<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 25, 1997
ECC International Corp.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-8988 23-1714658
- ------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
175 Strafford Avenue
Suite 116
Wayne, Pennsylvania 19087-3377
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(610) 687-2600
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 25, 1997 (the "Effective Date"), ECC International Corp.
(the "Registrant") and its wholly owned subsidiary, ECC Vending Corp. ("ECC
Vending"), completed the sale of certain of the assets and properties of ECC
Vending to Dixie-Narco, Inc. ("Dixie-Narco"), a subsidiary of Maytag Corporation
("Maytag"), pursuant to an Asset Purchase Agreement, dated as of November 25,
1997, by and among the Registrant, ECC Vending, Dixie-Narco and Maytag (the
"Purchase Agreement").
Pursuant to the Purchase Agreement, Dixie-Narco paid approximately $7.9
million to ECC Vending as consideration for certain of the fixed assets,
inventories and trade receivables of ECC Vending, which consideration was
determined in an "arm's length" negotiation between the parties. Prior to the
Effective Date, neither the Registrant nor ECC Vending nor any of their
affiliates, nor any director or officer of the Registrant or ECC Vending or any
associate of any such director or officer had any material relationship with
Dixie-Narco or Maytag.
The foregoing description of the Purchase Agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of
the Purchase Agreement which is filed as Exhibit 2 to this Current Report on
Form 8-K and incorporated herein by reference.
As a result of the anticipated sale of certain assets of the vending
subsidiary, the vending operation was reflected as a discontinued operation in
the Consolidated Statements of Operations at June 30, 1997. As such, the
estimated after tax loss associated with the transaction was recorded at that
time and was based upon management's best estimate of the amounts expected to be
realized on the proposed sale of the vending operation, the costs directly
associated with the disposal of the operation, as well as the operating losses
expected to be incurred during the phase-out period. As a result of information
obtained through the negotiation process, the estimated loss on the disposal of
the vending operation recorded at June 30, 1997 will require an adjustment to
increase the loss by an amount ranging from $250,000 to $450,000 after tax
depending on the outcome of supplemental negotiations. The additional loss will
be recorded during the second quarter of fiscal year 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) PRO FORMA FINANCIAL INFORMATION.
1. Unaudited Consolidated Balance Sheet as of September 30, 1997.
2. Unaudited Consolidated Statement of Operations for the Three
Month Period Ended September 30, 1997.
3. Unaudited Consolidated Statement of Operations for the Fiscal
Year Ended June 30, 1997.
4. Notes to Unaudited Consolidated Pro Forma Financial
Statements.
(c) EXHIBITS.
See Exhibit Index attached hereto.
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ECC INTERNATIONAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
Net Sales $ 12,156 $ 12,156
Cost of Sales 9,474 9,474
Gross Profit 2,682 2,682
Expenses:
Selling, General & Administrative 2,912 2,912
Systems Development 683 683
Total Expenses 3,595 3,595
Operating Loss (913) (913)
Other Income (Expense):
Interest Income 83 83
Interest Expense (390) 129 (261)
Other - Net (67) (67)
Total Other (Expense) (374) 129 (245)
Loss from Continuing Operations
Before Income Taxes (1,287) 129 (1,158)
Benefit from Income Taxes (294) 47 (247)
Loss from Continuing Operations (993) 82 (911)
Weighted Average Common Shares Outstanding 8,119,883 8,119,883
Loss Per Common Share
from Continuing Operations $ (0.12) $ (0.11)
</TABLE>
<PAGE> 4
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
<S> <C> <C> <C>
Net Sales $ 72,550 $ 72,550
Cost of Sales 63,175 63,175
Gross Profit 9,375 9,375
Expenses:
Selling, General & Administrative 11,759 11,759
Systems Development 1,126 1,126
Total Expenses 12,885 12,885
Operating Loss (3,510) (3,510)
Other Income (Expense):
Interest Income 432 432
Interest Expense (1,541) 506 (1,035)
Other - Net (37) (37)
Total Other (Expense) (1,146) 506 (640)
Loss from Continuing Operations
Before Income Taxes (4,656) 506 (4,150)
Benefit from Income Taxes (72) 184 112
Loss from Continuing Operations (4,584) 322 (4,262)
Weighted Average Common Shares Outstanding 7,997,296 7,997,296
Loss Per Common Share
from Continuing Operations $ (0.57) $ (0.53)
</TABLE>
<PAGE> 5
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
<S> <C> <C> <C>
Current Assets:
Cash $ 4,312 $ -- $ 4,312
Accounts Receivable, Net 9,953 (2,537) 7,416
Costs and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 21,678 -- 21,678
Inventories 10,165 (2,432) 7,733
Prepaid Expenses and Other 5,612 130 5,742
------- ------- -------
Total Current Assets 51,720 (4,839) 46,881
Property, Plant and Equipment - Net 25,769 (2,706) 23,063
Other Assets 2,260 -- 2,260
------- ------- -------
Total Assets $79,749 $(7,545) $72,204
======= ======= =======
Current Liabilities:
Accounts Payable 5,170 -- 5,170
Advances on Long-Term Contracts 4,719 -- 4,719
Accrued Expenses 6,749 (295) 6,454
------- ------- -------
Total Current Liabilities 16,638 (295) 16,343
------- ------- -------
Deferred Income Taxes 1,559 -- 1,559
------- ------- -------
Long-Term Debt 16,498 (7,000) 9,498
------- ------- -------
Stockholders' Equity:
Common Stock 815 -- 815
Preferred Stock -- -- --
Capital in Excess of Par 24,348 -- 24,348
Retained Earnings 19,756 (250) 19,506
Cumulative Translation Adjustment 135 -- 135
-------- ------- -------
Total Stockholders' Equity 45,054 (250) 44,804
-------- ------- -------
Total Liabilities & Stockholders' Equity $ 79,749 $ 7,545 $72,204
======== ======= =======
</TABLE>
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NOTES TO UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
1. As described in Item 2, on November 25, 1997, ECC completed the sale of
certain of the assets and properties of ECC Vending. As a result of the
anticipated sale of certain assets of the vending subsidiary, the vending
operation was reflected as a discontinued operation in the Consolidated
Statements of Operations as of June 30, 1997. As such, the estimated after
tax loss associated with the transaction was recorded at that time and was
based upon management's best estimate of the amounts expected to be realized
on the proposed sale of the vending operation, the costs directly associated
with the disposal of the operation, as well as the operating losses expected
to be incurred during the phase-out period. As a result of information
obtained through the negotiation process, the estimated loss on the disposal
of the vending operation recorded at June 30, 1997 will require an
adjustment to increase the loss by an amount ranging from $250,000 to
$450,000 after tax depending on the outcome of supplemental negotiations.
The additional loss will be recorded during the second quarter of fiscal
year 1998.
The ECC historical consolidated balance sheet has been restated, as
discussed in Note 2, on a pro forma basis to reflect this transaction.
Additionally, pro forma adjustments have been made to the ECC historical
consolidated statements of operations, as discussed in Note 3, to reflect
the use of proceeds from this transaction. As discussed earlier, no
additional pro forma adjustments are required in the historical consolidated
statement of operations since this transaction had been previously reflected
as a discontinued operation.
These pro forma consolidated financial statements should be read in
conjunction with the historical consolidated financial statements and notes
thereto of ECC. Additionally, the pro forma consolidated financial
statements are not necessarily indicative of the actual results that would
have been achieved had the transaction occurred on those dates, nor are they
necessarily indicative of future results.
2. All summary consolidated balance sheet pro forma adjustments assume the
transaction giving rise to the adjustments was consummated on the balance
sheet date. The pro forma balance sheet adjustments give effect for the
disposition of substantially all the assets of ECC Vending and the reduction
of debt with proceeds from the sale.
3. All summary consolidated statement of operations pro forma adjustments
assume the transaction giving rise to the adjustments was consummated
immediately prior to the first day of the fiscal year ended June 30, 1997;
accordingly, the additional loss from the transaction as indicated in Note 1
is not reflected in the consolidated statements of operations for the
periods presented.
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The pro forma consolidated statements of operations gives effect for the
following unaudited pro forma adjustments:
(a) Elimination of interest expense based on the assumed reduction in debt.
(b) Calculation of the pro forma tax provision using the statutory rates
for the periods presented in accordance with generally accepted
accounting principles.
4. Earnings per share appearing on the pro forma consolidated statements of
operations reflecting the sale of certain ECC Vending assets and use of the
proceeds to pay down debt are based on the weighted average number of common
shares outstanding for the three month period ended September 30, 1997 and
the fiscal year ended June 30, 1997.
<PAGE> 8
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 10, 1997 ECC INTERNATIONAL CORP.
------------------------------------
(Registrant)
By: /s/ Relland M. Winand
--------------------------------
Relland M. Winand
Vice President, Finance
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EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
2 Asset Purchase Agreement, dated as of November 25, 1997, by and among
Dixie-Narco, Inc., ECC International Corp. and ECC Vending Corp.
99 Press Release
<PAGE> 1
EXHIBIT 2
ASSET PURCHASE AGREEMENT
DATED AS OF NOVEMBER 25, 1997
AMONG
DIXIE-NARCO, INC.,
MAYTAG CORPORATION,
ECC INTERNATIONAL CORP.,
AND
ECC VENDING CORP.
