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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of May 31,
1996 among KDI/TRIANGLE CORPORATION, a Michigan corporation (the "Purchaser"), a
wholly-owned subsidiary of MICROWAVE COMPONENTS ENTERPRISES, INC., a Michigan
corporation ("Enterprises"), KDI D/H CORPORATION, a Delaware corporation ("KDI
D/H"), and KDI/TRIANGLE ELECTRONICS, INC., a Delaware corporation and
wholly-owned subsidiary of KDI D/H (the "Seller").
Recitals:
A. The Seller is engaged in the business of designing, manufacturing
and marketing catalog and custom engineered RF and electronic microwave
frequency components and subassemblies, which components and subassemblies are
utilized in a wide variety of commercial applications and defense systems
relating to telecommunications, cellular telephone cell site equipment, radar,
navigation, military electronic countermeasures and medical and industrial
monitoring and tracking systems in air, ground, sea and space environments (the
"Seller's Business").
B. The Purchaser desires to purchase and the Seller desires to sell the
assets of the Seller related to and used in the Seller's Business, upon the
terms and conditions set forth herein.
C. The Seller, KDI D/H and Merchant Financial, Inc., a Michigan
corporation and an affiliate of the Purchaser ("MFI"), entered into a letter of
intent, dated January 22, 1996, relative to the transactions contemplated herein
(the "Letter of Intent").
Agreement:
NOW, THEREFORE, in consideration of these premises and subject to the
representations, warranties, covenants and other terms and conditions contained
herein and for the consideration provided herein, the parties agree as follows:
I. DEFINITIONS.
For purposes of this Agreement, the following capitalized terms
shall have the following meanings:
"Account Balance Amount" has the meaning set forth in Section
9.15(b).
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"Accounts Payable" has the meaning set forth in Section
3.1(b).
"Accounts Receivable" has the meaning set forth in Section
2.2(b).
"Accounts Receivable Adjustment" has the meaning set forth in
Section 4.2(a).
"Accruals" has the meaning set forth in Section 3.1(c).
"Assumed Environmental Liabilities" has the meaning set forth
in Section 3.1(f).
"Assumed Liabilities" has the meaning set forth in Section
3.1.
"Assumed Pension Liabilities" has the meaning set forth in
Section 9.15(c).
"Broker" has the meaning set forth in Section 5.5.
"Cash" has the meaning set forth in Section 2.2(a).
"CERCLA" means the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended.
"Chemical Bank Credit Agreement" means that certain Amended &
Restated Credit Agreement, dated as of August 31, 1995, among KDI D/H, the
several lenders from time to time parties thereto and Chemical Bank, as Agent.
"Closing" has the meaning set forth in Section 12.1.
"Closing Date" has the meaning set forth in Section 12.1.
"Closing Date Net Working Capital Adjustment" has the meaning
set forth in Section 4.5(a).
"Closing Date Net Working Capital Base" has the meaning set
forth in Section 4.2(b)(ii).
"Closing Date Working Capital Balance Sheet" has the meaning
set forth in Section 4.5(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Contracts" has the meaning set forth in Section 2.2(i).
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"Contract Obligations" has the meaning set forth in Section
3.1(a).
"Customer and Supplier List" has the meaning set forth in
Section 2.2(h).
"Deed" has the meaning set forth in Section 8.1.
"Defined Benefit Plan" means the Defined Benefit Plan for
Former Employees of KDI Corporation-KDI/triangle Electronics, Inc.
"Employee Death Benefit Policy" means the policy of the Seller
which was terminated on May 31, 1993 pursuant to which the Seller distributed to
not more than 25 retirees a certificate which could be presented by a retiree's
estate upon the retiree's death in exchange for payment by the Seller of $2,500.
"Enterprises" means Microwave Components Enterprises, Inc., a
Michigan corporation and the Purchaser's parent corporation.
"Environmental Laws" shall include, without limitation, any
and all federal, state or local laws (including, statutes, regulations,
ordinances, codes, rules, policies, and other governmental restrictions and
requirements) relating to the Federal Solid Waste Disposal Act, the Federal
Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation
and Recovery Act of 1976, CERCLA, the Federal Toxic Substance Control Act, the
New Jersey Spill Compensation and Control Act, the New Jersey Industrial Site
Recovery Act, the New Jersey Air Pollution Control Act, the New Jersey Water
Pollution Control Act, the New Jersey Solid Waste Management Act, regulations,
ordinances, codes, rules, policies, guidelines and other governmental
restrictions and requirements of the Environmental Protection Agency, state
governmental authorities and local governmental authorities.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" has the meaning set forth in Section 4.4(b).
"Escrow Agreement" has the meaning set forth in Section
4.4(b).
"Escrow Fund" has the meaning set forth in Section 4.4(b).
"401(k) Plan" means the KDI D/H Corporation Employee
Retirement Benefit Plan.
"Excluded Assets" has the meaning set forth in Section 2.3.
"Excluded Liabilities" has the meaning set forth in Section
3.2.
"Financial Statements" has the meaning set forth in Section
6.3.
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"Freeze Date" has the meaning set forth in Section 6.14(f).
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Government Contract" has the meaning set forth in Section
2.2(i)(E).
"Government Contract Rights" has the meaning set forth in
Section 2.2(i)(E).
"Hazardous Materials" shall include, without limitation, (A)
any flammable substances, explosives, radioactive materials, hazardous
substances, hazardous wastes, toxic substances, pollutants, contaminants or
effluents regulated by any of the Environmental Laws, as defined herein
(including but not limited to any "hazardous substance" as defined in CERCLA, as
amended by the Superfund Amendments and Reauthorization Act ("SARA"), 42 USC
ss.9601 et. seq.), and (B) friable asbestos, polychlorinated biphenyls, urea
formaldehyde, nuclear fuel or material, chemical waste, explosives, petroleum
products and by-products (including any fraction thereof).
"Hazardous substance," "release" and "threatened release"
shall have the meanings specified in CERCLA and the terms "solid waste" and
"disposal" (or "disposed") shall have the meanings specified in the
Environmental Laws; provided, however, in the event multiple Environmental Laws
define any such term, and any one Environmental Law defines such term more
broadly than any other, or any amendment broadens the meaning of any term
defined therein, such broader meaning shall apply.
"Industrial Establishment" has the meaning set forth in
Section 9.14(g).
"Intellectual Property" has the meaning set forth in Section
2.2(g).
"Intellectual Property Contract Rights" has the meaning set
forth in Section 2.2(i)(C).
"Inventory" has the meaning set forth in Section 2.2(c).
"Inventory Adjustment" has the meaning set forth in Section
4.2(c).
"IRS" means the Internal Revenue Service.
"ISRA" means the New Jersey Industrial Site Recovery Act,
N.J.S.A. 13:1K-6, et seq.
"KDI D/H" means KDI D/H Corporation, a Delaware corporation.
"KDI D/H Delivered Documents" has the meaning set forth in
Section 5.2.
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"KDI D/H Non-Competition Agreement" has the meaning set forth
in Section 9.12.
"KDI PPI Stock Purchase Agreement" means the Stock Purchase
Agreement, dated November 10, 1995, among KDI D/H, KDI Precision Products, Inc.
and the Buyers (as defined therein) relative to the sale by KDI D/H of its KDI
Precision Products, Inc. stock.
"Knowledge", as used in this Agreement with respect to the
knowledge of KDI D/H, means the knowledge of Kevan Langner and Roger Byer, and,
as used in this Agreement with respect to the knowledge of the Seller, means the
knowledge of Michael Snyder, Ray Kaminsky, Kevan Langner, Roger Byer, George
Enslee, Donna Zarro, and Albert Bauer.
"Lease Rights" has the meaning set forth in Section 2.2(i)(D).
"Liens" means any and all liens, claims, encumbrances,
mortgages, pledges, security interests, option, restriction on transfer
(including without limitation any right of first refusal or offer), forfeiture,
penalty,and other restrictions.
"Material Adverse Effect" means a material and adverse effect
on an entity's business, future prospects, assets, properties, financial
condition or results of operations or relate in any material adverse way to the
transactions contemplated in this Agreement.
"Merger" has the meaning set forth in Section 6.14(g).
"MFI" means Merchant Financial, Inc., a Michigan corporation
and an affiliate of the Purchaser.
"Mortgage Obligations" has the meaning set forth in Section
3.1(e).
"NJDEP" means the New Jersey Department of Environmental
Protection.
"Negative Declaration" has the meaning set forth in Section
9.14(a).
"Net Working Capital Adjustment" has the meaning set forth in
Section 4.2(b).
"New Jersey Tax Certificate" has the meaning set forth in
Section 6.21(b).
"New Jersey Taxes" has the meaning set forth in Section
6.21(b).
"New Jersey Taxes Escrow Amount" has the meaning set forth in
Section 6.21(b).
"New Pension Plan" has the meaning set forth in Section
9.15(a).
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"New 401(k) Plan" has the meaning set forth in Section
9.15(b).
"No Further Action Letter" has the meaning set forth in
Section 9.14(a).
"Ordered Party" has the meaning set forth in Section 9.14(b).
"Other Contract Rights" has the meaning set forth in Section
2.2(i)(F).
"Owned Real Estate" has the meaning set forth in Section
6.6(a).
"Pension Plan and Trust" has the meaning set forth in Section
6.14(b).
"Permits" has the meaning set forth in Section 6.15.
"Permitted Liens" has the meaning set forth in Section 6.5(a).
"Personal Property" has the meaning set forth in Section
2.2(e).
"Plans" has the meaning set forth in Section 6.14(a).
"Preliminary Net Working Capital Adjustment" has the meaning
set forth in Section 4.4.
"Preliminary Assessment", "Site Investigation", "Remedial
Investigation" and "Remedial Action Workplan" have the meanings set forth in
Section 9.14(c).
"Pre-Paid Assets" has the meaning set forth in Section 2.2(d).
"Purchase Contract Rights" has the meaning set forth in
Section 2.2(i)(B).
"Purchase Price" has the meaning set forth in Section 4.1.
"Purchased Assets" shall have the meaning set forth in Section
II.
"Purchaser" means KDI/Triangle Corporation, a Michigan
corporation.
"Purchaser Delivered Documents" has the meaning set forth in
Section 7.2.
"Purchaser Management Severance Agreements" has the meaning
set forth in Section 9.3.
"Purchaser Non-Management Severance Arrangements" has the
meaning set forth in Section 9.3.
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"Real Estate" has the meaning set forth in Section 2.2(f).
"Release" has the meaning set forth in Section 11.6.
"Remedial Action Workplan" has the meaning set forth in
Section 9.14(a).
"Remediation Agreement" has the meaning set forth in Section
9.14(b).
"Remediation Funding Source" has the meaning set forth in
Section 9.14(b).
"Sales Contract Rights" has the meaning set forth in Section
2.2(i)(A).
"Secured Creditors" has the meaning set forth in Section 6.4.
"Seller" means KDI/triangle Electronics, Inc., a Delaware
corporation.
"Seller Non-Competition Agreement" has the meaning set forth
in Section 9.11.
"Seller's Auditors" means Arthur Andersen LLP.
"Seller's Business" has the meaning set forth in Recital A to
this Agreement.
"Seller Delivered Documents" has the meaning set forth in
Section 6.2.
"Seller Management Severance Agreements" has the meaning set
forth in Section 6.18(e).
"Seller Non-Management Severance Arrangements" has the meaning
set forth in Section 6.18(e).
"Spin-Off" has the meaning set forth in Section 6.14(g).
"Survey Defect" has the meaning set forth in Section 8.3.
"Surveys" has the meaning set forth in Section 8.2.
"Title Commitments" has the meaning set forth in Section 8.1.
"Title Company" has the meaning set forth in Section 8.1.
"12/31/95 Adjusted Net Working Capital Base" has the meaning
set forth in Section 4.2(b)(i).
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"Unpermitted Exception" has the meaning set forth in Section
8.3.
"Unpermitted Lien" has the meaning set forth in Section 8.3.
"WARN" shall mean the federal Worker Adjustment and Retraining
Notification Act
"Warranty Obligations" has the meaning set forth in Section
3.1(d).
II. AGREEMENT TO PURCHASE AND SELL.
2.1 Agreement. Subject to the terms and conditions hereof, at the
Closing (as hereinafter defined) and as of the Closing Date (as hereinafter
defined), the Seller shall sell, convey, transfer, assign and deliver to the
Purchaser, and the Purchaser shall purchase from the Seller, the assets of the
Seller related to and used in the Seller's Business, with such assets being
collectively referred to as the "Purchased Assets".
2.2 Purchased Assets. The Purchased Assets shall consist of all
of the Seller's right, title and interest in and to the following assets:
(a) Cash. All of the cash and cash equivalents as at the
Closing Date (collectively, the "Cash").
(b) Accounts Receivable. All of the accounts receivable,
including reserves related thereto, as at the Closing Date (the "Accounts
Receivable").
(c) Inventory. All of the inventory, including raw
materials, work-in-progress and finished goods, and the reserves related
thereto, as at the Closing Date (the "Inventory"). The Purchaser and the Seller
expressly acknowledge and agree that the Inventory is being purchased hereunder
for resale.
(d) Pre-Paid Assets. All of the pre-paid expenses and
pre-paid deposits as at the Closing Date (collectively, the "Pre-Paid Assets").
(e) Personal Property. All of the tooling, jigs,
machinery and operating equipment (including measuring and inspecting devices)
used in the Seller's Business, all of the office equipment (including furniture,
computers, printers and related software) used in the Seller's Business, and all
other tangible personal property used in the Seller's Business (the "Personal
Property"), which Personal Property includes the personal property described on
SCHEDULE 2.2(e) attached hereto.
(f) Real Estate. All real property, whether owned or
leased, including all land, buildings, structures, easements, oil, minerals,
riparian rights, appurtenances and privileges relating
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thereto, land lying in the bed of any street, road or avenue, adjoining the real
property to the center line thereof, all rights of way abutting, adjacent,
contiguous or adjoining the real property and all leaseholds, licenses,
leasehold improvements, fixtures and other appurtenances and options, including
options to purchase and renew, or other rights thereunder (the "Real Estate"),
including, but not limited to, the Owned Real Estate described on SCHEDULE 6.6
attached hereto.
(g) Intellectual Property. All of the Seller's
intellectual property rights used in connection with the Seller's Business,
including, without limitation, (i) all trademark registrations and applications
therefor, and trademarks (whether or not registered or registrable), and the
goodwill pertaining thereto, (ii) the exclusive use of the name "KDI/triangle
Electronics" and "KDI/Triangle" and the non-exclusive use of the name "KDI"
with respect to the Seller's Business as conducted as of December 31, 1995
(i.e., the date referenced in Section 19 of the KDI PPI Stock Purchase
Agreement), (iii) all copyrights, whether or not registered, (iv) all patents
and pending patent applications, (v) all inventions, processes, methods,
patterns, devices, formulae, discoveries, improvements and other know-how,
whether patentable or not, (vi) all trade secrets, (vii) all plans,
specifications, technical data (as defined by the U.S. Government with respect
to Government Contracts), know-how, computer programs and software, product
designs and specifications, and other related items and other data used in the
Seller's Business (including those items relating to customers' requirements for
products or services), and (viii) all causes of action for infringement of the
trademarks, tradenames, copyrights, and patents being transferred pursuant to
this Agreement (collectively, the "Intellectual Property"), which Intellectual
Property includes the intellectual property currently of public record, as well
as the causes of action described in subsection (viii) above, described on
SCHEDULE 2.2(g) attached hereto.
(h) Customer and Supplier List. Copies of all
correspondence, files, documents, and other information currently in Seller's
possession or control, whether set forth on paper-like media or contained or
stored in electronic or computer media, describing the customers (including
distributors, dealers, and sales representatives related thereto) and describing
the suppliers (including distributors, dealers, and sales representatives
related thereto) pertaining to the Seller's Business through the Closing Date,
including, without limitation, names of applicable contacts, addresses, nature
and volume of orders, date of purchases, sales or purchase contracts, etc. (the
"Customer and Supplier List").
(i) Contract Rights. All rights of the Seller under all
of the contracts (the "Contracts") related to the Seller's Business, including:
(A) All sales orders or contracts for the sale by the
Seller to third parties of the Seller's products and/or
services (the "Sales Contract Rights"); SCHEDULE 2.2(i)
attached hereto contains a list of all such Sales Contract
Rights as of the date hereof.
(B) All purchase orders or contracts for the purchase
by the Seller from third parties of products and/or services
(the "Purchase Contract Rights"); SCHEDULE 2.2(i) attached
hereto contains a list of all such Purchase Contract Rights as
of the date hereof.
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(C) All contracts with respect to the use of the
Intellectual Property by the Seller or a third party,
including, without limitation, any trademark licenses, royalty
agreements, patent licenses, etc. (the "Intellectual Property
Contract Rights"), which Contracts as of the date hereof are
described on SCHEDULE 2.2(i) attached hereto.
(D) All leases for equipment and personal property
(the "Lease Rights"); SCHEDULE 2.2(i) attached hereto contains
a description of all such Lease Rights as of the date hereof
which concern amounts greater than $10,000 or which were
entered into out of the normal course of the Seller's
Business.
(E) All of the Seller's Government Contracts (the
"Government Contract Rights"); SCHEDULE 2.2(i) attached hereto
contains a description of all such Government Contract Rights
as of the date hereof which concern amounts greater than
$10,000 or which were entered into out of the normal course of
the Seller's business. As used herein, "Government Contract"
means any prime contract, subcontract (to the Knowledge of the
Seller), basic ordering agreement, letter contract, purchase
order or delivery order of any kind between the Seller and (1)
the U.S. Government, or any state or local government, (2) any
prime contractor of the foregoing, or (3) any subcontractor to
any contract described in clauses (1) or (2) above. The
description of each of the Government Contracts on SCHEDULE
2.2(i) shall include information relevant to clauses (1)-(3)
above (i.e., the identity of the governmental entity and an
indication as to whether the Seller is the prime contractor or
a subcontractor).
(F) All of the Seller's contracts under distributor
agreements, sales representative agreements and other similar
contracts for the sale of its products, as well as all other
contracts of the Seller (the "Other Contract Rights");
SCHEDULE 2.2(i) attached hereto contains a description of all
such Other Contract Rights as of the date hereof which concern
amounts greater than $10,000 or which were entered into out of
the normal course of the Seller's Business.
The foregoing Sales Contract Rights, the Purchase Contract Rights, the
Intellectual Property Contract Rights, the Lease Rights, the Government Contract
Rights and the Other Contract Rights are collectively referred to as the
"Contract Rights." The Seller shall update SCHEDULE 2.2(i) so as to reflect the
Contract Rights required to be disclosed in SCHEDULE 2.2(i) in effect as of the
Closing Date; provided that such update shall not contain any Contract Rights
which have arisen outside of the normal course of business unless the Purchaser,
in its sole discretion, agrees to the assignment of same.
(j) ShadowNet System Product Line. All technology,
Intellectual Property and other rights and assets comprising or related to the
Seller's ShadowNet System product line.
(k) Permits. All transferable rights under the Permits
(as defined in Section 6.15).
(l) Warranties. All transferable rights under third
party warranties, including
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manufacturer warranties, relating to the Purchased Assets.
(m) Claims. Any and all rights, claims or causes of
action related to the Seller's Business or the Purchased Assets.
(n) Books and Records. Originals or copies of all books,
records and other data of Seller to the extent such books, records or other data
relate to the Seller's Business or the Purchased Assets; provided that neither
the Seller's tax returns nor the Seller's corporate minute books, stock records,
and related items shall be included in the Purchased Assets. The Seller shall
have the right to retain copies of all originals provided.
(o) Other. Other than the Excluded Assets, all other assets
related to the Seller's Business of every kind, nature and description, wherever
located, whether tangible or intangible, including the Seller's goodwill.
2.3 Excluded Assets. The Purchased Assets shall exclude, and the
Seller shall retain, the Seller's right to income tax refunds with respect to
income taxes paid prior to the Closing Date (the "Excluded Assets").
III. OBLIGATIONS AND LIABILITIES.
3.1 Assumed Liabilities. The Purchaser shall assume on the
Closing Date only the following obligations and liabilities of the Seller
(collectively, the "Assumed Liabilities"):
(a) Contract Obligations. The obligations and liabilities
under or related to the contracts related to the Contract Rights described in
Section 2.2(i) of this Agreement (the "Contract Obligations").
(b) Accounts Payable. The obligations and liabilities
related to all of the Seller's current trade related payables incurred in the
normal course of business as at the Closing Date (the "Accounts Payable"), which
as of March 31, 1996, are estimated to have an outstanding balance of
$3,508,061.
(c) Accruals. The obligations and liabilities related to all
of the Seller's current and normal operating accruals as at the Closing Date,
provided that (i) such accruals shall exclude (A) any taxes owing or refunds due
on previously earned income, (B) the Assumed Environmental Liabilities, (C) the
Assumed Pension Liabilities, (D) the current portion of long-term debt and
pension accruals as at the Closing Date and (E) any accrual on the Seller's
books for the litigation described in Items 2 and 3 on SCHEDULE 6.16, and (ii)
such accruals shall include (A) all compensation, bonuses, commissions,
severance or other remuneration which the Seller's employees shall be entitled
to receive in connection with their employment by the Seller through the Closing
Date (including severance
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payable to Messrs. Finer, Murphy and Ringuette) (provided that the Seller's
obligations for severance payments payable to Messrs. Hartwig, Kaminsky, Pelrin,
Schrafnagl and Snyder under the Seller Management Severance Agreements shall not
be included in the Accruals to the extent that the foregoing individuals enter
into the Purchaser Management Severance Agreements on or before the Closing
Date), (B) all accruals related to the termination of the ShadowNet System
product line, (C) the New Jersey Taxes Escrow Amount, (D) the personal property
taxes, the utility expenses and the real estate taxes described in Section 3.3,
(E) an accrual for the Seller's estimated liability for the Assumed Litigation
which shall be mutually agreed upon by the Seller and the Purchaser; provided
that the parties acknowledge and agree that (x) in the event the proceeding
described in Item 1 on SCHEDULE 6.16 is settled prior to the Closing Date then
there may be no need to establish an accrual therefor, except as otherwise
required by GAAP, and (y) the amount accrued with respect to the liabilities and
obligations of the Seller with respect to the proceeding set forth in Item 5 on
SCHEDULE 6.16 shall be in an amount equal to $7,500 and (F) an accrual for the
Seller's obligations under the Employee Death Benefit Policy and for retiree
health care coverage for the employees identified in subparagraph (i) on
SCHEDULE 6.14(c), which shall be mutually agreed upon by the Seller and the
Purchaser (the foregoing are collectively referred to as the "Accruals"). As of
March 31, 1996, the Accruals (except with respect to accruals for the Assumed
Litigation, Employee Death Benefit Policy and retiree health care coverage) are
estimated to have an outstanding balance of $1,946,610.
(d) Warranty Costs. The obligations and liabilities
related to all of the Seller's warranty costs respecting any goods or equipment
sold prior to, and finished goods on hand as of, the Closing Date (the "Warranty
Obligations").
(e) Mortgage Obligations. The obligations and liabilities
related to the mortgages described on SCHEDULE 3.1(e) attached hereto, which, as
of March 31, 1996, are estimated to have an outstanding balance of $938,626 (the
"Mortgage Obligations") and are secured by the Real Estate described in SCHEDULE
3.1(e).
(f) Environmental Liabilities. The obligations and
liabilities of the Seller relating to the matters disclosed on SCHEDULE 3.1(f)
attached hereto (the "Assumed Environmental Liabilities").
(g) Pension Liabilities. The Assumed Pension Liabilities
listed on SCHEDULES 9.15(a) and 9.15(b).
(h) Litigation. The obligations and liabilities of the
Seller with respect to the proceedings set forth in Items 1 and 5 on SCHEDULE
6.16; provided that the Purchaser shall be entitled to assert a claim for
payment under the Escrow Agreement to the extent that its liability for either
or both of Items 1 and 5 on SCHEDULE 6.16 exceeds the amount accrued for such
litigation in the Accruals (the "Assumed Litigation").
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(i) Employee Death Policy; Retiree Health Coverage. The
obligations and liabilities of the Seller relating to the Employee Death Benefit
Policy and retiree health care coverage for the employees listed in subparagraph
(i) of SCHEDULE 6.14(c).
3.2 Excluded Liabilities. Except for the Assumed Liabilities
described in Section 3.1 of this Agreement, the Purchaser shall not assume any
obligations or liabilities of the Seller or of KDI D/H of any kind or nature
whatsoever, known or unknown, whether or not incurred or accrued in connection
with the operation of the Seller's Business including, without limitation, (i)
any obligations for severance pay to the Seller's employees or any other
employee benefits, (ii) Item 2 set forth on SCHEDULE 6.16, Item 3 on SCHEDULE
6.16 or any other litigation pending against the Seller or KDI D/H, except for
the Assumed Litigation, (iii) any pension or environmental liabilities other
than the Assumed Pension Liabilities and the Assumed Environmental Liabilities
or (iv) any liability related to violations of law by the Seller, including
violations of the Government Cost Accounting Standards, the Federal Acquisition
Regulations or other government contract laws (collectively, the "Excluded
Liabilities"). As set forth in Article XVI of this Agreement and subject to the
limitations set forth in Section 16.4, the Seller shall indemnify the Purchaser
against any loss associated with any obligation or liability not expressly
assumed hereunder.
3.3 Prorations and Adjustments.
(a) Personal Property Taxes. The Seller shall accrue as
part of the Accruals all current personal property taxes through the Closing
Date by an appropriate adjustment to the Accruals.
(b) Utility Expenses. The Seller shall accrue as part of
the Accruals all current utility expenses through the Closing Date by an
appropriate adjustment to the Accruals, such that the Seller shall be
responsible for all items accruing prior to the Closing Date and the Purchaser
shall be responsible for all items accruing on and after the Closing Date.
(c) Real Estate Taxes. The Seller shall accrue as part of
the Accruals all property taxes and assessments, general and special, due,
levied or otherwise applicable to the Real Estate through the Closing Date. With
respect to Real Estate taxes which have been levied but are not yet due and
payable, the Seller shall credit the Purchaser at Closing with the amount of
such taxes or assessments based on the amount of the most recently ascertainable
taxes or assessments.
(d) Real Estate Transfer Taxes. The Seller shall pay all
real estate transfer taxes arising out of the transactions contemplated hereby.
IV. PURCHASE PRICE.
In consideration of the purchase and sale of the Purchased Assets, and
the other terms and conditions contained herein, the Purchaser shall pay to the
Seller a purchase price which shall be
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determined, adjusted, paid and allocated as follows:
4.1 Purchase Price. Subject to the adjustments described herein,
the purchase price shall be an amount equal to $14,256,000 (the "Purchase
Price").
4.2 Adjustments. The Purchase Price shall be subject to the
following adjustments:
(a) Delinquent Accounts Receivable. The Purchase Price shall
be adjusted downward in an amount equal to any delinquent Accounts Receivable in
excess of the reserve therefor set forth on the Closing Date Working Capital
Balance Sheet (as defined below) and calculated in a manner consistent with past
practices of the Seller (the "Accounts Receivable Adjustment"); provided that,
the aggregate amount of all adjustments shall be paid solely out of and capped
at an amount equal to the balance of the then Escrow Fund held pursuant to the
Escrow Agreement. Accounts Receivable shall be considered to be delinquent if
they are outstanding at the Closing Date and are not collected within the twelve
(12) month period following the Closing Date.
(b) Net Working Capital Adjustment. The Purchase Price shall
be adjusted upward or downward in an amount equal to the increase or decrease,
as the case may be, in the Closing Date Net Working Capital Base (as defined
below) compared to the 12/31/95 Adjusted Net Working Capital Base (as defined
below) (the "Net Working Capital Adjustment"):
(i) 12/31/95 Adjusted Net Working Capital Base. The
net working capital base of the Seller as at December 31, 1995, derived from the
Seller's audited December 31, 1995 balance sheet and as adjusted for the
termination of the Shadownet System product line and for bonus accrual, was
$8,012,000 and was calculated as follows (the "12/31/95 Adjusted Net Working
Capital Base"):
<TABLE>
<S> <C>
Cash $ 646,000
Accounts receivable
(net of reserves) 6,150,000
Inventory
(net of reserves) 5,818,000
Prepaids 91,000
Accounts payable (3,286,000)
Accruals (1,977,000) *
---------
Subtotal $ 7,442,000 **
Adjustments
Add: Shadownet
System Accrual 450,000
Add: Bonus Accrual 120,000
-----------
Total $ 8,012,000
===========
</TABLE>
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<PAGE> 15
-------
* Accruals excluded any taxes owing or refunds due on
previously earned income, the Assumed Environmental
Liabilities and the Assumed Pension Liabilities.
