<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PRECISION PARTNERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6719 22-3639336
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
------------------------
5605 N. MACARTHUR BOULEVARD
SUITE 760
IRVING, TEXAS 75038
(972) 580-1550
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
RONALD M. MILLER
CHIEF FINANCIAL OFFICER
PRECISION PARTNERS, INC.
5605 N. MACARTHUR BOULEVARD
SUITE 760
IRVING, TEXAS 75038
(972) 580-1550
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------
Copies to:
CHRISTOPHER M. KELLY, ESQ.
JONES, DAY, REAVIS & POGUE
NORTH POINT
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114-1190
(216) 586-3939
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding
company and there is compliance with General Instruction G, check the following
box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
12% Senior Subordinated Notes due 2009...... $100,000,000 100% $100,000,000 $26,400
Guarantees of 12% Senior Subordinated Notes
due 2009.................................. -- -- -- --(2)
Total Registration Fee...................... $26,400
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f) under the Securities Act.
(2) Pursuant to Rule 457(n), no registration fee is required with respect to the
guarantees.
------------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
The address of the principal executive offices of each of the additional
registrants listed below, and the name and address of the agent for service, is
the same as is set forth for Precision Partners, Inc. on the facing page of this
registration statement.
<TABLE>
<CAPTION>
PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER
NAME INCORPORATION CLASSIFICATION NUMBER IDENTIFICATION NUMBER
- ---- --------------- --------------------- ---------------------
<S> <C> <C> <C>
Mid State Machine Products................. Maine 3545 01-0280525
Galaxy Industries Corporation.............. Michigan 3545 38-1881019
Certified Fabricators, Inc................. California 3545 95-3316654
General Automation, Inc.................... Illinois 3545 75-2808932
Nationwide Precision Products Corp......... New York 3545 22-3639335
Gillette Machine & Tool Co., Inc........... New York 3545 16-0786135
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 28, 2000
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
PRECISION PARTNERS, INC.
OFFER TO EXCHANGE OUR 12% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR OUR OUTSTANDING 12% SENIOR SUBORDINATED NOTES DUE 2009
THESE NOTES ARE GUARANTEED ON A SENIOR SUBORDINATED BASIS BY:
MID STATE MACHINE PRODUCTS
GALAXY INDUSTRIES CORPORATION
CERTIFIED FABRICATORS, INC.
GENERAL AUTOMATION, INC.
NATIONWIDE PRECISION PRODUCTS CORP.
GILLETTE MACHINE & TOOL CO., INC.
---------------------
THE EXCHANGE OFFER
- - Precision Partners will exchange all outstanding notes that are validly
tendered and not validly withdrawn for an equal principal amount of exchange
notes that are freely tradeable.
- - You may withdraw tenders of outstanding notes at any time prior to the
expiration of the exchange offer.
- - The exchange offer expires at 5:00 p.m., New York City time, on , 2000,
unless extended. We do not currently intend to extend the expiration date.
RESALES OF THE EXCHANGE NOTES
- - We do not intend to list the exchange notes on any securities exchange or to
seek approval through any automated quotation system, and no active public
market for the exchange notes is anticipated.
------------------------
You should carefully consider the risk factors beginning on page 9 of this
prospectus before deciding to participate in the exchange offer.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The date of this prospectus is , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Forward-Looking Statements........... i
Where You Can Find More Information.. ii
Summary.............................. 1
Risk Factors......................... 9
The Exchange Offer................... 19
Use of Proceeds...................... 27
Capitalization....................... 28
Pro Forma Financial Information...... 29
Selected Historical Financial
Information........................ 31
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 33
Business............................. 39
Management........................... 49
Security Ownership................... 52
Related Party Transactions........... 53
Description of Credit Facilities..... 54
Description of Exchange Notes........ 56
Book-Entry; Delivery And Form........ 94
Registration Rights For Outstanding
Notes.............................. 97
Plan of Distribution................. 99
Certain U.S. Federal Income Tax
Considerations..................... 101
Legal Matters........................ 103
Experts.............................. 103
Index to Financial Statements........ F-1
</TABLE>
------------------------
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to a
number of risks and uncertainties, including those described under "Risk
Factors," many of which are beyond our control. Forward-looking statements are
typically identified by words such as "believe," "expect," "anticipate,"
"intend," "estimate" and similar expressions, and include, among others,
statements concerning:
- our strategy;
- our liquidity and capital expenditures;
- our debt levels and ability to obtain financing and service debt;
- competitive pressures and trends in the precision machining industry;
- cyclicality and economic condition of the industries we currently serve;
- prevailing levels of interest rates;
- legal proceedings and regulatory matters; and
- general economic conditions.
Actual results could differ materially from those contemplated by the
forward-looking statements as a result of factors such as those described in
"Risk Factors." In light of these risks and uncertainties, we cannot assure you
that the results and events contemplated by the forward-looking statements
contained in this prospectus will in fact transpire. You are cautioned not to
place undue reliance on these forward-looking statements. We do not undertake
any obligation to update or revise any forward-looking statements. All
subsequent written or oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements.
i
<PAGE>
------------------------
WHERE YOU CAN FIND MORE INFORMATION
Precision Partners and the subsidiary guarantors have filed a registration
statement on Form S-4 to register with the SEC the exchange notes to be issued
in exchange for the outstanding notes. This prospectus is part of that
registration statement. As allowed by the SEC's rules, this prospectus does not
contain all of the information you can find in the registration statement or the
exhibits to the registration statement. For further information about us and
about the exchange offer and the exchange notes, you should consult the
registration statement, including the exhibits and schedules. A copy of the
registration statement and any exhibits may be obtained from the SEC or by
writing or telephoning us at the following address and telephone number:
Precision Partners, Inc.
5605 N. MacArthur Boulevard
Suite 760
Irving, Texas 75038
(972) 580-1550
Attention: Chief Financial Officer
Upon effectiveness of the registration statement, we will file reports,
proxy statements and other documents with the SEC in accordance with the
requirements of the Securities Exchange Act of 1934. You may read and copy the
registration statement and, when filed, such reports, proxy statements and other
documents at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information regarding the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site, located at http://www.sec.gov., that contains
reports, proxy statements and other documents regarding registrants, including
us, that file electronically with the SEC. In addition, we are required by the
terms of the indenture to furnish the trustee and the holders of exchange and
outstanding notes with quarterly and annual reports and other information within
15 days of filing the reports or other information with the SEC.
You may also find further information about us and the subsidiary guarantors
at our website
http://www.precisionpartnersinc.com. The information contained on our website is
not a part of this prospectus.
------------------------
This exchange offer is not being made to, nor will tenders of outstanding
notes be accepted for exchange from holders of outstanding notes in any
jurisdiction in which this exchange offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of that jurisdiction.
ii
<PAGE>
SUMMARY
The following summary details the most important features of this offering.
THE COMPANY
GENERAL
Precision Partners is a leading contract mechanical manufacturing services
supplier of complex precision metal parts, tooling and assemblies for original
equipment manufacturers. Our flexible manufacturing facilities and operating
processes enable us to service customers across a wide range of industries and
aggressively pursue new customers in industries where we see the potential for
strong growth. Our customers include industry leaders such as General Electric,
New Venture Gear (a joint venture of General Motors and DaimlerChrysler), Xerox,
LucasVarity (Kelsey Hayes), Boeing, Caterpillar and Dana. We have earned
"Preferred" or "Qualified" supplier status with most of our customers and are
predominantly the sole-source supplier to our customers of the parts we
manufacture. Our pro forma revenues and EBITDA for the year ended December 31,
1999 were $149.8 million and $26.1 million, respectively, representing a 17.5%
EBITDA margin.
Our broad manufacturing capabilities and highly engineered processes allow
us to meet the critical specifications of our customers. We manufacture parts,
ranging in size from approximately 1 ounce to over 100,000 pounds, to extremely
close tolerances. We are also able to maintain tight tolerances across flat
sheets and surfaces with multiple contours. We work with traditional materials
such as steel, aluminum, iron, copper, magnesium and bronze, as well as exotic
and difficult to machine materials such as titanium, inconel, invar and
hastelloy. In addition, we provide our customers with design assistance, process
and product engineering support and quality testing.
Our manufacturing expertise includes precision machining such as milling,
turning, boring, drilling, broaching and grinding, as well as value-added
services such as prototyping, assembly, forming, welding, heat treating and
plating.
The industries we serve and the related precision parts, assemblies and
tooling we machine and manufacture include:
- Power Generation Industry - specialty alloy turbine wheels and spacers,
shrouds and nozzles;
- Automotive Industry - piston valves used primarily for automatic braking
systems in light trucks and sport utility vehicles and machined engine
blocks;
- Business Machines Industry - bases and internal components for high-end
scanners, digital imaging machines and copiers;
- Space and Satellite Industries - adapter rings, thrust rings, casting
chambers and handling and transport aids;
- Aerospace Industry, Commercial and Military - precision tooling including
bond jigs, assembly jigs and mill fixtures;
- Agriculture and Construction Equipment Industries - high tolerance bearing
caps, transmission housings and diesel and gas pump housings; and
- Transportation Industry - class eight heavy truck axles, engine blocks and
related parts.
INDUSTRY
The U.S. precision custom manufacturing industry is highly fragmented and,
excluding precision manufacturing operations owned directly by original
equipment manufacturers, is estimated to be comprised of approximately 7,500
companies representing, over the last several years, annual revenues
1
<PAGE>
in excess of $20 billion. Within this market, precision machine shops and
specialty tool manufacturers represent in excess of $13 billion of these
revenues. As a result of high fragmentation and a large number of captive
original equipment manufacturer operations, we believe there has been and will
continue to be significant consolidation opportunities among industry
participants.
We believe that there are two main trends in the U.S. precision machining
industry:
- an increased amount of outsourced manufacturing by original equipment
manufacturers; and
- increased reliance by original equipment manufacturers on a few
"Preferred" or "Qualified" suppliers that can provide a full line of high
quality manufacturing and sub-assembly services, as well as process
engineering and design assistance.
We intend to continue to capitalize on these industry trends by providing
our customers with a broad array of precision machining capabilities and by
leveraging our competitive strengths. See "Business--Industry."
COMPETITIVE STRENGTHS
We believe that we have the following competitive strengths:
- Leading supplier of high quality, difficult-to-produce parts;
- Broad manufacturing capabilities serving diverse end markets;
- Strong customer relationships;
- Modern, high quality operations; and
- An experienced management team.
BUSINESS STRATEGY
Our business strategies are as follows:
- Capitalize on the industry trends among leading original equipment
manufacturers to increase manufacturing outsourcing and concentrate on
fewer, more reliable suppliers;
- Pursue cross-selling opportunities and broaden our customer base across
the diverse manufacturing capabilities and complementary customer bases of
our operating subsidiaries;
- Implement the best operating practices of each of our operations and
utilize production resources to maximize manufacturing efficiency; and
- Pursue strategic acquisitions.
------------------------
The principal executive offices of Precision Partners and the subsidiary
guarantors are located at 5605 N. MacArthur Boulevard, Suite 760, Irving, Texas
75038 and our telephone number is (972) 580-1550.
2
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................... We are offering to exchange up to $100,000,000 aggregate
principal amount of our registered 12% Senior Subordinated
Notes due 2009 for an equal principal amount of our
outstanding 12% Senior Subordinated Notes due 2009. The
terms of the exchange notes are identical in all material
respects to those of the outstanding notes, except for
transfer restrictions and registration rights relating to
the outstanding notes.
Purpose of the Exchange
Offer.............................. The exchange notes are being offered to satisfy our
obligations under a registration rights agreement.
Expiration Date; Withdrawal of
Tender............................. The exchange offer will expire at 5:00 p.m., New York City
time, on , 2000, or on a later date and time to
which we extend it. The tender of outstanding notes in the
exchange offer may be withdrawn at any time prior to the
expiration date. Any outstanding notes not accepted for
exchange for any reason will be returned without expense to
the tendering holder as promptly as practicable after the
expiration or termination of the exchange offer.
Procedures for Tendering Outstanding
Notes.............................. Each holder of outstanding notes wishing to accept the
exchange offer must complete, sign and date the letter of
transmittal, in accordance with its instructions, and mail
or otherwise deliver it, together with the outstanding notes
and any other required documentation to the exchange agent
at the address listed in the letter of transmittal.
Outstanding notes may be physically delivered, but physical
delivery is not required if a confirmation of a book-entry
transfer of the outstanding notes to the exchange agent's
account at Depository Trust Company, or DTC, is delivered in
a timely fashion. See "The Exchange Offer--Procedures for
Tendering Outstanding Notes."
Conditions to the Exchange Offer..... The exchange offer is not conditioned upon any minimum
aggregate principal amount of outstanding notes being
tendered for exchange. The exchange offer is subject to
certain customary conditions, which may be waived by us. We
currently expect that each of the conditions will be
satisfied and that no waivers will be necessary. See "The
Exchange Offer--Conditions to the Exchange Offer."
Exchange Agent....................... The Bank of New York.
U.S. Federal Income Tax
Considerations..................... Your exchange of an outstanding note for an exchange note
will not constitute a taxable exchange. The exchange will
not result in taxable income, gain or loss being recognized
by you or by us. Immediately after the exchange, you will
have the same adjusted basis and holding period in each
exchange note received as you had immediately prior to the
exchange in the corresponding outstanding note surrendered.
See "Income Tax Considerations."
</TABLE>
3
<PAGE>
THE EXCHANGE NOTES
The terms of the exchange notes are identical in all material respects to
those of the outstanding notes, except for the transfer restrictions and
registration rights relating to the oustanding notes that do not apply to the
exchange notes.
<TABLE>
<S> <C>
Issuer............................... Precision Partners, Inc.
Securities Offered................... $100,000,000 aggregate principal amount of 12% Senior
Subordinated Notes due 2009. The exchange notes will each be
represented by one or more global certificates registered in
the name of DTC. Transfer of exchange notes will be limited
to transfers of book-entry interests within DTC and its
participants.
Maturity............................. March 15, 2009.
Interest............................. The exchange notes will accrue interest from the last
interest payment date. Interest on the notes will be payable
semi-annually in arrears on each March 15 and September 15.
Sinking Fund......................... None.
Optional Redemption.................. We can redeem the exchange notes at any time on or after
March 15, 2004, in whole or in part, at the redemption
prices described under "Description of Exchange
Notes--Optional Redemption," plus accrued and unpaid
interest.
Optional Redemption after Certain
Equity Offerings................... At any time and from time to time on or prior to March 15,
2002, we can redeem up to 35% of the exchange notes and the
outstanding notes with the net cash proceeds of certain
equity offerings, as long as:
- we pay 112% of the principal amount of the notes to be
redeemed, plus accrued and unpaid interest;
- we redeem the notes within 180 days of the completion of
the equity offering; and
- at least 65% of exchange notes and the outstanding notes
remains outstanding afterwards.
Change of Control.................... If we undergo a change of control, you will have the right,
as a holder of exchange notes, to require us to repurchase
all of your exchange notes at a repurchase price equal to
101% of their face amount, plus accrued and unpaid interest.
We might not be able to pay you the required price for
exchange notes you request us to purchase at the time of a
change of control because we may not have enough funds at
that time or the terms of our other indebtedness may prevent
us from doing so.
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Ranking.............................. The exchange notes will be unsecured and will be
subordinated in right of payment to all of our existing and
future senior debt, including debt under our credit
facilities. Because the exchange notes are subordinated, in
the event of our bankruptcy, liquidation or dissolution,
holders of notes will not be entitled to receive any payment
until all holders of our senior debt have been paid in full.
As of December 31, 1999, we had approximately
$134.5 million of senior debt outstanding (excluding the
$13.8 million of availability under our new revolving credit
facility).
Guarantees........................... All of our existing and certain of our future subsidiaries
will fully and unconditionally guarantee the exchange notes
on a joint and several basis. The subsidiary guarantees will
each be unsecured and will each be subordinated in right of
payment to each subsidiary guarantor's existing and future
senior debt.
Key Indenture Covenants.............. The indenture governing the exchange notes will contain
covenants that, among other things, limit our and some of
our subsidiaries' ability to:
- incur additional debt;
- pay dividends on or redeem or repurchase capital stock;
- issue or allow any person to own preferred stock of
subsidiaries;
- incur or permit to exist indebtedness senior to the notes,
but subordinated to any of our other indebtedness;
- in the case of certain subsidiaries, guarantee debt
without also guaranteeing the notes;
- in the case of certain subsidiaries, create or permit to
exist dividend or payment restrictions with respect to us;
- make certain investments;
- incur or permit to exist certain liens;
- enter into transactions with affiliates;
- merge, consolidate or amalgamate with another company; and
- transfer or sell assets.
These covenants are subject to a number of important
exceptions and limitations, which are described under the
heading "Description of Exchange Notes." All of our
subsidiaries on the issue date will be restricted for
purposes of the indenture.
</TABLE>
RISK FACTORS
An investment in the notes involves a high degree of risk. We urge you to
review carefully the Risk Factors beginning on page 9 for a discussion of
factors you should consider before making an investment in the exchange notes.
5
<PAGE>
THE ACQUISITIONS
On September 30, 1998 our indirect parent, Precision Partners L.L.C.,
acquired all of the outstanding capital stock of Mid Sate Machine Products and
Galaxy Industries Corporation for an aggregate purchase price of approximately
$54.5 million. On March 19, 1999, we underwent a corporate reorganization under
which we acquired all of the issued and outstanding capital stock of Mid State
and Galaxy. Also on March 19, 1999, we acquired all of the issued and
outstanding capital stock of Certified Fabricators, Inc. and its sister company,
Calbrit Design, Inc. and purchased substantially all of the assets and assumed
some liabilities of General Automation, Inc. and Nationwide Precision Products
Corp. for an aggregate purchase price of approximately $100.7 million, excluding
fees and expenses and an additional conditional payment which may be payable by
our parent, Precision Partners Holding Company. In July 1999, we merged Calbrit
into Certified. On September 1, 1999, we acquired all of the issued and
outstanding stock of Gillette Machine & Tool Co., Inc. for $11.4 million. The
purchase price for one of the companies acquired in March included a
$4.0 million escrow to be paid out upon the company meeting specified EBITDA
targets through April 30, 1999. Since these targets were not met, the
$4.0 million was returned to us, effectively reducing the purchase price by
$4.0 million.
In connection with the March acquisitions, we entered into new credit
facilities. See "Description of Credit Facilities."
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
Prior to the acquisitions of Mid State and Galaxy in September 1998,
Precision Partners, L.L.C. had substantially no operations and, prior to the
completion of the reorganization and acquisitions of Certified, Calbrit,
Nationwide and General Automation in March 1999, we had substantially no
operations. As a result, we believe historical financial information for our
company prior to March 1999 and for our predecessor for accounting purposes, Mid
State, is of limited relevance in understanding what our actual results of
operations, financial position or cash flows would have been for historical
periods had we in fact been organized and owned all of our current subsidiaries
for such periods. For this reason, the following table sets forth summary
historical financial information and summary unaudited pro forma financial
information for our company only as of and for the year ended December 31, 1999.
In addition, for financial statement presentation purposes, the
reorganization is accounted for as if it occurred in September 1998 and we are
treated as having commenced operations at that time in a manner similar to a
pooling of interests. See Note 1 to our consolidated financial statements.
The summary unaudited pro forma financial information gives effect to the
following transactions as if each had occurred on January 1, 1999:
- the acquisitions of Certified, Calbrit, Nationwide, General Automation and
Gillette;
- the reorganization under which we received the capital stock of Mid State
and Galaxy as a capital contribution from Precision Partners, L.L.C.; and
- the new credit facilities we entered into in March 1999 and the related
prepayment of an existing term loan.
The summary unaudited pro forma financial information is for illustrative
purposes only and does not purport to be indicative of what the actual results
of operations and financial position of our company would have been as of and
for the periods presented, nor does it purport to represent our future financial
position or results of operations. In addition, the fair value of the net assets
at the actual closing date of the acquisitions could be significantly different
than the fair value of the net assets used for purposes of the unaudited pro
forma financial information. The following summary unaudited pro forma financial
information should be read in conjunction with "Unaudited Pro Forma Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the historical audited financial statements of our
company, Precision Partners, L.L.C., Mid State, Certified, Nationwide, General
Automation and Gillette including the notes thereto, included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
---------------------------------
HISTORICAL PRO FORMA
------------- -----------------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................... $123,188 $149,749
Gross profit................................................ 29,754 36,240
Operating income............................................ 4,914 10,724
Interest expense(1)......................................... 12,567 15,671
Net loss.................................................... (5,515) (3,738)
OTHER FINANCIAL DATA:
EBITDA(2)(3)................................................ 16,820 26,144
EBITDA margin(4)............................................ 13.7% 17.5%
Depreciation and amortization............................... 11,906 15,420
Capital expenditures........................................ 10,260 11,677
Ratio of earnings to fixed charges(5)....................... -- --
Ratio of EBITDA to interest expense(1)...................... 1.3x 1.7x
Ratio of net debt to EBITDA(3)(6)........................... 8.0x 5.1x
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
HISTORICAL
-----------------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 313
Working capital............................................. 3,844
Total assets................................................ 206,391
Total debt.................................................. 134,548
Stockholders' equity........................................ 36,132
</TABLE>
- ------------------------
(1) Interest expense is shown net of historical and pro forma interest income of
$245 and $298, respectively. Both historical and pro forma interest expense
include $1,051 of amortization of deferred financing fees.
(2) Historical EBITDA is defined as operating income plus depreciation and
amortization of $11,906. Pro forma EBITDA is defined as pro forma operating
income plus depreciation and amortization of $15,420. EBITDA is not a
measure of performance under generally accepted accounting principles. While
EBITDA should not be used in isolation or as a substitute for net income,
cash flows from operating activities or other income or cash flow statement
data prepared in accordance with generally accepted accounting principles,
or as a measure of profitability or liquidity, management believes that it
may be used by certain investors as supplemental information to evaluate a
company's financial performance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In addition, the
definition of EBITDA used in this prospectus may not be comparable to the
definition of EBITDA used by other companies.
(3) EBITDA includes a jet aircraft lease expense of $186. This lease was
terminated at closing in connection with our acquisition of General
Automation pursuant to the terms of the purchase agreement. Excluding the
effects of this lease for the entire period, EBITDA would have been $17,006
and $26,330, respectively, for historical 1999 and pro forma 1999 and the
ratio of net debt to EBITDA would have been 7.9x and 5.1x, respectively, for
historical 1999 and pro forma 1999.
(4) EBITDA margin is calculated by dividing EBITDA for the period by net sales
for the period, expressed as a percentage.
(5) Earnings is defined as pre-tax income plus fixed charges, excluding
capitalized interest and preferred stock dividend requirements. Fixed
charges are defined as the sum of all interest expense (whether capitalized
or expensed), the amortization of debt issue costs and discount or premium
relating to any indebtedness (whether expensed or capitalized), the interest
portion of rental expense, and preferred stock dividend requirements for
majority-owned subsidiaries. For historical and pro forma 1999, earnings
were insufficient to cover fixed charges by $7,645 and $4,811, respectively.
(6) Net debt is defined as total debt less cash and cash equivalents.
(FOOTNOTES ON NEXT PAGE)
8
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS SET FORTH BELOW AS WELL AS
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS PRIOR TO ACCEPTING THE EXCHANGE
OFFER.
RISK FACTORS ASSOCIATED WITH THE NOTES
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING NOTES FOR EXCHANGE NOTES IN THE EXCHANGE
OFFER, YOUR EXCHANGE NOTES WILL CONTINUE TO BE SUBJECT TO SIGNIFICANT
RESTRICTIONS ON TRANSFER, AND MAY BE SUBJECT TO A LIMITED TRADING MARKET AND A
SIGNIFICANT DIMINUTION IN VALUE.
If you do not exchange your outstanding notes for the exchange notes in the
exchange offer, you will continue to be subject to the restrictions on transfer
described in the legend on your outstanding notes. In general, you may only
offer or sell the outstanding notes if they are registered under the Securities
Act and applicable state securities laws, or offered or sold pursuant to an
exemption from such requirements. We do not intend to register the outstanding
notes under the Securities Act. To the extent other outstanding notes are
tendered and accepted in the exchange offer, the trading market, if any, for the
remaining outstanding notes would be adversely affected and there could be a
significant diminution in the value of the outstanding notes as compared to the
value of the exchange notes. See "The Exchange Offer--Consequences of the
Failure to Exchange."
AN ACTIVE PUBLIC MARKET MAY NOT DEVELOP FOR THE EXCHANGE NOTES, WHICH COULD
ADVERSELY AFFECT THE MARKET PRICE AND LIQUIDITY OF THE EXCHANGE NOTES.
The exchange notes constitute securities for which there is no established
trading market. We do not intend to list the exchange notes on any securities
exchange or to seek approval for quotation through any automated quotation
system, and no active public market for the exchange notes is currently
anticipated. If a market for the exchange notes should develop, the exchange
notes could trade at a discount from their principal amount and they may be
difficult to sell. Future trading prices of the exchange notes will depend on
many factors, including prevailing interest rates, our operating results and the
market for similar securities. As a result, we can not give you any assurance
that you will be able to resell any exchange notes or, if you are able to resell
the price at which you will be able to do so.
IF YOU PARTICIPATE IN THE EXCHANGE OFFER FOR THE PURPOSE OF PARTICIPATING IN A
DISTRIBUTION OF THE EXCHANGE NOTES YOU COULD BE DEEMED AN UNDERWRITER UNDER THE
SECURITIES ACT.
If you exchange your outstanding notes in the exchange offer for the purpose
of participating in a distribution of the exchange notes, you may be deemed an
underwriter under the Securities Act. If so, you will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the exchange notes.
OUR INABILITY TO GENERATE SUFFICIENT CASH COULD RESULT IN A FAILURE TO MAKE
REQUIRED REPURCHASES OF TENDERED NOTES FOR A CHANGE OF CONTROL.
Upon a change of control, we will be required to make an offer to purchase
all outstanding notes and exchange notes. We would be required to purchase all
of the notes at 101% of their principal amount plus accrued and unpaid interest
up to, but not including, the date of repurchase. The source of funds for any
such purchase would be our available cash or cash generated from other sources.
However, we can not assure you that we will have or will be able to borrow
sufficient funds at the time of any change of control to make any required
repurchases of tendered notes. We also can not assure you that restrictions in
our credit facilities or other senior debt we may incur in the future would
permit us to make such required repurchases. See "Description of Exchange
Notes--Change of Control."
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RISK FACTORS ASSOCIATED WITH OUR INDEBTEDNESS
OUR SUBSTANTIAL DEBT AND THE SIGNIFICANT DEMANDS ON OUR CASH RESOURCES COULD
AFFECT OUR ABILITY TO MAKE PAYMENTS ON THE EXCHANGE NOTES AND ACHIEVE OUR
BUSINESS PLAN.
SUBSTANTIAL DEBT. We have incurred a substantial amount of indebtedness
which requires significant interest payments. As of December 31, 1999, we had
total consolidated debt of $134.5 million and net interest expense of
approximately $12.6 million for the year then ended. Subject to the limits
contained in the indenture governing the notes and the new credit facilities, we
and our subsidiaries may incur additional indebtedness from time to time to
finance capital expenditures, investments or acquisitions or for other general
corporate purposes.
DEMANDS ON CASH RESOURCES. We have substantial demands on our cash
resources in addition to operating expenses and interest expense on the notes,
including, among others, interest and amortization payments under our credit
facilities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
EFFECTS ON YOUR INVESTMENTS AND OUR BUSINESS STRATEGY. Our level of
indebtedness and these significant demands on our cash resources could have
important effects on your investment in the notes. For example they could:
- make it more difficult for us to satisfy our obligations with respect to
the notes and our secured indebtedness;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the amount of
our availability of our cash flow available for working capital, capital
expenditures, acquisitions and other general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
industry (including the pursuit of our growth strategy);
- place us at a competitive disadvantage compared to our competitors that
have fewer debts and significantly greater operating and financing
flexibility than we do;
- limit, along with the financial and other restrictive covenants applicable
to our indebtedness, among other things, our ability to borrow additional
funds even when necessary to maintain adequate liquidity;
- increase our vulnerability to general adverse economic and industry
conditions; and
- result in an event of default upon a failure to comply with these
covenants which, if not cured or waived, could have a material adverse
effect on our business, financial condition or results of operations.
Our ability to pay interest on the notes, to repay portions of our long-term
indebtedness including under the notes and the credit facilities, and to satisfy
our other debt obligations will depend upon our future operating performance and
the availability of refinancing indebtedness, which will be affected by the
instruments governing our indebtedness, including the indenture and the credit
facilities, prevailing economic conditions and financial, business and other
factors, certain of which are beyond our control.
If we are unable to service our indebtedness and fund our business, we will
be forced to adopt an alternative strategy that may include:
- reducing or delaying capital expenditures;
- seeking additional debt financing or equity capital;
- selling assets; or
- restructuring or refinancing our indebtedness.
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We cannot assure you that any such strategy could be effected on terms
satisfactory to us or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
EFFECT OF ADDITIONAL DEBT. Subject to the limits of our debt instruments,
we may incur additional indebtedness from time to time to finance capital
expenditures, investments or acquisitions for other purposes, including the
borrowing of amounts repaid under our credit facilities. This could further
exacerbate the risks described below.
THE INDENTURE AND OUR CREDIT FACILITIES RESTRICT OUR ABILITY AND THE ABILITY OF
SOME OF OUR SUBSIDIARIES TO ENGAGE IN SOME BUSINESS TRANSACTIONS.
INDENTURE. The indenture restricts our ability and the ability of some of
our subsidiaries to, among other things:
- incur additional debt;
- pay dividends on or redeem or repurchase capital stock;
- issue or allow any person to own preferred stock of subsidiaries;
- incur or permit to exist indebtedness senior to the notes, but
subordinated to any of our other indebtedness;
- in the case of non-guarantor subsidiaries, guarantee debt without also
guaranteeing the notes;
- in the case of restricted subsidiaries, create or permit to exist dividend
or payment restrictions with respect to us;
- make investments;
- incur or permit to exist liens;
- enter into transactions with affiliates;
- merge, consolidate or amalgamate with another company; and
- transfer or sell assets.
CREDIT FACILITIES. The credit facilities also contain similar covenants, as
well as a number of financial covenants requiring us to meet financial ratios
and financial condition tests. Our ability to borrow under our revolving credit
facility depends upon satisfaction of these covenants and our borrowing base
requirements. Our ability to meet these covenants and requirements can be
affected by events beyond our control. There can be no assurance that we will
meet these requirements.
EFFECT OF BREACH. Our failure to comply with the obligations and covenants
in the credit facilities or the indenture could result in an event of default
under the credit facilities or the indenture that, if not cured or waived, could
terminate our ability to borrow under the revolving credit facility, could
permit acceleration of the relevant debt and acceleration of debt under other
instruments and, in the case of the credit facilities, could permit foreclosure
on any collateral granted.
THE EXCHANGE NOTES AND SUBSIDIARY GUARANTEES ARE JUNIOR IN RIGHT OF PAYMENT TO
ALL OF OUR AND OUR SUBSIDIARY GUARANTOR'S INDEBTEDNESS, WHICH COULD ADVERSELY
AFFECT YOUR INVESTMENT.
The payment of principal, premium, if any, interest and additional interest,
if any, on the exchange notes and the subsidiary guarantees will, to the extent
set forth in the indenture, be subordinated in right of payment to all of our
and the subsidiary guarantors' indebtedness, including under the credit
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facilities, except any future indebtedness that expressly provides that it ranks
equal with, or junior in right of payment to, the exchange notes and the
subsidiary guarantees.
SUBSTANTIALLY ALL OF OUR ASSETS AND THOSE OF OUR SUBSIDIARIES SECURE OTHER LONG
TERM DEBT WHICH COULD REQUIRE US TO SATISFY THOSE OBLIGATIONS BEFORE THE
EXCHANGE NOTES IN THE EVENT OF BANKRUPTCY, LIQUIDATION OR REORGANIZATION.
The credit facilities are secured by, among other things, substantially all
of our assets and those of our subsidiaries. Consequently, upon any distribution
to our creditors or the creditors of a subsidiary guarantor in a bankruptcy,
liquidation or reorganization or similar proceeding relating to us or such
subsidiary guarantor or our or its property, the holders of our and its senior
debt, including the lenders under our credit facilities, will be entitled to be
paid in full in cash before any payment may be made with respect to the exchange
notes. Because we and such subsidiary guarantor may not have sufficient funds or
assets to pay all of our or its creditors, holders of exchange notes may receive
less, ratably, than the holders of senior debt.
In addition, the payment of principal, premium, if any, interest and
additional interest, if any, on the exchange notes will be prohibited in the
event of a payment default on any of our or a subsidiary guarantor's senior debt
and may be blocked, at the option of the holders of such senior debt, for up to
179 of 180 consecutive days in the event of specified non-payment defaults.
As of March 21, 2000, we had approximately $144.6 million of consolidated
senior debt outstanding, excluding $3.7 million of availability under our
revolving credit facility. In addition, subject to the terms of the indenture
and the credit facilities, we will be permitted to borrow substantial additional
indebtedness, including senior debt, in the future.
RISK FACTORS ASSOCIATED WITH PRECISION PARTNERS, INC.
WE ARE STRUCTURED AS A HOLDING COMPANY AND WE DEPEND ON OUR SUBSIDIARIES IN
ORDER TO SERVICE OUR DEBT.
We are now, and continue to be, structured as a holding company. Our only
significant asset is the capital stock or other equity interests of our
operating subsidiaries. As a holding company, we conduct all of our business
through our subsidiaries. Consequently, our cash flow and ability to service our
debt obligations, including the exchange notes, are dependent upon the earnings
of our operating subsidiaries and the distribution of those earnings to us, or
upon loans, advances or other payments made by these subsidiaries to us. The
ability of our subsidiaries to pay dividends or make other payments or advances
to us will depend upon their operating results and will be subject to applicable
laws and contractual restrictions contained in the instruments governing their
indebtedness, including our credit facilities and the indenture. Although the
indenture will limit the ability of these subsidiaries to enter into consensual
restrictions on their ability to pay dividends and make other payments to us,
these limitations will be subject to a number of significant qualifications. See
"Description of Exchange Notes--Certain Covenants--Limitations on Dividend and
Other Payment Restrictions Affecting Subsidiaries." There can be no assurance
that the earnings of our operating subsidiaries will be adequate for us to
service our debt obligations, including the exchange notes.
BECAUSE OF OUR LIMITED OPERATING HISTORY, AND THE NUMBER OF ACQUISITIONS WE HAVE
MADE, WE BELIEVE THAT HISTORICAL INFORMATION REGARDING OUR COMPANY PRIOR TO
MARCH 1999 AND FOR OUR PREDECESSOR FOR ACCOUNTING PURPOSES, MID STATE, IS OF
LITTLE RELEVANCE IN UNDERSTANDING OUR BUSINESS AS CURRENTLY CONDUCTED.
Precision Partners, L.L.C. was incorporated in September 1998 and we were
incorporated in February 1999 for the sole purpose of completing acquisitions.
Until the acquisitions of Mid State and
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Galaxy in September 1998, Precision Partners, L.L.C. had substantially no
operations and, until the consummation of the reorganization and the
acquisitions of Certified, Calbrit, Nationwide and General Automation in March
1999, we had substantially no operations. As a result, we believe the historical
financial information presented in this prospectus, other than for 1999, is of
limited relevance in understanding what our results of operations, financial
position or cash flows would have been for the historical periods presented had
we in fact been organized and owned all of our current subsidiaries. See "Pro
Forma Financial Information," "Selected Historical Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
THE SUCCESS OF OUR ACQUISITION STRATEGY DEPENDS ON THE AVAILABILITY OF SUITABLE
ACQUISITION CANDIDATES, DIVERSION OF MANAGEMENT TIME AND RISK OF UNDISCLOSED
LIABILITIES.
A significant aspect of our strategy is to continue to pursue select
strategic acquisitions of companies that we believe can benefit from our
operations, management and access to capital and enhance our relationships with
existing customers or augment our manufacturing capabilities. Our ability to
grow by acquisition is dependent upon, and may be limited by, the availability
of suitable acquisition candidates and capital, and the restrictions contained
in the new credit facilities, the indenture and any future financing
arrangements. In addition, growth by acquisition involves risks that could
adversely affect our operating results, including the substantial amount of
management time that may be diverted from operations in order to pursue and
complete such acquisitions, difficulties in managing the additional operations
and personnel of acquired companies and the potential loss of key employees of
acquired companies. There can be no assurance that we will be able to obtain the
capital necessary to pursue our growth strategy or consummate acquisitions on
satisfactory terms, if at all. Possible future acquisitions could result in the
incurrence of additional debt, costs, contingent liabilities and amortization
expenses related to goodwill and other intangible assets, all of which could
materially adversely affect our business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
Although we perform a due diligence investigation of each business that we
acquire, there may be liabilities of the acquired companies, including Mid
State, Galaxy, Certified, General Automation, Nationwide and Gillette, that we
fail or are unable to discover during our due diligence investigation and for
which we, as a successor owner, may be responsible. In connection with
acquisitions, we generally seek to minimize the impact of these liabilities by
obtaining indemnities and warranties from the seller which may be supported by
deferring payment of a portion of the purchase price. However, these indemnities
and warranties, if obtained, may not fully cover the liabilities due to their
limited scope, amount, or duration, the financial limitations of the indemnitor
or warrantor, or other reasons.
OUR SUCCESS DEPENDS ON OUR ABILITY TO SUCCESSFULLY OPERATE OUR SUBSIDIARIES ON A
COMBINED BASIS.
Mid State, Galaxy, Certified, Nationwide, General Automation and Gillette
previously operated independently of one another and there can be no assurance
that we will be able to effectively manage these six operating companies on a
combined basis. In addition, to the extent management time may be diverted to
any one or more of the companies, the other operating companies may be adversely
affected. A failure by us to operate these businesses profitably or to manage
them effectively on a combined basis could have a material adverse effect on our
results of operations and financial condition.
THE SUCCESS OF OUR BUSINESS STRATEGY TO REALIZE A NUMBER OF CROSS SELLING
OPPORTUNITIES COULD BE AFFECTED BY A NUMBER OF FACTORS BEYOND OUR CONTROL.
As part of our business strategy, we intend to capitalize on a number of
cross-selling opportunities we believe exist as a result the complementary
customer bases and manufacturing capabilities of the
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acquired companies and to implement certain operating improvements. Our ability
to implement and realize the benefits of this strategy could be affected by a
number of factors beyond our control, such as operating difficulties, increased
operating costs, regulatory developments, general economic conditions, increased
competition, or the inability to obtain adequate financing for our operations on
suitable terms. In addition, after gaining experience with our operations under
this strategy, we may decide to alter or discontinue certain aspects of it. Any
failure to implement aspects of our strategy may adversely affect our results of
operations, financial condition and ability to service debt, including our
ability to make principal and interest payments on the notes. See
"Business--Business Strategy."
OUR INABILITY TO ACCESS ADDITIONAL CAPITAL COULD HAVE A NEGATIVE IMPACT ON OUR
GROWTH STRATEGY.
Our growth strategy will require additional capital investment. Capital will
be required for, among other purposes, completing acquisitions, managing
acquired companies, acquiring new equipment and maintaining the condition of our
existing equipment. We intend to pay for future acquisitions using cash, capital
stock, debt financings and/or assumption of indebtedness. However, our ability
to make acquisitions and the manner in which they are financed will be limited
by the covenants contained in the indenture and our credit facilities. To the
extent that cash generated internally and cash available under our credit
facilities is not sufficient to fund capital requirements, we will require
additional debt and/or equity financing. There can be no assurance, however,
such financing will be available or, if available, will be available on terms
satisfactory to us. Future debt financings, if available, may result in
increased interest and amortization expense, increased leverage and decreased
income available to fund further acquisitions and expansion, and may limit our
ability to withstand competitive pressures and render us more vulnerable to
economic downturns. If we fail to obtain sufficient additional capital in the
future, we could be forced to curtail our growth strategy by reducing or
delaying capital expenditures and acquisitions, selling assets or restructuring
or refinancing our indebtedness. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
A LOSS OF KEY EMPLOYEES AND HIGHLY SKILLED WORKERS COULD ADVERSELY AFFECT OUR
BUSINESS.
Some of our executive officers are key to our management and direction. Our
future success will depend on our ability to retain capable management. To
assist with the integration of the operations of our subsidiaries, we have
retained the services of key personnel of these companies. The success of our
operations may depend, in part, on the successful retention, at least initially,
of these key personnel, as well as our ability to attract and retain additional
talented personnel. Although we believe we will be able to attract and retain
talented personnel and that we could replace key personnel should the need
arise, the inability to attract or retain such personnel could have a material
adverse effect on our business. In addition, because our products and processes
are complex and require a high level of precision, we are generally dependent on
an educated and trained workforce. We would be adversely affected by a shortage
of skilled employees. See "Management--Directors and Executive Officers."
FAILURE TO MAINTAIN RELATIONSHIPS WITH OUR LARGER CUSTOMERS AND FAILURE BY OUR
CUSTOMERS TO CONTINUE TO PURCHASE EXPECTED QUANTITIES DUE TO CHANGES IN MARKET
CONDITIONS COULD HAVE AN ADVERSE EFFECT ON OUR OPERATIONS.
Our largest customer, General Electric, accounted for approximately 26.5% of
our 1999 net sales and our top ten customers accounted for approximately 67% of
our 1999 net sales. The termination by General Electric or any one or more of
our other top 10 customers of its relationship with us could have a material
adverse effect upon our business, financial condition and results of operations.
In addition, we have recently been awarded long-term contracts with
Caterpillar and Dana. We currently anticipate that we will need to enter into up
to approximately $35 million of new operating leases in connection with
financing the new equipment necessary to meet the production requirements
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for these contracts. To the extent we are unable to purchase, integrate and make
operational this equipment on a cost-effective or timely basis, or to the extent
the costs associated with purchasing, integrating or making operational this
equipment are higher than we currently anticipate, our relationship with these
customers and our business and results of operations could be negatively
impacted.
OUR REVENUES AND OPERATING RESULTS MAY BE SUBJECT TO SIGNIFICANT FLUCTUATION.
A significant portion of our revenues is derived from new projects and
contracts, the timing of which is subject to a variety of factors beyond our
control, including customer budgets and modifications in customer products. We
cannot predict the degree to which, on a consolidated basis, these trends will
continue. A portion of our operating expenses are relatively fixed. Because we
typically do not enter into long-term contracts or have volume commitments with
our customers, we must anticipate the future volume of orders based upon the
historic purchasing patterns of our customers and upon discussions with our
customers as to their future requirements. Cancellations, reductions or delays
in orders by a customer or group of customers could have a material adverse
effect on our business, financial condition or results of operations.
Additionally, we may periodically incur cost increases due to hiring and
training of new employees in anticipation of future growth. The size, timing and
integration of possible future acquisitions may also cause substantial
fluctuations in operating results from quarter to quarter. As a result,
operating results for any fiscal quarter may not be indicative of the results
that may be achieved for any subsequent fiscal quarter or for a full fiscal
year.
THERE MAY BE CIRCUMSTANCES IN WHICH THE INTERESTS OF OUR INVESTORS COULD BE IN
CONFLICT WITH YOUR INTERESTS AS A HOLDER OF EXCHANGE NOTES.
Saunders, Karp & Megrue, L.P., a private equity firm, and its co-investors,
including Carlisle Enterprises L.P. and, Harvey Equity Partners, L.L.C., also
private equity firms, members of our management team, employees and some of the
selling stockholders of companies we have acquired or will acquire in the
acquisitions, indirectly own all of our equity securities. In addition, funds
sponsored by Saunders, Karp & Megrue own indirectly 66.8% of our outstanding
equity securities and, pursuant to our bylaws, Saunders, Karp & Megrue has the
right to appoint three of our six directors and the right to have one of its
appointees exercise two votes when all other directors have the right to only
one vote. Carlisle, Harvey and the members of our management team who have
invested in our company each have the right to appoint one of the remaining
three directors. As a result, circumstances may occur in which the interests of
Saunders, Karp & Megrue and/or the other investors could be in conflict with
your interests as a holder of exchange notes. In addition, Saunders, Karp &
Megrue and/or the other investors may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of exchange notes.
We may from time to time engage in transactions with related parties and
affiliates which include, among other things, business arrangements, lease
arrangements for certain manufacturing facilities and offices and the payment of
fees or commissions for the transfer of manufacturing by one operating company
to another. Although the indenture will require that these types of transactions
be on terms no less favorable to us or the applicable subsidiary than those
which could be obtained on an arms' length basis from third parties, there can
be no assurance that these transactions will not adversely affect our business,
financial condition or results of operations. See "Related Party Transactions."
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SIGNIFICANT COMPETITION FOR PRECISION PART MANUFACTURING OUTSOURCED BY ORIGINAL
EQUIPMENT MANUFACTURERS MAY AFFECT OUR ABILITY TO SUCCEED.
We operate in an industry which is highly fragmented and competitive. A
variety of suppliers with different subsets of our manufacturing capabilities
compete to supply the stringent demands of large original equipment
manufacturers. In addition, our customers are continually seeking to consolidate
their business among one or more "Preferred" or "Qualified" suppliers. If any
customer becomes dissatisfied with our prices, quality or timeliness of
delivery, among other things, it could award future business or, in an extreme
case, move existing business to our competitors. We cannot assure you that our
products will continue to compete successfully with the products of our
competitors, including original equipment manufacturers themselves, many of
which are significantly larger and have greater financial and other resources
than we do. See "Business--Competition."
THE CYCLICAL NATURE OF THE INDUSTRIES WE CURRENTLY SERVE COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR COMPANY.
A majority of our revenues are derived from customers which are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions, such as the construction, aerospace and automotive
industries. General economic or industry specific downturns could have a
material adverse effect on our company and our business, results of operations
and financial condition.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO OBTAIN RAW
MATERIALS AND COMPONENTS FROM OUR SUPPLIERS ON FAVORABLE TERMS.
Generally, our major raw materials consist of traditional materials such as
steel, aluminum, iron, copper, magnesium and bronze, as well as exotic and
difficult to machine materials such as titanium, inconel, invar and hastelloy. A
majority of our raw materials are supplied by our customers on consignment. Raw
materials not supplied by our customers are purchased from several suppliers.
Although all of these materials were available in adequate quantities to meet
our production demands in 1998 and 1999, we can give you no assurance that such
materials will be available in adequate quantities in the future.
We do not presently anticipate any raw material shortages which would
significantly affect production. However, the lead times between the placement
of orders for certain raw materials and actual delivery to us may vary
significantly and we may from time to time be required to order raw materials in
quantities and at prices less than optimal to compensate for the variability of
lead times of delivery. Because we maintain a relatively small inventory of raw
materials and component parts, our business could be adversely affected if we
are unable to obtain these raw materials and components from our suppliers on
favorable terms.
OUR BUSINESS COULD BE ADVERSELY AFFECTED TO THE EXTENT THE U.S. GOVERNMENT
TERMINATED OR MODIFIED A CONTRACT WITH US OR ONE OF OUR CUSTOMERS.
We are generally not a direct party to any contracts with the U.S.
Government. However, a portion of our sales are to customers who use the parts,
assemblies or tooling we supply to them to fill orders under U.S. government
contracts to which they are a party. U.S. government contracts have significant
inherent risks, including:
- the ability of the U.S. government to terminate a contract for
convenience, in which case the other party could be limited to receiving
only costs already incurred or committed;
- modification of U.S. government contracts due to lack of Congressional
funding or changes in such funds; and
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- an extensive and complex regulatory structure, which could subject the
other party to contract termination, civil and criminal penalties and in
some cases, suspension or disbarment from future U.S. government
contracts.
To the extent the U.S. government terminates or modifies a contract with one
of our customers, we could be adversely affected if the affected customer
reduced its purchases from us as a result. In addition, in the few instances
where we are a direct party to a U.S. government contract, the inherent risks
described above, as well as risks associated with the competitive bidding
atmosphere under which U.S. government contracts are awarded and unreimbursed
cost overruns in fixed-price contracts, could have a material adverse effect on
our results of operations and financial condition.
OUR EQUIPMENT, FACILITIES AND OPERATIONS ARE SUBJECT TO NUMEROUS ENVIRONMENTAL
AND OTHER GOVERNMENT REGULATIONS WHICH MAY BECOME MORE STRINGENT IN THE FUTURE
AND MAY RESULT IN INCREASED LIABILITY AND INCREASED CAPTIAL EXPENDITURES.
Our equipment, facilities and operations are subject to increasingly complex
and stringent federal, state and local laws and regulations pertaining to
protection of human health and the environment. These include, among other
things, the discharge of contaminants into the environment and the handling and
disposition of wastes (including industrial, solid and hazardous wastes). In
addition, we are required to obtain and maintain regulatory approvals in the
United States in connection with our operations. Many environmental laws and
regulations provide for substantial fines and criminal sanctions for violations.
It is difficult to predict the future development of such laws and regulations
or their impact on future earnings and operations, but we anticipate that these
laws and regulations will continue to require increased capital expenditures
because environmental standards will become more stringent. We cannot assure you
that material costs or liabilities will not be incurred.
Certain environmental laws provide for strict, joint and several liability
for investigation and remediation of spills and other releases of hazardous
materials. These laws typically impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of any hazardous
materials. Persons who "arrange", as defined under these laws, for the disposal
or treatment of hazardous materials also may be liable for the costs of
investigation, removal or remediation of such materials at the disposal or
treatment site, regardless of whether the affected site is owned or operated by
them. Such liability is strict, and may be joint and several.
Because we own and operate a number of facilities, and because we arrange
for the disposal of hazardous materials at many disposal sites, we may incur
costs for investigation, removal and remediation, as well as capital costs
associated with compliance with environmental laws and regulations. Although
such environmental costs have not been material in the past and are not expected
to be material in the future, changes in environmental laws and regulations or
unexpected investigations and clean-up costs could have a material adverse
effect on our business, financial condition or results of operations. See
"Business--Environmental and Safety Regulation."
A GUARANTEE COULD BE VOIDED IF THE GUARANTOR FRAUDULENTLY TRANSFERRED THE
GUARANTEE AT THE TIME IT INCURRED THE INDEBTEDNESS, WHICH COULD RESULT IN
NOTEHOLDERS BEING ABLE TO RELY ONLY UPON US TO SATISFY CLAIMS.
Under the U.S. bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee can be voided, or claims in respect of a guarantee
may be subordinated to all other debts of that guarantor if, among other things,
the guarantor, at the time it incurred the indebtedness evidenced by its
guarantee:
- intended to hinder, delay or defraud any present or future creditor; or
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- received less than reasonably equivalent value or fair consideration for
the incurrence of such guarantee; and
- was insolvent or rendered insolvent by reason of such incurrence;
or
- was engaged in a business or transaction for which the guarantor's
remaining assets constituted unreasonably small capital; or
- intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they mature.
In addition, any payment by that guarantor pursuant to its guarantee could be
voided and required to be returned to the guarantor or to a fund for the benefit
of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the governing law. Generally, however, a guarantor
would be considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater than
the fair saleable value of all of its assets, or
- if the present fair saleable value of its assets were less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature, or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that the subsidiary guarantees are being incurred
for proper purposes and in good faith and that each subsidiary guarantor, after
giving effect to its guarantee of the notes, will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and will
not have incurred debts beyond its ability to pay such debts as they mature.
There can be no assurance, however, as to what standard a court would apply in
making such determinations or that a court would agree with our conclusions in
this regard.
18
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the offering of the outstanding notes, we entered into a
registration rights agreement with the initial purchasers of the outstanding
notes. We are making this exchange offer to satisfy our obligations under the
registration rights agreement.
TERMS OF THE EXCHANGE
We are offering to exchange, upon the terms and subject to the conditions
set forth in this prospectus and in the accompanying letter of transmittal,
exchange notes for an equal principal amount of outstanding notes. The terms of
the exchange notes are identical in all material respects to those of the
outstanding notes, except for the transfer restrictions and registration rights
relating to the outstanding notes. The exchange notes will be entitled to the
benefits of the indenture. See "Description of the Notes."
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered or accepted for exchange. As of the
date of this prospectus, $100 million aggregate principal amount of the
outstanding notes is outstanding. Outstanding notes tendered in the exchange
offer must be in denominations of a minimum principal amount of $1,000 or any
integral multiple thereof.
Based on certain interpretive letters issued by the staff of the SEC to
third parties in unrelated transactions, holders of outstanding notes, except
any holder who is an "affiliate" of ours within the meaning of Rule 405 under
the Securities Act, who exchange their outstanding notes for exchange notes
pursuant to the exchange offer generally may offer the exchange notes for
resale, resell the exchange notes and otherwise transfer the exchange notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act, PROVIDED that the exchange notes are acquired in the
ordinary course of the holders' business and such holders are not participating
in, and have no arrangement or understanding with any person to participate in,
a distribution of the exchange notes.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where the outstanding notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. See "Plan of Distribution." In addition,
to comply with the securities laws of individual jurisdictions, if applicable,
the exchange notes may not be offered or sold unless they have been registered
or qualified for sale in the jurisdiction or an exemption from registration or
qualification is available and complied with. We have agreed, pursuant to our
registration rights agreement to register or qualify the exchange notes for
offer or sale under the securities or blue sky laws of the jurisdictions you
request in writing. If you do not exchange such outstanding notes for exchange
notes pursuant to the exchange offer, your outstanding notes will continue to be
subject to the restrictions on transfer contained in the legend.
If any holder of the outstanding notes is an affiliate of ours, is engaged
in or intends to engage in or has any arrangement or understanding with any
person to participate in the distribution of the exchange notes to be acquired
in the exchange offer, the holder could not rely on the applicable
interpretations of the SEC and must comply with the registration requirements of
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the registration requirement of the Securities Act and
applicable state securities laws.
19
<PAGE>
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The exchange offer expires on the expiration date, which is 5:00 p.m., New
York City time, on , 2000 unless we in our sole discretion extend
the period during which the exchange offer is open.
We reserve the right to extend the exchange offer at any time and from time
to time prior to the expiration date by giving written notice to The Bank of New
York, the exchange agent, and by public announcement communicated by no later
than 9:00 a.m. on the next business day following the previously scheduled
expiration date, unless otherwise required by applicable law or regulation, by
making a release to the Dow Jones News Service. During any extension of the
exchange offer, all outstanding notes previously tendered will remain subject to
the exchange offer and may be accepted for exchange by us.
The exchange date will be the second business day following the expiration
date. We expressly reserve the right to:
- terminate the exchange offer and not accept for exchange any outstanding
notes for any reason, including if any of the events set forth below under
"--Conditions to the Exchange Offer" shall have occurred and shall not
have been waived by us; and
- amend the terms of the exchange offer in any manner, whether before or
after any tender of the outstanding notes.
If any termination or amendment occurs, we will notify the exchange agent in
writing and will either issue a press release or give written notice to the
holders of the outstanding notes as promptly as practicable.
Unless we terminate the exchange offer prior to 5:00 p.m., New York City
time, on the expiration date, we will exchange the exchange notes for the
tendered outstanding notes on the exchange date. Any outstanding notes not
accepted for exchange for any reason will be returned without expense to the
tendering holder as promptly as practicable after expiration or termination of
the exchange offer. See "--Acceptance of Outstanding Notes for Exchange;
Delivery of Exchange Notes."
This prospectus and the related letter of transmittal and other relevant
materials will be mailed by us to record holders of outstanding notes and will
be furnished to brokers, banks and similar persons whose names, or the names of
whose nominees, appear on the lists of holders for subsequent transmittal to
beneficial owners of outstanding notes.
PROCEDURES FOR TENDERING OUTSTANDING NOTES
The tender of outstanding notes by you pursuant to any one of the procedures
set forth below will constitute an agreement between you and us in accordance
with the terms and subject to the conditions set forth in this prospectus and in
the letter of transmittal.
GENERAL PROCEDURES. You may tender the notes by:
- properly completing and signing the letter of transmittal or a facsimile
and delivering the letter of transmittal together with
-- the certificate or certificates representing the outstanding notes
being tendered and any required signature guarantees, to the
exchange agent at its address set forth in the letter of transmittal
on or prior to the expiration date, or
-- a timely confirmation of a book-entry transfer of the outstanding
notes being tendered, if the procedure is available, into the
exchange agent's account at DTC pursuant to the procedure for
book-entry transfer described below,
20
<PAGE>
- or complying with the guaranteed delivery procedures described below.
If tendered outstanding notes are registered in the name of the signer of
the letter of transmittal and the exchange notes to be issued in exchange
therefor are to be issued, and any untendered outstanding notes are to be
reissued, in the name of the registered holder, the signature of the signer need
not be guaranteed. In any other case, the tendered outstanding notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to us and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a commercial bank or
trust company located or having an office or correspondent in the United States
or by a member firm of a national securities exchange or of the National
Association of Securities Dealers, Inc. or by a member of a signature medallion
program such as "STAMP." If the exchange notes and/or outstanding notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the outstanding notes, the signature
on the letter of transmittal must be guaranteed by an eligible institution.
Any beneficial owner whose outstanding notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender outstanding notes should contact the holder promptly and instruct the
holder to tender outstanding notes on the beneficial owner's behalf. If the
beneficial owner wishes to tender the outstanding notes itself, the beneficial
owner must, prior to completing and executing the letter of transmittal and
delivering the outstanding notes, either make appropriate arrangements to
register ownership of the outstanding notes in the beneficial owner's name or
follow the procedures described in the immediately preceding paragraph. The
transfer of record ownership may take considerable time.
A tender will be deemed to have been received as of the date when:
- the tendering holder's properly completed and duly signed letter of
transmittal accompanied by the outstanding notes is received by the
exchange agent,
- the tendering holder's properly completed and duly signed letter of
transmittal accompanied by a book-entry confirmation is received by the
exchange agent, or
- a notice of guaranteed delivery or letter or facsimile transmission to
similar effect from an eligible institution is received by the exchange
agent.
Issuances of exchange notes in exchange for outstanding notes tendered
pursuant to a notice of guaranteed delivery or letter or facsimile transmission
to similar effect by an eligible institution will be made only against deposit
of the letter of transmittal, the tendered outstanding notes, or book-entry
confirmation, if applicable and any other required documents.
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance for exchange of any tender of outstanding notes will be
determined by us, and will be final and binding. We reserve the absolute right
to reject any or all tenders not in proper form or the acceptances for exchange
of which may, in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any of the conditions of the exchange offer or any
defects or irregularities in tenders of any particular holder whether or not
similar defects or irregularities are waived in the case of other holders.
Neither we, the exchange agent nor any other person will be under any duty to
give notification of any defects or irregularities in tenders or will incur any
liability for failure to give any such notification. Our interpretation of the
terms and conditions of the exchange offer, including the letter of transmittal
and its instructions, will be final and binding.
The method of delivery of outstanding notes and all other documents is at
the election and risk of the tendering holders, and delivery will be deemed made
only when actually received and confirmed by the exchange agent. If the delivery
is by mail, it is recommended that registered mail properly insured with return
receipt requested be used and that the mailing be made sufficiently in advance
of the
21
<PAGE>
expiration date to permit delivery to the exchange agent prior to 5:00 p.m., New
York City time, on the expiration date. As an alternative to delivery by mail,
holders may wish to consider overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the exchange agent prior
to 5:00 p.m., New York City time, on the expiration date. No letter of
transmittal or outstanding notes should be sent to us. Holders may request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect the above transactions for the holders.
BOOK-ENTRY TRANSFER. The exchange agent will make a request to establish an
account with respect to the outstanding notes at the book-entry transfer
facility for purposes of the exchange offer within two business days after the
date of the prospectus, and any financial institution that is a participant in
the book-entry transfer facility's systems may make book-entry delivery of
outstanding notes by causing the book-entry transfer facility to transfer the
outstanding notes into the exchange agent's account at the book-entry transfer
facility in accordance with the book-entry transfer facility's procedures for
transfer.
GUARANTEED DELIVERY PROCEDURES. If you desire to tender outstanding notes
pursuant to the exchange offer, but time will not permit a letter of
transmittal, the outstanding notes or other required documents to reach the
exchange agent on or before the expiration date, or if the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if the exchange agent has received at its office a letter or facsimile
transmission from an eligible institution setting forth the name and address of
the tendering holder, the names in which the outstanding notes are registered,
the principal amount of the outstanding notes being tendered and, if possible,
the certificate numbers of the outstanding notes to be tendered, and stating
that the tender is being made thereby and guaranteeing that within three New
York Stock Exchange trading days after the expiration date, the outstanding
notes, in proper form for transfer, or a book-entry confirmation, as the case
may be, together with a properly completed and duly executed letter of
transmittal and any other required documents, will be delivered by the eligible
institution to the exchange agent in accordance with the procedures outlined
above. Unless outstanding notes being tendered by the above-described method are
deposited with the exchange agent, including through a book-entry confirmation,
within the time period set forth above and accompanied or preceded by a properly
completed letter of transmittal and any other required documents, we may, at our
option, reject the tender. Copies of a notice of guaranteed delivery which may
be used by eligible institutions for the purposes described in this paragraph
are available from the exchange agent.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The letter of transmittal contains, among other things, the following terms
and conditions, which are part of the exchange offer.
The transferring party tendering outstanding notes for exchange thereby
exchanges, assigns and transfers the outstanding notes to us and irrevocably
constitutes and appoints the exchange agent as the transferor's agent and
attorney-in-fact to cause the outstanding notes to be assigned, transferred and
exchanged. The transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the outstanding notes and to
acquire exchange notes issuable upon the exchange of the tendered outstanding
notes and that, when the same are accepted for exchange, we will acquire good
and unencumbered title to the tendered outstanding notes, free and clear of all
liens, restrictions except restrictions on transfer, charges and encumbrances
and not subject to any adverse claim. The transferor also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
exchange agent or us to be necessary or desirable to complete the exchange,
assignment and transfer of tendered outstanding notes. The transferor further
agrees that acceptance of any tendered outstanding notes by us and the issuance
of exchange notes in exchange therefor will constitute performance in full by us
of our obligations under the registration rights agreement and that we will have
no further obligations or liabilities under the registration rights agreement,
except in
22
<PAGE>
certain limited circumstances. All authority conferred by the transferor will
survive the death, bankruptcy or incapacity of the transferor and every
obligation of the transferor will be binding upon the heirs, legal
representatives, successors, assigns, executors, administrators and trustees in
bankruptcy of the transferor.
By tendering outstanding notes and executing the letter of transmittal, the
transferor certifies that:
- it is not an affiliate of Precision Partners, the subsidiary guarantors or
any of our affiliates or, if the transferor is an affiliate, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable;
- the exchange notes are being acquired in the ordinary course of business
of the person receiving the exchange notes, whether or not the person is
the holder;
- the transferor has not entered into an arrangement or understanding with
any other person to participate in the distribution, within the meaning of
the Securities Act, of the exchange notes;
- the transferor is not a broker-dealer who purchased the outstanding notes
for resale pursuant to an exemption under the Securities Act; and
- the transferor will be able to trade the exchange notes acquired in the
exchange offer without restriction under the Securities Act.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such exchange notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Outstanding notes tendered pursuant to the exchange offer may be withdrawn
at any time prior to the expiration date.
For a withdrawal to be effective, a written letter or facsimile transmission
notice of withdrawal must be received by the exchange agent at its address set
forth in the letter of transmittal not later than the close of business on the
expiration date. Any notice of withdrawal must specify the person named in the
letter of transmittal as having tendered outstanding notes to be withdrawn, the
certificate numbers and principal amount of outstanding notes to be withdrawn,
that the holder is withdrawing its election to have such outstanding notes
exchanged and the name of the registered holder of the outstanding notes, and
must be signed by the holder in the same manner as the original signature on the
letter of transmittal, including any required signature guarantees, or be
accompanied by evidence satisfactory to us that the person withdrawing the
tender has succeeded to the beneficial ownership of the outstanding notes being
withdrawn. The exchange agent will return the properly withdrawn outstanding
notes promptly following receipt of notice of withdrawal. Properly withdrawn
outstanding notes may be retendered by following one of the procedures described
under "--Procedures for Tendering Outstanding Notes" above at any time on or
prior to the expiration date. If outstanding notes have been tendered pursuant
to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn outstanding notes and
otherwise comply with the procedures of such facility. All questions as to the
validity of notices of withdrawals, including time of receipt, will be
determined by us, and will be final and binding on all parties.
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the exchange offer, the
acceptance for exchange of outstanding notes validly tendered and not withdrawn
and the issuance of the exchange notes will be
23
<PAGE>
made on the exchange date. For purposes of the exchange offer, we will be deemed
to have accepted for exchange validly tendered outstanding notes when, and if we
have given written notice to the exchange agent.
The exchange agent will act as agent for the tendering holders of
outstanding notes for the purposes of receiving exchange notes from us and
causing the outstanding notes to be assigned, transferred and exchanged. Upon
the terms and subject to the conditions of the exchange offer, delivery of
exchange notes to be issued in exchange for accepted outstanding notes will be
made by the exchange agent promptly after acceptance of the tendered outstanding
notes. Any outstanding notes which have been tendered for exchange but which are
not exchanged for any reason will be returned to the holder without cost to the
holder, or, in the case of outstanding notes tendered by book-entry transfer
into the exchange agent's account at the book-entry transfer facility pursuant
to the book-entry procedures described above, the outstanding notes will be
credited to an account maintained by the holder with the book-entry transfer
facility for the outstanding notes, as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, or any extension
of the exchange offer, we will not be required to issue exchange notes in
exchange for any properly tendered outstanding notes not previously accepted and
may terminate the exchange offer, by oral or written notice to the exchange
agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service, or, at its option, modify or otherwise amend the exchange offer, if:
- there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any
court or governmental agency or other governmental regulatory or
administrative agency or commission
-- seeking to restrain or prohibit the making or consummation of the
exchange offer or any other transaction contemplated by the exchange
offer,
-- assessing or seeking any damages as a result thereof, or
-- resulting in a material delay in our ability to accept for exchange or
exchange some or all of the outstanding notes pursuant to the exchange
offer; or
- the exchange offer shall violate any applicable law or any applicable
interpretation of the staff of the SEC.
The foregoing conditions are for our sole benefit and may be asserted by us
with respect to all or any portion of the exchange offer regardless of the
circumstances, including any action or inaction by us, giving rise to the
condition or may be waived by us in whole or in part at any time or from time to
time in its sole discretion. The failure by us at any time to exercise any of
the foregoing rights will not be deemed a waiver of any such right, and each
right will be deemed an ongoing right which may be asserted at any time or from
time to time. In addition, we have reserved the right, notwithstanding the
satisfaction of each of the foregoing conditions, to terminate or amend the
exchange offer.
Any determination by us concerning the fulfillment or non-fulfillment of any
conditions will be final and binding upon all parties.
In addition, we will not accept for exchange any outstanding notes tendered,
and no exchange notes will be issued in exchange for any outstanding notes, if
at such time any stop order shall be threatened or in effect with respect to the
registration statement of which this prospectus constitutes a part or
qualification of the indenture under the Trust Indenture Act of 1939.
24
<PAGE>
EXCHANGE AGENT
The Bank of New York has been appointed as the exchange agent for the
exchange offer. Questions relating to the procedure for tendering, as well as
requests for additional copies of this prospectus or the letter of transmittal
and requests for notices of guaranteed delivery, should be directed to the
exchange agent addressed as follows:
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED FACSIMILE TRANSMISSION BY HAND/OVERNIGHT DELIVERY:
MAIL: NUMBER:
The Bank of New York (FOR ELIGIBLE INSTITUTIONS The Bank of New York
101 Barclay Street, 7E ONLY) 101 Barclay Street
New York, New York 10286 (212) 815-6339 Corporate Trust Services
Attention: Reorganization Window, Ground Level
Section TO CONFIRM BY TELEPHONE OR New York, New York 10286
FOR Attention: Reorganization
INFORMATION CALL: Section
(212) 815-6337
</TABLE>
Delivery of the letter of transmittal to an address other than as set forth
above, or transmission of instructions via facsimile other than as set forth
above, will not constitute a valid delivery.
The Bank of New York also acts as trustee under the indenture.
SOLICITATION OF TENDERS; EXPENSES
We have not retained any dealer-manager or similar agent in connection with
the exchange offer and we will not make any payments to brokers, dealers or
others for soliciting acceptances of the exchange offer. We will, however, pay
the exchange agent reasonable and customary fees for its services and will
reimburse it for reasonable out-of-pocket expenses in connection therewith. The
expenses to be incurred in connection with the exchange offer, including the
fees and expenses of the exchange agent and printing, accounting and legal fees,
will be paid by us and are estimated at approximately $0.5 million.
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those contained
in this prospectus. If given or made, the information or representations should
not be relied upon as having been authorized by us. Neither the delivery of this
prospectus nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in our affairs since the
respective dates as of which information is given in this prospectus. The
exchange offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of outstanding notes in any jurisdiction in which the making
of the exchange offer or the acceptance would not be in compliance with the laws
of the jurisdiction. However, we may, at our discretion, take any action as we
may deem necessary to make the exchange offer in any jurisdiction and extend the
exchange offer to holders of outstanding notes in the jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the exchange
offer to be made by a licensed broker or dealer, the exchange offer is being
made on behalf of us by one or more registered brokers or dealers which are
licensed under the laws of the jurisdiction.
APPRAISAL RIGHTS
You will not have dissenters' rights or appraisal rights in connection with
the exchange offer.
ACCOUNTING TREATMENT
The exchange notes will be recorded at the carrying value of the outstanding
notes as reflected in the issuer's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting
25
<PAGE>
purposes will be recognized by the issuer upon the exchange of exchange notes
for outstanding notes. Expenses incurred in connection with the issuance of the
exchange notes will be amortized over the term of the exchange notes.
TRANSFER TAXES
If you tender your outstanding notes, you will not be obligated to pay any
transfer taxes in connection therewith except that unless you instruct us to
register exchange notes in the name of, or request outstanding notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered holder, you will be responsible for the payment of any
applicable transfer tax.
INCOME TAX CONSIDERATIONS
You should consult your own tax advisers with respect to your particular
circumstances and with respect to the effects of state, local or foreign tax
laws to which you may be subject. The following discussion is based upon the
provisions of the Internal Revenue Code of 1986, regulations, rulings and
judicial decisions, in each case as in effect on the date of this prospectus,
all of which are subject to change.
The exchange of an outstanding note for an exchange note will not constitute
a taxable exchange. Such an exchange will not result in taxable income, gain or
loss being recognized by you or by us. Immediately after the exchange, you will
have the same adjusted basis and holding period in each exchange note received
as you had immediately prior to the exchange in the corresponding outstanding
note surrendered. See "Income Tax Considerations."
CONSEQUENCES OF FAILURE TO EXCHANGE
As consequence of the offer or sale of the outstanding notes pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws, holders
of outstanding notes who do not exchange outstanding notes for exchange notes
pursuant to the exchange offer will continue to be subject to the restrictions
on transfer of the outstanding notes as set forth in the legend. In general, the
outstanding notes may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. We do not
currently anticipate that we will register the outstanding notes under the
Securities Act.
Upon consummation of the exchange offer, due to the restrictions on transfer
of the outstanding notes and the absence of such restrictions applicable to the
exchange notes, it is likely that the market, if any, for outstanding notes will
be relatively less liquid than the market for exchange notes. Consequently,
holders of outstanding notes who do not participate in the exchange offer could
experience significant diminution in the value of their outstanding notes,
compared to the value of the exchange notes.
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<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. The net proceeds
from the sale of the outstanding notes were approximately $95.3 million, after
deducting discounts, commissions and expenses of the offering. We used these
proceeds, together with borrowings under our credit facilities, an equity
contribution of $10.0 million from our investors and available cash, to finance
the Certified, Calbrit, Nationwide and General Automation acquisitions and to
prepay a term loan. The following table illustrates the sources and uses of
proceeds in connection with the March acquisitions and the sale of the
outstanding notes (in millions):
<TABLE>
<CAPTION>
- ------------------------------------
- ------------------------------------
<S> <C>
Term loan........................... $ 23.0
Cash purchase price for the
Outstanding notes................... $100.0
acquisitions(1)................... 100.7
Equity contribution................. 10.0
Prepayment of indebtedness(2)....... 23.0
Available cash...................... 0.3
Fees and expenses................... 9.6
------
------
Total sources of funds............ $133.3
Total uses of funds............... $133.3
======
======
</TABLE>
- ------------------------
(1) Includes the prepayment of approximately $11.1 of outstanding indebtedness
of Certified plus approximately $0.4 million of related prepayment
penalties.
(2) Consisted of a $23.0 million floating rate term loan with an interest rate
of 7.6% as of February 15, 1999. Amortization payments in respect of this
loan were scheduled to begin December 31, 1999 and continue through
September 30, 2004.
27
<PAGE>
CAPITALIZATION
The following table sets forth our cash and temporary investments and our
consolidated capitalization as at December 31, 1999.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------
(IN MILLIONS)
<S> <C>
Cash and temporary investments.............................. $ 0.3
Debt:
Term loan................................................. 23.0
Revolving credit facility(1).............................. 11.2
12% Senior Subordinated Notes due 2009.................... 100.0
Other long-term debt...................................... 0.3
Total debt.............................................. 134.5
Stockholders equity......................................... 36.1
------
Total capitalization.................................... $170.9
======
</TABLE>
- ------------------------
(1) As at December 31, 1999, $11.2 million of our $25.0 million revolving credit
facility was outstanding. As of the closing date for the sale of the
outstanding notes, no indebtedness was outstanding under this facility. As
of March 21, 2000, $21.3 million was outstanding.
28
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 1999 gives effect to:
- the acquisitions of Certified, Nationwide, General Automation and
Gillette;
- the reorganization under which we received the capital stock of Mid State
and Galaxy as a capital contribution from Precision Partners, L.L.C.; and
- the new credit facilities we entered into in March 1999 and the related
prepayment of an existing term loan,
as if each such transaction had occurred on January 1, 1999. For purposes of the
unaudited pro forma consolidated statement of operations, the historical
financial information of General Automation and Nationwide has been adjusted to
eliminate the effect of assets not acquired and liabilities not assumed in the
relevant acquisition, in each case in accordance with the terms of the purchase
agreement relating to such acquisition.
The unaudited pro forma consolidated statement of operations should be read
in conjunction with our historical financial statements and those of Mid State,
Certified, Nationwide, General Automation and Gillette, including the notes
thereto, in each case included elsewhere in this prospectus, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The adjustments necessary to fairly present this pro forma consolidated
financial information have been made based on available information and in the
opinion of management are reasonable and are described in the accompanying
notes. The pro forma consolidated financial information should not be considered
indicative of actual results that would have been achieved had the transactions
been consummated on the date indicated and do not purport to indicate results of
operations as of any future date or for any future period. We cannot assure you
that the assumptions used in the preparation of the pro forma consolidated
financial information will prove to be correct.
The acquisitions of Mid State, Galaxy, Certified, Nationwide, General
Automation and Gillette were accounted for using the purchase method of
accounting, pursuant to which the purchase price was allocated among the assets
acquired and liabilities assumed in accordance with estimates of fair value as
of the date of acquisition. However, the unaudited pro forma consolidated
statement of operations reflects management's estimates of fair value as of
January 1, 1999 and not at the actual date of acquisition. In addition, the pro
forma adjustments are based upon available information and certain assumptions
that management considers reasonable under the circumstances. Consequently, the
amounts reflected in the unaudited pro forma consolidated statement of
operations are subject to change, which could be significant.
29
<PAGE>
PRECISION PARTNERS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
(HISTORICAL) ------------------------------------------------------------------
CONSOLIDATED CERTIFIED NATIONWIDE GENERAL GILETTE
PRECISION FOR THE THREE FOR THE THREE FOR THE THREE FOR THE EIGHT
PARTNERS, INC. MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED PRO FORMA
DECEMBER 31, 1999 MARCH 19, 1999 MARCH 19, 1999 MARCH 19, 1999 AUGUST 31, 1999 ADJUSTMENTS
----------------- -------------- -------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales................... $123,188 $ 5,739 $6,214 $4,464 $10,144 $ --
Cost of sales............... 93,434 5,110 4,940 2,270 6,810 945 (1)
Selling, general and
administrative expenses... 24,840 1,080 554 509 2,796 (4,263)(2)
Operating income (loss)..... 4,914 (451) 720 1,685 538 3,318
Other income (expense):
Net interest expense...... (12,567) (647) (166) 18 (112) (2,197)(3)
Other, net................ 8 4 (4) -- 128 --
Income (loss) before income
taxes..................... (7,645) (1,094) 550 1,703 554 1,121
Provision (benefit) for
income taxes.............. (2,130) -- -- 18 272 767 (4)
Net income (loss)........... (5,515) (1,094) 550 1,685 282 354
Depreciation................ 8,525 634 453 274 603 831
Amortization................ 3,381 -- -- -- -- 719
EBITDA (5),(6).............. 16,820 183 1,173 1,959 1,141 4,868
<CAPTION>
PRO
FORMA
--------
<S> <C>
Net sales................... $149,749
Cost of sales............... 113,509
Selling, general and
administrative expenses... 25,516
Operating income (loss)..... 10,724
Other income (expense):
Net interest expense...... (15,671)
Other, net................ 136
Income (loss) before income
taxes..................... (4,811)
Provision (benefit) for
income taxes.............. (1,073)
Net income (loss)........... (3,738)
Depreciation................ 11,320
Amortization................ 4,100
EBITDA (5),(6).............. 26,144
</TABLE>
<TABLE>
<S> <C> <C>
- ------------------------
(1) The pro forma adjustments for cost of sales reflect the
following:
Adjustment for additional depreciation for step-up in fair
market value of fixed assets related to the purchase
transactions.............................................. $ 831
Adjustment for new lease terms of facilities renegotiated in
connection with the purchase transaction.................. 114
-------
$ 945
=======
(2) The pro forma adjustments for selling, general and
administrative expenses reflect the following:
Adjustments for termination of executive positions held by
shareholders and related parties as part of the purchase
contract whose positions will not be replaced............. $(4,769)
Adjustment for additional amortization of goodwill related
to the purchase transaction which is being amortized over
twenty years.............................................. 719
Adjustments for professional fees expensed by one of the
acquisitions to negotiate and consummate the purchase
transaction............................................... (213)
-------
$(4,263)
=======
(3) Adjustment to record additional interest expense associated
with the notes offered for exchange herein (net of the
elimination of historical interest expense related to debt
not assumed or refinanced), and amortization of the
related debt issue costs over the ten year term of the
notes totaling $1,051..................................... $(2,197)
=======
(4) Adjustment to record the income tax benefit on pro forma
income before income taxes.
(5) Pro forma EBITDA is defined as operating income plus
depreciation and amortization of $15,420. EBITDA is not a
measure of performance under generally accepted accounting
principles. While EBITDA should not be used in isolation
or as a substitute for net income, cash flows from
operating activities or other income or cash flow
statement data prepared in accordance with generally
accepted accounting principles or as a measure of
profitability or liquidity, management believes that it
may be used by certain investors as supplemental
information to evaluate a company's financial performance.
See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In addition, the
definition of EBITDA used in this prospectus may not be
comparable to the definition of EBITDA used by other
companies.
(6) EBITDA includes the effect of a jet aircraft lease expense
of $186. This lease was terminated at closing in
connection with the acquisition of General Automation
pursuant to the terms of the purchase agreement. Excluding
the effects of this lease for the entire period, EBITDA
would have been $26,330.
</TABLE>
30
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
Prior to the acquisitions of Mid State and Galaxy in September 1998,
Precision Partners, L.L.C. had substantially no operations and, prior to the
completion of the reorganization and acquisitions of Certified, Calbrit,
Nationwide and General Automation in March 1999, we had substantially no
operations. As a result, we believe historical financial information for our
company prior to March 1999 and for Precision Partners, L.L.C. and our
predecessor for accounting purposes, Mid State, is of limited relevance in
understanding what our actual results of operations, financial position or cash
flows would have been for historical periods had we in fact been organized and
owned all five subsidiaries for such periods. In addition, for financial
statement presentation purposes, the reorganization is accounted for as if it
had occurred in September 1998 and we are treated as having commenced operations
at that time in a manner similar to a pooling of interests. See Note 1 to our
consolidated financial statements. The selected historical financial information
should be read in conjunction with our consolidated financial statements and Mid
State, including the notes thereto, included elsewhere in this prospectus, and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
PRECISION
MID STATE (PREDECESSOR) PARTNERS, INC.
--------------------------------------------------- --------------------------------
JANUARY 1, 1998 SEPTEMBER 9, 1998
THROUGH THROUGH
1995 1996 1997 SEPTEMBER 30, 1998 DECEMBER 31, 1998 1999
-------- -------- -------- ------------------ ----------------- ------------
(IN THOUSANDS, EXCEPT RATIO AND DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales...................... $29,824 $28,462 $33,870 $24,106 $12,602 $123,188
Cost of sales.................. 24,206 20,290 24,581 16,326 9,090 93,434
------- ------- ------- ------- ------- --------
Gross profit................... 5,618 8,172 9,289 7,780 3,512 29,754
Selling, general and
administrative expenses...... 4,141 4,322 4,571 3,374 3,134 24,840
------- ------- ------- ------- ------- --------
Operating income............... 1,477 3,850 4,718 4,406 378 4,914
Interest expense, net.......... 108 69 85 37 526 12,567
Other income (expense), net.... 475 1,157 1,220 12 (138) 8
------- ------- ------- ------- ------- --------
Income (loss) before provision
for income taxes............. 1,844 4,938 5,853 4,381 (286) (7,645)
Provision (benefit) for income
taxes........................ 671 1,818 2,310 1,677 109 (2,130)
------- ------- ------- ------- ------- --------
Net income (loss).............. $ 1,173 $ 3,120 $ 3,543 $ 2,704 $ (395) $ (5,515)
======= ======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
PRECISION
MID STATE (PREDECESSOR) PARTNERS, INC.
--------------------------------------------------- --------------------------------
JANUARY 1, 1998 SEPTEMBER 9, 1998
THROUGH THROUGH
1995 1996 1997 SEPTEMBER 30, 1998 DECEMBER 31, 1998 1999
-------- -------- -------- ------------------ ----------------- ------------
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(1)...................... $ 2,287 $ 4,734 $ 5,770 $ 5,212 $ 1,483 $ 16,820
Depreciation and
amortization................. $ 810 $ 884 $ 1,052 $ 806 $ 1,105 $ 11,906
Ratio of earnings to fixed
charges(2)................... 7.2x 20.2x 22.4x 25.6x -- --
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents...... $ 2,638 $ 40 $ 963 $ 313
Working capital................ 14,019 5,769 5,748 3,844
Total assets................... 20,119 11,574 63,321 206,391
Total debt..................... 686 403 23,000 134,548
Stockholders' equity........... 17,094 8,265 31,605 36,132
</TABLE>
- ------------------------
(1) EBITDA is defined as operating income plus depreciation and amortization.
EBITDA is not a measure of performance under generally accepted accounting
principles. While EBITDA should
31
<PAGE>
not be used in isolation or as a substitute for net income, cash flows from
operating activities or other income or cash flow statement data prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability or liquidity, management believes that it may be used by
certain investors as supplemental information to evaluate a company's
financial performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, the definition
of EBITDA used in this prospectus may not be comparable to the definition of
EBITDA used by other companies.
(2) Earnings are defined as pre-tax income plus fixed charges, excluding
capitalized interest and preferred stock dividend requirements. Fixed
charges are defined as the sum of all interest (whether capitalized or
expensed), the amortization of debt issue costs and discount or premium
relating to any indebtedness (whether expensed or capitalized), the interest
portion of rental expense, and preferred stock dividend requirements for
majority-owned subsidiaries. For the period from September 9, 1998 through
December 31, 1998 and for 1999, earnings were insufficient to cover fixed
charges by $286 and $7,645, respectively.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We are a leading contract mechanical manufacturing services supplier of
complex precision metal parts, tooling and assemblies for original equipment
manufacturers. Our broad manufacturing capabilities and highly engineered
processes allow us to meet the critical specifications of our customers across a
wide range of industries. We have earned "Preferred or "Qualified" supplier
status with most of our customers and are predominately the sole-source supplier
to our customers of the parts we manufacture.
Precision Partners, L.L.C. was formed in September 1998 and we were formed
in February 1999 for the sole purpose of consummating acquisitions in the
business of manufacturing and supplying complex precision metal parts, tooling
and assembles for original equipment manufacturers. On September 30, 1998,
Precision Partners, L.L.C. acquired all of the outstanding capital stock of Mid
State and Galaxy. In March 1999, we underwent a corporate reorganization under
which we acuired all of the issued and outstanding capital stock of Mid State
and Galaxy. At the same time, we also purchased all of the issued and
outstanding capital stock of Certified and Calbrit and we purchased
substantially all of the assets and assumed some liabilities of General
Automation and Nationwide. The aggregate purchase price for the March
acquisitions was approximately $100.7 million, excluding fees and expenses, and
was financed through the net proceeds from the sale of the outstanding notes,
borrowings under our credit facilities, an equity contribution and available
cash. In July 1999, we merged Calbrit into Certified and in September 1999 we
acquired Gillette. The purchase price for the Gillette acquisition was
approximately $14.4 million and was financed using existing cash and borrowings
under our revolving credit facility.
Prior to the acquisitions of Mid State and Galaxy, Precision Partners,
L.L.C. had substantially no operations and, prior to the consummation of the
reorganization and the acquisitions of Certified, Calbrit, Nationwide and
General Automation, we had substantially no operations. For financial statement
presentation purposes, and for purposes of the following discussion, the
reorganization is accounted for as if it occurred on September 9, 1998 and we
are treated as having commenced operations at that time. See Note 1 to our
consolidated financial statements. For this reason, the following management's
discussion and analysis relates to the financial condition and results of
operations of:
- a combination of Mid State, as predecessor, for the period from
January 1, 1998 through September 30, 1998 and our company for the period
from September 9, 1998 (inception) through December 31, 1998 on a
consolidated basis, including Mid State and Galaxy for the period from
October 1, 1998 through December 31, 1998 and LLC for the period from
September 9, 1998 through December 31, 1998; and
- a combination of our company for the period from February 9, 1999
(inception) through December 31, 1999 on a consolidated basis, including
Certified, Nationwide and General Automation from March 19, 1999 through
December 31, 1999, Precision Partners, L.L.C. from January 1, 1999 to
March 19, 1999 and Gillette from September 1, 1999 to December 31, 1999.
This discussion and analysis should be read in conjunction with our historical
audited financial statements and those of Mid State, and the Unaudited Pro Forma
Consolidated Statement of Operations, including the notes thereto, included
elsewhere in this prospectus.
As a result, we believe the historical financial information presented in
this prospectus for periods prior to 1999 is of limited relevance in
understanding what our results of operations, financial position or cash flows
would have been for the historical periods presented had we in fact been
organized and owned all of our current subsidiaries for such periods.
33
<PAGE>
A change in the senior management at Galaxy occurred during the third
quarter of 1999, and in connection with this change, we engaged in a review of
the operations (including customer and vendor relations) and accounting
practices and procedures at Galaxy. This review was performed by a team
consisting of internal management and outside professionals and has revealed
administration and accounting practices inconsistent with our policies and
procedures. These inconsistencies include the failure to execute proper cut-off
procedures at month-end and the failure to recognize certain expenses in the
period in which those expenses were incurred. We believe our 1999 financial
results accurately reflect the excess costs associated with these matters, and
after a review, we do not believe that our financial results for 1999 or any
previously reported period have been materially misstated as a result of past
practices at Galaxy.
The following table sets forth, for the periods indicated, information
derived from our audited consolidated statement of operations and the audited
consolidated statements of operations of Mid State, in each case, for the
periods indicated, both in dollars and expressed as a percentage of net sales
(dollars in thousands):
<TABLE>
<CAPTION>
MID STATE (HISTORICAL)
---------------------------------------------------------------
JANUARY 1, 1998
YEAR ENDED DECEMBER 31, THROUGH
----------------------------------------- SEPTEMBER 30,
1996 1997 1998
------------------- ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............ $28,462 100.0% $33,870 100.0% $24,106 100.0%
Cost of sales........ 20,290 71.3 24,581 72.6 16,326 67.7
Gross profit......... 8,172 28.7 9,289 27.4 7,780 32.3
Selling, general and
administrative
expenses........... 4,322 15.2 4,571 13.5 3,374 14.0
Operating income..... 3,850 13.5 4,718 13.9 4,406 18.3
Net income (loss).... 3,120 11.0 3,543 10.5 2,704 11.2
======= ======= ======= ======= ======= =======
Depreciation and
amortization....... $ 884 3.1% $ 1,052 3.1% $ 806 3.3%
EBITDA(1)............ 4,734 16.6 5,770 17.0 5,212 21.6
<CAPTION>
PRECISION PARTNERS, INC.
(HISTORICAL)
---------------------------------------------------------------
SEPTEMBER 9,
1998
THROUGH YEAR ENDED
DECEMBER 31, COMBINED DECEMBER 31,
1998 1998(2) 1999(3)
------------------- ------------------- -------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net sales............ $12,602 100.0% $36,708 100.0% $123,188 100.0%
Cost of sales........ 9,090 72.1 25,416 69.2 93,434 75.8
Gross profit......... 3,512 27.9 11,292 30.8 29,754 24.2
Selling, general and
administrative
expenses........... 3,134 24.9 6,508 17.7 24,840 20.2
Operating income..... 378 3.0 4,784 13.0 4,914 4.0
Net income (loss).... (395) (3.1) 2,309 6.3 (5,515) (4.5)
======= ======= ======= ======= ======== =======
Depreciation and
amortization....... $ 1,105 8.8% $ 1,911 5.2% $ 11,906 9.7%
EBITDA(1)............ 1,483 11.8 6,695 18.2 16,820 13.7
</TABLE>
- ---------------
(1) For historical financial information purposes, EBITDA is defined as
operating income plus depreciation and amortization. EBITDA is not a measure
of performance under generally accepted accounting principles. While EBITDA
should not be used in isolation or as a substitute for net income, cash
flows from operating activities or other income or cash flow statements data
prepared in accordance with generally accepted accounting principles, or as
a measure of profitability or liquidity, management believes that it may be
used by certain investors as supplemental information to evaluate a
company's financial performance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations." In addition, the
definition of EBITDA used in this prospectus may not be comparable to the
definition of EBITDA used by other companies.
(2) Precision Partners combined consists of our results of operations from
September 9, 1998 (inception) through December 31, 1998 and of Mid State
(predecessor) for the nine months ended September 30, 1998.
(3) Our results for the period from February 9, 1999 (inception) through
December 31, 1999, include Certified, Nationwide and General Automation,
Precision Partners, L.L.C.'s results from January 1, 1999 to March 19, 1999
and Gillette's results from September 1, 1999 to December 31, 1999.
HISTORICAL RESULTS OF OPERATIONS
1999 COMPARED TO 1998 COMBINED
NET SALES. Net sales increased 235.6% to $123.2 million in 1999 compared to
$36.7 million in 1998. The increase is due to the March acquisitions of
Certified, General Automation, and Nationwide and the September acquisition of
Gillette with aggregate sales for all of the acquired companies totaling
$58.8 million for the nine months ended December 31, 1999. Sales at Mid State
and Galaxy
34
<PAGE>
increased 40.8% and 24.4%, respectively, to $64.4 million due to increased
orders for gas turbine parts and engine and transmission components for large
construction equipment.
GROSS PROFIT. Gross profit for 1999 increased 163.5% to $29.8 million from
$11.3 million in 1998. Gross margin decreased to 24.2% from 30.8% in 1998. The
increase in gross profit is primarily attributable to the acquisitions of
Certified, General Automation, Nationwide, and Gillette. The decrease in gross
margin results from the lower margin products manufactured by the acquisitions
as well as changes in product mix at Mid State that reduced its gross margin by
1.5% from 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 281.7% to $24.8 million from $6.5 million in
1998. This increase is mainly due to $7.2 million in general and administrative
expense at Precision Partners, including the recognition of $3.0 million in
bonus compensation paid to a selling shareholder of one of the acquired
companies, $0.6 million in aborted acquisition costs, $6.5 million of selling,
general and administrative expenses at Certified, General Automation,
Nationwide, and Gillette expenses, and $4.5 million of goodwill amortization and
additional depreciation expense resulting from a step-up in basis of the
property, plant, and equipment of Certified, General Automation, Nationwide, and
Gillette in connection with their acquisition by us.
OPERATING INCOME. As a result of the foregoing, operating income increased
2.7% to $4.9 million in 1999 from $4.8 million in 1998.
INCOME TAX EXPENSE. We realized an income tax benefit of $2.1 million in
1999 compared to income tax expense of $1.8 million in 1998. Our effective tax
benefit rate was 27.9% in 1999 compared to an effective tax expense rate of
43.6% for 1998. The decrease in income tax expense is primarily due to interest
expense in 1999 of $12.8 million related to the issuance of the outstanding
notes resulting in a loss before taxes. The decrease in the effective benefit
rate is primarily due to the impact of non-deductible goodwill generated from
the 1999 acquisitions of Certified and Gillette and the 1998 acquisitions of Mid
State and Galaxy.
NET INCOME (LOSS). Net income decreased 338.8% to a loss of $5.5 million in
1999 from income of $2.3 million in 1998 for the aforementioned reasons.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for 1999 was
$11.9 million, which includes $3.4 million of amortization of $77.0 million of
goodwill resulting from the acquisitions of Mid State, Galaxy, Certified,
Nationwide, General Automation, and Gillette. The $8.5 million of depreciation
expense is mainly attributable to the additional depreciation expense associated
with the step-up in basis resulting from the acquisitions of these six
companies.
1998 COMPARED TO 1997
NET SALES. Net sales increased 8.4% to $36.7 million in 1998 compared to
$33.9 million in 1997. The increase is due to the acquisition of Galaxy in
September 1998 with sales of $2.8 million in the fourth quarter of 1998. Sales
at Mid State remained essentially flat. Increased orders for North American gas
turbine parts substantially offset the effect of delayed delivery dates for
hydroelectric turbine parts, which resulted from the downturn in the Asian
economy.
GROSS PROFIT. Gross profit for 1998 increased 21.6% to $11.3 million from
$9.3 million in 1997. Gross margin increased to 30.8% in 1998 from 27.4% in
1997. The increase is primarily attributable to the acquisition of Galaxy in
September 1998, which contributed fourth quarter gross profit of $0.7 million
and Mid State's product mix. Mid State also reduced costs through improved
production processes, increased operating efficiencies and the elimination of
large discretionary management bonuses paid in 1997.
35
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for 1998 increased 42.4% to $6.5 million from
$4.6 million in 1997. This increase is mainly due to $1.1 million in general and
administrative expense at Precision Partners, L.L.C. from September 9, 1998
(inception) to December 31, 1998, as well as additional Galaxy expenses totaling
$0.5 million in the last quarter of 1998.
OPERATING INCOME. As a result of the foregoing, operating income increased
slightly to $4.8 million in 1998 from $4.7 million in 1997.
INCOME TAX EXPENSE. Income tax expense was $1.8 million in 1998 compared to
$2.3 million in 1997. Our effective tax rate was 43.6% for 1998 compared to
39.5% for Mid State in 1997. The increase in the effective rate for 1998 is
primarily due to non-deductible goodwill generated in the acquisitions of Mid
State and Galaxy.
NET INCOME. Net income decreased 34.8% to $2.3 million for 1998 from
$3.5 million in 1997 for the aforementioned reasons.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
81.7% to $1.9 million in 1998 from $1.1 million in 1997. The increase includes
$0.4 million in amortization of $35.0 million of goodwill resulting from the
acquisitions of Mid State and Galaxy in September 1998, additional depreciation
on the step-up in basis of property, plant and equipment and the inclusion of
$0.3 million of depreciation expense recorded by Galaxy in the three months
ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are available borrowings under our
revolving credit facility and cash flow from operations. We expect that our
principal uses of liquidity will continue to be working capital, capital
expenditures, debt service requirements and permitted acquisitions.
Our credit facilities consist of a $23.0 million term loan facility and a
$25.0 million revolving credit facility, including a $2.0 million sublimit for
letters of credit, each maturing on March 31, 2005, unless terminated sooner
upon an event of default. As of December 31, 1999, we have total debt of
approximately $134.5 million, consisting of our $23.0 million term loan, the
outstanding aggregate principal amount of the notes and $11.2 million of
outstanding borrowings under our revolving credit facility. See
"Capitalization." Our ability to borrow under the revolving credit facility is
subject to our compliance with the financial covenants described below and a
borrowing base based on our eligible accounts receivables and inventory. See
"Description of Credit Facilities."
The indenture and our credit facilities impose limitations on our ability
to, among other things, incur additional indebtedness (including capital
leases), incur liens, pay dividends or make other restricted payments,
consummate asset sales, enter into transactions with affiliates, issue preferred
stock, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our assets. In
addition, the credit facilities limit our ability to enter into sale and
leaseback transactions and to make capital expenditures. The credit facilities
also require that we meet and maintain certain financial ratios and tests,
including (i) a minimum interest coverage ratio, EBITDA to interest expense,
(ii) a maximum leverage ratio, total debt to EBITDA, and (iii) a minimum fixed
charge coverage ratio, EBITDA to interest expense plus other fixed charges. Our
ability to comply with these covenants and to meet and maintain these financial
ratios and tests may be affected by events beyond our control, such as those
described under "Risk Factors."
As a result of the failure to have an exchange offer registration statement
filed by September 15, 1999, to have it declared effective by September 16, 1999
and to complete the exchange offer by October 15, 1999, we are paying additional
interest on the outstanding notes. The amount of additional interest has ranged
from 0.5% per annum for the period from September 15, 1999 through
36
<PAGE>
December 14, 1999 to 0.75% per annum for the period December 15, 1999 through
March 14, 2000. Beginning March 15, 2000, the amount of additional interest
increased to 1.0% per annum and will continue at that rate until effectiveness
of the registration statement and completion of the exchange offer. The
additional interest is expected to be nonrecurring with no impact on our
continuing operations.
We have limited amortization requirements under our credit facilities over
the next two years. Our other debt service requirements over the next two years
consist primarily of interest expense on the notes. Our short-term cash
requirements for our operations are expected to consist mainly of capital
expenditures to continue to maintain and expand our manufacturing capabilities
and working capital requirements. We currently expect that our capital
expenditures will be approximately $10.6 million in 2000, including maintenance
capital expenditures of approximately $5.0 million. However, our capital
expenditures will be affected by, and may be greater than currently anticipated
depending upon, the size and nature of new business opportunities. We also
expect to have to enter into approximately $35 million of operating leases in
2000 primarily for new equipment related to our recent contracts with
Caterpillar and Dana and increased unit delivery requirements from General
Electric.
The aggregate purchase price for the acquisitions of Certified, Calbrit,
Nationwide and General Automation of $100.7 million does not include fees and
expenses or the potential effects of certain contingent purchase arrangements.
The purchase price for one of the companies acquired included a $4.0 million
escrow to be paid out upon the company meeting specified EBITDA targets through
April 30, 1999. The targets were not met and the escrow has been returned to us,
effectively reducing the purchase price and the resulting goodwill by
$4.0 million. A contingent payment may be payable by our parent, Precision
Partners Holdings Company, in the form of cash or a note payable-in-kind
maturing September 30, 2009, based on one of the companies we acquired in March
1999 achieving specified EBITDA targets in 2000. Payment by Precision Partners
Holding Company of this additional contingent payment, assuming the maximum
amount is earned, would result in an annual increase in our goodwill
amortization of approximately $0.5 million. Additional contingent payments,
which were payable by Precision Partners Holding Company, based on this company
and another company acquired in March 1999 meeting certain EBITDA targets in
1999 were not earned. In addition, a bonus payment of $3.0 million, based on one
of the acquired companies achieving certain 1999 EBITDA targets, is payable in
2000 to the former stockholder of this company who is now an employee of our
company. This bonus payment was accrued in December 1999 as compensation expense
and will be paid no later than April 2000.
We plan to continue our acquisition strategy and expect to finance future
acquisitions using cash, capital stock, notes and/or assumption of indebtedness.
However, the restrictions imposed on us by our long-term debt instruments may
affect this strategy. In addition, to fully implement our growth strategy and
meet the resulting capital requirements, we may be required to request increases
in amounts available under our credit facilities, issue future debt securities
or raise additional capital through equity financings. There can be no assurance
that any such increase to our credit facilities will be available or, if
available, will be on terms satisfactory to us, or that we will be able to
successfully complete any future debt or equity financings on satisfactory
terms, if at all. As a result, we could be placed at a competitive disadvantage
in pursuing acquisitions.
Based upon current operations and the historical results of our
subsidiaries, we believe that our cash flow from operations, together with
available borrowings under our new revolving credit facility, will be adequate
to meet our anticipated requirements for working capital, capital expenditures,
lease payments, and scheduled interest payments over the next 12 months.
However, there can be no assurance that we will continue to generate cash flow
above current levels or that the acquired companies will repeat their historical
performance. In addition, our ability to pay the notes at maturity will depend
on the availability of refinancing. See "Risk Factors--Risks Associated With Our
Indebtedness."
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BACKLOG
Firm backlog for 1999 increased 36.1% to $107.7 million from $79.1 million
at December 31, 1998. Firm backlog represents the sales price of all undelivered
products for which we have customer purchase orders or contractual coverage that
will be delivered within the next 12 months. All of our firm backlog is subject
to price renegotiations, terminations or rescheduling at the customer's
convenience. Firm backlog for December 31, 1998 has been restated to be
consistent with the current method of calculating backlog.
DISCLOSURE ABOUT MARKET RISK
Our term loan facility provides for interest to be charged at either the
Eurodollar rate or a base rate determined in accordance with the credit
agreement. Based on our current level of borrowings from our term loan facility,
a 1.0% change in interest rate would result in a $0.2 million annual change in
interest expense. Our revolving line of credit provides for interest to be
charged at either the Eurodollar rate or a base rate determined in accordance
with the credit agreement. Based on our current level of outstanding revolving
line of credit, a 1.0% change in interest rate would result in a $0.1 million
annual change in interest expense. The remainder of our debt is at fixed
interest rates that are not subject to changes in interest rates. We do not own
nor are we obligated for other significant debt or equity securities that would
be affected by fluctuations in market risk.
INFLATION
We do not believe that inflation has had a significant impact on our cost of
operations.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued the FASB
Statement No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES,
which is effective for fiscal periods beginning after June 15, 2000. We adopted
this statement during 1999 and such adoption had no material effect on our
financial statements.
YEAR 2000
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue." However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems may occur with billing, payroll, or
finanical closings at month, quarterly or year end. We believe that any such
problems are likely to be minor and correctable. In addition, we could still be
negatively impacted if our customers or suppliers are adversely affected by the
Year 2000 or similar issues. We currently are not aware of any significant Year
2000 or similar problems that have arisen for our customers and suppliers.
We expended $0.9 million on Year 2000 readiness efforts from 1997 to 1999.
These efforts included replacing some outdated, noncompliant hardware and
noncompliant software as well as indentifying and remediating Year 2000
problems.
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BUSINESS
THE COMPANY
We are a leading contract mechanical manufacturing services supplier of
complex precision metal parts, tooling and assemblies for original equipment
manufacturers. Our flexible manufacturing facilities and operating processes
enable us to service customers across a wide range of industries and
aggressively pursue new customers in industries where we see the potential for
strong growth. Our customers include industry leaders such as General Electric,
New Venture Gear, a joint venture of General Motors and DaimlerChrysler, Xerox,
Boeing, Caterpillar and Dana. We have earned "Preferred" or "Qualified" supplier
status with most of our customers and are predominantly the sole-source supplier
to our customers of the parts we manufacture. Our pro forma revenues and EBITDA
for the fiscal year ended December 31, 1999 were $149.8 million and
$26.1 million, respectively, representing a 17.5% EBITDA margin.
Our broad manufacturing capabilities and highly engineered processes allow
us to meet the critical specifications of our customers. We manufacture parts,
ranging in size from approximately 1 ounce to over 100,000 pounds, to extremely
close tolerances. We are also able to maintain tight tolerances, across flat
sheets and surfaces with multiple contours. We work with traditional materials
such as steel, aluminum, iron, copper, magnesium and bronze, as well as exotic
and difficult to machine materials such as titanium, inconel, invar and
hastelloy. In addition, we provide our customers with design assistance, process
and product engineering support and quality testing.
Our manufacturing expertise includes precision machining such as milling,
turning, boring, drilling, broaching and grinding, as well as value-added
services such as prototyping, assembly, forming, welding, heat treating and
plating.
The industries we serve and the related precision parts, assemblies and
tooling we machine and manufacture include:
- Power Generation Industry - specialty alloy turbine wheels and spacers,
shrouds and nozzles;
- Automotive Industry - piston valves used primarily for automatic braking
systems in light trucks and sport utility vehicles and machined engine
blocks;
- Business Machines Industry - bases and internal components for high-end
scanners, digital imaging machines and copiers;
- Space and Satellite Industries - adapter rings, thrust rings, casting
chambers and handling and transport aids;
- Aerospace Industry; Commercial and Military - precision tooling including
bond jigs, assembly jigs and mill fixtures;
- Agriculture and Construction Equipment Industries - high tolerance bearing
caps, transmission housings and diesel and gas pump housings; and
- Transportation Industry - class eight heavy truck axles and related parts
and engine blocks.
INDUSTRY
The U.S. precision custom manufacturing industry is highly fragmented and,
excluding precision manufacturing operations owned directly by original
equipment manufacturers, is estimated to be comprised of approximately 7,500
companies representing, over the last several years, annual revenues in excess
of $20 billion. Within this market, precision machine shops and specialty tool
manufacturers represent in excess of $13 billion of these revenues. As a result
of high fragmentation and a large number of captive original equipment
manufacturer operations, we believe there has been and will
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continue to be significant consolidation opportunities among industry
participants. According to industry sources, since 1992, the U.S. precision
machining industry has grown at a rate of approximately 10% per year. We believe
that a significant component of this growth has been and will continue to be
attributable to an increase in outsourcing by original equipment manufacturers.
Historically, many of the large original equipment manufacturers were
vertically integrated with large in-house component machining capabilities. They
primarily utilized precision machining companies only for short term over-flow
production of parts during periods of great demand. During the past several
years, however, original equipment manufacturers have been increasingly
outsourcing component manufacturing functions and, in many cases, eliminating
their in-house machining capabilities. This outsourcing has been driven by the
original equipment manufacturers' desire to:
- reduce costs;
- increase efficiency;
- improve quality;
- shorten product development cycles; and
- increase their focus on core capabilities.
Furthermore, while original equipment manufacturers continue to increase the
amount of outsourced manufacturing, they have also begun to consolidate their
supplier bases to ensure quality, decrease administrative costs and improve
service, design and assembly coordination. Leading original equipment
manufacturers are increasingly relying on their "Preferred" or "Qualified"
suppliers to provide a full line of high quality manufacturing and sub-assembly
services, as well as manufacturing engineering and design assistance. We intend
to continue to capitalize on these industry trends by providing our customers
with a broad array of precision machining capabilities and by leveraging our
competitive strengths.
COMPETITIVE STRENGTHS
LEADING SUPPLIER OF HIGH QUALITY, DIFFICULT-TO-PRODUCE PARTS. We focus on
manufacturing and supplying precision metal parts and assemblies which require
exceptionally close tolerances and involve complex processes. Many of our parts
also involve microfine surface finishes and exotic, difficult to machine
materials. We manufacture parts ranging in size from approximately 1 ounce to
over 100,000 pounds and from less than 1 inch to over 20 feet in diameter. These
parts are manufactured to tolerances as tight as 50 millionths of an inch. We
are also able to maintain tolerances across flat sheets and surfaces with
multiple contours to within 1/1000 of an inch to produce three-dimensional
sculptured contouring and precise geometric shaping of parts. By focusing
primarily on more complex parts and assemblies with exacting dimensional and
cosmetic requirements, we believe we distinguish ourselves as a unique contract
manufacturer of a variety of high quality, difficult-to-produce parts.
BROAD MANUFACTURING CAPABILITIES SERVING DIVERSE END MARKETS. Our broad
range of manufacturing capabilities allows us to meet the exacting requirements
of customers serving a variety of end markets and reduces the need for our
customers to rely on multiple suppliers. Most of our manufacturing processes and
equipment can, with certain adjustments, produce a variety of parts and
assemblies. We therefore have the flexibility to serve customers in a wide range
of industries. We currently serve such diverse industries as power generation,
automotive, business machines, space and satellites, agriculture and
construction equipment, commercial and military aerospace and surgical supplies.
We believe that our manufacturing adaptability, coupled with our diverse range
of end markets, allows us to mitigate volatility or downturns in any one
particular sector. Additionally, through our ability to produce a wide range of
parts and assemblies we are able to capitalize on the increasing trend among our
customers to focus on a fewer number of "Preferred" or "Qualified" suppliers
capable of servicing their multiple needs.
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STRONG CUSTOMER RELATIONSHIPS. We have built strong relationships with our
customers by focusing on delivering high-quality complex precision parts and by
consistently offering on-time delivery, quick product turnaround and value-added
services. We have earned "Preferred" or "Qualified" supplier status with most of
our customers and we are predominantly the sole-source supplier to our customers
of the parts we manufacture. Our customer base consists of industry leaders such
as General Electric, New Venture Gear, Xerox, Mannesmann (Rexroth), LucasVarity
(Kelsey Hayes), Raytheon, Boeing, DaimlerChrysler, Robert Bosch, Caterpillar,
Johnson & Johnson, Kodak and Dana. We proactively work with customers and their
engineers to improve the design and manufacturing specifications of the product
material, the part to be produced and the tooling required to produce the
customer's finished product. These initiatives often lead to improved quality
and part performance, increased operating efficiency and reduced manufacturing
costs. We believe that the strong relationships and "Preferred" or "Qualified"
supplier status we have established with our customers present a significant
barrier to entry for our competitors on the parts we manufacture and give us a
competitive advantage procuring additional work.
MODERN, HIGH QUALITY OPERATIONS. We believe that our modern facilities,
diverse manufacturing capabilities and commitment to continuous operational
improvements enable us to consistently meet the demanding quality, tolerance and
cosmetic requirements of our customers. Over the last two years, we have
invested a substantial amount to ensure that our facilities are state-of-the-art
and will remain so for years to come without substantial additional
expenditures. Our modern manufacturing operations utilize advanced computer
numerically controlled machines with automatic tool changers and on-machine
gauging, as well as laser inspection machines. Our facilities and processes meet
demanding customer certification and quality requirements. We participate in
General Electric's Six Sigma program, are a D-1 supplier for Boeing and have
received NASA's coveted Silver Snoopy award for outstanding effort in
contributing to the success of space flight missions based on quality, safety
and cost efficiency. Currently, five of our manufacturing facilities are ISO
9000, DI 9000, and/or QS 9000 certified, with the remaining facility expected to
be certified by August 2000. Management believes that our commitment to modern,
high-quality manufacturing processes has been and will continue to be a key
reason for our strong growth and improvements in operating profitability.
EXPERIENCED MANAGEMENT TEAM. Our management team is comprised of executives
and plant managers who have, on average, over 25 years of manufacturing,
engineering and operational experience. We believe this management team has
demonstrated an ability to attract new customers, adapt to changing industry
trends and continuously improve manufacturing operations and efficiency. We also
believe that this management team will be able to continue to grow our company
and to manage even larger operations as we grow.
BUSINESS STRATEGY
CAPITALIZE ON INDUSTRY TRENDS. We intend to capture additional business
from existing customers and actively pursue new customers by capitalizing on
recent trends among leading original equipment manufacturers to increase
manufacturing outsourcing and concentrate on fewer, more reliable suppliers. By
leveraging our competitive strengths, we believe we can offer customers the
significant competitive advantages that can be obtained from manufacturing
outsourcing, including reduced costs, increased efficiency, improved quality and
shortened product development cycles. By continuing to focus on customer needs
and aggressively marketing our diverse manufacturing capabilities, we believe we
can capture incremental and new business from existing customers as well as
become the supplier of choice and sole-source for a variety of key complex
precision machine parts for new customers with outsourcing needs.
PURSUE CROSS-SELLING OPPORTUNITIES AND BROADEN CUSTOMER BASE. Our operating
subsidiaries' diverse manufacturing capabilities and complementary customer
bases create a number of cross-selling
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opportunities which we intend to aggressively pursue. We intend to proactively
market to both current and new customers our full range of process capabilities.
By doing so, we expect to further penetrate certain of the industries we
currently serve, as well as to expand into other industries where we see the
potential for strong growth.
IMPLEMENT OPERATING BEST PRACTICES AND MAXIMIZE EFFICIENCIES. We intend to
continue to focus and capitalize on the best practices of each of our operations
including manufacturing processes, capacity utilization, inventory management
and cycle and flow times from customer order to delivery. Management plans to
utilize production resources to maximize manufacturing efficiency across our
operating subsidiaries. Our operating philosophy is based on increasingly lean
production systems supported by excellence in customer service, as measured by
quality, on-time delivery, quick turnaround and low manufacturing cost. We have
a comprehensive company-wide management system that includes site visits and
periodic operating management meetings to leverage our market and manufacturing
expertise, focus on innovation and benchmarking and solve problems using a team
oriented approach. We believe implementing these best practices and maximizing
operating efficiencies will lead to continuing improvements in labor
productivity, reductions in overhead and scrap rates, decreased manufacturing
flow time and increased working capital turnover.
PURSUE STRATEGIC ACQUISITIONS. We believe we are well-positioned to take
advantage of the high fragmentation in the precision custom manufacturing
industry to continue to build a world class contract manufacturer of precision
parts, assemblies and tooling. We intend to do this by pursuing strategic
acquisitions which will expand, diversify our existing customer base, end
markets served and our portfolio of processing capabilities. We will continue to
focus on acquisitions of financially sound companies that manufacture high
quality, difficult to produce parts, tooling and assemblies and that are the
leading suppliers of those products to their customers.
CUSTOMERS
We currently service customers across a wide range of industries including
the power generation, automotive, business machines, space and satellite,
agriculture and construction equipment, commercial and military aerospace,
surgical supply and transportation industries. We have focused on developing
solid relationships with customers that are leaders in their respective
industries such as General Electric, New Venture Gear, Xerox, Mannesmann
(Rexroth), LucasVarity (Kelsey Hayes), Raytheon, Boeing, DaimlerChrysler, Robert
Bosch, Caterpillar, Johnson & Johnson, Kodak and Dana. Our largest customer,
General Electric, accounted for approximately 26.5% of our 1999 net sales and
our top ten customers represented approximately 67% of our 1999 net sales. We
have earned "Preferred" or "Qualified" supplier status with most of our
customers and we are predominantly the sole-source supplier to our customers of
the parts we manufacture.
We believe that we have developed strong and loyal customer relationships
with leading original equipment manufacturer's based on our ability to reliably
deliver high-precision, high-quality metal parts and our focus on providing the
highest level of service. We believe that the strong relationships and the
"Preferred" and "Qualified" supplier status we have established with our
customers present a significant barrier to entry for our competitors.
We obtain most of our orders for new precision parts, tooling or assemblies
through a presourcing process by which the customer invites one or more
"Preferred" or "Qualified" suppliers to bid on the design and/or manufacture of
a part or assembly that meets certain price, timing and functional parameters.
We then typically receive a blanket purchase order that covers parts and/or
assemblies to be supplied for the particular end-product. These supply
arrangements normally extend over the life of the particular part or assembly.
In addition, we compete to supply parts and assemblies for successor models of a
customer's product, even though we may currently be a preferred supplier of
parts or assemblies on a current or predecessor model. Our customer
relationships, coupled with the essential
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nature of many of the complex, close tolerance products we manufacture, have
enabled us to participate with our customers in the development of products and
to receive contracts that range in duration from annual blanket purchase orders
to six years.
Bids for new business are based on a target sale price, based on our
experience with making parts or assemblies of a similar nature. Prior to our
commitment for full production, we and the customer generally agree on a final
price, which, in some instances, may be subject to negotiated price reductions
over the life of the project.
MARKETING AND DISTRIBUTION
We market our parts and manufacturing capabilities either through an
internal sales force or an outside agency. We believe that our stable and
experienced sales force, coupled with senior management communication with key
customers, has been a key reason for our success in maintaining customer loyalty
and building new customer relationships. Most of our sales personnel have worked
with the same customers for many years. Prior to their acquisition by our
company, the sales forces at each of our subsidiaries operated independently of
one another. While maintaining the decentralized focus to promote customer
service and expertise, we expect to introduce an additional focus on marketing
our broad operating capabilities to pursue a number of cross-selling
opportunities which we believe exist between the complementary customer bases of
our subsidiaries. We compensate our sales force based on a base salary and/or
commissions.
Our parts either are shipped by common carrier, picked up by customers at
our facilities or delivered to customers by our own truck fleet.
PARTS AND END USES
Many of the parts we manufacture require innovative technical production
solutions to customer-specific requirements, as well as considerable
manufacturing expertise. The following table sets forth a sample of the complex,
precision parts or assembles that we manufacture for our customers, together
with the industry and end-use for such part.
<TABLE>
<CAPTION>
INDUSTRY CUSTOMER PART/ASSEMBLY END USE
- --------------------------- -------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Power Generation General Electric Turbine Wheel Hot section of land-based
power turbine
Automotive LucasVarity (Kelsey Piston/Pump Assembly Anti-lock braking systems
Hayes) Engine Blocks for light trucks
Business Machines Xerox Internal Components and High volume copiers,
Bases digital imaging copiers,
scanners
Agriculture and Caterpillar Bearing Caps Stabilizes engine shaft
Construction Equipment Transmission Housings and
Casings
Automotive New Venture Gear Transmission Housings Transmissions for light
trucks
Surgical Supplies Johnson & Johnson Surgical Saw Shaft Lapthroscopic and
endoscopic disposable
instruments
Military and Commercial Boeing Bond Jig Tooling Tooling for manufacture of
Aerospace nacelle frame
Space Thiokol Assembly Mold Tooling Tooling for Space Shuttle
rocket
Automotive Mannesmann (Rexroth) Diesel Engine Pump Housings Diesel gas pumps
</TABLE>
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<TABLE>
<CAPTION>
INDUSTRY CUSTOMER PART/ASSEMBLY END USE
- --------------------------- -------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Business Machines Kodak Internal Components and High and low volume copiers
Bases and thermal printers
Commercial Satellites Northrop Grumman Cure Fixtures Tooling Molds for commercial
satellite rocket components
Specialty Automotive DaimlerChrysler High Performance Engine Holds moving engine parts
Blocks for racing cars
Transportation Dana, Alstom Truck Axles, Switching Class eight trucks and
Signaling and Gears and Engine Blocks railroad switch gears
Caterpillar
Medical Ortho Clinical Base plate Blood analyzer
Diagnostics
</TABLE>
A majority of our parts are manufactured by us in their final configuration
with no additional processing, including brake piston plungers for LucasVarity,
bearing caps and engine blocks for Caterpillar and bond jigs for Boeing. In
concert with our customers, we routinely develop prototype parts. For example,
we have produced prototype parts for Johnson & Johnson's lapthroscopic and
endoscopic disposable instruments, for the joint strike fighter, for General
Electric's land-based power generation systems, for the Delta IV rocket and for
the assembly which links the modules of the International Space Station.
DESIGN, DEVELOPMENT AND ENGINEERING
Our customer-focused approach fosters a close working relationship with our
customers' engineers to improve the design and manufacturing specifications of
the parts we produce. We are able to develop our own tools, processes and
prototypes to test design parameters for minimization of variability and
lead-times. We apply engineering techniques such as computer aided design,
computer aided manufacturing and failure mode and effects analyses to optimize
part functionality and manufacturability. We believe our in-house capability to
develop and produce prototypes using standard and customized manufacturing
equipment and processes is a competitive advantage. We provide our customers
with full systems support to control product timing and ensure part quality and
reliability through all phases of design, launch and production manufacturing.
