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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- ----------------------
Commission File Number 333-28751
NEENAH FOUNDRY COMPANY
(Exact name of each registrant as it appears in its charter)
Wisconsin 39-1580331
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
2121 Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54957
(Address of principal executive offices) (Zip Code)
(920) 725-7000
(Registrant's telephone number, including area code)
None
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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NEENAH FOUNDRY COMPANY
Form 10-Q Index
For the Quarter Ended March 31, 1998
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Part 1. Financial Information
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Item 1. Financial Statements
Condensed consolidated balance sheets -- March 31, 1998 and September 30, 1997 3
Condensed consolidated statements of income -- Three and six months ended March 31, 1998
and March 31, 1997 4
Condensed consolidated statements of cash flows -- Six months ended March 31, 1998
and March 31, 1997 5
Notes to condensed consolidated financial statements -- March 31, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 7
Operations
Part II. Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
Exhibit Index 12
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\
NEENAH FOUNDRY COMPANY
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
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<CAPTION>
March 31 September 30
1998 1997(1)
---------- ------------
(Unaudited)
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ASSETS
Current assets:
Cash and cash equivalents ............................. $ 3,427 $ 20,344
Accounts receivable, net .............................. 25,341 29,932
Inventories ........................................... 25,635 19,639
Other current assets .................................. 987 318
Prepaid income taxes .................................. 1,921 --
Deferred income taxes ................................. 1,710 1,695
-------- --------
Total current assets ...................... 59,021 71,928
Property, plant and equipment ........................... 111,349 103,710
Less accumulated depreciation ........................... 7,105 3,131
-------- --------
104,244 100,579
Identifiable intangible assets, net ..................... 33,777 35,277
Goodwill, net ........................................... 130,775 116,690
Other assets ............................................ 3,714 3,951
-------- --------
$331,531 $328,425
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...................................... $ 9,572 $ 10,333
Income taxes payable .................................. -- 4,384
Accrued liabilities ................................... 18,818 17,283
Current portion of long-term debt ..................... 60 98
-------- --------
Total current liabilities ................. 28,450 32,098
Long-term debt .......................................... 197,390 197,522
Postretirement benefit obligations ...................... 5,056 4,894
Deferred income taxes ................................... 45,074 44,519
Other liabilities ....................................... 2,151 2,172
-------- --------
Total liabilities ......................... 278,121 281,205
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, par value $100 per share --
authorized 3,000 shares, no shares
issued or outstanding .......................... -- --
Common stock, par value $100 per share --
authorized 11,000 shares, issued
and outstanding 1,000 shares ................... 100 100
Additional paid in capital ............................ 48,750 44,900
Retained earnings ..................................... 4,560 2,220
-------- --------
Total stockholders' equity ................ 53,410 47,220
-------- --------
$331,531 $328,425
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</TABLE>
See notes to condensed consolidated financial statements.
(1)The balance sheet as of September 30, 1997 has been derived from the audited
financial statements as of that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
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NEENAH FOUNDRY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(In thousands)
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<CAPTION>
Predecessor Predecessor
----------- -----------
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- ----------------------------
1998 1997 1998 1997
--------- --------- -------- ---------
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Net sales .................................. $ 43,971 $ 37,871 $ 89,825 $ 75,686
Cost of sales .............................. 31,308 26,759 64,079 53,749
-------- -------- -------- --------
Gross profit ............................... 12,663 11,112 25,746 21,937
Selling, general and administrative
expenses.................................. 4,147 3,779 7,972 8,247
Amortization of intangible assets .......... 1,230 -- 2,459 --
-------- -------- -------- --------
Total operating expenses ................. 5,377 3,779 10,431 8,247
-------- -------- -------- --------
Operating income ........................... 7,286 7,333 15,315 13,690
Net interest income (expense) .............. (5,234) 379 (10,489) 726
-------- -------- -------- --------
Income before income taxes ................. 2,052 7,712 4,826 14,416
Provision for income taxes ................. 1,117 2,631 2,486 4,701
-------- -------- -------- --------
Net income ................................. $ 935 $ 5,081 $ 2,340 $ 9,715
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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NEENAH FOUNDRY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
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<CAPTION>
Predecessor
-----------
Six Months Six Months
Ended Ended
March 31, March 31,
1998 1997
---------- -----------
OPERATING ACTIVITIES
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Net income ........................................................ $ 2,340 $ 9,715
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................................. 6,426 3,362
Amortization of deferred financing costs and premium on notes... 158 --
Deferred income taxes .......................................... -- (103)
Changes in operating assets and liabilities .................... (2,928) (4,664)
-------- --------
Net cash provided by operating
activities ................................................ 5,996 8,310
INVESTING ACTIVITIES
Purchase of property, plant and equipment ......................... (2,115) (1,782)
Acquisition of Deeter Foundry, Inc. ............................... (20,759) --
Other ............................................................. -- (36)
-------- --------
Net cash used in investing
activities ................................................ (22,874) (1,818)
FINANCING ACTIVITIES
Dividends paid .................................................... -- (2,220)
Payments on long-term debt ........................................ (39) (35)
-------- --------
Net cash provided by (used in) financing
activities ................................................ (39) (2,255)
-------- --------
Increase (decrease) in cash and cash equivalents .................. (16,917) 4,237
Cash and cash equivalents at beginning of period .................. 20,344 18,166
-------- --------
Cash and cash equivalents at end of period ........................ $ 3,427 $ 22,403
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See notes to condensed consolidated financial statements.
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NEENAH FOUNDRY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1998
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal and recurring adjustments ) considered necessary for a fair
presentation have been included. Operating results for the three and six months
ended March 31, 1998 are not necessarily indicative of the results that may be
expected for the period ending September 30, 1998. (The Company changed its
fiscal year end to September 30 effective September 30, 1997). For further
information, refer to the consolidated financial statements and footnotes
thereto included in Neenah Foundry Company's Annual Report on Form 10-K for the
period ended September 30, 1997.
NOTE 2 -- INVENTORIES
The components of inventories are as follows:
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March 31 September 30
1998 1997
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(000's omitted)
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Raw materials ....................... $ 1,990 $ 1,688
Work in process and finished goods... 19,836 13,379
Supplies ............................ 4,662 4,572
-------- --------
Inventories at FIFO cost ............ 26,488 19,639
Excess of FIFO cost over LIFO cost... (853) --
-------- --------
$ 25,635 $ 19,639
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</TABLE>
At September 30, 1997, inventories at LIFO approximated FIFO cost.
NOTE 3 -- PURCHASE OF DEETER FOUNDRY, INC.
On March 30, 1998, the Company purchased Deeter Foundry, Inc. (a manufacturer of
gray iron construction castings) for $24,296 in cash and notes. The acquisition
has been accounted for using the purchase method of accounting. The purchase
price has been allocated on the basis of fair values of the underlying assets
acquired and liabilities assumed. The excess of the cost of acquisition over the
fair value of the net tangible and identifiable intangible assets acquired has
been allocated to goodwill. Had the acquisition occurred as of October 1, 1996
or 1997, there would have been no material proforma effect on net sales or net
income for the six months ended March 31, 1998 or 1997.
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NOTE 4 -- GUARANTOR SUBSIDIARIES
Neenah Transport, Inc.,Hartley Controls Corporation, and Deeter Foundry, Inc.
(the "Guarantor Subsidiaries") are wholly-owned subsidiaries of Neenah Foundry
Company and have fully and unconditionally guaranteed the Senior Subordinated
Notes on a joint and several basis. The Guarantor Subsidiaries comprise all of
the Company's direct and indirect subsidiaries. The separate financial
statements of the Guarantor Subsidiaries have not been included herein because
management has concluded that such financial statements would not provide
additional information that is material to investors.
The following is summarized combined financial information of the wholly owned
subsidiaries. Net sales include net sales to Neenah Foundry Company of $972 and
$2,041 for the three and six months ended March 31, 1998, respectively.
March 31, 1998
---------------
(000's omitted)
Current assets $ 7,639
Noncurrent assets 24,016
Current liabilities 3,085
Noncurrent liabilities 949
Three Months Six Months
Ended Ended
March 31, 1998 March 31, 1998
-------------- --------------
(000's omitted)
Net sales $2,193 $4,650
Gross profit 732 1,556
Net income 101 269
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
On April 30, 1997, pursuant to an Agreement and Plan of Reorganization with NC
Merger Company and NFC Castings, Inc., the stock of Neenah Corporation (the
"Predecessor Company") was acquired by NFC Castings, Inc. (the "Merger"). On
July 1, 1997, Neenah Foundry Company, which was the principal operating
subsidiary of Neenah Corporation, merged with and into Neenah Corporation and
the surviving company changed its name to Neenah Foundry Company (the
"Company").
The following discussion and analysis of the Company's financial condition and
results of operations addresses the periods both before and after the Merger.
The Merger has had a significant impact on the Company's results of operations
and financial condition. The Merger resulted in the recording of goodwill and
identifiable intangible assets totaling approximately $148.8 million. These
amounts are being amortized over their estimated useful lives, ranging from five
months to 40 years. The Merger has also resulted in a significant increase in
the Company's interest expense.
The Merger has been accounted for as a business combination and has resulted in
differences in the basis of certain assets and liabilities between the
Predecessor Company and the Company. The Company changed its fiscal year end to
September 30 from March 31 effective September 30, 1997. The following
discussions compare the results of operations of the Company for the three and
six months ended March 31, 1998, to the historical results of the Predecessor
Company for the three and six months ended March 31, 1997.
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RESULTS OF OPERATIONS (dollars in thousands)
Three Months Ended March 31, 1998 and 1997
Net sales. Net sales for the three months ended March 31, 1998 were $43,971
which are $6,100 or 16.1% higher than the quarter ended March 31, 1997. Net
sales of municipal castings increased by $1,704 or 16.1% due primarily to market
share gains in strategic focus areas of the Eastern and Southwestern United
States as well as a continuation of the successful transition to a modernized
product line. Net sales of industrial castings increased by $4,375 or 17.0% due
to the overall strength of the heavy duty truck market coupled with very high
demand in the agricultural business. Net sales for Hartley Controls Corporation
for the three months ended March 31, 1998, increased by $138 which is
attributable to increased equipment and replacement parts sales.
Gross profit. Gross profit for the three months ended March 31, 1998 was
$12,663, an increase of $1,551, or 14.0%, as compared to the quarter
ended March 31, 1997. The margin improvement was due to the combined effect of
spreading manufacturing overhead over a greater volume and improved efficiency
in plant operations.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended March 31, 1998 were $4,147,
an increase of $368, or 9.7%, as compared to the $3,779 for the quarter ended
March 31, 1997. The increase was due to costs incurred to upgrade computer
systems for the Year 2000 and travel and other costs related to potential
acquisitions of additional companies. As a percentage of net sales, selling,
general and administrative expenses decreased from 10.0% for the quarter ended
March 31, 1997 to 9.4% for the three months ended March 31, 1998. The decrease
in selling, general and administrative expenses as a percentage of net sales was
mainly due to the reduction in compensation for senior executives who did not
remain with the Company after the Merger.
Amortization of intangible assets. Amortization of intangible assets of $1,230
for the three months ended March 31, 1998, results from goodwill and
identifiable intangible assets from the Merger.
Operating income. Operating income was $7,286 for the three months ended March
31, 1998, a decrease of $47, or 0.6%, from the quarter ended March 31, 1997. As
a percentage of net sales, operating income decreased from 19.4% for the quarter
ended March 31, 1997 to 16.6% for the three months ended March 31, 1998. The
decrease in operating income was due to the amortization of intangible assets as
discussed above.
Net interest income (expense). Net interest expense was $5,234 for the three
months ended March 31, 1998 compared to interest income of $379 for the quarter
ended March 31, 1997. The interest expense resulted from the issuance of Senior
Subordinated Notes in connection with the Merger (see "Liquidity and Capital
Resources" section).
Provision for income taxes. The provision for income taxes for the three months
ended March 31, 1998 is higher than the amount computed by applying the
statutory rate of approximately 40% to income before income taxes mainly due to
the amortization of intangible assets which is not deductible for income tax
purposes.
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Six Months Ended March 31, 1998 and 1997
Net sales. Net sales for the six months ended March 31, 1998 were $89,825 which
are $14,139 or 18.7% higher than the six months ended March 31, 1997. Net sales
of municipal castings increased by $2,710 or 10.1% due primarily to market share
gains in strategic focus areas of the Eastern and Southwestern United States as
well as a continuation of the successful transition to a modernized product
line. Net sales of industrial castings increased by $11,803 or 26.1% due to the
overall strength of the heavy duty truck market coupled with very high demand in
the agricultural business. Net sales for Hartley Controls Corporation for the
six months ended March 31, 1998 declined by $228 which is mostly attributable to
a reduction in foundry expansion and lower capital spending at the major foundry
customers that Hartley Controls Corporation services.
Gross profit. Gross profit for the six months ended March 31, 1998 was $25,746,
an increase of $3,809, or 17.4%, as compared to the six months ended March 31,
1997. The margin improvement was due to the combined effect of spreading
manufacturing overhead over a greater volume, improved efficiency in plant
operations and, to a lesser extent, improved pricing of industrial castings.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the six months ended March 31, 1998 were $7,972, a
decrease of $275, or 3.3%, as compared to the $8,247 for the six months ended
March 31, 1997. As a percentage of net sales, selling, general and
administrative expenses decreased from 10.9% for the six months ended March 31,
1997 to 8.9% for the six months ended March 31, 1998. The decrease in selling,
general and administrative expenses was mainly due to the reduction in
compensation for senior executives who did not remain with the Company after the
Merger.
Amortization of intangible assets. Amortization of intangible assets of $2,459
for the six months ended March 31, 1998, results from goodwill and identifiable
intangible assets from the Merger.
Operating income. Operating income was $15,315 for the six months ended March
31, 1998, an increase of $1,625, or 11.9%, from the six months ended March 31,
1997. As a percentage of net sales, operating income decreased from 18.1% for
the six months ended March 31, 1997 to 17.0% for the six months ended March 31,
1998. The decrease in operating income as a percentage of net sales was due to
the amortization of intangible assets as discussed above.
Net interest income (expense). Net interest expense was $10,489 for the six
months ended March 31, 1998 compared to interest income of $726 for the six
months ended March 31, 1997. The interest expense resulted from the issuance of
Senior Subordinated Notes in connection with the Merger (see "Liquidity and
Capital Resources" section).
Provision for income taxes. The provision for income taxes for the six months
ended March 31, 1998 is higher than the amount computed by applying the
statutory rate of approximately 40% to income before income taxes mainly due to
the amortization of intangible assets which is not deductible for income tax
purposes.
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LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)
In connection with the Merger, the Company issued $150.0 million principal
amount of 11-1/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated
Notes") and entered into a credit agreement providing for term loans of $45.0
million and a revolving credit facility of up to $50.0 million, as amended (the
"Senior Bank Facility"). On July 1, 1997, the Company issued an additional $45.0
million principal amount of Senior Subordinated Notes and used the proceeds of
$47.6 million to pay the term loans, the accrued interest thereon and related
fees and expenses. In March, 1998, the Company amended the Senior Bank Facility,
providing for term loans of $75.0 million and a revolving credit facility of up
to $50.0 million. The term loans of $75.0 million will be used for acquisitions
subsequent to March 31, 1998.
The Company's liquidity needs will arise primarily from debt service on the
above indebtedness, working capital needs and funding of capital expenditures
and additional acquisitions. Borrowings under the revolving credit facility bear
interest at variable interest rates. The Senior Bank Facility imposes
restrictions on the Company's ability to make capital expenditures and both the
Senior Bank Facility and the indentures governing the Senior Subordinated Notes
limit the Company's ability to incur additional indebtedness. The covenants
contained in the Senior Bank Facility also, among other things, restrict the
ability of the Company and its subsidiaries to dispose of assets, incur
guarantee obligations, prepay the Senior Subordinated Notes or amend the
indentures, pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, change the business conducted by the Company, make
capital expenditures or engage in certain transactions with affiliates, and
otherwise restrict corporate activities.
For the six months ended March 31, 1998 and March 31, 1997, capital expenditures
were $2,115 and $1,782, respectively. The $333 increase in capital expenditures
was primarily the result of planned enhancements to certain equipment in the
manufacturing area.
The Company's principal source of cash to fund its liquidity needs will be net
cash from operating activities and borrowings under its revolving credit
facility. Net cash from operating activities for the six months ended March 31,
1998 was $5,996, a decrease of $2,314 from $8,310 for the six months ended March
31, 1997. The decrease in net cash from operating activities was primarily a
result of a decrease in net income resulting from interest expense incurred on
the Company's outstanding indebtedness in connection with the Merger.
The Company believes that cash generated from operations and existing revolving
lines of credit under the Senior Bank Facility will be sufficient to meet its
normal operating requirements, including interest payments on the Company's
outstanding indebtedness.