Accruals included all compensation, bonuses,
commissions, severance or other remuneration to which
the Seller's employees would be entitled to receive
in connection with their employment by the Seller
through December 31, 1995.
** Net working capital excluded the current portion of
long-term debt and pension accruals.
(ii) Closing Date Net Working Capital Base. As
used herein, the "Closing Date Net Working Capital Base" means the net working
capital base of the Seller as at the Closing Date, with such base to be in an
amount equal to the sum of the following items as at the Closing Date: (A) the
Cash; (B) plus, the Accounts Receivable; (C) plus, the sum of the Inventory
(which shall be valued in the same manner as previously used by the Seller); (D)
plus, the Prepaids; (E) less, the Accounts Payable; and (F) less, the Accruals.
(c) Inventory Adjustment. The Purchase Price shall be
adjusted downward in an amount equal to any obsolete or damaged Inventory in
excess of the reserve therefor set forth on the Closing Date Working Capital
Balance Sheet and calculated in a manner consistent with past practices of the
Seller (the "Inventory Adjustment"). Inventory shall be deemed to be obsolete if
such Inventory is more than two (2) years old as of the Closing Date and if such
items are not budgeted for sale in the twelve (12) month period following the
Closing Date; Inventory also shall be deemed to be obsolete if such Inventory is
more than two (2) years old at the Closing Date, and though budgeted for sale in
the twelve (12) month period following the Closing Date, remains unsold at the
end of such year when run against such twelve (12) month period's sales budget.
Inventory shall be deemed to be damaged if such Inventory is reasonably
determined by the Purchaser, acting in good faith and consistently with the past
practices of the Seller, not to be saleable and merchantable in the ordinary
course of business.
4.3 Determination of Preliminary Net Working Capital Adjustment.
The preliminary determination of the Net Working Capital Adjustment shall be
made as of May 31, 1996 by the Chief Financial Officer of the Seller based upon
the financial information of the Seller consistent with past practices of the
Seller and based on his reasonable good faith estimate of the difference between
the 12/31/95 Adjusted Net Working Capital Base and the Seller's net working
capital base as of May 31, 1996 (with such net working capital base to be
determined in accordance with the Section 4.2(b)(ii), substituting May 31, 1996
for the Closing Date, and crediting such net working capital base to the extent
that the principal amount of the Mortgage Obligations is less than $865,000 at
May 31, 1996 or debiting the net working capital base to the extent that the
principal amount of the Mortgage Obligations is greater than $865,000 at May 31,
1996) and shall be delivered to the Purchaser at the Closing (the "Preliminary
Net Working Capital Adjustment"). The Seller represents and warrants to the
Purchaser that (x) the Seller's determination of its net working capital base as
May 31, 1996 will (i)
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<PAGE> 16
present fairly the financial condition of the Seller with respect to the
Seller's net working capital balance sheet as of such date, (ii) be prepared in
accordance with GAAP (the Seller's determination of GAAP shall be conclusive as
between the parties if the review opinion of the Seller's Auditors states no
material modifications should be made to the Seller's financial statements to be
in conformity with GAAP) and using the principles the Seller's Auditors applied
in auditing the Seller's financial statements at December 31, 1995 including,
without limitation, a reconciliation of the Seller's perpetual inventory records
to the general ledger and the valuation of work-in-process at net realizable
values, (iii) be consistent with the Seller's books and records, and (iv) be
prepared in accordance with the books and records of the Seller (which books and
records will be complete in all material respects); and (y) the Preliminary
Working Capital Adjustment shall be prepared consistently with the Seller's
determination of its net working capital base at May 31, 1996; provided that the
Seller will not be deemed to have breached these representations and warranties
if its representatives have used their commercially reasonable good faith
efforts (including consultation with the Seller's Auditors, if necessary) to
comply in all material respects with such representations and warranties.
SCHEDULE 4.3 attached hereto sets forth an example of the Preliminary Net
Working Capital Adjustment, as adjusted, using the Seller's net working capital
base at March 31, 1996.
4.4 Payment of Initial Purchase Price. The initial Purchase Price
shall be paid to the Seller at the Closing as follows:
(a) Cash. The Purchaser shall pay to the Seller, in cash
(by wire transfer of immediately available federal funds or by other mutually
agreeable manner), an amount equal to the sum of the following:
(i) $12,756,000; and
(ii) In the event that the Preliminary Net
Working Capital Adjustment is positive, an amount equal to such increase shall
be added to the $12,756,000 cash payment described above, but, in the event that
the Preliminary Net Working Capital Adjustment is negative, an amount equal to
such decrease shall be subtracted from the $12,756,000 cash payment described
above.
(b) Escrow. The Purchaser shall place in escrow with
Comerica Bank or with such other escrow agent as shall be mutually agreed upon
by the parties (the "Escrow Agent") an amount equal to $1,500,000 (the "Escrow
Fund"), which shall be held subject to, adjusted from time to time and
distributed in accordance with the terms and conditions of, an Escrow Agreement
in substantially the form of EXHIBIT 4.4(b) attached hereto (the "Escrow
Agreement"). SCHEDULE 4.4 attached hereto sets forth an example of the
calculation of the initial Purchase Price payable at Closing using the financial
information available to the parties at March 31, 1996.
4.5 Preparation of Closing Date Working Capital Balance Sheet;
Determination of Closing Date Net Working Capital Adjustment.
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<PAGE> 17
(a) As soon as practicable, but in any event no later than
forty-five (45) days after the Closing Date, the Seller shall prepare and
deliver to the Purchaser the following: (i) a balance sheet relative to the
Seller's Closing Date Net Working Capital Base (the "Closing Date Working
Capital Balance Sheet"); and (ii) a determination of the Net Working Capital
Adjustment as of the Closing Date based upon the criteria described above in
Section 4.2(b), with the Seller receiving a credit for any reduction in the
principal amount of the Mortgage Obligations between May 31, 1996 and the date
of determination of the Closing Date Net Working Capital Base (the "Closing Date
Net Working Capital Adjustment"). The Closing Date Working Capital Balance Sheet
shall be reviewed by the Seller's Auditors who will issue an American Institute
of Certified Public Accountants Review Opinion as of the Closing Date. Such
review opinion will contain wording regarding departures from GAAP which is
consistent with the wording included in the reports of the Seller's Auditors
issued in connection with the audited financial statements of the Seller for
1995. The Closing Date Net Working Capital Adjustment shall be determined by the
Seller, and the Seller's Auditors will perform the following procedures with
respect to such determination: (1) trace and agree the amounts derived from the
May 31, 1996 unaudited interim balance sheet; and (2) trace and agree the
amounts derived from the Closing Date Working Capital Balance Sheet and verify
the arithmetic accuracy of the Seller's determination of the adjustment. The
Seller represents and warrants that (x) the Closing Date Working Capital Balance
Sheet will (i) fairly represent the Seller's financial condition with respect to
the Seller's Closing Date Working Capital Balance Sheet at the Closing Date (ii)
be prepared in accordance with GAAP (the Seller's determination of GAAP shall be
conclusive as between the parties if the review opinion of the Seller's Auditors
states no material modifications should be made to the Seller's financial
statements to be in conformity with GAAP) and using the principles the Seller's
Auditors applied in auditing the Seller's financial statements at December 31,
1995, including, without limitation, a reconciliation of the Seller's perpetual
inventory records to the general ledger and the valuation of work-in-process at
net realizable values, (iii) be consistent with the Seller's books and records,
and (iv) be prepared in accordance with the books and records of the Seller
(which books and records will be complete in all material respects); and (y) the
Closing Date Working Capital Adjustment shall be prepared consistently with the
Closing Date Working Capital Balance Sheet; provided that, the Seller will not
be deemed to have breached these representations and warranties if its
representatives have used their commercially reasonable good faith efforts
(including consultation with the Seller's Auditors, if necessary) to comply in
all material respects with such representations and warranties.
(b) With respect to the preparation of the Closing Date
Working Capital Balance Sheet and the determination of the Closing Date Net
Working Capital Adjustment, the Purchaser, the Seller and their respective
independent public accountants and other representatives shall have the right to
review and observe the taking of the physical count of the Inventory, if any,
and of the valuation of same and shall have full and complete access to all
books and accounts, workpapers and other records and files relating thereto. The
Seller shall use its best reasonable commercial efforts to provide such access
to all workpapers and supporting collateral documents relating to the foregoing
which are in the possession or control of the Seller's Auditors or other
representatives.
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<PAGE> 18
(c) Subject to further adjustment as described below in
Section 4.6, the Closing Date Working Capital Balance Sheet and the Closing Date
Net Working Capital Adjustment as prepared and determined by the Seller and
delivered to the Purchaser in accordance with this Section 4.5 shall be binding
and conclusive on the parties hereto, subject to Section 4.5(d), unless, on or
prior to 30 days after the delivery thereof, the Purchaser gives written notice
to the Seller of the Purchaser's objection to any item thereon, including a
reasonable description of the nature and amount of any alleged breach of the
Seller's representations and warranties in Sections 4.3 and 4.5(a). In the event
such an objection is made, any item not objected to shall be binding and
conclusive on the parties hereto, subject to Section 4.5(d), and if the parties
are unable to reach agreement with respect to any item objected to or any
alleged breach of such representations and warranties within fifteen (15) days
after the Purchaser's notice of objection, the joint determination of the
respective independent public accountants of the Purchaser and the Seller as to
any such item shall be binding and conclusive on the parties hereto, subject to
Section 4.5(d). If the independent public accountants representing the Purchaser
and the Seller cannot agree within twenty (20) days after the expiration of the
aforementioned fifteen (15) day period, at the option of either the Purchaser or
the Seller, any item so disputed shall be submitted to a third independent
public accountant mutually selected by the Purchaser and the Seller and
determinations thus made shall be binding upon the parties hereto, subject to
Section 4.5(d). If the Purchaser and the Seller cannot mutually agree, the third
independent accountant shall be KPMG Peat Marwick LLP. Each party shall pay the
cost of its own independent public accountants for services rendered in this
process and shall bear one-half (1/2) of the cost of the third independent
public accountant, if one is selected. The Purchaser and the Seller shall use
their best efforts to complete the final determination of the final adjustments
no later than one hundred fifty (150) days after the Closing Date.
(d) The parties acknowledge and agree that, in the event that
the Purchaser discovers a breach or breaches of the Seller's representations and
warranties set forth in Section 4.5(a) after the determination of the Closing
Date Net Working Capital Adjustment as described in Section 4.5(c), then the
Purchaser shall be entitled to its rights and remedies as provided herein with
respect to any damages arising as a result thereof, provided that any such
damages would be paid solely out of the Escrow Fund.
4.6 Payment of Adjustments to Purchase Price.
(a) Closing Date Net Working Capital Adjustment. If the
Closing Date Net Working Capital Adjustment as finally determined pursuant to
Section 4.5 above is different than the Preliminary Net Working Capital
Adjustment, then the parties shall, within seven (7) days of determination
thereof (through the use of immediately available funds and after taking into
account the Preliminary Net Working Capital Adjustment) take such actions as are
necessary to comply with the provisions of Section 4.2(b) for purposes of
effecting the Net Working Capital Adjustment, which actions shall include
either: (i) a payment by the Seller to the Purchaser, which payment shall be
made first out of the Escrow Fund held pursuant to the Escrow Agreement and,
second, if the amount due hereunder exceeds the amount of the Escrow Fund, the
Seller shall make a cash payment equal to such
18
<PAGE> 19
amount not covered by the Escrow Fund; provided that, in the event of any breach
or breaches by the Seller of its representations and warranties in Sections 4.3
or 4.5(a), which in the aggregate would cause the Seller to pay to the Purchaser
an amount hereunder in excess of $50,000 more than the Seller would have been
required to pay the Purchaser hereunder but for such breach or breaches, then
one hundred percent of the amount due hereunder shall be paid by the Seller to
the Purchaser in cash and the Escrow Fund shall not be used whatsoever for the
Seller's obligations under this Section 4.6; or (ii) a payment by the Purchaser
to the Seller in cash. Upon determination pursuant to Section 4.5(c) of the
Closing Date Net Working Capital Adjustment, the Purchaser and the Seller hereby
agree to execute a Certificate of Distribution in the form of Annex A to the
Escrow Agreement for the amount, if any, determined under Section 4.5(c) to be
payable out of the Escrow Fund from the Seller to the Purchaser. In the event
the Purchaser shall subsequently discover a breach or breaches of the Seller's
representations and warranties set forth in Section 4.5(a), the Purchaser may
assert a claim for consideration and payment in accordance with the terms and
conditions of the Escrow Agreement.
(b) Post Closing Date Inventory Adjustment. On the tenth
(10th) business day after the first (1st) anniversary of the Closing Date, the
Purchaser shall prepare and deliver to the Seller a certificate describing the
Inventory Adjustment determined in accordance with Section 4.2(c) above;
provided that the amount of such adjustment shall be paid solely out of, and
capped at an amount equal to, the then balance of the Escrow Fund held pursuant
to the Escrow Agreement; and provided further that such claim for adjustment
shall be submitted for consideration and payment in accordance with the terms
and conditions of the Escrow Agreement. In the event of any such Inventory
Adjustment, the actual damaged or obsolete Inventory, as the case may be, shall
be reassigned to the Seller.
(c) Accounts Receivable Adjustment. Within ten (10) business
days after the first (1st) anniversary of the Closing Date, the Purchaser shall
prepare and deliver to the Seller a certificate describing the Accounts
Receivable Adjustment determined in accordance with Section 4.2(a) above;
provided that the Accounts Receivable Adjustment shall be paid solely out of,
and capped at an amount equal to, the then balance of the Escrow Fund held
pursuant to the Escrow Agreement; and provided further that such claim for
adjustment shall be submitted for consideration and payment in accordance with
the terms and conditions of the Escrow Agreement. In the event of any such
Accounts Receivable Adjustment, delinquent Accounts Receivable in the principal
amount equal to such Accounts Receivable Adjustment (as mutually selected by the
Purchaser and the Seller) shall be reassigned to the Seller.
4.7 Allocation. The parties hereto mutually agree that the
allocation of the Purchase Price among the Purchased Assets and the Assumed
Liabilities shall be mutually determined by the Purchaser and the Seller within
one (1) year of the Closing Date. Attached hereto as EXHIBIT 4.7 is the
preliminary estimate relative to such allocation. The parties hereto also
mutually agree that, for tax reporting purposes, they shall each report the
transactions contemplated by this Agreement in accordance with such allocation
and shall not take a position for tax purposes inconsistent therewith.
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<PAGE> 20
V. REPRESENTATIONS AND WARRANTIES OF KDI D/H.
KDI D/H hereby represents, warrants and covenants to the Purchaser, on
and as of the date hereof, as follows:
5.1 Organization and Standing. KDI D/H is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
5.2 Authority and Action. KDI D/H has full power and authority to
enter into this Agreement and each of the other agreements, documents or
instruments to be delivered at the Closing or thereafter by KDI D/H and to
perform and consummate the transactions contemplated herein and therein. Such
other agreements, documents or instruments to be delivered at the Closing or
thereafter by KDI D/H, pursuant to this Agreement or otherwise are collectively
referred to as the "KDI D/H Delivered Documents". All corporate action required
to be taken by or on the part of KDI D/H to authorize the execution and delivery
of this Agreement and the KDI D/H Delivered Documents and to authorize KDI D/H
to perform and consummate the transactions contemplated hereby and thereby has
been, or prior to the Closing will be, duly and properly taken. This Agreement
has been and, upon execution and delivery, each of the KDI D/H Delivered
Documents will be duly executed and delivered by KDI D/H. This Agreement
constitutes and, upon execution and delivery, each of the KDI D/H Delivered
Documents will constitute valid and binding obligations of KDI D/H, enforceable
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
5.3 Ownership of Seller. The Seller is wholly-owned by KDI D/H
through ownership of 100% of the issued and outstanding shares of capital stock
of the Seller.
5.4 Litigation and Investigations. Except as set forth on SCHEDULE
5.4 hereto, there are no actions, suits, proceedings or governmental
investigations existing or, to the best Knowledge of KDI D/H, threatened against
or affecting KDI D/H or any of KDI D/H's property or assets, or any judgments,
decrees, orders, rulings, writs or injunctions specifically referring to KDI D/H
which (either by reason of adherence or default) may have a Material Adverse
Effect.
5.5 Fees and Commissions. KDI D/H has contracted Houlihan Lokey
Howard & Zukin Capital as its exclusive broker ("Broker") for the transactions
contemplated by this Agreement and is responsible for all fees payable to
Broker. KDI D/H has not agreed to pay or become liable to pay any broker's,
finder's or originator's fees or commission for which the Purchaser shall have
liability by reason of services alleged to have been rendered for or at the
instance of KDI D/H in connection with this Agreement and the transactions
contemplated hereby. In the event any such liability for fees and commission
shall arise, KDI D/H shall be specifically liable and responsible for the
payment of same.
5.6 No Default. To the best Knowledge of KDI D/H after reasonable
inquiry within KDI D/H, KDI D/H is not in breach or violation of, and neither
the execution and delivery of this
20
<PAGE> 21
Agreement or the KDI D/H Delivered Documents by KDI D/H nor performance or
compliance with its or their terms will result in a breach or violation of, (a)
the Certificate of Incorporation or Bylaws of KDI D/H, (b) any agreement,
indenture, mortgage, lease or other obligation or instrument to which KDI D/H is
a party or by which any of its property is bound, except any such breach or
violation that would not have a Material Adverse Effect or (c) any law, statute,
rule, regulation or any judgment, order or decree to which KDI D/H is a party or
by which KDI D/H or any of its properties are subject, except any such breach or
violation that would not have a Material Adverse Effect.
VI. REPRESENTATIONS AND WARRANTIES OF THE SELLER.
The Seller hereby represents, warrants and covenants to the Purchaser,
on and as of the date hereof, as follows:
6.1 Organization and Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Seller is qualified to do business as a foreign corporation in the
State of New Jersey. To the best Knowledge of the Seller after reasonable
inquiry within the Seller, the Seller is not required to be qualified as a
foreign corporation in any other jurisdiction because of the character or
location of its properties (owned, leased or licensed) or the nature or conduct
of the Seller's Business, except where the failure to be so qualified would not
have a Material Adverse Effect. The Seller has all requisite corporate power and
authority and, to the best Knowledge of the Seller after reasonable inquiry
within the Seller, all requisite and sufficient licenses, franchises, permits
and authorizations to own, lease and license its properties and assets and to
carry on its business as presently conducted.
6.2 Authority and Action. The Seller has full power and authority
to enter into this Agreement and each of the other agreements, documents or
instruments to be delivered at the Closing or thereafter by the Seller pursuant
to this Agreement or otherwise and to perform and consummate the transactions
contemplated herein and therein. Such other agreements, documents or instruments
to be delivered at the Closing or thereafter by the Seller pursuant to this
Agreement or otherwise are collectively referred to as the "Seller Delivered
Documents". All corporate action required to be taken by or on the part of the
Seller to authorize the execution and delivery of this Agreement and the Seller
Delivered Documents, and to authorize the Seller to perform and consummate the
transactions contemplated hereby and thereby, has been, or prior to the Closing
will be, duly and properly taken. This Agreement has been and, upon execution
and delivery, each of the Seller Delivered Documents will be duly executed and
delivered by the Seller. This Agreement constitutes and, upon execution and
delivery, each of the Seller Delivered Documents will constitute valid and
binding obligations of the Seller, enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally or the availability of equitable
remedies.
6.3 Financial Information. Attached hereto as SCHEDULE 6.3 are the
following financial statements of the Seller (the "Financial Statements"): (a)
audited balance sheets and statements of
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<PAGE> 22
income, changes in stockholders equity, and cash flow as of and for the fiscal
years ended December 31, 1995 and 1994; and (b) unaudited balance sheets and
statements of income, changes in stockholders equity and cash flow as of and for
the fiscal years ended December 31, 1993, 1992 and 1991 and as of and for the
three (3) month period ended March 31, 1996. Except as described on SCHEDULE
6.3, the Financial Statements (including the notes thereto): (i) present fairly
the financial condition of the Seller at their respective dates and the results
of the Seller's operations for the periods then ended in accordance with GAAP;
(ii) are consistent with the Seller's books and records; and (iii) have been
prepared in accordance with the books and records of the Seller (which books and
records are correct and complete in all material respects).
6.4 Liabilities. Since December 31, 1995, no material liabilities
of the Seller's Business (accrued or contingent, asserted, known or unknown)
have been incurred, except for those reflected in the Financial Statements or
incurred in the ordinary course of business since December 31, 1995 and
reflected in the books and records made available to and to be transferred to
the Purchaser pursuant to this Agreement or as disclosed in this Agreement and
or on a Schedule hereto. To the Knowledge of the Seller, except as reflected in
the Financial Statements or disclosed on the Schedules, there are no material
liabilities of the Seller (accrued or contingent, asserted, known or unknown)
prior to December 31, 1995 which are required to be reflected in Financial
Statements in accordance with GAAP. As of the Closing Date, except for the
Mortgage Obligations, all of the Seller's secured liabilities will be held by
persons who are parties to the release attached hereto as EXHIBIT 11.6
(collectively, the "Secured Creditors"). As of the Closing Date, except for the
Assumed Liabilities, Seller will not have any unsecured liabilities. To the best
Knowledge of Seller, there are no liabilities which may arise from the
termination of the ShadowNet System product line and which are not part of the
Accruals or the Accounts Payable.
6.5 Purchased Assets -- General.
(a) Ownership; Liens and Encumbrances; Liabilities. The Seller
owns all of the Purchased Assets, free and clear of all Liens, other than the
Mortgage Obligations and other than the permitted liens described on SCHEDULE
6.5 attached hereto (the "Permitted Liens"). At the Closing and as of the
Closing Date, the Seller will transfer to the Purchaser all of the Purchased
Assets free and clear of all Liens other than the Mortgage Obligations and
Permitted Liens.
(b) Consents. Except with respect to the consent of the United
States federal government relative to security clearances and except as
described on SCHEDULE 6.5 attached hereto, all of the Purchased Assets,
including claims, contracts, orders, leases, licenses and rights, are assignable
and transferrable in the manner contemplated herein without the prior consent of
any governmental entity or other third party. For purposes of this Section
6.5(b), the Seller makes no representations concerning (i) the assignability or
transferability of agreements or contracts that are terminable by the Seller
without penalty or not more than sixty (60) days notice and (ii) agreements or
contracts under which the Seller is or may be obligated to pay or receive a sum
less than $10,000 in the aggregate with respect to all of such agreement or
contracts.
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<PAGE> 23
(c) Utilization of Assets. Except for the Excluded Assets, the
Purchased Assets constitute all of the assets (tangible or intangible) being
used by the Seller in the operation of the Seller's Business as presently
conducted.
(d) Location. Except as described in SCHEDULE 6.5 attached
hereto and other than Inventory or Personal Property in transit, all of the
Inventory and the Personal Property is now, and on the Closing Date will be, in
the Seller's possession and located at the Seller's manufacturing facilities
located at 60 South Jefferson Road, Whippany, New Jersey 07981 or at 31
Farinella Drive, East Hanover, New Jersey 07936.
6.6. Real Estate.
(a) SCHEDULE 6.6 sets forth an accurate, correct and complete
list of each parcel of real property owned by the Seller (the "Owned Real
Estate"), including a street address, complete legal description and a list of
all contracts and agreements relating to or affecting the Real Estate or any
interest therein. The Seller has delivered to the Purchaser accurate, correct
and complete copies of all such contracts and agreements. The Seller has, and
will at Closing have, fee simple insurable title to, and is, or will be at
Closing, in possession of, all of the Owned Real Estate, in each case free and
clear of all liens (except for the Mortgage Obligations and matters disclosed on
SCHEDULE 6.5 as Permitted Liens), tenancies and other possessory interests,
contracts of sale, contract sale agreements, conditional sale or other title
retention agreements, licenses, options, rights of first refusal, defects in
title, encumbrances, encroachments and other rights burdening or otherwise
affecting the Owned Real Estate in any way whatsoever, including without
limitation: (i) rights or claims of parties in possession; (ii) easements or
claims not shown by public records; (iii) encroachments, overlaps, boundary line
or water drainage disputes or any other matter which would be disclosed by an
accurate survey of the Owned Real Estate; (iv) or options to purchase. All
contracts, agreements and undertakings affecting the Owned Real Estate as set
forth in SCHEDULE 6.6(a) are legally valid and binding and in full force and
effect; there are no defaults, offsets, counterclaims or defenses thereunder;
and the Seller has received no written notice of default, offset, counterclaim
or defense under any such contracts or agreements.
(b) Except as may be indicated in the Title Policy or on the
Survey(s) (as defined in Sections 8.1 and 8.2, respectively), no Owned Real
Estate is located within a flood, coastal or erosion hazard area. Except for
Permitted Liens, neither the whole nor any portion of any Real Estate owned,
leased, occupied or used by the Seller has been condemned, requisitioned or
otherwise taken by any public authority, and no notice of any such condemnation,
requisition or taking has been received. To the Knowledge of the Seller, no such
condemnation, requisition or taking is threatened or contemplated. The Seller
has no Knowledge of any public improvements which may require an expenditure of
funds or result in special assessments against or otherwise affect the Owned
Real Estate.
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(c) The Owned Real Estate is in substantial compliance with
all applicable zoning, building, health, fire, water, use or similar statutes,
codes, ordinances, laws, rules or regulations. The zoning of each parcel of
Owned Real Estate permits the existing improvements and the continuation without
additional requirements following consummation of the transactions contemplated
hereby of the Seller's Business as presently conducted thereon. To the Seller's
Knowledge, there is no proposed federal, state or local statute, ordinance,
order, requirement, law or regulation (including, but not limited to, zoning
changes) which may materially and adversely affect the current or planned use of
such Real Estate. The Seller has no Knowledge that the current use of the Real
Estate or any plants or equipment located thereon is dependent on any
nonconforming use or other permit. The Seller has received the licenses,
certificates, permits, approvals, authorizations and variances listed on
SCHEDULE 6.15 and, to the Seller's Knowledge, the Permits comprise all of the
material licenses, certificates of occupancy, permits and authorizations
required to operate the Seller's Business and utilize the Real Estate. The
Seller has all material easements and rights necessary to conduct the Seller's
Business, including easements for all utilities, services, roadway, railway and
other means of ingress and egress. To the Knowledge of the Seller, no fact or
condition exists which would result in the termination or impairment of access
to the Real Estate or discontinuation of sewer, water, electric, gas, telephone,
waste disposal or other utilities or services.
(d) The Seller has delivered to the Purchaser accurate,
correct and complete copies of all title insurance policies, title reports,
surveys, property reports and similar reports in Seller's possession, if any,
with respect to each parcel of Real Estate.
(e) Except as set forth on SCHEDULE 6.6, there is no
construction work being done at, or construction materials being supplied to,
any parcel of Real Estate, except in connection with routine maintenance
projects.
(f) SCHEDULE 6.6(f) contains copies of the real estate tax
bills and detailed assessments in the Seller's possession relating to the last
five (5) years. The Real Estate is each a separately subdivided parcel and is
separately assessed from all adjacent property for purposes of real estate
taxes. The sale or lease of the Real Estate to Purchaser does not and will not
violate or conflict with the requirements of any subdivision plan or any other
restriction of record applicable to the Real Estate. The use of the Real Estate
is currently separate and distinct from other businesses conducted in the
subdivision and does and will comply with all subdivision requirements and will
not require the consent or approval of or filing with any authority or other
person. The sale or lease of the Real Estate to Purchaser does not and will not
adversely affect any existing property tax abatement and will not result in any
upward reassessment of facilities located thereon.