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
ARTICLE I.....................................................................1
DEFINITIONS...................................................................1
1.1. Definitions....................................................1
ARTICLE II....................................................................7
PURCHASE AND SALE.............................................................7
2.1. Purchased Assets...............................................7
2.2. Excluded Assets................................................9
2.3. Assumed Liabilities...........................................10
2.4. Excluded Liabilities..........................................10
ARTICLE III..................................................................12
PURCHASE PRICE...............................................................12
3.1. Purchase Price................................................12
3.2. Allocation of Purchase Price..................................12
ARTICLE IV...................................................................13
CLOSING ....................................................................13
4.1. Closing Date..................................................13
4.2. Payment on the Closing Date...................................13
4.3. Buyer's Additional Deliveries.................................13
4.4. Deliveries by Seller and Parent...............................13
ARTICLE V....................................................................14
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT..........................14
5.1. Organization..................................................14
5.2. Authority.....................................................14
5.3. Taxes.........................................................15
5.4. Intellectual Property; Software...............................16
5.5. Trade Receivables.............................................18
5.6. Personal Property.............................................18
5.7. Availability of Assets........................................18
5.8. Title to Property.............................................18
5.9. Inventories...................................................18
5.10. No Violation, Litigation or Regulatory Action.................18
5.11. Warranties....................................................19
5.12. Employees.....................................................19
5.13. Financial Statements..........................................19
5.14. Purchase Orders...............................................19
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5.15 No Finder.....................................................20
ARTICLE VI...................................................................20
REPRESENTATIONS AND WARRANTIES OF BUYER......................................20
6.1. Organization..................................................20
6.2. Authority.....................................................20
6.3. No Finder.....................................................21
ARTICLE VII..................................................................21
ACTION PRIOR TO THE CLOSING DATE.............................................21
7.1. Investigation by Buyer........................................21
7.2. Preserve Accuracy of Representations and Warranties...........22
7.3. Governmental Approvals........................................22
7.4. Operations Prior to the Closing Date..........................22
ARTICLE VIII.................................................................23
ADDITIONAL AGREEMENTS........................................................23
8.1. Taxes.........................................................23
8.2. Remittances...................................................24
8.3. Non-Solicitation of Certain Employees and Employee
Matters....................................................24
8.4. Noncompetition................................................25
8.5. Product Liability and Recalls.................................26
8.6. Bulk Sales....................................................27
8.7. Discharge of the Business' Liabilities........................27
8.8. Access to the Facility........................................27
8.9. Handling of Purchase Orders...................................27
8.10. Excluded Trademark Application................................27
ARTICLE IX...................................................................28
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.................................28
9.1. No Misrepresentation or Breach of Covenants and
Warranties.................................................28
9.2. Corporate Action..............................................28
9.3. No Restraint..................................................28
9.4. Necessary Governmental Approvals..............................28
9.5. Necessary Consents............................................28
9.6. No Changes or Destruction of Property.........................29
ARTICLE X....................................................................29
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND PARENT.....................29
10.1. No Misrepresentation or Breach of Covenants and
Warranties.................................................29
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<PAGE> 4
10.2. Corporate Action.............................................29
10.3. No Restraint.................................................30
10.4. NECESSARY GOVERNMENTAL APPROVALS.............................30
10.5. Necessary Consents...........................................30
ARTICLE XI...................................................................30
INDEMNIFICATION..............................................................30
11.1. Indemnification by Parent and Seller.........................30
11.2. Indemnification by Buyer.....................................31
11.3. Notice of Claims.............................................32
11.4. Third Person Claims..........................................33
ARTICLE XII..................................................................35
TERMINATION..................................................................35
12.1. Termination..................................................35
12.2. Notice of Termination........................................35
12.3. Effect of Termination........................................35
ARTICLE XIII.................................................................36
GENERAL PROVISIONS...........................................................36
13.1. Survival of Obligations......................................36
13.2. Confidential Nature of Information...........................36
13.3. No Public Announcement.......................................37
13.4. Notices......................................................37
13.5. Successors and Assigns.......................................38
13.6. Access to Records after Closing..............................39
13.7. Entire Agreement; Amendments.................................39
13.8. Interpretation...............................................40
13.9. Waivers......................................................40
13.10. Expenses.....................................................40
13.11. Partial Invalidity...........................................40
13.12. Execution in Counterparts....................................40
13.13. Further Assurances...........................................41
13.14. Governing Law................................................41
13.15. Guaranty.....................................................41
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<PAGE> 5
SCHEDULES AND EXHIBITS
Exhibit A - Assumption Agreement
Exhibit B - Instrument of Assignment
Exhibit C - Letter to Certain Customers of Seller
SCHEDULES
Description Schedule Number
- ----------- ---------------
Fixed Assets 2.1(c)
Account of Seller for Payment on the Closing Date 4.2
Authority 5.2
Taxes 5.3
Intellectual Property; Software 5.4
Availability of Assets 5.7
Title to Property 5.8
No Violation, Litigation or Regulatory Action 5.10
Warranties 5.11
Purchase Orders 5.14
Business Employees 8.3
Necessary Consents 9.5
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<PAGE> 6
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of November 25, 1997 among
Dixie-Narco, Inc., a West Virginia corporation ("BUYER"), Maytag Corporation, a
Delaware corporation ("MAYTAG"), ECC International Corp., a Delaware corporation
("PARENT"), and ECC Vending Corp., a Delaware corporation and wholly-owned
subsidiary of Parent ("SELLER").
WHEREAS, Seller is engaged in the business of manufacturing
and distributing vending equipment (the "BUSINESS");
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, certain of the assets and properties of the Business, all
on the terms and subject to the conditions set forth herein;
WHEREAS, Parent owns 100% of the issued and outstanding
capital stock of Seller;
WHEREAS, it is a condition precedent to the obligations of
Buyer and Maytag under this Agreement that Parent execute and deliver this
Agreement;
WHEREAS, Parent acknowledges that the sale of certain assets
contemplated by this Agreement directly benefits Parent;
WHEREAS, it is a condition precedent to the obligations of
Seller and Parent under this Agreement that Maytag guarantee the obligations
hereunder of Buyer;
WHEREAS, Maytag desires to guarantee the obligations
hereunder of Buyer; and
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among Buyer, Parent and
Seller as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. In this Agreement, the following terms have
the meanings specified or referred to in this SECTION 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time
<PAGE> 7
to the extent permitted by the applicable provisions thereof and by this
Agreement.
"ACCRUED LIABILITY FOR WARRANTY OBLIGATIONS" shall mean the
accrued liability for Warranty Obligations, determined as of the Valuation Date
in accordance with the Agreed Accounting Principles.
"ADDITIONAL ACCOUNTING FIRM" has the meaning specified in
SECTION 3.3(d).
"AFFILIATE" means, with respect to any Person, any other
person which directly or indirectly controls, is controlled by or is under
common control with such person.
"AGREED ACCOUNTING PRINCIPLES" means generally accepted
accounting principles (as promulgated by the American Institute of Certified
Public Accountants).
"AGREED ADJUSTMENTS" has the meaning specified in
SECTION 3.3(c).
"AGREED RATE" means the prime rate published by First Union
National Bank, as that rate may vary from time to time, or if that rate is no
longer published, a comparable rate.
"ALLOCATION SCHEDULE" has the meaning specified in
SECTION 3.5.
"ASSUMED LIABILITIES" has the meaning specified in
SECTION 2.3.
"ASSUMPTION AGREEMENT" means the Assumption Agreement
in the form of EXHIBIT A.
"BALANCE SHEET" means the unaudited balance sheet of the
Business as of May 31, 1997.
"BUSINESS" has the meaning specified in the first recital of
this Agreement.
"BUSINESS EMPLOYEES" has the meaning specified in SECTION 8.3.
"BUYER" has the meaning specified in the first paragraph of
this Agreement.
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"BUYER ANCILLARY AGREEMENTS" means all agreements and
instruments being or to be executed and delivered by Buyer pursuant to the
express provisions of this Agreement.
"BUYER GROUP MEMBER" means Buyer and its Affiliates,
directors, officers, employees, agents, attorneys and consultants and their
respective successors and assigns.
"CLAIM NOTICE" shall have the meaning given such term in
SECTION 11.3(a).
"CLOSING" means the closing of the transfer of the Purchased
Assets from Seller to Buyer.
"CLOSING DATE" has the meaning specified in SECTION 4.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COPYRIGHTS" means United States and foreign copyrights,
whether registered or unregistered, and pending applications to register the
same.
"COURT ORDER" means any judgment, order, award or decree of
any foreign, federal, state, local or other court or tribunal and any award in
any arbitration proceeding.
"ENCUMBRANCE" means any lien, claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title, covenant or other restriction of any kind.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCLUDED ASSETS" has the meaning specified in SECTION 2.2.
"EXCLUDED LIABILITIES" has the meaning specified in
SECTION 2.4.
"EXPENSES" means any and all expenses incurred in connection
with investigating, defending or asserting any claim, action, suit or proceeding
incident to any matter indemnified against hereunder (including, without
limitation, court filing fees, court costs, arbitration fees or costs, witness
fees, and reasonable fees and disbursements of legal counsel,
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investigators, expert witnesses, accountants and other professionals).
"FACILITY" means Seller's facility at 2900 Titan Row,
Suite 142, Orlando, Florida 32809-5691.
"FIXED ASSETS" has the meaning specified in SECTION 2.1(c).
"FIXED ASSETS AMOUNT" means $1,759,878.
"GOVERNMENTAL BODY" means any foreign, federal, state, local
or other governmental authority or regulatory body.
"INDEMNIFIED PARTY" has the meaning specified in
SECTION 11.3(a).
"INDEMNITOR" has the meaning specified in SECTION 11.3(a).
"INSTRUMENT OF ASSIGNMENT" means the Instrument of Assignment
in the form of EXHIBIT B.
"INTELLECTUAL PROPERTY" means Copyrights, Patent Rights,
Trademarks and Trade Secrets.
"INVENTORIES" has the meaning specified in SECTION 2.1(b).
"INVENTORY AMOUNT" means $3,398,253.
"KNOWLEDGE OF SELLER" means the actual knowledge of any of the
following persons: George Murphy, Rell Winand, Clint Watts, Salome Lanas-Isbell,
Jerry Robbins, James Ferguson and Norm Holmes.
"LEASE" shall mean the Lease, dated January 26, 1996, by and
between the State of Wisconsin Investment Board and Parent for the premises
located at 2900 Titan Row, Suite 142, Orlando, Florida 32809.
"LEASEHOLD IMPROVEMENTS" shall mean investments in
improvements or alterations to the Leased Premises that revert to the benefit of
the lessor upon expiration of the Lease.
"LEASED PREMISES" shall mean the premises leased to Seller
pursuant to the Lease.
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"LOSSES" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges.
"MACHINES" shall have the meaning set forth in the Sales and
Licensing Agreement.
"MAYTAG" has the meaning specified in the first paragraph of
this Agreement.
"NET BOOK VALUE OF CERTAIN PURCHASED ASSETS" means the sum of
the following amounts: (i) the Trade Receivables Amount; PLUS (ii) the Inventory
Amount; PLUS (iii) the Fixed Assets Amount.
"OBSOLETE INVENTORY" means all items of Inventory that Buyer
and Seller have agreed are not of a quality and quantity that are usable or
saleable in the ordinary course of business.
"OWNED SOFTWARE" has the meaning specified in SECTION 5.4(g).
"PARENT" has the meaning specified in the first paragraph of
this Agreement.
"PATENTS" means United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto.
"PERMITTED ENCUMBRANCES" means (a) liens for taxes and other
governmental charges and assessments which are not yet due and payable and (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable.
"PERSON" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, limited liability
company, unincorporated organization or Governmental Body.
"PURCHASE PRICE" has the meaning specified in SECTION 3.1.
"PURCHASED ASSETS" has the meaning specified in SECTION 2.1.
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"REQUIREMENTS OF LAW" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body.
"SALES AND LICENSING AGREEMENT" has the meaning specified in
SECTION 2.1(j).
"SELLER" has the meaning specified in the first paragraph of
this Agreement.
"SELLER ANCILLARY AGREEMENTS" means all agreements and
instruments being or to be executed and delivered by Seller pursuant to the
express provisions of this Agreement.
"SELLER GROUP MEMBER" means Seller and its Affiliates,
directors, officers, employees, agents, attorneys and consultants and their
respective successors and assigns.