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NEENAH FOUNDRY COMPANY
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 2.1 - Stock Purchase Agreement for the acquisition of Deeter
Foundry, Inc. dated as of March 26, 1998 by and among Neenah Foundry
Company and the Selling Shareholders of Deeter Foundry, Inc.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed one report on Form 8-K during the quarter ended March 31,
1998. The report, dated February 27, 1998, disclosed that the Company had
entered into a letter of intent for the acquisition of Mercer Forge
Corporation.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEENAH FOUNDRY COMPANY
DATE: May 13, 1998 /s/ Gary LaChey
----------------------------------------------
Gary LaChey
Vice President-Finance, Secretary & Treasurer
(Principal Financial Officer and Duly
Authorized Officer)
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EXHIBIT 2.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
By and Among
THE STOCKHOLDERS OF DEETER FOUNDRY, INC.
LISTED ON ANNEX I HERETO,
as Sellers
and
NEENAH FOUNDRY COMPANY,
as Buyer
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EXECUTION COPY
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS; INTERPRETATION..............................................................................1
Section 1.1 Certain Defined Terms.................................................................1
Section 1.2 Interpretation........................................................................6
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING.....................................................................6
Section 2.1 Transfer of Shares....................................................................6
Section 2.2 Closing...............................................................................6
Section 2.3 Consideration for Shares..............................................................7
Section 2.4 Purchase Price Adjustment.............................................................7
Section 2.5 Closing Deliveries by Sellers........................................................10
Section 2.6 Closing Deliveries by Buyer..........................................................10
Section 2.7 Real Estate Matters to be Addressed at Closing.......................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS.....................................................................................12
Section 3.1 Representations and Warranties of the Sellers Concerning the
Transaction..........................................................................12
Section 3.2 Representations and Warranties Concerning the Company
and Its Subsidiaries.................................................................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.................................................................30
Section 4.1 Organization of Buyer................................................................30
Section 4.2 Authorization; Validity..............................................................30
Section 4.3 No Conflict or Violation.............................................................30
Section 4.4 Consents and Approvals...............................................................31
Section 4.5 No Brokers...........................................................................31
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES......................................................31
Section 5.1 Access to Information and Records....................................................31
Section 5.2 Confidentiality/Nondisclosure........................................................32
Section 5.3 Conduct of Business..................................................................32
Section 5.4 Preservation of Business.............................................................35
Section 5.5 Notice of Events.....................................................................35
Section 5.6 Exclusivity..........................................................................36
Section 5.7 Non-Competition; Non-Interference; Non-Solicitation..................................36
Section 5.8 Consents and Best Efforts............................................................36
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EXECUTION COPY
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Section 5.9 Public Announcements.................................................................37
Section 5.10 Appointment of Stockholder Representative............................................37
ARTICLE VI
TERMINATION.............................................................................................37
Section 6.1 Termination..........................................................................37
Section 6.2 Effect of Termination................................................................38
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS......................................................................38
Section 7.1 Representations, Warranties and Covenants............................................38
Section 7.2 No Injunction........................................................................39
Section 7.3 HSR Act Waiting Period...............................................................39
Section 7.4 Opinion of Counsel...................................................................39
Section 7.5 Payments.............................................................................39
Section 7.6 Consulting Agreement.................................................................39
Section 7.7 Documents to be Delivered by Buyer...................................................39
Section 7.8 All Proceedings To Be Satisfactory...................................................40
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS.......................................................................40
Section 8.1 Representations, Warranties and Covenants............................................40
Section 8.2 Consents; Releases...................................................................40
Section 8.3 No Injunction........................................................................40
Section 8.4 No Material Adverse Effect...........................................................40
Section 8.5 Funded Debt..........................................................................41
Section 8.6 Stockholders Approval................................................................41
Section 8.7 Documents to be Delivered by Sellers.................................................41
Section 8.8 Amendment of Restated Articles.......................................................42
Section 8.9 Absence of Litigation................................................................42
Section 8.10 Management Arrangements..............................................................43
Section 8.11 Real Property........................................................................43
Section 8.12 Financing............................................................................43
Section 8.13 Working Capital......................................................................43
Section 8.14 All Proceedings To be Satisfactory...................................................43
ARTICLE IX
POST-CLOSING COVENANTS..................................................................................44
Section 9.1 Further Assurances...................................................................44
Section 9.2 Tax Matters..........................................................................44
Section 9.3 Transition...........................................................................45
Section 9.4 Confidentiality......................................................................46
</TABLE>
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EXECUTION COPY
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ARTICLE X
INDEMNIFICATION.........................................................................................46
Section 10.1 Survival, Representations and Warranties.............................................46
Section 10.2 Indemnification Obligation of Sellers................................................46
Section 10.3 Indemnification Obligation of Buyer..................................................49
Section 10.4 Indemnification Procedures...........................................................49
Section 10.5 Recoupment...........................................................................50
Section 10.6 Payment..............................................................................51
Section 10.7 No Contribution......................................................................51
Section 10.8 General..............................................................................51
ARTICLE XI
MISCELLANEOUS...........................................................................................52
Section 11.1 Assignment...........................................................................52
Section 11.2 Notices..............................................................................52
Section 11.3 Choice of Law........................................................................53
Section 11.4 Entire Agreement; Amendments and Waivers.............................................53
Section 11.5 Counterparts.........................................................................54
Section 11.6 Invalidity...........................................................................54
Section 11.7 Headings.............................................................................54
Section 11.8 Expenses.............................................................................54
Section 11.9 Specific Performance.................................................................54
Section 11.10 Time is of the Essence; Computation of Time..........................................54
Section 11.11 Waiver of Jury Trial.................................................................55
Section 11.12 Incorporation by Reference...........................................................55
Section 11.13 Survival.............................................................................55
Annexes and Exhibits
Annex I - Stockholders
Exhibit A - Financial Statements
Exhibit B-1 - Form of Seller Note
Exhibit B-2 - Form of Standby Letter of Credit
Exhibit C - Consent of Board of Directors
Exhibit D - Insurance Policies to be Distributed
Exhibit E - Form of Consulting Agreement
Exhibit F - Form of Non-Competition Agreement
Exhibit G - Opinion of Buyers Counsel
Exhibit H - Opinion of Sellers' Counsel
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Disclosure Schedule
Section 1.1(a) - Non-Capitalized Leases
Section 2.7(a) - Permitted Encumbrances
Section 3.1(a) - Notice Requirements
Section 3.1(c) - Share Ownership
Section 3.2(a) - Jurisdiction
Section 3.2(b) - Capitalization
Section 3.2(c) - Filings and Approvals
Section 3.2(e) - Title to Assets
Section 3.2(f) - Subsidiaries
Section 3.2(g) - Financial Statements
Section 3.2(h) - Events Subsequent to Most Recent Fiscal Year End
(i) Sales of Assets
(ii) New Material Agreements
(iii) Changes to Material Agreements
(iv) Security Interests
(v) Capital Expenditures
(vi) Capital Investments
(vii) Indebtedness
(viii) Proprietary Rights
(ix) Charter and Bylaws
(x) Sales of Securities
(xi) Dividends and Distributions
(xii) Property Loss
(xiii) Affiliate Transactions
(xiv) Employee Compensation
(xv) Labor Agreements
(xvi) Employee Benefits
(xvii) Insurance
(xviii) Accounting Principles
(xix) Accounts Receivable
Section 3.2(i) - Undisclosed Liabilities
Section 3.2(j) - Legal Compliance
Section 3.2(k) - Tax Matters
Section 3.2(1)(i) - Owned Property
Section 3.2(l)(ii)(a) - Leases for Leased Property
Section 3.2(l)(ii)(b) - Exceptions to Leasehold Interests
Section 3.2(l)(ii)(c) - Exceptions to Lease Enforceability
Section 3.2(l)(ii)(d) - Required Landlord Consents
Section 3.2(l)(iii) - Real Property Exceptions
Section 3.2(m) - Proprietary Rights
Section 3.2(n) - Tangible Assets
Section 3.2(o) - Inventory
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Section 3.2(p) - Contracts
Section 3.2(q) - Notes and Accounts Receivable
Section 3.2(r) - Insurance
Section 3.2(s) - Litigation
Section 3.2(t) - Product Warranty Provisions
Section 3.2(w) - Employees
Section 3.2(x) - Employee Benefit Plans
Section 3.2(y) - Environmental Matters
Section 3.2(z) - Transactions with Affiliates
Section 3.2(aa) - Funded Debt
Section 4.4 - Buyers Consents and Approvals
Section 5.3(a)(i)(B) - Bonus Payments
Section 5.3(a)(ii)(D) - Form of Release
Section 5.8 - Consents and Approvals
Section 8.2 - Consents and Releases
Section 8.7(k) - Liens on Equipment
Section 8.7(l) - Form of Stockholder Release
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of March 26, 1998, by and among the
stockholders of DEETER FOUNDRY, INC., a Nebraska corporation (the "Company"),
listed on Annex I hereto (the "Stockholders" or the "Sellers"), and NEENAH
FOUNDRY COMPANY, a Wisconsin corporation (the "Buyer"). The Sellers and the
Buyer are referred to collectively herein as the "Parties".
WHEREAS, Sellers own 414.449 shares of common stock of the Company, par
value $100.00 per share (the "Shares"), constituting all of the issued and
outstanding capital stock of the Company; and
WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire to
sell, transfer and convey to Buyer, the Shares, all subject to the terms and
conditions of this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS; INTERPRETATION
Section 1.1 Certain Defined Terms. As used herein, the terms below
shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"controlled" and "controlling" have meanings correlative thereto.
"Affiliated Group" means any affiliated group within the meaning of
Section 1504(a) of the Code or any similar group defined under a similar
provision of state, local or foreign law.
"Balance Sheet" means the reviewed balance sheet of the Company as at
December 31, 1997, together with the notes thereon, previously delivered to
Buyer and attached hereto as part of Exhibit A.
"Balance Sheet Date" means December 31, 1997.
"Base Rate" means the prime lending rate announced from time to time by
the Chase Manhattan Bank.
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"Benefit Arrangement" means any employment, consulting, severance or
other similar contract, arrangement or policy and each plan, arrangement,
program, agreement or commitment providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
retirement benefits, life, health, disability or accident benefits (including,
without limitation, any "voluntary employees beneficiary association" as defined
in Section 501(c)(9) of the Code providing for the same or other benefits) or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is not an Employee
Welfare Benefit Plan, an Employee Pension Benefit Plan or Multiemployer Plan,
(B) is maintained or contributed to by or required to be maintained or
contributed to by the Company, or (C) covers any current or former employee of
the Company.
"Buyer Representative" means each of James K. Hildebrand, Gary W.
LaChey, William Barrett and John D. Rader.
"Cash Purchase Price" has the meaning set forth in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company Proprietary Rights" means all Proprietary Rights owned or used
by the Company, along with all income, royalties, damages and payments due or
payable at the Closing or thereafter (including, without limitation, damages and
payments for past and future infringements or misappropriation thereof), the
right to sue and recover for past infringement or misappropriation thereof, and
all corresponding rights that, now or hereafter, may be secured throughout the
world and all copies and tangible embodiments of any such Proprietary Rights.
"Confidential Company Information" means any information concerning the
businesses and affairs of the Company that is not already generally available to
the public.
"Consulting Agreement" has the meaning specified in Section 5.7.
"Controlled Group" has the meaning set forth in Section 1563 of the
Code.
"Disclosure Schedule" means the disclosure schedule delivered by the
Company and the Sellers to the Buyer and each Buyer Representative on the date
hereof and initialed by the Parties (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained herein.
"Employee Benefit Plans" means all Benefit Arrangements, Multiemployer
Plans, Employee Pension Benefit Plans and Employee Welfare Benefit Plans.
"Employee Pension Benefit Plan" means any "employee pension benefit
plan" as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), (A)
which the Company maintains
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or contributes to or with respect to which the Company has any liability, or (B)
which covers any current or former employee of the Company.
"Employee Welfare Benefit Plan" means any "employee welfare benefit
plan" as defined in Section 3(1) of ERISA, (A) which the Company maintains or
contributes to or with respect to which the Company has any liability, or (B)
which covers any current or former employee of the Company.
"Encumbrances" has the meaning specified in Section 2.7(a).
"Environmental, Health, and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law 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.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means U.S. Bank, N.A., f/k/a First Bank, N.A.
"Escrow Agreement" means the Escrow Agreement dated as of the Closing
Date by and among the Buyer, the Sellers and the Escrow Agent.
"Escrow Deposit" has the meaning specified in Section 2.3.
"Estimated Closing Balance Sheet" has the meaning specified in Section
2.4(a).
"Estimated Closing Working Capital" has the meaning specified in
Section 2.4(a).
"Financial Statements" has the meaning specified in Section 3.2(g).
"Funded Debt" of the Company, shall mean, without duplication, (i) all
obligations under indebtedness for borrowed money (including, without
limitation, principal, interest, overdrafts, penalties, premiums, fees,
expenses, indemnities and breakage costs), all obligations under capital leases
(other than the leases identified in Section 1.1(a) of the Disclosure Schedule),
notes payable, guaranties and drafts accepted representing extensions of credit
and (ii) all notes or other amounts payable to the Company's present or former
shareholders or any of their respective Affiliates, and excluding outstanding
purchase orders, accrued expenses and trade accounts payable.
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"GAAP" means generally accepted accounting principles as in effect in
the United States on the date of this Agreement, applied on a consistent basis.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Income Taxes" means taxes measured by or with reference to net income
imposed by any federal, state, local or foreign governmental taxing authority,
including additions to tax and penalties related to such taxes, and interest on
such taxes and on such additions to tax and penalties.
"L/C" has the meaning specified in Section 2.3.
"Lender" means the Buyer's senior lender (determined as of the close of
business on the Closing Date).
"Lien" means any claim, lien, pledge, option, charge, security
interest, mortgage, encumbrance or other right of any third party.
"Losses" means any claims, liabilities, losses, damages (including
consequential damages and damages for lost profits), deficiencies, assessments,
judgments, remediations and costs or expenses (including reasonable attorney's,
consultants' and experts' fees and expenses).
"Material Adverse Effect" has the meaning specified in Section 3.2(c).
"Most Recent Balance Sheet" has the meaning specified in Section
3.2(g).
"Most Recent Financial Statements" has the meaning specified in Section
3.2(g).
"Most Recent Fiscal Month End" has the meaning specified in Section
3.2(g).
"Multiemployer Plan" means any "multiemployer plan," as defined in
Section 4001 (a)(3) of ERISA with respect to which the Company or any Subsidiary
has any liability or potential liability.
"Non-Competition Agreement" has the meaning set forth in Section 5.7.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Encumbrances" has the meaning specified in Section 2.7(a).
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"Person" means an individual, partnership, corporation, limited
liability company, joint stock company, unincorporated organization or
association, trust, joint venture, association or other organization, whether or
not a legal entity, or a governmental authority.
"Pre-Closing Period" means any taxable period ending on or before the
Closing Date.
"Prohibited Transaction" has the meaning set forth in Section 406 of
ERISA and Section 4975 of the Code.
"Proprietary Rights" shall mean all (i) patents, patent applications,
patent disclosure and inventions (whether patentable or unpatentable and whether
or not reduced to practice), (ii) trademarks, service marks, trade dress, trade
names, logos, slogans, corporate names and Internet domain names, and
registrations and applications for registration thereof, together with all of
the goodwill associated therewith, (iii) copyrights and copyrightable works, and
registrations and applications for registration thereof, (iv) computer software,
data bases and documentation, and (v) trade secrets and other confidential
information (including ideas, formulae and compositions), know-how, processes,
techniques, research and development information, drawings, specifications,
designs, plans, proposals, data, financial, business and marketing plans and
customer and supplier lists and information.
"Rebate Amount" has the meaning specified in Section 2.4(d).
"Seller Note" has the meaning specified in Section 2.3.
"Stockholder Representative" has the meaning set forth in Section 5.10.
"Subsidiary" means any Person whose (a) securities having ordinary
voting power to elect a majority of its board of directors or managing or
general partners (or other persons having similar functions) or (b) other
ownership interests (including partnership and membership interests) ordinarily
constituting a majority interest in the capital, profits or cash flow of such
Person, are at the time, directly or indirectly, owned or controlled by such
other Person, or by one or more other Subsidiaries of such other Person, or by
such other Person and one or more of its other Subsidiaries. Unless otherwise
specified, each reference to a Subsidiary shall mean a Subsidiary of the
Company.
"Target Working Capital" means $3,050,000.00.
"Tax" shall mean any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or
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addition thereto, whether disputed or not, and any amounts payable pursuant to
the determination or settlement of an audit.
"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.
"Title Company" has the meaning specified in Section 2.7(a).
