title Work;
(F) there are no outstanding options or rights of first
refusal to purchase the parcel of Real Property, or any portion
thereof or interest therein;
(G) there are no parties (other than the Target) in possession
of the parcel of Real Property, other than tenants under any
leases disclosed in Section 4(l)(i) of the Disclosure Schedule who
are in possession of space to which they are entitled; and
(H) all facilities located on the parcel of Real Property are
supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer or septic tank/sewer, and storm sewer,
and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefitting the parcel of Real Property.
(ii) Section 4(l)(ii) of the Disclosure Schedule lists all
agreements pursuant to which any of the Real Property is leased or
subleased to any of NDE or the Target. All of such agreements will be
terminated as of the Closing Date and replaced by those leases and
sublease to be executed pursuant to Section Section 7(a)(xv) and
7(b)(ix).
(m) Intellectual Property.
(i) Each of the Target own or have the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of
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the businesses of the Target as presently conducted. Each item of
Intellectual Property owned or used by any of the Target immediately
prior to the Closing hereunder will be owned or available for use by the
Target on identical terms and conditions immediately subsequent to the
Closing hereunder.
(ii) To the Knowledge of the Sellers, none of the Target has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and none
of the Target has ever received any written charge, complaint, claim,
demand or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that any of the
Target must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of any of the Sellers, no
third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of any
of the Target.
(iii) No patent or trademark registration has been issued to any of
the Target with respect to any of its Intellectual Property, nor is there
any pending patent application or application for trademark registration
made by any of the Target with respect to any of its Intellectual
Property or license, agreement, or other permission which any of the
Target has granted to any third party with respect to any of its
Intellectual Property. Section 4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by any of the
Target in connection with any of its businesses.
(iv) Other than commercial off-the-shelf software, Target does not
use any item of Intellectual Property that any third party owns pursuant
to license, sublicense, agreement, or permission.
(v) To the Knowledge of any of the Sellers, none of the Target will
interfere with, infringe upon, misappropriate, or otherwise come into
conflict with, any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as presently
conducted.
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(n) Tangible Assets. Each of the Target owns or leases all buildings,
machinery, equipment, and other tangible assets necessary for the conduct of
their businesses as presently conducted. Each such tangible asset is free from
material defects (patent and latent), has been maintained in accordance with
normal industry practice, and is in good operating condition and repair
(subject to normal wear and tear).
(o) Inventory. The inventory of the Target consists of raw materials and
supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and no material portion of which is slow-moving,
obsolete, damaged, or defective, subject only to the reserve for inventory
write down set forth on the face of the Most Recent Balance Sheet (rather than
in any notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of the Target.
(p) Contracts. Section 4(p) of the Disclosure Schedule lists the
following contracts and other agreements to which any of the Target is a party
and which is currently in effect:
(i) any agreement (or group of related agreements) for the lease of
personal property to or from any Person;
(ii) any agreement (or group of related agreements) for the purchase
of raw materials, commodities, supplies, products, or other personal
property, the performance of which will extend over a period of more than
one year;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or under which it has imposed a Security Interest on any
of its assets, tangible or intangible;
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<PAGE> 33
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers and their Affiliates
(other than the Target);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $50,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could reasonably be expected to result in a Material Adverse
Effect; or
(xii) any other agreement (or group of related agreements).
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4(p) of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4(p) of the Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to
be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) to the Knowledge of the Sellers, (x) no party is in breach or
default in any material
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respect, and (y) no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated in
writing any provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
the Target are reflected properly on their books and records, are valid
receivables and, to the Knowledge of the Sellers, subject to no setoffs or
counterclaims, and are current and collectible in the ordinary course of
business.
(r) Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of any of the Target.
(s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which any of the Target is currently a named
insured or otherwise the beneficiary of coverage:
(i) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(ii) the policy number and the period of coverage;
(iii) the scope (including an indication of whether the coverage was
on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate)
of coverage; and
(iv) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
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With respect to each such insurance policy (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby; (C) to the Knowledge of the Sellers, (x) neither any of the Target nor
any other party to the policy is in breach or default in any material respect
(including with respect to the payment of premiums or the giving of notices),
and (y) no event has occurred which, with notice or the lapse of time, would
constitute such a material breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
has repudiated in writing any provision thereof. Each of the Target has been
covered since January 1, 1995 by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Section 4(s) of the Disclosure Schedule describes any self-insurance
arrangements affecting any of the Target.
(t) Litigation. Section 4(t) of the Disclosure Schedule sets forth each
instance in which any of the Target (i) is subject to any outstanding
injunction, judgment, order, decree or ruling of any court or administrative
agency, or (ii) is a party or, to the Knowledge of any of the Sellers, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in Section 4(t) of the Disclosure Schedule would
reasonably be expected to result in a Material Adverse Effect.
(u) Product Warranty. Each product manufactured, sold, leased, or
delivered by any of the Target has been manufactured by Target in conformity in
all material respects with all applicable contractual commitments and all
express and implied warranties, and, to the knowledge of the Sellers, none of
the Target has any material Liability for replacement or repair thereof or
other damages in connection therewith, other than in accordance with Target's
standard terms and conditions and subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Target. No
product manufactured, sold, leased, or delivered by any of the Target is
subject to any guaranty, warranty,
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or other indemnity from Target beyond the applicable standard terms and
conditions of sale or lease. Section 4(u) of the Disclosure Schedule includes
copies of the standard terms and conditions of sale or lease for each of the
Target (containing applicable guaranty, warranty, and indemnity provisions).
(v) Product Liability. To the Knowledge of the Sellers, none of the
Target has any material Liability arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by any of the Target.
(w) Employees. To the Knowledge of any of the Sellers, no executive, key
employee, or group of employees has any plans to terminate employment with any
of the Target. None of the Target is a party to or bound by any collective
bargaining agreement, nor since January 1, 1995 has any of them experienced any
strikes, open union grievances, open claims of unfair labor practices, or other
collective bargaining disputes. None of the Sellers of the Target has any
Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of any of the Target.
(x) Employee Benefits.
(i) Section 4(x) of the Disclosure Schedule lists each Employee
Benefit Plan that any of the Target maintains or to which any of the
Target contributes.
(A) To the Knowledge of Sellers, each such Employee Benefit
Plan (and each related trust, insurance contract, or fund) complies
in all material respects in form and in operation in all respects
with the applicable requirements of ERISA, the Code, and other
applicable laws.
(B) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of
Part 6 of Subtitle B of Title I of ERISA and of Code Section 4980B
have
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been met in all material respects with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee
Pension Benefit Plan and all contributions for any period ending on
or before the Closing Date which are not yet due have been paid to
each such Employee Pension Benefit Plan or accrued in accordance
with the past custom and practice of the Target. All premiums or
other payments for all periods ending on or before the Closing Date
have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan. All non-qualified
Employee Benefit Plans have been funded as described in Section
4(x) of the Disclosure Schedule.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code Section 401(a) and has received, within the last five
years, a favorable determination letter from the Internal Revenue
Service.