As a result, we are able to take an innovative, leadership role in the
development, design and assembly of parts, machines and systems to meet or
exceed customer requirements.
Through our computer aided manufacturing and computer aided design systems
we are able to provide virtual prototyping. This process enables hundreds of
design solutions to be visualized quickly and easily and facilitates product
design and manufacturing. Our computer systems are capable of finite element
analyses and simulation, as well as design for manufacturing and assembly. These
processes allow many aspects of a design to be evaluated prior to production,
resulting in lower tooling costs, reduced testing requirements and quicker time
to market.
Our reputation for quality, reliability and design improvement has led to
numerous requests for participation on customer engineering teams. Our
understanding of cutting tool technology and difficult to machine materials
makes our employees value-adding members of these teams. Through this
participation we are able to work with our customers to identify the most cost
effective process, materials and manufacturing methods for any specific
application. Once the design phase of the engineering process is completed, our
expertise and experience allow us to engineer and customize our tooling,
machines and systems to achieve the highest quality path to the customer's
requirements.
The parts we manufacture often have sophisticated tooling requirements which
we internally build or customize. The development costs are either billed to the
customer or amortized over the life of the parts. The tooling development
typically begins early in the engineering cycle and is quickly completed after
being selected as the supplier of choice.
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MANUFACTURING
Our manufacturing expertise includes precision machining capabilities such
as turning, milling, boring, drilling, broaching and grinding, as well as
value-added services such as prototyping, forming, fabrication, welding, heat
treating, plating, painting, tapping and assembly. We believe that the breadth
of our in-house process capability provides us with a significant competitive
advantage in being a sole-source supplier for our customers' multiple needs. To
produce many of our components, we develop innovative solutions to
customer-specific requirements by customizing either the process, the tooling or
the machines.
By highly engineering the process, we are able to utilize general-purpose
machines with computer numerically controlled capabilities to manufacture very
complex and difficult to machine parts in many different configurations with a
high degree of accuracy. Through data feedback, we systematically test for
quality throughout the entire manufacturing process. Our advanced computer
numerically controlled equipment includes machines with automatic tool changers
and on-machine gauging, as well as laser inspection machines. With computer
numerically controlled equipment, we are able to increase efficiency and
turn-around times by identifying, documenting and correcting potential defects
and irregularities and by more accurately shaping or cutting parts, while at the
same time, allowing the parts we are manufacturing to be run quickly and in
small lot sizes.
We are also able to manufacture complex and difficult to machine parts by
customizing our tooling and equipment. We are able to do this by capitalizing on
our substantial expertise and experience with a wide variety of part styles and
sizes, our knowledge of various cutting tools and our highly skilled workforce.
As a result, we are able to design and develop our own tooling, customize
conventional tooling and create customized machinery. Based on our innovative
approach to tooling and fixturing, we are able to tailor-make fixtures that help
hold tolerances and improve repeatability and consistency. We can also
reengineer conventional machines and cutting tools by changing heads, adding
computer numerically controlled capability or combining the most appropriate
aspects of different apparatus to create a better-designed machine to improve
manufacturability of parts. We also utilize functional gauging for quality
inspections to ensure accuracy and precision, thereby also improving
repeatability and consistency.
We emphasize a cellular approach to manufacturing. This approach allows our
processes to utilize such technology as optical measuring devices and robotics.
Further, we utilize a pelletized manufacturing approach which is easily
converted from one product application to another, and has lower reprogramming
costs than the traditional hard automation approach. Cellular manufacturing also
helps promote our team approach for optimizing the manufacturability of a part
by reducing inventory and increasing our through-put rate by better process
control, minimization of set-up times and improved traceability and
correctibility of errors at all stages of the manufacturing process. We also
utilize just-in-time manufacturing and sourcing systems which help us to meet
our customer requirements for faster deliveries while also minimizing inventory
levels.
Our operating philosophy emphasizes delivering a quality product, on time,
at the lowest achievable cost. Continuous improvement on these operating
parameters is achieved by driving our operations toward shorter and shorter lead
and cycle times, which in turn requires increasingly higher standards of
quality. We believe our disciplined approach to our manufacturing operations,
including monthly operations reviews and meetings, facilitates employee
participation and motivates management and employees to strive for better
operational performance. Through this process, we are also able to leverage
market and manufacturing expertise, put a focus on innovation and benchmarking
and solve problems using a team oriented approach. As a result, we can improve
productivity, quality and employee commitment while reducing inventory, floor
space requirements and lead times.
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QUALITY
Product quality is among the most important factors in maintaining
"Preferred" and "Qualified" supplier status with original equipment
manufacturers. In order to meet the exacting requirements of our customers, we
maintain the most stringent standards of quality control. We routinely employ
in-process inspection by using testing equipment as a process aid during all
stages of design, launch and the machining process to assess compliance. These
include state-of-the-art computer assisted design and computer assisted
manufacturing equipment, statistical process control systems, laser tracking
devices, failure mode and effect analysis and coordinate measuring machines. We
are also able to extract numerical control quality control data from our
computer numerically controlled machines, a statistical measurement of the
quality of the parts being manufactured. Our customers use this information in
place of inspections to determine quality assurance. In some cases, we have
installed testing equipment identical to that of our customers, again
eliminating the need for reinspection by our customers. We also perform quality
control tests on all parts we outsource to small machine shops. As a result, we
are able to significantly reduce defective parts and therefore improve
efficiency, quality and reliability.
Currently, five of our manufacturing facilities are ISO 9000, DI 9000,
and/or QS 9000 certified, with the remaining facility expected to be certified
by August 2000. Original equipment manufacturers are increasingly requiring
these standards in lieu of individual certification procedures and as a
condition to awarding business. We participate in General Electric's Six Sigma
program, are a D-1 9000 supplier for Boeing and have received NASA's coveted
Silver Snoopy award for outstanding effort in contributing to the success of
space flight missions based on quality, safety and cost efficiency.
We believe that our commitment to modern, high-quality manufacturing
processes has been and will continue to be a key reason for our strong customer
loyalty and growth and that the expense required to institute and maintain
quality control procedures comparable to ours represents a barrier to entry for
other companies.
COMPETITION
We operate in an industry which is highly fragmented and competitive. A
variety of suppliers with different subsets of our manufacturing capabilities
compete to supply the stringent demands of large original equipment
manufacturers. Competition is generally based on price, quality, timeliness of
delivery, design and engineering support and service and, in some instances, on
our ability to deliver assemblies or sub-assemblies rather than individual
parts. To an extent, the original equipment manufacturers are able to compete
with their suppliers, since they can produce their own components and assemblies
if they so choose. However, during the past several years, original equipment
manufacturers have been increasingly outsourcing component manufacturing
functions and, in many cases, eliminating their in-house machining capabilities,
in an effort to reduce costs, increase efficiency, improve quality and shorten
product development cycles.
A large number of actual or potential competitors exist, including the
internal component operations of the original equipment manufacturers as well as
independent suppliers, some of which are larger and have greater financial and
other resources than we do. However, we believe that none of these competitors
competes with us along all of our manufacturing capabilities. In addition, our
business is increasingly competitive due to the supplier consolidation resulting
from increased outsourcing by original equipment manufacturers and supplier
management policies designed to strengthen their supply base. These policies
include designating a limited number of suppliers as "Preferred" or "Qualified"
suppliers and, in some cases, encouraging new suppliers to begin to supply
selected product groups. We principally compete for new business both at the
beginning of the development of new products and upon the redesign of existing
products by our major customers. Because of the large investment by original
equipment manufacturers in tooling and the long lead time required to commence
production, original equipment manufacturers generally do not change a
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supplier during a program. If, however, a customer becomes dissatisfied with our
prices, quality or timeliness of delivery, it could award future business or, in
an extreme case, move existing business to another supplier.
SUPPLIERS, SUBCONTRACTORS AND RAW MATERIALS
Generally, our raw materials consist of traditional materials such as steel,
aluminum, iron, copper, magnesium and bronze, as well as exotic and difficult to
machine materials such as titanium, inconel, invar and hastelloy. These
materials are typically delivered in the form of bar stock, precision forgings,
castings and flat sheets. A majority of our raw materials are supplied by our
customers on consignment. Raw materials not supplied by our customers are
purchased from several suppliers, and we do not believe that we are dependent on
one or very few of them. All of these materials were available in adequate
quantities to meet our production demands in 1998 and 1999.
We may subcontract certain of our manufacturing or services such as plating
or painting, among others, to third parties. We have an active subcontractor
program that, among other things, assesses subcontractor capabilities and
quality on an on-going basis. We use a limited number of subcontractors based on
their ability to deliver high quality parts or services on a cost effective
basis. We have not experienced any difficulty obtaining necessary raw materials
or subcontractor services.
FACILITIES
In addition to our corporate office, we operate ten manufacturing
facilities, two of which we own and the remainder of which we lease. Leases
expire at various times through April 2007 and we generally have extension
options.
The following table summarizes the location of our manufacturing facilities
and their general size:
<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE TYPE OF INTEREST
- -------- -------------- ----------------
<S> <C> <C>
FACILITIES:
Buena Park, California (Altura)................ 32,000 Leased
Buena Park, California (Burnham)............... 41,000 Leased
Cerritos, California........................... 28,000 Leased
Plymouth, Michigan............................. 52,000 Owned
Canton, Michigan............................... 29,000 Leased
Canton, Michigan............................... 66,000 Leased
Skokie, Illinois............................... 82,000 Owned
Winslow, Maine................................. 92,000 Leased
Rochester, New York............................ 140,000 Leased
Rochester, New York............................ 73,000 Leased
CORPORATE OFFICE:
Irving, Texas.................................. 3,000 Leased
</TABLE>
BACKLOG
Firm backlog for 1999, increased 36.1% to $107.7 million from $79.1 million
at December 31, 1998. Firm backlog represents the sales price of all undelivered
products for which we have customer purchase orders or contractual coverage that
will be delivered within the next 12 months. All of our firm backlog is subject
to price renegotiations, termination or rescheduling or the customer's
convenience. Firm backlog for December 31, 1998, has been restated to be
consistent with the current method of calculating backlog.
47
<PAGE>
ENVIRONMENTAL AND SAFETY REGULATION
Our equipment, facilities and operations are subject to increasingly complex
and stringent federal, state and local laws and regulations pertaining to the
protection of human health and the environment. These include, among other
things, the discharge of contaminants into the environment and the handling and
disposition of wastes (including industrial, solid and hazardous wastes). In
addition, we are required to obtain and maintain regulatory approvals in the
United States in connection with our operations. Many environmental laws and
regulations provide for substantial fines and criminal sanctions for violations.
Based on the results of Phase I environmental site assessments which were
performed at each of our facilities in 1998 and 1999, we believe that we are in
material compliance with applicable environmental laws and regulations. We
continue to incur capital expenditures to ensure compliance with applicable
environmental laws and regulations. However, in 1998 and 1999, capital
expenditures for environmental control projects were not material. Based on
current information, we estimate that capital expenditures for environmental
control projects in 2000 will also not be material. It is difficult to predict
the future development of such laws and regulations or their impact on future
earnings and operations. The timing and magnitude of costs related to
environmental compliance may vary and we cannot assure you that material costs
or liabilities will not be incurred.
Certain environmental laws provide for strict, joint and several liability
for investigation and remediation of spills and other releases of hazardous
materials. These laws typically impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of any hazardous
materials. Persons who arrange (as defined under these laws) for the disposal or
treatment of hazardous materials also may be liable for the costs of
investigation, removal or remediation of such materials at the disposal or
treatment site, regardless of whether the affected site is owned or operated by
them. Such liability is strict, and may be joint and several.
Because we own and operate a number of facilities, and because we arrange
for the disposal of hazardous materials at many disposal sites, we may incur
costs for investigation, removal and remediation, as well as capital costs
associated with compliance with environmental laws and regulations. Although
such environmental costs have not been material in the past and are not expected
to be material in the future, changes in environmental laws and regulations or
unexpected investigations and clean-up costs could have a material adverse
effect on our business, financial condition or results of operations.
EMPLOYEES
As of December 31, 1999, we had over 1,000 employees, approximately 87.5% of
whom were employed in manufacturing and the remainder of whom were office and
managerial employees. None of our employees is represented by a union or covered
by a collective bargaining agreement. We believe our relations with our
employees are satisfactory.
LEGAL PROCEEDINGS
We are a party to various litigation matters that are incidental to our
business. We do not believe that the outcome of any of these legal proceedings
will have a material adverse effect on our business, financial condition or
results of operations.
48
<PAGE>
MANAGEMENT
OUR DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our
directors and executive officers as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
James E. Ashton...................... Chairman of the Board and Chief Executive
57 Officer
Ronald M. Miller..................... 55 Chief Financial Officer and Secretary
Melvin D. Johnson.................... 53 Executive Vice-President for Operations
John F. Megrue....................... 41 Director
William J. Gumina.................... 29 Director
Richard W. Detweiler................. 58 Director
David W.M. Harvey.................... 35 Director
</TABLE>
Effective as of February 24, 2000, Mr. John Clark resigned as a director.
The vacancy has not yet been filled. As Mr. Clark was an appointee of Saunders,
Karp & Megrue, we expect Saunders, Karp & Megrue to either appoint a replacement
or we may amend our bylaws to allocate an extra vote to one of the other
Saunders, Karp & Megrue director appointees.
DR. JAMES E. ASHTON has been our Chairman of the Board of Directors and
Chief Executive Officer since our formation. He has over 30 years of experience
in the aerospace, defense, oil service, medical products and composite materials
industries. Prior to joining our company, Dr. Ashton served as Chairman and CEO
of Fiberite, Inc. ("Fiberite"), a manufacturer of composite materials. From
April 1989 to June 1994, he served as Vice President and General Manager of the
Armament Systems division of FMC Corp. (now United Defense, L.P.), a defense
contractor ("FMC"). Prior to 1989, Dr. Ashton served in various management
positions at Rockwell International Corporation, Schlumberger Ltd.,
Healthdyne, Inc. and General Dynamics Corporation.
RONALD M. MILLER has been our Chief Financial Officer since our formation.
Prior to joining our company, he served as the Chief Financial Officer and Vice
President, Finance and Treasurer of Fiberite. Before joining Fiberite in
April 1996, Mr. Miller served in various management positions at Rohr, Inc., an
aerospace manufacturing company, including as its Vice President, Finance &
Treasurer.
MELVIN D. JOHNSON has been our Executive Vice-President for Operations since
our formation. He has over 28 years of experience in the aerospace/defense,
transportation, oilfield services, computer peripherals and photocopying
industries. Prior to joining our company, Mr. Johnson was a member of the
executive team of Fiberite, and served as general manager of Fiberite's Winona,
Minnesota division. From 1970 until 1996, Mr. Johnson held management positions
with Xerox Corporation, CalComp Technology Inc., a manufacturer of computer
graphic peripherals and a subsidiary of Lockheed Martin Corp.,
Schlumberger Ltd., FMC and Trailmobile Trailer Corporation, a manufacturer of
platform trailers.
JOHN F. MEGRUE has been a director since our formation. He also serves as
Chairman of the Board and a director of Hibbett Sporting Goods, Inc., as Vice
Chairman of the Board and a director of Dollar Tree Stores, Inc., and as a
director of The Children's Place Retail Stores, Inc. Mr. Megrue has been a
partner of Saunders, Karp & Megrue since 1992.
WILLIAM J. GUMINA has been a director since our formation. Mr. Gumina has
been a Vice President with Saunders, Karp & Megrue since January 1999 and was an
associate with Saunders, Karp & Megrue from March 1998 until he became a Vice
President. Prior to his association with Saunders, Karp & Megrue, Mr. Gumina was
an associate with Donaldson, Lufkin & Jenrette Merchant Banking Partners.
49
<PAGE>
RICHARD W. DETWEILER has been a director since our formation. He also serves
on the Board of Directors of TreeSource Industries, Inc. Mr. Detweiler has been
a Managing Director with Carlisle since November 1996. Prior thereto he was
Chairman and CEO of Precision Aerotech, Inc., a publicly traded, diversified
manufacturing company. Mr. Detweiler has also held senior general management,
financial and manufacturing positions with Caterpillar, Inc., Sundstrand
Corporation and International Harvester (Navistar).
DAVID W. M. HARVEY has been a director since our formation in September
1998. Mr. Harvey is the President of Harvey & Company LLC, a merchant banking
and advisory services firm, he founded in 1998. Prior thereto, he was a managing
director of W.E. Myers & Co.
BOARD OF DIRECTORS
BOARD CONSTITUTION. Our bylaws provide that our Board of Directors consist
of six directors, four of whom are to be nominated by the Precision Fund, one by
Harvey and one collectively by Messrs. Ashton, Miller and Johnson. Currently,
all directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. Officers are
elected by and serve at the discretion of our board of directors.
DIRECTOR COMPENSATION. Members of our Board appointed by Harvey, Saunders,
Karp & Megrue and Carlisle are reimbursed for expenses pursuant to certain
advisory agreements. See "Related Party Transactions." Dr. Ashton is reimbursed
by us for travel expenses incurred in connection with attending meetings.
We have established one standing committee of the board of directors, a
compensation committee. The compensation committee reviews and approves
executive salaries and administers our bonus, stock option and incentive
compensation plans. The compensation committee advises and consults with
management regarding significant employee benefit and compensation policies and
practices. Currently, the only member of the committee is Mr. Detweiler. A
replacement has not yet been appointed for Mr. Clark, who had been a member of
the compensation committee until his resignation.
EMPLOYMENT AGREEMENTS
We intend to enter into employment agreements with our senior management but
have not yet done so.
EXECUTIVE COMPENSATION
The following table provides information relating to compensation for our
chief executive officer and our two other most highly compensated executive
officers whose compensation is required to be disclosed by the rules and
regulations of the Securities Act. The compensation information for all of
50
<PAGE>
the named executive officers for 1999 and 1998 is based on their compensation
from us and has been annualized to reflect what their compensation would have
been had we been operating for all of 1998:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION/AWARD
------------------
ANNUAL COMPENSATION OTHER SHARES OF COMMON
------------------- ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------- -------- -------- ------------ ------------------ ------------
<S> <C> <C> <C> <C> <C> <C>
James E. Ashton........... 1999 $178,000 -- $ 7,868 -- --
Chief Executive Officer 1998 $130,000 $32,500 $ 2,368 -- --
Ronald M. Miller.......... 1999 $107,000 -- 22,809 -- --
Chief Financial Officer 1998 $ 78,000 $ 9,750 2,368 -- --
Melvin D. Johnson......... 1999 $100,000 -- 17,056 -- --
Executive Vice-President 1998 $ 73,000 $ 9,125 2,368 -- --
for Operations
</TABLE>
OPTION GRANTS
None of the executive officers named in the summary compensation table have
options to purchase common stock under Precision Partners Holding Company's 1999
Stock Option Plan.
PRECISION PARTNERS HOLDING COMPANY 1999 STOCK OPTION PLAN
Precision Partners Holding Company adopted its 1999 Stock Option Plan to
provide an incentive to attract, retain and reward certain individuals
performing services for Precision Partners Holding Company, its subsidiaries or
affiliates. The plan provides for the granting of options to purchase shares of
Class B common stock of Precision Partners Holding Company to employees,
directors or consultants. The board of directors of Precision Partners Holding
Company, the members of which are the same as the members of our board of
directors, currently administers the plan. Under the plan the board of the
directors has the power to:
- determine the persons eligible to receive options and the number of shares
subject to each option;
- designate the options as incentive stock options or nonstatutory stock
options;
- determine the fair market value of shares of stock;
- determine the terms and conditions applicable to each option;
- approve one or more forms of option agreements;
- amend, modify or otherwise adjust the exercise price of an option;
- accelerate, continue, extend to defer the exercisability of any option;
and
- otherwise administer and interpret the plan.
As of the date of this prospectus, eligible individuals have been granted
options to purchase 2,669,000, net of forfeitures, under the 1999 plan pursuant
to option agreements. An additional 1,000 shares of common stock are reserved
for issuance under the plan. All of the options were granted at fair market
value. Precision Partners Holdings Company intends that any additional options
granted under the plan will be exercisable at a price per share not less than
the fair market value of the common shares at the date of the grant. The option
agreements provide that the options can vest based upon the period of services
provided to the Precision Partners Holding Company, the attainment of specified
performance objectives, and/or the passage of a specified period of time.
51
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information regarding beneficial ownership of
our common stock as of March 1, 2000 held by:
- each person or group believed by us to beneficially own more than 5% of
our common stock;
- our directors, chief executive officer and two other most highly
compensated executive officers; and
- all our directors and executive officers as a group.
Virtually all of our outstanding common stock is owned indirectly by Precision
Partners, L.L.C. through Precision Partners Holding Company. The applicable
percentage ownership for our common stock set forth below is based on 43,683,612
membership units of Precision Partners, L.L.C. outstanding as of March 1, 2000.
Under the rules and regulations of Regulation S-K under the Securities Act,
beneficial ownership is calculated in accordance with Rule 13d-1 under the
Exchange Act. Under these rules, the term includes not only shares owned by a
person or group, but also shares over which the person or group exercises voting
and/or investment power. These rules also treat common stock subject to options,
warrants or other securities that are currently, or within 60 days will be,
convertible into or exchangeable for common stock, including preferred stock, as
outstanding for purposes of calculating the beneficial ownership of the person
owning such option warrant or other convertible or exchangeable security but not
outstanding for purposes of computing the total number of outstanding shares or
the beneficial ownership of any other person. Except as otherwise noted, we
believe that each of the holders listed below has sole voting and investment
power over the shares beneficially owned by them.
<TABLE>
<CAPTION>
PERCENT OF
NAME AND ADDRESS OF NUMBER OF SHARES COMMON
BENEFICIAL OWNER BENEFICIALLY OWNED STOCK OUTSTANDING
- ------------------------------------------------------------ ------------------ -----------------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS(1):
James E. Ashton............................................. 2,552,184 5.8%
Ronald M. Miller............................................ 419,494 1.0%
Melvin D. Johnson........................................... 251,697 0.6%
John F. Megrue(2)........................................... -- --
William J. Gumina(2)........................................ -- --
Richard W. Detweiler(2)..................................... -- --
David W.M. Harvey(3)........................................ -- --
All directors and executive officers as a group, 7
persons................................................... 3,223,375 7.4%
5% STOCKHOLDERS:
Precision Partners Investment Fund, L.L.C.(2)............... 36,367,236 83.2%
</TABLE>
- ------------------------
(1) All addresses are in care our company, except for Precision Partners
Investment Fund, L.L.C. whose address is 262 Harbor Drive, Stamford, CT
06902.
(2) Precision Partners Investment Fund, L.L.C. is owned by two private equity
funds sponsored by Saunders, Karp & Megrue, which collectively beneficially
own approximately 66.8% of our outstanding common stock, and by three
private equity funds sponsored by Carlisle, which collectively own
approximately 16.4% of our outstanding common stock. Messrs. Megrue and
Gumina are principals of Saunders, Karp and Megrue and may be deemed to be
beneficially own the shares owned by the two Saunders, Karp & Megrue
sponsored funds. Mr. Detweiler is a Managing Director with Carlisle and may
be deemed to beneficially own the shares owned by the
52
<PAGE>
three Carlisle funds. Each of Messrs. Megrue, Gumina and Detweiler disclaim
beneficial ownership of such shares.
(3) Harvey Equity Partners, L.L.C., which owns approximately 3.3% of our
outstanding common stock, is a private equity fund sponsored by Harvey &
Company LLC, a merchant banking and advisory services firm, of which
Mr. Harvey is President and a founder. Mr. Harvey may be deemed to
beneficially own the shares owned by Harvey Equity Partners, L.L.C.
Mr. Harvey disclaims beneficial ownership of such shares.
Founded in 1990, Saunders, Karp & Megrue is a private equity investment firm
currently managing over $800 million of private equity capital. Since its
inception, Saunders, Karp & Megrue has focused on investing in recapitalizations
and buyouts of high-growth, middle market companies in the U.S. and on executing
consolidation strategies of fragmented U.S. industry segments. Saunders, Karp &
Megrue, through its private equity funds, has invested over $475 million in 27
companies concentrated in basic manufacturing, consumer products, restaurant,
retail, financial services and distribution industries.
Thomas A. Saunders, III and Allan W. Karp founded Saunders, Karp & Megrue in
1990 and in 1992 were joined by John F. Megrue (together, the "Saunders, Karp &
Megrue Founders"). Since that time, the Saunders, Karp & Megrue Founders have
invested the Saunders, Karp & Megrue equity funds and actively managed their
respective portfolio investments. The Saunders, Karp & Megrue Founders are
joined by other senior investment professionals and collectively they have
significant experience in both the formation, management and investment of
equity capital pools, and in the global capital markets, including financial
advisory and mergers and acquisitions activity.
RELATED PARTY TRANSACTIONS
A majority of our directors are also principals of Saunders, Karp & Megrue,
Carlisle and Harvey and are therefore in positions involving possible conflicts
of interest. However, our directors and officers and those of our subsidiaries
are subject to fiduciary obligations to act in our and our subsidiaries' best
interests, as the case may be. We maintain with a third party insurer, for the
benefit of our and our subsidiaries' directors and officers, liability insurance
against certain liabilities incurred by these directors and officers in such
capacity.
We may from time to time engage in certain transactions with related parties
and affiliates which include, among other things:
- business arrangements;
- lease arrangements for certain manufacturing facilities and offices; and
- the payment of fees or commissions for the transfer of manufacturing by
one operating company to another.
The indenture governing the outstanding notes and which will govern the
exchange notes generally requires that these types of transactions be on terms
no less favorable to us or the applicable subsidiary than those which could be
obtained on an arms' length basis from third parties. However, we can not
provide you with any assurance that such transactions will not adversely affect
our business, financial condition or results of operations.
Certain consulting and advisory fees were payable to Harvey in connection
with the financial performance of one of the companies acquired in March. In
addition, similar fees may be payable if that company achieves specific
financial performance targets in 2000 in connection with future acquisitions.
From time to time, Saunders, Karp & Megrue, Carlisle and Harvey may also receive
other customary fees in connection with divestitures, acquisitions and other
transactions involving us or our subsidiaries. In addition, Precision Partners
Holding Company has agreed to pay Saunders, Karp & Megrue and Carlisle an annual
monitoring fee.
53
<PAGE>
DESCRIPTION OF CREDIT FACILITIES
GENERAL. We have a $23.0 million term loan facility and a $25.0 million
revolving credit facility, including a $2.0 million sublimit for letters of
credit. Each matures on March 31, 2005, unless terminated sooner upon an event
of default. If terminated upon an event of default, all outstanding advances
under the credit facilities may be required to be immediately repaid. The credit
facilities can be used to complete permitted acquisitions, pay fees and
expenses, or for working capital and other general corporate purposes.
Borrowings under the credit facilities bear interest, at our option, at either a
fixed rate equal to the higher of the overnight federal funds rate plus 50 basis
points and the prime rate announced from time to time by Citibank, N.A. plus a
margin of 100 to 200 basis points, based on our leverage ratio, or a floating
rate equal to LIBOR plus a margin of 200 to 300 basis points, also based on our
leverage ratio. Our ability to borrow under the credit facilities is subject to
our compliance with the covenants described below and a borrowing base based on
eligible accounts receivable and eligible inventory. At March 21, 2000,
approximately $44.3 million of borrowings were outstanding under the credit
facilities, consisting of the $23.0 million term loan and $21.3 million
outstanding under our revolver.
GUARANTEES AND SECURITY. All of our obligations under the credit facilities
are guaranteed, jointly and severally, by our existing and future domestic
subsidiaries and by Precision Partners Holding Company. In addition, our
obligations under the credit facilities are secured by a first priority pledge
of and security interest in all of the outstanding capital stock of our existing
subsidiaries and future domestic subsidiaries, 65% of the outstanding capital
stock of any future foreign subsidiary and substantially all of our assets and
the assets of our existing and future domestic subsidiaries, including
inventory, accounts receivable and all of our property, plants and equipment.
Our obligations under the credit facilities are also secured by a pledge by
Precision Partners Holding Company of all of our outstanding capital stock.
CERTAIN FINANCIAL COVENANTS. The credit facilities require that we meet and
maintain certain financial ratios and tests, including:
- a maximum consolidated leverage ratio, total debt to EBITDA;
- a minimum consolidated interest coverage ratio, EBITDA to interest
expense; and
- a minimum consolidated fixed charge coverage ratio, EBITDA to interest
expense plus other fixed charges.
CERTAIN OTHER COVENANTS. The credit facilities also contain covenants that
limit our ability and that of our operating subsidiaries to take various
actions, including:
- incurring additional indebtedness and liens;
- fundamentally changing corporate structure, including mergers,
consolidations and liquidations;
- disposing of property;
- making certain payments, including on indebtedness prior to maturity,
dividends and capital stock purchases;
- making investments;
- making capital expenditures;
- modifying certain instruments;
- changing fiscal periods;
- entering into sale and leaseback transactions;
- entering into affiliate transactions;
- entering into agreements restricting distributions;
- amending the acquisition documents;
- granting negative pledges; and
- entering into unrelated lines of business.
54
<PAGE>
EVENTS OF DEFAULT. The credit facilities contain customary events of
default with respect to us and our operating subsidiaries, including:
- nonpayment of principal, interest or fees when due;
- defaults with respect to other indebtedness;
- noncompliance with covenants and other agreements contained in the new
credit facilities;
- breaches of representations or warranties;
- events of bankruptcy;
- failure to satisfy or stay execution of judgments in excess of $1,500,000;
- incurrence of certain employee benefit liabilities;
- invalidity of any guarantee;
- failure of any new subsidiary to deliver documents necessary to create
valid, preferred security interests in collateral;
- invalidity or non-perfection of security interests in collateral;
- failure of the notes or guarantees thereof to be subordinated; and
- changes of control.
55
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The outstanding notes were, and the exchange notes will be issued under an
indenture among us, the subsidiary guarantors and The Bank of New York, as
trustee, as amended by the First and Second Supplemental Indentures thereto. The
following is a summary of the material provisions of the indenture as so
amended. It does not include all of the provisions of the indenture. We urge you
to read the indenture because it defines your rights. The terms of the exchange
notes include those stated in the indenture and those made part of the indenture
by reference to the Trust Indenture Act of 1939, as amended (the "TIA"). Copies
of the indenture and of the first and second supplemental indentures have been
filed as exhibits to the registration statement of which this prospectus is a
part and may be obtained from the SEC or from us as described under "Where to
Find More Information." You can find definitions of certain capitalized terms
used in this description under "--Certain Definitions." For purposes of this
section, references to the "Company" include only Precision Partners, Inc. and
not our subsidiaries.
BRIEF DESCRIPTION OF THE NOTES
The exchange notes will be unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt of the Company. The exchange
notes will be obligations of the Company evidencing the same indebtedness as the
outstanding notes.
Except as otherwise indicated, the following description relates to both the
outstanding notes and the exchange notes. The form and terms of the exchange
notes are the same as the form and terms of the outstanding notes in all
material respects, except that:
- The exchange notes have been registered under the Securities Act and
therefore will not bear legends restricting their transfer and will not
contain provisions relating to an increase in the interest rate which were
included in the terms of the outstanding notes in circumstances relating
to the timing of the exchange offer, and
- the holders of the exchange notes will not be entitled to all of the
rights of the holders of the outstanding notes under the registration
rights agreement, which rights shall terminate upon the consummation of
the exchange offer.
The indenture provides that the exchange notes may be issued in fully
registered form only, without coupons, in denominations of $1,000 and integral
multiples thereof. Initially, the exchange notes will be issued in the form of
one or more global notes and the trustee will act as Paying Agent and Registrar
for the notes. See "Book Entry; Delivery and Form." The exchange notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the exchange notes ("Holders"). The Company will pay principal (and premium, if
any) on the exchange notes at the trustee's corporate office in New York, New
York. At the Company's option, interest may be paid at the trustee's corporate
trust office or by check mailed to the registered address of the Holders. Any
outstanding notes that remain outstanding after the completion of the exchange
offer, together with the exchange notes issued in the exchange offer, will be
treated as a single class of securities under the indenture.
PRINCIPAL, MATURITY AND INTEREST
Notes issued under the indenture are limited in aggregate principal amount
to $150 million, of which $100 million was issued in the offer and sale of the
outstanding notes. For each outstanding note accepted for exchange, the Holder
will receive an exchange not having a principal amount equal to that of the
surrendered outstanding note. The exchange notes will mature on March 15, 2009.
Additional notes may be issued from time to time subject to the limitations set
forth under "Certain Covenants--Limitation on Incurrence of Additional
Indebtedness." Holders of such additional notes will have the right to vote
together with Holders of exchange notes and of outstanding notes as a single
class.
56
<PAGE>
Interest on the exchange notes will accrue at the rate of 12% per annum and will
be payable semiannually in cash on each March 15 and September 15 to the persons
who are registered Holders at the close of business on the March 1 and
September 1 immediately preceding the applicable interest payment date. Interest
on the exchange notes will accrue from and including the most recent date to
which interest has been paid or, if no interest has been paid, from and
including March 19, 1999, the date of issuance of the outstanding notes. The
interest rate on the exchange notes is subject to increase in the circumstances
described under "Exchange Offer and Registration Rights." Such additional
interest will be payable on the same interest payment dates. As a result of the
failure to have an exchange offer registration statement filed by September 15,
1999, to have it declared effective by September 16, 1999 and to complete the
exchange offer by October 15, 1999, we are paying additional interest. The
amount of additional interest has ranged from 0.5% per annum on September 15,
1999 to 0.75% per annum currently. Unless the registration statement is declared
effective and the exchange offer completed by March 14, 2000, the amount of
additional interest will increase to 1.0% per annum beginning on March 15, 2000
until effectiveness of the registration statement and completion of the exchange
offer.
SINKING FUND
The exchange notes will not be entitled to the benefit of any mandatory
sinking fund.
REDEMPTION
OPTIONAL REDEMPTION. Except as described below, the exchange notes are not
redeemable before March 15, 2004. Thereafter, the Company may redeem the
exchange notes at its option, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the following redemption prices (expressed as
percentages of the principal amount thereof) if redeemed during the twelve-month
period commencing on March 15 of the year set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004..................................... 106.000%
2005..................................... 104.000%
2006..................................... 102.000%
2007 and thereafter...................... 100.000%
</TABLE>
In addition, the Company must pay accrued and unpaid interest on the
exchange notes redeemed.
OPTIONAL REDEMPTION UPON QUALIFIED EQUITY OFFERINGS. At any time, or from
time to time, on or prior to March 15, 2002, the Company may, at its option, use
the net cash proceeds of one or more Qualified Equity Offerings (as defined
below) to redeem up to 35% of all notes issued under the indenture at a
redemption price equal to 112% of the principal amount thereof plus accrued and
unpaid interest, if any, thereon to the date of redemption; provided that:
(1) at least 65% of the principal amount of notes issued under the indenture
remains outstanding immediately after any such redemption; and
(2) the Company makes such redemption not more than 180 days after the
consummation of any such Qualified Equity Offering.
As used in the preceding paragraph, "Qualified Equity Offering" means a
primary offering of Qualified Capital Stock, or rights, warrants or options to
acquire Qualified Capital Stock, of Precision Partners Holding Company or
Precision Partners, L.L.C. in the United States of at least $25 million to
Persons who are not Affiliates of Precision Partners or Precision Partners
Holding Company provided that, in the case of any such offering of Qualified
Capital Stock of Precision Partners Holdings or Precision Partners, L.L.C., all
the net proceeds thereof necessary to pay the aggregate redemption price (plus
accrued interest to the redemption date) of the notes to be redeemed pursuant to
the preceding paragraph are contributed to the Company.
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SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the notes are to be redeemed at any time,
selection of such notes for redemption will be made by the trustee either:
(1) in compliance with the requirements of the principal national
securities exchange, if any, on which such notes are listed; or
(2) if such notes are not then listed on a national securities
exchange, on a pro rata basis, by lot or by such method as the trustee shall
deem fair and appropriate.
No notes of a principal amount of $1,000 or less shall be redeemed in part.
If a partial redemption is made with the proceeds of a Qualified Equity
Offering, selection of the notes or portions thereof for redemption shall be
made by the trustee only on a pro rata basis or on as nearly a pro rata basis as
is practicable (subject to DTC procedures), unless such method is otherwise
prohibited. Notice of redemption shall be mailed by first-class mail at least 30
but not more than 60 days before the redemption date to each Holder of notes to
be redeemed at its registered address. If any note is to be redeemed in part
only, the notice of redemption that relates to such note shall state the portion
of the principal amount thereof to be redeemed. A new note in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original note. On and after the redemption
date, interest will cease to accrue on notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the indenture.
SUBORDINATION
The payment of all Obligations on the notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due upon all Senior Debt shall first be paid in
full in cash or Cash Equivalents, or such payment duly provided for to the
satisfaction of the holders of Senior Debt, before any payment or distribution
of any kind or character is made on account of any Obligations on the notes or
for the acquisition of any of the notes for cash or property or otherwise. If
any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any principal of,
interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, any Senior Debt, no payment of any kind
or character shall be made by or on behalf of the Company or any other Person on
its behalf with respect to any Obligations on the notes or to acquire any of the
notes for cash or property or otherwise. In addition, if any other event of
default occurs and is continuing with respect to any Designated Senior Debt, as
such event of default is defined in the instrument creating or evidencing such
Designated Senior Debt, permitting the holders of such Designated Senior Debt
then outstanding to accelerate the maturity thereof and if the Representative
for such Designated Senior Debt gives written notice of the event of default to
the trustee (a "Default Notice"),then, unless and until all events of default
with respect to such Designated Senior Debt have been cured or waived or have
ceased to exist or the trustee receives notice from the Representative for such
Designated Senior Debt terminating the Blockage Period (as defined below),
during the 180 days after the delivery of such Default Notice (the "Blockage
Period"), neither the Company nor any other Person on its behalf shall (x) make
any payment of any kind or character with respect to any Obligations on the
notes or (y) acquire any of the notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the Default Notice was delivered to
the trustee and only one such Blockage Period may be commenced within any 360
consecutive days. No event of default
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which existed or was continuing on the date of the commencement of any Blockage
Period with respect to the Designated Senior Debt shall be, or be made, the
basis for commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not after a period of 360 consecutive days,
unless such event of default shall have been cured or waived or ceased to exist
for a period of not less than 90 consecutive days (it being acknowledged that
any subsequent action, or any breach of any financial covenants for a period
commencing after the date of commencement of such Blockage Period that, in
either case, would give rise to an event of default pursuant to any provisions
of the Designated Senior Debt under which an event of default previously existed
or was continuing shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt, including
the Holders, may recover less, ratably, than holders of Senior Debt.
GUARANTEES
The Guarantors, jointly and severally, will fully and unconditionally
guarantee the Company's obligations under the indenture and the notes. Each
Guarantee will be subordinated to Guarantor Senior Debt on the same basis as the
notes are subordinated to Senior Debt. The obligations of each Guarantor under
its Guarantee will be limited as necessary to prevent the Guarantee from
constituting a fraudulent conveyance or fraudulent transfer under applicable
law.
Each Guarantor may consolidate with or merge into or sell its assets to the
Company or another Guarantor that is a Wholly Owned Restricted Subsidiary of the
Company without limitation, or with other Persons upon the terms and conditions
set forth in the indenture. See "Certain Covenants--Merger, Consolidation and
Sale of Assets." In the event all of the Capital Stock of a Guarantor owned by
the Company or a Restricted Subsidiary is sold by the Company and/or a
Restricted Subsidiary or all or substantially all of the assets of a Guarantor
are sold by such Guarantor and the sale complies with the provisions set forth
in "Certain Covenants--Limitation on Asset Sales," such Guarantor's Guarantee
will be released at the time of such sale.
Separate financial statements of the Guarantors are not included herein
because such Guarantors are jointly and severally liable with respect to the
Company's obligations pursuant to the notes, and the aggregate net assets,
earnings and equity of the Guarantors and the Company are substantially
equivalent to the net assets, earnings and equity of the Company on a
consolidated basis.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder will have the right
to require that the Company purchase all or a portion of such Holder's notes
pursuant to the offer described below (the "Change of Control Offer"), at a
purchase price equal to 101% of the principal amount thereof plus accrued
interest, if any, thereon to the date of purchase.
Prior to the mailing of the notice referred to below, but in any event
within 30 days following any Change of Control, the Company will be required to
use its reasonable efforts to:
(i) repay in full and terminate all commitments under all Indebtedness under
the Credit Agreement and all other Senior Debt the terms of which
require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit
Agreement and all other such Senior Debt and to repay the Indebtedness
owed to each lender which has accepted such offer; or
(ii) obtain the requisite consents under the Credit Agreement and all other
Senior Debt to permit the repurchase of the notes as provided below.
The Company shall first comply with the covenant in the immediately
preceding sentence before it shall be required to repurchase notes pursuant to
the provisions described below.
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Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a copy
to the trustee, which notice shall govern the terms of the Change of Control
Offer. Such notice shall state, among other things, the purchase date, which
must be no earlier than 30 days nor later than 60 days from the date such notice
is mailed, other than as may be required by law (the "Change of Control Payment
Date"). Holders electing to have a note purchased pursuant to a Change of
Control Offer will be required to surrender the note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third business day prior to the Change of Control Payment Date.
If a Change of Control Offer is required to be made, there can be no
assurance that the Company will be permitted by the terms of its Senior Debt to
make such a Change of Control Offer or that it will have available funds
sufficient to pay the Change of Control purchase price for all the notes that
might be delivered by Holders seeking to accept the Change of Control Offer. In
addition, the exercise by the holders of notes of their right to require the
Company to repurchase the notes upon a Change of Control could cause a default
under such Senior Debt, even if the Change of Control itself does not, due to
the financial effect of such repurchase on the Company, which could cause an
acceleration of such Senior Debt and a foreclosure with respect to any
collateral securing it in the event such Senior Debt was not paid. In the event
the Company is required to purchase outstanding notes pursuant to a Change of
Control Offer, the Company expects that it would seek third party financing to
the extent it does not have available funds to meet its purchase obligations.
However, there can be no assurance that the Company would be able to obtain such
financing.
Neither the Board of Directors of the Company nor the trustee (without the
consent of a majority in principal amount of the notes then outstanding) may
waive the covenant relating to a Holder's right to require the purchase of notes
upon a Change of Control. This right and other restrictions in the indenture
described herein on the ability of the Company and the Restricted Subsidiaries
to incur additional Indebtedness, to grant liens on its property, to make
Restricted Payments and to make Asset Sales may also make more difficult or
discourage a sale or takeover of the Company and, as a result, the removal of
incumbent management, whether such sale or takeover is favored or opposed by
such management. This right of the holders to require a repurchase of notes upon
a Change of Control, however, is not part of a plan by management to adopt a
series of anti-takeover provisions. Instead, the Change of Control purchase
feature is a result of negotiations between the Company and the Initial
Purchasers. Management has no present intention to engage in a transaction
involving a Change of Control, although it is possible that the Company may
decide to do so in the future. Subject to the restrictions contained in the
indenture described herein on the ability of the Company to incur additional
Indebtedness, grant liens on its property, make Restricted Payments and make
Asset Sales, the Company could, in the future, enter into certain highly
leveraged transactions, including acquisitions, mergers, refinancings,
restructurings or other recapitalizations, that would not constitute a Change of
Control under the indenture, but that could increase the amount of indebtedness
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings and the holders of the notes. Except for limitations contained in
such covenants, however, the indenture will not contain any covenants or
provisions that would afford the holders of the notes protection in the event of
any such highly leveraged transaction that does not constitute a Change of
Control.
The Company's obligation to make a Change of Control Offer may be discharged
if a third party makes the Change of Control Offer in the manner and at the
times and otherwise in compliance with the requirements applicable to a Change
of Control Offer to be made by the Company and such third party purchases all
notes properly tendered under such Change of Control Offer.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with a Change of
Control Offer. To the extent that the provisions of any securities laws or
regulations conflict with the "Change of Control" provisions of the indenture,
the Company shall
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comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under the "Change of Control" provisions
of the indenture by virtue thereof.
CERTAIN COVENANTS
The indenture will contain, among others, the following covenants:
LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS. The Company will not,
and will not permit any of the Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company or any Guarantor may incur
Indebtedness (including, without limitation, Acquired Indebtedness) and the
Restricted Subsidiaries that are not Guarantors may incur Acquired Indebtedness,
in each case if on the date of the incurrence of such Indebtedness, after giving
effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio
of the Company is greater than 2.0 to 1.0 if such date of incurrence is on or
prior to March 15, 2002 and 2.25 to 1 thereafter.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Indebtedness or is entitled to be incurred pursuant to the prior
sentence, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such categories of Permitted Indebtedness (or divided and classified in more
than one of such categories of Permitted Indebtedness) or pursuant to the prior
sentence. Accrual of interest, the accretion of accreted value and the payment
of interest in the form of additional Indebtedness will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant.
LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and will not cause
or permit any of the Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock of the Company
or in options, warrants or other rights to purchase Qualified Capital Stock
of the Company) on or in respect of shares of the Company's Capital Stock;
(b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase
or acquire shares of any class of such Capital Stock; or
(c) make any Investment (other than Permitted Investments) (each of the
foregoing actions set forth in clauses (a), (b) and (c) being referred to as
a "Restricted Payment"), if at the time of such Restricted Payment or
immediately after giving effect thereto:
(i) a Default or an Event of Default shall have occurred and be
continuing; or
(ii) the Company is not able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
covenant described under "--Limitation on Incurrence of Additional
Indebtedness"; or
(iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the
amount expended for such purpose, if other than in cash, being the fair
market value of such property as determined reasonably and in good faith
by the Board of Directors of the Company) shall exceed the sum of:
(A) 50% of the cumulative Consolidated Net Income (or if
cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss) of the Company
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earned during the period beginning on the first day of the fiscal
quarter commencing prior to the Issue Date and through the end of the
most recent fiscal quarter for which financial statements are
available prior to the date such Restricted Payment occurs (the
"Reference Date") (treating such period as a single accounting
period); plus
(B) 100% of the aggregate net cash proceeds and the fair market
value of property other than cash (as determined in good faith by the
Company) received by the Company from any Person (other than a
Subsidiary of the Company) from the issuance and sale subsequent to
the Issue Date of Qualified Capital Stock of the Company or of other
Indebtedness or securities converted to or exchanged for Qualified
Capital Stock of the Company; plus
(C) without duplication of any amounts included in clause
(iii)(B) above, 100% of the aggregate net cash proceeds of any
contribution to the equity capital of the Company (other than the
Disqualified Capital Stock) received by the Company (excluding, in
the case of clauses (iii)(B) and (C), any net proceeds from a
Qualified Equity Offering to the extent used to redeem the notes);
plus
(D) an amount equal to the lesser of:
(a) the sum of the fair market value of the Capital Stock of
an Unrestricted Subsidiary owned by the Company and/or a
Restricted Subsidiary and the aggregate amount of all
Indebtedness of such Unrestricted Subsidiary owed to the Company
and each Restricted Subsidiary on the date of Revocation of such
Unrestricted Subsidiary as an Unrestricted Subsidiary in
accordance with the covenant described under "--Limitation on
Designations of Unrestricted Subsidiaries;" and
(b) the Designation Amount with respect to such Unrestricted
Subsidiary on the date of the Designation of such Subsidiary as
an Unrestricted Subsidiary in accordance with the covenant
described under "--Limitation on Designations of Unrestricted
Subsidiaries;" plus
(E) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue
Date, an amount equal to the lesser of the return of capital with
respect to such Investment and the initial amount of such Investment
which was treated as a Restricted Payment, less, in either case, the
cost of the disposition of such Investment and net of taxes.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit:
(1) the payment of any dividend or distribution within 60 days after
the date of declaration of such dividend if the dividend or distribution
would have been permitted on the date of declaration;
(2) any dividend or distribution in respect of or the repurchase,
redemption, retirement or other acquisition of any shares of Capital Stock
of the Company, either (i) solely by conversion into or in exchange for
shares of Qualified Capital Stock of the Company or (ii) through the
application of net proceeds of a substantially concurrent sale for cash
(other than to a Restricted Subsidiary of the Company) of shares of
Qualified Capital Stock of the Company;
(3) so long as no Default or Event of Default shall have occurred and
be continuing, repurchases of Capital Stock (or options therefor) of the
Company from current or former officers, directors, employees or consultants
pursuant to equity ownership or compensation plans or stockholders
agreements not to exceed $1.0 million in any year (with unused amounts in
any calendar year being carried over to succeeding calendar years, but not
to exceed $1.5 million in any one year);
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(4) payments pursuant to any tax sharing arrangement between the
Company or any of its Restricted Subsidiaries and any other Person with
which the Company or such Restricted Subsidiary files a consolidated tax
return or with which the Company or such Restricted Subsidiary is part of a
consolidated group for tax purposes not to exceed the amount the Company
would be required to pay on a stand-alone basis;
(5) the purchase or redemption of notes following a Change of Control
after the Company shall have complied with the provisions under "--Change of
Control," including payment of the purchase price pursuant to a Change of
Control Offer;
(6) the payment to Holdings of up to $800,000 in the aggregate in any
fiscal year for Holdings to pay annual monitoring fees to Saunders, Karp &
Megrue and Carlisle;
(7) the payment of consulting and advisory fees to Harvey in connection
with the 1999 Acquisitions or any future acquisition and related expenses;
(8) the declaration and payment of dividends to holders of any class or
series of Disqualified Capital Stock of the Company issued in accordance
with the covenant entitled "--Limitation on Incurrence of Additional
Indebtedness;" and
(9) so long as no Default or Event of Default shall have occurred and
be continuing, other Restricted Payments in an aggregate amount not to
exceed $5 million.
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date in accordance with clause (iii) of the immediately preceding
paragraph, amounts expended pursuant to clauses (1) and (2(ii)) shall be
included in such calculation.
LIMITATION ON ASSET SALES. The Company will not, and will not permit any of
the Restricted Subsidiaries to, consummate an Asset Sale unless:
(i) the Company or the applicable Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal
to the fair market value of the assets sold or otherwise disposed of (as
determined in good faith by the Board of Directors of the Company);
(ii) at least 75% of the consideration received by the Company or the
Restricted Subsidiary, as the case may be, from such Asset Sale shall be in
the form of cash or Cash Equivalents or Replacement Assets and is received
at the time of such disposition (provided that the amount of (x) any
Indebtedness of the Company or any Guarantor that is actually assumed by the
transferee in such Asset Sale and from which the Company and the Guarantors
are fully and unconditionally released, (y) Indebtedness of a Restricted
Subsidiary that is no longer such as a result of such Asset Sale (to the
extent the Company and each other Restricted Subsidiary us released from any
guarantee thereof) and (z) securities received by the Company or any
Restricted Subsidiary from the transferee that are promptly converted by the
Company or such Restricted Subsidiary into cash shall each be deemed to be
cash for purposes of clause (i) above); and
(iii) upon the consummation of an Asset Sale, the Company shall apply,
or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating
to such Asset Sale within 360 days of receipt thereof either:
(A) to prepay any Senior Debt or Guarantor Senior Debt and, in the
case of any Senior Debt or Guarantor Senior Debt under any revolving
credit facility, effect a permanent reduction in the availability under
such revolving credit facility;
(B) to acquire Replacement Assets; or
(C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii) (B).
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On the 361st day after an Asset Sale or such earlier date, if any, as the
Board of Directors of the Company or of such Restricted Subsidiary determines
not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in
clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each, a
"Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds
that have not been applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the next preceding
sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company to
make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net
Proceeds Offer Payment Date") not less than 30 nor more than 60 days following
the applicable Net Proceeds Offer Trigger Date, all outstanding notes up to a
maximum principal amount of notes equal to the Note Pro Rata Share, at a
purchase price in cash equal to 100% of the principal amount of notes, plus
accrued and unpaid interest (including additional interest, if any) thereon, if
any, to the date of purchase; PROVIDED, HOWEVER, that if at any time any
non-cash consideration received by the Company or any Restricted Subsidiary, as
the case may be, in connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received with respect to any
such non-cash consideration) or Cash Equivalents, then such conversion or
disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Cash Proceeds thereof shall be applied in accordance with this covenant.
The Company may defer the Net Proceeds Offer until there is an aggregate
unutilized Net Proceeds Offer Amount equal to or in excess of $10 million
resulting from one or more Asset Sales or deemed Asset Sales (at which time, the
entire unutilized Net Proceeds Offer Amount, and not just the amount in excess
of $10 million, shall be applied as required pursuant to this paragraph).
In the event that any other Indebtedness of the Company that ranks equally
to in right of payment with the notes requires that such Indebtedness be repaid
or repurchased upon the consummation of any Asset Sale (the "Other
Indebtedness"), the Company may use the Net Proceeds Offer Amount otherwise
required to be used to repay or repurchase such Other Indebtedness and to make a
Net Proceeds Offer so long as the amount of such Net Proceeds Offer Amount
available to be applied to purchase the notes is not less than the Note Pro Rata
Share. With respect to any Net Proceeds Offer Amount, the Company shall make the
Net Proceeds Offer in respect thereof at the same time as the analogous
repayment or repurchase is made under any Other Indebtedness and the date of
purchase in respect thereof shall be the same under the indenture as the
repayment or purchase of any Other Indebtedness.
With respect to any Net Proceeds Offer effected pursuant to this covenant,
to the extent that the principal amount of the notes tendered pursuant to such
Net Proceeds Offer exceeds the Note Pro Rata Share to be applied to the purchase
thereof, such notes shall be purchased PRO RATA based on the principal amount of
such notes tendered by each holder.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and the Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," which transaction does not constitute a Change of Control,
the successor corporation shall be deemed to have sold the properties and assets
of the Company and the Restricted Subsidiaries not so transferred for purposes
of this covenant and shall comply with the provisions of this covenant with
respect to such deemed sale as if it were an Asset Sale. In addition, the fair
market value (as determined in good faith by the Board of Directors of the
Company) of such properties and assets of the Company or the Restricted
Subsidiaries deemed to be sold shall be deemed to be Net Cash Proceeds for
purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 30 days following the Net Proceeds Offer Trigger
Date, with a copy to the trustee, and shall comply with the procedures set forth
in the indenture. Upon receiving notice of the Net Proceeds Offer, Holders may
elect to tender their notes in whole or in part in integral multiples of $1,000
in exchange for cash. To the extent Holders properly tender notes in an amount
exceeding the Net
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Proceeds Offer Amount, notes of tendering Holders will be purchased on a pro
rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open
for a period of 20 business days or such longer period as may be required by
law. If not fully subscribed, the Company may retain and use the remaining Net
Cash Proceeds for any purpose not otherwise prohibited by the indenture.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset Sale"
provisions of the indenture, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under the "Asset Sale" provisions of the indenture by virtue
thereof.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company will not, and will not cause or permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on or in respect of
its Capital Stock;
(b) make loans or advances or to pay any Indebtedness or other
obligation owed to the Company or any other Restricted Subsidiary; or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reasons of:
(1) applicable law;
(2) the indenture, the notes or the Guarantees;
(3) customary non-assignment provisions of any contract or any lease
governing a leasehold interest of any Restricted Subsidiary;
(4) any instrument governing Acquired Indebtedness, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person or the
properties or assets of the Person so acquired;
(5) the Credit Agreement;
(6) agreements existing on the Issue Date to the extent and in the
manner such agreements are in effect on the Issue Date;
(7) any other agreement entered into after the Issue Date that
contains encumbrances and restrictions that are not materially more
restrictive with respect to any Restricted Subsidiary than those in
effect with respect to such Restricted Subsidiary pursuant to agreements
as in effect on the Issue Date;
(8) agreements governing Permitted Indebtedness;
(9) customary bank credit agreements Incurred pursuant to clause
(xv) of the definition of Permitted Indebtedness;
(10) customary restrictions on the transfer of any property or
assets arising under a security agreement governing a Lien permitted
under the indenture;
(11) customary restrictions with respect to a Restricted Subsidiary
pursuant to an agreement that has been entered into in connection with
the sale or disposition of all or substantially all of the Capital Stock
or assets of such Restricted Subsidiary;
(12) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
discussed in clause (c) above on the property so acquired;
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(13) secured Indebtedness otherwise permitted to be incurred
pursuant to the covenants described under "--Limitations on Incurrence of
Additional Indebtedness" and "--Limitation on Liens" that limit the right
of the debtor to dispose of the assets securing such Indebtedness;
(14) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
(15) any agreement governing Refinancing Indebtedness incurred to
Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4), (5), (6), (8) or (13) above;
provided, however, that the provisions relating to such encumbrance or
restriction contained in any such Refinancing Indebtedness are not
materially more restrictive than the provisions relating to such
encumbrance or restriction contained in agreements referred to in such
clause (2), (4), (5), (6), (8) or (13) above.
LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES. The Company will
not permit any of the Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Restricted Subsidiary) or permit any Person
(other than the Company or a Restricted Subsidiary) to own any Preferred Stock
of any Restricted Subsidiary.
LIMITATION ON LIENS. The Company will not, and will not cause or permit any
of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or permit or suffer to exist any Liens of any kind against or upon any property
or assets of the Company or any of the Restricted Subsidiaries whether owned on
the Issue Date or acquired after the Issue Date, or any proceeds therefrom, or
assign or otherwise convey any right to receive income or profits therefrom
unless:
(i) in the case of Liens securing Indebtedness that is expressly
subordinate or junior in right of payment to the notes, the notes are
secured by a Lien on such property, assets or proceeds that is senior in
priority to such Liens; and
(ii) in all other cases, the notes are equally and ratably secured with
the obligations so secured until such obligations are no longer secured by a
Lien, except for:
(A) Liens existing as of the Issue Date to the extent and in the
manner such Liens are in effect on the Issue Date;
(B) Liens securing Senior Debt, Guarantor Senior Debt or
Indebtedness of a Restricted Subsidiary that is not a Guarantor that is
permitted to be incurred under the indenture;
(C) Liens securing the notes and any Guarantees;
(D) Liens in favor of the Company or a Restricted Subsidiary;
(E) Liens securing Refinancing Indebtedness incurred to Refinance
any Indebtedness which has been secured by a Lien permitted under the
indenture and which has been incurred in accordance with the provisions
of the indenture; provided, however, that such Liens do not extend to or
cover any property or assets of the Company or any of the Restricted
Subsidiaries not securing the Indebtedness so Refinanced (other than
improvements, additions or accessions thereto); and
(F) Permitted Liens.
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PROHIBITION ON INCURRENCE OF SENIOR SUBORDINATED DEBT. The Company will
not, and will not permit any Guarantor to, incur or suffer to exist Indebtedness
that is senior in right of payment to the notes or the Guarantee of such
Guarantor and subordinate in right of payment to any other Indebtedness of the
Company or such Guarantor, as the case may be.
MERGER, CONSOLIDATION AND SALE OF ASSETS. The Company will not, and will
not cause or permit any Guarantor (other than any Guarantor whose Guarantee is
to be released in accordance with the terms of the Guarantee and indenture in
connection with any transaction complying with the provisions of the covenant
described under "--Limitation on Asset Sales") to, in a single transaction or
series of related transactions, consolidate or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's assets
(determined on a consolidated basis for the Company and the Restricted
Subsidiaries) whether as an entirety or substantially as an entirety to any
Person unless:
(i) either:
(1) the Company or such Guarantor shall be the surviving or
continuing corporation; or
(2) the Person (if other than the Company or such Guarantor)
formed by such consolidation or into which the Company or such
Guarantor is merged or the Person which acquires by sale, assignment,
transfer, lease, conveyance or other disposition the properties and
assets of the Company and the Restricted Subsidiaries substantially
as an entirety (the "Surviving Entity"):
(x) shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the
District of Columbia; and
(y) shall expressly assume, by supplemental indenture (in
form and substance reasonably satisfactory to the trustee),
executed and delivered to the trustee, the due and punctual
payment of the principal of, and premium, if any, and interest on
all of the notes and the performance of every covenant of the
notes, the Guarantee, if applicable, the indenture and, if then
effect, the Registration Rights Agreement on the part of the
Company or such Guarantor to be performed or observed;
PROVIDED that a Guarantor may merge with or into the Company or
another Guarantor without complying with this clause (i).
(ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of
such transaction) on a pro forma basis, the Company or such Surviving
Entity, as the case may be, shall be able to incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
covenant described under "--Limitation on Incurrence of Additional
Indebtedness;" PROVIDED that a Guarantor may merge into the Company or
another Guarantor without complying with this clause (ii);
(iii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including, without
limitation, giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred and any Lien granted in connection
with or in respect of the transaction), no Default or Event of Default shall
have occurred or be continuing; and
(iv) the Company or the Surviving Entity shall have delivered to the
trustee an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or other disposition and, if a supplemental indenture is
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required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of the indenture and that all
conditions precedent in the indenture relating to such transaction have been
satisfied.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries the Capital Stock of which constitutes all or substantially all of
the properties and assets of the Company, shall be deemed to be the transfer of
all or substantially all of the properties and assets of the Company.
The indenture will provide that upon any consolidation, combination or
merger of the Company or a Guarantor or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, in which the
Company or such Guarantor is not the continuing corporation, the Surviving
Entity formed by such consolidation or into which the Company or such Guarantor
is merged or to which such conveyance, lease or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company or such Guarantor under the indenture, the notes and the Guarantees with
the same effect as if such Surviving Entity had been named as such and, except
in the case of a conveyance, transfer or lease, the Company or such Guarantor,
as the case may be, shall be released from the obligation to pay the principal
of and interest on the notes or in respect of its guarantee, as the case may be,
and all of the Company's or such Guarantor's other obligations and covenants
under the notes, the indenture and its Guarantee, if applicable.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with, or for the benefit of, any of
its Affiliates (each an "Affiliate Transaction"), other than (x) Affiliate
Transactions permitted under paragraph (b) below and (y) Affiliate Transactions
on terms that are not materially less favorable than those that would have
reasonably been expected in a comparable transaction at such time on an
arm's-length basis from a Person that is not an Affiliate of the Company or such
Restricted Subsidiary. All Affiliate Transactions (and each series of related
Affiliate Transactions which are similar or part of a common plan) involving
aggregate payments or other property with a fair market value in excess of $5.0
million shall be approved by the Board of Directors of the Company or such
Restricted Subsidiary, as the case may be, such approval to be evidenced by a
Board Resolution stating that such Board of Directors has determined that such
transaction complies with the foregoing provisions. If the Company or any
Restricted Subsidiary enters into an Affiliate Transaction (or series of related
Affiliate Transactions related to a common plan) that involves an aggregate fair
market value of more than $10.0 million, the Company or such Restricted
Subsidiary, as the case may be, shall, prior to the consummation thereof, obtain
a favorable opinion as to the fairness of such transaction or series of related
transactions to the Company or the relevant Restricted Subsidiary, as the case
may be, from a financial point of view, from an Independent Financial Advisor
and file the same with the trustee.
(b) The restrictions set forth in clause (a) shall not apply to:
(i) employment, consulting and compensation arrangements and
agreements of the Company or any Restricted Subsidiary consistent
with past practice or approved by a majority of the disinterested
members of the Board of Directors of the Company (or a committee
comprised of disinterested directors);
(ii) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees, consultants or
agents of the Company or any Restricted Subsidiary as determined in
good faith by the Company's Board of Directors or senior management,
including, without limitation, any issuance or grant of stock
options, bonuses or similar rights to such employees, officers and
directors;
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(iii) transactions exclusively between or among the Company and
any of the Restricted Subsidiaries or exclusively between or among
such Restricted Subsidiaries, provided such transactions are not
otherwise prohibited by the indenture;
(iv) Restricted Payments permitted to be made pursuant to the
"--Limitation on Restricted Payments" covenant;
(v) the payment to Holdings of up to $800,000 in the aggregate
in any fiscal year for Holdings to pay annual monitoring fees to
Saunders, Karp & Megrue and Carlisle;
(vi) the payment of consulting and advisory fees to Harvey in
connection with the 1999 Acquisitions or any future acquisition and
related expenses;
(vii) payments to the selling stockholders of Mid State, Galaxy
and Certified pursuant to the relevant acquisition agreements or
documents delivered in connection therewith (whether in cash or in
the form of bonus compensation, a note or other security);
(viii) Permitted Investments,
(ix) in connection with a public offering of Common Stock of the
Company, Holdings or any Restricted Subsidiary, loans or advances,
having a maturity of one year or less after the date first made, to
employees to finance the purchase by such employees of such Common
Stock;
(x) the issuance or sale of any Qualified Capital Stock of the
Company or of any Guarantor; and
(xi) the payment of all fees and expenses related to the 1999
Acquisitions, the new credit facilities and this offering (whether
paid at or subsequent to the closing of such transactions).
ADDITIONAL SUBSIDIARY GUARANTEES. If the Company or any Restricted
Subsidiary transfers or causes to be transferred, in one transaction or a series
of related transactions, any property with a book value in excess of $500,000 to
any Domestic Restricted Subsidiary that is not a Guarantor, or if the Company or
any of its Restricted Subsidiaries shall organize, acquire or otherwise invest
in another Domestic Restricted Subsidiary having total assets with a book value
in excess of $500,000, then such transferee or acquired or other Restricted
Subsidiary shall:
(1) execute and deliver to the trustee a supplemental indenture in form
reasonably satisfactory to the trustee pursuant to which such Restricted
Subsidiary shall unconditionally guarantee all of the Company's obligations
under the notes and the indenture on the terms set forth in the indenture;
and
(2) deliver to the trustee an opinion of counsel that such supplemental
indenture has been duly authorized, executed and delivered by such
Restricted Subsidiary and constitutes a legal, valid, binding and
enforceable obligation of such Restricted Subsidiary. Thereafter, such
Restricted Subsidiary shall be a Guarantor for all purposes of the
indenture.
The Indebtedness evidenced by any Guarantee (including the payment of
principal of, premium, if any, and interest on the notes) will be subordinated
to Guarantor Senior Debt on terms analogous to those applicable to the notes.
See "--Subordination."
The obligations of each Guarantor under its Guarantee will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor (including, without limitation, any guarantees
under the Credit Agreement) and after giving effect to any collections from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under its Guarantee or pursuant to its
contribution obligations under the indenture, result in
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the obligations of the Guarantor under the Guarantee not constituting a
fraudulent conveyance or fraudulent transfer under federal or state law. Each
Guarantor that makes a payment for distribution under a Guarantee is entitled to
a contribution from each other Guarantor in a pro rata amount based on the
Adjusted Net Assets of each Guarantor.
CONDUCT OF BUSINESS. The Company will not, and will not permit any
Restricted Subsidiary to, engage in any businesses which are not either: (i) the
same, similar or related to the businesses in which the Company or any of the
Restricted Subsidiaries are engaged on the Issue Date, (ii) businesses acquired
through an acquisition after the Issue Date which are not material to the
Company and the Restricted Subsidiaries, taken as a whole, or (iii) Permitted
Investments.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Company may
designate any Subsidiary of the Company (other than a Subsidiary of the Company
that owns Capital Stock of a Restricted Subsidiary) as an "Unrestricted
Subsidiary" under the indenture (a "Designation") only if:
(i) the Subsidiary to be so designated has total assets of $1,000 or
less or
(ii) such Subsidiary has total assets greater than $1,000 and
(a) no Default shall have occurred and be continuing after
giving effect to such Designation; and
(b) the Company would be permitted under the indenture to make
an Investment at the time of Designation (assuming the effectiveness
of such Designation) in an amount (the "Designation Amount") equal to
the sum of (i) the fair market value of the Capital Stock of such
Subsidiary owned by the Company and/or any of the Restricted
Subsidiaries on such date and (ii) the aggregate amount of
Indebtedness of such Subsidiary owed to the Company and the
Restricted Subsidiaries on such date; and
(c) after giving effect to such designation, the Company would
be permitted to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to the covenant described under
"--Limitation on Incurrence of Additional Indebtedness" at the time
of Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment in the Designation Amount
pursuant to the covenant described under "-- Limitation on Restricted Payments"
for all purposes of the indenture. The indenture will further provide that the
Company shall not, and shall not permit any Restricted Subsidiary to, at any
time (x) provide direct or indirect credit support for or a guarantee of any
Indebtedness of any Unrestricted Subsidiary (including of any undertaking
agreement or instrument evidencing such Indebtedness), (y) be directly or
indirectly liable for any Indebtedness of any Unrestricted Subsidiary or (z) be
directly or indirectly liable for any Indebtedness that provides that the holder
thereof may (upon notice, lapse of time or both) declare a default thereon or
cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity upon the occurrence of a default with respect to any
Indebtedness of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary), except, in the case of
clause (x) or (y), to the extent permitted under the covenant described under
"--Limitation on Restricted Payments."
The indenture will further provide that the Company may revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary ("Revocation"),
whereupon such Subsidiary shall then constitute a Restricted Subsidiary, if:
(a) no Default shall have occurred and be continuing at the time and
after giving effect to such Revocation; and
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(b) all Liens and Indebtedness of such Unrestricted Subsidiaries
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the indenture.
All Designations and Revocations must be evidenced by an officers'
certificate of the Company delivered to the trustee certifying compliance with
the foregoing provisions.
REPORTS TO HOLDERS. The indenture will provide that the Company will
deliver to the trustee within 15 days after the filing of the same with the
Commission, copies of the quarterly and annual reports and of the information,
documents and other reports, if any, that the Company is required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The
indenture further provides that, notwithstanding that the Company may not be
subject to the reporting requirements of Sections 13 or 15(d) of the Exchange
Act, the Company will file with the Commission, to the extent permitted, and
provide the trustee and Holders with such annual and quarterly reports and such
information, documents and other reports specified in Section 13 and 15(d) of
the Exchange Act. The Company will also comply with the other provisions of TIA
Section314(a).
EVENTS OF DEFAULT
The following events are defined in the indenture as "Events of Default:"
(i) the failure to pay interest on any notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
indenture);
(ii) the failure to pay the principal on any notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer) (whether or not such
payment shall be prohibited by the subordination provisions of the
indenture);
(iii) a default in the observance or performance of any other covenant
or agreement contained in the indenture which default continues for a period
of 45 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the trustee or the
Holders of at least 25% of the outstanding principal amount of the notes
(except in the case of a default with respect to the covenant described
under "--Certain Covenants--Merger, Consolidation and Sale of Assets," which
will constitute an Event of Default with such notice requirement but without
such passage of time requirement);
(iv) a default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of the Company or of any Restricted Subsidiary (or the payment
of which is guaranteed by the Company or any Restricted Subsidiary), whether
such Indebtedness now exists or is created after the Issue Date, which
default (a) is caused by a failure to pay principal of such Indebtedness
after notice and the lapse of any applicable grace period provided in such
Indebtedness on the date of such default (a "payment default") or (b)
results in the acceleration of such Indebtedness prior to its express
maturity (and such acceleration is not rescinded, or such Indebtedness is
not repaid, within 30 days) and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a payment default or the maturity of
which has been so accelerated (and such acceleration is not rescinded, or
such Indebtedness is not repaid, within 30 days), aggregates $7.5 million;
(v) one or more judgments in an aggregate amount in excess of $7.5
million not covered by adequate insurance shall have been rendered against
the Company or any of the Restricted Subsidiaries and such judgments remain
undischarged, unpaid or unstayed for a period of 60 days after such judgment
or judgments become final and nonappealable;
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(vi) certain events of bankruptcy affecting the Company or any of the
Significant Subsidiaries; or
(vii) any Guarantee of a Significant Subsidiary ceases to be in full
force and effect or any Guarantee of a Significant Subsidiary declared to be
null and void and unenforceable or any Guarantee of a Significant Subsidiary
is found to be invalid or any of the Guarantors that is a Significant
Subsidiary denies its liability under its Guarantee (other than by reason of
release of a Guarantor in accordance with the terms of the indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) above shall occur and be continuing, the trustee or the Holders of at least
25% in principal amount of outstanding notes may declare the principal of,
premium, if any, and accrued interest on all the notes to be due and payable by
notice in writing to the Company and (if given by the Holders) the trustee
specifying the respective Events of Default and that it is a "notice of
acceleration," and the same shall become immediately due and payable. If an
Event of Default specified in clause (vi) above occurs and is continuing, then
all unpaid principal of, premium, if any, and accrued and unpaid interest on all
of the outstanding notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the trustee or any
Holder.
The indenture will provide that, at any time after a declaration of
acceleration with respect to the notes as described in the preceding paragraph,
the Holders of a majority in principal amount of the then outstanding notes may
rescind and cancel such declaration and its consequences:
(i) if the rescission would not conflict with any judgment or decree;
(ii) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(iii) to the extent the payment of such interest is lawful, if interest
on overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid;
(iv) if the Company has paid the trustee its reasonable compensation
and reimbursed the trustee for its expenses, disbursements and advances; and
(v) in the event of the cure or waiver of an Event of Default of the
type described in clause (vi) of the description above of Events of Default,
the trustee shall have received an officers' certificate and an opinion of
counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right
consequent thereto.
The Holders of a majority in principal amount of the then outstanding notes
may waive any existing Default or Event of Default under the indenture, and its
consequences, except a default in the payment of the principal of or interest on
any notes.
Holders of the notes may not enforce the indenture or the notes or institute
any proceeding with respect thereto or for any remedy thereunder except as
provided in the indenture and under the TIA. Subject to the provisions of the
indenture relating to the duties of the trustee, the trustee is under no
obligation to exercise any of its rights or powers under the indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the trustee reasonable indemnity. Subject to all provisions of the
indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the trustee
or exercising any trust or power conferred on the trustee.
Under the indenture, the Company is required to provide an officers'
certificate to the trustee promptly upon the Company obtaining knowledge of any
Default or Event of Default (provided that the Company shall provide such
certification at least annually whether or not it knows of any Default
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or Event of Default) that has occurred and, if applicable, describe such Default
or Event of Default and the status thereof.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations and the obligations of any Guarantors discharged with respect to the
outstanding notes ("Legal Defeasance"). Such Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire indebtedness
represented by the outstanding notes, except for:
(i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the notes when such payments
are due;
(ii) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payments;
(iii) the rights, powers, trust, duties and immunities of the trustee
and the Company's obligations in connection therewith; and
(iv) the Legal Defeasance provisions of the indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the indenture ("Covenant Defeasance") and thereafter any
omission or failure to comply with such obligations shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization and insolvency events) described under "--Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise Legal Defeasance or Covenant Defeasance:
(i) the Company must irrevocably deposit with the trustee, in trust,
for the benefit of the Holders cash in U.S. dollars, non-callable U.S.
government obligations, or a combination thereof, in such amounts as will be
sufficient (through the payment of principal and interest), to pay the
principal of, premium, if any, and interest on the notes on the stated date
of payment thereof or on the applicable redemption date, as the case may be;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that:
(A) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling; or
(B) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders
will not recognize income, gain or loss for federal income tax purposes
as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the trustee an opinion of counsel in the United States
reasonably acceptable to the trustee confirming that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
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(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(vi) the Company shall have delivered to the trustee an officers'
certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company or others;
(vii) the Company shall have delivered to the trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with;
(viii) the Company shall have delivered to the trustee an opinion of
counsel to the effect that:
(A) the trust funds will not be subject to any rights of holders of
Senior Debt, including, without limitation, those arising under the
indenture; and
(B) after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and
(ix) certain other customary conditions precedent are satisfied.
Notwithstanding the foregoing, the opinion of counsel required by clause
(ii) above with respect to a Legal Defeasance need not be delivered if all notes
not theretofore delivered to the trustee for cancellation (1) have become due
and payable or (2) will become due and payable on the maturity date within one
year under arrangements satisfactory to the trustee for the giving of notice of
redemption by the trustee in the name, and at the expense, of the Company.
SATISFACTION AND DISCHARGE
The indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
notes, as expressly provided for in the indenture) as to all outstanding notes
when:
(i) either:
(a) all the notes theretofore authenticated and delivered (except
lost, stolen or destroyed notes which have been replaced or paid and
notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the trustee
for cancellation; or
(b) all notes not theretofore delivered to the trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the notes not
theretofore delivered to the trustee for cancellation, for principal of,
premium, if any, and interest on the notes to the date of deposit
together with irrevocable instructions from the Company directing the
trustee to apply such funds to the payment thereof at maturity or
redemption, as the case may be;
(ii) the Company has paid all other sums payable under the indenture by
the Company; and
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(iii) the Company has delivered to the trustee an officers' certificate
and an opinion of counsel stating that all conditions precedent under the
indenture relating to the satisfaction and discharge of the indenture have
been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company, the Guarantors and the trustee, without the
consent of the Holders, may amend the indenture for certain specified purposes,
including curing ambiguities, defects or inconsistencies, so long as such change
does not, in the opinion of the trustee, adversely affect the rights of any of
the Holders in any material respect. In formulating its opinion on such matters,
the trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding notes
issued under the indenture, except that, without the consent of each Holder
affected thereby, no amendment may:
(i) reduce the amount of notes whose holders must consent to an
amendment;
(ii) reduce the rate of or change or have the effect of changing the
time for payment of interest, including defaulted interest, on any notes;
(iii) reduce the principal of or change or have the effect of changing
the fixed maturity of any notes, or change the date on which any notes may
be subject to redemption or repurchase, or reduce the redemption or
repurchase price therefor;
(iv) make any notes payable in money other than that stated in the
notes;
(v) make any change in provisions of the indenture protecting the right
of each Holder to receive payment of principal of and interest on such notes
on or after the stated due date thereof or to bring suit to enforce such
payment, or permitting Holders of a majority in principal amount of the then
outstanding notes to waive Defaults or Events of Default;
(vi) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer after the
occurrence of a Change of Control or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated or modify any
of the provisions or definitions with respect thereto;
(vii) modify or change any provision of the indenture or the related
definitions affecting the subordination or ranking of the notes or any
Guarantee in a manner which adversely affects the Holders; or
(viii) release any Guarantor from any of its obligations under its
Guarantee or the indenture otherwise than in accordance with the terms of
the indenture.
GOVERNING LAW
The indenture will provide that it, the notes and any Guarantees will be
governed by, and construed in accordance with, the laws of the State of New York
but without giving effect to applicable principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be required
thereby.
THE TRUSTEE
The indenture will provide that, except during the continuance of an Event
of Default, the trustee will perform only such duties as are specifically set
forth in the indenture. During the existence of an Event of Default, the trustee
will exercise such rights and powers vested in it by the indenture, and use the
same degree of care and skill in its exercise as a prudent man would exercise or
use under the circumstances in the conduct of his own affairs.
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The indenture and the provisions of the TIA contain certain limitations on
the rights of the trustee, should it become a creditor of the Company, to obtain
payments of claims in certain cases or to realize on certain property received
in respect of any such claim as security or otherwise. Subject to the TIA, the
trustee will be permitted to engage in other transactions; provided that if the
trustee acquires any conflicting interest as described in the TIA, it must
eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
indenture. Reference is made to the indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or
at the time it merges or consolidates with the Company or any of the Restricted
Subsidiaries or assumed by the Company or any Restricted Subsidiary in
connection with the acquisition of assets from such Person and in each case
whether or not such Indebtedness is incurred by such Person in connection with,
or in anticipation or contemplation of, such Person becoming a Restricted
Subsidiary or such acquisition, merger or consolidation.
"ADJUSTED NET ASSETS" of a Guarantor at any date means the lesser of the
amount by which (x) the fair value of the property of such Guarantor exceeds the
total amount of its liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities
incurred or assumed on such date), but excluding liabilities under the Guarantee
of such Guarantor at such date, and (y) the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liability of such Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after giving effect to any collection from any Subsidiary of such
Guarantor in respect of the obligations of such Subsidiary under such
Guarantor's Guarantee), excluding debt in respect of the Guarantee, as they
become absolute and matured.
"AFFILIATE" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative of the foregoing.
"AFFILIATE TRANSACTION" has the meaning set forth under "--Certain
Covenants--Limitation on Transactions with Affiliates."
"ASSET ACQUISITION" means (a) an Investment by the Company or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or shall be merged with or into the Company or any
Restricted Subsidiary, or (b) the acquisition by the Company or any Restricted
Subsidiary of the assets of any Person (other than a Restricted Subsidiary) that
constitute all or substantially all of the assets of such Person or comprise any
division or line of business of such Person or any other properties or assets of
such Person other than in the ordinary course of business.
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"ASSET SALE" means any direct or indirect sale, issuance, conveyance, lease
(other than operating leases entered into in the ordinary course of business),
assignment or other transfer (other than the granting of a Lien in accordance
with the indenture) for value by the Company or any of the Restricted
Subsidiaries (including any Sale and Leaseback Transaction) to any Person other
than the Company or a Restricted Subsidiary of (a) any Capital Stock of any
Restricted Subsidiary (other than directors' qualifying shares or shares
required by applicable law to be held by a Person other than the Company or a
Restricted Subsidiary); or (b) any other property or assets of the Company or
any Restricted Subsidiary other than in the ordinary course of business;
provided, however, that Asset Sales shall not include (i) a transaction or
series of related transactions for which the Company or the Restricted
Subsidiaries receive aggregate consideration of less than $1.0 million, (ii) the
sale, lease, conveyance, disposition or other transfer of all or substantially
all of the assets of the Company as permitted by the covenant described under
"--Certain Covenants--Merger, Consolidation and Sale of Assets," (iii) any
Restricted Payment made in accordance with the covenant described under
"--Certain Covenants--Limitation on Restricted Payments," (iv) the sale, lease,
conveyance, disposition or other transfer of property or equipment that has
become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Restricted Subsidiary, (v)
the creation or realization of any Permitted Lien, (vi) the sale of receivables
or other assets pursuant to a receivables or asset securitization or similar
program, (vii) any disposition the making of which is a Permitted Investment,
(viii) the sale of any Cash Equivalents owned by the Company or any of its
Subsidiaries and (ix) any exchange of like property pursuant to Section 1031 of
the Internal Revenue Code of 1986, as amended.
"BLOCKAGE PERIOD" has the meaning set forth under "--Subordination."
"BOARD OF DIRECTORS" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have been
duly adopted by the Board of Directors of such Person and to be in full force
and effect on the date of such certification, and delivered to the trustee.
"CAPITAL STOCK" means:
(i) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person; and
(ii) with respect to any Person that is not a corporation, any and all
partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"CARLISLE" means Carlisle Enterprises, LLC.
"CASH EQUIVALENTS" means:
(i) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one
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year from the date of acquisition thereof and, at the time of acquisition,
having one of the two highest ratings obtainable from either Standard &
Poor's Corporation ("S&P") or Moody's Investors Service, Inc. ("Moody's");
(iii) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than
$250,000,000;
(v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered
into with any bank meeting the qualifications specified in clause (iv)
above; and
(vi) investments in money market funds that invest substantially all
their assets in securities of the types described in clauses (i) through (v)
above.
"CHANGE OF CONTROL" means the occurrence of one or more of the following
events:
(i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets
of the Company to any Person or group of related Persons for purposes of
Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
indenture);
(ii) the approval by the holders of Capital Stock of the Company of any
plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the provisions of the indenture); or
(iii) any Person or Group, other than the Permitted Holders, becomes
the beneficial owner, directly or indirectly, of more than 50% of the total
voting power of the Capital Stock of the Company, and the Permitted Holders
beneficially own, directly or indirectly in the aggregate, a lesser
percentage of the total voting power of the Capital Stock of the Company
than such Person or Group and do not have the right or ability by voting
power, contract, or otherwise to elect or designate for election a majority
of the Board of Directors (or any analogous governing body) of the Company;
or
(iv) following the consummation of an initial public offering of the
Company, the replacement of a majority of the Board of Directors of the
Company or Holdings over a two-year period from the directors who
constituted the Board of Directors of the Company or Holdings, as the case
may be, at the beginning of such period, and such replacement shall not have
been approved by a vote of at least a majority of the Board of Directors of
the Company or Holdings, as the case may be, then still in office who either
were members of such Board of Directors at the beginning of such period or
whose election as a member of such Board of Directors was previously so
approved.
"CHANGE OF CONTROL OFFER" has the meaning set forth under "--Change of
Control."
"CHANGE OF CONTROL PAYMENT DATE" has the meaning set forth under "--Change
of Control."
"COMMON STOCK" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
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"CONSOLIDATED EBITDA" means, with respect to the Company, for any period,
the sum (without duplication) of:
(i) Consolidated Net Income; and
(ii) to the extent Consolidated Net Income has been reduced thereby:
(A) all income taxes of the Company and the Restricted Subsidiaries
paid or accrued in accordance with GAAP for such period (other than
income taxes attributable to extraordinary or nonrecurring gains or taxes
attributable to Asset Sales outside the ordinary course of business);
(B) Consolidated Interest Expense;
(C) Consolidated Non-cash Charges, less any non-cash items
increasing Consolidated Net Income for such period,
(D) the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary or is merged or consolidated with the Company or any
Restricted Subsidiary but after the first day of the relevant Four
Quarter Period as used in the definition of "Consolidated Fixed Charge
Coverage Ratio,"
(E) the aggregate amount of any earn-out payments or bonuses paid to
the selling stockholders of Mid State and Galaxy during the relevant Four
Quarter Period;
(F) in the case of a successor to the Company by consolidation or
merger or as a transferee of the Company's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets but after the first day of the relevant Four Quarter Period as
used in the definition of "Consolidated Fixed Charge Coverage Ratio," and
(G) monitoring fees paid by Holdings to Saunders, Karp & Megrue and
Carlisle in an amount not to exceed $350,000 in the aggregate during the
Four-Quarter Period
all as determined on a consolidated basis for the Company and the Restricted
Subsidiaries in accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to the
Company, the ratio of Consolidated EBITDA of the Company during the four most
recent full consecutive fiscal quarters (the "Four Quarter Period") ending on or
prior to the date of the transaction giving rise to the need to calculate the
Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to
Consolidated Fixed Charges of the Company for the Four Quarter Period. In
addition to and without limitation of the foregoing, for purposes of this
definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be
calculated after giving effect on a pro forma basis for the period of such
calculation to:
(i) the incurrence or repayment of any Indebtedness of the Company or
any of the Restricted Subsidiaries (and the application of the proceeds
thereof) giving rise to the need to make such calculation and any incurrence
or repayment of other Indebtedness (and the application of the proceeds
thereof), other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursuant to working
capital facilities, occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date, as if such incurrence or repayment, as the case may be
(and the application of the proceeds thereof), occurred on the first day of
the Four Quarter Period; and
(ii) any Asset Sales or other dispositions or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the
need to make such calculation as a result of the Company
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or one of the Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also
including any Consolidated EBITDA (including any pro forma expense and cost
reductions calculated on a basis consistent with Regulation S-X under the
Exchange Act) occurring during the Four Quarter Period or at any time
subsequent to the last day of the Four Quarter Period and on or prior to the
Transaction Date as if such Asset Sale or Asset Acquisition or other
disposition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the Four Quarter Period.
If the Company or any of the Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if the Company
or any Restricted Subsidiary had directly incurred or otherwise assumed such
guaranteed Indebtedness.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio":
(1) interest on outstanding Indebtedness determined on a fluctuating
basis as of the Transaction Date and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal
to the rate of interest on such Indebtedness in effect on the Transaction
Date;
(2) if interest on any Indebtedness actually incurred on the
Transaction Date may optionally be determined at an interest rate based upon
a factor of a prime or similar rate, a eurocurrency interbank offered rate,
or other rates, then the interest rate in effect on the Transaction Date
will be deemed to have been in effect during the Four Quarter Period; and
(3) notwithstanding clause (1) above, interest on Indebtedness determined on
a fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements.
For purposes of this definition, whenever pro forma effect is to be given to
an Asset Acquisition, the amount of income or earnings relating thereto and the
amount of Consolidated Interest Expense associated with any Indebtedness
incurred in connection therewith, the pro forma calculations shall be determined
on a basis consistent with Regulation S-X under the Exchange Act, which
determination shall be made in good faith by a responsible financial or
accounting officer of the Company and such pro forma calculations may include
such pro forma adjustments for nonrecurring non-cash items that the Company
considers reasonable and quantifiable in order to reflect the ongoing impact of
any such transaction on the Company's results of operations.
"CONSOLIDATED FIXED CHARGES" means, with respect to the Company for any
period, the sum, without duplication, of:
(i) Consolidated Interest Expense; plus
(ii) the product of (x) the amount of all dividend payments on any
series of Preferred Stock of the Company (other than dividends paid in
Qualified Capital Stock) paid, accrued or scheduled to be paid or accrued
during such period times (y) a fraction, the numerator of which is one and
the denominator of which is one minus the then current effective
consolidated federal, state and local income tax rate of the Company,
expressed as a decimal.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company for any
period, the sum of, without duplication:
(i) the aggregate of the interest expense of the Company and the
Restricted Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP (excluding fees and expenses incurred in connection
with the offer and sale of the notes), including without limitation,
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(a) any amortization of debt discount, (b) the net costs under Interest Swap
Obligations, (c) all capitalized interest and (d) the interest portion of
any deferred payment obligation; and
(ii) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by the Company and the
Restricted Subsidiaries during such period as determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to the Company, for any
period, the aggregate net income (or loss) of the Company and the Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom:
(a) after-tax gains and losses from Asset Sales or abandonments or
reserves relating thereto other than in the ordinary course of business;
(b) after tax items classified as extraordinary or nonrecurring gains
or losses;
(c) the net income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted Subsidiary or
is merged or consolidated with the Company or any Restricted Subsidiary;
(d) the net income (but not loss) of any Restricted Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by a contract, operation
of law or otherwise (except for restrictions existing pursuant to clause (9)
of the covenant described under "--Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries");
(e) the net income of any Person, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions paid to the Company
or to a Restricted Subsidiary by such Person;
(f) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued); and
(g) in the case of a successor to the Company by consolidation or
merger or as a transferee of the Company's assets, any earnings of the
successor corporation prior to such consolidation, merger or transfer of
assets.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the Company, for any
period, the aggregate depreciation, amortization and other non-cash expenses of
the Company and the Restricted Subsidiaries reducing Consolidated Net Income of
the Company for such period, determined on a consolidated basis in accordance
with GAAP (excluding any such charge that requires an accrual of or a reserve
for cash charges for any future period).
"COVENANT DEFEASANCE" has the meaning set forth under "--Legal Defeasance
and Covenant Defeasance."
"CREDIT AGREEMENT" means the Credit Agreement dated as of the Issue Date by
and among the Company, the guarantors named therein, the lenders named therein,
Citibank, N.A., as administrative agent, Bank of America National Trust and
Savings Association, as syndication agent, and Sun Trust Bank, Atlanta, as
documentation agent, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including increasing the amount of available borrowings
thereunder (provided that such increase in borrowings is permitted by the
covenant described under "-- Certain Covenants -- Limitation on Incurrence of
Additional Indebtedness" (including the definition of Permitted Indebtedness))
or adding Restricted Subsidiaries as additional borrowers or guarantors
thereunder) all
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or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary against fluctuations in currency values.
"DEFAULT" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice of both would be, an Event of Default.
"DEFAULT NOTICE" has the meaning set forth under "--Subordination."
"DESIGNATED SENIOR DEBT" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt that,
at the time of determination, has an aggregate principal amount of at least
$25,000,000 and is specifically designated in the instrument evidencing such
Senior Debt as "Designated Senior Debt" by the Company.
"DESIGNATION" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"DESIGNATION AMOUNT" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"DISQUALIFIED CAPITAL STOCK" means that portion of any Capital Stock that,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event (other than a
Change of Control), matures or is mandatorily redeemable, pursuant to a sinking
fund obligation or otherwise, or is mandatorily exchangeable for Indebtedness,
or is redeemable, or exchangeable for Indebtedness, at the sole option of the
holder thereof (except upon the occurrence of a Change of Control) on or prior
to the final maturity date of the notes.
"DOMESTIC RESTRICTED SUBSIDIARY" means a Restricted Subsidiary incorporated
or otherwise organized or existing under the laws of the United States, any
state thereof or any territory or possession of the United States.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction between a
willing seller and a willing and able buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair market value shall be
determined by the Board of Directors of the Company acting reasonably and in
good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the trustee.
"FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that is
organized and existing under the laws of a jurisdiction other than the United
States, any State thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
of the United States, which are in effect as of the Issue Date.
"GUARANTEE" means as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or
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payment of damages in the event of non-performance) of all or any part of such
obligation, including, without limiting the foregoing, the payment of amounts
drawn down by letters of credit. A guarantee will include, without limitation,
any agreement to maintain or preserve any other Person's financial condition or
to cause any other Person to achieve certain levels of operating results.
"GUARANTEE" has the meaning set forth under "--Certain Covenants--Additional
Subsidiary Guarantees."
"GUARANTOR" means (i) each Subsidiary of the Company guaranteeing the notes
as of the Issue Date and (ii) each other Person that in the future executes a
Guarantee pursuant to the covenant described under "--Certain
Covenants--Additional Subsidiary Guarantees" or otherwise; provided that any
Person constituting a Guarantor as described above shall cease to constitute a
Guarantor when its Guarantee is released in accordance with the terms of the
indenture.
"GUARANTOR SENIOR DEBT" means, with respect to any Guarantor, (i) the
principal of, premium, if any, and interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for in
the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on any Indebtedness of such Guarantor,
whether outstanding on the Issue Date or thereafter created, incurred or
assumed, unless, in the case of any particular Indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is outstanding
expressly provides that such Indebtedness shall not be senior in right of
payment to the Guarantee of such Guarantor. Without limiting the generality of
the foregoing, "Guarantor Senior Debt" shall also include the principal of,
premium, if any, interest (including any interest accruing subsequent to the
filing of a petition of bankruptcy at the rate provided for in the documentation
with respect thereto, whether or not such interest is an allowed claim under
applicable law) on, and all other amounts owing in respect of:
(x) all monetary obligations of every nature of the Company or any
Guarantor with respect to the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities;
(y) all Interest Swap Obligations; and
(z) all obligations under Currency Agreements;
in each case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Guarantor Senior Debt" shall not include:
(i) any Indebtedness of such Guarantor owing to a Subsidiary of such
Guarantor or any Affiliate of such Guarantor or any of such Affiliate's
Subsidiaries;
(ii) Indebtedness to, or guaranteed on behalf of, any stockholder,
director, officer or employee of such Guarantor or any Subsidiary of such
Guarantor (including, without limitation, amounts owed for compensation);
(iii) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(iv) Indebtedness represented by Disqualified Capital Stock;
(v) any liability for federal, state, local or other taxes owed or
owing by such Guarantor;
(vi) Indebtedness incurred in violation of the covenant described under
"--Certain Covenants--Limitation on Incurrence of Additional Indebtedness";
(vii) Indebtedness that, when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to such Guarantor; and
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(viii) any Indebtedness that is, by its express terms, subordinated in
right of payment to any other Indebtedness of such Guarantor.
"HARVEY" means Harvey Equity Partners, L.L.C.
"HOLDINGS" means Precision Partners Holding Company or any successor or
assign thereof that owns 100% of the Qualified Capital Stock of the Company.
"INCUR" has the meaning set forth under "--Certain Covenants--Limitation on
Incurrence of Additional Indebtedness."
"INDEBTEDNESS" means, with respect to any Person, without duplication:
(i) all Obligations of such Person for borrowed money;
(ii) all Obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments;
(iii) all Capitalized Lease Obligations of such Person;
(iv) all Obligations of such Person issued or assumed as the deferred
purchase price of property or services, all conditional sale obligations and
all Obligations under any title retention agreement (but excluding trade or
other accounts payable and other accrued liabilities arising in the ordinary
course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted);
(v) all Obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar credit transaction;
(vi) guarantees and other contingent obligations in respect of
Indebtedness of any other Person referred to in clauses (i) through (v)
above and clause (viii) below;
(vii) all Obligations of any other Person of the type referred to in
clauses (i) through (vi) that are secured by any Lien on any property or
asset of such first Person, the amount of such Obligation being deemed to be
the lesser of the fair market value of such property or asset or the amount
of the Obligation so secured;
(viii) all Obligations under currency agreements and all interest swap
obligations of such Person; and
(xi) all Disqualified Capital Stock issued by such Person with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference
and its maximum fixed repurchase price, but excluding accrued dividends, if
any.
For purposes hereof, the "maximum fixed repurchase price" of any
Disqualified Capital Stock that does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to the indenture, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the Board of Directors of the issuer of such Disqualified Capital
Stock.
"INDEPENDENT FINANCIAL ADVISOR" means a firm (i) that does not, and whose
directors, officers and employees and Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) that, in the judgment of the
Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
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"INITIAL PURCHASERS" means Salomon Smith Barney Inc. and NationsBanc
Montgomery Securities LLC.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any Person, (i) any direct or indirect
loan or other extension of credit (including, without limitation, a guarantee)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or (ii) any purchase or acquisition by such Person of any Capital
Stock, bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person. "Investment" shall exclude extensions of trade
credit by the Company and the Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. If the Company or any Restricted
Subsidiary sells or otherwise disposes of less than all of the Capital Stock of
any Restricted Subsidiary (the "Referent Subsidiary") such that, after giving
effect to any such sale or disposition the Referent Subsidiary shall cease to be
a Restricted Subsidiary, the Company shall be deemed to have made an Investment
on the date of any such sale or disposition equal to the fair market value of
the Capital Stock of the Referent Subsidiary not sold or disposed of.
"ISSUE DATE" means March 19, 1999.
"LEGAL DEFEASANCE" has the meaning set forth under "--Legal Defeasance and
Covenant Defeasance."
"LIEN" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof and any agreement to give
any security interest).
"LLC" means Precision Partners, L.L.C.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest), received
by the Company or any of the Restricted Subsidiaries from such Asset Sale net
of:
(a) actual expenses and fees relating to such Asset Sale (including,
without limitation, legal, accounting and investment banking fees, sales
commissions and relocation expenses);
(b) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(c) repayments of Indebtedness secured by the property or assets
subject to such Asset Sale that is required to be repaid in connection with
such Asset Sale;
(d) provision for minority interest holders in any Restricted
Subsidiary as a result of such Asset Sale;
(e) payments of unassumed liabilities (not constituting Indebtedness)
relating to the assets sold at the time of, or within 30 days after, the
date of such Asset Sale; and
(f) appropriate amounts to be determined by the Company or any
Restricted Subsidiary, as the case may be, as a reserve, in accordance with
GAAP, against any liabilities associated with such
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Asset Sale and retained by the Company or any Restricted Subsidiary, as the
case may be, after such Asset Sale, including, without limitation, pension
and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"NET PROCEEDS OFFER" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"NET PROCEEDS OFFER AMOUNT" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"NET PROCEEDS OFFER PAYMENT DATE" had the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"NET PROCEEDS OFFER TRIGGER DATE" has the meaning set forth under "--Certain
Covenants--Limitation on Asset Sales."
"NOTE PRO RATA SHARE" means the amount of the applicable Net Proceeds Offer
Amount obtained by multiplying the amount of such Net Proceeds Offer Amount by a
fraction, (i) the numerator of which is the aggregate principal amount of notes
outstanding at the time of the applicable Asset Sale with respect to which the
Company is required to use the Net Proceeds Offer Amount to repay or make a Net
Proceeds Offer or repay and (ii) the demoninator of which is the sum of (a) the
aggregate accreted value and/or principal amount, as the case may be, of all
Other Indebtedness outstanding at the time of the applicable Asset Sale and (b)
the aggregate principal amount of all notes outstanding at the time of the
applicable Net Proceeds Offer with respect to which the Company is required to
use the applicable Net Proceeds Offer Amount to offer to repay or make a Net
Proceeds Offer or repay.
"OBLIGATIONS" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other liabilities
payable under the documentation governing any Indebtedness.
"PERMITTED HOLDERS" means (i) Saunders, Karp & Megrue and (ii) any Person
"controlled" (as defined in the definition of "Affiliate") by one or more
Persons identified in clause (i) of this definition.
"PERMITTED INDEBTEDNESS" means, without duplication, each of the following:
(i) Indebtedness under the notes, the indenture and any Guarantees
issued in respect thereto, outstanding on the Issue Date, not to exceed an
aggregate principal amount of $100 million;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed the greater
of (a) $50 million and (b) the sum of (x) 85% of the book value of the
accounts receivable of the Company and its Restricted Subsidiaries on a
consolidated basis plus (y) 50% of the book value of the inventory of the
Company and its Restricted Subsidiaries on a consolidated basis plus (z) $25
million;
(iii) other Indebtedness of the Company and the Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any proceeds from
Asset Sales used to repay such Indebtedness pursuant to the covenant
"--Limitation on Asset Sales;"
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any Guarantor and Interest Swap Obligations of any Restricted
Subsidiary covering Indebtedness of such Restricted Subsidiary; provided,
however, that such Interest Swap Obligations are entered into to protect the
Company and the Restricted Subsidiaries from fluctuations in interest rates
on Indebtedness incurred in accordance with the indenture to the extent the
notional principal amount of such Interest Swap Obligations does not exceed
the principal amount of the Indebtedness to which such Interest Swap
Obligations relates;
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(v) Indebtedness under Currency Agreements; provided that in the case
of Currency Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company and the
Restricted Subsidiaries outstanding other than as a result of fluctuations
in foreign currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(vi) Indebtedness of a Restricted Subsidiary to the Company or another
Restricted Subsidiary for so long as such Indebtedness is held by the
Company or a Restricted Subsidiary, in each case subject to no Lien held by
a Person other than the Company or a Restricted Subsidiary; provided that if
as of any date any Person other than the Company or a Restricted Subsidiary
owns or holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Restricted Subsidiary for so
long as such Indebtedness is held by a Restricted Subsidiary, in each case
subject to no Lien; provided that if as of any date any Person other than a
Restricted Subsidiary owns or holds any such Indebtedness or any Person
holds a Lien in respect of such Indebtedness, such date shall be deemed the
incurrence of Indebtedness not constituting Permitted Indebtedness by the
Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds
in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
(ix) Indebtedness of the Company or any of the Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with
self-insurance, performance or surety bonds entered into in the ordinary
cause of business or similar requirements in the ordinary course of
business;
(x) Refinancing Indebtedness;
(xi) Purchase Money Indebtedness and Capitalized Lease Obligations (and
any Indebtedness incurred to Refinance such Purchase Money Indebtedness or
Capitalized Lease Obligations) not to exceed $10.0 million at any one time
outstanding;
(xii) guarantees of the obligations of Restricted Subsidiaries;
(xiii) Indebtedness of the Company or any of its Restricted
Subsidiaries arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guarantees,
letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries, incurred
or assumed in connection with the disposition of any business, any Asset
Sale or any disposition of the Capital Stock of a Restricted Subsidiary
other than guarantees or similar credit support by the Company or any of its
Restricted Subsidiaries of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Capital Stock for the purpose of
financing such acquisition; provided that the maximum aggregate liability in
respect of all such Indebtedness in the nature of such guarantees shall at
no time exceed the gross proceeds actually received by the Company from the
sale of such business, assets or Capital Stock;
(xiv) reimbursement obligations relating to undrawn standby letters of
credit (other than under the Credit Agreement) issued in the ordinary course
of business;
(xv) Indebtedness of Foreign Restricted Subsidiaries in an aggregate
amount not to exceed $7.5 million; and
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(xvi) additional Indebtedness of the Company and the Guarantors in an
aggregate principal amount not to exceed $12.5 million at any one time
outstanding (which amount may, but need not, be incurred under the Credit
Agreement).
"PERMITTED INVESTMENTS" means:
(i) Investments by the Company or any Restricted Subsidiary in any
Person that is or will become immediately after such Investment a Restricted
Subsidiary or that will merge or consolidate into the Company or a
Restricted Subsidiary;
(ii) Investments in the Company or any Restricted Subsidiary by any
Restricted Subsidiary; provided that any Indebtedness evidencing such
Investment is unsecured and subordinate to the notes;
(iii) Investments in cash and Cash Equivalents;
(iv) loans and advances to employees, officers and directors of the
Company and the Restricted Subsidiaries in the ordinary course of business
for bona fide business purposes not in excess of 1.0 million at any time
outstanding;
(v) Currency Agreements and Interest Swap Obligations entered into in
the ordinary course of the Company's or a Restricted Subsidiary's businesses
and otherwise in compliance with the indenture;
(vi) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such trade creditors or customers;
(vii) Investments made by the Company or the Restricted Subsidiaries as
a result of consideration received in connection with an Asset Sale made in
compliance with the covenant described under "-- Certain Covenants --
Limitation on Asset Sales";
(viii) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms, provided that such
trade terms may include such concessionary trade terms as the Company or
such Restricted Subsidiary deems reasonable under the circumstances;
(ix) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Restricted Subsidiary or in satisfaction of judgments;
(x) lease, utility and other similar deposits in the ordinary course of
business;
(xi) Investments paid for solely in Qualified Capital Stock of the
Company;
(xii) Investments acquired by the Company or a Restricted Subsidiary as
a result of a foreclosure by, or other transfer of title to, the Company or
such Restricted Subsidiary with respect to any secured Investment;
(xiii) loans and advances to employees, officers and directors of the
Company and the Restricted Subsidiaries in the ordinary course of business
to purchase Capital Stock (or options therefor) of the Company in an amount
not to exceed $1.5 million in the aggregate outstanding at any one time; and
(xiv) additional Investments not to exceed $10.0 million at any one
time outstanding.
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"PERMITTED LIENS" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims
either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or any Restricted Subsidiary shall
have set aside on its books such reserves as may be required pursuant to
GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, including any Lien securing letters of
credit issued in the ordinary course of business consistent with past
practice in connection therewith, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges, restrictions or encumbrances in respect of real property or minor
imperfections of title which do not, in the aggregate, impair in any
material respect the ordinary conduct of the business of the Company and the
Restricted Subsidiaries taken as a whole;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or assets
which is not leased property subject to such Capitalized Lease Obligation;
(vii) purchase money Liens securing Indebtedness incurred to finance
property or assets of the Company or any Restricted Subsidiary acquired in
the ordinary course of business, and Liens securing Indebtedness which
Refinances any such Indebtedness; provided, however, that (A) the related
purchase money Indebtedness (or Refinancing Indebtedness) shall not exceed
the lesser of the fair market value and the cost of such property or assets
plus the aggregate amount of fees and expenses incurred in connection
therewith and shall not be secured by any property or assets of the Company
or any Restricted Subsidiary other than the property and assets so acquired
and (B) the Lien securing the purchase money Indebtedness shall be created
within 90 days of such acquisition;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or other
goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of the Company
or any of the Restricted Subsidiaries, including rights of offset and
set-off;
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(xi) Liens securing Interest Swap Obligations, which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
indenture;
(xii) Liens securing Indebtedness under Currency Agreements;
(xiii) Liens securing Acquired Indebtedness (and any Indebtedness which
Refinances such Acquired Indebtedness) incurred in accordance with the
covenant described under "-- Certain Covenants -- Limitation on Incurrence
of Additional Indebtedness"; provided that (A) such Liens secured the
Acquired Indebtedness at the time of and prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and were not
granted in connection with, or in anticipation of the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary and (B) such
Liens do not extend to or cover any property or assets of the Company or of
any of the Restricted Subsidiaries other than the property or assets that
secured the Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary;
(xiv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xv) Liens arising pursuant to Sale and Leaseback Transactions entered
into in compliance with the indenture;
(xvi) Liens on the Capital Stock or other securities of an Unrestricted
Subsidiary that secures indebtedness or other obligations of such
Unrestricted Subsidiary;
(xvii) any encumbrance or restriction (including put and call
arrangements) with respect to the Capital Stock of any joint venture,
partnership or similar arrangement pursuant to any joint venture,
partnership or similar agreement; and
(xviii) Liens securing Indebtedness that otherwise may be incurred
under the indenture in an aggregate amount not to exceed $5 million.
"PERSON" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company or any
Restricted Subsidiary incurred for the purpose of financing all or any part of
the purchase price or the cost of construction or improvement of any property,
provided that the aggregate principal amount of such Indebtedness does not
exceed the lesser of the fair market value of such property or such purchase
price or cost.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"QUALIFIED EQUITY OFFERING" has the meaning set forth under "
- --Redemption--Optional Redemption upon Qualified Equity Offerings."
"REFERENCE DATE" has the meaning set forth under "--Certain
Covenants--Limitation on Restricted Payments."
"REFINANCE" means in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"REFINANCING INDEBTEDNESS" means any Refinancing by the Company or any
Restricted Subsidiary of Indebtedness incurred in accordance with the covenant
described under "--Certain Covenants--
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Limitation on Incurrence of Additional Indebtedness" (other than pursuant to
clause (ii), (iv), (v), (vi), (vii), (viii), (ix) and (xi) through (xvi)
inclusive of the definition of Permitted Indebtedness), in each case that does
not:
(1) result in an increase in the aggregate principal amount of any
Indebtedness provided that the amount of any premium reasonably necessary to
Refinance such Indebtedness and the amount of reasonable expenses incurred
by the Company in connection with such Refinancing shall not be deemed an
increase in the aggregate principal amount of the Indebtedness to be
Refinanced;
(2) create Indebtedness (A) the portion of which is scheduled to mature
prior to the notes with a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) with a final maturity earlier than the final maturity of
the Indebtedness being Refinanced or the notes, whichever is later; provided
that if such Indebtedness being Refinanced is Indebtedness of the Company or
a Guarantor, then such Refinancing Indebtedness shall be Indebtedness solely
of the Company and/or Guarantors.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated the Issue Date by and among the Company, the Guarantors and the Initial
Purchasers.
"REPLACEMENT ASSETS" means assets and property that will be used in the
business of the Company and/or its Restricted Subsidiaries as existing on the
Issue Date or in a business the same, similar or reasonably related thereto
(including Capital Stock of a Person that becomes a Restricted Subsidiary if
such Person is engaged in businesses that comply with the covenant described
under "--Certain Covenants--Conduct of Business").
"REPRESENTATIVE" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt: provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then the
Representative for such Designated Senior Debt shall at all times constitute the
holders of a majority in outstanding principal amount of such Designated Senior
Debt in respect of any Designated Senior Debt.
"RESTRICTED PAYMENT" has the meaning set forth under "--Certain
Covenants--Limitation on Restricted Payments."
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that has not
been designated by the Board of Directors of the Company, by a Board Resolution
delivered to the trustee, as an Unrestricted Subsidiary pursuant to and in
compliance with the covenant described under "--Certain Covenants--Limitation on
Designations of Unrestricted Subsidiaries." Any such Designation may be revoked
by a Board Resolution of the Company delivered to the trustee, subject to the
provisions of such covenant.
"REVOCATION" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"SALE AND LEASEBACK TRANSACTION" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether owned
by the Company or any Restricted Subsidiary at the Issue Date or later acquired,
which has been or is to be sold or transferred by the Company or such Restricted
Subsidiary to such Person or to any other Person from whom funds have been or
are to be advanced by such Person on the security of such Property other than
between the Company and a Restricted Subsidiary or between Restricted
Subsidiaries.
"SEC" means the U.S. Securities and Exchange Commission, as from time to
time constituted, or if at any time after the execution of the indenture the SEC
is not existing and performing the applicable duties now assigned to it, then
the body or bodies performing such duties at such time.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"SENIOR DEBT" means:
(i) the principal of, premium, if any, and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include
the principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided
for in the documentation with respect thereto, whether or not such interest
is an allowed claim under applicable law) on, and all other amounts owing in
respect of:
(x) all monetary obligations of every nature of the Company, under
the Credit Agreement, including, without limitation, obligations to pay
principal and interest reimbursement obligations under letters of credit,
fees, expenses and indemnities;
(y) all Interest Swap Obligations; and
(z) all obligations under Currency Agreements, in each case whether
outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include:
(i) any Indebtedness of the Company to a Restricted Subsidiary or
any Affiliate of the Company or any of such Affiliate's Subsidiaries;
(ii) Indebtedness to, or guaranteed on behalf of, any shareholder,
director, officer or employee of the Company or any Restricted Subsidiary
(including without limitation, amounts owed for compensation);
(iii) Indebtedness to trade creditors and other amounts incurred in
connection with obtaining goods, materials or services;
(iv) Indebtedness represented by Disqualified Capital Stock;
(v) Indebtedness incurred in violation of the covenant described
under "--Certain Covenants--Limitation on Incurrence of Additional
Indebtedness"; and
(vi) any Indebtedness that is, by its express terms, subordinated in
right of payment to any other Indebtedness of the Company or a Restricted
Subsidiary and senior in right of payment to the notes.
"SIGNIFICANT SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person that satisfies the criteria for a "significant
subsidiary" set forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"SKM" means Saunders Karp & Megrue, L.P.
"SUBSIDIARY," with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
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"SURVIVING ENTITY" has the meaning set forth under "--Certain
Covenants--Merger, Consolidation and Sale of Assets."
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries." Any such
designation may be revoked by a Board Resolution of the Company delivered to the
trustee, subject to the provisions of such covenant.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total of
the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) which will elapse
between such date the making of such payment.
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BOOK-ENTRY; DELIVERY AND FORM
The outstanding notes were issued in the form of two global certificates,
one representing the outstanding notes issued under Rule 144A and the other
representing the notes issued under Regulation S. The exchange notes will be
issued in the form of one or more global certificates. The outstanding global
notes were deposited on the date of closing of the sale of the outstanding
notes, and the exchange global notes will be deposited on the exchange date,
with the trustee as custodian for The Depository Trust Company, or DTC, and
registered in the name of DTC or its nominee for credit to the account of a
direct or indirect participant in DTC, as described below. The term "global
notes" means the outstanding global notes or the exchange global notes, as the
context may require.
Except as set forth below, the global notes may be transferred, in whole,
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See
"--Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the global
notes will not be entitled to receive physical delivery of certificated notes.
Transfers of beneficial interests in the global notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
including, if applicable, those of Euroclear and Cedel, which may change from
time to time.
Initially, the trustee will act as paying agent and registrar. The exchange
notes may be presented for registration of transfer and exchange at the offices
of the registrar.
DEPOSITORY PROCEDURES
The following information regarding the operations and procedures of DTC,
Euroclear and Cedel has been provided by such organizations and is provided
solely as a matter of convenience. These operations and procedures are solely
within the control of the respective settlement systems and are subject to
change by them from time to time. We take no responsibility for these operations
and procedures (or the description thereof) and urge investors to contact the
system or their participants directly to discuss these matters.
DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the company that, pursuant to procedures established by
it, (i) upon deposit of the global notes, DTC will credit the accounts of
Participants designated by the trustee with portions of the principal amount of
the global notes and (ii) ownership of such interests in the global notes will
be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interests in the global notes).
Investors in the exchange notes may hold their interests therein directly
through DTC, if they are Participants in such system, or indirectly through
organizations, including Euroclear and Cedel, which are Participants in such
system. Euroclear and Cedel will hold interests in the global notes on behalf of
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their participants through customers' securities accounts in their respective
names on the books of their respective depositories, which are Morgan Guaranty
Trust Company of New York, Brussels office, as operator of Euroclear, and
Citibank, N.A., as operator of Cedel. All interests in a global note, including
those held through Euroclear or Cedel, may be subject to the procedures and
requirements of DTC. Those interests held through Euroclear or Cedel may also be
subject to the procedures and requirements of such systems. The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a global note to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants and certain banks, the ability of a person having
beneficial interests in a global note to pledge such interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, and interest
on a global note registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered Holder under the indenture. Under the
terms of the indenture, both we and the trustee will treat the persons in whose
names the exchange notes, including the global notes, are registered as the
owners thereof for the purpose of receiving such payments and for any and all
other purposes whatsoever. Consequently, neither we, the trustee nor any agent
of ours or of the trustee has or will have any responsibility or liability for
(i) any aspect of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership interest
in the global notes, or for maintaining, supervising or reviewing any of DTC's
records or any Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the global notes or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants. DTC has advised the company that its current practice,
upon receipt of any payment in respect of securities such as the exchange notes,
including principal and interest, is to credit the accounts of the relevant
Participants with the payment on the payment date, in amounts proportionate to
their respective holdings in the principal amount of beneficial interest in the
relevant security as shown on the records of DTC, unless DTC has reason to
believe it will not receive payment on such payment date. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants, as the case
may be, and will not be the responsibility of DTC, the trustee or us. Neither we
nor the trustee will be liable for any delay by DTC or any of its Participants
or Indirect Participants in identifying the beneficial owners of the exchange
notes, and both we and the trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interests
in the global notes are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. See "--Same Day Settlement and
Payment."
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through DTC
in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case may
be, by its respective depositary; however, such cross-
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market transactions will require delivery of instructions to Euroclear or Cedel,
as the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the global note in DTC, and making or receiving
payment in accordance with normal procedures for same-day funds settlement
applicable to DTC. Euroclear participants and Cedel participants may not deliver
instructions directly to the depositories for Euroclear or Cedel.
DTC has advised us that it will take any action permitted to be taken by a
Holder of exchange notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the global notes and only in
respect of such portion of the aggregate principal amount of the notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default with respect to the notes, DTC reserves
the right to exchange the global notes for legended notes in certificated form,
and to distribute such notes to its Participants.
Neither we nor the trustee nor any of our respective agents will have any
responsibility for the performance by DTC, Euroclear or Cedel or our respective
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A global note is exchangeable for definitive notes in registered
certificated form only if (i) DTC (x) notifies us that it is unwilling or unable
to continue as depositary for the global notes and fails to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) we, at our option, notify the trustee in writing
that we elect to cause the issuance of the notes or (iii) there shall have
occurred and be continuing an event of default with respect to the notes. In
addition, beneficial interests in a global note may be exchanged for
certificated notes upon request but only upon prior written notice given to the
trustee by or on behalf of DTC in accordance with the indenture. In all cases,
certificated notes delivered in exchange for any global note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary, in accordance with
its customary procedures.
SAME-DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the exchange notes
represented by the global notes, including principal, premium, if any, and
interest, be made by wire transfer of immediately available funds to the
accounts specified by the Holder of the global notes. With respect to exchange
notes in certificated form, we will make all payments of principal, premium, if
any, and interest on the exchange notes at the office or agency maintained by us
for such purpose within the City and State of New York, initially the office of
the paying agent maintained for such purpose, or, at our option, by check mailed
to the Holders thereof at their respective addresses set forth in the register
of Holders of exchange notes; PROVIDED that all payments of principal, premium,
if any, and interest on exchange notes in certificated form the Holders of which
have given wire transfer instructions to us will be required to be made by wire
transfer of immediately available funds to the accounts specified by such
Holders. The exchange notes represented by the global notes are expected to
trade in DTC's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such exchange notes will, therefore, be required by
DTC to be settled in immediately available funds. We expect that secondary
trading in any certificated notes will also be settled in immediately available
funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a global note from a Participant or
Indirect Participant in DTC will be
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credited, and any such crediting will be reported to the relevant Euroclear or
Cedel participant, during the securities settlement processing day, which must
be a business day for Euroclear and Cedel, immediately following the settlement
date of DTC. DTC has advised us that cash received in Euroclear or Cedel as a
result of sales of interests in a global note by or through a Euroclear or Cedel
participant to a Participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or Cedel
cash account only as of the business day for Euroclear or Cedel following DTC's
settlement date.
REGISTRATION RIGHTS FOR OUTSTANDING NOTES
The following is a summary of the material terms of the registration rights
agreement. Under the registration rights agreement, we were required to:
- by September 15, 1999, file a registration statement relating to the
exchange offer with the SEC;
- by September 16, 1999, use our best efforts to have the registration
statement declared effective; and
- by October 15, 1999, use our best efforts to consummate the exchange
offer.