(g) The Seller has no Knowledge of defects in the exterior
walls or the interior bearing walls, the foundation, the roof or any structural
component of any plant, building, garage or other such structure located on the
Real Estate which would have an adverse effect on the operation of the Real
Estate as presently operated, and the electrical, plumbing, heating and air
conditioning systems, and all building facilities and equipment, of any plants,
buildings, garages or structures are in
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good operating condition and repair, considering their related age and current
use.
(h) The Seller has not received any written or oral notice or
order by any authority, any insurance company which has issued a policy with
respect to any of the facilities located on any of the Owned Real Estate parcels
or any board of fire underwriters or other body exercising similar functions
which; (i) relates to material violations of building, safety, fire or other
ordinances or regulations, (ii) claims any material defect or deficiency with
respect to any of such facilities or (iii) requests the performance of any
material repairs, alterations or other work to or in any of such facilities or
in the streets bounding the same which has not been satisfied, waived or cured
and which would substantially detract from the value of the Real Estate.
(i) To the Seller's Knowledge, no defect or condition of the
Real Estate or the soil or geology thereof exists which will impair the current
use thereof.
(j) The Seller has legal and practical access to at least one
(1) publicly dedicated right-of-way or road; the Seller has not received
written notices of any adverse claims to such access that would materially
adversely affect the use currently being made of such access by the Seller.
(k) To the Seller's Knowledge, there are no encroachments onto
the Real Estate of any improvements on any adjoining property.
(l) Public and private utilities servicing the Real Estate
have adequate capacity to meet the utility requirements to the extent presently
operated by Seller for the current use of such Real Estate.
(m) To the Seller's Knowledge, there is no plan, study or
report by any governmental authority or any nongovernmental person or agency
which if implemented may adversely affect the current or planned use of the Real
Estate.
(n) The Seller has no oral or written agreement with any real
estate broker, agent or finder with respect to the Real Estate.
6.7. Real Estate Leases. The Seller is not a party to any lease
for real property, either as a lessor or lessee.
6.8 Accounts Receivable. Except as described on SCHEDULE 6.8, the
Accounts Receivable arose from bona fide transactions by the Seller.
6.9 Inventory. Except as described on SCHEDULE 6.9, substantially
all of the Inventory is merchantable in the ordinary course of business.
6.10 Personal Property. Except as disclosed on SCHEDULE 2.2(e),
substantially all of the Personal Property presently in use in the Seller's
Business is now, and on Closing Date will be, in
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<PAGE> 26
good, useable condition and repair, ordinary wear and tear and routine
maintenance excepted, and, to the best Knowledge of the Seller after reasonable
inquiry within the Seller, in conformity with all material applicable
ordinances, regulations and other laws.
6.11 Intellectual Property. SCHEDULE 2.2(g) sets forth a true and
correct list of that portion of the Intellectual Property which is currently of
public record, as well as the causes of action described in Section 2.2(g)(vii)
above. The Seller has no Knowledge of and has received no notice of any conflict
with, or any infringement of, third party-owned patents, patent applications,
copyrights, trademarks, tradenames, trade secrets, know-how, or inventions
caused by the Seller's use of or ownership interest in the Intellectual
Property. The Seller has no Knowledge of and has received no notice of any
conflict with, or any infringement of, the Seller-owned patents, patent
applications, copyrights, trademarks, tradenames, trade secrets, know-how, or
inventions caused by a third-party's use of or ownership interest in the
Intellectual Property. No officer, director, shareholder or employee of the
Seller has an ownership interest in any of the Intellectual Property. Except as
set forth in SCHEDULE 2.2(g), the Seller is not a party to any agreement or
arrangement providing for the payment of license fees or royalties in connection
with the Intellectual Property and there is no claim or obligation to pay any
such license fee or royalty. To the best Knowledge of the Seller after
reasonable inquiry within the Seller, the Seller owns or possesses adequate and
enforceable licenses or other rights to use the Intellectual Property now used
in the conduct of the Seller's Business, and is not in default under any such
license or right.
6.12 Relationship with Customers and Suppliers. Except as described on
SCHEDULE 6.12 hereto, no information has come to the attention of the Seller
which might reasonably lead it to believe that any customer or supplier of the
Seller would or intends to cease dealing with the Seller or the Purchaser, as
the case may be, or would or intends to alter or modify in any material manner
the amount of such customer's or supplier's dealings with the Purchaser in the
event of the consummation of the transactions contemplated hereby.
6.13 Contracts. Set forth on SCHEDULE 2.2(i) is a list or description
of certain of the Contract Rights and the Contract Obligations which are being
assigned to and assumed by the Purchaser hereunder (i.e., the "Contracts"). The
Purchaser shall have been given true and correct copies of all written
instruments evidencing the Contracts set forth on SCHEDULE 2.2(i) on or prior to
the Closing including true and correct copies of all written instruments
evidencing the Contracts set forth on SCHEDULE 2.2(i) as updated after the date
hereof, provided that the copies given and to be given with respect to the Sales
Contract Rights shall be limited to those which concern amounts greater than
$50,000 or which were entered into outside of the normal course of the Seller's
Business and the copies given and to be given with respect to Purchase Contract
Rights shall be limited to those which concern the ten highest monetary values
or which were entered into outside of the normal course of the Seller's
Business. To the best Knowledge of Seller, after reasonable inquiry within the
Seller, (a) all of the Contracts are valid and binding obligations of the
parties thereto in accordance with their respective terms; (b) there exists no
condition, event or act (including, without limitation, the consummation of the
transactions contemplated by this Agreement) which, with the giving of notice,
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<PAGE> 27
the lapse of time or the happening of any other event or condition, would (i)
become a default or an event of default, or would constitute a breach of any
provision of any such Contracts, or (ii) would permit the acceleration of any
obligation of any party thereto or the creation of a lien or encumbrance upon
any of the Purchased Assets; and (c) the Seller has not violated any of the
terms or conditions of any such Contracts. The Seller is not subject to the cost
accounting standards of the United States federal government with respect to
government contract matters.
6.14 Employee Benefit Plans
(a)(1) SCHEDULE 6.14(a) contains a true and complete list of
all written and unwritten plans, funds, programs, policies, arrangements, etc.
providing health and welfare benefits to the employees and former employees of
the Seller (except with respect to the Seller's Employee Death Benefit Policy)
listed on SCHEDULE 9.15(d) now maintained by Seller or under which Seller has
any obligations in respect of any such employee (the "Health and Welfare
Plans"). Except with respect to the Seller's Employee Death Benefit Policy, with
respect to each other Health and Welfare Plan, complete copies of (i) all
current plan and trust documents, summary plan descriptions, insurance
contracts, and any other descriptions relating thereto, (ii) copies of prior
plan and trust documents, summary plan descriptions, insurance contracts, and
any other descriptions relating thereto, to the extent that they are relevant to
the administration of a current Health and Welfare Plan; (iii) copies of all
substantive written communications relating thereto and written statements of
all substantive non-written communications relating thereto, and (iv) all
substantive correspondence to or from any governmental agency relating thereto,
if any, have been delivered to the Purchaser or will be so delivered at least
ten (10) days prior to the Closing Date.
(a)(2) With respect to the 401(k) Plan and the Defined Benefit
Plan (the "Plans), complete copies of (i) all current and prior plan and trust
documents, summary plan descriptions, insurance contracts, and any other
descriptions relating thereto, (ii) statements indicating the amount and nature
of Plan assets as of December 31, 1995, and as of each month end up to and
including April 30, 1996; (iii) copies of all substantive written communications
relating thereto and written statements of all substantive non-written
communications relating thereto, (iv) all substantive correspondence to or from
any governmental agency relating thereto, (v) copies of any responses to
accountant's requests for information relating thereto and applicable to any
date or period on or after January 1, 1992, (vi) all substantive correspondence
between an attorney and the Plans or the Seller (to the extent such
correspondence relates to such Plans) dated or received on or after January 1,
1992, (vii) the six most recent annual actuarial valuation reports, if any,
(viii) the six most recently filed Form 5500s or 5500-C/Rs and Schedules, as
applicable, (ix) all IRS rulings, if any (including, but not limited to private
letter rulings and technical advice memoranda) dated on or after January 1, 1992
or pertaining to any date or period on or after January 1, 1992, and (x) all IRS
determination letters dated on or after January 1, 1992 or pertaining to any
date or period on or after January 1, 1992, if any, have been delivered to the
Purchaser or will be so delivered at least ten (10) days prior to the Closing
Date.
(b) The 401(k) Plan and the Defined Benefit Plan and the
trusts, if any, forming a
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part thereof (each referred to herein as a "Pension Plan and Trust") are now and
since their inception have been covered by a favorable determination letter
issued by the IRS and, based solely on the terms of each Pension Plan and Trust,
each Pension Plan and Trust now meets, and since its inception has met, in all
material respects the requirements for qualification under Code Section 401(a)
and is now, and since its inception has been, exempt from taxation under Section
501(a) of the Code; (ii) the IRS has not taken any action to revoke any of such
IRS favorable determination letters; (iii) Seller has performed or is performing
normally in all material respects all obligations required to be performed under
each Pension Plan and Trust (including, but not limited to, the making of all
contributions required by ERISA), is not in default under or in violation of,
and has no Knowledge of any such default or violation by any other party to, any
and all of the Plans; (iv) Seller is in material compliance with the operational
rules and other requirements prescribed by any and all statutes, orders or
governmental rules or regulations applicable to each Pension Plan and Trust,
including but not limited to ERISA and the Code, and has no Knowledge of any
defect in the operation of either Pension Plan and Trust that could reasonably
be expected to result in a loss of the tax-qualified or tax-exempt status of
either Pension Plan and Trust; (v) neither Seller nor, to the best Knowledge of
Seller, any other "disqualified person" or "party in interest," within the
meanings of Section 4975 of the Code and Section 3(14) of ERISA, respectively,
has engaged in any "prohibited transaction," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, which could, following the Closing
Date, subject any Pension Plan and Trust, the Purchaser or any officer, director
or employee of the Purchaser, to any material tax or penalty imposed under the
Code or ERISA; (vi) there are no material actions, suits or claims pending
(other than routine claims for benefits) or, to the best Knowledge of Seller,
threatened against any Pension Plan and Trust or against the assets of any
Pension Plan and Trust; (vii) no Pension Plan and Trust which is subject to Part
3 of Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency," as such term is defined in Code Section
412(a), whether or not waived, and each such Pension Plan and Trust has been
funded in accordance with the Code and ERISA; (viii) each "plan official,"
within the meaning of Section 412 of ERISA, of each Pension Plan and Trust is
bonded to the extent required by said Section 412; (ix) there has not been a
termination of any Pension Plan and Trust and, with respect to the individuals
listed on SCHEDULE 9.15(a) or SCHEDULE 9.15(b) there has not been a partial
termination of any Pension Plan and Trust, and, except as set forth on SCHEDULE
6.14(b) which shall be provided by the Seller to the Purchaser within 10 days
prior to the Closing, no "reportable event," within the meanings of Section
4043(b) or 4063(a) of ERISA, has occurred with respect to any Plan (other than
those which may result from the transactions contemplated hereby); (x) no
Pension Plan and Trust is a "multiple employer plan," within the meaning of the
Code or ERISA, or a "multiemployer plan," within the meaning of Section 3(37) of
ERISA; (xi) Seller has complied in all material respects with the reporting and
disclosure requirements of ERISA and with applicable federal and state
securities laws; and (xii) there are no leased employees (as defined in Code
Section 414(n)) that must be taken into account under any Plan pursuant to Code
Section 414(n)(3).
(c) With respect to each Health and Welfare Plan and except as indicated on
SCHEDULE 6.14(c), (i) no retiree benefits are payable pursuant to any "employee
welfare benefit plan" (as defined in ERISA Section 3(1)) and, with respect to
those employees of the Seller listed on
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SCHEDULE 9.15(d), there are no agreements in effect that would obligate Seller
or Purchaser to pay any such benefits in the future; (ii) each Health and
Welfare Plan which is a "group health plan" (as defined in Code Section 5000(b))
complies and in each case has complied in all material respects with the
applicable requirements of ERISA Sections 601 through 609, Code Section 162(k)
(through December 31, 1988) and Code Section 4980(B) (commencing on January 1,
1989); (iii) each Health and Welfare Plan may be amended or terminated by Seller
at any time whether before or after the Closing Date; (iv) Seller has performed
or is performing normally all obligations required to be performed under each
Health and Welfare Plan (including, but not limited to, the making of all
contributions required by ERISA), is not in default under or in violation of,
and has no Knowledge of any such default or violation by any other party to, any
and all of the Health and Welfare Plans; (v) to the best Knowledge of the
Seller, the Seller is in material compliance with the operational rules and
other requirements prescribed by any and all statutes, orders or governmental
rules or regulations applicable to each Health and Welfare Plan, including but
not limited to ERISA and the Code; (vi) neither Seller nor, to the best
Knowledge of Seller, any other "disqualified person" or "party in interest,"
within the meanings of Section 4975 of the Code and Section 3(14) of ERISA,
respectively, has engaged in any "prohibited transaction," as such term is
defined in Section 4975 of the Code or Section 406 of ERISA, which could,
following the Closing Date, subject any Health and Welfare Plan, the Purchaser
or any officer, director or employee of the Purchaser, to any material tax or
penalty imposed under the Code or ERISA; (vii) there are no material actions,
suits or claims pending (other than routine claims for benefits) or, to the best
Knowledge of Seller, threatened against Health and Welfare Plan; (viii) no
Health and Welfare Plan is a "multiple employer plan," within the meaning of the
Code or ERISA, or a "multiemployer plan," within the meaning of Section 3(37) of
ERISA; and (ix) Seller has complied in all material respects with the reporting
and disclosure requirements of ERISA and with applicable federal and state
securities laws.
(d) With respect to the Defined Benefit Plan and any other
plan which is subject to the minimum funding requirements of Code Section 412
and, if applicable, Title IV of ERISA, (i) as of the Closing Date, Seller shall
have made all required premium payments to the PBGC; and (ii) no amendment of
such plan has occurred which required or could require Seller or the Purchaser
to provide security to such plan under Code Section 401(a)(29).
(e) Between the date of this Agreement and the Closing Date,
neither the Defined Benefit Plan, the 401(k) Plan, nor any Health and Welfare
Plan will be terminated or amended without the consent of the Purchaser.
(f) Benefit accruals under the Defined Benefit Plan were
frozen as of December 31, 1993 (the "Freeze Date"), in accordance with Section
204(h) of ERISA, such that no additional benefits accrued under the Defined
Benefit Plan after the Freeze Date.
(g) The facts stated in SCHEDULE 6.14(g) - Alexander &
Alexander's form of opinion letter are complete and accurate and to the Seller's
Knowledge the Merger, the Spinoff, and the Spinoff Allocations (as defined in
SCHEDULE 6.14(g)) comply with the requirements of applicable
29
<PAGE> 30
law, including Sections 401(a)(12) and 414(l) of the Code.
(h) Neither the Defined Benefit Plan nor the 401(k) Plan is or
was top-heavy for any plan year within the meaning of Section 416 of the Code.
(i) As of January 1, 1996, the fair market value of the assets
of the Defined Benefit Plan to be transferred to the New Pension Plan equaled
$545,700, and the present value of accrued benefit liabilities (vested or
non-vested) to be transferred from the Defined Benefit Plan to the New Pension
Plan equaled $1,750,658, based on the method for calculating accrued benefits
and the methods and actuarial assumptions for calculating present value that are
stated in the Defined Benefit Plan and in SCHEDULE 9.15(a).
(j) No part of the assets or liabilities listed on SCHEDULE
9.15(a) or 9.15(b) and no health and welfare benefits provided by Seller and/or
any predecessor of Seller or person or entity related to or under common control
with Seller, within the meaning of ERISA or any other applicable labor law, for
any of the employees listed in SCHEDULE 9.15(d) are or ever have been provided
pursuant to any collective bargaining agreement or were ever subject to
mandatory or voluntary collective bargaining.
(k) Seller will prepare SCHEDULES 9.15(a), 9.15(b) and 9.15(d)
and furnish them to Purchaser no later than ten (10) days prior to the Closing
Date.
6.15 Permits. The Seller currently holds all necessary licenses, permits
and approvals of all applicable federal, state and local authorities with
respect to the operation of the Seller's Business, the ownership of the
Purchased Assets, including the Real Estate (collectively, the "Permits"), all
of which Permits are described on SCHEDULE 6.15 hereto and, except as described
on SCHEDULE 6.15, are transferable to the Purchaser. All such Permits are in
good standing and there is no investigation or proceeding pending or threatened
with respect to such Permits. True copies of the Permits have been provided to
the Purchaser prior to the date hereof.
6.16 Litigation and Investigations. Except as set forth on SCHEDULE 6.16
hereto, there are no actions, suits, claims, demands, legal or administrative
proceedings or governmental investigations existing or, to the best Knowledge of
the Seller, threatened against or affecting the Seller, the Seller's Business,
the Purchased Assets, or any of its property or assets, or any judgments,
decrees, orders, rulings, writs or injunctions specifically referring to the
Seller which (either by reason of adherence or default) may have a Material
Adverse Effect.
6.17 Warranties; Product Liability; Etc. SCHEDULE 6.17 contains a complete
and accurate list of any and all warranties made by the Seller covering or
relating to any of the products or services sold by the Seller, including those
related to the warranty obligations. Except for losses, claims, damages and
expenses which are described on SCHEDULE 6.17, to the best Knowledge of the
Seller after reasonable inquiry within the Seller, there are no liabilities of
the Seller, fixed or contingent,
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asserted and arising out of or based upon incidents occurring on or before the
date hereof with respect to:
(a) Any product liability or any similar claim that relates to
any of the products sold by the Seller to others;
(b) The delivery of faulty service; or
(c) Any claim for the breach of any express or implied product
warranty, or any similar claim that relates to any product sold or service
delivered by the Seller and the Seller has no Knowledge of any product or
service defects which could give rise to any such liabilities or claims.
6.18 Labor and Employee Matters.
(a) Identification. SCHEDULE 6.18 contains a true and complete
list of the names, annual compensation, commencement date and description of
responsibilities of the Seller's employees who are involved in the Seller's
Business.
(b) Nature of Employment; Agreements. Except as described on
SCHEDULE 6.18, each employee of the Seller is employed on an at-will basis.
Except as described on SCHEDULE 6.18, the Seller does not have any written
agreements and, to the best Knowledge of the Seller after reasonable inquiry
within the Seller, any oral agreements with any of its employees engaged in the
Seller's Business, or any agreement which would interfere with the Seller's
ability to discharge such employees. Except as described on SCHEDULE 6.18, the
Seller has not made any representation to the Seller's employees relative to the
subsequent employment of the employees with the Purchaser. Except as described
on SCHEDULE 6.18 hereto, the Seller is not a party to any written sales
representative agreement, consulting agreement or other independent contractor
agreement with respect to the Seller's Business.
(c) Union Contracts; Labor Difficulty. There is no collective
bargaining agreement or union contract binding on the Seller and, to the best
Knowledge of Seller after reasonable inquiry within the Seller, there is no
labor strike, dispute, slowdown, organization drive, stoppage or other material
labor difficulty, pending or threatened against the Seller.
(d) Charges, Complaints, Etc. Except as described on SCHEDULE
6.18 attached hereto, Seller has no Knowledge of and has not received any notice
from any governmental agency of any alleged violation of applicable laws that
remains unresolved respecting employment and employment practices, terms and
conditions of employment and wage and hours. Except as described on SCHEDULE
6.18 attached hereto, there are no unfair labor practice charges or complaints,
minimum wage or overtime or equal pay charges or complaints, occupational
safety/health charges or complaints, wrongful discharge charges or complaints,
employee grievances, discrimination claims or workers' compensation claims
pending or, to the best Knowledge of the Seller, threatened against the
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Seller before any federal, state, local, or other governmental court or
authority.
(e) Severance. Except for the severance obligations set forth in
those certain severance agreements described on SCHEDULE 6.18 attached hereto
between the Seller, on the one hand, and Messrs. Kaminsky, Schrafnagl, Snyder,
Ringuette, Hartwig, Murphy and Pelrin, on the other hand, true and complete
copies of which have been provided to the Purchaser prior to the date hereof
(collectively, the "Seller Management Severance Agreements"), and except for the
severance arrangements for the other employees of the Seller as described on
SCHEDULE 6.18 attached hereto (collectively, the "Seller Non- Management
Severance Arrangements"), the Seller does not have any obligations for severance
payments to its employees arising out of the transactions contemplated herein or
otherwise.
6.19 Environmental Laws. Except as described on SCHEDULE 3.1(f) or
SCHEDULE 6.19 attached hereto, to the best Knowledge of Seller after reasonable
inquiry within Seller:
(a) No Hazardous Materials are currently or have been used,
stored, emitted or discharged (unless used, stored, emitted or discharged in
compliance with all applicable Environmental Laws), released, disposed of, or
otherwise deposited, at, on, in, from under or about the Real Estate by the
Seller in any quantity that requires or that may result in liability for
investigation, reporting, or clean up under any applicable Environmental Laws.
(b) No activity has been undertaken on the Real Estate by the
Seller that has caused or may have caused:
(i) The Real Estate to become a treatment, storage or
disposal facility within the meaning of the Environmental Laws;
(ii) A release or threatened release of any Hazardous
Materials in any quantity that requires or that may result in liability for
investigation, reporting, or clean up under any applicable Environmental Laws;
or
(iii) The discharge of Hazardous Materials into the air,
land, surface water, ground water, wetlands or other water source or system
thereof, or the dredging or filling of any waters or wetlands, that would
require a permit or give rise to liability under the Environmental Laws.
(c) There are no substances or conditions at, on, in, under or
about the Real Estate or any other property now or previously owned or operated
by the Seller that may give rise to a claim or cause of action under the
Environmental Laws.
(d) No underground storage tanks have been installed, used or
removed by the Seller, or are presently located in, on or under the Real Estate.
(e) With respect to the operation of the Seller's Business and
the use of the Real
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Estate, the Seller has obtained all permits, licenses and other authorizations
required under the Environmental Laws relating to pollution or protection of the
environment (indoor or outdoor, relating to air, land, water (i.e., surface
water, ground water, wetlands or other water source or system thereof), noise,
odor or otherwise) which could affect the Seller's ability to conduct the
Seller's Business as presently conducted, and all such permits, licenses and
other authorizations are in full force and effect as of the date hereof. The
Seller is and has at all times been in substantial compliance with all such
permits, licenses and authorizations, and is, as of the date hereof, in
substantial compliance with all such Environmental Laws related thereto. Seller
has made timely and complete application for issuance, renewal, extension and
reissuance of all Permits applicable to or required for the operation of
Seller's Business and the use of the Real Estate. Seller has not obtained
information from regulatory agencies having jurisdiction or otherwise, which
would lead a reasonable person with knowledge of the facts and circumstances to
believe that such Permits may not be issued, renewed, extended or reissued in
due course and as requested without material cost or penalty.
(f) The Seller has not generated, stored, disposed of or
transported to a landfill or other facility, which is listed on the U.S.
Environmental Protection Agency's National Priorities List of Hazardous Waste
Sites, the NJDEP's Report prepared by the Site Remediation Program of the Known
Contaminated Sites in New Jersey, dated July 1995, or any analogous state
listing. The Seller has not received, nor is the Seller aware of, any request
for response action, administrative or other order (or request therefor),
judgment, complaint, claim, investigation, request for information or other
request for relief in any form relating to any facility where Hazardous
Materials generated or transported by Seller have been or may have been handled,
stored, disposed of, placed or located.
(g) The Seller has not received any written notice (i) of any
pending or threatened claims, investigations, administrative proceedings,
litigation, regulatory hearings or requests or demands for remedial or response
actions or for compensation, with respect to the Real Estate, alleging
noncompliance with or violation of any Environmental Law or seeking relief under
any Environmental Law, or (ii) that any unit of government or third party has
determined that there exists a violation of Environmental Law.
(h) The Real Estate is not and never has been listed on the
United States Environmental Protection Agency's National Priorities List of
Hazardous Waste Sites, the NJDEP's Report prepared by the Site Remediation
Program of the Known Contaminated Sites in New Jersey, dated July 1995, or any
analogous state listing.
(i) The Seller has disclosed and delivered to Purchaser all
environmental reports, audits, investigations, and other material documents
which Seller has ever obtained or ordered or which the Seller has in its
possession or control with respect to the Real Estate and the operation of the
Seller's Business.
(j) The Real Estate and the Seller's Business are in
substantial compliance with all Environmental Laws.
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6.20 Compliance with Laws. Except for the Environmental Laws (which are
the subject of Section 6.19 above), to the best Knowledge of Seller after
reasonable inquiry within the Seller, the Seller, with regard to the Seller's
Business, the Purchased Assets, business practices, products or services, is not
in violation of any applicable laws, statutes, regulations, rules, orders or
other requirements of any governmental authority, the violation of which might
have a Material Adverse Effect. Except for the Environmental Laws (which are
discussed in Section 6.19 above), the Seller is not aware of, and has not
received any notice of, (a) any pending or threatened review or investigation of
an alleged violation of any such laws, statutes, regulations, rules, orders or
other requirements, or (b) any past, present or future events, conditions,
actions or plans which may interfere with or prevent continued compliance with
such laws, statutes, regulations, rules, orders or other requirements or which
may give rise to any common law or legal liability, or otherwise form the basis
of any claim, action, suit, proceeding, hearing or investigation.
6.21 Taxes.
(a) General. All tax returns, including, without limitation,
income, sales and personal property tax returns, required to be filed by reason
of the operations conducted by the Seller by either the Seller or KDI D/H on or
prior to the Closing Date with the United States or any state or any other
governmental agency or authority have been or will be duly prepared and filed,
and were or will be true and correct and complete. All taxes due or to become
due by reason of the operations conducted by the Seller, including, without
limitation, the sale of the Purchased Assets as contemplated by this Agreement,
have been or will be paid when due, other than the taxes payable by the
Purchaser. Neither the Seller nor KDI D/H have received any notice of assessment
of additional taxes or an intent to assess additional taxes and has not executed
or filed with any taxing authority any agreement extending the period for
assessment of any income or other taxes. The Purchaser will have no liability
whatsoever for any federal, state or local tax payments based upon or measured
by the income of the Seller, the ownership of its property, the conduct of the
Seller's Business prior to the Closing Date or arising out of the transactions
contemplated hereby, or arising out of or related to the sale or transfer of the
Purchased Assets contemplated by this Agreement. Except for taxes not yet due
and payable, there are no tax liens upon any of the properties or assets, real,
personal or mixed, tangible or intangible of the Seller, there are no pending
claims, examinations or proceedings by any authority or agency relating to the
assessment of any taxes, interest or penalty on such properties or assets, and,
to the best Knowledge of the Seller, there is no basis for any such claim or
assessment. Except as described on SCHEDULE 6.21 attached hereto, during the
three year period ending on the Closing Date, the Seller has not been audited,
or received notice of any proposed audit, by the Internal Revenue Service or any
other governmental agency or authority.
(b) New Jersey Taxes. Without limiting the generality of the
foregoing, except to the extent otherwise provided as part of the Accruals, the
Seller shall timely comply with, and pay, all taxes, interest, and penalties as
may be due and unpaid under, all New Jersey tax laws (the "New Jersey Taxes").
The Seller shall timely cooperate with the Purchaser in preparing and filing the
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necessary forms and notices required to be filed with the applicable tax
authorities of New Jersey under NJSA ss. 54:32B-22, including the Notification
of Sale, Transfer or Assignment in Bulk to be filed with the New Jersey
Department of the Treasury, and shall pay all taxes as may be due and imposed
under New Jersey law except for those taxes which are part of the Accruals as to
which the Purchaser shall be responsible. In addition, upon notice from such tax
authorities as to the applicable amount of the Purchase Price which should be
held in escrow pending payment of the New Jersey Taxes in order to limit or
eliminate liability for the non-payment by the Seller of such taxes (the "New
Jersey Taxes Escrow Amount"), the parties agree that, to the extent not
otherwise reflected in the Accruals, such amount shall be added to the Accruals.
As soon as reasonably practicable after the Closing, the Seller shall deliver to
the Purchaser the receipt or certificate contemplated under New Jersey law from
such tax authorities evidencing that all such New Jersey Taxes have been paid or
are not due (the "New Jersey Tax Certificate"). Within 5 business days of
receipt of the New Jersey Tax Certificate, the Purchaser shall pay to the Seller
the portion of the New Jersey Taxes Escrow Amount, if any, which was included in
the Accruals and which exceeded the estimate of the tax authorities as to the
New Jersey Taxes due the State of New Jersey from the Seller.