(E) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from
the Internal Revenue Service, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit
Plan.
(ii) There is no Employee Pension Benefit Plan (including any
Multiemployer Plan) that any of the Target or the Controlled Group of
Corporations which includes the Target maintains or ever has maintained
or to which any of them contributes, ever has contributed, or ever has
been required to contribute, which is or was subject to Title IV of
ERISA.
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(iii) There have been no Prohibited Transactions with respect to any
Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation
with respect to the administration or the investment of the assets of any
such Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the Knowledge of any of the Sellers, threatened.
(iv) None of the Target maintains or ever has maintained or
contributes, ever has contributed, or ever has been required to
contribute to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code Section 4980B).
(y) Guaranties. None of the Target is a guarantor or otherwise is liable
for any Liability or obligation (including indebtedness) of any other Person.
(z) Environmental, Health, and Safety Matters. To the Knowledge of
Sellers, except as disclosed in the Disclosure Schedule or the Phase I
Environmental Site Assessments (draft 9/19/97 or 9/24/97) prepared for Buyer by
IT Corporation with respect to the Target's facilities:
(i) Each of the Target is in compliance in all material respects
with all Environmental, Health, and Safety Requirements.
(ii) Without limiting the generality of the foregoing, each of the
Target has obtained and is in compliance in all material respects with,
all permits, licenses and other authorizations that are required pursuant
to Environmental, Health, and Safety Requirements for the occupation of
its facilities and the operation of its business where the failure to so
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obtain such license, permit or authorization would reasonably be expected
to result in a Material Adverse Effect; a list of all such permits,
licenses and other authorizations is set forth on the attached
"Environmental and Safety Permits Schedule."
(iii) The Target has received no written notice, report or other
information regarding any actual or alleged violation by Target of
Environmental, Health, and Safety Requirements, or any liabilities or
potential liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to the Target or its facilities arising
under Environmental, Health, and Safety Requirements, where such actual
or alleged violation or actual or potential liability would reasonably be
expected to result in a Material Adverse Effect.
(iv) None of the following exists at any property or facility owned
or operated by the Target: (1) underground storage tanks, (2) friable
asbestos-containing material, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface impoundments, or
waste disposal areas regulated under Environmental, Health and Safety
Requirements.
(v) Since January 1, 1995, none of the Target has treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any
Hazardous Substance, or owned or operated any property or facility (and
no such property or facility is contaminated by any such substance) in a
manner that has given rise to liabilities which would reasonably be
expected to result in a Material Adverse Effect, including any such
liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended
("SWDA") or any other Environmental, Health, and Safety Requirements.
For the purpose of this clause (v), the term "Knowledge" shall also
include any activity in which any of Sellers participated.
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(vi) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations
imposed on the Target, which would reasonably be expected to result in a
Material Adverse Effect, for site investigation or cleanup, or
notification to or consent of government agencies or third parties,
pursuant to any of the so-called "transaction-triggered" or "responsible
property transfer" Environmental, Health, and Safety Requirements.
(vii) Since January 1, 1995, none of the Target has, either
expressly or by operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective or remedial
action, of any other Person relating to Environmental, Health, and Safety
Requirements which would reasonably be expected to result in a Material
Adverse Effect. For the purpose of this clause (vii), the term
"Knowledge" shall also include any activity in which any of Sellers
participated.
(viii) Excluding the impact of any future change in the operations
of the Target, no facts, events or conditions relating to the past or
present facilities, properties or operations of the Target or any of
their respective predecessors or Affiliates would reasonably be expected
to prevent, hinder or limit continued compliance by the Target with
Environmental, Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite releases
or threatened releases of hazardous materials, substances or wastes,
personal injury, property damage or natural resources damage.
(aa) Certain Business Relationships with the Target. None of the Sellers
and their Affiliates has been involved in any business arrangement or
relationship with any of the Target within the past 12 months, and none of the
Sellers and their Affiliates owns any asset, tangible or intangible, which is
used in the business of any of the Target.
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(bb) Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading in any material respect.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing or
termination of this Agreement:
(a) General. Each of the Parties will use his or its best efforts,
reasonable under the circumstances, to take all action and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the Closing conditions set forth in Section 7 below).
(b) Notices and Consents. The Sellers will cause each of the Target to
give any notices to third parties, and will cause each of the Target to use its
best efforts, reasonable under the circumstances, to obtain any third party
consents, that the Buyer may reasonably request in connection with the matters
referred to in Section 4(c) above. Each of the Parties will (and the Sellers
will cause each of the Target to) give any notices to, make any filings with,
and use its best efforts, reasonable under the circumstances, to obtain any
authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in Section 3(a)(ii),
Section 3(b)(ii), and Section 4(c) above. Without limiting the generality of
the foregoing, each of the Parties will file (and the Sellers will cause each
of the Target to file) any Notification and Report Forms and related material
that he or it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use his or its best efforts, reasonable under the
circumstances, to obtain (and the Sellers will cause each of the Target to use
its best efforts, reasonable under the circumstances, to obtain) an early
termination of the applicable waiting period, and will make (and the Sellers
will cause each of the Target to make) any further filings pursuant thereto
that may be necessary, proper, or advisable in connection therewith.
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(c) Operation of Business. The Sellers will not cause or permit any of
the Target to engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, the Sellers will not cause or permit any of the
Target to (i) declare, set aside, or pay any dividend or make any distribution
with respect to its capital stock or redeem, purchase, or otherwise acquire any
of its capital stock except as otherwise contemplated under this Agreement, or
(ii) otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in Section 4(h) above.
(d) Preservation of Business. The Sellers will cause each of the Target
to use its best efforts to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, and relationships with lessors, licensors, suppliers, customers,
and employees.
(e) Full Access. Each of the Sellers will permit, and the Sellers will
cause each of the Target to permit, representatives of the Buyer to have full
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Target, to all premises, properties,
personnel, books, records (including Tax records), contracts, and documents of
or pertaining to each of the Target.
(f) Notice of Developments. The Sellers will give prompt written notice
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in Section 4 above. Each Party will give prompt
written notice to the others of any material adverse development causing a
breach of any of his or its own representations and warranties in Section 3
above. No disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement Annex I, Annex II, or the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant; provided that if the other Party shall consummate the
transaction contemplated under this Agreement notwithstanding any disclosure by
the disclosing Party or Parties under this Section 5(f), upon such consummation
the other Party shall be deemed to have waived any right, remedy or other claim
it may otherwise have had on account of any matter so disclosed under this
Section 5(f).
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(g) Exclusivity. None of the Sellers will (and the Sellers will not cause
or permit any of the Target to) (i) solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the acquisition
of any capital stock or other voting securities, or any substantial portion of
the assets, of any of the Target (including any acquisition structured as a
merger, consolidation, or share exchange), or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. None of the Sellers
will vote their Target Shares in favor of any such acquisition structured as a
merger, consolidation, or share exchange. The Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing.