"SOFTWARE" means computer software programs and software
systems, including, without limitation, all databases, compilations, tool sets,
compilers, higher level or "proprietary" languages, applications related to
vendor controller board components and related documentation and materials,
whether in source code, object code or human readable form.
"TAX" means any federal, state, local or foreign income, gross
receipts, property, sales, use, transfer, gains, license, excise, employment,
payroll, withholding or minimum tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"TRADEMARKS" means United States, state and foreign
trademarks, service marks, Internet domain names, logos, trade dress and trade
names, whether registered or unregistered, and pending applications to register
the foregoing.
"TRADE RECEIVABLES" has the meaning specified in
SECTION 2.1(a).
"TRADE RECEIVABLES ADJUSTMENT" shall mean $556,140.
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<PAGE> 12
"TRADE RECEIVABLES AMOUNT" means $1,251,202.
"TRADE SECRETS" means confidential ideas, trade secrets,
know-how, concepts, methods, processes, formulae, reports, data, customer lists,
mailing lists, business plans or other proprietary information.
"VALUATION DATE" means October 31, 1997.
"WARRANTY OBLIGATIONS" has the meaning specified in
SECTION 2.3(a).
"WURLITZER" has the meaning specified in SECTION 2.1(j).
ARTICLE II
PURCHASE AND SALE
2.1. PURCHASED ASSETS. Upon the terms and subject to the
conditions of this Agreement, on the Closing Date, Seller (and, where
applicable, Parent) shall sell, transfer, assign, convey and deliver to Buyer,
and Buyer shall purchase from Seller, free and clear of all Encumbrances (except
for Permitted Encumbrances), the following assets and properties as such assets
and properties shall exist on the Closing Date (excepting any Excluded Assets)
(herein collectively called the "PURCHASED ASSETS"):
(a) The trade receivables generated by the sale of food and
beverage vending machines (the "TRADE RECEIVABLES");
(b) All raw materials, purchased parts, repair parts,
supplies, work-in-process, prototypes and finished goods included in
the inventory of Seller (the "INVENTORIES"), other than Obsolete
Inventory;
(c) All the machinery, equipment, vehicles, furniture and
other personal property (other than Leasehold Improvements) reflected
on the Balance Sheet, including without limitation, the machinery,
equipment, vehicles, furniture and other personal property (other than
Leasehold Improvements) listed in SCHEDULE 2.1(c), excluding any of the
foregoing disposed of by the Business between the date of the Balance
Sheet and the
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Closing Date, and including any machinery, equipment, vehicles,
furniture and other personal property (other than Leasehold
Improvements) purchased by Seller between the date of the Balance Sheet
and the Closing Date (collectively, the "FIXED ASSETS");
(d) The Copyrights, Patents and Trademarks (and goodwill
associated therewith) listed or required to be listed in SCHEDULE 5.4;
(e) All Trade Secrets and other proprietary or confidential
information used in or relating to the Business;
(f) The Software listed or required to be listed in
SCHEDULE 5.4;
(g) All mailing lists, customer lists, subscriber lists,
supplier lists, processes, computer software, equipment lists, manuals,
know-how, designs, engineering drawings and reports and other
proprietary or confidential information used in or relating to the
Business;
(h) All of Seller's rights, claims, rights of offset or causes
of action against third parties (i) arising under warranties from
vendors and others in connection with the Purchased Assets or (ii)
relating to any of the Assumed Liabilities, other than rights, claims,
rights of offset or causes of action relating to Obsolete Inventory;
(i) All books and records (including all data and other
information stored on discs, tapes or other media) of Seller and Parent
relating solely to the Purchased Assets or the Assumed Liabilities; and
(j) All rights of Parent and Seller in and to the Amended
Sales and Licensing Agreement dated as of September 22, 1997 between
Deutsche Wurlitzer GmbH, a German corporation ("WURLITZER"), and Parent
(the "SALES AND LICENSING AGREEMENT"), to the extent related to
Machines manufactured or sold after the Closing Date;
(k) All rights of Parent and Seller in and to the Settlement
Agreement and Releases dated as of November 24, 1997 between Wurlitzer
and Parent, to the extent related to
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non-frozen product glass front vending machines manufactured or sold
after the Closing Date; and
(l) All rights of Parent and Seller in the Trademark "The
Clear Choice" and the goodwill associated therewith.
2.2. EXCLUDED ASSETS. Notwithstanding the provisions of
SECTION 2.1, the Purchased Assets shall not include the following (herein
referred to as the "EXCLUDED ASSETS"):
(a) All cash, bank deposits, cash equivalents and non-Trade
Receivables;
(b) The name "ECC" or any related or similar trade name,
trademark, service mark or logo to the extent the same incorporates
such name or any variation thereof;
(c) Except for the Trade Receivables and except as set forth
in SECTION 2.1(h) above, Seller's rights, claims or causes of action
against third parties relating to the assets, properties, business or
operations of the Business prior to the Closing Date;
(d) All contracts of insurance;
(e) The General Ledger of Seller and all corporate minute
books and stock transfer books and the corporate seal of Seller;
(f) All refunds of any Tax for which Seller is liable pursuant
to SECTION 8.1;
(g) All prepaid insurance and personal property taxes and all
deposits and interest receivables;
(h) All employee benefit agreements, plans or arrangements
maintained by Seller or Parent on behalf of persons employed by Seller;
(i) All Obsolete Inventory and all rights, claims or causes of
action against third parties relating to Obsolete Inventory;
(j) All rights, claims or causes of action in respect of the
claims or proceedings described in Items 2 through 6 of SCHEDULE 5.10;
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(k) The Leased Premises and the Leasehold Improvements
thereon; and
(l) The pending application on The Principal Register of the
United States Patent and Trademark Office for "ECC Vending Corp. The
Clear Choice," serial number 75/279901.
2.3. ASSUMED LIABILITIES. On the Closing Date, Buyer shall
deliver to Seller the Assumption Agreement, pursuant to which Buyer shall assume
and agree to discharge the following obligations and liabilities of Seller in
accordance with their respective terms and subject to the respective conditions
thereof:
(a) All liabilities and obligations of Seller to be paid or
performed after the Closing Date arising from warranty obligations for
products sold by Seller on or prior to the Closing Date (the "WARRANTY
OBLIGATIONS");
(b) All liabilities and obligations of Seller to pay
commissions to New Vending Concepts, Inc., pursuant to an agreement
dated November 24, 1993, for sales made after the Closing Date;
(c) All liabilities in respect of Taxes for which Buyer is
liable pursuant to SECTION 8.1(a);
(d) All liabilities relating to the operation of the Purchased
Assets after the Closing Date; and
(e) All obligations of Seller pursuant to the Sales and
Licensing Agreement relating to Machines manufactured or sold after the
Closing Date.
All of the foregoing liabilities and obligations to be assumed by Buyer
hereunder (excluding any Excluded Liabilities) are referred to herein as the
"ASSUMED LIABILITIES."
2.4. EXCLUDED LIABILITIES. Buyer shall not assume or be
obligated to pay, perform or otherwise discharge any liability or obligation of
Seller, direct or indirect, known or unknown, absolute or contingent, not
expressly assumed by Buyer pursuant to the Assumption Agreement or otherwise
expressly set forth in this Agreement (all such liabilities and obligations not
being assumed being herein called the "EXCLUDED LIABILITIES") and,
notwithstanding anything to the contrary in SECTION 2.3, none of
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the following shall be "Assumed Liabilities" for purposes of this Agreement:
(a) Any liabilities of Seller in respect of Taxes for which
Seller is liable pursuant to SECTION 8.1;
(b) Any costs and expenses incurred by Seller incident to its
negotiation and preparation of this Agreement and its performance and
compliance with the agreements and conditions contained herein;
(c) Any liabilities or obligations in respect of any Excluded
Assets;
(d) All liabilities in respect of the claims or proceedings
described in SCHEDULE 5.10;
(e) Except as set forth in SECTION 8.5(b), all liabilities and
obligations arising from or in connection with product liability claims
or recall liability relating to any products manufactured by the
Business prior to the Closing Date;
(f) All liabilities and obligations arising in connection
with, or in any way related to, the employment or termination of
employment by Seller at any time of the current or former officers,
directors, employees and consultants of Seller, including, but not
limited to, any and all liabilities and obligations (including Taxes)
arising under or in any way related to any employee benefit plan,
program, policy, agreement, understanding or arrangement of any kind
whatsoever, any collective bargaining agreement, or any other
agreement, understanding or arrangement of any kind with or for the
benefit of any such person (including, without limitation, any
employment, consulting, compensation, deferred compensation or
severance agreement or arrangement, and any agreement or arrangement
associated with a change in control or sale of Seller or any assets
thereof);
(g) All liabilities and obligations arising out of the
ownership of the Purchased Assets and operation of the Business prior
to the Closing Date, except as provided in SECTION 2.3;
(h) All liabilities and obligations pursuant to (i) the
Settlement Agreement and Releases dated as of November 24, 1997 between
Wurlitzer and Parent and (ii) except as set
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forth in Section 2.3(e) hereof, the Sales and Licensing Agreement;
(i) All liabilities and obligations relating to the Leased
Premises; and
(j) All liabilities and obligations relating to the purchase
orders listed or required to be listed on SCHEDULE 5.14, including the
cancellation thereof.
ARTICLE III
PURCHASE PRICE
3.1. PURCHASE PRICE. The purchase price for the Purchased
Assets (the "PURCHASE PRICE") is $7,881,093. The Purchase Price was determined
pursuant to the following formula:
(a) $10,525,000; PLUS
(b) the Net Book Value of Certain Purchased Assets; MINUS
(c) $8,953,240; MINUS
(d) $100,000, representing the amount by which the Accrued
Liability for Warranty Obligations exceeds $250,000.
3.2. ALLOCATION OF PURCHASE PRICE. Within 30 days following
the Closing Date, Buyer and Seller shall negotiate and draft a schedule (the
"ALLOCATION SCHEDULE") allocating the Purchase Price (including, for purposes of
this SECTION 3.2, any other consideration paid to Seller, including the Assumed
Liabilities) among the Purchased Assets. The Allocation Schedule shall be
reasonable and shall be prepared in accordance with Section 1060 of the Code and
the regulations thereunder. Buyer and Seller each agrees that promptly upon
receiving said Allocation Schedule it shall return an executed copy thereof to
the other party. Buyer and Seller each agrees to file Internal Revenue Service
Form 8594, and all federal, state, local and foreign Tax Returns, in accordance
with the Allocation Schedule. Buyer and Seller each agrees to provide the other
promptly with any other information required to complete Form 8594.