"Working Capital" means, as of the date of determination, an amount
equal to the current assets of the Company less the current liabilities of the
Company, in each case, and except as set forth in Section 3.2(g) of the
Disclosure Schedule or Section 2.4(e) hereof, determined in accordance with
GAAP, applied in a manner consistent with the preparation of the Financial
Statements. For purposes of this Agreement, (a) current assets shall mean,
without duplication, cash, accounts receivable, trade notes receivable,
inventory, deposits and prepaid insurance excluding (i) any amounts in respect
of Taxes and (ii) any amounts in respect of the assets to be distributed
pursuant to Section 5.3(b) below and (b) current liabilities shall mean, without
duplication, trade accounts payable and accrued expenses, excluding (i) any
portion thereof which is included in Funded Debt, (ii) any unpaid amounts due or
to become due for contracts or purchase orders entered into in connection with
the capital improvements identified in Section 5.3(a)(ii) below and (iii) any
amount in respect of Taxes.
Section 1.2 Interpretation. Unless otherwise indicated to the contrary
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neutral genders, and vice versa; and (iv) words importing the
singular shall also include the plural, and vice versa.
ARTICLE II
PURCHASE AND SALE OF SHARES; CLOSING
Section 2.1 Transfer of Shares. Upon the terms and subject to the
conditions contained herein, Sellers shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall acquire and in reliance upon the
representations, warranties and covenants contained herein, at the Closing, the
Shares.
Section 2.2 Closing. The closing of the transactions contemplated
herein shall be held at 10:00 a.m., local time, on the later of (i) March 26,
1998, and (ii) three (3) business days after the satisfaction or waiver of all
conditions to closing contained in Articles VII and VIII, (the "Closing" or the
"Closing Date"), at the offices of Kirkland & Ellis, 153 East 53rd Street, New
York, New York 10022, or such other time and/or place as the Parties hereto
otherwise agree.
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Section 2.3 Consideration for Shares. Upon the terms and subject to the
conditions contained herein, as consideration for the purchase of the Shares,
Buyer shall pay to Sellers, in the aggregate, the amount of TWENTY-THREE MILLION
EIGHT HUNDRED FIFTY THOUSAND DOLLARS ($23,850,000) (the "Purchase Price"),
subject to adjustment as provided in Section 2.4 hereof, (a) by depositing or
causing to be deposited with the Escrow Agent by wire transfer of immediately
available funds, $1,000,000 of the Purchase Price (the "Escrow Deposit") to be
held by the Escrow Agent in accordance with Section 10.2 of this Agreement and
in accordance with the Escrow Agreement, (b) by tendering to Sellers by wire
transfer of immediately available funds to an account designated by Sellers not
less than five (5) business days prior to Closing, $19,000,000 (the "Cash
Purchase Price"), and (c) by tendering to the Stockholder Representative as
agent of the Sellers a promissory note of ACP Holding Company ("Parent") in the
amount of $3,850,000 in the form of Exhibit B-1 hereto (the "Seller Note") and
the irrevocable standby letter of credit issued by The Chase Manhattan Bank in
substantially the form of Exhibit B-2 hereto (the "L/C").
Section 2.4 Purchase Price Adjustment
(a) Estimated Closing Balance Sheet. The Company shall prepare
and deliver to Buyer a balance sheet (the "Estimated Closing Balance
Sheet"), on or before a date not less than five (5) business days prior
to the Closing Date for the purposes of showing an estimate of the
Working Capital of the Company as at the Closing Date (the "Estimated
Closing Working Capital"). The Estimated Closing Balance Sheet shall be
prepared from the books and records of the Company in accordance with
the accounting principles set forth in subsection (e) below taking into
account the payments to be made by the Company at the Closing
(including any payments of expenses or Taxes in accordance with Section
11.8).
(b) Closing Date Adjustment. The Cash Purchase Price payable
at Closing (i) shall be reduced dollar-for-dollar by (A) the amount of
any outstanding Funded Debt and (B) the excess, if any, of the Target
Working Capital over the Estimated Closing Working Capital and (ii)
shall be increased by the aggregate amount, if any, paid by the Company
prior to the Closing Date for the capital improvements set forth in
Section 5.3(a)(ii) below; provided, that in no event shall such amounts
exceed individually, or in the aggregate, the amounts set forth
opposite thereto for each such capital improvement.
(c) Preparation of Closing Balance Sheet; Dispute Resolution.
(i) Preparation of Closing Balance Sheet. On or
before the 60th day after the Closing Date, personnel of the
Buyer and an accounting firm engaged by the Buyer (the
"Buyer's Accountant") will prepare and deliver to the
Stockholder Representative an audited balance sheet of the
Company as of the close of business on the Closing Date (the
"Closing Date Balance Sheet"), together with an unqualified
report of the Buyer's Accountant thereon, and a certificate of
the chief financial officer of the Buyer setting forth the
Buyer's determination of the
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Working Capital as of the Closing Date (the "Adjustment
Statement"). The Closing Date Balance Sheet shall be prepared
from the Company's books and records in accordance with the
accounting principles set forth in subsection (e) below taking
into account the payments to be made by the Company in
connection with the Closing (including the fees and expenses
and Taxes described in Section 11.8). During the preparation
of the Closing Date Balance Sheet and all activities in
connection therewith, the Stockholder Representative will be
entitled to designate a representative (the "Representative
Accountant") to observe and comment on the preparation of the
Closing Date Balance Sheet and the Adjustment Statement and
procedures relating thereto and shall have the right to review
the work papers prepared in connection therewith. On or prior
to the 20th day after the Stockholder Representative's receipt
of the Closing Date Balance Sheet and the Adjustment
Statement, the Stockholder Representative may give the Buyer a
written notice stating in reasonable detail the Stockholder
Representative's objections (an "Objection Notice") to the
Closing Date Balance Sheet and/or the Adjustment Statement. If
the Stockholder Representative does not tender to the Buyer an
Objection Notice within such 20-day period, then the Closing
Date Balance Sheet and the Adjustment Statement will be
conclusive and binding upon the Parties and the Working
Capital as of the Closing Date determined therefrom will
likewise be binding on the Parties for purposes of Section
2.4(d) below.
(ii) Dispute and Amicable Resolution. If the
Stockholder Representative timely gives an Objection Notice as
described in subsection (i) above, then the Stockholder
Representative and the Buyer will attempt amicably to resolve
their disputes as reflected in the Objection Notice, and any
amount agreed to in writing by the Stockholder Representative
and the Buyer as the Final Closing Date Working Capital, will
be conclusive and binding upon the Parties for purposes of
Section 2.4(d) below.
(iii) Resolution by Independent Accounting Firm. If
the Stockholder Representative and the Buyer do not resolve
all disputes as reflected in the Objection Notice on or prior
to the 15th day after the Objection Notice is given, then the
Stockholder Representative and the Buyer will retain a firm of
certified public accountants that is mutually acceptable to
the Stockholder Representative and the Buyer (if the
Stockholder Representative and the Buyer are unable to agree
on a mutually acceptable accounting firm prior to the 22nd day
following delivery of the Objection Notice, then such firm
will be chosen randomly by lot from among the nationally
recognized public accounting firms with offices in Nebraska
formerly constituting the "big six" (other than the
Representative Accountant and the Buyer's Accountant) (the
"Independent Accounting Firm") and the Nebraska office of said
Independent Accounting Firm shall be used by the Parties to
determine the Working Capital as of the Closing Date, as soon
as practicable, and, in any event, within 30 days after the
submission of any dispute thereto, all in accordance with the
standards and definitions set forth herein and
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in subsection (e) below. The Working Capital as of the Closing
Date, determined by the Independent Accounting Firm (1) must
be within the range of values established for such amount as
determined by reference to the value assigned to such amount
by the Representative Accountant and the Buyer in the
Objection Notice and the Adjustment Statement, respectively,
and, assuming compliance with the preceding clause, (2) will
be conclusive and binding upon the Parties for purposes of
Section 2.4(d) below. The fees and expenses of the Independent
Accounting Firm will be split equally between the Buyer and
the Sellers.
(iv) "Final Closing Date Working Capital" means the
Working Capital as set forth on the Closing Date Balance Sheet
as finally determined pursuant to clauses (i), (ii) and (iii)
above (the "Final Closing Date Balance Sheet").
(d) Purchase Price Adjustment. The Purchase Price will be
adjusted if the Final Closing Date Working Capital is greater or less
than the Estimated Closing Working Capital as follows:
(i) if the Final Closing Date Working Capital is
greater than the Estimated Closing Working Capital, then the
Buyer shall cause to be paid to the Stockholder Representative
on behalf of each Stockholder, an aggregate amount equal to
the lesser of (A) the excess of the Target Working Capital
over the Estimated Closing Working Capital or (B) the excess
of the Final Closing Date Working Capital over the Estimated
Closing Working Capital, plus interest thereon at the Base
Rate from the Closing Date. Any such payment shall be made by
wire transfer of immediately available funds to an account or
accounts designated by the Stockholder Representative in
writing, no later than three (3) business days after the
completion of the Final Closing Date Balance Sheet, and the
Stockholder Representative shall distribute to each
Stockholder, their share of such amount.
(ii) if the Final Closing Date Working Capital is
less than the Target Working Capital, then the Cash Purchase
Price will be reduced on a dollar-for-dollar basis by the
lesser of (A) the excess of Estimated Working Capital over the
Final Closing Date Working Capital or (B) the excess of the
Target Working Capital over the Final Closing Date Working
Capital (the "Rebate Amount"). In such event, the
Stockholders, jointly and severally, agree to pay the Rebate
Amount, plus interest thereon at the Base Rate, from the
Closing Date to Buyer by wire transfer of immediately
available funds to an account or accounts designated by Buyer
in writing, no later than three (3) business days after the
completion of the Final Closing Date Balance Sheet.
(e) Accounting Conventions. Subject to the definition of
Working Capital set forth as in Section 1.1 hereof, each accounting
term used herein shall have the meaning that is applied thereto in
accordance with GAAP and each account included in the Closing Date
Balance Sheet shall be calculated in accordance with GAAP and shall be
consistent
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with the books and records of the Company; provided, that all known
arithmetic errors shall be taken into account in the calculation of
each account set forth above, regardless of their materiality and with
respect to the calculation of the levels of the accounts set forth
above, provided, further, that no change in accounting principles shall
be made from those utilized in preparing the Financial Statements,
including, with respect to the nature or classification of accounts,
closing proceedings, valuation of inventory or levels of reserves or
levels of accruals other than as a result of objective changes in the
underlying business which occur prior to the Closing Date. For purposes
of the preceding sentence, "changes in accounting principles" includes
all changes in accounting principles, policies, practices, procedures
or methodologies with respect to Financial Statements, their
classification or their display, as well as all changes in practices,
methods, conventions or assumptions utilized in making accounting
estimates.
Section 2.5 Closing Deliveries by Sellers. To effect the transfer
referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.3 hereof, Sellers shall, on or prior to the Closing Date,
tender the following to Buyer:
(a) certificates evidencing the Shares, free and clear of any
and all Liens, duly endorsed in blank for transfer or accompanied by
stock powers duly executed in blank;
(b) all consents, approvals, releases, and waivers from
governmental authorities and other third parties required or necessary
as a result of the transactions contemplated hereby all of which are
set forth in Section 3.2(c) of the Disclosure Schedule, reasonably
satisfactory in form and substance to Buyer and its counsel; and
(c) all other documents required to be delivered pursuant to
Article VIII hereof not specifically mentioned above in this Section
2.5.
Section 2.6 Closing Deliveries by Buyer. To effect the transfer
referred to in Section 2.1 hereof and the delivery of the consideration
described in Section 2.3 hereof, Buyer shall, on the Closing Date:
(a) tender to Sellers the Cash Purchase Price, as the same may
be adjusted pursuant to Section 2.4, by wire transfer of immediately
available funds to such account of which Sellers shall have given
notice to Buyer hereunder not later than five (5) business days prior
to the Closing Date;
(b) tender to the Escrow Agent the Escrow Deposit;
(c) tender to Sellers the Seller Note and the L/C;
(d) tendered all other documents required to be delivered
pursuant to Article VII hereof and not specifically mentioned above in
this Section 2.6.
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Section 2.7 Real Estate Matters to be Addressed at Closing.
(a) At the Closing, Sellers shall have delivered to Buyer
policies of title insurance issued by Chicago Title Insurance Company
(the "Title Company"), issued at standard rates, insuring the Company's
marketable title in and to the Owned Property, as hereinafter defined,
in fee simple, and for a value of Seven Hundred Twenty-Seven Thousand
Five Hundred Dollars ($727,500), free and clear of all Liens,
encroachments, encumbrances or other defects in title (collectively,
"Encumbrances"), except for (i) installments of special assessments or
real estate taxes which are not yet due and payable, (ii) the items set
forth in Section 2.7(a) of the Disclosure Schedule, (iii) building and
zoning restrictions applicable to the Owned Property and (iv) items
disclosed by that certain survey of the Owned Property by Billy Joe
Kerr dated February 20, 1998 (collectively, "Permitted Encumbrances").
Buyer may obtain such additional endorsements and affirmative coverages
as Buyer and the Lender may reasonably require (including without
limitation non-imputation endorsements), and the Sellers shall provide
the Title Company with an Owner's Affidavit and Personal Undertaking of
Sellers issued in connection therewith, a Nonimputation Endorsement
Affidavit and Indemnity of Sellers and such other information as the
Title Company may reasonably require in order to afford such coverage.
Sellers shall be responsible for obtaining an owner's policy and shall
bear the cost of the title premium for said title policies. Buyer shall
bear the cost of obtaining all endorsements and affirmative coverages
which may be required by Buyer of Lender.
(b) At the Closing, Buyer shall have received surveys of each
Owned Property conforming to the Minimum Standard Detail Requirements
jointly established and approved in 1992 by ALTA and ACSM certified to
the Buyer, Lender, Title Company and the Company, showing no defects,
encroachments or encumbrances other than the matters disclosed in
Section 3.2(1) of the Disclosure Schedule. In the event any defect in
the Company's title is determined to exist as a result of said survey,
then, unless the same is waived by the Buyer, Sellers shall have the
option, but not the obligation, to correct such defect to Buyer's
reasonable satisfaction.
(c) At the Closing, Sellers shall have delivered to Buyer (i)
from each landlord under a Lease an estoppel certificate, (ii) from
each landlord under a Lease described in Section 3.2(1)(ii)(d) of the
Disclosure Schedule, a consent to the transactions contemplated by this
agreement and (iii) from each mortgagee and ground lessor of any Leased
Property a nondisturbance agreement, in each case in form and substance
reasonably satisfactory to Buyer and Lender. Sellers shall have
delivered to Lender, from each landlord under a Lease designated by
Lender, an agreement regarding the subordination to Lender of such
landlord's lien against personal property on the applicable demised
premises. In the event Sellers, after exercising commercially
reasonable efforts to do so, are unable to obtain any one or more of
the foregoing certificates, consents, or agreements, Buyer may either
waive any such requirement under Article VIII or terminate this
Agreement in accordance with Section 6.1.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Section 3.1 Representations and Warranties of the Sellers Concerning
the Transaction. Each of the Sellers represents and warrants to the Buyer that
the statements contained in this Section 3.1 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 3.1) with respect to himself,
herself or itself.
(a) Authorization of Transaction. The Seller has full power
and authority to execute and deliver this Agreement and to perform his,
her or its obligations hereunder. This Agreement constitutes the valid
and legally binding obligation of the Seller, enforceable in accordance
with its terms and except as set forth in Section 3.1(a) of the
Disclosure Schedule, the Seller 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.
(b) Brokers' Fees. The Seller 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
the Company or the Buyer could become liable or obligated.
(c) Company Shares. All of the shares of capital stock of the
Company are or will at Closing be held of record and owned beneficially
by the Sellers as set forth in Section 3.1(c) of the Disclosure
Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act of 1933 and state securities
laws), Taxes, Liens, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands.
Section 3.2 Representations and Warranties Concerning the Company and
Its Subsidiaries. The Sellers represent and warrant to the Buyer that the
statements contained in this Section 3.2 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 3.2).
(a) Organization Qualification and Corporate Power. The
Company is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. The
Company is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is clearly
required. The Company has full corporate power and authority to carry
on the businesses in which it is engaged and to own and use the
properties owned and used by it. Section 3.2(a) of the Disclosure
Schedule lists the directors and officers of the Company.
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(b) Capitalization. The entire authorized capital stock of the
Company consists of 1000 shares of common stock, of which 434 shares of
common stock are issued and outstanding and all of which together
represent the Shares. All of the issued and outstanding Shares have
been or will at Closing be duly authorized, validly issued, fully paid,
and nonassessable. As of the date hereof, 26 shares of common stock are
held as treasury shares, all of which will be distributed to one or
more of the Sellers or be cancelled and as of Closing, no shares of the
Company's capital stock will be held as treasury shares. Except as set
forth in Section 3.2(b) of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other
commitments that could require the Company to issue, sell, or otherwise
cause to become outstanding any of its capital stock, nor are there
outstanding or authorized any stock appreciation rights, phantom stock,
or similar rights or instruments. There is no action, suit, proceeding,
hearing, investigation, charge, complaint, demand or notice pending, or
to the knowledge of any Seller, threatened by any present or former
shareholder of the Company with respect to the Company's capital stock,
nor to the knowledge of any Seller, do any facts exist which could form
the basis for any such claim.