6. Post-Closing Covenants. The Parties agree as follows with respect to
the period following the Closing.
(a) General. In case at any time after the Closing any further action is
necessary or reasonably desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor
under Section 8 below). The Sellers acknowledge and agree that from and after
the Closing the Buyer will be entitled to possession of all documents, books,
records (including Tax records), agreements, and financial data of any sort
relating to the Target.
(b) Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Target, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall
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be necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 8
below).
(c) Transition. None of the Sellers will take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of any of the Target from
maintaining the same business relationships with the Target after the Closing
as it maintained with the Target prior to the Closing. Each of the Sellers
will refer all customer inquiries relating to the businesses of the Target to
the Buyer or its representative from and after the Closing.
(d) Confidentiality. Each of the Sellers will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in his
or its possession. In the event that any of the Sellers is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Seller will notify the
Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Sellers is, on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, that Seller may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Seller shall use his or its
best efforts, reasonable under the circumstances, to obtain, at the request and
at the sole expense of the Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
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(e) Sellers' Access to Information After the Closing. After the Closing,
(i) the Buyer shall cause the Target, and shall use its reasonable efforts to
cause its and the Target's counsel and independent public accountants, to
afford to Sellers and their employees, agents and representatives, including
counsel and independent public accountants, reasonable access, during normal
business hours and upon reasonable advance notice regarding the proposed visit
and describing the items to be seen, to the premises of the Target and to all
books, records, files, documents or other assets related to the operation of
the Target on or prior to the Closing Date in the Buyer's or the Target's
possession or under the Buyer's or the Target's control as may be reasonably
requested by Sellers in connection with preparing Tax Returns or the
investigation or defense of claims, and (ii) Sellers shall have the right to
copy, at Sellers' sole expense, such books, records, files and documents
related to the Target or the Business as may be reasonably useful to Sellers.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(a) and
Section 4 above shall be true and correct in all material respects at and
as of the Closing Date;
(ii) the Sellers shall have performed and complied with all of their
covenants hereunder in all material respects through the Closing;
(iii) the Target shall have procured all of the third party consents
specified in Section 5(b) above, and Buyer shall have procured all of the
title insurance commitments, policies, and riders required by Buyer
regarding the Real Property, all of which shall be satisfactory to Buyer
in Buyer's sole discretion;
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(iv) no action, suit, or proceeding shall be pending or threatened
in writing before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of the Buyer to own the
Target Shares and to control the Target, or (D) affect adversely the
right of any of the Target to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(v) Target shall not have issued any additional stock of any class
or series, or have issued or outstanding any options or warrants of any
stock or class or series, and shall not have declared any dividend in
cash or property with respect to Target's stock, other than distributions
of cash as contemplated in Section 2(b) hereof;
(vi) the businesses of Target and NDE shall have been conducted in
the ordinary course, and there shall have been no material adverse change
in the business, operations, assets or financial condition of Target or
NDE from March 31, 1997 to the Closing; Target, NDE or the Sellers shall
promptly notify Buyer as soon as any of them learns of any such changes;
(vii) the Target shall have discharged all Financial Debt;
(viii) the aggregate cash on hand of the Target as of the Closing
Date shall be equal to or greater than Five Hundred Thousand and no/100
Dollars ($500,000);
(ix) the Sellers shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section
7(a)(i)-(viii) is satisfied in all respects;
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(x) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties and the Target shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and Section
4(c) above;
(xi) the Buyer shall have received from counsel to the Sellers an
opinion in form and substance as set forth in Exhibit E attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
(xii) the Buyer shall have received the resignations, effective as
of the Closing, of each director and officer of the Target other than
those whom the Buyer shall have specified in writing at least five
business days prior to the Closing;
(xiii) [RESERVED]
(xiv) all actions to be taken by the Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to the Buyer and its counsel;
(xv) Buyer and KVYN shall have executed and delivered leases with
regard to each of the parcels of Real Property owned by KVYN, in the form
of the attached Exhibits G-1, G-2, G-3, G-4 and G-5, and a sublease with
regard to the parcel of Real Property located at 518 Industrial Drive,
Owensboro, Kentucky (the "Marks Facility"), in the form of the attached
Exhibit G-6. In connection with the sublease of the Marks Facility, KVYN
shall have obtained and delivered to Buyer the consent of Marks Co.,
Inc., the owners of the Marks Facility, to the assignment of the existing
lease with regard to the Marks Facility from the Target to KVYN. In the
event such consent cannot be obtained, Buyer shall have the right to
waive the requirement for such consent or to vacate the Marks Facility;
and
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(xvi) Buyer and Target each shall have entered into Sales
Representation Agreements with Narens Associates, Inc. in the form
attached as Exhibit C-1 and Exhibit C-2, respectively.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Sellers. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3(b)
above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending or threatened
in writing before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect);
(iv) [RESERVED]
(v) contemporaneously with the Closing, Target or Buyer shall have
hired James Narens for a period of twelve (12) months following the
Closing, pursuant to an Agreement in the form attached as Exhibit H,
which agreement shall provide for a severance payment
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equal to his base salary for the remainder of such twelve (12) month
period if his employment is terminated by Buyer or Target prior to
expiration of such term;
(vi) contemporaneously with the Closing, Buyer or Target shall have
hired those individuals identified on attached Exhibit D for a period of
six (6) months following the Closing, pursuant to an agreement
substantially in the form attached as Exhibit I, which Agreement shall
provide for a severance payment equal to the individual's base salary
through the end of the twelfth month following the Closing if any such
individual's employment is terminated by Buyer or Target prior to
expiration of such six (6) month term;
(vii) the Buyer shall have delivered to the Sellers a certificate to
the effect that each of the conditions specified above in Section
7(b)(i)-(vi) is satisfied in all respects;
(viii) all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Parties and the Target shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and Section
4(c) above;
(ix) Buyer and KVYN shall have executed and delivered leases with
regard to each of the parcels of Real Property owned by KVYN, in the form
of the attached Exhibits G-1, G-2, G-3, G-4 and G-5, and a sublease with
regard to the parcel of Real Property located at 518 Industrial Drive,
Owensboro, Kentucky (the "Marks Facility"), in the form of the attached
Exhibit G-6.
(x) Buyer and Target each shall have entered into Sales
Representation Agreements with Narens Associates, Inc. in the form
attached as Exhibit C-1 and Exhibit C-2, respectively;
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(xi) the Sellers shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit F attached hereto,
addressed to the Sellers, and dated as of the Closing Date; and
(xii) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Requisite Sellers and their
counsel.
The Requisite Sellers may waive any condition specified in this Section 7(b) if
they execute a writing so stating at or prior to the Closing.