6.22 Insurance Coverage. SCHEDULE 6.22 hereto sets forth a complete and
correct list of all insurance policies currently maintained by the Seller and
identifies the insurance company, type of coverage and annual premium for each
such policy.
6.23 No Default. To the best Knowledge of the Seller after reasonable
inquiry within the Seller, the Seller is not in breach or violation of, and
neither the execution and delivery of this Agreement or the Seller Delivered
Documents by the Seller, nor performance of or compliance with its or their
terms will result in a breach or violation of, (a) the Certificate of
Incorporation or Bylaws of the Seller, (b) any agreement, indenture, mortgage,
lease or other obligation or instrument to which the Seller is a party or by
which any of its property is bound, except any such breach or violation that
would not have a Material Adverse Effect, or (c) any law, statute, rule,
regulation or any judgment, order or decree to which the Seller is a party or by
which the Seller or any of its properties is subject, except any such breach or
violation that would not have a Material Adverse Effect.
6.24 No Material Adverse Change. Except as set forth in SCHEDULE 6.24
hereto, from the date of the latest balance sheet in the Financial Statements,
there has been no material and adverse change in the business, operations,
properties or financial condition of the Seller, or, to the best the Knowledge
of the Seller after reasonable inquiry within the Seller, any facts related to
the Seller's Business or the Purchased Assets which, by reason of passage of
time or otherwise, may reasonably be expected to result in any such material and
adverse change, except as otherwise described herein or in the Seller Delivered
Documents.
6.25 Insider Interests. SCHEDULE 6.25 attached hereto sets forth each
interest which any officer, employee, director or shareholder of the Seller has
in any of the Purchased Assets or in any of the Contracts pertaining to the
Seller's Business.
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6.26 Hart-Scott-Rodino Antitrust Improvements Act of 1976. Neither the
Seller nor its "ultimate parent entity", as that term is defined in 16 C.F.R.
Part 801.1(a)(3), has annual net sales or total assets of $100 million or more,
as determined pursuant to 16 C.F.R. Part 801.11. Neither Seller nor its
"ultimate parent entity" are required to file a premerger notification with the
Federal Trade Commission or with the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, in connection with the transactions contemplated by this
Agreement.
6.27 Sensitive Transactions. To the best Knowledge of the Seller after
reasonable inquiry within the Seller, none of the Seller, or any employee, agent
or representative of any of the Seller has directly or indirectly used funds or
other assets of the Seller for illegal contributions, gifts, or payments to or
for the benefit of any governmental official or employee, or any other person or
entity.
6.28 Fees and Commissions. The Seller has not agreed to pay or become
liable to pay any broker's, finder's or originator's fees or commission for
which the Purchaser shall have liability by reason of services alleged to have
been rendered for or at the instance of the Seller in connection with this
Agreement and the transactions contemplated hereby. In the event any such
liability for fees and commission shall arise, the Seller shall be specifically
liable and responsible for the payment of same.
6.29 Misstatement or Omission. Except with respect to those
representations and warranties limited by the best Knowledge of the Seller after
reasonable inquiry within the Seller, no representation or warranty by the
Seller in this Agreement, and none of the Seller Delivered Documents furnished
or to be furnished by the Seller pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact, or omits or will omit to state a material fact required to
be stated therein or necessary to make the statements contained therein not
misleading.
VII. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the Seller and KDI D/H,
on and as of the date hereof, as follows:
7.1 Organization and Standing. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan. The Purchaser has all requisite corporate power and authority to carry
on its business as presently conducted.
7.2 Authority and Action. The Purchaser has full power and authority to
enter into this Agreement and each of the other agreements, documents or
instruments to be delivered at the Closing or thereafter by the Purchaser
pursuant to this Agreement or otherwise (collectively, the "Purchaser Delivered
Documents") and to perform and consummate the transactions contemplated herein
and therein. All corporate action required to be taken by or on the part of the
Purchaser to authorize the execution and delivery of this Agreement and the
Purchaser Delivered Documents and to authorize the
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Purchaser to perform and consummate the transactions contemplated hereby and
thereby has been, or prior to the Closing will be, duly and properly taken. This
Agreement has been and, upon execution and delivery, each of the Purchaser
Delivered Documents will be duly executed and delivered by the Purchaser. This
Agreement constitutes and, upon execution and delivery, each of the Purchaser
Delivered Documents will constitute valid and binding obligations of the
Purchaser, enforceable in accordance with their respective terms, except as may
be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally.
7.3 Hart-Scott-Rodino Antitrust Improvement Act of 1976. Neither the
Purchaser nor its "ultimate parent entity", as that term is defined in 16 C.F.R.
Part 801.1(a)(3), has annual net sales or total assets of $100 million dollars
or more, as determined pursuant to 16 C.F.R. Part 801.11. Neither the Purchaser
nor its "ultimate parent entity" are required to file a pre-merger notification
with the Federal Trade Commission or the Antitrust Division of the United States
Department of Justice under the Hart- Scott-Rodino Antitrust Improvement Act of
1976, as amended, in connection with the transactions contemplated by this
Agreement.
7.4 Litigation and Investigations. There are no actions, suits,
proceedings or governmental investigations existing or, to the best Knowledge of
the Purchaser, threatened against or affecting the Purchaser or any of the
Purchaser's property or assets, or any judgments, decrees, orders, rulings,
writs or injunctions specifically referring to the Purchaser which (either by
reason of adherence or default) may have a Material Adverse Effect.
7.4 Fees and Commissions. Neither the Purchaser nor any affiliate
thereof have agreed to pay or become liable to pay any broker's, finder's or
originator's fees or commission for which the Seller or KDI D/H shall have
liability by reason of services alleged to have been rendered for or at the
instance of the Purchaser in connection with this Agreement and the transactions
contemplated hereby. In the event any such liability for fees and commission
shall arise, the Purchaser shall be specifically liable and responsible for the
payment of same.
7.6 No Default. To the best Knowledge of the Purchaser after
reasonable inquiry within the Purchaser, the Purchaser is not in breach or
violation of, and neither the execution and delivery of this Agreement or the
Purchaser Delivered Documents by the Purchaser nor performance or compliance
with its or their terms will result in a breach or violation of, (a) the
Articles of Incorporation or Bylaws of the Purchaser, (b) any agreement,
indenture, mortgage, lease or other obligation or instrument to which the
Purchaser is a party or by which any of its property is bound, except any such
breach or violation that would not have a Material Adverse Effect or (c) any
law, statute, rule, regulation or any judgment, order or decree to which the
Purchaser is a party or by which the Purchaser or any of its properties are
subject, except any such breach or violation that would not have a Material
Adverse Effect.
VIII. REAL ESTATE MATTERS.
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8.1 Title Policy. Within ten (10) days after the date of this
Agreement, the Purchaser shall order a commitment(s) for a 1992 Form B ALTA
Owner's Title Insurance Policy with respect to each parcel of Owned Real Estate
(the "Title Commitments") issued by a title insurer licensed to do business in
New Jersey and approved by the Seller (which approval will not be unreasonably
withheld) (the "Title Company"). Each such Commitment when delivered to the
Seller, shall be accompanied by legible copies of each exception to title
referred to therein. At the Closing, the Purchaser shall, at its expense, cause
to be delivered to the Purchaser, in a form reasonably satisfactory to the
Purchaser, an ALTA Owner's Title Insurance Policy Form B dated as of the Closing
Date issued to the Purchaser by the Title Company, with respect to each parcel
of Owned Real Estate which title insurance policy(s) insure that the fee simple
absolute title to the parcel of Owned Real Estate described therein is
marketable and valid and vested in Purchaser, subject only to the Permitted
Liens in respect of such property and to all exceptions which the Purchaser has
approved or is deemed to have approved pursuant to Section 8.3 below and to no
other exceptions, printed or otherwise and such policies shall affirmatively
insure against encroachments and against violations of applicable covenants,
conditions and restrictions. The premiums for such policies as well as the Title
Commitment and survey charges, including, but not limited to, charges for title
abstract and examination (including all search, continuation and later-date
fees), shall be paid by the Purchaser. Such title insurance policies shall be
(i) issued by the Title Company, (ii) showing in SCHEDULE A thereof the approved
legal description of such Owned Real Estate and each easement appurtenant
thereto, (iii) with the standard printed exceptions deleted, and otherwise
showing in SCHEDULE B thereof only the Permitted Exceptions, and (iv) containing
such endorsements as may reasonably be requested by Purchaser. At Closing, the
Seller shall deliver to the Purchaser, in a form reasonably satisfactory to the
Purchaser and the Title Company, a bargain and sale deed covenanting against the
grantor's own acts (the "Deed") for each parcel of Owned Real Estate which shall
be in recordable form free and clear of all liens, claims and encumbrances,
other than Permitted Liens and any matters which Purchaser shall have approved
or be deemed to have approved pursuant to Section 8.3 below, and for each such
parcel such affidavits or other instruments as the Title Company may require to
issue and delete standard exceptions and any required special endorsements.
8.2 Surveys. Within ten (10) days after the date of this Agreement,
the Seller shall cause to be delivered to Purchaser and the Title Company, at
the Seller's expense, surveys of the Owned Real Property (the "Surveys")
prepared by a survey or registered in the State on which the Owned Real Estate
is located, in accordance with the 1992 minimum standard detail requirements for
ALTA/ACSM surveys, Class A, and dated after the date of this Agreement showing
the Owned Real Estate, all known easements and rights granted by license thereon
which can be depicted on the Surveys, all improvements (including fences and
driveways), and access to and from a dedicated and accepted public right-of-way.
Each such Survey shall (a) be certified to the Purchaser and its assigns, its
mortgage lender, if any, and the Title Company, and (b) comply with any
requirements imposed by the Title Company as a condition to the removal of any
survey exception from the general exceptions in the Title Commitment. Each
Survey shall indicate whether the improvements located on the surveyed land
encroach onto adjoining land or onto any easements, building lines or setback
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requirements, and whether there are any encroachments by improvements from
adjoining land onto the surveyed land or onto any easements for the benefit of
the surveyed land. Each Survey shall show all conditions as then existing,
including the location of all pipes, wires and conduits serving the Owned Real
Estate and their connections to public ways, parking areas denominated as such,
loading docks and other improvements and the access to and from the improvements
on the Owned Real Estate.
8.3 Unpermitted Exceptions and Survey Defects. If (i) any Commitment
discloses a title exception other than a Permitted Lien (an "Unpermitted Lien")
or (ii) any Survey discloses an encroachment, overlap or other defect or
reflects that any utility service to the improvements or access thereto does not
lie wholly within the Owned Real Estate or an unencumbered easement for the
benefit of the Owned Real Estate or reflects any other matter whatsoever
affecting the use or improvements of the Real Estate (a "Survey Defect"), then,
upon the occurrence of either (i) or (ii) above the Purchaser or the Purchaser's
counsel may deliver written objections to the Seller of such matter and
thereafter, the Seller shall have fifteen (15) days from the date of delivery
thereof to have the Unpermitted Lien removed from such Commitment or title
abstract or insured over, or the Survey Defect corrected all in a manner
reasonably satisfactory to the Purchaser, and in any such event the Closing
shall be extended, if necessary, to the date which is five (5) business days
after the expiration of such fifteen (15)-day period. Nothing contained in this
Agreement shall be construed to require the Seller to incur any expense or
commence any proceeding to remove any such Unpermitted Liens or Survey Defects.
If the Seller fails to have any Unpermitted Lien removed or any Survey Defect
corrected to the reasonable satisfaction of the Purchaser within the time
specified therefor, the Purchaser, at its sole option, upon not less than three
(3) days' prior written notice to the Seller, acting in its sole discretion may:
(a) Take title to the subject parcel of Owned Real Estate as
it then is with the right to deduct from the cash portion of the Purchase Price
to be paid for the Purchased Assets pursuant to Article IV above an amount
(reasonably determined by the Purchaser acting in good faith) equal to all
liquidated liens, claims, encumbrances and costs of correction; or
(b) Reduce the cash portion of the Purchase Price for the
Purchased Assets to be paid pursuant to Article IV above by an amount
(reasonably determined by the Purchaser acting in good faith) equal to the
reduction in value of the Purchased Assets created by all of the Unpermitted
Liens or Survey Defects; or
(c) Refuse to take title to the subject parcel of Owned Real
Estate and deduct from the Purchase Price to be paid for the Purchased Assets
pursuant to Article IV above an amount (reasonably determined by the Purchaser
acting in good faith) equal to the portion of the consideration allocable to
such parcel; or
(d) Terminate this Agreement and all of the Purchaser's
obligations hereunder pursuant to Article XIV below. Notwithstanding the
foregoing, the existence of Liens other than Permitted Liens shall not be
objections to title provided that properly executed instruments in
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recordable form, necessary to satisfy same, are delivered to the Purchaser and
the Title Company at the Closing together with any recording or filing fees
required in connection therewith.
8.4 Internal Revenue Code ss.1445. The Seller shall furnish the
Purchaser on or before the Closing Date with a certificate of non-foreign status
signed by the appropriate party and sufficient in form and substance to relieve
the Purchaser of all withholding obligations under Code ss.1445 (26 U.S.C.
ss.1445). In the event that the Seller cannot furnish such a certificate or the
Purchaser is not entitled to rely upon such certificate under the provisions of
Code ss.1445 and the regulations thereunder, the Seller shall take and/or permit
the Purchaser to take any and all steps necessary to allow the Purchaser to
satisfy the requirements of Code ss.1445, all at the Seller's expense.
IX. COVENANTS.
The parties hereto hereby covenant and agree as follows:
9.1 Access and Information. For purposes of enabling the Purchaser and
MFI to complete their due diligence review, the parties agree that, from and
after the date hereof, for a period ending on the date such review is completed
to the Purchaser's sole satisfaction or the Closing Date, whichever is earlier,
the Seller shall permit the Purchaser, MFI and their counsel, accountants,
lenders, investors, agents and other representatives, full access during normal
business hours and upon reasonable advance notice to the Real Estate and to all
of the properties, books, contracts, commitments and records of the Seller
reasonably relating to the Purchased Assets and the Seller's Business, and
during such period the Seller shall furnish the Purchaser and MFI with all such
statements (financial and otherwise), records and documents or copies thereof,
and other information reasonably relating to operations of the Seller's Business
as the Purchaser and MFI shall, from time to time, reasonably request. Without
limiting the generality of the foregoing, the Seller shall allow the Purchaser
and MFI ongoing access during such period to the Seller's environmental audits
and other information relating to environmental matters, periodic management
reports, current accounts receivable aging reports, inventory reports, and cash
balance reports. The Seller shall allow the Purchaser and MFI to conduct further
environmental audits if the Purchaser or MFI so request, to be conducted at
Purchaser's and MFI's expense. The Seller shall also allow the Purchaser and its
representatives ongoing access during such period to the Seller's Government
Contract audits, both internal and external, and other information relating to
Government Contract compliance or performance in the areas of financial control
or costs, including defective pricing, labor or socio-economic clause
implementation, purchasing and subcontract selection or management, security
clearances, or other Government Contract requirements, as well as any allegation
of violation or noncompliance with any contract provision, regulation, or
statute. The Seller shall use its best efforts to cause its independent public
accountants, attorneys and other representatives to cooperate with the
Purchaser, MFI and their accountants, lenders, investors, agents and other
representatives in connection with the right of access granted herein.
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9.2 Contact with Employees, Etc.; Customers and Suppliers.
(a) The Seller shall cooperate with and use its best
commercially reasonable efforts to assist the Purchaser in its efforts to employ
or retain those employees, agents, salespersons, and independent sales
representatives or other contractors who are employed or retained by the Seller
with respect to the Purchased Assets and the operation of the Seller's Business
and, for such purposes, shall provide the Purchaser with a reasonable
opportunity to identify and interview such persons within a reasonable time
prior to the Closing. Although the Purchaser shall offer employment to all
current employees of the Seller effective as of the Closing Date, the Purchaser
reserves the right to make employment changes after the Closing in such a manner
as it shall determine in its sole discretion.
(b) The Seller shall cooperate with and use its best
commercially reasonable efforts to assist the Purchaser in its efforts to hold
discussions with the material customers (particularly, AT&T) and suppliers of
the Seller. The Purchaser shall not directly or indirectly contact any customers
or suppliers of the Seller without the prior consent of the Seller (which
consent shall not be unreasonably withheld).
9.3 New Hires. The parties hereto expressly acknowledge and agree that
the Purchaser will hire the employees employed by the Seller as of the Closing
Date and the Seller's employees who are hired by the Purchaser shall be
considered as "new hires." The Purchaser shall provide those employees hired as
of the Closing Date who are currently parties to the Seller Management Severance
Agreement with the opportunity to enter into new severance agreements on or
before the Closing Date in substantially the form attached hereto as EXHIBIT
9.3-1 (the "Purchaser Management Severance Agreements"). In addition, the
Purchaser shall provide those employees hired as of the Closing Date who are
covered by the Seller Non-Management Severance Arrangements with new severance
arrangements which are substantially similar to the Seller Non-Management
Severance Arrangements, including credit for years of service with the Seller,
provided that such new severance arrangement will provide that salary
continuation payments for terminated employees who are subsequently re-employed
will be offset by the salary received by such employees in their subsequent
employment during the continuation period (collectively, the "Purchaser
Non-Management Severance Arrangements"). The Purchaser Non-Management Severance
Arrangements shall be substantially in the form attached hereto as EXHIBIT
9.3-2. Except to the extent otherwise provided for as part of the Accruals and
except to the extent otherwise provided in this Section 9.3 or in Section 9.15,
the Purchaser shall not have any responsibility or liability with respect to the
payment of severance or other compensation or termination pay to any of the
Seller's employees whose employment is terminated as a result of or in
connection with the consummation of this Agreement or with respect to any other
employee benefits.
9.4 Operation of Business. From and after the date hereof and through
the Closing Date, the Seller shall operate the Seller's Business consistent with
past operations and practices and shall use its best efforts to maintain the
Seller's Business intact, retain the present employees of the Seller's Business
and preserve the confidence of suppliers, distributors, dealers, representatives
and customers
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related thereto. Without limiting the generality of the foregoing,
neither the Seller nor the KDI D/H shall (a) enter into any contracts that could
have a material adverse impact on the business, assets, properties, financial
condition, results of operations, cash flows or relate in any adverse way to the
transactions contemplated in this Agreement, (b) materially increase the
compensation or employee benefits of any executive employee of the Seller, (c)
transfer, sell, or dispose of any of the Purchased Assets, or enter into any
agreements relative to the foregoing, except in the ordinary course of business,
(d) amend the Seller's Articles of Incorporation, or (e) merge, consolidate,
participate in a share exchange or otherwise transfer the stock or assets of the
Seller to any other party, or enter into any agreements relative to the
foregoing.
9.5 ShadowNet System Product Line Investigation. From and after the
date hereof through the Closing, KDI D/H and the Seller will use their best
commercially reasonable efforts to conduct an investigation for purposes of
identifying and quantifying all liabilities which may arise from or in
connection with the termination of the ShadowNet System product line, including
possible claims from purchasers thereof, and KDI D/H and the Seller will
disclose the results of such investigation to the Purchaser.
9.6 Exclusivity. None of KDI D/H, the Seller or any of their officers,
directors, employees, agents or other representatives or affiliates will solicit
any party relating to any proposal contemplating merger, consolidation,
liquidation, stock sale, sale of all or substantially all of the assets of the
Seller or any similar action with any person or entity, nor will they encourage
any of the foregoing. The Seller shall notify MFI immediately of the details of
any indication of interest from any persons with respect to the foregoing of
which it becomes aware.
9.7 WARN. The Purchaser and the Seller hereby covenant and agree that
(a) the Seller shall assume all liability relating to any violation of WARN with
respect to the Seller's employees occurring as a result of actions taken by the
Seller or KDI D/H prior to the Closing Date, and (b) the Purchaser shall assume
all liability relating to any violations of WARN with respect to the Seller's
employees occurring as a result of actions taken by the Purchaser on or after
the Closing Date.
9.8 Notice of Material Adverse Change. From and after the date hereof
and through the Closing Date, the Seller shall promptly notify the Purchaser in
writing of any event having a Material Adverse Effect or materially affecting
the accuracy of any of the representations and warranties of the Seller
contained herein on and as of the date hereof or on and as of the Closing Date.
9.9 Consents. From and after the date hereof and through the Closing
Date, the Seller shall use its best commercially reasonable efforts in obtaining
any consents, assignments, novations, approvals, orders, qualifications,
licenses, permits or other authorizations, and waivers from any governmental
entity or other third parties necessary to permit the consummation of the
transactions contemplated by this Agreement, provided that the parties
acknowledge and agree that the consent of the United States federal government
relative to security clearances cannot be obtained until after the Closing and
that the Seller shall use its best commercially reasonable efforts in obtaining
same as soon
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as is reasonably practicable after the Closing.
9.10 Assigned/Novated Contracts. This Agreement shall not constitute
an assignment, attempted assignment, novation, attempted novation or transfer or
attempted transfer of any Contract that cannot be assigned, transferred or
novated without a third party consent that has not been obtained if such
assignment, attempted assignment, novation, attempted novation, transfer or
attempted transfer would constitute a breach of such Contract. The Purchaser and
the Seller, immediately following execution of this Agreement and through and
after the Closing, each shall use commercially reasonable efforts, working in
cooperation, to obtain any consent necessary for the assignment or novation of
each Contract (it being understood that neither party shall be required to offer
or grant financial accommodations or assumption of any additional obligations or
liabilities in connection therewith). The Purchaser and the Seller shall
cooperate, to the extent reasonably requested by either of them, in connection
therewith, including executing agreements of assumption or novation. If such
consent is not obtained, or if an attempted assignment or transfer thereof would
be ineffective or would adversely affect the rights of the Purchaser thereunder
so that the Purchaser would not in fact receive all such rights as of the
Closing, the Purchaser and the Seller will cooperate in a mutually agreeable
arrangement under which the Purchaser would obtain substantially the same
economic benefits that would be obtained under an assignment thereof and assume
the obligations thereunder in accordance with this Agreement (including
subcontracting, sublicensing, or subleasing to the Purchaser, or under which the
Seller would enforce for the benefit of the Purchaser, with the Purchaser
assuming the Seller's obligations, any and all rights of the Seller against a
third party thereto, subject to the Purchaser's indemnifying and holding the
Seller harmless from performing such obligations and reimbursing the Seller for
its reasonable out-of-pocket expenses approved by the Purchaser in connection
therewith). The Seller will promptly pay to the Purchaser when received all
monies received by the Seller under any Contract or any claim or right or any
benefit arising thereunder not transferred pursuant to this Section 9.10, except
to the extent the same represents a reassigned asset. In no event shall the
Seller or KDI D/H be obligated (i) to pay any money to the Seller, the U.S.
Government or any third party or to offer or grant financial accommodations to
the Purchaser, the U.S. Government or any third party or, except as specifically
provided herein, to assume any obligations or liabilities in connection with or
relating to any Contract as a result of the assignment of any Contract (by way
of novation or otherwise) or any claim or right or any benefit arising
thereunder or resulting therefrom pursuant to this Agreement, or (ii) after
consummation of the Closing, to take any action under or pursuant to any
Contract referred to in this Section 9.10, whether for the benefit of the
Purchaser or otherwise except as specifically required pursuant to this Section
9.10, this Agreement or any agreement, document or instrument to be delivered at
the Closing or thereafter by the Seller pursuant to this Agreement or otherwise.
Nothing in this Section 9.10 shall be construed to require the Seller to take
any action pursuant to this Section 9.10 in the event that a condition precedent
to the Seller's obligation to close has not been satisfied or waived by the
Seller.
9.11 Seller Non-Competition Agreement. The Purchaser and the Seller
agree to execute and deliver a non-competition agreement, in substantially the
form attached hereto as EXHIBIT 9.11 (the "Seller Non-Competition Agreement"),
prior to or as of the Closing Date.
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9.12 KDI D/H Non-Competition Agreement. The Purchaser and KDI D/H agree
to execute and deliver a non-competition agreement, in substantially the form
attached hereto as EXHIBIT 9.12 (the "KDI D/H Non-Competition Agreement"), prior
to or as of the Closing Date.
9.13 Escrow Agreement. Contemporaneously with the execution of this
Agreement, Seller, KDI D/H and Purchaser shall execute and deliver the Escrow
Agreement.
9.14 Industrial Site Recovery Act.
(a) The Seller's Business has a Standard Industrial
Classification Code of 3679, one of the codes subject to ISRA. The Seller and
the Purchaser agree that the Seller is required to comply with the provisions of
ISRA at both its Whippany and East Hanover facilities prior to Closing. The
parties desire, and the Seller agrees, that the Seller's compliance obligations
shall be satisfied by receipt from NJDEP of: (1) a "No Further Action Letter",
or (2) an approved "Negative Declaration", or (3) an approved "Remedial Action
Workplan", as such terms are defined at N.J.S.A. 13:1K-8, N.J.S.A. 58:10B-1.
(b) In order to effectuate a Closing prior to obtaining a No
Further Action Letter, Negative Declaration, or approved Remedial Action
Workplan, Seller, at its sole discretion, shall have the right to apply for, and
obtain from NJDEP, a "Remediation Agreement", as such term is defined at
N.J.S.A. 13:1K-9(e). In connection with any Remediation Agreement, the Seller
(or a Seller-related party) shall be designated as the party responsible for
obtaining approval of, and implementing, the Remedial Action Workplan, and
Seller (or a Seller-related party) shall provide and maintain any required
"Remediation Funding Source", as such term is defined at N.J.S.A. 58:10B-3, in
form and amount acceptable to NJDEP. In no event shall the Purchaser be required
to be an "Ordered Party" to the Seller's Remediation Agreement. Upon entry into
a Remediation Agreement with NJDEP, the Seller shall have been deemed to have
fulfilled all conditions precedent to Closing with respect to ISRA.
(c) Seller shall, at its sole cost and expense, undertake and
complete, with reasonable due diligence, all actions necessary to achieve
compliance with the provisions of ISRA, any Remediation Agreement issued by
NJDEP, and all other requirements imposed by NJDEP pursuant to ISRA or other New
Jersey environmental statutes, regulations and programs arising from the
Seller's obligation to comply with ISRA. Such actions shall include, but shall
not be limited to, the filing with NJDEP of a complete General Information
Notice on NJDEP's standard form within five (5) days of the execution of this
Asset Purchase Agreement, the development and performance of a "Preliminary
Assessment", "Site Investigation", "Remedial Investigation" and "Remedial Action
Workplan", as defined at N.J.S.A. 13:1K- 8, as necessary, and the preparation
and submittal of necessary and appropriate reports to NJDEP relating to such
actions. In the event this transaction closes upon the issuance of a Remediation
Agreement or an approved Remedial Action Workplan, the Seller agrees that it
shall undertake all necessary actions to receive a No Further Action Letter or
an approved
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Negative Declaration.
(d) The Seller shall keep the Purchaser fully informed of its
progress in achieving ISRA compliance by providing copies of all correspondence
and documents sent by the Seller to NJDEP or received by the Seller from NJDEP.
In the event the Seller elects to comply with ISRA pursuant to the "expedited
procedures" set forth at N.J.S.A. 13:1K-11.2 to -11.8, the Seller shall provide
drafts to the Purchaser, at least one (1) business day prior to the delivery of
such documents to NJDEP, of the Preliminary Assessment Report and all other
submittals the Seller proposes to deliver to NJDEP in connection with a request
for expedited approval. The Purchaser shall, during such one (1) business day
period, have an opportunity to review such documents and consult with and
provide comments to the Seller. In all other instances, the Seller shall, to the
extent practicable, provide to the Purchaser drafts of submittals to NJDEP prior
to delivery of such documents to NJDEP, and the Purchaser shall have an
opportunity to consult with and provide comments to the Seller.
(e) The Seller shall continue after the Closing to fulfill its
obligations to comply with ISRA to NJDEP's satisfaction, such compliance to
include providing and maintaining any Remediation Funding Source required by
NJDEP in connection with an approved Remedial Action Workplan or Remediation
Agreement.