(c) Noncontravention. Except as set forth in Section 3.2(c) of
the Disclosure Schedule, 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, or other restriction of any government,
governmental agency, or court to which the Company is subject or any
provision of the charter or bylaws of the Company, 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 the Company 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 Lien upon
any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure
to give notice, or Lien would not have a material adverse effect on the
business, condition (financial or otherwise), operations, results of
operations, or future prospects of the Company or on the ability of the
Parties to consummate the transactions contemplated by this Agreement
(a "Material Adverse Effect"). Except for such filings as may be
required under the HSR Act; except for authorizations, consents,
approvals, declarations, filings or registrations the failure of which
to obtain, would not, in the aggregate, impair the ability of the
Sellers or the Company to perform their obligations hereunder or have a
Material Adverse Effect on the Company; and except as set forth in
Section 3.2(c) of the Disclosure Schedule, the Company does not need to
obtain any authorization, consent, or approval of, or make any
declaration, filing or registration with, any government or
governmental agency or regulatory authority in connection with the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby.
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(d) Brokers' Fees. The Company 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.
(e) Title to Assets; Sufficiency. Except as set forth on
Section 3.2(e) of the Disclosure Schedule, Liens attributable to Funded
Debt, as to which Sellers shall, in accordance with Article VIII
hereof, have caused to be delivered to Buyer as of Closing duly
executed UCC termination statements with respect thereto, Permitted
Encumbrances and lessor's Liens arising under Leases identified in
Section 3.2(l)(ii)(a) and 3.2(p)(i) of the Disclosure Schedule, the
Company has good and marketable title to, or a valid leasehold interest
in, the properties and assets used by it to conduct its business,
located on its premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Liens, except
for properties and assets disposed of in the Ordinary Course of
Business since the date of the Most Recent Balance Sheet. The assets
currently owned by the Company, or licensed or leased by the Company
pursuant to a valid and enforceable license or lease agreement entered
into in the ordinary course of business or otherwise disclosed to Buyer
constitute all of the assets used by the Company in the conduct of the
business of the Company in accordance with past practices as of the
Most Recent Fiscal Year End and as of the date hereof.
(f) Subsidiaries. The Company has no Subsidiaries and does not
own the stock of or have any financial interest in any other Person.
(g) Financial Statements. Attached hereto as Exhibit A are the
following financial statements (collectively the "Financial
Statements"): (i) reviewed balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal
years ended December 31, 1994, 1995, 1996 and 1997 (the "Most Recent
Fiscal Year End") for the Company; and (ii) unaudited consolidated and
consolidating balance sheets (the "Most Recent Balance Sheet") and
statements of income, changes in stockholders' equity, and cash flow
(the "Most Recent Financial Statements") as of and for the one-month
period ended January 31, 1998 (the "Most Recent Fiscal Month End"), for
the Company. The Financial Statements (including the notes thereto)
have been prepared from the books and records of the Company, and
except as set forth in Section 3.2(g) of the Disclosure Schedule, are
correct and complete, have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby,
and present fairly the financial condition of the Company as of such
dates and the results of operations of the Company for such periods;
provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not, in the
aggregate, be material) and such adjustments as are necessary in
accordance with GAAP to reflect the transactions contemplated or
referred to in this Agreement and lack footnotes and other presentation
items.
(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, condition
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(financial or otherwise), operations, results of operations, or future
prospects of the Company taken as a whole. Without limiting the
generality of the foregoing, except as specifically provided in this
Agreement, since that date:
(i) except as set forth in Section 3.2(h)(i) of the
Disclosure Schedule, the Company has not sold, leased,
transferred, abandoned, allowed to lapse or assigned any
material assets, tangible or intangible, outside the Ordinary
Course of Business;
(ii) except as set forth in Section 3.2(h)(ii) of the
Disclosure Schedule, the Company has not entered into any
material agreement, contract, lease, or license (or series of
related agreements, contracts, leases or licenses) involving
more than $50,000, nor modified the terms of any such existing
contract or agreement outside the Ordinary Course of Business;
(iii) except as set forth in Section 3.2(h)(iii) of
the Disclosure Schedule, no party (including the Company) has
accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license
to which the Company is a party or by which it is bound;
(iv) except as set forth in Section 3.2(h)(iv) of the
Disclosure Schedule, the Company has not imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) except as set forth in Section 3.2(h)(v) of the
Disclosure Schedule, the Company has not made any capital
expenditures in an amount in excess of $50,000 individually or
in the aggregate;
(vi) except as set forth in Section 3.2(h)(vi) of the
Disclosure Schedule, the Company has not made any capital
investment in, or any loan to, any other Person;
(vii) except as set forth in Section 3.2(h)(vii) of
the Disclosure Schedule, the Company has not created,
incurred, assumed, or guaranteed more than $50,000 in
aggregate indebtedness for borrowed money and capitalized
lease obligations;
(viii) except as set forth in Section 3.2(h)(viii) of
the Disclosure Schedule, the Company has not granted any
license or sublicense of any material rights under or with
respect to any Company Proprietary Rights;
(ix) except as set forth in Section 3.2(h)(ix) of the
Disclosure Schedule, there has been no change made or
authorized in the charter or bylaws of the Company;
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(x) except as set forth in Section 3.2(h)(x) of the
Disclosure Schedule, the Company has not 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;
(xi) except as set forth in Section 3.2(h)(xi) of the
Disclosure Schedule, or with respect to periods between the
date hereof and the Closing Date as permitted pursuant to
Section 5.3(a)(i)(C), the Company has not declared, set aside,
or made any stock 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;
(xii) except as set forth in Section 3.2(h)(xii) of
the Disclosure Schedule, the Company has not experienced any
material damage, destruction, or loss (whether or not covered
by insurance) to its property;
(xiii) except as set forth in Section 3.2(h)(xiii) of
the Disclosure Schedule, the Company has not made any loan to,
or entered into any other transaction with, any of its
directors, officers, and employees, other than employment
arrangements or transactions entered into in the Ordinary
Course of Business and disclosed in writing to Buyer;
(xiv) except as set forth in Section 3.2(h)(xiv) of
the Disclosure Schedule, the Company has not granted any
increase in the base compensation of or made any other
material change in the employment terms of any of its
directors, officers and employees;
(xv) except as set forth in Section 3.2(h)(xv) of the
Disclosure Schedule, the Company has not entered into any
employment contract or collective bargaining agreement,
written or oral, or modified the terms of any such existing
contract or agreement;
(xvi) except as set forth in Section 3.2(h)(xvi) of
the Disclosure Schedule, the Company has not 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);
(xvii) except as set forth in Section 3.2(h)(xvii) of
the Disclosure Schedule, the Company has not experienced any
material changes in the amount or scope of coverage of
insurance now carried by it;
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(xviii) except as set forth in Section 3.2(h)(xviii) of
the Disclosure Schedule, the Company has not made or been
subject to any change in its accounting practices, procedures
or methods or in its cash management practices;
(xix) except as set forth in Section 3.2(h)(xix) of
the Disclosure Schedule, the Company has not engaged in any
activity which has resulted in any acceleration or delay of
the collection of its accounts or notes receivable or any
delay in the payment of its accounts payable; and
(xx) except as set forth in Section 3.2(h)
subparagraph (i) through (xix) of the Disclosure Schedule, the
Company has not committed to do any of the foregoing.
(i) Undisclosed Liabilities. Except as set forth in Section
3.2(i) of the Disclosure Schedule or as expressly modified herein as to
specific types of liabilities, the Company has no material 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), except for (i) liabilities set forth on the
face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (ii) liabilities which have arisen after the Most Recent
Fiscal Month End in the Ordinary Course of Business, none of which is a
liability resulting from, arising out of, relating to, in the nature of
or caused by any breach of contract, breach of warranty, tort,
infringement, claim or lawsuit.
(j) Legal Compliance. Except as set forth in Section 3.2(j) of
the Disclosure Schedule or as more specifically provided for in Section
3.2(y), the Company has complied with and is in compliance with all
applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been
filed, commenced or threatened against any of them alleging any failure
so to comply, except where the failure to so comply would not have a
Material Adverse Effect.
(k) Tax Matters.
(i) The Company has duly and timely filed all Tax
Returns it was required to file. All such Tax Returns were
correct and complete in all material respects. All Taxes owed
by the Company (whether or not shown on any Tax Return) have
been timely paid. The Company currently is not the beneficiary
of any extension of time within which to file any Tax Return.
The Company has maintained or will prior to Closing make or
obtain, adequate provision for, and adequate funds to pay,
Taxes payable by the Company as of December 31, 1997, and such
provision and funds (as adjusted for the passage of time
through the Closing Date in accordance with the past custom
and practices of the Company in
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filing their respective Tax Returns) will be adequate for
Taxes payable by the Company as of the Closing Date (including
any Taxes resulting from a distribution or other action set
forth in Section 5.3 hereof);
(ii) There is no dispute or claim concerning any Tax
liability of the Company 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;
(iii) Section 3.2(k) of the Disclosure Schedule lists
all federal, state, local, and foreign Tax Returns filed with
respect to the Company for taxable periods ended on or after
December 31, 1990, 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 Tax Returns,
examination reports, and statements of deficiencies assessed
against, or agreed to by the Company since December 31, 1990.
The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency;
(iv) The Company has not received, and does not
expect to receive, from any taxing authority any written
notice of proposed adjustment, deficiency, underpayment of
Taxes or any other such notice which has not been satisfied by
payment or been withdrawn, and no claims have been asserted
relating to such Taxes against the Company;
(v) The Company has withheld and paid all required
Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or
other similar third party;
(vi) The Company has not filed a consent to the
application of Section 341(f) of the Code;
(vii) The Company will not be required, as a result of
(A) a change in accounting method for a Tax period beginning
on or before the Closing Date, to include any adjustment under
Section 481(c) of the Code (or any corresponding provision of
state, local or foreign Tax law) in taxable income for any Tax
period beginning on or after the Closing Date, or (B) any
"closing agreement," as described in Section 7121 of the Code
(or any corresponding provision of state, local or foreign Tax
law), to include any item or income in or exclude any item of
deduction from any Tax period beginning on or after the
Closing Date;
(viii) The Company has disclosed on its income Tax
Returns all positions taken therein that could give rise to an
accuracy-related penalty under Section 6662 of the Code (or
any corresponding provision of Tax law);
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(ix) Except as set forth in Section 3.2(k)(ix) of the
Disclosure Schedule, the Company has not made any payments, is
not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Section
280G or Section 162(m) of the Code;
(x) No claim has ever been communicated to the
Company by a taxing authority in a jurisdiction where the
Company does not pay Taxes or file Tax Returns that the
Company is or may be subject to Taxes assessed by such
jurisdiction;
(xi) The Company has not been a United States real
property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(l)(A)(ii);
(xii) The Company is not a party to any Tax
allocation or sharing agreement;
(xiii) The Company (A) has not been a member of an
Affiliated Group filing a consolidated federal income Tax
Return and (B) has no liability for the Taxes of any Person
(other than the Company ) under Treas. Reg. ss.1.1502-6 (or
any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise;
(xiv) Anything herein to the contrary notwithstanding,
no representation or warranty is made and the Sellers
expressly disclaim any liability for or with respect to any
tax liability that may arise out of or in any way be connected
with any election made by Buyer under Section 338 of the Code;
(xv) The Company (and any predecessor of the Company)
has been a validly electing S corporation within the meaning
of Code ss.ss.1361 and 1362 at all times since February 1,
1992, and the Company will be an S corporation up to and
including the Closing Date.
(xvi) The Company has not, in the past 10 years, (A)
acquired assets from another corporation in a transaction in
which the Company's Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis
of the acquired assets (or any other property) in the hands of
the transferor or (B) acquired the stock of any corporation
which is a qualified subchapter S subsidiary.
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(l) Real Property.
(i) Section 3.2(l)(i) of the Disclosure Schedule
contains a legal description of each parcel of real property
owned by the Company (the "Owned Property"). The Company has
good and marketable title in and to all of the Owned Property
subject to no Encumbrances, except for Permitted Encumbrances.
(ii) Section 3.2(l)(ii)(a) of the Disclosure Schedule
contains a list of all leases, subleases and other occupancy
agreements including all amendments, extensions and other
modifications (the "Leases") for real property (the "Leased
Property"; the "Owned Property" and the "Leased Property"
collectively the "Real Property") to which the Company is the
"tenant", "subtenant" or other lessee party. Except as set
forth in Section 3.2(l)(ii)(b) of the Disclosure Schedule,
Permitted Encumbrances and Liens attributable to Funded Debt,
or created pursuant to the terms of the applicable Lease, the
Company has a good and valid leasehold interest in and to all
of the Leased Property, and such leasehold interests are
subject to no Encumbrances. Except as set forth in Section
3.2(l)(ii)(c) of the Disclosure Schedule, each Lease is in
full force and effect and is enforceable in accordance with
its terms. There exists no default or condition which, with
the giving of notice, the passage of time or both, could
become a default under any Lease. Sellers have previously
delivered to Buyer true and complete copies of all the Leases.
Except as described on Section 3.2(l)(ii)(d) to the Disclosure
Schedule, no consent, waiver, approval or authorization is
required from the landlord under any Lease as a result of the
execution of this Agreement or the consummation of the
transactions contemplated hereby.
(iii) The Real Property constitutes all of the real
property owned, leased, occupied or otherwise utilized in
connection with the business of the Company Except as set
forth in Section 3.2(l)(iii) of the Disclosure Schedule: (A)
other than the Company, there are no parties in possession or
parties having any current or future right to occupy any of
the Real Property; (B) the Real Property is in good condition
and repair and is sufficient for the conduct of the business
of the Company as presently conducted; (C) the Real Property
and all plants, buildings and improvements located thereon
conform to all applicable building, zoning and other laws,
ordinances, rules and regulations; (D) all permits, licenses
and other approvals necessary to the current occupancy and use
of the Real Property have been obtained, are in full force and
effect and have not been violated; and (E) there exists no
violation of any covenant, condition, restriction, easement,
agreement or order affecting any portion of the Real Property.
All improvements located on the Owned Property have direct
access to a public road adjoining such Owned Property. No such
improvements or accessways encroach on land not included in
the Owned Property and no such improvement is dependent for
its access, operation or utility on any land, building or
other improvement not included in the Owned Property. There is
no pending or, to the knowledge of any
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Seller, threatened condemnation proceeding affecting any
portion of the Owned Property.
(m) Intellectual Property.
(i) The Company has not interfered with, infringed
upon, misappropriated, or violated any Proprietary Rights of
any third party, in any material respect, and the Company has
not ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the
Company must license or refrain from using any Proprietary
Rights of any third party). To the knowledge of any Seller, no
third party has interfered with, infringed upon,
misappropriated, or violated any Proprietary Rights of the
Company in any material respect. No claim by any third party
contesting the validity, enforceability, use or ownership of
any of the Company Proprietary Rights is pending or, to the
knowledge of any Seller is threatened, and to the knowledge of
any Seller, there are no grounds for the same.
(ii) Section 3.2(m)(ii) of the Disclosure Schedule
identifies each patent or registration which has been issued
to the Company with respect to any of the Company Proprietary
Rights, identifies each pending patent application or
application for registration which the Company has made with
respect to any of the Company Proprietary Rights, and
identifies each material license, agreement, or other
permission which the Company has granted to any third party
with respect to any of the Company Proprietary Rights
(together with any exceptions). The Sellers have delivered to
the Buyer correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and
permissions (as amended to date). Section 3.2(m)(ii) of the
Disclosure Schedule also identifies each material trade name
or material unregistered trademark used by any of the Company
and its Subsidiaries.
(iii) Section 3.2(m)(iii) of the Disclosure Schedule
identifies each material item of the Company Proprietary
Rights that any third party owns and that the Company uses
pursuant to license, sublicense, agreement, or permission. The
Sellers have delivered to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and
permissions, including, licenses of software (as amended to
date), except to the extent the same are contained in the body
of such software and not otherwise reduced to writing. With
respect to each item of the Company Proprietary Rights
identified in Section 3.2(m)(iii) of the Disclosure Schedule
and exceptions noted above:
(A) the license, sublicense, agreement, or
permission covering the item is legal, valid,
binding, enforceable, and in full force and
effect in all material respects;
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(B) no party to the license, sublicense,
agreement, or permission is in material breach or
default, and no event has occurred which with
notice or lapse of time would constitute a
material breach or default or permit termination,
modification, or acceleration thereunder;
(C) no party to the license, sublicense,
agreement, or permission has repudiated any
material provision thereof; and
(D) the Company has not granted any
sublicense or similar right with respect to the
license, sublicense, agreement, or permission.