8. Indemnification,
(a) Indemnification by Sellers. Subject to Section 11(a) below, Sellers
hereby agree to indemnify and hold harmless Buyer and its affiliates and their
respective officers, directors, employees, stockholders, agents and
representatives, both individually and in their corporate capacities, from and
against any and all Adverse Consequences asserted against, suffered or incurred
by Buyer and its affiliates and their respective officers, directors,
employees, stockholders, agents and representatives as a result of or in
connection with (i) any and all obligations of NDE existing prior to Closing
but not assumed by Buyer, or (ii) any material misrepresentation, breach of
warranty and/or nonfulfillment of any agreement or covenant on the part of
Sellers under this Agreement or resulting from any material misrepresentation
in any certificate, schedule, list or other instrument furnished by Sellers to
Buyer pursuant to this Agreement. Buyer hereby acknowledges that none of the
Sellers shall have any responsibility or obligation with respect to the
Target's outstanding indebtedness arising in connection with the Target's
purchase of the Equipment or the Novatec dryer to be installed in the Corunna,
Michigan plant.
(b) Indemnification by Buyer. Buyer hereby agrees to indemnify and hold
harmless Sellers, NDE, their affiliates and their respective officers,
directors, employees, stockholders, agents
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and representatives, both individually and in their corporate capacities, from
and against any and all Adverse Consequences asserted against, suffered or
incurred by Sellers, NDE, their affiliates and their respective officers,
directors, employees, stockholders, agents and representatives as a result of
or in connection with (i) any obligations of NDE assumed by Buyer, (ii) any
material misrepresentation, breach of warranty, and/or nonfulfillment of any
agreement or covenant on the part of Buyer under this Agreement or resulting
from any material misrepresentation in any certificate, schedule, list or other
instrument to be furnished by Buyer to Sellers pursuant to this Agreement,
(iii) Buyer's entry on the Real Property prior to the Closing Date and the
performance by Buyer of any environmental investigation at the Real Property,
or (iv) the ownership of the Target and the NDE assets acquired by Buyer
hereunder from and after the Closing. If Buyer disturbs the Real Property in
any manner in performing any environmental investigation, Buyer shall
thereafter immediately restore the Real Property to a condition as good as or
better than the condition than existed before the disturbance.
(c) Environmental Indemnification.
(i) The provisions of Clauses (ii)-(vi) of this Section 8(c) shall
apply to all Environmental Liabilities other than those related to the
Oil Conditions, which are defined in and shall be governed by Clause
(vii) of Section 8(c).
(ii) Except as otherwise provided herein, Sellers agree to indemnify
and hold harmless Buyer and its affiliates and their respective officers,
directors, employees, stockholders, agents, and representatives, both
individually and in their corporate capacities, from and against any and
all Environmental Liabilities arising out of or relating to (A) any
Hazardous Substances released by Sellers, Target, NDE, or any affiliate
of Sellers, Target or NDE or any predecessor in title or occupancy and
existing on the Real Property as of or prior to the Closing Date, and (B)
Hazardous Substances generated by Sellers, Target, or NDE or any
affiliate of Sellers, Target or NDE at the Real Property but disposed of
outside the Real Property prior to the Closing Date.
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(iii) Sellers shall have no duty to indemnify any Person from or
against any Environmental Liability arising out of or relating to any act
or omission by any person other than Sellers after the Closing Date or to
any Hazardous Substance that is first present on the Real Property after
the Closing Date. Without limiting the previous sentence, and by way of
illustration only, Seller shall have no duty to indemnify any person from
or against any Environmental Liability arising out of or relating to any
Hazardous Substance discovered on the Real Property after the Closing
Date as a result of the performance of any environmental testing or other
investigation by or on behalf of Buyer unless Buyer was required to
perform such testing or other investigation under the Environmental,
Health and Safety Requirements.
(iv) Sellers shall thereafter have no duty to indemnify any Person
from or against any Environmental Liability as to which Buyer has not
provided written notice within six (6) years after the Closing Date.
(v) For any Environmental Liability for which a Person is entitled
to indemnification under this Section 8(c) and which entails the payment
of costs to perform any investigation, remediation, or other measure
regarding any Hazardous Substance, Seller shall indemnify Buyer for only
those costs that are reasonable and necessary to incur in order to meet
the Applicable Cleanup Standard. The "Applicable Cleanup Standard" is
the least stringent standard for cleaning up or remediating Hazardous
Substances that applies to the Real Property under the Environmental,
Health and Safety Requirements and that is consistent with unrestricted
industrial use of the Real Property for Buyer's industrial use. At the
request of Sellers Buyer shall cooperate with Sellers in implementing
restrictions on the use of the groundwater under the Real Property, for
the purpose of reducing the cost of remediating the Real Property,
provided such restrictions do not interfere with Buyer's activities on
the Real Property. Sellers shall have no duty to indemnify any Person
for any cost incurred solely to achieve compliance with any cleanup
standard more stringent that the Applicable Cleanup Standard, including,
without limitation, any standard applicable to property used for
residential purposes. If Seller has a duty to indemnify any Person for
the cost of performing any remediation, investigation or other measure
regarding any Hazardous
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Substance, Seller may, at its option, perform such measures itself or
reimburse Buyer for the cost of performing such measures; provided that
Sellers shall have no such duty unless Target or Buyer shall have a legal
duty under Environmental, Health and Safety Requirements to perform such
investigation or remediation. Within 60 days after Sellers receive a
claim for indemnification under this Section 8(c), Sellers shall notify
Buyer of whether Sellers agree to indemnify Buyer and, if Sellers agree
to do so, and the claim entails the performance of any investigation,
remediation or other measures regarding Hazardous Substances, whether
Sellers elect to perform such measures themselves or to reimburse Buyer
for the costs of performing such measures. Notwithstanding the previous
sentence, if delaying the performance of any investigation, remediation,
or other measures during the aforementioned 60-day notice period would
cause Buyer to be in violation of any Environmental, Health, and Safety
Requirements, or would unreasonably interfere with Buyer's operations
(including in the event that Hazardous Substances are discovered during
construction activities) then Buyer may perform such measures itself
before receiving notification of Sellers' election, without prejudicing
or limiting any right that Buyer may have to indemnification for the cost
of performing such measures. If Sellers choose to perform such measures
themselves, Sellers shall diligently proceed to perform such measures
after making such election and shall use its best efforts to engage a
contractor in 14 days, and Buyer shall provide Sellers with all necessary
access to the Real Property and shall otherwise cooperate with Buyer in
the performance of such measures. If Seller chooses to reimburse Buyer
for the costs for which Buyer is entitled to indemnification, then Buyer
shall make available to Seller upon request all documents and information
related to the performance of such measures. For any Environmental
Liability for which Buyer is entitled to indemnification under this
Section 8(c), if Sellers elect to reimburse Buyer for costs incurred by
Buyer rather than to perform investigation, remediation, or other
measures themselves, Sellers shall reimburse Buyer for such costs within
30 days after Sellers received invoices reasonably documenting the costs
incurred by Buyer and such other documentation as Sellers are entitled to
receive under this Section 8(c). If Sellers request such documents and
information, and Buyer reasonably determines that it is necessary for
Buyer and Sellers to enter into an agreement requiring Sellers to
maintain such information in confidence, Sellers shall enter into such an
agreement.