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ARTICLE IV
CLOSING
4.1. CLOSING DATE. The Closing shall be consummated at 10:00
A.M., local time, on November 25, 1997, or such later date as may be agreed upon
by Buyer and Seller after the conditions set forth in ARTICLES IX and X have
been satisfied, at the offices of Sidley & Austin, One First National Plaza,
Chicago, Illinois, or at such other place or at such other time as shall be
agreed upon by Buyer and Seller. The time and date on which the Closing is
actually held is referred to herein as the "CLOSING DATE."
4.2. PAYMENT ON THE CLOSING DATE. Subject to fulfillment or
waiver of the conditions set forth in ARTICLE IX, at Closing Buyer shall pay
Seller the Purchase Price by wire transfer of immediately available funds to the
account of Seller specified in SCHEDULE 4.2.
4.3. BUYER'S ADDITIONAL DELIVERIES. Subject to fulfillment or
waiver of the conditions set forth in ARTICLE IX, at Closing Buyer shall deliver
to Seller all the following:
(a) The Assumption Agreement duly executed by Buyer;
(b) The certificate contemplated by SECTION 10.1, duly
executed by the President or any Vice President of Buyer; and
(c) The certified copies of resolutions of the Board of
Directors of Maytag and Buyer contemplated by SECTION 10.2.
4.4. DELIVERIES BY SELLER AND PARENT. Subject to fulfillment
or waiver of the conditions set forth in ARTICLE X, at Closing Seller and
Parent, as the case may be, shall deliver to Buyer all the following:
(a) The Instrument of Assignment duly executed by Seller;
(b) Such other bills of sale, assignments, deeds, certificates
of title or origin and other instruments of transfer or conveyance duly
executed by Seller, as Buyer may reasonably request or as may be
otherwise necessary to evidence and effect the sale, assignment,
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transfer, conveyance and delivery of the Purchased Assets to Buyer;
(c) All consents, waivers or approvals obtained by Seller with
respect to the Purchased Assets or the consummation of the transactions
contemplated by this Agreement;
(d) The certificate contemplated by SECTION 9.1, duly executed
by the President or any Vice President of Seller and Parent,
respectively; and
(e) The certified copies of resolutions contemplated by
SECTION 9.2.
In addition to the above deliveries, Seller and Parent shall take all steps and
actions as Buyer may reasonably request or as may otherwise be necessary to put
Buyer in actual possession or control of the Purchased Assets to the extent
Seller or Parent is in possession or control thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and Parent represent and
warrant to Buyer and agree as follows (disclosure in any one schedule shall be
deemed to be disclosure in all other schedules):
5.1. ORGANIZATION. Each of Parent and Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller has the corporate power and authority to own or lease
and to operate and use the Purchased Assets and to carry on the Business as now
conducted.
5.2. AUTHORITY. Each of Seller and Parent has the corporate
power and authority to execute, deliver and perform this Agreement and all of
the Seller Ancillary Agreements to which it is a party. The execution, delivery
and performance of this Agreement and the Seller Ancillary Agreements by Seller
and/or Parent, as appropriate, have been duly authorized and approved by
Seller's Board of Directors and its sole stockholder and Parent's Board of
Directors, as appropriate, and do not
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require any further authorization or consent of Seller or Parent. This Agreement
has been duly authorized, executed and delivered by Seller and Parent and is the
legal, valid and binding obligation of Seller and Parent enforceable against
each of them in accordance with its terms, and each of the Seller Ancillary
Agreements has been duly authorized by Seller and/or Parent, as appropriate, and
upon execution and delivery by Seller and/or Parent, as appropriate, will be a
legal, valid and binding obligation of Seller and/or Parent, as the case may be,
enforceable in accordance with its terms.
Except as set forth in SCHEDULE 5.2, neither the execution
and delivery of this Agreement or any of the Seller Ancillary Agreements by
Seller or Parent or the consummation by Seller or Parent of any of the
transactions contemplated hereby or thereby nor compliance with or fulfillment
of the terms, conditions and provisions hereof or thereof by Seller or Parent
will:
(a) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or a
loss of rights under, or result in the creation or imposition of any
Encumbrance upon any of the Purchased Assets, under (1) the charter or
By-laws of Seller or Parent, (2) any other material note, instrument,
agreement, mortgage, lease, license, franchise, permit or other
authorization, right, restriction or obligation to which Seller or
Parent is a party or any of the Purchased Assets is subject or by which
Seller or Parent is bound, (3) any Court Order to which Seller or
Parent is a party or any of the Purchased Assets is subject or by which
Seller or Parent is bound or (4) any Requirements of Law affecting
Seller or Parent or the Purchased Assets, or
(b) require the approval, consent, authorization or act of, or
the making by Seller or Parent of any declaration, filing or
registration with, any Person.
5.3. TAXES. Except as set forth in SCHEDULE 5.3, (i) Seller
has, in respect of the Purchased Assets, filed all Tax Returns which are
required to be filed on or before the Closing Date and has paid all Taxes which
have become due pursuant to such Tax Returns or pursuant to any assessment which
has become payable on or before the Closing Date; (ii) there is no action, suit,
investigation, audit, claim or assessment pending or, to the Knowledge of
Seller, threatened with respect to Taxes of the
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Purchased Assets, and, to the Knowledge of Seller, no basis exists therefor; and
(iii) Seller has not waived or been requested to waive any statute of
limitations in respect of Taxes associated with the Purchased Assets which
waiver is currently in effect.
5.4. INTELLECTUAL PROPERTY; SOFTWARE. (a) SCHEDULE 5.4
contains a list and description (showing in each case the registered or other
owner, expiration date and number, if any) of all Patents, Trademarks (including
all assumed or fictitious names under which Seller is conducting the Business or
has within the previous five years conducted the Business) and registered
Copyrights owned by, licensed to or used by Seller in connection with the
Business.
(b) SCHEDULE 5.4 contains a list and description (showing in
each case any owner, licensor or licensee) of all Software owned by, licensed to
or used by Seller in connection with the Business, PROVIDED that SCHEDULE 5.4
does not list Software licensed to Seller that is available in consumer retail
stores and subject to "shrink-wrap" license agreements.
(c) SCHEDULE 5.4 contains a list (showing in each case the
parties thereto) of all agreements, contracts, licenses, sublicenses,
assignments and indemnities to which Seller or Parent is a party which relate to
(i) any Copyrights, Patent Rights or Trademarks listed in SCHEDULE 5.4, (ii) any
Trade Secrets owned by, licensed to or used by Seller in connection with the
Purchased Assets and (iii) any Software listed in SCHEDULE 5.4.
(d) Except as disclosed in SCHEDULE 5.4, Seller either: (i)
owns the entire right, title and interest in and to the Intellectual Property
and to the Software listed or required to be listed in SCHEDULE 5.4 and included
in the Purchased Assets, free and clear of any Encumbrance other than Permitted
Encumbrances or (ii) has the perpetual, royalty-free right to use the same.
(e) Except as disclosed in SCHEDULE 5.4, (i) all registrations
for Copyrights, Patent Rights and Trademarks identified in SCHEDULE 5.4 as being
owned by Seller are valid and in force, and all applications to register any
unregistered Copyrights, Patent Rights and Trademarks so identified are pending
and in good standing, all without challenge of any kind; (ii) the Intellectual
Property owned by Seller is valid and enforceable; and (iii) Seller has the sole
and exclusive right to bring actions for infringement, misappropriation,
violation or unauthorized use of the Intellectual Property and Software owned
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by Seller and included in the Purchased Assets, and to the Knowledge of Seller,
there is no basis for any such action.
(f) Except as set forth in SCHEDULE 5.4, (i) no infringement,
misappropriation or violation of any Intellectual Property has occurred from the
operation of the Business or the use of the Purchased Assets as such Business
was operated and such Purchased Assets were used on or prior to the Closing
Date, (ii) no claim of any infringement, misappropriation or violation of any
Intellectual Property of any other Person has been made or asserted in respect
of the operation of the Business or the use of the Purchased Assets and (iii)
Seller has not had notice of, or knowledge of any basis for, a claim against
Seller that the operations, activities, products, software, equipment, machinery
or processes included in the Purchased Assets infringe, misappropriate or
violate any Intellectual Property of any other Person.
(g) Except as disclosed in the software license agreements
described in SCHEDULE 5.4, (i) the Software listed or required to be listed in
SCHEDULE 5.4 and included in the Purchased Assets is not subject to any
transfer, assignment, site, equipment, or other operational limitations, (ii)
Seller has maintained and protected the Software included in the Purchased
Assets that it owns (the "OWNED SOFTWARE") (including, without limitation, all
source code and system specifications) with such measures as are reasonably
necessary and customarily used to protect the proprietary, trade secret or
confidential information contained therein, (iii) the Owned Software is eligible
for protection and registration under applicable copyright law as of the date
hereof, (iv) Seller has complete and exclusive right, title and interest in and
to the Owned Software, (v) the Owned Software does not infringe, misappropriate
or violate any Intellectual Property of any other Person, (vi) any Owned
Software includes (x) the source code, (y) all relevant system documentation,
statements of principles of operation and schematics in the possession of Parent
or Seller and (z) any pertinent commentary, explanation, program (including
compilers), workbenches, tools, and higher level (or "proprietary") language
used for the development, maintenance, implementation and use thereof, and (vii)
there are no agreements or arrangements in effect with respect to the marketing,
distribution, licensing or promotion of the Owned Software by any other Person.
(h) Except as disclosed in SCHEDULE 5.4, each employee, agent,
consultant or contractor who has contributed to or participated in the creation
or development of any copyrightable, patentable or trade secret material on
behalf of Seller or any predecessor in interest thereto and included in the
Purchased Assets has executed an assignment or an agreement to
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assign in favor of Seller (or such predecessor in interest, as applicable) of
all right, title and interest in such material.
5.5. TRADE RECEIVABLES. All Trade Receivables have arisen from
bona fide transactions by Seller in the ordinary course of the Business. All
documents evidencing the existence of the Trade Receivables (including, without
limitation, delivery receipts and invoices) are genuine and valid.
5.6. PERSONAL PROPERTY. The Fixed Assets are in good condition
(subject to normal wear and tear) and serviceable condition.
5.7. AVAILABILITY OF ASSETS. Except as set forth in SCHEDULE
5.7 and except for the Excluded Assets, the Purchased Assets constitute all of
the assets used in the Business.
5.8. TITLE TO PROPERTY. Seller has good and marketable title
to all of the Purchased Assets, free and clear of all Encumbrances, except for
Permitted Encumbrances and except as set forth in SCHEDULE 5.8. Upon delivery to
Buyer on the Closing Date of the instruments of transfer contemplated by SECTION
4.4, Seller will thereby transfer to Buyer good and valid title to all of the
Purchased Assets, subject to no Encumbrances, except for Permitted Encumbrances.
5.9. INVENTORIES. All Inventories are in good and useable
condition and all inventories of finished goods and service parts are also
saleable.