Under existing SEC interpretations contained in several no-action letters to
unrelated third parties, the exchange notes will be freely transferable by
holders which are not our affiliates after the exchange offer without further
registration under the Securities Act if the holder of the exchange notes can
make the representations described under "Exchange Offer--Terms and Conditions
of the Letter of Transmittal." Broker-dealers receiving exchange notes in the
exchange offer will, however, have a prospectus delivery requirement with
respect to resales of such exchange notes, as described in "Plan of
Distribution." In the no-action letters, the SEC has taken the position that
broker-dealers receiving exchange notes in the exchange offer may fulfill their
prospectus delivery requirements with respect to exchange notes, other than a
resale of an unsold allotment from the original sale of the outstanding notes,
with this prospectus. We have agreed for a period of 180 days after completion
of the exchange offer to make available a prospectus meeting the requirements of
the Securities Act to these broker-dealers and other persons, if any, with
similar prospectus delivery requirements for use in connection with any resale
of exchange notes.
If we are not permitted to consummate the exchange offer because it is not
permitted by applicable law or SEC policy or any holder of outstanding notes
notifies us prior to the 60th day following completion of the exchange offer
that:
- it is prohibited by law or SEC policy from participating in the exchange
offer,
- that it may not resell the exchange notes acquired by it in the exchange
offer to the public without delivering a prospectus and this prospectus is
not appropriate or available for such resale, or
- that it is a broker-dealer and owns outstanding notes acquired directly
from us or one of our affiliates,
we and the subsidiary guarantors have agreed to file with the SEC a shelf
registration statement to cover resales of outstanding notes by holders who
satisfy specified conditions relating to the provision of information in
connection with the shelf registration statement. We have agreed to use our best
efforts to cause the shelf registration statement to be declared effective as
promptly as possible by the SEC.
Upon the occurrence of events which would require an amendment or supplement
to the prospectus, public resales will not be permitted under a shelf
registration statement or this prospectus until the amendment or supplement is
provided to holders, including a period of up to 120 days in any
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calendar year during which we are entitled under the registration rights
agreement to suspend use of the shelf registration statement or this prospectus
to avoid public disclosure of an event that would have a material adverse effect
on us or require public disclosure of a pending material transaction not
previously disclosed.
If we fail to meet any of the deadlines described above for the exchange
offer or a shelf registration statement, additional interest will accrue on the
outstanding notes over and above the stated interest rate of 12% at a rate of
0.50% per annum for the first 90 days after the default and increasing by an
additional 0.25% per annum at the beginning of each subsequent 90-day period.
However, the additional interest rate on the outstanding notes may not exceed in
the aggregate 1.0% per annum. Upon curing the registration default, additional
interest on the outstanding notes as a result of such registration default shall
cease to accrue. If, after curing all registration defaults, there is a
subsequent registration default, the rate of additional interest will initially
be 0.50%, regardless of the additional interest rate in effect with respect to
any prior registration default. As a result of the failure to have an exchange
offer registration statement filed by September 15, 1999, to have it declared
effective by September 16, 1999 and to complete the exchange offer by
October 15, 1999, we are paying additional interest on the outstanding notes.
The amount of additional interest has ranged from 0.5% per annum on
September 15, 1999 to 1.0% per annum currently. Additional interest will
continue to accrue at that rate until effectiveness of the registration
statement and completion of the exchange offer.
Any amount of additional interest that becomes due is payable in cash, on
the same dates as interest payments are made on the outstanding notes. The
amount of additional interest is determined by multiplying the applicable
additional interest rate by the principal amount of the outstanding notes
multiplied by a fraction, the numerator of which is the number of days the
additional interest rate was applicable during such period, determined on the
basis of a 360-day year comprised of twelve 30-day months, and the denominator
of which is 360.
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PLAN OF DISTRIBUTION
Except as provided below, this prospectus may not be used for an offer to
resell, resale or other retransfer of the exchange notes.
Each broker-dealer receiving exchange notes for its own account from the
exchange offer must acknowledge that it will deliver a prospectus if it resells
the exchange notes. This prospectus may be used by a broker-dealer who resells
exchange notes received in exchange for outstanding notes, but only if the
broker-dealer acquired the outstanding notes from its market-making activities
or other trading activities. We have agreed that for 180 days after the exchange
date, we will make this prospectus available to any broker-dealer to use in a
resale of the exchange notes. In addition, until , 2000, 90 days
after the date of this prospectus, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus. We acknowledge and each
holder, except a broker-dealer, must acknowledge, that it is not engaged in,
does not intend to engage in, and does not have an arrangement or understanding
with any person to participate in any distribution of exchange notes.
We will not receive any proceeds from the exchange of outstanding notes for
exchange notes or from any resale of exchange notes by broker-dealers.
Broker-dealers who receive exchange notes for their own accounts through the
exchange offer may sell using the following resale methods, alone or in
combination:
- resale in the over-the-counter market;
- resale in negotiated transactions; or
- resale by writing options on the exchange notes
Any resale by the preceding methods must be at the prevailing market price
at the time of resale, at some price related to the prevailing market price, or
at negotiated prices. Resales may be made directly to purchasers or to or
through brokers or dealers. Broker-dealers may receive compensation in the form
of commissions or concessions from any other broker-dealer or from the
purchasers of exchange notes. A broker-dealer that resells exchange notes
received for its own account through the exchange offer, and a broker or dealer
that participates in a distribution of the exchange notes, may be deemed an
underwriter within the meaning of the Securities Act. Consequently, any profit
on the resale of exchange notes and any commission or concessions the broker or
dealer receives may be considered underwriting compensation under the Securities
Act. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the Securities Act.
By tendering outstanding notes and executing the letter of transmittal,
holders tendering outstanding notes for exchange notes certifies that:
- it is not an affiliate of ours or of our subsidiaries or affiliates or, if
the tendering party is an affiliate of ours or of our subsidiaries or
affiliates, it will comply with the registration and prospectus
requirements of the Securities Act if applicable;
- the exchange notes are being acquired in the ordinary course of business
of the person receiving the exchange notes, whether or not that person is
the holder of the exchange notes;
- the tendering party has not entered into any arrangement or understanding
with any person to participate in the distribution of exchange notes;
- the tendering party is not a broker-dealer who purchased the outstanding
notes for resale through an exemption under the Securities Act; and
- the tendering party will be able to trade the exchange notes acquired in
the exchange offer without restriction under the Securities Act.
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In addition, any broker-dealer who acquired the outstanding notes for its
own account by its market-making activities or other trading activities must
deliver a prospectus that complies with the Securities Act. Except in the case
where a broker-dealer resells an unsold allotment from the original sale of the
outstanding notes, the SEC has indicated that a participating broker-dealer may
fulfill its prospectus delivery requirements with this prospectus. For 180 days
after the expiration date, we will promptly send additional copies of this
prospectus, and any amendments or supplements, to any participating
broker-dealer that requests the prospectus in the letter of transmittal. We will
pay all expenses incident to the exchange offer. This does not include, however,
any commissions or concessions of any brokers or dealers. Additionally, we will
indemnify the holders of the notes, including participating broker-dealers,
against liabilities, including liabilities under the Securities Act.
By accepting this exchange offer, each participating broker-dealer agrees
that it will discontinue its use of this prospectus if the we should notify it
that an event has occurred that makes a statement in the prospectus materially
false or misleading. Once we provide the participating broker-dealer with an
amendment or supplement to the prospectus correcting any misstatement or
omission, then the broker-dealer may resume using the prospectus with the
amendment or supplement, as the case may be. If we give notice to the
broker-dealer to suspend use of the prospectus, then the 180-day period referred
to above will be extended by the number of days from the date the broker-dealer
received notice until the date the broker-dealer received the amended or
supplemented prospectus. For our part, we agree to promptly notify participating
broker-dealers of material changes that render any statement in the prospectus
false or misleading.
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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and disposition
of notes by an initial beneficial owner of notes that, for United States federal
income tax purposes, is not a "United States person" (a "Non-United States
Holder"). This discussion is based upon the United States federal tax law now in
effect, which is subject to change, possibly retroactively.
When we use the term "United States person," we generally mean a holder of
notes who (for United States Federal income tax purposes):
- is a citizen or resident of the United States;
- is a corporation (including an entity treated as a corporation for federal
income tax purposes) created or organized in or under the laws of the
United States or any state thereof or the District of Columbia;
- is an estate, the income of which is subject to United States Federal
income taxation regardless of its source; or
- is a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who
have the authority to control all substantial decisions of the trust (or,
is a trust that was a "United States person" under the law in effect on
August 20, 1996 and elected to continue to be so treated).
The tax treatment applicable to each holder of the notes may vary depending
upon the particular situation of such holder. United States persons acquiring
the notes are subject to different rules than those discussed below. In
addition, certain other holders (including, but not limited to, insurance
companies, tax exempt organizations, financial institutions, persons who own
notes through partnerships or other pass-through entities, broker-dealers and
individuals who are United States expatriates) may be subject to special rules
not discussed below. WE ADVISE YOU TO CONSULT WITH YOUR OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES TO YOU OF THE ACQUISITION, OWNERSHIP AND SALE OF
THE NOTES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX
CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
INTEREST
Interest paid by the company to a Non-United States Holder will not be
subject to United States federal income or withholding tax if such interest is
not "effectively connected with the conduct of a trade or business within the
United States" (within the meaning of the United States Internal Revenue Code of
1986, as amended (the "Code") carried on by such Non-United States Holder and
such Non-United States Holder:
- does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the company;
- is not a "controlled foreign corporation" (within the meaning of the Code)
with respect to which the company is a "related person" (within the
meaning of the Code); and
- certifies, under penalties of perjury, that it is not a United States
person and provides its name and address (on Internal Revenue Service
Form W-8 or W-8BEN, as appropriate) to the company or an agent appointed
by the company (or, a securities clearing organization, bank or other
financial institution that holds the notes on behalf of the Non-United
States Holder in the ordinary course of its trade or business certifies on
behalf of such holder that it has received such certification from the
holder and provides a copy to the company or its agent).
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If you are not qualified for exemption under these rules, interest paid to
you may be subject to withholding tax at the rate of 30% (or any lower
applicable treaty rate). The payment of interest effectively connected with your
United States trade or business, however, would not be subject to a 30%
withholding tax so long as you provide the company or its paying agent an
adequate certification (on Internal Revenue Service Form W-8ECI or 4224, as
appropriate), but such interest would be subject to United States federal income
tax on a net basis at the rates applicable to United States persons generally
(and, if you are a corporation, you may also be subject to branch profits tax at
a rate of 30% or a lower treaty rate).
GAIN ON DISPOSITION
If you are a Non-United States Holder, you will generally not be subject to
United States federal income tax on gain recognized on a sale, exchange, (other
than pursuant to this exchange offer), redemption or other disposition of a
note, unless any of the following is true:
- your investment in the notes is effectively connected with a United States
trade or business that is carried on by you; or
- if you are a nonresident alien individual and you hold the note as a
capital asset or you are present in the United States for 183 or more days
in the taxable year within which such sale, exchange, redemption or other
disposition takes place and, in each case, certain other requirements are
met.
If you have a United States trade or business and the investment in the
notes is effectively connected with such United States trade or business, any
gain recognized on a sale, redemption or other disposition of notes may be
subject to United States federal income tax on a net basis at the rates
applicable to United States persons generally (and, if you are a corporation,
you may also be subject to branch profits tax at a rate of 30% or a lower treaty
rate).
If you exchange our outstanding notes for our exchange notes pursuant to
this exchange offer, you wil not recognize any taxable gain or loss because of
that exchange. Your tax basis in the exchange notes you receive in the exchange
will be the same as your tax basis (immediately before the exchange) in the
outstanding notes you surrended in the exchange. Your holding period for the
exchange notes you receive in the exchange will include your holding period for
the outstanding notes you surrendered in the exchange.
FEDERAL ESTATE TAXES
If interest on the notes is not effectively connected with a United States
trade or business, and is exempt from withholding of United States federal
income tax under the rules described above (other than by treaty), the notes
will not be included in the estate of a deceased Non-United States Holder for
United States federal estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The company will, where required, report to the holders of notes and the
Internal Revenue Service the amount of any interest paid on the notes in each
calendar year and the amounts of tax withheld, if any, from those payments.
In the case of payments of interest to Non-United States Holders, temporary
Treasury regulations provide that the 31% backup withholding tax and certain
information reporting requirements will not apply to payments for which the
requisite certification, as described above, has been received or an exemption
has otherwise been established, provided that neither the company nor its
payment agent has actual knowledge that the holder is a United States person or
that the conditions of any other exemption are not in fact satisfied. Under
temporary Treasury regulations, these information reporting
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and backup withholding requirements will apply, however, to the gross proceeds
paid to a Non-United States Holder on the disposition of the notes by or through
a United States office of a United States or foreign broker, unless the holder
certifies to the broker under penalties of perjury as to its name, address and
status as a foreign person or the holder otherwise establishes an exemption. As
a general matter, information reporting and backup withholding will not apply to
a payment of the proceeds of a disposition of the notes by or through a foreign
office of a foreign broker. Information reporting (but not backup withholding)
will apply, however, to a payment of the proceeds of a sale of notes by a
foreign office of a broker that:
- is a United States person;
- derives 50% or more of its gross income for certain periods from
activities that are effectively connected with the conduct of a trade or
business in the United States; or
- is a "controlled foreign corporation."
Even if a broker meets one of these three conditions, information reporting
will not apply if the broker has documentary evidence in its records that the
holder is not a United States person and certain other conditions are met.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules may be refunded or credited against the Non-United
States Holder's United States federal income tax liability, provided that the
required information is furnished to the Internal Revenue Service.
You should be aware that the Treasury Department promulgated revised final
regulations regarding the withholding and information reporting rules discussed
above. In general, the final regulations do not significantly change the
substantive withholding and information reporting requirements, but unify
current certification procedures and forms. The final regulations are generally
effective for payments made after December 31, 2000, subject to certain
transition rules. WE STRONGLY URGE PROSPECTIVE NON-UNITED STATES HOLDERS TO
CONSULT THEIR OWN TAX ADVISORS FOR INFORMATION ON THE IMPACT, IF ANY, OF THE NEW
FINAL REGULATIONS.
LEGAL MATTERS
The validity of the exchange notes will be passed upon for us by Jones Day
Reavis & Pogue, New York, New York.
EXPERTS
Our consolidated financial statements as of December 31, 1999 and 1998 and
the year ended December 31, 1999, and for the period from September 9, 1998
(inception) to December 31, 1998 (Precision), and of Mid State (Predecessor) for
the nine month period ended September 30, 1998, appearing in this prospectus and
registration statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein, and
are included in reliance upon such reports given on the authority of such firm
as experts in accounting and auditing.
The consolidated financial statements of Mid State (Predecessor) for the
year ended December 31, 1997, appearing in this prospectus and registration
statement, have been audited by Baker Newman & Noyes, independent auditors, as
indicated in their report thereon appearing elsewhere herein and are included in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
The financial statements of General Automation as of March 19, 1999 and
December 31, 1998 and for the period from January 1, 1999 to March 19, 1999 and
the years ended December 31, 1998 and 1997, appearing in this prospectus and
registration statement, have been audited by
103
<PAGE>
Ernst & Young, LLP independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firms as experts in accounting and auditing.
The combined financial statements of Certified and Calbrit as of March 19,
1999 and October 31, 1998 and for the period from November 1, 1998 to March 19,
1999 and the years ended October 31, 1998 and 1997, appearing in this prospectus
and registration statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of Nationwide as of March 19, 1999 and for the
period from June 1, 1998 to March 19, 1999, included in this prospectus and
registration statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of Nationwide for years ended May 31, 1998 and
1997, included in this prospectus, have been audited by Insero, Kasperski,
Ciaccia & Co., P.C., independent auditors, as set forth in their report
appearing elsewhere herein, and are included in reliance upon such report given
on the authority of such firm as experts in accounting and auditing.
The financial statements of Gillette as of August 31, 1999 and for the
period from March 1, 1999 to August 31, 1999, included in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The financial statements of Gillette as of February 28, 1999 and for the
year then ended, included in this Prospectus and Registration Statement, have
been audited by Bonadio & Co., LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
104
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF PRECISION PARTNERS,
INC. (PRECISION) AND MID STATE MACHINE PRODUCTS
(PREDECESSOR)
Report of Independent Auditors, Ernst & Young LLP........... F-3
Report of Independent Auditors, Ernst & Young LLP........... F-4
Report of Independent Auditors, Baker Newman & Noyes........ F-5
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998 (Precision)............................. F-6
Consolidated Statements of Operations for the year ended
December 31, 1999 and the period from September 9, 1998
(Inception) to December 31, 1998 (Precision), and the nine
months ended September 30, 1998 and year ended
December 31, 1997 (Predecessor)........................... F-7
Consolidated Statements of Stockholders' Equity for the year
ended December 31, 1999 and the period from September 9,
1998 (Inception) to December 31, 1998 (Precision), and the
nine months ended September 30, 1998 and year ended
December 31, 1997 (Predecessor)........................... F-8
Consolidated Statements of Cash Flows for the year ended
December 31, 1999 and the period from September 9, 1998
(Inception) to December 31, 1998 (Precision), and the nine
months ended September 30, 1998 and year ended
December 31, 1997 (Predecessor)........................... F-9
Notes to Consolidated Financial Statements.................. F-11
FINANCIAL STATEMENTS OF GENERAL AUTOMATION, INC.
Report of Independent Auditors, Ernst &Young LLP............ F-22
Balance Sheets as of March 19, 1999 and December 31, 1998... F-23
Statements of Income for the period from January 1, 1999 to
March 19, 1999, and the years ended December 31, 1998 and
1997...................................................... F-24
Statements of Stockholders' Equity for the period from
January 1, 1999 to March 19, 1999, and the years ended
December 31, 1998 and 1997................................ F-25
Statements of Cash Flows for the period from January 1, 1999
to March 19, 1999, and the years ended December 31, 1998
and 1997.................................................. F-26
Notes to Financial Statements............................... F-27
COMBINED FINANCIAL STATEMENTS OF CERTIFIED FABRICATORS, INC.
AND CALBRIT DESIGN, INC.
Report of Independent Auditors, Ernst & Young LLP........... F-31
Combined Balance Sheets as of March 19, 1999 and
October 31, 1998.......................................... F-32
Combined Statements of Operations for the period from
November 1, 1998 to March 19, 1999, and for the years
ended October 31, 1998 and 1997........................... F-33
Combined Statements of Stockholders' Equity for the period
from November 1, 1998 to March 19, 1999, and the years
ended October 31, 1998 and 1997........................... F-34
Combined Statements of Cash Flows for the period from
November 1, 1998 to March 19, 1999, and for the years
ended October 31, 1998 and 1997........................... F-35
Notes to Combined Financial Statements...................... F-36
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
FINANCIAL STATEMENTS OF NATIONWIDE PRECISION PRODUCTS CORP.
Report of Independent Auditors, Ernst & Young LLP........... F-46
Report of Independent Auditors, Insero, Kasperski, Ciaccia &
Co., P.C.................................................. F-47
Balance Sheets as of March 19, 1999 and May 31, 1998........ F-48
Statements of Income for the period from June 1, 1999 to
March 19, 1999, and the years ended May 31, 1998 and
1997...................................................... F-49
Statements of Stockholders' Equity for the period from
June 1, 1999 to March 19, 1999, and the years ended
May 31, 1998 and 1997..................................... F-50
Statements of Cash Flows for the period from June 1, 1999 to
March 19, 1999, and the years ended May 31, 1998 and
1997...................................................... F-51
Notes to Financial Statements............................... F-52
FINANCIAL STATEMENTS OF GILLETTE MACHINE & TOOL CO., INC.
Report of Independent Auditors, Ernst & Young LLP........... F-59
Report of Independent Auditors, Bonadio & Co., LLP.......... F-60
Balance Sheets as of August 31, 1999 and February 28,
1999...................................................... F-61
Statements of Income and Retained Earnings for the period
from March 1, 1999 to August 31, 1999, and the year ended
February 28, 1999......................................... F-62
Statements of Cash Flows for the period from March 1, 1999
to August 31, 1999, and the year ended February 28,
1999...................................................... F-63
Notes to Financial Statements............................... F-64
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
The Board of Directors
Precision Partners, Inc.
We have audited the consolidated balance sheets of Precision Partners, Inc.
("Precision") as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 1999 and the period from September 9, 1998 (inception) through
December 31, 1998. These financial statements are the responsibility of
Precision's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Precision
Partners, Inc. at December 31, 1999 and 1998, and the consolidated results of
its operations and its cash flows for the year ended December 31, 1999 and the
period from September 9, 1998 (inception) through December 31, 1998, in
conformity with accounting principles generally accepted in the United States.
March 17, 2000 /s/ Ernst & Young LLP
Dallas, Texas
F-3
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
The Management Committee
Precision Partners, Inc.
We have audited the consolidated statements of operations, stockholders' equity
and cash flows of Mid State Machine Products (the "Predecessor") for the nine
month period ended September 30, 1998. These financial statements are the
responsibility of the Predecessor's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements of Mid State Machine Products referred
to above present fairly, in all material respects, the consolidated results of
its operations and its cash flows for the nine month period ended September 30,
1998 in conformity with accounting principles generally accepted in the United
States.
January 19, 1999 /s/ Ernst & Young LLP
Boston, Massachusetts
F-4
<PAGE>
REPORT OF INDEPENDENT AUDITORS, BAKER NEWMAN & NOYES
The Board of Directors
Mid State Machine Products
We have audited the consolidated statements of operations, stockholders' equity
and cash flows of Mid State Machine Products for the year ended December 31,
1997. These financial statements are the responsibility of management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements of Mid State Machine Products referred
to above present fairly, in all material respects, the consolidated results of
its operations and its cash flows for the year ended December 31, 1997 in
conformity with generally accepted accounting principles.
February 2, 1998 /s/ Baker Newman & Noyes LLC
Portland, Maine
F-5
<PAGE>
PRECISION PARTNERS, INC. (PRECISION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 313 $ 963
Trade accounts receivable, less allowance for doubtful
accounts of $260,838 and $85,000 at December 31, 1999
and 1998, respectively 23,613 5,719
Inventories 18,404 4,340
Current deferred income taxes 1,303 37
Other current assets 1,916 499
-------- -------
Total current assets 45,549 11,558
Property, plant and equipment, at cost, net 71,611 15,224
Goodwill, net 77,429 34,589
Non-compete agreement, net 933 1,000
Other assets 10,869 950
-------- -------
Total assets $206,391 $63,321
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 11,200 $ --
Accounts payable 7,703 3,215
Accrued expenses 11,406 1,613
Income taxes payable 1,014 232
Deferred revenue 4,700 --
Current installments of long-term debt 2,611 750
Other current liabilities 3,071 --
-------- -------
Total current liabilities 41,705 5,810
Long-term debt, less current portion 120,737 22,250
Non-current deferred taxes 7,817 3,656
Stockholders' equity:
Common stock, Class A, $.01 par value, 100 shares
authorized, issued and outstanding -- --
Additional paid-in capital 42,042 32,000
Accumulated deficit (5,910) (395)
-------- -------
Total stockholders' equity 36,132 31,605
-------- -------
Total liabilities and stockholders' equity $206,391 $63,321
======== =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PRECISION
---------------------------------
PERIOD FROM PREDECESSOR
SEPTEMBER 9, ----------------------------------
YEAR ENDED 1998 (INCEPTION) NINE MONTH PERIOD YEAR ENDED
DECEMBER 31, THROUGH ENDED SEPTEMBER 30, DECEMBER 31,
1999 DECEMBER 31, 1998 1998 1997
------------- ----------------- ------------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales $123,188 $12,602 $24,106 $33,870
Cost of sales 93,434 9,090 16,326 24,581
-------- ------- ------- -------
Gross profit 29,754 3,512 7,780 9,289
Selling, general and administrative
expenses 24,840 3,134 3,374 4,571
-------- ------- ------- -------
Operating income 4,914 378 4,406 4,718
Other income (expense):
Investment income 245 -- 103 1,197
Interest expense (12,812) (526) (37) (85)
Gain on sale of property and
equipment -- -- -- 29
Other 8 (138) (91) (6)
-------- ------- ------- -------
(Loss) income before income taxes (7,645) (286) 4,381 5,853
(Benefit) provision for income
taxes (2,130) 109 1,677 2,310
-------- ------- ------- -------
Net (loss) income $ (5,515) $ (395) $ 2,704 $ 3,543
======== ======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-7
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON COMMON RETAINED
STOCK STOCK EARNINGS TOTAL
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
PREDECESSOR:
Balance at January 1, 1997 $25 $25 $13,701 $13,751
Net income -- -- 3,543 3,543
Dividend paid -- -- (200) (200)
--- --- ------- -------
Balance at December 31, 1997 25 25 17,044 17,094
Net income -- -- 2,704 2,704
Redemption of shares (6) (6) (11,521) (11,533)
--- --- ------- -------
Balance at September 30, 1998 $19 $19 $ 8,227 $ 8,265
=== === ======= =======
</TABLE>
<TABLE>
<CAPTION>
CLASS A ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------- ---------- ----------- --------
<S> <C> <C> <C> <C>
PRECISION:
Initial capitalization at September 9, 1998.......... $ -- $32,000 $ -- $32,000
Net loss............................................. -- -- (395) (395)
------- ------- ------- -------
Balance at December 31, 1998......................... -- 32,000 (395) $31,605
Additional capitalization at time of
reorganization..................................... -- 10,035 -- 10,035
Capital contributions................................ -- 7 -- 7
Net loss............................................. -- -- (5,515) (5,515)
------- ------- ------- -------
Balance at December 31, 1999......................... $ -- $42,042 $(5,910) $36,132
======= ======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-8
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PRECISION
--------------------------------------- PREDECESSOR
PERIOD FROM SEPTEMBER 9, ----------------------------------
YEAR ENDED 1998 (INCEPTION) NINE MONTH PERIOD YEAR ENDED
DECEMBER 31, THROUGH DECEMBER 31, ENDED SEPTEMBER 30, DECEMBER 31,
1999 1998 1998 1997
------------ ------------------------ ------------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (5,515) $ (395) $ 2,704 $ 3,543
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation 8,525 658 806 1,052
Amortization 4,432 447 -- --
Gain on sale of fixed assets -- -- -- (29)
Loss (gain) on trading securities -- -- 200 (836)
Purchase of trading securities -- -- (3,382) (4,826)
Proceeds from the sale of trading
securities -- -- 9,564 3,197
Deferred income taxes (1,510) (22) (315) 115
Changes in operating assets and
liabilities, net of
acquisitions:
Trade accounts receivable (5,531) 772 (805) (1,277)
Inventories (4,345) 1,413 (1,623) (471)
Income taxes receivable -- -- 364 --
Other current assets (7,190) (267) 4 57
Accounts payable 1,551 385 87 (184)
Accrued expenses 7,553 (130) 97 142
Income taxes payable (192) (107) 354 (674)
Deferred revenue -- -- 183 (53)
Other current liabilities 7,620 -- -- --
-------- -------- -------- -------
Net cash provided by (used in)
operating activities 5,398 2,754 8,238 (244)
INVESTING ACTIVITIES
Proceeds from sale of property, plant
and equipment -- -- -- 30
Proceeds from sale of Sukee Arena -- -- 260 --
Purchase of property, plant and
equipment (10,260) (751) (623) (928)
Payment of deferred acquisition costs -- (342) -- --
Acquisition of subsidiaries, net of
cash (111,277) (53,483) -- --
Payment for non-compete agreement -- (1,000) -- --
Proceeds from available-for-sale
securities -- -- 500 (500)
Proceeds from maturities of held-to-
maturity securities -- -- 808 1,382
Proceeds from note receivable,
stockholder 90 -- 175 100
-------- -------- -------- -------
Net cash (used in) provided by
investing activities (121,447) (55,576) 1,120 84
FINANCING ACTIVITIES
Proceeds from revolving line of credit 11,200
Repayment of long-term debt (250) (595) (283) (305)
Proceeds from long-term debt 100,000 23,000 -- 400
</TABLE>
F-9
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
PRECISION
--------------------------------------- PREDECESSOR
PERIOD FROM SEPTEMBER 9, ----------------------------------
YEAR ENDED 1998 (INCEPTION) NINE MONTH PERIOD YEAR ENDED
DECEMBER 31, THROUGH DECEMBER 31, ENDED SEPTEMBER 30, DECEMBER 31,
1999 1998 1998 1997
------------ ------------------------ ------------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Contribution of capital $ 10,042 $ 32,000 $ -- $ --
Payment of debt issue costs (5,593) (660) -- --
Common stock redemption -- -- (11,673) --
Dividends paid -- -- -- (200)
-------- -------- -------- -------
Net cash provided by (used in)
financing activities 115,399 53,745 (11,956) (105)
-------- -------- -------- -------
Net increase (decrease) in cash and
cash equivalents (650) 923 (2,598) (265)
Cash and cash equivalents, beginning
of period 963 40 2,638 2,903
-------- -------- -------- -------
Cash and cash equivalents, end of
period $ 313 $ 963 $ 40 $ 2,638
======== ======== ======== =======
SUPPLEMENTARY INFORMATION FOR THE
STATEMENT OF CASH FLOWS:
Interest payments $ 7,897 $ 548 $ 34 $ 84
Income tax payments $ 547 $ 253 $ 1,276 $ 2,868
Non-cash investing and financing
activities - purchase of software
under financing agreements $ 344 $ -- $ -- $ --
</TABLE>
SEE ACCOMPANYING NOTES.
F-10
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Precision Partners, L.L.C. (LLC) was incorporated on September 9, 1998 for
the purpose of acquiring and operating companies in the business of
manufacturing and supplying complex precision metal parts, toolings and
assemblies for original equipment manufacturers ("OEMS").
On September 30, 1998, investors contributed approximately $32 million of
capital to LLC which was then contributed by LLC to two wholly-owned
subsidiaries, Mid State Acquisition Corp. and Galaxy Acquisition Corp.,
established to acquire on September 30, 1998 all of the outstanding capital
stock of Mid State Machine Products ("Mid State") and Galaxy Industries
Corporation ("Galaxy") (the "1998 Acquisitions"). The total purchase price
including transaction expenses was approximately $54,483,000 and was financed by
the proceeds of the contributed capital and borrowings under the Company's
credit facility. The purchase price was allocated to the estimated fair value of
the assets acquired and liabilities assumed in accordance with the purchase
method of accounting as follows:
<TABLE>
<S> <C>
Current assets $12,472,000
Property, plant and equipment 15,131,000
Goodwill 35,036,000
Other assets 1,007,000
Current liabilities (5,553,000)
Deferred taxes, non-current (3,610,000)
</TABLE>
In February, 1999 Precision Partners, Inc. ("Precision" or "Company") was
formed as a wholly-owned subsidiary of Precision Partners Holdings, Inc.
(Holdings) which is a wholly-owned subsidiary of LLC. On March 19, 1999 as part
of a reorganization, LLC contributed through Holdings to Precision its
investments and related equity in Galaxy, Mid State and Precision Partners
Management Corporation ("Management Corporation"), which comprised substantially
all of the equity of LLC. Simultaneous with this reorganization, Precision
issued $100,000,000 of 12% Senior Subordinated Notes (the "Notes") in order to
purchase all of the issued and outstanding capital stock of Certified
Fabricators, Inc. and its sister company Calbrit Design, Inc. (together,
"Certified") and to purchase substantially all of the assets and assume certain
liabilities of General Automation, Inc. ("General Automation") and Nationwide
Precision Products Corp. ("Nationwide"). Also, on September 1, 1999, Precision
purchased all of the issued and outstanding capital stock of Gillette Machine &
Tool, Inc. ("Gillette") using existing cash and borrowings under Precision's
credit facility. The acquisitions of Certified, General Automation, Nationwide,
and Gillette are referred to collectively as the "1999 Acquisitions." Subsequent
to this reorganization, capital totaling approximately $42 million had been
contributed to LLC by investors; this capital has been contributed through
Holdings to Precision.
F-11
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The 1999 Acquisitions were financed through the net proceeds of the issuance
of the Notes, together with borrowings under our credit facilities, an equity
contribution of approximately $10,000,000 and available cash. The total purchase
price, including transaction expenses, was approximately $116,388,000, and the
purchase price was allocated to estimated fair value of the assets acquired and
liabilities assumed in accordance with the purchase method of accounting as
follows:
<TABLE>
<S> <C>
Current assets $27,848,000
Property, plant, and equipment 54,658,000
Goodwill 45,641,000
Other assets 309,000
Current liabilities (6,466,000)
Deferred taxes, non-current (5,602,000)
</TABLE>
The excess of the purchase price over the net fair value of the assets
acquired was allocated to goodwill, which is being amortized over 20 years. We
are still in the process of obtaining appraisals for certain assets and there
are also contingent payments which may subject the purchase price to future
refinements. The purchase price for one company acquired in 1999 included a
$4 million escrow to be paid out upon the company meeting certain operating
targets through April 30, 1999. Such targets were not met and, accordingly, the
escrow has been returned to Precision, thereby reducing the purchase price and
the resulting goodwill by $4 million. The acquisitions which have been accounted
for under the purchase method of accounting have been included in results of
operations since the date of the acquisitions.
The Company's unaudited pro forma revenues and net loss, after giving effect
to the 1999 and 1998 Acquisitions, as if each such acquisition had occurred on
January 1, 1998, were $149,749,000 and $3,738,000 and $147,078,000 and $488,000
for 1999 and 1998, respectively.
Prior to the 1998 Acquisitions, LLC had substantially no operations and
prior to the 1999 Acquisitions, Precision had substantially no operations. For
financial statement presentation purposes, the reorganization is being accounted
for as if it had occurred on September 9, 1998 in a manner similar to a pooling
of interests. Therefore, operations for the period from September 9, 1998
through December 31, 1998 are shown only for Precision and consist of the
operations of Mid State and Galaxy from the date of acquisition through
December 31, 1998 and of LLC from inception (September 9, 1998) through
December 31, 1998. Similarly, 1999 operations are shown for Precision and
consist of the operations of Mid State and Galaxy for the entire year, of LLC
from January 1, 1999 through March 19, 1999 and the 1999 Acquisitions from the
date of acquisition through December 31, 1999. Since Precision is treated as
having commenced operations in September 1998, Mid State is considered the
predecessor for financial reporting purposes. The predecessor financial
statements include the operations of Mid State and its wholly-owned subsidiaries
for the periods reported. All significant intercompany balances and transactions
for both the Company's financial statements and the Predecessor's financial
statements have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the actual amounts reported in the financial statement
and accompanying notes. Actual results could differ from those estimates.
F-12
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash in bank demand deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk with respect to cash.
The Company is materially dependent on a small group of customers. During
the year ended December 31, 1999, 26.5%, 7.4%, and 6.8% of the Company's sales
were to three customers. As of December 31, 1999, the Company's receivables from
these three customers were approximately $4,674,000, $4,717,000 and $1,125,000.
During the period from September 9, 1998 through December 31, 1998, 60.5%,
14.8%, and 11.2% of the Company's sales were to three customers. As of
December 31, 1998, the Company's receivables from these three customers were
approximately $1,906,000, $782,000, and $686,000. The Predecessor was materially
dependent on a single customer representing 74% and 72% of sales for the nine
month period ended September 30, 1998 and year ended December 31, 1997,
respectively. The Company routinely assesses the financial strength of its
customers and, as a consequence, believes that its trade accounts receivable
credit risk exposure is limited. The Company does not require collateral or
security for these receivables.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash with original maturities of 90 days or
less.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments consisting of cash and cash
equivalents, trade accounts receivable, accounts payable and accrued liabilities
are stated at expected settlement amounts which approximate fair value. The
carrying amounts of the note payable to the bank and the line of credit
approximate fair value due to the variable rate interest feature on the related
debt. Management believes the carrying amount of the subodinated notes is not
materially different from the estimated fair value based on prevailing interest
rates for similar notes.
INVENTORIES
Inventories are stated at the lower of cost or market. The Predecessor used
the first-in, first out (FIFO) method for pricing material and the last-in,
first-out (LIFO) method for labor and overhead. At the acquisition date, the
Company valued the inventories at fair value which approximated the FIFO method
and will account for inventories on a FIFO basis.
DEBT ISSUE COSTS
The Company incurred costs related to obtaining financing. These costs are
being amortized on a straight line basis over the term of the related debt. The
difference between the straight line method and interest method for amortizing
debt issue costs is not significant.
F-13
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DEFERRED ACQUISITION AND OFFERING COSTS
The Company has deferred $6,261,617 of costs related to issuance of the
Notes. The costs related to the Notes will be amortized over the term of the
Notes and the accumulated amortization of those costs totaled $1,077,137 as of
December 31, 1999.
DEPRECIATION AND AMORTIZATION
Buildings, machinery and equipment, and furniture and fixtures are
depreciated using both straight line and declining balance methods over the
estimated useful lives of the individual assets. The lives are five to seven
years on furniture and fixtures, five to ten years for machinery and equipment,
twenty years for land improvements and forty years for building and
improvements. Leasehold improvements are amortized on a straight line basis over
the lesser of the estimated service lives or the terms of the leases.
LONG-LIVED ASSETS
The Company accounts for its long-lived assets under FASB No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF, which requires impairment losses to be recognized for long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are not
sufficient to recover the assets' carrying amount. The impairment loss is
measured by comparing the fair value of the asset to its carrying amount.
INTANGIBLES
The excess of cost over the fair market value of net assets acquired
(goodwill) is amortized on a straight-line basis over 20 years. Accumulated
amortization was $3,831,100 and $450,000 as of December 31, 1999 and 1998,
respectively.
In connection with the acquisition of one of its subsidiaries, the Company
entered into a non-compete agreement with the seller for $1,000,000. The
$1,000,000 is amortized on a straight line basis over the non-compete period.
Accumulated amortization at December 31, 1999 is approximately $67,000.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued FASB Statement No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION which is
effective for fiscal years beginning after December 15, 1997. This statement
changes the way that companies report information about operating segments in
financial statements. The Company adopted this statement during 1998 and
determined that it is one reportable segment and such adoption had no material
effect on the financial statements.
In June 1998, the Financial Accounting Standards Board issued FASB Statement
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is
effective for fiscal periods beginning after June 15, 2000. The adoption of this
statement is not expected to have a material effect on the financial statements.
F-14
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ADVERTISING COSTS
Advertising costs are expensed as incurred and amounted to approximately
$214,408 for the year ended December 31, 1999, $61,188 for the period from
September 9, 1998 through December 31, 1998 and $222,738 and $230,115 for the
nine month period ended September 30, 1998 and the year ended December 31, 1997,
respectively.
INCOME TAXES
The Company accounts for taxes under the liability method where deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
REVENUE RECOGNITION
Sales are recorded when products are shipped to customers. Revenues from
long-term contracts are recognized on the percentage-of-completion method,
measured by the percentage of total costs incurred to date to estimated total
costs of the contract. Total costs include all direct material and labor costs
and those indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs and depreciation costs. Selling, general and
administrative costs are charged to expense as incurred. Contract revisions are
recognized in the period in which the revisions are determined. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
STOCK COMPENSATION
Precision has elected to account for stock-based compensation to employees
using the intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) and related
Interpretations. Accordingly, compensation cost for stock options is measured as
the excess, if any, of the fair market value of the Company's stock at the date
of the grant over the amount an employee must pay to acquire the stock.
EARNINGS PER SHARE
Earnings per share is not presented for either Precision or the Predecessor
since such amounts are not considered meaningful.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to current year
presentation.
F-15
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVENTORIES AND COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Inventories consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Raw material $ 2,575 $1,122
Work in process 13,978 2,968
Finished goods 2,365 300
------- ------
18,918 4,390
Less reserves for obsolescence 514 50
------- ------
$18,404 $4,340
======= ======
</TABLE>
Information regarding contract costs, estimating earnings, and progress
billings consists of the following at:
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
Costs incurred on uncompleted contracts $ 9,510
Estimated earnings 1,187
-------
10,697
Less net progress billings 7,893
-------
Costs and estimated earnings on uncompleted contracts
included in work in process inventory $ 2,804
=======
</TABLE>
There were no significant billings in excess of net costs and estimated
earnings on uncompleted contracts.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, which are valued at cost, consists of the
following at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Building and improvements $ 4,799 $ 2,034
Leasehold improvements 2,079 749
Machinery and equipment 72,868 12,935
Furniture, fixtures and other 2,567 164
------- -------
82,313 15,882
Less accumulated depreciation and amortization 10,702 658
------- -------
$71,611 $15,224
======= =======
</TABLE>
4. INVESTMENT SECURITIES
Gross unrealized holding gains for investments categorized as held to
maturity were $0 and $3,615 for the nine month period ended September 30, 1998,
and for the year ended December 31, 1997, respectively.
F-16
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENT SECURITIES (CONTINUED)
Net income includes gross realized gains (losses) of approximately
($200,000) and $652,000 for the nine month period ended September 30, 1998 and
the year ended December 31, 1997, respectively.
5. DEBT
Precision maintains a line of credit of $25,000,000, which matures on
March 31, 2005, under which it can borrow funds or secure letters of credit at
prevailing market rates. As of December 31, 1999, we had outstanding draws on
the line of credit totaling $11,200,000 (9.85% at December 31, 1999). The
revolving line of credit is secured by accounts receivable and inventory of
Precision. Advances under the line are available to us based upon 85% of
outstanding eligible accounts receivable and 50% of eligible inventories.
Associated with the line of credit is a commitment fee of 0.5% per annum payable
in arrears on the last day of each quarter. The fee is calculated from the
closing date, March 19, 1999, to the date the revolving commitments have been
terminated, computed at the committment fee rate on the actual daily amount of
available revolving commitment of such lending during the period. As of
December 31, 1999, the Company had approximately $12,600,000 available under the
revolving credit facility.
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Precision Partners, Inc. 12% Senior Subordinated Notes due
2009, interest paid semiannually on March 15 and
September 15 commencing on September 15, 1999. $100,000 $ --
Note payable to a bank, due in quarterly principal
installments plus interest at a variable rate (8.44% as of
December 31, 1999), maturing March 31, 2005. Quarterly
principal installments of $805,000 begin on June 30, 2000,
increasing to $920,000 on June 30, 2001, $1,150,000 on
June 30, 2002, $1,380,000 on June 30, 2003, and $1,495,000
on June 30, 2004, secured by all assets of Precision
Partners and its subsidiaries. 23,000 --
Financial software financing agreement, due in twelve
quarterly installments of $32,471, including interest at
7.8%. 265 --
Director and officer insurance premium financing agreement
due in six quarterly installments of $28,997, including
interest at 7.15%. 83 --
Note payable to a bank, due in quarterly principal
installments plus interest at a variable rate (9.00% at
December 31, 1998), refinanced on March 19, 1999. -- 23,000
-------- -------
123,348 23,000
Less current installments 2,611 750
-------- -------
$120,737 $22,250
======== =======
</TABLE>
Pursuant to the terms entered into in conjunction with the March 19, 1999
issuance of the Notes, the interest payable on the Notes increased from 12.00%
to 12.50% on September 16, 1999 and from 12.50% to 12.75% on December 16, 1999.
This increase in the interest rate is a contractual obligation which has arisen
because the Notes were not registered with the SEC within 180 days of their
initial issuance. Until the registration of the Notes is complete and effective,
the interest rate will increase by an additional 0.25% per annum for each 90-day
period subsequent to December 16, 1999, but the additional interest shall not
exceed 1.0% per annum regardless of the effective date of the registration.
F-17
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT (CONTINUED)
The company has unamortized deferred costs of $5,184,480 related to the
Notes and the $23,000,000 term loan and credit facility. The costs are being
amortized over the life of the related Notes, term loan and credit facility.
Aggregate future maturities of long-term debt are as follows:
2000--$2,611,000; 2001--$3,686,000; 2002--$4,402,000; 2003--$5,290,000;
2004--$5,865,000; thereafter--$101,494,000.
Under the terms of the note payable to the bank, the Company is required to
maintain certain leverage, interest coverage, and fixed charge coverage ratios
on a consolidated basis. The company was in compliance with all of the
restrictive covenants at December 31, 1999.
The indenture governing the Notes contains covenants that limit our and some
of our subsidiaries' ability to incur additional debt, pay dividends on or
redeem or repurchase capital stock, enter into transactions with affiliates and
transfer or sell assets, among other things.
6. INCOME TAXES
The income tax provision (benefit) is as follows:
<TABLE>
<CAPTION>
PRECISION
-------------------------------
PERIOD FROM PREDECESSOR
SEPTEMBER 9, ----------------------------
1998 (INCEPTION) NINE MONTH
YEAR ENDED THROUGH PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1999 1998 1998 1997
------------ ---------------- ------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Current federal $ -- $ 40 $1,553 $1,723
Current state 303 91 439 472
------- ---- ------ ------
Total current tax provision 303 131 1,992 2,195
------- ---- ------ ------
Deferred federal (1,917) (28) (237) 46
Deferred state (516) 6 (78) 69
------- ---- ------ ------
Total deferred tax provision (benefit) (2,433) (22) (315) 115
------- ---- ------ ------
Total tax provision $(2,130) $109 $1,677 $2,310
======= ==== ====== ======
</TABLE>
The difference between the effective rate reflected in the income tax
expense (benefit) and the amount determined by applying the statutory U.S. rate
of 34% to income (loss) before income tax
F-18
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
expense (benefit) for the period September 9, 1998 through December 31, 1998,
the nine month period ended September 30, 1998 and the year ended December 31,
1997 is analyzed below:
<TABLE>
<CAPTION>
PRECISION
-------------------------------
PERIOD FROM PREDECESSOR
SEPTEMBER 9, ----------------------------
1998 (INCEPTION) NINE MONTH
YEAR ENDED THROUGH PERIOD ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, DECEMBER 31,
1999 1998 1998 1997
------------ ---------------- ------------- ------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Income tax expense (benefit) at statutory
rate $(2,599) $(97) $1,489 $1,990
Permanent differences, primarily goodwill 672 159 (46) (56)
State income tax, net of federal income
tax benefit (203) 47 239 376
Other -- -- (5) --
------- ---- ------ ------
Total tax provision $(2,130) $109 $1,677 $2,310
======= ==== ====== ======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the deferred tax assets and (liabilities) are as follows:
<TABLE>
<CAPTION>
PRECISION
---------------------------
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
(IN THOUSANDS)
Net operating losses $ 1,097 $ 5
Tax credit carryforwards 576 243
Other accruals and reserves 1,806 217
Property, plant and equipment (9,041) (3,708)
Inventories (176) (176)
Goodwill amortization (433) --
Deferred tax asset valuation allowance (343) (200)
------- -------
Net deferred tax liability $(6,514) $(3,619)
======= =======
Net non-current deferred tax liability $(7,817) $(3,656)
Net current deferred tax asset 1,303 37
------- -------
Net deferred tax liability $(6,514) $(3,619)
======= =======
</TABLE>
7. PROFIT SHARING/401K PLANS
The Company's subsidiaries sponsor defined contribution plans covering all
their employees. Pension expense related to these plans, which are generally
based on partial matching of employee contributions, amounted to $672,643 for
the year ended December 31, 1999, $123,447 for the period from September 9, 1998
(inception) to December 31, 1998 and $335,950 and $407,426 for the nine month
period ended September 30, 1998 and the year ended December 31, 1997,
respectively.
F-19
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
The Company leases certain property and equipment under operating leases.
Rent expense totaled approximately $2,407,000 and $276,898 for the year ended
December 31, 1999 and the period from September 9, 1998 (inception) to
December 31, 1998, respectively. Rent expense for the nine month period ended
September 30, 1998 and year ended December 31, 1997, was $369,378 and $564,500,
respectively. Minimum rental commitments under noncancellable operating leases
are as follows: 2000--$3,441,181; 2001--$3,499,464; 2002--$3,242,202;
2003--$2,330,696; 2004--$2,054,525; thereafter--$3,219,614.
9. STOCK OPTION PLAN
In April 1999 Holdings approved an Incentive Stock Option Plan (Plan) for
certain employees including employees of Precision and Precision's wholly-owned
subsidiaries for the issuance of up to 2,700,000 shares of Holdings common
stock. During 1999, 2,454,000 options were granted with an exercise price of
$.1875, which was the market value of Holdings common stock at the date of grant
as determined by management and the Board of Directors. At December 31, 1999,
74,343 options had been exercised and 645,000 options had been forfeited leaving
1,734,657 options outstanding at December 31, 1999. These options vest up to a
period of four years. The impact of accounting for the employee stock options
under the fair value method provided for under Financial Accounting Standards
Board Statement No. 123 ACCOUNTING FOR STOCK-BASED COMPENSATION is immaterial to
the Company's financial statements.
10. LITIGATION
Precision or its subsidiaries are defendants from time to time in lawsuits
and disputes arising in the normal course of business. Management believes that
the ultimate outcome of those matters will not have a materially adverse effect
on the consolidated financial position, results of operations, or cash flows.
11. YEAR 2000 (UNAUDITED)
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue." However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems may occur with billing, payroll, or
financial closings at month, quarterly, or year end. We believe that any such
problems are likely to be minor and correctable. In addition, we could still be
negatively impacted if our customers or suppliers are adversely affected by the
Year 2000 or similar issues. We currently are not aware of any significant Year
2000 or similar problems that have arisen for our customers and suppliers.
We expended $0.9 million on Year 2000 readiness efforts in 1999. These
efforts including replacing some outdated, non-compliant hardware and
noncompliant software, as well as identifying and remediating Year 2000
problems.
F-20
<PAGE>
PRECISION PARTNERS, INC. (PRECISION) AND
MID STATE MACHINE PRODUCTS (PREDECESSOR)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS
To support recently signed sales contracts, which will require new
facilities, machinery, and equipment of approximately $35,000,000, the Company
plans to enter into operating lease agreements to meet those requirements.
F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
To the Board of Directors of
Precision Partners, Inc.
We have audited the accompanying balance sheets of General Automation, Inc. as
of March 19, 1999 and December 31, 1998, and the related statements of income,
stockholder's equity, and cash flows for the period from January 1, 1999 to
March 19, 1999 and each of the two years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of General Automation, Inc. at
March 19, 1999 and December 31, 1998, and the results of its operations and its
cash flows for the period from January 1 to March 19, 1999 and for each of the
two years in the period ended December 31, 1998, in conformity with accounting
principles generally accepted in the United States.
March 10, 2000 /s/ Ernst & Young LLP
Dallas, Texas
F-22
<PAGE>
GENERAL AUTOMATION, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 19, DECEMBER 31,
1999 1998
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 464 $ 678
Trade accounts receivable, net of allowance for doubtful
accounts of $65,000 at March 19, 1999 and December 31,
1998 2,952 2,734
Inventories 870 694
Prepaid expenses and other 20 31
------- -------
Total current assets 4,306 4,137
Property, plant and equipment, at cost, net 8,731 9,046
Receivables from employees 131 135
------- -------
Total assets $13,168 $13,318
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 89 $ 89
Accounts payable 471 631
Accrued state income taxes 27 141
Accrued real estate tax 211 272
Other accrued expenses 244 153
------- -------
Total current liabilities 1,042 1,286
Long-term debt, less current portion 50 57
Stockholder's equity:
Common stock, $100 par value; 1,000 authorized shares; 900
issued shares (including 616 shares in treasury stock);
and 284 shares outstanding 90 90
Retained earnings 12,841 12,740
Less: Cost of common stock in treasury (855) (855)
------- -------
Total stockholder's equity 12,076 11,975
------- -------
Total liabilities and stockholder's equity $13,168 $13,318
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-23
<PAGE>
GENERAL AUTOMATION, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED DECEMBER 31,
JANUARY 1 TO -------------------------
MARCH 19, 1999 1998 1997
--------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales $ 4,464 $19,776 $16,520
Cost of sales 2,270 11,080 10,388
------- ------- -------
Gross profit 2,194 8,696 6,132
Selling, general and administrative expenses 525 2,055 1,855
Special recovery -- (70) (720)
Other operating (income) expenses (16) 23 35
------- ------- -------
Operating income 1,685 6,688 4,962
Other income (expense):
Interest income 19 86 97
Interest expense (1) (16) (32)
------- ------- -------
Income before income taxes 1,703 6,758 5,027
Provision for state income taxes 18 102 76
------- ------- -------
Net income $ 1,685 $ 6,656 $ 4,951
======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-24
<PAGE>
GENERAL AUTOMATION, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON TREASURY RETAINED
STOCK STOCK EARNINGS TOTAL
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $90 $ (855) $ 8,238 $ 7,473
Net income -- -- 4,951 4,951
Distributions -- -- (2,329) (2,329)
--- ------ ------- -------
Balance at December 31, 1997 90 (855) 10,860 10,095
Net income -- -- 6,656 6,656
Distributions -- -- (4,776) (4,776)
--- ------ ------- -------
Balance at December 31, 1998 90 (855) 12,740 11,975
Net income -- -- 1,685 1,685
Distributions -- -- (1,584) (1,584)
--- ------ ------- -------
Balance at March 19, 1999 $90 $ (855) $12,841 $12,076
=== ====== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-25
<PAGE>
GENERAL AUTOMATION, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
JANUARY 1 TO DECEMBER 31,
MARCH 19, -------------------
1999 1998 1997
------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,685 $6,656 $4,951
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 340 1,427 1,178
(Gain) loss on sale of property, plant and equipment -- (9) 13
Changes in operating assets and liabilities:
Trade accounts receivable (218) (578) (945)
Inventories (176) (6) (144)
Receivables from employees 4 80 44
Prepaid expenses and other 11 (10) 1
Accounts payable (160) (415) (132)
Accrued expenses and taxes (83) 124 99
------- ------ ------
Net cash provided by operating activities 1,403 7,269 5,065
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net of deposit on
machinery (26) (3,612) (1,907)
Proceeds from sale of property, plant and equipment -- 153 9
Proceeds from (payments on) cash surrender value
stockholder's life insurance -- 197 (17)
------- ------ ------
Net cash used in investing activities (26) (3,262) (1,915)
FINANCING ACTIVITIES
Distributions to stockholder (1,584) (4,776) (2,329)
Payment of long-term debt (7) (81) (79)
Payment on note payable to bank -- -- (487)
------- ------ ------
Net cash used in financing activities (1,591) (4,857) (2,895)
------- ------ ------
Net (decrease) increase in cash and cash equivalents (214) (850) 255
Cash and cash equivalents, beginning of period 678 1,528 1,273
------- ------ ------
Cash and cash equivalents, end of period $ 464 $ 678 $1,528
======= ====== ======
Supplementary information for the statement of cash flows:
Interest payments $ 1 $ 16 $ 32
State income tax payments $ 21 -- 35
</TABLE>
SEE ACCOMPANYING NOTES.
F-26
<PAGE>
GENERAL AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
General Automation, Inc. (the Company) machines and sells precision screw
machine and other products to serve as component parts to a wide variety of
manufacturers (e.g., automotive, surgical equipment, and aerospace).
BASIS OF PRESENTATION
The financial statements include all accounts of General Automation, Inc.
Pursuant to a contract with Precision Partners Holdings, Inc. ("Holdings") that
was signed on February 5, 1999, the Company agreed to sell substantially all of
the Company's assets and Holdings agreed to assume substantially all of the
Company's liabilities. The contract was assigned by Holdings to its wholly-owned
subsidiary, Precision Partners, Inc., and the transaction was closed on March
19, 1999. The financial statements are presented on a historical cost basis and
do not include any adjustments related to the purchase transaction.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash with original maturities of 90 days or
less.
INVENTORIES
Inventories are stated at the lower of cost or market. The Company uses the
first in, first out (FIFO) method of determining cost for its inventories.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash in bank demand deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk with respect to cash. The Company is materially
dependent on a small group of customers. The Company routinely assesses the
financial strength of its customers and, as a consequence, believes that its
trade accounts receivable credit risk exposure is limited.
DEPRECIATION
Buildings, machinery and equipment, and furniture and fixtures are
depreciated using the straight-line method over the estimated useful lives of
the individual assets. The general range of estimated lives is 15 to 39 years
for buildings and improvements, five to seven years for machinery and equipment,
five years for automobiles, and five to seven years for office furniture and
equipment.
F-27
<PAGE>
GENERAL AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company elected by consent of its stockholder to be taxed under the
provisions of subchapter S of the Internal Revenue Code. Under these provisions,
the taxable income of the Company is reported directly in the sole stockholder's
individual tax returns.
LONG-LIVED ASSETS
The Company evaluates the carrying value of its long-lived assets under
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires impairment losses to be recognized for long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are not sufficient to recover
the assets' carrying amount. The impairment loss is measured by comparing the
fair value of the asset to its carrying amount.
REVENUE RECOGNITION
Sales are recorded when products are shipped to a customer.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 19, DECEMBER 31,
1999 1998
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $234 $205
Work in process 432 318
Finished goods 204 171
---- ----
$870 $694
==== ====
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
MARCH 19, DECEMBER 31,
1999 1998
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Land $ 480 $ 480
Buildings 4,099 4,099
Machinery and equipment 12,761 12,741
Furniture, fixtures and other 728 723
------- ------
18,068 18,043
Less accumulated depreciation 9,337 8,997
------- ------
Property, plant and equipment, net $ 8,731 $9,046
======= ======
</TABLE>
F-28
<PAGE>
GENERAL AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEBT
As of March 19, 1999 and December 31, 1998, the Company had no outstanding
bank borrowings.
The Company has a note payable to a former stockholder (a party related to the
current stockholder) related to the purchase of the former stockholder's
interest in the Company. The note payable requires a monthly payment of $8,333,
which includes annual interest at 10.0%. Aggregate future maturities as of
March 19, 1999 of the note payable are as follows, remainder of 1999--$89,477
and 2000--$49,414.
As of March 19, 1999 and December 31, 1998 the Company was technically in
default on its note payable to a former stockholder because the Company
terminated an insurance policy that served as collateral for the note payable,
and the proceeds from the policy were distributed to the sole stockholder. No
actions have been taken by the former stockholder and the note payable
obligation was current at March 19, 1999.
5. BENEFIT PLAN 401(K)
The Company sponsors a 401(k) plan covering substantially all full-time
employees who meet age and service requirements. Discretionary contributions to
the 401(k) plan amounted to $70,000 and $78,000 for the years ended
December 31, 1998 and 1997, respectively. The contribution for the period ended
March 19, 1999 has not yet been determined.
6. RELATED PARTY TRANSACTIONS, LEASE OBLIGATIONS, AND CONTINGENCIES
The Company leases certain warehouse space from a limited liability company
whose owners are the sole stockholder and his children. The lease is for a term
of one year through May 1999 and requires payments of $10,000 per month plus the
payment of all insurance, real estate tax, and maintenance costs. The Company
paid and expensed $24,000, $131,970, and $0 related to such lease for the period
ended March 19, 1999 and the years ended December 31, 1998 and 1997,
respectively. Also, in conjunction with such arrangement, the Company guaranteed
a mortgage loan related to the warehouse. The guaranteed mortgage was originally
$275,000 and as of March 19, 1999, was approximately $233,000.
The Company leases a jet aircraft from a business owned by the sole
stockholder. The jet aircraft lease was for a term of three years through
December 31, 1999, and requires payments of $10,000 per month, plus $60 per
engine hour operated, and plus all operating expenses. In conjunction with the
jet aircraft lease, the Company has a sublease obligation for a hangar that
houses the jet aircraft. The current hangar lease was renewed on March 31, 1998,
for a term of three years and requires payments of $5,650 per month. The Company
recorded expenses of $186,928, $528,962 and $576,339; for the jet aircraft and
hangar leases in the period ended March 19, 1999 and the years ended
December 31, 1998 and 1997, respectively.
Future minimum lease commitments for the jet aircraft, hangar and warehouse
amount to $140,850 for 1999; $67,800 for 2000; and $16,950 for 2001.
7. SPECIAL CHARGE (RECOVERY)
The Company incurred a $1,315,000 loss due to the embezzlement of funds by a
former contracted (i.e., not an employee of the Company) accountant. The loss
was discovered and expensed in 1996.
F-29
<PAGE>
GENERAL AUTOMATION, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SPECIAL CHARGE (RECOVERY) (CONTINUED)
Recoveries of amounts from the accountant and insurance company were received
and recorded as income in 1997 and 1998.
8. MAJOR CUSTOMERS
The Company has two major customers which accounted for 57.2%, 48.1% and
54.4% of the Company's sales for the period ended March 19, 1999 and the years
ended December 31, 1998 and 1997, respectively. As of March 19, 1999 and
December 31, 1998, the Company's receivables from these two customers were
$1,849,780 and $1,651,905, respectively.
9. YEAR 2000 (UNAUDITED)
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue." However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems may occur with billing, payroll, or
financial closings at month, quarterly, or year end. We believe that any such
problems are likely to be minor and correctable. In addition, we could still be
negatively impacted if our customers or suppliers are adversely affected by the
Year 2000 or similar issues. We currently are not aware of any significant Year
2000 or similar problems that have arisen for our customers and suppliers.
F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
The Board of Directors
Precision Partners, Inc.
We have audited the accompanying combined balance sheets as of March 19, 1999
and October 31, 1998, of the companies listed in Note 1, and the related
combined statements of operations, stockholders' equity, and cash flows for the
period from November 1, 1998 to March 19, 1999, and for each of the two years in
the period ended October 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position at March 19, 1999 and
October 31, 1998, of the companies listed in Note 1, and the combined results of
their operations and their cash flows for the period from November 1, 1998 to
March 19, 1999, and for each of the two years in the period ended October 31,
1998, in conformity with accounting principles generally accepted in the United
States.
March 10, 2000 /s/ Ernst & Young LLP
Dallas, Texas
F-31
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,859 $ 2,890
Trade accounts receivable 2,889 4,086
Net costs and estimated earnings in excess of billings on
uncompleted contracts 4,131 4,641
Other current assets 153 7
------- -------
Total current assets 10,032 11,624
Property and equipment, net 10,785 11,338
Due from related parties 760 795
Notes receivable from stockholders 768 727
Deposits and other assets 35 210
------- -------
Total assets $22,380 $24,694
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,400 $ 1,400
Accounts payable 906 1,520
Accrued expenses 1,042 1,304
Current portion of notes payable and capital lease
obligations 1,949 2,042
Billings in excess of net costs and estimated earnings on
uncompleted contracts 225 185
Notes payable to stockholders 95 25
Income taxes payable 977 1,795
------- -------
Total current liabilities 6,594 8,271
Notes payable and capital lease obligations, less current
portion 6,879 7,354
Deferred income taxes 943 896
Commitments
Stockholders' equity:
Common stock, no par value:
Authorized shares - 25,000 Certified; 1,000,000 Calbrit
Issued and outstanding shares at March 19, 1999 and
October 31, 1998 - 9,305 Certified; 2,041 Calbrit 93 93
Retained earnings 7,871 8,080
------- -------
Total stockholders' equity 7,964 8,173
------- -------
Total liabilities and stockholders' equity $22,380 $24,694
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-32
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
PERIOD FROM 31,
NOVEMBER 1, 1998 -------------------
TO MARCH 19, 1999 1998 1997
------------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales $ 9,465 $37,433 $30,377
Cost of sales 7,712 27,209 21,136
------- ------- -------
Gross profit 1,753 10,224 9,241
Selling, general and administrative expenses 1,347 4,813 4,999
Related party rent expense 268 460 352
------- ------- -------
Operating income 138 4,951 3,890
Other income (expense):
Interest income 43 126 80
Interest expense (362) (1,092) (651)
Miscellaneous income 2 7 79
------- ------- -------
(317) (959) (492)
------- ------- -------
(Loss) income before income taxes (179) 3,992 3,398
Provision for income taxes 30 1,689 1,315
------- ------- -------
Net income (loss) $ (209) $ 2,303 $ 2,083
======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-33
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED EARNINGS TOTAL
------------ ----------------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Balance at October 31, 1996 $93 $3,694 $3,787
Net income -- 2,083 2,083
--- ------ ------
Balance at October 31, 1997 93 5,777 5,870
Net income -- 2,303 2,303
--- ------ ------
Balance at October 31, 1998 93 8,080 8,173
Net loss -- (209) (209)
--- ------ ------
Balance at March 19, 1999 $93 $7,871 $7,964
=== ====== ======
</TABLE>
SEE ACCOMPANYING NOTES.
F-34
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
PERIOD FROM NOVEMBER 1, -----------------------
1998 TO MARCH 19, 1999 1998 1997
----------------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (209) $ 2,303 $ 2,083
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 821 2,027 1,242
Provision for deferred income taxes 47 378 205
Changes in operating assets and liabilities:
Trade accounts receivable 1,197 118 (1,605)
Net costs and estimated earnings in excess
of billings on uncompleted contracts 510 (426) (974)
Other current assets (146) (4) 1
Deposits and other assets 175 47 (2)
Due from stockholders (41) (436) (16)
Accounts payable (614) 308 280
Accrued expenses (262) (259) 388
Billings in excess of net costs and
estimated earnings on uncompleted
contracts 40 52 7
Income taxes payable (818) (54) 112
------ ------- -------
Net cash provided by operating activities 700 4,054 1,721
INVESTING ACTIVITIES
Purchases of property and equipment (14) (724) (447)
------ ------- -------
Net cash used in investing activities (14) (724) (447)
FINANCING ACTIVITIES
Proceeds from stockholders' notes payable 117 125 420
Repayments of stockholders' notes payable (47) (170) (350)
Payments on line of credit -- -- 218
Repayments of notes payable and capital lease
obligations (822) (2,096) (1,202)
Repayments (advances) from related parties 35 (163) (546)
------ ------- -------
Net cash used in financing activities (717) (2,304) (1,460)
------ ------- -------
Net increase (decrease) in cash and cash equivalents (31) 1,026 (186)
Cash and cash equivalents, beginning of period 2,890 1,864 2,050
------ ------- -------
Cash and cash equivalents, end of period $2,859 $ 2,890 $ 1,864
====== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-35
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Certified Fabricators, Inc.'s principal activities relate to the manufacture
and assembly of highly sophisticated structural steel components. Calbrit
Design, Inc.'s principal activity is the technical design and drawings of parts
used in the aerospace industry.
BASIS OF PRESENTATION
The combined financial statements include all accounts of Certified
Fabricators, Inc. and Calbrit Design, Inc. ("the Company") which are under
common control. All significant intercompany balances and transactions have been
eliminated in the combination. On November 6, 1998, the Company entered into an
agreement with Precision Partners, L.L.C. ("LLC") to sell all of the outstanding
common stock of the Company. The agreement was assigned by LLC to a wholly-owned
subsidiary, Precision Partners Holdings, Inc. ("Holdings") which was in turn
assigned to Holdings' wholly-owned subsidiary, Precision Partners, Inc. The
transaction was completed on March 19, 1999. The combined financial statements
are presented on a historical cost basis and do not include any adjustments
related to the purchase transaction.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers highly
liquid investments with original maturities of 90 days or less to be cash
equivalents.
The following table sets forth certain non-cash transactions excluded from
the statements of cash flows:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD FROM OCTOBER 31,
NOVEMBER 1, 1998 ---------------
TO MARCH 19, 1999 1998 1997
---------------------- ------ ------
<S> <C> <C> <C>
(IN THOUSANDS)
Acquisition of equipment through notes payable and
capital leases $254 $3,678 $5,807
Forgiveness of advances to former stockholder -- -- 21
</TABLE>
REVENUE RECOGNITION
Revenues from contracts are recognized on the percentage-of-completion
method, measured by the percentage of total costs incurred to date to estimated
total costs of the contract. Total costs include all direct material and labor
costs and those indirect costs related to contract performance, such as indirect
labor, supplies, tools, repairs and depreciation costs. Selling, general and
administrative costs are charged to expense as incurred. Contract revisions are
recognized in the period in which the revisions are determined. Provisions for
estimated losses on uncompleted contracts are made in the period in which such
losses are determined.
F-36
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Profit incentives are included in revenues when their realization is
reasonably assured. An amount equal to contract costs attributable to claims is
included in revenues when realization is probable and the amount can be
reasonably estimated.
The asset, "Net costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of amounts
billed. The liability, "Billings in excess of net costs and estimated earnings
on uncompleted contracts," represents billings in excess of revenues recognized.
CONCENTRATION OF CREDIT RISK
The Company sells to customers throughout the United States. The Company is
materially dependent on a small group of customers. During the period ended
March 19, 1999 and the years ended October 31, 1998 and 1997, the Company had a
total of four customers whose sales represented 10% or more of sales in certain
or all years. Sales to these customers were approximately 79%, 81% and 79% of
total sales for the period ended March 19, 1999 and the years ended October 31,
1998 and 1997, respectively. These customers also represented 71% and 72% of the
accounts receivable balance at March 19, 1999 and October 31, 1998,
respectively. Sales to customers are subject to cancellation which can occur due
to cancellation clauses given by the manufacturer to its customer. The Company
has, nevertheless, maintained a strong relationship with these customers and,
providing it continues to meet shipment schedules and quality standards,
management believes that its trade accounts receivable credit risk exposure is
limited.
No other customer represented more than 10% of the Company's annual total
sales.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have been
within management's expectations and amounts have been provided for doubtful
accounts as deemed necessary.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
expenses are calculated using the straight-line method. The depreciation and
amortization methods are designed to amortize the cost of the assets over their
estimated useful lives, in years, of the respective assets as follows:
<TABLE>
<S> <C>
Machinery and equipment 3 to 20
Furniture, fixtures and
other 3 to 14
Leasehold improvements 5 to 39
</TABLE>
Leasehold improvements are amortized over the shorter of the term of the
lease or the life of the improvements. Maintenance and repairs are charged to
expense as incurred. Renewals and improvements of a major nature are
capitalized. At the time of retirement or other disposition of property and
equipment, the cost and accumulated depreciation are removed from the accounts
and any resulting gains or losses are reflected in income.
LONG-LIVED ASSETS
The Company accounts for its long-lived assets under FASB No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF, which requires
F-37
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are not sufficient to recover the assets'
carrying amount. The impairment loss is measured by comparing the fair value of
the asset to its carrying amount.
ADVERTISING COSTS
Advertising costs are expensed as incurred and were approximately $12,000,
$191,000 and $66,000 for the period ended March 19, 1999 and years ended
October 31, 1998 and 1997, respectively.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes as
set forth in FASB Statement No. 109, ACCOUNTING FOR INCOME TAXES. Under the
liability method, deferred taxes are determined based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist principally of cash and cash
equivalents, receivables, net costs and estimated earnings in excess of billings
on uncompleted contracts, payables, and billings in excess of net costs and
estimated earnings on uncompleted contracts. The Company believes all of the
financial instruments' recorded values approximate current values.
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Information regarding contract costs, estimated earnings, and progress
billings consisted of the following at:
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Costs incurred on uncompleted contracts $ 11,867 $11,077
Estimated earnings 2,197 1,552
-------- -------
14,064 12,629
Less net progress billings 10,158 8,173
-------- -------
$ 3,906 $ 4,456
======== =======
</TABLE>
F-38
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (CONTINUED)
The above amounts are included in the Company's balance sheets under the
following captions at:
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Net costs and estimated earnings in excess of
billings on uncompleted contracts $ 4,131 $ 4,641
Billings in excess of net costs and estimated
earnings on uncompleted contracts (225) (185)
-------- -------
$ 3,906 $ 4,456
======== =======
</TABLE>
3. DUE FROM RELATED PARTIES
The Company has advanced monies to a partnership for use in financing
various properties. The partnership is 100% owned by the stockholders of the
Company. At March 19, 1999 and October 31, 1998, the Company has advanced
$760,000 and $795,000, respectively.
4. NOTES RECEIVABLE FROM STOCKHOLDERS
Notes receivable from stockholders consisted of the following at:
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
6% note receivable, interest accrues monthly, due on
demand $220 $215
6% note receivable, interest accrues monthly, due on
demand 91 89
10% note receivable, interest accrues monthly, with
principal and interest due November 2002 85 82
10% note receivable, interest accrues monthly, with
principal and interest due November 2002 28 27
Note receivable, interest and payment terms undetermined 172 157
Note receivable, interest and payment terms undetermined 172 157
---- ----
$768 $727
==== ====
</TABLE>
F-39
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
<TABLE>
<CAPTION>
OCTOBER
MARCH 19, 31,
1999 1998
--------- --------
<S> <C> <C>
(IN THOUSANDS)
Machinery and equipment $17,416 $17,152
Furniture, fixtures and other 1,877 1,876
Leasehold improvements 1,117 1,114
------- -------
20,410 20,142
Less accumulated depreciation and amortization 9,625 8,804
------- -------
$10,785 $11,338
======= =======
</TABLE>
6. LINE OF CREDIT, NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
The Company maintains a $3,000,000 credit line under which it can borrow
funds or secure letters of credit at prevailing market rates. The credit line is
renewable each year on April 30. As of March 19, 1999, $1,400,000 was
outstanding. The revolving line of credit is secured by accounts receivable and
all other assets of the Company. Interest accrues beginning at the date of
advance at the bank's base rate plus .25% (the bank's base rate at March 31,
1999 was 8.00%). Advances under the line are available to the Company based upon
80% of outstanding eligible accounts receivable. Eligible accounts receivable
consist of those accounts which are less than ninety days from the date of
invoice. The unused portion of the credit line is subject to withdrawal at the
discretion of the Company.
Under the terms of the line of credit, the Company is required to maintain
minimum levels of tangible net worth, current ratio, working capital and maximum
level of debt to tangible net worth. Subsequent to the balance sheet date, the
Company sold all of the outstanding common stock to Precision Partners, Inc. The
outstanding draws on the credit line were paid off as a result of that
transaction.
Notes payable, including capital lease obligations, consisted of the
following at (in thousands):
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to stockholders, interest of 8.5%, monthly
installments range from $2 to $3, due 12/31/97 to 1/31/98 $ -- $ 25
Notes payable to stockholders, interest of 8.5%, monthly
installments, $2, due 1/5/00 95 --
------ ------
$ 95 $ 25
====== ======
Installment contracts with vendors, interest ranging from
10.1% to 25.7%, monthly installments totaling from $1 to
$14, due 1/31/98 to 3/31/00, secured by equipment $ 93 $ 238
Term loans with finance companies, interest ranging from
4.7% to 10.8%, monthly installments totaling from $1 to
$71, due 2/28/00 to 7/31/01, secured by equipment 8,402 8,726
</TABLE>
F-40
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. LINE OF CREDIT, NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Installment loans with finance companies, interest ranging
from 6.2% to 10.3%, monthly installments totaling from $1
to $6, secured by equipment $ 333 $ 294
Interim loan with finance companies, bearing 11.3% interest,
fixed interest paid monthly, due on demand, secured by
equipment -- 138
------ ------
8,828 9,396
Less current portion 1,949 2,042
------ ------
$6,879 $7,354
====== ======
</TABLE>
Aggregate future maturities of notes payables at March 19, 1999 are as
follows, in thousands:
<TABLE>
<S> <C>
1999 $1,527
2000 1,924
2001 1,873
2002 1,994
2003 1,510
</TABLE>
Interest paid to third parties was $362,000, $1,092,000 and $651,000, for
the period from November 1, 1998 to March 19, 1999, and for the years ended
October 31, 1998, and 1997, respectively. Pursuant to the purchase transaction
completed on March 19, 1999, the Company's debt was paid by Precision Partners,
Inc.
7. INCOME TAXES
The income tax provision (benefit) is as follows:
<TABLE>
<CAPTION>
PERIOD FROM NOVEMBER 1, 1998 TO OCTOBER 31,
MARCH 19, -------------------
1999 1998 1997
------------------------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current federal $ 31 $1,256 $1,084
Current state 12 55 26
---- ------ ------
Total current tax provision 43 1,311 1,110
Deferred federal (12) 274 257
Deferred state (1) 104 (52)
---- ------ ------
Total deferred tax provision
(benefit) (13) 378 205
---- ------ ------
Total tax provision $ 30 $1,689 $1,315
==== ====== ======
</TABLE>
The difference between the effective rate reflected in the income tax
provision for income taxes and the amount determined by applying the statutory
U.S. rate to income before income taxes for the
F-41
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
period from November 1, 1998 to March 19, 1999 and the years ended October 31,
1998 and 1997 is analyzed below:
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 1, YEAR ENDED
1998 TO OCTOBER 31,
MARCH 19, -------------------
1999 1998 1997
----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax provision (benefit) at statutory rate $(61) $1,357 $1,155
Valuation allowance 65 -- --
State income tax, net of federal income tax
benefit 8 104 (17)
Permanent differences 12 44 27
Other 6 184 150
---- ------ ------
Total income tax provision $ 30 $1,689 $1,315
==== ====== ======
</TABLE>
The Company reported deferred tax liabilities and assets as follows at:
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $(1,096) $(1,013)
------- -------
Total deferred tax liabilities (1,096) (1,013)
Deferred tax assets:
Accrued expenses 18 11
Tax credit carryforwards 90 60
Other 45 46
------- -------
Total deferred tax assets 153 117
------- -------
Net deferred tax liabilities $ (943) $ (896)
======= =======
</TABLE>
At March 19, 1999, the Company has approximately $60,000 of California
manufacturing investment credits and $30,000 of federal alternative minimum tax
credits, which do not expire. In addition, the Company has approximately
$190,000 of net operating loss carryforwards which expire in 2020.
Income taxes paid in the period 1999, 1998 and 1997 were approximately
$100,000, $1,365,000 and $943,000, respectively.
8. COMMITMENTS WITH RELATED AND UNRELATED PARTIES
The Company's operations are conducted in four buildings, all of which are
owned by a partnership that includes the Company's principal stockholders (the
Partnership). The principal stockholders own a 100% interest in the Partnership
at March 31, 1999. One building is leased from the Partnership under a
noncancellable ten year lease agreement with a monthly rent of $15,000. The
lease agreement dated February 1, 1993 expires February 1, 2003. Under the
leasing agreement, the
F-42
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS WITH RELATED AND UNRELATED PARTIES (CONTINUED)
Company is required to pay property taxes and common area charges (maintenance,
utilities and property insurance) attributable to the lease. Total rent expense
for the related party operating lease for the period from November 1, 1998 to
March 19, 1999 and the years ended October 31, 1998, and 1997 was $75,000,
$180,000 and $180,000, respectively.
The second building is leased from the Partnership under a noncancellable
ten year lease agreement with varying monthly rents starting at $25,000 on
May 1, 1997 and increasing to $30,000 on May 1, 1999. The lease agreement dated
May 1, 1997 expires April 30, 2007. Total rent expense for the related party
operating lease for the period from November 1, 1998 to March 19, 1999 and the
years ended October 31, 1998 and 1997 was $125,000, $269,000 and $184,000,
respectively. The Company subleases a portion of this space under a
non-cancelable two year agreement with monthly rental income of approximately
$11,000. The sublease is dated May 1, 1997 and expires on April 30, 2000. Total
rent expense, net of sublease income, for the period from November 1, 1998 to
March 19, 1999 and the years ended October 31, 1998 and 1997 was $70,000,
$135,000 and $117,000, respectively.
The third building was previously leased from an unrelated party under a
noncancellable lease agreement expiring December 31, 1998 with an option to
purchase the property. The lease provided for monthly rents of $10,000 through
December 31, 1997 and $10,000 through December 31, 1998. The Partnership
exercised the option to purchase the property in May 1997.
The Company now leases from the Partnership under a noncancellable five year
lease agreement with a monthly rent of $10,000. The agreement, dated May 16,
1997 expires May 16, 2002. Total rent expense for this related party operating
lease for the period from November 1, 1998 to March 19, 1999 and the years ended
October 31, 1998, and 1997 was $50,000, $120,000, and $118,000, respectively.
The fourth building is leased from the Partnership under a noncancellable
ten year lease agreement with a monthly rent of $2,500. The lease agreement
dated January 1, 1998 expires on December 31, 2003. Total rent expense for the
related party operating lease for the period from November 1, 1998 to March 19,
1999 and the year ended October 31, 1998 was $12,500 and $25,000, respectively.
The Company leased an additional warehouse facility under a noncancellable
lease agreement with an unrelated party. The monthly rent on the aforementioned
lease was $10,000 and expired on August 31, 1998. The Company subsequently
entered into a new lease agreement with the same monthly rent of $11,000 that
will expire on August 31, 2001. Total rent expense for the operating lease for
the period from November 1, 1998 to March 19, 1999 and the years ended
October 31, 1998, and 1997 was $56,000, $121,000 and $118,000, respectively.
Total rent expense for all of the Company's facilities under noncancellable
operating lease agreements, net of sublease income, for the period from
November 1, 1998 to March 19, 1999 and the years ended October 31, 1998, and
1997 was $264,000, $632,000, and $586,000, respectively.
The Company leases machinery and equipment from a related party under a
month to month lease agreement with monthly rents of $4,000.
The Company has assisted two affiliated entities in obtaining financing. The
affiliated entities have recorded the assets and liabilities on their books. The
Company, however, has guaranteed the indebtedness outstanding of $3,395,000 and
$3,490,000 at March 31, 1999 and October 31, 1998, respectively.
F-43
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. COMMITMENTS WITH RELATED AND UNRELATED PARTIES (CONTINUED)
Future rental commitments for the remaining years of all noncancellable
operating leases are as follows:
<TABLE>
<CAPTION>
UNRELATED
RELATED PARTIES-- SUBLEASE TOTAL
PARTIES FACILITIES INCOME COMMITMENTS
-------- ---------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Years ending October 31:
1999 $ 357 $240 $ (78) $ 519
2000 713 270 (134) 849
2001 738 194 (45) 887
2002 700 32 -- 732
2003 550 5 -- 555
Thereafter 1,648 -- -- 1,648
------ ---- ----- ------
$4,706 $741 $(257) $5,190
====== ==== ===== ======
</TABLE>
9. CAPITAL LEASES
The following is an analysis of leased property under capital leases
included in property and equipment (Note 5) at:
<TABLE>
<CAPTION>
MARCH 19, OCTOBER 31,
1999 1998
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment $ 1,507 $ 1,507
Furniture, fixtures and other 714 714
Leasehold improvements 10 10
------- -------
2,231 2,231
Less accumulated amortization 1,388 1,268
------- -------
$ 843 $ 963
======= =======
</TABLE>
Amortization of equipment under capital leases is included in depreciation
and amortization in the accompanying Combined Statements of Cash Flows.
F-44
<PAGE>
CERTIFIED FABRICATORS, INC. AND CALBRIT DESIGN, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. CAPITAL LEASES (CONTINUED)
The following is a schedule of future minimum lease payments under capital
lease agreements together with the present value of the net minimum lease
payments included in notes payable (Note 6) as of March 19, 1999, in thousands:
<TABLE>
<S> <C>
Years ending October 31:
1999 $163
2000 137
2001 27
----
327
Less amount representing interest at rates from 6.2% to
16.5% 26
----
Present value of net minimum lease payments $301
====
</TABLE>
10. PROFIT SHARING/401K PLANS
The Company sponsors a profit sharing plan covering all eligible employees
whereby the Company may contribute the lesser of $30,000 or 15% of annual
compensation. The Company may make discretionary contributions to the profit
sharing plan annually in amounts determined by management. Profit sharing
contributions for the period from November 1, 1998 to March 19, 1999 and the
years ended October 31, 1998, and 1997 were $0, $150,000, and $500,000,
respectively.
The Company also sponsors a 401K plan (the Plan) covering all eligible
employees whereby the Company may make matching contributions on the first 6% of
employee contributions in an amount or percentage determined by the Company, if
any. Matching contributions vest over a seven year period or 100% at normal
retirement as defined by the Plan. No matching contributions have been made
through March 19, 1999.
11. YEAR 2000 (UNAUDITED)
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue." However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems may occur with billing, payroll, or
financial closings at month, quarterly, or year end. We believe that any such
problems are likely to be minor and correctable. In addition, we could still be
negatively impacted if our customers or suppliers are adveresly affected by the
Year 2000 or similar issues. We currently are not aware of any significant Year
2000 or similar problems that have arisen for our customers and suppliers.
F-45
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
The Board of Directors
Precision Partners, Inc.
We have audited the balance sheet of Nationwide Precision Products Corp. as of
March 19, 1999, and the related statements of income, stockholders' equity and
cash flows for the period from June 1, 1998 to March 19, 1999. These financial
statements are the responsibility of the management of Nationwide Precision
Products Corp. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of Parlec, Inc. (a
corporation in which Nationwide Precision Products Corp. has a 44% interest),
have been audited by other auditors whose report has been furnished to us;
insofar as our opinion on the financial statements relates to data included for
Parlec, it is based solely on their report.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit and the report of other auditors provide
a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Nationwide Precision Products Corp. as of March 19,
1999, and the results of its operations and its cash flows for the period from
June 1, 1998 to March 19, 1999 in conformity with accounting principles
generally accepted in the United States.
February 25, 2000 /s/ Ernst & Young LLP
Dallas, Texas
F-46
<PAGE>
REPORT OF INDEPENDENT AUDITORS, INSERO, KASPERSKI, CIACCIA & CO., P.C.
The Board of Directors
Nationwide Precision Products Corp.
We have audited the balance sheet of Nationwide Precision Products Corp., as of
May 31, 1998, and the related statements of income, stockholders' equity and
cash flows for each of the two years in the period ended May 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nationwide Precision Products
Corp. at May 31, 1998, and the results of its operations and its cash flows for
each of the two years in the period ended May 31, 1998, in conformity with
generally accepted accounting principles.
June 29, 1998 /s/ Insero, Kasperski, Ciaccia & Co., P.C.
Rochester, New York
F-47
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 19, MAY 31,
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 442 $ 183
Accounts receivable, net of allowance for doubtful
accounts of $30,838 at March 19, 1999 and May 31, 1998 3,522 3,590
Accounts receivable from affiliate -- 592
Inventories 2,683 3,301
Prepaid expenses and other current assets 98 133
------- -------
Total current assets 6,745 7,799
Property, plant and equipment, at cost, net 17,580 17,008
Investment in Parlec, Inc. 4,821 2,598
Notes receivable from officers -- 295
Notes receivable from employee -- 105
Cash surrender value of officers' life insurance, net of
loans of $0 at
March 19, 1999 and $769,523, at May 31, 1998 -- 297
Debt issue costs, net 82 100
Federal tax deposit 273 274
------- -------
Total assets $29,501 $28,476
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,109 $ --
Accounts payable and accrued expenses 1,329 4,258
Current maturities of long-term debt and capital lease
obligations 2,564 2,065
------- -------
Total current liabilities 5,002 6,323
Long-term debt and capital lease obligations, less current
portion 9,370 8,842
Stockholders' equity:
Common stock, no par value; 700 shares authorized, 600
issued and outstanding 3 3
Additional paid-in capital 275 275
Retained earnings 14,851 13,033
------- -------
Total stockholders' equity 15,129 13,311
------- -------
Total liabilities and stockholders' equity $29,501 $28,476
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-48
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED MAY 31,
JUNE 1, 1998 -------------------
TO MARCH 19, 1999 1998 1997
------------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales $22,141 $28,440 $23,251
Cost of sales 17,056 22,239 18,549
------- ------- -------
Gross profit 5,085 6,201 4,702
Bonuses 773 895 640
Selling, general and administrative expenses 1,880 2,113 1,938
------- ------- -------
Operating income 2,432 3,193 2,124
Interest expense, net 529 682 646
------- ------- -------
Income before equity in net (loss) income of investee 1,903 2,511 1,478
Equity in net (loss) income of investee (85) 373 284
------- ------- -------
Net income $ 1,818 $ 2,884 $ 1,762
======= ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-49
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL PAID-IN RETAINED
COMMON STOCK CAPITAL EARNINGS TOTAL
------------ ------------------ -------- --------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Balance at June 1, 1996 $3 $275 $ 9,767 $10,045
Net income -- -- 1,762 1,762
Distributions -- -- (800) (800)
-- ---- ------- -------
Balance at May 31, 1997 3 275 10,729 11,007
Net income -- -- 2,884 2,884
Distributions -- -- (580) (580)
-- ---- ------- -------
Balance at May 31, 1998 3 275 13,033 13,311
Net income -- -- 1,818 1,818
-- ---- ------- -------
Balance at March 19, 1999 $3 $275 $14,851 $15,129
== ==== ======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-50
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED MAY 31,
JUNE 1, 1998 -------------------
TO MARCH 19, 1999 1998 1997
------------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,818 $ 2,884 $ 1,762
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,469 1,662 1,532
Equity in net loss (income) of investee 85 (373) (284)
Changes in operating assets and liabilities:
Accounts receivable 68 (1,287) 867
Accounts receivable from affiliate 592 (424) 49
Inventories (650) (634) (766)
Prepaid expenses 35 (35) 14
Federal tax deposit 1 197 87
Accounts payable and accrued expenses (2,929) 2,136 267
------- ------- -------
Net cash provided by operating activities 489 4,126 3,528
INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,023) (4,945) (557)
Increase in investment in minority interest of investee (1,040) -- --
Cash surrender value of officers' life insurance 297 (14) (41)
Repayments from officers and employees 400 135 175
------- ------- -------
Net cash used in investing activities (2,366) (4,824) (423)
FINANCING ACTIVITIES
Borrowings of long-term debt 3,000 3,500 --
Repayments of long-term debt (1,973) (2,228) (2,207)
Borrowings under line of credit 1,109 -- --
Distributions -- (580) (800)
------- ------- -------
Net cash provided by (used in) financing activities 2,136 692 (3,007)
------- ------- -------
Net increase (decrease) in cash and cash equivalents 259 (6) 98
Cash and cash equivalents, beginning of period 183 189 91
------- ------- -------
Cash and cash equivalents, end of period $ 442 $ 183 $ 189
======= ======= =======
Supplementary information for the statement of cash flows:
Interest payments $ 600 $ 748 $ 750
Note receivable and inventory converted to equity in
investee $ 1,618 -- --
</TABLE>
SEE ACCOMPANYING NOTES.
F-51
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Nationwide Precision Products Corp. ("the Company"), located in Rochester,
New York, manufactures precision machined parts, extrusions and castings for a
customer base primarily in the United States. The Company has a 44% interest in
Parlec, Inc., a producer of tooling and tool measuring equipment utilized by
manufacturing companies primarily in the United States, Canada and Western
Europe, located in Rochester, New York. On December 4, 1998, the Company entered
into an agreement with Precision Partners, L.L.C. ("LLC") to sell substantially
all of its assets exclusive of its investment in Parlec and certain other
assets, and for LLC to assume certain liabilities. The agreement was assigned by
LLC to a wholly-owned subsidiary, Precision Partners Holdings, Inc. ("Holdings")
which was in turn assigned to Holdings' wholly-owned subsidiary, Precision
Partners, Inc. The acquistion was completed on March 19, 1999. The financial
statements are presented on a historical cost basis and do not include any
adjustments related to the purchase transaction.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the actual amounts reported in the financial statement
and accompanying notes. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash in bank demand deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk with respect to cash. The Company routinely assesses the
financial strength of its customers and, as a consequence, believes that its
trade accounts receivable credit risk exposure is limited.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash with original maturities of 90 days or
less.
INVENTORIES
Inventories are stated at the lower of cost or market. The Company uses the
first-in, first-out (FIFO) method of determining cost for the majority of its
inventories.
REVENUE RECOGNITION
Sales are recorded when products are shipped to a customer.
DEPRECIATION
Buildings, machinery and equipment, and furniture and fixtures are
depreciated using both straight-line and declining balance methods over the
estimated useful lives of the individual assets. The
F-52
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
lives are five to ten years for equipment, twenty years for land improvements
and forty years for building and improvements.
INCOME TAXES
The Company has elected to be treated as an S Corporation for Federal and
New York State income tax purposes under the provisions of subchapter S of the
Internal Revenue Code. Under these provisions, the taxable income of the Company
is reported directly on the stockholders' individual tax returns.
LONG-LIVED ASSETS
The Company accounts for its long-lived assets under Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, which requires impairment losses to
be recognized for long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are not sufficient to recover the assets' carrying amount. The
impairment loss is measured by comparing the fair value of the asset to its
carrying amount.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to current year
presentation.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 19, MAY 31,
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $1,353 $2,416
Work-in-process 206 449
Finished goods 1,357 686
------ ------
2,916 3,551
Reserve for obsolescence (233) (250)
------ ------
$2,683 $3,301
====== ======
</TABLE>
F-53
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are valued at cost and consist of the
following:
<TABLE>
<CAPTION>
MARCH 19, MAY 31,
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Land and improvements $ 980 $ 980
Buildings and improvements 5,343 5,187
Machinery and equipment 26,585 24,778
Furniture, fixtures and other 670 610
------- -------
33,578 31,555
Less accumulated depreciation 15,998 14,547
------- -------
Property, plant and equipment, net $17,580 $17,008
======= =======
</TABLE>
4. DEBT
At March 19, 1999, the Company has $4,862,219 of unused letters-of-credit
with a bank to guarantee payment of the Industrial Revenue Bonds. A
letter-of-credit fee is charged at approximately 1% of the outstanding balance.
The Company has available a $2,000,000 working capital line-of-credit.
Borrowings on the line bear interest at the Bank's prime rate (7.75% at
March 31, 1999). The outstanding balance on this line is $1,109,000 at
March 19, 1999. There was no outstanding balance at May 31, 1998.
The Company has available a $600,000 equipment line-of-credit to fund future
equipment purchases for specific contracts. Borrowings on this line bear
interest at the Bank's prime rate (7.75% at March 19, 1999). There were no
outstanding balances on this line at March 19, 1999 and May 31, 1998.
F-54
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEBT (CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, MAY 31,
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Capital lease obligation consisting of a Tax Exempt
Industrial Revenue Bond, variable interest on outstanding
balance (3.10% at March 31, 1999), maturing 2004. No
principal payments are required until 2003. $ 3,325 $ 3,325
Capital lease obligation consisting of a Taxable Industrial
Revenue Bond, variable interest rate on outstanding
balance (5.20% at March 31, 1999), maturing 2003.
Principal installment of $180,000 began in fiscal 1996 and
increase by $20,000 per year through maturity. 1,435 1,675
Note payable to bank, $68,750 monthly plus 7.67% interest,
matured July, 1998. -- 138
Note payable to bank, $25,000 monthly plus 8.25% interest,
maturing December, 1999. 225 475
Note payable to bank, $31,250 monthly plus 8.035% interest,
maturing April, 2000. 406 719
Note payable to bank, $41,667 monthly plus 7.74% interest,
maturing May, 2000. 583 1,000
Note payable to bank, $71,445 monthly, including interest at
7.7%, maturing July, 2003. 3,101 3,500
Note payable to bank, $58,698 monthly, including interest at
6.5%, maturing September, 2003. 2,792 --
Deferred compensation payable to a former employee requiring
yearly payments of $15,000, including imputed interest at
9%, maturing 2005. 67 75
------- -------
11,934 10,907
Less current portion 2,564 2,065
------- -------
$ 9,370 $ 8,842
======= =======
</TABLE>
The Company's debt is collateralized by substantially all of the Company's
assets.
Aggregate future maturities of long-term debt are as follows:
2000--$2,564,000; 2001--$1,686,000; 2002--$1,680,000; 2003--$1,792,000;
2004--$4,194,000; thereafter--$18,000.
CAPITAL LEASE OBLIGATION
On December 1, 1994, the Company entered into an agreement to purchase land,
construct an addition to its facility in Henrietta, New York and to extend the
County of Monroe Industrial Development Agency (COMIDA) lease term of the 1986
bonds which related to the original building construction. The new bonds are
ten-year Industrial Development Revenue Bonds (IRB) issued through the COMIDA
and originally totaled $5,600,000. The Company leases the building under a
ten-year agreement with COMIDA. At the end of the lease term, the Company has an
option to purchase the property for one dollar, thus the lease has been
capitalized for financial reporting purposes.
F-55
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. DEBT (CONTINUED)
The present value of future minimum lease payments based on current
prevailing interest rates as of March 31, 1999, is as follows, in thousands:
<TABLE>
<S> <C>
Years ending March 31,
2000 $ 470
2001 477
2002 481
2003 485
2004 488
Thereafter 3,381
-------
5,782
Less amount representing interest 1,022
-------
Present value of future minimum lease payments $ 4,760
=======
</TABLE>
5. PROFIT SHARING/401(K) PLANS
The Company, along with Parlec, Inc., sponsors a profit sharing and 401(k)
plan covering their employees. The Plan is a discretionary profit sharing plan
where contributions are determined annually by the Board of Directors. No
contributions were made during the periods presented. In addition, the Company
makes matching contributions equal to 50% of the employee's elective deferrals
up to a maximum of $250 per year. Matching contributions totaled approximately
$28,000, $27,400, and $16,500 for the period from June 1, 1998 to March 19,
1999, and the years ended May 31, 1998 and 1997, respectively.
6. RELATED PARTIES
NOTES RECEIVABLE FROM OFFICERS
During 1991 and 1993, the President of the Company (Michael Nuccitelli)
borrowed various monies to purchase interests in Parlec, Inc. (Parlec), a
manufacturing company related through common management and the real estate
partnership that owns the Parlec facility. Interest accrues at rates that
approximate market rates (6.25% at March 19, 1999) and is payable annually. The
balance outstanding on these notes was $0 and $295,000 at March 19, 1999 and
May 31, 1998, respectively.
INVESTMENT IN PARLEC, INC.
In May 1994, the Company purchased 30% of the outstanding shares of
Parlec, Inc. The aggregate purchase price for these share was $1,200,000. The
investment has been accounted for using the equity method of accounting. At the
date of acquisition, the investment in Parlec exceeded the Company's share of
the underlying net assets by $1,055,400. This amount is being amortized as
goodwill on a straight-line basis over 40 years.
In December 1998, the Company purchased 200,000 shares, or an additional 14%
of the outstanding shares of Parlec. The aggregate purchase price for the shares
was $2,658,000, which consisted of cash and inventory of $1,040,000 and
$1,268,000, respectively, and the "forgiveness" of a 1993 loan due to the
Company from Parlec of $350,000 which was included in the Investment in
F-56
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTIES (CONTINUED)
Parlec, Inc. On the date of the transaction, the additional investment in Parlec
exceeded the Company's share of the underlying net assets by approximately
$1,576,000. This amount will be amortized over 40 years beginning in 1999.
The following summarized balance sheet is presented for Parlec, Inc. as of
March 19, 1999 and May 31, 1998:
<TABLE>
<CAPTION>
MARCH 19, MAY 31,
1999 1998
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Assets
Current assets $ 9,554 $ 8,564
Fixed and other assets 7,194 7,323
------- -------
$16,748 $15,887
======= =======
Liabilities
Current liabilities $ 6,663 $ 7,086
Long-term debt 3,452 4,149
Other long-term debt (Nationwide) -- 350
------- -------
10,115 11,585
Stockholders' Equity 6,633 4,302
------- -------
Total $16,748 $15,887
======= =======
</TABLE>
The following summarized statements of operations is presented for
Parlec, Inc. for the period from June 1, 1998 to March 19, 1999 and the years
ended May 31, 1998 and 1997:
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED MAY 31,
JUNE 1, 1998 TO -------------------
MARCH 19, 1999 1998 1997
---------------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales $20,133 $24,541 $17,381
Cost of sales 15,819 16,650 11,053
------- ------- -------
Gross profit $ 4,314 $ 7,891 $ 6,328
======= ======= =======
Net (loss) income, before tax $ (327) $ 1,329 $ 1,033
======= ======= =======
</TABLE>
SALES
During the period from June 1, 1998 to March 19, 1999 and the years ended
May 31, 1998 and 1997 the Company had sales to Parlec, Inc. of approximately
$1,617,550, $2,672,000 and $2,559,000 respectively. As of March 19, 1999 and
May 31, 1998, amounts due from Parlec, Inc. were approximately $309,000 and
$572,000, respectively.
F-57
<PAGE>
NATIONWIDE PRECISION PRODUCTS CORP.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. MAJOR CUSTOMERS
During the period from June 1, 1998 to March 19, 1999 and the years ended
May 31, 1998 and 1997, 68%, 70% and 71%, respectively, of the Company's sales
were to three customers. As of March 19, 1999 and May 31, 1998, the Company's
receivables from these three customers were approximately $1,734,541 and
$2,701,000, respectively.
8. YEAR 2000 (UNAUDITED)
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue." However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems may occur with billing, payroll, or
financial closings at month, quarterly, or year end. We believe that any such
problems are likely to be minor and correctable. In addition, we could still be
negatively impacted if our customers or suppliers are adversely affected by the
year 2000 or similar issues. We currently are not aware of any significant Year
2000 or similar problems that have arisen for our customers and suppliers.
F-58
<PAGE>
REPORT OF INDEPENDENT AUDITORS, ERNST & YOUNG LLP
The Board of Directors
Precision Partners, Inc.
We have audited the balance sheet of Gillette Machine & Tool Co., Inc.
("Gillette") as of August 31, 1999, and the related statements of income and
retained earnings and cash flows for the period from March 1, 1999 to
August 31, 1999. These financial statements are the responsibility of Gillette's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gillette at August 31, 1999,
and the results of its operations and its cash flows for the period from
March 1, 1999 to August 31, 1999 in conformity with accounting principles
generally accepted in the United States.
March 10, 2000 /s/ Ernst & Young LLP
Dallas, Texas
F-59
<PAGE>
REPORT OF INDEPENDENT AUDITORS, BONADIO & CO., LLP
The Board of Directors
Precision Partners, Inc.
We have audited the combined balance sheet of Gillette Machine & Tool Co., Inc.
("Gillette") as of February 28, 1999, and the related statements of income and
retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of Gillette's management. Our responsibility
is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gillette at February 28, 1999,
and the results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
August 27, 1999 /s/ Bonadio & Co., LLP
Rochester, New York
F-60
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31, 1999 FEBRUARY 28, 1999
--------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash $ -- $ 68
Accounts receivable 1,948 1,742
Due from related party -- 87
Inventories 3,159 3,489
Prepaid expenses 142 50
---------- ----------
Total current assets 5,249 5,436
Property, plant and equipment, net 1,698 1,890
Deferred tax asset, net 97 163
---------- ----------
Total assets $ 7,044 $ 7,489
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 224 $ --
Demand note payable 267 300
Current portion of long-term debt 170 164
Accounts payable 832 906
Accrued expenses 290 363
Accrued income taxes 43 171
Due to related party 57 134
Due to stockholders -- 323
---------- ----------
Total current liabilities 1,883 2,361
Long-term debt, net of current portion 480 640
Stockholders' equity:
Common stock, Class A, voting, par value $2, 5,000 shares
authorized, 375 shares issued and outstanding 1 1
Common stock, Class B, non-voting, par value $2,
45,000 shares authorized, 3,375 shares issued and
outstanding 7 7
Retained earnings 4,673 4,480
---------- ----------
Total stockholders' equity 4,681 4,488
---------- ----------
Total liabilities and stockholders' equity $ 7,044 $ 7,489
========== ==========
</TABLE>
SEE ACCOMPANYING NOTES.
F-61
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
PERIOD FROM MARCH 1, 1999
TO YEAR ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
------------------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Sales $ 7,977 $ 13,469
Cost of goods sold 5,387 10,195
-------- --------
Gross profit 2,590 3,274
Selling, general and administrative expenses 2,345 2,724
-------- --------
Income from operations 245 550
Other income (expense):
Miscellaneous income 46 62
Interest expense (50) (94)
Gain on sale of equipment 62 38
-------- --------
Other income, net 58 6
-------- --------
Income before income taxes 303 556
Income tax expense 110 199
-------- --------
Net income 193 357
Retained earnings, beginning of period 4,480 4,123
-------- --------
Retained earnings, end of period $ 4,673 $ 4,480
======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
F-62
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 1, 1999
TO
AUGUST 31, YEAR ENDED
1999 FEBRUARY 28, 1999
------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net income $ 193 $ 357
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred tax expense (benefit) 66 (30)
Depreciation and amortization 247 620
Gain on sale of equipment (62) (38)
Changes in operating assets and liabilities:
Accounts receivable (206) (1)
Due to/from related party 10 67
Inventories 330 (1,074)
Prepaid expenses (92) (6)
Prepaid income taxes -- 16
Accounts payable and cash overdraft 150 175
Accrued expenses (73) 80
Accrued income taxes (128) 171
Customer advances -- (69)
----- -------
Net cash provided by operating activities 435 268
Investing activities:
Purchases of property, plant and equipment (58) (357)
Proceeds from the sale of equipment 65 38
----- -------
Net cash provided by (used in) investing
activities 7 (319)
Financing activities:
Payments on demand note payable (33) (116)
Borrowings on long-term debt -- 115
Payments on long-term debt (154) (126)
(Decrease) increase in due to stockholders (323) 203
----- -------
Net cash (used in) provided by financing
activities (510) 76
----- -------
(Decrease) increase in cash (68) 25
Cash at beginning of period 68 43
----- -------
Cash at end of period $ -- $ 68
===== =======
</TABLE>
SEE ACCOMPANYING NOTES.
F-63
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Gillette Machine & Tool Co., Inc. (the "Company") is a manufacturer of
precision machined components for customers located primarily in the northeast
United States operating in a variety of industries.
BASIS OF PRESENTATION
On June 17, 1999 the Company entered into an agreement with Precision
Partners, Inc. to sell all of the outstanding common stock of the Company. The
transaction was completed on September 1, 1999. The financial statements are
presented on a historical cost basis and do not include any adjustments related
to the purchase.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash with original maturities of 90 days or
less.
CONCENTRATION OF CREDIT RISK
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash in bank demand deposit accounts
which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk with respect to cash. The Company routinely assesses the
financial strength of its customers and, as a consequence, believes that its
trade accounts receivable credit risk exposure is limited.
REVENUE RECOGNITION
Sales are recorded when products are shipped to a customer.
INVENTORIES
Inventories are stated at the lower of cost or market. The Company uses the
first-in, first-out (FIFO) method of determining cost.
DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets,
which range from three to twenty-four years.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-64
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS
The company accounts for its long-lived assets under Statement of Financial
Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, which requires impairment losses to
be recognized for long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are not sufficient to recover the assets' carrying amount. The
impairment loss is measured by comparing to the fair value of the asset to its
carrying amount.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates.
2. INVENTORIES
Inventories consist of the following at:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1999 1999
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials $ 74 $ 71
Work-in-process 2,607 2,596
Finished goods 528 872
----------- -----------
3,209 3,539
Less reserve for obsolescence 50 50
----------- -----------
$ 3,159 $ 3,489
=========== ===========
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following at:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1999 1999
----------- ------------
(IN THOUSANDS)
<S> <C> <C>
Machinery and equipment $ 7,922 $ 8,207
Leasehold improvements 1,187 1,184
Office equipment 460 437
Vehicles 181 170
----------- -----------
9,750 9,998
Less accumulated depreciation and amortization 8,052 8,108
----------- -----------
$ 1,698 $ 1,890
=========== ===========
</TABLE>
F-65
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. FINANCING ARRANGEMENTS
The Company may borrow up to $3,500,000 under the terms of an annually
renewable line-of-credit agreement with a bank. Amounts borrowed bear interest
at the bank's prime rate, are collateralized by substantially all assets of the
Company, and are guaranteed by the estate of Frank P. Gillette. There were no
amounts outstanding at August 31, 1999.
Long term debt consists of the following at:
<TABLE>
<CAPTION>
FEBRUARY 28,
AUGUST 31, 1999 1999
---------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Note payable to bank in monthly installments of $7,397,
including interest at 7.94% through November 2001 $ 194 $ 223
Note payable to the estate of Frank P. Gillette in monthly
installments of $3,029, including interest at 9.5% through
February 2007 197 206
Note payable to the estate of Frank P. Gillette in monthly
installments of $500, including interest at 9.5% through
May 2025 155 158
Note payable to bank in monthly installments of $2,282,
including interest at 7.25% through February 2004 104 115
Note payable to bank in monthly installments of $4,437,
including interest at 7.55% through February 2001 -- 102
---------- --------
650 804
Less current portion 170 164
---------- --------
$ 480 $ 640
========== ========
</TABLE>
The notes payable to bank are collateralized by substantially all assets of
the Company and are guaranteed by the stockholders of the Company and the estate
of Frank P. Gillette.
All debt was subsequently paid at September 1, 1999 pursuant to the terms of
the Stock Purchase Agreement between the former stockholders of Gillette and
Precision Partners, Inc. (See Note 1).
Interest paid for the period ended August 31, 1999 and year ended February
28, 1999 was approximately $50,000 and $91,000, respectively.
5. INCOME TAXES
Deferred taxes are provided in the financial statements for significant
temporary differences arising from assets and liabilities whose bases are
different for financial reporting and income tax purposes. The primary
differences are attributable to inventory, depreciation, alternative minimum tax
credit carryforwards and investment tax credit carryforwards.
F-66
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
The benefit (provision) for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD FROM MARCH 1, 1999 FEBRUARY 28,
TO AUGUST 31, 1999 1999
------------------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Current $ 46 $ 229
Deferred 64 (30)
--------- ---------
$ 110 $ 199
========= =========
</TABLE>
The tax effect of temporary differences that give rise to the net deferred
tax asset are as follows:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1999 1999
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset:
Inventory reserve $ 19 $ 20
Accrued expenses 22 20
Alternative minimum tax credit 157 192
Net operating loss carryforward--New York -- 10
New York State investment tax credit 187 187
--------- ---------
385 429
Deferred tax liability:
Accelerated depreciation (288) (266)
--------- ---------
Net deferred tax asset $ 97 $ 163
========= =========
</TABLE>
At August 31, 1999, the Company has investment tax credits of approximately
$290,000 available to reduce future New York State tax liabilities. These
credits will begin to expire in 2005.
The provision for income taxes differs from the "expected" provision for the
periods (computed by applying the U.S. Federal corporate income tax rate of 34%
to income before income taxes) as follows:
<TABLE>
<CAPTION>
YEAR ENDED
PERIOD FROM MARCH 1, 1999 FEBRUARY 28,
TO AUGUST 31, 1999 1999
------------------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Computed "expected" tax expense $ 105 $ 189
State income taxes, net of Federal income
tax benefit 7 33
Other, net (2) (23)
--------- ---------
$ 110 $ 199
========= =========
</TABLE>
F-67
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
LEASING
The Company has a lease for its facilities with the estate of Frank
P. Gillette through 2001. This lease is renewable for additional five year
periods. Rent expense was approximately $87,667 and $158,200 for the period
March 1, 1999 to August 31, 1999 and the year ended February 28, 1999,
respectively.
Pursuant to the terms of the Stock Purchase Agreement between Precision
Partners and the former stockholders, a new lease was executed as of
September 1, 1999 with two five year terms plus two additional five year options
to renew. Future minimum annual lease payments for the years ending August 31
are:
<TABLE>
<S> <C>
2000 $ 282,438
2001 282,438
2002 282,438
2003 282,438
2004 282,438
Thereafter 1,412,190
</TABLE>
MANUFACTURING SERVICES
The Company purchases machining services at agreed upon rates from a
partnership in which the Company's stockholders are the partners. The Company
also sells labor to the partnership at agreed upon rates.
The Company sold labor totaling $193,662 and $400,577 to the partnership and
purchased machining services totaling $401,349 and $817,540 from the partnership
for the six months ended August 31, 1999 and the year ended February 28, 1999,
respectively.
Pursuant to the terms of the Stock Purchase Agreement between Precision
Partners and the former shareholders of the Company, the Partnership was
dissolved effective September 1, 1999.
7. PROFIT-SHARING PLAN
The Company contributes to a profit sharing and 401(k) plan. The Company
matched employee contributions up to 3% of their eligible compensation in 1999.
Profit-sharing contributions to the plan are at the discretion of the Board of
Directors and are allocated to eligible employees based on wages. The Company
accrued approximately $106,000 for the six months ended August 31, 1999 and
contributed approximately $182,000 to the Plan for the year ended February 28,
1999.
8. MAJOR CUSTOMERS
During the period from March 1, 1999 to August 31, 1999, 68% of the
Company's sales were to two customers. As of August 31, 1999, the Company's
receivables from these two customers were approximately $1,421,000. During the
year ended February 28, 1999, 78% of the Company's sales were to four customers.
As of February 28, 1999, the Company's receivables from these four customers
were approximately $1,399,000.
F-68
<PAGE>
GILLETTE MACHINE & TOOL CO., INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. YEAR 2000 (UNAUDITED)
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue." However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues such as leap year-related problems may occur with billing, payroll, or
financial closings at month, quarterly, or year end. We believe that any such
problems are likely to be minor and correctable. In addition, we could still be
negatively impacted if our customers or suppliers are adversely affected by the
Year 2000 or similar issues. We currently are not aware of any significant Year
2000 or similar problems that have arisen for our customers and suppliers.
F-69
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRECISION PARTNERS, INC.
OFFER TO EXCHANGE
12% SENIOR SUBORDINATED NOTES DUE 2009
FOR ITS OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2009
[LOGO]
--------
PROSPECTUS
, 2000
--------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE GENERAL CORPORATION LAW
The Delaware General Corporation Law ("DGCL") permits a corporation to
indemnify any person made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding (other than an action by or in
the right of the corporation), whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding. Such expenses may be paid by
the corporation in advance in accordance with the provisions of the DGCL. To be
indemnified, such person must have acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, that the
person had no reasonable cause to believe such person's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
does not of itself create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
The DGCL also permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such liability
under the DGCL.
CERTIFICATE OF INCORPORATION
Article Seven of the Certificate of Incorporation (the "Certificate of
Incorporation") for Precision Partners, Inc. (the "Company") provides that the
Company will, to the fullest extent permitted or required by Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all persons to whom it will have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein will not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and will continue as to a person who has ceased to be a director,
officer, employee or agent and will inure to the benefit of the heirs, executors
and administrators of such person. Any repeal or modification of Article Seven
will not adversely affect any right or protection existing thereunder
immediately prior to such repeal or modification.
BY-LAWS
Article Four of the Company's By-laws ("Article Four") provides that the
Company (1) shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Company) by reason of the fact that he or
she is or was
II-1
<PAGE>
a director or an officer of the Company and (2) except as otherwise required by
Section 3 of Article Four, may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he or she is or was an employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee, agent of
or participant in another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts actually and reasonably incurred by such person in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
The By-laws further provide that the Company shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the Company to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee, agent of or participant in
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the Company unless and only
to the extent that the Delaware Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Delaware Court of Chancery or such other court shall deem proper.
To the extent that a person who is or was a director, officer, employee or
agent of the Company has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in Section 1 or Section 2 of
Article Four, or in defense of any claim, issue or matter therein, such person
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
Any indemnification under Section 1 or Section 2 of Article Four (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because such person
has met the applicable standard of conduct set forth in said Sections 1 and 2.
Such determination shall be made (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
Expenses incurred by any person who may have a right of indemnification
under Article Four in defending a civil or criminal action, suit or proceeding
may be paid by the Company in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors in the specific case
upon receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he or she is entitled to be indemnified by the. Company pursuant to Article
Four.
II-2
<PAGE>
The indemnification provided by Article Four shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled under
any by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
The Company may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of or participant in another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of such person's status as
such, whether or not the Company would have the power to indemnify him or her
against such liability under the provisions of Article Four, Section 145 of the
General Company Law of the State of Delaware or otherwise.
NATIONWIDE
NEW YORK BUSINESS CORPORATION LAW
The New York Business Corporation Law ("NYBCL") permits a corporation to
indemnify any person made or threatened to be made a party to an action or
proceeding (other than an action by or in the right of the corporation to
procure a judgment in its favor), including an action by or in the right of
another corporation of any type or kind, domestic or foreign, or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
which any director of officer of the corporation served in any capacity at the
request of the corporation, by reason of the fact that the person, the person's
testator or intestate, was a director or officer of the corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or any appeal therein. To be
indemnified, such person must have acted in good faith, for a purpose which he
reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation, and in
criminal action or proceedings, in addition, had no reasonable cause to believe
that such person's conduct was unlawful.
The termination of any such civil or criminal action or proceeding by
judgment, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent, does not of itself create a presumption that the person did not act
in good faith, for a purpose which such person reasonably believed to be in, or,
in the case of service for any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise, not opposed to, the
best interests of the corporation, or that such person had reasonable cause to
believe such person's conduct was unlawful.
Where indemnification is sought by judicial action, the court may allow a
person such reasonable expenses, including attorneys' fees, during the pendency
of the litigation as are necessary in connection with such person's defense
therein, if the court shall find that such person has, by such person's
pleadings or during the course of the litigation, raised genuine issues of fact
or law.
The NYBCL also permits a corporation to purchase and maintain insurance
(1) to indemnify the corporation for any obligation which it incurs as a result
of the indemnification of directors and officers under the NYBCL, (2) to
indemnify directors and officers in instances in which they may be indemnified
by the corporation under the NYBCL, and (3) to indemnify directors and officers
in instances in which they may not otherwise be indemnified by the corporation
under the NYBCL.
AMENDED CERTIFICATE OF INCORPORATION AND BYLAWS
Nationwide's Certificate of Incorporation, as amended, and its Bylaws,
provide for indemnification of all persons to the fullest extent permitted by
the NYBCL, and also authorize Nationwide to
II-3
<PAGE>
purchase and maintain insurance to indemnify such persons, whether or not such
persons can be indemnified under the NYBCL; except that Nationwide's bylaws do
not extend indemnification to persons who were or are serving at Nationwide's
request as an agent of or participant in an employee benefit plan. Nationwide's
bylaws also permit the advancement of expenses under certain circumstances.
MID STATE
MAINE BUSINESS CORPORATION ACT
The Maine Business Corporation Act (the "MBCA") permits a corporation to
indemnify any person made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that such person was or
is a director, officer, employee or agent of the corporation, or was or is
serving at the request of the corporation as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan, or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding. Such expenses may be paid by the corporation in
advance in accordance with the provisions of the MBCA. To be indemnified, such
person must have acted (i) honestly or (ii) in the reasonable belief that his or
her action was in or not opposed to the best interests of the corporation or its
shareholders or, in the case of a person serving as a fiduciary of an employee
benefit plan or trust, in or not opposed to the best interests of that plan or
trust, or its participants or beneficiaries, or, in the case of any criminal
action or proceeding, such person must have acted without reasonable cause to
believe that such person's conduct was unlawful.
The termination of any action, suit, or proceeding by judgment, order or
conviction adverse to convict that person, or by settlement or pleas of NOLO
CONTENDERE or its equivalent, does not of itself create a presumption that the
person did not act honestly or in the reasonable belief that his or her action
was in or not opposed to the best interests of the corporation or its
shareholders or, in the case of a person serving as a fiduciary of an employee
benefit plan or trust, in or not opposed to the best interests of that plan or
trust or its participants or beneficiaries and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such person's conduct
was unlawful.
The MBCA also permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or who is or was serving at the request of the corporation as a
director, officer, trustee, partner, fiduciary, employee or agent of another
corporation, partnership, joint venture, trust, pension or other employee
benefit plan or other enterprise, against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of his
or her status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the MBCA.
CERTIFICATE OF ORGANIZATION AND AMENDED AND RESTATED BYLAWS
Mid State's Certificate of Organization contains no provision for
indemnification. However, its Amended and Restated Bylaws provide that Mid State
shall indemnify persons to the extent permitted by the MBCA, including the
advancement of expenses, except that such indemnification does not extend to
trustees, partners, fiduciaries, or employees or agents of a pension or other
employee benefit plan.
The Amended and Restated Bylaws of Mid State also provide that Mid State may
purchase and maintain insurance on behalf of such persons to the extent
permitted by the MBCA, whether or not such persons can be indemnified under its
bylaws; except that Mid State may not purchase or maintain such insurance to
indemnify trustees, partners, fiduciaries, or employees or agents of a pension
or other employee benefit plan.