(iv) the Company owns or has a license to use all
Proprietary Rights necessary for the operation of their
businesses as conducted as of the Most Recent Fiscal Year End
and as currently conducted.
(v) All Proprietary Rights owned or used by the
Company immediately prior to Closing will be owned or
available for use by the Company on identical terms and
conditions immediately subsequent to Closing.
(n) Tangible Assets. Except as set forth in Section 3.2(n) of
the Disclosure Schedule, the buildings, machinery, equipment, and
tangible assets that the Company owns or leases are free from known
material defects (patent and latent), have been maintained in
accordance with normal industry practice, and, as currently used by the
Company, are in good operating condition and repair (subject to normal
wear and tear), considering their age and operational use.
(o) Inventory. Except as set forth in Section 3.2(o) of the
Disclosure Schedule, the inventory of the Company consists of raw
materials, manufactured and processed parts, work in process, iron
scrap, and finished goods, all of which are in good and (with respect
to finished goods) merchantable condition and are reasonably fit for
the purpose for which they were purchased or manufactured.
(p) Contracts. Other than this Agreement, Section 3.2(p) of
the Disclosure Schedule lists the following contracts and other
agreements to which the Company is a party:
(i) any agreement (or group of related agreements)
for the consignment or lease of machinery, equipment or other
personal property to or from any Person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements)
for the purchase or sale of raw materials, products,
machinery, equipment or other personal property, or for the
furnishing or receipt of services, the performance of which
will extend over a period of more than one year or involve
consideration in excess of $50,000;
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(iii) any capitalized lease, pledge, conditional sale
or title retention agreement involving the payment of more
than $50,000 in the aggregate;
(iv) any agreement concerning a partnership or joint
venture;
(v) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease
obligation, or under which it has imposed a Security Interest
on any of its assets, tangible or intangible;
(vi) any agreement concerning confidentiality or
noncompetition or otherwise prohibiting the Company from
freely engaging in any business;
(vii) any material agreement with any of the Sellers
and their Affiliates;
(viii) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation,
severance, or other material plan or arrangement for the
benefit of its current or former directors, officers, or
employees;
(ix) any license, royalty or other agreement relating
to the Company Proprietary Rights;
(x) any agreement containing commitments of
suretyship guarantee or indemnification (except for
guarantees, warranties and indemnities provided by the Company
in the ordinary course of business and those having a contract
value, individually or in the aggregate of $25,000 or less);
(xi) any mortgage, indenture, note, bond or other
agreement relating to indebtedness incurred or provided by the
Company;
(xii) any agreement involving a governmental body;
(xiii) any collective bargaining agreement;
(xiv) 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 material severance benefits;
(xv) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect;
(xvi) any other agreement (or group of related
agreements) the performance of which involves consideration in
excess of $50,000; or
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(xvii) any commitment to do any of the foregoing
described clauses (i) through (xvi).
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 3.2(p) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the material terms and
conditions of each oral agreement referred to in Section 3.2(p) of the
Disclosure Schedule. With respect to each such agreement and except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought
or as set forth in Section 3.2(p) of the Disclosure Schedule: (A) the agreement
is legal, valid, binding, and enforceable in accordance with its terms and in
full force and effect in all material respects and will continue to be so
following the Closing; (B) no party is in material breach or default, and 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 (C) no party has repudiated any material
provision of the agreement. Except as specifically identified in Section 3.2(p)
of the Disclosure Schedule, the Company is not a party to any contract,
agreement or understanding which contains a "change in control", "potential
change in control" or similar provision which could be triggered by the
transactions contemplated by this Agreement
(q) Notes and Accounts Receivable. Except as set forth in
Section 3.2(q) of the Disclosure Schedule, all notes and accounts receivable of
the Company are reflected properly on the Company's books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible
in accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for operations and transactions
through the Closing Date in accordance with the past custom and practice of the
Company.
(r) Insurance. Except for life insurance policies set forth in
Exhibit D hereto, Section 3.2(r) of the Disclosure Schedule sets forth the
following information with respect to each material insurance policy (including
policies providing property, casualty, liability, and workers' compensation
coverage and bond and surety arrangements) with respect to which the Company is
a party, a named insured, or otherwise the beneficiary of coverage:
(i) the name, address, and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured; and
(iii) the policy number, the amount of coverage and
the period of coverage.
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With respect to each such insurance policy, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors rights, and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought: (A) the policy is legal,
valid, binding, enforceable, and in full force and effect in all material
respects; (B) neither the Company nor any other party to the policy is in
material breach or default (including with respect to the payment of premiums or
the giving of notices), and 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 (C) no party
to the policy has repudiated any material provision thereof. Section 3.2(r) of
the Disclosure Schedule identifies any material self-insurance arrangements
affecting the Company. All known claims, if any, made against the Company that
are covered by insurance have been disclosed to and accepted by the appropriate
insurance companies and are being defended by such appropriate insurance
companies and are described in Section 3.2(r) of the Disclosure Schedule and,
except as disclosed in Section 3.2(r) of the Disclosure Schedule, no claims have
been denied coverage during the last three years. The Sellers have delivered to
the Buyer a correct and complete copy of each insurance policy listed in Section
3.2(r) of the Disclosure Schedule.
(s) Litigation. Section 3.2(s) of the Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree, ruling, settlement, claim or charge or (ii)
is a party or, to the knowledge of any Seller, is threatened to be made a party
to any action, suit, proceeding, hearing, or investigation of, in, or that could
come before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator, none of which,
individually or in the aggregate, will result in a Material Adverse Effect.
(t) Product Warranty. Substantially all of the products
manufactured, sold, leased, and delivered by the Company have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and the Company has no 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) for replacement or repair thereof or other damages in connection
therewith, subject only to the reserve for product warranty claims set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in accordance
with past custom and practice of the Company, for which the Company will have to
make payment, grant credits, pay damages, or repair or replace product within 90
days of the Closing. Substantially all of the products manufactured, sold,
leased, and delivered by the Company within the last 24 months are subject to
standard terms and conditions of sale or lease. Section 3.2(t) of the Disclosure
Schedule includes copies of the standard terms and conditions of sale or lease
for the Company (containing applicable guaranty, warranty, and indemnity
provisions).
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(u) Product Liability. The Company has no 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) exceeding $50,000 individually or in the
aggregate arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Company.
(v) Books and Records. The stock records of the Company fairly
and accurately reflect in all material respects the record ownership of all of
the outstanding shares of the Company's capital stock. The other books and
records of the Company, including financial records, minute books and books of
account, are complete and are accurate in all material respects.
(w) Employees. To the knowledge of any of the Sellers, no
executive, key employee, or significant group of employees plans to terminate
employment with the Company during the next 12 months. Except as set forth in
Section 3.2(w) of the Disclosure Schedule, the Company is not a party to or
bound by any collective bargaining agreement, nor has it experienced any strike
or material grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past three years. The Company has not committed
any material unfair labor practice. The Sellers have no knowledge of any
organizational or decertification effort presently being made or threatened by,
on behalf of or against any labor union with respect to any employee of the
Company. The Company has not engaged in any plant closing or employee layoff
activities that would violate or require notification pursuant to, the Worker
Adjustment Retraining and Notification Act of 1988, as amended, or any similar
state or local plant closing or mass layoff statute, rule or regulation.
(x) Employee Benefits.
(i) Section 3.2(x) of the Disclosure Schedule lists
each Employee Benefit Plan.
(A) Subject to such retroactively effective
amendments as may be required or permitted under
applicable law, each such Employee Benefit Plan (and
each related trust, insurance contract, or fund)
complies in form and in operation in all material
respects with its terms and with the applicable
requirements of ERISA, the Code, any applicable
collective bargaining agreement, and other applicable
laws;
(B) All required reports and descriptions
(including Form 5500 annual reports, summary annual
reports, PBGC-l's, and summary plan descriptions)
have been filed or distributed as required by
applicable law 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
("COBRA") have been met in all material respects with
respect to each
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such Employee Benefit Plan which is an Employee
Welfare Benefit Plan and which is subject to such
requirements;
(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 will, prior to Closing, be paid to each
such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the
Company. All premiums or other payments for all
periods ending on or before the Closing Date have
been or will, prior to Closing, be paid with respect
to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and which is not a
standardized, prototype plan, has received a
determination letter from the Internal Revenue
Service that such Employee Benefit Plan is qualified
under Code Section 401(a), and nothing has occurred
since the date of such determination that could
adversely affect the qualification of such Employee
Benefit Plan
(E) Sellers have delivered to Buyer correct
and complete copies of the plan documents and summary
plan descriptions, the most recent determination
letter received from the Internal Revenue Service, if
applicable, the three most recent Form 5500 Annual
Reports, if applicable, and all related trust
agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit
Plan.
(ii) With respect to each employee benefit plan (as
such term is defined in Section 3(3) of ERISA) that the
Company maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been required
to contribute:
(A) There have been no Prohibited
Transactions. No fiduciary has any liability for
material breach of fiduciary duty or any other
material 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 Seller, threatened.
(B) The Company has not incurred any known
material liability (whether asserted or unasserted,
whether absolute or contingent, whether
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accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) to
the PBGC (other than PBGC premium payments) or
otherwise under Title IV of ERISA (including any
withdrawal liability) or under the Code.
(iii) The Company does not contribute to and never
has contributed to, or ever been required to contribute to,
any Multiemployer Plan, and the Company has no material
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 withdrawal liability, under
any Multiemployer Plan.
(iv) Except as set forth in Section 3.2(x)(iv) of the
Disclosure Schedule, the Company does not maintain or
contribute to and has never maintained or contributed to, or
ever 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 COBRA).
(y) Environment, Health, and Safety.
(i) Except as set forth in Section 3.2(y)(i) of the
Disclosure Schedule, the Company has complied and is in
compliance with all Environmental, Health, and Safety
Requirements.
(ii) Except as set forth in Section 3.2(y)(ii) of the
Disclosure Schedule, without limiting the generality of the
foregoing, the Company has obtained and complied with, and is
in compliance 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; a list of all
such permits, licenses and other authorizations is set forth
in Section 3.2(y)(ii) of the Disclosure Schedule.
(iii) Except as set forth in Section 3.2(y)(iii) of
the Disclosure Schedule, the Company has not received any
written or oral notice, report or other information regarding
any actual or alleged violation 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 any of them or
its facilities arising under Environmental, Health, and Safety
Requirements.
(iv) Except as set forth in Section 3.2(y)(iv) of the
Disclosure Schedule, none of the following exists at any
property or facility owned or operated by the Company: (1)
underground storage tanks, (2) asbestos-containing material in
any
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form or condition, (3) materials or equipment containing
polychlorinated biphenyls, or (4) landfills, surface
impoundments, or disposal areas.
(v) Except as set forth in Section 3.2(y)(v) of the
Disclosure Schedule, the Company has not, to the knowledge of
any Seller, 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 or would give rise to
liabilities, including any 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.
(vi) To the knowledge of any Seller, neither this
Agreement nor the consummation of the transaction that is the
subject of this Agreement will result in any obligations 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) Except as set forth in Section 3.2(y)(vii), the
Company has not, 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.
(viii) Except as set forth in Section 3.2(y)(viii) of
the Disclosure Schedule, to the knowledge of any of the
Sellers, no facts, events or conditions relating to the past
or present facilities, properties or operations of the Company
will prevent, hinder or limit continued compliance 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.
(z) Transaction With Affiliates. Except as set forth in
Section 3.2(z) of the Disclosure Schedule, neither the Company nor any of its
shareholders, directors, officers or employees nor any of their respective
relatives or Affiliates is involved in any business arrangement or relationship
with the Company (whether written or oral), and neither the Company's nor any of
its shareholders, directors, officers or employees nor any of their
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respective relatives or Affiliates owns any property or right, tangible or
intangible, which is used by the Company.
(aa) Funded Debt. Except as set forth in Section 3.2(aa) of
the Disclosure Schedule, the Company has no outstanding Funded Debt nor is a
guarantor or is otherwise responsible for any liability or obligation (including
indebtedness) of any other Person.
(bb) Board Recommendation. The board of directors of the
Company, by written consent dated as of March 16, 1998, a copy of which is
attached hereto as Exhibit C, has by unanimous vote of the directors signing
such consent (who constituted 100% of the directors then in office) (a)
determined that this Agreement and the transactions contemplated hereby, taken
together, are fair to and in the best interests of the stockholders of the
Company, (b) adopted resolutions to recommend that the holders of the Shares
approve this Agreement and the transactions contemplated, herein.
(cc) Disclosure. Subject to the provisions of Section 5.4 and
Article X hereof, and all matters disclosed to the Buyer in the annexes,
exhibits, and the Disclosure Schedule, which are attached hereto and
incorporated herein by reference, the representations and warranties contained
in this Section 3.2 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 3.2 not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though the
Closing Date were substituted for the date of this Agreement throughout this
Article IV) as follows:
Section 4.1 Organization of Buyer. Buyer is a corporation organized
duly, validly existing and in good standing under the laws of the State of
Wisconsin, and has all requisite power and authority to conduct its business as
it is presently being conducted and to own and lease its properties and assets.
Section 4.2 Authorization; Validity. Buyer has all necessary power and
authority to enter into this Agreement and have taken all action necessary
(including, without limitation, obtaining authorization from its board of
directors) to consummate the transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly executed and delivered by
Buyer and is a legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms.
Section 4.3 No Conflict or Violation. Neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will result in:
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(a) a violation of or a conflict with any provision of the
constitutive documents of Buyer;
(b) a breach of, or a default under, any term or provision of
any contract, commitment or license to which Buyer is a party or by
which its assets are bound, which breach or default would have a
material adverse affect on Buyer's ability to consummate the
transactions contemplated herein; or
(c) a violation by Buyer of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree or award,
which violation would have a material adverse effect on Buyer's ability
to consummate the transactions contemplated hereby.
Section 4.4 Consents and Approvals. Except as set forth in Section 4.4
of the Disclosure Schedule, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, or any other person or entity, is required to be made or obtained by
Buyer in connection with the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated herein, except
for consents, approvals or authorizations, declarations, filings or
registrations, the failure of which to obtain would not in the aggregate impair
the ability of Buyer to perform its obligations hereunder.
Section 4.5 No Brokers. Neither Buyer nor any affiliate of Buyer has
entered into or will enter into any agreement, arrangement or understanding with
any Person which will result in any claim against or obligation of Seller for
the payment of any fees or commissions to any broker, finder or agent or for any
similar payment to any such Person in connection with this Agreement or the
transactions contemplated herein.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
Section 5.1 Access to Information and Records. At or prior to the
Closing Date, Buyer and its financing sources shall be entitled, through their
respective representatives and agents, to make such investigation of the assets,
properties, business and operations of the Company and such examination of the
books, records, Tax Returns, financial condition and operations of the Company
as Buyer or its Lender may reasonably desire. Any such investigation and
examination shall be conducted at reasonable times and under reasonable
circumstances and the Company and Sellers shall cooperate fully therein,
including with respect to all communications with the Company's customers,
suppliers and lenders. Except as is otherwise provided herein, no investigation
by Buyer shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Company or Sellers under this Agreement. In order
that Buyer and its lenders may have full opportunity to make such a business,
accounting and legal review, examination or investigation as it or they may wish
of the business and affairs of the Company, the Company shall furnish the
representatives of Buyer and its lenders during such period with all such
information and copies of such documents concerning the affairs of the Company
as such representatives may reasonably request and cause its officers,
employees, consultants, agents,
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accountants and attorneys to cooperate fully with such representatives in
connection with such review and examination and to make full disclosure to Buyer
and its lenders of all material facts affecting the financial condition and
business operation of the Company.
Section 5.2 Confidentiality/Nondisclosure. Until the Closing, Buyer and
its Affiliates shall keep all documents or information obtained from Company,
Sellers, or its or their officers, directors, employees, agents, or
representatives, in whatever form existing, and all information regarding this
transaction, confidential and shall not use the same in any manner except for
the performance of due diligence on the transactions contemplated by this
Agreement. In the event this Agreement is terminated for any reason and the
Closing does not occur, Buyer and its Affiliates shall keep all such documents
and information, and all information relating to the transactions contemplated
herein, confidential and shall not disclose the same to any Person, nor use any
information or documents obtained from the Company or the Sellers or its or
their officers, directors, employees, agents, or representatives concerning its
assets, properties, business, finances, or operations, of the Company for their
own benefit, unless (a) the same are generally available to the public or are
readily ascertainable from public or published information, or trade sources,
(b) already known or subsequently developed by Buyer independently of any
investigation of the Sellers or Company or (c) to the extent such disclosure is
required by law. In the event this transaction does not close for any reason,
Buyer and its Affiliates shall promptly return or destroy all such documents and
information, all Company Confidential Information, and all compilations thereof.