5.10. NO VIOLATION, LITIGATION OR REGULATORY ACTION. Except as
set forth in SCHEDULE 5.10:
(a) to the Knowledge of Seller, the Purchased Assets and their
current uses by Seller comply with all applicable Requirements of Laws
and Court Orders;
(b) Seller has complied with all Requirements of Laws and
Court Orders which are applicable to Seller's use of the Purchased
Assets;
(c) there are no lawsuits, claims, suits, proceedings or
investigations pending or, to the Knowledge of Seller, threatened
against or affecting Seller or Parent in respect of the Purchased
Assets, nor, to the Knowledge of Seller, is there any basis for any of
the same, and there are no lawsuits, suits or proceedings pending in
which Seller or Parent is the
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plaintiff or claimant and which relate to the Purchased Assets; and
(d) there is no action, suit or proceeding pending or, to the
Knowledge of Seller, threatened which questions the legality or
propriety of the transactions contemplated by this Agreement.
5.11. WARRANTIES. SCHEDULE 5.11 sets forth (i) a specimen copy
of each form of written warranty covering products sold by Seller which have not
yet expired and (ii) a summary of the warranty expense incurred by Seller during
each of its last three fiscal years.
5.12. EMPLOYEES. Neither Seller nor any entity treated as a
single employer with Seller under Section 414 of the Code (i) maintains or is
required to contribute to or has any liability (including a contingent
liability) with respect to any multiple employer plan (within the meaning of
Section 4064(a) of ERISA) or any "multiemployer plan" (as defined in Section
3(37) of ERISA), (ii) maintains any pension plan which has incurred an
"accumulated funding deficiency" within the meaning of Section 412 of the Code,
whether or not waived, (iii) has failed to make a required installment or other
payment required under Section 412 of the Code on or before the application due
date, (iv) has maintained any pension plan subject to Title IV of ERISA which
has been terminated or for which a termination proceeding has been initiated, or
(v) otherwise has any liability to the Pension Benefit Guaranty Corporation
under Title IV of ERISA.
5.13. FINANCIAL STATEMENTS. Seller has previously delivered to
Buyer copies of (i) the Balance Sheet and the related statements of income and
cash flows for the 11 months ended May 31, 1997 and (ii) its balance sheet as of
June 30, 1996 and the related statements of income and cash flows for the year
then ended. Except as set forth therein and except for the absence of footnotes
and normal year-end audit adjustments, such financial statements were prepared
in accordance with generally accepted accounting principles consistently applied
and presents fairly in all material respects the financial position of Seller as
of the dates of such balance sheets and the results of operations and cash flows
of Seller for the respective periods indicated. Notwithstanding the foregoing,
Seller makes no representation as to the accuracy or adequacy of any warranty
reserves.
5.14. PURCHASE ORDERS. SCHEDULE 5.14 contains a true and
accurate list of all outstanding purchase orders received by
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Seller by the close of business on the day prior to the signing of this
Agreement.
5.15 NO FINDER. Neither Seller nor any Seller Affiliate nor
any party acting on the behalf of Seller or any Seller Affiliate has paid or
become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of the transactions contemplated by this
Agreement other than to CIBC Oppenheimer Corp., which has served as an
investment advisor to Seller and whose fees and expenses, to the extent payable,
shall be paid by Seller or Parent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer hereby represents and
warrants to Seller and agrees as follows:
6.1. ORGANIZATION. Each of Buyer and Maytag is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to own
or lease and to operate and use its properties and assets and to carry on its
business as now conducted.
6.2. AUTHORITY. Each of Buyer and Maytag has the corporate
power and authority to execute, deliver and perform this Agreement and all of
the Buyer Ancillary Agreements to which it is a party. The execution, delivery
and performance of this Agreement and the Buyer Ancillary Agreements by Buyer
have been duly authorized and approved by the Boards of Directors of Buyer and
Maytag and do not require any further authorization or consent of Buyer or
Maytag. This Agreement has been duly authorized, executed and delivered by Buyer
and Maytag and is the legal, valid and binding agreement of Buyer and Maytag
enforceable against each of them in accordance with its terms, and each of the
Buyer Ancillary Agreements has been duly authorized by Buyer and upon execution
and delivery by Buyer will be a legal, valid and binding obligation of Buyer
enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement or any of
the Buyer Ancillary Agreements by Buyer or Maytag or the consummation by Buyer
or Maytag of any of the transactions
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contemplated hereby or thereby nor compliance by Buyer or Maytag with or
fulfillment of the terms, conditions and provisions hereof or thereof by Buyer
or Maytag will:
(a) conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default, an event of default or an
event creating rights of acceleration, termination or cancellation or a
loss of rights under (1) the charter or By-laws of Buyer or Maytag, (2)
any material note, instrument, agreement, mortgage, lease, license,
franchise, permit or other authorization, right, restriction or
obligation to which Buyer or Maytag is a party or any of his or its
properties is subject or by which Buyer or Maytag is bound, (3) any
Court Order to which Buyer or Maytag is a party or by which either of
them is bound or (4) any Requirements of Law affecting Buyer or Maytag,
or
(b) require the approval, consent, authorization or act of, or
the making by Buyer or Maytag of any declaration, filing or
registration with, any Person.
6.3. NO FINDER. Neither Buyer nor any Person acting on its
behalf has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary for or on account of the transactions contemplated by
this Agreement.
ARTICLE VII
ACTION PRIOR TO THE CLOSING DATE
The respective parties hereto covenant and agree to take the
following actions between the date hereof and the Closing Date:
7.1. INVESTIGATION BY BUYER. Seller and Parent shall afford to
the officers, employees and authorized representatives of Buyer (including,
without limitation, independent public accountants and attorneys) reasonable
access during normal business hours upon reasonable advance notice to the
offices and properties of Seller and all employees and business and financial
records relating to the Business to the extent Buyer shall reasonably deem
necessary or desirable and shall furnish to Buyer or its authorized
representatives such additional information concerning the Purchased Assets and
the Business as shall be
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reasonably requested. Buyer agrees that such investigation shall be conducted in
such a manner as not to interfere unreasonably with the operations of the
Business. No investigation made by Buyer or its representatives hereunder shall
affect the representations and warranties of Seller or Parent hereunder.
7.2. PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES.
Each of the parties hereto shall refrain from taking any action which would
render any representation or warranty contained in this Agreement inaccurate in
any material respect as of the Closing Date. Each party shall promptly notify
the other of any action, suit or proceeding that shall be instituted or
threatened against such party to restrain, prohibit or otherwise challenge the
legality of any transaction contemplated by this Agreement. Seller shall
promptly notify Buyer of any lawsuit, claim, proceeding or investigation that
may be threatened, brought, asserted or commenced against Seller which would
have been listed in SCHEDULE 5.10 if such lawsuit, claim, proceeding or
investigation had arisen prior to the date hereof.
7.3. GOVERNMENTAL APPROVALS. During the period prior to the
Closing Date, Seller, Parent and Buyer shall act diligently and reasonably, and
shall cooperate with each other, to secure any consents and approvals of any
Governmental Body required to be obtained by them in order to assign or transfer
any licenses, franchises, permits, privileges, immunities, approvals and other
authorizations from a Governmental Body to Buyer, to permit the consummation of
the transactions contemplated by this Agreement; PROVIDED that neither Seller
nor Parent shall make any agreement or understanding affecting the Purchased
Assets or the Business as a condition for obtaining any such consents or
approvals except with the prior written consent of Buyer (which consent shall
not be unreasonably withheld or delayed).
7.4. OPERATIONS PRIOR TO THE CLOSING DATE. (a) Seller shall
keep and maintain the Purchased Assets in good operating condition and repair
and shall use its reasonable best efforts consistent with good business practice
to preserve the goodwill of, and relations with, the suppliers, contractors,
licensors, employees, customers, distributors and others having business
relations with the Business.
(b) Notwithstanding SECTION 7.4(a), except as expressly
contemplated by this Agreement or except with the express written approval of
Buyer, Seller shall not:
(i) make any material change in the Purchased Assets;
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(ii) sell, lease (as lessor), transfer or otherwise dispose of
(including any transfers to any of its Affiliates), or mortgage or
pledge, or impose or suffer to be imposed any Encumbrance on, any of
the Purchased Assets, other than inventory and minor amounts of
personal property sold or otherwise disposed of in the ordinary course
of the Business and other than Permitted Encumbrances;
(iii) purchase or otherwise acquire any Fixed Assets;
(iv) allow the levels of raw materials, supplies,
work-in-process or other materials included in the Inventories to vary
in any material respect from the levels customarily maintained in the
Business; and
(v) accept any purchase orders that cannot be satisfied prior
to October 31, 1997.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1. TAXES. (a) Seller shall be liable for and pay all Taxes
(whether assessed or unassessed) applicable to the Purchased Assets, in each
case attributable to periods (or portions thereof) ending on or prior to the
Closing Date. Buyer shall be liable for and shall pay all Taxes (whether
assessed or unassessed) applicable to the Purchased Assets, in each case
attributable to periods (or portions thereof) beginning after the Closing Date.
Seller shall prepare and timely file all Tax Returns related to the Purchased
Assets for all periods ending on or before the Closing Date (other than returns
for periods described in the following sentence) and Buyer shall be responsible
for preparing and filing all other Tax Returns related to the Purchased Assets.
For purposes of this SECTION 8.1(a), any period beginning before and ending
after the Closing Date shall be treated on a "closing of the books" basis as two
partial periods, one ending on the Closing Date and the other beginning on the
day after the Closing Date. Notwithstanding the foregoing, Seller shall be
liable for and pay all property Taxes (whether assessed or unassessed), and
shall prepare and timely file all related Tax Returns, applicable to the
Purchased Assets and imposed by the State of Florida or any county, municipality
or other political subdivision therein attributable to periods
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(or portions thereof) that begin prior to the removal of the Purchased Assets
pursuant to SECTION 8.8.
(b) Notwithstanding SECTION 8.1(a), any sales Tax, use Tax,
real property transfer or gains Tax, documentary stamp Tax or similar Tax
attributable to the sale or transfer of the Purchased Assets shall be paid by
Seller. Buyer agrees to timely sign and deliver such certificates or forms as
may be necessary or appropriate to establish an exemption from (or otherwise
reduce), or make a report with respect to, such Taxes.
(c) Seller or Buyer, as the case may be, shall provide
reimbursement for any Tax paid by one party all or a portion of which is the
responsibility of the other party in accordance with the terms of this SECTION
8.1. Within a reasonable time prior to the payment of any said Tax, the party
paying such Tax shall give notice to the other party of the Tax payable
(together with copies of the supporting documentation relating to such tax) and
the portion which is the liability of each party, although failure to do so will
not relieve the other party from its liability hereunder.