II-4
<PAGE>
GENERAL AUTOMATION
ILLINOIS BUSINESS CORPORATION ACT
The Illinois Business Corporation Act ("IBCA") permits a corporation to
indemnify any person made or threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation, or who is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan, or other enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred or paid by such person in connection with such action, suit or
proceeding. Such expenses may be paid by the corporation in advance in
accordance with the provisions of the IBCA. To be indemnified, such person must
have acted in good faith and in a manner the person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe such
person's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
does not of itself create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of General Automation, and, with respect to any
criminal action or proceeding, that the person had no reasonable cause to
believe that his or her conduct was unlawful.
The IBCA also permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against such liability
under the IBCA.
ARTICLES OF INCORPORATION AND BYLAWS
General Automation's Articles of Incorporation contain no provision for
indemnification. However, its Bylaws provide that General Automation will
indemnify persons to the extent permitted by the IBCA; except that such
indemnification does not extend to persons who were or are serving at General
Automation's request as an agent of or participant in an employee benefit plan.
The bylaws also permit General Automation to purchase and maintain insurance to
indemnify such persons, whether or not such persons can be indemnified under its
bylaws.
CERTIFIED
CALIFORNIA GENERAL CORPORATION LAW
The California General Corporation Law (the "CGCL") permits a corporation to
indemnify any person who was or is a director, officer, employee or other agent
of the corporation, or who is or was serving at the request of the corporation
as a director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or who was a
director, officer, employee or agent of a foreign or domestic corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of the predecessor corporation, (other than an action by or in right of
the corporation), against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred by such
person in connection with any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investigative. To be
indemnified, such person must have acted (i) in good faith and (ii) in a manner
he or she reasonably believed to be in the best interests of the corporation;
and, in the case of a criminal
II-5
<PAGE>
proceeding, such person must have acted without reasonable cause to believe that
his or her conduct was unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent does not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of the
corporation or that the person had reasonable cause to believe that the person's
conduct was unlawful.
In respect of any action by or in right of the corporation, a corporation
may indemnify any person who was or is an agent of the corporation against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of the action if he or she acted (i) in good faith and
(ii) in a manner he or she believed to be in the best interests of the
corporation and its shareholders.
The CGCL also permits a corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation , or is or was serving at the request of the corporation as a
director, officer, employee or agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under its
bylaws, the CGCL, or otherwise.
ARTICLES OF INCORPORATION AND AMENDED AND RESTATED BYLAWS
Certified's Articles of Incorporation contain no provision for
indemnification. However, its Amended and Restated Bylaws provide that Certified
will indemnify all persons to the extent permitted by the CGCL and may purchase
and maintain insurance to indemnify such persons, whether or not such persons
can be indemnified under its bylaws, the CGCL, or otherwise. Certified's bylaws
also permit the advancement of expenses.
GILLETTE
NEW YORK GENERAL CORPORATION LAW
See the discussion of applicable provisions of the NYBCL above under
"--Nationwide."
RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Gillette's Restated Certificate of Incorporation and its Bylaws provide for
indemnification of all persons to the fullest extent permitted by the NYBCL, and
also authorize Gillette to purchase and maintain insurance to indemnify such
persons, whether or not such persons can be indemnified under the NYBCL.
Gillette's bylaws also permit the advancement of expenses under certain
circumstances.
GALAXY
MICHIGAN BUSINESS CORPORATION ACT
The Michigan Business Corporation Act (the "Michigan BCA") permits a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative or investigative and whether
formal or informal (other than an action by or in the right of the corporation),
by reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorneys' fees),
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if the person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to any
II-6
<PAGE>
criminal action or proceeding, if the person had no reasonable cause to believe
his conduct was unlawful.
The termination of any action, suit, or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
does not of itself create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation or its shareholders, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his or her conduct was unlawful.
The Michigan BCA also permits a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
or agent of the corporation, or who is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity or arising out of his or her status as such, whether or not
the corporation would have power to indemnify him or her against liability under
the Michigan BCA.
ARTICLES OF INCORPORATION AND AMENDED AND RESTATED BYLAWS
Galaxy's Articles of Incorporation contain no provision for indemnification.
However, its Amended and Restated Bylaws provide that Galaxy will indemnify all
persons to the fullest extent authorized or by the Michigan BCA and also
authorize Galaxy to purchase and maintain insurance to indemnify such persons,
whether or not such persons can be indemnified under the Michigan BCA. Galaxy's
bylaws also permit the advancement of expenses under certain circumstances.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- --------------------- ----
<C> <S>
2.1 Merger Agreement dated September 30, 1998 by and among
Galaxy Industries Corporation, Kenneth Smith, Galaxy Holding
Co., Inc., Robert H. Leidel Revocable Living Trust, Betty A.
Leidel Revocable Living Trust, Michael Leidel, Cheryl
Brooks, and Galaxy Acquisition, Inc.
2.2 Redemption and Merger Agreement dated September 17, 1998 by
and among Mid State Machine Products, S. Douglas Sukeforth,
Mid State Holdings Co., Inc. and Mid State Acquisition Inc.
2.3 Asset Purchase Agreement dated February 5, 1999 by and among
General Automation, Inc., Max Starr, and Precision Partners
Holding Company
2.4 Asset Purchase Agreement dated February 11, 1999 by and
among Nationwide Precision Products Corp., certain of its
stockholders and Nationwide Acquisition Delaware, Inc.
2.5 Stock Purchase Agreement dated February 19, 1999 by and
among Certified Fabricators Inc., Calbrit Design, Inc.,
certain of their selling shareholders and Precision
Partners, Inc.
2.6 Stock Purchase Agreement dated August 27, 1999 by and among
Gillette Machine & Tool Co., Inc., Gillette Machine &
Equipment Company, certain of their selling shareholders and
and Precision Partners, Inc.
2.7 Agreement of Merger dated as of May 28, 1999 by and among
Certified Fabricators Inc., Calbrit Design, Inc. and
Precision Partners, Inc. and filed with the Secretary of
State of the State of California on July 7, 1999
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- --------------------- ----
<C> <S>
3.1 Amended & Restated Certificate of Incorporation of Precision
Partners, Inc.
3.2 Bylaws of Precision Partners, Inc.
3.3 Certificate of Incorporation of Nationwide (together with
all amendments thereto)
3.4 By-laws of Nationwide
3.5 Certificate of Incorporation of Mid State (together with all
amendments thereto)
3.6 Amended and Restated By-laws of Mid State
3.7 Articles of Incorporation of General Automation (together
with all amendments thereto)
3.8 By-laws of General Automation
3.9 Articles of Incorporation of Certified (together with all
amendments thereto)
3.10 Amended and Restated By-laws of Certified
3.11 Restated Certificate of Incorporation of Gillette
3.12 By-laws of Gillette
3.13 Articles of Incorporation of Galaxy
3.14 Amended and Restated By-laws of Galaxy
*4.1 Indenture dated as of March 19, 1999 among Precision
Partners, Inc., as Company, the Guarantors named therein and
The Bank of New York, as trustee
4.2 First Supplemental Indenture dated October 15, 1999, among
Precision Partners, Inc. and The Bank of New York, as
trustee.
4.3 Second Supplemental Indenture dated October 29, 1999, among
Precision Partners, Inc. and The Bank of New York, as
trustee.
*4.4 Form of Initial Notes (included in Exhibit 4.1)
*4.5 Form of Exchange Notes (included in Exhibit 4.1)
4.6 Registration Rights Agreement dated as of March 19, 1999
among Precision Partners, Inc., Salomon Smith Barney and
NationsBanc Montgomery Securities LLC
*5.1 Opinion of Jones, Day, Reavis & Pogue, counsel to Precision
Partners, Inc.
*10.1 Credit Agreement (the "Credit Agreement") dated as of March
19, 1999 among Precision Partners, Inc., the guarantors and
lenders named therein, Citibank, N.A., as Administrative
Agent, Bank of America National Trust and Savings
Association, as Syndication Agent, and Sun Trust Bank,
Atlanta, as Documentation Agent
10.2 Waiver and Amendment to the Credit Agreement dated
August 9, 1999 among Precision Partners, Inc., the
guarantors and lenders named therein, and Citicorp U.S.A.,
Inc.
10.3+ General Electric Gas Turbine Systems Source Operation
Agreement dated December 1, 1998 by and between General
Electric and Mid State
10.4+ Purchase Agreement dated October 26, 1999 between
Caterpillar Inc. and Galaxy.
10.5+ Purchase Agreement dated February 1, 2000 between Dana
Corporation--Spicer Heavy Axle & Brake Division and
Nationwide.
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- --------------------- ----
<C> <S>
12.1 Statement re: computation of ratios
21.1 List of subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of Baker Newman & Noyes
23.3 Consent of Insero, Kasperski Ciaccia & Co., P.C.
23.4 Consent of Bonadio & Co., LLP
*23.5 Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1)
24.1 Powers of Attorney
*25.1 Statement on Form T-1 of the eligibility of the trustee
27.1 Financial Data Schedule of the Company
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to DTC Participants
99.4 Form of Letter to Clients
99.5 Form of Instruction to Book-Entry Transfer Participants
</TABLE>
- ------------------------
* To be filed by amendment. All other exhibits are filed herewith.
+ Portions of this agreement have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment in accordance
with Rule 406 of Regulation C.
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Securities and Exchange Commission (the "Commission") pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
II-9
<PAGE>
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(5) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
registered, the Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Precision
Partners, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irving, in
the State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
PRECISION PARTNERS, INC.
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman, Chief Executive Officer and Director
------------------------------------------- (Principal Executive Officer)
Dr. James E. Ashton
* Vice President and Chief Financial Officer
------------------------------------------- (Principal Financial and Accounting Officer)
Ronald M. Miller
* Vice President--Operations
-------------------------------------------
Melvin Johnson
* Director
-------------------------------------------
David W.M. Harvey
* Director
-------------------------------------------
Richard Detweiler
* Director
-------------------------------------------
John F. Megrue
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Certified
Fabricators, Inc. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Irving,
in the State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
CERTIFIED FABRICATORS, INC.
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT, TREASURER
AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
Richard Fagan
* Vice President, Treasurer,
------------------------------------------- Secretary and Director
Ronald M. Miller (Principal Financial and Accounting Officer)
* Chairman and Director
-------------------------------------------
Dr. James E. Ashton
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Galaxy Industries
Corporation has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irving, in
the State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
GALAXY INDUSTRIES CORPORATION
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT, TREASURER
AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
Byrdell C. Goldsmith
* Vice President, Treasurer,
------------------------------------------- Secretary and Director
Ronald M. Miller (Principal Financial and Accounting Officer)
* Chairman and Director
-------------------------------------------
Dr. James E. Ashton
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Mid State Machine
Products. has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Irving, in the
State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
MID STATE MACHINE PRODUCTS
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT, TREASURER
AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
S. Douglas Sukeforth
* Vice President, Treasurer,
------------------------------------------- Secretary and Director
Ronald M. Miller (Principal Financial and Accounting Officer)
* Chairman and Director
-------------------------------------------
Dr. James E. Ashton
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, General
Automation, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irving, in
the State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
GENERAL AUTOMATION, INC.
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT, TREASURER
AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
Edward R. Gajewski
* Vice President, Treasurer,
------------------------------------------- Secretary and Director
Ronald M. Miller (Principal Financial and Accounting Officer)
* Chairman and Director
-------------------------------------------
Dr. James E. Ashton
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Nationwide Precision
Products Corp. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irving, in
the State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
NATIONWIDE PRECISION PRODUCTS CORP.
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT, TREASURER
AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
Ronald S. Ricotta
* Vice President, Treasurer,
------------------------------------------- Secretary and Director
Ronald M. Miller (Principal Financial and Accounting Officer)
* Chairman and Director
-------------------------------------------
Dr. James E. Ashton
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Gillette Machine & Tool
Co., Inc. has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Irving, in the
State of Texas, on March 28, 2000.
<TABLE>
<S> <C> <C>
GILLETTE MACHINE & TOOL CO., INC.
By: /s/ RONALD M. MILLER
-----------------------------------------
Ronald M. Miller
VICE PRESIDENT, TREASURER
AND SECRETARY
</TABLE>
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on March 28, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President
------------------------------------------- (Principal Executive Officer)
Darren J. Gillette
* Vice President, Treasurer,
------------------------------------------- Secretary and Director
Ronald M. Miller (Principal Financial and Accounting Officer)
* Chairman and Director
-------------------------------------------
Dr. James E. Ashton
* Director
-------------------------------------------
William J. Gumina
</TABLE>
<TABLE>
<S> <C> <C>
* By: /s/ RONALD M. MILLER
----------------------------------------
Ronald M. Miller
Pursuant to Powers of Attorney
filed herewith or previously with the
Securities and Exchange Commission
</TABLE>
II-17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- --------------------- ----
<C> <S>
2.1 Merger Agreement dated September 30, 1998 by and among
Galaxy Industries Corporation, Kenneth Smith, Galaxy Holding
Co., Inc., Robert H. Leidel Revocable Living Trust, Betty A.
Leidel Revocable Living Trust, Michael Leidel, Cheryl
Brooks, and Galaxy Acquisition, Inc.
2.2 Redemption and Merger Agreement dated September 17, 1998 by
and among Mid State Machine Products, S. Douglas Sukeforth,
Mid State Holdings Co., Inc. and Mid State Acquisition Inc.
2.3 Asset Purchase Agreement dated February 5, 1999 by and among
General Automation, Inc., Max Starr, and Precision Partners
Holding Company
2.4 Asset Purchase Agreement dated February 11, 1999 by and
among Nationwide Precision Products Corp., certain of its
stockholders and Nationwide Acquisition Delaware, Inc.
2.5 Stock Purchase Agreement dated February 19, 1999 by and
among Certified Fabricators Inc., Calbrit Design, Inc.,
certain of their selling shareholders and Precision
Partners, Inc.
2.6 Stock Purchase Agreement dated August 27, 1999 by and among
Gillette Machine & Tool Co., Inc., Gillette Machine &
Equipment Company, certain of their selling shareholders and
and Precision Partners, Inc.
2.7 Agreement of Merger dated as of May 28, 1999 by and among
Certified Fabricators Inc., Calbrit Design, Inc. and
Precision Partners, Inc. and filed with the Secretary of
State of the State of California on July 7, 1999
3.1 Amended and Restated Certificate of Incorporation of
Precision Partners, Inc.
3.2 Bylaws of Precision Partners, Inc.
3.3 Certificate of Incorporation of Nationwide (together with
all amendments thereto)
3.4 By-laws of Nationwide
3.5 Certificate of Incorporation of Mid State (together with all
amendments thereto)
3.6 Amended and Restated By-laws of Mid State
3.7 Articles of Incorporation of General Automation (together
with all amendments thereto)
3.8 By-laws of General Automation
3.9 Articles of Incorporation of Certified (together with all
amendments thereto)
3.10 Amended and Restated By-laws of Certified
3.11 Restated Certificate of Incorporation of Gillette
3.12 By-laws of Gillette
3.13 Articles of Incorporation of Galaxy
3.14 Amended and Restated By-laws of Galaxy
*4.1 Indenture dated as of March 19, 1999 among Precision
Partners, Inc., as Company, the Guarantors named therein and
The Bank of New York, as trustee
4.2 First Supplemental Indenture dated October 15, 1999, among
Precision Partners, Inc. and The Bank of New York, as
trustee.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
- --------------------- ----
<C> <S>
4.3 Second Supplemental Indenture dated October 29, 1999, among
Precision Partners, Inc. and The Bank of New York, as
trustee.
*4.4 Form of Initial Notes (included in Exhibit 4.1)
*4.5 Form of Exchange Notes (included in Exhibit 4.1)
4.6 Registration Rights Agreement dated as of March 19, 1999
among Precision Partners, Inc., Salomon Smith Barney and
NationsBanc Montgomery Securities LLC
*5.1 Opinion of Jones, Day, Reavis & Pogue, counsel to Precision
Partners, Inc.
*10.1 Credit Agreement (the "Credit Agreement") dated as of March
19, 1999 among Precision Partners, Inc., the guarantors and
lenders named therein, Citibank, N.A., as Administrative
Agent, Bank of America National Trust and Savings
Association, as Syndication Agent, and Sun Trust Bank,
Atlanta, as Documentation Agent
10.2 Waiver and Amendment to the Credit Agreement dated
August 9, 1999 among Precision Partners, Inc., the
guarantors and lenders named therein, and Citicorp U.S.A.,
Inc.
10.3+ General Electric Gas Turbine Systems Source Operation
Agreement dated December 1, 1998 by and between General
Electric and Mid State
10.4+ Purchase Agreement dated October 26, 1999 between
Caterpillar Inc. and Galaxy.
10.5+ Purchase Agreement dated February 1, 2000 between Dana
Corporation--Spicer Heavy Axle & Brake Division and
Nationwide.
12.1 Statement re: computation of ratios
21.1 List of subsidiaries of the Company
23.1 Consent of Ernst & Young LLP
23.2 Consent of Baker Newman & Noyes
23.3 Consent of Insero, Kasperski Ciaccia & Co., P.C.
23.4 Consent of Bonadio & Co., LLP
*23.5 Consent of Jones, Day, Reavis & Pogue (included in
Exhibit 5.1)
24.1 Powers of Attorney
*25.1 Statement on Form T-1 of the eligibility of the trustee
27.1 Financial Data Schedule of the Company
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to DTC Participants
99.4 Form of Letter to Clients
99.5 Form of Instruction to Book-Entry Transfer Participants
</TABLE>
- ------------------------
* To be filed by amendment. All other exhibits are filed herewith.
+ Portions of this agreement have been omitted and filed separately with the
Commission pursuant to a request for confidential treatment in accordance
with Rule 406 of Regulation C.
<PAGE>
EXHIBIT 2.1
CONFORMED COPY
MERGER AGREEMENT
MERGER AGREEMENT (this "AGREEMENT"), dated as of September 30, 1998, by and
among GALAXY INDUSTRIES CORPORATION, a Michigan corporation (the "COMPANY"), the
Persons listed on SCHEDULE 1 attached hereto (the "STOCKHOLDERS"), GALAXY HOLD
CO., INC., a Delaware corporation ("PARENT"), and GALAXY ACQUISITION, INC., a
Delaware corporation and a wholly owned subsidiary of Parent ("MERGER SUB").
RECITALS
A. Parent has formed Merger Sub solely for the purpose of facilitating an
efficient exchange by stockholders of the Company of their shares of common
stock of the Company, no par value per share ("COMPANY STOCK"), for the
Aggregate Closing Merger Consideration pursuant to the terms of this Agreement,
and Merger Sub will not conduct any separate business activity nor serve any
function other than to effect for the benefit of Parent and the Stockholders the
conversion of Company Stock into the Aggregate Closing Merger Consideration.
B. The respective Boards of Directors of the Company, Parent and Merger Sub
have each determined that it is in the best interests of their respective
shareholders for Merger Sub to merge with and into the Company (the "MERGER"),
on the terms and subject to the conditions set forth herein.
C. Immediately prior to the consummation of the transactions contemplated
hereby, Kenneth Smith has contributed 7,192 shares of Company Stock to Precision
Partners, L.L.C. in exchange for Membership Units (as defined in the Members
Agreement of Precision Partners, L.L.C.). SCHEDULE 1 to this Agreement reflects
the contribution of such shares of Company Stock, which have been contributed by
Precision Partners, L.L.C. to Parent and will continue as shares of common stock
of the Surviving Corporation as described in Section 2.6(e) hereof.
D. The parties desire to make certain representations, warranties and
covenants in connection with the Merger and to prescribe various conditions to
the Merger.
Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere herein, the
following terms, as used herein, have the following meanings when used herein
with initial capital letters:
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with the first
Person. For the
1
<PAGE>
purposes of this definition, "CONTROL," when used with respect to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGGREGATE CLOSING MERGER CONSIDERATION" has the meaning ascribed to such
term in Section 2.6(a).
"AGREEMENT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement as the same may be amended from time to time in
accordance with the terms hereof.
"BALANCE SHEET DATE" means August 31, 1997.
"BONUSES" have the meaning ascribed to such term in Section 3.1.21(b).
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day on
which banks located in New York City are authorized or required to close.
"CAPITAL STOCK" means (a) with respect to any Person that is a corporation,
any and all shares, interests, participation or other equivalents (however
designated and whether or not voting) of corporate stock, including the common
stock of such Person and (b) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"CLOSING" has the meaning ascribed to such term in Section 2.9.
"CLOSING DATE" has the meaning ascribed to such term in Section 2.9.
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMPANY" has the meaning ascribed to such term in the introductory
paragraph of this Agreement, provided that references to the Company shall be
deemed to include references to former Subsidiaries of the Company that have
been directly or indirectly merged into or otherwise combined with the Company.
"COMPANY PROPERTY" means any real property and improvements and any
personal property at any time owned, leased, used, operated or occupied (whether
for storage, disposal or otherwise) by the Company or any Subsidiary.
"COMPANY SECURITIES" has the meaning ascribed to such term in Section
3.1.5(b).
"COMPANY STOCK" has the meaning ascribed to such term in Recital A.
"COMPUTER SYSTEMS" has the meaning ascribed to such term in Section 3.1.25.
2
<PAGE>
"CONSTITUENT OF CONCERN" means any substance defined as a hazardous
substance, hazardous waste, hazardous material, pollutant, or contaminant by any
Environmental Law, any petroleum hydrocarbon and any degradation product of a
petroleum hydrocarbon, asbestos, PCB or similar substance, the handling,
storage, treatment or exposure of or to which is subject to regulation under any
Environmental Law.
"DAMAGES" has the meaning ascribed to such term in Section 6.2(a).
"DGCL" has the meaning ascribed to such term in Section 2.1.
"DIRECT CLAIM" has the meaning ascribed to such term in Section 6.4(c).
"DISPUTE NOTICE" has the meaning ascribed to such term in Section 5.1.
"EFFECTIVE TIME" has the meaning ascribed to such term in Section 2.2.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, citations, summonses,
notices of non-compliance or violation, requests for information, investigations
or proceedings relating to any Environmental Law or any permit issued under any
such Law, including (a) Environmental Claims by Governmental Authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) Environmental Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Constituents of Concern or
arising from alleged injury or threat of injury to human health and safety or
the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to the environment
which has resulted or could result in a material loss, liability, cost or
expense to the Company .
"ENVIRONMENTAL LAW" means any Law in effect or to the Company's and the
Shareholders' knowledge, any Law reasonably expected to be adopted or made
effective, in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health and safety, including, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601, ET
SEQ. ("CERCLA") and any state and local counterparts or equivalents.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws and necessary for the business of the Company as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity that, together with the Company, would
be considered a single employer within the meaning of Section 4001 of ERISA or
Section 414 of the Code.
3
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FISCAL YEAR" means the twelve months ended August 31 or any other annual
period as determined from time to time by the board of directors of the Company.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign governmental or
regulatory authority.
"INDEBTEDNESS" means with respect to any Person, at any date, without
duplication, (i) all obligations of such Person for borrowed money, including,
without limitation, all principal, interest, premiums, fees, expenses,
overdrafts and penalties with respect thereto, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of the
property or services, except trade payables incurred in the ordinary course of
business, (iv) all obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (v) all obligations of such Person as lessee which are required to
be capitalized in accordance with GAAP and (vi) all Indebtedness of any other
Person of the type referred to in clauses (i) to (v) above directly or
indirectly guaranteed by such Person or secured by any assets of such Person.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in Section
6.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
6.4(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right, in each case
which is used or held for use or otherwise necessary in connection with the
conduct of the business of the Company as now conducted or proposed to be
conducted.
"INTERIM FINANCIAL STATEMENTS" means the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of July 31, 1998 and the related
consolidated statements of earnings and retained earnings, stockholders' equity
and cash flows.
"IRS" means the Internal Revenue Service.
"LAW" means any federal, state or local statute, law, rule, regulation,
ordinance, code, permit, license, policy or rule of common law.
"LEIDAL FAMILY STOCKHOLDERS" means the Robert H. Leidal Revocable Living
Trust, the Betty A. Leidal Revocable Living Trust, Michael R. Leidal and Cheryl
Brooks.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such
4
<PAGE>
property or asset. For the purposes of this Agreement, a Person will be deemed
to own, subject to a Lien, any property or asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, liabilities, condition (financial and other), results of operations or
prospects of the Company and the Subsidiaries.
"MBCA" has the meaning ascribed to such term in Section 2.1.
"MERGER" has the meaning ascribed to such term in Recital B.
"MERGER SUB" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"MILLENNIUM COMPLIANCE" means that the Computer Systems are capable of the
following, during and/or after January 1, 2000: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without any
change in performance; (c) responding to and processing two digit year input
without creating any ambiguity as to the century; and (d) storing and providing
date input information without creating any ambiguity as to the century.
"1998 TAX RESERVES" means an amount equal to $194,000 representing agreed
upon reserves for Taxes with respect to the Company for the fiscal year ended
1998.
"1998 TAX YEAR" means the fiscal year ending August 31, 1998.
"OPERATING COMPANY" means an "operating company" within the meaning of
Department of Labor Regulation Section 2510.3-101(c) or successor rule or
regulation, as from time to time amended and in effect.
"ORDER" means any judgment, injunction, judicial or administrative order or
decree.
"PARENT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"PARENT INDEMNIFIED PARTIES" has the meaning ascribed to such term in
Section 6.2.
"PERMITTED LIEN" means (i) mechanics', workmen's, repairmen's or other like
Liens arising or incurred in the ordinary course of business in respect of
obligations that are not overdue or (ii) other imperfections of title or
encumbrances, which do not materially affect the value or marketability of the
property subject thereto.
5
<PAGE>
"PER SHARE CLOSING MERGER CONSIDERATION" has the meaning ascribed to such
term in Section 2.6(a).
"PERSON" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"PLANS" has the meaning ascribed to such term in Section 3.1.19(a).
"POST-CLOSING TAX PERIOD" means any Tax period (or portion thereof) ending
after the Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) that
actually ends on or before the Closing Date or that would have ended on or
before the Closing Date if Parent were a C corporation filing a consolidated
return.
"REAL PROPERTY" has the meaning ascribed to such term in Section 3.1.16(b).
"RETURNS" has the meaning ascribed to such term in Section 3.1.10(a)(i).
"REVIEWED BALANCE SHEET" means the reviewed balance sheet of the Company as
of August 31, 1997.
"REVIEWED STATEMENTS" means the reviewed consolidated balance sheets of the
Company and its Subsidiaries, as of August 31, 1997, 1996 and 1995, together
with the related consolidated statements of earnings and retained earnings,
stockholders' equity and cash flows for the fiscal years then ended, together
with the notes thereto.
"SELECTED REPRESENTATIONS AND WARRANTIES" has the meaning ascribed to such
term in Section 6.1.
"SHAREHOLDER AGREEMENT" means the Shareholder, Restriction and Governance
Agreement among the Stockholders and the Company, dated September 12, 1997.
"STOCKHOLDER" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the time directly
or indirectly owned by the Company.
"SURVIVING CORPORATION" has the meaning ascribed to such term in Section
2.1.
"TAX" means (a) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company or
any Subsidiary, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty, levy, or
other tax, governmental fee or other like assessment or charge of any kind
6
<PAGE>
whatsoever, together with any interest, penalty, addition to tax or additional
amount imposed by any Taxing Authority (as hereinafter defined), (b) any
liability of the Company or any Subsidiary for the payment of any amounts of any
of the foregoing types as a result of being a member of an affiliated,
consolidated, combined or unitary group, or being a party to any agreement or
arrangement whereby liability of the Company or any Subsidiary for payment of
such amounts was determined or taken into account with reference to the
liability of any other Person, and (c) liability of the Company or any
Subsidiary for the payment of any amounts as a result of being a party to any
Tax Sharing Agreements or with respect to the payment of any amounts of any of
the foregoing types as a result of any express or implied obligation to
indemnify any other Person.
"TAX MATTER" has the meaning ascribed to such term in Section 5.4.
"TAX SHARING AGREEMENTS" means all existing Tax sharing agreements or
arrangements (whether or not written) binding the Company or any Subsidiary.
"TAXING AUTHORITY" means any Governmental Authority responsible for the
imposition of any Tax.
"THIRD PARTY CLAIM" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this Agreement.
II. THE MERGER; CLOSING
2.1. THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the Delaware General Corporation Law
(the "DGCL") and the Michigan Business Corporation Act (the "MBCA") at the
Effective Time, Merger Sub will be merged with and into the Company. As a result
of the Merger, the separate corporate existence of Merger Sub will cease and the
Company will continue as the surviving corporation (sometimes referred to herein
as the "SURVIVING CORPORATION") and will succeed to and assume all of the rights
and obligations of Merger Sub in accordance with the DGCL and the MBCA.
2.2. CONSUMMATION OF THE MERGER. As soon as practicable on the Closing
Date, the parties will cause the Merger to be consummated by filing with the
Delaware Secretary of State and the Michigan Secretary of State a certificate of
merger or articles of merger, in form reasonably satisfactory to the Company,
Parent and Merger Sub, executed in accordance with the relevant provisions of
the DGCL and MBCA and will make all other filings or recordings required under
the DGCL and MBCA to effect the Merger. The "EFFECTIVE TIME" as that term is
used in this Agreement will mean the effective time set forth in the certified
copy of the certificate of merger or articles of merger issued by the Michigan
Secretary of State and the Delaware Secretary of State with respect to the
Merger.
2.3. EFFECTS OF THE MERGER. The Merger will have the effects set forth in
the DGCL and the MBCA.
2.4. ARTICLES OF INCORPORATION; BY-LAWS. The Articles of Incorporation and
Bylaws of the Company, as in effect immediately prior to the Effective Time,
will be the Articles of
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Incorporation and By-laws of the Surviving Corporation and thereafter will
continue to be its Articles of Incorporation and By-Laws until amended as
provided therein and under the MBCA.
2.5. DIRECTORS AND OFFICERS. The director of Merger Sub immediately prior
to the Effective Time will be the initial director of the Surviving Corporation,
to hold office in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation until his successor is duly elected or appointed and
qualified. The officers of the Company immediately prior to the Effective Time
will be the initial officers of the Surviving Corporation, each to hold office
until their respective successors are duly elected or appointed and qualified.
2.6. CONVERSION OF SECURITIES; MERGER CONSIDERATION. Subject to the terms
and conditions of this Agreement, at the Effective Time, by virtue of the Merger
and without any action on the part of the Company, Parent, Merger Sub or their
respective shareholders (including, without limitation, the Stockholders):
(a) Each share of Company Stock issued and outstanding immediately prior to
the Effective Time as set forth on SCHEDULE 1 opposite each Person's name
thereon, except for Company Stock owned by Parent, will be converted into the
right to receive, in cash, an amount per share of Company Stock equal to (i)
$8.0 million (the "AGGREGATE CLOSING MERGER CONSIDERATION") DIVIDED BY (ii) the
number of issued and outstanding shares of Company Stock immediately prior to
the Effective Time (the quotient of (i) DIVIDED BY (ii), the "PER SHARE CLOSING
MERGER CONSIDERATION").
(b) As of the Effective Time, all Company Stock, except for Company Stock
owned by Parent, will no longer be outstanding and will automatically be
canceled and retired and will cease to exist, and each holder of a certificate
representing any shares of Company Stock will cease to have any rights with
respect thereto, except the right to receive such holder's appropriate portion
of the Aggregate Closing Merger Consideration as set forth in Section 2.6(a),
upon surrender of such certificate in accordance with Section 2.6(d).
(c) Each share of Company Stock held in the treasury of the Company
immediately prior to the Effective Time will be canceled and extinguished at the
Effective Time without any conversion thereof and no payment will be made with
respect thereto.
(d) At the Effective Time, each Stockholder will be entitled, upon
surrender to Parent of such Stockholder's certificates representing shares of
Company Stock, to receive in exchange therefor an amount equal to the Per Share
Closing Merger Consideration MULTIPLIED BY the number of shares of Company Stock
set forth opposite such Stockholder's name on SCHEDULE 1.
(e) Each share of Company Stock owned by Parent shall continue to be issued
and outstanding upon the Effective Time as validly issued, fully paid and
nonassessable shares of common stock of the Surviving Corporation.
(f) Each share of common stock, par value $.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time will
automatically without any action on the part of the holder thereof, be converted
into one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation which as of the Effective
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Time will, together with the stock of the Surviving Corporation described in
paragraph (e) above, constitute all of the issued and outstanding shares of the
Surviving Corporation.
2.7. CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Company Stock outstanding prior to the Effective Time
will not be made on the stock transfer books of the Surviving Corporation.
2.8. PAYMENT OF AGGREGATE CLOSING MERGER CONSIDERATION. Payment of the
Aggregate Closing Merger Consideration will be made in immediately available
funds by wire transfer at Closing to the account designated in writing by each
Stockholder as set forth in SCHEDULE 2.8 attached hereto, for the benefit of
such Stockholder.
2.9. CLOSING. The closing of the Merger (the "CLOSING") will take place at
the offices of Jones, Day, Reavis & Pogue located at 599 Lexington Avenue, New
York, New York, at 10:00 a.m., New York time, on the date hereof (the date on
which the Closing occurs is herein referred to as the "CLOSING DATE").
2.10. CLOSING DELIVERIES. In addition to such other deliveries as may be
contemplated hereby, at the Closing, the following deliveries shall be made:
(a) Each Stockholder shall deliver to parent a spousal consent of such
Stockholder's spouse, if any, dated the Closing Date in substantially the form
attached hereto as EXHIBIT A.
(b) The Company shall deliver to Parent a non-foreign person affidavit
required by Section 1445 of the Code.
(c) The Company shall deliver to Parent a letter of resignation from each
Director of the Company.
(d) The Company shall deliver to Parent the opinion of counsel to the
Company and the Stockholders, dated the Closing Date, substantially in the form
attached hereto as EXHIBIT B.
(e) Parent shall deliver to the Stockholders the opinion of counsel to
Parent, dated the Closing Date, substantially in the form attached hereto as
EXHIBIT C.
2.11. PROCEEDINGS. (a) Except as otherwise specifically provided for
herein, all proceedings that will be taken and all documents that will be
executed and delivered by the parties hereto on the Closing Date will be deemed
to have been taken and executed simultaneously, and no proceeding will be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
(b) The Stockholders agree that, upon execution and delivery of this
Agreement and the closing of the transactions contemplated hereby, the
Shareholder Agreement will be terminated and of no further force and effect.
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III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
3.1. The Stockholders and the Company represent and warrant to Parent and
Merger Sub as of the Closing Date as follows:
3.1.1. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. The Company has heretofore delivered
to Parent true and complete copies of the articles of incorporation and by-laws
of the Company.
3.1.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by the Company of this Agreement are within the Company's corporate
powers and have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
3.1.3. GOVERNMENTAL AUTHORIZATION. Except for the filing of the
certificates of merger, the execution, delivery and performance by the Company
of this Agreement require no action by or in respect of, or filing with, any
Governmental Authorities.
3.1.4. NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 3.1.4,
the execution, delivery and performance by the Company of this Agreement will
not (a) violate the articles of incorporation or by-laws or comparable
organizational documents of the Company or any Subsidiary, (b) violate any
applicable Law or Order, (c) require any filing with or permit, consent or
approval of, or the giving of any notice to, any Person (including filings,
consents or approvals required under any permits of the Company or any licenses
to which the Company is a party), (d) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of, the Company or any Subsidiary or to
a loss of any benefit to which the Company or any Subsidiary is entitled under
any agreement or other instrument binding upon, the Company or such Subsidiary
or any license, franchise, permit or other similar authorization held by the
Company or such Subsidiary, or (e) result in the creation or imposition of any
Lien on any asset of the Company or any Subsidiary, except in the case of
clauses (c), (d) and (e) for such filings, permits, consents, approvals or
notices and violations, breaches, conflicts and Liens which, individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
3.1.5. CAPITALIZATION. (a) The authorized, issued and outstanding capital
of the Company is as set forth on SCHEDULE 3.1.5(a). The Company Stock to be
acquired by Parent is duly authorized, validly issued, fully-paid, nonassessable
and free and clear of any Lien or other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such shares,
subject to applicable securities laws).
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(b) Except as disclosed in SCHEDULE 3.1.5(b), there are no outstanding (i)
shares of capital stock or other securities of the Company, (ii) securities of
the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, or (iii) options or other rights to acquire
from the Company, or other obligation of the Company to issue, any capital
stock, other securities or securities convertible into or exchangeable for
capital stock or other securities of the Company (the items in clauses (i), (ii)
and (iii) being referred to collectively as the "COMPANY SECURITIES"). Except as
disclosed in SCHEDULE 3.1.5(b), there are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities.
3.1.6. SUBSIDIARIES. The Company has no Subsidiaries. Except as disclosed
in SCHEDULE 3.1.6(c), the Company does not own any capital stock or other equity
or ownership or proprietary interest in any corporation, partnership,
association, trust, joint venture or other entity.
3.1.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS. (a) The Company has
heretofore furnished Parent the Reviewed Statements. The Reviewed Statements,
including the footnotes thereto, have been prepared from the Company's general
ledger and fairly and accurately present in all material respects the Company's
general ledger and the financial position of the Company at the respective dates
thereof and the results of the operations and cash flows of the Company and the
Subsidiaries for the periods indicated.
(b) The Company has also heretofore furnished Parent the Interim Financial
Statements. The Interim Financial Statements have been prepared from the
Company's general ledger and on a basis consistent with the Reviewed Statements.
The Interim Financial Statements fairly and accurately present in all material
respects the Company's general ledger and the financial position of the Company
at the date thereof and the results of the operations of the Company for the
period indicated.
(c) Except as set forth on Schedule 3.1.7(c), there have been no changes in
the Company's reserve or accrual amounts or policies from the Balance Sheet
Date.
(d) The books of account, minute books, stock record books, and other
records of the Company, all of which have been made available to Parent, are
complete and correct and have been maintained in accordance with sound business
practices.
3.1.8. NO UNDISCLOSED LIABILITIES. (a) There are no liabilities of the
Company or any facts or circumstances which could give rise to liabilities of
the Company, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than (a) liabilities fully provided for in the Interim
Financial Statements; (b) liabilities specifically disclosed on SCHEDULE 3.1.8
or SCHEDULE 3.1.10; and (c) other undisclosed liabilities incurred since the
date of the Interim Financial Statements in the ordinary course of business
which, individually or in the aggregate, could not have a Material Adverse
Effect.
3.1.9. INTERCOMPANY ACCOUNTS. SCHEDULE 3.1.9 contains a complete list of
all intercompany balances as of the date hereof between any Stockholder and such
Stockholder's Affiliates, on the one hand, and the Company, on the other hand.
Other than as disclosed on SCHEDULE 3.1.9, there has not been any accrual of
liability by the Company to any Stockholder or
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such Stockholder's Affiliates or other transaction between the Company and any
Stockholder and such Stockholder's Affiliates or any action taken (other than
this Agreement) which could reasonably be expected to result in any such accrual
or the incurrence of any legal or financial obligation to any such Person.
3.1.10. TAX MATTERS. (a) Except as disclosed in SCHEDULE 3.1.10(a):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with
any Taxing Authority with respect to any Pre-Closing Tax Period by or on
behalf of the Company (collectively, the "RETURNS") have, to the extent
required to be filed on or before the date hereof, been filed when due in
accordance with all applicable laws;
(ii) The Returns correctly reflected in all material respects, the
facts regarding the income, business, assets, operations, and activities
and status of the Company;
(iii) All Taxes owed by the Company (whether or not shown as due and
payable on the Returns that have been filed) have been timely paid, or
withheld and remitted to the appropriate Taxing Authority;
(iv) Any reserves established for Taxes, with respect to the Company
for any Pre-Closing Tax Period (including any Pre-Closing Tax Period for
which no Return has yet been filed) reflected on the books of the Company
or Schedule 3.1.7(c) (excluding any provision for deferred income taxes)
fairly and accurately reflect the Tax liability of the Company in all
material respects for such Pre-Closing Tax Period(s);
(v) The Company is not delinquent in the payment of any Tax and has
not requested any extension of time within which to file any Return except
for extensions granted as a matter of right;
(vi) The Company (or any member of any affiliated, consolidated,
combined or unitary group of which the Company is or has been a member) has
not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(vii) There is no action, suit or proceeding now pending and no claim,
audit or investigation now pending of which the Company is aware or, to the
knowledge of the Company, any action, suit, claim, audit or investigation
threatened against or with respect to the Company in respect of any Tax;
(viii) The Company does not own any interest in real property in any
jurisdiction in which a Tax is imposed on the transfer of a controlling
interest in an entity that owns any interest in real property;
(ix) Neither the Company nor any other Person on behalf of the Company
has entered into any agreement or consent pursuant to Section 341(f) of the
Code;
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(x) There are no Liens for Taxes upon the assets of the Company,
except Liens for current Taxes not yet due;
(xi) Except as may be required as a result of the disclosure in item 2
of Schedule 3.1.11(b) and Schedule 3.1.24, the Company will not be required
to include any adjustment in taxable income for any Post-Closing Tax Period
under Section 481(c) of the Code (or any similar provision of the Tax laws
of any jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability of
the Company for any Pre-Closing Tax Period; and
(xii) The Company has not been a member of an affiliated,
consolidated, combined or unitary group or participated in any other
arrangement whereby any income, revenues, receipts, gain or loss of the
Company was determined or taken into account for Tax purposes with
reference to or in conjunction with any income, revenues, receipts, gain,
loss, asset or liability of any other Person.
(b) SCHEDULE 3.1.10(b) contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax imposed on overall net income
is properly payable by the Company.
3.1.11. ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE
3.1.11(b), since the Balance Sheet Date, the business of the Company has been
conducted in the ordinary course consistent with past practice and the Company
has not otherwise:
(i) Amended or modified its articles of incorporation, bylaws or any other
organizational document;
(ii) Changed any salaries or other compensation of, or paid any bonuses to
any director, officer, employee or stockholder of the Company, or entered into
any employment, severance, or similar agreement with any director, officer,
stockholder or employee of the Company, PROVIDED, HOWEVER, that the compensation
of employees of the Company receiving annual compensation of less than $50,000
may have been changed in the ordinary course of business consistent with past
practice;
(iii) Adopted or increased any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees;
(iv) Entered into any contract or commitment except contracts and
commitments (for capital expenditures or otherwise) in the ordinary course of
business consistent with past practice;
(v) Incurred, assumed or guaranteed Indebtedness;
(vi) Entered into any transaction or commitment relating to the assets of
the business of the Company which, individually or in the aggregate, could
reasonably be expected to be material to the Company, or canceled or waived any
claim or right of substantial value
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which, individually or in the aggregate, could reasonably be expected to be
material to the Company, or amended any term of any Company Securities;
(vii) Set aside or paid any dividend or made any other distribution with
respect to any shares of capital stock of the Company or repurchased, redeemed
or otherwise acquired directly or indirectly, any outstanding shares of capital
stock or other securities of, or other ownership interests in, the Company;
(viii) Made any change in accounting methods or practices (including
changes in accruals or reserve amounts or policies);
(ix) Issued or sold any Company Securities or made any other changes in its
capital structure, including the grant of any stock option or other right to
purchase shares of capital stock of the Company;
(x) Sold, leased or otherwise disposed of any material asset or property;
(xi) Except as expressly permitted under this Agreement, written off as
uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material; written off, written up or written
down any other material asset of Company; or altered its customary time periods
for collection of accounts receivable or payments of accounts payable;
(xii) Created or assumed any Lien other than a Permitted Lien;
(xiii) Made any loan, advance or capital contributions to or investment in
any Person;
(xiv) Terminated or closed any material facility, business or operation of
the Company;
(xv) Caused or suffered any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or assets of the
Company which, individually or in the aggregate, had or could reasonably be
expected to have a Material Adverse Effect;
(xvi) Caused any other event, occurrence, development or state of
circumstances or facts which individually or together with other matters, had or
could reasonably be expected to have a Material Adverse Effect; or
(xvii) Agreed to do any of the foregoing.
3.1.12. CONTRACTS. (a) Except as specifically disclosed in SCHEDULE
3.1.12(a), the Company is not a party to nor bound by any of the following
(whether written or oral):
(i) any lease (whether of real or personal property) providing for
annual rentals of $10,000 or more;
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(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets (including in terms of quantity and
dollar amount) that provides for either (A) annual payments by the Company
of $10,000 or more or (B) aggregate payments by the Company of $20,000 or
more;
(iii) any sales, distribution or other similar agreement providing for
the sale by the Company of materials, supplies, goods, services, equipment
or other assets that provides for either (A) annual payments to the Company
of $10,000 or more or (B) aggregate payments to the Company of $20,000 or
more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any agreement that substantially limits the freedom of the
Company to compete in any line of business, geographic area or with any
Person or which would so limit the freedom of the Company after the Closing
Date;
(x) any agreement with (A) any Stockholder or any of such
Stockholder's Affiliates, (B) any Person directly or indirectly owning,
controlling or holding with power to vote, 5% or more of the outstanding
voting securities of any Stockholder's Affiliates, (C) any Person 5% or
more of whose outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by a Stockholder or any of
such Stockholder's Affiliates, (D) any director or officer of a
Stockholder's Affiliates or any "associates" or members of the "immediate
family" (as such terms are respectively defined in Rule 12b-2 and Rule
16a-1 of the Exchange Act) of any such director or officer, or (E) any
director or officer of the Company or with any "associate" or any member of
the "immediate family" (as such terms are respectively defined in Rules
12b-2 and 16a-1 of the Exchange Act) of any such director or officer;
(xi) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution
in respect of capital stock of the Company;
(xii) any management service, consulting or any other similar type of
contract;
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(xiii) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by the Company other than in
the ordinary course of business consistent with past practice;
(xiv) any employment, deferred compensation, severance, bonus,
retirement or other similar agreement or plan in effect as of the date
hereof and entered into or adopted by the Company, on the one hand, and any
director or officer of the Company or any other employee of the Company
receiving annual compensation of $80,000 or more, on the other hand; or
(xv) any other agreement, commitment, arrangement or plan not made in
the ordinary course of business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in SCHEDULE 3.1.12(a) or any other Schedule to this Agreement or
required to be disclosed pursuant to this Section is a valid and binding
agreement of the Company, as the case may be, and is in full force and effect,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles, and none of the Company or the Stockholders, or, to the knowledge of
the Company or any Stockholder, any other party thereto is in default or breach
in any material respect under the terms of any such agreement, contract, plan,
lease, arrangement or commitment. To the knowledge of the Company or any
Stockholder, there is no event, occurrence, condition or act (including the
consummation of the transactions contemplated hereby) which, with the giving of
notice or the passage of time, or the happening of any other event or condition,
could become a material default or event of default thereunder.
(c) SCHEDULE 3.1.12(c) sets forth every grant by the Company in the past
three years of any severance or termination pay to any employee of the Company
receiving annual compensation of $80,000 or more, or any director or officer of
the Company.
3.1.13. INSURANCE COVERAGE. The Company has furnished to Parent a list of,
and true and complete copies of, all insurance policies and fidelity bonds
covering the assets, business, operations, employees, officers and directors of
the Company. There is no material claim by the Company pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and the Company has complied in
all material respects with the terms and conditions of all such policies and
bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) are in full force and effect
and are disclosed in SCHEDULE 3.1.13. Such policies of insurance and bonds are
of the type and in amounts deemed by the management of the Company to be
sufficient. The Company does not know of any threatened termination of, or
premium increase with respect to, any of such policies or bonds. Since the last
renewal date of any insurance policy, there has not been any material adverse
change in the relationship of the Company with its insurers or the premiums
payable pursuant to such policies.
3.1.14. LITIGATION. Except as disclosed in SCHEDULE 3.1.14, there is no
action, suit, investigation, arbitration or administrative or other proceeding
pending or, to the knowledge
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of the Company or any Stockholder, threatened against or affecting the Company
or any Stockholder or any of their respective properties before any court or
arbitrator or any Governmental Authorities which, if determined or resolved
adversely to the Company, could reasonably be expected to, individually or when
considered together with all other such matters, (a) materially and adversely
affect the right or ability of the Company to carry on its business as now
conducted, (b) have a Material Adverse Effect, or (c) which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement; and neither the Company nor any
Stockholder knows of any valid basis for any such action, proceeding or
investigation.
3.1.15. COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed in SCHEDULE
3.1.15(a), the Company is not and has not been since the Balance Sheet Date in
violation of any applicable Law or Order, except for such violations that have
not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) SCHEDULE 3.1.15(b) sets forth a list of each material government or
regulatory license, authorization, permit, consent and approval held by the
Company, issued and held in respect of the Company or required to be so issued
and held to carry on the business of the Company as currently conducted. Except
as disclosed in SCHEDULE 3.1.15(b), to the knowledge of the Company or any
Stockholder, each such license, authorization, permit, consent and approval is
valid and in full force and effect and will not be terminated or impaired (or
become terminated or impaired) as a result of the transactions contemplated
hereby. To the knowledge of the Company or any Stockholder, the Company is not
in default under, and no condition exists that with notice or lapse of time or
both would constitute a default under, any material license, franchise, permit,
consent or approval or similar authorization held by the Company.
3.1.16. PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as disclosed in
SCHEDULE 3.1.16(a) and except for inventory disposed of in the ordinary course
of business, the Company has good title to, or in the case of leased property
has valid leasehold interests in, all property and assets (whether real or
personal, tangible or intangible) reflected in the Reviewed Balance Sheet or
acquired after the Balance Sheet Date. None of such property or assets is
subject to any Liens, except for (i) Liens disclosed in the Reviewed Balance
Sheet; (ii) Liens for Taxes not yet due or being contested in good faith (and
for which adequate accruals or reserves have been established on the Reviewed
Balance Sheet); and (iii) Permitted Liens.
(b) SCHEDULE 3.1.16(b) sets forth a list of all real property assets owned
or leased by the Company ("REAL PROPERTY"). Each such lease of real property is
a valid and binding obligation of the Company, and is in full force and effect,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles, and the Company is a tenant or possessor in good standing thereunder
and all rents due under such leases have been paid. There does not exist under
any such lease any default or any event which with notice or lapse of time or
both would constitute a default, except for such defaults that have not and
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company is in peaceful and undisturbed possession
of the space and/or estate under each lease of which it is a tenant and, to the
knowledge of the Company or any Stockholder, has good and valid rights of
ingress and egress to and from all the
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Real Property from and to the public street systems for all usual street, road
and utility purposes. Neither the Company nor any Stockholder has received any
notice of any appropriation, condemnation or like proceeding, or of any
violation of any applicable zoning Law or Order relating to or affecting the
Real Property, and to the Company's and each Stockholder's knowledge, no such
proceeding has been threatened or commenced.
(c) Except as disclosed in SCHEDULE 3.1.16(c), to the knowledge of the
Company or any Stockholder, the assets owned or leased by the Company
(including, real, personal, tangible and intangible property), or which they
otherwise have the right to use (including, real, personal, tangible and
intangible property), constitute all of the assets held for use or used in
connection with the businesses of the Company and are generally in good
operating condition and repair (normal wear and tear excepted) and are adequate
to conduct such businesses as currently conducted.
3.1.17. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.1.17(a) sets forth a list of
all Intellectual Property Rights and all material licenses, sublicenses and
other written agreements as to which the Company or any of its Affiliates is a
party and pursuant to which any Person is authorized to use such Intellectual
Property Right, including the identity of all parties thereto.
(b) Except as disclosed in SCHEDULE 3.1.17(b):
(i) The Company has not since January 1, 1993, been sued or charged in
writing with or been a defendant in any claim, suit, action or proceeding
relating to its business that is either pending or, to the knowledge of the
Company or any Stockholder, threatened that, in either case, has not been
finally terminated prior to the date hereof and that involves a claim of
infringement by the Company of any trademark, service mark, trade name,
invention, patent, trade secret, copyright, know-how or any other similar
type of proprietary intellectual property right of any other Person or
continuing infringement by any other Person of any Intellectual Property
Rights and the Company has no knowledge of any basis for such claim of
infringement, and no knowledge of any continuing infringement by any other
Person of any Intellectual Property Rights;
(ii) No Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use
thereof by the Company or restricting the licensing thereof by the Company
to any Person;
(iii) The Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how or
any other similar type of proprietary intellectual property right; and
(iv) There are no processes or formulae, research or development
results or other know-how of the Company, the value of which to the Company
is contingent upon maintenance of the confidentiality thereof.
3.1.18. ENVIRONMENTAL MATTERS. (a) Except as disclosed in SCHEDULE 3.1.18:
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(i) Constituents of Concern have not been generated, recycled, used,
treated or stored on, transported to or from, or released or disposed on,
the Company Property or, to the knowledge of the Company and the
Stockholders, any property adjoining or adjacent except in compliance with
Environmental Laws;
(ii) Except as could not individually, or in the aggregate, reasonably
be expected to have a Material Adverse Effect, the Company is in compliance
with Environmental Laws and the requirements of permits issued under such
Environmental Laws with respect to the Company Property;
(iii) There are no pending or, to the knowledge of the Company,
threatened Environmental Claims against the Company or any Company
Property;
(iv) There are no facts, circumstances, conditions or occurrences
regarding the Company's or any Subsidiary's past or present business or
operations or any Company Property, or to the knowledge of the Company and
the Stockholders, any property adjoining any Company Property, that could
reasonably be expected (i) to form the basis of an Environmental Claim
against the Company, or any of the Company Property or assets, or (ii) to
cause any such current Company Property or assets to be subject to any
restrictions on its ownership, occupancy, use or transferability under any
Environmental Law;
(v) There are not now and, to the knowledge of the Company and the
Stockholders, there have never been any underground storage tanks or sumps
located on any Company Property or, to the knowledge of the Company and the
Stockholders, located on any property that adjoins or is adjacent to any
Company Property;
(vi) Neither the Company nor any Company Property is listed or
proposed for listing on the National Priorities List under CERCLA, or
CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign
list of sites requiring investigation or clean-up;
(vii) There are no Environmental Permits that are nontransferable or
require consent, notification or other action to remain in full force and
effect following the consummation of the transactions contemplated hereby;
and
(viii) The Company has no liability under any Environmental Law
(including an obligation to remediate any Environmental Condition whether
caused by the Company or any other Person) which could reasonably be
expected to have a Material Adverse Effect.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis commenced or conducted by or on behalf of the Company
(or by a third party of which the Company or any Stockholder has knowledge) in
relation to the current or prior business of the Company or any Subsidiary, or
any property or facility currently or, to the
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knowledge of the Company or any Stockholder, previously owned or leased by the
Company or any Subsidiary, which has not been disclosed or delivered to Parent
prior to the date hereof.
(c) Neither the Company nor any Subsidiary owns or leases or has owned or
leased any property, and does not conduct and has not conducted any operations,
in New Jersey or Connecticut.
(d) For purposes of this Section, the terms "Company" (including the use of
such terms in the term "Company Property") will include any entity which is, in
whole or in part, a predecessor of the Company.
3.1.19. PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 3.1.19(a) sets forth a
list of all employee benefit plans (as defined in Section 3(3) of ERISA), and
all other employee benefit plans, programs, arrangements, contracts or schemes,
written or oral, statutory or contractual, with respect to which the Company, a
Subsidiary or any ERISA Affiliate has or has had in the six years preceding the
date hereof any obligation or liability or which are or were in the six years
preceding the date hereof maintained, contributed to or sponsored by the Company
or any ERISA Affiliate for the benefit of any current or former employee,
officer or director of the Company or any ERISA Affiliate (collectively, the
"PLANS"). With respect to each employee pension benefit plan subject to ERISA,
the Company has delivered to Parent a true and complete copy of each such Plan
(including all amendments thereto) and a true and complete copy of each material
document (including all amendments thereto) prepared in connection with each
such Plan including, without limitation, (i) a copy of each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, and (iii) the most recently filed IRS Form 5500 for each such
Plan, if any. The Company has no express or implied commitment, whether legally
enforceable or not, to create, incur liability with respect to or cause to exist
any employee benefit plan or to modify any Plan, other than as required by law.
(b) Except as disclosed in SCHEDULE 3.1.19(b), none of the Plans is a plan
that is or has ever been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code. None of the Plans is (i) a "multiemployer plan" as
defined in Section 3(37) of ERISA, (ii) a plan or arrangement described under
Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a plan maintained in connection
with a trust described in Section 501(c)(9) of the Code. Except as disclosed in
SCHEDULE 3.1.19(b), (A) none of the Plans provides for the payment of
separation, severance, termination or similar-type benefits to any person, and
(B) none of the Plans provides for or promises retiree medical or life insurance
benefits to any current or former employee, officer or director of the Company.
Except as disclosed in SCHEDULE 3.1.19(b), each of the Plans is subject only to
the laws of the United States or a political subdivision thereof.
(c) Except as disclosed in SCHEDULE 3.1.19(c), each Plan is in compliance
in all material respects with, and has always been operated in all material
respects in accordance with, its terms and the requirements of all applicable
law, foreign and domestic, and the Company and the ERISA Affiliates have
satisfied in all material respects all of their statutory, regulatory and
contractual obligations with respect to each such Plan. No legal action, suit or
claim is pending or, to the knowledge of the Company and any Stockholder,
threatened with respect to any Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could give rise to any such
action, suit or claim.
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(d) Except as disclosed in SCHEDULE 3.1.19(d), each Plan or trust which is
intended to be qualified or exempt from taxation under Section 401(a), 401(k) or
501(a) of the Code has received a favorable determination letter from the IRS
that it is so qualified or exempt, and no fact or event has occurred since the
date of such determination letter to adversely affect the qualified or exempt
status of any Plan or trust.
(e) There has been no non-exempt prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither the Company nor any ERISA Affiliate has incurred any material liability
for any excise tax arising under Section 4971, 4972, 4975, 4980 or 4980B of the
Code and no fact or event exists which could give rise to such liability.
Neither the Company nor any ERISA Affiliate has incurred any material liability
relating to Title IV of ERISA (other than for the payment of premiums to the
Pension Benefit Guaranty Corporation), and no fact or event exists which could
give rise to such liability.
(f) All material contributions, premiums or payments required to be made
with respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Government Authorities, and
no fact or event exists which could give rise to any such challenge or
disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any ERISA Affiliate
thereof relating to, or change in employee participation or coverage under, any
Plan that would increase materially the expense of maintaining such Plan above
the level of the expense incurred in respect thereto for the most recent fiscal
year ended prior to the date hereof.
(h) Except as disclosed in SCHEDULE 3.1.19(h) or in this Agreement, no
employee or former employee of the Company or any ERISA Affiliate thereof will
become entitled to any bonus, retirement, severance, job security or similar
benefit or enhanced such benefit (including acceleration of vesting or exercise
of an incentive award) as a result of the transactions contemplated hereby.
(i) Except as disclosed in SCHEDULE 3.1.19(i), no current or former
employee of the Company or any ERISA Affiliate thereof holds any option to
purchase shares of the Company.
(j) None of the Plans promises or provides retiree health or life insurance
benefits.
3.1.20. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 3.1.20, to the knowledge of the Company, no Stockholder, nor any
other officer or director of the Company possesses, directly or indirectly,
any ownership interest in, or is a director, officer or employee of, any
Person which is a supplier, customer, lessor, lessee, licensor, developer,
competitor or potential competitor of the Company. Ownership of securities of
a company whose securities are registered under the Exchange Act of 2% or
less of any class of such securities will not be deemed to be a financial
interest for purposes of this Section 3.1.20.
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3.1.21. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS; EMPLOYEE COMPENSATION;
BONUSES. To the knowledge of the Company or any Stockholder:
(a) The relationships of the Company with its customers, suppliers and
employees are good commercial working relationships and, except as disclosed in
SCHEDULE 3.1.21(a), none of the Company's material customers or material
suppliers or employees receiving annual compensation in excess of $50,000 has
canceled, terminated or otherwise materially altered or notified the Company of
any intention or otherwise threatened to cancel, terminate or materially alter
its relationship with the Company effective prior to, as of, or within one year
after, the Closing. As of the date hereof, there has not been, and the Company
has no reason to believe that there will be, any change in relations with
material customers, suppliers or employees of the Company as a result of the
transactions contemplated by this Agreement.
(b) SCHEDULE 3.1.21(b) lists (i) all employees of the Company who receive
annual compensation in excess of $60,000 and (ii) all bonuses and any other
amounts to be paid by the Company to employees of the Company at or in
connection with the Closing ("BONUSES").
3.1.22. OTHER EMPLOYMENT MATTERS. (a) The Company is in material compliance
with all Federal, state or other applicable laws, domestic or foreign,
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not, and is not, engaged in any unfair
labor practice which could reasonably be expected to have a Material Adverse
Effect; no unfair labor practice complaint against the Company is pending before
the National Labor Relations Board; there is no labor strike, dispute, slowdown
or stoppage actually pending, or, to the knowledge of the Company or any
Stockholder, threatened against, or involving, the Company; the Company is not a
party to any collective bargaining agreement and no collective bargaining
agreement is currently being negotiated by the Company; to the knowledge of the
Company and Stockholders, no representation question exists respecting employees
of the Company; and, except as specifically set forth on SCHEDULE 3.1.22, no
claim in respect of the employment of any employee has been asserted and is
currently pending or, to the knowledge of the Company or any Stockholder
threatened, against the Company.
(b) SCHEDULE 3.1.22 contains a complete and accurate list of the following
information for each employee or director of the Company, including each
employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since the
Balance Sheet Date: vacation accrued; and service credited for purposes of
vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Plan of the Company.
(c) No former or current employee or current or former director of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition, or proprietary rights agreement,
between such employee or director and any other Person that in any way adversely
affected, affects, or will affect (i) the performance of his duties as an
employee or director of the Company, or (ii) the ability of the Company to
conduct its business.
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(d) SCHEDULE 3.1.22 also contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefits, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
3.1.23. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.1.23, all of
the accounts receivable reflected on the Reviewed Balance Sheet (net of the
reserves set forth on the Reviewed Balance Sheet) and all accounts receivable
which have arisen since the Balance Sheet Date (net of any additional reserves
established since the Balance Sheet Date in accordance with past practice, none
of which is material) are valid and enforceable claims, and the goods and
services sold and delivered which gave rise to such accounts receivable were
sold and delivered in conformity with the applicable purchase orders, agreements
and specifications. Such accounts receivable are subject to no defenses, offsets
or recovery in whole or in part by the Persons whose purchase gave rise to such
accounts receivable or by third parties and are fully collectible in the
ordinary course of business without resort to legal proceedings, except to the
extent of the amount of the reserve for doubtful accounts reflected in the
Reviewed Balance Sheet.
3.1.24. INVENTORY. Except as set forth in SCHEDULE 3.1.24, all inventories
reflected on the Reviewed Balance Sheet (net of the reserves set forth on the
Reviewed Balance Sheet) and all inventories which have been acquired or produced
since the Balance Sheet Date (net of any additional reserves established since
the Balance Sheet Date in accordance with past practice, none of which is
material) are in good condition, are not obsolete, and are useable or saleable
in the ordinary course of business, as is consistent with the past business
practice of the Company. Past practice includes the continued inclusion of
inventory requiring re-work and material subsequently determined after machining
to be scrapped due to perocity, as well as excess quantity purchases over
specific order requirements due to minimum purchase requirements imposed by
vendors. Except as set forth in the immediately preceding sentence and Schedule
3.1.24, to the Company's and the Stockholders' knowledge, the values at which
such inventories are carried are in accordance with GAAP consistently applied.
The amount and mix of items in the inventories of supplies, in-process and
finished products are consistent with the past business practices of the
Company. The Company has not written down or written off any inventory acquired
by it after September 1, 1997, except for the generation of scrap in the
ordinary course of manufacturing, none of which in the aggregate is material.
3.1.25. MILLENNIUM COMPLIANCE. SCHEDULE 3.1.25 describes the measures that
have been implemented to determine the extent to which the computer systems used
by the Company in its business (the "COMPUTER SYSTEMS") are not in Millennium
Compliance, and the material details of any program undertaken with a view
towards causing the Computer Systems to achieve Millennium Compliance.
3.1.26 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of the Stockholders or the Company who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement.
3.2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
represents and warrants, severally and not jointly and with respect to such
Stockholder only, to Parent as of the Closing Date as follows:
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3.2.1. AUTHORITY; ENFORCEABILITY. Such Stockholder has all requisite power
and authority, and has taken all action necessary, to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and to perform his
or its obligations hereunder. This Agreement has been duly executed and
delivered by such Stockholder and is a legal, valid and binding obligation of
such Stockholder enforceable against such Stockholder in accordance with its
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.2.2. NO CONFLICTS. The execution and delivery of this Agreement do not,
and the consummation of the transactions contemplated hereby and compliance with
the terms hereof do not, violate or conflict with in any respect or result in a
breach under any contract, license, Order or Law applicable to such Stockholder.
3.2.3. NO CONSENTS. Except for the filing of the certificates of merger, no
consent of, approval or filing with, any court or other Person is required to be
obtained or made by or with respect to such Stockholder in connection with the
execution and delivery of this Agreement or the consummation by such Stockholder
of the transactions contemplated hereby.
3.2.4. OWNERSHIP OF SHARES; TITLE. All of the issued and outstanding shares
of Company Stock set forth opposite such Stockholder's name on SCHEDULE 1 are
lawfully owned of record and beneficially by such Stockholder, free and clear of
any Liens. Such Stockholder has the full legal right, power and authority to
vote, sell, assign, transfer and convey such shares of Company Stock. Such
shares are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment, option, proxy, right of first refusal or
understanding, including without limitation any contract restricting or
otherwise relating to the voting, dividend rights or disposition of such shares.
3.2.5. LITIGATION. Except as disclosed in SCHEDULE 3.2.5, there is no
action, suit, investigation, arbitration or administrative or other proceeding
pending or, to the knowledge of such Stockholder, threatened against or
affecting such Stockholder before any court or arbitrator or any Governmental
Authorities which, individually or in the aggregate, if determined or resolved
adversely to such Stockholder could, individually or when considered together
with all other such matters, adversely affect the right or ability of such
Stockholder to consummate the transactions contemplated by this Agreement; and
such Stockholder knows of no valid basis for any such action, proceeding or
investigation.
3.2.6. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 3.2.6, neither such Stockholder, nor, to the knowledge of such
Stockholder, any other officer or director of the Company, possesses, directly
or indirectly, any ownership interest in, or is a director, officer or employee
of, any Person which is a supplier, customer, lessor, lessee, licensor,
developer, competitor or potential competitor of the Company. Ownership of
securities of a company whose securities are registered under the Exchange Act
of 2% or less of any class of such securities will not be deemed to be an
ownership interest for purposes of this Section 3.2.6.
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IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub represents and warrants to the Company and
the Stockholders as of the Closing Date as follows:
4.1. CORPORATE EXISTENCE AND POWER. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Parent and Merger Sub has all
power and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted.
4.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by each of Parent and Merger Sub of this Agreement are within each
of Parent's and Merger Sub's respective corporate powers and have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by Parent or Merger Sub
and constitutes a valid and binding agreement of Parent or Merger Sub, as
applicable, enforceable against Parent or Merger Sub in accordance with its
terms, except to the extent that enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
4.3. GOVERNMENTAL AUTHORIZATION. Except for the filing of the certificates
of merger, the execution, delivery and performance by Parent and Merger Sub of
this Agreement require no action by or in respect of, or filing with, any
Governmental Authorities.
4.4. NON-CONTRAVENTION. The execution, delivery and performance by each of
Parent and Merger Sub of this Agreement will not (a) violate the certificate of
incorporation or bylaws of Parent or Merger Sub, or (b) violate any applicable
Law or Order.
4.5. LITIGATION. Except as disclosed in SCHEDULE 4.5, there is no action,
suit, investigation, arbitration or administrative or other proceeding pending
or, to the knowledge of Parent, threatened against or affecting Parent or Merger
Sub, or any of Parent's or Merger Sub's properties before any court or
arbitrator or any Governmental Authorities which, individually or in the
aggregate, if determined or resolved adversely to Parent or Merger Sub, could
reasonably be expected to materially and adversely affect the right or ability
of Parent or Merger Sub to consummate the transactions contemplated by this
Agreement.
4.6. FINDERS' FEES. Except for Saunders Karp & Megrue, L.P. and Carlisle
Group, L.P., whose fees and expenses (including transaction fees) will be paid
by the Surviving Corporation, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Parent who might be entitled to any fee or commission from the Stockholders
or the Company upon consummation of the transactions contemplated by this
Agreement.
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V. TAX MATTERS
5.1. TAX RETURNS. The Stockholders will have the exclusive authority and
obligation to prepare and timely file, or cause to be prepared and timely filed,
all Returns of the Company that are due with respect to any taxable year or
other taxable period ending on or prior to the Closing Date. Such authority will
include, but not be limited to, the determination of the manner in which any
items of income, gain, deduction, loss or credit arising out of the income,
properties and operations of the Company will be reported or disclosed in such
Returns; PROVIDED, HOWEVER, that such Returns will be prepared by treating items
on such Returns in a manner consistent with the past practice with respect to
such items, unless otherwise required by law. The Stockholders will provide to
Parent drafts of all Returns of the Company required to be prepared and filed by
the Stockholders under this Section 5.1 at least 30 days prior to the due date
for the filing of such Returns (including any extensions). At least 15 days
prior to the due date for the filing of such Returns (including any extensions),
Parent will notify the Stockholders of the existence of any objection
(specifying in reasonable detail the nature and basis of such objection) Parent
may have to any items set forth on such draft Returns (a "DISPUTE NOTICE").
Parent and the Stockholders agree to consult and resolve in good faith any such
objection. The Stockholders will not file any return without the prior written
consent of Parent, which consent will not be unreasonably withheld or delayed;
PROVIDED, HOWEVER, that no such consent will be required if Parent shall not
have timely delivered a Dispute Notice or the objections contained in such
Dispute Notice shall have been finally resolved.
5.2. APPORTIONMENT OF TAXES. All Taxes and Tax liabilities with respect to
the income, property or operations of the Company that relate to a taxable year
or other taxable period beginning before and ending after the Closing Date will
be apportioned between the Pre-Closing Tax Period and the Post-Closing Tax
Period as determined from the books and records of the Company, between
Pre-Closing and Post-Closing Tax Periods as though the taxable year of the
Company terminated at the close of business on the Closing Date, and based on
accounting methods, elections and conventions that do not have the effect of
distorting income and expenses. The Stockholders will be liable for the payment
of all Taxes of the Company which are attributable to any Pre-Closing Tax
Period, whether shown on any original return or amended return for the period
referred to therein, to the extent, only in the case of Taxes attributable to
the Company's 1998 Tax Year, such amounts exceed in the aggregate the 1998 Tax
Reserves. The Company will be liable for the payment of all Taxes which are
attributable to any Post-Closing Tax Period. All transfer, documentary, sales,
use, stamp, registration, value added and other such Taxes and fees (including
any penalties and interest), imposed on the Parent or the Company which are
incurred in connection with this Agreement will be borne and paid by the
Stockholders when due, and the Stockholders will, at their own expense, cause to
be filed all necessary Returns and other documentation with respect to all such
Taxes and fees. Notwithstanding the foregoing: (i) there shall be no
apportionment of Federal 1120 income taxes or State of Michigan Single Business
Tax for the tax year beginning September 1, 1998; and (ii) there shall be no
apportionment of personal or real property taxes due after June 30, 1998.
5.3. COOPERATION; AUDITS. In connection with the preparation of Returns,
audit examinations and any administrative or judicial proceedings relating to
the Tax liabilities imposed on the Company for all Pre-Closing Tax Periods,
Parent and the Company on the one hand, and the Stockholders on the other hand,
will cooperate fully with each other, including, but not limited to, the
furnishing or making available during normal business hours of records,
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personnel (as reasonably required), books of account, powers of attorney or
other materials necessary or helpful for the preparation of such Returns, the
conduct of audit examinations or the defense of claims by Tax authorities as to
the imposition of Taxes.
5.4. CONTROVERSIES. Parent will promptly notify each of the Stockholders in
writing upon receipt by Parent or any Affiliate of Parent (including the Company
after the Closing Date) of written notice of any inquiries, claims, assessments,
audits or similar events with respect to Taxes relating to a Pre-Closing Tax
Period for which the Stockholders may be liable under this Agreement (any such
inquiry, claim, assessment, audit or similar event, a "TAX MATTER"). The
Stockholders, at their sole expense, will have the exclusive authority to
represent the interests of the Company with respect to any Tax Matter before the
IRS, any other Taxing Authority, any other governmental agency or authority or
any court and will have the sole right to extend or waive the statute of
limitations, with respect to a Tax Matter and to control the defense, compromise
or other resolution of any Tax Matter, including responding to inquiries, filing
Tax returns and settling audits; PROVIDED, HOWEVER, that the Stockholders will
not enter jointly and/or severally into any settlement of or otherwise
compromise any Tax Matter that affects or may affect the Tax liability of Parent
or the Company or any affiliate of the foregoing for any Post-Closing Tax
Period, including the portion of a period beginning before the Closing Date and
ending after the Closing Date, without the prior written consent of Parent,
which consent will not be unreasonably withheld. The Stockholders will keep
Parent fully and timely informed with respect to the commencement, status and
nature of any Tax Matter. The Stockholders will, in good faith, allow Parent to
consult with the Stockholders regarding the conduct of or positions taken in any
such proceeding.
5.5. AMENDED RETURNS. The Stockholders will not file or cause or permit to
be filed jointly and/or severally any amended Return without the prior written
consent of Parent, which consent will not be unreasonably withheld or delayed.
Parent will not file or cause to be filed any amended return covering any period
or adjusting any Taxes for a period which includes any period prior to the
Closing Date without the prior written consent of the Stockholders, which
consent will not be unreasonably withheld or delayed.
VI. SURVIVAL; INDEMNIFICATION
6.1. SURVIVAL. The representations and warranties of the parties contained
in this Agreement or in any certificate or other writing delivered pursuant
hereto or in connection herewith will survive the Closing for two years
thereafter; PROVIDED, HOWEVER, that the representations and warranties contained
in Sections 3.1.10 and 3.1.18 will survive the Closing until the expiration of
the statute of limitations applicable to the matters covered thereby (after
giving effect to any waiver, mitigation or extension thereof granted by the
Company after the Closing) and the representations and warranties contained in
Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5 and 3.1.6, (collectively, the
"SELECTED REPRESENTATIONS AND WARRANTIES"), 3.2.1, 3.2.2, 3.2.3, 3.2.4, 4.1,
4.2, 4.3 and 4.4 will survive the Closing indefinitely. Notwithstanding the
preceding sentence, any representation or warranty in respect of which indemnity
may be sought under this Agreement will survive the time at which it would
otherwise terminate pursuant to the preceding sentence if written notice of the
inaccuracy or breach thereof giving rise to such right of indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time; PROVIDED, HOWEVER, that the applicable representation or warranty will
survive only with respect to the particular inaccuracy or breach specified in
such written notice. All
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covenants and agreements of the parties contained in this Agreement will survive
the Closing indefinitely.
6.2. INDEMNIFICATION. (a) Kenneth Smith hereby agrees to indemnify, defend
and hold harmless Parent and its officers, directors, employees, members,
managing directors, Affiliates (including the Company) and agents, and the
successors to the foregoing (and their respective officers, directors,
employees, members, managing directors, Affiliates and agents) (collectively,
the "PARENT INDEMNIFIED PARTIES"), against any and all liabilities, damages and
losses, including, without limitation, diminution in value of the Company,
Company Stock, lost profits and, only to the extent asserted in a Third Party
Claim, punitive damages, and all costs or expenses, including, without
limitation, attorneys' and consultants' fees and expenses ("DAMAGES"), incurred
or suffered as a result of or arising out of the failure of any representation
or warranty in any subsection of Section 3.1 to be true and correct as of the
Closing Date (other than a breach of Section 3.1.10 with respect to Taxes, which
will be governed by Section 6.3) as a result of an event, fact or circumstance
occurring on or after, and not otherwise existing prior to, January 1, 1997.
Kenneth Smith will not be liable under this Section 6.2(a) (other than with
respect to breaches of any of the Selected Representations and Warranties)
unless the aggregate amount of Damages exceeds $100,000 and then from the first
dollar to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that
Kenneth Smith's liability under this Section 6.2(a) (other than with respect to
breaches of any of the Selected Representations and Warranties) will not exceed,
in the aggregate, $3.0 million.
(b) Each of the Leidal Family Stockholders hereby agrees to indemnify,
defend and hold harmless, jointly and severally, the Parent Indemnified Parties
against any and all Damages incurred or suffered as a result of or arising out
of the failure of any representation or warranty in any subsection of Section
3.1 to be true and correct as of the Closing Date (other than a breach of
Section 3.1.10 with respect to Taxes, which will be governed by Section 6.3) as
a result of an event, fact or circumstance occurring or existing prior to, but
not first occurring on or after, January 1, 1997; PROVIDED, HOWEVER, that the
Leidal Family Stockholders will not be liable under this Section 6.2(b) (other
than with respect to breaches of any of the Selected Representations and
Warranties) unless the aggregate amount of Damages exceeds $100,000 and then
from the first dollar to the full extent of such Damages; PROVIDED, FURTHER,
HOWEVER, that the Leidal Family Stockholders' liability under this Section
6.2(b) (other than with respect to breaches of any of the Selected
Representations and Warranties) will not exceed, in the aggregate, $3.0 million.
(c) Each of the Stockholders severally and not jointly, hereby agree to
indemnify, defend and hold harmless the Parent Indemnified Parties against any
and all Damages incurred or suffered as a result of or arising out of the
failure of any representation or warranty made by such Stockholder in any
subsection of Section 3.2 of this Agreement to be true and correct as of the
Closing Date.
(d) Parent and the Company, jointly and severally, hereby agree to
indemnify, defend and hold harmless the Stockholders against Damages incurred or
suffered as a result of or arising out of the failure of any representation or
warranty made by Parent or Merger Sub in this Agreement to be true and correct
as of the Closing Date; PROVIDED, HOWEVER, that Parent will not be liable under
this Section 6.2(d) unless the aggregate amount of Damages exceeds $100,000
28
<PAGE>
and then from the first dollar to the full extent of such Damages; PROVIDED,
FURTHER, HOWEVER, that Parent's liability under this Section 6.2(d) will not
exceed, in the aggregate, $6.0 million.
6.3. TAX INDEMNIFICATION. (a) Kenneth Smith hereby agrees to indemnify,
defend and hold harmless the Parent Indemnified Parties against (i) all Taxes
(and losses, claims and expenses related thereto) resulting from, arising out
of, or incurred with respect to, any claims that may be asserted by any party
based upon, attributable to, or resulting from the failure of any representation
or warranty made pursuant to Section 3.1.10 to be true and correct as of the
Closing Date as a result of an event, fact or circumstance occurring on or
after, and not otherwise existing prior to, January 1, 1997, to the extent, only
in the case of Taxes attributable to the Company's 1998 Tax Year, such amounts
exceed in the aggregate the 1998 Tax Reserves, (ii) all Taxes imposed on or
asserted against the Company or for which the Company may be liable in respect
of the properties, income or operations of the Company for all Pre-Closing Tax
Periods ending on or after January 1, 1997, to the extent, only in the case of
Taxes attributable to the Company's 1998 Tax Year, such amounts exceed in the
aggregate the 1998 Tax Reserves, and (iii) all Taxes imposed on or asserted
against the Company, or for which the Company may be liable, as a result of any
transaction contemplated by this Agreement, but excluding (i) any Federal 1120
income taxes or State of Michigan Single Business Tax for the tax year beginning
September 1, 1998, and (ii) any real and personal property taxes of the Company
due after June 30, 1998.
(b) Each of the Leidal Family Stockholders hereby agrees to indemnify,
defend and hold harmless, jointly and severally, the Parent Indemnified Parties
against (i) all Taxes (and losses, claims and expenses related thereto)
resulting from, arising out of, or incurred with respect to, any claims that may
be asserted by any party based upon, attributable to, or resulting from the
failure of any representation or warranty made pursuant to Section 3.1.10 to be
true and correct as of the Closing Date as a result of an event, fact or
circumstance occurring or existing prior to, but not first occurring on or
after, January 1, 1997, and (ii) all Taxes imposed on or asserted against the
Company or for which the Company may be liable in respect of the properties,
income or operations of the Company for all Pre-Closing Tax Periods ending prior
to January 1, 1997.
6.4. PROCEDURES. (a) If any Person who or which is entitled to seek
indemnification under Section 6.2 or Section 6.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third Party Claim
against such Indemnified Party with respect to which the Person against whom or
which such indemnification is being sought (an "INDEMNIFYING PARTY") is
obligated to provide indemnification under this Agreement, the Indemnified Party
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 20 days after receipt of such written notice of such
Third Party Claim. Such notice by the Indemnified Party will describe the Third
Party Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnified Party, to assume, the defense of any
Third Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel (reasonably satisfactory to the Indemnified
Party), and the Indemnified Party will cooperate in good faith in such defense.
29
<PAGE>
(b) If, within ten days after giving notice of a Third Party Claim to an
Indemnifying Party pursuant to Section 6.4(a), an Indemnified Party receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 6.4(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten days after receiving written notice from the Indemnified Party that
the Indemnified Party reasonably believes the Indemnifying Party has failed to
take such steps or if the Indemnifying Party has not undertaken fully to
indemnify the Indemnified Party in respect of all damages relating to the
matter, the Indemnified Party may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs and expenses paid or incurred in
connection therewith. Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any Third
Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified Party
is not entitled to indemnification hereunder, or which provides for injunctive
or other non-monetary relief applicable to the Indemnified Party, or, as to
matters other than Tax Matters, does not include an unconditional release of all
Indemnified Parties. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within ten days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim and,
in such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer. The Indemnified
Party will provide the Indemnifying Party with reasonable access during normal
business hours to books, records, and employees of the Indemnified Party
necessary in connection with the Indemnifying Party's defense of any Third Party
Claim which is the subject of a claim for indemnification by an Indemnified
Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages which does not
result from a Third Party Claim (a "DIRECT CLAIM") will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 20 days after the Indemnified Party becomes aware of such
Direct Claim. Such notice by the Indemnified Party will describe the Direct
Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have a period of ten days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such ten day period, the Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnified Party will be free to
pursue such remedies as may be available to the Indemnified Party on the terms
and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified information
in any notice as provided in Section 6.4(a), 6.4(b) or 6.4(c) will not affect
the rights or obligations of any party hereunder, except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under
30
<PAGE>
its applicable insurance coverage or was otherwise materially prejudiced as a
result of such failure.
(e) All indemnifiable Damages under this Agreement will be paid in cash in
immediately available funds.
6.5. TREATMENT OF INDEMNIFICATION PAYMENTS. Any amount paid by any
Stockholder or Parent under Section 6.2 or 6.3 will be treated as a capital
contribution, on the one hand, or an adjustment to the Aggregate Closing Merger
Consideration, on the other hand.
6.6. INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The amount of
Damages for which indemnification is provided under Sections 6.2 and 6.3 will be
computed net of any insurance proceeds received by the Indemnified Party in
connection with such Damages, reduced by all costs and expenses related thereto
and any premium increase or expense resulting therefrom. If the amount with
respect to which any claim is made under this Section 6.6 gives rise to a
currently realizable Tax benefit, the indemnity payment will be reduced by the
amount of such currently realizable benefit then available to the party making
the claim if and to the extent actually realized by such party in the fiscal
year in which such indemnity payment is made to such party or in the next
succeeding fiscal year.
VII. MISCELLANEOUS
7.1. NOTICES. All notices, requests and other communications to any party
hereunder will be in writing (including facsimile transmission) and will be
given to such party at its address set forth in SCHEDULE 7.1. All such notices,
requests and other communications will be deemed received on the date of receipt
by the recipient thereof if received prior to 5:00 p.m. in the place of receipt
and such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication will be deemed not to have been received until
the next succeeding business day in the place of receipt.
7.2. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by law.
7.3. EXPENSES. Except as otherwise expressly provided for herein, the
parties will pay or cause to be paid all of their own fees and expenses incident
to this Agreement and in preparing to consummate and consummating the
transactions contemplated hereby, including the fees and expenses of any broker,
finder, financial advisor, legal advisor or similar person engaged by such
party. It is agreed that the Company shall pay, at or prior to the Closing, the
reasonable legal fees of Thav, Gross, Steinway & Bennett, P.C. for services
rendered in
31
<PAGE>
connection with this transaction, provided that a reasonably detailed invoice
therefor shall have been delivered to Parent at the Closing.
7.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto.
7.5. NO THIRD PARTY BENEFICIARIES. Except as provided in Article VI, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied will give or be construed to
give to any Person, other than the parties hereto and such permitted assigns any
legal or equitable rights hereunder.
7.6. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the law of the State of New York, without regard to the
conflict of laws rules of such state.
7.7. JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any court of competent
jurisdiction in the Borough of Manhattan or the United States District Court for
the Southern District of New York and each of the parties hereby consents to the
non-exclusive jurisdiction of such courts (and of the appropriate appellate
courts therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
in any such court or that any such suit, action or proceeding which is brought
in any such court has been brought in an inconvenient forum. Process in any such
suit, action or proceeding may be served on any party anywhere in the world,
whether within or without the jurisdiction of any such court. Without limiting
the foregoing, each party agrees that service of process on such party as
provided in Section 7.1 will be deemed effective service of process on such
party.
7.8. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.9. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
7.10. HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
7.11. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement among the parties with respect
to the subject matter of this Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes all
32
<PAGE>
prior agreements and understandings, both oral and written, between the parties
with respect to the subject matter hereof of this Agreement.
7.12. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
7.13. NO WAIVER. No action or inaction taken or omitted pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
7.14. CERTAIN INTERPRETIVE MATTERS. (a) Unless the context otherwise
requires, (a) all references to Sections, Articles, Exhibits or Schedules are to
Sections, Articles, Exhibits, or Schedules of or to this Agreement, (b) each of
the Schedules will apply only to the corresponding Section or subsection of this
Agreement, (c) each term defined in this Agreement has the meaning assigned to
it, (d) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, (e) words in the singular
include the plural and VICE VERSA, and (f) the term "INCLUDING" means "including
without limitation." All references to $ or dollar amounts will be to lawful
currency of the United States. To the extent the term "day" or "days" is used,
it shall mean calendar days.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) (i) All references to the "KNOWLEDGE OF THE COMPANY" or to words of
similar import will be deemed to be references to the actual knowledge of one or
more of the executive officers or directors of the Company whose names are
listed on SCHEDULE 7.14(c)(i), and will include such knowledge as such executive
officers or directors would have had after due inquiry of the responsible
individuals of the Company whose names are listed separately on SCHEDULE
7.14(c)(i) and its counsel and accountants.
(ii) All references to the "KNOWLEDGE OF PARENT" or to words of
similar import will be deemed to be references to the actual knowledge of
one or more of the executive officers, directors or members of the
management committee of Parent whose names are listed on SCHEDULE
7.14(c)(ii) and, will include such knowledge as such executive officers,
directors or management committee members would have had after due inquiry
of the responsible individuals of Parent whose names are listed separately
on SCHEDULE 7.14(c)(ii) and its counsel and accountants.
(iii) All references to the "KNOWLEDGE OF STOCKHOLDER" or to words of
similar import will be deemed to be references to the actual knowledge of
such Stockholder, as applicable.
33
<PAGE>
7.15. FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto, the other parties will execute and deliver, or cause to be
executed and delivered, all such documents and instruments and will take, or
cause to be taken, all such further or other actions, as the requesting party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
34
<PAGE>
The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers or in their individual capacity, if applicable,
as of the day and year first above written.
GALAXY INDUSTRIES
CORPORATION
By: /s/ Kenneth Smith
------------------------
Name: Kenneth Smith
Title: President
GALAXY HOLD CO., INC.
By: /s/ William Gumina
------------------------
Name: William Gumina
Title: Vice President
GALAXY ACQUISITION, INC.
By: /s/ William Gumina
------------------------
Name: William Gumina
Title: Vice President
/s/ Kenneth Smith
------------------------------
Kenneth Smith
/s/ Robert H. Leidal
------------------------------
Robert H. Leidal
/s/ Betty A. Leidal
------------------------------
Betty A. Leidal
/s/ Michael R. Leidal
------------------------------
Michael R. Leidal
/s/ Cheryl Brooks
------------------------------
Cheryl Brooks
35
<PAGE>
Robert H. Leidal Revocable Living Trust
By: /s/ Robert H. Leidal
----------------------
Robert H. Leidal
Trustee
Betty A. Leidal Revocable Living Trust
By: /s/ Betty A. Leidal
----------------------
Betty A. Leidal
Trustee
36
<PAGE>
EXHIBIT 2.2
CONFORMED COPY
- --------------------------------------------------------------------------------
REDEMPTION AND MERGER AGREEMENT
AMONG
MID STATE MACHINE PRODUCTS,
S. DOUGLAS SUKEFORTH,
MID STATE HOLDING CO., INC.
AND
MID STATE ACQUISITION, INC.
DATED AS OF SEPTEMBER 17, 1998
- --------------------------------------------------------------------------------
<PAGE>
(Not a part of this Agreement)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
I. DEFINITIONS...................................................................................................1
1.1. DEFINITIONS.....................................................................................1
II. THE REDEMPTION; THE MERGER; CLOSING.........................................................................11
2.1. THE REDEMPTION.................................................................................11
2.2. THE MERGER.....................................................................................11
2.3. CONSUMMATION OF THE MERGER.....................................................................11
2.4. EFFECTS OF THE MERGER..........................................................................11
2.5. ARTICLES OF INCORPORATION; BY-LAWS.............................................................12
2.6. DIRECTORS AND OFFICERS.........................................................................12
2.7. PAYMENT OF REDEMPTION AMOUNT; DELIVERY OF REDEEMED SHARES......................................12
2.8. CONVERSION OF SECURITIES; MERGER CONSIDERATION......................................12
2.9. CLOSING OF TRANSFER RECORDS....................................................................13
2.10. PAYMENT OF AGGREGATE CLOSING MERGER CONSIDERATION..............................................13
2.11. INDEMNIFICATION................................................................................14
2.12. ESTIMATED CLOSING WORKING CAPITAL BALANCE......................................................14
2.13. CLOSING........................................................................................14
2.14. MBCA SECTION 909.4.............................................................................14
2.15. PROCEEDINGS....................................................................................14
2.16. POST-CLOSING ADJUSTMENT........................................................................14
2.17. 1998 FISCAL YEAR-END ADJUSTMENT................................................................16
2.18. ADJUSTMENTS TO CLOSING PAYMENTS................................................................17
III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PRINCIPAL STOCKHOLDER............................................................18
3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE PRINCIPAL STOCKHOLDER......................................................................18
3.1.1. CORPORATE EXISTENCE AND POWER.......................................................19
3.1.2. CORPORATE AUTHORIZATION; ENFORCEABILITY.............................................19
3.1.3. GOVERNMENTAL AUTHORIZATION..........................................................19
3.1.4. NON-CONTRAVENTION; CONSENTS.........................................................19
3.1.5. CAPITALIZATION; OWNERSHIP OF COMPANY STOCK..........................................20
3.1.6. SUBSIDIARIES........................................................................20
3.1.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS.............................................21
3.1.8. NO UNDISCLOSED LIABILITIES..........................................................22
3.1.9. INTERCOMPANY ACCOUNTS...............................................................22
3.1.10. TAX MATTERS.........................................................................22
3.1.11. ABSENCE OF CERTAIN CHANGES..........................................................23
3.1.12. CONTRACTS...........................................................................24
3.1.13. INSURANCE COVERAGE..................................................................26
ii
<PAGE>
(Not a part of this Agreement)
3.1.14. LITIGATION..........................................................................26
3.1.15. COMPLIANCE WITH LAWS; PERMITS.......................................................26
3.1.16. PROPERTIES; SUFFICIENCY OF ASSETS...................................................27
3.1.17. INTELLECTUAL PROPERTY...............................................................27
3.1.18. ENVIRONMENTAL MATTERS...............................................................28
3.1.19. PLANS AND MATERIAL DOCUMENTS........................................................30
3.1.20. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC..............................................31
3.1.21. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS; EMPLOYEE COMPENSATION;
BONUSES.............................................................................32
3.1.22. OTHER EMPLOYMENT MATTERS............................................................32
3.1.23. ACCOUNTS RECEIVABLE.................................................................33
3.1.24. INVENTORY...........................................................................33
3.1.25. MILLENNIUM COMPLIANCE...............................................................33
3.1.26. FINDERS' FEES.......................................................................33
3.2. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER....................................33
3.2.1. AUTHORITY; ENFORCEABILITY...........................................................34
3.2.2. NO CONFLICTS........................................................................34
3.2.3. NO CONSENTS.........................................................................34
3.2.4. OWNERSHIP OF SHARES; TITLE..........................................................34
3.2.5. LITIGATION..........................................................................35
3.2.6. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC..............................................35
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................................................35
4.1. CORPORATE EXISTENCE AND POWER..................................................................35
4.2. CORPORATE AUTHORIZATION; ENFORCEABILITY........................................................35
4.3. GOVERNMENTAL AUTHORIZATION.....................................................................36
4.4. NON-CONTRAVENTION..............................................................................36
4.5. LITIGATION.....................................................................................36
4.6. FINDERS' FEES..................................................................................36
V. CERTAIN COVENANTS............................................................................................36
5.1. CONDUCT OF BUSINESS OF THE COMPANY.............................................................36
5.2. EXCLUSIVE DEALING..............................................................................38
5.3. REVIEW OF THE COMPANY; CONFIDENTIALITY.........................................................38
5.4. BEST EFFORTS...................................................................................39
5.5. SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS............................................39
5.6. PLAN ASSETS....................................................................................39
5.7. NET WORTH......................................................................................40
5.8. REORGANIZATIONAL TRANSACTIONS..................................................................40
5.9. APPRAISAL......................................................................................40
5.10. FURTHER ASSURANCES.............................................................................40
VI. TAX MATTERS.................................................................................................40
6.1. TAX RETURNS....................................................................................40
6.2. APPORTIONMENT OF TAXES.........................................................................41
iii
<PAGE>
(Not a part of this Agreement)
6.3. COOPERATION; AUDITS............................................................................41
6.4. CONTROVERSIES..................................................................................42
6.5. AMENDED RETURNS................................................................................42
6.6. NON-FOREIGN PERSON AFFIDAVIT...................................................................42
VII. CONDITIONS TO CLOSING......................................................................................42
7.1. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.............................................42
7.1.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY............................42
7.1.2. COMPANY'S CERTIFICATE...............................................................43
7.1.3. STOCKHOLDER APPROVAL................................................................43
7.1.4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PRINCIPAL STOCKHOLDER. .............................................................43
7.1.5. NO INJUNCTION, ETC..................................................................43
7.1.6. NO PROCEEDINGS......................................................................43
7.1.7. REQUIRED FILINGS....................................................................43
7.1.8. OPINION OF COUNSEL..................................................................43
7.1.9. DUE DILIGENCE.......................................................................44
7.1.10. ANCILLARY AGREEMENTS................................................................44
7.1.11. RESIGNATION OF DIRECTORS............................................................44
7.1.12. THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS........................................44
7.1.13. FIRPTA..............................................................................44
7.1.14. HSR ACT.............................................................................44
7.1.15. NO MATERIAL ADVERSE CHANGE..........................................................44
7.1.16. FINANCING...........................................................................44
7.1.17. LIQUIDATION OF INVESTMENT SECURITIES................................................44
7.1.18. STOCKHOLDER INDEBTEDNESS............................................................44
7.1.19. PRINCIPAL STOCKHOLDER OWNERSHIP.....................................................44
7.1.20. DISSENTERS RIGHTS...................................................................44
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL STOCKHOLDER.........................45
7.2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT
AND MERGER SUB......................................................................45
7.2.2. PARENT'S AND MERGER SUB'S CERTIFICATE...............................................45
7.2.3. NO INJUNCTION, ETC..................................................................45
7.2.4. OPINION OF COUNSEL..................................................................45
7.2.5. ESCROW AGREEMENT....................................................................45
7.2.6. HSR ACT.............................................................................45
7.2.7. MANAGEMENT BONUS PLAN...............................................................45
VIII. SURVIVAL INDEMNIFICATION..................................................................................46
8.1. SURVIVAL.......................................................................................46
8.2. INDEMNIFICATION................................................................................46
8.3. TAX INDEMNIFICATION............................................................................47
8.4. PROCEDURES.....................................................................................47
8.5. TREATMENT OF INDEMNIFICATION PAYMENTS..........................................................49
8.6. INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED...............................................49
iv
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(Not a part of this Agreement)
IX. MISCELLANEOUS...............................................................................................49
9.1. TERMINATION....................................................................................49
9.2. NOTICES........................................................................................50
9.3. AMENDMENTS AND WAIVERS.........................................................................50
9.4. EXPENSES.......................................................................................51
9.5. SUCCESSORS AND ASSIGNS.........................................................................51
9.6. NO THIRD PARTY BENEFICIARIES...................................................................51
9.7. GOVERNING LAW..................................................................................51
9.8. JURISDICTION...................................................................................51
9.9. WAIVER OF JURY TRIAL...........................................................................51
9.10. COUNTERPARTS...................................................................................52
9.11. HEADINGS.......................................................................................52
9.12. ENTIRE AGREEMENT...............................................................................52
9.13. SEVERABILITY...................................................................................52
9.14. NO WAIVER......................................................................................52
9.15. CERTAIN INTERPRETIVE MATTERS...................................................................52
9.16. TRANSFER OF PROCEEDS...........................................................................53
9.17. STOCKHOLDERS' REPRESENTATIVE...................................................................53
</TABLE>
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(Not a part of this Agreement)
EXHIBIT AND SCHEDULE INDEX
Exhibit A Form of Escrow Agreement
Exhibit B Form of Financial Advisory Services Letter
Exhibit C Form of Lease Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Working Capital Methodology
Exhibit F Form of Company Counsel Opinion
Exhibit G Form of Parent Counsel Opinion
Schedule 1 Family Stockholders
Schedule 2 New Capital Equipment
Schedule 3 Stockholders
Schedule 2.15 Proceedings
Schedule 3.1.4 Non-Contravention; Consents
Schedule 3.1.5(a)(i) Capitalization
Schedule 3.1.5(a)(ii) Capitalization
Schedule 3.1.5(a)(iii) Capitalization
Schedule 3.1.5(b) Capitalization
Schedule 3.1.6(a) Subsidiaries
Schedule 3.1.6(b) Subsidiaries
Schedule 3.1.6(c) Subsidiaries
Schedule 3.1.8 No Undisclosed Liabilities
Schedule 3.1.9 Intercompany Accounts
Schedule 3.1.10(a) Tax Matters
Schedule 3.1.10(b) Tax Matters
Schedule 3.1.11 Absence of Certain Changes
Schedule 3.1.12(a) Contracts
Schedule 3.1.12(c) Contracts
Schedule 3.1.13 Insurance Coverage
Schedule 3.1.14 Litigation
Schedule 3.1.15(a) Compliance with Laws; Permits
Schedule 3.1.15(b) Compliance with Laws; Permits
Schedule 3.1.16(a) Properties; Sufficiency of Assets
Schedule 3.1.16(b) Properties; Sufficiency of Assets
Schedule 3.1.17(a) Intellectual Property
Schedule 3.1.17(b) Intellectual Property
Schedule 3.1.18 Environmental Matters
Schedule 3.1.19(a) Material Plans and Documents
Schedule 3.1.19(b) Material Plans and Documents
Schedule 3.1.19(c) Material Plans and Documents
Schedule 3.1.19(d) Material Plans and Documents
Schedule 3.1.19(h) Material Plans and Documents
Schedule 3.1.19(i) Material Plans and Documents
Schedule 3.1.20 Interests in Customers and Suppliers, Etc.
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(Not a part of this Agreement)
Schedule 3.1.21(a) Customers, Suppliers and Employee Relations; Compensation;
Bonuses
Schedule 3.1.21(b) Customers, Suppliers and Employee Relations; Compensation;
Bonuses
Schedule 3.1.22 Other Employment Matters
Schedule 3.1.23 Accounts Receivables
Schedule 3.1.24 Inventory Schedule 3.1.25 Millennium Compliance
Schedule 3.2.4(i) Ownership of Shares; Title
Schedule 3.2.4(ii) Ownership of Shares; Title
Schedule 3.2.4(iii) Ownership of Shares; Title
Schedule 3.2.5 Litigation
Schedule 3.2.6 Interests in Customers; Suppliers, Etc.
Schedule 4.5 Litigation
Schedule 9.2 Notices
Schedule 9.15(c)(i) Knowledge
Schedule 9.15(c)(ii) Knowledge
vii
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REDEMPTION AND MERGER AGREEMENT (this "AGREEMENT"), dated as of September
17, 1998, among MID STATE MACHINE PRODUCTS, a Maine corporation (the "COMPANY"),
S. DOUGLAS SUKEFORTH (the "PRINCIPAL STOCKHOLDER"), MID STATE HOLDING CO., INC.,
a Delaware corporation ("PARENT") and MID STATE ACQUISITION, INC., a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER SUB").
RECITALS
A. Parent has formed Merger Sub solely for the purpose of facilitating an
efficient exchange by stockholders of the Company of their shares of Class A
common stock of the Company, no par value per share, and Class B common stock of
the Company, no par value per share (collectively, "COMPANY STOCK") for the
Aggregate Closing Merger Consideration pursuant to the terms of this Agreement,
and Merger Sub will not conduct any separate business activity nor serve any
function other than to effect for the benefit of Parent and the Stockholders the
conversion of Company Stock into the Aggregate Closing Merger Consideration.
B. The respective Boards of Directors of the Company, Parent and Merger Sub
have each determined that it is in the best interests of their respective
shareholders for the Company to redeem the Redeemed Shares and for Merger Sub to
merge with and into the Company (the "MERGER"), in each case, on the terms and
subject to the conditions set forth herein.
C. The parties desire to make certain representations, warranties and
covenants in connection with the Redemption and Merger and to prescribe various
conditions to Redemption and the Merger.
Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere herein, the
following terms, as used herein, have the following meanings when used herein
with initial capital letters:
"ACCOUNTANTS" has the meaning ascribed to such term in Section 2.16(b).
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with the first
Person. For the purposes of this definition, "CONTROL," when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"AGGREGATE CLOSING MERGER CONSIDERATION" has the meaning ascribed to such
term in Section 2.8(a). The Aggregate Closing Merger Consolidation will be
subject to adjustment pursuant to Sections 2.16, 2.17 and 2.18.
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AGGREGATE CONSIDERATION" means the sum of the Aggregate Closing Merger
Consideration and the Redemption Amount.
"AGREEMENT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement as the same may be amended from time to time in
accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Lease, the Non-Competition Agreement, the
Financial Advisory Services Letter and the Escrow Agreement.
"APPRAISAL" has the meaning ascribed to such term in Section 5.9
"ASSET SALE" means any direct or indirect issuance, conveyance, transfer,
lease (other than operating leases entered into in the ordinary course of
business), assignment or other transfer for value by the Company or any of the
Subsidiaries of the Company to any Person other than the Company or a Subsidiary
of the Company of (a) any Capital Stock of any Subsidiary of the Company or (b)
any other property or assets of the Company or any Subsidiary of the Company
other than in the ordinary course of business.
"AUDITED BALANCE SHEET" means the audited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 1997.
"AUDITED STATEMENTS" means the audited consolidated balance sheets of the
Company and its Subsidiaries, as of December 31, 1997, 1996 and 1995, together
with the related audited consolidated statements of earnings and retained
earnings, stockholders' equity and cash flows for the fiscal years then ended,
together with the notes thereto and reports thereon of Baker Newman & Noyes.
"BALANCE SHEET DATE" means December 31, 1997.
"1997 BALANCE SHEET PRINCIPLES" has the meaning ascribed to such term in
Section 2.16(a).
"BONUSES" have the meaning ascribed to such term in Section 3.1.21(b).
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day on
which banks located in New York City are authorized or required to close.
"CAPITAL STOCK" means (a) with respect to any Person that is a corporation,
any and all shares, interests, participation or other equivalents (however
designated and whether or not voting) of corporate stock, including the common
stock of such Person and (b) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to the Company, for any
applicable period, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP, and the amount of such obligations
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at any date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP.
"CASH" means cash and cash equivalents as would be shown on a balance sheet
of the Company prepared in accordance with GAAP and on a basis consistent with
the 1997 Balance Sheet Principles.
"CLOSING" has the meaning ascribed to such term in Section 2.13.
"CLOSING DATE" has the meaning ascribed to such term in Section 2.13.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such term in
Section 2.16(a).
"CLOSING WORKING CAPITAL BALANCE" has the meaning ascribed to such term in
Section 2.16(a).
"CLOSING WORKING CAPITAL BALANCE STATEMENT" has the meaning ascribed to
such term in Section 2.16(a).
"CODE" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
"COMPANY" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"COMPANY PROPERTY" means any real property and improvements at any time
owned, leased, used, operated or occupied (whether for storage, disposal or
otherwise) by the Company or any Subsidiary.
"COMPANY SECURITIES" has the meaning ascribed to such term in Section
3.1.5(b).
"COMPANY STOCK" has the meaning ascribed to such term in Recital A.
"COMPUTER SYSTEMS" has the meaning ascribed to such term in Section 3.1.25.
"CONSOLIDATED EBITDA" means, with respect to the Company the sum (without
duplication) of (a) Consolidated Net Income and (b) to the extent Consolidated
Net Income has been reduced thereby, (i) all income Taxes of the Company and the
Subsidiaries of the Company recorded as a Tax provision in accordance with GAAP
for such period (other than income Taxes attributable to extraordinary, unusual
or nonrecurring gains or losses or Taxes attributable to sales or dispositions
outside the ordinary course of business), (ii) Consolidated Interest Expense and
(iii) Consolidated Non-cash Charges, all as determined on a consolidated basis
for the Company and the Subsidiaries of the Company in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company, for any
applicable period, the sum of, without duplication: (a) the aggregate of the
interest expense of
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<PAGE>
the Company and the Subsidiaries of the Company during such period determined on
a consolidated basis in accordance with GAAP and (b) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and Subsidiaries of the Company during such period as
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to the Company for any
applicable period, the aggregate net income (or loss) of the Company and the
Subsidiaries of the Company for such period on a consolidated basis, determined
in accordance with GAAP, provided that there shall be excluded from the
calculation thereof (a) after-tax gains and losses from Asset Sales or
abandonments or reserves relating thereto, (b) after-tax items classified as
extraordinary or nonrecurring gains or losses, (c) the net income of any Person
acquired in a "pooling of interests" transaction accrued prior to the date it
becomes a Subsidiary of the Company or is merged or consolidated with the
Company or any Subsidiary of the Company, (d) the net income of any Subsidiary
of the Company to the extent that the declaration of dividends or similar
distributions by that Subsidiary of that income is restricted by a contract,
operation of law or otherwise, (e) the net income of any other Person, other
than a Subsidiary of the Company, except to the extent of cash dividends or
distributions paid to the Company or to a Subsidiary of the Company by such
other Person, (f) in the case of a successor to the Company by consolidation or
merger or as a transferee of the Company's assets, any net income (or loss) of
the successor corporation prior to such consolidation, merger or transfer of
assets, (g) the aggregate of gross interest income of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP, and (h)
Transaction Fees and Expenses expensed during any such period.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to the Company for any
applicable period, the aggregate depreciation and amortization of the Company
and the Subsidiaries of the Company reducing Consolidated Net Income of the
Company for such period.
"CONSTITUENT OF CONCERN" means any substance defined as a hazardous
substance, hazardous waste, hazardous material, pollutant, or contaminant by any
Environmental Law, any petroleum hydrocarbon and any degradation product of a
petroleum hydrocarbon, asbestos, PCB or similar substance, the handling,
storage, treatment or exposure of or to which is subject to regulation under any
Environmental Law.
"DAMAGES" has the meaning ascribed to such term in Section 8.2(a).
"DGCL" has the meaning ascribed to such term in Section 2.2.
"DIRECT CLAIM" has the meaning ascribed to such term in Section 8.4(c).
"DISPUTE NOTICE" has the meaning ascribed to such term in Section 6.1.
"EBITDA ADJUSTMENT" has the meaning ascribed to such term in Section
2.18(b).
"EBITDA STATEMENT" has the meaning ascribed to such term in Section
2.17(a).
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<PAGE>
"EFFECTIVE TIME" has the meaning ascribed to such term in Section 2.3.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, citations, summonses,
notices of non-compliance or violation, requests for information, investigations
or proceedings relating to any Environmental Law or any permit issued under any
such Law, including (a) Environmental Claims by Governmental Authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) Environmental Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Constituents of Concern or
arising from alleged injury or threat of injury to human health and safety or
the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to the environment
which has resulted or could result in a material loss, liability, cost or
expense to the Company .
"ENVIRONMENTAL LAW" means any Law in effect or to the Company's and the
Shareholders' knowledge, any Law reasonably expected to be adopted or made
effective, in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health and safety, including, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601, ET
SEQ. ("CERCLA") and any state and local counterparts or equivalents.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws and necessary for the business of the Company as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity that, together with the Company, would
be considered a single employer within the meaning of Section 4001 of ERISA or
Section 414 of the Code.
"ESCROW ACCOUNT" has the meaning ascribed to such term in Section
2.7(a)(ii).
"ESCROW AGENT" has the meaning ascribed to such term in Section 2.7(a)(ii).
"ESCROW AGREEMENT" means the Escrow Agreement between the Parent, Escrow
Agent and the Stockholders' Representative, substantially in the form attached
hereto as EXHIBIT A.
"ESCROW AMOUNT" means an amount equal to $3.0 million.
"ESTIMATED CLOSING WORKING CAPITAL BALANCE" has the meaning ascribed to
such term in Section 2.12.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"FAMILY STOCKHOLDERS" means the holders of Company Stock listed on SCHEDULE
1 attached hereto.
"FINANCIAL ADVISORY SERVICES LETTER" means the Financial Advisory Services
Letter Agreement between the Company and Saunders Karp & Megrue, L.P. (or its
designee(s)) on the other hand, in respect of advisory and monitoring services
to be provided to the Company, substantially in the form attached hereto as
EXHIBIT B.
"FISCAL YEAR" means the calendar year or any other annual period as
determined from time to time by the board of directors of the Company.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign governmental or
regulatory authority.
"HSR ACT" has the meaning ascribed to such term in Section 3.1.3.
"INDEBTEDNESS" means with respect to any Person, at any date, without
duplication, (i) all obligations of such Person for borrowed money, including,
without limitation, all principal, interest, premiums, fees, expenses,
overdrafts and penalties with respect thereto, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of the
property or services, except trade payables incurred in the ordinary course of
business, (iv) all obligations of such Person to reimburse any bank or other
Person in respect of amounts paid under a letter of credit or similar
instrument, (v) all obligations of such Person as lessee which are required to
be capitalized in accordance with GAAP and (vi) all Indebtedness of any other
Person of the type referred to in clauses (i) to (v) above directly or
indirectly guaranteed by such Person or secured by any assets of such Person.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in Section
8.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
8.4(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right, in each case
which is used or held for use or otherwise necessary in connection with the
conduct of the business of the Company as now conducted or proposed to be
conducted.
"INTERIM FINANCIAL STATEMENTS" means the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of July 31, 1998 and the related
consolidated summary income statement and cost allocation income statement.
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<PAGE>
"INVESTMENT SECURITIES" means all available Cash of the Company and
securities held by or for the benefit of the Company or its Subsidiaries by the
Company (excluding securities issued by Subsidiaries and notes payable to
stockholders or employees of the Company or any Subsidiary), including, but not
limited to, "held-to-maturity securities," "trading securities" and
"available-for-sale securities."
"IRS" means the Internal Revenue Service.
"LAST OFFER" has the meaning ascribed to such term in Section 2.16(b).
"LAW" means any federal, state or local statute, law, rule, regulation,
ordinance, code, permit, license, policy or rule of common law.
"LEASE" means the Amended and Restated Lease Agreement between the
Principal Stockholder, Rita Sukeforth and the Surviving Corporation,
substantially in the form attached hereto as EXHIBIT C.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own, subject to a Lien, any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, liabilities, condition (financial and other), results of operations or
prospects of the Company and the Subsidiaries.
"MBCA" has the meaning ascribed to such term in Section 2.1.
"MERGER" has the meaning ascribed to such term in Recital B.
"MERGER ESCROW AMOUNT" has the meaning ascribed to such term in Section
2.10.
"MERGER SUB" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"MILLENNIUM COMPLIANCE" means that the Computer Systems are capable of the
following, during and/or after January 1, 2000: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without any
change in performance; (c) responding to and processing two digit year input
without creating any ambiguity as to the century; and (d) storing and providing
date input information without creating any ambiguity as to the century.
"NEW CAPITAL EQUIPMENT" means the growth-oriented capital equipment
described on SCHEDULE 2 attached hereto.
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"NEW CAPITAL EQUIPMENT AGGREGATE PURCHASE PRICE" means the purchase price
paid by the Company during the period commencing May 26, 1998 and ending
immediately prior to the Closing of up to $1,027,680 million in the aggregate in
consideration for the New Capital Equipment described on SCHEDULE 2 attached
hereto.
"NON-COMPETITION AGREEMENT" means the Non-Competition Agreement between the
Company, Parent and the Principal Stockholder substantially in the form attached
hereto as EXHIBIT D.
"OPERATING COMPANY" means an "operating company" within the meaning of
Department of Labor Regulation Section 2510.3-101(c) or successor rule or
regulation, as from time to time amended and in effect.
"ORDER" means any judgment, injunction, judicial or administrative order or
decree.
"PARENT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"PERCENTAGE INTEREST" has the meaning ascribed to such term in Section
8.5(a)(ii).
"PERMITTED LIEN" means (i) mechanics', workmen's, repairmen's or other like
Liens arising or incurred in the ordinary course of business in respect of
obligations that are not overdue or (ii) other imperfections of title or
encumbrances, which do not materially affect the value or marketability of the
property subject thereto.
"PER SHARE CLOSING MERGER CONSIDERATION" means (i)(A) $31.8 million PLUS
(B) the Estimated Closing Working Capital Balance PLUS (C) the New Capital
Equipment Purchase Price PLUS (D) the after-Tax proceeds of the liquidation of
Investment Securities provided for in Section 7.1.17 DIVIDED BY (ii) the number
of issued and outstanding shares of Company Stock immediately prior to the
consummation of the Redemption. The Per Share Closing Merger Consideration will
be subject to adjustment pursuant to Sections 2.16, 2.17 and 2.18.
"PERSON" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.
"PLAN ASSETS" means "plan assets" within the meaning of Department of Labor
Regulation Section 2510.3-101(c) or successor rule or regulation, as from time
to time amended and in effect.
"1999 PLAN EBITDA" means $7.5 million.
"2000 PLAN EBITDA" means $9.0 million.
"PLANS" has the meaning ascribed to such term in Section 3.1.19(a).
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"POST-CLOSING TAX PERIOD" means any Tax period (or portion thereof) ending
after the Closing.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) that
actually ends on or before the Closing.
"PREMISES" has the meaning ascribed to such term in Section 5.9.
"PRINCIPAL STOCKHOLDER" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"REAL PROPERTY" has the meaning ascribed to such term in Section 3.1.16(b).
"REDEEMED SHARES" has the meaning ascribed to such term in Section 2.1.
"REDEEMED STOCKHOLDERS" has the meaning ascribed to such term in Section
2.1.
"REDEMPTION" has the meaning ascribed to such term in Section 2.1.
"REDEMPTION AMOUNT" has the meaning ascribed to such term in Section
2.7(a). The Redemption Amount will be subject to adjustment pursuant to Sections
2.16, 2.17 and 2.18.
"REDEMPTION ESCROW AMOUNT" has the meaning ascribed to such term in Section
2.7(a)(i).
"REFERENCE WORKING CAPITAL STATEMENT" has the meaning ascribed to such term
in Section 2.16(a).
"REORGANIZATIONAL TRANSACTIONS" has the meaning ascribed to such term in
Section 5.8.
"RETURNS" has the meaning ascribed to such term in Section 3.1.10(a)(i).
"SELECTED REPRESENTATIONS AND WARRANTIES" has the meaning ascribed to such
term in Section 8.1.
"STOCKHOLDER" means any holder of issued and outstanding Company Stock on
the Closing Date and prior to the Effective Time.
"STOCKHOLDERS' REPRESENTATIVE" has the meaning ascribed to such term in
Section 9.17(a).
"SUBSIDIARY" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other Persons performing similar functions are at the time directly
or indirectly owned by the Company.
"SUBSIDIARY SECURITIES" has the meaning ascribed to such term in Section
3.1.6(b).
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"SURVIVING CORPORATION" has the meaning ascribed to such term in Section
2.2.
"TAX" means (a) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company or
any Subsidiary, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Taxing Authority (as hereinafter defined), (b) any liability of
the Company or any Subsidiary for the payment of any amounts of any of the
foregoing types as a result of being a member of an affiliated, consolidated,
combined or unitary group, or being a party to any agreement or arrangement
whereby liability of the Company or any Subsidiary for payment of such amounts
was determined or taken into account with reference to the liability of any
other Person, and (c) liability of the Company or any Subsidiary for the payment
of any amounts as a result of being a party to any Tax Sharing Agreements or
with respect to the payment of any amounts of any of the foregoing types as a
result of any express or implied obligation to indemnify any other Person.
"TAX MATTER" has the meaning ascribed to such term in Section 6.4.
"TAX SHARING AGREEMENTS" means all existing Tax sharing agreements or
arrangements (whether or not written) binding the Company or any Subsidiary.
"TAXING AUTHORITY" means any Governmental Authority responsible for the
imposition of any Tax.
"THIRD PARTY CLAIM" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this Agreement.
"TRANSACTION FEES AND EXPENSES" means (i) the reasonable fees and expenses
of legal counsel, accountants and other advisors for Parent incurred in
connection with the transactions contemplated hereby, (ii) the fees and expenses
contemplated by Section 4.6 and (iii) the ongoing fees and expenses referred to
in the Financial Advisory Services Letter (excluding indemnification payments
contemplated by SCHEDULE 1 attached thereto).
"UNAFFILIATED STOCKHOLDER" means any Stockholder other than the Principal
Stockholder or a Family Stockholder.
II. THE REDEMPTION; THE MERGER; CLOSING
2.1. THE REDEMPTION. Subject to and in accordance with the
terms and conditions of this Agreement and in accordance with the Maine Business
Corporation Act (the "MBCA"), on the Closing Date and prior to the Effective
Time, the Principal Stockholder will cause the Company to, and the Company will,
redeem (the "REDEMPTION") from all or certain of the Stockholders whose names
are listed on SCHEDULE 3 attached hereto under the heading "Redeemed
Stockholders" (the "REDEEMED STOCKHOLDERS") an aggregate number of issued and
outstanding shares of Company Stock then held by such Redeemed Stockholders
equal to (i) the after-Tax proceeds of the liquidation of Investment Securities
provided for in Section 7.1.17
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divided by (ii) the Per Share Closing Merger Consideration (the quotient of
clause (i) divided by clause (ii), the "REDEEMED SHARES"). The allocation of the
Redeemed Shares among the Redeemed Stockholders will be determined by the
Stockholders' Representative with the consent of Parent (which will not be
unreasonably withheld), on or before the date immediately preceding the Closing
Date, and SCHEDULE 3 will be updated prior to the Closing upon such
determination to reflect such allocation.
2.2. THE MERGER. Subject to and in accordance with the terms and conditions
of this Agreement and in accordance with the Delaware General Corporation Law
(the "DGCL") and the MBCA, at the Effective Time, Merger Sub will be merged with
and into the Company. As a result of the Merger, the separate corporate
existence of Merger Sub will cease and the Company will continue as the
surviving corporation (sometimes referred to herein as the "SURVIVING
CORPORATION") and will succeed to and assume all of the rights and obligations
of Merger Sub in accordance with the DGCL and the MBCA.