Buyer shall use its best efforts to cause its Affiliates and its and their
respective officers, directors, employees, agents, accountants, attorneys and
consultants to comply with the terms of this Section 5.2 regarding return,
destruction, nondisclosure, or use of any such documents or information.
Section 5.3 Conduct of Business.
(a) From the date hereof through the Closing Date, the Sellers
shall cause the Company to and the Company shall (i) conduct its
business in the ordinary course in the same manner as it has been
conducted since the date of the Most Recent Financial Statements
(except as otherwise expressly contemplated herein) and (ii) without
limiting the generality of the foregoing, not undertake any of the
actions specified in Section 3.2(h) without the prior written consent
of the Buyer; provided, however, that the Company may, after full
disclosure to Buyer of the same, undertake all or any combination of
the following activities in connection with the operation of its
business, provided, however, that the aggregate amount expended by the
Company in connection with each of the items defined in subparagraphs
(i)(A), (B), (C), (D), (E) and (F) below shall not exceed $1,500,000 in
the aggregate:
(i) Subject to reduction of the Cash Purchase Price
to the extent the same results in any increase in Funded Debt
or results in a reduction in Working Capital:
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(A) implement salary and/or wage increases
and payment of bonuses to employees, including
shareholder employees, to the extent the same are
made in the Ordinary Course of Business;
(B) make one time bonus payments in the form
of distributions of shares of the Company's common
stock from treasury (all of which shall be Shares
sold hereunder) in the amounts and to the Company's
employees listed in Section 5.3(a)(i)(B) of the
Disclosure Schedule to recognize their contribution
to the Company's success;
(C) make distributions to Shareholders in
the form of cash dividends in an amount not to exceed
$1.00;
(D) compromise, settle or otherwise satisfy
the obligation which the Company owes Eugene Deeter
and/or Jacqueline Deeter under the terms of the
Consulting Agreement and/or the Deferred Compensation
Agreements between Eugene A. Deeter and the Company,
complete and correct copies of which have previously
been provided to Buyer, provided that any such
agreement shall provide for the full release of any
and all claims against and obligations of the Company
and shall otherwise be on terms and conditions
reasonably acceptable to Buyer;
(E) purchase the Real Property identified in
Section 3.2(l) of the Disclosure Schedule from Mr.
Eugene A. Deeter in the event the same has not been
acquired prior to the date hereof;
(F) pay in full all amounts due and owing to
shareholders under the agreements for redemption of
stock identified in Section 3.2(h)(xi) of the
Disclosure Schedule; and
(G) pay the costs and expenses of the
Sellers and Company in connection with the
transaction contemplated hereby, which have been
incurred prior to Closing.
(ii) Without further adjustment of the Purchase
Price, except as provided in Section 2.4(b):
(A) undertake and pay or contract for the
following capital improvements for a cost not to
exceed the amount set forth below:
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Capital Improvements Estimated Cost
-------------------- --------------
1) New cupola baghouse $491,247
2) New cooling tower $ 54,150
3) New cupola shell $519,184
4) Concrete work in yard $ 77,412
5) Storage bunker walls $ 10,000
(B) eliminate any and all restrictions on
and waive and agree to forego any and all rights,
options, or first rights of refusal which the Company
may now have or which may arise at any time in the
future with respect to the purchase or redemption of
any of the shares of the issued and outstanding stock
of the Company insofar as such restrictions, rights,
options, or first rights of refusal relate to or
would otherwise relate to or arise out of or in
connection with the sale of stock or other
transactions contemplated in this Agreement;
(C) authorize the cancellation of all shares
currently held by the Company as treasury stock; and
(D) deliver to Sellers and each officer,
director or executive employee of the Company
identified in Section 3.2(a) of the Disclosure
Schedule, a release agreement in the form set forth
in Section 5.3(a)(ii)(D) of the Disclosure Schedule;
provided, that nothing contained therein shall in any
way limit Buyer's right with respect to the breach of
any provision of this Agreement.
(b) Notwithstanding the provisions of Section 5.3(a), on or
prior to the Closing Date the Company shall distribute or assign the
following assets as provided below:
(i) distribute the insurance policies set forth on
Exhibit D hereto to the named insured or his or her designee
and as to which the Company shall have no further obligation
or liability in respect of any premium or other amount payable
thereunder;
(ii) distribute 2 cars (a Ford Explorer VIN
1FM0U34X4UA77265 and a Honda Prelude VIN 3HMBB22SSPCO 14457)
to Douglas Deeter;
(iii) distribute (1) Car (1990 Lincoln Town Car VIN
8916) to Eugene A. Deeter;
(iv) distribute 10 UNL Football tickets to Douglas
Deeter; and
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(v) unless settled prior to Closing, assignment of
all of the Company's claims and causes of action against
International Molding Machine, including but not limited to
its pending suit to the Stockholders as their interests appear
immediately prior to Closing.
Section 5.4 Preservation of Business. From the date hereof through the
Closing Date and except as is otherwise specifically provided herein, each of
the Company and Sellers shall use their best efforts to (i) preserve intact the
business, assets, properties and organizations of the Company; (ii) keep
available the services of the present officers, employees, consultants and
agents of the Company; and (iii) maintain its present suppliers and customers
and to preserve its goodwill.
Section 5.5 Notice of Events. In making representations, warranties and
covenants to disclose and/or deliver information and/or documents as set forth
herein, it is the intent of both parties to require and make, respectively, full
and good faith disclosure in all material respects in order to assure that each
realize the full benefits of their respective bargain hereunder.
Accordingly, each of the parties hereto agrees as follows:
(a) to the extent that any state of facts, items, or
information become known to or are discovered by one of the parties and
are known by that party to materially contradict any of the
representations or warranties made by the other party hereunder, or in
the event any party is unable to obtain any authorizations, consents,
or approval as otherwise required hereunder, then in all events the
same shall be promptly disclosed in writing to the other party;
(b) to the extent that any such items or information or state
of facts are disclosed or any such authorization, consent, or approval
cannot, after the exertion of commercially reasonable efforts as
required in Section 5.8 hereof, be obtained and are not material, the
same shall not be deemed to constitute a breach or justify rescission
or require a delay in Closing; provided that the same can be and are in
fact cured at the sole cost and expense of the Sellers in the case of
any representation or warranty of the Company or the Sellers, or the
Buyer, in the case of any representation and warranties of the Buyer,
in each case, to the reasonable satisfaction of the other party to whom
such representation or warranty was made prior to or at Closing; and
(c) to the extent that any such items, information, or state
of facts are disclosed or any such authorization, consent, or approval
cannot, after the exertion of best commercially reasonable efforts as
required in Section 5.8 hereof, be obtained and to the further extent
that the same cannot reasonably be cured prior to Closing, then unless
otherwise agreed, the other party shall have the option, as such
party's sole and exclusive remedy, to (i) waive such item(s),
information, or state of facts or such authorization, consent, or
approval and proceed to Closing, or (ii) terminate this Agreement prior
to Closing in accordance with Section 6.1.
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Section 5.6 Exclusivity. Until the earlier of the Closing or the
termination of this Agreement, none of the Sellers or the Company (collectively,
the "Company Group") shall initiate, solicit, entertain, negotiate, accept or
discuss, directly or indirectly, or encourage inquiries or proposals (each, an
"Acquisition Proposal") with respect to, or furnish any information relating to
or participate in any negotiations or discussions concerning, or enter into any
agreement with respect to, any acquisition or purchase of all or a substantial
portion of the business, assets, properties, capital stock or capital stock
equivalents of the Company or any of its Subsidiaries (a "Potential Sale"),
whether by merger, combination, sale of stock, sale of assets, or otherwise, or
enter into any agreement, arrangement or undertaking requiring it to abandon,
terminate or fail to consummate the transaction contemplated by this Agreement.
The Sellers shall, and shall cause each other member of the Company Group to,
immediately cease and cause to be terminated any existing activities, including
discussions or negotiations with any parties, other than Buyer, conducted prior
to the date hereof with respect to any Acquisition Proposal. The Sellers shall
(i) immediately inform Buyer of any inquiries any member of the Company Group
receives after the date hereof concerning an Acquisition Proposal or Potential
Sale and provide Buyer with copies of all correspondence or other documents
received in connection therewith and (ii) inform the Persons sending such
inquiries, requests or proposals that the Company is bound by an exclusivity
arrangement (without any reference to Buyer, its Affiliates, or its potential
financing sources). The Sellers represent that each is not, nor is the Company a
party to or bound by any agreement with respect to an Acquisition Proposal other
than under this Agreement. Each of the Sellers shall use their best efforts to
cause the Company and its officers, directors, agents, representatives and
advisors to comply with the provisions of this Section 5.6.
Section 5.7 Non-Competition; Non-Interference; Non-Solicitation. As a
significant inducement to Buyer to enter into and perform its obligations under
this Agreement, on the Closing Date Douglas Deeter ("Deeter") shall have entered
into a consulting agreement with Buyer substantially in the form of Exhibit E
hereto (the "Consulting Agreement") and a non-competition agreement with Buyer
in substantially the form of Exhibit F hereto (the "Non- Competition
Agreement").
Section 5.8 Consents and Best Efforts. Buyer, Sellers and the Company
will, as soon as reasonably practicable, commence to take all commercially
reasonable actions required to obtain all consents, approvals, waivers and
agreements of, and to give all notices and make all other registrations or
filings with, any third parties, including governmental authorities, including
any such filing required under the HSR Act, necessary to authorize, approve or
permit the full and complete sale, conveyance, assignment, transfer and delivery
of the Shares and the continuance in full force and effect of the permits,
contracts and other agreements set forth on the Disclosure Schedules, and shall
cooperate with each other with respect thereto; provided, that (i) any filing
fee under the HSR Act shall be paid by Buyer and (ii) it shall be the obligation
of the Company and Sellers, consistent with the following sentence, to procure
all authorizations, consents and approvals set forth in Section 5.8 of the
Disclosure Schedule. Subject to the terms and conditions herein provided, each
of the parties hereto covenants and agrees to use all commercially reasonable
efforts to take, or cause to be taken, all actions, or do, or cause to be done,
all things necessary, proper or advisable under applicable laws and regulations,
to
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consummate and make effective as promptly as practicable the transactions
contemplated hereby and to cause the fulfillment of the Parties' obligations
hereunder.
Section 5.9 Public Announcements. The timing and content of all
announcements regarding any aspect of this Agreement or the transactions
contemplated hereto to the financial community, government agencies, employees
or the general public shall be mutually agreed upon in advance by the Parties
hereto; provided, that each party hereto upon reasonable advance notice to the
other party as to the timing and content thereof, may make any such announcement
which it in good faith believes, based on advice of counsel, is necessary in
connection with any requirement of law or regulation, it being understood and
agreed that each party shall promptly provide the other parties hereto with
copies of any such announcement; and provided further that Buyer or its
Affiliates may, following Closing, make any announcement or disclosure to
current or future financing sources or subsequent purchasers or assignees of
substantially all of the capital stock or assets of Buyer or any Subsidiary or
Affiliate thereof without consent of or disclosure to the Company or the
Sellers.
Section 5.10 Appointment of Stockholder Representative. By execution of
a counterpart of this Agreement, the Stockholders hereby appoint Douglas Deeter
to act as representative of the Stockholders (the "Stockholder Representative")
in all matters provided for herein, including without limitation all matters
related to Article X. In the event of the death, incapacity, removal or
resignation of Douglas Deeter, a successor Stockholder Representative shall be
appointed by vote of a majority of the Stockholders.
Section 5.11 HSR Act Filings. Each Party shall, in cooperation with the
other Parties, file or cause to be filed any reports or notifications that may
be required to be filed by it under the HSR Act, with the Federal Trade
Commission and the Antitrust Division of the Department of Justice, shall
request early termination of all applicable waiting periods under the HSR Act
and shall furnish to the others all such information in its possession as may be
necessary for the completion of the reports or notifications to be filed by the
others. Prior to making any communication, written or oral, with the Federal
Trade Commission, the Antitrust Division of the federal Department of Justice or
any other governmental agency or authority or members of their respective staffs
with respect to this Agreement or the transactions contemplated hereby, each
Party shall consult with the other Parties with respect thereto.
ARTICLE VI
TERMINATION
Section 6.1 Termination. This Agreement may be terminated and the sale
and purchase of the Shares may be abandoned, notwithstanding the approval
thereof by the Sellers or the Company, at any time prior to Closing:
(a) by mutual consent of the Sellers and Buyer;
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(b) by either the Sellers or Buyer, if the sale and purchase
of the Shares shall not have been consummated on or before March 31,
1998 (the "Termination Date");
(c) by Buyer, in the event that the conditions to its
obligations set forth in Article VIII hereof have not been satisfied or
waived at or prior to the Termination Date;
(d) by Buyer if any Buyer Representative has actual knowledge
of any fact, event, condition or circumstance, and such Buyer
Representative knows or would be reasonably expected to know that the
existence of such fact, event, condition or circumstance constitutes a
breach of any representation or warranty of the Sellers giving rise to
the right of Buyer to terminate this Agreement under Section 5.5(c);
(e) by the Sellers in the event that the conditions to its
obligations set forth in Article VII hereof have not been satisfied or
waived at or prior to the Termination Date;
(f) by the Sellers if any Seller has actual knowledge of any
fact, event, condition or circumstance and such Seller knows or would
be reasonably expected to know that the existence of such fact, event,
condition or circumstance constitutes a breach of any representation or
warranty of the Buyer, which breach gives rise to the right of the
Sellers to terminate this Agreement under Section 5.5(c);
(g) by Buyer, if the Sellers fail to unanimously adopt and
approve this Agreement and the sale and purchase of the Shares on or
before March 10, 1998;
Section 6.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 6.1 hereof, all rights and obligations of the Parties
hereunder shall terminate and no Party shall have liability to the other Party,
except for obligations of the Parties hereto in Sections 5.2, 5.9, 11.8 and
11.11, which shall survive the termination of this Agreement, and except that
nothing herein will relieve any Party from liability for any breach of any
agreement or covenant contained herein prior to such termination.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligation of Sellers to sell and transfer the Shares to Buyer on
the Closing Date are subject, in the discretion of the Sellers, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by the Sellers in their sole discretion:
Section 7.1 Representations, Warranties and Covenants. All
representations and warranties of Buyer contained in this Agreement shall be
true and correct at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Buyer shall have
performed all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date.
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Section 7.2 No Injunction. No injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
by this Agreement.
Section 7.3 HSR Act Waiting Period. All applicable waiting periods
related to the HSR Act shall have expired.
Section 7.4 Opinion of Counsel. Buyer shall have delivered to Seller an
opinion of Baird Holm, Attorneys at Law, special Nebraska counsel to Buyer,
substantially in the form of Exhibit G hereto.
Section 7.5 Payments. Buyer shall have unconditionally tendered,
subject only to the satisfaction of the terms and conditions of this Agreement,
the Cash Purchase Price, the Seller Note and the L/C to Sellers and the Escrow
Deposit to the Escrow Agent in accordance with Section 2.3.
Section 7.6 Consulting Agreement. Buyer shall have executed and
delivered the Consulting Agreement with Douglas Deeter.
Section 7.7 Documents to be Delivered by Buyer. At the Closing, Buyer
shall have delivered to Sellers the following documents, in each case duly
executed or otherwise in proper form:
(a) Compliance Certificate. A certificate signed by the chief
executive officer of the Buyer that each of the representations and
warranties made by the Buyer in this Agreement is true and correct in
all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or
given on and as of the Closing Date, and that the Buyer has performed
and complied in all material respects with all of its obligations under
this Agreement which are to be performed or complied with by it prior
to or at the Closing Date.
(b) Certified Resolutions. Certified copies of the resolutions
of the Board of Advisors and member(s) of Buyer, authorizing and
approving this Agreement and the consummation of the transactions
contemplated hereby.
(c) Certificate of Formation; Good Standing. (i) a copy of the
Certificate of Incorporation of Buyer, certified as of a recent date by
the Secretary of State of the state of its incorporation, and (ii) a
Certificate of Good Standing for the Buyer from the Secretary of State
of the state of its incorporation, dated not more than ten (10) days
prior to the Closing Date.
(d) Consents and Approvals. Material consents, if any, of all
third parties necessary for the Buyer to execute, deliver and perform
this Agreement.
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(e) Incumbency Certificate. Incumbency certificates relating
to each person executing (as corporate officer or otherwise on behalf
of another person) any document executed and delivered to the Sellers
or the Company pursuant to the terms hereof.
(f) Escrow Agreement. The Escrow Agreement duly executed by
the Buyer and the Escrow Agent.
(g) Other Documents. All other documents, instruments or
writings required to be delivered to Seller at or prior to the Closing
pursuant to this Agreement.