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Any such agreement shall contain exceptions to its confidentiality
requirements permitting the legally required disclosure of documents or
information, the disclosure of documents or information to enforce
Sellers' rights hereunder, and such other exceptions as may be reasonably
necessary.
(vi) In any dispute that may arise as to whether any Hazardous
Substance was present at the Real Property as of or before the Closing
Date, there shall be rebuttable presumptions that (A) any Hazardous
Substance discovered on the Real Property during the three years
immediately after the Closing Date was present at the Real Property as of
or prior to the Closing Date, and (B) any Hazardous Substance discovered
on the Real Property more than three years after the Closing Date was not
present at the Real Property as of or prior to the Closing Date. If any
person asserts any claim for indemnification under this Section 8(c),
Buyer shall provide Sellers, upon Sellers' request, with any reports,
studies, correspondence, or other documents or information in Buyer's
possession or control that address or are related to Buyer's waste
handling practices, any releases of Hazardous Substances that occurred at
the Property after the Closing Date, or any other fact or matter relevant
to determining whether a Hazardous Substance was first present at the
Property after the Closing Date, Sellers must request any such documents
and information within 10 days after receiving an indemnification claim.
Buyers shall provide such documents and information to Sellers within 10
days after Sellers request them, provided, however, that if it is not
reasonably possible for Sellers to provide documents and information
within 10 days, then the 60-day period for notice of Seller's election
referenced in Clause (v) of Section 8(c) shall be extended by the same
number of days that Buyer extends the 10-day period for providing
documents and information. If Sellers request such documents and
information, and Buyer reasonably determines that it is necessary for
Buyer and Sellers to enter into an agreement requiring Sellers to
maintain such information in confidence, Sellers shall enter into such an
agreement. Any such agreement shall contain exceptions to its
confidentiality requirements permitting the legally required disclosure
of documents or information, the disclosure of documents or information
in connection with enforcement of Sellers' rights hereunder, and such
other exceptions as may be reasonably necessary.
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(vii) Oil Conditions. Sellers shall indemnify Buyer for the
reasonable and necessary costs of investigating and, if necessary to
satisfy any applicable cleanup standard, remediating the Oil Conditions
to the reasonable satisfaction of IT Corporation, which shall perform
such investigation and remediation. The "Oil Conditions" are the
following conditions as they existed as of the Closing Date: (i) the
following conditions at the Owosso Main Plant, 1650 E. South Street,
Owosso, Michigan ("Owosso Main Plant") -- used oil stains on that portion
of a concrete pad used to store approximately eight used oil drums, on
the south side of the building at the Owosso Main Plant, and any
migration of such used oil through cracks and seams in or along the
concrete pad, as described in the "Draft Phase I Environmental Site
Assessment of Kenco Plastics, Inc. Owosso Main Plant, 1650 E. South
Street, Owosso Michigan," prepared by IT, dated September 19, 1997, at
page 7, final six lines; and (ii) the following conditions at Kentucky
Plant 2, 838 Industrial Drive, Owensboro, Kentucky ("Kentucky Plant 2")
-- (A) of oil staining of soil and any seepage of such oil along the
south side of the 50,000 square foot main building at the location where
buckets of used oil are stored after emptying, near the loading/unloading
area, as described in the "Draft Phase I Environmental Site Assessment of
Kenco Plastics, Inc. -- Kentucky Plant 2, 838 Industrial Drive, Owensboro
Kentucky" (the "Kentucky Plant 2 Report"), prepared by IT, dated
September 24, 1997, at page 7, third full paragraph, and (B) oil staining
in and around the secondary containment area for the used oil above
ground storage tank, and seepage of such oil through the bottom of the
concrete containment in between the concrete blocks and the abutting
concrete slab, as described in the Kentucky Plant 2 Report, at page 7,
fourth full paragraph. Sellers shall also indemnify Buyer for the cost
of repairing any concrete or other improvements damaged during the
investigation or remediation of the Oil Conditions, and for repairing any
cracks or seams in the concrete in the area where the Oil Conditions are
present. Buyer shall not authorize IT to commence any activity regarding
the Oil Conditions until Buyer has provided a work plan to Sellers for
the performance of the activity and afforded Sellers a reasonable
opportunity to comment on the work plan. Buyer shall also provide
Sellers, upon request, with any study, report, correspondence, or other
document related to the investigation and remediation of the Oil
Conditions. Buyer shall reimburse Sellers for the investigation and
remediation of the Oil Conditions within 30 days after Sellers received
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invoices for such expenses and such other documents related to the Oil
Conditions as Sellers are entitled to receive hereunder.
(d) Indemnification Procedures. The procedure for indemnification shall
be as follows:
(i) The party claiming indemnification ("Claimant") shall, within
thirty (30) days after its discovery of any claim for which
indemnification will be sought as provided in this Agreement (the
"Claim"), give notice to the party from whom indemnification is sought
("Indemnitor") of its Claim, specifying in reasonable detail the factual
basis for the Claim and, to the extent known, the amount of the Claim.
Notwithstanding the foregoing, the failure by Claimant to provide notice
of any Claim within the period specified, or any delay in providing such
notice, shall not affect or impair the obligations of Indemnitor
hereunder, except and only to the extent that Indemnitor has been
adversely affected by such failure or delay.
(ii) With respect to Claims between the parties, following receipt
of notice from Claimant of a Claim, Indemnitor shall have sixty (60) days
to make any investigation of the Claim that Indemnitor deems necessary or
desirable. For purposes of this investigation, Claimant agrees to make
available to Indemnitor and its authorized representatives the
information relied upon by Claimant to substantiate the Claim. If
Claimant and Indemnitor cannot agree as to the validity and amount of the
Claim within the sixty (60) day period (or any mutually agreed upon
extension thereof), Claimant may seek appropriate legal remedy.
(iii) With respect to any Claim by a third party as to which
Claimant is entitled to indemnification hereunder ("Third Party Claim"),
Indemnitor shall have the right, exercisable by written notice to
Claimant within forty-five (45) days after receipt of written notice from
Claimant of the commencement or assertion of any such Claim, at its own
expense to participate in or assume control of the defense of the Claim,
and Claimant shall cooperate fully with Indemnitor, subject to
reimbursement for actual out-of-pocket expenses incurred by Claimant as
the result of a request by the Indemnitor. If Indemnitor does not elect
to assume control or otherwise participate in the defense of any Third
Party Claim within
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forty-five (45) days of its receipt of notice of the Claim (or any
extended period mutually agreed upon by the parties), Claimant shall
(upon further written notice to Indemnitor) have the right to undertake
the defense, compromise or settlement of the Claim for the account of
Indemnitor. In no event shall Indemnitor be liable or otherwise have any
obligation with respect to any settlement, compromise or determination of
any claim agreed to by Claimant without the prior written consent of
Indemnitor (which shall not be withheld unreasonably).