2.3. CONSUMMATION OF THE MERGER. As soon as practicable on the Closing
Date, the parties will cause the Merger to be consummated by filing with the
Delaware Secretary of State and the Maine Secretary of State a certificate of
merger or articles of merger, in form reasonably satisfactory to the Company,
Parent and Merger Sub, executed in accordance with the relevant provisions of
the DGCL and MBCA and will make all other filings or recordings required under
the DGCL and MBCA to effect the Merger. The "EFFECTIVE TIME" as that term is
used in this Agreement will mean the effective time set forth in the certified
copy of the certificate of merger or articles of merger issued by the Maine
Secretary of State and the Delaware Secretary of State with respect to the
Merger.
2.4. EFFECTS OF THE MERGER. The Merger will have the effects set forth in
the DGCL and the MBCA.
2.5. ARTICLES OF INCORPORATION; BY-LAWS. The Articles of Incorporation and
By-laws of the Company, as in effect immediately prior to the Effective Time,
will be the Articles of Incorporation and By-laws of the Surviving Corporation
and thereafter will continue to be its Articles of Incorporation and By-Laws
until amended as provided therein and under the MBCA.
2.6. DIRECTORS AND OFFICERS. The director of Merger Sub immediately prior
to the Effective Time will be the initial director of the Surviving Corporation,
to hold office in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation until his successor is duly elected or appointed and
qualified. The officers of the Company immediately prior to the Effective Time
will be the initial officers of the Surviving Corporation, each to hold office
until their respective successors are duly elected or appointed and qualified.
2.7. PAYMENT OF REDEMPTION AMOUNT; DELIVERY OF REDEEMED SHARES. (a) Subject
to adjustment in accordance with Sections 2.16, 2.17 and 2.18, on the Closing
Date and prior to the Effective Time, in consideration of the Redemption
(including the delivery of the Redeemed Shares pursuant to Section 2.7(b)), the
Principal Stockholder will cause the Company to, and the Company will, pay to
the Stockholders' Representative (for the benefit of the Redeemed Stockholders),
by wire transfer in immediately available funds, an amount equal to the product
of the aggregate number of Redeemed Shares and the Per Share Closing Merger
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Consideration (such product, the "REDEMPTION AMOUNT") as follows: (i) an amount
equal to the Redemption Amount less the percentage of the Escrow Amount equal to
the percentage that the number of Redeemed Shares bears to the aggregate number
of shares of Company Stock issued and outstanding immediately prior to the
consummation of the Redemption (the "REDEMPTION ESCROW AMOUNT") to one account
designated in writing by the Stockholders' Representative for the benefit of the
Redeemed Stockholders and (ii) the Redemption Escrow Amount to one account (the
"ESCROW ACCOUNT") designated in writing by the escrow agent (the "ESCROW AGENT")
appointed pursuant to the terms and conditions of the Escrow Agreement to be
held in escrow pursuant to the terms and conditions of such Escrow Agreement.
(b) Simultaneously with payment of the Redemption Amount pursuant to
Section 2.7(a), the Stockholders' Representative will cause the Redeemed
Stockholders to deliver to Parent stock certificates representing an aggregate
number shares of Company Stock equal to the Redeemed Shares. Such stock
certificates will be duly endorsed (or accompanied by stock powers duly
endorsed) for transfer to the Company with all necessary transfer Tax and other
revenue stamps, acquired at the Redeemed Stockholders' expense, affixed and
canceled. The Redeemed Stockholders will cover any deficiencies with respect to
the endorsement of the certificates representing the Redeemed Shares and with
respect to the stock powers accompanying such certificates. The Redeemed Shares
will be retired upon the redemption thereof.
2.8. CONVERSION OF SECURITIES; MERGER CONSIDERATION. Subject to the terms
and conditions of this Agreement, at the Effective Time, by virtue of the Merger
and without any action on the part of the Company, Parent, Merger Sub or their
respective shareholders (including, without limitation, the Stockholders):
(a) Each share of Company Stock issued and outstanding after consummation
of the Redemption and immediately prior to the Effective Time as set forth on
SCHEDULE 3 attached hereto under the heading "Other Stockholders" opposite each
Person's name thereon will be converted into the right to receive, in cash, an
amount per share of Company Stock equal to (i)(A) $31.8 million PLUS (B) the
Estimated Closing Working Capital Balance PLUS (C) the New Capital Equipment
Aggregate Purchase Price (the aggregate of (A) PLUS (B), PLUS (C), the
"AGGREGATE CLOSING MERGER CONSIDERATION") DIVIDED BY (ii) the number of shares
of Company Stock issued and outstanding after consummation of the Redemption and
immediately prior to the Effective Time.
(b) As of the Effective Time, all Company Stock will no longer be
outstanding and will automatically be canceled and retired and will cease to
exist, and each holder of a certificate representing any shares of Company Stock
will cease to have any rights with respect thereto, except the right to receive
such holder's appropriate portion of the Aggregate Closing Merger Consideration
as set forth in Section 2.8(a), upon surrender of such certificate in accordance
with Section 2.8(d).
(c) Each share of Company Stock held in the treasury of the Company
immediately prior to the Effective Time will be canceled and extinguished at the
Effective Time without any conversion thereof and no payment will be made with
respect thereto.
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(d) At the Effective Time, each Stockholder will be entitled, upon
surrender to Parent of such Stockholder's certificates representing shares of
Company Stock, to receive in exchange therefor an amount equal to the Per Share
Closing Merger Consideration (as adjusted in accordance with Sections 2.16, 2.17
and 2.18) MULTIPLIED BY the number of shares of Company Stock set forth opposite
such Stockholder's name on SCHEDULE 3 under the heading "Other Stockholders".
(e) Each share of common stock, par value $.01 per share, of Merger Sub
issued and outstanding immediately prior to the Effective Time will
automatically without any action on the part of the holder thereof, be converted
into one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation which as of the Effective Time will constitute all of
the issued and outstanding shares of the Surviving Corporation.
2.9. CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Company Stock outstanding prior to the Effective Time
will not be made on the stock transfer books of the Surviving Corporation.
2.10. PAYMENT OF AGGREGATE CLOSING MERGER CONSIDERATION. Subject to
adjustment in accordance with Sections 2.16, 2.17 and 2.18, payment of the
Aggregate Closing Merger Consideration will be made in immediately available
funds by wire transfer at Closing as follows: (a) an amount equal to the
Aggregate Closing Merger Consideration less the excess of the Escrow Amount over
the Redemption Escrow Amount (the "MERGER ESCROW AMOUNT") to the account
designated pursuant to Section 2.7(a)(i) and (b) the Merger Escrow Amount to the
account designated pursuant to the terms of Section 2.7(a)(ii) to be held in
escrow pursuant to the terms and conditions of such Escrow Agreement.
2.11. INDEMNIFICATION. The Stockholders' Representative will indemnify and
hold Parent harmless from any claim of any Stockholder arising out of the
alleged misapplication of any sums paid by Parent to the Stockholders'
Representative under this Agreement.
2.12. ESTIMATED CLOSING WORKING CAPITAL BALANCE. Not less than two Business
Days prior to the Closing Date, the Company and Parent will prepare and agree
on, an estimate of the Closing Working Capital Balance (the "ESTIMATED CLOSING
WORKING CAPITAL BALANCE") determined in accordance with the second sentence of
Section 2.16(a), as if it were the actual Closing Working Capital Balance, but
based upon the Company's and Parent's review of monthly financial information
then available and inquiries of personnel responsible for the preparation of the
financial information relating to the Company in the ordinary course.
2.13. CLOSING. The closing of the Merger (the "CLOSING") will take place at
the offices of Jones, Day, Reavis & Pogue located at 599 Lexington Avenue, New
York, New York, at 10:00 a.m., New York time as soon as possible after the date
hereof but in no event later than ten Business Days after the satisfaction or
waiver of the conditions to Closing (the date on which the Closing occurs is
herein referred to as the "CLOSING DATE"). The Closing will be effective at
11:59 p.m. on the Closing Date. The Principal Stockholder and the Company will
also deliver or cause to be delivered the other agreements, instruments and
certificates provided for in Article VII.
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2.14. MBCA SECTION 909.4. The parties agree and acknowledge that Section
909.4 of the MBCA will not be construed to impose liability on any Stockholder
other than the Principal Stockholder for the failure of any representation and
warranty made hereunder to be true and correct on the date hereof and at the
Closing.
2.15. PROCEEDINGS. Except as otherwise specifically provided for herein or
in SCHEDULE 2.15, all proceedings that will be taken and all documents that will
be executed and delivered by the parties hereto on the Closing Date will be
deemed to have been taken and executed simultaneously, and no proceeding will be
deemed taken nor any document executed and delivered until all have been taken,
executed and delivered.
2.16. POST-CLOSING ADJUSTMENT. (a) As soon as practicable (and in no event
later than 60 days after the Closing), Parent will prepare and deliver or cause
to be prepared and delivered to the Stockholders' Representative a balance sheet
of the Company as of the close of business on the Closing Date (the "CLOSING
DATE BALANCE SHEET") without giving effect to the transactions described in this
Agreement to be consummated at the Closing and a proposed statement of net
working capital of the Company as of the Closing Date (the "CLOSING WORKING
CAPITAL BALANCE STATEMENT"). The Closing Date Balance Sheet and the Closing
Working Capital Balance Statement (i) will reflect, respectively, the financial
position of the Company and the components and calculation of net working
capital of the Company in each case as of the Closing Date; (ii) will be
prepared and determined in accordance with GAAP, on a basis consistent with the
policies, principles and methodology used in connection with the preparation of
the Audited Balance Sheet (the "1997 BALANCE SHEET PRINCIPLES"); and (iii) will
be adjusted in accordance with the methodology set forth in EXHIBIT E attached
hereto (the "REFERENCE WORKING CAPITAL STATEMENT"). The net working capital of
the Company as of the Closing Date determined in accordance with this Section
2.16, including the adjustments set forth in the Reference Working Capital
Statement, is referred to herein as the "CLOSING WORKING CAPITAL BALANCE." To
the extent of any inconsistency between the methodology disclosed in the
Reference Working Capital Statement and the 1997 Balance Sheet Principles, the
terms of the Reference Working Capital Statement will govern.
(b) If, within 30 days after the date of Parent's delivery of the Closing
Date Balance Sheet and the Closing Working Capital Balance Statement, the
Stockholders' Representative determines in good faith that the Closing Date
Balance Sheet and the Closing Working Capital Balance Statement have not been
prepared and determined in accordance with this Agreement, the Stockholders'
Representative will give written notice to Parent within such 30 day period (i)
setting forth the Stockholders' Representative's proposed changes to the Closing
Date Balance Sheet as prepared by Parent and the determination by the
Stockholders' Representative of the Closing Working Capital Balance and (ii)
specifying in detail the Stockholders' Representative's basis for disagreement
with Parent's preparation and determination of the Closing Date Balance Sheet
and the Closing Working Capital Balance. The failure by the Stockholders'
Representative to so express disagreement and provide such specification within
such 30 day period will constitute the acceptance of Parent's preparation of the
Closing Date Balance Sheet and the computation of the Closing Working Capital
Balance. If Parent and the Stockholders' Representative are unable to resolve
any disagreement between them with respect to the preparation of the Closing
Date Balance Sheet and the determination of the Closing Working Capital Balance
within 30 days after the giving of notice by the Stockholders' Representative to
Parent of such disagreement, the items in dispute will be referred
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for determination to Price Waterhouse Coopers, L.L.P. (the "ACCOUNTANTS") as
promptly as practicable, but not later than five days after the expiration of
such 30 day period. Parent and the Stockholders' Representative will use
reasonable efforts to cause the Accountants to render their decision as soon as
practicable thereafter (but in no event later than 30 days after the submission
to the Accountants of the notice of disagreement referred to in the immediately
preceding sentence), including without limitation by promptly complying with all
reasonable requests by the Accountants for information, books, records and
similar items. The Accountants will make a determination as to each of the items
in dispute (but only those items in dispute), which determination will be (A) in
writing, (B) furnished to each of the parties hereto as promptly as practicable
after the items in dispute have been referred to the Accountants (but in no
event later than 30 days thereafter), (C) made in accordance with this Agreement
(including the Reference Working Capital Statement), and (D) conclusive and
binding upon each of the parties hereto. Nothing herein will be construed to
authorize or permit the Accountants to determine (i) any question or matter
whatsoever under or in connection with this Agreement, except the determination
of what adjustments, if any, must be made in one or more disputed items
reflected in the Closing Date Balance Sheet and the Closing Working Capital
Balance Statement delivered by Parent in order for the Closing Working Capital
Balance to be determined in accordance with the provisions of this Agreement
(including the Reference Working Capital Statement), or (ii) a Closing Working
Capital Balance that is not equal to one of, or between, the Closing Working
Capital Balance as determined by the Stockholders' Representative and as
determined by Parent. The fees and expenses of the Accountants will be paid by
the party whose last written settlement offer related to all items in dispute,
in the aggregate, submitted to the Accountants upon the referral of the matter
to the Accountants in accordance with this Section 2.16(b) (each, a "LAST
OFFER") varies by the greatest absolute amount from the determination by the
Accountants of all such disputed items. No party will disclose to the
Accountants, and the Accountants will not consider for any purpose, any
settlement discussions or settlement offer (other than the Last Offer) made by
any party.
(c) During the period that the Stockholders' Representative's advisors and
personnel are conducting their review of Parent's preparation of the Closing
Date Balance Sheet and determination of the Closing Working Capital Balance, the
Stockholders' Representative and his representatives will have reasonable access
during normal business hours to the work papers, prepared by or on behalf of
Parent and its representatives in connection with Parent's preparation of the
Closing Working Capital Balance Statement and determination of the Closing
Working Capital Balance; PROVIDED, HOWEVER, that the Stockholders'
Representative will conduct such review in a manner that does not unreasonably
interfere with the conduct of the business of the Company or result in
substantial out-of-pocket costs to Parent. To the extent any such work papers
are in the control of the Stockholders' Representative after the Closing, the
Stockholders' Representative will grant Parent and its representatives
reciprocal access rights for the purpose of finalizing the preparation of the
Closing Date Balance Sheet and the determination of the Closing Working Capital
Balance. The Stockholders' Representative and Parent agree in good faith to use
all reasonable efforts to provide such information and access described in this
Section 2.16(c).
2.17. 1998 FISCAL YEAR-END ADJUSTMENT. (a) As soon as practicable (and in
no event later than 90 days after the end of the Surviving Corporation's Fiscal
Year ended 1998), Parent shall prepare and deliver to the Stockholders'
Representative a statement of the Surviving
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Corporation's Consolidated EBITDA for the Fiscal Year ended 1998 (the "EBITDA
STATEMENT"), prepared in accordance with GAAP and the 1997 Balance Sheet
Principles.
(b) If within 30 days after the date of the Parent's delivery of the EBITDA
Statement, the Stockholders' Representative determines in good faith that the
EBITDA Statement and Consolidated EBITDA for the Fiscal Year ended 1998 has not
been prepared and determined in accordance with this Agreement, the
Stockholders' Representative will give written notice to Parent within such 30
day period (i) setting forth the Stockholders' Representative's proposed changes
to the EBITDA Statement and (ii) specifying in detail the Stockholders'
Representative's basis for disagreement with the preparation of the EBITDA
Statement and the determination of Consolidated EBITDA for the Fiscal Year ended
1998. The failure by the Stockholders' Representative to so express disagreement
and provide such specification within such 30 day period will constitute the
acceptance of the preparation of the EBITDA Statement and the determination of
Consolidated EBITDA for the Fiscal Year ended 1998. If Parent and the
Stockholders' Representative are unable to resolve any disagreement between them
with respect to the preparation of the EBITDA Statement and the determination of
Consolidated EBITDA for the Fiscal Year ended 1998 within 30 days after the
giving of notice by the Stockholders' Representative to Parent of such
disagreement, the items in dispute will be referred for determination to the
Accountants as promptly as practicable, but not later than five days after the
expiration of such 30 day period. Parent and the Stockholders' Representative
will use reasonable efforts to cause the Accountants to render their decision as
soon as practicable thereafter (but in no event later than 30 days after the
submission to the Accountants of the notice of disagreement referred to in the
immediately preceding sentence), including without limitation by promptly
complying with all reasonable requests by the Accountants for information,
books, records and similar items. The Accountants will make a determination as
to each of the items in dispute (but only those items in dispute), which
determination will be (A) in writing, (B) furnished to each of the parties
hereto as promptly as practicable after the items in dispute have been referred
to the Accountants (but in no event later than 30 days thereafter), (C) made in
accordance with this Agreement, and (D) conclusive and binding upon each of the
parties hereto. Nothing herein will be construed to authorize or permit the
Accountants to determine (i) any question or matter whatsoever under or in
connection with this Agreement, except the determination of what adjustments, if
any, must be made in one or more disputed items reflected in the EBITDA
Statement delivered by Parent in order for the Consolidated EBITDA for the
Fiscal Year ended 1998 to be determined in accordance with the provisions of
this Agreement, or (ii) a Consolidated EBITDA for the Fiscal Year ended 1998
that is not equal to one of, or between, the Consolidated EBITDA for the Fiscal
Year ended 1998 as determined by the Stockholders' Representative and as
determined by Parent. The fees and expenses of the Accountants will be paid by
the party whose Last Offer varies by the greatest absolute amount from the
determination by the Accountants of all such disputed items. No party will
disclose to the Accountants, and the Accountants will not consider for any
purpose, any settlement discussions or settlement offer (other than the Last
Offer) made by any party.
(c) During the period that the Stockholders' Representative's advisors and
personnel are conducting their review of Parent's preparation of the EBITDA
Statement, the Stockholders' Representative and his representatives will have
reasonable access during normal business hours to the work papers, prepared by
or on behalf of Parent and its representatives in connection with Parent's
preparation of the EBITDA Statement; PROVIDED, HOWEVER, that the Stockholders'
Representative will conduct such review in a manner that does not unreasonably
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interfere with the conduct of the business of Parent or the Surviving
Corporation or result in substantial out-of-pocket costs to the Surviving
Corporation. The Stockholders' Representative and Parent agree in good faith to
use all reasonable efforts to provide such information and access described in
this Section 2.17(c).
2.18. ADJUSTMENTS TO CLOSING PAYMENTS. (a) Upon the final determination of
the Closing Working Capital Balance, the parties shall make the following
adjustments:
(i) If the Closing Working Capital Balance exceeds the Estimated Closing
Working Capital Balance, then the Aggregate Consideration will be increased (and
the Per Share Closing Merger Consideration will be increased accordingly) by,
and Parent shall pay to the Stockholders' Representative (for the benefit of the
Stockholders) the amount of such difference.
(ii) If the Closing Working Capital Balance is less than the Estimated
Closing Working Capital Balance, then the Aggregate Consideration will be
decreased (and the Per Share Closing Merger Consideration will be decreased
accordingly) by, and Parent will be entitled to receive from the Escrow Agent in
accordance with the terms of the Escrow Agreement, the amount of such
difference, up to the then available Escrow Amount. In the event the sum of the
Closing Working Capital Balance and the then available Escrow Amount is less
than the Estimated Closing Working Capital Balance, the Aggregate Consideration
will be further decreased (and the Per Share Closing Merger Consideration will
be decreased accordingly) by, and the Principal Stockholder will pay to Parent,
the amount of such difference.
(b) Upon the final determination of Consolidated EBITDA for the Fiscal Year
ended 1998, the parties will make the following adjustment: if the Consolidated
EBITDA for the Fiscal Year ended 1998 is less than $7.0 million, then the
Aggregate Consideration will be decreased (and the Per Share Closing Merger
Consideration will be decreased accordingly) by, and Parent will be entitled to
receive from the Escrow Agent in accordance with the terms of the Escrow
Agreement, an amount (the "EBITDA ADJUSTMENT") equal to (A) 5.2 MULTIPLIED BY
(B) the difference between (i) Consolidated EBITDA for the Fiscal Year ended
1998 and (ii) $7.0 million, up to a maximum of $3.0 million. In the event the
EBITDA Adjustment exceeds the amount then available in the Escrow Account, then
the Aggregate Consideration will be further decreased (and the Per Share Closing
Merger Consideration will be decreased accordingly) by, and the Principal
Stockholder will pay to Parent, the amount of such difference.
(c) Any payment in respect of an adjustment required to be made under
Paragraph (a) or Paragraph (b) of this Section 2.18 will be made by Parent or,
the Principal Stockholder, as applicable, in cash by wire transfer in
immediately available funds to one account specified by Parent or the
Stockholders' Representative (for the benefit of the Stockholders), as
applicable, in writing, prior to the date such payment is required to be made
hereunder. Such payment will be made on such of the following dates as may be
applicable: (i) if the Stockholders' Representative shall have not objected to
the preparation of the Closing Date Balance Sheet, the determination of the
Closing Working Capital Balance or the determination of Consolidated EBITDA for
the Fiscal Year ended 1998, as applicable, the earlier of (A) 30 days after
delivery to the Stockholders' Representative of the Closing Date Balance Sheet,
the Closing Working Capital Balance Statement or the EBITDA Statement or (B)
five days after the Stockholders' Representative has indicated that he has no
objections to the preparation of the Closing Date Balance Sheet, the
determination of the Closing Working Capital Balance or the
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determination of Consolidated EBITDA for the Fiscal Year ended 1998, as
applicable, or (ii) if the Stockholders' Representative shall have objected to
the preparation of the Closing Date Balance Sheet, the determination of the
Closing Working Capital Balance by Parent or the determination of Consolidated
EBITDA for the Fiscal Year ended 1998, as applicable, within five days following
final agreement or decision with respect to the Closing Date Balance Sheet, the
Closing Working Capital Balance or the determination of Consolidated EBITDA for
the Fiscal Year ended 1998, as applicable, as provided in Section 2.16, Section
2.17 and this Section 2.18.
III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE PRINCIPAL STOCKHOLDER
3.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDER. The Principal Stockholder and the Company jointly and severally
represent and warrant to Parent and Merger Sub as of the date hereof and the
Closing as follows:
3.1.1. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. The Company is duly qualified to
conduct business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary except for those
jurisdictions where the failure to be so qualified or in good standing could not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect. The Company has heretofore delivered to Parent true and complete
copies of the articles of incorporation and by-laws of the Company.
3.1.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by the Company of this Agreement and each of the Ancillary
Agreements to which it will be a party at the Closing or thereafter in
accordance with the terms hereof are within the Company's corporate powers and
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been and each of the Ancillary Agreements to which
the Company will be a party at the Closing or thereafter in accordance with the
terms hereof will have been duly executed and delivered by the Company and
constitute and will constitute at the Closing or when executed and delivered
thereafter valid and binding agreements of the Company, enforceable against the
Company in accordance with their terms, except to the extent that their
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
3.1.3. GOVERNMENTAL AUTHORIZATION. Except for the filing of the
certificates of merger and except as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the execution,
delivery and performance by the Company of this Agreement and each Ancillary
Agreement to which the Company will be a party at the Closing require no action
by or in respect of, or filing with, any Governmental Authorities.
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3.1.4. NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 3.1.4,
the execution, delivery and performance by the Company of this Agreement and
each Ancillary Agreement to which the Company will be a party at the Closing
will not (a) violate the articles of incorporation or by-laws or comparable
organizational documents of the Company or any Subsidiary, (b) violate any
applicable Law or Order, (c) require any filing with or permit, consent or
approval of, or the giving of any notice to, any Person (including filings,
consents or approvals required under any permits of the Company or any licenses
to which the Company is a party), (d) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of, the Company or any Subsidiary or to
a loss of any benefit to which the Company or any Subsidiary is entitled under
any agreement or other instrument binding upon, the Company or such Subsidiary
or any license, franchise, permit or other similar authorization held by the
Company or such Subsidiary, or (e) result in the creation or imposition of any
Lien on any asset of the Company or any Subsidiary, except in the case of
clauses (c), (d) and (e) for such filings, permits, consents, approvals or
notices and violations, breaches, conflicts and Liens which, individually or in
the aggregate could not reasonably be expected to have a Material Adverse
Effect.
3.1.5. CAPITALIZATION; OWNERSHIP OF COMPANY STOCK. (a) Immediately prior to
the date hereof, the authorized, issued and outstanding capital of the Company
will be as set forth on SCHEDULE 3.1.5(a)(i); immediately prior to the
consummation of the Redemption, the authorized, issued and outstanding capital
of the Company will be as set forth on SCHEDULE 3.1.5(a)(ii); and after
consummation of the Redemption and immediately prior to the Effective Time, the
authorized, issued and outstanding capital of the Company will be as set forth
on SCHEDULE 3.1.5(a)(iii). The Company Stock to be redeemed by the Company
hereunder and acquired by Parent in the Merger is on the date hereof, and will
be at the Closing, duly authorized, validly issued, fully-paid, nonassessable
and free and clear of any Lien or other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of, such shares,
subject to applicable securities laws). The number of such shares of Company
Stock set forth opposite each such Stockholder's name on SCHEDULES 3.1.5(a),
3.1.5(a)(ii) and 3.1.5(a)(iii) are, and will be at the times set forth on such
Schedules, owned beneficially and of record by each such Stockholder. Each such
Stockholder has on the date hereof, and will have at the times set forth on
SCHEDULES 3.1.5(a)(i), 3.1.5(a)(ii) and 3.1.5(a)(iii) the full legal right,
power and authority to vote, sell, assign, transfer and convey the shares of the
Company Stock set forth opposite such Stockholder's name on such Schedules.
(b) Except as disclosed in SCHEDULE 3.1.5(b), there are no outstanding (i)
shares of capital stock or other securities of the Company, (ii) securities of
the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, or (iii) options or other rights to acquire
from the Company, or other obligation of the Company to issue, any capital
stock, other securities or securities convertible into or exchangeable for
capital stock or other securities of the Company (the items in clauses (i), (ii)
and (iii) being referred to collectively as the "COMPANY SECURITIES"). Except as
disclosed in SCHEDULE 3.1.5(b), there are no outstanding obligations of the
Company or any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities.
3.1.6. SUBSIDIARIES. (a) Each Subsidiary is a corporation duly incorporated
or otherwise formed, validly existing and in good standing under the laws of its
jurisdiction of
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incorporation, has all requisite corporate power to carry on its business as now
conducted, is duly qualified to conduct business as a foreign corporation and is
in good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where the failure to be so qualified or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has heretofore delivered to Parent
true and complete copies of the articles of incorporation and by-laws of each
Subsidiary, or, in the case of Subsidiaries which are not corporations, other
formation documents of each of the Subsidiaries as currently in effect. All
Subsidiaries, their respective jurisdictions of incorporation and their
respective numbers of authorized and outstanding shares of capital stock or
other ownership interests are disclosed in SCHEDULE 3.1.6(a).
(b) Except as disclosed in SCHEDULE 3.1.6(b), all of the outstanding
capital stock of, or other securities or ownership interests in, each
Subsidiary, is owned by the Company, directly or indirectly, free and clear of
any Lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other securities or ownership interests). Except as disclosed in
SCHEDULE 3.1.6(b), there are no outstanding (i) securities of the Company or any
Subsidiary convertible into or exchangeable for shares of capital stock or other
securities or ownership interests in any Subsidiary or (ii) options or other
rights to acquire from the Company or any Subsidiary, or other obligation of the
Company or any Subsidiary to issue, any capital stock or other securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any
Subsidiary (the items in clauses (i) and (ii) being referred to collectively as
the "SUBSIDIARY SECURITIES"). Except as disclosed in SCHEDULE 3.1.6(b), there
are no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any Subsidiary Securities.
(c) Except as disclosed in SCHEDULE 3.1.6(c) and except for the interests
of the Company in the Subsidiaries and investments reflected in the Interim
Financial Statements, neither the Company nor any Subsidiary owns any capital
stock or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
3.1.7. FINANCIAL STATEMENTS; BOOKS AND RECORDS. (a) The Company has
heretofore furnished Parent the Audited Statements. The Audited Statements,
including the footnotes thereto, have been prepared in accordance with GAAP and
fairly present in all material respects the financial position of the Company
and the Subsidiaries at the respective dates thereof and the consolidated
results of operations and cash flows of the Company and the Subsidiaries for the
periods indicated.
(b) The Company has also heretofore furnished Parent the Interim Financial
Statements. The Interim Financial Statements have been prepared in accordance
with GAAP (except for normal year-end adjustments and the absence of notes to
such financial statements, which, in each case, would not be material) and on a
basis consistent with the 1997 Balance Sheet Principles. The Interim Financial
Statements fairly represent in all material respects the financial position of
the Company and the Subsidiaries at the date thereof and the results of the
operations of the Company and the Subsidiaries for the period indicated.
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(c) There have been no changes in the Company's or any Subsidiary's reserve
or accrual amounts or policies from March 31, 1998.
(d) The books of account, minute books, stock record books, and other
records of the Company and the Subsidiaries, all of which have been made
available to Parent, are complete and correct and have been maintained in
accordance with sound business practices and the requirements of Section
13(b)(2) of the Exchange Act (regardless of whether or not the Company and the
Subsidiaries are subject to that Section), including the maintenance of an
adequate system of internal controls. The minute books of the Company and the
Subsidiaries contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors, and
committees of the Boards of Directors of the Company and the Subsidiaries, and
no meeting of any such stockholders, Board of Directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books.
3.1.8. NO UNDISCLOSED LIABILITIES. There are no liabilities of the Company
or any Subsidiary or any facts or circumstances which could give rise to
liabilities of the Company, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than (a) liabilities fully provided for in the
Interim Financial Statements; (b) liabilities specifically disclosed on SCHEDULE
3.1.8 or SCHEDULE 3.1.10; and (c) other undisclosed liabilities incurred since
the Balance Sheet Date in the ordinary course of business which, individually or
in the aggregate, could not have a Material Adverse Effect.
3.1.9. INTERCOMPANY ACCOUNTS. SCHEDULE 3.1.9 contains a complete list of
all intercompany balances as of August 31, 1998 between any Family Stockholder
or, to the knowledge of the Company and the Principal Stockholder, any
Unaffiliated Stockholder, or an Affiliate of any such Stockholder, on the one
hand, and the Company and the Subsidiaries, on the other hand. Other than (a) as
disclosed on SCHEDULE 3.1.9 and (b) compensation paid in the ordinary course
consistent with past practice, since such date, there has not been any accrual
of liability by the Company or any Subsidiary to any Family Stockholder or, to
the knowledge of the Company and the Principal Stockholder, any Unaffiliated
Stockholder, or any such Stockholder's Affiliates or other transaction between
the Company or any Subsidiary and any such Stockholder and such Stockholder's
Affiliates or any action taken (other than this Agreement) which could
reasonably be expected to result in any such accrual, or the incurrence of any
legal or financial obligation to any such Person, after August 31, 1998.
3.1.10. TAX MATTERS. (a) Except as disclosed in SCHEDULE 3.1.10(a):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with
any Taxing Authority with respect to any Pre-Closing Tax Period by or on
behalf of the Company or any Subsidiary (collectively, the "RETURNS") have,
to the extent required to be filed on or before the date hereof, been filed
when due in accordance with all applicable laws;
(ii) The Returns correctly reflected in all material respects, the
facts regarding the income, business, assets, operations, and activities
and status of the Company and its Subsidiaries;
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(iii) All Taxes owed by the Company and the Subsidiaries (whether or
not shown as due and payable on the Returns that have been filed) have been
timely paid, or withheld and remitted to the appropriate Taxing Authority;
(iv) Any reserves established for Taxes with respect to the Company
and its Subsidiaries for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Return has yet been filed) reflected on
the books of the Company and its Subsidiaries (excluding any provision for
deferred income taxes) are adequate in accordance with GAAP;
(v) Neither the Company nor any Subsidiary is delinquent in the
payment of any Tax and neither the Company nor any Subsidiary has requested
any extension of time within which to file any Return except for extensions
granted as a matter of right;
(vi) The Company (or any member of any affiliated, consolidated,
combined or unitary group of which the Company is or has been a member) has
not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(vii) There is no action, suit or proceeding now pending and no claim,
audit or investigation now pending of which the Company is aware or, to the
knowledge of the Company, any action, suit, claim, audit or investigation
threatened against or with respect to the Company or any Subsidiary in
respect of any Tax;
(viii) The Company does not own any interest in real property in any
jurisdiction in which a Tax is imposed on the transfer of a controlling
interest in an entity that owns any interest in real property;
(ix) Neither the Company, the Subsidiaries nor any other Person on
behalf of the Company has entered into any agreement or consent pursuant to
Section 341(f) of the Code;
(x) There are no Liens for Taxes upon the assets of the Company or any
Subsidiary, except Liens for current Taxes not yet due;
(xi) Neither the Company nor any Subsidiary will be required to
include any adjustment in taxable income for any Post-Closing Tax Period
under Section 481(c) of the Code (or any similar provision of the Tax laws
of any jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability of
the Company or any Subsidiary for any Pre-Closing Tax Period; and
(xii) Neither the Company nor any Subsidiary has been a member of an
affiliated, consolidated, combined or unitary group or participated in any
other arrangement whereby any income, revenues, receipts, gain or loss of
the Company or any Subsidiary was determined or taken into account for Tax
purposes with reference to or in conjunction with any income, revenues,
receipts, gain, loss, asset or liability of any other Person.
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(b) SCHEDULE 3.1.10(b) contains a list of all jurisdictions (whether
foreign or domestic) to which any Tax imposed on overall net income is
properly payable by the Company and any Subsidiary.
3.1.11. ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE 3.1.11,
since the Balance Sheet Date, there has not been any event, occurrence,
development, circumstances or state of facts which (a) has had or which could
reasonably be expected to have a Material Adverse Effect or (b) would have
constituted a violation of any covenant of the Principal Stockholder or the
Company hereunder (including Section 5.1) had such covenant applied to either of
them since the Balance Sheet Date.
3.1.12. CONTRACTS. (a) Except as specifically disclosed in SCHEDULE
3.1.12(a), neither the Company nor any Subsidiary is a party to or bound by any
of the following (whether written or oral):
(i) any lease (whether of real or personal property) providing for
annual rentals of $25,000 or more;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets (including in terms of quantity and
dollar amount) that provides for either (A) annual payments by the Company
or any Subsidiary of $25,000 or more or (B) aggregate payments by the
Company or any Subsidiary of $50,000 or more;
(iii) any sales, distribution or other similar agreement providing for
the sale by the Company or any Subsidiary of materials, supplies, goods,
services, equipment or other assets that provides for either (A) annual
payments to the Company or any Subsidiary of $25,000 or more or (B)
aggregate payments to the Company or any Subsidiary of $50,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any agreement that substantially limits the freedom of the
Company or any Subsidiary to compete in any line of business, geographic
area or with any Person or which would so limit the freedom of the Company
or any Subsidiary after the Closing Date;
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(x) any agreement with (A) any Stockholder or any of such
Stockholder's Affiliates, (B) any Person directly or indirectly owning,
controlling or holding with power to vote, 5% or more of the outstanding
voting securities of any Stockholder's Affiliates, (C) any Person 5% or
more of whose outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by any Stockholder or any of
such Stockholder's Affiliates, (D) any director or officer of a
Stockholder's Affiliates or any "associates" or members of the "immediate
family" (as such terms are respectively defined in Rule 12b-2 and Rule
16a-1 of the Exchange Act) of any such director or officer, or (E) any
director or officer of the Company or with any "associate" or any member of
the "immediate family" (as such terms are respectively defined in Rules
12b-2 and 16a-1 of the Exchange Act) of any such director or officer;
(xi) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution
in respect of capital stock of the Company or any Subsidiary;
(xii) any management service, consulting or any other similar type of
contract;
(xiii) any warranty, guaranty or other similar undertaking with
respect to a contractual performance extended by the Company other than in
the ordinary course of business consistent with past practice;
(xiv) any employment, deferred compensation, severance, bonus,
retirement or other similar agreement or plan in effect as of the date
hereof and entered into or adopted by the Company or any Subsidiary, on the
one hand, and any director or officer of the Company or any Subsidiary or
any other employee of the Company or any Subsidiary receiving annual
compensation of $50,000 or more, on the other hand; or
(xv) any other agreement, commitment, arrangement or plan not made in
the ordinary course of business that is material to the Company or any
Subsidiary.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in SCHEDULE 3.1.12(a) or any other Schedule to this Agreement or
required to be disclosed pursuant to this Section is a valid and binding
agreement of the Company or a Subsidiary, as the case may be, and is in full
force and effect, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and none of the Company or the Principal Stockholder, the
Family Stockholders, or, to the knowledge of the Principal Stockholder, any
Unaffiliated Stockholders or any other party thereto, is in default or breach in
any material respect under the terms of any such agreement, contract, plan,
lease, arrangement or commitment. To the knowledge of the Company and the
Principal Stockholder, there is no event, occurrence, condition or act
(including the consummation of the transactions contemplated hereby) which, with
the giving of notice or the passage of time, or the happening of any other event
or condition, could become a material default or event of default thereunder.
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(c) SCHEDULE 3.1.12(c) sets forth every grant by the Company in the past
three years of any severance or termination pay to any employee of the Company
or any Subsidiary receiving annual compensation of $50,000 or more, or any
director or officer of the Company or any Subsidiary.
3.1.13. INSURANCE COVERAGE. The Company has furnished to Parent a list of,
and true and complete copies of, all insurance policies and fidelity bonds
covering the assets, business, operations, employees, officers and directors of
the Company and its Subsidiaries. There is no material claim by the Company or
any Subsidiary pending under any of such policies or bonds as to which coverage
has been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company and its Subsidiaries have complied in all material respects
with the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) are in full force and effect and are disclosed in SCHEDULE
3.1.13. Such policies of insurance and bonds are of the type and in amounts
deemed by the management of the Company to be sufficient. The Company does not
know of any threatened termination of, or premium increase with respect to, any
of such policies or bonds. Since the last renewal date of any insurance policy,
there has not been any material adverse change in the relationship of the
Company with its insurers or the premiums payable pursuant to such policies.
3.1.14. LITIGATION. Except as disclosed in SCHEDULE 3.1.14, there is no
action, suit, investigation, arbitration or administrative or other proceeding
pending or, to the knowledge of the Company and the Principal Stockholder,
threatened, against or affecting the Company, any Subsidiary, the Principal
Stockholder, the Family Stockholders or, to the knowledge of the Company and the
Principal Stockholder, any Unaffiliated Stockholders, or any of their respective
properties before any court or arbitrator or any Governmental Authorities which,
if determined or resolved adversely to any of them, could reasonably be expected
to, individually or when considered together with all other such matters, (a)
materially and adversely affect the right or ability of the Company or any
Subsidiary to carry on its business as now conducted, (b) have a Material
Adverse Effect, or (c) which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement and the Ancillary Agreements to which it will be party at Closing; and
none of the Company, the Subsidiaries or the Principal Stockholder knows of any
valid basis for any such action, proceeding or investigation.
3.1.15. COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed in SCHEDULE
3.1.15(a), neither the Company nor any Subsidiary is and neither the Company nor
any Subsidiary has been since the Balance Sheet Date in violation of any
applicable Law or Order, except for such violations that have not had and could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
(b) SCHEDULE 3.1.15(b) sets forth a list of each government or regulatory
license, authorization, permit, consent and approval held by the Company and its
Subsidiaries, issued and held in respect of the Company and its Subsidiaries or
required to be so issued and held to carry on the business of the Company and
its Subsidiaries as currently conducted. Except as disclosed in SCHEDULE
3.1.15(b), each such license, authorization, permit, consent and approval is
valid and in full force and effect and will not be terminated or impaired (or
become terminated
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or impaired) as a result of the transactions contemplated hereby. Neither the
Company nor any Subsidiary is in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, any
material license, franchise, permit, consent or approval or similar
authorization held by the Company and its Subsidiaries.
3.1.16. PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as disclosed in
SCHEDULE 3.1.16(a) and except for inventory disposed of in the ordinary course
of business, the Company and its Subsidiaries have good title to, or in the case
of leased property have valid leasehold interests in, all property and assets
(whether real or personal, tangible or intangible) reflected in the Audited
Balance Sheet or acquired after the Balance Sheet Date, including the New
Capital Equipment. None of such property or assets is subject to any Liens,
except for (i) Liens disclosed in the Audited Balance Sheet; (ii) Liens for
Taxes not yet due or being contested in good faith (and for which adequate
accruals or reserves have been established on the Audited Balance Sheet); (iii)
and Permitted Liens.
(b) SCHEDULE 3.1.16(b) sets forth a list of all real property assets owned
or leased by the Company and its Subsidiaries ("REAL PROPERTY"). All such leases
of real property are valid, binding and enforceable in accordance with their
respective terms and the Company and its Subsidiaries is a tenant or possessor
in good standing thereunder and all rents due under such leases have been paid.
There does not exist under any such lease any default or any event which with
notice or lapse of time or both would constitute a default, except for such
defaults that have not and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The Company and its
Subsidiaries are in peaceful and undisturbed possession of the space and/or
estate under each lease of which they are a tenant and have good and valid
rights of ingress and egress to and from all the Real Property from and to the
public street systems for all usual street, road and utility purposes. Neither
the Company, any Subsidiary nor the Principal Stockholder has received any
notice of any appropriation, condemnation or like proceeding, or of any
violation of any applicable zoning Law or Order relating to or affecting the
Real Property, and to the Company's, each Subsidiary's and the Principal
Stockholder's knowledge, no such proceeding has been threatened or commenced.
(c) The assets owned or leased by the Company or any Subsidiary (including,
real, personal, tangible and intangible property), or which they otherwise have
the right to use (including, real, personal, tangible and intangible property),
constitute all of the assets held for use or used in connection with the
businesses of the Company and its Subsidiaries and are, generally in good
operating condition and repair (normal wear and tear excepted) and are adequate
to conduct such businesses as currently conducted.
3.1.17. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.1.17(a) sets forth a list of
all Intellectual Property Rights and all material licenses, sublicenses and
other written agreements as to which the Company, its Subsidiaries or any of
their Affiliates is a party and pursuant to which any Person is authorized to
use such Intellectual Property Right, including the identity of all parties
thereto.
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(b) Except as disclosed in SCHEDULE 3.1.17(b):
(i) Neither the Company nor any Subsidiary has since January 1, 1993,
been sued or charged in writing with or been a defendant in any claim,
suit, action or proceeding relating to its business that is either pending
or, to the knowledge of the Company, the Subsidiaries or the Principal
Stockholder, threatened that, in either case, has not been finally
terminated prior to the date hereof and that involves a claim of
infringement by the Company or any Subsidiary of any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how or
any other similar type of proprietary intellectual property right of any
other Person or continuing infringement by any other Person of any
Intellectual Property Rights and the Company has no knowledge of any basis
for such claim of infringement, and no knowledge of any continuing
infringement by any other Person of any Intellectual Property Rights;
(ii) No Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use
thereof by the Company or any Subsidiary or restricting the licensing
thereof by the Company or any Subsidiary to any Person;
(iii) Neither the Company nor any Subsidiary has entered into any
agreement to indemnify any other Person against any charge of infringement
of any trademark, service mark, trade name, invention, patent, trade
secret, copyright, know-how or any other similar type of proprietary
intellectual property right; and
(iv) There are no processes or formulae, research or development
results or other know-how of the Company or Subsidiary, the value of which
to the Company or any Subsidiary is contingent upon maintenance of the
confidentiality thereof.
3.1.18. ENVIRONMENTAL MATTERS. (a) Except as disclosed in SCHEDULE 3.1.18:
(i) Constituents of Concern have not been generated, recycled, used,
treated or stored on, transported to or from, or released or disposed on,
the Company Property or, to the knowledge of the Company and the Principal
Stockholder, any property adjoining or adjacent except in compliance with
Environmental Laws;
(ii) Except as could not individually, or in the aggregate, reasonably
be expected to have a Material Adverse Effect, the Company and the
Subsidiaries are in compliance with Environmental Laws and the requirements
of permits issued under such Environmental Laws with respect to the Company
Property;
(iii) There are no pending or, to the knowledge of the Company,
threatened Environmental Claims against the Company, the Subsidiaries or
any Company Property;
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(iv) There are no facts, circumstances, conditions or occurrences
regarding the Company's or any Subsidiary's past or present business or
operations or any Company Property, or to the knowledge of the Company, the
Subsidiaries and the Principal Stockholder, any property adjoining any
Company Property, that could reasonably be expected (i) to form the basis
of an Environmental Claim against the Company, or any of the Company
Property or assets, or (ii) to cause any such current Company Property or
assets to be subject to any restrictions on its ownership, occupancy, use
or transferability under any Environmental Law;
(v) There are not now and, to the knowledge of the Company, the
Subsidiaries and the Principal Stockholder, there have never been any
underground storage tanks or sumps located on any Company Property or, to
the knowledge of the Company and the Principal Stockholder, located on any
property that adjoins or is adjacent to any Company Property;
(vi) Neither the Company, any Subsidiary nor any Company Property is
listed or proposed for listing on the National Priorities List under
CERCLA, or CERCLIS (as defined in CERCLA) or on any similar federal, state
or foreign list of sites requiring investigation or clean-up;
(vii) There are no Environmental Permits that are nontransferable or
require consent, notification or other action to remain in full force and
effect following the consummation of the transactions contemplated hereby;
and
(viii) Neither the Company nor any of its Subsidiaries has any
liability under any Environmental Law (including an obligation to remediate
any Environmental Condition whether caused by the Company or any other
Person) which could reasonably be expected to have a Material Adverse
Effect.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis commenced or conducted by or on behalf of the Company
or any Subsidiary (or by a third party of which the Company or the Principal
Stockholder has knowledge) in relation to the current or prior business of the
Company or any Subsidiary, or any property or facility currently or, to the
knowledge of the Company or the Principal Stockholder, previously owned or
leased by the Company or any Subsidiary, which has not been disclosed or
delivered to Parent prior to the date hereof.
(c) Neither the Company nor any Subsidiary owns or leases or has owned or
leased any property, and does not conduct and has not conducted any operations,
in New Jersey or Connecticut.
(d) For purposes of this Section, the terms "Company" (including the use of
such terms in the term "Company Property") will include any entity which is, in
whole or in part, a predecessor of the Company.
3.1.19. PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 3.1.19(a) sets forth a
list of all employee benefit plans (as defined in Section 3(3) of ERISA), and
all other employee benefit
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plans, programs, arrangements, contracts or schemes, written or oral, statutory
or contractual, with respect to which the Company, a Subsidiary or any ERISA
Affiliate has or has had in the six years preceding the date hereof any
obligation or liability or which are or were in the six years preceding the date
hereof maintained, contributed to or sponsored by the Company or any ERISA
Affiliate for the benefit of any current or former employee, officer or director
of the Company or any ERISA Affiliate (collectively, the "PLANS"). With respect
to each employee pension benefit plan subject to ERISA, the Company has
delivered to Parent a true and complete copy of each such Plan (including all
amendments thereto) and a true and complete copy of each material document
(including all amendments thereto) prepared in connection with each such Plan
including, without limitation, (i) a copy of each trust or other funding
arrangement, (ii) each summary plan description and summary of material
modifications, and (iii) the most recently filed IRS Form 5500 for each such
Plan, if any. Neither the Company nor any Subsidiary has any express or implied
commitment, whether legally enforceable or not, to create, incur liability with
respect to or cause to exist any employee benefit plan or to modify any Plan,
other than as required by law.
(b) Except as disclosed in SCHEDULE 3.1.19(b), none of the Plans is a plan
that is or has ever been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code. None of the Plans is (i) a "multiemployer plan" as
defined in Section 3(37) of ERISA, (ii) a plan or arrangement described under
Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a plan maintained in connection
with a trust described in Section 501(c)(9) of the Code. Except as disclosed in
SCHEDULE 3.1.19(b), (A) none of the Plans provides for the payment of
separation, severance, termination or similar-type benefits to any person, and
(B) none of the Plans provides for or promises retiree medical or life insurance
benefits to any current or former employee, officer or director of the Company.
Except as disclosed in SCHEDULE 3.1.19(b), each of the Plans is subject only to
the laws of the United States or a political subdivision thereof.
(c) Except as disclosed in SCHEDULE 3.1.19(c), each Plan is in compliance
in all material respects with, and has always been operated in all material
respects in accordance with, its terms and the requirements of all applicable
law, foreign and domestic, and the Company and the ERISA Affiliates have
satisfied in all material respects all of their statutory, regulatory and
contractual obligations with respect to each such Plan. No legal action, suit or
claim is pending or, to the knowledge of the Company and the Principal
Stockholder, threatened with respect to any Plan (other than claims for benefits
in the ordinary course) and no fact or event exists that could give rise to any
such action, suit or claim.
(d) Except as disclosed in SCHEDULE 3.1.19(d), each Plan or trust which is
intended to be qualified or exempt from taxation under Section 401(a), 401(k) or
501(a) of the Code has received a favorable determination letter from the IRS
that it is so qualified or exempt, and no fact or event has occurred since the
date of such determination letter to adversely affect the qualified or exempt
status of any Plan or trust.
(e) There has been no non-exempt prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan.
Neither the Company nor any ERISA Affiliate has incurred any material liability
for any excise tax arising under Section 4971, 4972, 4975, 4980 or 4980B of the
Code and no fact or event exists which could give rise to such liability.
Neither the Company nor any ERISA Affiliate has incurred any material liability
relating to Title IV of ERISA (other than for the payment of premiums to the
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Pension Benefit Guaranty Corporation), and no fact or event exists which could
give rise to such liability.
(f) All material contributions, premiums or payments required to be made
with respect to any Plan have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Government Authorities, and
no fact or event exists which could give rise to any such challenge or
disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any ERISA Affiliate
thereof relating to, or change in employee participation or coverage under, any
Plan that would increase materially the expense of maintaining such Plan above
the level of the expense incurred in respect thereto for the most recent fiscal
year ended prior to the date hereof.
(h) Except as disclosed in SCHEDULE 3.1.19(h) or in this Agreement or the
Ancillary Agreements, no employee or former employee of the Company or any ERISA
Affiliate thereof will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including acceleration of
vesting or exercise of an incentive award) as a result of the transactions
contemplated hereby.
(i) Except as disclosed in SCHEDULE 3.1.19(i), no current or former
employee of the Company or any ERISA Affiliate thereof holds any option to
purchase shares of the Company.
(j) None of the Plans promises or provides retiree health or life insurance
benefits.
3.1.20. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 3.1.20, to the knowledge of the Company, no Stockholder, nor any other
officer or director of the Company or any Subsidiary possesses, directly or
indirectly, any ownership interest in, or is a director, officer or employee of,
any Person which is a supplier, customer, lessor, lessee, licensor, developer,
competitor or potential competitor of the Company or any Subsidiary. Ownership
of securities of a company whose securities are registered under the Exchange
Act of 2% or less of any class of such securities will not be deemed to be a
financial interest for purposes of this Section 3.1.20.
3.1.21. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS; EMPLOYEE COMPENSATION;
BONUSES. (a) The relationships of the Company and the Subsidiaries with its
customers, suppliers and employees are good commercial working relationships
and, except as disclosed in SCHEDULE 3.1.21(a), none of the Company's or the
Subsidiaries' material customers or material suppliers or employees receiving
annual compensation in excess of $50,000 has canceled, terminated or otherwise
materially altered or notified the Company of any intention or otherwise
threatened to cancel, terminate or materially alter its relationship with the
Company effective prior to, as of, or within one year after, the Closing. As of
the date hereof, there has not been, and the Company has no reason to believe
that there will be, any change in relations with material customers, suppliers
or employees of the Company as a result of the transactions contemplated by this
Agreement.
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(b) SCHEDULE 3.1.21(b) lists (i) all employees of the Company and the
Subsidiaries who receive annual compensation in excess of $50,000 and (ii) all
bonuses and any other amounts to be paid by the Company or the Subsidiaries to
employees of the Company and the Subsidiaries at or in connection with the
Closing ("BONUSES").
3.1.22. OTHER EMPLOYMENT MATTERS. (a) The Company is in material compliance
with all Federal, state or other applicable laws, domestic or foreign,
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not, and is not, engaged in any unfair
labor practice; no unfair labor practice complaint against the Company is
pending before the National Labor Relations Board; there is no labor strike,
dispute, slowdown or stoppage actually pending or threatened against or
involving the Company; the Company is not a party to any collective bargaining
agreement and no collective bargaining agreement is currently being negotiated
by the Company; to the knowledge of the Company and the Principal Stockholder,
no representation question exists respecting employees of the Company; and,
except as specifically set forth on SCHEDULE 3.1.22, no claim in respect of the
employment of any employee has been asserted and is currently pending or, to the
knowledge of the Company or the Principal Stockholder threatened, against the
Company.
(b) SCHEDULE 3.1.22 contains a complete and accurate list of the following
information for each employee or director of the Company and its Subsidiaries,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable and any change in compensation
since the Balance Sheet Date: vacation accrued; and service credited for
purposes of vesting and eligibility to participate under any pension,
retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus,
stock option, cash bonus, employee stock ownership (including investment credit
or payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Plan of the Company or any of its Subsidiaries.
(c) No former or current employee or current or former director of the
Company or any of its Subsidiaries is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, non-competition, or
proprietary rights agreement, between such employee or director and any other
Person that in any way adversely affected, affects, or will affect (i) the
performance of his duties as an employee or director of the Company or any of
its Subsidiaries, or (ii) the ability of any of the Company or any of its
Subsidiaries to conduct its respective business.
(d) SCHEDULE 3.1.22 also contains a complete and accurate list of the
following information for each retired employee or director of the Company and
each of the Subsidiaries, or their dependents, receiving benefits or scheduled
to receive benefits in the future: name, pension benefits, pension option
election, retiree medical insurance coverage, retiree life insurance coverage,
and other benefits.
3.1.23. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.1.23, all of
the accounts receivable reflected on the Audited Balance Sheet (net of the
reserves set forth on the Audited Balance Sheet) and all accounts receivable
which have arisen since the Balance Sheet Date (net of any additional reserves
established since the Balance Sheet Date in accordance with past practice, none
of which is material) are valid and enforceable claims, and the goods and
services sold and delivered which gave rise to such accounts receivable were
sold and delivered
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in conformity with the applicable purchase orders, agreements and
specifications. Such accounts receivable are subject to no defenses, offsets or
recovery in whole or in part by the Persons whose purchase gave rise to such
accounts receivable or by third parties and are fully collectible in the
ordinary course of business without resort to legal proceedings, except to the
extent of the amount of the reserve for doubtful accounts reflected in the
Audited Balance Sheet.
3.1.24. INVENTORY. Except as set forth in SCHEDULE 3.1.24, all inventories
reflected on the Audited Balance Sheet (net of the reserves set forth on the
Audited Balance Sheet) and all inventories which have been acquired or produced
since the Balance Sheet Date (net of any additional reserves established since
the Balance Sheet Date in accordance with past practice, none of which is
material) are in good condition, conform in all material respects with the
applicable specifications and warranties of the Company, are not obsolete, and
are useable or saleable in the ordinary course of business. The values at which
such inventories are carried are in accordance with GAAP consistently applied.
The amount and mix of items in the inventories of supplies, in-process and
finished products are, and will be at the Closing Date, consistent with the past
business practices of the Company.
3.1.25. MILLENNIUM COMPLIANCE. SCHEDULE 3.1.25 describes the measures that
have been implemented to determine the extent to which the computer systems used
by the Company in its business (the "COMPUTER SYSTEMS") are not in Millennium
Compliance, and the material details of any program undertaken with a view
towards causing the Computer Systems to achieve Millennium Compliance.
3.1.26. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of the Stockholders or the Company who might be entitled to any fee or
commission in connection with the transactions contemplated by this Agreement or
any of the Ancillary Agreements.
3.2. REPRESENTATIONS AND WARRANTIES OF THE PRINCIPAL STOCKHOLDER. The
Principal Stockholder represents and warrants, to Parent as of the date hereof
and the Closing as follows:
3.2.1. AUTHORITY; ENFORCEABILITY. The Principal Stockholder has all
requisite power and authority, and has taken all action necessary, to execute
and deliver this Agreement and each Ancillary Agreement to which the Principal
Stockholder will be a party at the Closing, to consummate the transactions
contemplated hereby and to perform his or its obligations hereunder. This
Agreement has been and each of the Ancillary Agreements to which the Principal
Stockholder will be a party at the Closing will have been, duly executed and
delivered by the Principal Stockholder and are legal, valid and binding
obligations of the Principal Stockholder enforceable against the Principal
Stockholder in accordance with their respective terms, except to the extent that
their enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
3.2.2. NO CONFLICTS. The execution and delivery of this Agreement and each
Ancillary Agreement to which the Principal Stockholder will be a party at the
Closing do not and will not at the Closing, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof do not and
will not at the Closing, violate or conflict with in
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any respect or result in a breach under any contract, license, Order or Law
applicable to the Principal Stockholder.
3.2.3. NO CONSENTS. Except for the filing of the certificates of merger and
except as may be required under the HSR Act, no consent of, approval or filing
with, any court or other Person is required to be obtained or made by or with
respect to the Principal Stockholder in connection with the execution and
delivery of this Agreement or any of the Ancillary Agreements to which the
Principal Stockholder will be a party at the Closing or the consummation by the
Principal Stockholder of the transactions contemplated hereby or thereby.
3.2.4. OWNERSHIP OF SHARES; TITLE. The issued and outstanding shares of
Company Stock set forth on SCHEDULE 3.2.4(i) are lawfully owned beneficially and
of record by the Principal Stockholder immediately prior to the date hereof,
free and clear of any Liens; the issued and outstanding shares of Company Stock
set forth on SCHEDULE 3.2.4(ii) will be lawfully owned beneficially and of
record by the Principal Stockholder immediately prior to the consummation of the
Redemption, free and clear of any Liens; and the issued and outstanding shares
of Company Stock set forth on SCHEDULE 3.2.4(iii) will be lawfully owned
beneficially and of record by the Principal Stockholder after the consummation
of the Redemption and immediately prior to the Effective Time, free and clear of
any Liens. The Principal Stockholder has on the date hereof the full legal
right, power and authority to vote, sell, assign, transfer and convey the shares
of Company Stock set forth on SCHEDULES 3.2.4(i), 3.2.4(ii), and 3.2.4(iii); the
Principal Stockholder will, immediately prior to the consummation of the
Redemption, have the full legal right, power and authority to vote, sell,
assign, transfer and convey the shares of Company Stock set forth on SCHEDULE
3.2.4(ii); and the Principal Stockholder will, immediately prior to the
Effective Time, have the full legal right, power and authority to vote, sell,
assign, transfer and convey the shares of Company Stock set forth on SCHEDULE
3.2.4(iii). Such shares of Company Stock referred to in the immediately
preceding sentence are not, on the date hereof, and will not be, on the
applicable date of transfer or conversion pursuant to the Redemption or the
Merger, subject to any voting trust agreement or other contract, agreement,
arrangement, commitment, option, proxy, right of first refusal or understanding,
including without limitation any contract restricting or otherwise relating to
the voting, dividend rights or disposition of such shares.
3.2.5. LITIGATION. Except as disclosed in SCHEDULE 3.2.5, there is no
action, suit, investigation, arbitration or administrative or other proceeding
pending or, to the knowledge of the Principal Stockholder, threatened, against
or affecting the Principal Stockholder, the Family Stockholders or, to the
knowledge of the Principal Stockholder, the Unaffiliated Stockholders before any
court or arbitrator or any Governmental Authorities which, individually or in
the aggregate, if determined or resolved adversely to such Stockholder could,
individually or when considered together with all other such matters, adversely
affect the right or ability of the Principal Stockholder to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements to
which the Principal Stockholder will be a party at the Closing; and the
Principal Stockholder knows of no valid basis for any such action, proceeding or
investigation.
3.2.6. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 3.2.6, neither the Principal Stockholder, the Family Stockholders, nor,
to the knowledge of the Principal Stockholder, any Unaffiliated Stockholder or
any other officer or director of the Company, possesses, directly or indirectly,
any ownership interest in, or is a director, officer or
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employee of, any Person which is a supplier, customer, lessor, lessee, licensor,
developer, competitor or potential competitor of the Company. Ownership of
securities of a company whose securities are registered under the Exchange Act
of 2% or less of any class of such securities will not be deemed to be an
ownership interest for purposes of this Section 3.2.6.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Each of Parent and Merger Sub represents and warrants (jointly and
severally) to the Company and the Principal Stockholder as of the date hereof
and the Closing as follows:
4.1. CORPORATE EXISTENCE AND POWER. Each of Parent and Merger Sub is, a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Parent and Merger Sub has all
power and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted.
4.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance by each of Parent and Merger Sub of this Agreement and each of the
Ancillary Agreements to which it will be a party at the Closing are within, each
of Parent's and Merger Sub's respective corporate powers and have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been and each of the Ancillary Agreements to which
Parent or Merger Sub will be a party at the Closing will have been duly executed
and delivered by Parent or Merger Sub and constitute and will constitute at the
Closing valid and binding agreements of Parent or Merger Sub, as applicable,
enforceable against Parent or Merger Sub in accordance with their terms, except
to the extent that their enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
4.3. GOVERNMENTAL AUTHORIZATION. Except for the filing of the certificates
of merger and except as may be required under the HSR Act, the execution,
delivery and performance by Parent and Merger Sub of this Agreement and each of
the Ancillary Agreements to which Parent and Merger Sub will be a party at the
Closing require no action by or in respect of, or filing with, any Governmental
Authorities.
4.4. NON-CONTRAVENTION. The execution, delivery and performance by each of
Parent and Merger Sub of this Agreement and each Ancillary Agreement to which
Parent or Merger Sub will be a party at the Closing will not (a) violate the
certificate of incorporation or bylaws or comparable organizational documents of
Parent or Merger Sub, as applicable, or (b) violate any applicable Law or Order.
4.5. LITIGATION. Except as disclosed in SCHEDULE 4.5, there is no action,
suit, investigation, arbitration or administrative or other proceeding pending
or, to the knowledge of Parent or Merger Sub, threatened against or affecting
Parent or Merger Sub, or any of Parent's or Merger Sub's properties before any
court or arbitrator or any Governmental Authorities which, individually or in
the aggregate, if determined or resolved adversely to Parent or Merger Sub,
could reasonably be expected to materially and adversely affect the right or
ability of Parent or Merger Sub to consummate the transactions contemplated by
this Agreement and any Ancillary Agreement to which Parent or Merger Sub will be
a party at the Closing.
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4.6. FINDERS' FEES. Except for Saunders Karp & Megrue, L.P., Carlisle
Group, L.P. and Harvey & Company, LLC, whose fees and expenses (including
transaction fees) will be paid by the Surviving Corporation, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Parent who might be entitled to any fee
or commission from the Principal Stockholder or the Company upon consummation of
the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
V. CERTAIN COVENANTS
5.1. CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement to the Closing Date, the Principal Stockholder will cause the
Company to, and the Company and its Subsidiaries will, conduct its respective
operations only according to its ordinary and usual course of business
(including managing its working capital in accordance with its past practice and
custom) and use its respective best efforts to: (a) preserve intact its business
organizations, (b) keep available the services of its officers and employees and
(c) maintain its relationships and goodwill with licensors, suppliers,
distributors, customers, landlords, employees, agents and others having business
relationships with it. The Company will confer with Parent concerning
operational matters of a material nature and report periodically to Parent
concerning the business, operations and finances of the Company. Without
limiting the generality or effect of the foregoing, prior to the Closing Date,
except with the prior written consent of Parent, neither the Company nor its
Subsidiaries will, and the Principal Stockholder will cause the Company and its
Subsidiaries not to:
(a) Amend or modify its articles of incorporation, bylaws or any other
organizational document from its form on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any bonuses to any
director, officer, employee or stockholder of the Company, or enter into any
employment, severance, or similar agreement with any director, officer,
stockholder or employee of the Company, provided, however, that the compensation
of employees of the Company receiving annual compensation of less than $50,000
may be changed in the ordinary course of business consistent with past practice;
(c) Adopt or increase any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees;
(d) Enter into any contract or commitment except contracts and commitments
(for capital expenditures or otherwise) in the ordinary course of business
consistent with past practice;
(e) Incur, assume or guarantee its Indebtedness;
(f) Enter into any transaction or commitment relating to the assets or the
business of the Company which, individually or in the aggregate, could be
material to the Company, or cancel or waive any claim or right of substantial
value which, individually or in the
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aggregate, could be material to the Company, or amend any term of any Company
Securities or Subsidiary Securities;
(g) Set aside or pay any dividend or make any other distribution with
respect to any shares of capital stock of the Company or any Subsidiary (other
than pursuant to Section 5.8 hereof) or repurchase, redeem (other than pursuant
to Article II hereof) or otherwise acquire directly or indirectly, any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any Subsidiary;
(h) Make any change in accounting methods or practices (including changes
in accrual or reserve amounts or policies);
(i) Issue or sell any Company Securities or Subsidiary Securities (other
than the capital stock of Sukee Arena Inc. and Northway, Corp. in the
Reorganizational Transactions), or make any other changes in its capital
structure, including the grant of any stock option or other right to purchase
shares of capital stock of the Company or any Subsidiary;
(j) Sell, lease or otherwise dispose of any material asset or property;
(k) Except as expressly permitted under this Agreement, write-off as
uncollectible any notes or accounts receivable, except write-offs in the
ordinary course of business charged to applicable reserves, none of which
individually or in the aggregate is material; write-off, write-up or write-down
any other material asset of the Company ; or alter its customary time periods
for collection of accounts receivable or payments of accounts payable;
(l) Create or assume any Lien other than a Permitted Lien;
(m) Make any loan, advance or capital contributions to or investment in any
Person;
(n) Terminate or close any material facility, business or operation of the
Company;
(o) Cause or suffer any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of the Company or
any Subsidiary which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(p) Cause any other event, occurrence, development or state of
circumstances or facts which individually or together with other matters, has
had or could reasonably be expected to have a Material Adverse Effect; or
(q) Agree to do any of the foregoing.
5.2. EXCLUSIVE DEALING. During the period from the date of this Agreement
to the earlier of the Closing Date and the termination of this Agreement in
accordance with its terms, neither the Principal Stockholder, nor the Company,
its Subsidiaries, or any of their respective Affiliates, or any officer or
director of the Company its Subsidiaries, or any of their
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respective Affiliates, or other representative of any of the foregoing
(including advisors, agents, attorneys, employees or consultants) will, and the
Principal Stockholder will cause the other Stockholders not to, take any action
to, directly or indirectly, encourage, initiate, solicit or engage in
discussions or negotiations with, or provide any information to any Person,
other than Parent (and its affiliates and representatives), concerning any
purchase of any capital stock of the Company or its Subsidiaries or any merger,
asset sale or similar transaction involving the Company or its Subsidiaries. The
Company, its Subsidiaries and the Principal Stockholder will, and the Principal
Stockholder will cause the other Stockholders to, disclose to Parent the
existence or occurrence of any proposal or contract which it or they or any of
their representatives described above may receive in respect of any such
transaction and the identity of the Person from whom such a proposal or contract
is received.
5.3. REVIEW OF THE COMPANY; CONFIDENTIALITY. (a) Parent may, prior to the
Closing Date, directly or through its representatives, review the properties,
books and records of the Company and its Subsidiaries and their financial and
legal condition to the extent they deem necessary or advisable to familiarize
itself with such properties and other matters. The Company will permit Parent
and its representatives to have, after the date of execution of this Agreement,
reasonable access to the premises and to all the books and records of the
Company and its Subsidiaries and to cause the officers of the Company and its
Subsidiaries to furnish Parent with such financial and operating data and other
information with respect to the business and properties of the Company and its
Subsidiaries as Parent will from time to time reasonably request. The Company
will deliver or cause to be delivered to Parent such additional instruments,
documents, certificates and opinions as Parent may reasonably request for the
purpose of (i) verifying the information set forth in this Agreement or on any
Schedule attached hereto and (ii) consummating or evidencing the transactions
contemplated by this Agreement.
(b) Prior to the Closing, without the prior written consent of the other
parties, no party will, or will permit any of its Affiliates to, disclose to any
other Person (other than such Person's financing sources, existing stockholders
and such Person's directors, officers, employees, advisors and other
representatives that need to know) any proprietary, non-public information of
another party previously delivered or made available to such other party in
connection with the transactions contemplated hereby (including the existence of
and terms of this Agreement and the Ancillary Agreements), other than to the
extent required by applicable Law and upon the advice of counsel. Each party
will direct its financing sources, stockholders, directors, officers, employees
and representatives to keep all such information in strict confidence; provided,
however, that each such person may disclose such information to the extent
required by Law and upon the advice of counsel.
5.4. BEST EFFORTS. Each of the Company, the Subsidiaries, the Principal
Stockholder and Parent will cooperate and use their respective best efforts to
take, or cause to be taken, all appropriate actions, and to make, or cause to be
made, all filings necessary, proper or advisable under applicable laws and
regulations (including, without limitation, the filing of Notification and
Report Forms under the HSR with the Federal Trade Commission and the Antitrust
Division of the Department of Justice) to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
their respective reasonable efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and parties to contracts with the Company as
are necessary for consummation of the transactions contemplated by the
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Agreement and to fulfill the conditions to the sale contemplated hereby.
Notwithstanding any other provision hereof, in no event will Parent or any of
its Affiliates (including the Company and its Subsidiaries after the Closing) be
required to (a) enter into or offer to enter into any divestiture,
hold-separate, business limitation or similar agreement or undertaking in
connection with this Agreement or the transactions contemplated hereby or (b)
make any payment in connection with any consent or approval or condition to
Closing set forth in any subsection of Section 7.1 which it is necessary or
advisable for the Principal Stockholder or the Company to obtain or satisfy in
order to consummate the transactions contemplated by this Agreement.
5.5. SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS. On or prior to
the Closing Date, the Company will terminate all equity-based plans or
agreements listed in any of the Company disclosure Schedules attached hereto.
5.6. PLAN ASSETS. The Company will promptly take all actions necessary to
allow it to continue to constitute an Operating Company, and otherwise not to
cause any of the underlying assets of the Company to be deemed "PLAN ASSETS"
with respect to Parent or any other stockholder of the Company.
5.7. NET WORTH. The Company will, and the Principal Stockholder will cause
the Company to, (a) have a net worth (calculated on a basis consistent with the
policies, principles and methodology used in connection with the preparation of
the Audited Balance Sheet) of not less than $19.9 million at the Closing before
any adjustments for the Reorganizational Transactions and (b) deliver evidence
of the foregoing reasonably satisfactory to Parent.
5.8. REORGANIZATIONAL TRANSACTIONS. At or prior to the Closing, the
Principal Stockholder will cause the Company to, and the Company will, dispose
of the capital stock of Sukee Arena Inc. and Northway, Corp. in such manner and
on such terms and conditions as may be approved by Parent, and the Principal
Stockholder shall bear any and all Taxes, costs and expenses related to such
disposition. The transactions described in this Section 5.8 are referred to as
the "REORGANIZATIONAL TRANSACTIONS."
5.9. APPRAISAL. Within 30 days of the Closing, the Principal Stockholder
will select a third party appraiser with the consent of Parent to perform a fair
market value appraisal (the "APPRAISAL") based on the current use, location and
market conditions and based on other factors agreed upon by the parties of the
Surviving Corporation's premises located at 1501 Verti Drive, Winslow, Maine
(the "PREMISES"). The costs and expenses of the Appraisal will be borne equally
by the Principal Stockholder and the Surviving Corporation. Within 90 days after
receipt of the Appraisal, the Surviving Corporation will either (a) execute and
deliver an amendment to the Lease reflecting a monthly Basic Rent from the date
of such amendment based on the fair market value of the Premises determined in
accordance with this Section 5.9 and as set forth in the Appraisal or (b)
purchase the Premises from the Principal Stockholder and Rita Sukeforth for an
amount equal to the fair market value of the Premises determined in accordance
with this Section 5.9 and as set forth in the Appraisal.
5.10. FURTHER ASSURANCES. From time to time, as and when requested by
any party hereto and subject to Section 5.4, the other parties will execute
and deliver, or cause to be executed and delivered, all such documents and
instruments and will take, or cause to be taken,
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all such further or other actions, as the requesting party may reasonably deem
necessary or desirable to consummate the transactions contemplated by this
Agreement.
VI. TAX MATTERS
6.1. TAX RETURNS. The Stockholders' Representative will have the exclusive
authority and obligation to prepare and timely file, or cause to be prepared and
timely filed, all Returns of the Company that are due with respect to any
taxable year or other taxable period ending on or prior to the Closing Date.
Such authority will include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company will be reported or
disclosed in such Returns; PROVIDED, HOWEVER, that such Returns will be prepared
by treating items on such Returns in a manner consistent with the past practice
with respect to such items, unless otherwise required by law. The Stockholders'
Representative will provide to Parent drafts of all Returns of the Company
required to be prepared and filed by the Stockholders' Representative under this
Section 6.1 at least 30 days prior to the due date for the filing of such
Returns (including any extensions). At least 15 days prior to the due date for
the filing of such Returns (including any extensions), Parent will notify the
Stockholders' Representative of the existence of any objection (specifying in
reasonable detail the nature and basis of such objection) Parent may have to any
items set forth on such draft Returns (a "DISPUTE NOTICE"). Parent and the
Stockholders' Representative agree to consult and resolve in good faith any such
objection. The Stockholders' Representative will not file any return without the
prior written consent of Parent, which consent will not be unreasonably withheld
or delayed; PROVIDED, HOWEVER, that no such consent will be required if Parent
shall not have timely delivered a Dispute Notice or the objections contained in
such Dispute Notice shall have been finally resolved.
6.2. APPORTIONMENT OF TAXES. (a) All Taxes and Tax liabilities with respect
to the income, property or operations of the Company that relate to a taxable
year or other taxable period beginning before and ending after the Closing Date
will be apportioned between the Pre-Closing Tax Period and the Post-Closing Tax
Period as follows: (A) in the case of Taxes other than income Taxes and sales
and use Taxes, on a per diem basis, and (B) in the case of income Taxes and
sales and use Taxes, as determined from the books and records of the Company,
between Pre-Closing and Post-Closing Tax Periods as though the taxable year of
the Company terminated at the close of business on the Closing Date, and based
on accounting methods, elections and conventions that do not have the effect of
distorting income and expenses. The Stockholders will be liable for the payment
of all Taxes of the Company which are attributable to any Pre-Closing Tax Period
(net of reserves for such Taxes to the extent accurately reflected in the
preparation of the Closing Date Balance Sheet and the computation of the Closing
Working Capital Balance), whether shown on any original return or amended return
for the period referred to therein. The Company will be liable for the payment
of all Taxes which are attributable to any Post-Closing Tax Period. All
transfer, documentary, sales, use, stamp, registration, value added and other
such Taxes and fees (including any penalties and interest), imposed on the
Parent or the Company which are incurred in connection with this Agreement will
be borne and paid by the Principal Stockholder when due, and the Principal
Stockholder will, at his own expense, cause to be filed all necessary Returns
and other documentation with respect to all such Taxes and fees.
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(b) To the extent the Company has made a payment of Taxes on or prior to
the Closing Date with respect to Taxes attributable to a Pre-Closing Tax Period
in excess of the liability of the Company for such Taxes for such Pre-Closing
Tax Period, the Surviving Corporation will, upon written request by the
Stockholders' Representative, use commercially reasonable efforts to obtain a
prompt refund of such overpayment. The Surviving Corporation will remit any
refund received pursuant to the immediately preceding sentence, net of any Taxes
of the Surviving Corporation arising from the receipt of such refund, to the
Stockholders' Representative for the benefit of the Stockholders within 15 days
of the receipt of such refund.
6.3. COOPERATION; AUDITS. In connection with the preparation of Returns,
audit examinations and any administrative or judicial proceedings relating to
the Tax liabilities imposed on the Company for all Pre-Closing Tax Periods,
Parent and the Company on the one hand, and the Stockholders' Representative on
the other hand, will cooperate fully with each other, including, but not limited
to, the furnishing or making available during normal business hours of records,
personnel (as reasonably required), books of account, powers of attorney or
other materials necessary or helpful for the preparation of such Returns, the
conduct of audit examinations or the defense of claims by Tax authorities as to
the imposition of Taxes.
6.4. CONTROVERSIES. Parent will promptly notify the Stockholders'
Representative in writing upon receipt by Parent or any affiliate of Parent
(including the Company after the Closing Date) of written notice of any
inquiries, claims, assessments, audits or similar events with respect to Taxes
relating to a Pre-Closing Tax Period for which the Principal Stockholder may be
liable under this Agreement (any such inquiry, claim, assessment, audit or
similar event, a "TAX MATTER"). The Stockholders' Representative, at the
Principal Stockholder's sole expense, will have the exclusive authority to
represent the interests of the Company with respect to any Tax Matter before the
IRS, any other Taxing Authority, any other governmental agency or authority or
any court and will have the sole right to extend or waive the statute of
limitations, with respect to a Tax Matter and to control the defense, compromise
or other resolution of any Tax Matter, including responding to inquiries, filing
Tax returns and settling audits; PROVIDED, HOWEVER, that the Stockholders'
Representative will not enter into any settlement of or otherwise compromise any
Tax Matter that affects or may affect the Tax liability of Parent or the Company
or any affiliate of the foregoing for any Post-Closing Tax Period, including the
portion of a period beginning before the Closing Date and ending after the
Closing Date, without the prior written consent of Parent, which consent will
not be unreasonably withheld. The Stockholders' Representative will keep Parent
fully and timely informed with respect to the commencement, status and nature of
any Tax Matter. The Stockholders' Representative will, in good faith, allow
Parent to consult with the Stockholders' Representative regarding the conduct of
or positions taken in any such proceeding.
6.5. AMENDED RETURNS. The Stockholders' Representative will not file or
cause or permit to be filed any amended Return without the prior written consent
of Parent, which consent will not be unreasonably withheld or delayed. Parent
will not file or cause to be filed any amended return covering any period or
adjusting any Taxes for a period which includes any period prior to the Closing
Date without the prior written consent of the Stockholders' Representative,
which consent will not be unreasonably withheld or delayed.
6.6. NON-FOREIGN PERSON AFFIDAVIT. The Company will furnish to Parent on or
before the Closing Date a non-foreign person affidavit as required by Section
1445 of the Code.
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VII. CONDITIONS TO CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The obligations of
Parent and Merger Sub to consummate the Closing are subject to the satisfaction
of the following conditions:
7.1.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a) The
representations and warranties of the Company made in this Agreement will be
true and correct in all respects (or, if any such representation is not
expressly qualified by "materiality," "Material Adverse Effect" or words of
similar import, then in all material respects) as of the date hereof and as of
the Closing, as though made as of the Closing; (b) the Company shall have
performed and complied with all terms, agreements and covenants contained in
this Agreement required to be performed or complied with by the Company on or
before the Closing Date; and (c) the Company shall have delivered to Parent a
certificate of the Company's Chief Executive Officer, dated the Closing Date,
confirming the foregoing and such other evidence of compliance with its
obligations as Parent may reasonably request.
7.1.2. COMPANY'S CERTIFICATE. The Company shall have delivered to Parent a
certificate from its Secretary or an Assistant Secretary certifying as to the
due adoption of resolutions adopted by its Board of Directors and its
stockholders, (if required) authorizing the execution of this Agreement and the
taking of any and all actions deemed necessary or advisable to consummate the
transactions contemplated herein.
7.1.3. STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved in the manner and by the requisite
vote of the Stockholders required by applicable law.
7.1.4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PRINCIPAL
STOCKHOLDER. (a) The representations and warranties of the Principal Stockholder
made in this Agreement will be true and correct in all respects (or, if any such
representation is not expressly qualified by "materiality," "Material Adverse
Effect" or words of similar import, then in all material respects) as of the
date hereof and as of the Closing, as though made as of the Closing; (b) the
Principal Stockholder shall have performed and complied with all terms,
agreements and covenants contained in this Agreement required to be performed or
complied with by the Principal Stockholder on or before the Closing Date; and
(c) the Principal Stockholder shall have delivered to Parent certificates dated
the Closing Date confirming the foregoing and such other evidence of compliance
with the Principal Stockholder's obligations as Parent may reasonably request.
7.1.5. NO INJUNCTION, ETC. No provision of any applicable law or regulation
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
7.1.6. NO PROCEEDINGS. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages will have been instituted by any Person (other than Parent or the
Company) before any court, arbitrator or Governmental Authorities and be
pending.
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7.1.7. REQUIRED FILINGS. All actions by or in respect of or filings by the
Company or the Principal Stockholder with any Person required to permit the
consummation of the Closing shall have been taken, made or obtained.
7.1.8. OPINION OF COUNSEL. Parent shall have received an opinion of Daviau,
Jabar & Bratten, counsel to the Company and the Stockholders dated the Closing
Date, substantially in the form attached hereto as EXHIBIT F.
7.1.9. DUE DILIGENCE. Parent shall have completed, or caused to be
completed by its attorneys, accountants and other representatives, to its
satisfaction, business, legal, environmental and accounting due diligence
investigations and reviews of the Company.
7.1.10. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
been executed and delivered by the parties thereto other than Saunders Karp &
Megrue, L.P.
7.1.11. RESIGNATION OF DIRECTORS. Each of the Directors of the Company
immediately prior to the Closing shall have submitted a letter of resignation to
the Company effective as of the Closing.
7.1.12. THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
otherwise required in connection with the consummation of the transactions
contemplated by this Agreement shall have been received. All of the consents,
approvals, authorizations, exemptions and waivers from Governmental Authorities
that will be required in order to enable Parent to consummate the transactions
contemplated hereby shall have been obtained.
7.1.13. FIRPTA. The Company shall have furnished to Parent, on or prior to
the Closing Date, a non-foreign person affidavit required by Section 1445 of the
Code.
7.1.14. HSR ACT. Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby will have expired or been terminated.
7.1.15. NO MATERIAL ADVERSE CHANGE. Prior to the Closing, no event shall
have occurred which, individually or when considered together with all other
matters, has had or which could reasonably be expected to have a Material
Adverse Effect.
7.1.16. FINANCING. Parent shall have obtained financing for the payment of
the Aggregate Closing Merger Consideration on terms satisfactory to it in its
sole discretion.
7.1.17. LIQUIDATION OF INVESTMENT SECURITIES. Prior to the Closing, the
Company shall have disposed of all of the Investment Securities for fair market
value cash consideration.
7.1.18. STOCKHOLDER INDEBTEDNESS. Each Stockholder shall have repaid all
Indebtedness of such Stockholder to the Company or any Subsidiary of the Company
outstanding immediately prior to the Closing.
7.1.19. PRINCIPAL STOCKHOLDER OWNERSHIP. The Principal Stockholder will own
beneficially and of record not less than 51% of each class of the issued and
outstanding Company
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Stock on the date hereof and immediately prior to the Effective Time and will
have provided evidence thereof reasonably satisfactory to Parent and its
counsel.
7.1.20. DISSENTERS RIGHTS. All Stockholders shall have lawfully waived
their statutory rights (including dissenters rights) under the MBCA to receive
consideration for their shares of Company Stock other than the consideration
expressly provided for under this Agreement.
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE PRINCIPAL
STOCKHOLDER. The obligations of the Company and the Principal Stockholder to
consummate the Closing are subject to the satisfaction of the following
conditions:
7.2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARENT AND MERGER SUB.
(a) The representations and warranties of Parent and Merger Sub made in this
Agreement will be true and correct in all respects (or, if any such
representation is not expressly qualified by "materiality," "Material Adverse
Effect" or words of similar import, then in all material respects) as of the
date hereof and as of the Closing, as though made as of the Closing; (b) Parent
and Merger Sub shall have performed and complied with all terms, agreements and
covenants contained in this Agreement required to be performed or complied with
by Parent and Merger Sub on or before the Closing Date; and (c) Parent and
Merger Sub shall have delivered to the Company and the Stockholders'
Representative a certificate of Parent's and Merger Sub's Chief Executive
Officer, dated the Closing Date, confirming the foregoing and such other
evidence of compliance with its obligations as the Company or the Stockholders'
Representative may reasonably request.
7.2.2. PARENT'S AND MERGER SUB'S CERTIFICATE. Parent and Merger Sub shall
have delivered to the Company and the Stockholders' Representative a certificate
from its Secretary or Assistant Secretary certifying as to the due adoption of
resolutions adopted by the Board of Directors or Management Committee of Parent
and Merger Sub (and the stockholders or members if required) authorizing the
execution of this Agreement and the taking of any and all actions deemed
necessary or advisable to consummate the transactions contemplated herein.
7.2.3. NO INJUNCTION, ETC. No provision of any applicable law or regulation
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
7.2.4. OPINION OF COUNSEL. The Principal Stockholder shall have received an
opinion of Jones, Day, Reavis & Pogue, counsel to Parent, dated the Closing
Date, substantially in the form attached hereto as EXHIBIT G.
7.2.5. ESCROW AGREEMENT. The Escrow Agreement shall have been executed and
delivered by the parties thereto other than the Stockholders' Representative.
7.2.6. HSR ACT. Any applicable waiting period under the HSR Act relating to
the transactions contemplated hereby shall have expired or been terminated.
7.2.7. MANAGEMENT BONUS PLAN. Parent shall have executed and delivered to
the Principal Stockholder a letter agreement obligating the Surviving
Corporation to adopt, effective
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on the Closing Date, a management bonus plan, such letter agreement to be in
form and in substance reasonably satisfactory to the Principal Stockholder.
VIII. SURVIVAL INDEMNIFICATION
8.1. SURVIVAL. All covenants and agreements of the parties contained in
this Agreement will survive the Closing indefinitely. Notwithstanding the
preceding sentence the representations and warranties of the parties contained
in this Agreement or in any certificate or other writing delivered pursuant
hereto or in connection herewith will survive the Closing for two years
thereafter; PROVIDED, HOWEVER, that the representations and warranties contained
in Section 3.1.10 will survive the Closing until the expiration of the statute
of limitations applicable to the matters covered thereby (after giving effect to
any waiver, mitigation or extension thereof granted by the Company after the
Closing), the representations and warranties contained in Section 3.1.18 will
survive the Closing for five years thereafter, and the representations and
warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6 and
3.1.7(c) (collectively, the "SELECTED REPRESENTATIONS AND WARRANTIES"), 3.2.1,
3.2.2, 3.2.3, 3.2.4, 4.1, 4.2, 4.3 and 4.4 will survive the Closing
indefinitely. Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under this Agreement will
survive the time at which it would otherwise terminate pursuant to the preceding
sentence if written notice of the inaccuracy or breach thereof giving rise to
such right of indemnity shall have been given to the party against whom such
indemnity may be sought prior to such time; PROVIDED, HOWEVER, that the
applicable representation or warranty will survive only with respect to the
particular inaccuracy or breach specified in such written notice.
8.2. INDEMNIFICATION. (a) Prior to the Closing, the Company, and thereafter
the Principal Stockholder, will indemnify, defend and hold harmless Parent and
its officers, directors, employees, members, managing directors, Affiliates
(including, after the Closing Date, the Company) and agents, and the successors
to the foregoing (and their respective officers, directors, employees, members,
managing directors, Affiliates and agents), against any and all liabilities,
damages and losses, including, without limitation, diminution in value of the
Company, Company Stock, lost profits and other consequential damages and, if but
only to the extent asserted in a Third Party Claim, punitive damages, and all
costs or expenses, including, without limitation, attorneys' and consultants'
fees and expenses ("DAMAGES"), incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Company or
the Principal Stockholder in any subsection of Section 3.1 to be true and
correct as of the Closing Date (other than a breach of Section 3.1.10 with
respect to Taxes which will be governed by Section 8.3), or (ii) the breach of
any covenant or agreement made or to be performed by the Company pursuant to
this Agreement; PROVIDED, HOWEVER, that neither the Company nor the Principal
Stockholder will be liable under clause (i) of this Section 8.2(a) (other than
with respect to such breaches of any of the Selected Representations and
Warranties and the representations and warranties contained in Section 3.1.7)
unless the aggregate amount of Damages exceeds $300,000 and then from the first
dollar to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that the
Principal Stockholder's liability under clause (i) of this Section 8.2(a) (other
than with respect to such breaches of any of the Selected Representations and
Warranties and the representations and warranties contained in Section 3.1.7)
will not exceed, in the aggregate, $13.0 million.
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(b) The Principal Stockholder will indemnify, defend and hold harmless
Parent and its officers, directors, employees, members, managing directors,
Affiliates (including, after the Closing Date, the Company) and agents and the
successors to the foregoing (and their respective officers, directors,
employees, members, managing directors, Affiliates and agents) against Damages
incurred or suffered as a result of or arising out of (i) the failure of any
representation or warranty made by the Principal Stockholder in any subsection
of Section 3.2 of this Agreement to be true and correct as of the Closing Date
or (ii) the breach of any covenant or agreement made or to be performed by the
Principal Stockholder pursuant to this Agreement.
(c) Parent and the Surviving Corporation, jointly and severally, on and
after the Closing Date will indemnify, defend and hold harmless the Principal
Stockholder against Damages incurred or suffered as a result of or arising out
of (i) the failure of any representation or warranty made by Parent or Merger
Sub in this Agreement to be true and correct as of the Closing Date or (ii) the
breach of any covenant or agreement made or to be performed by Parent or Merger
Sub pursuant to this Agreement; PROVIDED, HOWEVER, that Parent will not be
liable under clause (i) of this Section 8.2(c) unless the aggregate amount of
Damages exceeds $300,000 and then from the first dollar to the full extent of
such Damages; PROVIDED, FURTHER, HOWEVER, that Parent's liability under clause
(i) of this Section 8.2(c) will not exceed, in the aggregate, $13.0 million.
(d) The Principal Stockholder will indemnify, defend and hold harmless
Parent and its officers, directors, employees, members, managing directors,
Affiliates (including, after the Closing Date, the Company) and agents and the
successors to the foregoing (and their respective officers, directors,
employees, members, managing directors, Affiliates and agents) against Damages
incurred or suffered as a result of or arising out of or in connection with item
4 disclosed on SCHEDULE 3.1.19(a) to the extent attributable to conditions,
events or circumstances occurring or existing on or prior to the Closing Date;
PROVIDED, HOWEVER, that the Principal Stockholder's liability under this Section
8.2(d) will not exceed, in the aggregate, $13.0 million.
8.3. TAX INDEMNIFICATION. Prior to the Closing, the Company, and thereafter
the Principal Stockholder, will indemnify, defend and hold harmless Parent, and
its officers, directors, employees, members, managing directors, Affiliates
(including, after the Closing Date, the Company) and agents and the successors
to the foregoing (and their respective officers, directors, employees, members,
managing directors, Affiliates and agents) against (i) all Taxes (and losses,
claims and expenses related thereto) resulting from, arising out of, or incurred
with respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 3.1.10 to be true and correct as of the Closing Date,
(ii) all Taxes imposed on or asserted against the Company or for which the
Company may be liable in respect of the properties, income or operations of the
Company for all Pre-Closing Tax Periods, and (iii) all Taxes imposed on or
asserted against the Company, or for which the Company may be liable, as a
result of any transaction, contemplated by this Agreement as in the case of
clauses (i) and (ii) of this Section 8.3, net of reserves for Taxes to the
extent accurately reflected in the computation of the Closing Working Capital
Balance.
8.4. PROCEDURES. (a) If any Person who or which is entitled to seek
indemnification under Section 8.2 or Section 8.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third Party Claim
against such Indemnified Party with
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respect to which the Person against whom or which such indemnification is being
sought (an "INDEMNIFYING PARTY") is obligated to provide indemnification under
this Agreement, the Indemnified Party will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 20
days after receipt of such written notice of such Third Party Claim. Such notice
by the Indemnified Party will describe the Third Party Claim in reasonable
detail, will include copies of all available material written evidence thereof
and will indicate the estimated amount, if reasonably practicable, of the
Damages that has been or may be sustained by the Indemnified Party. The
Indemnifying Party will have the right to participate in, or, by giving written
notice to the Indemnified Party, to assume, the defense of any Third Party Claim
at such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel (reasonably satisfactory to the Indemnified Party), and the Indemnified
Party will cooperate in good faith in such defense.
(b) If, within 20 days after giving notice of a Third Party Claim to an
Indemnifying Party pursuant to Section 8.4(a), an Indemnified Party receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 8.4(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within 20 days after receiving written notice from the Indemnified Party that
the Indemnified Party reasonably believes the Indemnifying Party has failed to
take such steps or if the Indemnifying Party has not undertaken fully to
indemnify the Indemnified Party in respect of all damages relating to the
matter, the Indemnified Party may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs and expenses paid or incurred in
connection therewith. Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any Third
Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnified Party for which the Indemnified Party
is not entitled to indemnification hereunder, or which provides for injunctive
or other non-monetary relief applicable to the Indemnified Party, or, as to
matters other than Tax Matters, does not include an unconditional release of all
Indemnified Parties. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within ten days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim and,
in such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer. The Indemnified
Party will provide the Indemnifying Party with reasonable access during normal
business hours to books, records, and employees of the Indemnified Party
necessary in connection with the Indemnifying Party's defense of any Third Party
Claim which is the subject of a claim for indemnification by an Indemnified
Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages which does not
result from a Third Party Claim (a "DIRECT CLAIM") will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 20 days after the Indemnified Party becomes aware of such
Direct Claim. Such notice by the
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Indemnified Party will describe the Direct Claim in reasonable detail, will
include copies of all available material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of Damages that has
been or may be sustained by the Indemnified Party. The Indemnifying Party will
have a period of ten days within which to respond in writing to such Direct
Claim. If the Indemnifying Party does not so respond within such ten day period,
the Indemnifying Party will be deemed to have rejected such claim, in which
event the Indemnified Party will be free to pursue such remedies as may be
available to the Indemnified Party on the terms and subject to the provisions of
this Agreement.
(d) A failure to give timely notice or to include any specified information
in any notice as provided in Section 8.4(a), 8.4(b) or 8.4(c) will not affect
the rights or obligations of any party hereunder, except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise materially prejudiced as a result of such
failure.
(e) All indemnifiable Damages under this Agreement will be paid in cash in
immediately available funds.
8.5. TREATMENT OF INDEMNIFICATION PAYMENTS. Any amount paid by the
Principal Stockholder or Parent under Section 8.2 or 8.3 will be treated as a
capital contribution, on the one hand, and/or an adjustment to the Aggregate
Consideration, on the other hand.
8.6. INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The amount of
Damages for which indemnification is provided under Sections 8.2 and 8.3 will be
computed net of any insurance proceeds received by the Indemnified Party in
connection with such Damages, reduced by all costs and expenses related thereto
and any premium increase or expense resulting therefrom. If the amount with
respect to which any claim is made under this Section 8.6 gives rise to a
currently realizable Tax benefit, the indemnity payment will be reduced by the
amount of such currently realizable benefit then available to the party making
the claim if and to the extent actually realized by such party in the fiscal
year in which such indemnity payment is made to such party or in the next
succeeding fiscal year.
IX. MISCELLANEOUS
9.1. TERMINATION. (a) This Agreement may be terminated at any time prior to
the Closing:
(i) by the mutual written consent of Parent, the Company and the Principal
Stockholder;
(ii) by Parent, if there has been a material violation or breach by the
Company or the Principal Stockholder of any covenant, representation or warranty
contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of Parent at the Closing, and such violation or
breach has not been waived by Parent or, in the case of a covenant breach, cured
by the Company or the Principal Stockholder within the earlier of (x) ten days
after written notice thereof from Parent or (y) the Closing Date;
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(iii) by the Company or the Principal Stockholder, if there has been a
material violation or breach by Parent of any covenant, representation or
warranty contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of the Company or the Principal Stockholder at the
Closing, and such violation or breach has not been waived by the Company or the
Principal Stockholder or, in the case of a covenant breach, cured by Parent
within the earlier of (x) ten days after written notice thereof from the Company
or the Principal Stockholder or (y) the Closing Date; or
(iv) by Parent, the Company or the Principal Stockholder if the
transactions contemplated hereby have not been consummated by December 31, 1998;
PROVIDED, HOWEVER, that neither Parent, the Company nor any Stockholder will be
entitled to terminate this Agreement pursuant to this Section 9.1(a)(iv) if such
Person's breach of this Agreement has prevented the consummation of the
transactions contemplated hereby; and
(v) by Parent, if the conditions to Closing set forth in Sections 7.1.9 or
7.1.16 have not been satisfied.
(b) In the event that this Agreement is terminated pursuant to Section
9.1(a), all further obligations of the parties hereto under this Agreement
(other than pursuant to Section 9.4, which will continue in full force and
effect) will terminate without further liability or obligation of any party to
any other party hereunder; PROVIDED, HOWEVER, that no party will be released
from liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (i) failure of such party to have performed its
obligations hereunder or (ii) any misrepresentation made by such party of any
matter set forth herein.
9.2. NOTICES. All notices, requests and other communications to any party
hereunder will be in writing (including facsimile transmission) and will be
given to such party at its address set forth in SCHEDULE 9.2. All such notices,
requests and other communications will be deemed received on the date of receipt
by the recipient thereof if received prior to 5:00 p.m. in the place of receipt
and such day is a business day in the place of receipt. Otherwise, any such
notice, request or communication will be deemed not to have been received until
the next succeeding business day in the place of receipt.
9.3. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement (subject to
Section 9.17(b)(iii)), or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor will any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided will be cumulative and not exclusive of any rights or remedies provided
by law.
9.4. EXPENSES. Except as otherwise expressly provided for herein, the
parties will pay or cause to be paid all of their own fees and expenses incident
to this Agreement and in preparing to consummate and consummating the
transactions contemplated hereby, including the fees and expenses of any broker,
finder, financial advisor, legal advisor or similar person
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engaged by such party; PROVIDED, HOWEVER, that in the event that the Company or
the Principal Stockholder elects not to consummate the transactions contemplated
hereby (other than as a result of a material breach by Parent of any covenant,
representation or warranty of Parent contained in this Agreement), the Company
will pay to Parent the reasonable expenses of Parent (including expenses of
Parent's counsel and other advisors) incurred in connection with this Agreement
and the transactions contemplated hereby up to a maximum of $150,000.
9.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto.
9.6. NO THIRD PARTY BENEFICIARIES. Except as provided in Article VIII, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied will give or be construed to
give to any Person, other than the parties hereto and such permitted assigns any
legal or equitable rights hereunder.
9.7. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the law of the State of New York, without regard to the
conflict of laws rules of such state.
9.8. JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any court of competent
jurisdiction in the Borough of Manhattan or the United States District Court for
the Southern District of New York and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 9.2 will be deemed effective service of process on such party.
9.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9.10. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9.11. HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
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9.12. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement among the parties with respect
to the subject matter of this Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
of this Agreement.
9.13. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
9.14. NO WAIVER. No action or inaction taken or omitted pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
9.15. CERTAIN INTERPRETIVE MATTERS. (a) Unless the context otherwise
requires, (i) all references to Sections, Articles, Exhibits or Schedules are to
Sections, Articles, Exhibits, or Schedules of or to this Agreement, (ii) each of
the Schedules will apply only to the corresponding Section or subsection of this
Agreement, (iii) each term defined in this Agreement has the meaning assigned to
it, (iv) each accounting term not otherwise defined in this Agreement has the
meaning assigned to it in accordance with GAAP, (v) words in the singular
include the plural and VICE VERSA, and (vi) the term "INCLUDING" means
"including without limitation." All references to $ or dollar amounts will be to
lawful currency of the United States. To the extent the term "day" or "days" is
used, it shall mean calendar days.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) (i) All references to the "KNOWLEDGE OF THE COMPANY" or to words of
similar import will be deemed to be references to the actual knowledge of one or
more of the executive officers or directors of the Company whose names are
listed on SCHEDULE 9.15(c)(i), and will include such knowledge as such executive
officers or directors would have had after due inquiry of the responsible
individuals of the Company whose names are listed separately on SCHEDULE
9.15(c)(i) and its counsel and accountants.
(ii) All references to the "KNOWLEDGE OF PARENT" or to words of
similar import will be deemed to be references to the actual knowledge of
one or more of the executive officers, directors or members of the
management committee of Parent whose names are listed on SCHEDULE
9.15(c)(ii) and, will include such knowledge as such executive officers ,
directors or management committee members would have had after due inquiry
of the responsible individuals of Parent whose names are listed separately
on SCHEDULE 9.15(c)(ii) and its counsel and accountants.
50
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(iii) All references to the "KNOWLEDGE OF PRINCIPAL STOCKHOLDER" or to
words of similar import will be deemed to be references to the actual
knowledge of the Principal Stockholder, as applicable.
9.16. TRANSFER OF PROCEEDS. Until the later to occur of the fifth
anniversary of the Closing Date or the expiration of the statute of limitations
applicable to the matters covered in Section 3.1.10, the Principal Stockholder
will not transfer or permit the transfer of any of the Aggregate Consideration
received by or on behalf of the Principal Stockholder if the result thereof
would make the Principal Stockholder unable to satisfy his obligations hereunder
as to indemnification in an amount up to $13.0 million.
9.17. STOCKHOLDERS' REPRESENTATIVE. (a) By the execution and delivery of
this Agreement and by delivery of waivers of dissent, each Stockholder hereby
irrevocably constitutes and appoints the Principal Stockholder as Stockholders'
Representative ("STOCKHOLDERS' REPRESENTATIVE") with the exclusive authority to
act in accordance with Section 9.17(b). In the event of the death, resignation
or inability to act of the Principal Stockholder, Robert Daviau will be
successor Stockholders' Representative with all powers of his predecessor. In
addition, upon written notice to Parent, the Stockholders may change the
identity of the Stockholders' Representative by written consent signed by the
Stockholders owning more than 50% of the shares of the issued and outstanding
Company Stock on the date hereof.
(b) The Stockholders' Representative will have full power:
(i) to act on each Stockholder's behalf according to the terms of this
Agreement, to give and receive notices on behalf of all Stockholders and to act
on their behalf in connection with any matter as to which one or more
Stockholders is an "Indemnified Party" or "Indemnifying Party" under this
Agreement, all in the absolute discretion of Stockholders' Representative; and
(ii) in general, to do all things and to perform all acts, including
executing and delivering all agreements, certificates, receipts, instructions
and other instruments contemplated by or in connection with this Agreement.
(iii) to amend this Agreement on behalf of the Stockholders.
Notwithstanding anything in this Section 9.17 to the contrary, the Stockholders'
Representative will not be authorized to alter, change or modify the Aggregate
Consideration or the Per Share Closing Merger Consideration on behalf of the
Stockholders.
This power of attorney, and all authority hereby conferred, is granted subject
to the interests of the other Stockholders, the Company and Parent hereunder and
in consideration of the mutual covenants and agreements made herein, and is
irrevocable and will not be terminated by any act of any Stockholder or by
operation of Law, whether by the death or incapacity of any Stockholder or by
the occurrence of any other event. The Stockholders' Representative will not be
liable for any action taken in the capacity of Stockholders' Representative in
accordance with the terms of this Agreement, including the compromise,
settlement, payment or defense of any claim (including expenses and costs
associated therewith) under this Agreement regardless of whether any Stockholder
is the claimant or the party against whom a claim is being made. In
51
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connection with the exercise of his duties, the Stockholders' Representative
will be entitled to consult with and rely upon legal counsel and other
professional advisors, with the costs thereof to be allocated among the
Stockholders and will have no liability hereunder for actions taken in good
faith reliance upon the advice of such advisors. Each Stockholder will, jointly
and severally, holder the Stockholders' Representative harmless from any and all
Damage which they, or any one of them, may sustain as a result of any action
taken in good faith hereunder.
52
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The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers or in their individual capacity, if applicable,
as of the day and year first above written.
MID STATE MACHINE PRODUCTS
By: /s/ S. Douglas Sukeforth
----------------------------------------
Name: S. Douglas Sukeforth
Title: President
MID STATE HOLDING CO., INC.
By: /s/ John Clark
----------------------------------------
Name: John Clark
Title: President and Chief
Executive Officer
MID STATE ACQUISITION, INC.
By: /s/ John Clark
----------------------------------------
Name: John Clark
Title: President and Chief
Executive Officer
/s/ S. Douglas Sukeforth
----------------------------------------------
S. Douglas Sukeforth, individually, as the
Principal Stockholder and as the
Stockholders' Representative
53
<PAGE>
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
GENERAL AUTOMATION, INC.,
MAX STARR
AND
PRECISION PARTNERS HOLDING COMPANY
----------------------------
DATED AS OF FEBRUARY 5, 1999
----------------------------
<PAGE>
TABLE OF CONTENTS
(Not a part of this Agreement)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
RECITALS ........................................................................................1
I. DEFINITIONS..................................................................................1
1.1. Definitions....................................................................1
II. SALE AND PURCHASE OF ASSETS.................................................................8
2.1. Purchased Assets...............................................................8
2.2. Excluded Assets...............................................................10
2.3 Nonassignable Contracts, Leases and Permits...................................11
III. ASSUMPTION OF LIABILITIES.................................................................11
3.1. Liabilities Assumed by Buyer..................................................11
3.2. Liabilities Not Assumed by Buyer..............................................12
IV. CONSIDERATION FOR PURCHASED ASSETS; CLOSING................................................13
4.1. Purchase Price................................................................13
4.2. Estimated Adjustment..........................................................13
4.3. Post-Closing Adjustment.......................................................13
4.4. Adjustments to Closing Payments...............................................15
4.5. Allocation of Purchase Price..................................................15
V. CLOSING AND CLOSING DELIVERIES.............................................................16
5.1. The Closing...................................................................16
5.2. Deliveries of Seller..........................................................16
5.3. Deliveries by Buyer...........................................................17
5.4. Proceedings...................................................................18
VI. REPRESENTATIONS AND WARRANTIES OF SELLER...................................................18
6.1. ..............................................................................18
6.1.1. Corporate Existence and Power.........................................18
6.1.2. Enforceability........................................................18
6.1.3. Governmental Authorization............................................18
6.1.4. Non-Contravention; Consents...........................................18
6.1.5. Capitalization........................................................19
6.1.6. Financial Statements; Books and Records..............................19
6.1.7. No Undisclosed Liabilities...........................................20
6.1.8. Intercompany Accounts................................................20
6.1.9. Tax Matters..........................................................20
6.1.10. Absence of Certain Changes...........................................21
6.1.11. Contracts............................................................21
6.1.12. Insurance Coverage...................................................23
6.1.13. Litigation...........................................................24
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(Not a part of this Agreement)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
6.1.14. Compliance with Laws; Permits........................................24
6.1.15. Properties; Sufficiency of Assets....................................24
6.1.16. Intellectual Property................................................25
6.1.17. Environmental Matters................................................25
6.1.18. Plans and Material Documents.........................................27
6.1.19. Interests in Customers, Suppliers, Etc...............................28
6.1.20. Customer, Supplier and Employee Relations............................28
6.1.21. Other Employment Matters.............................................29
6.1.22. Accounts Receivable..................................................29
6.1.23. Inventory............................................................30
6.1.24. Millennium Compliance................................................30
6.1.25 Finders' Fees........................................................30
VII. REPRESENTATIONS AND WARRANTIES OF BUYER...................................................30
7.1. Corporate Existence and Power.................................................30
7.2. Authorization; Enforceability.................................................30
7.3. Governmental Authorization....................................................30
7.4. Non-Contravention.............................................................31
7.5. Litigation....................................................................31
7.6. Consents......................................................................31
7.7. Finders' Fees.................................................................31
7.8. Precision Structure...........................................................31
VIII. CERTAIN COVENANT.........................................................................31
8.1. Conduct of Business of the Company............................................31
8.2. Exclusive Dealing.............................................................33
8.3. Review of the Company; Confidentiality........................................33
8.4. Reasonable Efforts............................................................34
8.5. Transfer of Employees and Benefit Plans.......................................34
8.6 Books and Records.............................................................36
8.7 Bulk Transfer Laws............................................................36
8.8 Non-competition...............................................................36
8.9 Collection of Payments........................................................37
8.10 Accounts Receivable...........................................................37
8.11 Use of Names..................................................................37
8.12 Pre-Closing Audits............................................................37
8.13 Satisfaction and Termination of Equity Arrangements...........................38
8.14 Further Assurances. .........................................................38
IX. CONDITIONS TO CLOSING......................................................................38
9.1 Conditions to Obligations of Buyer............................................38
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(Not a part of this Agreement)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.1.1. Representations, Warranties and Covenants of Seller...................38
9.1.2. No Injunction, etc....................................................39
9.1.3. No Proceedings........................................................39
9.1.4. Required Filings......................................................39
9.1.5. Opinion of Counsel....................................................39
9.1.6. Due Diligence.........................................................39
9.1.7. Ancillary Agreements..................................................39
9.1.8. Third Party Consents; Governmental Approvals..........................39
9.1.9. FIRPTA................................................................39
9.1.10. No Material Adverse Change............................................39
9.1.11. Financing.............................................................39
9.1.12. HSR Act...............................................................39
9.1.13. Pre-Closing Audits...................................................40
9.2 Conditions to Obligations of Seller............................................40
9.2.1. Representations, Warranties and Covenants of Buyer....................40
9.2.2. Buyer's Certificate...................................................40
9.2.3. No Injunction, etc....................................................40
9.2.4. No Proceedings........................................................40
9.2.5. Required Filings......................................................40
9.2.6. Ancillary Agreements..................................................40
9.2.7. Opinion of Counsel....................................................40
9.2.8. HSR Act...............................................................40
X. SURVIVAL; INDEMNIFICATION....................................................................41
10.1 Survival.......................................................................41
10.2 Indemnification................................................................41
10.3 Tax Indemnification............................................................42
10.4 Procedures.....................................................................42
10.5 Payment and Treatment of Indemnification Payments..............................44
10.6 Indemnification Amounts Net of Benefits Received...............................44
10.7 Exclusive Remedy. .............................................................44
XI. MISCELLANEOUS...............................................................................44
11.1. Termination. .................................................................44
11.2. Notices. .....................................................................45
11.3. Amendments and Waivers.........................................................45
11.4. Expenses. ....................................................................45
11.5. Successors and Assigns. ......................................................46
11.6. No Third Party Beneficiaries. ................................................46
11.7. Governing Law. ...............................................................46
11.8. Jurisdiction. ................................................................46
</TABLE>
iii
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TABLE OF CONTENTS
(Not a part of this Agreement)
<TABLE>
<CAPTION>
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<S> <C> <C>
11.9. Waiver of Jury Trial...........................................................46
11.10. Counterparts. ................................................................46
11.11. Headings. ....................................................................47
11.12. Entire Agreement. ............................................................47
11.13. Severability. ................................................................47
11.14. No Waiver. ...................................................................47
11.15. Certain Interpretive Matters. ...............................................47
</TABLE>
iv
<PAGE>
(Not a part of this Agreement)
EXHIBIT AND SCHEDULE INDEX
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
EXHIBIT A: Form of Employment Agreement
EXHIBIT B-1: Interim Financial Statements
EXHIBIT B-2: Monthly Financial Statements
EXHIBIT B-3: Compilation Statements
EXHIBIT C: Form of Non-competition Agreement
EXHIBIT D-1: Form of Bill of Sale
EXHIBIT D-2: Trademark Assignment
EXHIBIT D-3: Form of Copyright Assignment
EXHIBIT D-4: Form of Special Warranty Deed
EXHIBIT E: Balance Sheet Principles
EXHIBIT F: Form of Opinion of Rosenthal and Schanfield
EXHIBIT G: Form of Certificate of Amendment of Company's Charter
EXHIBIT H: Form of Opinion of Jones, Day, Reavis & Pogue
</TABLE>
v
<PAGE>
(Not a part of this Agreement)
<TABLE>
<CAPTION>
SCHEDULES
---------
<S> <C>
SCHEDULE 2.1(a)(xiv): Names
SCHEDULE 2.1(a)(xvii): Bank Accounts, etc.
SCHEDULE 2.2(c): Property
SCHEDULE 2.2(d): Stuart J. Stein Letter
SCHEDULE 3.1(a)(vi): Liability in Respect of Claims
SCHEDULE 6.1.4: Non-Contravention; Consents
SCHEDULE 6.1.5(a): Capitalization
SCHEDULE 6.1.5(b): Ownership of Shares of Capital Stock
SCHEDULE 6.1.6(c): Changes in the Company's Reserve or Accrual Policies
SCHEDULE 6.1.7: Undisclosed Liabilities
SCHEDULE 6.1.8: Intercompany Accounts
SCHEDULE 6.1.9(a): Tax Matters
SCHEDULE 6.1.9(b): Jurisdictions Which Impose Tax on Overall Net Income
SCHEDULE 6.1.10: Absence of Certain Changes
SCHEDULE 6.1.11(a): Contracts and Agreements
SCHEDULE 6.1.11(c): Grants of Severance or Termination Pay
SCHEDULE 6.1.12: Insurance Policies and Bonds
SCHEDULE 6.1.13: Litigation
SCHEDULE 6.1.14(a): Compliance with Laws; Permits
SCHEDULE 6.1.14(b)(i): Lists of Government or Regulatory Permits and Licenses
SCHEDULE 6.1.14(b)(ii): Invalid or Defective Permits and Licenses
SCHEDULE 6.1.15(a): Properties; Sufficiency of Assets
SCHEDULE 6.1.15(b): Real Property
SCHEDULE 6.1.16(a): Intellectual Property
SCHEDULE 6.1.16(b): Intellectual Property Disputes
SCHEDULE 6.1.17: Environmental Matters
SCHEDULE 6.1.17(b): Environmental Investigations
SCHEDULE 6.1.18(a): List of Benefit Plans
SCHEDULE 6.1.18(b): List of Certain Benefit Plans
SCHEDULE 6.1.18(c): Benefit Plans compliance
SCHEDULE 6.1.18(h): Employees Entitled to Bonuses and Benefits
SCHEDULE 6.1.18(i): Employees with Options to Purchase Shares
SCHEDULE 6.1.19: Interests in Customers, Suppliers, Etc.
SCHEDULE 6.1.20: Customer, Supplier and Employee Relations
SCHEDULE 6.1.21(a): Claims by Employees
SCHEDULE 6.1.21(b): Employees
SCHEDULE 6.1.21(d): Retired Employees Scheduled to Receive Benefits in the
Future
SCHEDULE 6.1.22: Accounts Receivable
SCHEDULE 6.1.23: Inventory
SCHEDULE 6.1.24: Millennium Compliance
SCHEDULE 7.5: Litigation
SCHEDULE 7.6: Consents
</TABLE>
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(Not a part of this Agreement)
<TABLE>
<S> <C>
SCHEDULE 8.5(a): Transferred Employees
SCHEDULE 8.5(b): Benefits
SCHEDULE 8.8: Certain Employees of Seller
SCHEDULE 11.2: Notices
SCHEDULE 11.15(c)(i): Knowledge of Buyer
SCHEDULE 11.15(c)(ii): Knowledge of Buyer
</TABLE>
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February 5, 1999,
by and among GENERAL AUTOMATION, INC., an Illinois corporation (the "COMPANY" or
"SELLER"), MAX STARR ("STOCKHOLDER") and PRECISION PARTNERS HOLDING COMPANY, a
Delaware corporation ("BUYER").
RECITALS
A. The Company is a manufacturer of high precision screw machined parts
primarily for the automotive and medical industries.
B. Stockholder is the beneficial owner, through a living trust, of all of
the issued and outstanding capital stock of the Company.
C. Buyer desires to purchase from Seller and Seller desires to sell to
Buyer all of the assets, properties and rights of Seller (other than the
Excluded Assets) subject to the Assumed Liabilities, all on the terms and
conditions set forth herein.
D. The parties desire to make certain representations, warranties and
covenants in connection with the transactions contemplated hereby and to
prescribe various conditions in connection therewith.
Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere herein and/or
in the Schedules attached hereto, the following terms, as used herein, have the
following meanings when used herein with initial capital letters:
"ACCOUNTANTS" has the meaning ascribed to such term in Section 4.3(b).
"ACCOUNTS RECEIVABLE" has the meaning ascribed to such term in Section
2.1(a)(vii).
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with the first
Person. For the purposes of this definition, "CONTROL," when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the
foregoing.
"AGGREGATE CLOSING CONSIDERATION" has the meaning ascribed to such term in
Section 4.1.
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"AGREEMENT" has the meaning ascribed to such term in the introductory
paragraph of this Agreement as the same may be amended from time to time in
accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Employment Agreement, the Non- competition
Agreement, the Bill of Sale, the Trademark Assignment, the Copyright Assignment
and the Deed.
"ASSUMED LIABILITIES" has the meaning ascribed to such term in Section
3.1(b).
"AUDITED FINANCIAL STATEMENTS" has the meaning ascribed to such term in
Section 8.12.
"BALANCE SHEET DATE" means June 30, 1998.
"BALANCE SHEET PRINCIPLES" has the meaning ascribed to such term in Section
4.3(a).
"BASE NET WORTH" means $8.0 million.
"BENEFIT PLANS" has the meaning ascribed to such term in Section 3.1(a)(iv)
"BILL OF SALE" has the meaning ascribed to such term in Section 2.1(b)(i).
"BONUSES" have the meaning ascribed to such term in Section 6.1.21(b).
"BUSINESS" means the businesses of Seller as conducted as of the date
hereof and on the Closing, as described in Recital A.
"BULK TRANSFER LAWS" has the meaning ascribed to such term in Section 8.7.
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day on
which banks located in New York City or Chicago, Illinois are authorized or
required to close.
"BUYER" has the meaning ascribed to such term in the introductory paragraph
of this Agreement.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, for any
applicable period, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP, and the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, 42 U.S.C. Sections 9601, ET SEQ.
"CLOSING" has the meaning ascribed to such term in Section 5.1.
2
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"CLOSING DATE" has the meaning ascribed to such term in Section 5.1.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such term in
Section 4.3(a).
"CLOSING NET WORTH" has the meaning ascribed to such term in Section
4.3(a).
"CLOSING NET WORTH STATEMENT" has the meaning ascribed to such term in
Section 4.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"COMPANY" has the meaning ascribed to such term in the introductory
paragraph.
"COMPANY PROPERTY" means any real property and improvements at any time
owned, leased, used, operated or occupied (whether for storage, disposal or
otherwise) by the Company.
"COMPILATION STATEMENTS" means the compiled balance sheets of the Company
as of December 31, 1997, 1996 and 1995, together with the related statements of
income and retained earnings for the periods then ended and, for the period
ended December 31, 1997 only, cash flows, and the reports thereon. The
Compilation Statement for 1997 and 1996 were prepared by Shapiro, Olefsky &
Company, certified public accountants, and the Compilation Statements for 1995
were prepared by Mann, Weitz & Cohn, certified public accountants. All of the
Compilation Statements are attached hereto as EXHIBIT B-3.
"COMPUTER SYSTEMS" has the meaning ascribed to such term in Section 6.1.24.
"CONSTITUENT OF CONCERN" means any substance defined as a hazardous
substance, hazardous waste, hazardous material, pollutant, or contaminant by any
Environmental Law, any petroleum hydrocarbon and any degradation product of a
petroleum hydrocarbon, asbestos, PCB or similar substance, the handling,
storage, treatment or exposure of or to which is subject to regulation under any
Environmental Law.
"CONTRACTS" has the meaning ascribed to such term in Section 2.1(a)(vi).
"COPYRIGHT ASSIGNMENT" has the meaning ascribed to such term in Section
2.1(b)(iii).
"COVENANT PERIOD" has the meaning ascribed to such term in the Non-
competition Agreement.
"DEED" has the meaning ascribed to such term in Section 2.1(b)(iv).
"DAMAGES" has the meaning ascribed to such term in Section 10.2(a).
"DIRECT CLAIM" has the meaning ascribed to such term in Section 10.4(c)
3
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"DROP DEAD DATE" has the meaning ascribed to such term in Section
11.1(a)(iv).