(f) The Purchaser hereby grants to the Seller, its consultants
and contractors, and to the NJDEP, the right to enter upon the Real Estate at
all reasonable times, without notice, as required to monitor the work necessary
for the Seller to comply with ISRA. The Purchaser shall cooperate with the
Seller, at the Seller's cost and expense, to enable the Seller to meet its
obligations under this Section 9.14.
(g) The Purchaser and the Seller understand that NJDEP may
accept remedial action workplans or other proposals that will not require
removal, containment, or other remediation activities for all contaminants in
soil, sediments, surface waters, or ground waters at or in proximity to the real
property on which an "Industrial Establishment", a term defined at N.J.S.A.
13:1K-6, is located or otherwise in order to meet unrestricted (residential)
standards for soil or sediments or ground water quality criteria. The Seller
agrees that in connection with the approval by NJDEP of the Remedial Action
Workplan and/or the issuance of a No Further Action Letter or an approved
Negative Declaration, the Seller shall not propose, without the Purchaser's
prior written consent (which consent will not be unreasonably withheld), a
restriction on the future use of the Seller's Whippany or East Hanover
facilities to commercial/industrial uses only, or restrictions on the withdrawal
or use of ground water.
9.15 Employee Benefit Plans; Assumed Pension Liabilities.
(a) Defined Benefit Plan.
(i) For each individual (participant, beneficiary or other)
who is entitled to a benefit from the Defined Benefit Plan and who, after and
subject to Closing, will be entitled to a
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benefit from the plan to be implemented by the Purchaser to receive assets and
liabilities from the Defined Benefit Pension Plan (the "New Pension Plan"),
SCHEDULE 9.15(a) shall contain the following:
(A) the amount of the assets and accrued
benefits and any other benefit liabilities to be
transferred from the Defined Benefit Plan to the New
Pension Plan for each individual;
(B) the date of birth, compensation, hours
and years (or other measure) of service, and the
other data and assumptions supporting the
calculations in (A) and a statement of the applicable
benefit formula(s) and the arithmetic calculation of
the accrued benefits (including the accrued benefits
as of April 30, 1988), the vested accrued benefits
and any other benefit liabilities for each individual
listed in (A);
(C) the name, date of birth, date of hire,
date and reason for termination, Social Security
Number, most current address, marital status, years
of service and any other data used to compute vesting
percentages, plan entry dates and benefit accruals,
most current beneficiary designation and QPSA waiver,
if any, and any other information reasonably
necessary for the proper administration of the New
Pension Plan.
(ii) As of the Closing Date the Purchaser shall
establish the New Pension Plan, a new defined benefit pension plan which is
intended to be qualified under Section 401(a) of the Code, for the benefit of
those individuals listed on SCHEDULE 9.15(a) attached hereto. To the extent
permitted under the Code's nondiscrimination and controlled group rules and
without materially changing the Purchaser's current employee benefit plans, the
New Pension Plan will be frozen, such that no additional benefits accrue to the
listed individuals and the provisions of the New Pension Plan shall be
substantially similar to the provisions of the Defined Benefit Plan in this and
other respects. The New Pension Plan shall grant service credit for service
performed with the Seller prior to the Closing Date, based on the service
information provided in SCHEDULE 9.15(a). The Purchaser shall provide the Seller
with a copy of the New Pension Plan for review and approval by the Seller (which
approval shall not be unreasonably withheld) prior to the Purchaser filing an
application for a determination letter from the Internal Revenue Service with
respect to the qualification of the New Pension Plan under Section 401(a) of the
Code.
(iii) At Closing or as soon as practicable
thereafter, the Seller shall cause the trustees of the Defined Benefit Plan to
calculate and transfer to the trustees of the New Pension Plan cash in an amount
equal to $545,700 as of December 31, 1995, increased by earnings generated and
decreased by any losses, transaction expenses and benefit payments calculated in
accordance with past practices between January 1, 1996 and the date of transfer;
provided that Purchaser shall have applied to the IRS for a favorable
determination letter stating that the New Pension Plan is qualified under
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Section 401(a) of the Code and agreed to hold Seller harmless in the event that
the New Pension Plan does not receive a favorable determination letter due to a
defect in the terms of the New Pension Plan.
(b) 401(k) Plan.
(i) For each individual (participant, beneficiary or other)
who is entitled to a benefit from the 401(k) Plan and who, after and subject to
Closing, will be entitled to a benefit from the plan to be implemented by the
Purchaser to receive assets and liabilities from the 401(k) Plan (the "New
401(k) Plan"), SCHEDULE 9.15(b) shall contain the following:
(A) the amount of the assets and liabilities
to be transferred from the 401(k) Plan to the New
401(k) Plan for the account of each individual;
(B) the various types of contributionsand
subaccounts (e.g., employer and before-tax and
after-tax employee contributions), each subaccount
balance, earnings attributable to each type of
contribution and subaccount, the cost basis for any
investments in employer stock and the other data, if
any, supporting the calculations in (A);
(C) the name, date of birth, date of hire,
date and reason for termination, Social Security
Number, most current address, marital status, years
of service and any other data used to compute vesting
percentages, plan entry dates and benefit accruals,
the most current beneficiary designation and QPSA
waiver, if any, and any other information reasonably
necessary for the proper administration of the New
401(k) Plan.
(ii) As of the Closing Date the Purchaser shall
establish the New 401(k) Plan, a new 401(k) plan which is qualified under
Section 401(a) of the Code, for the benefit of those individuals listed on
SCHEDULE 9.15(b) attached hereto. To the extent permitted under the Code's
nondiscrimination and controlled group rules and without materially changing the
Purchaser's current employee benefit plans, the provisions of the New 401(k)
Plan shall be substantially similar to the provisions of the 401(k) Plan. The
New 401(k) Plan shall grant service credit for service performed with the Seller
prior to the Closing Date, based on the service information provided in SCHEDULE
9.15(b). The Purchaser shall provide the Seller with a copy of the New 401(k)
Plan for review and approval by the Seller (which approval shall not be
unreasonably withheld) prior to the Purchaser filing an application for a
determination letter from the Internal Revenue Service with respect to the
qualification of the New 401(k) Plan under Section 401(a) of the Code.
(iii) At Closing or as soon as practicable
thereafter, the Seller shall cause the trustees of the Seller's 401(k) Plan to
transfer to the New 401(k) Plan the account balances and the amounts of assets
listed on SCHEDULE 9.15(b) (including, as applicable, all employee and employer
contributions, all earnings attributable to such contributions and participant
promissory notes), such
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balances to be determined as of the date of such transfer. In consideration of
the transfer of assets hereunder, the Purchaser shall cause the New 401(k) Plan
to assume the liabilities of the 401(k) Plan for benefits to the current and
former employees of the Seller to the extent assets were transferred, provided
that Purchaser shall have applied to the IRS for a favorable determination
letter stating that the New 401(k) Plan is qualified under Section 401(a) of the
Code and agreed to hold Seller harmless in the event that the New 401(k) Plan
does not receive a favorable determination letter due to a defect in the terms
of the New 401(k) Plan.
(iv) Each of the parties hereto shall pay its own
expenses in connection with the transactions described in this Section 9.15.
(v) Continuing past the Closing Date, the Seller
shall be responsible for the administration and all related costs of
administering the Defined Benefit Plan and the 401(k) Plan. The Seller agrees to
administer such plans in compliance with the plan and trust documents and all
applicable laws, including but not limited to ERISA and the Code.
(c) Assumed Pension Liabilities. The obligations and
liabilities under the Defined Benefit Plan and the 401(k) Plan which are listed
in SCHEDULES 9.15(a) and 9.15(b) are collectively referred to as the "Assumed
Pension Liabilities". The Seller or its plans (pension, health and welfare,
etc.) shall remain responsible for all liabilities other than those expressly
listed in SCHEDULE 9.15(a) or 9.15(b) and those expressly assumed by the
Purchaser pursuant to Section 3.1(i). Neither the Purchaser nor any of its plans
shall be responsible for any liabilities other than those expressly listed in
SCHEDULE 9.15(a) or 9.15(b) or expressely assumed by the Purchaser pursuant to
Section 3.1(i).
(d) Health and Welfare. As of the Closing Date or as soon as
practicable thereafter, the Purchaser shall establish employee welfare benefit
plans (the "New Health and Welfare Plans") within the meaning of Section 3(l) of
ERISA for the benefit of those current employees of the Seller listed on
SCHEDULE 9.15(d). The provisions of the New Health and Welfare Plans shall be
substantially similar to the provisions of the Health and Welfare Plans listed
in SCHEDULE 6.14(a) and maintained by the Seller and/or by KDI D/H for the
benefit of the Seller's employees. The New Health and Welfare Plans shall, as
applicable, waive any preexisting condition clause as may exist under the plan
terms. Neither the Purchaser nor any New Health and Welfare Plan shall be
responsible to provide any health or other welfare benefits or for any
liabilities other than those expressly stated in the New Health and Welfare
Plans for those employees listed in SCHEDULE 9.15(d) and those assumed by the
Purchaser pursuant to Section 3.1(i).
The Seller or its Health and Welfare Plans shall remain
responsible for all costs and treatments incurred prior to the Closing Date,
regardless of when the claim is presented. The Purchaser or its Health and
Welfare Plans shall be responsible only for costs and treatments incurred on or
after the Closing Date. The Seller and/or its Health and Welfare Plans, at
Closing or as soon as practicable thereafter, shall pay to the Purchaser, for
the benefit of the affected participants, any amounts withheld from an
employee's compensation for any period of coverage extending after the
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Closing Date, any premium rebates attributable or allocable to premiums or other
costs paid by any plan participants listed on SCHEDULE 9.15(d), and any other
amount properly attributable or allocable to those participants.
9.16 Use of Name. In the event that the Closing does not occur, the
Purchaser agrees to change its name to some other name which is dissimilar to,
and cannot be confused with, "KDI/triangle Electronics, Inc."
9.17 Office Space. During the period beginning on the Closing Date and
ending on the sooner to occur of one hundred eighty (180) days thereafter or the
sale, lease or other disposition of the Seller's facilities located at East
Hanover, New Jersey, the Purchaser agrees to provide office space at such
facilities to Roger Byer and reasonable access thereto and to basic office
equipment.
9.18 Defined Benefit Plan Freeze Date. The Seller shall provide to the
Purchaser at the Closing an opinion of Rosenman & Colin LLP, with all supporting
documentation and certificates relied upon by such law firm, which opines that
benefit accruals under the Defined Benefit Plan were frozen as of December 31,
1993, in accordance with 204(h) of ERISA, such that no additional benefits
accrued under the Defined Benefit Plan.
X. CONDITIONS TO OBLIGATIONS OF THE SELLER AND KDI D/H.
The obligations of the Seller and KDI D/H to go forward on the Closing
Date with the consummation of the purchase and sale transactions contemplated
herein is subject to the satisfaction, or waiver by the Seller and KDI D/H, of
each of the following conditions precedent:
10.1 Representations and Warranties. The representations and warranties
of the Purchaser contained in this Agreement or in the Purchaser Delivered
Documents shall be true in all material respects at the Closing Date as though
such representations and warranties were made at the Closing Date.
10.2 Performance of Covenants. The Purchaser shall have performed and
complied in all material respects with all of the covenants and agreements
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
10.3 Officer's Certificate. The Seller and KDI D/H shall, at the
Closing, have been furnished with a certificate executed by an authorized
officer of the Purchaser, dated as of the Closing Date, certifying the
fulfillment of the conditions set forth in Sections 10.1 and 10.2 above.
10.4 Absence of Litigation. No action, suit or proceeding shall have
been instituted or threatened and no labor dispute shall have occurred which
challenges the validity or legality of any transaction contemplated hereby, or
which threatens to enjoin any such transaction or which seeks damages on account
of consummation hereof or which would have a Material Adverse Effect.
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10.5 Opinion of Counsel for the Purchaser. The Purchaser shall have
delivered to the Seller and KDI D/H, at the Closing, the opinion of counsel for
the Purchaser in substantially the form attached hereto as EXHIBIT 10.5.
10.6 Required Consents. The Seller and KDI D/H shall have received the
consents required under the Chemical Bank Credit Agreement and required in order
for the Purchaser to assume the Mortgage Obligations.
XI. CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
The obligations of the Purchaser to go forward on the Closing Date with
the consummation of the purchase and sale transactions contemplated herein is
subject to the satisfaction, or waiver by the Purchaser, of each of the
following conditions precedent:
11.1 Representations and Warranties. The representations and warranties
of the Seller and KDI D/H contained in this Agreement or in the Seller Delivered
Documents and the KDI D/H Delivered Documents, respectively, shall be true in
all material respects at the Closing Date as though such representations and
warranties were made at the Closing Date.
11.2 Performance of Covenants. The Seller and KDI D/H shall have
performed and complied in all material respects with all of their respective
covenants and agreements required by this Agreement to be performed or complied
with by them prior to or as at the Closing.
11.3 Due Diligence. The Purchaser and MFI shall have completed a due
diligence review of the Seller within the scope and results of review acceptable
to the Purchaser and to the Purchaser's financing sources as determined in their
sole discretion. Satisfaction of this condition shall include, but not be
limited to, receipt by the Purchaser and MFI of an opinion letter from Alexander
& Alexander in the form attached hereto as EXHIBIT 6.14(b) on or prior to the
Closing Date, and completed SCHEDULES 6.14(b), 9.15(a), 9.15(b) and 9.15(d)
within 10 days prior to the Closing Date.
11.4 ShadowNet System Product Line Investigation. The Purchaser shall
be satisfied, in its sole discretion, with the results of the ShadowNet System
product line investigation, described in Section 9.5.
11.5 Receipt of All Consents, Governmental and Regulatory Approvals.
Except with respect to the consent of the United States federal government
relative to security clearances, the parties shall have received all necessary
governmental and regulatory approvals or waivers, as well as all necessary
consents, assignments, novations, approvals, or other authorizations from third
parties, necessary to consummate the transactions contemplated by this Agreement
and any approvals required under the
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Contracts listed on SCHEDULE 2.2(i).
11.6 Release from Holders of the Seller's Secured Indebtedness. The
Purchaser shall have received a release from the Secured Creditors releasing the
Purchaser from any obligation or liability relating to the secured indebtedness
of the Seller (other than the Mortgage Obligations), which release shall be in
substantially the form attached hereto as EXHIBIT 11.6 (the "Release").
11.7 The Seller and KDI D/H Officer's Certificate. The Purchaser shall,
at the Closing, have been furnished with a certificate executed by a proper
officer of the Seller and with a certificate executed by a proper officer of KDI
D/H, both dated as of the Closing Date, certifying the fulfillment of the
conditions set forth in Sections 10.1 and 10.2 above with respect to the Seller
and KDI D/H, respectively.
11.8 Absence of Litigation. No action, suit or proceeding shall have
been instituted or threatened and no labor dispute shall have occurred which
challenges the validity or legality of any transaction contemplated hereby, or
which threatens to enjoin any such transaction or which seeks damages on account
of consummation hereof or which would have a Material Adverse Effect.
11.9 No Adverse Change. There shall not have occurred any event which
had or might have a material adverse change with respect to the Seller's
Business, the Purchased Assets, properties, results of operations, condition
(financial or otherwise) or prospects.
11.10 Opinion of Counsel for Seller and KDI D/H. The Seller and KDI D/H
shall have delivered to the Purchaser, at the Closing, the opinion of counsel of
Rosenman & Colin LLP in substantially the form attached hereto as EXHIBIT 11.10.
11.11 Opinion of Counsel for Seller. The Seller shall have delivered
to the Purchaser, at the Closing, an opinion of Kevan Langner, Esq. in
substantially the form attached hereto as EXHIBIT 11.11.
11.12 ISRA. The Purchaser shall have received a No Further Action
Letter, an NJDEP-approved Negative Declaration, or NJDEP-approved Remedial
Action Workplan, or in the alternative, shall have obtained from NJDEP a
Remediation Agreement in form satisfactory to the Purchaser.
11.13 Purchaser Management Severance Agreements. Each of Messrs.
Hartwig, Kaminsky, Pelrin, Schrafnagl and Snyder shall have entered into a
Purchaser Management Severance Agreement with the Purchaser, or the Seller shall
have included in the Accruals a provision for severance payments which respect
to any of the foregoing persons who have not entered into a Purchaser Management
Severance Agreement.
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XII. CLOSING.
12.1 Closing and Closing Date. There shall be a closing of the purchase
and sale contemplated herein (the "Closing"), which shall be held at the offices
of Rosenman & Colin, 575 Madison Avenue, New York, New York 10022-2585
(212-940-8800; fax 212-940-3815), at 10:00 a.m. on June 28, 1996 or at such
other date and time as the parties hereto may mutually agree upon (the "Closing
Date"), to be effective as of the close of business on the Closing Date.
12.2 Actions and Deliveries at Closing. At the Closing, the parties
hereto shall take the following actions and make the following deliveries to be
effective as of the Closing Date:
(a) Purchased Assets. The Seller shall convey the Purchased
Assets to the Purchaser (including, without limitation, the assignment of the
Contract Rights and Intellectual Property) by delivery of an Assignment and Bill
of Sale, a Patent Assignment, a Copyright Assignment and a Trademark Assignment,
as the case may be, each in substantially the form attached hereto as EXHIBIT
12.2(a)-1, and, with respect to the Owned Real Estate, the Deeds in
substantially the form attached hereto as EXHIBIT 12.2(a)-2 in recordable form
duly executed and acknowledged by the Seller. The Seller and KDI D/H shall
cooperate with the Purchaser to put the Purchaser in actual possession and
operating control of the Purchased Assets.
(b) Initial Purchase Price. The Purchaser shall pay to the
Seller the initial Purchase Price in the manner described in Section 4.4 of this
Agreement.
(c) Assumption Agreement. The Purchaser and the Seller shall
execute and deliver an assumption agreement in substantially the form attached
hereto as EXHIBIT 12.2(c) relative to the Purchaser's assumption of the Assumed
Liabilities.
(d) Consents. Except for the consent of the United States
federal government relative to security clearances (which is addressed above in
Section 9.9), the Seller shall deliver to the Purchaser, in writing, all
necessary consents, assignments, novations, approvals, orders, qualifications,
licenses, permits or other authorizations, and waivers from any governmental
entity or other third parties necessary to permit the consummation of the
transactions contemplated by this Agreement, all in form and substance
satisfactory to the Purchaser and its counsel.
(e) Officer's Certificates.
(i) From Purchaser. The Purchaser shall deliver to
the Seller and KDI D/H the certificate as described in Section 10.3 hereof.
(ii) From Seller and KDI D/H. The Seller and KDI D/H
shall deliver to the Purchaser the certificates as described in Section 11.7
hereof.
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(f) Secretary's Certificate.
(i) From Purchaser. The Purchaser shall deliver to the
Seller and KDI D/H a certificate of its secretary certifying the incumbency of
the officer(s) executing this Agreement and the Purchaser Delivered Documents
and certifying the due adoption of corporate resolutions of the Purchaser
authorizing and approving the execution, delivery and performance of this
Agreement and the Purchaser Delivered Documents and of all of the transactions
contemplated herein and therein.
(ii) From Seller. The Seller shall deliver to the
Purchaser a certificate of its secretary certifying the incumbency of the
officer(s) executing this Agreement and the Seller Delivered Documents and
certifying the due adoption of corporate resolutions of the Seller authorizing
and approving the execution, delivery and performance of this Agreement and the
Seller Delivered Documents and of all of the transactions contemplated herein
and therein.
(g) Certificates of Good Standing. The Purchaser shall deliver
to the Seller and KDI D/H, and the Seller shall deliver to the Purchaser, a
certificate of good standing issued by the appropriate officials of the state in
which the Purchaser and the Seller are incorporated and, in the case of the
Seller, the states in which the Seller is qualified to do business as a foreign
corporation, dated not more than 3 business days prior to the Closing Date,
attesting to the fact that the Purchaser and the Seller, as the case may be, is
in good standing and is duly authorized to transact business or conduct affairs
in such state.
(h) Change of the Seller's Name. The Seller shall deliver to
the Purchaser a duly adopted and executed certificate of amendment to the
Certificate of Incorporation of the Seller, and amendment to the Seller's
certificates of authority to do business in all jurisdictions in which it is
qualified to do business, relative to the change of the Seller's name in
accordance with Section 13.2 hereof.
(i) Ancillary Agreements. The Purchaser, the Seller, KDI D/H
and the other persons described herein, as the case may be, shall execute and
deliver the following ancillary agreements: (i) the Seller Non-Competition
Agreement; (ii) the KDI D/H Non-Competition Agreement; (iii) the Release; (iv)
the Escrow Agreement; and (v) the Purchaser Management Severance Agreements.
(j) Other. All other documents and instruments contemplated by
this Agreement to be delivered at the Closing and all other actions contemplated
by this Agreement to be taken at the Closing shall be delivered and taken,
including, without limitation, any statements such as transfer or conveyance tax
forms or returns required by applicable state or local law to be executed by the
Seller in order to effect the Closing.
XIII. POST CLOSING.
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13.1 Further Assurances. The parties hereto agree that each of them
will, from time to time after the Closing Date when so requested by the other,
perform, execute, acknowledge or deliver or cause to be performed, executed,
acknowledged or delivered, all such further acts, deeds, assignments, transfers,
conveyances and assurances as may be required for (a) the better assigning,
transferring, granting, conveying, selling, assuring and confirming to the
Purchaser and its successors and assigns, and for aiding and assisting in
reducing to possession, the Purchased Assets transferred to the Purchaser as
herein contemplated (including, without limitation, assistance and cooperation
in connection with transferring to the Seller the exclusive use of the name
"KDI/Triangle Electronics" and "KDI/Triangle" and the non- exclusive use of the
name "KDI" with respect to the Seller's Business as conducted as of December 31,
1995 (i.e., the date referenced in Section 19 of the KDI PPI Stock Purchase
Agreement) and with any registration of patents and trademarks comprising the
Intellectual Property in the United States Patent and Trademark Office) and any
transfer of permits necessary to continue the Seller's Business, and (b) the
better assuming, assuring and confirming to the Seller and its successors and
assigns, the due assumption by the Purchaser of all of the Assumed Liabilities
(including any and all service records, compensation and other data that is or
may be necessary to calculate benefits, account balances, vesting percentages
and distributions under the New Pension Plan or the New 401(k) Plan).
13.2 Change of Name. On the Closing Date, the Seller shall deliver to
the Purchaser a certificate of amendment to the Certificate of Incorporation of
the Seller, fully authorized and executed by the Seller, for purposes of filing
same with the Delaware Secretary of State so as to change its name to some other
name which is dissimilar to, and cannot be confused with, "KDI/triangle
Electronics, Inc." or "KDI/Triangle Corporation". The Purchaser expressly
acknowledges and agrees to the use by the Seller of the name "IDK Tri-El Corp."
on and after the Closing Date.
13.3 Accounts Receivable. After the Closing Date, the Purchaser shall
use its reasonable best efforts to collect the Accounts Receivable on a timely
basis and shall follow all reasonable collection procedures recommended by KDI
D/H. All payments made by a customer shall be deemed to apply to the invoice(s)
specified by such customer with respect to each payment, provided that, if no
such specification is made, all payments shall be deemed to apply against the
earliest unpaid invoice issued by the Seller.
13.4 Luciani Litigation. The Seller shall set aside $100,000 of the
initial Purchase Price to pay any legal fees, court costs, witness fees,
expenses, judgments and/or amounts necessary to settle the litigation described
in Item 2 on SCHEDULE 6.16 (the "Luciani Litigation"). If the Seller is not able
to resolve the Luciani Litigation for $100,000 or less, the Seller shall be
entitled to a distribution or distributions from the Escrow Fund established
under the Escrow Agreement to cover its documented out- of-pocket expenses in
excess of $100,000 to settle or otherwise resolve the Luciani Litigation to the
extent that: (i) the aggregate amount of such claim or claims for payment from
the Escrow Fund do not exceed $175,000 and (ii) there are unclaimed amounts
comprising the Escrow Fund which are available to pay a claim at the time that
the claim is submitted; provided that to the
54
<PAGE> 55
extent that unclaimed amounts of the Escrow Fund are insufficient to fully pay a
claim as of the date the claim is first submitted, such claim will be payable at
such time, if any, as additional unclaimed amounts of the Escrow Fund become
available as if such unclaimed amounts were available on the date the claim was
first submitted.
XIV. TERMINATION.
14.1 Methods. This Agreement may be terminated as follows:
(a) By mutual consent of the Purchaser, the Seller and KDI
D/H;
(b) By any party, if the Closing fails to occur on or before
June 28, 1996; or
(c) By written notice of the Purchaser to the Seller and KDI
D/H if any condition to the obligations of the Purchaser set forth in Article XI
is not satisfied on the Closing Date or by written notice of the Seller and KDI
D/H to the Purchaser if any condition to the obligations of the Seller and KDI
D/H set forth in Article X is not satisfied on the Closing Date; provided,
however, that either the Seller and KDI D/H, on the one hand, or the Purchaser,
on the other hand, may at any time waive in writing compliance with any such
condition to their respective obligations, and in such circumstances, the
election to terminate herein provided shall no longer exist with respect to that
particular condition.
In the event of termination as provided above, this Agreement shall terminate
without further action by any of the parties hereto.
14.2 Liability; Liquidated Damages. None of the parties shall be
obligated to the other parties for any expense, cost or liability which may be
incurred by such party in connection with the negotiation or due diligence of
the transactions contemplated in this Agreement. In the event that the
transactions contemplated in this Agreement fail to close because the Seller or
KDI D/H has breached the provisions of Section 9.6 herein or refuses to continue
with the due diligence process in good faith, however, the Seller will pay a
minimum of $100,000 to the Purchaser or the amount of Purchaser's actual
expenses (whichever is greater).
XV. SURVIVAL.
The representations, warranties, covenants, indemnities and agreements
contained herein shall terminate one (1) year plus twelve (12) business days
after the Closing Date; provided that the obligations of the Seller and/or KDI
D/H with respect to the covenants made by Seller and KDI D/H in the Seller Non-
Competition Agreement and the KDI D/H Non-Competition Agreement shall survive
the Closing Date for the term of such agreements; and provided further that the
obligations of the Purchaser with respect to the Assumed Liabilities and with
respect to the Net Working Capital
55
<PAGE> 56
Adjustment shall survive the Closing Date indefinitely.
XVI. INDEMNIFICATION.
16.1 Indemnification by the Seller. The Seller agrees to indemnify and
hold harmless the Purchaser, its successors and assigns, and its officers,
directors, employees, shareholders, and representatives, against and with
respect to any and all loss, injury, liability, claim, assessment, damage
(including, without limitation, actual and consequential damages) or expense
(including, without limitation, reasonable attorneys' fees), court costs and
amounts paid in settlement of claims, of any kind or character arising out of or
in any manner incident, relating or attributed to, any of the following:
(a) Any inaccuracy in, or breach or violation of, the
representations and warranties made by the Seller and KDI D/H and the covenants
undertaken by them pursuant to this Agreement or the Seller Delivered Documents,
whether or not such inaccuracy or breach or violation was known to, or should
have been known by, any of the parties hereto on the Closing Date, it being the
acknowledged intention of the parties hereto that the Seller shall be completely
responsible for, and the Purchaser shall be conclusively deemed to have relied
upon, such representations, warranties and covenants in the consummation of the
purchase and sale transactions herein contemplated.
(b) Any liability arising as a result of any obligations or
liabilities not expressly assumed by the Purchaser hereunder (i.e., any
liability arising as a result of the Excluded Liabilities described in
Section 3.2 hereof).
(c) Except to the extent accrued as part of the Accruals, any
liability arising with respect to the COBRA rights, whether arising by operation
of law or otherwise, to which any of the Seller's employee are entitled as a
result of the consummation of the transaction contemplated herein.
(d) Any liability of the Seller or relating to the conduct of
the Seller's Business, the Purchased Assets or the operation of the Real Estate
arising out of transactions entered into or events or conditions (including,
without limitation, events or conditions associated with the Hazardous Materials
or violations of or liabilities pursuant to the Environmental Laws) occurring on
or prior to the Closing Date, except with respect to any Assumed Liabilities.