(iv) The parties shall cooperate in defending any Third Party Claim,
and the defending party shall be given reasonable access to the books,
records and personnel which are pertinent to the defense and which are in
control of the other party. The parties agree to furnish such records,
information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested
by the other party in connection with defending any Third Party Claim.
(e) Disclosure of Knowledge of Incorrect Representations. In order to
fully preserve indemnification rights under this Section 8, each party shall,
prior to Closing, disclose to the parties any knowledge by its officers,
employees, or agents that any representation or warranty of such other party
under this Agreement was, in any material respect, either incorrect when made
or has become incorrect on or prior to Closing in the course of subsequent
events. Such disclosure shall be made prior to the execution hereof with
respect to any representation and warranty of the other party that is known to
be incorrect in any material respect as of the date hereof The failure of a
party to make any such disclosure to the other party shall be a waiver of any
indemnification right of such party under this Section 8 based upon such
incorrect representation or warranty by the other party.
(f) Survival of Representations and Warranties. The representations
and warranties in this Agreement, any other agreement executed in connection
herewith or on any instrument delivered pursuant to this Agreement, shall
survive for a period of two (2) years from the Closing Date; provided, however,
that (i) the representations and warranties under Section 4(z) shall survive
for a period of six (6) years from the Closing Date, and (ii) the
representations and warranties under Section 4(k)(vii) shall survive the
Closing Date with no expiration date. This Section 8 shall not limit any
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covenant or agreement of the parties that by its terms contemplates performance
after the Closing. Notwithstanding the foregoing, the rights and obligations
with respect to indemnification shall continue with respect to any matter for
which indemnification had been properly sought pursuant to the terms and
conditions of this Agreement prior to the expiration of such survival period.
(g) Exclusion of Other Representations. Each Party acknowledges that it
has sufficient knowledge and expertise in business and financial matters to
evaluate the merits and risks associated with the transactions contemplated by
this Agreement. Each Party has made its decision to enter into this Agreement
and to consummate the transactions provided for herein without relying upon any
express or implied representations, warranties, commitments or undertakings of
any other Party, or such other Party's directors, officers, employees, agents,
representatives or affiliates, except as expressly set forth in this Agreement
and in the other documents to be delivered hereunder.
(h) Limitation and Conditions Applicable to Buyer. The right of Buyer or
any other Person to obtain indemnification from Sellers pursuant to this
Agreement is subject to the following limitations:
(i) Neither Buyer nor any other Person shall be entitled to
indemnification pursuant to Section 8(a) or Section 8(b) until the
Adverse Consequences for which Sellers are liable under such subsections
exceeds $350,000 in the aggregate, whereupon Buyer and such other Persons
shall be entitled to indemnification by Sellers for such Adverse
Consequences only to the extent in excess of that amount. There is no
minimum amount of Adverse Consequences required for indemnification by
Sellers pursuant to Section 8(c) hereof.
(ii) Neither Buyer nor any other Person shall be entitled to
indemnification pursuant to this Section 8 for that amount of the
aggregate Adverse Consequences for which Sellers are liable under this
Section which is in excess of $17,500,000.
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(iii) Sellers shall not be liable for Adverse Consequences to the
extent that the Adverse Consequences arise from a change in the
accounting or Tax policies or practices of Buyer, the Target or any
affiliate of Buyer after the Closing Date.
(i) Limitations Applicable to all Parties. No Party shall have any
liability to another Party under this Section 8 for Adverse Consequences to the
extent that:
(i) such Claim relates to a liability or matter with respect to
which Claimant has made recovery from a person or entity other than
Indemnitor (to the extent of such recovery);
(ii) Claimant had actual knowledge of the breach of the
representation, warranty or obligation giving rise to the Claim, or
otherwise had actual knowledge of the basis for the Claim, prior to the
consummation of the Closing; or
(iii) the Adverse Consequences would not have arisen but for a
voluntary act or omission after the Closing Date by Claimant or at the
request of Claimant; provided that such voluntary act or omission was not
required (A) in connection with the securing of any approval necessary
for the performance by such Claimant of its obligations under this
Agreement, or (B) in order to comply with any applicable law, regulation,
injunction, judgment, order, ruling or decree.
(j) Remedies Exclusive. The remedies provided in this Section 8 shall be
exclusive as to any Claims by a Party under this Agreement or any other
document or agreement to be delivered hereunder or arising out of the
transactions provided for herein and therein and shall preclude assertion by
any Party of any other rights or the seeking of any other remedies against
another Party; provided, however, that nothing in this Section 8 shall limit
rights or remedies expressly provided for in this Agreement or any other
document or agreement to be delivered hereunder or rights or remedies which, as
a matter of applicable law or public policy, cannot be limited or waived.
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(k) Adjustment to Purchase Price. Sellers and Buyer shall treat any
indemnity payment under this Agreement as an adjustment to the Purchase Price
for Tax purposes, unless a final determination with respect to the indemnified
party causes any such payment not to be treated as an adjustment to the
Purchase Price for United States federal income Tax purposes.
9. Tax Matters. The following provisions shall govern the allocation of
responsibility as between Buyer and Sellers for certain tax matters following
the Closing Date:
(a) Section 338(h)(10) Election. Target and each of the Sellers will join
with Buyer in making an election under Section 338(h)(10) of the Code (and any
corresponding elections under state, local, or foreign tax law) (collectively,
a "Section 338(h)(10) Election") with respect to the purchase and sale of the
stock of the Target hereunder. Sellers will pay any Tax, including any
liability of Target for Tax resulting from the application to it of Treasury
Regulation Section 1.338(h)(10)-1(f)(5), attributable to the making of the
Section 338(h)(10) Election and will indemnify the Buyer and Target against
any Adverse Consequences arising out of any failure to pay such Tax.
(b) Tax Periods Ending on or Before the Closing Date.
(i) As required in connection with the Section 338(h)(10) Election,
the current fiscal/tax year of the Target will be split into two separate
tax years, one beginning January 1, 1997 and ending on the Closing Date
and the other beginning on the day after the Closing Date and ending on
the last day of Buyer's tax year ending immediately after the Closing
Date. Sellers shall prepare or cause to be prepared and file or cause to
be filed all Tax Returns for the Target for all periods ending on or
prior to the Closing Date which are filed after the Closing Date.
Sellers shall permit Target to review and comment on each such Tax Return
described in the preceding sentence prior to filing. Sellers shall
reimburse Buyer for Taxes of the Target with respect to such periods
within fifteen (15) days after the Sellers' receipt of written notice
from Buyer that Buyer or the Target has paid such Taxes to the extent
such Taxes are not reflected in the reserve for Tax Liability (rather
than any reserve
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for deferred Taxes established to reflect timing differences between book
and Tax income) shown on the face of the Closing Balance Sheet.