Section 7.8 All Proceedings To Be Satisfactory. All corporate and other
proceedings to be taken by the Buyer in connection with the authorization and
approval of this Agreement, and by Buyer's Parent with respect to the
authorization or approval of the Seller Note, shall be reasonably satisfactory
in form and substance to the Sellers and their counsel.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase the Shares as provided hereby are
subject, in the discretion of Buyer, to the satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
the Buyer in its sole discretion:
Section 8.1 Representations, Warranties and Covenants. All
representations and warranties of Sellers and the Company contained in this
Agreement shall be true and correct when made and, except as contemplated by
this Agreement. at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and Seller and the Company
shall have performed all agreements and covenants required hereby to be
performed by either of them prior to or at the Closing Date.
Section 8.2 Consents; Releases. All consents, approvals and waivers
from governmental authorities and other parties required or necessary as a
result of the transactions contemplated hereby, including, without limitation,
those set forth in Section 8.2 of the Disclosure Schedule, shall have been
obtained, including under the HSR Act. Releases reasonably satisfactory in form
and substance to Buyer and its counsel shall have been obtained from all of the
persons and entities set forth in Section 8.2 of the Disclosure Schedule.
Section 8.3 No Injunction. No injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
by this Agreement.
Section 8.4 No Material Adverse Effect. During the period from December
31, 1997 to the Closing Date, no event shall have occurred or be continuing
(including any litigation) which has had or could reasonably be expected to have
a Material Adverse Effect.
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Section 8.5 Funded Debt. Sellers shall have delivered to Buyer duly
executed payoff letters from each lender or creditor in respect of any Funded
Debt outstanding as of the Closing Date, setting forth the total outstanding
amount of such Funded Debt, and an acknowledgment that upon receipt of payment
in full of such amount, all Funded Debt shall be paid in full, all arrangements
pursuant to which such credit was advanced shall have been terminated or
cancelled and each such lender shall take all such other actions as may be
necessary to discharge all Liens in favor of any such lender.
Section 8.6 Stockholders Approval. This Agreement, and the transactions
contemplated thereby shall have been unanimously approved by all the votes
entitled to be cast with respect thereto by the holders of the outstanding
Shares; and dissenters' rights shall not have been asserted with respect to any
of the issued and outstanding Shares.
Section 8.7 Documents to be Delivered by Sellers. At the Closing,
Company and Sellers shall have delivered to Buyer the following documents, in
each case duly executed or otherwise in proper form:
(a) Stock Certificate(s). Stock certificates representing all
of the outstanding Shares, duly endorsed in blank or otherwise
acceptable for transfer, with all restrictive legends (if any) either
removed or properly canceled.
(b) Stock Options, etc. Evidence of the exercise, conversion
or cancellation of all options, warrants, convertible securities and
other rights or securities disclosed in Section 3.2(b) of the
Disclosure Schedule, in form and substance satisfactory to Buyer.
(c) Compliance Certificate. A certificate signed by the chief
executive officer of the Company that each of the representations and
warranties made by the Company in this Agreement is true and correct in
all material respects on and as of the Closing Date with the same
effect as though such representations and warranties had been made or
given on and as of the Closing Date, and that the Company has performed
and complied in all material respects with all of its obligations under
this Agreement which are to be performed or complied with on or prior
to the Closing Date.
(d) Opinion of Counsel. A written opinion of Cline, Williams,
Wright, Johnson & Oldfather, counsel to the Company, dated as of the
Closing Date, addressed to Buyer, substantially in the form of Exhibit
H hereto.
(e) Certified Resolutions. Certified copies of the resolutions
of the Board of Directors and the stockholders of the Company,
authorizing and approving this Agreement and the consummation of the
transactions contemplated hereby.
(f) Escrow Agreement. The Escrow Agreement duly executed by
Sellers and Escrow Agent.
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(g) Articles; Bylaws; Good Standings. (i) A copy of the
articles of incorporation of the Company certified as of a recent date
by the Secretary of State of the state of incorporation, (ii) a copy of
the bylaws of the Company certified by the secretary of the Company and
(iii) certificates of good standing for the Company from the Secretary
of State of the state of incorporation of each such company and from
each other jurisdiction in which such company is required to qualify to
do business, in each case dated not more than ten (10) days prior to
the Closing Date.
(h) Consents and Approvals. Material consents, if any, of
third parties necessary for the Company, or the Stockholders to
execute, deliver and perform this Agreement.
(i) Incumbency Certificate. Incumbency certificates relating
to each person executing (as corporate officer or otherwise on behalf
of another person) any document executed and delivered to Buyer
pursuant to the terms hereof.
(j) Consulting Agreement; Non-Competition Agreement. Buyer
shall have received the Consulting Agreement and the Non-Competition
Agreement executed by Douglas Deeter.
(k) Lien Releases. Fully executed UCC-3 Termination Statements
and other terminations and/or releases necessary to terminate or
release all Security Interests in, and Liens on, any assets of the
Company, except for Security Interests or Liens arising out of or in
connection with Equipment Leases set forth in Section 8.7(k) of the
Disclosure Schedule.
(l) General Releases. The releases in the form set forth in
Section 8.7(l) of the Disclosure Schedule executed by each Stockholder.
(m) Resignations. Written resignations and releases of the
directors and officers of the Company and its Subsidiary.
(n) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement and such other certificates of authority and
documents as Buyer may reasonably request.
Section 8.8 Amendment of Restated Articles. The Company shall have
amended its Articles of Incorporation to remove therefrom any restrictions on
the transfer of Shares.
Section 8.9 Absence of Litigation. No action, suit, investigation or
proceeding shall have been commenced or threatened by a governmental agency or
third party against Buyer, the Company or any of the Affiliates, officers or
directors of any of them, with respect to the transactions contemplated hereby,
challenging the rights of the parties hereto to consummate such transactions or
which reasonably could be expected to have a material adverse effect.
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Section 8.10 Management Arrangements. Buyer shall have entered into
arrangements with the following named individuals to continue their employment,
on terms and conditions satisfactory to Buyer, provided that such terms shall
not require any such individual to accept a reduction in salary: Jeff Jenkins,
John Moylan, Jeff Tomhave.
Section 8.11 Real Property.
(a) Buyer shall have received each of the deliveries required
under Section 2.7.
(b) All Real Property shall be in substantially the same
condition and repair as that on the date of this Agreement, reasonable
wear and tear excepted.
(c) Seller shall have timely paid any and all real property
transfer, transfer gains, stamp and other similar taxes, if any,
assessed in connection with the transactions contemplated by this
Agreement and shall have delivered evidence satisfactory to Buyer and
the Title Company of the payment of such taxes.
(d) Purchaser shall have received from each Seller that owns
any of the Owned Property an affidavit (1) stating that such Seller is
not a "foreign person", as defined in Section 1445(f)(3) of the
Internal Revenue Code, (2) setting forth such Seller's taxpayer
identification number, (3) stating that such Seller intends to file a
U.S. income tax return with respect to the sale of such Owned Property,
and (4) granting Buyer permission to furnish a copy of such affidavit
to the Internal Revenue Service.
Section 8.12 Financing. Buyer shall have received cash proceeds of
financing in an amount necessary to consummate the purchase of the Shares and to
pay all fees and expenses in connection therewith and to provide for ongoing
working capital needs of Buyer and the Company, and having such terms and
conditions as are satisfactory to Buyer in its sole discretion.
Section 8.13 Working Capital. The determination of Estimated Closing
Working Capital and the Estimate Closing Balance Sheet shall be reasonably
acceptable to Buyer and the Target Working Capital shall not exceed the
Estimated Working Capital by more than $1,000,000.
Section 8.14 All Proceedings To be Satisfactory. All corporate and
other proceedings to be taken by the Sellers in connection with the transactions
contemplated hereby, and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Buyer and its counsel, and the Buyer
and said counsel shall have received all such counterpart originals or certified
or other copies of such documents as it or they may reasonably request.
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ARTICLE IX
POST-CLOSING COVENANTS
Section 9.1 Further Assurances. On and after the Closing Date, Sellers
and Buyer will take all appropriate action and execute (or cause to be executed)
all documents, instruments or conveyances of any kind which may be reasonably
necessary or advisable to carry out any of the provisions of this Agreement.
Section 9.2 Tax Matters.
(a) Except for such tax liability as may arise out of or in
any way relate to any election made by Buyer under Section 338 of the
Code, all of which shall be and remain the sole obligation of Buyer,
Sellers shall be responsible for the payment of any Taxes that may be
imposed on the Company with respect to any taxable periods ending on or
before the Date of Closing. Buyer and the Company shall be responsible
for the payment of any Taxes that may be imposed on the Company for any
taxable period beginning after the Closing Date.
(b) Seller shall file or cause to be filed when due all Tax
Returns of the Company for the taxable periods ending as of the Closing
Date and except as noted in Section 9.2(a) above, shall pay or cause to
be paid the Taxes shown to be due on any such Tax Return. In connection
with the filing of such Tax Return with respect to the taxable period
ending on the Closing Date, the Sellers shall be entitled to any tax
credit or credits allowable to the Company attributable to periods up
to and including the Closing under the Employment and Investment Growth
Act, Neb. Rev. Stat. ss. 77-4101, et seq. (Reissue 1996), which the
Sellers shall allocate amongst themselves in accordance with their
existing pro rata ownership interests in the Shares.
(c) The Closing is intended to terminate the Company's taxable
year. If for any reason, the Closing does not terminate the Company's
current taxable year with respect to any Taxes, then Buyer and the
Company shall be responsible for the payment of the portion of the
Company's Taxes attributable to the portion of such taxable year
beginning after the Closing Date. For this purpose, Taxes shall be
apportioned between the pre-Closing and post-Closing portions of the
Company's current taxable year according to when the income was
actually earned except that exemptions, allowances or deductions that
are calculated on an annual basis shall be allocated to each such
portion of the taxable period on a daily basis.
(d) Sellers shall be entitled to all losses or deductions
attributable to taxable periods ending on or before the Closing Date
and all credits used to offset Taxes imposed on the Company for any
Pre-Closing Period and all refunds of Income Taxes for which Sellers
are responsible under Section 9.2 hereof, and Buyer and the Company
agree to remit to the Stockholder Representative on behalf of Sellers
any such refund received by Buyer or the Company net of any Taxes
imposed on the recipient by reason of the receipt
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thereof and net of any fees and expenses incurred by Buyer to process
the claim for refund.
(e) Buyer and the Company shall cooperate fully with the
Stockholder Representative, and among other things shall prepare and
submit to the Stockholder Representative such tax data and other
information as may be required for the preparation by Sellers of any
Tax Return for Sellers' taxable year which includes the Closing Date or
which otherwise relates to the Company's pre-Closing operations. Such
data and other information shall be prepared on a basis consistent with
that prepared for prior Pre- Closing Periods and shall be submitted to
the Stockholder Representative at such time as shall reasonably enable
Sellers to comply with applicable tax return filing requirements on a
timely bases.
(f) Buyer and the Company shall permit the Stockholder
Representative, and the Sellers shall permit Buyer and the Company to
have full access, at any reasonable time and from time to time after
the Closing Date, to all pre-Closing Tax Returns and all books and
records, wherever located, of the Company, or Sellers relating to the
Company, relevant to such Tax Returns. Sellers and Buyer shall preserve
such information until the expiration of all applicable statutes of
limitations (including any waivers or extensions thereof), and shall
make such information available to the other party as may be reasonably
required by the other party in connection with any tax examination of
or preparation of a Tax Return by the other party. If Buyer or the
Company shall receive a notice of a proposed adjustment to Income Taxes
for any Pre-Closing Period, then Buyer shall, or shall cause the
Company to, promptly furnish to the Stockholder Representative a copy
of such notice.
(g) S Corporation Status. The Company and Sellers will not
revoke the Company's election to be taxed as an S corporation within
the meaning of Code ss.ss.1361 and 1362. The Company and Sellers will
not take or allow any action, other than the sale of the Company's
stock pursuant to this Agreement, that would result in the termination
of the Company's status as a validly electing S corporation. The
parties intend that the sale of the Shares pursuant to this Agreement
will terminate the Company's status as a validly electing S corporation
as of the Closing.
Section 9.3 Transition. Neither the Sellers nor their respective
Affiliates shall 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 Company from maintaining the same business relationships
with the Company after the Closing as it maintained with the Company prior to
the Closing. The Sellers and their Affiliates will refer all customer inquiries
relating to the businesses of the Company to the Company from and after the
Closing. The Sellers shall use their best efforts to cause the Company and its
officers, directors, employees and agents to comply with the provisions of this
Section 9.3.
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Section 9.4 Confidentiality. Following Closing, Sellers will treat and
hold as such all Confidential Company Information, refrain from using any
Confidential Company Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of Buyer,
all tangible embodiments (and all copies) of the Confidential Company
Information which are in its possession. In the event that Sellers are 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 Company Information, Sellers will
notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
Section 9.4. If, in the absence of a protective order or the receipt of a waiver
hereunder, Sellers are, on the advice of counsel, compelled to disclose any
Confidential Company Information to any tribunal or else stand liable for
contempt, Sellers may disclose the Confidential Company Information to the
tribunal; provided, that Sellers shall use their best efforts to obtain, at the
reasonable request of Buyer, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Company
Information required to be disclosed as Buyer shall designate.
ARTICLE X
INDEMNIFICATION
Section 10.1 Survival, Representations and Warranties. Except as is
otherwise expressly provided herein, the respective representations and
warranties of the Sellers and Buyers contained herein or in any certificates or
other documents delivered at the Closing shall not be deemed waived or otherwise
affected by any investigation made by any party hereto. The representations and
warranties provided for in this Agreement shall survive for eighteen (18) months
beyond the Closing Date , except that the representations and warranties set
forth in Sections 3.1, 3.2(b), (d) and (z), 4.2, and 4.5 shall survive
indefinitely, the representations and warranties set forth in Sections 3.2(k)
and (x) shall survive until 90 days following the expiration of the applicable
statute of limitations with respect thereto, and the representations and
warranties set forth in Section 3.2(y) shall survive for a period of 24 months
after the Closing Date. The provisions of this Section 10.1 shall not otherwise
limit any covenant or agreement of the Parties hereto which, by its terms,
contemplates performance after the Closing Date.
Section 10.2 Indemnification Obligation of Sellers.
(a) Subject to the provisions of subparagraphs (b) through (d)
hereof and Section 10.8, each of the Sellers jointly and severally
agree to indemnify Buyer and its Affiliates, stockholders, officers,
directors, employees, agents, representatives and successors and
assigns (collectively, the "Buyer Indemnitees") in respect of, and save
and hold each Buyer Indemnitee harmless against and pay on behalf of or
reimburse each Buyer Indemnitee as and when incurred, any Losses which
any Buyer Indemnitee suffers, sustains or becomes subject to as a
result of or by virtue of, without duplication:
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(i) any facts or circumstances which constitute a
material misrepresentation or breach by any Seller of any
representation or warranty given by Sellers to Buyer pursuant
to this Agreement (including any Schedule), or any certificate
delivered to Buyer by any Seller or the Company pursuant to
this Agreement (provided that each Seller from whom
indemnification is sought is given written notice of such Loss
during the survival period specified in Section 10.1 above);
(ii) any nonfulfillment or breach of any covenant or
agreement of the Company or any Seller set forth in this
Agreement;
(iii) any Funded Debt incurred by the Company prior to
the Closing Date and outstanding after the Closing Date, to
the extent the Cash Purchase Price was not reduced by the
same;
(iv) the Rebate Amount, if any;
(v) expenses of the Company and the Sellers incident
to this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses and
Taxes described in Section 11.8), except to the extent the
same were paid on or prior to Closing in accordance with
Section 11.8;
(vi) obligations of the Company incurred in
connection with any severance obligation arising as a result
of the transactions contemplated by this Agreement;
(vii) obligations of the Company to any former
shareholder of the Company or any Affiliate or successor in
interest of any such former shareholder;
(viii) any retroactive increase in insurance premiums
payable by the Company in respect of any insurance policy in
effect in any Pre-Closing Period, net of any retroactive
rebate or return of premium, credited or payable to the
Company after the Closing Date in respect of any insurance
policy in effect in any Pre-Closing Period; and
(ix) any obligations of the Company in connection
with the matters set forth in Section 3.2(i)(f) of the
Disclosure Schedule and Section 3.2(y)(b) of the Disclosure
Schedule.
(b) The Sellers shall not be required to indemnify the Buyer
Indemnitees in respect of any Losses Buyer suffers, sustains or becomes
subject to as a result of or by virtue of any of the occurrences
referred to in Section 10.2(a)(i) above (other than Losses arising out
of any misrepresentation or breach under any of Section 3.1 or Sections
3.2(b), (d), (f), (h)(xi), (k) and (z)) unless the aggregate of all
such Losses exceeds $200,000;
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provided, that in such event, Sellers shall be responsible for the
amount of all such Losses, except for any claim involving $5,000 or
less with respect to the breach of any representation or warranty,
other than a representation or warranty contained in any of Sections
3.2(b), (d), (f), (h)(xi), (k) and (z); and provided, further, that
only such Losses which individually exceed $5,000, shall be included in
the calculation of the $200,000 threshold described above. Sellers'
obligation to indemnify the Buyer Indemnitees under this Article X in
respect of any Losses Buyer Indemnitees may suffer, sustain, or become
subject to, as a result of or by virtue of any and all such occurrences
referred to in Section 10.2(a)(i) shall not under any circumstances
exceed $4,500,000 in the aggregate or, in the case of any individual
Seller, the portion of the Purchase Price allocable to such Seller,
including without duplication any amount recovered by way of offset
against the Escrow Deposit or the Seller Note, in connection with this
Agreement and the transaction contemplated herein.