(e) Any liability arising from any accrual of benefits under
the Defined Benefit Plan after the Freeze Date and any liability arising from
any inaccuracy in the service records, compensation, or other data from which
the amounts in SCHEDULE 9.15(a) and/or SCHEDULE 9.15(b) were calculated or any
omission in data which is necessary for the calculation of any amount which is
listed or which should have been listed in either SCHEDULE 9.15(a) or SCHEDULE
9.15(b).
(f) Any liability arising from the Assumed Litigation in
excess of the amounts
56
<PAGE> 57
accrued for such litigation in the Accruals.
16.2 Indemnification by the Purchaser. The Purchaser agrees to
indemnify and hold harmless the Seller and KDI D/H, and their respective
successors and assigns, from, against and with respect to any and all loss,
injury, liability, claim, damage (including, without limitation, actual and
consequential damages) or expense (including, without limitation, reasonable
attorneys' fees), court costs and amounts paid in settlement of claims, of any
kind or character arising out of or in any manner incident, relating or
attributed to, any of the following:
(a) Any inaccuracy in, or breach or violation of, the
representations and warranties made by the Purchaser and the covenants
undertaken by it pursuant to this Agreement or the Purchaser Delivered
Documents, whether or not such inaccuracy or breach or violation was known to,
or should have been known by, any of the parties hereto on the Closing Date, it
being the acknowledged intention of the parties hereto that the Purchaser shall
be completely responsible for, and the Seller and KDI D/H shall be conclusively
deemed to have relied upon, such representations, warranties and covenants in
the consummation of the purchase and sale transactions herein contemplated.
(b) Any liability arising from the Assumed Liabilities.
16.3 Claims and Defense Procedures.
(a) Notification. If any action, claim or demand shall be
brought or asserted against any party in respect of which indemnity may be
sought pursuant to this Article XVI, the party seeking indemnification shall
promptly notify the party(ies) from whom indemnification is to be sought,
stating the name and address of any claimant and of counsel to any claimant (if
known), the amount claimed to be due and payable, the basis of the claim as
alleged by any claimant and the provision or provisions of this Agreement under
which such claim for indemnity is asserted. The notice shall be accompanied by
copies of any documents relied on by any claimant and furnished to the party
seeking indemnification.
(b) Response. Within thirty (30) days after receipt of such
notice, the party(ies) from whom indemnification is sought shall by written
notice either:
(i) concede liability in whole as to the amount
claimed in such notice;
(ii) deny liability in whole as to such amount; or
(iii) concede liability in part and deny liability
in part.
(c) Settlement or Compromise. Any settlement or compromise
of a claim shall be agreed upon by all parties, except that, with respect to
third party claims, the party seeking indemnification need not receive the
agreement of any other party if suit shall have been instituted
57
<PAGE> 58
against it and the parties from whom indemnification is sought shall not have
taken control of such suit after notification thereof as provided in subsection
(d) below. If the party seeking indemnification declines to accept a bona fide
offer of settlement which is recommended by the party from whom indemnification
is sought, the maximum liability of the parties from whom indemnification is
sought shall not exceed that amount which it would have been liable for had such
settlement been accepted. If the party from whom indemnification is sought
declines to accept a bona fide offer of settlement recommended by the party
seeking indemnification, the party from whom indemnification is sought shall be
liable for whatever outcome results from such third party claim.
(d) Defense by Indemnifying Party in Third Party Claim.
(i) In connection with any claim giving rise to
indemnification hereunder resulting from or arising out of any claim or legal
proceeding by a person who is not a party to this Agreement, the party from whom
indemnification is sought, at its sole cost and expense, may, upon written
notice to the party seeking indemnification, assume the defense of any such
claim or legal proceeding if it acknowledges to the party seeking
indemnification in writing its obligation to indemnify the party seeking
indemnification with respect to all elements of such claim. The indemnified
party shall be entitled to participate in, but not control, the defense of any
such action, with its counsel and at its own expense.
(ii) If the party from whom indemnification is
sought does not assume the defense of any such claim or litigation arising
therefrom, and if the notice required hereunder is properly given, (A) the
indemnified party may defend against such claim or litigation in such manner as
it may deem appropriate, including, but not limited to, settling such claim or
litigation, after giving written notice of same to the indemnifying party, upon
such terms and conditions as the indemnified party may deem appropriate, (B) the
indemnity obligations of the parties from whom indemnification is sought shall
extend to whatever outcome results from such claim or litigation, (C) the
indemnifying party shall be responsible for paying the reasonable attorneys'
fees, court costs, and other expenses relative to the defense of such claim or
litigation, and (D) the indemnifying party shall be entitled to participate in,
but not control, the defense of any such action, with its counsel and at its own
expense.
16.4 Limitation.
(a) Any amounts payable by Seller to Purchaser pursuant to
this Article XVI shall be paid out of and shall be capped at an amount equal to
the then balance of the Escrow Fund held pursuant to the Escrow Agreement, as
adjusted from time to time as provided in the Escrow Agreement; provided that
none of the obligations of the Seller with respect to any breach of the
representations and warranties in Sections 4.3, 4.5(a) or 6.26 hereof shall be
subject to the limitations set forth in this Section 16.4; and provided further
that the limitations provided in this Section 16.4 shall not apply to any breach
by the Seller or KDI D/H of the Seller Non-Competition Agreement or the KDI D/H
Non-Competition Agreement.
58
<PAGE> 59
(b) Any amounts payable by the Purchaser to the Seller or KDI
D/H pursuant to this Article XVI shall be capped at an amount equal to the
Escrow Fund, as adjusted from time to time as provided in the Escrow Agreement,
provided that the obligations of the Purchaser with respect to the Assumed
Liabilities, with respect to the Net Working Capital Adjustment and with respect
to a breach of any of its covenants in Sections 9.3 (regarding New Hires) and
9.7 (regarding WARN) hereof shall not be subject to the limitations set forth in
this Section 16.4.
16.5 Remedies Exclusive. If the Closing occurs, the remedies provided
in this Article XVI shall be the exclusive remedy for monetary damages (whether
in law or in equity) with respect to this Agreement and the transactions
contemplated herein; provided, however, that this Article XIV shall not be the
exclusive remedy for a breach by the Seller or KDI D/H of the Seller
Non-Competition Agreement or the KDI D/H Non-Competition Agreement, as any such
breach shall entitle the Purchaser to all remedies available to it in law or in
equity.
XVII. FEES AND EXPENSES.
Except as otherwise provided herein, each of the parties hereto shall
bear any and all fees and expenses (including, without limitation, legal,
accounting, consulting and other professional fees and expenses) incurred by it
in connection with the negotiation and the consummation of this Agreement and
the transactions contemplated herein.
XVIII. CONFIDENTIALITY MATTERS.
The parties hereto agree not to disclose, directly or indirectly, the
terms of or reveal the existence of the Letter of Intent, this Agreement or any
of the Seller Delivered Documents or the Purchaser Delivered Documents to any
person, firm or entity, other than to a party's attorneys, accountants, lenders
or other representatives who are entitled to be informed thereof in connection
with their approval of or their representation of a party in connection with the
consummation of the transactions contemplated herein or employees or agents of
the parties on a need-to-know basis. Without limiting the generality of the
foregoing, no press release, governmental notification, report or other filing
by the Seller or KDI D/H shall be made without the Purchaser's prior written
consent.
XIX. MISCELLANEOUS.
19.1 Entire Agreement; Amendment. This Agreement (including the
Exhibits and Schedules hereto and the Seller Delivered Documents and the
Purchaser Delivered Documents) constitutes the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings of the parties with
respect to the subject matter hereof (including, without limitation, the Letter
of Intent). No representation, inducement, agreement, promise or understanding
altering, modifying, amending, taking from or adding to the terms and
59
<PAGE> 60
conditions hereof shall have any force and effect unless the same is in writing
and validly executed by the parties hereto.
19.2 Notices. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given (i) if
physically delivered, (ii) if telephonically transmitted by telecopier or other
similar means, (iii) seven (7) days after having been deposited in the United
States Mail, as certified mail with return receipt requested and with postage
prepaid, or (iv) one (1) business day after having been transmitted to a third
party providing delivery services in the ordinary course of business which
guarantees delivery on the next business day after such transmittal (e.g., via
Federal Express), all of which notices or other communications shall be
addressed to the recipient as follows:
(a) If to the Purchaser, to:
c/o Merchant Financial, Inc.
15450 East Jefferson
Grosse Pointe Park, Michigan 48230
(313-331-2563; fax 313-331-3921)
Attention: John L. Smucker
and, after the Closing, to:
KDI/Triangle Corporation
60 South Jefferson Road
Whippany, New Jersey 07981
(201-887-8100; fax 201-887-4645)
Attention: President
with courtesy a copy to:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
(313-568-6800; fax 313-568-6915)
Attention: J. Michael Bernard
(b) If to the Seller or KDI D/H, to:
31 Farinella Drive
East Hanover, New Jersey 07936
(201-884-0990; fax 201-887-4484)
Attention: Roger Byer
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<PAGE> 61
and to:
3975 McMann Road
Cincinnati, Ohio 45245
(513-943-2000; fax 513-943-2438)
Attention: Kevan Langner
with a courtesy copy to:
Rosenman & Colin LLP
575 Madison Avenue
New York, New York 10022-2585
(212-940-8580; fax 212-940-3815)
Attention: Edward H. Cohen
The addresses so indicated for any party may be changed by similar written
notice.
19.3 Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of, and be enforceable by, the parties hereto and their
respective permitted successors and assigns, heirs and personal representatives.
19.4 Assignment. The rights and obligations provided by this Agreement
shall not be assignable by either party without the prior written consent of the
other parties, which consent shall not be unreasonably withheld.
19.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be treated as an original but all of which,
collectively, shall constitute a single instrument.
19.6 Severability. In the event that any one or more of the provisions
of this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
19.7 Captions. The captions and headings of the sections and the
subsections have been inserted as a matter of convenience and reference only and
shall not control or affect the meaning or construction of this Agreement.
19.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
61
<PAGE> 62
KDI/TRIANGLE CORPORATION,
the Purchaser
By: /s/ John L. Smucker
-------------------
John L. Smucker, President
KDI D/H CORPORATION,
KDI D/H
By: /s/ P. Roger Byer
-----------------
P. Roger Byer, Vice President
KDI/triangle ELECTRONICS, INC.,
the Seller
By: /s/ Michael D. Snyder
---------------------
Michael D. Snyder, President & CEO
Merchant/KDI Asset
Purchase Agreement
Execution Copy
<PAGE> 63
ASSET PURCHASE AGREEMENT
dated
May 31, 1996
among
KDI/TRIANGLE CORPORATION,
a Michigan corporation,
KDI D/H CORPORATION,
a Delaware corporation,
and
KDI/triangle ELECTRONICS, INC.,
a Delaware corporation
63
<PAGE> 64
TABLE OF CONTENTS
-----------------
I. DEFINITIONS
II. AGREEMENT TO PURCHASE AND SELL
III. OBLIGATIONS AND LIABILITIES
IV. PURCHASE PRICE
V. REPRESENTATIONS AND WARRANTIES OF KDI D/H
VI. REPRESENTATIONS AND WARRANTIES OF THE SELLER
VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER
VIII. REAL ESTATE MATTERS
IX. COVENANTS
X. CONDITIONS TO OBLIGATIONS OF THE SELLER AND KDI D/H
XI. CONDITIONS TO OBLIGATIONS OF THE PURCHASER
XII. CLOSING
XIII. POST CLOSING
XIV. TERMINATION
XV. SURVIVAL
XVI. INDEMNIFICATION
XVII. FEES AND EXPENSES
XVIII. CONFIDENTIALITY MATTERS
XIX. MISCELLANEOUS
(64)
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBITS
(initially to be prepared by Purchaser/Purchaser's counsel)
<S> <C>
4.4(b) Escrow Agreement
4.7 Estimated Allocation
9.3 Purchaser Management Severance Agreements; Purchaser
Non-Management Arrangements
9.11 Seller Noncompetition Agreement
9.12 KDI D/H Noncompetition Agreement
10.5 Opinion of Counsel for the Purchaser
11.6 Release of Secured Indebtedness
11.10 Opinion of Rosenman & Colin LLP, Counsel for the
Seller and KDI D/H
11.11 Opinion of Kevan Langner, counsel for the Seller
12.2(a)-1 Assignment and Transfer Documents -- Assignment and
Bill of Sale; Patent Assignment; Copyright
Assignment; Trademark Assignment
12.2(a)-2 Deeds
12.2(c) Assumption Agreement
<CAPTION>
SCHEDULES
(initially to be prepared by Purchaser/Purchaser's Counsel)
<S> <C>
4.3 Preliminary Working Capital Adjustment Computation -
Example
4.4 Calculation of Initial Purchase Price Payable at
Closing - Example
<CAPTION>
(initially to be prepared by Seller/Seller's counsel)
<S> <C>
2.2(e) Personal Property
2.2(g) Intellectual Property
2.2(i) Contracts
3.1(e) Mortgage Obligations
3.1(f) Assumed Environmental Liabilities
5.4 KDI D/H - Litigation and Investigations
6.3 Financial Statements
6.5 Purchased Assets -- General
6.6 Owned Real Estate
6.8 Accounts Receivable
6.9 Inventory
6.12 Relationship with Customers and Suppliers
6.14(a) Health and Welfare Plans
</TABLE>
(65)
<PAGE> 66
<TABLE>
<S> <C>
6.14(b) Alexander & Alexander Opinion Letter
6.15 Permits
6.16 Seller's Litigation and Investigations
6.17 Warranties and Product Liability
6.18 Labor and Employee Matters
6.19 Environmental Matters
6.21 Tax Matters
6.22 Insurance
6.24 Material Adverse Change
6.25 Insider Interests
9.15(a) Defined Benefit Plan Assets and Liabilities
9.15(b) 401(k) Plan Account Balances
9.15(d) Employees to be Covered by New Health and Welfare
Plans
(66)
</TABLE>
<PAGE> 67
SCHEDULE 4.3
Preliminary Working Capital Adjustment Computation - Example
<TABLE>
<CAPTION>
03/31/96
--------------
Working Capital Base: (In thousands)
<S> <C>
Cash 447
Receivables 4,568
Inventory 7,318
Prepaids 79
Accounts Payable (3,275)
Accruals (1,860)
-------
Subtotal $ 7,276
Adjustments*:
Less: Accounts Payable (233)**
Less: Additional Severance ( 87)
Add: Bonus Accrual 120
-----
Mortgage Obligations Adjustment -- ***
-----
3/31/96 Adjusted Working Capital 7,076
=====
12/31/95 Adjusted Working Capital 8,012
=====
Preliminary Working Capital Adjustment $ (936)
===
</TABLE>
(67)
<PAGE> 68
* In determining the Preliminary Working Capital Adjustment, the
Seller shall adjust the net working capital to add back the
Shadownet System accrual.
** Adjusted for cash borrowed from KDI D/H by the Seller to pay
interest expense. This entry was incorrectly accounted for in
the March interim statement.
*** As set forth in Section 4.3, the working capital base will be
credited to the extent that the principal amount of the
Mortgage Obligations is less than $865,000 or shall be debited
to the extent that the principal amount of the Mortgage
Obligations is greater than $865,000.
(68)
<PAGE> 69
SCHEDULE 4.4
Calculation of Initial
Purchase Price Payable at Closing - Example
<TABLE>
<CAPTION>
Initial Purchase Price
<S> <C>
Cash (Section 4.4(a))
Cash (Section 4.4(a)(i)) $12,756
3/31/96 Preliminary Working
Capital Adjustment (Section
4.4(a)(ii)) (936)*
-------
Cash Paid to the Seller $11,820
=======
Escrow (Section 4.4(b))
Escrow Fund $ 1,500
-------
Total $13,320 **
----- =======
</TABLE>
----------
* Preliminary Working Capital Adjustment (as of 3/31/96). See Schedule
4.3.
** The sum of $13,320,000 (i.e., the Initial Purchase Price), plus
$936,000 (i.e., the Preliminary Working Capital Adjustment (as of
3/31/96)) equals $14,256,000 (i.e., the Purchase Price described in
Section 4.1).
(69)
<PAGE> 70
SCHEDULE 6.14(a)
Health and Welfare Plans
1. Health Insurance
2. Dental Insurance
3. Accident Insurance
4. Disability Insurance
5. Long Term Disability
6. Life Insurance
(70)
<PAGE> 71
SCHEDULE 6.14(b)
[DRAFT - 5/23/96]
FORM OF ALEXANDER & ALEXANDER
CONSULTING GROUP, INC. LETTER
May ____, 1996
KDI/Triangle Corporation, a Michigan Corporation
KDI/triangle Electronics, Inc.
Microwave Components Enterprises, Inc.
Defined Benefit Plan for Former Employees of KDI Corporation - KDI/triangle
Electronics, Inc.
Fiduciaries of the Defined Benefit Plan for Former Employees of KDI Corporation
- KDI/triangle Electronics, Inc.
Fiduciaries of Any Other Plan Created to Receive the Assets and Liabilities of
the Defined Benefit Plan for Former Employees of KDI Corporation - KDI/triangle
Electronics, Inc.
Dear Sirs:
We understand that KDI/Triangle Corporation, a Michigan corporation
("Triangle"), has entered into an Asset Purchase Agreement, dated May , 1996,
among Triangle, KDI D/H Corporation, a Delaware corporation, and KDI/triangle
Electronics, Inc., a Delaware corporation (the "Asset Purchase Agreement"). We
further understand that receipt of this letter is a condition precedent to
Triangle implementing a defined benefit plan and agreeing to have the defined
benefit plan accept the assets and liabilities listed and/or to be listed in
Schedule 9.15(a) of the Asset Purchase Agreement. We understand from Triangle
that Triangle is a wholly-owned subsidiary of Microwave Components Enterprises,
Inc., a Michigan corporation.
We are actuarial consultants to General Aquatics, Inc. and KDI D/H Corporation,
successors in interest to KDI Corporation, by whom we also were engaged as
actuarial consultants. In such capacity, we have rendered actuarial services
with respect to the KDI Corporation Defined Benefit Plan (the "Plan") and, more
specifically (a) the merger, effective as of December 31, 1992, of the assets
and liabilities of certain plans, including the
<PAGE> 72
KDI/triangle Electronics, Inc. Employees' Pension Plan (the "triangle Plan")
into the Plan (the "Merger"), and (b) the spinoff of assets and liabilities from
the Plan to separate plans, including the Defined Benefit Plan for Former
Employees of KDI Corporation - KDI/triangle Electronics, Inc. (the "KDI Triangle
Plan"), effective as of January 1, 1996 (the "Spinoff"). We have continued to
render actuarial services with respect to the Defined Benefit Plan for Former
Employees of KDI Corporation, the successor plan that reflects said spinoffs and
certain unrelated amendments.
In our capacity as actuarial consultants and enrolled actuaries, the latter
within the meaning of Section 7701(a)(35) of the Internal Revenue Code of 1986,
as amended (the "Code"), and as required by Section 6058(b) of the Code, we
prepared an actuarial statement of certification with respect to the Merger,
evidencing compliance with the requirements of Sections 401(a)(12) and 414(1) of
the Code (the "Merger Statement"). The Merger Statement certified to the plan
administrator of the Plan that, in accordance with Section 1.414(l)-1(i) and (j)
of Treasury Regulations, employee data would be maintained for a period of up to
five years from December 31, 1992 in order to create the special schedule of
benefits specified in Section 1.414(l)-1(f) of the Regulations in the event of a
subsequent spinoff or merger within the five-year period. The Merger Statement
certified that as a result of the Merger and based upon the employee data
referred to above, each participant in the Plan would (if the Plan then
terminated) receive a benefit immediately after the Merger equal to or greater
than the benefit he would have been entitled to receive immediately before the
Merger (if the Plan and the triangle Plan had then terminated). The Merger
Statement was included as part of each Notice of Merger, Consolidation or
Transfer of Plan Assets or Liabilities (Form 5310-A) filed with the Internal
Revenue Service on November 20, 1992 and pertaining to the merger of the Plan
and the triangle Plan. A copy of each such Form 5310-A (including the Merger
Statement and all other attachments) as filed with the IRS is attached hereto as
Exhibit 1 and incorporated herein.
In our opinion, the Merger was accomplished in accordance with the requirements
of applicable law, including Sections 401(a)(12) and 414(1) of the Code and the
applicable Treasury Regulations, and did not adversely affect the tax-qualified
status of the triangle Plan, the Plan, or any other plan involved in the Merger
under Section 401(a) of the Code or the tax-exempt status of any of the related
trusts under Section 501(a) of the Code.
In our capacity as actuarial consultants and enrolled actuaries and as required
by Section 6058(b) of the Code, we prepared an actuarial statement of
certification in connection with the
<PAGE> 73
Spinoff, evidencing compliance with the requirements of Sections 401(a)(12) and
414(l) of the Code (the "Spinoff Statement"). The Spinoff Statement certified
that because the market value of assets of the Plan was less than the present
value of accumulated plan benefits on a termination basis (as defined in Section
1.414(l)-1(b)(5) of Treasury Regulations), the amount of assets to be
transferred to the KDI Triangle Plan and the other seven (7) plans receiving
assets and liabilities as a result of the Spinoff would be determined under the
asset allocation rules of Section 4044 of the Employee Retirement Income
Security Act of 1974, as amended, including the special schedule of benefits
created as the result of the Merger. The asset allocations for all plans
involved in the Spinoff (the "Spinoff Allocations") were determined in
accordance with the requirements of Section 1.414(l)-1(n)(1) of Treasury
Regulations. The Spinoff Statement was included as part of the Notice of Plan
Merger or Consolidation, Spinoff, or Transfer of Plan Assets or Liabilities;
Notice of Qualified Separate Lines of Business (Form 5310-A) filed with the
Internal Revenue Service on December 1, 1995. A copy of each Form 5310-A
(including the Spinoff Statement and all other attachments) as filed with the
IRS is attached hereto as Exhibit 2 and incorporated herein.
In our opinion the Spinoff and the Spinoff Allocations were performed in
accordance with the requirements of applicable law, including Sections
401(a)(12) and 414(l) of the Code and the applicable Treasury Regulations, and
did not adversely impact the tax-qualified status of the Plan, the tax-qualified
status of the KDI Triangle Plan, or the tax-qualified status of any other plan
involved in the Spinoff under Section 401(a) of the Code, or the tax-exempt
status of any of the related trusts under Section 501(a) of the Code.
In our capacity as actuarial consultants and advisors, we make the following
representations:
1. We affirm our professional responsibility for preparation of
the Merger Statement, the Spinoff Statement, and the Spinoff
Allocations and for our opinions that neither the Merger, the
Spinoff nor the Spinoff Allocations had any adverse effect on
the tax-qualified status of the triangle Plan, the Plan, the
KDI Triangle Plan, or any other plan involved in the Merger
or the Spinoff under Section 401(a) of the Code or any
adverse impact on the tax-exempt status of any of the related
plan trusts under Section 501(a) of the Code.
2. Upon receipt by us of written determination of the Internal
Revenue Service that the triangle Plan, the Plan, the KDI
Triangle Plan or any other plan involved
<PAGE> 74
in the Merger or Spinoff fails to satisfy or may not have
satisfied the qualification requirements of Section 401(a) of
the Code because any one or more of the Merger, the Spinoff,
or the Spinoff Allocations were not in compliance with the
requirements of applicable law, including Sections 401(a)(12)
and 414(l) of the Code and the applicable Treasury
Regulations, or upon written objection to the Merger, Spinoff
or the Spinoff Allocations by any other governmental
department or agency, by any participant in the triangle
Plan, the Plan or the KDI Triangle Plan or by any other
individual or entity, we shall provide to Triangle a copy of
such determination or objection and afford to Triangle an
opportunity to participate in the response thereto and/or the
assertion of any defenses to such failure or proposed failure
of qualification, challenge or the consequences thereof.
3. We acknowledge that all above-named addressees, and any other
plan, trust, fund, or program that may be created to receive
the assets and liabilities of the KDI Triangle Plan ("Other
Plan") and any fiduciaries of the Other Plan, whether now in
existence or not ("Other Plan Fiduciaries"), and their
respective successors, assignees and/or appointees, are
entitled to rely upon the opinions and statements contained
herein. We acknowledge that the fiduciaries of the KDI
Triangle Plan may not have been named or appointed, that the
Other Plan has not been formed, and that the Other Plan
Fiduciaries have not been named or appointed. Upon acceptance
of their appointment as fiduciaries, the fiduciaries of the
KDI Triangle Plan and/or the Other Plan Fiduciaries, and upon
its formation the Other Plan, will be entitled to rely on the
opinions and representations contained in this letter to the
same extent as if currently appointed as such or currently
formed.
4. We agree to keep the terms of this letter in strict
confidence and protected from disclosure to third parties,
except as may otherwise be required by law.
5. Any proceeding seeking enforcement of the terms of this
letter shall be brought in the State of Michigan or, at the
option of Triangle, in any other state in which is located
the principal place of business or the principal contacts of
any of the above-named addressees (including their
successors, assignees and/or appointees).
<PAGE> 75
In making the above representations, we are acting solely in our capacity as
actuarial consultants and advisors and do not thereby undertake to assume any
fiduciary or other capacity or any other legal relationship with respect to the
Plan or the KDI Triangle Plan.
Very truly yours,
ALEXANDER & ALEXANDER CONSULTING GROUP INC.
A. David Degann
Managing Director and Enrolled Actuary (No. 96-0025)
Enclosures
<PAGE> 76
SCHEDULE 9.15(a)
Defined Benefit Plan Assets and Liabilities
To be prepared by Seller in accordance with Section 9.15(a) and
furnished to Purchaser at least ten (10) days prior to Closing.
<PAGE> 77
SCHEDULE 9.15(b)
401(k) Plan Account Balances
To be prepared by Seller in accordance with Section 9.15(b) and
furnished to Purchaser at least ten (10) days prior to Closing.
<PAGE> 78
SCHEDULE 9.15(d)
Employees to be Covered by
New Health and Welfare Plans
At least ten (10) days prior to Closing, Seller shall furnish to
Purchaser the names of its current employees to be covered by the Health and
Welfare Plans, along with any other data requested by Purchaser and that is
reasonably necessary for the implementation of the New Health and Welfare Plans.
<PAGE> 79
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT ("Amendment No. 1")
is made as of June 28, 1996 among KDI/TRIANGLE CORPORATION, a Michigan
corporation (the "Purchaser"), a wholly-owned subsidiary of MICROWAVE COMPONENTS
ENTERPRISES, INC., a Michigan corporation ("Enterprises"), KDI D/H CORPORATION,
a Delaware corporation ("KDI D/H"), and KDI/triangle ELECTRONICS, INC., a
Delaware corporation and wholly-owned subsidiary of KDI D/H (the "Seller").
Recitals
1. Prior to the date hereof, the parties hereto entered into .
that certain Asset Purchase Agreement dated May 31, 1996 (the "Agreement").
Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement.
2. The Closing is subject to certain conditions which are not
expected to be satisfied until on or about July 12, 1996. It is the intention of
the parties that, subject to the terms and conditions of the Agreement and of
this Amendment No. 1 and subject to occurrence of the Closing, the several
adjustments to the Purchaser Price, namely the Accounts Receivable Adjustment,
the Net Working Capital Adjustment and the Inventory Adjustment, shall be
finally determined as of the close of business on June 30, 1996 in lieu of the
Closing Date.
3. In light of the foregoing and in light of certain other
reasons, the parties hereto desire to amend the Agreement.
Agreement
NOW, THEREFORE, in consideration of these premises and subject to
the terms and conditions contained herein and for the other consideration
provided herein, the parties agree to amend the Agreement as follows:
A. Mortgage Obligations.
1. The definition of "Mortgage Obligations" in Section
I of the Agreement is amended and restated in its entirety as follows:
"Mortgage Obligations" means the obligations and liabilities
related to the mortgages described on SCHEDULE 3.1(e)
attached hereto, which, as of March 31, 1996, are estimated
to have an outstanding balance of $938,626 (the "Mortgage
Obligations") and are secured by the Real Estate described
in SCHEDULE 3.1(e).
<PAGE> 80
2. Section 3.1(e) of the Agreement is amended and
restated in its entirety as follows:
(e) THIS SECTION HAS BEEN INTENTIONALLY LEFT BLANK.