8.2. REMITTANCES. Seller shall, on a weekly basis beginning on
the first week after the Closing Date, pay over to Buyer all amounts received by
Seller (whether before or after the Closing Date) with respect to any Trade
Receivables in existence on the Valuation Date and deliver to Buyer all
corresponding documentation. Conversely, if, after the Closing Date, Buyer shall
receive any remittance from any account debtors not in payment of any Trade
Receivables or other rights or receivables included in the Purchased Assets,
then Buyer shall, on a weekly basis, pay over to Seller the amount so received
by it and deliver to Seller all corresponding documentation.
8.3. NON-SOLICITATION OF CERTAIN EMPLOYEES AND EMPLOYEE
MATTERS. (a) Seller agrees that neither Seller nor any of its Affiliates will,
for a period of one year after the Closing Date, solicit for employment any of
the employees of the Business listed in SCHEDULE 8.3 who become employees of
Buyer within 30 days after the Closing.
(b) Buyer may offer employment to any or all of the employees
of Seller as of the date of this Agreement ("BUSINESS EMPLOYEES") who are listed
in SCHEDULE 8.3. Seller has heretofore furnished Buyer a list of the salaries
and other compensation (in each case on an annual basis) payable to each
Business Employee as of May 28, 1997.
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(c) Parent and Seller hereby waive any non-competition
provision which may otherwise apply to the employment of any Business Employee
by Buyer or any of its Affiliates after the Closing. Seller shall provide Buyer
reasonable access to the Business Employees prior to the Closing in order for
Buyer to discuss possible employment of such employees after the Closing.
(d) Nothing in this Agreement, express or implied, shall
confer upon any employee of Seller, or any representative of any such employee,
any rights or remedies, including any right to employment or continued
employment for any period of any nature whatsoever.
8.4. NONCOMPETITION. In furtherance of the sale of the
Purchased Assets to Buyer hereunder by virtue of the transactions contemplated
hereby and to more effectively protect the value and goodwill of the Purchased
Assets so sold, Parent and Seller covenant and agree that, for a period ending
on the third anniversary of the Closing Date, neither Parent, Seller nor any of
their Affiliates will directly or indirectly (whether as principal, agent,
independent contractor, partner or otherwise) own, manage, operate, control,
participate in, perform services for, or otherwise carry on, a business
competitive with the food and beverage vending equipment business of Buyer
anywhere in the world (it being understood by the parties hereto that the
Business is not limited to any particular region in the world and that such
business may be engaged in effectively from any location in the world);
PROVIDED, HOWEVER, that nothing set forth in this SECTION 8.4 shall prohibit
Parent, Seller or any of their Affiliates from (i) selling or disposing of any
Obsolete Inventory or (ii) owning not in excess of 5% in the aggregate of any
class of capital stock of any corporation if such stock is publicly traded and
listed on any national or regional stock exchange or on the NASDAQ market
system.
In addition, each of Parent and Seller covenants and agrees
that neither it nor any of its Affiliates will divulge or make use of any trade
secrets or other confidential information of the Business other than to disclose
such secrets and information to Buyer or its Affiliates. In the event Parent,
Seller or any of their Affiliates violate any of their obligations under this
SECTION 8.4, Buyer may proceed against such entity in law or in equity for such
damages or other relief as a court may deem appropriate. Each of Parent and
Seller acknowledges that a violation of this SECTION 8.4 may cause Buyer
irreparable harm which may not be adequately compensated for by money damages.
Each of Parent and Seller therefore agrees that in the event of any actual or
threatened violation of this SECTION 8.4, Buyer shall be entitled, in addition
to other
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remedies that it may have, to a temporary restraining order and to preliminary
and final injunctive relief against Parent, Seller or such Affiliate of Parent
or Seller to prevent any violations of this SECTION 8.4. The prevailing party in
any action commenced under this SECTION 8.4 shall also be entitled to receive
reasonable attorneys' fees and court costs. It is the intent and understanding
of each party hereto that if, in any action before any court or agency legally
empowered to enforce this SECTION 8.4, any term, restriction, covenant or
promise in this SECTION 8.4 is found to be unreasonable and for that reason
unenforceable, then such term, restriction, covenant or promise shall be deemed
modified to the extent necessary to make it enforceable by such court or agency.
8.5. PRODUCT LIABILITY AND RECALLS. (a) Without limiting the
generality of SECTION 2.4(e) and except as provided in SECTION 8.5(b), Seller
agrees to be responsible, at its expense, for (i) all product liability claims,
and (ii) all liabilities and obligations under any recalls mandated by any
Governmental Body, in each case with respect to all finished goods included in
the Inventories; PROVIDED, that in the event Buyer believes that it would be
commercially reasonable to effect a voluntary recall of any such goods prior to
such time as a Governmental Body has mandated a recall, it shall notify Seller,
and the parties shall discuss whether a voluntary recall should be undertaken
and the nature and amount of the costs, if any, of any voluntary recall to be
borne by Seller.
(b) Buyer agrees to be responsible, at its expense, for all
product liability claims specifically caused by any modification made by Buyer
to any product manufactured and sold by Seller; provided, however, that Buyer's
liability for product liability claims specifically caused by modifications made
in connection with retrofitting projects started by Seller prior to the date
hereof shall be limited to defects in workmanship performed by Buyer. In
addition, it is expressly understood that normal service and maintenance by
Buyer does not constitute a modification of any such product.
(c) Parent has previously delivered to Buyer true and correct
copies of its current Commercial General Liability Policy and Catastrophe
Umbrella Policy. Parent shall maintain, for a period of at least five years
after the Closing Date, insurance policies providing substantially equivalent
coverage for product liability claims related to products manufactured by the
Business prior to the Closing Date and shall provide Buyer with copies of all
such policies, and all such policies shall provide for notice to be given to
Parent or Buyer prior to cancellation thereof.
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8.6. BULK SALES. Seller and Buyer waive compliance with the
provisions of the "Bulk Sales Law" or any similar provision of law of any state
insofar as it may be applicable to the transactions contemplated by this
Agreement.
8.7. DISCHARGE OF THE BUSINESS' LIABILITIES. Seller covenants
and agrees that it will pay and discharge, and hold Buyer harmless from, each
and every liability and obligation of Seller in respect of the Business or the
Purchased Assets arising from events occurring on or prior to the Closing Date,
excepting only those liabilities and obligations expressly assumed by Buyer at
the Closing pursuant to instruments of assumption delivered to Seller at the
Closing, it being understood and agreed that Buyer is assuming no liabilities or
obligations of Seller other than liabilities and obligations so expressly
assumed by Buyer.
8.8. ACCESS TO THE FACILITY. Pending the removal by Buyer of
the Purchased Assets which Buyer wishes to remain on the premises of the
Facility for a period of time after the Closing Date, Seller hereby agrees to
exercise such reasonable care in the possession and preservation of such
Purchased Assets as it exercises with respect to its own assets and to maintain
such insurance coverage as it now has in force with respect to the Facility and
the Purchased Assets located therein. Buyer hereby agrees to remove such
Purchased Assets, at its own expense, no later than 14 days after the Closing
Date. Buyer hereby agrees to reimburse Seller for the reasonable amount of any
damages to the Facility directly caused by Buyer's removal of the Purchased
Assets. Seller shall provide Buyer's officers, employees and other
representatives with reasonable access to the Facility, during normal business
hours, and shall cooperate with Buyer in connection with Buyer's removal
efforts.
8.9. HANDLING OF PURCHASE ORDERS. Buyer agrees to use its
reasonable efforts to solicit and fill replacement orders from the customers
listed on SCHEDULE 5.14. Such reasonable efforts shall include (i) circulation
of a letter in the form of EXHIBIT C hereto to all customers listed on SCHEDULE
5.14 and (ii) filling any such replacement orders on a priority basis, taking
into account the transition time required to move the Purchased Assets to, and
begin production at, Buyer's facility.
8.10. EXCLUDED TRADEMARK APPLICATION. Seller agrees to
withdraw the Trademark application referred to in SECTION 2.2(l) within 30 days
after the Closing Date.
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ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall, at the
option of Buyer, be subject to the satisfaction, on or prior to the Closing
Date, of the following conditions:
9.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by Seller or Parent in the
performance of any of their covenants and agreements herein which shall not have
been remedied or cured; each of the representations and warranties of Seller or
Parent contained in this Agreement shall be true and correct in all material
respects on the Closing Date as though made on the Closing Date (except to the
extent that they expressly relate to an earlier date), except for changes
therein specifically permitted by this Agreement or resulting from any
transaction expressly consented to in writing by Buyer or any transaction
permitted by SECTION 7.4; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date, signed by and on behalf of
Seller and Parent by the President or any Vice President of Seller and Parent,
respectively.
9.2. CORPORATE ACTION. Seller and Parent shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement, and Seller and Parent shall have furnished Buyer with certified
copies of resolutions adopted by their respective Boards of Directors and the
sole stockholder of Seller in form and substance reasonably satisfactory to
counsel for Buyer, in connection with such transactions.
9.3. NO RESTRAINT. No action, suit, investigation or
proceeding shall have been instituted or threatened to restrain or prohibit or
otherwise challenge the legality or validity of the transactions contemplated
hereby.
9.4. NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all approvals and actions of or by all Governmental Bodies which are
necessary to consummate the transactions contemplated hereby, which are either
specified in SCHEDULE 5.2 or otherwise required to be obtained prior to the
Closing by applicable Requirements of Law.
9.5. NECESSARY CONSENTS. The parties shall have received
consents, in form and substance reasonably satisfactory to Buyer, to the
transactions contemplated hereby from the other
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parties to all contracts, leases, agreements and permits which are specified in
SCHEDULE 9.5 or are otherwise necessary to prevent a material adverse change in
the Purchased Assets.
9.6. NO CHANGES OR DESTRUCTION OF PROPERTY. Between the date
hereof and the Closing Date, there shall have been (a) no material adverse
change in the Business or the Purchased Assets and (b) no material damage to the
Purchased Assets by fire, flood, casualty, act of God or the public enemy or
other cause, regardless of insurance coverage for such damage; and there shall
have been delivered to Buyer a certificate to such effect, dated the Closing
Date and signed on behalf of Seller by the President or any Vice President of
Seller.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND PARENT
The obligations of Seller and Parent under this Agreement
shall, at the option of Seller and Parent, be subject to the satisfaction, on or
prior to the Closing Date, of the following conditions:
10.1. NO MISREPRESENTATION OR BREACH OF COVENANTS AND
WARRANTIES. There shall have been no material breach by Buyer in the performance
of any of its covenants and agreements herein which shall not have been remedied
or cured; each of the representations and warranties of Buyer contained in this
Agreement shall be true and correct on the Closing Date as though made on the
Closing Date, except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing by
Seller or any transaction contemplated by this Agreement; and there shall have
been delivered to Seller a certificate to such effect, dated the Closing Date
and signed on behalf of Buyer by the President or any Vice President of Buyer.