"EMPLOYMENT AGREEMENT" means the agreement between the entity designated by
Buyer pursuant to Section 11.5 and Stockholder, to be dated the Closing Date,
substantially in the form attached hereto as EXHIBIT A.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, citations, summonses,
notices of non-compliance or violation, requests for information under Section
104(e) of CERCLA or proceedings relating to any Environmental Law or any permit
issued under any such Law, including (a) Environmental Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b)
Environmental Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from alleged injury or threat of injury to
human health and safety or the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to the environment
which has resulted or could result in a material loss, liability, cost or
expense to the Company.
"ENVIRONMENTAL LAW" means any Law in effect and amended as of the Closing
Date, together with any judicial interpretation thereof and applicable clean-up
standards, as of the Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the environment, human health and
safety, including CERCLA and any state and local counterparts or equivalents.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws and necessary for the business of the Company as currently
conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any Person that, together with the Company, would
be considered a single employer within the meaning of Section 4001 of ERISA or
Section 414 of the Code.
"ESTIMATED ADJUSTMENT" has the meaning ascribed to such term in Section
4.2.
"ESTIMATED CLOSING NET WORTH" has the meaning ascribed to such term in
Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning ascribed to such term in Section 2.2.
"FINAL ADJUSTMENT" has the meaning ascribed to such term in Section 4.4(a).
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"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign governmental or
regulatory authority.
"HSR ACT" has the meaning ascribed to such term in Section 6.1.3.
"INDEBTEDNESS" means with respect to any Person, at any date, without
duplication, (i) all obligations of such Person for borrowed money, including,
without limitation, all principal, interest, premiums, fees, expenses,
overdrafts and penalties with respect thereto, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of the
property or services, (iv) all obligations of such Person to reimburse any bank
or other Person in respect of amounts paid under a letter of credit or similar
instrument, (v) Capitalized Lease Obligations of such Person and (vi) all
Indebtedness of any other Person of the type referred to in clauses (i) to (v)
above directly or indirectly guaranteed by such Person or secured by any assets
of such Person. Notwithstanding anything to the contrary contained herein, the
term "Indebtedness" will not include trade payables or security deposits for
leases incurred in the Ordinary Course of Business.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in Section
10.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
10.4(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right, in each case
which is owned, used or held for use or otherwise necessary in connection with
the conduct of the Business.
"INTERIM FINANCIAL STATEMENTS" means the unaudited balance sheet of the
Company as of June 30, 1998 and September 30, 1998, together with the related
statements of income for the periods then ended, in each case, prepared
internally by the Company for management purposes only and which are attached
hereto as EXHIBIT B-1.
"IRS" means the Internal Revenue Service.
"JUNE 1998 BALANCE SHEET" means the unaudited balance sheet of the Company
as of June 30, 1998, prepared internally by the Company for management purposes
only and included in the Interim Financial Statements.
"LAW" means any federal, state or local statute, law, rule, regulation,
ordinance, code, permit, license, or rule of common law.
"LENDERS" has the meaning ascribed to such term in Section 5.2(viii).
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"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person will be deemed to own, subject to a Lien, any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business,
assets, liabilities, condition (financial and other), results of operations or
prospects of the Company.
"MAY 1985 REDEMPTION" has the meaning ascribed to such term in Section
3.2(a)(vi).
"MILLENNIUM COMPLIANCE" means that the Computer Systems are capable of the
following, during and/or after January 1, 2000: (a) handling date information
involving all and any dates, including accepting input, providing output and
performing date calculations in whole or in part; (b) operating accurately
without interruption on and in respect of any and all dates and without any
change in performance; (c) responding to and processing two digit year input
without creating any ambiguity as to the century; and (d) storing and providing
date input information without creating any ambiguity as to the century.
"MONTHLY FINANCIAL STATEMENTS" means the unaudited monthly balance sheets
of the Company from December 31, 1996 through the Closing Date and the related
monthly statements of income for the periods then ended, in each case, prepared
internally by the Company for management purposes only. The Monthly Financial
Statements through the month-ended immediately prior to the date hereof are
attached as EXHIBIT B-2.
"NON-COMPETITION AGREEMENT" means the Non-competition Agreement, dated as
of the Closing Date, between the entity designated by Buyer pursuant to Section
11.5, Buyer and Stockholder, substantially in the form attached hereto as
EXHIBIT C.
"NOVEMBER 1998 BALANCE SHEET" means the balance sheet of the Company as of
November 30, 1998, prepared internally by the Company for internal management
purposes only and contained in the Monthly Financial Statements.
"ORDER" means any judgment, injunction, judicial or administrative order or
decree.
"ORDINARY COURSE OF BUSINESS" means, with respect to any Person, the
ordinary course of business of such Person, consistent in all material respect
with such Person's past practice and custom, including with respect to any
category, quantity or dollar amount, term and frequency of payment, delivery,
accrual and expense or any other accounting entry.
"PERMITS" has the meaning ascribed to such term in Section 6.14(b).
"PERMITTED LIEN" means (a) mechanics', workmen's, repairmen's or other
Liens arising or incurred in the Ordinary Course of Business in respect of
obligations that are not
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overdue or (b) other imperfections of title or encumbrances, in the case of
clause (a) and (b) which do not or could not reasonably be expected to,
individually or in the aggregate, materially affect the value or marketability
of the property subject thereto.
"PERSON" means an individual, corporation, partnership, limited liability
company or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PRE-CLOSING AUDITS" has the meaning ascribed to such term in Section 8.12.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) that
actually ends on or before the Closing Date.
"PURCHASED ASSETS" has the meaning ascribed to such term in Section 2.1(a).
"REAL PROPERTY" has the meaning ascribed to such term in Section 6.1.15(b).
"RELIANCE LETTERS" has the meaning ascribed to such term in Section
5.2(viii).
"RETAINED LIABILITIES" has the meaning ascribed to such term in Section
3.2(b).
"RETURNS" has the meaning ascribed to such term in Section 6.1.9(a)(i).
"S CORPORATION" has the meaning ascribed to such term in Section
6.1.9(a)(ix).
"SELECTED BUYER REPRESENTATIONS AND WARRANTIES" means the representations
and warranties contained in Sections 7.1 (Corporate Existence and Power); 7.2
(Authorization; Enforceability), 7.3 (Governmental Authorization) and 7.4
(Non-Contravention).
"SELECTED SELLER REPRESENTATIONS AND WARRANTIES" means the representations
and warranties contained in Sections 6.1.1 (Corporate Existence and Power),
6.1.2 (Enforceability), 6.1.3 (Governmental Authorization) and 6.1.4
(Non-Contravention; Consents).
"SELLER" has the meaning ascribed to such term in the introductory
paragraph.
"SCHEDULE 8.8 INDIVIDUALS" has the meaning ascribed to such term in Section
3.1(a)(iv).
"SURVIVAL PERIOD" has the meaning ascribed to such term in Section 10.1.
"STOCKHOLDER" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"TAX" means (a) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any Taxing
Authority
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(as hereinafter defined), (b) any liability of the Company for the payment
of any amounts of any of the foregoing types as a result of being a member of an
affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement whereby liability of the Company for payment of such
amounts was determined or taken into account with reference to the liability of
any other Person, and (c) liability of the Company for the payment of any
amounts as a result of being a party to any Tax Sharing Agreements or with
respect to the payment of any amounts of any of the foregoing types as a result
of any express or implied obligation to indemnify any other Person.
"TAX SHARING AGREEMENTS" means all existing Tax sharing agreements or
arrangements (whether or not written) binding the Company.
"TAXING AUTHORITY" means any Governmental Authority responsible for the
imposition of any Tax.
"THIRD PARTY CLAIM" means any claim, demand, action, suit or proceeding
made or brought by any Person who or which is not a party to this Agreement.
"TRADEMARK ASSIGNMENT" has the meaning ascribed to such term in Section
2.1(b)(ii).
"TRANSFER" has the meaning ascribed to such term in Section 2.1(a).
"TRANSFERRED EMPLOYEES" has the meaning ascribed to such term in Section
8.5(b)(i).
II. SALE AND PURCHASE OF ASSETS
2.1. PURCHASED ASSETS.
(a) At the Closing provided for in Article V, Seller will sell, assign,
transfer, convey and deliver ("TRANSFER"), free and clear of all Liens (except
Permitted Liens), whether legal or equitable, to Buyer and Buyer will purchase
and accept from Seller on the terms and subject to the conditions hereinafter
set forth, all of the assets, properties, rights and interests of Seller to the
extent existing as of the Closing Date, other than the Excluded Assets (all of
such assets, properties, rights and interests being hereinafter collectively
referred to as the "PURCHASED ASSETS"), including but not limited to:
(i) those assets, properties, rights and interests reflected on the
November 1998 Balance Sheet, other than such assets, properties and
interests sold in the Ordinary Course of Business or otherwise disposed of
as expressly authorized or permitted under this Agreement after such date;
(ii) Seller's title to, interest in, or rights under the leases of,
real property described in SCHEDULE 6.1.15(b), together with all right,
title and interest of Seller, if any, to all leasehold improvements thereon
and all easements, rights-of-way, transferable licenses and permits and
other appurtenances thereof;
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(iii) all right, title and interest of Seller to all plant, machinery,
equipment, tools, spare parts, supplies, furniture, furnishings, vehicles
and other fixed assets owned or leased by Seller and used or held for use
in the conduct of the Business;
(iv) all raw materials and inventories wherever located, including
inventories of work-in-process, stores and supplies, owned by Seller and
used or held for use in connection with the conduct of the Business;
(v) any item that would constitute "cash" as shown on a balance sheet
of the Business as of the Closing Date determined in accordance with GAAP,
deposits, advance payments of any kind or prepayments by clients, letters
of credit naming Seller as account party, certificates of deposit, notes,
drafts, checks and similar instruments relating to or arising out of the
conduct of the Business;
(vi) all right, title and interest of Seller to all contracts (whether
written or oral) (other than to the extent that such contracts relate to
the Retained Liabilities or Excluded Assets), commitments, leases, purchase
orders, contracts to purchase raw materials, contracts for services and
supplies, contracts to supply or sell products and all of the other
agreements (whether written or oral) including those set forth or required
to be set forth in SCHEDULE 6.1.11(a) (collectively, the "CONTRACTS");
(vii) all accounts receivable (including billed and unbilled) of
Seller ("ACCOUNTS RECEIVABLE");
(viii) all Intellectual Property Rights of Seller;
(ix) all licenses, Permits, registrations, and authorizations held by
Seller;
(x) the books and records of Seller relating to the Purchased Assets
including, without limitation, all customer and supplier files, equipment
maintenance and warranty information, all correspondence with any
customers, suppliers, employees or governmental entities, all personnel
records related to the Transferred Employees, and any other reports,
marketing studies, plans and documents, including, without limitation, data
stored electronically;
(xi) all prepaid claims, prepaid Taxes (other than any prepaid Taxes
which can be utilized to offset or satisfy any liabilities described in
Section 3.2(a)(iii)), prepaid insurance premiums and other prepaid expense
items and deferred charges, credits, advance payments, security and other
deposits made by Seller to any other Person relating to the conduct of the
Business;
(xii) all policies of insurance, fidelity, surety or similar bonds and
third-party indemnities to the extent assignable where Seller is an
indemnified party and the coverages afforded thereby, in each case other
than to the extent relating to the Retained Liabilities or Excluded Assets;
(xiii) lists of customers and vendors of Seller, including, without
limitation, any data stored electronically;
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(xiv) the right to use the names set forth on SCHEDULE 2.1(a)(xiv),
and all variants thereof;
(xv) the Business and goodwill of Seller;
(xvi) all securities or other ownership interests in any Person held
by Seller;
(xvii) all telephone and facsimile numbers (together with all other
similar numbers), electronic mail addresses and web sites, in each case
owned or used by Seller in the Business including such items as set forth
on SCHEDULE 2.1(a)(xvii);
(xviii) all rights of Seller pertaining to any counterclaims, set-offs
or defenses it may have with respect to the Assumed Liabilities; and
(xix) all other assets, properties and rights of every kind and nature
owned or held by Seller or in which Seller has an interest on the Closing
Date, known or unknown, fixed or unfixed, accrued, absolute, contingent or
otherwise, whether or not specifically referred to in this Agreement.
(b) In confirmation of the foregoing sale, assignment and transfer, Seller
will execute and deliver to Buyer at the Closing (i) a Bill of Sale and
Assignment and Assumption Agreement (the "BILL OF SALE"), (ii) an Assignment of
Trademarks (the "TRADEMARK ASSIGNMENT"), (iii) an Assignment of Copyrights (the
"COPYRIGHT ASSIGNMENT"), (iv) the Special Warranty Deed (the "DEED"), each
substantially in the forms attached hereto as EXHIBITS D-1, D-2, D-3 and D-4,
respectively, and (v) such other assignments and other instruments of transfer
as Buyer may reasonably deem necessary or desirable.
2.2. EXCLUDED ASSETS. Anything in this Agreement to the contrary
notwithstanding, the following assets of Seller (the "EXCLUDED ASSETS") are
being retained by Seller and will not be included in the Purchased Assets:
(a) Tax records reasonably necessary for the discharge by Seller of all
income and other Taxes payable in respect of the conduct of the Business of
Seller, prior to the Closing Date, provided that Buyer will have reasonable
access to such records prior to and after the Closing Date in accordance with
the provisions of Section 8.6(b) hereof to the extent Buyer will reasonably
require such access;
(b) the rights of Seller and Stockholder under this Agreement and under the
Ancillary Agreements and the proceeds payable to Seller pursuant to this
Agreement;
(c) all of the property listed on SCHEDULE 2.2(c);
(d) any recovery of funds, assets or any other item or items of value
obtained in connection with the matters described in the December 4, 1998 letter
from Stuart J. Stein and/or the documents related thereto and/or referred to
therein, which letter is attached hereto as SCHEDULE 2.2(d);
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(e) any Tax refund received to the extent attributable to any Pre-Closing
Tax Period (other than net operating loss carry-backs); and
(f) Indebtedness of employees of Seller to Seller set forth on the November
1998 Balance Sheet.
2.3 NONASSIGNABLE CONTRACTS, LEASES AND PERMITS. In the case of any
Purchased Assets constituting Contracts or Permits that are not by their terms
assignable or that require the consent of a third-party in connection with the
sale by Seller, Seller will use reasonable efforts (without being required to
expend money in connection therewith) to obtain, or cause to be obtained in
writing, prior to the Closing Date, any consents necessary to convey the
benefits thereof. Buyer will assist Seller in such manner as may be reasonably
requested in connection therewith; provided that such assistance will not be
deemed to require any expenditure of money on the part of Buyer. If the consent
of any third-party is not obtained prior to the Closing Date and the Closing
occurs notwithstanding the failure to obtain such consent, Seller will use
reasonable efforts (without being required to expend money in connection
therewith) to assist Buyer in obtaining such consent promptly. During such
period in which the applicable Contract or Permit is not capable of being
assigned to Buyer due to the failure to obtain any required consent, Seller will
use reasonable efforts (without being required to expend money in connection
therewith) to make such arrangements as may be necessary to enable Buyer to
receive all the economic rights and liabilities under such Contract accruing on
and after the Closing Date.
III. ASSUMPTION OF LIABILITIES
3.1. LIABILITIES ASSUMED BY BUYER.
(a) Subject to Section 3.2, at the Closing, Buyer will assume, as of the
Closing Date, and will subsequently pay, honor and discharge when due and
payable and otherwise in accordance with their terms, the following liabilities
and obligations of Seller to the extent existing on the Closing Date:
(i) (x) all liabilities reflected on the November 1998 Balance Sheet
and (y) all such liabilities of the same categories as those reflected on
the November 1998 Balance sheet arising thereafter and to the extent
reflected on the Closing Date Balance Sheet as finally determined in
accordance with this Agreement, in the case of liabilities described in
clauses (x) and (y) of this clause 3.1(a)(i), to the extent that such
liabilities were not incurred in breach of this Agreement, and in each
case, other than Indebtedness described in Section 3.2(a)(vi);
(ii) all liabilities and obligations under Contracts to which Seller
is a party, including those that (A) are disclosed in SCHEDULE 6.1.11(a)
and SCHEDULE 6.1.15(b) and (B) have been entered into by Seller in the
Ordinary Course of Business prior to the Closing Date, in each case, other
than contracts to which Seller is a party that are entered into by Seller
in breach of this Agreement and liabilities and obligations under Contracts
to which Seller is a party that relate to a breach by Seller of any of the
terms and conditions of any such Contracts on, or prior to the Closing
Date; PROVIDED that the
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existence of any such Contract does not constitute the breach of any
representation, warranty or covenant of Seller hereunder;
(iii) all liabilities or obligations to Transferred Employees in
accordance with, and subject to the limitations set forth in, Section 8.5
with respect to wages, salaries, bonus, vacation, severance or other
compensation reflected on the Closing Date Balance Sheet (to the extent not
discharged prior to the Closing Date) or otherwise accruing on and after
the Closing, provided that the existence thereof does not constitute a
breach of any representation, warranty or covenant of Seller hereunder;
(iv) except as provided in Section 3.2(a)(iii) and other than to the
extent applicable to the individuals listed on SCHEDULE 8.8 (the "SCHEDULE
8.8 INDIVIDUALS") (but without limiting the obligations of Buyer and GA
Acquisition Delaware, Inc. under: (x) the Employment Agreement, or (y)
COBRA for such SCHEDULE 8.8 Individuals), liabilities or obligations
relating or pertaining to any employee benefit plan within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and any other plan, program, agreement, arrangement,
policy, contract, commitment, or scheme, written or oral, statutory or
contractual of Seller, including, but not limited to, any deferred
compensation agreement, executive compensation, bonus, incentive or
severance pay plan, any life, health, disability or accident insurance plan
or any cafeteria plan or any holiday or vacation practice under which
employees or former employees of Seller are eligible to participate or
derive a benefit and as to which such Seller has or in the future could
reasonably be expected to have any direct or indirect actual or contingent
liability (hereinafter the "BENEFIT PLANS"), provided that the existence of
such Benefit Plans does not constitute a breach of any representation,
warranty or covenant of Seller hereunder;
(v) the obligation to issue credit as appropriate in the Ordinary
Course of Business of Seller; and
(vi) liability (for the defense of, and liability (if any) in respect
of, claims in suits and other proceedings specifically described in
SCHEDULE 3.1(a)(vi).
(b) The liabilities to be assumed by Buyer pursuant to Section 3.1(a) are
hereinafter sometimes collectively referred to as "ASSUMED LIABILITIES."
3.2. LIABILITIES NOT ASSUMED BY BUYER.
(a) Anything in this Agreement to the contrary notwithstanding, Buyer will
not assume or be liable or responsible for, from and after the date hereof or
after the Closing, any liabilities or obligations of Seller, except as listed in
Section 3.1(a). Without limiting the generality or effect of the foregoing,
Buyer will not assume the following:
(i) any liability or obligation of Seller (including the liability
referred to in Section 6.1.25) arising out of or in connection with the
negotiation and preparation of the Agreement (including the Ancillary
Agreements) and the consummation and performance of the transactions
contemplated hereby;
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(ii) liability for the defense of, and liability (if any) in respect
of, all claims (other than claims which constitute Assumed Liabilities), to
the extent arising out of or relating to facts or circumstances existing on
or prior to the Closing Date;
(iii) any liability or obligation of Seller with respect to federal,
state or local Taxes;
(iv) any liability or obligation of Seller incurred in breach of this
Agreement or any of the Ancillary Agreements;
(v) all claims, liabilities and obligations with respect to the
Excluded Assets;
(vi) (x) Indebtedness in connection with the 1985 redemption by the
Seller of 565 shares of its capital stock from Irene Starr Fleischman (the
"MAY 1985 REDEMPTION")) and (y) Indebtedness constituting the guaranty
referred to in SCHEDULE 6.1.11(a)(vi); and
(vii) items listed in any of the Schedules which are expressly
identified in any such Schedule as constituting a "Retained Liability."
(b) All liabilities or obligations of Seller other than Assumed Liabilities
are hereinafter sometimes collectively referred to as the "RETAINED
LIABILITIES."
IV. CONSIDERATION FOR PURCHASED ASSETS; CLOSING
4.1. PURCHASE PRICE. In consideration for the Transfer by Seller to Buyer
of the Purchased Assets pursuant to this Agreement, Buyer will deliver at the
Closing to Seller an aggregate amount equal to $45.0 million (the "AGGREGATE
CLOSING CONSIDERATION"). The Aggregate Closing Consideration will be subject to
adjustment at the Closing as provided in Section 4.2 and will be payable in cash
by wire transfer in immediately available funds to one account designated in
writing by Seller. The Aggregate Closing Consideration will be subject to
adjustment after the Closing as provided in Sections 4.3 and 4.4.
4.2. ESTIMATED ADJUSTMENT. Not less than two Business Days prior to the
Closing Date, Seller will cause Shapiro, Olefsky & Company, certified public
accountants, to prepare a good faith estimate of the Closing Net Worth (the
"ESTIMATED CLOSING NET WORTH") determined in accordance with Section 4.3, as if
it were the actual Closing Net Worth, but based upon Shapiro, Olefsky &
Company's review of the monthly financial information then available and
inquiries of personnel responsible for the preparation of the financial
information relating to the Company in the Ordinary Course of Business. The
Aggregate Closing Consideration will be adjusted by the amount equal to the
difference, if any, between the Estimated Closing Net Worth and the Base Net
Worth and as otherwise adjusted in accordance with the methodology set forth in
EXHIBIT E (as so adjusted, the "ESTIMATED ADJUSTMENT").
4.3. POST-CLOSING ADJUSTMENT. (a) As soon as practicable (and in no event
later than 90 days after the Closing), Buyer will prepare and deliver or cause
to be prepared and delivered to Seller a balance sheet of the Company as of the
opening of business on the Closing Date (the "CLOSING DATE BALANCE SHEET") and a
proposed statement of the net worth of the
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Company as of the opening of business on the Closing Date (the "CLOSING NET
WORTH STATEMENT"). The Closing Date Balance Sheet and the Closing Net Worth
Statement (i) will reflect, respectively, the financial position of the Company
and the components and calculation of the net worth of the Company in each case
as of the opening of business on the Closing Date, (ii) will be prepared and
determined as of the opening of business on the Closing Date using the same
policies, principles and methodology used in connection with the preparation of
the June 1998 Balance Sheet, and (iii) will be subject to adjustment in
accordance with the principles and methodology set forth in EXHIBIT E attached
hereto (the policies, principles and methodology in clauses (ii) and (iii) of
this Section 4.3(a) being referred to herein as the "BALANCE SHEET PRINCIPLES").
Notwithstanding anything contained herein to the contrary, there will be no
changes in reserve or accrual policies or amounts (with respect to accrual and
reserve amounts, without the prior written consent of Buyer which will not be
unreasonably withheld or delayed) between June 30, 1998 and the Closing Date
without the prior written consent of Buyer. The net worth of the Company as of
the Closing Date determined in accordance with this Section 4.3 is referred to
herein as the "CLOSING NET WORTH." In the event of any conflict or inconsistency
between the policies, principles and methodology described in the foregoing
clauses (ii) and (iii), the policies, principles and methodology set forth in
EXHIBIT E shall govern.
(b) If, within 45 days after the date of Buyer's delivery of the Closing
Date Balance Sheet and the Closing Net Worth Statement, Seller disagrees with
the Closing Date Balance Sheet and/or the Closing Net Worth Statement as
prepared and determined by Buyer, Seller will give written notice to Buyer
within such 45-day period (i) setting forth Seller's proposed changes to the
Closing Date Balance Sheet as prepared by Buyer and the determination by Buyer
of the Closing Net Worth and (ii) specifying in reasonable detail Seller's basis
for disagreement. The failure by Seller to so express disagreement and provide
such specification within such 45-day period will constitute the acceptance of
Buyer's preparation of the Closing Date Balance Sheet and the computation of the
Closing Net Worth. If Buyer and Seller are unable to resolve any disagreement
between them with respect to the Closing Date Balance Sheet and the Closing Net
Worth within 30 days after the giving of notice by Seller to Buyer of such
disagreement, the items in dispute will be referred for determination to
Pricewaterhouse Coopers LLP (the "ACCOUNTANTS") as promptly as practicable, but
not later than five days after the expiration of such 30 day period. Buyer and
Seller will use reasonable efforts to cause the Accountants to render their
decision as soon as practicable thereafter (but in no event later than 30 days
after the submission to the Accountants of the notice of disagreement referred
to in the immediately preceding sentence), including without limitation by
promptly complying with all reasonable requests by the Accountants for
information, books, records and similar items. The Accountants will make a
determination as to each of the items in dispute (but only those items in
dispute), which determination will be in writing, furnished to each of the
parties hereto as promptly as practicable after the items in dispute have been
referred to the Accountants (but in no event later than 30 days thereafter),
made in accordance with this Agreement (including EXHIBIT E), and conclusive and
binding upon each of the parties hereto. Nothing herein will be construed to
authorize or permit the Accountants to determine (i) any question or matter
whatsoever under or in connection with this Agreement, except the determination
of what adjustments, if any, must be made in one or more disputed items
reflected in the Closing Date Balance Sheet and the Closing Net Worth Statement
delivered by Buyer in order for the Closing Net Worth to be determined in
accordance with the provisions of this Agreement (including EXHIBIT E), or a
Closing Net Worth that is not equal to one of, or between, the Closing Net Worth
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as determined by Seller and as determined by Buyer. The fees and expenses of the
Accountants will be paid one-half by Buyer and one-half by Seller.
(c) During the period that Seller's advisors are conducting their review of
Buyer's preparation of the Closing Date Balance Sheet and determination of the
Closing Net Worth, Seller and its representatives will have reasonable access
during normal business hours to the work papers prepared by or on behalf of
Buyer and its representatives and any and all other things reasonably requested
by Seller's advisors, in each case, in connection with Buyer's preparation of
the Closing Net Worth Statement and determination of the Closing Net Worth;
PROVIDED, HOWEVER, that Seller will conduct such review in a manner that does
not unreasonably interfere with the conduct of the business of the Company. To
the extent any such work papers are in the control of Seller after the Closing,
Seller will grant Buyer and its representatives reciprocal access rights for the
purpose of finalizing the preparation of the Closing Date Balance Sheet and the
determination of the Closing Net Worth. Seller and Buyer agree in good faith to
use all reasonable efforts to provide such information and access described in
this Section 4.3(c).
4.4. ADJUSTMENTS TO CLOSING PAYMENTS.
(a) Upon the final determination of the Closing Net Worth, the parties will
recalculate the Estimated Adjustment in accordance with the methodology set
forth in EXHIBIT E (the "FINAL ADJUSTMENT") and will make the following
adjustments:
(i) If the Final Adjustment exceeds the Estimated Adjustment, then the
Aggregate Closing Consideration will be increased by, and Buyer will pay to
Seller the amount of such difference; and
(ii) If the Final Adjustment is less than the Estimated Adjustment,
then the Aggregate Closing Consideration will be decreased by, and Seller
will pay to Buyer the amount of such difference.
(b) Any payment in respect of an adjustment required to be made under
Section 4.4(a) will be made by Buyer or Seller, as applicable, in cash by wire
transfer of immediately available funds to one account of the payee specified
prior to the date such payment is required to be made hereunder in writing by
Buyer or Seller, as applicable. Such payment will be made on such of the
following dates as may be applicable: (i) if Seller shall not have disagreed
with the Closing Date Balance Sheet and/or the Closing Net Worth as prepared and
determined by Buyer, the earlier of (A) 45 days after delivery to Seller of the
Closing Date Balance Sheet and the Closing Net Worth Statement or (B) seven days
after Seller has indicated in writing that it has no objections to the Closing
Date Balance Sheet and the Closing Net Worth, or (ii) if Seller shall have
objected to the Closing Date Balance Sheet and the Closing Net Worth as prepared
and determined by Buyer, within seven days following final agreement or decision
with respect to the Closing Date Balance Sheet and the Closing Net Worth, as
provided in Section 4.3 and this Section 4.4.
4.5. ALLOCATION OF PURCHASE PRICE. The Aggregate Closing Consideration will
be allocated among the Purchased Assets as determined by Seller in the manner
required by Section 1060 of the Code and otherwise in its sole discretion
(exercised reasonably and in good faith). For purposes of determining the
Buyer's basis in the Purchased Assets and gain or loss
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recognized by Seller with respect to the sale of the Purchased Assets to Buyer,
Buyer and Seller covenant and agree that the aggregate Purchase Price will be
allocated among the Purchased Assets consistent with this Section 4.5 and the
parties further agree that they shall file all Tax returns and related forms
(including, without limitation, Form 8594) in accordance with the allocation
determined in accordance with this Section 4.5 and will not make any
inconsistent statement or take any inconsistent position on any Tax returns, in
any refund claim, or during the course of any IRS or other tax audit. Each party
will notify the other party if it receives notice that the IRS proposes any
allocation that is different from the allocation agreed upon under this Section
4.5.
V. CLOSING AND CLOSING DELIVERIES
5.1. THE CLOSING. The closing of the sale and purchase of the Purchased
Assets (the "CLOSING") will take place at the offices of Jones, Day, Reavis &
Pogue located at 599 Lexington Avenue, New York, New York at 10:00 a.m., New
York time, as soon as possible after the date hereof but in no event later than
the first to occur of (a) ten Business Days after satisfaction or waiver of the
conditions to Closing and (b) March 31, 1999. The date upon which the Closing
occurs is herein called the "CLOSING DATE."
5.2. DELIVERIES OF SELLER. At the Closing, Seller will deliver to
Purchaser:
(i) Bill of Sale duly executed by Seller;
(ii) Trademark Assignment duly executed by Seller;
(iii) Copyright Assignment duly executed by Seller;
(iv) Deed duly executed by Seller;
(v) instruments of assignment and assumption and other instruments, as
Buyer may reasonably deem necessary or desirable to transfer any of the
Purchased Assets duly executed by Seller;
(vi) certificates of the Chief Executive Officer of Seller to evidence
compliance with the conditions set forth in Section 9.1.1(c);
(vii) certificates of Seller's Secretary or Assistant Secretary as
provided in Section 9.1.1(d);
(viii) the opinion of Rosenthal and Schanfield counsel to Seller and
Stockholder, dated the Closing Date substantially in the form attached
hereto as EXHIBIT F, together with letters (the "RELIANCE LETTERS")
entitling the bank lenders and underwriters engaged by or on behalf of
Buyer to provide financing as contemplated by Section 9.1.11 (the
"LENDERS") to rely on such opinion;
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(ix) evidence or copies of any consents, approvals, orders,
qualifications or waivers required by any third-party or governmental
entity pursuant to Section 9.1.8;
(x) Certificate of Amendment of Seller's Certificate of Incorporation,
dated the Closing Date and in proper form for filing substantially in the
form attached hereto as EXHIBIT G, which Seller will, on the Closing Date,
file with the Secretary of State of the State of Illinois, changing
Seller's corporate name to "GAI, Inc.," together with all other
documentation required to be filed in other jurisdictions where Seller is
qualified or licensed to do business to reflect such name change;
(xi) other Ancillary Agreements required to be duly executed and
delivered by Seller or Stockholder;
(xii) a non-foreign person affidavit of Seller required by Section
1445 of the Code; and
(xiii) such other documents and instruments as may be reasonably
required in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements and to comply
with the terms hereof and thereof (including state environmental disclosure
statements, good standing certificates and resale exemption certificates).
5.3. DELIVERIES BY BUYER. At the Closing, Buyer will deliver or cause to be
delivered to Seller:
(i) the Aggregate Closing Consideration by wire transfer of
immediately available funds to the one account specified pursuant to
Section 4.1;
(ii) certificate of the Chief Executive Officer of Buyer to evidence
compliance with the conditions set forth in Section 9.2.1;
(iii) certificate of Buyer's Secretary or Assistant Secretary as
provided in Section 9.2.2;
(iv) Bill of Sale duly executed by Buyer;
(v) the opinion of Jones, Day, Reavis & Pogue, counsel to Buyer, dated
the Closing Date substantially in the form attached hereto as EXHIBIT H;
(vi) other Ancillary Agreements required to be duly executed and
delivered by Buyer; and
(vii) such other documents and instruments as may be reasonably
required in connection with the consummation the transactions contemplated
by this Agreement and the Ancillary Agreements and to comply with the terms
hereof and thereof (including state environmental disclosure statements,
good standing certificates and resale exemption certificates).
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5.4. PROCEEDINGS. Except as otherwise specifically provided for herein, all
proceedings that will be taken and all documents that will be executed and
delivered by the parties hereto on the Closing Date will be deemed to have been
taken and executed simultaneously, and no proceeding will be deemed taken nor
any document executed and delivered until all have been taken, executed and
delivered.
VI. REPRESENTATIONS AND WARRANTIES OF SELLER
6.1. Seller represents and warrants to Buyer as of the date hereof and the
Closing as follows:
6.1.1. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has all corporate power required to
carry out its business as now conducted and, to Seller's knowledge, all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. The Company is duly qualified to
conduct business as a foreign corporation and is in good standing in each
jurisdiction where such qualification is necessary except for those
jurisdictions where the failure to be so qualified or in good standing could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has heretofore delivered to Buyer a true and
complete copy of its articles of incorporation and bylaws, the receipt of which
by Buyer is hereby acknowledged.
6.1.2. ENFORCEABILITY. The execution, delivery and performance by the
Company of this Agreement are within its corporate powers and have been duly
authorized by all necessary corporate action on its part. This Agreement and
each Ancillary Agreement to which Stockholder and/or the Company will be a party
at the Closing have been and will be at the Closing duly executed and delivered
by Stockholder and/or the Company, as applicable and constitute and will
constitute the valid and binding agreements of Stockholder and the Company,
enforceable against them in accordance with their terms, except to the extent
that their enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
6.1.3. GOVERNMENTAL AUTHORIZATION. Except as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), to Seller's knowledge, the execution, delivery and performance by
Stockholder and the Company of this Agreement and each Ancillary Agreement to
which Stockholder and the Company will be a party at the Closing require no
action by or in respect of, or filing with, any Governmental Authorities.
6.1.4. NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 6.1.4,
the execution, delivery and performance by the Company and the Stockholder of
this Agreement and each Ancillary Agreement to which the Company or the
Stockholder will be a party at the Closing will not
(a) violate the articles of incorporation or bylaws or comparable
organizational documents of the Company,
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(b) violate any applicable Law or Order,
(c) require any filing with or permit, consent or approval of, or the
giving of any notice to, any Person (including filings, consents or approvals
required under any permits of the Company or any licenses to which the Company
is a party),
(d) result in a violation or breach of, conflict with, constitute (with or
without due notice or lapse of time or both) a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company under or result in a loss of any benefit to which the
Company is entitled under any agreement or other instrument binding upon, the
Company or any license, franchise, permit or other similar authorization held by
the Company, or
(e) result in the creation or imposition of any Lien on any asset of the
Company;
(f) except in the case of clauses (c), (d) and (e) for such filings,
permits, consents, approvals or notices and violations, breaches, conflicts and
Liens which, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect.
6.1.5. CAPITALIZATION. (a) Immediately prior to the Closing, the
authorized, issued and outstanding capital of the Company will be as set forth
on SCHEDULE 6.1.5(a).
(b) Except as disclosed in SCHEDULE 6.1.5(b), Seller does not own any
capital stock or other equity or ownership or proprietary interest in any
corporation, partnership, association, trust, joint venture or other entity.
6.1.6. FINANCIAL STATEMENTS; BOOKS AND RECORDS. (a) Seller has heretofore
furnished Buyer with a true and complete copy of the Compilation Statements, the
receipt of which by Buyer is hereby acknowledged. The Compilation Statements
have been derived from the books and records of the Company and constitute a
fair and accurate presentation in all material respects of the financial
position of the Company at the respective dates thereof and the results of the
operations of the Company for the periods indicated and, in the case of the
Compilation Statements, dated as of and for the period ended December 31, 1997
only, cash flows of the Company.
(b) Seller has also heretofore furnished Buyer with a true and complete
copy of the Interim Financial Statements and, through the month ended December
31, 1998, the Monthly Financial Statements, the receipt of which by Buyer is
hereby acknowledged. The Interim Financial Statements and such Monthly Financial
Statements have been, and Monthly Financial Statements required to be delivered
pursuant to Section 8.1 when delivered shall have been, derived from the books
and records of the Company, and have been, and shall have been, as applicable,
prepared on a basis consistent otherwise with the Compilation Statements dated
as of and for the periods ended December 31, 1996 and December 31, 1997. The
Interim Financial Statements and, through the month ended December 31, 1998, the
Monthly Financial Statements constitute, and the Monthly Financial Statements
required to be delivered pursuant to Section 8.1, when delivered will
constitute, a fair and accurate presentation in all material respects of the
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financial position of the Company at the respective dates thereof and the
results of operations of the Company for the respective periods indicated.
(c) Except as disclosed on SCHEDULE 6.1.6.(c), there have been no changes
in the Company's reserve policies since November 30, 1998.
(d) The books of account, minute books, stock record books, and other
records of the Company, all of which have been made available to Buyer, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices. The minute books of the Company
contain materially accurate and complete records of all meetings held of, and
corporate action taken by, Stockholder, the Board of Directors, and committees
of the Boards of Directors of the Company, and no meeting of stockholders, Board
of Directors or committee thereof has been held for which minutes have not been
prepared and are not contained in such minute books.
6.1.7. NO UNDISCLOSED LIABILITIES. There are no liabilities of the Company
or any facts or circumstances which could reasonably be expected to give rise to
liabilities of the Company, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than (a) liabilities fully provided for in the
most recent Interim Financial Statements; (b) liabilities specifically disclosed
on SCHEDULE 6.1.7; (c) and other undisclosed liabilities incurred since the date
of the most recent Interim Financial Statements in the Ordinary Course of
Business which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
6.1.8. INTERCOMPANY ACCOUNTS. SCHEDULE 6.1.8 contains a complete list of
all intercompany balances, as of the date immediately preceding the date hereof,
between the Company's Affiliates, on the one hand, and of the Company, on the
other hand. Other than as disclosed on SCHEDULE 6.1.8 and compensation paid in
the Ordinary Course of Business, since such date, there has not been any accrual
of liability of the Company to Stockholder or any of Company's Affiliates or
other transaction between the Company, on the one hand, and the Company's
Affiliates, on the other hand, or any action taken (other than this Agreement)
which could reasonably be expected to result in any such accrual, or the
incurrence of any legal or financial obligation to any such Person, after such
date.
6.1.9. TAX MATTERS. (a) Except as disclosed in SCHEDULE 6.1.9(a):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with
any Taxing Authority with respect to any Pre-Closing Tax Period by or on
behalf of the Company (collectively, the "RETURNS") have, to the extent
required to be filed on or before the date hereof, been filed when due in
accordance with all applicable laws;
(ii) All Taxes owed by the Company (shown as due and payable on the
Returns that have been filed) have been timely paid, or withheld and
remitted to the appropriate Taxing Authority;
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(iii) The Company is not delinquent in the payment of any Tax and the
Company has not requested any extension of time within which to file any
Return except for extensions granted as a matter of right;
(iv) The Company (or any member of any affiliated, consolidated,
combined or unitary group of which the Company is or has been a member) has
not granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such
extension or waiver) has not yet expired;
(v) There is no action, suit or proceeding of which Seller has been
served with process or has otherwise received written notice now pending
and no claim, audit or investigation now pending of which Seller is aware
or, to the knowledge of Seller, any action, suit, claim, audit or
investigation threatened, against or with respect to the Company in respect
of any Tax;
(vi) There are no Liens for Taxes upon the assets of the Company,
except Liens for current Taxes not yet due;
(vii) The Company has not been a member of an affiliated,
consolidated, combined or unitary group or participated in any other
arrangement whereby any income, revenues, receipts, gain or loss of the
Company was determined or taken into account for Tax purposes with
reference to or in conjunction with any income, revenues, receipts, gain,
loss, asset or liability of any other Person; and
(viii) The Company made a timely and valid election to be treated as
an "S corporation" for federal income tax purposes pursuant to Section 1362
of the Code within the meaning of Section 1361(a) of the Code (an "S
CORPORATION"). Such election was effective for the year commencing January
1, 1991. The Company has also made all such elections permitted or required
under analogous provisions of state and local Law; and the Company will
continue to be a valid S Corporation through the Closing.
(b) To Seller's knowledge, SCHEDULE 6.1.9(b) contains a list of all
jurisdictions (whether foreign or domestic) to which any Tax imposed on overall
net income is properly payable by the Company.
6.1.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE 6.1.10,
since June 30, 1998, there has not been any event, occurrence, development,
circumstances or state of facts which (a) has had or which could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect or
(b) could reasonably be expected to have constituted a violation of any covenant
of Stockholder or the Company hereunder (including Section 8.1) had such
covenant applied to either of them since June 30, 1998.
6.1.11. CONTRACTS. (a) Except as specifically disclosed in SCHEDULE
6.1.11(a), the Company is not a party to or bound by any of the following
(whether written or oral):
(i) any lease (whether of real or personal property) providing for
annual rentals of $50,000 or more;
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(ii) other than purchase orders entered into in the Ordinary Course of
Business, any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets (including in terms of quantity and
dollar amount) that provides for either (A) annual payments by the Company
of $25,000 or more or (B) aggregate payments by the Company of $50,000 or
more;
(iii) other than purchase orders entered into in the Ordinary Course
of Business, any sales, distribution or other similar agreement providing
for the sale by the Company or any subsidiary of materials, supplies,
goods, services, equipment or other assets that provides for either (A)
annual payments to the Company of $25,000 or more or (B) aggregate payments
to the Company of $50,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any noncompetition agreement limiting the freedom of the Company
to compete in any line of business or geographic area or with any Person;
(x) any agreement with (A) Stockholder or any of Stockholder's
Affiliates, (B) any Person directly or indirectly owning, controlling or
holding with power to vote, 5% or more of the outstanding voting securities
of any of Stockholder's Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by Stockholder or any of Stockholder's
Affiliates, (D) any director or officer of any of Stockholder's Affiliates
or any "associates" or members of the "immediate family" (as such terms are
respectively defined in Rule 12b-2 and Rule 16a-1 of the Exchange Act) of
any such director or officer, or (E) any director or officer of the Company
or with any "associate" or any member of the "immediate family" (as such
terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange
Act) of any such director or officer;
(xi) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution
in respect of capital stock of the Company;
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(xii) any management service, consulting or any other similar type of
contract;
(xiii) any warranty, guaranty or other similar undertaking with
respect to contractual performance extended by the Company other than in
the Ordinary Course of Business;
(xiv) any employment, deferred compensation, severance, bonus,
retirement or other similar agreement or plan in effect as of the date
hereof and entered into or adopted by the Company, on the one hand, and to
which any director or officer of the Company or any other employee of the
Company receiving annual compensation of $75,000 or more is a party or who
is otherwise a beneficiary thereof, on the other hand; or
(xv) any other agreement, commitment, arrangement or plan not made in
the Ordinary Course of Business that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in SCHEDULE 6.1.11(a) or any other Schedule to this Agreement or
required to be disclosed pursuant to this Section is, to Seller's knowledge, a
valid and binding agreement of the Company, and is in full force and effect,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles, and neither the Company, nor, to the knowledge of Seller, any other
party thereto is in default or breach in any material respect under the terms of
any such agreement, contract, plan, lease, arrangement or commitment. To the
knowledge of Seller, there is no event, occurrence, condition or act (including
the consummation of the transactions contemplated hereby) which, with the giving
of notice or the passage of time, or the happening of any other event or
condition, could reasonably be expected to become a material default or event of
default thereunder.
(c) SCHEDULE 6.1.11(c) sets forth every grant by the Company in the past
three years of any severance or termination pay in excess of $5,000 to any
employee of the Company receiving annual compensation of $75,000 or more, or any
director or officer of the Company.
6.1.12. INSURANCE COVERAGE. The Company has furnished or otherwise made
available to Buyer a list of, and a true and complete copy of, all insurance
policies and fidelity bonds covering the assets, business, operations,
employees, officers and directors of the Company. To Seller's knowledge, there
is no material claim by the Company pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and the Company has complied in all material respects
with the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) are in full force and effect and are disclosed in SCHEDULE
6.1.12. The Company does not know of any threatened termination of, or premium
increase with respect to, any of such policies or bonds. To Seller's knowledge,
since the last renewal date of any insurance policy, there has not been any
material adverse change in the relationship of the Company with its insurers or
the premiums payable pursuant to such policies.
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6.1.13. LITIGATION. Except as disclosed in SCHEDULE 6.1.13, there is no
action, suit, investigation, arbitration or administrative or other proceeding
pending in respect of which the Company or Stockholder has been served with
process or has otherwise received written notice or, to the knowledge of the
Company, threatened against or affecting the Company or Stockholder or any of
their respective properties before any court or arbitrator or any Governmental
Authorities which, if determined or resolved adversely to the Company or the
Stockholder, (a) could reasonably be expected to, individually or in the
aggregate, materially and adversely affect the right or ability of the Company
to carry on its business as now conducted or have a Material Adverse Effect, or
(b) which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement and the
Ancillary Agreements to which it will be party at Closing; and Seller does not
know of any valid basis for any such action, proceeding or investigation.
6.1.14. COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed in SCHEDULE
6.1.14(a), the Company is not and the Company has not been since the Balance
Sheet Date in violation of any applicable Law or Order, except for such
violations that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) To Seller's knowledge, SCHEDULE 6.1.14(b)(i) sets forth a list of each
government or regulatory license, authorization, permit, consent and approval
held by the Company, issued and held in respect of the Company or required to be
so issued and held to carry on the businesses of the Company as currently
conducted (collectively "PERMITS"). Except as disclosed in SCHEDULE
6.1.14(b)(ii), each such license, authorization, permit, consent and approval is
valid and in full force and effect and will not be terminated or impaired (or
become terminated or impaired) as a result of the transactions contemplated
hereby. The Company is not in default under, and no condition exists that with
notice or lapse of time or both would constitute a default under, any material
license, franchise, permit, consent or approval or similar authorization held by
the Company.
6.1.15. PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as disclosed in
SCHEDULE 6.1.15(a) and except for inventory disposed of in the Ordinary Course
of Business, the Company has good title to, or in the case of leased property
has valid leasehold interests in, all property and assets (whether real or
personal, tangible or intangible) reflected in the June 1998 Balance Sheet or
acquired after the Balance Sheet Date. None of such property or assets is
subject to any Liens, except for (i) Liens disclosed in the June 1998 Balance
Sheet; (ii) Liens for Taxes not yet due or being contested in good faith (and
for which adequate accruals or reserves have been established on the June 1998
Balance Sheet); (iii) Permitted Liens and (iv) regarding the Premises (as
defined in SCHEDULE 6.1.15(b)), the Permitted Exceptions (as defined in EXHIBIT
D-4 attached hereto)
(b) SCHEDULE 6.1.15(b) sets forth a list of all real property assets owned
or leased by the Company ("REAL PROPERTY"). All such leases of real property are
valid and binding agreements of the Company, have been duly executed and
delivered by the parties thereto and, to Seller's knowledge, are in full force
and effect, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally or by general equitable
principles. The Company is a tenant or possessor in good standing under all such
leases of real property and all rents due under such leases have been paid.
There does not exist under any such lease any default or any event which with
notice or lapse of time or both would constitute a default, except for such
defaults that have not and could not reasonably be expected to have,
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individually or in the aggregate, a Material Adverse Effect. The Company has not
received any written notice of any appropriation, condemnation or like
proceeding, or of any violation of any applicable zoning Law or Order relating
to or affecting the Real Property, and to the Company's knowledge, no such
proceeding has been threatened or commenced.
(c) The assets owned or leased by the Company (including, real, personal,
tangible and intangible property), or which it otherwise has the right to use
(including, real, personal, tangible and intangible property), constitute all of
the assets held for use or used in connection with the business of the Company
and are generally in good operating condition and repair (normal wear and tear
excepted) and are adequate to conduct such businesses as currently conducted.
6.1.16. INTELLECTUAL PROPERTY. (a) SCHEDULE 6.1.16(a) sets forth a list of
all Intellectual Property Rights and all material licenses, sublicenses and
other written agreements as to which the Company or any of its Affiliates is a
party and pursuant to which any Person is authorized to use such Intellectual
Property Right, including the identity of all parties thereto.
(b) Except as disclosed in SCHEDULE 6.1.16(b):
(i) The Company has not since January 1, 1996, been sued or charged in
writing with or been a defendant in any claim, suit, action or proceeding
relating to its business that is either pending or, to the knowledge of the
Company, threatened that, in either case, has not been finally terminated
prior to the date hereof and that involves a claim of infringement by the
Company of any trademark, service mark, trade name, invention, patent,
trade secret, copyright, know-how or any other similar type of proprietary
intellectual property right of any other Person or continuing infringement
by any other Person of any Intellectual Property Rights, and Seller does
not have any knowledge of any basis for such claim of infringement or of
any continuing infringement by any other Person of any Intellectual
Property Rights;
(ii) No Intellectual Property Right is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use
thereof by the Company or restricting the licensing thereof by the Company
to any Person; and
(iii) The Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how or
any other similar type of proprietary intellectual property right.
6.1.17. ENVIRONMENTAL MATTERS. (a) Except as disclosed in SCHEDULE 6.1.17
and except for any matters which otherwise could not reasonably be expected ,
individually or in the aggregate, to have a Material Adverse Effect:
(i) Constituents of Concern have not been generated, recycled, used,
treated or stored on, transported to or from, or released or disposed on,
the Company Property or, to the knowledge of Seller, any property adjoining
or adjacent, except in compliance with Environmental Laws;
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(ii) the Company is in compliance with Environmental Laws and the
requirements of permits issued under such Environmental Laws with respect
to the Company Property;
(iii) There are no Environmental Claims (a) which are pending against
the Company or any Company Property and in respect of which the Company has
been served with process or has otherwise received written notice, or, (b)
to Seller's knowledge, which are threatened against the Company or any
Company Property;
(iv) There are no facts, circumstances, conditions or occurrences
regarding the Company' past or present business or operations or any
Company Property, or to the knowledge of Seller, any property adjoining any
Company Property, that could reasonably be expected to form the basis of an
Environmental Claim against the Company, or any of the Company Property or
assets, or to cause any currently owned, leased, used, operated or occupied
Company Property or assets to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law;
(v) There are not now and, to the knowledge of the Company, there have
never been any underground storage tanks or sumps located on any Company
Property or, to the knowledge of Seller, located on any property that
adjoins or is adjacent to any Company Property;
(vi) Neither the Company nor any Company Property is listed or
proposed for listing on the National Priorities List under CERCLA, or
CERCLIS (as defined in CERCLA) or on any similar federal, state or foreign
list of sites requiring investigation or clean-up;
(vii) There are no Environmental Permits that are nontransferable or
require consent, notification or other action to remain in full force and
effect following the consummation of the transactions contemplated hereby;
and
(viii) The Company does not have any liability under any Environmental
Law (including an obligation to remediate any Environmental Condition
whether caused by the Company or any other Person) which could reasonably
be expected to have a Material Adverse Effect.
(b) Except as disclosed on SCHEDULE 6.1.17(b) there has been no
environmental investigation, study, audit, test, review or other analysis
commenced or conducted by or on behalf of the Company (or by a third party of
which the Company has knowledge) in relation to the current or prior business of
the Company, or any property or facility currently or, to the knowledge of the
Company, previously owned or leased by the Company, which has not been disclosed
or delivered to Buyer prior to the date hereof.
(c) The Company does not own or lease or has not owned or leased any
property, and does not conduct and has not conducted any operations, in New
Jersey or Connecticut.
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(d) For purposes of this Section, the terms "COMPANY" (including the use of
such terms in the term "COMPANY PROPERTY") will include any entity which is, in
whole or in part, a predecessor of the Company.
6.1.18. PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 6.1.18(a) sets forth a
list of all Benefit Plans with respect to which the Company or any ERISA
Affiliate has or has had in the six years preceding the date hereof any
obligation or liability or which are or were in the six years preceding the date
hereof maintained, contributed to or sponsored by the Company or any ERISA
Affiliate for the benefit of any current or former employee, officer or director
of the Company or any ERISA Affiliate. With respect to each Benefit Plan subject
to ERISA, the Company has delivered to Buyer a true and complete copy of each
such Benefit Plan (including all amendments thereto) and a true and complete
copy of each material document (including all amendments thereto) prepared in
connection with each such Benefit Plan including, without limitation, (i) a copy
of each trust or other funding arrangement, (ii) each summary plan description
and summary of material modifications, and (iii) the most recently filed IRS
Form 5500 for each such Benefit Plan, if any. The Company does not have any
express or implied commitment to create, incur liability with respect to or
cause to exist any employee benefit plan or to modify any Benefit Plan, other
than as required by Law.
(b) Except as disclosed in SCHEDULE 6.1.18(b), none of the Plans is a plan
that is or has ever been subject to Title IV of ERISA, Section 302 of ERISA or
Section 412 of the Code. None of the Benefit Plans is (i) a "multiemployer plan"
as defined in Section 3(37) of ERISA, (ii) a plan or arrangement described under
Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a plan maintained in connection
with a trust described in Section 501(c)(9) of the Code. Except as disclosed in
SCHEDULE 6.1.18(b), and except for benefits provided in the Company's 401(k)
Plan, none of the Benefit Plans provides for the payment of separation,
severance, termination or similar-type benefits to any person or provides for
or, except to the extent required by Law, promises retiree medical or life
insurance benefits to any current or former employee, officer or director of the
Company.
(c) Except as disclosed in SCHEDULE 6.1.18(c), each Benefit Plan is in
compliance in all material respects with, and has always been operated in all
material respects in accordance with, its terms and the requirements of all
applicable Law and the Company and the ERISA Affiliates have satisfied in all
material respects all of their statutory, regulatory and contractual obligations
with respect to each such Benefit Plan. No legal action, suit or claim is
pending or, to the knowledge of the Company, threatened with respect to any
Benefit Plan (other than claims for benefits in the ordinary course) and no fact
or event exists that could reasonably be expected to give rise to any such
action, suit or claim.
(d) The Company's 401(k) Plan has been established by the Company pursuant
to its adoption of a prototype plan and adoption agreement sponsored and
prepared by Great-West Life & Annuity Insurance Company. The Company has not
applied for a determination letter from the Internal Revenue Service that this
Plan is qualified and exempt from taxation under Sections 401(a) and 501(a) of
the Code. The form of the prototype plan has been determined by the Internal
Revenue Service to be in compliance with the applicable provisions of the Code
and a copy of that opinion has been delivered to Buyer. To Seller's knowledge,
no fact or occurrence has occurred since the date of the above-referenced
opinion to
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adversely affect the qualified or exempt status of any Benefit Plan or related
trust, including the Company's 401(K) plan.
(e) There has been no non-exempt prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code) with respect to any Benefit
Plan. Neither the Company nor any ERISA Affiliate has incurred any material
liability for any excise tax arising under the Code with respect to a Benefit
Plan and no fact or event exists which could reasonably be expected to give rise
to such liability.
(f) All material contributions, premiums or payments required to be made
with respect to any Benefit Plan have been made on or before their due dates.
For completed plan years of the Benefit Plans, all such contributions have been
fully deducted for income tax purposes and no such deduction has been challenged
or disallowed by any Government Authorities, and no fact or event exists which
could give rise to any such challenge or disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any ERISA Affiliate
thereof relating to, or change in employee participation or coverage under, any
Benefit Plan that would increase materially the expense of maintaining such
Benefit Plan above the level of the expense incurred in respect thereto for the
most recent fiscal year ended prior to the date hereof.
(h) Except as disclosed in SCHEDULE 6.1.18(h) or in this Agreement or the
Ancillary Agreements, no employee or former employee of the Company or any ERISA
Affiliate thereof will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit (including acceleration of
vesting or exercise of an incentive award) as a result of the transactions
contemplated hereby.
(i) Except as disclosed in SCHEDULE 6.1.18(i), no current or former
employee of the Company or any ERISA Affiliate thereof holds any option to
purchase shares of the Company.
6.1.19. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 6.1.19, neither Stockholder, nor, to Seller's knowledge, any other
officer or director of the Company possesses, directly or indirectly, any
ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
or potential competitor of the Company. Ownership of securities of a company
whose securities are registered under the Exchange Act of 2% or less of any
class of such securities will not be deemed to be an ownership interest for
purposes of this Section 6.1.19.
6.1.20. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS. To Seller's knowledge,
the relationships of the Company with its customers, suppliers and employees are
good commercial working relationships. Except as disclosed in SCHEDULE 6.1.20,
none of the Company's material customers or material suppliers or employees
receiving annual compensation in excess of $75,000 has canceled, terminated or
otherwise materially altered or notified the Company in writing of any intention
or otherwise threatened to cancel, terminate or materially alter its
relationship with the Company effective prior to, as of, or within one year
after, the Closing. As of the date hereof, there has not been, and Seller has no
reason to believe that there will be, any
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change in relations with material customers, suppliers or employees of the
Company as a result of the transactions contemplated by this Agreement.
6.1.21. OTHER EMPLOYMENT MATTERS. (a) The Company is in compliance with all
Laws and Orders respecting employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be so
in compliance could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and has not, and is not, engaged in any
unfair labor practice; no unfair labor practice complaint against the Company is
pending of which the Company has been served with process or has otherwise
received written notice before the National Labor Relations Board; there is no
labor strike, dispute, slowdown or stoppage actually pending or to Seller's
knowledge threatened against or involving the Company; the Company is not party
to any collective bargaining agreement and no collective bargaining agreement is
currently being negotiated by the Company; to the knowledge of Seller, no
representation question exists respecting employees of the Company; and, except
as specifically set forth on SCHEDULE 6.1.21(a), no claim in respect of the
employment of any employee has been asserted and is currently pending of which
the Company has been served with process or has otherwise received written
notice or, to the knowledge of Seller threatened, against the Company.
(b) Seller has delivered to Buyer a complete and accurate list, attached
hereto as SCHEDULE 6.1.21(b), of each employee and director of the Company,
together with each such employee's and director's job description, salary or
hourly rate of compensation, date of hire, and all bonuses and any other amounts
to be paid by the Company to employees of the Company at or in connection with
the Closing ("BONUSES").
(c) No current employee or current director of the Company or, to Seller's
knowledge, any former employee or director of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
director and any other Person that in any way adversely affected, affects, or
could reasonably be expected to affect the performance of his duties as an
employee or director of the Company, or the ability of the Company to conduct
its business.
(d) SCHEDULE 6.1.21(d) contains a complete and accurate list of the
following information for each retired employee or director of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the
future: name, pension benefits, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
6.1.22. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 6.1.22, all of
the accounts receivable reflected on the June 1998 Balance Sheet (net of the
applicable reserves set forth on the June 1998 Balance Sheet) and all accounts
receivable which have arisen since the Balance Sheet Date (net of any immaterial
additional applicable reserves established since the Balance Sheet Date in the
Ordinary Course of Business) are valid and enforceable claims, and the goods and
services sold and delivered which gave rise to such accounts receivable were
sold and delivered in conformity with the applicable purchase orders, agreements
and specifications. To Seller's knowledge, such accounts receivable are subject
to no defenses, offsets or recovery in whole or in part by the Persons whose
purchase gave rise to such accounts receivable or by third parties and are fully
collectible in the Ordinary Course of Business without resort to legal
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proceedings, except to the extent of the amount of the applicable reserve for
doubtful accounts reflected in the June 1998 Balance Sheet and reasonable
additional applicable reserves for doubtful accounts established since the
Balance Sheet Date in the Ordinary Course of Business.
6.1.23. INVENTORY. Except as set forth in SCHEDULE 6.1.23, all inventories
reflected on the June 1998 Balance Sheet (net of the applicable reserves set
forth on the June 1998 Balance Sheet) and all inventories which have been
acquired or produced since the Balance Sheet Date (net of any reasonable
additional applicable reserves established since the Balance Sheet Date in the
Ordinary Course of Business) are in good condition, conform in all material
respects with the applicable specifications and warranties of the Company, are
not obsolete, and are useable or saleable in the Ordinary Course of Business.
The amount and mix of items in the inventories of supplies, in-process and
finished products are, and will be at the Closing Date, consistent with the past
business practices of the Company.
6.1.24. MILLENNIUM COMPLIANCE. To the knowledge of Seller, SCHEDULE 6.1.24
describes the measures that have been implemented to determine the extent to
which the computer systems used by the Company in its business (the "COMPUTER
SYSTEMS") are not in Millennium Compliance, and the material details of any
program undertaken with a view towards causing the Computer Systems to achieve
Millennium Compliance.
6.1.25 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Stockholder or the Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement or any of the
Ancillary Agreements.
VII. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and Stockholder as of the date
hereof and the Closing as follows:
7.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Buyer has all corporate power required to carry
on its business as now conducted. To Buyer's knowledge, Buyer has all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
7.2. AUTHORIZATION; ENFORCEABILITY. The execution, delivery and performance
by Buyer of this Agreement are within, Buyer's powers and have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
7.3. GOVERNMENTAL AUTHORIZATION. To the Buyer's knowledge, except as may be
required under the HSR Act, the execution, delivery and performance by Buyer of
this Agreement require no action by or in respect of, or filing with, any
Governmental Authorities.
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7.4. NON-CONTRAVENTION. The execution, delivery and performance by Buyer of
this Agreement will not violate the certificate of incorporation or bylaws of
Buyer, or any applicable Law or Order.
7.5. LITIGATION. Except as disclosed in SCHEDULE 7.5, there is no action,
suit, investigation, arbitration or administrative or other proceeding pending
in respect of which Buyer has been served with process or has otherwise received
written notice or, to the knowledge of Buyer, threatened against or affecting
Buyer, or any of Buyer's properties before any court or arbitrator or any
Governmental Authorities which, if determined or resolved adversely to Buyer,
could, individually or in the aggregate, reasonably be expected to materially
and adversely affect the right or ability of Buyer to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements to
which the Company will be a party after the Closing; and Buyer knows of no valid
basis for any such action, suit, investigation or proceeding.
7.6. CONSENTS. Except as disclosed on SCHEDULE 7.6, the execution, delivery
and performances by Buyer of this Agreement will not require the consent of or
notice to any Person.
7.7. FINDERS' FEES. Except for Saunders Karp & Megrue, L.P., Carlisle
Group, L.P. and Harvey & Company, LLC, whose fees and expenses (including
transaction fees) will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee or commission from
Stockholder, the Company, Buyer or any of Buyer's Affiliates upon consummation
of the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
7.8. PRECISION STRUCTURE. Effective as of the Closing, Buyer (a) will own
of record, directly or indirectly, all of the issued and outstanding capital
stock of Mid State Machine Products and Galaxy Industries Corporation and (b)
will own, indirectly the Purchased Assets and the other businesses acquired with
the financing contemplated by Section 9.1.11.
VIII. CERTAIN COVENANTS
8.1. CONDUCT OF BUSINESS OF THE COMPANY. During the period from the date of
this Agreement to the Closing Date, the Company will conduct its operations in
the Ordinary Course of Business (including managing its working capital in
accordance with its past practice and custom), except as expressly permitted
under this Agreement, and will use reasonable efforts to: preserve intact its
business organizations, keep available the services of its officers and
employees and maintain its relationships and goodwill with licensors, suppliers,
distributors, customers, landlords, employees, agents and others having business
relationships with it. During the period from the date of this Agreement to the
Closing, the Company will confer with Buyer concerning operational matters of a
material nature and report periodically to Buyer concerning their respective
businesses, operations and finances and will deliver all Monthly Financial
Statements to Buyer not previously delivered to Buyer on or prior to the date
hereof. Without limiting the generality or effect of the foregoing, prior to the
Closing Date, except with the prior written consent of Buyer, the Company will
not (except to the extent otherwise expressly permitted under this Agreement):
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(a) Amend or modify its articles of incorporation, bylaws or any other
organizational document from its form on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any bonuses to any
director, officer, employee or stockholder of the Company, or enter into any
employment, severance, or similar agreement with any director, officer,
stockholder or employee of the Company, provided, however, that the compensation
of employees of the Company receiving annual compensation of less than $75,000
may be changed in the Ordinary Course of Business;
(c) Adopt or increase any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees, other than matching
contributions by the Company under the Company's 401(k) plan in an amount not to
exceed 100% of each employee's contribution not in excess of $80,000 in the
aggregate;
(d) Enter into any contract or commitment except contracts and commitments
(for capital expenditures or otherwise) in the Ordinary Course of Business;
(e) Incur, assume or guaranty (i) Indebtedness to employees of Seller or
any of its Affiliates or (ii) other Indebtedness, except, in the case of clause
(ii), incurred in the Ordinary Course of Business;
(f) Enter into any transaction or commitment relating to the assets or the
business of the Company (other than purchase orders entered into in the Ordinary
Course of Business) which, individually or in the aggregate, could reasonably be
expected to be material to the Company, or cancel or waive any claim or right of
substantial value which, individually or in the aggregate, could reasonably be
expected to be material to the Company, or amend any term of any Company
Securities;
(g) Other than to the extent necessary to pay the unpaid and/or estimated
Taxes of Stockholder imposed in connection with the income or operations of
Seller between January 1, 1998 and the Closing Date (other than Taxes which
constitute a breach of any representation or warranty contained in this
Agreement), set aside or pay any dividend or make any other distribution with
respect to any shares of capital stock of the Company or repurchase, redeem or
otherwise acquire directly or indirectly, any outstanding shares of capital
stock or other securities of, or other ownership interests in as of the Closing
Date, the Company, which Seller believes, in its reasonable good faith judgment,
would, in the aggregate, result in a reduction in the Company's net worth to
below the Base Net Worth;
(h) Make any change in accounting methods or practices (including changes
in accruals or reserve amounts (with respect to amounts, such prior written
consent of Buyer not to be unreasonably withheld or delayed) or policies),
except as otherwise expressly set forth in this Agreement and except for changes
in accounting methods instituted, prescribed, utilized, and/or adopted by Ernst
& Young, LLP in conducting the Pre-Closing Audits;
(i) Issue or sell any Company Securities or make any other changes in its
capital structure, including the grant of any stock option or other right to
purchase shares of capital stock of the Company;
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(j) Sell, lease or otherwise dispose of any material asset or property
(such prior written consent of Buyer not to be unreasonably withheld or
delayed);
(k) Write-off as uncollectible any notes or accounts receivable or any
other asset, except write-offs in the Ordinary Course of Business charged to
applicable reserves; write-off, write-up or write-down any other asset of the
Company, except write-ups and write-downs in the Ordinary Course of Business and
except for employee compensation or bonus paid by canceling Indebtedness listed
under item no. 6 on SCHEDULE 2.2(c); or alter its customary time periods for
collection of accounts receivable or payments of accounts payable;
(l) Create or assume any Lien other than a Permitted Lien;
(m) Make any loan, advance or capital contributions to or investment in any
Person;
(n) Terminate or close any material facility, business or operation of the
Company;
(o) Intentionally cause or suffer any damage, destruction or other casualty
loss (whether or not covered by insurance) affecting the business or assets of
the Company which, individually or in the aggregate, has had or could reasonably
be expected to have a Material Adverse Effect;
(p) Intentionally cause any other event, occurrence, development or state
of circumstances or facts which, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect; or
(q) Agree to do any of the foregoing.
Nothing in this Section 8.1 will be construed to prohibit the Stockholder from
purchasing at the book value thereof between the date hereof and the Closing
Date the property listed on SCHEDULE 2.2(c).
8.2. EXCLUSIVE DEALING. During the period from the date of this Agreement
to the earlier of the Closing Date and the termination of this Agreement in
accordance with its terms, Stockholder will not and will cause his Affiliates
(including the Company) and their respective representatives (including
advisors, agents, attorneys, directors, employees and consultants) not to, take
any action to, directly or indirectly, encourage, initiate, solicit or engage in
discussions or negotiations with, or provide any information to any Person,
other than Buyer (and its affiliates and representatives), concerning any
purchase of any capital stock of the Company or any asset purchase, merger or
similar transaction involving the Company. Stockholder will disclose to Buyer
the existence or occurrence of any proposal or contract which he or any of his
Affiliates (including the Company) or any of their respective representatives
described above may receive in respect of any such transaction as well as the
identity of the Person from whom such a proposal or contract is received.
8.3. REVIEW OF THE COMPANY; CONFIDENTIALITY. (a) Buyer may, prior to the
Closing Date, through one or more representatives of the Company designated by
the Company
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in writing, review the properties, books and records of the Company and their
financial and legal condition to the extent it in good faith deems necessary or
advisable to familiarize itself with such properties and other matters. The
Company will permit Buyer and its representatives to have, after the date of
execution of this Agreement through the representative or representatives
designated pursuant to the immediately preceding sentence, full access (at
mutually convenient times agreed upon in advance) to the premises and to all the
respective books and records of the Company and to cause the officers of the
Company to furnish Buyer through such representative with such financial and
operating data and other information with respect to the business and properties
of the Company as Buyer may from time to time reasonably request. The Company
will deliver or cause to be delivered to Buyer such additional instruments,
documents, certificates and opinions as Buyer may reasonably request for the
purpose of verifying the information set forth in this Agreement or on any
Schedule attached hereto and consummating or evidencing the transactions
contemplated by this Agreement. Any review or access by or of Buyer described in
this Section 8.3(a) will be subject to the condition that such review and access
not unreasonably interfere with the conduct of the business of Seller.
(b) Prior to the Closing, the parties will be bound by the provisions of
the section entitled "Confidentiality" of the letter of intent between Seller
and Buyer dated November 4, 1998.
8.4. REASONABLE EFFORTS. Seller and Buyer will cooperate and use their
respective reasonable efforts to take, or cause to be taken, all appropriate
actions, and to make, or cause to be made, all filings necessary, proper or
advisable under applicable laws and regulations (including, without limitation,
the filing of Notification and Report Forms under the HSR Act with the Federal
Trade Commission and the Antitrust Division of the Department of Justice) to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable efforts to obtain,
prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Authorities and
parties to contracts with the Company as are necessary for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby. Notwithstanding any other provision hereof, (i) in no
event will Buyer or any of its Affiliates (including the Company after the
Closing) be required to enter into or offer to enter into any divestiture,
hold-separate, business limitation or similar agreement or undertaking in
connection with this Agreement or the transactions contemplated hereby and (ii)
in no event will Buyer, Stockholder or any of their respective Affiliates
(including the Company after the Closing) be required to make any payment in
connection with any consent or approval or condition to Closing set forth in any
subsection of Sections 9.1 or 9.2 which it is necessary or advisable for
Stockholder, the Company or Buyer to obtain or satisfy in order to consummate
the transactions contemplated by this Agreement.
8.5. TRANSFER OF EMPLOYEES AND BENEFIT PLANS. As of the Closing Date:
(a) Employees of Seller with respect to the Business immediately prior to
the Closing Date whose names are listed on SCHEDULE 8.5(a) will be offered
employment with Buyer or an Affiliate of Buyer with each such offer to include
(i) a substantially equivalent title, level of responsibility and compensation
as each such employee had as an employee of Seller on the date hereof and (ii)
the benefits listed on SCHEDULE 8.5(b), provided that this Section 8.5 will not
be
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construed to prohibit Buyer from modifying or eliminating any such benefits
after the Closing Date other than benefits provided to Executive under the
Employment Agreement;
(b) Other than with respect to the SCHEDULE 8.8 Individuals, Buyer will
assume all obligations relating to the payment of (i) salary, wages and benefits
reflected on the Closing Date Balance Sheet as finally determined in accordance
with this Agreement (to the extent not discharged prior to the Closing Date) or
otherwise arising or accruing after the Closing Date, provided that the
existence thereof does not constitute a breach of any representation, warranty
or covenant of Seller hereunder, in each case with respect to any employee of
Seller who accepts employment with Buyer (the "TRANSFERRED EMPLOYEES"), and (ii)
severance payments and other severance benefits to which the Transferred
Employees become entitled because of actual termination of their employment with
and by Buyer or an Affiliate of Buyer after they become employees of Buyer,
PROVIDED, HOWEVER, that Buyer will provide all COBRA benefits under applicable
Law for all of the SCHEDULE 8.8 Individuals.
(c) Buyer will assume and discharge the obligations of Seller under each of
the agreements listed on SCHEDULE 6.1.11(a)(xiv) to which Seller is party;
(d) Buyer will assume sponsorship of all Benefit Plans and Seller will take
all action necessary to transfer sponsorship of all Benefit Plans to Buyer as of
the Closing; and
(e) Buyer will cause the Company's health plan, or any health plan it
adopts to replace the Company's health plan, to provide COBRA benefits or
similar benefits required by applicable Law for any former employee of the
Company (and such former employee's eligible beneficiaries) who, on the Closing
Date, is receiving or is eligible to elect COBRA or such similar benefits and
will be responsible for providing COBRA notices or similar notices required by
applicable Law to any employee of the Company who terminates employment on or
after the Closing Date and to such employee's eligible beneficiaries.
Nothing contained in this Agreement will confer upon any Transferred Employee,
or any legal representative thereof, any rights or remedies, including, without
limitation, any right to employment for any specified period, of any nature or
kind whatsoever, under or by reason of this Agreement (other than as provided in
the Employment Agreement). Notwithstanding anything to the contrary contained in
this Agreement, neither Buyer nor any Affiliate of Buyer will be required to
continue any particular Benefit Plan after the Closing Date for the Transferred
Employees, and any such Benefit Plan may be amended or terminated in accordance
with its terms and any applicable Law. In the event the Benefit Plans are
terminated by Buyer, Buyer will replace such Benefit Plans with a benefit
program for Transferred Employees, and such Transferred Employees will be
eligible to participate in such benefit program and will receive full credit for
their service with Seller and Buyer for eligibility and vesting purposes with
respect to such benefit program. In addition, at any time prior to the Closing
Date, Seller may, with the prior written consent of Buyer, which will not be
unreasonably withheld or delayed, distribute to its employees a written notice
announcing the existence of this Agreement and the transactions contemplated
hereby, the Closing Date, and the identity of the Buyer.
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8.6 BOOKS AND RECORDS.
(a) From and after the Closing Date, Buyer will give Seller's
representatives reasonable access to such documentation and information and
reasonable access to and cooperation of employees which Seller may reasonably
require (i) to prepare and file Tax returns and to respond to any issues which
may arise with respect to Taxes for which Sellers or the Stockholder are
responsible to the extent relating to the Purchased Assets or Assumed
Liabilities, (ii) with respect to any Retained Liabilities; and (iii) to defend
any claim which Seller is required to defend pursuant to this Agreement or in
connection with the operation of the Business prior to the Closing Date. Subject
to the other provisions of this Section 8.6(a), Buyer will retain and maintain
at the principal place of business of the Company a copy of all of the books,
records, and other documentation which are delivered or transferred to Buyer
under the terms of this Agreement, including without limitation all of all of
the same described in Section 2.1(a)(x). Prior to the fourth anniversary of the
Closing Date, Buyer will give Seller at least ten days prior written notice of
Buyer's intention to dispose of any books, records or other documentation which
are delivered to Buyer under the terms of this Agreement, and Seller will have
the opportunity to obtain possession, at its own expense, of any such books,
records or documentation prior to Buyer's disposition thereof. In the absence of
bad faith or willful misconduct, Buyer will have no liability arising out of or
in connection with its retention and handling of such records.
(b) From and after the Closing Date, Seller will give Buyer's
representatives reasonable access to such documentation, information and
reasonable access to and cooperation of the Stockholder and other employees of
Seller which Buyer may reasonably require (i) to prepare and file tax returns
and respond to any issues which may arise with respect to Taxes for which Buyer
is responsible to the extent relating to the Purchased Assets or Assumed
Liabilities or (ii) to defend any claim which Buyer is required to defend
pursuant to this Agreement or in connection with the operation of the Business
after the Closing Date. Prior to the fourth anniversary of the Closing Date,
Seller will give Buyer at least ten days prior written notice of Seller's
intention to dispose of any books, records or other documentation contemplated
by this Section 8.6(b), and Buyer will have the opportunity to obtain
possession, at its own expense, of any such books, records or documentation
prior to Seller's disposition thereof. In the absence of bad faith or willful
misconduct, Seller will have no liability arising out of or in connection with
its retention and handling of such records.
8.7 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller with the
provisions of any Laws of any jurisdiction relating to bulk transfers which may
be applicable in connection with the transfer of the Purchased Assets to Buyer
("BULK TRANSFER LAWS"), and no representation, warranty or covenant of
Stockholder contained in this Agreement will be deemed to have been breached as
a result of such noncompliance.
8.8 NON-COMPETITION.
(a) During the Covenant Period, Seller will not promote, participate or
engage in any business which is competitive with the Business of Buyer or any
Affiliate of Buyer;
(b) During the Covenant Period, Seller will not directly or indirectly
solicit, canvass or approach any Person who, to the knowledge of Seller, was
provided with products or
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services by Seller at any time prior to the Closing Date, to offer that Person
products or services similar to or derivative of products or services currently
provided or previously provided at any time within the two year period preceding
the Closing Date or prior to the expiration of the Covenant Period, in each
case, by Buyer or any Affiliate of Buyer or at any time prior to the Closing
Date, by Seller.
(c) During the Covenant Period, Seller will not directly or indirectly
solicit, canvass or approach any Person who, to the knowledge of Seller,
provided products or services to Buyer or any Affiliate of Buyer at any time
during the two years before the Closing Date or prior to the expiration of the
Covenant Period to endeavor to cause such Person to cease providing products or
services to Buyer or any Affiliate of Buyer.
(d) During the Covenant Period, Seller will not directly or indirectly
employ, solicit or entice away any Board of Directors member, management
committee member, director, officer or employee of Buyer or any other Person
directly or indirectly controlled by Buyer, other than the current employees of
Seller identified on SCHEDULE 8.8.
8.9 COLLECTION OF PAYMENTS. Following the Closing: (a) Seller will
promptly, and in any event, not later than seven days following receipt, forward
to Buyer any payments received by Seller with respect to any of the Purchased
Assets, and any checks, drafts or other instruments payable to Seller will, when
so delivered, bear all endorsements required to effectuate the transfer of the
same to Buyer, (b) Seller will promptly forward to Buyer any mail or other
communications received by Seller relating to the Purchased Assets or the
Assumed Liabilities, (c) Buyer will promptly, and in any event, not later than
seven days following receipt, forward to Seller any payments received by Buyer
with respect to any of the Excluded Assets, and any checks, drafts or other
instruments payable to Buyer shall, when so delivered, bear all endorsements
required to effect the transfer of the same to Seller and (d) Buyer will
promptly forward to Seller any mail or other communications received by Buyer
relating to the Excluded Assets or the Retained Liabilities.
8.10 ACCOUNTS RECEIVABLE. From and after the Closing Date, Seller will use
reasonable efforts to assist Buyer in the collection of Accounts Receivable,
and, promptly after receipt of payment by Seller in respect of any Accounts
Receivable, Seller will pay to Buyer or its designee the full amount of such
payment.
8.11 USE OF NAMES. On and after the Closing Date, Seller will discontinue
all use of the name "General Automation, Inc." alone or in any combination of
words for any product or service and will as promptly as possible, but in no
event later than 30 days after the Closing Date, eliminate such names from all
signs, purchase orders, invoices, sales orders, packaging stock, labels,
letterheads, shipping documents and other materials used by Seller.
8.12 PRE-CLOSING AUDITS. Seller will permit Ernst & Young LLP to conduct
and complete prior to Closing an audit of the Company's financial statements
(including balance sheet and statements of income, retained earnings and cash
flows) at the expense of Buyer, for the fiscal years ended December 31, 1996,
1997 and 1998 (the "AUDITED FINANCIAL STATEMENTS") in accordance with GAAP
(including the issuance of reports thereon by such certified public accountants)
(collectively, the "PRE-CLOSING AUDITS") and to deliver the Audited Financial
Statements (together with the reports thereon by such certified public
accountants) with
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copies thereof to Seller and Buyer upon completion thereof. Seller will,
directly or through its representatives, provide such access to the books and
records of the Company (including accountants' work papers) and to employees and
other representatives of the Company as is necessary or advisable in the good
faith judgment of Buyer and as requested by Buyer in good faith to complete the
Pre-Closing Audits; provided that such activities will not unreasonably
interfere with the operations of the Company in the Ordinary Course of Business.
Prior to the Closing, Seller will keep the Audited Financial Statements
confidential in accordance with Section 8.3(b) and will not copy or otherwise
use the Audited Financial Statements other than as expressly permitted by this
Agreement. Notwithstanding anything to the contrary contained in the immediately
preceding sentence, Seller may retain possession of the Audited Financial
Statements without restriction on the use thereof (a) if the Closing fails to
occur because of any of the conditions to Closing set forth in Section 9.1.6,
Section 9.1.11 or in any subsection of Section 9.2 (other than Sections 9.2.3 ,
9.2.4 and 9.2.8) has not been satisfied prior to the Drop Dead Date; or (b) if
the Closing fails to occur because any of the conditions to Closing set forth in
Sections 9.1.2, 9.1.3, 9.1.8, 9.1.10, 9.1.12, 9.1.13, 9.2.3, 9.2.4 or 9.2.8 has
not been satisfied prior to the Drop Dead Date, PROVIDED, HOWEVER, that in the
case of this clause (b), Seller shall have paid Buyer or its designee an
aggregate of $25,000.
8.13 SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS. On or prior to
the Closing Date, Seller will terminate all equity-based plans or agreements
listed in any of the Schedules attached hereto.
8.14 FURTHER ASSURANCES. From time to time, as and when requested by any
party hereto and subject to Section 8.4, the other parties will execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and will take, or cause to be taken, all such further or other
actions, as the requesting party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
IX. CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the Closing are subject to the satisfaction of the following
conditions:
9.1.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. (a) The
representations and warranties of Seller made in this Agreement will be true and
correct in all respects (or, if any such representation is not expressly
qualified by "materiality," "Material Adverse Effect" or words of similar
import, then in all material respects) as of the date hereof and as of the
Closing, as though made as of the Closing; (b) Seller shall have performed and
complied with all terms, agreements and covenants contained in this Agreement
required to be performed or complied with by Seller on or before the Closing
Date; (c) Seller shall have delivered to Buyer a certificate of Seller's Chief
Executive Officer, dated the Closing Date, confirming the foregoing and such
other evidence of compliance with Seller's obligations as Buyer may reasonably
request; and (d) Seller shall have delivered to Buyer a certificate from its
Secretary or Assistant Secretary certifying as to the due adoption of
resolutions of the Board of Directors of Seller authorizing the execution of
this Agreement and the taking of any and all actions deemed necessary or
advisable to consummate the transactions contemplated herein.
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9.1.2. NO INJUNCTION, ETC. No provision of any applicable law or regulation
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.1.3. NO PROCEEDINGS. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages will have been instituted by any Person (other than Buyer or the
Company) before any court, arbitrator or Governmental Authorities and be
pending.
9.1.4. REQUIRED FILINGS. All actions by or in respect of or filings by the
Company or Stockholder with any Person required to permit the consummation of
the Closing shall have been taken, made or obtained.
9.1.5. OPINION OF COUNSEL. Buyer shall have received the opinion of
Rosenthal & Schanfield, counsel to the Company and Stockholder, dated the
Closing Date, substantially in the form attached hereto as EXHIBIT F, together
with the Reliance Letters to the Lenders.
9.1.6. DUE DILIGENCE. Buyer shall have completed, or caused to be completed
by its attorneys, accountants and other representatives, to its reasonable and
good faith satisfaction, business, legal, environmental and accounting due
diligence investigations and reviews of each of the Company.
9.1.7. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
been executed and delivered by the parties thereto other than Buyer.
9.1.8. THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
otherwise required in connection with the consummation of the transactions
contemplated by this Agreement shall have been received. All of the consents,
approvals, authorizations, exemptions and waivers from Governmental Authorities
that will be required in order to enable Buyer to consummate the transactions
contemplated hereby shall have been obtained.
9.1.9. FIRPTA. Seller shall have furnished to Buyer, on or prior to the
Closing Date, a non-foreign person affidavit required by Section 1445 of the
Code.
9.1.10. NO MATERIAL ADVERSE CHANGE. Prior to the Closing, no event shall
have occurred which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
9.1.11. FINANCING. Buyer shall have obtained financing for the payment of
the Aggregate Closing Consideration on terms satisfactory to it in its sole
discretion.
9.1.12. HSR ACT. Any applicable waiting period under the HSR Act relating
to the transactions contemplated hereby will have expired or been terminated.
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9.1.13. PRE-CLOSING AUDITS. The Pre-Closing Audits shall have been
completed and the Audited Financial Statements shall have been delivered to
Buyer and will not in the aggregate reflect any materially adverse difference
from the applicable Compiled Statements.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate the Closing are subject to the satisfaction of the following
conditions:
9.2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. (a) The
representations and warranties of Buyer made in this Agreement will be true and
correct in all respects (or, if any such representation is not expressly
qualified by "materiality," "Material Adverse Effect" or words of similar
import, then in all material respects) as of the date hereof and as of the
Closing, as though made as of the Closing; (b) Buyer shall have performed and
complied with all terms, agreements and covenants contained in this Agreement
required to be performed or complied with by Buyer on or before the Closing
Date; and (c) Buyer shall have delivered to Seller a certificate of Buyer's
Chief Executive Officer, dated the Closing Date, confirming the foregoing and
such other evidence of compliance with its obligations as Seller may reasonably
request.
9.2.2. BUYER'S CERTIFICATE. Buyer shall have delivered to Seller a
certificate from its Secretary or Assistant Secretary certifying as to the due
adoption of resolutions adopted by the Board of Directors (or equivalent body)
of Buyer authorizing the execution of this Agreement and the taking of any and
all actions deemed necessary or advisable to consummate the transactions
contemplated herein.
9.2.3. NO INJUNCTION, ETC. No provision of any applicable law or regulation
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.2.4. NO PROCEEDINGS. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages will have been instituted by any Person (other than Stockholder) before
any court, arbitrator or Governmental Authorities and be pending.
9.2.5. REQUIRED FILINGS. All actions by or in respect of or filings by
Buyer with any Person required to permit the consummation of the Closing shall
have been taken, made or obtained.
9.2.6. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall have
been executed and delivered by the Company.
9.2.7. OPINION OF COUNSEL. The Company and Stockholder shall have received
an opinion of Jones, Day, Reavis & Pogue, counsel to Buyer, dated the Closing
Date, substantially in the form attached hereto as EXHIBIT H.
9.2.8. HSR ACT. Any applicable waiting period under the HSR Act relating to
the transactions contemplated hereby will have expired or been terminated.
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X. SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. The representations and warranties, and the covenants and
agreements, of the parties contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith will survive
the Closing for 15 months thereafter; PROVIDED, HOWEVER, that the
representations and warranties contained in Sections 6.1.9 and 6.1.17 will
survive the Closing until the expiration of the statute of limitations
applicable to the matters covered thereby (after giving effect to any waiver,
mitigation or extension thereof granted by the Company after the Closing) and
the Selected Seller Representations and Warranties and the Selected Purchaser
Representations and Warranties will survive the Closing indefinitely; provided,
however, that for any matter covered by Section 6.1.17 for which there is no
applicable statute of limitations, the representations and warranties under
Section 6.1.17 relating to such matter will survive the Closing for five years
thereafter. Notwithstanding the immediately preceding sentence, any
representation and warranty, or covenant and agreement, in respect of which
indemnity may be sought under this Agreement will survive the time at which it
would otherwise terminate pursuant to the preceding sentence if written notice
of the inaccuracy or breach thereof giving rise to such right of indemnity shall
have been in good faith given to the party against whom such indemnity may be
sought prior to such time; PROVIDED, HOWEVER, that the applicable covenant,
agreement, representation or warranty will survive only with respect to the
particular inaccuracy or breach specified in such written notice.
Notwithstanding the first sentence of this Section 10.1, all covenants and
agreements of the parties contained in this Agreement, to the extent required by
their terms to be performed after the Closing, will survive the Closing until
each such covenant shall have been performed in accordance with its respective
terms. The period of time for which a representation and warranty, or covenant
and agreement, survives as provided for in this Section 10.1 is hereinafter
referred to as the "SURVIVAL PERIOD."
10.2 INDEMNIFICATION. (a) Subject to compliance with Section 10.4(d),
Stockholder, will indemnify, defend and hold harmless Buyer and its officers,
directors, employees, members, managing directors, Affiliates and agents, and
the successors to the foregoing (and their respective officers, directors,
employees, members, managing directors, Affiliates and agents), against any and
all liabilities, damages and losses, including, without limitation, diminution
in value of the Business and other consequential damages and, if and only to the
extent asserted in a Third Party Claim, punitive damages, and all costs or
expenses, including, without limitation, reasonable attorneys' and consultants'
fees and expenses ("DAMAGES"), incurred or suffered as a result of or arising
out of (i) the failure of any representation and warranty made by the Company in
any subsection of Section 6.1 to be true and correct as of the Closing Date
(other than a breach of Section 6.1.9 with respect to Taxes, which will be
governed by Section 10.3), (ii) the breach of any covenant or agreement made or
to be performed by the Company pursuant to this Agreement or (iii) claims under
the Bulk Transfer Laws; PROVIDED, HOWEVER, that notwithstanding anything to the
contrary contained in this Agreement, Stockholder will not be liable under this
Section 10.2(a) unless the aggregate amount of Damages exceeds $500,000 and then
from the first dollar above $250,000 of such Damages to the full extent of such
Damages; PROVIDED, FURTHER, HOWEVER, that notwithstanding anything to the
contrary contained in this Agreement, Stockholder's liability under this Section
10.2(a) will not exceed, in the aggregate, $7.5 million.
(b) Subject to compliance with Section 10.4(d), Buyer will indemnify,
defend and hold harmless Stockholder and Seller and its shareholders, officers,
directors, employees,
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members, managing directors, Affiliates and agents and the successors to the
foregoing (and their respective officers, directors, employees, members,
managing directors, Affiliates and agents), against Damages incurred or suffered
as a result of or arising out of (i) the failure of any representation or
warranty made by Buyer in this Agreement to be true and correct as of the
Closing Date or (ii) the breach of any covenant or agreement made or to be
performed by Buyer pursuant to this Agreement; PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary contained in this Agreement, Buyer will
not be liable under this Section 10.2(b) unless the aggregate amount of Damages
exceeds $500,000 and then from the first dollar above $250,000 of such Damages
to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that Buyer's
liability under this Section 10.2(b) will not exceed, in the aggregate, $7.5
million.
10.3 TAX INDEMNIFICATION. Subject to compliance with Section 10.4(d), the
Stockholder will indemnify, defend and hold harmless Buyer, and its officers,
directors, employees, members, managing directors, Affiliates (including, after
the Closing Date, the Company) and agents and the successors to the foregoing
(and their respective officers, directors, employees, members, managing
directors, Affiliates and agents) against (i) all Taxes (and losses, claims and
expenses related thereto) resulting from, arising out of, or incurred with
respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the failure of any representation or warranty
made pursuant to Section 6.1.9 to be true and correct as of the Closing Date;
(ii), until the expiration of the statute of limitations applicable to the
matters covered by this clause (ii) (after giving effect to any waiver,
mitigation or extension thereof granted by the Company after the Closing), all
Taxes imposed on or asserted against the Company or Buyer or for which the
Company or Buyer may be liable in respect of the properties, income or
operations of the Company for all Pre-Closing Tax Periods (net of applicable
reserves for Taxes to the extent accurately reflected in the computation of the
Closing Net Worth) and (iii), until the expiration of the statute of limitations
applicable to the matters covered by this clause (iii) (after giving effect to
any waiver, mitigation or extension thereof granted by the Company after the
Closing) and subject to the last sentence of this Section 10.3, all Taxes
imposed or asserted against the Company or Buyer, or for which the Company or
Buyer may be liable, as a result of any transaction contemplated by this
Agreement (net of applicable reserves to the extent accurately reflected in the
computation of Closing Net Worth. All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest), imposed on the Buyer or the Company which are incurred in
connection with this Agreement will be borne by Buyer when due.
10.4 PROCEDURES. (a) If any Person who or which is entitled to seek
indemnification under Section 10.2 or Section 10.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third Party Claim
against such Indemnified Party with respect to which the Person against whom or
which such indemnification is being sought (an "INDEMNIFYING PARTY") is
obligated to provide indemnification under this Agreement, the Indemnified Party
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 20 days after receipt of such written notice of such
Third Party Claim. Such notice by the Indemnified Party will describe the Third
Party Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have the right to participate in, or, by
giving written notice to the Indemnified Party, to assume, the defense of any
Third Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel
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(reasonably satisfactory to the Indemnified Party), and the Indemnified Party
will cooperate in good faith in such defense.
(b) If, within ten days after giving notice of a Third Party Claim to an
Indemnifying Party pursuant to Section 10.4(a), an Indemnified Party receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 10.4(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnified Party in connection with
the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party fails to
take reasonable steps necessary to defend diligently such Third Party Claim
within ten days after receiving written notice from the Indemnified Party that
the Indemnified Party reasonably believes the Indemnifying Party has failed to
take such steps or if the Indemnifying Party has not undertaken fully to
indemnify the Indemnified Party in respect of all damages relating to the
matter, the Indemnified Party may assume its own defense, and, subject to
Sections 10.2(a) and (b), the Indemnifying Party will be liable for all
reasonable costs and expenses paid or incurred in connection therewith. Without
the prior written consent of the Indemnified Party, except to the extent
expressly set forth in this Agreement, the Indemnifying Party will not enter
into any settlement of any Third Party Claim which would lead to liability or
create any financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder, or
which provides for injunctive or other non-monetary relief applicable to the
Indemnified Party, or does not include an unconditional release of all
Indemnified Parties. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnified Party for which the Indemnified Party is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnified Party to that effect. If the Indemnified Party fails to
consent to such firm offer within ten days after its receipt of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim and,
in such event, the maximum liability of the Indemnifying Party as to such Third
Party Claim will not exceed the amount of such settlement offer. The Indemnified
Party will provide the Indemnifying Party with reasonable access during normal
business hours to books, records, and employees of the Indemnified Party
necessary in connection with the Indemnifying Party's defense of any Third Party
Claim which is the subject of a claim for indemnification by an Indemnified
Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages which does not
result from a Third Party Claim (a "DIRECT CLAIM") will be asserted by giving
the Indemnifying Party reasonably prompt written notice thereof, but in any
event not later than 20 days after the Indemnified Party becomes aware of such
Direct Claim. Such notice by the Indemnified Party will describe the Direct
Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have a period of ten days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such ten day period, the Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnified Party will be free to
pursue such remedies as may be available to the Indemnified Party on the terms
and subject to the provisions of this Agreement.
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(d) A failure to give timely notice or to include any specified information
in any notice as provided in Section 10.4(a), 10.4(b) or 10.4(c) will not affect
the rights or obligations of any party hereunder, except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise materially prejudiced as a result of such
failure, unless such notice is received by the Indemnifying Party after the
expiration of the Survival Period applicable to the representation, warranty,
covenant or agreement the breach of which gives rise to the indemnity obligation
asserted in such notice, in which case the Indemnifying Party will have no
indemnification obligation under this Agreement with respect to the breach of
such representation, warranty, covenant or agreement described in such notice.
10.5 PAYMENT AND TREATMENT OF INDEMNIFICATION PAYMENTS. All indemnifiable
Damages under this Agreement will be paid in cash in immediately available
funds. Any amount paid by Stockholder or Buyer under Section 10.2 or 10.3 will
be treated as a capital contribution, on the one hand, and/or an adjustment to
the Aggregate Closing Consideration on the other hand.
10.6 INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The amount of
Damages for which indemnification is provided under Sections 10.2 and 10.3 will
be computed net of any insurance proceeds actually received by or paid for the
benefit of the Indemnified Party in connection with such Damages, reduced by all
direct costs and expenses related thereto. If the amount with respect to which
any claim is made under this Section 10.6 gives rise to a realizable Tax
benefit, the indemnity payment will be reduced by the amount of such realizable
benefit then available to the party making the claim if and to the extent
actually realized by such party.
10.7 EXCLUSIVE REMEDY. Absent fraud, Article X constitutes the exclusive
remedy for the breach of covenants, agreements, representations or warranties
set forth in this Agreement; PROVIDED, HOWEVER, that the provisions of this
Section 10.7 will not prevent the Stockholder, the Company or Buyer from seeking
the remedies of specific performance or injunctive relief in connection with the
breach of a covenant or agreement of any party hereto.
XI. MISCELLANEOUS
11.1. TERMINATION. (a) This Agreement may be terminated at any time prior
to the Closing:
(i) by the mutual written consent of Buyer and Seller;
(ii) by Buyer, if there has been a material and intentional violation
or breach by Seller of any covenant, representation or warranty contained
in this Agreement which prevents the satisfaction of any condition to the
obligations of Buyer at the Closing, and such material and intentional
violation or breach has not been waived by Buyer or, in the case of a
covenant breach, cured by Seller within the earlier of (x) ten days after
written notice thereof from Buyer or (y) the Closing Date;
(iii) by Seller, if there has been a material and intentional
violation or breach by Buyer of any covenant, representation or warranty
contained in this Agreement which
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prevents the satisfaction of any condition to the obligations of Seller at
the Closing, and such material and intentional violation or breach has not
been waived by Seller or, in the case of a covenant breach, cured by Buyer
within the earlier of (x) ten days after written notice thereof from Seller
or (y) the Closing Date; or
(iv) by Buyer or Seller for any reason or cause or for no reason or
cause without any liability whatsoever to Buyer or Seller or Stockholder or
to any other Person if the transactions contemplated hereby have not been
fully consummated by March 31, 1999 (the "DROP DEAD DATE"), other than by
reason of the intentional acts of Stockholder or Seller or Buyer, as
applicable, calculated to prevent the Closing; and
(v) by Buyer, if the conditions to Closing set forth in Sections 9.1.6
or 9.1.11 have not been satisfied.
(b) In the event that this Agreement is terminated pursuant to Section
11.1(a), all further obligations of the parties hereto under this Agreement
(other than pursuant to Section 11.4, which will continue in full force and
effect) will terminate without further liability or obligation of any party to
any other party hereunder; PROVIDED, HOWEVER, that Buyer will not be released
from liability hereunder if this Agreement is terminated pursuant to Section
11.1(a)(iii) and Seller will not be released from liability hereunder if this
Agreement is terminated pursuant to Section 11.1(a)(ii).
11.2. NOTICES. All notices, requests and other communications to any party
hereunder will be in writing (including facsimile transmission) and will be
given to such party at its address set forth in SCHEDULE 11.2. All such notices,
requests and other communications will be deemed received on the date of receipt
by the recipient thereof if received prior to 5:00 p.m. in the place of receipt
and such day is a Business Day in the place of receipt. Otherwise, any such
notice, request or communication will be deemed not to have been received until
the next succeeding business day in the place of receipt.
11.3. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) Except as otherwise expressly provided in this Agreement, no failure or
delay by any party in exercising any right, power or privilege hereunder will
operate as a waiver thereof nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided will be
cumulative and not exclusive of any rights or remedies provided by Law.
11.4. EXPENSES. Except as otherwise expressly provided for herein, the
parties will pay or cause to be paid all of their own fees and expenses incident
to this Agreement and in preparing to consummate and consummating the
transactions contemplated hereby, including the fees and expenses of any broker,
finder, financial advisor, legal advisor or similar person engaged by such
party; PROVIDED that if the Closing does not occur on or before March 31, 1999,
because of the failure of the condition set forth in Section 9.1.11 to be
satisfied, Buyer will pay
45
<PAGE>
the reasonable fees and expenses of Seller up to, but not exceeding $100,000
promptly after presentation of reasonably detailed invoices in respect thereof.
11.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto. Notwithstanding the foregoing (a) Buyer may,
on or prior to the Closing designate a wholly-owned subsidiary of Buyer to
acquire all of the Purchased Assets and to assume all of the Assumed Liabilities
under this Agreement, without the consent of Seller or Stockholder provided that
such designation will not relieve Buyer of any of its obligations hereunder and
(b) Buyer may assign its rights (but not its obligations) under this Agreement
in connection with obtaining bank financing as contemplated by Section 9.1.11.
11.6. NO THIRD PARTY BENEFICIARIES. Except as provided in Article X, this
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied will give or be construed to
give to any Person, other than the parties hereto and such permitted assigns any
legal or equitable rights hereunder.
11.7. GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal substantive law of the State of Illinois, without
regard to any conflict of laws rules, principles or provisions of such state or
of any other state.
11.8. JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby shall be brought in any court of competent
jurisdiction in the courts of the State of Illinois and/or the United States
District Court for the Northern District of Illinois, Eastern Division (assuming
that such court otherwise has or can obtain or accept jurisdiction) and each of
the parties hereby consents to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.2 will be deemed
effective service of process on such party.
11.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.10. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
46
<PAGE>
11.11. HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
11.12. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) constitutes the entire agreement among the parties with respect
to the subject matter of this Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof
of this Agreement.
11.13. SEVERABILITY. If any provision of this Agreement or the application
of any such provision to any person or circumstance is held invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
hereof.
11.14. NO WAIVER. No action or inaction taken or omitted pursuant to this
Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
11.15. CERTAIN INTERPRETIVE MATTERS. (a) Unless the context otherwise
requires, (i) all references to Sections, Articles, Exhibits or Schedules are to
Sections, Articles, Exhibits, or Schedules of or to this Agreement, (ii) each of
the Schedules will apply only to the corresponding Section or subsection of this
Agreement, (iii) each term defined in this Agreement has the meaning assigned to
it, (iv) words in the singular include the plural and VICE VERSA, and (v) the
term "INCLUDING" means "including without limitation." All references to $ or
dollar amounts will be to lawful currency of the United States. To the extent
the term "day" or "days" is used, it shall mean calendar days.
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) All references to the "KNOWLEDGE OF BUYER" or to words of similar
import will be deemed to be references to the actual knowledge of one or more of
the executive officers, directors or members of the management committee of
Buyer whose names are listed on SCHEDULE 11.15(c)(i) and, will include such
knowledge as such executive officers, directors or management committee members
would have had after due inquiry of the responsible individuals of Buyer whose
names are listed separately on SCHEDULE 11.15(c)(ii).
(ii) All references to the "KNOWLEDGE OF SELLER" or to words of
similar import will be deemed to be references to the actual knowledge of
Stockholder after due inquiry.
47
<PAGE>
The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers or in their individual capacity, if applicable,
as of the day and year first above written.
GENERAL AUTOMATION, INC.
By: /s/ Max J. Starr
-------------------------------
Name: Max J. Starr
Title: President
PRECISION PARTNERS HOLDING COMPANY
By: /s/ James E. Ashton
-------------------------------
Name: James E. Ashton
Title: Chief Executive Officer
STOCKHOLDER
/s/ Max Starr
------------------------------------
Max Starr
48
<PAGE>
Exhibit 2.4
ASSET PURCHASE AGREEMENT
among
NATIONWIDE PRECISION PRODUCTS CORP.,
THE STOCKHOLDERS LISTED ON SCHEDULE 1 ATTACHED HERETO
and
NATIONWIDE ACQUISITION DELAWARE, INC.
dated as of February 11, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS..........................................................................................................1
ARTICLE I
DEFINITIONS................................................................................................1
1.1 Definitions........................................................................................1
ARTICLE II
SALE AND PURCHASE OF ASSETS................................................................................8
2.1 Purchased Assets...................................................................................8
2.2 Excluded Assets...................................................................................10
2.3 Nonassignable Contracts, Leases and Permits.......................................................11
ARTICLE III
ASSUMPTION OF LIABILITIES.................................................................................12
3.1 Liabilities Assumed by Purchaser..................................................................12
3.2 Liabilities Not Assumed by Purchaser..............................................................13
ARTICLE IV
CONSIDERATION FOR PURCHASED ASSETS; CLOSING...............................................................15
4.1 Purchase Price....................................................................................15
4.2 Estimated Closing Working Capital.................................................................15
4.3 Post-Closing Adjustment...........................................................................15
4.4 Adjustments to Purchase Price.....................................................................17
4.5 Allocation of Purchase Price......................................................................17
ARTICLE V
CLOSING AND CLOSING DELIVERIES............................................................................18
5.1 The Closing.......................................................................................18
5.2 Deliveries of Seller..............................................................................18
5.3 Deliveries by Purchaser...........................................................................19
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS.............................................19
6.1 Representations and Warranties of Seller and the Stockholders.....................................19
6.1.1 Corporate Existence and Powers.............................................................19
6.1.2 Corporate Authorization; Enforceability....................................................20
6.1.3 Governmental Authorization.................................................................20
6.1.4 Non-Contravention; Consents................................................................20
6.1.5 Capitalization.............................................................................20
6.1.6 Subsidiaries...............................................................................20
6.1.7 Financial Statements......................................................................20
</TABLE>
i
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<TABLE>
<S> <C>
6.1.8 No Undisclosed Liabilities.................................................................21
6.1.9 Intercompany Accounts......................................................................21
6.1.10 Tax Matters...............................................................................22
6.1.11 Absence of Certain Changes................................................................23
6.1.12 Contracts.................................................................................23
6.1.13 Insurance Coverage........................................................................24
6.1.14 Litigation................................................................................25
6.1.15 Compliance with Laws; Permits.............................................................25
6.1.16 Properties; Sufficiency of Assets.........................................................25
6.1.17 Intellectual Property.....................................................................26
6.1.18 Environmental Matters.....................................................................27
6.1.19 Plans and Material Documents..............................................................28
6.1.20 Interests in Customers, Suppliers, Etc....................................................29
6.1.21 Customer, Supplier and Employee Relations.................................................29
6.1.22 Other Employment Matters..................................................................29
6.1.23 Accounts Receivable.......................................................................30
6.1.24 Inventory.................................................................................30
6.1.25 Millennium Compliance.....................................................................31
6.1.26 Finders' Fees.............................................................................31
6.2 Stockholders' Representations and Warranties......................................................31
6.2.1 Authority; Enforceability..................................................................31
6.2.2 No Conflicts...............................................................................31
6.2.3 No Consents................................................................................31
6.2.4 Litigation.................................................................................32
6.2.5 Interests in Customers, Suppliers, Etc.....................................................32
6.3 No Inference of Assumption of Retained Liabilities or Acquisition of Excluded
Assets by Purchaser or any of its affiliates......................................................32
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER...............................................................32
7.1 Corporate Existence and Power.....................................................................32
7.2 Corporate Authorization; Enforceability...........................................................32
7.3 Governmental Authorization........................................................................33
7.4 Non-Contravention.................................................................................33
7.5 Litigation........................................................................................33
ARTICLE VIII
CERTAIN COVENANTS.........................................................................................33
8.1 Conduct of Business of Seller.....................................................................33
8.2 Exclusive Dealing.................................................................................35
8.3 Review of Seller..................................................................................35
8.4 Reasonable Best Efforts...........................................................................35
8.5 Transfer of Employees and Benefit Plans...........................................................35
8.6 Books and Records.................................................................................37
8.7 Bulk Transfer Laws................................................................................38
8.8 Non-competition...................................................................................38
8.9 Collection of Payments............................................................................38
8.10 Accounts Receivable...............................................................................39
</TABLE>
ii
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<TABLE>
<S> <C>
8.11 Use of Names......................................................................................39
8.12 S Corporation Status..............................................................................39
8.13 Other Financial Statements........................................................................39
8.14 Available Cash....................................................................................39
8.15 Transfer Taxes; HSR Act Filing Fees...............................................................40
8.16 Further Assurances................................................................................40
8.17 Confidentiality...................................................................................40
ARTICLE IX
CONDITIONS TO CLOSING.....................................................................................41
9.1 Conditions to Obligations of Purchaser............................................................41
9.1.1 Representations, Warranties and Covenants of Seller and the Stockholders...................41
9.1.2 Seller's Certificate.......................................................................41
9.1.3 Stockholder Approval.......................................................................41
9.1.4 No Injunction, etc.........................................................................41
9.1.5 No Proceedings.............................................................................41
9.1.6 Required Filings...........................................................................41
9.1.7 Opinion of Counsel.........................................................................41
9.1.8 Termination of Security Interests..........................................................41
9.1.9 Ancillary Agreements.......................................................................42
9.1.10 Third-Party Consents; Governmental Approvals..............................................42
9.1.11 Financing.................................................................................42
9.1.12 Due Diligence.............................................................................42
9.1.13 No Material Adverse Change................................................................42
9.1.14 FIRPTA....................................................................................42
9.1.15 HSR Act...................................................................................42
9.2 Conditions to Obligations of Seller...............................................................42
9.2.1 Representations, Warranties and Covenants of Purchaser.....................................42
9.2.2 Purchaser's Certificate....................................................................42
9.2.3 No Injunction, etc.........................................................................43
9.2.4 Opinion of Counsel.........................................................................43
9.2.5 Ancillary Agreements.......................................................................43
9.2.6 HSR Act....................................................................................43
9.2.7 Offer of Employment........................................................................43
9.2.8 No Proceedings.............................................................................43
9.2.9 Third-Party Consents; Governmental Approvals...............................................43
ARTICLE X
SURVIVAL; INDEMNIFICATION.................................................................................43
10.1 Survival..........................................................................................43
10.2 Indemnification...................................................................................44
10.3 Tax Indemnification...............................................................................45
10.4 Procedures........................................................................................45
10.5 Treatment of Indemnification Payments.............................................................46
10.6 Indemnification Amounts Net of Benefits Received..................................................46
10.7 Exclusive Remedy..................................................................................47
</TABLE>
iii
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TABLE OF CONTENTS
(Not a part of this Agreement)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE XI
MISCELLANEOUS.............................................................................................47
11.1 Termination.......................................................................................47
11.2 Notices...........................................................................................48
11.3 Amendments and Waivers............................................................................48
11.4 Expenses..........................................................................................48
11.5 Successors and Assigns............................................................................48
11.6 No Third-Party Beneficiaries......................................................................48
11.7 Governing Law.....................................................................................49
11.8 Jurisdiction......................................................................................49
11.9 Waiver of Jury Trial..............................................................................49
11.10 Counterparts......................................................................................49
11.11 Headings..........................................................................................49
11.12 Entire Agreement..................................................................................49
11.13 Severability; Injunctive Relief...................................................................49
11.14 No Waiver.........................................................................................50
11.15 Certain Interpretive Matters......................................................................50
</TABLE>
iv
<PAGE>
(Not a part of this Agreement)
EXHIBIT AND SCHEDULE INDEX
EXHIBITS
EXHIBIT A: Audited Financial Statements
EXHIBIT B-1: Form of Employment Agreement/Mr. Ricotta
EXHIBIT B-2 Form of Employment Agreement/Mr. Nuccitelli
EXHIBIT C: Monthly Financial Statements
EXHIBIT D-1: Noncompetition Agreement with Mr. Ricotta
EXHIBIT D-2: Noncompetition Agreement with Mr. Nuccitelli
EXHIBIT D-3: Noncompetition Agreement with other Stockholders
EXHIBIT E: Parlec Agreement
EXHIBIT F: Sublease
EXHIBIT G: Bill of Sale
EXHIBIT H: Audited financial Statement Principles
EXHIBIT I: Form of Opinion of Harris, Beach & Wilcox
EXHIBIT J Form of Certificate of Amendment of Company's Charter
EXHIBIT K: Form of Opinion of Jones, Day, Reavis & Pogue
v
<PAGE>
(Not a part of this Agreement)
SCHEDULES
SCHEDULE 1: Stockholders
SCHEDULE 2.1(a)(xiii): Names
SCHEDULE 2.1(a)(xvi): Bank Accounts, etc.
SCHEDULE 2.2(c): Parlec Inventory
SCHEDULE 6.1.4: Non-Contravention; Consents
SCHEDULE 6.1.5: Capitalization
SCHEDULE 6.1.6: Subsidiaries
SCHEDULE 6.1.7(a): Matters with respect to Audited Financial Statements
SCHEDULE 6.1.7(b): Matters with respect to Monthly Financial Statements
SCHEDULE 6.1.7(c): Changes in the Company's Reserve or Accrual Policies
SCHEDULE 6.1.8: Undisclosed Liabilities
SCHEDULE 6.1.9: Intercompany Accounts
SCHEDULE 6.1.10: Tax Matters
SCHEDULE 6.1.11: Absence of Certain Changes
SCHEDULE 6.1.12(a): Contracts and Agreements
SCHEDULE 6.1.12(c): Grants of Severance or Termination Pay
SCHEDULE 6.1.13: Insurance Policies and Bonds
SCHEDULE 6.1.14: Litigation
SCHEDULE 6.1.15(a): Compliance with Laws; Permits
SCHEDULE 6.1.15(b): Government or Regulatory Permits and Licenses
SCHEDULE 6.1.16(a): Properties; Sufficiency of Assets
SCHEDULE 6.1.16(b): Real Property
SCHEDULE 6.1.17(a): Intellectual Property
SCHEDULE 6.1.17(b): Intellectual Property Disputes
SCHEDULE 6.1.18(a): Environmental Matters
SCHEDULE 6.1.19(a): List of Benefit Plans
SCHEDULE 6.1.19(b): List of Certain Benefit Plans
SCHEDULE 6.1.19(c): Benefit Plans Compliance
SCHEDULE 6.1.19(d) Non-Exempt Benefit Plans
SCHEDULE 6.1.19(h): Employees Entitled to Bonuses and Benefits
SCHEDULE 6.1.20: Interests in Customers, Suppliers, Etc.
SCHEDULE 6.1.21: Customer, Supplier and Employee Relations
SCHEDULE 6.1.22(a): Claims by Employees
SCHEDULE 6.1.22(b): Employees
SCHEDULE 6.1.22(d): Retired Employees Scheduled to Receive Benefits
in the Future
SCHEDULE 6.1.23: Accounts Receivable
SCHEDULE 6.1.24: Inventory
SCHEDULE 6.1.25: Millennium Compliance
SCHEDULE 6.2.4: Litigation
SCHEDULE 7.5: Litigation
SCHEDULE 8.5(a): Transferred Employees
SCHEDULE 8.5(b): Benefits
SCHEDULE 10.2.9: Third Party Consents; Government Approvals
vi
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(Not a part of this Agreement)
SCHEDULE 12.2: Notices
vii
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
February 11, 1999, by and among NATIONWIDE PRECISION PRODUCTS CORP., a New York
corporation ("SELLER"), NATIONWIDE ACQUISITION DELAWARE, INC., a Delaware
corporation ("PURCHASER") and the Persons listed on SCHEDULE 1 attached hereto
(the "STOCKHOLDERS").
RECITALS
A. Seller is a full service manufacturing company engaged in
the business of engineering, assembly and finishing of precision machined parts,
extrusions and castings for the automotive, business machine and other
industries.
B. Purchaser wishes to purchase from Seller, and Seller wishes
to sell to Purchaser, all of the assets, properties and rights of Seller (other
than the Excluded Assets), subject to the Assumed Liabilities, upon the terms
and conditions of this Agreement.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In addition to the terms defined elsewhere
herein, the following terms, as used herein, have the following meanings when
used herein with initial capital letters:
"ACCOUNTANTS" has the meaning ascribed to such term in
Section 4.3(b).
"ACCOUNTS RECEIVABLE" has the meaning ascribed to such term in
Section 2.1(a)(vi).
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with the first Person on or after the date of this Agreement. For the purposes
of this Agreement, "CONTROL," when used with respect to any Person, means the
possession, directly or indirectly, of the power to (a) vote 10% or more of the
securities having ordinary voting power for the election of directors (or
individuals holding comparable positions) of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the
1
<PAGE>
foregoing; PROVIDED, HOWEVER that Parlec will not be deemed to be an Affiliate
for purposes of Article II.
"AGREEMENT" means this Asset Purchase Agreement, as the same
may be amended from time to time in accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Bill of Sale, the
Non-competition Agreements, the Employment Agreements, the Sublease and the
Parlec Agreement.
"ASSUMED LIABILITIES" has the meaning ascribed to such term in
Section 3.1(b).
"AUDITED DECEMBER 1998 BALANCE SHEET" means the audited
balance sheet of Seller as of December 31, 1998 contained in the Audited
Financial Statements.
"AUDITED FINANCIAL STATEMENTS" means (a) the audited balance
sheets of Seller as of May 31, 1995, 1996, 1997 and 1998, together with the
related statements of income, changes in retained earnings and cash flows for
the periods then ended, and including the notes to such financial statements and
the related auditors' reports of Brovitz, Insero, Kasperski & Co., P.C. and (b)
the Audited Balance Sheet of Seller as of December 31, 1998, together with the
related statements of income, changes in retained earnings and cash flows for
the periods then ended, and including the notes to such financial statements and
the related report of Ernst & Young, LLP, all of which are attached hereto as
EXHIBIT A.
"AUDITED FINANCIAL STATEMENT PRINCIPLES" has the meaning
ascribed to such term in Section 4.3(a).
"BALANCE SHEET DATE" means December 31, 1998.
"BASE WORKING CAPITAL BALANCE" means an amount equal to $4.849
million.
"BENEFIT PLANS" has the meaning ascribed to such term in
Section 3.1(a)(iv).
"BILL OF SALE" has the meaning ascribed to such term in
Section 2.1(b).
"BONUSES" has the meaning ascribed to such term in Section
6.1.22(b).
"BUSINESS" means the businesses of Seller as currently
conducted as of the date hereof and on the Closing Date, as described in Recital
A.
"BUSINESS DAY" means a day other than a Saturday, Sunday or a
day on which banks located in New York City are authorized or required to close.
"CAPITAL STOCK" means (a) with respect to any Person that is a
corporation, any and all shares, interests, participation or other equivalents
(however designated and whether or not voting) of corporate stock, including the
common stock of such Person and (b) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
2
<PAGE>
"CAPITALIZED LEASE OBLIGATIONS" means, with respect any
Person, for any applicable period, the obligations of such Person that are
required to be classified and accounted for as capital lease obligations under
GAAP, and the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date determined in accordance with GAAP.
"CASH" means cash and cash equivalents as would be shown on
such balance sheet of Seller prepared in accordance with GAAP and on a basis
consistent with the principles and policies used in the preparation of the
Audited December 1998 Balance Sheet.
"CERCLA" means the Comprehensive Environmental Response,
Compensation, Liability Act of 1980, 42 U.S.C. Sections 9601, et seq., as
amended.
"CLOSING" has the meaning ascribed to such term in Section
5.1.
"CLOSING DATE" has the meaning ascribed to such term in
Section 5.1.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such
term in Section 4.3(a).
"CLOSING WORKING CAPITAL BALANCE" has the meaning ascribed to
such term in Section 4.3(a).
"CLOSING WORKING CAPITAL BALANCE STATEMENT" has the meaning
ascribed to such term in Section 4.3(a).
"CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"COMIDA" has the meaning ascribed to such term in Section
2.2(a).
"COMPUTER SYSTEMS" has the meaning ascribed to such term in
Section 6.1.25.
"CONFIDENTIAL INFORMATION" has the meaning ascribed to such
term in Section 8.17.
"CONSTITUENT OF CONCERN" means any substance defined as a
hazardous substance, hazardous waste, hazardous material, pollutant, or
contaminant by any Environmental Law, any petroleum hydrocarbon and any
degradation product of a petroleum hydrocarbon, asbestos, PCB or similar
substance, the handling, storage, treatment or exposure of or to which is
subject to regulation under any Environmental Law.
"CONTRACTS" has the meaning ascribed to such term in Section
2.1(a)(v).
"COVENANT PERIOD" means the period commencing on the date of
this Agreement and terminating on the expiration of the longest Covenant Period
contained in any of the Non- Competition Agreements.
"DAMAGES" has the meaning ascribed to such term in Section
10.2(a).
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"DIRECT CLAIM" has the meaning ascribed to such term in
Section 10.4(c).
"EMPLOYEE BONUS ACCRUAL" means the accrual of bonuses in the
Ordinary Course of Business for all employees of Seller (excluding directors and
executive officers) for the period from June 1, 1998 through the Closing Date.