(c) To induce Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company and the
Sellers have agreed that, subject to the provisions of this Section
10.2 and the other Sections of this Article X, the Escrow Deposit shall
be withheld and placed in escrow at Closing for the purpose of securing
the indemnification obligations to the Buyer Indemnitees under this
Article X. The Escrow Deposit shall be withheld and placed at Closing
in an interest bearing escrow account with the Escrow Agent who shall
hold and administer the Escrow Deposit in accordance with the terms of
the Escrow Agreement.
(d) Other than with respect to any Loss related to Taxes, the
Sellers shall not be required to indemnify any Buyer Indemnitees
hereunder with respect to the breach of any representation or warranty
of the Sellers or of any misstatement or omission in any certificate
delivered to the Buyer by Sellers or Company pursuant to this Agreement
as a result of the existence of any fact, event, condition or
circumstance, if, (i) for the avoidance of doubt, such fact, event,
condition or circumstance is set forth in the applicable section of the
Disclosure Schedule or (ii) as of the Closing, (A) any Buyer
Representative has actual knowledge of such fact, event, condition or
circumstance and (B) such Buyer Representative either knows or would be
reasonably expected to know under the circumstances that the existence
of such fact, event, condition or circumstance constitutes a breach of
such representation or warranty of the Sellers as of such date and (C)
no Seller has actual knowledge of the existence of any such fact,
event, condition or circumstance, either knows or would be reasonably
expected to know under the circumstances that the existence of such
fact, event, condition, or circumstance constitutes a breach of such
representation or warranty of the Sellers and has failed to disclose
the existence of such fact, event, condition or circumstance in the
applicable sections of the Disclosure Schedule with respect to such
representation or warranty, or with respect to any fact, event,
condition or circumstance which becomes known to any Seller after the
date hereof but prior to Closing, Sellers have failed to disclose the
existence thereof to Buyer in writing prior to Closing.
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Section 10.3 Indemnification Obligation of Buyer. Buyer will indemnify
Sellers and their respective representatives, successors and assigns
(collectively, the "Seller Indemnitees") in respect of, and save and hold each
Seller Indemnitee harmless against any Losses which such Seller Indemnitee
suffers, sustains or becomes subject to as a result of or by virtue of, without
duplication:
(a) any facts or circumstances which constitute a material
misrepresentation or breach by Buyer of any representation or warranty
given by Buyer to Sellers or the Company pursuant to this Agreement
(including any schedule) or any certificate delivered by Buyer to
Sellers or the Company pursuant to this Agreement (provided that Buyer
is given written notice of such Loss during the applicable survival
period specified in Section 10.1 above), except for any claim involving
$5,000 or less;
(b) any nonfulfillment or breach of any covenant or agreement
of the Buyer set forth in this Agreement; provided, that for the
avoidance of doubt, Buyer shall have no obligation to indemnify the
Seller Indemnitees in respect of the breach of any obligation under the
Seller Note or the L/C.
Section 10.4 Indemnification Procedures.
(a) Any Person making a claim for indemnification pursuant to
Section 10.2 or 10.3 above (each, an "Indemnified Party") must give the
party from whom indemnification is sought (an "Indemnifying Party")
written notice of such claim promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding,
investigation or other claim (a "Proceeding") against or involving the
Indemnified Party by any Person or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification;
provided, that the failure to notify or delay in notifying an
Indemnifying Party will not relieve the Indemnifying Party of its
obligations pursuant to Section 10.2 or 10.3 above, as applicable,
except to the extent that such failure actually materially harms the
Indemnifying Party.
(b) With respect to the defense of any Proceeding brought by
any Person who is not a party to this Agreement against or involving an
Indemnified Party in which any Person in question seeks only the
recovery of a sum of money (and not for injunctive or equitable relief)
for which indemnification is provided in Section 10.2 or 10.3 above, at
its option an Indemnifying Party may appoint as lead counsel of such
defense any legal counsel selected by the Indemnifying Party and
reasonably acceptable to the Indemnified Party; provided, that before
the Indemnifying Party assumes control of such defense it must first:
(i) enter into an agreement with the Indemnified
Party (in form and substance satisfactory to the Indemnified
Party) pursuant to which the Indemnifying Party agrees to be
fully responsible (with no reservation of any rights other
than the right to be subrogated to the rights of the
Indemnified Party)
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for all Losses relating to such Proceeding and unconditionally
guarantees the payment and performance of any liability or
obligation which may arise with respect to such Proceeding or
the facts giving rise to such claim for indemnification; and
(ii) furnish the Indemnified Party. with evidence
that the Indemnifying Party, in the Indemnified Party's sole
judgment, is and will be able to satisfy any such liability.
(c) Notwithstanding Section 10.4(b) above: (i) the Indemnified
Party will be entitled to participate in the defense of such claim and
to employ counsel of its choice for such purpose at its own expense
(provided that the Indemnifying Party will bear the reasonable fees and
expenses of such separate counsel incurred prior to the date upon which
the Indemnifying Party effectively assumes control of such defense),
and (ii) the Indemnifying Party will not be entitled to assume control
of the defense of such claim, and will pay the reasonable fees and
expenses of legal counsel retained by the Indemnified Party, if:
(i) the Indemnified Party reasonably believes that
an adverse determination of such Proceeding could be
detrimental to or injure the Indemnified Party's reputation or
future business prospects;
(ii) the Indemnified Party reasonably believes that
there exists or could arise a conflict of interest which,
under applicable principles of legal ethics, could prohibit a
single legal counsel from representing both the Indemnified
Party and the Indemnifying Party in such Proceeding; or
(iii) a court of competent jurisdiction rules that the
Indemnifying Party has failed or is failing to prosecute or
defend vigorously such claim.
(d) the Indemnifying Party shall not enter into any settlement
of such claim or Proceeding or cease to defend such claim or
Proceeding, without first obtaining the prior written consent of the
Indemnified Party (which the Indemnified Party will not unrea sonably
withhold) provided that any such settlement shall provide for the full
release of all claims against each Indemnified Party.
Section 10.5 Recoupment. Each of the Parties acknowledges that the
agreement contained in this Article X is an integral part of the transactions
contemplated by this Agreement and that, without such agreement they would not
have entered into this Agreement; accordingly, if any Indemnifying Party fails
to pay promptly the amounts due pursuant to either Section 10.2 or 10.3 and in
order to obtain such amounts, the Indemnified Party commences a suit to collect
the amounts provided for herein, the Indemnifying Parties shall also be jointly
and severally liable to pay to Indemnified Party its costs and expenses
(including attorneys fees) reasonably incurred in connection with such suit.
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Section 10.6 Payment. Upon the determination of the liability under
Article X or otherwise between the parties or by judicial proceeding from which
no appeal is possible or taken, the appropriate party shall pay to the other, as
the case may be, within ten (10) days after such determination, the amount of
any claim for indemnification made hereunder. In the event that the Indemnified
Party is not paid in full for any such claim pursuant to the foregoing
provisions promptly after the other party's obligation to indemnify has been
determined in accordance herewith, it shall have the right, notwithstanding any
other rights that it may have against any other Person, to setoff the unpaid
amount of any such claim against any amounts owed by it (or with respect to
Buyer, any amounts owed by Buyer or Parent) under any instrument or agreement
entered into pursuant to this Agreement or otherwise, including the Seller Note.
Upon the payment in full of any claim, either by setoff or otherwise, the entity
making payment shall be subrogated to the rights of the Indemnified Party
against any Person with respect to the subject matter of such claim. Any
indemnification payment made hereunder shall be deemed to be an adjustment to
the Purchase Price.
Section 10.7 No Contribution. Anything to the contrary contained herein
notwithstanding, no Seller shall have any right to seek any indemnification or
contribution from or remedy against the Company whether arising prior to or
after the Closing Date in respect of any breach of any representation or
warranty by the Sellers or the failure of the Sellers or the Company to comply
with any covenant or agreement to be performed by the Sellers or the Company on
or prior to the Closing Date and each Seller hereby waives any such claim it may
have against the Company with respect thereto whether at law, in equity or
otherwise.
Section 10.8 General.
(a) Except to the extent the same shall directly result in an
increase of insurance premiums on a prospective basis, the dollar
amount of indemnification due any party with respect to any claim shall
be reduced to the extent that such claim has been reimbursed by the
Indemnified Party's actual receipt of insurance proceeds net of any
increase in premium directly attributable to such claim.
(b) The amounts for which an Indemnifying Party shall be
liable to an Indemnified Party hereunder shall be net of any Tax
deduction, credit, refund or other benefit realized or to be realized
by the Indemnified Party as a result of the facts and circumstances
giving rise to the Indemnifying Party's liability.
(c) The indemnification provisions contained in this Article X
shall be the exclusive remedy any party hereto may have for solely
monetary damages for any breach of any representations and warranties
under this Agreement, provided, however, that the foregoing limitation
shall not in any way derogate any party's remedies for fraud under
common law or federal securities laws; provided, further, that nothing
contained herein shall limit the rights of any party hereto to seek or
obtain any non-monetary relief to which it may be entitled at law or in
equity. The covenants and agreements in this
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Article X shall survive until such time as any claim for
indemnification is finally settled in accordance with the terms hereof.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Assignment. Neither this Agreement nor any of the rights
or obligations hereunder may be assigned by the Company or any of the Sellers
without the prior written consent of Buyer, or by Buyer without the prior
written consent of Sellers, except that Buyer may, without such consent, assign,
directly or indirectly, all of its rights and obligations under this Agreement
to any of its Affiliates, any Person which provides financing to the Buyer or
any of its Subsidiaries or any subsequent purchaser of the Buyer or its
Affiliates (whether by merger, consolidation, sale of stock, sale of assets or
otherwise). Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns. This Agreement shall be for
the sole benefit of the parties hereto and their respective heirs, successors,
permitted assigns and legal representatives and is not intended, nor shall be
construed, to give any Person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 11.2 Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing. All such notices shall be delivered personally, by telecopier, by
certified mail, return receipt requested, or by reputable overnight courier
(costs prepaid), and shall be deemed given or made upon receipt thereof. All
such notices are to be given or made to the parties at the following addresses
(or to such other address as any party may designate by a notice given in
accordance with the provisions of this Section):
If to Buyer:
Neenah Foundry Company
2121 Brooks Avenue
Neenah, Wisconsin 54957
Attention: James K. Hildebrand
Telecopy No.: (920) 729-3603
With copies (which shall not constitute notice to Buyer) to:
Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor, Zone 4
New York, NY 10043
Attention: John D. Weber
Telecopy No.: (212) 888-2940
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and
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
Attention: Kirk A. Radke, Esq.
Telecopy No.: (212) 446-4900
If to the Company or Sellers:
Seller Representative
6433 Winding Ridge Circle
Lincoln, NE 68512
Attention: Douglas E. Deeter
Telecopy No.: None
With copies (which shall not constitute notice to the Company or
Sellers) to:
Cline, Williams, Wright, Johnson & Oldfather
1900 First Bank Building
233 South 13th Street
Lincoln, NE 68508
Attention: L. Bruce Wright
Telecopy No.: (402) 474-5393
SECTION 11.3 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEBRASKA. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO SHALL BE BROUGHT ONLY IN THE DISTRICT COURTS OF DOUGLAS COUNTY,
NEBRASKA, OR THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEBRASKA, IN
OMAHA, NEBRASKA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY
HERETO HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY FORUM
NON CONVENIENS, WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
Section 11.4 Entire Agreement; Amendments and Waivers. This Agreement,
together with all Exhibits and Schedules hereto, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
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Section 11.5 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11.6 Invalidity. Except to the extent the same would
effectively operate to materially deprive either the Buyer or the Seller of the
economic benefit which they would otherwise be entitled to receive hereunder, in
the event that any one or more of the provisions contained in this Agreement or
in any other instrument referred to herein, shall, for any reason, be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such instrument.
Section 11.7 Headings. The headings of the Articles and Sections herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
Section 11.8 Expenses. Except as otherwise provided herein, Sellers and
Buyer will each be liable for their respective costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Agreement and the consummation of the transactions contemplated hereby and
Sellers shall be responsible for all such costs and expenses incurred by the
Company; provided, that any such costs and expenses which are incurred by the
Company including any and all real property transfer, transfer, gains, stamp and
other similar Taxes, if any, assessed and/or due prior to the Closing Date in
connection with the transactions contemplated by this Agreement shall, subject
to reduction of the Cash Purchase Price to the extent required by Section 2.4,
be paid by the Company on or before the Closing Date. The Sellers shall be
jointly and severally liable to pay, or at the Company's request, reimburse the
Company, for any such expenses which become payable by the Company following the
Closing.
Section 11.9 Specific Performance. Each of the Buyer, the Company and
Sellers acknowledges and agrees that the other party would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each party agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the parties and the matter, in
addition to any other remedy to which they may be entitled, at law or in equity.
Section 11.10 Time is of the Essence; Computation of Time. Buyer,
Sellers and Company agree that time is of the essence with respect to every
covenant, condition to be satisfied, and action to be taken hereunder, and shall
proceed accordingly with respect to every action necessary, proper or advisable
to make effective the transactions contemplated by this Agreement. Whenever the
last day for the exercise of any privilege or the discharge of any duty
hereunder shall fall upon any day which is not a business day, the party having
such privilege or duty may exercise such privilege or discharge such duty on the
next succeeding business day.
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Section 11.11 Waiver of Jury Trial. Each of the parties hereto waives
to the fullest extent permitted by law any right it may have to trial by jury in
respect of any claim, demand, action or cause of action based on, or arising out
of, under or in connection with this Agreement, or any course of conduct, course
of dealing, verbal or written statement or action of any party hereto, in each
case whether now existing or hereafter arising, and whether in contract, tort,
equity or otherwise. The parties to this Agreement each hereby agrees that any
such claim, demand, action or cause of action shall be decided by court trial
without a jury and that the parties to this Agreement may file an original
counterpart of a copy of this Agreement with any court as evidence of the
consent of the parties hereto to the waiver of their right to trial by jury.
Section 11.12 Incorporation by Reference. All exhibits, annexes and
attachments referred to herein specifically including the Disclosure Schedule,
are incorporated herein and expressly made a part hereof by this reference.
Section 11.13 Survival. In addition to all rights, remedies,
obligations, and covenants in this Agreement and in the ancillary agreements and
transactions contemplated hereby, which, by their terms contemplate performance
which extends or is to occur after execution and/or Closing, all of which shall
survive Closing and remain enforceable in accordance with their express terms,
the representatives and warranties and the covenants and agreements given by
Buyer to Sellers or Sellers to Buyer hereunder shall, except as the same are
expressly limited herein, survive the Closing and continue to be binding as of
the date or dates given.
**********
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
NEENAH FOUNDRY COMPANY
By: James K. Hildebrand
-------------------------------------
Name: James K. Hildebrand
Its: CEO
Douglas E. Deeter Carol Campbell
- ---------------------------------- --------------------------------------
Douglas E. Deeter Carol Campbell
Jane Pohlman Jeffery Tomhave
- ---------------------------------- --------------------------------------
Jane Pohlman Jeffery Tomhave
Leslie Deeter Eugene A. Deeter
- ---------------------------------- --------------------------------------
Leslie Deeter Eugene A. Deeter
Jeffrey Jenkins John Moylan
- ---------------------------------- --------------------------------------
Jeffrey Jenkins John Moylan
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF NEENAH FOUNDRY COMPANY AS OF AND FOR THE
SIX MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 3,427
<SECURITIES> 0
<RECEIVABLES> 25,813
<ALLOWANCES> 472
<INVENTORY> 25,635
<CURRENT-ASSETS> 59,021
<PP&E> 111,349
<DEPRECIATION> 7,105
<TOTAL-ASSETS> 331,531
<CURRENT-LIABILITIES> 28,450
<BONDS> 197,300
0
0
<COMMON> 100
<OTHER-SE> 53,310
<TOTAL-LIABILITY-AND-EQUITY> 331,531
<SALES> 89,825
<TOTAL-REVENUES> 89,825
<CGS> 64,079
<TOTAL-COSTS> 64,079
<OTHER-EXPENSES> 10,431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,489
<INCOME-PRETAX> 4,826
<INCOME-TAX> 2,486
<INCOME-CONTINUING> 2,340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,340
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