(ii) If the Section 338(h)(10) Election is not effective, Sellers,
Buyer and the Target agree to the application of Section 1377(a)(2) of
the Code so as to split the Target's tax year into two tax years, the
first of which will end on the Closing Date.
(c) Tax Periods Beginning Before and Ending After the Closing Date.
Except as otherwise provided in Section 9(b), Buyer shall prepare or cause to
be prepared and file or cause to be filed any Tax Returns of the Target for
taxable periods which begin before the Closing Date and end after the Closing
Date. Sellers shall pay to Buyer within fifteen (15) days after the Sellers'
receipt of written notice from Buyer that Buyer or the Target has paid Taxes
with respect to such periods in an amount equal to the portion of such Taxes
which relates to the portion of such taxable period ending on the Closing Date
to the extent such Taxes are not reflected in the reserve for Tax Liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) shown on the face of the Closing
Balance Sheet. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates
to the portion of such taxable period ending on the Closing Date shall (x) in
the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing Date. Any
credits relating to a taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Target.
(d) Cooperation on Tax Matters.
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(i) Buyer, the Target and Sellers shall cooperate fully, as and to
the extent reasonably requested by the other Party, in connection with
the filing of Tax Returns pursuant to this Section and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other Party's prior request)
the provision, inspection or copying of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and
making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided
hereunder. Buyer, the Target and Sellers agree (A) to retain all books
and records with respect to Tax matters pertinent to the Target relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into
with any taxing authority, and (B) to give the other Party reasonable
written notice prior to transferring, destroying or discarding any such
books and records and, if the other Party so requests, the Buyer, the
Target or Sellers, as the case may be, shall allow the other Party to
take possession of such books and records.
(ii) Buyer and Sellers further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including,
but not limited to, with respect to the transactions contemplated
hereby).
(iii) Buyer and Sellers further agree, upon request, to provide the
other party with all information that either party may be required to
report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(e) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Target shall be terminated as of
the Closing Date and, after the Closing Date, the Target shall not be bound
thereby or have any liability thereunder.
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(f) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement shall be paid by Buyer
when due, and Buyer or the Target will, at its own expense, file all necessary
Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, Sellers Will join in the execution of any such Tax
Returns and other documentation.
(g) Allocation of Purchase Price. Buyer, the Target, NDE and Sellers
agree that the Purchase Price, the liabilities of the Target and other relevant
items (including, for example, adjustments to the Purchase Price)
(collectively, "Total Purchase Price") will be allocated to the Target and NDE
for all Tax purposes as shown on the Asset Allocation Schedule attached hereto
as Exhibit 9(g); provided, however, that (i) the portion of the Total Purchase
Price in excess of the tax basis of the Target and NDE in their assets as of
the Closing Date (including any post-Closing adjustments) shall be allocated to
goodwill, and (ii) the remaining portion of the Total Purchase Price shall be
allocated among the other assets of the Target and NDE in an amount equal to
the tax basis of the Target and NDE in such assets as of the Closing Date.
Buyer, the Target, NDE and Sellers will file all Tax Returns (including amended
returns and claims for refund) and tax information reports in a manner
consistent with such allocation, and shall use their reasonable best efforts to
sustain such allocation in any subsequent Tax audit or Tax dispute.
10. Termination,
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Requisite Sellers may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) [RESERVED];
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(iii) the Buyer may terminate this Agreement by giving written
notice to the Requisite Sellers at any time prior to the Closing (A) in
the event any of the Sellers has breached any material representation,
warranty, or covenant contained in this Agreement in any material
respect, the Buyer has notified the Requisite Sellers of the breach, and
the breach has continued without cure for a period of 30 days after the
notice of breach, or (B) if the Closing shall not have occurred on or
before October 15, 1997, by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the failure results primarily
from the Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement); and
(iv) the Requisite Sellers may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing (A) in the
event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, any of the
Sellers has notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach, or (B) if the Closing shall not have occurred on or before
October 15, 1997, by reason of the failure of any condition precedent
under Section 7(b) hereof (unless the failure results primarily from any
of the Sellers themselves breaching any representation, warranty, or
covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to Section 10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach attributable to its willful
failure to fulfill a condition to the obligations of the other Party).
11. Miscellaneous.
(a) Nature of Certain Obligations.
(i) The covenants of each of the Sellers in Section 2(a) above
concerning the sale of his or its Target Shares to the Buyer and the
representations and warranties of each of the Sellers in Section 3(a)
above concerning the transaction are several obligations. This means
that the
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particular Seller making the representation, warranty, or covenant will
be solely responsible to the extent provided in Section 8 above for any
Adverse Consequences the Buyer may suffer as a result of any breach
thereof.
(ii) The remainder of the representations, warranties, and covenants
in this Agreement are joint and several obligations. This means that
each Seller will be responsible to the extent provided in Section 8 above
for the entirety of any Adverse Consequences the Buyer may suffer as a
result of any breach thereof. Notwithstanding the foregoing or anything
else set forth in this Agreement, Buyer agrees that any claim for
indemnification it may assert pursuant to Section 8 shall only be
asserted against the following Sellers: Edward Narens, Norman Katz,
Steven Victor and William Yolles; except, as contemplated in Section
11(a)(i), claims for indemnification under Section 8 arising out of a
breach of any covenant set forth in Section 2(a) or of a breach of any
representation and warranty set forth in Section 3(a) may be asserted
against the breaching Seller.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Requisite Sellers; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities (in
which case the disclosing Party will use its best efforts to advise the other
Parties prior to making the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
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(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of the Buyer and the Requisite Sellers; provided, however,
that the Buyer may (i) assign any or all of its rights and interests hereunder
to one or more of its Affiliates, and (ii) designate one or more of its
Affiliates to perform its obligations hereunder (in any or all of which cases
the Buyer nonetheless shall remain responsible for the performance of all of
its obligations hereunder).
(f) Counterparts and Facsimiles. This Agreement may be executed by
facsimile and/or in one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
IF TO THE SELLERS:
Edward Narens
c/o Narens Associates, Inc.
31500 Northwestern Highway, Suite 180
Farmington Hills, MI 48334
(248) 855-4050
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COPY TO: AND TO:
Norman Beitner, Esq. Norman Katz, Esq.
Honigman Miller Schwartz and Cohn, P.C. Katz, Victor and Yolles, P.C.
2290 First National Building 401 S. Woodward, Suite 333
Detroit, MI 48226 Birmingham, MI 48009
(313) 256-7550 (248) 433-0600
IF TO NDE:
Edward Narens
c/o Narens Associates, Inc.
31500 Northwestern Highway, Suite 180
Farmington Hills, MI 48334
(248) 855-4050
COPY TO:
Norman Beitner, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
(313) 256-7550
IF TO THE BUYER:
LDM Technologies, Inc.
c/o Mr. Richard J. Nash, President
2500 Executive Hills Drive
Auburn Hills, Michigan 48326
(248) 858-2800
COPY TO:
Michael B. Lewis, Esq.