"EMPLOYMENT AGREEMENTS" means the employment agreements
between the Company and Mr. Ronald S. Ricotta and Mr. Jeffrey J. Nuccitelli,
respectively, substantially in the forms attached hereto as EXHIBITS B-1 and
B-2.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, citations,
summonses, notices of non-compliance or violation, requests for information,
investigations or proceedings relating in any way to any Environmental Law or
any permit issued under any such Law, including (a) Environmental Claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
(b) Environmental Claims by any third-party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from alleged injury or threat of injury to
human health and safety or the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to
the environment which has resulted or could reasonably be expected to result in
a material loss, liability, cost or expense to Seller.
"ENVIRONMENTAL LAW" means any Law in effect or, to Seller's or
any Stockholder's knowledge, any Law reasonably expected to be adopted or made
effective, in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, human health and safety, including CERCLA; and any state and local
counterparts or equivalents to all of the foregoing.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
authorizations, certificates and approvals of Governmental Authorities relating
to or required by Environmental Laws and necessary for the Business of Seller as
currently conducted or conducted as of the Closing.
"ERISA" has the meaning ascribed to such term in Section
3.1(a)(iv).
"ESTIMATED WORKING CAPITAL BALANCE" has the meaning ascribed
to such term in Section 4.2.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" has the meaning ascribed to such term in
Section 2.2.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
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"GOVERNMENTAL AUTHORITY" means any domestic or foreign
governmental or regulatory authority, body, agency or official.
"HSR ACT" has the meaning ascribed to such term in Section
6.1.3.
"INDEBTEDNESS" means with respect to any Person, at any date,
without duplication, (a) all obligations of such Person for borrowed money,
including, without limitation, all principal, interest, premiums, fees,
expenses, overdrafts and penalties with respect thereto, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(c) all obligations of such Person to pay the deferred purchase price of the
property or services, except trade payables incurred in the Ordinary Course of
Business of such Person, (d) all obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (e) all Capitalized Lease Obligations of such Person, (f)
all other obligations of a Person which would be required to be shown as
indebtedness on a balance sheet of such Person prepared in accordance with GAAP,
and (g) all indebtedness of any other Person of the type referred to in clauses
(a) to (f) above directly or indirectly guaranteed by such Person or secured by
any assets of such Person.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in
Section 10.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in
Section 10.4(a).
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how,
proprietary computer software, computer databases, Internet addresses (including
any registrations or applications for registration or renewal of any of the
foregoing) or any other similar type of proprietary intellectual property right,
in each case which is used or held for use or otherwise necessary in connection
with the conduct of the Business.
"IRS" means the Internal Revenue Service.
"LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code, permit, license, policy or rule of common law.
"LAST OFFER" has the meaning ascribed to such term in Section
4.3(b).
"LENDERS" has the meaning ascribed to such term in Section
5.2(v).
"LIEN" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person will be deemed to own, subject to a Lien, any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the business, assets, liabilities, condition (financial and other), results of
operations or prospects of Seller taken as a whole.
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"MILLENNIUM COMPLIANCE" means that the Computer Systems are
capable of the following, during and/or after January 1, 2000: (a) handling date
information involving all and any dates, including accepting input, providing
output and performing date calculations in whole or in part; (b) operating
accurately without interruption on and in respect of any and all dates and
without change in performance; (c) responding to and processing two digit year
input without creating any ambiguity as to the century; and (d) storing and
providing date input information without creating any ambiguity as to the
century.
"MONTHLY FINANCIAL STATEMENTS" means (a) the unaudited monthly
statements of earnings of Seller covering the calendar year 1996, (b) the
unaudited monthly balance sheets of Seller covering the periods beginning
January 1, 1997 through the month ending immediately prior to the date hereof,
together with the related monthly statements of earnings and (c) the unaudited
monthly balance sheets of Seller covering the periods beginning with the month
in which this Agreement is executed and delivered through the Closing Date,
together with the related monthly statements of earnings, all of which are
attached or in the case of the financial statements referred to in clause (c),
will be attached prior to the Closing hereto as EXHIBIT C.
"NON-COMPETITION AGREEMENTS" means the Non-competition
Agreements between Purchaser and Mr. Ricotta, Mr. Nuccitelli and each of the
Stockholders, respectively substantially in the forms attached hereto as
EXHIBITS D-1, D-2 and D-3.
"ORDER" means any judgment, injunction, judicial or
administrative order or decree.
"ORDINARY COURSE OF BUSINESS" means, with respect to any
Person, the ordinary course of business of such Person, consistent in all
material respects with such Person's past practice and custom, including, with
respect to any category, quantity or dollar amount, term and frequency of
payment, delivery, accrual, and expense or any other accounting entry.
"PARLEC" means, Parlec, Inc., a New York corporation, located
at 101 Perinton Parkway, Fairport, New York, and its successors and assigns.
"PARLEC AGREEMENT" means the agreement between Purchaser and
Parlec, dated the Closing Date, in respect of specified machining and assembly
work, inventory consignments and non-hire covenants, substantially in the form
attached hereto as EXHIBIT E.
"PERMITS" has the meaning ascribed to such term in Section
6.1.15(b).
"PERMITTED LIEN" means, with respect to the property of any
Person (a) mechanics', workmen's, carriers' repairmen's or other like Liens
arising or incurred in the Ordinary Course Of Business of a Person in respect of
obligations that are not overdue or (b) other imperfections of title or
encumbrances, which do not materially affect the value or marketability of the
property subject thereto.
"PERSON" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
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"PRE-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending on or before the Closing Date.
"PURCHASE PRICE" has the meaning ascribed to such term in
Section 4.1.
"PURCHASED ASSETS" has the meaning ascribed to such term in
Section 2.1(a).
"PURCHASER" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"PUT DATE" means, with respect to any Account Receivable, the
90th day after the Closing Date.
"REAL PROPERTY" has the meaning ascribed to such term in
Section 6.1.16(b).
"RELIANCE LETTERS" has the meaning ascribed to such term in
Section 5.2(v).
"RETAINED LIABILITIES" has the meaning ascribed to such term
in Section 3.2(b).
"RETURNS" has the meaning ascribed to such term in Section
6.1.10(a).
"S CORPORATION" has the meaning ascribed to such term in
Section 6.1.10(j).
"SELECTED PURCHASER REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 7.1 (Corporate Existence
and Power), 7.2 (Corporate Authorization; Enforceability), 7.3 (Governmental
Authorization) and 7.4 (Non-Contravention).
"SELECTED SELLER AND STOCKHOLDERS REPRESENTATIONS AND
WARRANTIES" means the representations and warranties contained in Sections 6.1.1
(Corporate Existence and Power), 6.1.2 (Corporate Authorization;
Enforceability), 6.1.3 (Governmental Authorization), 6.1.4(a), (b), (d) and (e)
(Non-Contravention), 6.1.7(c) (Financial Statements - as to accrual and reserve
amounts and policies), 6.1.16 (Properties; Sufficiency of Assets -- as to
title), 6.1.26 (Finders' Fees), 6.2.1 (Authority; Enforceability) and Section
6.2.2 (No Conflicts).
"SELLER" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"SELLER PROPERTY" means any real property and improvements at
any time owned, leased, used, operated or occupied (whether for storage,
disposal or otherwise) by Seller.
"STOCKHOLDERS" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"SUBLEASE" means the long-term operating sublease in respect
of the real property and improvements thereon located at Seller's facility in
Henrietta, New York substantially in the form annexed hereto as EXHIBIT F.
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"TAX" means (a) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by
Seller, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any Taxing Authority (as hereinafter defined), (b) any liability of
Seller for the payment of any amounts of any of the foregoing types as a result
of being a member of an affiliated, consolidated, combined or unitary group, or
being a party to any agreement or arrangement whereby liability of Seller for
payment of such amounts was determined or taken into account with reference to
the liability of any other Person, and (c) any liability of Seller for the
payment of any amounts as a result of being a party to any Tax-Sharing
Agreements or with respect to the payment of any amounts of any of the foregoing
types as a result of any express or implied obligation to indemnify any other
Person.
"TAX-SHARING AGREEMENTS" means all existing Tax-sharing
agreements or arrangements (whether or not written) binding Seller.
"TAXING AUTHORITY" means any Governmental Authority
responsible for the imposition of any Tax.
"THIRD-PARTY CLAIM" means any claim, demand, action, suit or
proceeding made or brought by any Person who or which is not a party to this
Agreement.
"TRANSFER" has the meaning ascribed to such term in Section
2.1(a).
"TRANSFERRED EMPLOYEES" has the meaning ascribed to such term
in Section 8.5(b)(i).
"UNCOLLECTED ACCOUNTS RECEIVABLE" means all or any part of any
Account Receivable which remains uncollected by Purchaser for 90 days after the
Closing Date.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 PURCHASED ASSETS.
(a) At the closing provided for in Article V, Seller will
sell, assign, transfer, convey and deliver ("TRANSFER"), free and clear of all
Liens (except Permitted Liens), whether legal or equitable, to Purchaser and
Purchaser will purchase and accept from Seller on the terms and subject to the
conditions hereinafter set forth, all of the assets, properties, rights and
interests of Seller to the extent existing as of the Closing Date, other than
the Excluded Assets (all of such assets, properties, rights and interests being
hereinafter collectively referred to as the "PURCHASED ASSETS"), including but
not limited to:
(i) those assets, properties, rights and interests
reflected on the Audited December 1998 Balance Sheet;
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(ii) all right, title and interest of Seller to all
machinery, equipment, tools, spare parts, supplies, furniture,
furnishings, vehicles and other fixed assets owned, leased or
otherwise used by Seller and, in each case, used or held for
use in the conduct of the Business;
(iii) all raw materials and inventories, wherever
located, including inventories of work-in-process, stores and
supplies, owned, leased or otherwise used by Seller and used
or held for use in connection with the conduct of the
Business;
(iv) subject to Section 2.2.(k), Cash as shown on a
balance sheet of the Business as of the Closing Date
determined in accordance with GAAP, deposits, advance payments
of any kind or prepayments by clients, letters of credit
naming Seller as account party, certificates of deposit,
notes, drafts, checks and similar instruments relating to or
arising out of the conduct of the Business;
(v) all right, title and interest of Seller to all
contracts (whether written or oral) (other than to the extent
that such contracts relate to the Retained Liabilities or
Excluded Assets), commitments, leases, purchase orders,
contracts to purchase raw materials, contracts for services
and supplies, contracts to supply or sell products and all of
the other agreements (whether written or oral) including those
set forth or required to be set forth in SCHEDULE 6.1.12(a)
(collectively, the "CONTRACTS");
(vi) all accounts receivable (including billed and
unbilled) of Seller relating to the conduct of the Business
("ACCOUNTS RECEIVABLE");
(vii) all Intellectual Property Rights of Seller;
(viii) all licenses, Permits, registrations, and
authorizations held by Seller relating to the conduct of the
Business;
(ix) the books and records of Seller relating to the
Purchased Assets including, without limitation, all customer
and supplier files, equipment maintenance and warranty
information, all correspondence with any customers, suppliers,
employees or governmental entities, all personnel records
related to the Transferred Employees, and any other reports,
marketing studies, plans and documents, including, without
limitation, data stored electronically;
(x) except as described in Section 2.2(g), all
prepaid claims, prepaid Taxes, prepaid insurance premiums and
other prepaid expense items and deferred charges, credits,
advance payments, security and other deposits made by a Seller
to any other Person relating to the conduct of the Business;
(xi) all policies of insurance, fidelity, surety or
similar bonds and third-party indemnities where Seller is an
indemnified party and the coverages
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afforded thereby, in each case other than to the extent
relating to the Retained Liabilities or Excluded Assets;
(xii) lists of customers and vendors of Seller,
including, without limitation, any data stored electronically;
(xiii) the right to use the names set forth on
SCHEDULE 2.1(a)(xiii), and all variants thereof;
(xiv) the Business and goodwill of Seller;
(xv) except as described in Section 2.2(b), all
securities or other ownership interests in any Person held by
Seller;
(xvi) all bank accounts and bank account numbers,
telephone and facsimile numbers (together with all other
similar numbers), electronic mail addresses and web sites, in
each case, owned or used by Seller in the Business including
such items as set forth on SCHEDULE 2.1(a)(xvi),
(xvii) all rights of Seller pertaining to any
counterclaims, set-offs or defenses it may have with respect
to the Assumed Liabilities; and
(xviii) all other assets, properties and rights of
every kind and nature owned or held by Seller or in which
Seller has an interest on the Closing Date, known or unknown,
fixed or unfixed, accrued, absolute, contingent or otherwise,
whether or not specifically referred to in this Agreement.
(b) In confirmation of the foregoing sale, assignment and
transfer, Seller will execute and deliver to Purchaser at the Closing a Bill of
Sale and Assignment and Assumption Agreement (the "BILL OF SALE"), substantially
in the form attached hereto as EXHIBIT G and such other assignments and other
instruments of transfer as Purchaser may reasonably deem necessary or desirable.
2.2 EXCLUDED ASSETS. Anything in this Agreement to the
contrary notwithstanding, the following assets of Seller (the "EXCLUDED
ASSETS"), each to the extent existing on the Closing Date, are being retained by
Seller and will not be included in the Purchased Assets:
(a) all real property of Seller and all of Seller's right,
title and interest to Seller property under the Amended and Restated Lease
Agreement, dated as of November 1, 1994, between the County of Monroe Industrial
Development Agency ("COMIDA") and Seller, including all fixtures and other
equipment owned by COMIDA, together with all right, title and interest of Seller
to all leasehold improvements thereon and all easements, rights-of-way,
transferrable licenses and permits and other appurtenances thereof;
(b) investment by Seller in Parlec, Inc., as reflected on the
Audited December 1998 Balance Sheet;
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(c) inventory of Seller related to Parlec assembly business
and which is identified on Schedule 2.2(c);
(d) cash surrender value of the life insurance policies
reflected on the Audited December 1998 Balance Sheet made available to officers
of Seller by Seller, net of loans;
(e) notes receivable from officers of Seller, as reflected on
the Audited December 1998 Balance Sheet;
(f) notes receivable from employees of Seller, as reflected on
the Audited December 1998 Balance Sheet;
(g) federal tax deposit, as reflected on the Audited December
1998 Balance Sheet;
(h) Tax records reasonably necessary for the discharge by
Seller of all income and other Taxes payable in respect of the conduct of the
Business of Seller, prior to the Closing Date, PROVIDED that Purchaser will have
reasonable access to such records prior to and after the Closing Date in
accordance with the provisions of Section 8.6(b) hereof to the extent Purchaser
will reasonably require such access;
(i) any and all prepayments made by Seller in connection with
a certain letter of credit issued by Manufacturer and Traders Trust Company in
connection with the financing of the property described in the lease referred to
in Section 2.2(a);
(j) the rights of Seller under this Agreement and the proceeds
payable to Seller pursuant to this Agreement;
(k) Cash in excess of $200,000 as shown the Closing Date
Balance Sheet, but only to the extent that the Closing Working Capital Balance
exceeds the Base Working Capital Balance (after giving effect to all other
adjustments to such excess as provided for in this Agreement); and
(l) bond and financing acquisition costs and accumulated
depreciation - MAC, in each case, as reflected on the Audited December 1998
Balance Sheet.
2.3 NONASSIGNABLE CONTRACTS, LEASES AND PERMITS. In the case
of any Purchased Assets constituting Contracts or Permits that are not by their
terms assignable or that require the consent of a third-party in connection with
the sale by Seller, Seller will, and the Stockholders will, jointly and
severally, cause Seller to, use its reasonable best efforts to obtain, or cause
to be obtained in writing, prior to the Closing Date, any consents necessary to
convey the benefits thereof. Purchaser will assist Seller in such manner as may
be reasonably requested in connection therewith; PROVIDED that such assistance
will not be deemed to require any expenditure of money on the part of Purchaser.
If the consent of any third-party is not obtained prior to the Closing Date and
the Closing occurs notwithstanding the failure to obtain such consent, Seller
will, and the Stockholders will, jointly and severally, cause Seller to use its
reasonable best efforts to assist Purchaser to obtain such consent promptly.
During such period in which the applicable Contract or Permit is not capable of
being assigned to Purchaser due to
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the failure to obtain any required consent, Seller will and the Stockholders
will cause the Seller to make such arrangements as may be necessary to enable
Purchaser to receive all the economic rights and liabilities under such contract
accruing on and after the Closing Date. Notwithstanding any provision to the
contrary set forth herein, the obligations of Seller and the Stockholders under
this section 2.3 represent all of Seller's and the Stockholders' obligations
from and after the Closing under this Agreement with respect to obtaining any
such assignment and/or consent of a third party in connection with any such
Contract or Permit.
ARTICLE III
ASSUMPTION OF LIABILITIES
3.1 LIABILITIES ASSUMED BY PURCHASER.
(a) Subject to Section 3.2, at the Closing, Purchaser will
assume, as of the Closing Date, and will subsequently pay, honor and discharge
when due and payable and otherwise in accordance with their terms, the following
liabilities and obligations of Seller to the extent existing on the Closing
Date:
(i) (x) all Accounts Payable and Accrued Expenses
only to the extent reflected on the Audited December 1998
Balance Sheet and not discharged prior to the Closing Date,
and (y) all Accounts Payable and Accrued Expenses arising
thereafter and to the extent reflected on the Closing Date
Balance Sheet, in the case of liabilities described in clauses
(x) and (y) of this clause 3.1(a)(i), to the extent that such
liabilities arose in the Ordinary Course of Business of Seller
and were not incurred in breach of this Agreement;
(ii) all liabilities and obligations under Contracts
to which Seller is a party that (A) are disclosed in SCHEDULE
6.1.12(a) and SCHEDULE 6.1.16(b); PROVIDED that the existence
of such Contract does not constitute a breach of
representation, warranty or covenant under this Agreement, and
(B) have been entered into by Seller in the Ordinary Course of
Business of Seller prior to the Closing Date and not in breach
of this Agreement, in each case other than liabilities and
obligations thereunder that relate to a breach by Seller of
any of the terms and conditions of any such Contracts prior to
the Closing Date;
(iii) all liabilities or obligations to Transferred
Employees in accordance with, and subject to the limitations
set forth in, Section 8.5 with respect to wages, salaries,
bonus, vacation, severance or other compensation reflected on
the Closing Date Balance Sheet (to the extent not discharged
prior to the Closing Date) or otherwise accruing on and after
the Closing PROVIDED that the existence thereof does not
constitute a breach of any representation, warranty or
covenant of Seller hereunder, it being understood that
severance liabilities that arise in connection with
constructive termination of such Transferred Employee
resulting from the terms and conditions of the offer of
employment made by Purchaser in compliance with Section 8.5
will not constitute Assumed Liabilities;
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(iv) except as provided in Section 3.2(a)(iii),
liabilities or obligations under any employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any
other plan, program, agreement, arrangement, policy, contract,
commitment, or scheme, written or oral, statutory or
contractual of Seller, including, but not limited to, any
deferred compensation agreement, executive compensation,
bonus, incentive or severance pay plan, any life, health,
disability or accident insurance plan or any holiday or
vacation practice under which employees or former employees of
Seller are eligible to participate or derive a benefit and as
to which Seller has or in the future could have any direct or
indirect actual or contingent liability (hereinafter the
"BENEFIT PLANS") but only to the extent liabilities or
obligations relate or pertain to a Transferred Employee;
PROVIDED that the existence of such Benefit Plans does not
constitute a breach of any representation, warranty or
covenant of Seller hereunder; PROVIDED FURTHER that severance
liabilities that result from the failure of any employees of
Seller to accept employment by Purchaser in compliance with
Section 8.5 will not constitute Assumed Liabilities;
(v) the obligation to issue credit as appropriate in
the Ordinary Course of Business of Seller;
(vi) any liability for Employee Bonus Accruals, but
only to the extent that such amount is accurately reflected on
the Closing Working Capital Balance Sheet and in the
calculation of the Base Working Capital Balance and PROVIDED
that Seller has complied with its obligations under Section
8.14; and
(vii) any other liability of Seller arising out of or
relating to the operation of the Business by Seller prior to
the Closing Date in the Ordinary Course of Business (other
than to the extent that the existence of any such liability
constitutes a breach of any representation or warranty under
this Agreement and other than to the extent that the
assumption of any such liability is otherwise limited by
clauses (i) through (vi) of this Section 3.1(a)).
(b) The liabilities to be assumed by Purchaser pursuant to
Section 3.1(a) are hereinafter sometimes collectively referred to as "ASSUMED
LIABILITIES."
3.2 LIABILITIES NOT ASSUMED BY PURCHASER.
(a) Anything in this Agreement to the contrary
notwithstanding, Purchaser will not assume, cause to be assumed or be deemed to
have assumed, or in any way be liable or responsible for, any liabilities or
obligations of Seller or any Stockholder, except as specifically provided in
Section 3.1(a). Without limiting the generality or effect of the foregoing,
Purchaser will not assume the following:
(i) any liability or obligation of Seller (including
the liability referred to in Section 6.1.26) or any
Stockholder arising out of or in connection with the
negotiation and preparation of the Agreement (including the
Ancillary
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Agreements) and the consummation and performance of the
transactions contemplated hereby;
(ii) any liability or obligation of Seller or any
Stockholder for Indebtedness (including accrued interest);
(iii) any liability or obligation of Seller or any
Stockholder with respect to federal, state, local or foreign
Taxes for any Pre-Closing Tax Period or liability or
obligation of Seller or the Business as operated by Seller
arising out of or relating to noncompliance with Environmental
Law, the existence of an Environmental Condition, or an
Environmental Claim against Seller or against the Business as
operated by Seller;
(iv) any liability or obligation of Seller or any
Stockholder incurred in breach of this Agreement or any of the
Ancillary Agreements;
(v) all claims, liabilities and obligations with
respect to the Excluded Assets (irrespective of whether such
liabilities or obligations arise before, on or after the
Closing Date);
(vi) Employee Bonus Accruals that do not constitute
Assumed Liabilities; and
(vii) all other liabilities and obligations
(including all obligations of Seller or any Stockholder
arising out of or otherwise relating to facts or circumstances
existing or occurring on or prior to the Closing) which are
not set forth in Section 3.1(a) as Assumed Liabilities.
(b) All liabilities or obligations of Seller other than
Assumed Liabilities are hereinafter sometimes collectively referred to as the
"RETAINED LIABILITIES."
ARTICLE IV
CONSIDERATION FOR PURCHASED ASSETS; CLOSING
4.1 PURCHASE PRICE. In consideration for the Transfer by
Seller to Purchaser of the Purchased Assets pursuant to this Agreement,
Purchaser will deliver at the Closing to Seller in cash by wire transfer of
immediately available funds to one bank account specified at least two Business
Days prior to the Closing Date by Seller, $30.0 million, subject to adjustment
as provided in this Article IV (the "PURCHASE PRICE").
4.2 ESTIMATED CLOSING WORKING CAPITAL. Not less than two
Business Days prior to the Closing Date, Seller and Purchaser will prepare and
agree on an estimate of the Closing Working Capital Balance (the "ESTIMATED
CLOSING WORKING CAPITAL BALANCE") determined in accordance with Section 4.3, as
if it were the actual Closing Working Capital Balance, but based upon Seller's
and Purchaser's review of monthly financial information then available and
inquiries of personnel responsible for the preparation of the financial
information relating to Seller in the ordinary course, all in accordance with
the policies, principles and
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methodologies set forth in EXHIBIT H attached hereto. The Purchase Price will be
reduced dollar-for-dollar by the amount, if any, by which the Estimated Closing
Working Capital Balance, determined in accordance with Section 4.3, is less than
the Base Working Capital Balance.
4.3 POST-CLOSING ADJUSTMENT. (a) Within 120 days after the
Closing Date, Purchaser will prepare and deliver or cause to be prepared and
delivered to Seller an audited balance sheet of Seller as of the opening of
business on the Closing Date (the "CLOSING DATE BALANCE SHEET") and a proposed
statement of the net working capital of Seller as of the Closing Date (the
"CLOSING WORKING CAPITAL BALANCE STATEMENT"), in each case, without giving
effect to the transactions described in this Agreement to be consummated at the
Closing. The Closing Date Balance Sheet and the Closing Working Capital Balance
Statement (i) will reflect, respectively, the financial position of Seller and
the components and calculation of the net working capital of Seller in each case
as of the Closing Date, (ii) will be prepared and determined in accordance with
GAAP, on a basis consistent with the policies, principles and methodology used
in connection with the preparation of the Audited Financial Statements, and
(iii) will be subject to adjustment in accordance with the policies, principles
and methodology set forth in EXHIBIT H attached hereto (the policies, principles
and methodology in clauses (ii) and (iii) being referred to herein as the
"AUDITED FINANCIAL STATEMENT PRINCIPLES"). Notwithstanding anything contained
herein to the contrary, there will be no changes in reserve or accrual amounts
or policies between May 31, 1998 and the Closing Date without the prior written
consent of Purchaser. The net working capital Seller as of the Closing Date
determined in accordance with this Section 4.3 is referred to herein as the
"CLOSING WORKING CAPITAL BALANCE." In the event of any inconsistency between the
policies, principles and methodology described in the foregoing clauses (ii) and
(iii), the policies, principles and methodology set forth in EXHIBIT H will
govern.
(b) If, within 30 days after the date of Purchaser's delivery
of the Closing Date Balance Sheet and the Closing Working Capital Balance
Statement, Seller disagrees in good faith with the determination of the Closing
Working Capital Balance proposed by Purchaser, Seller will give written notice
to Purchaser within such 30 day period (i) setting forth Seller's proposed
changes to the Closing Date Balance Sheet as prepared by Purchaser and the
determination by Seller of the Closing Working Capital Balance and (ii)
specifying in detail Seller's basis for disagreement with Purchaser's
preparation and determination of the Closing Date Balance Sheet and the Closing
Working Capital Balance. The failure by Seller to so express disagreement and
provide such specification within such 30 day period will constitute the
acceptance of Purchaser's preparation of the Closing Date Balance Sheet and the
computation of the Closing Working Capital Balance. If Purchaser and Seller are
unable to resolve any disagreement between them with respect to the preparation
of the Closing Date Balance Sheet and the determination of the Closing Working
Capital Balance within 30 days after the giving of notice by Seller to Purchaser
of such disagreement, the items in dispute will be referred for determination to
Pricewaterhouse Coopers LLP (the "ACCOUNTANTS") as promptly as practicable, but
not later than five days after the expiration of such 30 day period. Purchaser
and Seller will use reasonable efforts to cause the Accountants to render their
decision as soon as practicable thereafter (but in no event later than 30 days
after the submission to the Accountants of the notice of disagreement referred
to in the immediately preceding sentence), including without limitation by
promptly complying with all reasonable requests by the Accountants for
information, books, records and similar items. The Accountants will make a
determination as to each of the items in dispute (but only those items in
dispute), which determination will be (A) in writing, (B)
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furnished to each of the parties hereto as promptly as practicable after the
items in dispute have been referred to the Accountants (but in no event later
than 30 days thereafter), (C) made in accordance with this Agreement (including
EXHIBIT H, and (D) conclusive and binding upon each of the parties hereto.
Nothing herein will be construed to authorize or permit the Accountants to
determine (i) any question or matter whatsoever under or in connection with this
Agreement, except the determination of what adjustments, if any, must be made in
one or more disputed items reflected in the Closing Date Balance Sheet and the
Closing Working Capital Balance Statement delivered by Purchaser in order for
the Closing Working Capital Balance to be determined in accordance with the
provisions of this Agreement (including EXHIBIT H), or (ii) a Closing Working
Capital Balance that is not equal to one of, or between, the Closing Working
Capital Balance as determined by Seller and as determined by Purchaser. The fees
and expenses of the Accountants will be paid by the party whose last written
settlement offer related to all items in dispute, in the aggregate, submitted to
the Accountants upon the referral of the matter to the Accountants in accordance
with this Section 4.3(b) (each, a "LAST OFFER") varies by the greatest absolute
amount from the determination by the Accountants of all such disputed items. No
party will disclose to the Accountants, and the Accountants will not consider
for any purpose, any settlement discussions or settlement offer (other than the
Last Offer) made by any party.
(c) During the period that Seller's advisors and personnel are
conducting their review of Purchaser's preparation of the Closing Date Balance
Sheet and determination of the Closing Working Capital Balance, Seller and its
representatives will have reasonable access during normal business hours to the
work papers, prepared by or on behalf of Purchaser and its representatives in
connection with Purchaser's preparation of the Closing Working Capital Balance
Statement and determination of the Closing Working Capital Balance; PROVIDED,
HOWEVER, that Seller will conduct such review in a manner that does not
unreasonably interfere with the conduct of the businesses of Seller or result in
substantial out-of-pocket costs to Purchaser. To the extent any such work papers
are in the control of Seller after the Closing, Seller will grant Purchaser and
its representatives reciprocal access rights for the purpose of finalizing the
preparation of the Closing Date Balance Sheet and the determination of the
Closing Working Capital Balance. Seller and Purchaser agree in good faith to use
all reasonable efforts to provide such information and access described in this
Section 4.3(c).
4.4 ADJUSTMENTS TO PURCHASE PRICE. (a) Upon the final
determination of the Closing Working Capital Balance, the parties shall make the
following adjustments:
(i) If the Closing Working Capital Balance exceeds
the Estimated Closing Working Capital Balance, then the
Purchase Price (if reduced pursuant to Section 4.2) will be
increased by, and Purchaser will pay to Seller the amount of
such difference; PROVIDED that the Purchase Price will in no
event exceed $30.0 million.
(ii) If the Closing Working Capital Balance is less
than the Estimated Closing Working Capital Balance, then the
Purchase Price will be decreased by, and the Stockholders
will, jointly and severally, pay or cause Seller to pay, to
Purchaser the amount of such difference.
(b) Any payment in respect of an adjustment required to be
made under Section 4.4(a) will be made by Purchaser or Seller, as applicable, in
cash by wire transfer of
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immediately available funds to one account specified by Purchaser or Seller, as
applicable, in writing, prior to the date such payment is required to be made
hereunder. Such payment will be made on such of the following dates as may be
applicable: (i) if Seller shall have not objected to the preparation of the
Closing Date Balance Sheet and the determination of the Closing Working Capital
Balance, the earlier of (A) 30 days after delivery to Seller of the Closing Date
Balance Sheet and Closing Working Capital Balance Statement or (B) five days
after Seller has indicated that it has no objections to the preparation of the
Closing Date Balance Sheet and the determination of the Closing Working Capital
Balance, or (ii) if Seller shall have objected to the preparation of the Closing
Date Balance Sheet and the determination of the Closing Working Capital Balance
by Purchaser, within five days following final agreement or decision with
respect to the Closing Date Balance Sheet and the Closing Working Capital
Balance as provided in Section 4.3 and this Section 4.4.
4.5 ALLOCATION OF PURCHASE PRICE. The Aggregate Closing
Consideration will be allocated among the Purchased Assets as determined by
Seller in the manner required by Section 1060 of the Code with the prior written
consent of Purchaser which will not be unreasonably withheld or delayed. The
parties understand that no more than a nominal portion of the Purchase Price may
be allocated to the Non-competition Agreements. For purposes of determining the
Purchaser's basis in the Purchased Assets and gain or loss recognized by Seller
with respect to the sale of the Purchased Assets to Purchaser, Purchaser and
Seller covenant and agree that the aggregate Purchase Price will be allocated
among the Purchased Assets consistent with this Section 4.5 and the parties
further agree that they shall file all Tax returns and related forms (including,
without limitation, Form 8594) in accordance with the allocation determined in
accordance with this Section 4.5 and will not make any inconsistent statement or
take any inconsistent position on any Tax returns, in any refund claim, or
during the course of any IRS or other tax audit. Each party will notify the
other party if it receives notice that the IRS proposes any allocation that is
different from the allocation agreed upon under this Section 4.5.
ARTICLE V
CLOSING AND CLOSING DELIVERIES
5.1 THE CLOSING. The closing of the sale and purchase of the
Purchased Assets (the "CLOSING") will take place at the offices of Jones, Day,
Reavis & Pogue located at 599 Lexington Avenue, New York, New York at 10:00
a.m., New York time, as soon as possible after the date hereof but in no event
later than ten Business Days after satisfaction or waiver of the conditions to
Closing. The date upon which the Closing occurs is herein called the "CLOSING
DATE."
5.2 DELIVERIES OF SELLER. At the Closing, Seller and the
Stockholders will deliver to Purchaser:
(i) Bills of Sale duly executed by Seller;
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(ii) instruments of assignment and assumption and
other instruments, as Purchaser may deem reasonably necessary
or desirable to transfer any of the Purchased Assets duly
executed by Seller;
(iii) certificates of an officer of Seller and
certificates of the Stockholders to evidence compliance with
the conditions set forth in Section 9.1.1;
(iv) certificates of Seller's Secretary or Assistant
Secretary as provided in Section 9.1.2;
(v) the opinion of Harris, Beach & Wilcox, LLP,
counsel to Seller and the Stockholders, dated the Closing Date
substantially in the form attached hereto as EXHIBIT I,
together with letters ("RELIANCE LETTERS") entitling the bank
lenders and underwriters engaged by or on behalf of Purchaser
(the "LENDERS") to provide the financing contemplated by
Section 9.1.11 to rely on such opinion;
(vi) evidence or copies of any consents, approvals,
orders, qualifications or waivers required by any third-party
or governmental entity pursuant to Section 9.1.10;
(vii) Certificate of Amendment of Seller's
Certificate of Incorporation, dated the Closing Date and in
proper form for filing substantially in the form attached
hereto as EXHIBIT J which Seller will, on the Closing Date,
file with the Secretary of State of the State of New York,
changing each Seller's corporate name to "Nuccitelli
Corporation," together with all other documentation required
to be filed in other jurisdictions where Seller is qualified
or licensed to do business to reflect such name change;
(viii) other Ancillary Agreements required to be duly
executed and delivered by parties other than Purchaser;
(ix) a non-foreign person affidavit as required by
Section 1445 of the Code;
(x) such other documents and instruments as may be
reasonably required to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements
and to comply with the terms hereof and thereof.
5.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser will
deliver or cause to be delivered to Seller:
(i) the Purchase Price by the wire transfer of
immediately available funds to the account specified pursuant
to Section 4.1;
(ii) certificate of an officer of Purchaser to
evidence compliance with the conditions set forth in Section
9.2.1;
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(iii) certificate of Purchaser's Secretary or
Assistant Secretary as provided in Section 9.2.2;
(iv) Bills of Sale duly executed by Purchaser;
(v) the opinion of Jones, Day, Reavis & Pogue,
counsel to Purchaser, dated the Closing Date substantially in
the form attached hereto as EXHIBIT K;
(vi) other Ancillary Agreements required to be duly
executed and delivered by Purchaser; and
(vii) such other documents and instruments as may be
reasonably required to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements
and to comply with the terms hereof and thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDERS
6.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
STOCKHOLDERS. Seller and the Stockholders jointly and severally represent and
warrant to Purchaser as of the date hereof and the Closing as follows:
6.1.1 CORPORATE EXISTENCE AND POWERS. Seller is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Seller has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. Seller is duly qualified to conduct
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary except for those jurisdictions where the
failure to be so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Seller has
heretofore delivered to Purchaser true and complete copies of its certificate of
incorporation and bylaws.
6.1.2 CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by Seller of this Agreement and each of the Ancillary
Agreements to which it will be a party at the Closing are, and will be at the
Closing, within Seller's corporate powers and have been duly authorized by all
necessary corporate action on the part of Seller. This Agreement has been and
each of the Ancillary Agreements to which Seller will be a party at the Closing
will have been duly executed and delivered by Seller and constitute, and will
constitute, at the Closing, valid and binding agreements of Seller, enforceable
against Seller in accordance with their terms, except to the extent that their
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
6.1.3 GOVERNMENTAL AUTHORIZATION. Except as may be required
under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), the
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execution, delivery and performance by Seller of this Agreement and each
Ancillary Agreement to which Seller is or will be a party at the Closing require
no action by or in respect of, or filing with, any Governmental Authority.
6.1.4 NON-CONTRAVENTION; CONSENTS. Except as disclosed on
SCHEDULE 6.1.4, the execution, delivery and performance by Seller of this
Agreement and each Ancillary Agreement to which Seller will be a party at the
Closing will not (a) violate the certificate of incorporation or bylaws or
comparable organizational documents of Seller, (b) violate any applicable Law or
Order, (c) require any filing with or permit, consent or approval of, or the
giving of any notice to, any Person (including filings, consents or approvals
required under any Permits of Seller or any licenses to which Seller is a
party), (d) result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of Seller or give rise to a loss of any benefit to which Seller is
entitled under any agreement or other instrument binding upon Seller or under
any license, franchise, permit or other similar authorization held by Seller, or
(e) result in the creation or imposition of any Lien on any asset of Seller,
except in the case of clauses (c), (d) and (e) for such filings, permits,
consents, approvals or notices and violations, breaches, conflicts and Liens
which, (i) individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect, or (ii) relate exclusively to the Excluded
Assets.
6.1.5 CAPITALIZATION. The authorized, issued and outstanding
Capital Stock of Seller (including the record and beneficial owners thereof and
the percentage of the issued and outstanding Capital Stock held by each such
owner) is as disclosed in SCHEDULE 6.1.5.
6.1.6 SUBSIDIARIES. Except as disclosed in SCHEDULE 6.1.6 and
except for the interests of the Seller and investments reflected on the face of
the Audited December 1998 Balance Sheet, Seller does not own any Capital Stock
or other equity or ownership or proprietary interest in any corporation,
partnership, association, trust, joint venture or other entity.
6.1.7 FINANCIAL STATEMENTS. (a) Seller has heretofore
furnished Purchaser a complete and correct copy of the Audited Financial
Statements. Except as disclosed in SCHEDULE 6.1.7(a), the Audited Financial
Statements, including the footnotes thereto, have been prepared in accordance
with GAAP and fairly present in all material respects the financial position of
Seller at the respective dates thereof and the results of the operations and
cash flows of the Seller for the periods indicated.
(b) Seller has also heretofore furnished Purchaser a complete
and correct copy of the Monthly Financial Statements through the month ended
immediately prior to the date hereof. Such Monthly Financial Statements have
each been prepared in accordance with GAAP (except for normal year-end
adjustments identified in SCHEDULE 6.1.7(b) and the absence of notes to such
financial statements, which, in each case, would not be material) and on a basis
consistent with the policies, principles and methodology used in connection with
the preparation of the Audited Financial Statement Principles. Except as
disclosed in SCHEDULE 6.1.7(b), such Monthly Financial Statements fairly
represent in all material respects the financial position of Seller at the date
thereof and the results of the operations and cash flows of Seller for the
periods indicated. The Monthly Financial Statements to be delivered after the
date hereof, when delivered in accordance with this Agreement, will have been
prepared in accordance with GAAP (except for normal year-end adjustments and the
absence of notes to such financial statements,
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which, in each case, would not be material) and on a basis consistent with the
Audited Financial Statement Principles and will fairly represent in all material
respects the financial position of Seller at the dates thereof and the results
of the operations and cash flows of Seller for the periods indicated.
(c) There have been no changes in Seller's reserve or accrual
policies or amounts, except as disclosed on SCHEDULE 6.1.7(c), since May 31,
1998.
(d) The books of account, minute books, stock record books,
and other records of Seller, all of which have been made available to Purchaser,
have been maintained in accordance with sound business practices.
6.1.8 NO UNDISCLOSED LIABILITIES. There are no liabilities,
whether accrued, contingent, absolute, determined, determinable or otherwise, of
Seller or any facts or circumstances which could reasonably be expected to give
rise to any such liabilities of Seller other than (a) liabilities fully provided
for in the Audited December 1998 Balance Sheet; (b) liabilities specifically
disclosed on SCHEDULE 6.1.8; and (c) other undisclosed liabilities incurred
since the Audited December 1998 Balance Sheet in the Ordinary Course of Business
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
6.1.9 INTERCOMPANY ACCOUNTS. SCHEDULE 6.1.9 contains a
complete list of all intercompany transactions and balances as of February 10,
1999 between any Stockholder and any of their respective Affiliates, on the one
hand, and Seller or any of its Affiliates, on the other hand. Other than (a) as
disclosed on SCHEDULE 6.1.9 and (b) compensation paid in the Ordinary Course of
Business, since such date, there has not been any accrual of liability by Seller
to any Stockholder or any of such Stockholder's Affiliates or other transaction
between Seller or any of its Affiliates, on the one hand, and any Stockholder or
any of their Affiliates, on the other hand, or any action taken (other than this
Agreement) which could reasonably be expected to result in any such accrual, or
the incurrence of any legal or financial obligation to any such Person, after
such date.
6.1.10 TAX MATTERS. Except as disclosed in SCHEDULE 6.1.10:
(a) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed with any
Taxing Authority with respect to any Pre-Closing Tax Period by or on behalf of
Seller (collectively, the "RETURNS") have, to the extent required to be filed on
or before the date hereof and on or before the Closing, been filed when due in
accordance with all applicable Laws;
(b) The Returns correctly reflected the facts regarding the
income, business, assets, operations, and activities and status of Seller;
(c) All Taxes owed by Seller (whether or not shown as due and
payable on the Returns that have been filed) have been timely paid, or withheld
(including withholding for independent contractors, consultants and other
employees) and remitted to the appropriate Taxing Authority;
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(d) Any reserves established for Taxes with respect to Seller,
for any Pre-Closing Tax Period (including for any Pre-Closing Tax Period for
which no Return has yet been filed) reflected on the books of Seller (excluding
any provision for deferred income taxes) are adequate in accordance with GAAP;
(e) Seller is not delinquent in the payment of any Tax, nor
has Seller requested any extension of time within which to file any Return
except for extensions granted as a matter of right;
(f) Neither Seller nor any member of any affiliated,
consolidated, combined or unitary group of which Seller is or has been a member
has granted any extension or waiver of the statute of limitations period
applicable to any Return, which period (after giving effect to such extension or
waiver) has not yet expired;
(g) There is no action, suit or proceeding now pending and no
claim, audit or investigation now pending of which Seller is aware or, to the
knowledge of Seller or any Stockholder, any action, suit, claim, audit or
investigation threatened against or with respect to Seller in respect of any
Tax;
(h) There are no Liens for Taxes upon the assets of Seller,
except Liens for current Taxes not yet due;
(i) Seller has not been a member of an affiliated,
consolidated, combined or unitary group or participated in any other arrangement
whereby any income, revenues, receipts, gain or loss of Seller was determined or
taken into account for Tax purposes with reference to or in conjunction with any
income, revenues, receipts, gain, loss, asset or liability of any other Person;
and
(j) Seller has made a timely and valid S election under
Section 1362 of the Code to be treated as an "S Corporation" within the meaning
of Section 1361(a) of the Code (an "S CORPORATION"). The first day of the first
taxable year for which Seller was an S Corporation was more than ten years prior
to the date hereof. Seller has also made all such elections permitted or
required under analogous provisions of state or local law.
6.1.11 ABSENCE OF CERTAIN CHANGES. Except as disclosed on
SCHEDULE 6.1.11, since the Balance Sheet Date, there has not been any event,
occurrence, development, circumstances or state of facts which (a) has had or
which could reasonably be expected to have a Material Adverse Effect or (b)
would have constituted a violation of any covenant of Seller or any Stockholder
hereunder (including Section 8.1) had such covenant applied to any of them since
the Balance Sheet Date.
6.1.12 CONTRACTS. (a) Except as specifically disclosed in
SCHEDULE 6.1.12(a), Seller is neither a party nor bound by any of the following
(whether written or oral):
(i) any lease (whether of real or personal property)
providing for annual rentals of $50,000 or more;
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(ii) any agreement for the purchase of materials,
supplies, goods, services, equipment or other assets that
provides for either (A) annual payments by Seller of $50,000
or more or (B) aggregate payments by Seller of $100,000 or
more;
(iii) any sales, distribution or other similar
agreement providing for the sale by Seller of materials,
supplies, goods, services, equipment or other assets that
provides for either (A) annual payments to Seller of $50,000
or more or (B) aggregate payments to Seller of $100,000 or
more;
(iv) any partnership, joint venture or other similar
agreement or arrangement;
(v) any agreement relating to the acquisition or
disposition of any business (whether by merger, sale of stock,
sale of assets or otherwise);
(vi) any agreement relating to Indebtedness (in any
case, whether incurred, assumed, guaranteed or secured by any
asset);
(vii) any license, franchise or similar agreement;
(viii) any agency, dealer, sales representative,
marketing or other similar agreement;
(ix) any agreement that substantially limits the
freedom of Seller to compete in any line of business,
geographic area or with any Person or which would so limit the
freedom of Purchaser after the Closing Date;
(x) any agreement with (A) any Stockholder or any of
such Stockholder's Affiliates, (B) any Person directly or
indirectly owning, controlling or holding with power to vote,
5% or more of the outstanding voting securities of any of such
Stockholder's Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly
owned, controlled or held with power to vote by any
Stockholder or any of such Stockholder's Affiliates, (D) any
director or officer of any Stockholder's Affiliates or any
"associates" or members of the "immediate family" (as such
terms are respectively defined in Rule 12b-2 and Rule 16a-1 of
the Exchange Act) of any such director or officer, or (E) any
director or officer of a Seller or with any "associate" or any
member of the "immediate family" (as such terms are
respectively defined in Rules 12b-2 and 16a-1 of the Exchange
Act) of any such director or officer;
(xi) any management service, consulting or any other
similar type of contract;
(xii) any warranty, guaranty or other similar
undertaking with respect to a contractual performance (or
Seller's standard forms of any of the foregoing) extended by
Seller, or any other warranty, guaranty or other similar
undertaking
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with respect to contractual performance extended by Seller
other than in the Ordinary Course of Business.
(xiii) any employment, deferred compensation,
severance, bonus, retirement or other similar agreement or
plan in effect as of the date hereof and entered into or
adopted by Seller, on the one hand, and any director or
officer of Seller or any other employee of Seller receiving
annual compensation of $70,000 or more, on the other hand; or
(xiv) any other agreement, commitment, arrangement or
plan not made in the Ordinary Course of Business of Seller
that is material to Seller.
(b) Each agreement, contract, plan, lease, arrangement or
commitment disclosed in SCHEDULE 6.1.12(a) or any other Schedule to this
Agreement or required to be disclosed pursuant to this Section is a valid and
binding agreement of the Seller, as the case may be, and is in full force and
effect, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and neither Seller nor, to the knowledge of Seller or any
Stockholder, any other party thereto is in default or breach in any material
respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment. To the knowledge of Seller or any Stockholder, there
is no event, occurrence, condition or act (including the consummation of the
transactions contemplated hereby) which, with the giving of notice or the
passage of time, or the happening of any other event or condition, could
reasonably be expected to become a material default or event of default
thereunder.
(c) SCHEDULE 6.1.12(c) sets forth every grant by Seller in the
past three years of any severance or termination pay to any employee of Seller
receiving annual compensation of $70,000 or more, or any director or officer of
Seller.
6.1.13 INSURANCE COVERAGE. Seller has furnished to Purchaser a
list of and true and complete copies of all of the insurance policies and
fidelity bonds covering the assets, Business, operations, employees, officers
and directors of Seller. There is no material claim by Seller pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and Seller and the
Stockholders have complied in all material respects with the terms and
conditions of all such policies and bonds. Such policies of insurance and bonds
(or other policies and bonds providing substantially similar insurance coverage)
are in full force and effect and are disclosed in SCHEDULE 6.1.13. Such policies
of insurance and bonds are of the type and in amounts deemed by the management
of Seller to be sufficient in light of the business of Seller. Neither Seller
nor any Stockholder know of any threatened termination of, or premium increase
with respect to, any of such policies or bonds. Since the last renewal date of
any insurance policy, there has not been any material adverse change in the
relationship of either Seller or the Stockholders with its insurers or the
premiums payable pursuant to such policies.
6.1.14 LITIGATION. Except as disclosed in SCHEDULE 6.1.14 or
SCHEDULE 6.1.18, there is no action, suit, investigation, arbitration or
administrative or other proceeding pending or, to the knowledge of Seller or any
Stockholder, threatened, against or affecting Seller, the
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Stockholders or any of their respective properties before any court or
arbitrator or any Governmental Authority which, if determined or resolved
adversely to any of them, could reasonably be expected, individually or when
considered together with all other such matters, (a) to materially and adversely
affect the right or ability of Seller to carry on the Business as now conducted,
(b) to have a Material Adverse Effect, or (c) which in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement and the Ancillary Agreements to which Seller is
or will be a party at Closing; and neither Seller nor any Stockholder knows of
any valid basis for any such action, proceeding or investigation.
6.1.15 COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed
in SCHEDULE 6.1.15(a), Seller is not or has not been since the Balance Sheet
Date in violation of any applicable Law or Order, except for such violations
that have not had and could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(b) SCHEDULE 6.1.15(b) sets forth a list of each material
government or regulatory license, authorization, permit, franchise, consent and
approval (the "PERMITS") issued and held by or on behalf of Seller or required
to be so issued and held to carry on the Business as currently conducted and as
to be conducted at the Closing. Except as disclosed in SCHEDULE 6.1.15(b), each
Permit is valid and in full force and effect. Seller is not in default under,
and no condition exists that with notice or lapse of time or both could
constitute a default or could give rise to a right of termination, cancellation
or acceleration under, any material Permit held by Seller.
6.1.16 PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as
disclosed in SCHEDULE 6.1.16(a) and except for inventory disposed of in the
Ordinary Course Of Business of Seller, Seller has good title to, or in the case
of leased property has valid leasehold interests in, all property and assets
(whether real or personal, tangible or intangible) reflected in the Audited
December 1998 Balance Sheet or acquired after the date thereof. None of such
property or assets is subject to any Liens, except for (i) Liens disclosed in
the Audited December 1998 Balance Sheet or incurred after the date thereof in
the Ordinary Course of Business of Seller; (ii) Liens for Taxes not yet due or
being contested in good faith (and for which adequate accruals or reserves are
set forth on the Audited December 1998 Balance Sheet); and (iii) Permitted
Liens.
(b) SCHEDULE 6.1.16(b) sets forth a list of all real property
assets owned or leased by Seller ("REAL PROPERTY"). All such leases of real
property are valid, binding and enforceable in accordance with their respective
terms and Seller is a tenant or possessor in good standing thereunder and all
rents due under such leases have been paid. There does not exist under any such
lease any default or any event which with notice or lapse of time or both could
reasonably be expected to constitute a default, except for such defaults that
have not and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Seller is in peaceful and undisturbed
possession of the space and/or estate under each lease of which it is a tenant
and has good and valid rights of ingress and egress to and from all the Real
Property from and to the public street systems for all usual street, road and
utility purposes. Neither Seller nor any Stockholder has received any notice of
any appropriation, condemnation or like proceeding, or of any violation of any
applicable zoning Law or Order relating to or affecting the Real Property, and
to Seller's or any Stockholder's knowledge, no such proceeding has been
threatened or commenced.
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(c) The Purchased Assets owned or leased by Seller (including
real, personal, tangible and intangible property), or which it otherwise has the
right to use (including real, personal, tangible and intangible property),
constitute all of the assets held for use or used in connection with the
Business and are in good operating condition and repair (normal wear and tear
excepted) and are adequate to conduct the Business as currently conducted.
6.1.17 INTELLECTUAL PROPERTY. (a) SCHEDULE 6.1.17(a) sets
forth a list of all Intellectual Property Rights of Seller and all material
licenses, sublicenses and other written agreements as to which Seller is a party
and pursuant to which any Person is authorized to use such Intellectual Property
Right, including the identity of all parties thereto.
(b) Except as disclosed in SCHEDULE 6.1.17(b):
(i) Neither Seller nor any Stockholder has, since
January 1, 1993, been sued or charged in writing with or been
a defendant in any claim, suit, action or proceeding relating
to the Business that is either pending or, to the knowledge of
Seller or any Stockholder, threatened, that, in either case,
has not been finally terminated prior to the date hereof and
that involves a claim of infringement by a Seller of any
trademark, service mark, trade name, invention, patent, trade
secret, copyright, know-how or any other similar type of
proprietary intellectual property right of any other Person
and neither Seller nor any Stockholder has knowledge of any
basis for any such claim of infringement and no knowledge of
any continuing infringement by any other Person of any
Intellectual Property Rights;
(ii) No Intellectual Property Right is subject to any
outstanding order, judgment, decree, stipulation or agreement
restricting the use thereof by Seller or restricting the
licensing thereof by Seller to any Person; and
(iii) Seller has not entered into any agreement to
indemnify any other Person against any charge of infringement
of any trademark, service mark, trade name, invention, patent,
trade secret, copyright, know-how or any other similar type of
proprietary intellectual property right.
6.1.18 ENVIRONMENTAL MATTERS. (a) Except as disclosed
in SCHEDULE 6.1.18:
(i) Constituents of Concern have not been generated,
recycled, used, treated or stored on, transported to or from,
or released or disposed on, Seller Property or, to the
knowledge of Seller or any Stockholder, any property adjoining
or adjacent except in compliance with Environmental Laws;
(ii) Except as could not individually, or in the
aggregate reasonably be expected to have a Material Adverse
Effect, Seller is in compliance with Environmental Laws and
the requirements of permits issued under such Environmental
Laws with respect to the Seller Property;
(iii) There are no pending or, to the knowledge of
Seller, threatened Environmental Claims against Seller, or any
Seller Property;
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(iv) There are no facts, circumstances, conditions or
occurrences regarding Seller's past or present business or
operations of any Seller Property, or to the knowledge of
Seller or any Stockholder, any property adjoining any Seller
Property, that could reasonably be expected (i) to form the
basis of an Environmental Claim against Seller or any of the
Seller Property or assets, or (ii) to cause any such current
Seller Property or assets to be subject to any restrictions on
its ownership, occupancy, use or transferability under any
Environmental Law;
(v) There are not now and to the knowledge of Seller,
or any Stockholder, there never have been any underground
storage tanks or sumps located on any Seller Property or, to
the knowledge of Seller or any Stockholder, located on any
property that adjoins or is adjacent to any Seller Property;
(vi) Neither Seller nor any Seller Property is listed
or proposed for listing on the National Priorities List under
CERCLA, or CERCLIS (as defined in CERCLA) or on any similar
federal or state of sites requiring investigation or clean-up;
(vii) There are no Environmental Permits that are
nontransferable or require consent, notification or other
action to remain in full force and effect following the
consummation of the transactions contemplated hereby; and
(viii) Seller has no liability under any
Environmental Law (including an obligation to remediate any
Environmental Condition whether caused by Seller or any other
Person) which could reasonably be expected to have a Material
Adverse Effect.
(b) There has been no environmental investigation, study,
audit, test, review or other analysis commenced or conducted by or on behalf of
Seller (or by a third-party of which Seller or any Stockholder has knowledge) in
relation to the current or prior business of Seller, or any property or facility
currently or, to the knowledge of Seller or any Stockholder, previously owned or
leased by Seller which has not been delivered to Purchaser prior to the date
hereof.
(c) Seller does not own or lease and/or has not owned or
leased any property, and does not conduct and has not conducted any operations,
in New Jersey or Connecticut.
(d) For purposes of this Section 6.1.18, the term "SELLER"
(including the use of such term in the term "SELLER PROPERTY") will include any
entity which is, in whole or in part, a predecessor of Seller.
6.1.19 PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 6.1.19(a)
sets forth a list of all Benefit Plans with respect to which Seller has or has
had in the six years preceding the date hereof any obligation or liability or
which are or were in the six years preceding the date hereof maintained,
contributed to or sponsored by Seller for the benefit of any current or former
employee, officer or director of Seller. With respect to each Benefit Plan
subject to ERISA, Seller has delivered to Purchaser a true and complete copy of
each such Benefit Plan (including all amendments thereto) and a true and
complete copy of each material document (including all amendments thereto)
prepared in connection with each such Benefit Plan, including, without
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limitation, (i) a copy of each trust or other funding arrangement, (ii) each
summary plan description and summary of material modifications, and (iii) the
most recently filed IRS Form 5500 for each such Benefit Plan, if any. Except as
provided in Sections 8.5(d) and 8.5(e), Seller does not have any express or
implied commitment to create, incur liability with respect to or cause to exist
any employee benefit plan or to modify any Benefit Plan, other than as required
by Law.
(b) Except as disclosed in SCHEDULE 6.1.19(b), none of the
Benefit Plans is a plan that is or has ever been subject to Title IV of ERISA,
Section 302 of ERISA or Section 412 of the Code. None of the Benefit Plans is
(i) a "multiemployer plan" as defined in Section 3(37) of ERISA, (ii) a plan or
arrangement described under Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a
plan maintained in connection with a trust described in Section 501(c)(9) of the
Code. Except as disclosed in SCHEDULE 6.1.19(b), and except for benefits
provided in Seller's 401(k) plan, none of the Benefit Plans provides for the
payment of separation, severance, termination or similar-type benefits to any
person or provides for or, except to the extent required by Law, promises
retiree medical or life insurance benefits to any current or former employee,
officer or director of Seller.
(c) Except as disclosed in SCHEDULE 6.1.19(c), each Benefit
Plan is in compliance in all material respects with, and has always been
operated in all material respects in accordance with, its terms and the
requirements of all applicable Law and Seller has satisfied in all material
respects all of their statutory, regulatory and contractual obligations with
respect to each such Benefit Plan. No legal action, suit or claim is pending or,
to the knowledge of Seller or any Stockholder, threatened with respect to any
Benefit Plan (other than claims for benefits in the ordinary course) and no fact
or event exists that could reasonably be expected to give rise to any such
action, suit or claim.
(d) Except as disclosed in SCHEDULE 6.1.19(d), each Benefit
Plan or trust which is intended to be qualified or exempt from taxation under
Section 401(a), 401(k) or 501(a) of the Code has received a favorable
determination letter from the IRS that it is so qualified or exempt, and no fact
or occurrence has occurred since the date of such determination letter to
adversely affect the qualified or exempt status of any Benefit Plan or related
trust, including Seller's 401(k) plan.
(e) There has been no non-exempt prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Benefit Plan. Seller has not incurred any material liability for
any excise tax arising under the Code with respect to a Benefit Plan and no fact
or event exists which could reasonably be expected to give rise to such
liability.
(f) All material contributions, premiums or payments required
to be made with respect to any Benefit Plan have been, or will be, made on or
before their due dates. For completed plan years of the Benefit Plans, all such
contributions have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any Governmental Authority, and
no fact or event exists which could give rise to any such challenge or
disallowance.
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(g) There has been no amendment to, written interpretation of
or announcement (whether or not written) by Seller thereof relating to, or
change in employee participation or coverage under, any Benefit Plan that would
increase materially the expense of maintaining such Benefit Plan above the level
of the expense incurred in respect thereto for the most recent fiscal year ended
prior to the date hereof.
(h) Except as disclosed in SCHEDULE 6.1.19(h) or in this
Agreement or the Ancillary Agreements, no employee or former employee of Seller
thereof will become entitled to any bonus, retirement, severance, job security
or similar benefit or enhanced such benefit (including acceleration of vesting
or exercise of an incentive award) as a result of the transactions contemplated
hereby.
6.1.20 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
disclosed in SCHEDULE 6.1.20, to the knowledge of Seller, none of the
Stockholders, nor any other director, officer or other employee of Seller
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer, competitor or potential competitor of Seller.
Ownership of securities of a Person whose securities are registered under the
Exchange Act of 2% or less of any class of such securities will not be deemed to
be an ownership interest purposes of this Section 6.1.20.
6.1.21 CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS. The
relationships of Seller with its customers, suppliers and employees are good
commercial working relationships and, except as disclosed in SCHEDULE 6.1.21,
none of the material customers or material suppliers of Seller or employees of
Seller receiving annual compensation in excess of $70,000 has canceled,
terminated or otherwise materially altered or notified Seller of any intention
or otherwise threatened to cancel, terminate or materially alter its
relationship with Seller since the Balance Sheet Date. Except as disclosed in
SCHEDULE 6.1.21, as of the date hereof, Seller has no reason to believe that
there will be any change in relations with material customers or suppliers or
employees of Seller receiving annual compensation in excess of $70,000 as a
result of the transactions contemplated by this Agreement which could reasonably
be expected to have a Material Adverse Effect, individually or in the aggregate.
6.1.22 OTHER EMPLOYMENT MATTERS. (a) Seller is in material
compliance with all Laws in respect of employment and employment practices,
terms and conditions of employment and wages and hours, and has not, and is not,
engaged in any unfair labor practice; no unfair labor practice complaint against
Seller is pending before the National Labor Relations Board; there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving Seller; Seller is not a party to any collective bargaining agreement
and no collective bargaining agreement is currently being negotiated by Seller;
to the knowledge of Seller, no representation question exists regarding
employees of Seller; and except as specifically set forth on SCHEDULE 6.1.22(a),
no claim in respect of the employment of any employee has been asserted and is
currently pending or, to the knowledge of Seller or any Stockholder, threatened
against Seller.
(b) SCHEDULE 6.1.22(b) contains a complete and accurate list
of the following information for each employee or director of Seller, including
each employee on leave of absence or layoff status: employer; name; job title;
current compensation paid or payable and any change in compensation since the
Balance Sheet Date: vacation accrued; service credited for purposes of
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vesting and eligibility to participate under any pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), Seller severance pay, insurance, medical, welfare, or
vacation plan, or other Benefit Plan of Seller; and all bonuses and any other
amounts to be paid by Seller to employees of Seller, including bonuses and other
such amounts at or in connection with the Closing ("BONUSES").
(c) No current employee or current director of Seller or, to
the knowledge of Seller, any former employee or former director of Seller is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person that in any way adversely affected,
affects, or will affect (i) the performance of his duties as an employee or
director of Seller or (ii) the ability of Seller to conduct its respective
business.
(d) SCHEDULE 6.1.22(d) also contains a complete and accurate
list of the following information for each retired employee or director of
Seller or their dependents, receiving benefits or scheduled to receive benefits
in the future: name, pension benefits, pension option election, retiree medical
insurance coverage, retiree life insurance coverage, and other benefits.
6.1.23 ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE
6.1.23, all of the accounts receivable reflected on the Audited December 1998
Balance Sheet (net of the reserves set forth on the Audited December 1998
Balance Sheet) and all accounts receivable which have arisen since the Balance
Sheet Date (net of any additional reserves established since such date in
accordance with GAAP and in the Ordinary Course of Business of Seller, none of
which is material) are valid and enforceable claims, and the goods and services
sold and delivered which gave rise to such accounts receivable were sold and
delivered in conformity with the applicable purchase orders, agreements and
specifications. Such accounts receivable are subject to no defenses, offsets or
recovery in whole or in part by the Persons whose purchase gave rise to such
accounts receivable or by third-parties and are fully collectible in the
Ordinary Course of Business of Seller without resort to legal proceedings,
except to the extent of the amount of the reserve for doubtful accounts
reflected on the Audited December 1998 Balance Sheet.
6.1.24 INVENTORY. Except as set forth in SCHEDULE 6.1.24, all
inventories reflected on the Audited December 1998 Balance Sheet (net of the
reserves set forth on the Audited December 1998 Balance Sheet) and all
inventories which have been acquired or produced since the Balance Sheet Date
(net of any additional reserves established since the Balance Sheet Date in the
Ordinary Course of Business of Seller, none of which is material) are in good
condition, conform in all material respects with the applicable specifications
and warranties of Seller, are not obsolete, and are usable and salable in the
Ordinary Course of Business of Seller. The values at which such inventories are
carried are in accordance with GAAP, consistently applied. The amount and mix of
items in the inventories of supplies, in-process and finished products are, and
will be at the Closing Date, consistent with the past business practices of
Seller.
6.1.25 MILLENNIUM COMPLIANCE. SCHEDULE 6.1.25 describes the
measures that have been implemented to determine the extent to which the
computer systems used by Seller in its business (the "COMPUTER SYSTEMS") are not
in Millennium Compliance, and the material
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details of any program undertaken with a view towards causing the Computer
Systems to achieve Millennium Compliance.
6.1.26 FINDERS' FEES. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Seller or any Stockholder or any of their Affiliates who might be
entitled to any fee or other commission in connection with the transactions
contemplated by this Agreement.
6.2 STOCKHOLDERS' REPRESENTATIONS AND WARRANTIES. Each
Stockholder, severally and not jointly and with respect to such Stockholder
only, represents and warrants to Purchaser as follows:
6.2.1 AUTHORITY; ENFORCEABILITY. Such Stockholder has all
requisite power and authority, and has taken all action necessary, to execute
and deliver this Agreement and each Ancillary Agreement to which such
Stockholder is or will be a party at the Closing, to consummate the transactions
contemplated hereby and to perform his obligations hereunder and thereunder.
This Agreement has been, and each of the Ancillary Agreements to which such
Stockholder will be a party at the Closing will have been, duly executed and
delivered by such Stockholder and constitute, and will constitute at the
Closing, legal, valid and binding obligations of such Stockholder enforceable
against such Stockholder in accordance with their respective terms, except to
the extent that their enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
6.2.2 NO CONFLICTS. The execution and delivery of this
Agreement and each Ancillary Agreement to which such Stockholder is or will be a
party at the Closing has not and will not at the Closing, and the consummation
of the transactions contemplated hereby and compliance with the terms hereof has
not and will not at the Closing, violate or conflict with in any respect or
result in a breach under any Contract, Law or Order applicable to such
Stockholder.
6.2.3 NO CONSENTS. Except as may be required under the HSR
Act, no consent of, approval or filing with, any court or other Person is
required to be obtained or made by or with respect to such Stockholder in
connection with the execution, delivery and performance of this Agreement or any
of the Ancillary Agreements to which such Stockholder is or will be a party at
the Closing or the consummation by such Stockholder of the transactions
contemplated hereby or thereby.
6.2.4 LITIGATION. Except as disclosed in SCHEDULE 6.2.4, there
is no action, suit, investigation, arbitration or administrative or other
proceeding pending, or, to the knowledge of such Stockholder threatened, against
or affecting such Stockholder before any court or arbitrator or any Governmental
Authority, which, if determined or resolved adversely to such Stockholder could
reasonably be expected to, individually or when considered together with all
other such matters, adversely affect the right or ability of such Stockholder to
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements to which he is or will be a party at the Closing; and such
Stockholder knows of no valid basis for any such action, proceeding or
investigation.
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6.2.5 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
disclosed in SCHEDULE 6.1.20, neither such Stockholder, nor, to the knowledge of
such Stockholder, any other director, officer or other employee of Seller,
possesses, directly or indirectly, any ownership interest in, or is a director,
officer or employee of, any Person which is a supplier, customer, lessor,
lessee, licensor, developer, competitor or potential competitor of Seller.
Ownership of securities of a company whose securities are registered under the
Exchange Act of 2% or less of any class of such securities will not be deemed to
be an ownership interest for purposes of this Section 6.2.5.
6.3 NO INFERENCE OF ASSUMPTION OF RETAINED LIABILITIES OR
ACQUISITION OF EXCLUDED ASSETS BY PURCHASER OR ANY OF ITS AFFILIATES. Nothing
contained in any of the representations and warranties set forth in this
Agreement will be construed to constitute the assumption by Purchaser or any of
its affiliates of any of the Retained Liabilities, or the acquisition by
Purchaser or any of its affiliates of any of the Excluded Assets, all of which
are and will remain after the date hereof for the account of Seller and the
Stockholders.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
7.1 CORPORATE EXISTENCE AND POWER. Purchaser is a Delaware
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Purchaser has all corporate power and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted.
7.2 CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by Purchaser of this Agreement and each of the
Ancillary Agreements to which it is or will be a party at the Closing are and
will be at the Closing within Purchaser's corporate power and have been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been and each of the Ancillary Agreements to which Purchaser is or
will be a party at the Closing will have been duly executed and delivered by
Purchaser and constitute, and will constitute at the Closing, valid and binding
agreements of Purchaser, enforceable against Purchaser in accordance with their
terms, except to the extent that their enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
7.3 GOVERNMENTAL AUTHORIZATION. Except as may be required
under the HSR Act, the execution, delivery and performance by Purchaser of this
Agreement and each of the Ancillary Agreements to which Purchaser will be a
party at the Closing require no action by or in respect of, or filing with, any
Governmental Authorities.
7.4 NON-CONTRAVENTION. The execution, delivery and
performance by Purchaser of this Agreement and each Ancillary Agreement to which
Purchaser is or will be a party at the Closing, do not and will not at the
Closing (a) violate the certificate of incorporation or bylaws or comparable
organizational documents of Purchaser or (b) violate any applicable Law or
Order.
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7.5 LITIGATION. Except as disclosed in SCHEDULE 7.5, there is
no action, suit, investigation, arbitration or administrative or other
proceeding pending or, to the knowledge of Purchaser, threatened against or
affecting Purchaser, or any of Purchaser's properties before any court or
arbitrator or any Governmental Authority which, if determined or resolved
adversely to Purchaser, could, individually or in the aggregate, reasonably be
expected to materially and adversely affect the right or ability of Purchaser to
consummate the transactions contemplated by this Agreement and any Ancillary
Agreement to which Purchaser will be a party at Closing.
ARTICLE VIII
CERTAIN COVENANTS
8.1 CONDUCT OF BUSINESS OF SELLER. During the period from the
date of this Agreement to the Closing Date, the Stockholders will, jointly and
severally, cause Seller to, and Seller will, conduct its operations only in the
Ordinary Course of Business of Seller (including managing their working capital
in accordance with its past practice and custom) and use their respective
reasonable best efforts to: (a) preserve intact its business organizations, (b)
keep available the services of its officers and employees and (c) maintain its
relationships and goodwill with licensors, suppliers, distributors, customers,
landlords, employees, agents and others having business relationships with any
of them or the Business. Seller will confer with Purchaser concerning
operational matters of a material nature and report periodically to Purchaser
concerning the Business of Seller, operations and finances of Seller. Without
limiting the generality or effect of the foregoing, prior to the Closing Date,
except with the prior written consent of Purchaser, Seller will not, and the
each Stockholder will cause Seller not to:
(a) Amend or modify their certificates of incorporation or
bylaws from their respective forms on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any
bonuses to any director, officer, employee or stockholder of Seller, or enter
into any employment, severance, or similar agreement with any director, officer,
stockholder or employee of Seller, PROVIDED, HOWEVER, that the compensation of
employees of Seller receiving annual compensation of less than $70,000 may be
changed in the Ordinary Course of Business of Seller;
(c) Except as contemplated by Sections 8.5(d) and 8.5(e),
adopt or increase any benefits under any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of its employees;
(d) Except as contemplated by Section 8.14, enter into any
contract or commitment except contracts and commitments (for capital
expenditures or otherwise) in the Ordinary Course of Business of Seller (and in
any case not exceeding the dollar amounts with respect to specified categories
of Contracts in Section 6.1.12);
(e) Incur, assume or guarantee any Indebtedness other than in
the Ordinary Course of Business;
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(f) Enter into any transaction or commitment relating to the
assets or the Business of Seller which, individually or in the aggregate, could
be material to Seller, or cancel or waive any claim or right of substantial
value which, individually or in the aggregate, could be material to Seller
without the prior written consent of Purchaser which will not be unreasonably
withheld or delayed;
(g) Make any change in accounting methods or practices
(including changes in reserve or accrual amounts or policies);
(h) Issue or sell any Capital Stock, or make any other changes
in its capital structure, including the grant of any stock option or other right
to purchase shares of Capital Stock of Seller;
(i) Sell, lease or otherwise dispose of any material asset or
property without the prior written consent of Purchaser which will not be
unreasonably withheld or delayed;
(j) Except as expressly permitted under this Agreement,
write-off as uncollectible any notes or accounts receivable, except write-offs
in the Ordinary Course of Business of Seller charged to applicable reserves,
none of which individually or in the aggregate is material; write-off, write-up
or write-down any other material asset of Seller; or alter its customary time
periods for collection of accounts receivable or payments of accounts payable;
(k) Create or assume any Lien other than a Permitted Lien;
(l) Make any loan, advance or capital contributions to or
investment in any Person;
(m) Terminate or close any material facility, business or
operation of Seller;
(n) Cause or permit to occur any event, development or state
of circumstances or facts which individually or together with other matters, has
had or could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate; or
(o) Agree to do any of the foregoing.
8.2 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date and the termination of this
Agreement in accordance with its terms, neither Seller nor any Stockholder or
any of their respective Affiliates, or any officer or director of Seller or any
of its Affiliates, or other representative of any of the foregoing (including
advisors, agents, attorneys, employees or consultants) will take any action to,
directly or indirectly, encourage, initiate, solicit or engage in discussions or
negotiations with, or provide any information to any Person, other than
Purchaser (and its Affiliates and representatives), concerning any purchase of
any Capital Stock of Seller or any merger, asset sale or similar transaction
involving Seller. Seller and each Stockholder will disclose to Purchaser the
existence or occurrence of any proposal or contract which it or he or any of
their representatives described above may receive in respect of any such
transaction and the identity of the Person from whom such a proposal or contract
is received.
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8.3 REVIEW OF SELLER. Purchaser may, prior to the Closing
Date, directly or through its representatives, review the properties, books and
records of Seller and their financial and legal condition to the extent it deems
necessary or advisable to familiarize itself with such properties and other
matters. Seller will permit Purchaser and their representatives to have, after
the date of execution of this Agreement, reasonable access to the premises and
to all the books and records of Seller and to cause the officers of Seller to
furnish Purchaser with such financial and operating data and other information
with respect to the Business and properties of Seller as Purchaser will from
time to time reasonably request. Seller will deliver or cause to be delivered to
Purchaser such additional instruments, documents, certificates and opinions as
Purchaser may reasonably request for the purpose of (i) verifying the
information set forth in this Agreement or on any Schedule attached hereto and
(ii) consummating or evidencing the transactions contemplated by this Agreement.
8.4 REASONABLE BEST EFFORTS. Seller and Purchaser will
cooperate and use their respective reasonable best efforts to take, or cause to
be taken, all appropriate actions, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable Laws (including, without
limitation, the filing of Notification and Report Forms under the HSR Act with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice) to consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, their respective reasonable best
efforts to obtain, prior to the Closing Date, all licenses, Permits, consents,
approvals, authorizations, qualifications and orders of Governmental Authorities
and parties to contracts with Seller as are necessary for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby. Notwithstanding any other provision hereof, in no
event will Purchaser or any of its Affiliates be required to (a) enter into or
offer to enter into any divestiture hold-separate, business limitation or
similar agreement or undertaking in connection with this Agreement or the
transactions contemplated hereby or (b) make any payment in connection with any
consent or approval or condition to Closing set forth in any subsection of
Section 9.1 which it is necessary or advisable for Seller to obtain or satisfy
in order to consummate the transactions contemplated by this Agreement.
8.5 TRANSFER OF EMPLOYEES AND BENEFIT PLANS. As of the
Closing Date:
(a) Employees of Seller with respect to the Business
immediately prior to the Closing Date whose names are listed on SCHEDULE 8.5(a)
will be offered employment with Purchaser or an Affiliate of Purchaser each such
offer to include (i) a substantially equivalent title, level of responsibility
and compensation as each such employee had as an employee of Seller on the date
hereof and (ii) the benefits listed on SCHEDULE 8.5(b), PROVIDED that this
Section 8.5 will not be construed to prohibit Purchaser from modifying or
eliminating any such benefits after the Closing Date;
(b) Purchaser will assume all obligations relating to the
payment of (i) Employee Bonus Accruals to the extent provided in Section
3.1(a)(vii), salary, wages and benefits reflected on the Closing Date Balance
Sheet (to the extent not discharged prior to the Closing Date) or otherwise
arising or accruing after the Closing Date, PROVIDED that the existence thereof
does not constitute a breach of any representation, warranty or covenant of
Seller hereunder, in each case with respect to any employee of Seller who
accepts employment with Purchaser (the "TRANSFERRED EMPLOYEES"), and (ii)
severance payments and other severance
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benefits to which the Transferred Employees become entitled because of
termination of their employment with and by Purchaser or an Affiliate of
Purchaser after they become employees of Purchaser (other than severance arising
from constructive termination resulting from the terms and conditions of the
offer of employment made by Purchaser in compliance with this Section 8.5);
(c) Purchaser will assume the obligations of Seller under each
of the employment agreements listed on SCHEDULE 6.1.12(a)(iii) to which Seller
is party; and
(d) Prior to the Closing Date and subject to the compliance by
Seller with its obligations under Section 8.5(g), Purchaser will take all action
necessary to establish a defined contribution plan for Transferred Employees
(the "TRANSFEREE 401(K) PLAN") containing substantially the same terms and
conditions as the Nationwide Precision/Parlec Section 401(k) Plan (the
"NATIONWIDE/PARLEC 401(K) PLAN") and, effective as of or as promptly as possible
after the Closing Date, Seller will cause assets of the Nationwide/Parlec 401(k)
Plan attributable to the benefits of Transferred Employees to be transferred in
a manner that satisfies Section 414(l) of the Code to the Transferee 401(k)
Plan; PROVIDED, HOWEVER, that no transfer will occur until Purchaser has
received such assurances as may be reasonable that the applicable provisions of
the Code have been satisfied. The assets transferred from the Nationwide/Parlec
401(k) Plan to the Transferee 401(k) Plan will be equal to the vested and
nonvested account balances of Transferred Employees as of the date of Transfer.
Purchaser will take such action as may be necessary to provide each Transferred
Employee participating in the Transferee 401(k) Plan after the transfer with an
initial account balance that is at least equal to the account balance
transferred from the Nationwide/Parlec 401(k) Plan, and to provide all benefits
protected by Law, including optional forms of benefit.
(e) With respect to all other Benefit Plans in which Seller
and Parlec or any other employer participate, Purchaser will take all action
necessary to establish, effective as of the Closing Date, benefit plans for
Transferred Employees containing substantially the same terms and conditions as
such Benefit Plans (the "TRANSFEREE PLANS"). Purchaser will assume sponsorship
of the Transferee Plans, and Seller will take all action necessary to transfer
sponsorship of the Transferee Plans to Purchaser, effective as of the Closing.
(f) Purchaser will assume sponsorship of all Benefit Plans not
described in Sections 8.5(d) and 8.5(e) above, and Seller will take all action
necessary to transfer sponsorship of such Benefit Plans to Purchaser, effective
as of the Closing.
(g) Seller will provide all reasonable assistance to Purchaser
in connection with the performance by Purchaser of its obligations under
Sections 8.5(d), 8.5(e) and 8.5(f).
Nothing contained in this Agreement will confer upon any
Transferred Employee, or any legal representative thereof, any rights or
remedies, including, without limitation, any right to employment for any
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement (other than as provided in the Employment Offer Letter).
Notwithstanding anything to the contrary contained in this Agreement, neither
Purchaser nor any Affiliate of Purchaser will be required to continue any
particular Benefit Plan after the Closing Date for the Transferred Employees,
and any such Benefit Plan may be amended or terminated in accordance with its
terms and any applicable Law.
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8.6 BOOKS AND RECORDS. (a) From and after the Closing Date,
Purchaser will give Seller's representatives reasonable access to such
documentation and information and reasonable access to and cooperation of
employees which Seller may reasonably require (i) to prepare and file Tax
returns and to respond to any issues which may arise with respect to Taxes for
which Seller or any Stockholder are responsible to the extent relating to the
Purchased Assets or Assumed Liabilities, (ii) with respect to any Retained
Liabilities; and (iii) to defend any claim which Seller is required to defend
pursuant to this Agreement or in connection with the operation of the Business
prior to the Closing Date. Prior to the sixth anniversary of the Closing Date,
Purchaser will give Seller at least ten days prior written notice of Purchaser's
intention to dispose of any books, records or other documentation which are
delivered to Purchaser under the terms of this Agreement and that Seller may
reasonably require, and Seller will have the opportunity to obtain possession,
at its own expense, of any such books, records or documentation prior to
Purchaser's disposition thereof. In the absence of bad faith or willful
misconduct, Purchaser will have no liability arising out of or in connection
with its retention and handling of such records.
(b) From and after the Closing Date, Seller and each
Stockholder will give Purchaser's representatives reasonable access to such
documentation, information and reasonable access to and cooperation of each
Stockholder and other employees of Seller which Purchaser may reasonably require
(i) to prepare and file tax returns and respond to any issues which may arise
with respect to Taxes for which Purchaser is responsible to the extent relating
to the Purchased Assets or Assumed Liabilities or (ii) to defend any claim which
Purchaser is required to defend pursuant to this Agreement or in connection with
the operation of the Business after the Closing Date. Prior to the sixth
anniversary of the Closing Date, Seller will give Purchaser at least ten days
prior written notice of Seller's intention to dispose of any books, records or
other documentation contemplated by this Section 8.6(b) and that Purchaser may
otherwise reasonably require, and Purchaser will have the opportunity to obtain
possession, at its own expense, of any such books, records or documentation
prior to Seller's or the Stockholders' disposition thereof. In the absence of
bad faith or willful misconduct, Seller will have no liability arising out of or
in connection with its retention and handling of such records. Without limiting
the generality or effect of the foregoing, Seller will deliver or cause to be
delivered to Purchaser such additional instruments, documents, certificates and
opinions as Purchaser may reasonably request for the purpose of (x) verifying
the information set forth in this Agreement or on any Schedule attached hereto
and (y) consummating or evidencing the transactions contemplated by this
Agreement.
8.7 BULK TRANSFER LAWS. Seller will use its reasonable best
efforts to assist Purchaser in complying with the provisions of any Laws of any
jurisdiction relating to bulk transfers which may be applicable in connection
with the transfer of the Purchased Assets to Purchaser.
8.8 NON-COMPETITION. (a) During the Covenant Period, Seller
will not promote, participate, engage or have any other interest (whether Seller
is acting as owner, purchaser, shareholder, employee, broker, agent, principal,
trustee, corporate officer, director, consultant or in any other capacity) (i)
in any business which is competitive with any product or service offered by
Seller on or prior to the Closing Date (including tooling services but excluding
the performance of the Subject Work by Parlec in accordance with the terms of
the Parlec Agreement) or (ii) otherwise in the business of manufacturing and
supplying of complex machined metal parts for original equipment manufacturers;
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(b) During the Covenant Period, Seller will not directly or
indirectly solicit, canvass or approach any Person who, to the knowledge of
Seller or any Stockholder, was provided with products or services by Seller at
any time prior to the Closing Date, to offer that Person products or services
similar to or derivative of products or services provided by Seller to such
Person at any time within the two year period prior to the Closing Date by
Seller.
(c) During the Covenant Period, Seller will not directly or
indirectly solicit, canvass or approach any Person who, to the knowledge of
Seller, provided products or services to Seller at any time during the two years
before the Closing Date to endeavor to cause such Person to cease providing
products or services to Purchaser.
(d) During the Covenant Period, Seller will not directly or
indirectly employ, solicit or entice away any Board of Directors member,
management committee member, director, officer or other employee of Purchaser or
any other Person directly or indirectly controlled by Purchaser until such
individual has not been employed or otherwise affiliated or associated with
Purchaser or such other Person for at least two consecutive years; PROVIDED,
HOWEVER, that this provision will not prohibit Seller from hiring Mr. Ronald S.
Ricotta after the expiration of the term of his Employment Agreement prior to
the expiration of such two year period.
8.9 COLLECTION OF PAYMENTS. Following the Closing: (a) Seller
will promptly, and in any event, not later than seven days following receipt,
forward to Purchaser any payments received by Seller with respect to any of the
Purchased Assets, and any checks, drafts or other instruments payable to Seller
will, when so delivered, bear all endorsements required to effectuate the
transfer of the same to Purchaser, (b) Seller will promptly forward to Purchaser
any mail or other communications received by Seller relating to the Purchased
Assets or the Assumed Liabilities, (c) Purchaser will promptly, and in any
event, not later than seven days following receipt, forward to Seller any
payments received by Purchaser with respect to any of the Excluded Assets, and
any checks, drafts or other instruments payable to Purchaser shall, when so
delivered, bear all endorsements required to effect the transfer of the same to
Seller and (d) Purchaser will promptly forward to Seller any mail or other
communications received by Purchaser relating to the Excluded Assets or the
Retained Liabilities.
8.10 ACCOUNTS RECEIVABLE. (a) Seller and the each Stockholder
will use their reasonable best efforts to assist Purchaser in the collection of
Accounts Receivable. On the Business Day immediately following the Put Date,
Purchaser may transfer to Seller, and if so transferred, the Stockholders will,
jointly and severally, cause Seller to, and Seller will, purchase from
Purchaser, each Uncollected Accounts Receivable for an amount equal to the
difference between (i) the face amount thereof, and (ii) the amount of any
reserve for doubtful accounts set forth on the Closing Date Balance Sheet.
During the 90 day period immediately following the Put Date, Purchaser will use
all reasonable efforts (but at no substantial out-of-pocket cost to Purchaser)
to assist Seller in the collection of the then Uncollected Accounts Receivable.
Purchaser hereby covenants and agrees to execute any and all documents
reasonably necessary to transfer any and all right, title and interest in
Uncollected Accounts Receivable to Seller.
(b) Any payment received by Seller after the Closing in
respect of an Account Receivable (other than Uncollected Accounts Receivable
transferred to Seller by Purchaser in accordance with Section 8.10(a)) will be
deemed to be made in trust for the benefit of Purchaser. Seller will and the
Stockholders will, jointly and severally, cause Seller to, upon receipt of such
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payment, pay to Purchaser or its designee by wire transfer in immediately
available funds the full amount of such payment. Any payment received by the
Purchaser after the Closing in respect of an Uncollected Account Receivable
transferred and conveyed to Seller in accordance with Section 8.10(a) will be
deemed to be made in trust for the benefit of Seller, and Purchaser will, upon
receipt of such payment, pay to Seller or its designee by wire transfer in
immediately available funds the full amount of such payment.
8.11 USE OF NAMES. On and after the Closing Date, Seller will,
and the Stockholders will, jointly and severally, cause Seller to, discontinue
all use of the names "Nationwide Precision Products Corp." alone or in any
combination of words for any product or service and will as promptly as
possible, but in no event later than 30 days after the Closing Date, eliminate
such names from all signs, purchase orders, invoices, sales orders, packaging
stock, labels, letterheads, shipping documents and other materials used by
Seller.
8.12 S CORPORATION STATUS. Seller will continue to be a valid
S Corporation through the Closing.
8.13 OTHER FINANCIAL STATEMENTS. (a) Seller and each
Stockholder will, prior to the Closing and thereafter as necessary in the
judgement of Purchaser, deliver to Purchaser the written consent(s) of Brovitz,
Insero, Kasperski & Co., P.C. authorizing the use by Purchaser or an Affiliate
of Purchaser of the Audited Statements in connection with the financing
contemplated by Section 9.1.11 (including a registration statement to be filed
with the Securities and Exchange Commission in connection therewith).
(b) Seller and each Stockholder will, prior to the Closing,
deliver to Purchaser within twenty days after the last day of each applicable
month the Monthly Financial Statements contemplated by clause (ii) of the
definition thereof.
8.14 AVAILABLE CASH. Seller will, and each Stockholder will
cause Seller to, (a) have available Cash of not less than $200,000 at the
Closing (before giving effect to the payment of the Purchase Price) and (b)
deliver evidence of the foregoing reasonably satisfactory to Purchaser.
8.15 TRANSFER TAXES; HSR ACT FILING FEES. Purchaser will pay
all filing fees required to be paid in connection with the filings required to
be made under the HSR Act. All transfer, documentary, sales, use, stamp,
registration and value added Taxes imposed on Purchaser or Seller which are
incurred in connection with this Agreement will be borne equally by Seller and
Purchaser.
8.16 FURTHER ASSURANCES. From time to time, as and when
requested by any party hereto, the other parties will execute and deliver, or
cause to be executed and delivered, all such documents and instruments and will
take, or cause to be taken, all such further actions, as the requesting party
may reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
8.17 CONFIDENTIALITY. It is understood that the business of
Purchaser and Precision Partners, L.L.C. and its subsidiaries and of Seller, and
all matters related thereto, are of a confidential nature. Prior to the date
hereof, there may have been revealed, and on or after the
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date hereof there may be revealed, to Purchaser and its Affiliates or
representatives, on the one hand, and to Seller and its Affiliates and
representatives, on the other, "CONFIDENTIAL INFORMATION" (as hereinafter
defined) concerning the business of Purchaser and Precision Partners, L.L.C. and
its affiliates or the business of Seller. In consideration for and as an
inducement to the parties to execute, deliver and perform this Agreement, each
of the parties hereto hereby agrees that, following the termination of this
Agreement or any other failure of the Closing to be consummated, neither party
shall divulge or appropriate for their own use, or for the use of any third
party, any Confidential Information of the other party. As used herein, the term
"Confidential Information" means the following oral or written information
relating to each party's business: know-how, technology, inventions, designs,
methodologies, trade secrets, patents, secret processes and formulae,
information relating to the development, research, testing, manufacturing,
marketing, sales, distribution and uses of products, sources of supplies,
budgets and strategic plans, the identity and special needs of customers, plants
and other properties, and any other information which may give the party who
received such Confidential Information an opportunity to obtain an advantage
over its competitors who do not know or use such information; PROVIDED, HOWEVER,
that the term "CONFIDENTIAL INFORMATION" shall not include (i) any such
information that, prior to its use or disclosure by any party hereto, can be
shown to have been in the public domain or generally known or available to
customers, suppliers or competitors of the business of Purchaser and Precision
Partners, L.L.C. and its affiliates or Seller, as the case may be, through no
breach of the provisions of this Section; (ii) any such information that, prior
to its use or disclosure by any party hereto was rightfully in the receiving
party's possession, without violation of the provisions of this Section or other
non-disclosure covenants that were executed for the benefit of Purchaser and
Precision Partners, L.L.C. and its affiliates or Seller, as the case may be; or
(iii) any such information that, prior to its use or disclosure by Purchaser or
Seller, as the case may be, was developed by such party without violation of the
provisions of this Section or other non-disclosure covenants that were executed
for the benefit of Purchaser and Precision Partners, L.L.C. and its affiliates
or Seller, as the case may be.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate the Closing are subject to the satisfaction of the
following conditions:
9.1.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER AND
THE STOCKHOLDERS. (a) The representations and warranties of Seller and each
Stockholder made in this Agreement will be true and correct in all respects (or,
if any such representation is not expressly qualified by "materiality,"
"Material Adverse Effect" or words of similar import, then in all material
respects) as of the date hereof and as of the Closing, as though made as of the
Closing; (b) Seller and each Stockholder shall have performed and complied with
all terms, agreements and covenants contained in this Agreement required to be
performed or complied with by Seller and each Stockholder on or before the
Closing Date; and (c) Seller will have delivered to Purchaser a certificate of
Seller's Chief Executive Officer and each Stockholder will have delivered to
Purchaser a certificate of Stockholder, all dated the Closing Date, confirming
the foregoing and such other evidence of compliance with their obligations as
Purchaser may reasonably request.
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9.1.2 SELLER'S CERTIFICATE. Seller shall have delivered to
Purchaser a certificate from Seller's Secretary or an Assistant Secretary
certifying as to the due adoption of resolutions adopted by its Board of
Directors (and its stockholders, if required) authorizing the execution of this
Agreement and the Ancillary Agreements and the taking of any and all actions
deemed necessary or advisable to consummate the transactions contemplated herein
and therein.
9.1.3 STOCKHOLDER APPROVAL. This Agreement and the
transactions contemplated hereby shall have been approved in the manner and by
the requisite vote of the Stockholders required by applicable Law.
9.1.4 NO INJUNCTION, ETC. No provision of any applicable Law
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.1.5 NO PROCEEDINGS. No proceeding challenging this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or seeking to prohibit, alter, prevent or materially delay the Closing
or seeking damages will have been instituted by any Person (other than Seller)
before any court, arbitrator or Governmental Authority and be pending.
9.1.6 REQUIRED FILINGS. All actions by or in respect of or
filings by Seller or any Stockholder with any Person required to permit the
consummation of the Closing shall have been taken, made or obtained.
9.1.7 OPINION OF COUNSEL. Purchaser shall have received an
opinion of Harris, Beach & Wilcox, LLP, counsel to Seller and the Stockholders,
dated the Closing Date substantially in the form attached hereto as EXHIBIT I,
together with the Reliance Letters to the Lenders.
9.1.8 TERMINATION OF SECURITY INTERESTS. Seller shall have
obtained releases and other documentation reasonably requested by Purchaser in
form and in substance satisfactory to Purchaser providing for the termination
and release of all Liens (other than Permitted Liens) on the Purchased Assets.
9.1.9 ANCILLARY AGREEMENTS. Each of the Ancillary Agreements
shall have been executed and delivered by the parties thereto other than
Purchaser.
9.1.10 THIRD-PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals, waivers and Permits, if any, disclosed or required to be
disclosed on any Schedule attached hereto or otherwise required in connection
with the consummation of the transactions contemplated by this Agreement shall
have been received. All of the consents, approvals, authorizations, exemptions,
waivers and Permits from Governmental Authorities that will be required in order
to enable Purchaser to consummate the transactions contemplated hereby shall
have been obtained.
9.1.11 FINANCING. Purchaser shall have available to it
financing necessary to consummate Closing on terms satisfactory to Purchaser in
its sole discretion.
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9.1.12 DUE DILIGENCE. Purchaser shall have completed, or
caused to be completed by its attorneys, accountants and other representatives,
to its satisfaction, business, legal, environmental and accounting due diligence
investigations and reviews of Seller.
9.1.13 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date,
no event shall have occurred which, individually or when considered together
with all other matters, has had or could reasonably be expected to have a
Material Adverse Effect.
9.1.14 FIRPTA. Seller shall have furnished to Purchaser, on or
prior to the Closing Date, a non-foreign person affidavit required by Section
1445 of the Code.
9.1.15 HSR ACT. Any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby shall have expired or been
terminated.
9.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of
Seller and the Stockholders to consummate the Closing are subject to the
satisfaction of the following conditions:
9.2.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
The representations and warranties of Purchaser made in this Agreement will be
true and correct in all respects (or, if any such representation is not
expressly qualified by "materiality," "Material Adverse Effect" or words of
similar import, then in all material respects) as of the date hereof and as of
Closing, as though made as of the Closing; (b) Purchaser shall have performed
and complied with all terms, agreements and covenants contained in this
Agreement required to be performed or complied with by Purchaser on or before
the Closing Date; and (c) Purchaser shall have delivered to Seller a certificate
of Purchaser's Chief Executive Officer, dated the Closing Date, confirming the
foregoing and such other evidence of compliance with its obligations as Seller
may reasonably request.
9.2.2 PURCHASER'S CERTIFICATE. Purchaser will have delivered
to Seller a certificate from its Secretary or Assistant Secretary certifying as
to the due adoption of resolutions adopted by its Board of Directors (and its
stockholders, if required) authorizing the execution of this Agreement and the
Ancillary Agreements and the taking of any and all actions deemed necessary or
advisable to consummate the transactions contemplated herein and therein.
9.2.3 NO INJUNCTION, ETC. No provision of any applicable Law
and no judgment, injunction, order or decree will be in effect which will
prohibit the consummation of the Closing.
9.2.4 OPINION OF COUNSEL. Seller shall have received an
opinion of Jones, Day, Reavis & Pogue, counsel to Purchaser, dated the Closing
Date substantially in the form attached hereto as EXHIBIT K.
9.2.5 ANCILLARY AGREEMENTS. Each of the Ancillary Agreements
shall have been executed by Purchaser, if Purchaser is a party thereto.
9.2.6 HSR ACT. Any applicable waiting period under the HSR Act
relating to the transactions contemplated hereby shall have expired or been
terminated.
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9.2.7 OFFER OF EMPLOYMENT. Each of the employees listed on
SCHEDULE 8.5(a) shall have been offered employment by Purchaser.
9.2.8 NO PROCEEDINGS. No proceeding challenging this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or seeking to prohibit, alter, prevent or materially delay the Closing
or seeking damages will have been instituted by any Person (other than
Purchaser) before any court, arbitrator or Governmental Authority and be
pending.
9.2.9 THIRD-PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals, waivers and Permits required in connection with the
consummation of the transactions contemplated by this Agreement, and all of the
consents, approvals, authorizations, exemptions waivers and Permits from
Governmental Authorities that will be required in order to enable Seller to
consummate the transactions contemplated hereby, in each case set forth on
SCHEDULE 9.2.9, shall have been received or obtained.
ARTICLE X
SURVIVAL; INDEMNIFICATION
10.1 SURVIVAL. (a) The representations and warranties of the
parties contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith will survive the Closing
until the first to occur of (i) the completion of Purchaser's audit in
accordance with GAAP, (including receipt by Purchaser of an opinion of its
auditors with respect, thereto) of its financial statements for Purchaser's
fiscal year ended December 31, 2000 or (ii) March 31, 2001; PROVIDED, HOWEVER,
that the representations and warranties contained in Section 6.1.10 and 6.1.18
will survive the Closing until the expiration of the statute of limitations
applicable to the matters covered thereby (after giving effect to any waiver,
mitigation or extension thereof granted by Seller), and the Selected Seller and
Stockholders Representations and Warranties will survive the Closing
indefinitely. Notwithstanding the immediately preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement will survive the time at which it would otherwise terminate
pursuant to the immediately preceding sentence if written notice of the
inaccuracy or breach thereof giving rise to such right of indemnity shall have
been given to the party against whom such indemnity may be sought prior to such
time; PROVIDED, HOWEVER, that the applicable representation or warranty will
survive only with respect to the particular inaccuracy or breach specified in
such written notice. All covenants and agreements of the parties contained in
this Agreement, will survive the Closing indefinitely.
10.2 INDEMNIFICATION. (a) On and after the Closing, Seller and
the Stockholders, jointly and severally, will indemnify, defend and hold
harmless Purchaser and its officers, directors, employees, affiliates,
stockholders and agents, and the successors to the foregoing (and their
respective officers, directors, employees, affiliates, stockholders and agents),
against any and all liabilities, damages and losses, in each case, actually
incurred (including diminution in value of the Business, and, if but only to the
extent asserted in a Third-Party Claim, punitive damages, but excluding lost
profits and other consequential damages), and all costs or expenses actually
incurred, including reasonable attorneys' and consultants' fees and
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expenses ("DAMAGES"), incurred or suffered as a result of or arising out of (i)
the failure of any representation or warranty made by Seller or any Stockholder
in any subsection of Section 6.1 to be true and correct as of the Closing Date
(other than a breach of Section 6.1.10 with respect to Taxes which will be
governed by Section 10.3), (ii) the breach of any covenant or agreement made or
to be performed by Seller or any Stockholder pursuant to this Agreement and
(iii) any Retained Liabilities; PROVIDED, HOWEVER, that neither Seller nor any
Stockholder will be liable under clause (i) of this Section 10.2(a) (other than
with respect to a breach of any of the Selected Seller and Stockholders
Representations and Warranties) unless the aggregate amount of Damages exceeds
$250,000 and then from the first dollar to the full extent of such Damages;
PROVIDED, FURTHER, HOWEVER, that the aggregate liability of Seller and the
Stockholders under clause (i) of Section 10.2(b) and under clause (i) of this
Section 10.2(a) will not exceed (other than with respect to a breach of any of
the Selected Seller and Stockholders Representations and Warranties), an amount
equal to $10.0 million (the "CAP").
(b) On and after the Closing, Seller and the Stockholders,
severally and not jointly (except where the covenants of the Stockholders are
expressly set forth in this Agreement to be joint and several, in which case the
indemnification obligations of the Stockholders under this Section 10.2(b) with
respect to a breach of any such covenants will be joint and several), will
indemnify, defend and hold harmless Purchaser and its officers, directors,
employees, affiliates, stockholders and agents and the successors to the
foregoing (and their respective officers, directors, employees, affiliates,
stockholders and agents) against Damages incurred or suffered as a result of or
arising out of (i) the failure of any representation or warranty made by any of
the Stockholders in any subsection of Section 6.2 of this Agreement to be true
and correct as of the Closing Date or (ii) the breach of any covenant or
agreement made or to be performed by a Stockholder pursuant to this Agreement;
PROVIDED, HOWEVER, that the aggregate liability of Seller and the Stockholders
under clause (i) of Section 10.2(a) and under clause (i) of this Section 10.2(b)
will not exceed the Cap.
(c) On and after the Closing, Purchaser will indemnify, defend
and hold harmless Seller and its officers, directors, employees, affiliates,
stockholders and agents and the successors to the foregoing (and their
respective officers, directors, employees, affiliates, stockholders and agents)
against Damages incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by Purchaser in Article VII of
this Agreement to be true and correct as of the Closing Date, (ii) the breach of
any covenant or agreement made or to be performed by Purchaser pursuant to this
Agreement or (iii) any Assumed Liability; PROVIDED, HOWEVER, that Purchaser will
not be liable under clause (i) of this Section 10.2(c) (other than with respect
to a breach of any of the Selected Purchaser Representations and Warranties)
unless the aggregate amount of Damages exceeds $250,000 and then from the first
dollar to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that
Purchaser's liability under clause (i) of this Section 10.2(c) (other than with
respect to a breach of any of the Selected Purchaser Representations and
Warranties) will not exceed, in the aggregate an amount equal to the Cap.
10.3 TAX INDEMNIFICATION. On and after the Closing, Seller and
the Stockholders, jointly and severally, will indemnify, defend and hold
harmless Purchaser, and its officers, directors, employees, affiliates and
agents and the successors to the foregoing (and their respective officers,
directors, employees, affiliates and agents) against (i) all Taxes (and losses,
claims and expenses related thereto) resulting from, arising out of, or incurred
with respect to, any claims that may be asserted by any party based upon,
attributable to, or resulting from the
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failure of any representation or warranty made pursuant to Section 6.1.10 to be
true and correct as of the Closing Date and (ii) all Taxes imposed on or
asserted against Purchaser or for which Purchaser or any of its Affiliates may
be liable in respect of the Purchased Assets, the Business or the income or
operations of Seller for all Pre-Closing Tax Periods (net of reserves for Taxes
accurately reflected on the Closing Date Balance Sheet).
10.4 PROCEDURES. (a) If any Person who or which is entitled to
seek indemnification under Section 10.2 or Section 10.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third-Party Claim
against such Indemnified Party with respect to which the Person against whom or
which such indemnification is being sought (an "INDEMNIFYING PARTY") is
obligated to provide indemnification under this Agreement, the Indemnified Party
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 20 days after receipt of such written notice of such
Third-Party Claim. Such notice by the Indemnified Party will describe the
Third-Party Claim in reasonable detail, will include copies of all available
material written evidence thereof and will indicate the estimated amount, if
reasonably practicable, of the Damages that has been or may be sustained by the
Indemnified Party. The Indemnifying Party will have the right to participate in,
or, by giving written notice to the Indemnified Party, to assume, the defense of
any Third-Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel (reasonably satisfactory to the Indemnified
Party), and the Indemnified Party will cooperate in good faith in such defense.
(b) If, within ten days after giving notice of a Third-Party
Claim to an Indemnifying Party pursuant to Section 10.4(a), an Indemnified Party
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such Third-Party Claim as provided in the
last sentence of Section 10.4(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof; PROVIDED, HOWEVER, that if the Indemnifying Party
fails to take reasonable steps necessary to defend diligently such Third-Party
Claim within ten days after receiving written notice from the Indemnified Party
that the Indemnified Party reasonably believes the Indemnifying Party has failed
to take such steps, the Indemnified Party may assume its own defense, and the
Indemnifying Party will be liable for all reasonable costs and expenses paid or
incurred in connection therewith. Without the prior written consent of the
Indemnified Party, the Indemnifying Party will not enter into any settlement of
any Third-Party Claim which would lead to liability or create any financial or
other obligation on the part of the Indemnified Party for which the Indemnified
Party is not entitled to indemnification hereunder, or which provides for
injunctive or other non-monetary relief applicable to the Indemnified Party, or
does not include an unconditional release of all Indemnified Parties. If a firm
offer is made to settle a Third-Party Claim without leading to liability or the
creation of a financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder and
the Indemnifying Party desires to accept and agree to such offer, the
Indemnifying Party will give written notice to the Indemnified Party to that
effect. If the Indemnified Party fails to consent to such firm offer within ten
days after its receipt of such notice, the Indemnified Party may continue to
contest or defend such Third-Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third-Party Claim will not exceed
the amount of such settlement offer. The Indemnified Party will provide the
Indemnifying Party with reasonable access during normal business hours to books,
records, and employees of the Indemnified Party necessary in connection with the
Indemnifying Party's
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<PAGE>
defense of any Third-Party Claim which is the subject of a claim for
indemnification by an Indemnified Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages
which does not result from a Third-Party Claim (a "DIRECT CLAIM") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 20 days after the Indemnified Party
becomes aware of such Direct Claim. Such notice by the Indemnified Party will
describe the Direct Claim in reasonable detail, will include copies of all
available material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of Damages that has been or may be sustained
by the Indemnified Party. The Indemnifying Party will have a period of ten days
within which to respond in writing to such Direct Claim. If the Indemnifying
Party does not so respond within such ten day period, the Indemnifying Party
will be deemed to have rejected such claim, in which event the Indemnified Party
will be free to pursue such remedies as may be available to the Indemnified
Party on the terms and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any
specified information in any notice as provided in Section 10.4(a), 10.4(b) or
10.4(c) will not affect the rights or obligations of any party hereunder, except
and only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise materially prejudiced
as a result of such failure.
10.5 TREATMENT OF INDEMNIFICATION PAYMENTS. Any amount paid by
Seller, the Stockholders or Purchaser under Section 10.2 or 10.3 will be treated
as a capital contribution and/or an adjustment to the Purchase Price.
10.6 INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The
amount of Damages for which indemnification is provided under Sections 10.2 and
10.3 shall be computed net of any insurance proceeds received by the Indemnified
Party in connection with such Damages. If the amount with respect to which any
claim is made under this Section 10.6 gives rise to a currently realizable Tax
benefit to the Indemnified Party, the indemnity payment shall be reduced by the
amount of such currently realizable Tax benefit then available to the party
making the claim if and to the extent actually realized by such party in the
year in which such indemnity payment is made to such party or in the next
succeeding year.
10.7 EXCLUSIVE REMEDY. Absent fraud, Article X constitutes the
exclusive remedy for the breach of covenants, agreements, representations or
warranties set forth in this Agreement; PROVIDED, HOWEVER, that the provisions
of this Section 10.7 will not prevent the Stockholders, Seller or Buyer from
seeking the remedies of specific performance or injunctive relief in connection
with the breach of a covenant or agreement of any party hereto.
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ARTICLE XI
MISCELLANEOUS
11.1 TERMINATION. (a) This Agreement may be terminated
at any time prior to the Closing:
(i) by the mutual written consent of Purchaser and
Seller;
(ii) by Purchaser, if there has been a material
violation or breach by Seller or any Stockholder of any
covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any
condition to the obligations of Purchaser at the Closing, and
such violation or breach has not been waived by Purchaser or,
in the case of a covenant breach, cured by Seller or any
Stockholder within the earlier of (x) ten days after written
notice thereof from Purchaser or (y) the Closing Date;
(iii) by Seller, if there has been a material
violation or breach by Purchaser of any covenant,
representation or warranty contained in this Agreement which
has prevented the satisfaction of any condition to the
obligation of Seller or any Stockholder at the Closing, and
such violation or breach has not been waived by Seller or any
Stockholder or, with respect to a covenant breach, cured by
Purchaser within the earlier of (x) ten days after written
notice thereof by Seller or (y) the Closing Date;
(iv) by Purchaser or Seller if the transactions
contemplated hereby have not been consummated by March 31,
1999; PROVIDED, HOWEVER, that (i) neither Purchaser nor Seller
will be entitled to terminate this Agreement pursuant to this
Section 11.1(a)(iv) if such Person's breach of this Agreement
has prevented the consummation of the transactions
contemplated hereby;
(v) by Purchaser, if the conditions to Closing set
forth in Sections 9.1.11, 9.1.13 or 9.1.15 have not been
satisfied on or before March 31, 1999, or, on or prior to
March 1, 1999, if the condition to Closing set forth in
Section 9.1.12 has not been satisfied by such date; or
(vi) by Seller, if the condition to Closing set forth
in Section 9.2.6 has not been satisfied on or before March 31,
1999 or if the condition to Closing set forth in Section
9.1.12 has not been satisfied by March 1, 1999.
(b) In the event that this Agreement is terminated pursuant to
Section 11.1(a), all further obligations of the parties hereto under this
Agreement (other than pursuant to Section 11.4, which will continue in full
force and effect) will terminate without further liability or obligation of
either party to the other party hereunder; PROVIDED, HOWEVER, that no party will
be released from liability hereunder if this Agreement is terminated and the
transactions abandoned by reason of (i) failure of such party to have performed
its obligations hereunder or (ii) any misrepresentation made by such party of
any matter set forth herein.
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11.2 NOTICES. All notices, requests and other communications
to any party hereunder will be in writing (including facsimile transmission) and
will be given to such party at its address and facsimile number set forth in
SCHEDULE 11.2 (which may be changed by such party upon notice in accordance with
this Section 11.2). All such notices, requests and other communications will be
deemed received on the date of receipt by the recipient thereof if received
prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the
place of receipt. Otherwise, any such notice, request or communication will be
deemed not to have been received until the next succeeding Business Day in the
place of receipt.
11.3 AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder will operate as a waiver thereof nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. Subject to
Section 10.7, the rights and remedies herein provided will be cumulative and not
exclusive of any rights or remedies provided by law.
11.4 EXPENSES. Except as otherwise expressly provided for
herein, the parties will pay or cause to be paid all of their own fees and
expenses incident to this Agreement and in preparing to consummate and
consummating the transactions contemplated hereby, including the fees and
expenses of any broker, finder, financial advisor, legal advisor or similar
person engaged by such party.
11.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto; PROVIDED that Purchaser may assign its
rights and obligations under this Agreement to a wholly-owned Affiliate of
Purchaser, it being understood that such assignment will not relieve Purchaser
from its obligations hereunder.
11.6 NO THIRD-PARTY BENEFICIARIES. Except as provided in
Article XI, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied will give or be
construed to give to any Person, other than the parties hereto and such
permitted assigns any legal or equitable rights hereunder.
11.7 GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the laws of the State of New York, without regard
to the conflict of laws rules of such state.
11.8 JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any court of competent jurisdiction in the City of Rochester or the United
States District Court for the Western District of New York and each of the
parties hereby consents to the non-exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably
48
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waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding which
is brought in any such court has been brought in an inconvenient forum. Process
in any such suit, action or proceeding may be served on any party anywhere in
the world, whether within or without the jurisdiction of any such court. Without
limiting the foregoing, each party agrees that service of process on such party
as provided in Section 11.2 will be deemed effective service of process on such
party.
11.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.10 COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which will be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
11.11 HEADINGS. The headings in this Agreement are for
convenience of reference only and will not control or affect the meaning or
construction of any provisions hereof.
11.12 ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits hereto) constitutes the entire agreement among the
parties with respect to the subject matter of this Agreement. This Agreement
(including the Schedules and Exhibits hereto) supersedes all prior agreements
and understandings, both oral and written, between the parties with respect to
the subject matter hereof of this Agreement.
11.13 SEVERABILITY; INJUNCTIVE RELIEF. (a) The provisions of
this Agreement are severable. If any provision of this Agreement is held
invalid, illegal or otherwise unenforceable, in whole or in part, the remaining
provisions or enforceable parts thereof will not be affected thereby and will be
enforced to the fullest extent permitted by law. In addition, should any
provision or any portion thereof ever be adjudicated by a court of competent
jurisdiction to exceed the time or other limitation permitted by applicable Law
as determined by such court in such action, then such provisions will be
decreased, performed to the maximum time or other limitations prescribed by
applicable Law, the parties acknowledging their desire that in such event such
action be taken.
(b) The parties acknowledge and agree that the provisions of
Section 8.17 are reasonably necessary to protect the legitimate interests of
Seller, its Affiliates and their businesses and (i) that any violation of
Section 8.17 will result in irreparable injury to Seller, and its Affiliates,
the exact amount of which will be difficult to ascertain and the remedies at Law
for which will not be reasonable or adequate compensation to Seller and its
Affiliates for such a violation. Accordingly, Purchaser hereby agrees that if
Purchaser violates any of the provisions of Section 8.17 in addition to any
other remedy available at law or in equity, Seller will be entitled to seek
specific performance or injunctive relief without posting a bond, or other
security, and without the necessity of proving actual damages.
49
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(c) The parties acknowledge and agree that the provisions of
Sections 8.2, 8.8 and 8.17 are reasonably necessary to protect the legitimate
interests of Purchaser, its Affiliates and their businesses and (i) that any
violation of Sections 8.2, 8.8 or 8.17 will result in irreparable injury to
Purchaser, and its Affiliates, the exact amount of which will be difficult to
ascertain and the remedies at Law for which will not be reasonable or adequate
compensation to Purchaser and its Affiliates for such a violation. Accordingly,
Seller hereby agrees that if Seller violates any of the provisions of Sections
8.2, 8.8 or 8.17 in addition to any other remedy available at law or in equity,
Purchaser will be entitled to seek specific performance or injunctive relief
without posting a bond, or other security, and without the necessity of proving
actual damages.
11.14 NO WAIVER. No action or inaction taken or omitted
pursuant to this Agreement will be deemed to constitute a waiver of compliance
with any representations, warranties or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.
11.15 CERTAIN INTERPRETIVE MATTERS. (a) Unless the context
otherwise requires, (i) all references to Sections, Articles, Schedules or
Exhibits are to Sections, Articles, Schedules or Exhibits of or to this
Agreement; (ii) each of the Schedules will apply only to the corresponding
Section or Subsection of this Agreement, except that an item set forth or on
Schedule may be deemed to be disclosed on another Schedule if the disclosure
relating to such item is on its face expressly responsive to the representation
and warranty to which such Schedule relates, it being understood that the
foregoing exception will not be deemed to include any facts or circumstances
derived from, or not otherwise expressly set forth in the disclosure with
respect to such Scheduled item; (iii) each term defined in this Agreement has
the meaning assigned to it; (iv) each accounting term not otherwise defined in
this Agreement has the meaning assigned to it in accordance with GAAP; (v) words
in the singular include the plural and VICE VERSA; and (vi) the term "INCLUDING"
means "including without limitation." All references to $ or dollar amounts will
be to lawful currency of the United States. To the extent the term "DAY" or
"DAYS" is used, it will mean calendar days.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
(c)(i) All references to the "KNOWLEDGE OF SELLER" or
to words of similar import will be deemed to be references to
the actual knowledge of one or more of the officers or
directors of Seller, which knowledge will include such
knowledge as such officers or directors would have had after
due inquiry of the responsible employees of Seller and their
counsel and accountants.
(ii) All references to the "KNOWLEDGE OF
STOCKHOLDERS" or to words of similar import will be deemed
references to the actual knowledge of each Stockholder.
(iii) All references to the "KNOWLEDGE OF PURCHASER"
or to words of similar import will be deemed to be references
to the actual knowledge of one or
50
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more of the executive officers or directors of Purchaser after
due inquiry, which knowledge will include such knowledge as
such executive officers or directors would have had after due
inquiry of the responsible officers and employees of Purchaser
and its counsel and accountants.
51
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The parties hereto have caused this Agreement to be duly
executed by their respective authorized officers or in their individual
capacity, if applicable, as of the day and year first above written.
NATIONWIDE PRECISION PRODUCTS CORP.
By: /s/ Michael R. Nuccitelli
----------------------------------
Name: Michael R. Nuccitelli
Title: President
NATIONWIDE ACQUISITION DELAWARE, INC.
By: /s/ James E. Ashton
----------------------------------
Name: James E. Ashton
Title: Chief Executive Officer
STOCKHOLDERS
By: /s/ John F. Nuccitelli
----------------------------------
John F. Nuccitelli
By: /s/ Robert L. Nuccitelli
----------------------------------
Robert L. Nuccitelli
By: /s/ Michael R. Nuccitelli
----------------------------------
Michael R. Nuccitelli
52
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Exhibit 2.5
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
BY AND AMONG
CERTIFIED FABRICATORS, INC.,
CALBRIT DESIGN, INC.