10.2. CORPORATE ACTION. Buyer and Maytag shall have taken all
corporate action necessary to approve the transactions contemplated by this
Agreement, and Buyer and Maytag shall have furnished Seller with certified
copies of resolutions adopted by their respective Boards of Directors, in form
and substance reasonably satisfactory to counsel for Seller, in connection with
such transactions.
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10.3. NO RESTRAINT. No injunction or restraining order shall
have been issued by any court of competent jurisdiction and be in effect which
restrains or prohibits any material transaction contemplated hereby.
10.4. NECESSARY GOVERNMENTAL APPROVALS. The parties shall have
received all approvals and actions of or by all Governmental Bodies specified in
Schedule 5.2.
10.5. NECESSARY CONSENTS. The parties shall have received
consents, in form and substance reasonably satisfactory to Seller, to the
transactions contemplated hereby from the other parties to all contracts,
leases, agreements and permits which are specified in Schedule 9.5.
ARTICLE XI
INDEMNIFICATION
11.1. INDEMNIFICATION BY PARENT AND SELLER. Parent and Seller
hereby jointly and severally agree to indemnify and hold harmless each "Buyer
Group Member" from and against any and all Losses and Expenses incurred by such
Buyer Group Member in connection with or arising from:
(a) any breach by Parent or Seller of any of its covenants in
this Agreement or in any Seller Ancillary Agreement;
(b) any failure of Parent or Seller to perform any of its
obligations in this Agreement or in any Seller Ancillary Agreement;
(c) any breach of any warranty or the inaccuracy of any
representation of Parent or Seller contained or referred to in this
Agreement or any certificate delivered by or on behalf of Parent or
Seller pursuant hereto;
(d) any Excluded Liability; or
(e) the failure of Parent and/or Seller to comply with any
applicable bulk sales law, except that this clause shall not affect the
obligation of Buyer to pay and discharge the Assumed Liabilities and no
indemnification is made by Seller or Parent with respect to the Assumed
Liabilities;
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PROVIDED, HOWEVER, that Parent and Seller shall be required to indemnify and
hold harmless under this SECTION 11.1 with respect to Loss and Expense incurred
by Buyer Group Members as a result of the inaccuracy of any representation or
warranty contained in Article V (other than the representations and warranties
contained in SECTIONS 5.1, 5.2, 5.8 and 5.15, as to which this proviso shall
have no effect) only to the extent that the aggregate amount of such Loss and
Expense exceeds $150,000; PROVIDED, FURTHER, that the reimbursement and
indemnification obligations of Parent and Seller under this SECTION 11.1 (other
than with respect to Excluded Liabilities) shall be limited to $5,000,000. The
indemnification provided for in this SECTION 11.1 shall terminate on December
31, 1998 (and no claims shall be made by any Buyer Group Member under this
SECTION 11.1 thereafter), except that the indemnification by Parent and Seller
shall continue as to:
(A) the representations and warranties contained in SECTIONS
5.2, 5.8 and 5.15 and the covenants of Seller set forth in SECTIONS
3.5, 8.1, 8.5, 8.6, 8.7, 11.1(d), 13.2, 13.6, 13.10 and 13.13, as to
all of which no time limitation shall apply;
(B) the covenants set forth in SECTION 8.3 and 8.4, each of
which shall terminate upon expiration of the applicable statute of
limitations for claims relating to the covenants set forth therein; and
(C) any Loss or Expense of which any Buyer Group Member has
notified Seller in accordance with the requirements of SECTION 11.3 on
or prior to the date such indemnification would otherwise terminate in
accordance with this SECTION 11.1, as to which the obligation of Seller
shall continue until the liability of Seller shall have been determined
pursuant to this ARTICLE XI, and Seller shall have reimbursed all Buyer
Group Members for the full amount of such Loss and Expense in
accordance with this ARTICLE XI.
11.2. INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and
hold harmless each Seller Group Member from and against any and all Loss and
Expense incurred by such Seller Group Member in connection with or arising from:
(a) any breach by Buyer of any of its covenants in this
Agreement or in any Buyer Ancillary Agreement;
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(b) any failure by Buyer to perform any of its obligations in
this Agreement or in any Buyer Ancillary Agreement;
(c) any breach of any warranty or the inaccuracy of any
representation of Buyer contained or referred to in this Agreement or
in any certificate delivered by or on behalf of Buyer or Maytag
pursuant hereto or thereto; or
(d) any Assumed Liability;
provided, however, that the reimbursement and indemnification obligations of
Buyer and Maytag under this SECTION 11.2 (other than with respect to Assumed
Liabilities) shall be limited to $5,000,000. The indemnification provided for in
this SECTION 11.2 shall terminate on December 31, 1998 (and no claims shall be
made by any Seller Group Member under this SECTION 11.2 thereafter), except that
the indemnification by Buyer shall continue as to:
(A) the representations and warranties set forth in SECTION
6.3, the covenants of Buyer set forth in SECTIONS 8.1, 8.5, 11.2(d),
13.2, 13.6 and 13.10, and the obligations and representations of Buyer
under the Assumption Agreement, as to which no time limitation shall
apply; and
(B) any Loss or Expense of which any Seller Group Member has
notified Buyer in accordance with the requirements of SECTION 11.3 on
or prior to the date such indemnification would otherwise terminate in
accordance with this SECTION 11.2, as to which the obligation of Buyer
shall continue until the liability of Buyer shall have been determined
pursuant to this ARTICLE XI, and Buyer shall have reimbursed all Seller
Group Members for the full amount of such Loss and Expense in
accordance with this ARTICLE XI.
11.3. NOTICE OF CLAIMS. (a) Any Buyer Group Member or Seller
Group Member (the "INDEMNIFIED PARTY") seeking indemnification hereunder shall
give to the party or parties obligated to provide indemnification to such
Indemnified Party (the "INDEMNITOR") a notice (a "CLAIM NOTICE") describing in
reasonable detail the facts giving rise to any claim for indemnification
hereunder (together with any available supporting documentation) and shall
include in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim, and a reference to the provision of
this Agreement or any other agreement, document or instrument executed hereunder
or in connection herewith upon which such claim is based; PROVIDED, that a Claim
Notice in respect of any action at law or suit in
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equity by or against a third Person as to which indemnification will be sought
shall be given promptly after the action or suit is commenced.
(b) Losses shall not include any special, indirect, incidental
or consequential damages. In calculating any Loss or Expense there shall be
deducted (i) any tax benefits actually realizable by the Indemnified Party and
its Affiliates (after taking into account all increases in federal, state,
local, foreign or other Taxes payable by the Indemnified Party and its
Affiliates as a result of the receipt of any indemnification payment hereunder
(by reason of such payment being included in income, resulting in a reduction of
tax basis, or otherwise increasing such Taxes payable by the Indemnified Party
at any time), (ii) any related insurance proceeds net of premium insurance
reasonably anticipated to result therefrom and (iii) proceeds and amounts from
third parties (regardless of when received but only if actually received), in
each case with clauses (i), (ii) and (iii) in connection with or as a result of
such Losses; provided, however, that no right of subrogation shall accrue to any
insurer or third party hereunder.
(c) After the giving of any Claim Notice pursuant hereto, the
amount of indemnification to which an Indemnified Party shall be entitled under
this ARTICLE XI shall be determined: (i) by the written agreement between the
Indemnified Party and the Indemnitor; (ii) by a final judgment or decree of any
court of competent jurisdiction; or (iii) by any other means to which the
Indemnified Party and the Indemnitor shall agree in writing. The judgment or
decree of a court shall be deemed final when the time for appeal, if any, shall
have expired and no appeal shall have been taken or when all appeals taken shall
have been finally determined. The Indemnified Party shall have the burden of
proof in establishing the amount of Loss and Expense suffered by it.
11.4. THIRD PERSON CLAIMS. (a) Subject to paragraph (b) of
this SECTION 11.4, the Indemnified Party shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise or settlement
of any third Person claim, action or suit against such Indemnified Party as to
which indemnification will be sought by any Indemnified Party from any
Indemnitor hereunder, and in any such case the Indemnitor shall cooperate in
connection therewith and shall furnish such records, information and testimony
and attend such conferences, discovery proceedings, hearings, trials and appeals
as may be reasonably requested by the Indemnified Party in connection therewith;
PROVIDED, that the Indemnitor may participate, through counsel chosen by it and
at its own expense, in the defense of any such
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claim, action or suit as to which the Indemnified Party has so elected to
conduct and control the defense thereof; and PROVIDED, FURTHER, that the
Indemnified Party shall not, without the written consent of the Indemnitor
(which written consent shall not be unreasonably withheld), pay, compromise or
settle any such claim, action or suit, except that no such consent shall be
required if, following a written request from the Indemnified Party, the
Indemnitor shall fail, within 14 days after the making of such request, to
acknowledge and agree in writing that, if such claim, action or suit shall be
adversely determined, such Indemnitor has an obligation to provide
indemnification hereunder to such Indemnified Party.
(b) If any third Person claim, action or suit against any
Indemnified Party is solely for money damages or, where Seller is the
Indemnitor, will have no continuing effect in any material respect on Buyer's
ability to manufacture, produce or sell the products of the Business, including
any upgrades thereto, then the Indemnitor shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise or settlement
of any such third Person claim, action or suit against such Indemnified Party as
to which indemnification will be sought by any Indemnified Party from any
Indemnitor hereunder if the Indemnitor has acknowledged and agreed in writing
that, if the same is adversely determined, the Indemnitor has an obligation to
provide indemnification to the Indemnified Parties in respect thereof, and in
any such case the Indemnified Parties shall cooperate in connection therewith
and shall furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested by the Indemnitor in connection therewith; PROVIDED, that
the Indemnified Parties may participate, through counsel chosen by it and at its
own expense, in the defense of any such claim, action or suit as to which the
Indemnitor has so elected to conduct and control the defense thereof. Notwith-
standing the foregoing, the Indemnified Parties shall have the right to pay,
settle or compromise any such claim, action or suit, PROVIDED that in such event
the Indemnified Parties shall waive any right to indemnity therefor hereunder.
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ARTICLE XII
TERMINATION
12.1. TERMINATION. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated at any time prior to
the Closing Date:
(a) by the mutual consent of Buyer and Seller;
(b) by Buyer or Seller if the Closing shall not have occurred
on or before December 31, 1997 (or such later date as may be mutually agreed to
by Buyer and Seller) PROVIDED, HOWEVER, that the right to terminate this
Agreement pursuant to this clause (b) shall not be available to any party whose
failure to fulfill any obligation of this Agreement has been the cause of, or
resulted in, the failure of the transactions contemplated hereby to have
occurred on or prior to such date.