3. A new Section 3.4 is added to the Agreement in its
entirety as follows:
3.4 Mortgage Obligations. Notwithstanding the provisions
in Section 3.2 of the Agreement to the contrary, effective as
of the Closing Date, the Purchaser shall either assume the
Mortgage Obligations (in which case the Mortgage Obligations
shall be deemed to be included in the Assumed Liabilities) or
make payment in full of the Mortgage Obligations.
B. Certain Definitions.
1. 6/30/96 Net Working Capital Adjustment. The definition of
and all references to the "Closing Date Net Working Capital Adjustment" in
Sections I and 4.5(a) of the Agreement and in all other sections and provisions
of the Agreement and in the KDI D/H Delivered Documents, the Purchaser Delivered
Documents and the Seller Delivered is amended Documents and restated in its
entirety to read and mean "6/30/96 Net Working Capital Adjustment".
2. 6/30/96 Net Working Capital Base. The definition of and all
references to the "Closing Date Net Working Capital Base" in Sections I and
4.2(b)(ii) of the Agreement and in all other sections and provisions of the
Agreement and in the KDI D/H Delivered Documents, the Purchaser Delivered
Documents and the Seller Delivered Documents is amended and restated in its
entirety to read and mean "6/30/96 Net Working Capital Base".
3. 6/30/96 Net Working Capital Balance Sheet. The definition
of and all references to the "Closing Date Net Working Capital Balance Sheet" in
Sections I and 4.5(a) of the Agreement and in all other sections and provisions
of the Agreement and in the KDI D/H Delivered Documents, the Purchaser Delivered
Documents end the Seller Delivered Documents is amended and restated in its
entirety to read and mean "6/30/96 Net Working Capital Balance Sheet".
C. Delinquent Accounts. Section 4.2(a)of the Agreement is amended
and restated in entirety as follows:
(a) Delinquent Accounts Receivable. The Purchase Price
shall be adjusted downward in an amount equal to any delinquent
Accounts Receivable in excess of the reserve therefor set forth
on the 6/30/96 Working Capital Balance Sheet (as defined below)
and calculated in a manner consistent with past practices of
the Seller (the "Accounts Receivable Adjustment"); provided
that the aggregate amount of all adjustments shall be paid
solely out of and capped at an amount equal to the balance of
the then Escrow Fund held pursuant to the Escrow Agreement.
Accounts Receivable shall be considered to be delinquent if
they are outstanding at June 30, 1996 and are not collected -
within the twelve (12) month period following the close of
business on June 30, 1996.
<PAGE> 81
D. 6/30/96 Net Working Capital Base Section 4.2(b)(ii) of the
Agreement is amended and restated in its entirety as follows:
(ii) 6/30/96 Net Working Capita1 Base. As used
herein, the "6/30/96 Net Working Capital Base" means the net
working capital base of the Seller as at the close of business
of June 30, 1996, with such base to be in an amount equal to
the sum of the following items as at the close of business on
June 30, 1996: (A) the Cash; (B) plus, the Accounts Receivable;
(C) plus, the sum of the Inventory (which shall be valued in
the same manner as previously used by the Seller); (D) plus,
the Prepaids; (E) less, the Accounts Payable: and (F) less, the
Accruals.
E. Inventory Adjustment. Section 4.2(c)of the Agreement is
amended and restated in its entirety as follows:
(c) Inventory Adjustment. The Purchase Price shall be
adjusted downward in an amount equal to any obsolete or damaged
Inventory in excess of the reserve therefor set forth on the
6/30/96 Working Capital Balance Sheet and calculated in a
manner consistent with past practices of the Seller (the
"Inventory Adjustment"). Inventory shall be deemed to be
obsolete if such Inventory is more than two (2) years old as of
the close of business on June 30, 1996 and if such items are
not budgeted for sale in the twelve (12) month period following
the close of business on June 30, 1996; Inventory also shall be
deemed to be obsolete if such Inventory is more than two (2)
years old at the close of business on June 30, 1996, and though
budgeted for sale in the twelve (12) month period following the
close of business on June 30, 1996, remains unsold at the end
of such year when run against such twelve (12) month period's
sales budget. Inventory shall be deemed to be damaged if such
Inventory is reasonably determined by the Purchaser, acting in
good faith and consistently with the past practices of the
Seller, not to be saleable and merchantable in the ordinary
course of business.
F. Determination of Preliminary Net Working Capital Adjustment.
The first sentence of Section 4.3 of the Agreement is amended and restated in
its entirety as follows:
<PAGE> 82
The preliminary determination of the Net Working Capital
Adjustment shall be made as of May 31, 1996 by the Chief
Financial Officer of the Seller based upon the financial
information of the Seller consistent with past practices of the
Seller and based on his reasonable good faith estimate of the
difference between the 12/31/95 Adjusted Net Working Capital
Base and the Seller's net working capital base as of May 31,
1996 (with such net working capital base to be determined in
accordance with the Section 4.2(b)(ii), substituting May 31,
1996 for the close of business on June 30, 1996, and crediting
such net working capital base to the extent that the principal
amount of the Mortgage Obligations is less than $865,000 at May
31, 1996 or debiting the net working capital base to the extent
that the principal amount of the Mortgage Obligations is
greater than $865,000 at May 31, 1996) and shall be delivered
to the Purchaser at the Closing (the "Preliminary Net Working
Capital Adjustment").
G. Preparation of 6/30/96 Working Capital Balance Sheet;
Determination of 6/30/96 Net Working Capital Adjustment. The first sentence of
Section 4.5(a) of the Agreement is amended and restated in its entirety as
follows:
(a) As soon as practicable, but in any event no later than
forty-five (45) days after the Closing Date, the Seller shall
prepare and deliver to the Purchaser the following (i) a
balance sheet relative to the Seller's 6/30/96 Net Working
Capital Base (the "6/30/96 Working Capital Balance Sheet"); and
(ii) a determination of the Net Working Capital Adjustment as
of the close of business on June 30, 1996 based upon the
criteria described above in Section 4.2(b), with the Seller
receiving a credit for any reduction in the principal amount of
the Mortgage Obligations between May 31, 1996 and the date of
determination of the 6/30/96 Net Working Capital Base (the
"6/30/96 Net Working Capital Adjustment").
H. Post Closing Date Inventory Adjustment. Section 4.6(b) of the
Agreement is amended and restated in its entirety as follows:
(b). Post Closing Date Inventory Adjustment. On the tenth
(10th) business day after June 30, 1997, the Purchaser shall
prepare and deliver to the Seller a certificate describing the
Inventory Adjustment determined in accordance with Section
4.2(c) above; provided that the amount of such adjustment shall
be paid solely out of, and capped at an amount equal to, the
then balance of the Escrow Fund held pursuant to the Escrow
Agreement; and provided further that such claim for adjustment
shall be submitted for consideration and payment in accordance
with the terms and conditions of the Escrow Agreement. In the
event of any such Inventory Adjustment, the actual damaged or
obsolete Inventory, as the case may be, shall be reassigned to
the Seller.
<PAGE> 83
I. Accounts Receivable Adjustment. Section 4.6(c) of the
Agreement is amended and restated in its entirety as follows:
(c) Accounts Receivable Adjustment. Within ten (10) business
days after June 30, 1997, the Purchaser shall prepare and
deliver to the Seller a certificate describing the Accounts
Receivable Adjustment determined in accordance with Section
4.2(a) above; provided that the Accounts Receivable Adjustment
shall be paid solely out of, and capped at an amount equal to,
the then balance of the Escrow Fund held pursuant to the Escrow
Agreement; and provided further that such claim for adjustment
shall be submitted for consideration and payment in accordance
with the terms and conditions of the Escrow Agreement. In the
event of any such Accounts Receivable Adjustment, delinquent
Accounts Receivable in the principal amount equal to such
Accounts Receivable Adjustment (as mutually selected by the
Purchaser and the Seller) shall be reassigned to the Seller.
J. Operation of Business. Section 9.4 of the Agreement is
amended and restated in its entirety as follows:
9.4 Operation of Business.
(a) From and after the date hereof and through the Closing
Date, the Seller shall operate the Seller's Business consistent
with past operations and practices and shall use its best
efforts to maintain the Seller's Business intact, retain the
present employees of the Seller's Business and preserve the
confidence of suppliers, distributors, dealers, representatives
and customers related thereto. Without limiting the generality
of the foregoing, neither the Seller nor KDI D/H shall (i)
enter into any contracts that could have a material adverse
impact on the business, assets, properties, financial
conditions, results of operations, cash flows or relate in any
adverse way to the transactions contemplated in this Agreement,
(ii) materially increase the compensation or employee benefits
of any executive employee of the Seller, (iii) transfer, sell,
or dispose of any of the Purchased Assets, or enter into any
agreements relative to the foregoing, except in the ordinary
course of business, (iv) amend the Seller's Articles of
Incorporation, or (v) merge, consolidate, participate in a
share exchange or otherwise transfer the stock or assets of the
Seller to any other party, or enter into any agreements
relative to the foregoing.
(b) From and after the close of business on June --30, 1996
through the Closing Date (the "Period"), and in addition to and
without limiting the generality of the provisions set forth
above in Section 9.4(a), neither the Seller nor KDI D/H shall,
without the prior consent of the Purchaser acting through John
L. Smucker
<PAGE> 84
or Colleen M. Spencer (which consent shall not be unreasonably
withheld), (i) pay, distribute or otherwise transfer any cash
or cash equivalents or other assets or properties to KDI D/H,
to the Secured Creditors, to the beneficial owners of the
Seller in connection with any management or related fees or
expenses, (ii) subject to subsection (i) above, distribute or
otherwise transfer any cash or cash equivalents out of the
Seller to KDI D/H, to the Secured Creditors, to any affiliates
of the foregoing or to any third party, or enter into any
agreements relative to the foregoing, except in the ordinary
course of business, (iii) purchase or commit to purchase any
fixed assets, or enter into any agreements relative to the
foregoing, except in the ordinary course of business, (iv)
purchase or commit to purchase any inventory in an aggregate
amount during the Period in excess of $250,000, or greater into
any agreements relative to the foregoing, except in the
ordinary course of business, (v) increase the compensation or
employee benefits of any employee of the Seller or enter into
any agreements relative to the foregoing, or (vi) take any
actions which would materially effect the amount or scope of
the Purchased Assets or the Assumed Liabilities. In addition,
during the Period, the Seller shall, and KDI D/H shall cause
the Seller to, prepare and distribute to the Purchaser, on a
daily basis (except as otherwise described below), a report
relative to the Seller's Business describing in reasonable
detail the following information with respect to the Seller,
with such report to be transmitted via telecopier no later than
the close of business on the following business day (except as
otherwise described below): (1) cash collections for such day;
(2) the cash distributions for such day (3) the balance of
accounts receivable as of the last business day of each week
during the Period (with such information to be provided to the
Purchaser of the next business day following the last business
day of such week); (4) the balance of accounts payable as of
the last business day of each week during the Period (with such
information to be provided to the Purchaser on the next
business day following the last business day of such week); (5)
the sales reported for such day; (6) the purchase commitments
made during such day; and (7) the "bookings" made during such
day. Finally, without limiting the generality of Section 9.1 of
the Agreement, the Purchaser shall have the right, during the
Period, to have a representative on the premises of the Seller
during normal business hours and after prior reasonable notice
for purposes of monitoring the Seller's Business in general and
the provisions of this Section 9.4 in particular.
K. Closing and Closing Date. Section 12.1 of the Agreement is
amended and restated in its entirety as follows:
12.1 Closing and Closing Date. There shall be a closing of the
purchase and sale contemplated herein (the "Closing"), which
shall be held at the offices of Rosenman & Colin, 575 Madison
Avenue, New York, New York 10022-2585 (212-940-8800; fax
212-940-3815), at 10:00 a. m. on July 12, 1996 or at such other
date and time as the parties hereto may mutually agree upon
(the "Closing Date"), to be effective as of the close of
business on the Closing Date.
<PAGE> 85
L. Termination - Methods. Section 14.1(b)of the Agreement is
amended and restated in its entirety as follows:
(b) By any party, if the Closing fails to occur on or before
July 12, 1996; or
M. Survival. Section XV of the Agreement is amended and restated
in its entirety as follows:
XV. SURVIVAL.
The representations, warranties, covenants, indemnities and
agreements contained herein shall terminate one (1) year plus
twelve (12) business days after June 30, 1997; provided that
the obligations of the Seller and/or KDI D/H with respect to
the covenants made by Seller and KDI D/H in the Seller Non-
Competition Agreement and the KDI D/H Non-Competition Agreement
shall survive the Closing Date for the term of such agreements;
and provided further that the obligations of the Purchaser with
respect to the Assumed Liabilities and with respect to the Net
Working Capital Adjustment shall survive the Closing Date
indefinitely.
N. Effective Date. The effective date of this Amendment No. 1 is
as of the date first written above.
0. Continuation of Agreement. Except as expressly modified or
amended hereby, all of the terms and conditions of the Agreement shall continue
and remain in full force and effect.
P. Counter Parts. This Amendment No. 1 may be executed in any
number of counterparts, each of which shall be treated as an original but all of
which, collectively, shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 1 of the day and year first above written.
KDI/TRIANGLE CORPORATION.
the purchaser
By: /s/ John L. Smucker
----------------------------------
John L. Smucker, President
KDI D/H CORPORATION,
KDI D/H
By: /s/ P. Roger Byer
----------------------------------
Its: Vice President
KDI/TRIANGLE ELECTRONICS, INC.,
the Seller
By: /s/ Michael D. Snyder
----------------------------------
Its: President
<PAGE> 86
AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT ("Amendment No. 2") is
made as of July 12, 1996 among KDI/TRIANGLE CORPORATION, a Michigan corporation
(the "Purchaser"), a wholly-owned subsidiary of MICROWAVE COMPONENTS
ENTERPRISES, INC., a Michigan corporation (" Enterprises"), KDI D/H CORPORATION,
a Delaware corporation ("KDI D/H"), and KDI/triangle ELECTRONICS, INC., a
Delaware corporation and wholly-owned subsidiary of KDI D/H (the "Seller").
RECITALS
1. Prior to the date hereof, the parties hereto entered into that
certain Asset Purchase Agreement dated May 31, 1996 (the "Agreement") and
Amendment No. 1 to Asset Purchase Agreement dated June 28, 1996 ("Amendment No.
1"). Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement, as revised by Amendment No. 1, to the
extent not redefined herein.
2. The parties desire to revise the Agreement and Amendment No. 1 to
change the Purchase Price and terms of payment of the Purchase Price, eliminate
the Escrow Agreement attached as Exhibit 4.4(b) to the Agreement, revise
Schedule 4.4 to the Agreement and make certain other changes as set forth
herein.
3. In light of the foregoing and in light of certain other reasons, the
parties hereto desire to amend the Agreement and Amendment No. 1.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and subject to the
terms and conditions contained herein and for the other consideration provided
herein, the parties agree to amend the Agreement and Amendment No. 1 as follows:
The definitions of "Escrow Agreement" and "Escrow Fund" are deleted
from Article I.
The definitions of "Escrow Agent" and "New Jersey Taxes Escrow Amount"
set forth in Article I of the Agreement are amended and restated as follows:
"Escrow Agent" means Comerica Bank, a Michigan banking
corporation.
<PAGE> 87
"New Jersey Taxes Escrow Amount" has the meaning set forth in
Section 6.21(b), and has been determined by the State of New Jersey to
be in an amount equal to $10,500.
The following definitions are added to Article I of the Agreement:
"Escrow Funds" shall have the meaning. set forth in Article
XVI-A, subsection (b)(ii).
"Notes" means, collectively, the Six-Month Note and the
Twelve-Month Note.
"Six-Month Note" means the promissory note referenced in
Section 4.4(b) and attached as EXHIBIT 4.4(b) to Amendment No. 2.
"Twelve-Month Note" means the promissory note referenced in
Section 4.4(c) and attached as EXHIBIT 4.4(c) to Amendment No. 2.
B. Litigation. Section 3.1(h) of the Agreement is emended and restated
in its entirety as follows:
(h) Litigation. The obligations and liabilities of
the Seller with respect to the proceedings set forth in Items
1 and 5 on SCHEDULE 6.16; provided that the Purchaser shall be
entitled to set-off from its obligations under the Notes on a
dollar-for-dollar basis, following the procedures set forth in
Article XVI-A, an amount equal to its liability for either or
both of Items 1 and 5 on SCHEDULE 6.16 to the extent that
Purchaser's liability for such litigation exceeds the amount
accrued for such litigation in the Accruals (the "Assumed
Litigation").
C. Purchase Price. Section 4.1 of the Agreement is emended and restated
in its entirety as follows:
Purchase Price. Subject to the adjustments described
herein, the purchase price shall be an amount equal to
$14,216,000 (the "Purchase Price").
D. Delinquent Accounts Receivable. Section 4.2(a) of the Agreement and
paragraph C of Amendment No. 1 is amended and restated in its entirety as
follows:
(a) Delinquent Accounts Receivable. The Purchase
Price shall be adjusted downward in an amount equal to any
delinquent Accounts Receivable in excess of the reserve
therefor set forth on the 6/30/96 Working Capital Balance
Sheet (as defined below) and calculated in a manner consistent
with past practices of the Seller (the "Accounts Receivable
Adjustment"); provided that, the aggregate amount of all
adjustments shall be satisfied solely by Purchaser's right of
set-off from its obligations under the Notes on a
dollar-for-dollar basis, following the procedures set forth in
Article XVI-A. Accounts Receivable shall be considered to be
delinquent if they are outstanding at June 30, 1996 and are
not collected within the twelve (12) month period following
the close of business on June 30, 1996.
<PAGE> 88
E. Payment of Initial Purchase Price. Section 4.4 of the Agreement is
amended and restated in its entirety as follows:
4.4 Payment of Initial Purchase P rice. The initial
Purchase Price shall be paid to the Seller at the Closing as
follows:
(a) Cash. The Purchaser shall pay, in cash in
accordance with joint payment instructions issued by
the Seller and Chemical Bank (by wire transfer of
immediately available federal funds or by other
mutually agreeable manner), an amount equal to the
sum of the following:
(i) $13,216,000; and
(ii) In the event that the
Preliminary Net Working Capital Adjustment is
positive, an amount equal to such increase shall be
added to the $13,216,000 cash payment described
above, but, in the event that the Preliminary Net
Working Capital Adjustment is negative, an amount
equal to such decrease shall be subtracted from the
$13,216,000 cash payment described above.
(b) Six-Month Note. At the Closing, the Purchaser
shall execute and deliver to the Seller a promissory
note in the principal amount of Five Hundred Thousand
Dollars ($500,000), which promissory note shall bear
simple interest at the per annum rate of 9.25%, shall
mature six months from the Closing Date, shall
provide for one lump-sum payment of principal and
interest at maturity and shall otherwise be in
substantially the form attached hereto as EXHIBIT
4.4(b) (the "Six-Month Note"). The Purchaser's
obligations under the Six-Month Note shall be
subject to certain rights of set-off referenced and
described in Article XVI-A.
(c) Twelve-Month Note. At the Closing, the Purchaser
shall execute and deliver to the Seller a promissory
note in the principal amount of Five Hundred Thousand
Dollars ($500,000), which promissory note shall bear
simple interest at the per annum rate of 9.25%, shall
mature 12 months from the Closing Date, shall provide
for one lump-sum
<PAGE> 89
payment of principal and interest at maturity and
shall otherwise be in substantially the form attached
hereto as EXHIBIT 4.4(c) (the "Twelve-Month Note").
The Purchaser's obligations under the Twelve-Month
Note shall be subject to certain rights of set-off
referenced and described in Article XVI-A below.
SCHEDULE 4.4 attached hereto sets forth an example of
the calculation of the initial Purchase Price payable
at Closing using the financial information available
to the parties at March 31, 1996.
F. Determination of 6/30/96 Net Working Capital Adjustment. Section
4.5(d) of the Agreement is amended and restated in its entirety as follows:
(d) The parties acknowledge and agree that, in the
event that the Purchaser discovers a breach or
breaches of the Seller's representations and
warranties set forth in Sections 4.3 or 4.5(a) after
the final determination of the 6/30/96 Net Working
Capital Adjustment as described in Section 4.5(c),
then the Purchaser shall be entitled to its rights
and remedies as provided herein with respect to any
damages arising as a result thereof, provided that
any such damages would be satisfied solely by
Purchaser's right of set-off from its obligations
under the Notes on a dollar-for-dollar basis,
following the procedures set forth in Article XVI-A.
G. Payment of Adjustments to Purchase Price. Section 4.6 of the
Agreement (including the amendments thereto set forth in paragraphs H and I of
Amendment No. 1) is amended and restated in their entirety as follows:
(a) 6/30/96 Net Working Capital Adjustment. If the
6/30/96 Net Working Capital Adjustment as finally
determined pursuant to Section 4.5 above is different
than the Preliminary Net Working Capital Adjustment,
then the parties shall, within seven (7) days of
determination thereof (through the use of immediately
available funds and after taking into account the
Preliminary Net Working Capital Adjustment) take such
actions as are necessary to comply with the
provisions of Section 4.2(b) for
<PAGE> 90
purposes of effecting the Net Working Capital
Adjustment, which actions shall include either: (i) a
payment by the Seller to the Purchaser to be capped
at the amount outstanding under the Notes and
satisfied solely by Purchaser's right of set-off from
its obligations under the Notes on a
dollar-for-dollar basis, following the procedures set
forth in Article XVI-A; or (ii) a payment by the
Purchaser to the Seller in cash.
(b) Post-Closing Date Inventory Adjustment. On the
tenth (10th) business day after June 30, 1997, the
Purchaser shall prepare and deliver to the Seller a
certificate describing the Inventory Adjustment
determined in accordance with Section 4.2(c) above;
provided that the amount of such adjustment shall be
satisfied solely by Purchaser's right of set-off from
its obligations under the Notes on a dollar-for-
dollar basis, following the procedures set forth in
Article XVI-A. In the event of any such Inventory
Adjustment, the actual damaged or obsolete Inventory,
as the case may be, shall be reassigned to the
Seller.
(c) Accounts Receivable Adjustment. Within ten (10)
business days after June 30, 1997, the Purchaser
shall prepare and deliver to the Seller a certificate
describing the Accounts Receivable Adjustment
determined in accordance with Section 4.2(a) above;
provided that the Accounts Receivable Adjustment
shall be satisfied solely by Purchaser's right of
set-off from its obligations under the Notes on a
dollar-for-dollar basis, following the procedures set
forth in Article XVI-A. In the event of any such
Accounts Receivable Adjustment, delinquent Accounts
Receivable in the principal amount equal to such
Accounts Receivable Adjustment (as mutually selected
by the Purchaser and the Seller) shall be reassigned
to the Seller.
H. Escrow Agreement. Section 9.13 of the Agreement is amended and
restated in its entirety as follows:
9.13 THIS SECTION HAS BEEN INTENTIONALLY LEFT BLANK.
I. Employee Benefit Plans. Section 6.14(i) is amended and restated in
its entirety as follows:
(i) As of January 1, 1996, the fair market value of
the assets of the Defined Benefit Plan to be
transferred to the New Pension Plan equaled $545,700,
and the present value of accrued benefit liabilities
(vested or non-vested) to be transferred from the
Defined Benefit Plan to the New Pension Plan equaled
$1,790,366, based on the method for calculating
accrued benefits and the methods and actuarial
assumptions for calculating present value that are
stated in the Defined Benefit Plan and in SCHEDULE
9.15(a).
<PAGE> 91
J. Motor Vehicle Lease. A new Section 9.19 shall be added to the
Agreement as follows:
9.19 Motor Vehicle Lease. The Purchaser shall use its best
commercially reasonable efforts to cooperate with Seller in
obtaining a consent to the assignment of the Motor Vehicle
Lease between the Seller and New Concepts Leasing, Inc. dated
March 11, 1992, or to enter into a new Motor Vehicle Lease
with New Concepts Leasing, Inc. on substantially the same
terms contained in the existing lease on the Closing Date or
as soon as is practicable thereafter.
K. Closing and Closing Date. Section 12.1 of the Agreement and
paragraph K of Amendment No. 1 is amended and restated in its entirety as
follows:
Closing and Closing Date. There shall be a closing of
the purchase and sale contemplated herein (the "Closing"),
which shall be held at the offices of Rosenman & Colin LLP,
575 Madison Avenue, New York, New York 10022-2585
(212-940-8800; fax 212-940-3815), at 10:00 a.m. on July 18,
1996 or at such other date and time as the parties hereto may
mutually agree upon (the "Closing Date"), to be effective as
of the close of business on the Closing Date. The parties
shall hold a pre-Closing meeting to assemble, review and
execute Closing documents on the date preceding the Closing
Date at the same location.
L. Ancillary Agreements. Section 12.2(i) of the Agreement is amended
and restated to read in its entirety as follows:
(i) Ancillary Agreements. The Purchaser, the Seller, KDI D/H
and the other persons described herein, as the case may be,
shall execute and deliver the following ancillary agreements:
(i) the Seller Non-Competition Agreement; (ii) the KDI D/H
Non-Competition Agreement; (iii) the Release; and (iv) the
Purchaser Management Severance Agreements.
M. Luciani Litigation. Section 13.4 of the Agreement is amended and
restated in its entirety as follows:
The Seller shall set aside $158,000 of the initial Purchase
Price to pay any legal fees, court costs, witness fees,
expenses, judgments and/or amounts necessary to settle the
litigation described in Item 2 on SCHEDULE 6.16 (the "Luciani
Litigation"). If the Seller is not able to resolve the Luciani
Litigation for $158,000 or less, the Purchaser shall not be
entitled to exercise its right of set-off under
<PAGE> 92
the Six-Month Note or the Twelve-Month Note, as the case may
be, to the extent that the Seller has previously submitted
documented out-of-pocket expenses in excess of the $158,000
the Seller had set aside to settle or otherwise resolve the
Luciani Litigation; provided that the limitation on
Purchaser's right to exercise its right of set-off shall not
apply to more than $117,000 of such excess documented
out-of-pocket expenses; and provided further that in the event
that the principal amount outstanding under the Notes is
insufficient to pay any claim of the Seller for excess
documented out-of-pocket expenses as of the date the claim is
first submitted, such claim will be payable at such time, if
any, as additional principal becomes payable under the Notes
as if such principal were payable on the date the claim was
first submitted.
N. Termination - - Methods. Section 14.1(b) of the Agreement and
paragraph of Amendment No. 1 is amended and restated in its entirety as follows:
(b) By any party, if the Closing fails to occur on or
before July 19, 1996; or
O. Limitation. Section 16.4 of the Agreement is amended and restated in
its entirety as follows:
(a) Any amounts payable by Seller to Purchaser pursuant to
this Article XVI shall be satisfied solely by Purchaser's
right of set-off from its obligations under the Notes on a
dollar-for-dollar basis, following the procedures set forth in
Article XVI-A; provided that none of the obligations of the
Seller with respect to any breach of the representations and
warranties in Sections 4.3, 4.5(a) or 6.26 hereof shall be
subject to the limitations set forth in this Section 16.4; and
provided further; that the limitations provided in this
Section 16.4 shall not apply to any breach by the Seller or
KDI D/H of the Seller Non-Competition Agreement or the KDI D/H
Non-Competition Agreement.
(b) Any amounts payable by the Purchaser to the Seller or KDI
D/H pursuant to this Article XVI shall be capped at an amount
equal to the principal amount outstanding under the Notes, as
adjusted for claims made by the Purchaser under Article XVI-A
and for claims made by the Seller pursuant to Section l3.4,
provided that the obligations of the Purchaser with respect to
the Assumed Liabilities, with respect to the Net Working
Capital Adjustment and with respect to a breach of any of its
covenants in Sections 9.3 (regarding New Hires) and 9.7
(regarding WARN) hereof shall not be subject to the
limitations set forth in this Section 16.4.
<PAGE> 93
P. Set-Off. Article XVI-A shall be added to the Agreement as follows:
XVI-A. Purchaser's Right of Set-Off.