Dean & Fulkerson, P.C.
801 West Big Beaver, Fifth Floor
Troy, Michigan 48084
(248) 362-1300
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such
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notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Michigan without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Michigan or any other Jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Michigan.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer, the Requisite Sellers and NDE. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(1) Expenses. Each of the Parties and the Target will bear his or its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Sellers
agree that none of the Target has borne or will bear any of the Sellers' costs
and expenses (including any of their legal fees and expenses) in connection
with this Agreement or any of the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this
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Agreement shall be construed as if drafted jointly by the Parties and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word "including" shall mean
including without limitation. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance.
If any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules, The Exhibits,
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(o) Paying Agent.
(i) Each of the Sellers and NDE hereby appoints Edward Narens as its
true and lawful agent and attorney-in-fact (the "Paying Agent"), with
full power of substitution in its name, place and stead, to receive, hold
and distribute any and all consideration payable hereunder, including the
Purchase Price and any portion thereof, and to make, execute, sign and
file such Closing documents and any other instrument as are contemplated
hereby. In such capacity, the Paying Agent shall also have the full and
sufficient right, power and authority to receive notice on behalf of the
Sellers. Such power of attorney is coupled with an interest and shall
continue in full force and effect until all funds received or to be
received by the Sellers pursuant to this Agreement shall be appropriately
distributed.
(ii) The Paying Agent shall distribute to the Sellers any funds
received pursuant to this Agreement within forty-five (45) days after its
receipt of such funds, reserving only reasonable sums for future
contingencies. The reserve funds shall be deposited in one or more
interest bearing accounts. When the Paying Agent reasonably determines
that the
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reserve accounts are no longer required and, in any event within thirty
(30) months after the Closing, the unused portion of the reserved funds
plus the interest earned thereon shall also be distributed to the
Sellers.
(iii) In the event of the death or incapacitation of Edward Narens,
Judith Narens shall succeed as the "Paying Agent". In the event of the
death or incapacitation of both Edward Narens and Judith Narens, Norman
Katz shall succeed as the "Paying Agent".
(iv) The Paying Agent may resign as such following the giving of
sixty (60) days' prior written notice to the Buyer and each of the
Sellers. In the event of such resignation, the duties of the Paying
Agent shall terminate upon the later of (i) sixty (60) days after the
date of such notice, or (ii) the appointment of a successor Paying Agent
reasonably acceptable to the Sellers. If the Requisite Sellers are
unable to agree upon a successor Paying Agent prior to the expiration of
fifteen (15) days prior to the proposed date of such resignation, the
then acting Paying Agent shall petition any court of competent
jurisdiction for the appointment of a successor Paying Agent or other
appropriate relief and any such resulting appointment shall be binding
upon all of the Parties. Within thirty (30) days after the Paying
Agent's resignation, the Paying Agent shall deliver to the Sellers and
NDE a final report of the payments and distributions by the Paying Agent
with respect to this Agreement and the reserve funds.
(p) Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event of any Party's
failure or refusal to consummate the transactions contemplated in this
Agreement other than for reasons specifically permitted by the terms hereof.
Accordingly, each of the Parties agrees that the other Parties shall be
entitled to an injunction or injunctions to prevent breaches of the provisions
of this Agreement and to enforce specifically those portions of this Agreement
requiring consummation of the Closing, by any Party hereto, and the terms and
provisions hereof requiring such Closing in any action instituted in any court
of the United States or any state thereof having jurisdiction over the Parties
and the matter (subject to the
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provisions set forth in Section 10(p) below), in addition to any other remedy
to which they may be entitled, at law or in equity.
(q) Submission to Jurisdiction. Each of the Parties submits to the
jurisdiction of any state or federal court sitting in Detroit, Michigan, in any
action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought
and waives any bond, surety, or other security that might be required of any
other Party with respect thereto. Any Party may make service on any other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
10(h) above. Nothing in this Section 10(p), however, shall affect the right of
any Party to bring any action or proceeding arising out of or relating to this
Agreement in any other court or to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
*****
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date set forth above.
LDM TECHNOLOGIES, INC., a
Michigan corporation, BUYER
By: /s/ Joe Balous
---------------------------
Joe Balous, Chairman
Date: 9/30/97
-------------------------
NARENS DESIGN & ENGINEERING CO.,
a Michigan corporation, SELLER
By: /s/ Edward Narens
---------------------------
Its: President
--------------------------
Date: 9/30/97
------------------------
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STOCKHOLDERS:
/s/ Edward Narens /s/ Edward Narens as attorney
- -------------------------------------- ---------------------------------
Edward Narens for Barbara Narens
Date: 9/30/97 Date: 9/30/97
---------------------- -------------------
/s/ James Narens /s/ Edward Narens as attorney for
- -------------------------------------- ---------------------------------
James Narens William Narens
Date: 9/30/97 Date: 9/30/97
---------------------- -------------------
/s/ Judith Narens
- --------------------------------------
Judith Narens, Trustee under the Trust
Agreement f/b/o Nanci Narens dated 3/31/94
Date: 9/30/97
----------------------
/s/ Norman Katz /s/ Norman Katz attorney in fact for
- -------------------------------------- -----------------------------------
Norman Katz for Richard Katz
Date: 9/30/97 Date: 9/30/97
---------------------- -------------------
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/s/ Norman Katz attorney in fact /s/ Norman Katz attorney in fact
- -------------------------------------- ------------------------------------
for Susan Amster for Stephen Katz
Date: 9/30/97 Date: 9/30/97
---------------------- -------------------
Norman Katz, attorney in fact
- ----------------------------------------
for Laura Adler, as Trustee of the Laura
Adler Trust U/T/A dated 1/19/94
Date: 9/30/97
----------------------
/s/ Steven Victor /s/ Norman Katz
- -------------------------------------- ---------------------------------
Steven Victor Norman Katz
/s/ William Yolles
---------------------------------
Date: 9/30/97 William Yolles
----------------------
Norman Katz and William Yolles,
as Trustees under Trust Agreement
dated 12/31/93 for the benefit of
David R. Victor, and as Trustees
under Trust Agreement dated 12/31/93
for the benefit of Jacqueline Joy
Victor, and as Trustees under Trust
Agreement dated 12/31/93 for the
benefit of Julie Pauline Victor
Date: 9/30/97
-------------------
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/s/ William Yolles /s/ William Yolles attorney in fact
- -------------------------------------- -----------------------------------
William Yolles for Robert Yolles
Date: 9/30/97 Date: 9/30/97
---------------------- -------------------
/s/ William Yolles attorney in fact /s/ Norman Katz
- -------------------------------------- -----------------------------------
for Richard Yolles Norman Katz
Date: 9/30/97 /s/ Steven Victor
---------------------- -----------------------------------
Steven Victor
Norman Katz and Steven Victor, as
Trustees under Trust Agreement dated
12/31/93 f/b/o Nancy Yolles Levine
Date: 9/30/97
----------------------
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