(c) by Buyer in the event of any material breach by Seller of
any of Seller's agreements, representations or warranties contained herein and
the failure of Seller to cure such breach within 14 days after receipt of notice
from Buyer requesting such breach to be cured;
(d) by Seller in the event of any material breach by Buyer of
any of its agreements, representations or warranties contained herein and the
failure of Buyer to cure such breach within 14 days after receipt of notice from
Seller requesting such breach to be cured; or
(e) by Buyer or Seller if any court of competent jurisdiction
in the United States or other United States Governmental Body shall have issued
an order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby.
12.2. NOTICE OF TERMINATION. Any party desiring to terminate
this Agreement pursuant to SECTION 12.1 shall give notice of such termination to
the other parties to this Agreement.
12.3. EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to this ARTICLE XII, all further obligations of the
parties under this Agreement (other
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than SECTIONS 13.2 and 13.10) shall be terminated without further liability of
any party to the other, provided that nothing herein shall relieve any party
from liability for its breach of this Agreement.
ARTICLE XIII
GENERAL PROVISIONS
13.1. SURVIVAL OF OBLIGATIONS. All representations,
warranties, covenants and obligations contained in this Agreement shall survive
the consummation of the transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that, except as otherwise provided in ARTICLE XI, the representations
and warranties contained in ARTICLES V and VI shall terminate on December 31,
1998. Except as otherwise provided herein, no claim shall be made for the breach
of any representation or warranty contained in ARTICLE V or VI or under any
certificate delivered with respect thereto under this Agreement after the date
on which such representation or warranty terminates as set forth in this
Section.
13.2. CONFIDENTIAL NATURE OF INFORMATION. Each party agrees
that it will treat in confidence all documents, materials and other information
which it shall have obtained regarding the other party during the course of the
negotiations leading to the consummation of the transactions contemplated hereby
and the preparation of this Agreement and other related documents, and, in the
event the transactions contemplated hereby shall not be consummated, each party
will return to the other party all copies of nonpublic documents and materials
which have been furnished in connection therewith. Such documents, materials and
information shall not be communicated to any third Person (other than, in the
case of Buyer, to its counsel, accountants, financial advisors or lenders, and,
in the case of Seller, to its counsel, accountants or financial advisors). No
other party shall use any confidential information in any manner whatsoever
except solely for the purpose of evaluating the proposed purchase and sale of
the Purchased Assets; PROVIDED, HOWEVER, that after the Closing Buyer may use or
disclose any confidential information included in the Purchased Assets or
otherwise reasonably related to the Business or the Purchased Assets. The
obligation of each party to treat such documents, materials and other
information in confidence shall not apply to any information which (i) is or
becomes available to such party from a source other than such party, (ii) is or
becomes available to the public other than as a
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result of disclosure by such party or its agents, (iii) is required to be
disclosed under applicable law or judicial process, but only to the extent it
must be disclosed, or (iv) such party deems necessary to obtain any of the
consents or approvals contemplated hereby.
13.3. NO PUBLIC ANNOUNCEMENT. Neither Buyer nor Seller shall,
without the approval of the other, make any further press release or other
public announcement concerning the transactions contemplated by this Agreement,
except as and to the extent that any such party shall be so obligated by law, in
which case the other party shall be advised and the parties shall use their best
efforts to cause a mutually agreeable release or announcement to be issued;
PROVIDED that the foregoing shall not preclude communications, disclosures or
filings (including, without limitation, a filing of this Agreement) necessary to
implement the provisions of this Agreement or to comply with accounting or the
Securities and Exchange Commission disclosure obligations.
13.4. NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered by hand, sent by
first class mail, registered or certified (return receipt requested), or by
nationally recognized overnight courier or by facsimile transmission, in each
case addressed as follows:
If to Buyer, to:
Dixie-Narco, Inc.
One Dixie-Narco Boulevard
P.O. Drawer 719
Williston, South Carolina 29853
Attention: Chief Financial Officer
Facsimile No.: 803-266-5050
and
If to Maytag, to:
Maytag Corporation
403 West Fourth Street North
Newton, Iowa 50208
Attention: General Counsel
Facsimile No.: 515-791-8102
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<PAGE> 43
In each case, with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attention: Dennis V. Osimitz
Facsimile No.: 312-853-7036
If to Seller, to:
ECC Vending Corp.
175 Strafford Avenue
Wayne, Pennsylvania 19087-3377
Attention: President
Facsimile No.: (610) 687-6425
If to Parent, to:
ECC International Corp.
175 Strafford Avenue
Wayne, Pennsylvania 19087-3377
Attention: President
Facsimile No.: (610) 687-6425
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: Martin S. Kaplan, Esq.
Facsimile No.: (617) 526-5000
or to such other address as such party may indicate by a notice delivered to the
other parties hereto. Notices shall be deemed effective (i) upon receipt, if
delivered by hand, (ii) on the next business day, if delivered by nationally
recognized overnight courier or by facsimile transmission, and (iii) three
business days after deposit in the U.S. mails, registered or certified (return
receipt requested).
13.5. SUCCESSORS AND ASSIGNS. (a) The rights of the parties
under this Agreement shall not be assignable prior to the Closing without the
written consent of the other parties. Following the Closing, any party may
assign any of its rights hereunder, but no such assignment shall relieve it of
its obligations hereunder.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and per-
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mitted assigns. Nothing in this Agreement, expressed or implied, is intended or
shall be construed to confer upon any Person other than the parties and
successors and assigns permitted by this SECTION 13.5 any right, remedy or claim
under or by reason of this Agreement.
13.6. ACCESS TO RECORDS AFTER CLOSING. For a period of six
years after the Closing Date, Seller and its representatives shall have
reasonable access to all of the books and records of the Business relating to
the Purchased Assets transferred to Buyer hereunder to the extent that such
access may reasonably be required by Seller in connection with matters relating
to or affected by the operation of the Purchased Assets prior to the Closing
Date. Such access shall be afforded by Buyer upon receipt of reasonable advance
notice and during normal business hours. Seller shall be solely responsible for
any costs or expenses incurred by it pursuant to this SECTION 13.6. If Buyer
shall desire to dispose of any of such books and records prior to the expiration
of such six-year period, Buyer shall, prior to such disposition, give Seller a
reasonable opportunity, at Seller's expense, to segregate and remove such books
and records as Seller may select.
For a period of six years after the Closing Date, Buyer and
its representatives shall have reasonable access to all of the books and records
relating to the Business which Seller, Parent or any of their Affiliates may
retain after the Closing Date. Such access shall be afforded by Seller, Parent
and their Affiliates upon receipt of reasonable advance notice and during normal
business hours. Buyer shall be solely responsible for any costs and expenses
incurred by it pursuant to this SECTION 13.6. If Seller, Parent or any of their
Affiliates shall desire to dispose of any of such books and records prior to the
expiration of such six-year period, Seller or Parent, as the case may be, shall,
prior to such disposition, give Buyer a reasonable opportunity, at Buyer's
expense, to segregate and remove such books and records as Buyer may select.
13.7. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
Exhibits and Schedules referred to herein, and the documents delivered pursuant
hereto, contain the entire understanding of the parties hereto with regard to
the subject matter contained herein or therein, and supersede all prior
agreements, under standings or letters of intent between or among any of the
parties hereto, and there are no other representations, warranties or covenants
between the parties hereto, written or oral, except as expressly set forth
herein. This Agreement shall not be amended, modified or supplemented except by
a written
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<PAGE> 45
instrument signed by an authorized representative of each of the parties hereto.
13.8. INTERPRETATION. Article titles and headings to sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement. The
Schedules and Exhibits referred to herein shall be construed with and as an
integral part of this Agreement to the same extent as if they were set forth
verbatim herein.
13.9. WAIVERS. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
13.10. EXPENSES. Each party hereto will pay all costs and
expenses incident to its negotiation and preparation of this Agreement and to
its performance and compliance with all agreements and conditions contained
herein on its part to be performed or complied with, including the fees,
expenses and disbursements of its counsel and accountants.
13.11. PARTIAL INVALIDITY. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable.
13.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same
agreement, and shall become binding when one or more counterparts have been
signed by each of the parties hereto and delivered to each of Seller and Buyer.
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<PAGE> 46
13.13. FURTHER ASSURANCES. On the Closing Date, Seller shall
(i) deliver to Buyer such other bills of sale, deeds, endorsements, assignments
and other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Buyer and its counsel, as Buyer may reasonably
request or as may be otherwise reasonably necessary to vest in Buyer all the
right, title and interest of Seller in, to or under any or all of the Purchased
Assets, and (ii) take all steps as may be reasonably necessary to put Buyer in
actual possession and control of all the Purchased Assets. From time to time
following the Closing, Seller shall execute and deliver, or cause to be executed
and delivered, to Buyer such other instruments of conveyance and transfer,
powers of attorney or other documents as Buyer may reasonably request or as may
be otherwise necessary to more effectively convey and transfer to, and vest in,
Buyer and put Buyer in possession of, any part of the Purchased Assets.
13.14. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to the conflicts of
law provisions) of the State of Delaware.
13.15. GUARANTY. Maytag hereby unconditionally guarantees the
obligations of Buyer under this Agreement.
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<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed the day and year first above written.
DIXIE-NARCO, INC.
By /s/ Mark A. Garth
-------------------------------
Name: Mark A. Garth
----------------------------
Title: VP & Controller
---------------------------
MAYTAG CORPORATION
By /s/ Gerald J. Pribanic
-------------------------------
Name: Gerald J. Pribanic
----------------------------
Title: Exec. V.P. & CFO
---------------------------
ECC INTERNATIONAL CORP.
By /s/ Relland M. Winand
-------------------------------
Name: Relland M. Winand
----------------------------
Title: V.P. Finance
---------------------------
ECC VENDING CORP.
By /s/ Relland M. Winand
-------------------------------
Name: Relland M. Winand
----------------------------
Title: Secretary/Treasurer
---------------------------
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EXHIBIT 99
ECC INTERNATIONAL CORP. COMPLETES SALE OF ITS VENDING DIVISION
WAYNE, PA - November 26, 1997--ECC International Corp. (NYSE:ECC) announced
today that it has completed the sale of the fixed assets, inventory and trade
receivables of its ECC Vending Corp. subsidiary for approximately $7.9 million
to an affiliate of Maytag Corporation. The proceeds from the sale have been
applied to the reduction of the Company's bank debt. A preliminary agreement of
sale was announced on September 25, 1997. The anticipated financial effect of
the sale was taken into consideration in ECC's June 30, 1997 fiscal year end
financial statements.
ECC International Corp. is a world leader in the design, research and production
of simulators and related training programs for crew, operator and maintenance
training. Through its headquarters and Instructional Systems Development Group
in Wayne, PA; its Systems Design and Production Center in Orlando, FL; and
through a wholly owned subsidiary, ECC Simulation Limited in Sussex, England,
the Company provides a wide range of products and services used by all branches
of the U.S. Department of Defense and by armed forces in 25 countries.