(a) General. The Purchaser shall be entitled to set-off from
its obligations first under the Six-Month Note and then under
the Twelve-Month Note, on a dollar-for-dollar basis, an
aggregate amount equal to the sum of: (i) the Purchaser's
liability for Assumed Litigation in excess of the amount
accrued for such litigation in the Accruals, as provided in
Section 3.1(h): (ii) the Accounts Receivable Adjustment, as
provided in Sections 4.2(a) and 4.6(a); (iii) breach of the
Seller's representations and warranties in Sections 4.3 or
4.5(a), as provided in Section 4.5(d); (iv) the Inventory
Adjustment, as provided in Section 4.6(b); and (v) Seller's
indemnification obligations to the Purchaser, as provided in
Section 16.1; provided that Purchaser shall not exercise its
right of set-off in violation of the limitations set forth in
Section 13.4.
(b) Procedures. In the event the Purchaser elects to make such
a set-off, the parties hereto shall comply with the following
procedures:
(i) Notification. The Purchaser shall notify the
Seller and the Escrow Agent of its intention to use the
set-off procedures described in this Article XVI-A by delivery
of a written notice to the Seller which (A) certifies that a
claim is being asserted pursuant to Article XVI-A of this
Agreement, (B) describes the amount and nature of such claim
in reasonable detail, (C) specifies which of the Notes is
being set-off pursuant to the procedures set forth in this
Article XVI-A, and (D) indicates whether, and the extent to
which, future payments to become due with respect to the Notes
shall be the subject of such claim (a "Claim"); in the event
that the amount of the Claim is not reasonably ascertainable
by the Purchaser at the time notice is given, the Purchaser
shall specify in its notification a reasonable estimate of the
amount of the Claim and shall promptly notify the Seller of
the actual amount of the Claim as soon as such amount becomes
reasonably ascertainable by the Purchaser.
(ii) Escrow. The Purchaser shall deposit into escrow,
with Comerica Bank, a Michigan banking corporation (the
"Escrow Agent"), an aggregate amount determined by the
Purchaser, in good faith, to be due and owing to it pursuant
to Article XVI-A, subsection (a), which deposit shall be made
upon the maturity of the Six-Month Note or the Twelve-Month
Note, as the case may be, from the amount due and owing under
such Note. The
<PAGE> 94
Purchaser shall give the Seller prompt written notice of the
amount deposited with the Escrow Agent. The Escrow Agent
shall, except as otherwise agreed by the Purchaser and the
Seller in writing, invest any funds deposited in escrow (the
"Escrow Funds") in interest bearing savings accounts, money
market funds, or similar investments, provided that all
investments comprising such Escrow Funds shall have
unrestricted rights of withdrawal. The Purchaser, on the one
hand, and the Seller on the other hand, shall each bear
one-half (1/2) of the fees and expenses charged by the Escrow
Agent in connection with the matters contemplated by this
Article XVI-A.
(iii) Procedures for Distribution of Escrow Funds.
The Seller shall have thirty (30) days after delivery by the
Purchaser of a Claim within which to object in writing to same
(which period shall, for purposes of counting, begin the first
day after such delivery of notice). If the Seller fails to
notify the Purchaser and any Escrow Agent in writing that a
Claim is disputed on or before such thirtieth (30th) day, the
Escrow Agent shall distribute to the Purchaser the amount
specified in such notice of Claim if the Purchaser has made
the deposit specified in subsection (ii) above, or the
Purchaser shall be entitled to set-off from its obligations
under the relevant Note at maturity the amount of the Claim if
the Purchaser has not made the deposit specified in subsection
(ii) above. If the Seller notifies the Purchaser and any
Escrow Agent in writing that a Claim is disputed on or before
such thirtieth (30th) day: (A) the Purchaser shall not be
entitled to set off from its obligations under the relevant
Note or Notes at maturity the amount of the Claim, until the
Claim has been settled as set forth in subsection (iv) below;
and (B) the Escrow Agent shall not make any distribution to
the Purchaser pending receipt of a written notice that the
amount of the Claim has been settled as set forth in
subsection (iv) below and, upon receipt of such written notice
of settlement, the Escrow Agent shall distribute the amount of
the settled Claim, if any, in accordance therewith.
(iv) Settlement of Disputes. Any dispute which may
arise under this Agreement with respect to the rights of the
Purchaser or the Seller to the Escrow Funds or any part
thereof, shall be settled as follows:
(A) By mutual agreement of the parties concerned
(evidenced by appropriate notice of settlement and
instructions in writing to the Escrow Agent, signed by both
the Purchaser and the Seller); or
<PAGE> 95
(B) If the parties concerned mutually agree to
submit the dispute to arbitration, by binding arbitration;
or
(C) By a final order, decree or judgment of a court
of competent jurisdiction in the United States of America (the
time for appeal having expired and no appeal having been
perfected). The Escrow Agent shall be under no duty to
institute or defend any such proceedings.
Q. Remedies. Section 16.5 of the Agreement shall be deleted in its
entirety, and replaced with Article XVI-B as follows:
XVI-B. Remedies Exclusive.
If the Closing occurs, the remedies provided in this
Articles XVI and XVI-A shall be the exclusive remedies for
monetary damages (whether in law or in equity) with respect to
this Agreement and the transactions contemplated herein;
provided, however, that the remedies in Articles XVI and XVI-A
shall not be the exclusive remedy for a breach by the Seller
or KDI D/H of the Seller Non-Competition Agreement or the KDI
D/H Non- Competition Agreement, as any such breach shall
entitle the Purchaser to all remedies available to it in law
or in equity.
R. Exhibit 4.4(b). EXHIBIT 4.4(b), is hereby amended and restated in
its entirety as set forth on EXHIBIT 4.4(b) to this Amendment No. 2.
S. Exhibit 4.4(c). A new EXHIBIT 4.4(c) is added to the Agreement as
set forth on EXHIBIT 4.4(c) to this Amendment No. 2.
T. Schedule 4.4. SCHEDULE 4.4 is hereby amended and restated in its
entirety as set forth on SCHEDULE 4.4 to this Amendment No. 2.
U. Effective Date. The effective date of this Amendment No. 2 is as of
the date first written above.
V. Continuation of Agreement. Except as expressly modified or amended
hereby, all of the terms and conditions of the Agreement and of Amendment No. 1
shall continue and remain in full force and effect.
W. Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, each of which shall be treated as an original but all of which,
collectively, shall constitute a single instrument.
<PAGE> 96
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 2 as of the day and year first above written.
KDI/TRIANGLE CORPORATION,
the Purchaser
By: /s/ John L. Smucker
--------------------------------
John L. Smucker, President
KDI D/H CORPORATION,
KDI D/H
By: /s/ P. Roger Byer
--------------------------------
Its: Vice President
KDI/triangle ELECTRONICS, INC.,
the Seller
By: /s/ Michael D. Snyder
--------------------------------
Its: President
<PAGE> 97
[EXHIBIT 4.4(b)]
$500,000 PROMISSORY NOTE
(SIX-MONTH MATURITY)
(NON-NEGOTIABLE)
$500,000.00 Detroit, Michigan
July , 1996
FOR VALUE RECEIVED, the undersigned, KDI/TRIANGLE CORPORATION, a
Michigan corporation whose address is 60 South Jefferson Road, Whippany, New
Jersey 07981 (the "Purchaser"), hereby promises to pay to KDI/TRIANGLE
ELECTRONICS, INC., a Delaware corporation whose address is (3975 McMann Road,
Cincinnati, Ohio 452451 (the "Seller"), in lawful money of the United States,
the principal amount of Five Hundred Thousand Dollars ($500,000.00). The unpaid
principal amount due under this promissory note (this "Six-Month Note")shall
bear (i) simple interest at the rate of 9.25% per annum, and (ii) from and after
the failure of the Purchaser to pay the principal and accrued interest when due
or the occurrence of an Event of Default, simple interest at the rate of 11.25%
per annum.
This Six-Month Note is referred to in, and issued pursuant to, that
certain Asset Purchase Agreement, dated May 31, 1996, among the Purchaser, the
Seller and KDI D/H Corporation, as amended by Amendment No. 1 to Asset Purchase
Agreement dated June 28, 1996 and Amendment No. 2 to Asset Purchase Agreement
dated July 12, 1996 (the "Asset Purchase Agreement"). Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Asset Purchase Agreement. This Note is subject to and governed by the terms and
conditions of the Asset Purchase Agreement. Without limiting the generality of
the foregoing, the indebtedness evidenced by this Note shall be subject to
set-off pursuant to Article XVI-A of the Asset Purchase Agreement.
The principal amount and accrued interest due under this Six-Month Note
shall be due in one, lump-sum payment on January 17, 1997. This Six-Month Note
may be prepaid in part or in full, with accrued interest, without penalty at any
time.
The Purchaser hereby represents, warrants and covenants the following:
1. The Purchaser shall not sell all or substantially all of its
assets without payment of this Six-Month Note and the Twelve-Month Note in the
principal amount of $500,000 of even date herewith made by the Purchaser to the
Seller (the "Twelve-Month Note"), with accrued interest.
2. This Six-Month Note and the Twelve-Month Note each are and shall
be: (i) junior and subordinate to the Purchaser's obligations under .the notes
issued pursuant to the Loan Agreement by and between the Purchaser and Comerica
Bank dated July , 1996, or any renewal thereof (the "Comerica Debt"); and (ii)
senior to any obligations now or hereafter existing to Microwave Components
Enterprises, Inc., which obligations shall at all times be unconditionally
subordinated to the Purchaser's obligations under this Six-Month Note and the
Twelve-Month Note.
<PAGE> 98
3. A default in the payment of the Purchaser's obligations under the
Comerica Debt will constitute an Event of Default under this Six-Month Note.
Upon a breach of any representation, warranty or covenant contained in
the three enumerated paragraphs above or Purchaser's failure to pay this
Six-Month Note at maturity (each an "Event of Default"), amounts then remaining
due and unpaid under this Six-Month Note shall become or may be declared to be,
immediately due and payable.
In addition to all principal and accrued interest due under this
Six-Month Note, the Purchaser agrees to pay (a) for reasonable costs and
expenses incurred by the Seller in collecting the amounts due under this
Six-Month Note through reorganization or other proceedings; and (b) all
reasonable attorneys' fees and disbursements when and if this Six-Month Note is
placed in the hands of an attorney for collection. The payment of all principal
and interest and such costs, expenses, fees and disbursements shall not be
subject to the limitations contained in Section 16.4 of the Asset Purchase
Agreement.
The payments due hereunder are to be made to the Seller at the address
referenced above, or at such other place or places as the Seller shall designate
from time to time in writing to the Purchaser.
The Purchaser hereby waives presentment for payment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this
Six-Month Note.
This Six-Month Note, and the rights and obligations hereunder, are
non-negotiable and non- assignable.
This Six-Month Note shall be governed by and construed, interpreted and
the rights of the parties determined in accordance with, the laws of the State
of Michigan.
KDI/TRIANGLE CORPORATION,
the Purchaser
By:
------------------------
Its:
------------------------
ACCEPTED:
KDI/TRIANGLE ELECTRONICS, INC.
the Seller
By:
----------------------------
Its:
--------------------------
Dated:
---------------
<PAGE> 99
[EXHIBIT 4.4(c)]
$500,000 PROMISSORY NOTE
(Twelve-Month Maturity)
(Non-Negotiable)
$500,000.00 Detroit, Michigan
July , 1996
FOR VALUE RECEIVED, the undersigned, KDI/TRIANGLE CORPORATION, a
Michigan corporation whose address is 60 South Jefferson Road, Whippany, New
Jersey 07981 (the "Purchaser"), hereby promises to pay to KDI/TRIANGLE
ELECTRONICS, INC., a Delaware corporation whose address is (3975 McMann Road,
Cincinnati, Ohio 452451 (the "Seller"), in lawful money of the United States,
the principal amount of Five Hundred Thousand Dollars ($500,000.00). The unpaid
principal amount due under this promissory note (this "Twelve-Month Note") shall
bear (i) simple interest at the rate of 9.25% per annum, and (ii) from and after
the failure of the Purchaser to pay the principal and accrued interest when due
or the occurrence of an Event of Default, simple interest at the rate of 11.25%
per annum.
This Twelve-Month Note is referred to in, and issued pursuant to, that
certain Asset Purchase Agreement, dated May 31, 1996, among the Purchaser, the
Seller and KDI D/H Corporation, as amended by Amendment No. 1 to Asset Purchase
Agreement dated June 28, 1996 and Amendment No. 2 to Asset Purchase Agreement
dated July 12, 1996 (the "Asset Purchase Agreement"). Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Asset Purchase Agreement. This Note is subject to and governed by the terms and
conditions of the Asset Purchase Agreement. Without limiting the generality of
the foregoing, the indebtedness evidenced by this Note shall be subject to
set-off pursuant to Article XVI-A of the Asset Purchase Agreement.
The principal amount and accrued interest due under this Twelve-Month
Note shall be due in one lump-sum payment on [insert date one year and 12 days
after June 30, 1996]. This Twelve-Month Note may be prepaid in part or in full,
with accrued interest, without penalty at any time.
The Purchaser hereby represents, warrants and covenants the following:
1. The Purchaser shall not sell all or substantially all of its
assets without payment of this Twelve-Month Note and the Six-Month Note in the
principal amount of $500,000 of even date herewith made by the Purchaser to the
Seller (the "Six-Month Note"), with accrued interest.
2. This Twelve-Month Note and the Six-Month Note each are and shall
be: (i) junior and subordinate to the Purchaser's obligations under the notes
issued pursuant to the Loan Agreement by and between the Purchaser and Comerica
Bank dated July , 1996, or any renewal thereof (the "Comerica Debt"); and (ii)
senior to any obligations now or hereafter existing to
<PAGE> 100
Microwave Components Enterprises, Inc., which obligations shall at all times be
unconditionally subordinated to the Purchaser's obligations under this
Twelve-Month Note and the Six-Month Note.
3. A default in the payment of the Purchaser's obligations under the
notes issued pursuant to the Comerica Debt will constitute an Event of Default
under this Twelve-Month Note.
4. A default in the payment of the Purchaser's payment obligations
under the Six-Month Note for a period of 30 or more days.
Upon a breach of any representation, warranty or covenant contained in
the four enumerated paragraphs above or Purchaser's failure to pay this
Twelve-Month Note at maturity (each an "Event of Default"), amounts then
remaining due and unpaid under this Twelve-Month Note shall become or may be
declared to be, immediately due and payable.
In addition to all principal and accrued interest due under this
Twelve-Month Note, the Purchaser agrees to pay (a) for reasonable costs and
expenses incurred by the Seller in collecting the amounts due under this
Twelve-Month Note through reorganization or other proceedings; and (b) all
reasonable attorneys' fees and disbursements when and if this Twelve-Month Note
is placed in the hands of aa attorney for collection. The payment of all
principal and interest and such costs, expenses, fees and disbursements shall
not be subject to the limitations contained in Section 16.4 of the Asset
Purchase Agreement.
The payments due hereunder are to be made to the Seller at the address
referenced above, or at such other place or places as the Seller shall designate
from time to time in writing to the Purchaser.
The Purchaser hereby waives presentment for payment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this
Twelve-Month Note.
This Twelve-Month Note, and the rights and obligations hereunder, are
non-negotiable and non-assignable.
<PAGE> 101
This Twelve-Month Note shall be governed by and construed, interpreted
and the rights of the parties determined in accordance with, the laws of the
State of Michigan.
KDI/TRIANGLE CORPORATION,
the Purchaser
By:
----------------------
Its:
----------------------
ACCEPTED:
KDI/TRIANGLE ELECTRONICS, INC.
the Seller
By:
--------------------------
Its:
------------------------
Dated:
---------------
<PAGE> 102
SCHEDULE 4.4
CALCULATION OF INITIAL
PURCHASE PRICE PAYABLE AT CLOSING - EXAMPLE
Initial Purchase Price
----------------------
<TABLE>
<S> <C>
Cash (Section 4.4(a))
----
Cash (Section 4.4(a)(i)) $13,216
3/31/96 Preliminary Working
Capital Adjustment
(Section 4.4(a)(ii)) (936)*
--------
Cash Paid to the Seller $12,284
========
Notes (Sections 4.4(b), 4.4(c))
-----
Six-Month Note $ 500
Twelve-Month Note 500
--------
Total $13,280**
----- ========
</TABLE>
---------------------
* Preliminary Working Capital Adjustment (as of 3/31/96). See Schedule 4.3.
** The sum of $13,280,000 (i.e., the Initial Purchase Price), plus $936,000
(i.e., the Preliminary Working Capital Adjustment (as of 3/31/96)) equals
$14,216,000 (i.e., the Purchase Price described in Section 4.1).
<PAGE> 103
AMENDMENT NO. 3 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 3 TO ASSET PURCHASE AGREEMENT ("Amendment No. 3") is
made as of July 19, 1996 among KDI/TRIANGLE CORPORATION, a Michigan corporation
(the "Purchaser"), a wholly-owned subsidiary of MICROWAVE COMPONENTS
ENTERPRISES, INC., a Michigan corporation ("Enterprises"), KDI D/H CORPORATION,
a Delaware corporation ("KDI D/H"), and KDI/triangle ELECTRONICS, INC., a
Delaware corporation and wholly-owned subsidiary of KDI D/HE (the "Seller").
RECITALS
1. Prior to the date hereof, the parties hereto entered into that certain
Asset Purchase Agreement dated May 31, 1996 (the "Agreement"), Amendment No. 1
to Asset Purchase Agreement dated June 28, 1996 ("Amendment No. 1") and
Amendment No. 2 to Asset Purchase Agreement dated July 12, 1996 (" Amendment No.
2"). Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement, as revised by the later of Amendment No. 1
or Amendment No. 2, to the extent not redefined herein.
2. The parties desire to revise the Agreement, as amended, to extend the
Closing Date. In addition, the parties desire to amend the Agreement, as
amended, to provide that the Purchaser will assume the Assumed Pension
Liabilities of the Defined Benefit Plan when the assets of such plan are
transferred to the New Pension Plan, and will assume the Assumed Pension
Liabilities of the 401(k)Plan when the assets of such plan are transferred to
the New 401(k)Plan.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and subject to the terms
and conditions contained herein and for the other consideration provided herein,
the parties agree to amend the Agreement, as amended, as follows:
A. Assumed Pension Liabilities.
1. Section 3.1(g) of the Agreement is amended and restated in its
entirety as follows:
(g) THIS SECTION HAS BEEN INTENTIONALLY LEFT BLANK.
2. A new Section 3.1.A is added to the Agreement to read in its
entirety as follows:
3.1.A Assumed Pension Liabilities. The Purchaser shall assume the
Assumed Pension Liabilities as follows:
(a) The Purchaser will assume the Assumed Pension Liabilities of
the Defined Benefit Plan when the assets of such plan are
transferred to the New Pension Plan.
<PAGE> 104
(b) The Purchaser will assume the Assumed Pension Liabilities of
the 401(k) Plan when the assets of such plan are transferred to the
New 401(k) Plan.
B. Closing and Closing Date. Section 12.1 of the Agreement, paragraph
K of Amendment No. 1 and paragraph K of Amendment No. 2 is amended and restated
to read in its entirety as follows:
12.1 Closing and Closing Date. There shall be a closing of the
purchase and sale contemplated herein (the "Closing"), which shall
be held at the offices of Rosenman 6 Colin LLP, 575 Madison Avenue,
New York, New York 10022- 2585 (212-940-8800; fax 212-940-3815), at
10:00 a. m. on July 23, 1996 or at such other date and time as the
parties hereto may mutually agree upon (the "Closing Date"), to be
effective as of the close of 'business on the Closing Date. The
parties shall hold a pre-Closing meeting to assemble, review and
execute Closing documents on the date preceding the Closing Date at
the same location.
C. Closing Deliveries. Section 12.2(c) of the Agreement is hereby amended
to change the references to the date of good standing certificates to be
delivered on the Closing Date to a "date not more than 10 business days prior to
the Closing Date."
D. Termination --Methods. Section 14.1(b) of the Agreement, paragraph L of
Amendment No. 1 and paragraph N of Amendment No. 2 is amended and restated in
its entirety as follows:
(b) By any party, if the Closing fails to occur on or before July
23, 1996; or
E. Effective Date. The effective date of this Amendment No. 3 is as of the
date first written above.
F. Continuation of Agreement. Except as expressly modified or amended
hereby, all of the terms and conditions of the Agreement, as amended, shall
continue and remain in full force and effect.
G. Counterparts. This Amendment No. 3 may be executed in any number of
counterparts, each of which shall be treated as an original but all of which,
collectively, shall constitute a single instrument.
<PAGE> 105
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 3 as of the day and year first above written.
KDI/TRIANGLE CORPORATION,
the Purchaser
By: /s/ John L. Smucker
-----------------------------------------
John L. Smucker, President
KDI D/H CORPORATION,
KDI D/H
By: /s/ P. Roger Byer
-----------------------------------------
Its: Vice President
KDI/triangle ELECTRONICS, INC.,
the Seller
By: /s/ Michael D. Snyder
------------------------------------------
Its: President
<PAGE> 106
AMENDMENT NO. 4 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 4 TO ASSET PURCHASE AGREEMENT (" Amendment No. 4")
is made as of August 1, 1996 among KDI/TRIANGLE CORPORATION, a Michigan
corporation (the "Purchaser"), a wholly-owned subsidiary of MICROWAVE COMPONENTS
ENTERPRISES, INC., a Michigan corporation ("Enterprises"), KDI D/H CORPORATION,
a Delaware corporation (" KDI D/H"), and KDI/triangle ELECTRONICS, INC., a
Delaware corporation and wholly-owned subsidiary of KDI D/H (the "Seller").
Recitals
1. Prior to the date hereof, the parties hereto entered into that
certain Asset Purchase Agreement dated May 31, 1996 (the "Agreement"), Amendment
No. 1 to Asset Purchase Agreement dated June 28, 1996 ("Amendment No. 1")
Amendment No. 2 to Asset Purchase Agreement dated July 12, 1996 ("Amendment No.
2") and Amendment No. 3 to Asset Purchase Agreement dated July 19, 1996.
Capitalized terms not otherwise defined herein shall have the respective
meanings set forth in the Agreement, as revised by the later of Amendment Nos.
1, 2 or 3, to the extent not redefined herein.
2. The parties desire to revise the Agreement, as amended, to provide
for the assumption by the Purchaser of the assets and liabilities of the
Seller's 401(k) Plan on August 1, 1996.
Agreement
NOW, THEREFORE, in consideration of these premises and subject to the
terms and conditions contained herein and for the other consideration provided
herein, the parties agree to amend the Agreement, as amended, as follows:
A. Assumed Pension Liabilities.
1. The definition of "New 401(k) Plan" is hereby deleted from
Article I of the Agreement.
2. Section 3.1. A(b) of the Agreement is amended and restated
in its entirety as follows:
(b) THIS SECTION HAS BEEN INTENTIONALLY LEFT
BLANK.
<PAGE> 107
3. Section 9.15(b)of the Agreement is amended and restated in
its entirety as follows:
(b) 401(k) Plan.
(i) On August 1, 1996 (A) the Purchaser
shall adopt and assume and become substituted as sponsor for
the 401(k) Plan (including its assets and the Assumed Pension
Liabilities thereof) for the benefit of the individuals
(participants, beneficiaries or others) listed on SCHEDULE
9.15(b) attached hereto and shall be entitled to and shall
have the sole right to amend w the 401(k) Plan, (B) the
Purchaser shall adopt and assume all of the Seller's rights
and obligations under the Trust Agreement Between KDI D/H Inc.
and Fidelity Management Trust Company KDI D/H Inc. Employee
Retirement Benefit Plan Trust ("Fidelity Trust") and shall
have the sole right to appoint and remove the trustee(s) under
the 401(k) Plan and to amend the Fidelity Trust or to enter
into a new trust agreement, and (C) the Purchaser shall adopt
and assume all of the Seller's rights and obligations under
the KDI Employee Retirement Benefit Plan Trust Agreement,
under which The Fifth Third Bank is the trustee ("Fifth Third
Trust"), and shall have the sole right to appoint and remove
the trustee(s)under the 401(k) Plan and to amend the Fifth
Third Trust or to enter into a new trust agreement. Upon the
Purchaser's adoption and assumption of the 401(k) Plan, the
Fidelity Trust, or the Fifth Third Trust, as the case may be,
and subject to the Purchaser's compliance with Section
9.15(b)(v), Seller shall have no further rights with respect
thereto or any assets held thereunder.
(ii) Following its adoption and assumption
by the Purchaser, the 401(k) Plan shall provide credit for
service performed with the Seller prior to the Closing Date,
based on the information provided in SCHEDULE 9.15(b). Whether
in connection with a pending request for a favorable
determination letter from the IRS or for some other reason,
the Seller shall execute such other documents and take such
other action as may be requested by the Purchaser and as may
be reasonably necessary for the ongoing administration of the
401(k) Plan, the Fidelity Trust, or the Fifth Third Trust.
With respect to any pending request for a favorable
determination letter pertaining to the 401(k) Plan, and
provided that Seller shall have supplied to Purchaser the
documentation pertaining thereto, Purchaser shall diligently
and within the prescribed time frames (as may be extended)
pursue obtaining the favorable determination letter from the
IRS.
<PAGE> 108
(iii) For each individual (participant,
beneficiary or other) who is entitled to a benefit
from the 401(k)Plan, SCHEDULE 9.15(b) shall contain
the following:
(A) the amount of the assets and liabilities held
under the 401(k) Plan for the account of each
individual;
(B) the various types of contributions and
subaccounts (e. g., employer and before-tax and
after- tax employee contributions), each subaccount
balance, earnings attributable to each type of
contribution and subaccount, the coat basis for any
investments in employer stock and the other data, if
any, supporting the calculations in (A);
(C) the name, date of birth, date of hire, date and
reason for termination, Social Security Number, most
current address, marital status, years of service and
any other data used to compute vesting percentages,
plan entry dates and benefit accruals, the most
current beneficiary designation and QPSA waiver, if
any, and any other information reasonably necessary
for the proper administration of the 401(k) Plan.
(iv) Each of the parties hereto shall pay its own expenses in
connection with the transactions described in this Section
9.15.
(v) Prior to August 1, 1996, the Seller shall be responsible
for the administration and all related costs of administering
the 401(k) Plan to the extent that such expenses are not paid
from the 401(k) Plan, provided, however, that any reasonable
costs of administering the 401(k) Plan that may, under the
Code and ERISA, be paid from the assets of the 401(k) Plan,
and that historically have been paid out of the forfeiture
account, a part of the 401(k) Plan, (the "Forfeiture
Account"), whether incurred before, on or after August 1,
1996, shall continue to be paid out of the
<PAGE> 109
Forfeiture Account up to the amount allocated to the
Forfeiture Account as of August 1, 1996, including, without
limitation, the costs of required audits, IRS filings (e. g.,
Form 5500's), and other reasonable services that are necessary
for the establishment or operation of the Plan, in order that
such costs shall not be the responsibility of the Seller.
Notwithstanding, Seller shall be responsible for any and all
costs properly incurred prior to August 1, 1996, to the extent
that such costs cannot be paid out of the balance of the
Forfeiture Account on August 1, 1996, and Purchaser may adopt
alternative methods of payment for any expenses incurred on or
after August 1, 1996. The Seller agrees to administer the
401(k) Plan in compliance with the plan and trust documents
and all applicable, laws, including but not limited to ERISA
and the Code. After the Closing Date and prior to the transfer
of the assets of the Defined Benefit Plan to the New Pension
Plan, the Seller shall be responsible for the administration
and all related costa of administering the Defined Benefit
Plan. The Seller agrees to administer the Defined Benefit Plan
in compliance with the plan and trust documents and all
applicable laws, including but not limited to ERISA and the
Code.
B. Effective Date. The effective date of this Amendment No. 4 is as of
the date first written above.
C. Continuation of Agreement. Except as expressly modified or amended
hereby, all of the terms and conditions of the Agreement, as amended, shall
continue and remain in full force and effect.
D. Authority. The parties represent that a duly authorized officer is
executing this Amendment No, 4 on its behalf.
E. Counterparts. This Amendment No. 4 may be executed in any number of
counterparts, each of which shall be treated as an original but all of which,
collectively, shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 4 as of the day and year first above written.
KDI/TRIANGLE CORPORATION,
the Purchaser
By: /s/ John L. Smucker
---------------------------------------
Its: President
KDI D/H CORPORATION,
KDI D/H
By: /s/ P. Roger Byer
--------------------------------------
Its: Vice President
KDI/triangle ELECTRONICS, INC.,
the Seller
By: /s/ Michael D. Snyder
--------------------------------------
Its: President