AND THEIR STOCKHOLDERS
AND
PRECISION PARTNERS, INC.,
DATED AS OF FEBRUARY 19, 1999
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. DEFINITIONS..............................................................................................1
1.1. Definitions................................................................................1
II. THE PURCHASE; CLOSING..................................................................................11
2.1. Purchase of Common Stock..................................................................11
2.2. Purchase Price............................................................................11
2.3. Estimated Closing Shareholders' Equity....................................................11
2.4. Post-Closing Adjustment...................................................................11
2.5. Adjustments to Closing Payments...........................................................13
2.6. Disposition of Escrow Amount..............................................................14
2.7. Earnout Amount............................................................................16
2.8. Closing...................................................................................17
2.9. Proceedings...............................................................................17
III. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SHAREHOLDERS..................................17
3.1. ..........................................................................................17
3.1.1. Corporate Existence and Power....................................................17
3.1.2. Corporate Authorization; Enforceability..........................................18
3.1.3. Governmental Authorization.......................................................18
3.1.4. Non-Contravention; Consents......................................................18
3.1.5. Capitalization...................................................................18
3.1.6. Financial Statements; Books and Records..........................................19
3.1.7. No Undisclosed Liabilities.......................................................20
3.1.8. Intercompany Accounts............................................................20
3.1.9. Tax Matters......................................................................20
3.1.10. Absence of Certain Changes.......................................................22
3.1.11. Contracts........................................................................22
3.1.12. Insurance Coverage...............................................................24
3.1.13. Litigation.......................................................................24
3.1.14. Compliance with Laws; Permits....................................................25
3.1.15. Properties; Sufficiency of Assets................................................25
3.1.16. Intellectual Property............................................................26
3.1.17. Environmental Matters............................................................26
3.1.18. Plans and Material Documents.....................................................27
3.1.19. Interests in Customers, Suppliers, Etc...........................................29
3.1.20. Customer, Supplier and Employee Relations; Employee Compensation; Bonuses........29
3.1.21. Other Employment Matters.........................................................30
3.1.22. Accounts Receivable..............................................................30
3.1.23. Inventory........................................................................31
3.1.24. Millennium Compliance............................................................31
3.1.25. Finders' Fees....................................................................31
</TABLE>
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<TABLE>
<S> <C>
3.2. Representations and Warranties of the Shareholders........................................31
3.2.1. Authority; Enforceability........................................................31
3.2.2. No Conflicts.....................................................................32
3.2.3. No Consents......................................................................32
3.2.4. Ownership of Shares; Title.......................................................32
3.2.5. Litigation.......................................................................32
IV. REPRESENTATIONS AND WARRANTIES OF BUYER...............................................................32
4.1. Corporate Existence and Power.............................................................32
4.2. Corporate Authorization; Enforceability...................................................33
4.3. Governmental Authorization................................................................33
4.4. Non-Contravention.........................................................................33
4.5. Litigation................................................................................33
4.6. Finders' Fees.............................................................................33
4.7. Purchase for Investment...................................................................33
V. CERTAIN COVENANTS.......................................................................................34
5.1. Conduct of Business of the Companies......................................................34
5.2. Exclusive Dealing.........................................................................35
5.3. Review of the Companies; Confidentiality..................................................36
5.4. Best Efforts..............................................................................37
5.5. Satisfaction and Termination of Equity Arrangements.......................................37
5.6. Plan Assets...............................................................................37
5.7. Monthly Financial Statements..............................................................37
5.8. Supplements to Schedules..................................................................37
5.9. Further Assurances........................................................................37
VI. TAX MATTERS............................................................................................38
6.1. Tax Returns...............................................................................38
6.2. Apportionment of Taxes....................................................................39
6.3. Cooperation; Audits.......................................................................39
6.4. Controversies.............................................................................39
6.5. Amended Returns...........................................................................40
6.6. Non-foreign Person Affidavit..............................................................40
VII. CONDITIONS TO CLOSING.................................................................................40
7.1. Conditions to Obligations of Buyer........................................................40
7.1.1. Representations, Warranties and Covenants of the Companies.......................40
7.1.2. Certificate of each of the Companies.............................................41
7.1.3. Representations, Warranties and Covenants of the Shareholders....................41
7.1.4. No Injunction, etc...............................................................41
7.1.5. No Proceedings...................................................................41
7.1.6. Required Filings.................................................................41
7.1.7. Opinion of Counsel...............................................................41
7.1.8. Spousal Consent..................................................................41
7.1.9. Due Diligence; Schedule Supplements..............................................41
7.1.10. Ancillary Agreements.............................................................42
7.1.11. Resignation of Directors.........................................................42
</TABLE>
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<TABLE>
<S> <C>
7.1.12. Third Party Consents; Governmental Approvals.....................................42
7.1.13. FIRPTA...........................................................................42
7.1.14. No Material Adverse Change.......................................................42
7.1.15. Financing........................................................................42
7.1.16. Shareholder Indebtedness; Intercompany Accounts..................................42
7.1.17. HSR Act..........................................................................42
7.2. Conditions to Obligations of Each of the Companies and the Shareholders...................42
7.2.1. Representations, Warranties and Covenants of Buyer...............................43
7.2.2. Buyer's Certificate..............................................................43
7.2.3. No Injunction, etc...............................................................43
7.2.4. No Proceedings...................................................................43
7.2.5. Required Filings.................................................................43
7.2.6. Opinion of Counsel...............................................................43
7.2.7. Ancillary Agreements.............................................................43
7.2.8. HSR Act..........................................................................43
7.2.9. Shareholder Guarantees...........................................................43
VIII. SURVIVAL; INDEMNIFICATION............................................................................44
8.1. Survival..................................................................................44
8.2. Indemnification...........................................................................44
8.3. Tax Indemnification.......................................................................45
8.4. Procedures................................................................................46
8.5. Personal Liability of the Shareholders; Indemnification Cap...............................48
8.6. Treatment of Indemnification Payments.....................................................48
8.7. Indemnification Amounts Net of Benefits Received; Set-off.................................48
8.8. Exclusive Remedy..........................................................................49
IX. MISCELLANEOUS..........................................................................................49
9.1. Termination...............................................................................49
9.2. Notices...................................................................................50
9.3. Amendments and Waivers....................................................................50
9.4. Expenses..................................................................................50
9.5. Successors and Assigns....................................................................50
9.6. No Third Party Beneficiaries..............................................................50
9.7. Governing Law.............................................................................50
9.8. Jurisdiction..............................................................................51
9.9. Waiver of Jury Trial......................................................................51
9.10. Counterparts..............................................................................51
9.11. Headings..................................................................................51
9.12. Entire Agreement..........................................................................51
9.13. Severability..............................................................................51
9.14. No Waiver.................................................................................51
9.15. Certain Interpretive Matters..............................................................51
9.16. Transfer of Proceeds......................................................................52
9.17. Shareholders' Representative..............................................................52
</TABLE>
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EXHIBIT INDEX
EXHIBIT A: Form of Amendment to Asset Lease Agreements
EXHIBIT B-1: Form of Employment and Consulting Letter between CFI Holding
and Buehler
EXHIBIT B-2: Form of Employment and Consulting Letter between CFI Holding
and Reagan
EXHIBIT C: Form of Escrow Agreement among CFI Holding, the Escrow Agent
and the Stockholders' Representative
EXHIBIT D: Form of Financial Advisory Services Letter between CFI Holding
and SKM
EXHIBIT E-1: Form of Noncompetition Agreement between CFI Holding and
Buehler
EXHIBIT E-2: Form of Noncompetition Agreement between CFI Holding and
Reagan
EXHIBIT F-1: Form of Earnout Note
EXHIBIT F-2: Form of Subordination Agreement
EXHIBIT G-1: Form of Opinion of Ward, Kroll & Jampol
EXHIBIT G-2: Form of Opinion of LeBoeuf, Lamb, Greene & MacRae
EXHIBIT H: Form of Spousal Consent
EXHIBIT I: Form of Opinion of Jones, Day, Reavis & Pogue
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SCHEDULE INDEX
SCHEDULE 1: Shareholders
SCHEDULE 3.1.4: Non-Contravention; Consents
SCHEDULE 3.1.5(a): Authorized, Issued and Outstanding Capital Stock
SCHEDULE 3.1.5(b): Capitalization; Outstanding Interest to repurchase,
redeem or otherwise acquire company securities.
SCHEDULE 3.1.5(c): Capitalization; Company Owned Interests in Other
Entities
SCHEDULE 3.1.6(d): Changes in Companies' reserve or accrual amounts or
policies
SCHEDULE 3.1.7: Undisclosed Liabilities
SCHEDULE 3.1.8: Inter-Company balances
SCHEDULE 3.1.9(a): Tax Matters
SCHEDULE 3.1.9(b): Jurisdictions to which any Tax on overall Net Income
is Properly Payable
SCHEDULE 3.1.10: Absence of Certain Changes
SCHEDULE 3.1.11(a): Contracts
SCHEDULE 3.1.11(b): Contracts
SCHEDULE 3.1.11(c): Grants of Severance or Termination Pay
SCHEDULE 3.1.13: Litigation
SCHEDULE 3.1.14(a): Compliance with Laws; Permits
SCHEDULE 3.1.14(b): Government or Regulatory Permits and Licenses
SCHEDULE 3.1.15(a): Properties; Sufficiency of Assets
SCHEDULE 3.1.15(b): Real Property assets owned or leased
SCHEDULE 3.1.16: Intellectual Property
SCHEDULE 3.1.17: Environmental Matters
SCHEDULE 3.1.18(a): Benefit Plans
SCHEDULE 3.1.18(b): Benefit Plans; ERISA and Code Compliance
SCHEDULE 3.1.18(c): Benefit Plans: Compliance with the law or statutory,
regulatory and contractual obligations
SCHEDULE 3.1.18(d): Benefit Plans without favorable IRS determination
letters
SCHEDULE 3.1.18(h): Bonus, retirement, severance, job security or similar
benefits
SCHEDULE 3.1.18(i): Employee options to purchase shares
SCHEDULE 3.1.19: Interests in Customers, Suppliers, Etc.
SCHEDULE 3.1.20(a): Customer, Supplier and Employee Relations; Employer
Compensation
SCHEDULE 3.1.20(b): Bonuses
SCHEDULE 3.1.21: Other Employment Matters
SCHEDULE 3.1.22: Accounts Receivable
SCHEDULE 3.1.23: Inventories acquired or produced since Balance Sheet
Date
SCHEDULE 3.1.24: Millennium Compliance
SCHEDULE 3.1.25: Finder's Fees
SCHEDULE 3.2.5: Litigation
SCHEDULE 4.5: Litigation
SCHEDULE 7.2.9 Shareholder Guarantees
SCHEDULE 9.2: Notices
SCHEDULE 9.15(c)(i): Knowledge of the Companies
SCHEDULE 9.15(c)(ii): Knowledge of Buyer
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
February 19, 1999, by and among CERTIFIED FABRICATORS, INC., a California
corporation ("CFI"), CALBRIT DESIGN, INC., a California corporation ("CALBRIT"),
the Persons listed on SCHEDULE 1 attached hereto (the "SHAREHOLDERS"), and
PRECISION PARTNERS, INC., a Delaware corporation ("BUYER").
RECITALS
A. The Shareholders own all of the issued and outstanding
common stock, no par value (collectively, the "COMMON STOCK"), of each of CFI
and Calbrit (each, a "COMPANY," and both collectively, the "COMPANIES") in the
proportions set forth across from their names on SCHEDULE 1.
B. Buyer desires to purchase from the Shareholders and the
Shareholders desire to sell to Buyer (the "PURCHASE") the Common Stock in
exchange for the Aggregate Consideration, all on the terms and conditions set
forth herein.
C. The parties desire to make certain representations,
warranties and covenants in connection with the Purchase and to prescribe
various conditions to the Purchase.
Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere
herein, the following terms, as used herein, have the following meanings when
used herein with initial capital letters:
"1999 EBITDA" has the meaning ascribed to such term in Section
2.7(b).
"1999 PAYOUT RATIO" has the meaning ascribed to such term in
Section 2.7(b).
"2000 EBITDA" has the meaning ascribed to such term in Section
2.7(c).
"2000 PAYOUT RATIO" has the meaning ascribed to such term in
Section 2.7(c).
"ACCOUNTANTS" has the meaning ascribed to such term in Section
2.4(b).
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with the first Person. For the purposes of this definition, "CONTROL," when used
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
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otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings
correlative to the foregoing.
"AGGREGATE CLOSING CONSIDERATION" has the meaning ascribed to
such term in Section 2.2(a).
"AGGREGATE CONSIDERATION" means the sum of the Aggregate
Closing Consideration, the Escrow Amount, if any, payable to the Shareholders,
and the Earnout Amount, if any, payable to the Shareholders.
"AGREEMENT" has the meaning ascribed to such term in the
introductory paragraph of this Agreement, as the same may be amended from time
to time in accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Asset Lease Agreements, the
Employment Letters, the Escrow Agreement and the Noncompetition Agreements.
"ASSET LEASE AGREEMENTS" means the lease agreements disclosed
in SCHEDULE 3.1.15(b) between Certified Fabricators, a California general
partnership, and the Company relating to the following properties:
(a) 6291 Burnham Avenue, Buena Park, CA;
(b) 6332 Burnham Avenue, Buena Park, CA;
(c) 6351 Burnham Avenue, Buena Park, CA; and
(d) 6350 Altura, Buena Park, CA;
in each case as amended to the effect set forth in EXHIBIT A
attached hereto.
"ASSET SALE" means any direct or indirect issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer for value by either
Company or any of their Subsidiaries to any Person of any property or assets of
either Company or any of their Subsidiaries other than in the ordinary course of
business.
"AUDITED BALANCE SHEET" means the audited balance sheet of CFI
as of October 31, 1998 contained in the Audited Statements.
"AUDITED STATEMENTS" means the audited balance sheets of CFI
as of October 31, 1998, 1997 and 1996, together with the related statements of
earnings and retained earnings, shareholders' equity and cash flows for the
fiscal years then ended, together with the notes thereto and reports thereon of
Ernst & Young, LLP.
"BALANCE SHEET DATE" means October 31, 1998.
"BALANCE SHEET PRINCIPLES" has the meaning ascribed to such
term in Section 2.4(a).
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"BASE SHAREHOLDERS' EQUITY" means shareholders equity
reflected in the Audited Balance Sheet.
"BONUSES" have the meaning ascribed to such term in Section
3.1.20(b).
"BUSINESS DAY" means a day other than a Saturday or Sunday or
a day on which banks located in New York City or Los Angeles are authorized or
required to close.
"BUYER" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"CALBRIT FINANCIAL STATEMENTS" means the unaudited balance
sheet of Calbrit through the period ending October 31, 1998, together with the
related statement of earnings, and, for each monthly period thereafter, the
unaudited balance sheet of Calbrit covering such monthly period (or portion
thereof) from November 1, 1998 through January 31, 1999 (or such later period as
may be available prior to the Closing Date) , together with the related
statement of earnings.
"CAP" means, as of any point in time, the aggregate of the
following two definitions:
(i) "CASH CAP" means, as of any point in time, an
amount equal to (a) $3.5 million plus (b) to the extent paid to the Shareholders
or the Shareholders' Representative (for the benefit of the Shareholders) as
required under this Agreement, up to 75% of the sum of any cash payments of the
Escrow Amount and any cash payments of the Earnout Amount.
(ii) "NON-CASH CAP" means, as of any point in time,
to the extent the Earnout Amount (or portion thereof) is not paid in cash (but
by tender of an Earnout Note) to the Shareholders or the Shareholders'
Representative (for the benefit of the Shareholders), up to 75% of the Earnout
Notes issued from time to time, reduced by the Earnout Amount previously paid in
cash (under the Earnout Notes) or set off against previously issued Earnout
Notes.
"CAPITAL STOCK" means (a) with respect to any Person that is a
corporation, any and all shares, interests, participation or other equivalents
(however designated and whether or not voting) of corporate stock, including the
common stock of such Person and (b) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to either
Company, for any applicable period, the obligations of such Person under a lease
that are required to be classified and accounted for as capital lease
obligations under GAAP, and the amount of such obligations at any date shall be
the capitalized amount of such obligations at such date, determined in
accordance with GAAP.
"CLOSING" has the meaning ascribed to such term in Section
2.8.
"CLOSING DATE" has the meaning ascribed to such term in
Section 2.8.
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"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such
term in Section 2.4(a).
"CLOSING SHAREHOLDERS' EQUITY" has the meaning ascribed to
such term in Section 2.4(a).
"CLOSING SHAREHOLDERS' EQUITY STATEMENT" has the meaning
ascribed to such term in Section 2.4(a).
"CODE" means the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"COMMON STOCK" has the meaning ascribed to such term in
Recital A of this Agreement.
"COMPANY" and "COMPANIES" have the meaning ascribed to such
terms in Recital A of this Agreement.
"COMPANY PROPERTY" means any real property and improvements at
any time owned, leased, used, operated or occupied (whether for storage,
disposal or otherwise) by either of the Companies.
"COMPANY SCHEDULES" has the meaning ascribed to such term in
Section 5.8.
"COMPANY SECURITIES" has the meaning ascribed to such term in
Section 3.1.5(b).
"COMPUTER SYSTEMS" has the meaning ascribed to such term in
Section 3.1.24.
"CONSTITUENTS OF CONCERN" means any substance defined as a
hazardous substance, hazardous waste, hazardous material, pollutant, or
contaminant by any Environmental Law, any petroleum hydrocarbon and any
degradation product of a petroleum hydrocarbon, asbestos, PCB or similar
substance, the handling, storage, treatment or exposure of or to which is
subject to regulation under any Environmental Law.
"DAMAGES" has the meaning ascribed to such term in Section
8.2(a).
"DIRECT CLAIM" means a claim by an Indemnified Party on
account of Damages which does not result from a Third Party Claim or a Third
Party Notice.
"EARNOUT AMOUNT" has the meaning ascribed to such term in
Section 2.7.
"EARNOUT EBITDA STATEMENTS" has the meaning set forth in
Section 2.7(a).
"EARNOUT NOTE" and "EARNOUT NOTES" have the meanings ascribed
to such terms in Section 2.7(d).
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"EBITDA" means, with respect to CFI and its Subsidiaries the
sum (without duplication) of (a) Net Income and (b) to the extent Net Income has
been reduced thereby, (i) all income Taxes of CFI recorded as a Tax provision in
accordance with GAAP for such period (other than income Taxes attributable to
extraordinary, unusual or nonrecurring gains or losses or Taxes attributable to
sales or dispositions outside the ordinary course of business), (ii) Interest
Expense and (iii) Non-cash Charges, all as determined in accordance with GAAP.
"EBITDA STATEMENT" has the meaning ascribed to such term in
Section 2.6(a).
"EMPLOYMENT AND CONSULTING LETTERS" means the employment or
consulting letter agreements between Buyer and each of BRW, Inc. and Robert
Reagan, substantially to the effect set forth in EXHIBITS B-1 and B-2.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, citations,
summonses, notices of non-compliance or violation, requests for information,
investigations or proceedings relating to any Environmental Law or any permit
issued under any such Law, including (a) Environmental Claims by Governmental
Authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b)
Environmental Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Constituents of Concern or arising from alleged injury or threat of injury to
human health and safety or the environment.
"ENVIRONMENTAL CONDITION" means a condition with respect to
the environment which has resulted or could result in a material loss,
liability, cost or expense to the Companies.
"ENVIRONMENTAL LAW" means any Law in effect or to the
Companies' and the Shareholders' knowledge, any Law reasonably expected to be
adopted or made effective, in each case as amended as of the Closing Date, and
any judicial or administrative interpretation thereof as of the Closing Date,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, human health and safety, including, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. Sections 9601, et seq. ("CERCLA") and any state and local counterparts
or equivalents.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means any Person that, together with either
of the Companies, would be considered a single employer within the meaning of
Section 4001 of ERISA or Section 414 of the Code.
"ESCROW AGENT" means Orange Coast Title Company.
"ESCROW AGREEMENT" means the Escrow Agreement among Buyer, the
Escrow Agent and the Shareholders' Representative, substantially to the effect
set forth in EXHIBIT C.
"ESCROW AMOUNT" has the meaning ascribed to such term in
Section 2.2(b).
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"ESTIMATED CLOSING SHAREHOLDERS' EQUITY" has the meaning
ascribed to such term in Section 2.3.
"ESCROW EBITDA STATEMENT" has the meaning ascribed to such
term in Section 2.6(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FINANCIAL ADVISORY SERVICES LETTER" means the Financial
Advisory Services Letter Agreement between Buyer and Saunders Karp & Megrue,
L.P., in respect of advisory and monitoring services to be provided to the
Companies, substantially to the effect set forth in EXHIBIT D.
"FISCAL YEAR" means any 12-month period commencing on November
1.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign
governmental or regulatory authority.
"HSR ACT" has the meaning ascribed to such term in Section
3.1.3.
"INDEBTEDNESS" means with respect to any Person, at any date,
without duplication, (i) all outstanding obligations of such Person for borrowed
money, including, without limitation, all principal, interest, premiums, fees,
expenses, overdrafts and penalties with respect thereto, (ii) all outstanding
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (iii) all outstanding obligations of such Person to pay the
deferred purchase price of the property or services, except trade payables
incurred in the ordinary course of business, (iv) all outstanding obligations of
such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit or similar instrument, (v) all outstanding obligations
of such Person as lessee under Capitalized Leases; and (vi) all Indebtedness of
any other Person of the type referred to in clauses (i) to (v) above directly or
indirectly guaranteed by such Person or secured by any assets of such Person.
"INDEMNIFIED PARTY" means a Person who or which is seeking
indemnification under Section 8.2 or Section 8.3.
"INDEMNIFYING PARTY" means a Person against whom or which
indemnification under Section 8.2 or Section 8.3 is being sought.
"INTELLECTUAL PROPERTY RIGHT" means any trademark, service
mark, trade name, invention, patent, trade secret, copyright, know-how
(including any registrations or applications for registration of any of the
foregoing) or any other similar type of proprietary intellectual property right,
in each case which is used or held for use or otherwise necessary in connection
with the conduct of the businesses of either of the Companies as now conducted
or as conducted at the Closing Date.
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"INTEREST EXPENSE" means, with respect to CFI and its
Subsidiaries, for any applicable period, the sum of, without duplication: (a)
the aggregate of the interest expense (net of interest income) of CFI and its
Subsidiaries during such period determined in accordance with GAAP and (b) the
interest component of Capitalized Lease Obligations paid, accrued and/or
scheduled to be paid or accrued by CFI during such period as determined in
accordance with GAAP.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" has the meaning ascribed to such term in Sections
9.15(c)(i), (ii) and (iii).
"LAST OFFER" has the meaning ascribed to such term in Section
2.4(b).
"LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code, permit or license issued by a Governmental
Authority or rule of common law.
"LIEN" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person will be deemed to own, subject to a Lien, any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on
the business, assets, liabilities, condition (financial and other) or results of
operations of the Companies, taken as a whole.
"MILLENNIUM COMPLIANCE" means that the Computer Systems are
capable of the following, during and/or after January 1, 2000: (a) handling date
information involving all and any dates, including accepting input, providing
output and performing date calculations in whole or in part; (b) operating
accurately without interruption on and in respect of any and all dates and
without any change in performance; (c) responding to and processing two digit
year input without creating any ambiguity as to the century; and (d) storing and
providing date input information without creating any ambiguity as to the
century.
"MONTHLY CFI FINANCIAL STATEMENTS" means, for each month from
November 1, 1998 through January 31, 1999 (or such later period as may available
prior to the Closing Date), the unaudited monthly balance sheet of CFI covering
such monthly period together with the related monthly statements of earnings and
retained earnings, shareholders' equity and cash flows.
"NET INCOME" means, with respect to CFI and its Subsidiaries
for any applicable period, the aggregate net income (or loss) of CFI and its
Subsidiaries for such period, determined in accordance with GAAP, PROVIDED,
HOWEVER, that the calculation of such aggregate net income or loss will be made
without giving effect to, by excluding from the calculation thereof, the
following items: (a) after-tax gains and losses from Asset Sales or abandonments
or reserves relating thereto, (b) after-tax items classified as extraordinary or
nonrecurring gains or losses, (c)
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the net income of any Person acquired in a "pooling of interests" transaction or
a recapitalization accrued prior to the date it becomes a subsidiary of CFI or
is merged or consolidated with CFI or any subsidiary of either Company, (d) the
net income of any subsidiary of CFI to the extent that the declaration of
dividends or similar distributions by that subsidiary of that income is
restricted by a contract, operation of law or otherwise, (e) the net income of
any other Person, other than a subsidiary of CFI, except to the extent of cash
dividends or distributions paid to CFI or to a subsidiary of CFI by such other
Person, (f) in the case of a successor to either Company by consolidation or
merger or as a transferee of CFI's assets, any net income (or loss) of the
successor corporation prior to such consolidation, merger or transfer of assets,
(g) the aggregate of gross interest income of CFI and its subsidiaries
determined in accordance with GAAP, and (h) Transaction Fees and Expenses
expensed during any such period.
"NON-CASH CHARGES" means, with respect to CFI and its
Subsidiaries for any applicable period, the aggregate depreciation and
amortization of the Companies and their Subsidiaries reducing Net Income of the
Companies and their Subsidiaries for such period, determined in accordance with
GAAP.
"NONCOMPETITION AGREEMENTS" means the Noncompetition
Agreements between Buyer and each of Gary Buehler and Robert Reagan
substantially to the effect set forth in EXHIBITS E-1 and E-2.
"NOTIFIED PARTY" has the meaning ascribed to such term in
Section 8.4(a).
"NOTIFYING PARTY" has the meaning ascribed to such term in
Section 8.4(a).
"OPERATING COMPANY" means an "operating company" within the
meaning of Department of Labor Regulation ss. 2510.3-101(c) or successor rule or
regulation, as from time to time amended and in effect.
"ORDER" means any judgment, injunction, judicial or
administrative order or decree.
"PERCENTAGE INTEREST" means, with respect to any Shareholder,
the percentage set forth opposite such Shareholder's name on SCHEDULE 1.
"PERMITTED LIEN" means (i) mechanics', workmen's, repairmen's
or other like Liens arising or incurred in the ordinary course of business in
respect of obligations that are not overdue or (ii) other imperfections of title
or encumbrances, which do not materially affect the value (including the
transferability) of the property subject thereto.
"PERSON" means an individual, corporation, partnership,
association, trust or other entity or organization, including a Governmental
Authority.
"PERSONAL LIABILITY AMOUNT" has the meaning ascribed to such
term in Section 8.5(a).
"PLANS" has the meaning ascribed to such term in Section
3.1.18(a).
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"POST-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending after the Closing Date.
"POST-OCTOBER 31, 1995 TAX MATTERS" has the meaning ascribed
to such term in Section 6.4(a).
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion
thereof) ending on or before the Closing Date.
"PRE-OCTOBER 31, 1995 TAX MATTERS" has the meaning ascribed to
such term in Section 6.4(b).
"PURCHASE" has the meaning ascribed to such term in Recital B.
"Q1/Q2 EBITDA" means the aggregate EBITDA of CFI for the first
two quarters of CFI's Fiscal Year ended October 31, 1999.
"REAL PROPERTY" has the meaning ascribed to such term in
Section 3.1.15(b).
"RETURNS" has the meaning ascribed to such term in Section
3.1.9(a)(i).
"SELECTED COMPANY REPRESENTATIONS AND WARRANTIES" has the
meaning ascribed to such term in Section 8.1.
"SELECTED SHAREHOLDER REPRESENTATIONS AND WARRANTIES" has the
meaning ascribed to such term in Section 8.1.
"SHAREHOLDERS' REPRESENTATIVE DISPUTE NOTICE" has the meaning
ascribed to such term in Section 6.1(a).
"SHAREHOLDERS" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"SHAREHOLDERS' REPRESENTATIVE" has the meaning ascribed to
such term in Section 9.17(a).
"SUBSIDIARY" means, with respect to a Company, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions and at the time are directly or indirectly owned by such Company.
"TAX" means (a) any net income, alternative or add-on minimum
tax, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, license, withholding on amounts paid to or by
either of the Companies, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest, penalty, addition to tax or
additional amount imposed by any Taxing Authority (as hereinafter defined), (b)
any liability of either of the Companies for the payment of
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any amounts of any of the foregoing types as a result of being a member of
an affiliated, consolidated, combined or unitary group, or being a party to any
agreement or arrangement whereby liability of either of the Companies for
payment of such amounts was determined or taken into account with reference to
the liability of any other Person, and (c) liability of either of the Companies
for the payment of any amounts as a result of being a party to any Tax Sharing
Agreements or with respect to the payment of any amounts of any of the foregoing
types as a result of any express or implied obligation to indemnify any other
Person.
"TAX SHARING AGREEMENTS" means all existing Tax sharing
agreements or arrangements (whether or not written) binding either of the
Companies.
"TAXING AUTHORITY" means any Governmental Authority
responsible for the imposition of any Tax.
"THIRD PARTY CLAIM" means any suit or proceeding made or
brought by any Person who or which is not a party to this Agreement.
"THIRD PARTY NOTICE" means any claim, demand, action or notice
from any Person who or which is not a party to this Agreement, which does not
constitute a Third Party Claim.
"THIRD-PARTY TRANSACTION" has the meaning ascribed to such
term in Section 5.2.
"TRANSACTION FEES AND EXPENSES" means (i) the reasonable fees
and expenses of legal counsel, accountants and other advisors engaged by Buyer
incurred in connection with the transactions contemplated hereby, (ii) the fees
and expenses of Saunders Karp & Megrue, L.P., Carlisle Group, L.P. and Harvey &
Company, LLC, (iii) the ongoing fees and expenses referred to in the Financial
Advisory Services Letter, and (iv) corporate overhead allocated by Buyer and
Affiliates of Buyer to each of the Companies.
"TRANSFER" has the meaning ascribed to such term in Section
2.1.
II. THE PURCHASE; CLOSING
2.1. PURCHASE OF COMMON STOCK. On the terms and subject to the
conditions of this Agreement, at the Closing, (a) Buyer will purchase from each
Shareholder and each Shareholder will sell, assign, transfer and deliver
("TRANSFER") to Buyer, the Common Stock owned by such Shareholder. The
certificates representing the Common Stock will be duly endorsed in blank, or
accompanied by stock powers duly executed in blank, by the Shareholder
Transferring the same to Buyer. The Shareholder will cure any deficiencies with
respect to the endorsement of the certificates representing the Common Stock
owned by such Shareholder or with respect to the stock power accompanying any
such certificates.
2.2. PURCHASE PRICE. In consideration for the Transfer by the
Shareholders of the Common Stock to Buyer, Buyer will deliver at the Closing (a)
to the Shareholders'
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Representative (for the benefit of the Shareholders) an aggregate amount equal
to $11.0 million (the "AGGREGATE CLOSING CONSIDERATION"), subject to adjustment
as provided in Section 2.4 and Section 2.5, payable to each Shareholder in cash
by wire transfer of immediately available funds to one account designated in
writing by the Shareholders' Representative, and (b) to the Escrow Agent $4.0
million (the "ESCROW AMOUNT") by wire transfer of immediately available funds to
the account designated in writing by the Escrow Agent, to be held in escrow
under the Escrow Agreement, payable as set forth therein and in Section 2.6
hereof. The Shareholders' Representative will indemnify and hold Buyer harmless
from any claim of any Shareholder arising out of the alleged misapplication of
any sums paid by Buyer to the Shareholders' Representative or Earnout Notes
delivered to the Shareholders' Representative under this Agreement.
2.3. ESTIMATED CLOSING SHAREHOLDERS' EQUITY. Not less than two
Business Days prior to the Closing Date, CFI and Buyer will prepare and agree on
an estimate of the Closing Shareholders' Equity (the "ESTIMATED CLOSING
SHAREHOLDERS' EQUITY") determined in accordance with Section 2.4, as if it were
the actual Closing Shareholders' Equity, but based upon CFI's and Buyer's review
of monthly financial information then available and inquiries of personnel
responsible for the preparation of the financial information relating to CFI in
the ordinary course. The Aggregate Closing Consideration will be reduced
dollar-for-dollar by the amount, if any, by which the Estimated Closing
Shareholders' Equity, determined in accordance with Section 2.4, is less than
the Base Shareholders' Equity.
2.4. POST-CLOSING ADJUSTMENT. (a) As soon as practicable (and
in no event later than 90 days after the Closing), Buyer will prepare and
deliver or cause to be prepared and delivered to the Shareholders'
Representative a balance sheet of CFI as of the close of business on the Closing
Date, without giving effect to the transactions contemplated hereby (the
"CLOSING DATE BALANCE SHEET") and a proposed statement of the shareholders'
equity of CFI as of the close of business on the Closing Date, without giving
effect to the transactions contemplated hereby (the "CLOSING SHAREHOLDERS'
EQUITY STATEMENT"). The Closing Date Balance Sheet and the Closing Shareholders'
Equity Statement (i) will reflect, respectively, the financial position of CFI
and the components and calculation of the shareholders' equity of CFI in each
case as of the close of business on Closing Date, without giving effect to the
transactions contemplated hereby and (ii) will be prepared and determined in
accordance with GAAP, on a basis consistent with the policies, principles and
methodology used in connection with the preparation of the Audited Balance Sheet
(the policies, principles and methodology in clause (ii) being referred to
herein as the "BALANCE SHEET PRINCIPLES"). Notwithstanding anything contained
herein to the contrary, there will be no changes in reserve or accrual amounts
or policies between The Balance Sheet Date and the Closing Date, without the
prior written consent of Buyer except as set forth on Schedule 3.1.6(d). The
shareholders' equity of CFI as of the Closing Date determined in accordance with
this Section 2.4 is referred to herein as the "CLOSING SHAREHOLDERS' EQUITY."
(b) If, within 45 days after the date of Buyer's delivery of
the Closing Date Balance Sheet and the Closing Shareholders' Equity Statement,
the Shareholders' Representative determines in good faith that the Closing Date
Balance Sheet and the Closing Shareholders' Equity Statement have not been
prepared and determined in accordance with this Agreement, the Shareholders'
Representative will give written notice to Buyer within such 45 day period (i)
setting forth the Shareholders' Representative's proposed changes to the Closing
Date Balance Sheet as prepared by Buyer and the determination by the
Shareholders' Representative of the
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Closing Shareholders' Equity and (ii) specifying in reasonable detail the
Shareholders' Representative's basis for disagreement with Buyer's
preparation and determination of the Closing Date Balance Sheet and the
Closing Shareholders' Equity. The failure by the Shareholders' Representative
to so express disagreement and provide such specification within such 45 day
period will constitute the acceptance of Buyer's preparation of the Closing
Date Balance Sheet and the computation of the Closing Shareholders' Equity.
If Buyer and the Shareholders' Representative are unable to resolve any
disagreement between them with respect to the preparation of the Closing Date
Balance Sheet and the determination of the Closing Shareholders' Equity
within 30 days after the giving of notice by the Shareholders' Representative
to Buyer of such disagreement, the items in dispute will be referred by Buyer
for determination to PricewaterhouseCoopers LLP (the "ACCOUNTANTS") as
promptly as practicable, but not later than five days after the expiration of
such 30 day period. Buyer and the Shareholders' Representative will use
reasonable efforts to cause the Accountants to render their decision as soon
as practicable thereafter, including without limitation by promptly complying
with all reasonable requests by the Accountants for information, books,
records and similar items. Buyer and the Shareholders' Representative will
cause the Accountants to make a determination as to each of the items in
dispute (but only those items in dispute), which determination will be (A) in
writing, (B) furnished to each of the parties hereto as promptly as
practicable after the items in dispute have been referred to the Accountants,
(C) made in accordance with this Section 2.4. Such determination of the
Accountants will be conclusive and binding upon each of the parties hereto.
Nothing herein will be construed to authorize or permit the Accountants to
determine (i) any question or matter whatsoever under or in connection with
this Agreement, except the determination of what adjustments, if any, must be
made in one or more disputed items reflected in the Closing Date Balance
Sheet and the Closing Shareholders' Equity Statement delivered by Buyer in
order for the Closing Shareholders' Equity to be determined in accordance
with the provisions of this Agreement, in Section 2.4, or (ii) a Closing
Shareholders' Equity that is not equal to one of, or between, the Closing
Shareholders' Equity as determined by the Shareholders' Representative and as
determined by Buyer. The fees and expenses of the Accountants will be paid by
the party whose last written settlement offer related to all items in
dispute, in the aggregate, submitted to the Accountants immediately prior to
the initial referral of the matter to the Accountants in accordance with this
Section 2.4(b) (each, a "LAST OFFER") varies by the greatest absolute amount
from the determination by the Accountants of all such disputed items. No
party will disclose to the Accountants, and the Accountants will not consider
for any purpose, any settlement discussions or settlement offer (other than
the Last Offer) made by any party.
(c) During the period that the Shareholders' Representative's
advisors and personnel are conducting their review of Buyer's preparation of the
Closing Date Balance Sheet and determination of the Closing Shareholders'
Equity, the Shareholders' Representative and his representatives will have
reasonable access during normal business hours to the work papers, prepared by
or on behalf of Buyer and its representatives in connection with Buyer's
preparation of the Closing Shareholders' Equity Statement and determination of
the Closing Shareholders' Equity; PROVIDED, HOWEVER, that the Shareholders'
Representative will conduct such review in a manner that does not unreasonably
interfere with the conduct of the businesses of the Companies or result in
substantial out-of-pocket costs to Buyer. To the extent any such work papers are
in the control of the Shareholders' Representative after the Closing, the
Shareholders' Representative will grant Buyer and its representatives reciprocal
access rights for the purpose of finalizing the preparation of the Closing Date
Balance Sheet and the determination of the Closing
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Shareholders' Equity. The Shareholders' Representative and Buyer agree in good
faith to use all reasonable efforts to provide such information and access
described in this Section 2.4(c).
2.5. ADJUSTMENTS TO CLOSING PAYMENTS. (a) Upon the final
determination of the Closing Shareholders' Equity, the parties shall make the
following adjustments:
(i) If the Closing Shareholders' Equity exceeds the Estimated
Closing Shareholders' Equity, then the Aggregate Closing Consideration (if
reduced pursuant to Section 2.3) will be increased by, and Buyer shall pay to
the Shareholders' Representative (for the benefit of the Shareholders) the
amount of, such difference; provided that the Aggregate Closing Consideration
will in no event exceed $11.0 million.
(ii) If the Closing Shareholders' Equity is less than the
Estimated Closing Shareholders' Equity, then the Aggregate Closing Consideration
will be decreased by, and each Shareholder will pay to Buyer, the amount of such
difference multiplied by such Shareholders' Percentage Interest.
(b) Any payment in respect of an adjustment required to be
made under Section 2.5(a) will be made by Buyer or the Shareholders, as
applicable, in cash by wire transfer of immediately available funds to one
account specified by Buyer or the Shareholders' Representative (for the benefit
of the Shareholders), as applicable, in writing, prior to the date such payment
is required to be made hereunder. Such payment will be made on such of the
following dates as may be applicable: (i) if the Shareholders' Representative
shall have not objected to the preparation of the Closing Date Balance Sheet and
the determination of the Closing Shareholders' Equity, the earlier of (A) 30
days after delivery to the Shareholders' Representative of the Closing Date
Balance Sheet and Closing Shareholders' Equity Statement or (B) five days after
the Shareholders' Representative has indicated that he has no objections to the
preparation of the Closing Date Balance Sheet and the determination of the
Closing Shareholders' Equity, or (ii) if the Shareholders' Representative shall
have objected to the preparation of the Closing Date Balance Sheet and the
determination of the Closing Shareholders' Equity by Buyer, within five Business
Days following final agreement or decision with respect to the Closing Date
Balance Sheet and the Closing Shareholders' Equity as provided in Section 2.4
and this Section 2.5.
2.6. DISPOSITION OF ESCROW AMOUNT. (a) As soon as practicable
(and in no event later than 90 days after the end of the second quarter of CFI's
Fiscal Year ended October 31, 1999), Buyer shall prepare and deliver to the
Shareholders' Representative a statement of EBITDA for CFI and its subsidiaries
(an "EBITDA STATEMENT") for the first two quarters of CFI's Fiscal Year ended
October 31, 1999 (such EBITDA Statement, the "ESCROW EBITDA STATEMENT") prepared
in accordance with GAAP and the Balance Sheet Principles.
(b) If within 45 days after the date of the Buyer's delivery
of the EBITDA Statement, the Shareholders' Representative determines in good
faith that the Escrow EBITDA Statement and the Q1/Q2 EBITDA have not been
prepared and determined in accordance with this Agreement, the Shareholders'
Representative will give written notice to Buyer within such 45 day period (i)
setting forth the Shareholders' Representative's proposed changes to the Escrow
EBITDA Statement and (ii) specifying in reasonable detail the Shareholders'
Representative's basis for disagreement with the preparation of the Escrow
EBITDA Statement
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and the determination of the Q1/Q2 EBITDA. The failure by the Shareholders'
Representative to so express disagreement and provide such specification
within such 45 day period will constitute the acceptance by the Shareholders
of the preparation of the Escrow EBITDA Statement and the determination of
the Q1/Q2 EBITDA. If Buyer and the Shareholders' Representative are unable to
resolve any disagreement between them with respect to the preparation of the
Escrow EBITDA Statement and the determination of the Q1/Q2 EBITDA within 30
days after the giving of notice by the Shareholders' Representative to Buyer
of such disagreement, the items in dispute will be referred by Buyer for
determination to the Accountants as promptly as practicable, but not later
than five Business Days after the expiration of such 30 day period. Buyer and
the Shareholders' Representative will use reasonable efforts to cause the
Accountants to render their decision as soon as practicable thereafter,
including without limitation by promptly complying with all reasonable
requests by the Accountants for information, books, records and similar
items. Buyer and the Shareholders' Representative will cause the Accountants
to make a determination as to each of the items in dispute (but only those
items in dispute), which determination will be (A) in writing, (B) furnished
to each of the parties hereto as promptly as practicable after the items in
dispute have been referred to the Accountants (but in no event later than 30
days thereafter) and (C) made in accordance with this Section 2.6. Such
determination by the Accountants will be conclusive and binding upon each of
the parties hereto. Nothing herein will be construed to authorize or permit
the Accountants to determine (i) any question or matter whatsoever under or
in connection with this Agreement, except the determination of what
adjustments, if any, must be made in one or more disputed items reflected in
the Escrow EBITDA Statement delivered by Buyer in order for the Q1/Q2 EBITDA
to be determined in accordance with the provisions of this Section 2.6, or
(ii) a Q1/Q2 EBITDA that is not equal to one of, or between, the Q1/Q2 EBITDA
as determined by the Shareholders' Representative and as determined by Buyer.
The fees and expenses of the Accountants will be paid by the party whose Last
Offer varies by the greatest absolute amount from the determination by the
Accountants of all such disputed items. No party will disclose to the
Accountants, and the Accountants will not consider for any purpose, any
settlement discussions or settlement offer (other than the Last Offer) made
by any party.
(c) During the period that the Shareholders' Representative's
advisors and personnel are conducting their review of Buyer's preparation of the
Escrow EBITDA Statement, the Shareholders' Representative and his
representatives will have reasonable access during normal business hours to the
work papers, prepared by or on behalf of Buyer and its representatives in
connection with Buyer's preparation of the Escrow EBITDA Statement; PROVIDED,
HOWEVER, that the Shareholders' Representative will conduct such review in a
manner that does not unreasonably interfere with the conduct of the business of
Buyer or the Company or result in substantial out-of-pocket costs to the
Company. To the extent that such work-papers are in the control of the
Shareholders' Representative, the Shareholders' Representative will grant Buyer
and its representatives reciprocal access rights for the purpose of finalizing
the preparation of the Escrow EBITDA Statement and the determination of the
Q1/Q2 EBITDA. The Shareholders' Representative and Buyer agree in good faith to
use all reasonable efforts to provide such information and access described in
this Section 2.6(c).
(d) Within five Business Days after the final determination of
the Escrow EBITDA Statement and the Q1/Q2 EBITDA in accordance with this Section
2.6, Buyer and the Shareholders' Representative or, if applicable, the
Accountants will execute and deliver, to the Escrow Agent, a certificate
reflecting the amounts to be distributed as determined in accordance
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with this Section 2.6 and the Escrow Amount (together with all Investment
Income, as defined in the Escrow Agreement) shall be disbursed as follows:
(i) If the Q1/Q2 EBITDA is equal to or greater than
$3,000,000, the entire Escrow Amount (together with all Investment
Income) will be disbursed to the Shareholders' Representative for the
benefit of the Shareholders, subject to and in accordance with the
terms of the Escrow Agreement.
(ii) If the Q1/Q2 EBITDA is greater than $2,500,000 and less
than $3,000,000, a portion of the Escrow Amount equal to the product
(such product not to exceed the Escrow Amount) of (A) the Escrow Amount
and (B) the following fraction will be disbursed to the Shareholders'
Representative for the benefit of the Shareholders, subject to and in
accordance with the terms of the Escrow Agreement:
Q1/Q2 EBITDA - $2,500,000
-------------------------
$500,000
The applicable pro rata portion of all Investment Income with respect
to the above-referenced portion of the Escrow Amount to be disbursed to
the Shareholders' Representative in this Section 2.6(d)(ii) will be
disbursed together with such portion of the Escrow Amount, subject to
and in accordance with the terms of the Escrow Agreement. The balance
of the Escrow Amount, if any (together with all Investment Income with
respect to such balance) will be disbursed to Buyer or its designee,
subject to and in accordance with the terms of the Escrow Agreement.
(iii) If the Q1/Q2 EBITDA is equal to or less than $2,500,000,
the entire Escrow Amount (together with all Investment Income) will be
disbursed to Buyer or its designee, subject to and in accordance with
the terms of the Escrow Agreement.
2.7. EARNOUT AMOUNT. As further consideration for the Transfer
of the Common Stock to Buyer, the Shareholders will be eligible to receive up to
an additional $15.7 million (the "EARNOUT AMOUNT"), subject to the following
terms and conditions:
(a) As soon as practicable (and in no event later than 90 days
after the end of the applicable Fiscal Years of CFI set forth below in this
Section 2.7(a), Buyer will prepare and deliver to the Shareholders'
Representative an EBITDA Statement for each Fiscal Year of CFI ended October 31,
1999 and 2000 (collectively, the "EARNOUT EBITDA STATEMENTS"), prepared in
accordance with GAAP and the Balance Sheet Principles. Each such Earnout EBITDA
Statement and the 1999 EBITDA and 2000 EBITDA determined therein will be
otherwise prepared, reviewed and finally determined on basis consistent with
Sections 2.6(b) and 2.6(c) above.
(b) An amount equal to $5.0 million multiplied by the 1999
Payout Ratio will be payable to the Shareholders within five Business Days after
determination of the EBITDA of CFI for CFI's Fiscal Year ended October 31, 1999
("1999 EBITDA") in accordance with this Agreement. The "1999 PAYOUT RATIO" will
equal a fraction, the numerator of which will be 1999 EBITDA less $6.0 million,
and the denominator of which shall be $4.0 million; PROVIDED,
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that the 1999 Payment Ratio will in no event exceed 1.0; and PROVIDED, FURTHER,
that if the 1999 Payout Ratio is negative, no amount under this Section 2.7(b)
will be payable to the Shareholders.
(c) An amount equal to $10.7 million multiplied by the 2000
Payout Ratio will be payable to the Shareholders within five Business Days after
determination of the EBITDA of CFI for CFI's Fiscal Year ended October 31, 2000
("2000 EBITDA") in accordance with this Agreement. The "2000 PAYOUT RATIO" will
equal a fraction, the numerator of which will be 2000 EBITDA less $6.6 million,
and the denominator of which shall be $4.4 million; provided that the 2000
Payout Ratio will in no event exceed 1.0; provided further that if the 2000
Payout Ratio is negative, no amount under this Section 2.7(c) will be payable to
the Shareholders.
(d) Payments required under this Section 2.7 will be made by
or on behalf of Buyer when due pursuant to the applicable subsection of this
Section 2.7; provided that Buyer may, in its discretion, make all or any portion
of such payments when due either by: (i) wire transfer of immediately available
funds to one account specified by the Shareholders' Representative (for the
Shareholders' benefit) in writing prior to the date such payment is due, or (ii)
by delivery to the Shareholders' Representative (for the Shareholders' benefit)
of unsecured, subordinated promissory notes (collectively, "EARNOUT NOTES")
issued by Precision Partners Holding Company to each Shareholder in principal
amount equal to the aggregate Earnout Amount then due pursuant to this Section
2.7 multiplied by such Shareholder's Percentage Interest. Each such Earnout Note
will be in substantially to the effect set forth in EXHIBIT F-1. Each
Shareholder agrees to execute and deliver to Buyer at the Closing a
subordination agreement substantially to the effect set forth in EXHIBIT F-2
(subject to reasonable revision prior to the Closing pursuant to the
requirements of Buyer's lenders and as necessary to avoid "push down" accounting
treatment of the Earnout Notes) to be effective as to a Shareholder upon the
issuance of an Earnout Note pursuant to this Section 2.7(d) to such Shareholder.
(e) Earnout Amounts payable to Mr. Reagan will, if previously
unpaid, be subject to setoff at the discretion of Buyer or the issuer of the
Earnout Notes, to the extent that Buyer or any other subsidiary of Precision
Partners Holding Company is damaged as a result of the breach by Mr. Reagan of
his obligations under Section 1(b) of his Noncompetition Agreement.
2.8. CLOSING. The closing of the Purchase (the "CLOSING") will
take place at the offices of Jones, Day, Reavis & Pogue located at 599 Lexington
Avenue, New York, New York, at 10:00 a.m., New York time as soon as possible
after the date hereof but in no event later than ten Business Days after the
satisfaction or waiver of the conditions to Closing (the date on which the
Closing occurs is herein referred to as the "CLOSING DATE"). At the Closing, the
Shareholders and the Companies will also deliver the other agreements,
instruments and certificates provided for in Article VII.
2.9. PROCEEDINGS. Except as otherwise specifically provided
for herein, all proceedings that will be taken and all documents that will be
executed and delivered by the parties hereto on the Closing Date will be deemed
to have been taken and executed simultaneously, and no proceeding will be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
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III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE SHAREHOLDERS
3.1. The Shareholders and each of the Companies (severally but
not jointly) represent and warrant to Buyer as of the date hereof and the
Closing Date as follows:
3.1.1. CORPORATE EXISTENCE AND POWER. Each of the Companies is
a corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of the Companies has all
corporate power and all governmental licenses, authorizations, permits, consents
and approvals required to carry on its business as now conducted, except where
the failure to have any such governmental licenses, authorizations, permits,
consents and approvals could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. Each of the Companies is duly
qualified to conduct business as a foreign corporation and is in good standing
in each jurisdiction where such qualification is necessary except for those
jurisdictions where the failure to be so qualified or in good standing could not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect. Each of the Companies has heretofore delivered to Buyer true and
complete copies of each of its respective articles of incorporation and by-laws.
3.1.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by each of the Companies of this Agreement are within
its corporate powers and have been duly authorized by all necessary corporate
action on its part. This Agreement has been duly executed and delivered by such
Company and constitutes and will constitute as of the Closing Date the valid and
binding agreement of such Company, enforceable against it in accordance with its
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.1.3. GOVERNMENTAL AUTHORIZATION. Except as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), the execution, delivery and performance by the Companies of this
Agreement require no action by or in respect of, or filing with, any
Governmental Authorities.
3.1.4. NON-CONTRAVENTION; CONSENTS. Except as disclosed on
SCHEDULE 3.1.4, the execution, delivery and performance by the Companies of this
Agreement will not (a) violate the articles of incorporation or by-laws or
comparable organizational documents of either of the Companies, (b) violate any
applicable Law or Order, (c) require any filing with or permit, consent or
approval of, or the giving of any notice to, any Person other than as provided
in Section 3.1.3 (including filings, consents or approvals required under any
permits of either of the Companies or any licenses to which either of the
Companies is a party), (d) result in a violation or breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default
under, or give rise to any right of termination, cancellation or acceleration of
any right or obligation of, either of the Companies or to a loss of any benefit
to which either of the Companies is entitled under any agreement or other
instrument binding upon, either of the Companies or any license, franchise,
permit or other similar authorization held by either of the Companies, or (e)
result in the creation or imposition of any Lien on any asset of either of the
Companies, except in the case of clauses (c), (d) and (e) for such filings,
permits, consents,
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approvals or notices and violations, breaches, conflicts and Liens which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
3.1.5. CAPITALIZATION. (a) Immediately prior to the Closing,
the authorized, issued and outstanding Capital Stock of the Companies will be as
set forth on SCHEDULE 3.1.5(a). The Common Stock to be acquired by Buyer will be
duly authorized, validly issued, fully-paid, nonassessable and free and clear of
any Lien and, subject to applicable federal and state securities laws, will be
free and clear of any other limitation or restriction (including any restriction
on the right to vote, sell or otherwise dispose of such shares).
(b) Except as disclosed in SCHEDULES 3.1.5(a) and 3.1.5(b),
there are no outstanding (i) shares of capital stock or other securities of
either of the Companies, (ii) securities of either of the Companies convertible
into or exchangeable for shares of capital stock or other securities of either
of the Companies, or (iii) options or other rights to acquire from either of the
Companies, or other obligation of either of the Companies to issue, any capital
stock, other securities or securities convertible into or exchangeable for
capital stock or other securities of either of the Companies (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "COMPANY
SECURITIES"). Except as disclosed in SCHEDULE 3.1.5(b), there are no outstanding
obligations of either of the Companies to repurchase, redeem or otherwise
acquire any Company Securities.
(c) Except as disclosed in SCHEDULE 3.1.5(c) and except for
investments reflected in the Audited Statements, neither of the Companies owns
any Capital Stock or other equity or ownership or proprietary interest in any
corporation, partnership, association, trust, joint venture or other entity.
3.1.6. FINANCIAL STATEMENTS; BOOKS AND RECORDS. (a) The
Audited Statements, including the footnotes thereto, fairly present in all
material respects the financial position of CFI at the respective dates thereof
and the results of the operations and cash flows of CFI for the periods
indicated.
(b) CFI has heretofore furnished Buyer the Monthly CFI
Financial Statements through the month ended January 31, 1999. Such Monthly CFI
Financial Statements have been, and the Monthly CFI Financial Statements
required to be delivered pursuant to Section 5.7 when delivered shall have been,
prepared from the books and records of CFI (including the general ledger) and
fairly present or will fairly present (in the case of the Monthly CFI Financial
Statements required to be delivered pursuant to Section 5.7) in all material
respects the financial position of CFI at the respective dates thereof and the
results of operations of CFI for the respective periods indicated, in each case,
subject to the adjustments required by reason of the methodology used in the
calculation of annual net income in the Audited Statements.
(c) Calbrit has heretofore furnished Buyer the Calbrit
Financial Statements through October 31, 1998. Such Calbrit Financial Statements
have been, and the Calbrit Financial Statements required to be delivered
pursuant to Section 5.7 when delivered shall have been, prepared from the books
and records of Calbrit (including the general ledger) and fairly present or will
fairly present (in the case of the Calbrit Financial Statements required to be
delivered pursuant to Section 5.7) in all material respects the financial
position of Calbrit at the respective dates thereof and results of operations of
Calbrit for the respective periods indicated,
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in each case, subject to adjustments, if any, required by reason of the
methodology used in the calculation of annual net income in the Audited
Statements.
(d) Except as disclosed on SCHEDULE 3.1.6(d), there have been
no changes in either of the Companies' reserve or accrual amounts or policies
from the Balance Sheet Date.
(e) The books of account, minute books, stock record books,
and other corporate records of the Companies, all of which have been made
available to Buyer, are in all material respects complete and correct and have
been maintained in accordance with customary business practices. The minute
books of each of the Companies in all material respects contain accurate and
complete records of all meetings held of, and corporate action taken by, the
Shareholders and the Board of Directors of each of the Companies, and no meeting
of any such Shareholders or Board of Directors has been held for which minutes
have not been prepared and are not contained in such minute books. There are no
and have not been any committees of the Board of Directors of either Company
during the five years preceding the date hereof.
3.1.7. NO UNDISCLOSED LIABILITIES. There are no liabilities of
the Companies or any facts or circumstances which could give rise to liabilities
of either of the Companies, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than (a) liabilities fully provided for in the
most recent Monthly CFI Financial Statements and Calbrit Financial Statements
prior to the date hereof; (b) liabilities expressly disclosed on SCHEDULE 3.1.7
or on any other Schedule attached to this Agreement or (c) other undisclosed
liabilities incurred since the Balance Sheet Date in the ordinary course of
business which, individually or in the aggregate, could not have a Material
Adverse Effect.
3.1.8. INTERCOMPANY ACCOUNTS. SCHEDULE 3.1.8 contains a
complete list of all intercompany balances through the date of this Agreement
between any Shareholder and such Shareholder's Affiliates, on the one hand, and
either of the Companies, on the other hand. Other than (a) as disclosed on
SCHEDULE 3.1.8, (b) the lease agreements listed on Schedule 3.1.15(b) and marked
with an asterisk and (c) compensation paid in the ordinary course consistent
with past practice, since such date, there has not been any accrual of liability
by either of the Companies to any Shareholder or such Shareholder's Affiliates
or other transaction between either of the Companies and any Shareholder and
such Shareholder's Affiliates or any action taken (other than this Agreement)
which could reasonably be expected to result in any such accrual, or the
incurrence of any legal or financial obligation to any such Person, after such
date.
3.1.9. TAX MATTERS. (a) Except as disclosed in SCHEDULE
3.1.9(a):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed
with any Taxing Authority with respect to any Pre-Closing Tax Period by
or on behalf of either of the Companies (collectively, the "RETURNS")
have, to the extent required to be filed on or before the date hereof,
been filed when due in accordance with all applicable laws;
(ii) The Returns correctly reflect in all material respects,
the income, business, assets, and financial status of each of the
Companies consistent with applicable Law;
(iii) All Taxes owed by each of the Companies (whether or not
shown as due
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and payable on the Returns) have been timely paid, or withheld and
remitted to the appropriate Taxing Authority or reserved in the most
recent balance sheet contained in the Monthly CFI Financial Statements
and the Calbrit Financial Statements;
(iv) Any reserves established for Taxes with respect to either
of the Companies for any Pre-Closing Tax Period (including any
Pre-Closing Tax Period for which no Return has yet been filed)
reflected on the books of either of the Companies (excluding any
provision for deferred income taxes) are adequate in accordance with
GAAP;
(v) Neither of the Companies is delinquent in the payment of
any Tax and neither of the Companies has requested any extension of
time within which to file any Return except for extensions granted as a
matter of right or granted automatically upon the filing of a request
for such extension;
(vi) Each of the Companies (or any member of any affiliated,
consolidated, combined or unitary group of which either of the
Companies is or has been a member) has not granted any extension or
waiver of the statute of limitations period applicable to any Return,
which period (after giving effect to such extension or waiver) has not
yet expired;
(vii) There is no action, suit, claim, audit, investigation or
proceeding now pending, (in each case, in respect of which either of
the Companies or any Shareholder has been served with process or has
otherwise received written notice) or, to the knowledge of either of
the Companies, threatened against or with respect to either of the
Companies in respect of any Tax;
(viii) Neither of the Companies owns any interest in real
property in any jurisdiction in which a Tax is imposed on the transfer
of a controlling interest in an entity that owns any interest in real
property;
(ix) Neither of the Companies nor any other Person on behalf
of either of the Companies has entered into any agreement or consent
pursuant to Section 341(f) of the Code;
(x) There are no Liens for Taxes upon the assets of either of
the Companies, except Liens for current Taxes not yet due;
(xi) Neither of the Companies will be required to include any
adjustment in taxable income for any Post-Closing Tax Period under
Section 481(c) of the Code (or any similar provision of the Tax laws of
any jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability
of either of the Companies for any Pre-Closing Tax Period;
(xii) Neither of the Companies has been a member of an
affiliated, consolidated, combined or unitary group or participated in
any other arrangement whereby any income, revenues, receipts, gain or
loss of either of the Companies was
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determined or taken into account for Tax purposes with reference to or
in conjunction with any income, revenues, receipts, gain, loss, asset
or liability of any other Person; and
(xiii) Neither of the Companies has been an "S Corporation"
within the meaning of the Code at any time during the ten years prior
to the Closing Date.
(b) SCHEDULE 3.1.9(b) contains a list of all jurisdictions
(whether foreign or domestic) to which any Tax imposed on overall net income is
properly payable for a Pre-Closing Tax Period by either of the Companies.
3.1.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed on
SCHEDULE 3.1.10, since the Balance Sheet Date, there has not been any event,
occurrence, development, circumstances or state of facts which (a) has had or
could reasonably be expected to have a Material Adverse Effect or (b) would have
constituted a violation of any covenant of any Shareholder or either of the
Companies hereunder (including Section 5.1) had such covenant applied to any of
them since the Balance Sheet Date; provided, however, that no representation or
warranty is made hereunder with respect to macro-economic or industry conditions
which are generally available to the public.
3.1.11. CONTRACTS. (a) Except as expressly disclosed in
SCHEDULE 3.1.11(a) or any other Schedule attached hereto, neither of the
Companies is a party to or bound by any of the following, including all
amendments and supplements thereto (whether written or oral, unless otherwise
expressly set forth below in this Section 3.11):
(i) any lease (whether of real or personal property) providing
for annual rentals of $25,000 or more;
(ii) any agreement (other than purchase orders or invoices in
the ordinary course of business) for the purchase of materials,
supplies, goods, services, equipment or other assets (including in
terms of quantity and dollar amount) which by its terms requires either
(A) annual payments by either of the Companies of $25,000 or more or
(B) aggregate annual payments by the Companies of $50,000 or more;
(iii) any sales, distribution or other similar agreement
(other than purchase orders or invoices in the ordinary course of
business) providing for the sale by the Company or any Subsidiary of
materials, supplies, goods, services, equipment or other assets that
provides for either (A) annual payments to either of the Companies of
$25,000 or more or (B) aggregate annual payments to the Companies of
$50,000 or more;
(iv) any partnership, joint venture or limited liability
company agreement;
(v) any agreement, other than this Agreement, relating to the
acquisition or disposition of any business (whether by merger, sale of
stock, sale of assets or otherwise);
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(vi) any agreement evidencing Indebtedness (in any case,
whether incurred, assumed, guaranteed or secured by any asset) of
either of the Companies, other than any agreement identified in any
other subparagraph of this Section 3.1.11;
(vii) any license, franchise or similar agreement (other than
"off the shelf" computer software licenses or as disclosed on SCHEDULE
3.1.16);
(viii) any agency, dealer, sales representative, marketing or
other similar agreement, other than any agreement identified in clause
(xiv) below;
(ix) other than the Noncompetition Agreements to be entered
into as part of the transactions contemplated hereby, any agreement or
covenant of either of the Companies not to compete in any line of
business, geographic area or with any Person or which would so limit
the freedom of either of the Companies after the Closing Date;
(x) other than the lease agreements disclosed on SCHEDULE
3.1.15(b) and marked with an asterisk, any agreement with (A) any
Shareholder or any of such Shareholder's Affiliates, (B) any Person
directly or indirectly owning, controlling or holding with power to
vote, 5% or more of the outstanding voting securities of any
Shareholder's Affiliates, (C) any Person 5% or more of whose
outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by a Shareholder or any of such
Shareholder's Affiliates, (D) any director or officer of a
Shareholder's Affiliates or any "associates" or members of the
"immediate family" (as such terms are respectively defined in Rule
12b-2 and Rule 16a-1 of the Exchange Act) of any such director or
officer, or (E) any director or officer of either of the Companies or
with any "associate" or any member of the "immediate family" (as such
terms are respectively defined in Rules 12b-2 and 16a-1 of the Exchange
Act) of any such director or officer;
(xi) other than any agreements identified in clause (vi)
above, any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of capital stock of either of the Companies;
(xii) any management service, consulting or any other similar
type of contract;
(xiii) any warranty, guaranty or other similar undertaking
with respect to a contractual performance extended by either of the
Companies other than in the ordinary course of business consistent with
past practice;
(xiv) any written employment, deferred compensation,
severance, bonus, retirement or other similar agreement or plan in
effect as of the date hereof and entered into or adopted by either of
the Companies, on the one hand, and any director or officer of either
of the Companies or any other employee of either of
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the Companies receiving annual compensation of $100,000 or more, on the
other hand; or
(xv) any other agreement, commitment, arrangement or plan not
made in the ordinary course of business that is material to the
operations or business of either of the Companies as currently
conducted or as conducted between the date hereof and the Closing Date.
(b) Except as set forth on SCHEDULE 3.1.11(b), each agreement,
contract, plan, lease, arrangement or commitment disclosed in SCHEDULE 3.1.11(a)
or any other Schedule to this Agreement or required to be disclosed pursuant to
this Section has, in the case of such written agreements, contracts, plans,
leases, arrangements or commitments, been executed and delivered by the Company
and, to the knowledge of the Companies and the Shareholders, is in full force
and effect and neither CFI, or, to the knowledge of either of the Companies and
the Shareholders, any other party thereto, is in default or breach in any
material respect under the terms of any such agreement, contract, plan, lease,
arrangement or commitment. To the knowledge of each of the Companies and the
Shareholders, there is no event, occurrence, condition or act (including the
consummation of the transactions contemplated hereby) which, with the giving of
notice or the passage of time, or the happening of any other event or condition,
could become a material default or event of default thereunder.
(c) SCHEDULE 3.1.11(c) sets forth every continuing obligation
to pay as of the Closing Date by either of the Companies in the past three years
of any severance or termination pay to any director or officer of either of the
Companies or any other employee of either of the Companies receiving annual
compensation of $100,000 or more.
3.1.12. INSURANCE COVERAGE. Each of the Companies has
furnished to Buyer a list of, and true and complete copies of, all insurance
policies and fidelity bonds covering the assets, business, operations,
employees, officers and directors of each of the Companies. To the knowledge of
the Companies and the Shareholders, there is no material claim asserted by
either of the Companies pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums which have become due and payable under all such
policies and bonds have been paid and each of the Companies has complied in all
material respects with the terms and conditions of all such policies and bonds.
Such policies of insurance and bonds (or other policies and bonds providing
substantially similar insurance coverage) are in full force and effect. Such
policies of insurance and bonds are of the type and in amounts reasonably deemed
by the respective management of each of the Companies to be sufficient to cover
risks reasonably anticipated by such management based upon past risk occurrences
and knowledge of operations. Neither of the Companies knows of any threatened
termination of, or premium increase with respect to, any of such policies or
bonds.
3.1.13. LITIGATION. Except as disclosed in SCHEDULE 3.1.13,
there is no action, suit, investigation, arbitration or administrative or other
proceeding (in each case, in respect of which either of the Companies or any of
the Shareholders has been served with process or has otherwise received written
notice) pending, or, to the knowledge of either of the Companies or any
Shareholder, threatened against or affecting either of the Companies or any
Shareholder or any properties of either Company before any court or arbitrator
or any Governmental Authorities
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which, if determined or resolved adversely to either of the Companies, could
reasonably be expected to, individually or when considered together with all
other such matters, (a) materially and adversely affect the right or ability of
either of the Companies to carry on its business as now conducted, (b) have a
Material Adverse Effect, or (c) which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement; and neither of the Companies or any Shareholder knows of any valid
basis for any such action, proceeding or investigation.
3.1.14. COMPLIANCE WITH LAWS; PERMITS. (a) Except as disclosed
in SCHEDULE 3.1.14(a), neither of the Companies is and neither of the Companies
has been since the Balance Sheet Date in violation of any applicable Law or
Order, except for such violations that have not had and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
(b) SCHEDULE 3.1.14(b) sets forth a list of each government or
regulatory license, authorization, permit, consent and approval necessary for
the conduct of the business of such Company as conducted on the Balance Sheet
Date and through and including the Closing Date. Except as disclosed in SCHEDULE
3.1.14(b) each such license, authorization, permit, consent and approval, to the
knowledge of the Companies and the Shareholders, is valid and in full force and
effect, and will not be terminated or impaired (or become terminated or
impaired) as a result of the transactions contemplated hereby. Neither of the
Companies is in default under, and no condition exists that with notice or lapse
of time or both would constitute a default under, any license, franchise,
permit, consent or approval or similar authorization held by either of the
Companies except for such defaults which could not, individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.
3.1.15. PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as
disclosed in SCHEDULE 3.1.15(a) and except for inventory disposed of in the
ordinary course of business, the Companies have good title to, or in the case of
leased property have valid leasehold interests in, all property and assets
(whether real or personal, tangible or intangible) reflected in the Audited
Balance Sheet or acquired after the Balance Sheet Date. None of such property or
assets is subject to any Liens, except for (i) Liens disclosed in the Audited
Balance Sheet; (ii) Liens for Taxes not yet due or being contested in good faith
(and for which adequate accruals or reserves have been established on the
Audited Balance Sheet); and (iii) Permitted Liens.
(b) SCHEDULE 3.1.15(b) sets forth a list of all real property
assets owned or leased by each of the Companies ("REAL PROPERTY"). Except as
disclosed on SCHEDULE 3.1.15(b), all such leases of real property have been
executed and delivered by the Company and, to the knowledge of the Companies and
the Shareholders, are in full force and effect. The applicable Company is a
tenant or possessor in good standing thereunder and all rents due under such
leases have been paid. There does not exist under any such lease any default or
any event which with notice or lapse of time or both would constitute a default,
except for such defaults that have not and could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. Each of the
Companies is in peaceful and undisturbed possession of the space and/or estate
under each lease of which it is a tenant and has good and valid rights of
ingress and egress to and from all the Real Property from and to the public
street systems for all usual street, road and utility purposes. Neither of the
Companies nor any Shareholder has received any notice of any appropriation,
condemnation or like proceeding, or of any violation of any applicable
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zoning Law or Order relating to or affecting the Real Property, and to each of
the Companies' and each Shareholder's knowledge, no such proceeding has been
threatened or commenced.
(c) The assets owned or leased by each of the Companies
(including, real, personal, tangible and intangible property), or which they
otherwise have the right to use (including, real, personal, tangible and
intangible property), constitute all of the assets held for use or used in
connection with the businesses of the Companies and are generally in good
operating condition and repair (normal wear and tear excepted) and are adequate
to conduct such businesses as currently conducted.
3.1.16. INTELLECTUAL PROPERTY. Except as disclosed in SCHEDULE
3.1.16, neither of the Companies owns or uses (under license or otherwise) any
proprietary Intellectual Property Rights in connection with the operation of its
business. Neither of the Companies has since January 1, 1993, been sued or
charged in writing with or been a defendant in any claim, suit, action or
proceeding relating to its business that is either pending (in respect of which
either of the Companies or any Shareholder has been served with process or has
otherwise received written notice), or, to the knowledge of either of the
Companies or any Shareholder, threatened that, in either case, has not been
finally terminated prior to the date hereof and that involves a claim of
infringement by either of the Companies of any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how or any other similar
type of proprietary intellectual property right of any other Person or
continuing infringement by any other Person of any Intellectual Property Rights,
and neither of the Companies has any knowledge of any basis for such claim of
infringement or of any continuing infringement by any other Person of any
Intellectual Property Rights.
3.1.17. ENVIRONMENTAL MATTERS. (a) Except as disclosed in
SCHEDULE 3.1.17:
(i) Constituents of Concern have not been generated, recycled,
used, treated or stored on, transported to or from, or released or
disposed on, the Company Property or, to the knowledge of each of the
Companies and the Shareholders, any property adjoining or adjacent
except in compliance with Environmental Laws;
(ii) Except as could not individually, or in the aggregate,
reasonably be expected to have a Material Adverse Effect, each of the
Companies is in compliance with Environmental Laws and the requirements
of permits issued under such Environmental Laws with respect to the
Company Property;
(iii) There are no pending Environmental Claims (in respect of
which either of the Companies or any Shareholder has been served with
process or has received written notice) against either of the Companies
or any Company Property, or, to the knowledge of each of the Companies
and the Shareholders, threatened Environmental Claims against either of
the Companies or any Company Property;
(iv) There are not now and, to the knowledge of each of the
Companies and the Shareholders, there have never been any underground
storage tanks or sumps located on any Company Property or, to the
knowledge of each of the
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Companies and the Shareholders, located on any property that adjoins or
is adjacent to any Company Property;
(v) Neither of the Companies nor any Company Property is
listed or has received notice of proposed listing on the National
Priorities List under CERCLA, or CERCLIS (as defined in CERCLA) or on
any similar federal, state or foreign list of sites requiring
investigation or clean-up;
(vi) Neither of the Companies has any liability under any
Environmental Law (including an obligation to remediate any
Environmental Condition whether caused by either of the Companies or
any other Person) which could reasonably be expected to have a Material
Adverse Effect.
(b) There has been no environmental investigation, study,
audit, test, review or other analysis commenced or conducted by or at the
request of either of the Companies (or by a third party of which either of the
Companies or any Shareholder has knowledge (other than the Companies' past and
current lenders)) in relation to the current or prior business of either of the
Companies, or any property or facility currently or, to the knowledge of either
of the Companies or any Shareholder, previously owned or leased by either of the
Companies, which has not been disclosed or delivered to Buyer prior to the date
hereof.
(c) Neither of the Companies owns or leases or has owned or
leased any property, and does not conduct and has not conducted any operations
(other than periodic shipments of product), in New Jersey or Connecticut.
(d) For purposes of this Section, the terms "Company" or
"Companies" (including the use of such terms in the term "Company Property")
will include any entity which is, in whole or in part, a predecessor of either
of the Companies.
3.1.18. PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 3.1.18(a)
sets forth a list of all employee benefit plans (as defined in Section 3(3) of
ERISA), and all other employee benefit plans, programs, arrangements, contracts
or schemes, written or oral, statutory or contractual, with respect to which
either of the Companies or any ERISA Affiliate has or has had in the six years
preceding the date hereof any obligation or liability or which are or were in
the six years preceding the date hereof maintained, contributed to or sponsored
by either of the Companies or any ERISA Affiliate for the benefit of any current
or former employee, officer or director of either of the Companies or any ERISA
Affiliate (collectively, the "PLANS"). With respect to each employee pension
benefit plan subject to ERISA, CFI has delivered to Buyer a true and complete
copy of each such Plan (including all amendments thereto) and a true and
complete copy of each material document (including all amendments thereto)
prepared in connection with each such Plan including, without limitation, (i) a
copy of each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, and (iii) the most recently
filed IRS Form 5500 for each such Plan, if any. Neither of the Companies has any
express or implied commitment, whether legally enforceable or not, to create,
incur liability with respect to or cause to exist any employee benefit plan or
to modify any Plan, other than as required by law.
(b) Except as disclosed in SCHEDULE 3.1.18(b), none of the
Plans is a plan that is or has ever been subject to Title IV of ERISA, Section
302 of ERISA or Section 412 of the
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Code. None of the Plans is (i) a "multiemployer plan" as defined in Section
3(37) of ERISA, (ii) a plan or arrangement described under Section 4(b)(5) or
401(a)(1) of ERISA, or (iii) a plan maintained in connection with a trust
described in Section 501(c)(9) of the Code. Except as disclosed in SCHEDULE
3.1.18(b), (A) none of the Plans provides for the payment of separation,
severance, termination or similar-type benefits to any person, and (B) none of
the Plans provides for or promises retiree medical or life insurance benefits to
any current or former employee, officer or director of either of the Companies
(other than as required by Section 601 of ERISA). Except as disclosed in
SCHEDULE 3.1.18(b), each of the Plans is subject only to the laws of the United
States or a political subdivision thereof.
(c) Except as disclosed in SCHEDULE 3.1.18(c), each Plan is in
compliance in all material respects with, and has always been operated in all
material respects in accordance with, its terms and the requirements of all
applicable law, foreign and domestic, and each of the Companies and the ERISA
Affiliates have satisfied in all material respects all of their statutory,
regulatory and contractual obligations with respect to each such Plan. No legal
action, suit or claim is pending or, to the knowledge of each of the Companies
and any Shareholder, threatened with respect to any Plan (other than claims for
benefits in the ordinary course) and no fact or event exists that could give
rise to any such action, suit or claim.
(d) Except as disclosed in SCHEDULE 3.1.18(d), each Plan or
trust which is intended to be qualified or exempt from taxation under Section
401(a), 401(k) or 501(a) of the Code has received a favorable determination
letter from the IRS that it is so qualified or exempt, and, to the knowledge of
the Companies and the Shareholders, no fact or event has occurred since the date
of such determination letter to adversely affect the qualified or exempt status
of any Plan or trust.
(e) There has been no non-exempt prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code) with
respect to any Plan. Neither of the Companies nor any ERISA Affiliate has
incurred any material liability for any excise tax arising under Section 4971,
4972, 4975, 4980 or 4980B of the Code and, to the knowledge of the Companies and
the Shareholders, no fact or event exists which could give rise to such
liability. Neither of the Companies nor any ERISA Affiliate has incurred any
material liability relating to Title IV of ERISA (other than for the payment of
premiums to the Pension Benefit Guaranty Corporation), and, to the knowledge of
the Companies and the Shareholders, no fact or event exists which could give
rise to such liability.
(f) All material contributions, premiums or payments required
to be made with respect to any Plan have been made on or before their due dates.
All such contributions with respect to which the Companies have claimed a
deduction have been fully deducted for income tax purposes and no such deduction
has been challenged or disallowed by any Government Authorities, and, to the
knowledge of the Companies and the Shareholders, no fact or event exists which
could give rise to any such challenge or disallowance.
(g) There has been no amendment to, written interpretation of
or announcement (whether or not written) by either of the Companies or any ERISA
Affiliate thereof relating to, or change in employee participation or coverage
under, any Plan that would increase materially the expense of maintaining such
Plan above the level of the expense incurred in respect thereto for the most
recent fiscal year ended prior to the date hereof.
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(h) Except as disclosed in SCHEDULE 3.1.18(h) or in this
Agreement or the Ancillary Agreements, no employee or former employee of either
of the Companies or any ERISA Affiliate thereof will become entitled to any
bonus, retirement, severance, job security or similar benefit or enhanced such
benefit (including acceleration of vesting or exercise of an incentive award) as
a result of the transactions contemplated hereby.
(i) Except as disclosed in SCHEDULE 3.1.18(i) or any Schedule
under Section 3.1.5, no current or former employee of either of the Companies or
any ERISA Affiliate thereof holds any option to purchase shares of either of the
Companies.
3.1.19. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as
disclosed in SCHEDULE 3.1.19 and except for the lease agreements listed in
SCHEDULE 3.1.15(b) and marked with an asterisk, to the knowledge of each of the
Companies and the Shareholders, no Shareholder, nor any other officer or
director of either of the Companies possesses, directly or indirectly, any
ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
or potential competitor of either of the Companies. Ownership of securities of a
company whose securities are registered under the Exchange Act of 2% or less of
any class of such securities will not be deemed to be a financial interest for
purposes of this Section 3.1.19.
3.1.20. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS; EMPLOYEE
COMPENSATION; BONUSES. (a) To the knowledge of the Companies and the
Stockholders, the relationships of each of the Companies with its customers,
suppliers and employees are good commercial working relationships. Except as
disclosed in SCHEDULE 3.1.20(a), none of the Companies' (i) existing customers
or suppliers has, since the Balance Sheet Date, canceled, terminated or
otherwise altered or notified either of the Companies of any intention or
otherwise threatened to cancel, terminate or alter the gross volume of purchases
and sales to or from either of the Companies or (ii) employees receiving annual
compensation in excess of $100,000 or having managerial status has canceled,
terminated or otherwise altered or notified either of the Companies of any
intention or otherwise threatened to cancel, terminate or materially alter his
or her employment relationship with either of the Companies, in the case of
clauses (i) and (ii) of this Section 3.1.20, which cancellations, terminations
or alterations having become effective prior to the Closing or having been
noticed to become effective as of, or within one year after, the Closing, other
than such cancellations, terminations or material alterations which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as disclosed on SECTION 3.1.20(a), as of the date hereof
there has not been, and each of the Companies has no knowledge that there will
be, any change in relations with material customers, material suppliers or
material employees of either of the Companies as a result of the transactions
contemplated by this Agreement.
(b) SCHEDULE 3.1.20(b) lists all bonuses and any other amounts
to be paid by either of the Companies to employees of either of the Companies at
or in connection with the Closing ("BONUSES").
3.1.21. OTHER EMPLOYMENT MATTERS. (a) Each of the Companies is
in material compliance with all Federal, state or other applicable laws,
domestic or foreign, respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not, and is not, engaged
in any unfair labor practice, which could, individually or
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in the aggregate, reasonably be expected to have a Material Adverse Effect; no
unfair labor practice complaint against either of the Companies is pending (in
respect of which either of the Companies or any Shareholder has been served with
process or has otherwise received written notice) before the National Labor
Relations Board; there is no labor strike, dispute, slowdown or stoppage
actually pending (in respect of which either of the Companies or any Shareholder
has received written notice) or, to the knowledge of the Companies and the
Shareholders, threatened against or involving either of the Companies; neither
of the Companies is a party to any collective bargaining agreement and no
collective bargaining agreement is currently being negotiated by either of the
Companies; to the knowledge of each of the Companies and the Shareholders, no
representation question exists respecting employees of either of the Companies;
and, except as specifically set forth on SCHEDULE 3.1.21, no claim in respect of
the employment of any employee of either of the Companies has been asserted (in
respect of which either of the Companies or any Shareholder has been served with
process or has otherwise received written notice) by such employee or any third
party with respect to such employee's employment and is currently pending or, to
the knowledge of each of the Companies and the Shareholders threatened, against
either of the Companies by such employee or any third party with respect to such
employee's employment.
(b) To the knowledge of the Companies and the Shareholders, no
current employee who receives annual compensation in excess of $100,000 per year
or current director of either of the Companies is, a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between such employee or
director and any other Person that in any way adversely, affects or will affect
(i) the performance of his duties as an employee or director of either of the
Companies, or (ii) the ability of either of the Companies to conduct its
respective business consistent with past practice.
(c) SCHEDULE 3.1.21 also contains a complete and accurate list
of the following information for each retired employee or director of each of
the Companies, or their dependents currently receiving benefits as of the date
hereof or scheduled to receive benefits in the future: name, pension benefits,
pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
3.1.22. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE
3.1.22, all accounts receivable which have arisen since the Balance Sheet Date
(net of any additional reserves established since the Balance Sheet Date in
accordance with past practice, none of which is material) and which are
outstanding are valid and enforceable claims, and the goods and services sold
and delivered which gave rise to such accounts receivable were sold and
delivered in conformity with the applicable purchase orders, agreements and
specifications as such may have been changed, modified, amended or supplemented
from time to time, which amendments have been disclosed to Buyer. Such accounts
receivable are subject to no defenses, offsets or recovery in whole or in part
by the Persons whose purchase gave rise to such accounts receivable or by third
parties, and to the knowledge of the Shareholders and the Companies, such
accounts receivable are fully collectible in the ordinary course of business
without resort to legal proceedings, except to the extent of the amount of the
reserve for doubtful accounts reflected on the most recent balance sheet
contained in the Monthly CFI Financial Statements and the Calbrit Financial
Statements delivered on or prior to the date hereof.
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3.1.23. INVENTORY. Except as set forth in SCHEDULE 3.1.23, all
inventories which have been acquired or produced since the Balance Sheet Date
(net of any additional reserves established since the Balance Sheet Date in
accordance with past practice, none of which is material) are in good condition,
conform in all material respects with the applicable specifications and
warranties of each of the Companies, are not obsolete, and are useable or
saleable in the ordinary course of business.
3.1.24. MILLENNIUM COMPLIANCE. SCHEDULE 3.1.24 describes the
measures that have been implemented to determine the extent to which the
computer systems used by each of the Companies in its business (the "COMPUTER
SYSTEMS") are not in Millennium Compliance, and the material details of any
program undertaken with a view towards causing the Computer Systems to achieve
Millennium Compliance.
3.1.25 FINDERS' FEES. Except as set forth in SCHEDULE 3.1.25,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of the Shareholders or either
of the Companies who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
3.2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each
Shareholder represents and warrants, severally and not jointly and with respect
to such Shareholder only, to Buyer as of the date hereof and the Closing as
follows:
3.2.1. AUTHORITY; ENFORCEABILITY. Such Shareholder has all
requisite power and authority, and has taken all action necessary, to execute
and deliver this Agreement and each Ancillary Agreement to which such
Shareholder will be a party at the Closing, to consummate the transactions
contemplated hereby and to perform his, her or its obligations hereunder. This
Agreement has been and each of the Ancillary Agreements to which such
Shareholder will be a party at the Closing will have been, duly executed and
delivered by such Shareholder and this Agreement is, and each of the Ancillary
Agreements will be when executed by such Shareholder, legal, valid and binding
obligations of such Shareholder enforceable against such Shareholder in
accordance with their respective terms, except to the extent that their
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
3.2.2. NO CONFLICTS. The execution and delivery of this
Agreement and each Ancillary Agreement to which such Shareholder will be a party
at the Closing do not and will not at the Closing, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof do not and
will not at the Closing, violate or conflict with in any respect or result in a
breach under any contract, license, Order or Law applicable to such Shareholder.
3.2.3. NO CONSENTS. Except as may be required under the HSR
Act, no consent of, approval or filing with, any court or other Person is
required to be obtained or made by or with respect to such Shareholder in
connection with the execution and delivery of this Agreement or any of the
Ancillary Agreements to which such Shareholder will be a party at the Closing or
the consummation by such Shareholder of the transactions contemplated hereby or
thereby.
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3.2.4. OWNERSHIP OF SHARES; TITLE. All of the issued and
outstanding shares of Common Stock set forth opposite such Shareholder's name on
SCHEDULE 1 are lawfully owned of record and beneficially by such Shareholder,
free and clear of any Liens. Such Shareholder has the full legal right, power
and authority to vote, sell, assign, transfer and convey such shares of Common
Stock. Such shares are not subject to any voting trust agreement or other
contract, agreement, arrangement, commitment, option, proxy, right of first
refusal or understanding, including without limitation any contract restricting
or otherwise relating to the voting, dividend rights or disposition of such
shares.
3.2.5. LITIGATION. Except as disclosed in SCHEDULE 3.2.5,
there is no action, suit, investigation, arbitration or administrative or other
proceeding (in each case, in respect of which such Shareholder has been served
with process or has otherwise received written notice) which is currently
pending, or, to the knowledge of such Shareholder, threatened against or
affecting such Shareholder before any court or arbitrator or any Governmental
Authorities which, individually or in the aggregate, if determined or resolved
adversely to such Shareholder could, individually or when considered together
with all other such matters, adversely affect the right or ability of such
Shareholder to consummate and perform the transactions contemplated by this
Agreement and the Ancillary Agreements to which such Shareholder will be a party
at the Closing; and such Shareholder knows of no valid basis for any such
action, proceeding or investigation.
IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each of the Companies and the
Shareholders as of the date hereof and the Closing Date as follows:
4.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of organization. Buyer has all power and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. Buyer is duly qualified to conduct business as a
foreign corporation and is good standing in each jurisdiction where such
qualification is necessary, except where the failure to be so qualified and in
good standing could not reasonably be expected to have a material adverse effect
on the business, assets, liabilities, conditions (financial or other), results
of operations or prospects of the Buyer, taken as a whole.
4.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by Buyer of this Agreement and each of the Ancillary
Agreements to which it will be a party at the Closing are within, Buyer's
corporate powers and have been duly authorized by all necessary corporate action
on the part of Buyer. This Agreement has been and each of the Ancillary
Agreements to which Buyer will be a party at the Closing will have been duly
executed and delivered by Buyer and constitute and will constitute at the
Closing valid and binding agreements of Buyer, enforceable against Buyer in
accordance with their terms, except to the extent that their enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
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4.3. GOVERNMENTAL AUTHORIZATION. Except as may be required
under the HSR Act, the execution, delivery and performance by Buyer of this
Agreement and each of the Ancillary Agreements to which Buyer will be a party at
the Closing require no action by or in respect of, or filing with, any
Governmental Authorities.
4.4. NON-CONTRAVENTION. The execution, delivery and
performance by Buyer of this Agreement and each Ancillary Agreement to which
Buyer will be a party at the Closing will not (a) violate the certificate of
incorporation or bylaws of Buyer, (b) violate any applicable Law or Order, or
(c) require any filing with or permit, consent or approval of, or the giving of
notice to, any Person other than as provided in Section 4.3.
4.5. LITIGATION. Except as disclosed in SCHEDULE 4.5, there is
no action, suit, investigation, arbitration or administrative or other
proceeding pending (in respect of which Buyer has been served with process or
has otherwise received written notice), or, to the knowledge of Buyer,
threatened against or affecting Buyer, or any of Buyer's properties before any
court or arbitrator or any Governmental Authorities which, individually or in
the aggregate, if determined or resolved adversely to Buyer, could reasonably be
expected to materially and adversely affect the right or ability of Buyer to
consummate and perform the transactions contemplated by this Agreement and any
Ancillary Agreement to which Buyer will be a party at the Closing, and Buyer
knows of no valid basis for any such action, proceeding or investigation.
4.6. FINDERS' FEES. Except for Saunders Karp & Megrue, L.P.,
Carlisle Group, L.P. and Harvey & Company, LLC, whose fees and expenses
(including transaction fees) will be paid by Buyer, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee or
commission from the Shareholders or either of the Companies upon consummation of
the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
4.7. PURCHASE FOR INVESTMENT. Buyer is purchasing the Common
Stock for investment for its own account and not with a view to, or for sale in
connection with, any distribution of the Common Stock except in compliance with
applicable securities laws.
V. CERTAIN COVENANTS
5.1. CONDUCT OF BUSINESS OF THE COMPANIES. During the period
from the date of this Agreement to the Closing Date, the Shareholders will cause
each of the Companies to, and each of the Companies will, conduct its respective
operations only according to its ordinary and usual course of business
(including managing its working capital in accordance with its past practice and
custom) and use its respective best efforts to: (a) preserve intact its business
organizations, (b) keep available the services of its officers and employees and
(c) maintain its relationships and goodwill with licensors, suppliers,
distributors, customers, landlords, employees, agents and others having business
relationships with it. Between the date hereof and the Closing Date, each of the
Companies will confer with Buyer concerning the status of operational and
financial matters concerning the Companies in general and otherwise as
reasonably requested by Buyer. Without limiting the generality or effect of the
foregoing, during the period from the date of this Agreement to the Closing
Date, except with the prior written
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consent of Buyer, neither of the Companies will, and the Shareholders will cause
each of the Companies not to:
(a) Amend or modify its articles of incorporation, bylaws or any other
organizational document from its form on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any bonuses to
any director, officer, employee or shareholder of either of the Companies, or
enter into any employment agreement, severance agreement, or similar agreement
with any director, officer, shareholder or employee of either of the Companies,
PROVIDED, HOWEVER, that the compensation of employees of either of the Companies
receiving annual compensation of less than $100,000 may be changed in the
ordinary course of business consistent with past practice;
(c) Unless otherwise required by Law (and then only to the extent so
required), adopt or increase any benefits under any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any of its employees;
(d) Enter into any contract or commitment except contracts and
commitments (for capital expenditures or otherwise) in the ordinary course of
business consistent with past practice;
(e) Incur, assume or guarantee Indebtedness other than in the ordinary
course of business of the Companies;
(f) Enter into any extraordinary transaction or commitment relating to
the assets or the business of either of the Companies which, individually or in
the aggregate, could reasonably be expected to be material to either of the
Companies, or cancel or waive any claim or right of substantial value which,
individually or in the aggregate, could reasonably be expected to be material to
either of the Companies, or amend any term of any Company Securities;
(g) Set aside or pay any dividend or make any other distribution with
respect to any shares of capital stock of either of the Companies or repurchase,
redeem or otherwise acquire directly or indirectly, any outstanding shares of
capital stock or other securities of, or other ownership interests in, either of
the Companies;
(h) Other than those reflected in the Audited Statements, make any
change in accounting methods or practices (including changes in accrual or
reserve policies) or, other than in the ordinary course of business consistent
with past practice, any change in accrual or reserve amounts;
(i) Issue or sell any Company Securities or make any other changes in
its capital structure, including the grant of any stock option or other right to
purchase shares of capital stock of either of the Companies;
(j) Enter into or effect any extraordinary sale, lease or other
disposition of any material asset or property owned, leased or otherwise used by
either of the Companies;
(k) Except as expressly permitted under this Agreement, write-off as
uncollectible
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any notes or accounts receivable, except write-offs in the ordinary course of
business charged to applicable reserves, none of which individually or in the
aggregate is material; write-off, write-up or write-down any other material
asset of either of the Companies; or alter (in a manner which is adverse to the
Company or the Buyer) its customary time periods (applicable to each account
party) for collection of accounts receivable or payments of accounts payable;
(l) Create or assume any Lien other than a Permitted Lien;
(m) Make any loan, advance or capital contributions to or investment in
any Person other than between the Companies in the ordinary course of business;
(n) Terminate or close any material facility, business or operation of
either of the Companies;
(o) Cause any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of either of the
Companies which, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect;
(p) Cause any other event, occurrence, development or state of
circumstances or facts which individually or together with other matters, could
reasonably be expected to have a Material Adverse Effect; or
(q) Agree to do any of the foregoing.
5.2. EXCLUSIVE DEALING. During the period from the date of
this Agreement to the earlier of the Closing Date and the termination of this
Agreement in accordance with its terms, no Shareholder, nor either of the
Companies, or any of their respective Affiliates, or any officer or director of
either of the Companies, or any of their respective Affiliates, or other
representative of any of the foregoing (including advisors, agents, attorneys,
employees or consultants) will take any action to, directly or indirectly,
encourage, initiate, solicit or engage in discussions or negotiations with, or
provide any information to any Person, other than Buyer (and its affiliates and
representatives), concerning any purchase of any capital stock of either of the
Companies or any purchase or sale of substantially all of the Companies' assets
or similar transaction involving either of the Companies (a "THIRD-PARTY
TRANSACTION"), PROVIDED, HOWEVER, that during such period the directors of the
Companies may, in response to a proposed Third-party Transaction that was not
solicited by the Companies or any Shareholder or any of their respective
Affiliates and that did not otherwise result from a breach of this Section 5.2,
provide information regarding the Companies or engage in negotiations or
substantive discussions with such Person regarding such proposed Third-Party
Transaction, in each case only if the directors of the Companies determine in
good faith, after consultation with counsel and their financial advisors, that
failing to take such action would result in a breach of the fiduciary duties of
the directors of the Companies. Each of the Companies and the Shareholders will
disclose to Buyer the existence or occurrence of any proposal or contract which
it or they or any of their representatives described above may receive in
respect of any such transaction and the identity of the Person from whom such a
proposal or contract is received.
5.3. REVIEW OF THE COMPANIES; CONFIDENTIALITY. (a) Buyer may,
prior to the Closing Date, directly or through its representatives, review the
properties, books and records of
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each of the Companies and their financial and legal condition to the extent it
deems necessary or advisable to familiarize itself with such properties and
other matters. Each of the Companies will permit Buyer and its representatives
to have, after the date of execution of this Agreement, reasonable access during
the regular business hours of the Companies to the premises and to all the
respective books and records of each of the Companies and to cause the officers
of each of the Companies to furnish Buyer with such financial and operating data
and other information with respect to the respective business and properties of
each of the Companies as Buyer will from time to time reasonably request. Each
of the Companies will deliver or cause to be delivered to Buyer such additional
instruments, documents and certificates as Buyer may reasonably request for the
purpose of (i) verifying the information set forth in this Agreement or on any
Schedule attached hereto and (ii) consummating or evidencing the transactions
contemplated by this Agreement.
(b) Prior to the Closing, without the prior written consent of
the other parties, no party will, or will permit any of its Affiliates to,
disclose to any other Person (other than such party's financing sources,
existing shareholders and such party's directors, officers, employees, advisors
and other representatives that need to know) any proprietary, non-public
information of another party previously delivered or made available to such
other party in connection with the transactions contemplated hereby (including
the existence of and terms of this Agreement and the Ancillary Agreements),
other than to the extent required by applicable Law and upon the advice of
counsel. Each party will direct its financing sources, shareholders, directors,
officers, employees and representatives to keep all such information in strict
confidence; provided, however, that each such person may disclose such
information to the extent required by Law and upon the advice of counsel.
5.4. BEST EFFORTS. Each of the Companies, the Shareholders and
Buyer will cooperate and use their respective best efforts to take, or cause to
be taken, all appropriate actions, and to make, or cause to be made, all filings
necessary, proper or advisable under applicable laws and regulations (including,
without limitation, the filing of Notification and Report Forms under the HSR
Act with the Federal Trade Commission and the Antitrust Division of the
Department of Justice) to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, their respective
reasonable efforts to obtain, prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Authorities and parties to contracts with each of the Companies, the
Shareholders or Buyer as are necessary, if any, for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby. Notwithstanding any other provision hereof, in no
event will Buyer or any of its Affiliates (including either of the Companies
after the Closing) be required to (a) enter into or offer to enter into any
divestiture, hold-separate, business limitation or similar agreement or
undertaking in connection with this Agreement or the transactions contemplated
hereby or (b) make any payment in connection with any consent or approval or
condition to Closing set forth in any subsection of Section 7.1 or 7.2 (except
for the filing fee associated with the filing of Notification and Report Forms
under the HSR Act) which it is necessary or advisable for the Shareholders or
either of the Companies to obtain or satisfy in order to consummate the
transactions contemplated by this Agreement.
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5.5. SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS. On
or prior to the Closing Date, each of the Companies will terminate all
equity-based plans or agreements listed in any Schedule referred to in Section
3.1.18.
5.6. PLAN ASSETS. Prior to Closing, each of the Companies will
conduct their businesses in the same manner as currently conducted, which the
Companies and the Shareholders believe will cause the Companies to constitute an
Operating Company.
5.7. MONTHLY FINANCIAL STATEMENTS. Prior to the Closing and
promptly after the preparation thereof, the Companies will deliver to Buyer all
Monthly CFI Financial Statements and Calbrit Financial Statements not delivered
to Buyer as of the date hereof.
5.8. SUPPLEMENTS TO SCHEDULES. Prior to the Closing, the
Companies and the Shareholders may supplement the Schedules required by any
subsection of Sections 3.1 and 3.2 of this Agreement ("COMPANY SCHEDULES"),
subject to Buyer's rights under Section 7.1.9
5.9. FURTHER ASSURANCES. From time to time, as and when
requested by any party hereto and subject to Section 5.4, the other parties will
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and will take, or cause to be taken, all such further or other
actions, as the requesting party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
VI. TAX MATTERS
6.1. TAX RETURNS. (a) Buyer will have the exclusive authority
and obligation to prepare and timely file, or cause to be prepared and timely
filed, all Returns of each of the Companies that are due with respect to any
taxable year or other taxable period ending on or prior to the Closing Date.
Such authority will include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the respective income, properties and operations of each of the Companies
will be reported or disclosed in such Returns; PROVIDED, HOWEVER, that such
Returns will be prepared by treating items on such Returns in a manner
consistent with the past practice with respect to such items, unless otherwise
required by Law. Buyer will provide to the Shareholders' Representative drafts
of all Returns of each of the Companies required to be prepared and filed by the
Buyer under this Section 6.1(a) at least 30 days prior to the due date for the
filing of such Returns (including any extensions). At least 15 days prior to the
due date for the filing of such Returns (including any extensions), the
Shareholders' Representative will notify Buyer in writing of the existence of
any objection (specifying in reasonable detail the nature and basis of such
objection) the Shareholders' Representative may have to any items set forth on
such draft Returns (a "SHAREHOLDERS' REPRESENTATIVE DISPUTE NOTICE"). The
Shareholders' Representative and Buyer agree to consult and resolve in good
faith any such objection. Buyer will not file any such Return without the prior
written consent of the Shareholders' Representative, which consent will not be
unreasonably withheld or delayed; PROVIDED, HOWEVER, that no such consent will
be required if the Shareholders' Representative shall not have timely delivered
a Shareholders' Representative Dispute Notice or the objections contained in
such Shareholders' Representative Dispute Notice shall have been finally
resolved.
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(b) If within five days of the delivery of a Shareholders'
Representative Dispute Notice in accordance with Section 6.1(a), Buyer and the
Shareholders' Representative are unable to resolve in good faith any objection
set forth in such Shareholders' Representative Dispute Notice, such objection
will be referred by the parties for determination to the Accountants as promptly
as practicable, but no later than two Business Days after the expiration of such
five day period. Buyer and the Shareholders' Representative will use reasonable
efforts to cause the Accountants to render their decision as soon as practicable
thereafter, including without limitation by promptly complying with all
reasonable requests by the Accountants for information, books, records and
similar items. Buyer and the Shareholders' Representative will cause the
Accountants to make a determination as to each such objection (but only such
objection), which determination will be in writing and furnished to each of the
parties hereto as promptly as practicable after the items in dispute have been
referred to the Accountants (but in no event later than two Business Days prior
to the due date (including extensions) for filing such Return). Such
determination by the Accountants will be conclusive and binding upon each of the
parties hereto. Except as provided for in Section 2.6(b), nothing herein will be
construed to authorize or permit the Accountants to determine any question or
matter whatsoever under or in connection with this Agreement, except the
determination of such objection. The fees and expenses of the Accountants
relating to this Section 6.1(b) will be paid equally by the parties.
6.2. APPORTIONMENT OF TAXES. All Taxes and Tax liabilities
with respect to the income, property or operations of each of the Companies that
relate to a taxable year or other taxable period beginning before and ending
after the Closing Date will be apportioned between the Pre-Closing Tax Period
and the Post-Closing Tax Period as follows: (A) in the case of Taxes other than
income Taxes, payroll Taxes and sales and use Taxes, on a per diem basis, and
(B) in the case of income Taxes, payroll Taxes and sales and use Taxes, as
determined from the books and records of each of the Companies, between
Pre-Closing and Post-Closing Tax Periods as though the taxable year of each of
the Companies terminated at the close of business on the Closing Date without
giving effect to the transactions contemplated hereby and in a manner consistent
with past practices of the Companies. Subject to Section 8.3, the Shareholders
will be liable for the payment of all Taxes of each of the Companies which are
attributable to any Pre-Closing Tax Period (net of reserves for such Taxes to
the extent accurately reflected in the Closing Date Balance Sheet and the
computation of the Closing Shareholders' Equity), whether shown on any original
return or amended return for the period referred to therein. Each of the
Companies will be liable for the payment of all Taxes which are attributable to
any Post-Closing Tax Period.
6.3. COOPERATION; AUDITS. In connection with the preparation
of Returns, audit examinations and any administrative or judicial proceedings
relating to the Tax liabilities imposed on each of the Companies for all
Pre-Closing Tax Periods, Buyer and each of the Companies on the one hand, and
the Shareholders' Representative on the other hand, will cooperate on a
reasonable basis with each other following the Closing, including, but not
limited to, the furnishing or making available during normal business hours of
records, personnel (as reasonably required), books of account, powers of
attorney or other materials necessary or helpful for the preparation of such
Returns, the conduct of audit examinations or the defense of claims by Tax
authorities as to the imposition of Taxes.
6.4. CONTROVERSIES. (a) Buyer or the Shareholders'
Representative (as the case may be) will promptly, but in no event later than 10
Business Days after receipt thereof, notify the
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other party in writing of any inquiries, claims, assessments, audits or similar
events with respect to Taxes relating to a Pre-Closing Tax Period ending after
October 31, 1995 for which the Shareholders may be liable (any such inquiry,
claim, assessment, audit or similar event, a "POST-OCTOBER 31, 1995 TAX
MATTER"). Buyer, at Buyer's sole expense, with the cooperation of the
Shareholders' Representative, will have the exclusive authority to represent the
interests of each of the Companies with respect to any Post-October 31, 1995 Tax
Matter before the IRS, any other Taxing Authority, any other governmental agency
or authority or any court and will have the sole right, with the cooperation of
the Shareholders' Representative, to extend or waive the statute of limitations,
with respect to any such Post-October 31, 1995 Tax Matter and to control the
defense, compromise or other resolution of any such Post-October 31, 1995 Tax
Matter, including responding to inquiries, filing Tax returns and settling
audits; PROVIDED, HOWEVER, that Buyer will not enter into any settlement of or
otherwise compromise any Post-October 31, 1995 Tax Matter that affects or may
affect the Tax liability of the Shareholders without the prior written consent
of the Shareholders' Representative, which consent will not be unreasonably
withheld or delayed. Each of the Shareholders' Representative and Buyer will, in
good faith, allow the other party to consult with it regarding the conduct of or
positions taken in any such proceeding.
(b) Buyer or the Shareholders' Representative (as the case may
be) will promptly, but in no event later than 10 Business Days after receipt
thereof, notify the other party in writing of any inquiries, claims,
assessments, audits or similar events with respect to Taxes relating to a
Pre-Closing Tax Period ending prior to October 31, 1995 for which either Company
may be liable (any such inquiry, claim, assessment, audit or similar event, a
"PRE-OCTOBER 31, 1995 TAX MATTER"). The Shareholders' Representative, at the
Shareholders' sole expense, with the cooperation of the Buyer, will have the
exclusive authority to represent the interests of each of the Companies with
respect to any Pre-October 31, 1995 Tax Matter before the IRS, any other Taxing
Authority, any other governmental agency or authority or any court and will have
the sole right, with the cooperation of the Buyer, to extend or waive the
statute of limitations, with respect to a Pre-October 31, 1995 Tax Matter and to
control the defense, compromise or other resolution of any Pre-October 31, 1995
Tax Matter, including responding to inquiries, filing Tax returns and settling
audits; PROVIDED, HOWEVER, that the Shareholders' Representative or any other
Shareholder will not enter into any settlement of or otherwise compromise any
Tax Matter that affects or may affect the Tax liability of either Company
without the prior written consent of the Buyer, which consent will not be
unreasonably withheld or delayed. Each of the Shareholders' Representative and
Buyer will, in good faith, allow the other party to consult with it regarding
the conduct of or positions taken in any such proceeding.
6.5. AMENDED RETURNS. Buyer will not file or cause to be filed
any amended return covering any period or adjusting any Taxes for a period which
includes any period prior to the Closing Date without the prior written consent
of the Shareholders' Representative, which consent will not be unreasonably
withheld or delayed.
6.6. NON-FOREIGN PERSON AFFIDAVIT. Each of the Shareholders
will furnish to Buyer on or before the Closing Date a non-foreign person
affidavit as required by Section 1445 of the Code.
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VII. CONDITIONS TO CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate the transactions contemplated hereby to occur at the Closing
are subject to the satisfaction of the following conditions:
7.1.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
COMPANIES. (a) The representations and warranties of each of the Companies made
in this Agreement will be true and correct in all respects (or, if any such
representation is not expressly qualified by "materiality," "Material Adverse
Effect" or words of similar import, then in all material respects) as of the
date hereof and as of the Closing, as though made as of the Closing; (b) each of
the Companies shall have performed and complied with all terms, agreements and
covenants contained in this Agreement required to be performed or complied with
by each of the Companies on or before the Closing Date; and (c) each of the
Companies shall have delivered to Buyer a certificate of each of the Companies'
Chief Executive Officers, dated the Closing Date, confirming the foregoing and
such other evidence of compliance with its obligations as Buyer may reasonably
request.
7.1.2. CERTIFICATE OF EACH OF THE COMPANIES. Each of the
Companies shall have delivered to Buyer a certificate from its Secretary or an
Assistant Secretary certifying as to the due adoption of resolutions adopted by
its Board of Directors and its shareholders (if required), authorizing the
execution of this Agreement and the taking of any and all actions deemed
necessary or advisable to consummate the transactions contemplated herein.
7.1.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SHAREHOLDERS. (a) The representations and warranties of the Shareholders made in
this Agreement will be true and correct in all respects (or, if any such
representation is not expressly qualified by "materiality," "Material Adverse
Effect" or words of similar import, then in all material respects) as of the
date hereof and as of the Closing, as though made as of the Closing; (b) the
Shareholders shall have performed and complied with all terms, agreements and
covenants contained in this Agreement required to be performed or complied with
by the Shareholders on or before the Closing Date; and (c) the Shareholders
shall have delivered to Buyer certificates dated the Closing Date confirming the
foregoing and such other evidence of compliance with the Shareholders'
obligations as Buyer may reasonably request.
7.1.4. NO INJUNCTION, ETC. No judgment, injunction, order or
decree will be in effect which will prohibit the consummation of the
transactions contemplated hereby to occur at the Closing.
7.1.5. NO PROCEEDINGS. No proceeding challenging this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or seeking to prohibit, alter, prevent or materially delay the Closing
or seeking damages will have been instituted by any Person (other than Buyer)
before any court, arbitrator or Governmental Authorities and be pending.
7.1.6. REQUIRED FILINGS. All actions by or in respect of or
filings by each of the Companies or the Shareholders with any Person required to
permit the consummation of the transactions contemplated hereby to occur at the
Closing shall have been taken, made or obtained.
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7.1.7. OPINION OF COUNSEL. Buyer shall have received the
opinions of Ward, Kroll & Jampol, a Law Corporation and LeBoeuf, Lamb, Greene &
MacRae L.L.P., counsel to the Companies and the Shareholders, dated the Closing
Date, which, taken together are to the effect substantially as set forth in
EXHIBIT G-1 AND EXHIBIT G-2, RESPECTIVELY, together with letters of each such
counsel entitling the banks and underwriters providing the financing
contemplated by Section 7.1.15 to rely on such opinions.
7.1.8. SPOUSAL CONSENT. Each Shareholder will cause to be
delivered to Buyer a spousal consent by such Shareholder's spouse, if any,
pursuant to the laws of the State of California, dated the date hereof,
substantially in the form attached hereto as EXHIBIT H.
7.1.9. DUE DILIGENCE; SCHEDULE SUPPLEMENTS. (a) Buyer shall
have completed, or caused to be completed by its attorneys, accountants and
other representatives, business, legal, environmental and accounting due
diligence investigations and reviews of each of the Companies, with the results
thereof satisfactory to Buyer in its sole discretion.
(b) Buyer shall have been given the opportunity to review and
shall have approved, in its sole discretion, any supplement to a Company
Schedule permitted by Section 5.8.
7.1.10. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements
required to be executed by any party other than Buyer shall have been executed
and delivered by the parties thereto other than Buyer.
7.1.11. RESIGNATION OF DIRECTORS. Each of the Directors of
each of the Companies immediately as of the Closing shall have submitted a
letter of resignation to the applicable Company effective as of the Closing.
7.1.12. THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All
consents, approvals or waivers, if any, disclosed on any Schedule attached
hereto or otherwise required in connection with the consummation of the
transactions contemplated by this Agreement shall have been received. All of the
consents, approvals, authorizations, exemptions and waivers from Governmental
Authorities that will be required in order to enable Buyer to consummate the
transactions contemplated hereby shall have been obtained.
7.1.13. FIRPTA. Each of the Shareholders shall have furnished
to Buyer, on or prior to the Closing Date, a non-foreign person affidavit
required by Section 1445 of the Code.
7.1.14. NO MATERIAL ADVERSE CHANGE. Prior to the Closing, no
event shall have occurred which, individually or when considered together with
all other matters, has had or which could reasonably be expected to have a
Material Adverse Effect.
7.1.15. FINANCING. Buyer shall have obtained financing for the
payment of the Aggregate Closing Consideration, the Escrow Amount and the
Indebtedness of the Companies on terms satisfactory to it in its sole
discretion.
7.1.16. SHAREHOLDER INDEBTEDNESS; INTERCOMPANY ACCOUNTS.
Except for the loan from Mr. Robert Reagan to the Company as disclosed on
SCHEDULE 7.1.16, all Indebtedness (including Indebtedness set forth on SCHEDULE
3.1.8) owed to any Shareholder or any of such Shareholder's
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Affiliates by either of the Companies and all Indebtedness (including
Indebtedness set forth on SCHEDULE 3.1.8) owed by any Shareholder or any of such
Shareholder's Affiliates to either of the Companies shall have been repaid and
canceled, which may occur by reduction of such Shareholder's portion of the
Aggregate Closing Consideration.
7.1.17. HSR ACT. Any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby will have expired or been
terminated.
7.2. CONDITIONS TO OBLIGATIONS OF EACH OF THE COMPANIES AND
THE SHAREHOLDERS. The obligations of each of the Companies and the Shareholders
to consummate the transactions contemplated hereby to occur at the Closing are
subject to the satisfaction of the following conditions:
7.2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. (a)
The representations and warranties of Buyer made in this Agreement will be true
and correct in all respects (or, if any such representation is not expressly
qualified by "materiality," "Material Adverse Effect" or words of similar
import, then in all material respects) as of the date hereof and as of the
Closing, as though made as of the Closing; (b) Buyer shall have performed and
complied with all terms, agreements and covenants contained in this Agreement
required to be performed or complied with by Buyer on or before the Closing
Date; and (c) Buyer shall have delivered to each of the Companies and the
Shareholders a certificate of Buyer's Chief Executive Officer, dated the Closing
Date, confirming the foregoing and such other evidence of compliance with its
obligations as either of the Companies or the Shareholders may reasonably
request.
7.2.2. BUYER'S CERTIFICATE. Buyer shall have delivered to each
of the Companies and the Shareholders a certificate from its Secretary or
Assistant Secretary certifying as to the due adoption of resolutions adopted by
the Board of Directors of Buyer authorizing the execution of this Agreement and
the taking of any and all actions deemed necessary or advisable to consummate
the transactions contemplated herein.
7.2.3. NO INJUNCTION, ETC. No judgment, injunction, order or
decree will be in effect which will prohibit the consummation of the
transactions contemplated hereby to occur at the Closing.
7.2.4. NO PROCEEDINGS. No proceeding challenging this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby or seeking to prohibit, alter, prevent or materially delay the Closing
or seeking damages will have been instituted by any Person (other than the
Companies or any Shareholder) before any court, arbitrator or Governmental
Authorities and be pending.
7.2.5. REQUIRED FILINGS. All actions by or in respect of or
filings by Buyer with any Person required to permit the consummation of the
Closing shall have been taken, made or obtained.
7.2.6. OPINION OF COUNSEL. Each of the Companies and the
Shareholders shall have received an opinion of Jones, Day, Reavis & Pogue,
counsel to Buyer, dated the Closing Date, substantially in the form attached
hereto as EXHIBIT I.
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7.2.7. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements
required to be executed by Buyer or an Affiliate shall have been executed and
delivered by Buyer or its designee.
7.2.8. HSR ACT. Any applicable waiting period under the HSR
Act relating to the transactions contemplated hereby will have expired or been
terminated.
7.2.9. SHAREHOLDER GUARANTEES. Buyer shall have paid directly
to the applicable creditor or to the Escrow Agent under an escrow arrangement
with terms reasonably acceptable to the parties and the Escrow Agent, an amount
sufficient to pay in full the Indebtedness listed on Schedule 7.2.9.
VIII. SURVIVAL; INDEMNIFICATION
8.1. SURVIVAL. The representations and warranties of the
parties contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith will survive the Closing for
two years thereafter; PROVIDED, HOWEVER, that the representations and warranties
contained in Sections 3.1.9 and 3.1.17 will survive the Closing until the
expiration of the statute of limitations applicable to the matters covered
thereby (after giving effect to any waiver, mitigation or extension thereof
granted by either of the Companies after the Closing) and the representations
and warranties contained in Sections 3.1.1, 3.1.2, 3.1.3, 3.1.4 and 3.1.5
(collectively, the "SELECTED COMPANY REPRESENTATIONS AND WARRANTIES"), 3.2.1,
3.2.2, 3.2.3, 3.2.4 (collectively, the "SELECTED SHAREHOLDER REPRESENTATIONS AND
WARRANTIES"), and 4.1, 4.2, 4.3 and 4.4 will survive the Closing indefinitely.
Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under this Agreement will survive the
time at which it would otherwise terminate pursuant to the preceding sentence if
written notice of the inaccuracy or breach thereof giving rise to such right of
indemnity (including notice given pursuant to Section 8.4(a)) shall have been
given to the party against whom such indemnity may be sought prior to such time,
PROVIDED, HOWEVER, that the applicable representation or warranty will survive
only with respect to the particular inaccuracy or breach specified in such
applicable written notice. All covenants and agreements of the parties contained
in this Agreement, to the extent required to be performed after the Closing,
will survive the Closing indefinitely.
8.2. INDEMNIFICATION. (a) Provided that notice has been given
pursuant to Section 8.4(a), if required, and the Notified Party fails to cure,
or otherwise to perform its obligations with respect to curing, as provided in
Section 8.4(a), each Shareholder, severally and not jointly, will indemnify,
defend and hold harmless Buyer and its Affiliates (including, after the Closing
Date, each of the Companies) and the successors to the foregoing (and their
respective members and partners), against any and all liabilities, damages and
losses, and, if (but only to the extent) asserted in a Third Party Claim,
punitive damages, and all costs or expenses, including, without limitation,
reasonable attorneys' and consultants' fees and expenses ("DAMAGES"), incurred
or suffered as a result of or arising out of (i) the failure of any
representation or warranty made by either of the Companies or any Shareholder in
any subsection of Section 3.1 to be true and correct as of the Closing Date
(other than a breach of Section 3.1.9 with respect to Taxes, which will be
governed by Section 8.3) or (ii) the breach of any covenant or agreement made or
to be performed by either of the Companies pursuant to this Agreement; PROVIDED,
HOWEVER, that to the extent such breach or failure cannot be cured "DAMAGES"
shall also include the diminution in value of the Common Stock caused by such
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breach or failure; and, PROVIDED, FURTHER, that no Shareholder will be liable
under this Section 8.2(a) (other than with respect to such breaches of any of
the Selected Company Representations and Warranties) unless the aggregate amount
of Damages exceeds $200,000 and then from the first dollar to the full extent
of such Damages and subject to the limitations set forth elsewhere in this
Article VIII.
(b) Provided that notice has been given pursuant to Section
8.4(a), if required, and the Notified Party fails to cure, or otherwise to
perform its obligations with respect to curing, as provided in Section
8.4(a), each Shareholder, severally and not jointly, will indemnify, defend
and hold harmless Buyer and its Affiliates (including, after the Closing
Date, each of the Companies) and the successors to the foregoing (and their
respective partners and members) against Damages incurred or suffered as a
result of or arising out of (i) the failure of any representation or warranty
made by such Shareholder in any subsection of Section 3.2 of this Agreement
to be true and correct as of the Closing Date or (ii) the breach of any
covenant or agreement made or to be performed by such Shareholder pursuant to
this Agreement.
(c) Provided that notice has been given pursuant to Section
8.4(a), if required, and the Notified Party fails to cure, or otherwise to
perform its obligations with respect to curing, as provided in Section
8.4(a), Buyer and each of the Companies, jointly and severally, on and after
the Closing Date will indemnify, defend and hold harmless each of the
Shareholders against Damages incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by Buyer in
this Agreement to be true and correct as of the Closing Date or (ii) the
breach of any covenant or agreement made or to be performed by Buyer pursuant
to this Agreement; PROVIDED, HOWEVER, that Buyer will not be liable under
this Section 8.2(c) unless the aggregate amount of Damages exceeds $200,000
and then from the first dollar to the full extent of such Damages; PROVIDED,
FURTHER, HOWEVER, that Buyer's liability under this Section 8.2(c) will not
exceed, in the aggregate, the Cap.
8.3. TAX INDEMNIFICATION. (a) Each Shareholder, severally and
not jointly, will indemnify, defend and hold harmless Buyer, and its Affiliates
(including, after the Closing Date, each of the Companies) and the successors to
the foregoing (and their respective members and partners) against the following
Taxes: (i) all Taxes (and losses, claims and expenses related thereto) resulting
from, arising out of, or incurred with respect to, any claims that may be
asserted by any party based upon, attributable to, or resulting from the failure
of any representation or warranty made pursuant to Section 3.1.9 to be true and
correct as of the Closing Date, (ii) all Taxes imposed on or asserted against
each of the Companies or for which either of the Companies may be liable in
respect of the properties, income or operations of either of the Companies for
all Pre-Closing Tax Periods, net of reserves for Taxes to the extent accurately
reflected in the computation of the Closing Shareholders' Equity; PROVIDED,
HOWEVER, that, with respect to income Taxes of CFI for the period from November
1, 1995 through and including October 31, 1998, the Shareholders will be liable
under this Agreement only for such income Taxes for such period which, in the
aggregate, exceed the greater of (x) of $1.1 million plus interest and penalties
thereon, and (y) the product of (I) the difference between (A) the cumulative
aggregate net taxable income of CFI for the fiscal years ended October 31, 1996,
1997 and 1998 set forth in the statements of operations of CFI as audited by
Ernst & Young, LLP and (B) the cumulative aggregate net taxable income of CFI
for the fiscal years ended October 31, 1996, 1997 and 1998 set forth in the
statement of operations of CFI as audited by Kushner, Smith, Joanou & Gregson,
LLP, and (II) applicable federal, state and local income tax rates, plus
interest and penalties thereon.
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(b) Amounts payable hereunder by the Shareholders pursuant to
Section 8.3(a) in respect of income Taxes, including penalties and interest
thereon: (i) for the period from November 1, 1995 through October 31, 1998, will
be paid from prior or future payments of the Earnout Amount, if any (whether
paid in cash or, if paid by Earnout Notes, by offset against the Earnout Notes)
and (ii) for any period ending prior to November 1, 1995, will be paid from
prior or future payments of the Escrow Amount, if any, and prior or future
payments of the Earnout Amount, if any (whether paid in cash or, if paid by
Earnout Notes, by offset against the Earnout Notes). If the income Tax liability
for the periods described in clauses (i) and (ii) of the immediately preceding
sentence exceeds the respective amounts from which such income Tax liability is
permitted to be paid as set forth in such clauses (respectively, the "TAX
CAPS"), the Shareholders will have no further liability whatsoever for such
income Taxes which would otherwise be payable hereunder but for the Tax Caps.
Amounts paid by the Shareholders under this Section 8.3 will be credited against
the Cap.
8.4. PROCEDURES. (a) (i) Notwithstanding anything to the
contrary contained in Section 8.2, for all matters other than Third Party
Claims, prior to seeking indemnity pursuant to Section 8.2, any party seeking
such indemnification (the "NOTIFYING PARTY") will first notify in writing the
party from whom such indemnification is sought (including the Shareholders'
Representative, in the case of any Shareholder) (the "NOTIFIED PARTY") of such
matter. The Notified Party will respond to the Notifying Party in writing within
30 days after receipt of such notice as to the validity of such matter.
(ii) If such validity is so confirmed by the Notified Party,
the Notified Party will, in consultation with, but without requiring
the approval of, the Notifying Party, diligently and in good faith
(without unreasonably disrupting the business of the Indemnified Party)
pursue the resolution or remedy of the matters set forth in such notice
to the extent that such matters would no longer give rise to a right of
indemnification under Section 8.2 as of the Closing. The Notified Party
will certify in writing to the Notifying Party that the matters set
forth in such notice have been remedied or resolved to the extent
required in the immediately preceding sentence at the time of such
remedy or resolution (the "Cure"). Any Cure effected after the Closing,
shall be deemed to be effective as of the Closing. If the Notifying
Party disagrees with the Notified Party and believes that the Cure has
not been effected, then the Notifying Party may, in good faith, seek
indemnification under Section 8.2 in respect of the matters described
in such notice.
(iii) If the validity of a Direct Claim is disputed or the
notice referred to in the first sentence of this Section 8.4(a) (i) is
not responded to within the stated 30 day period, the Notifying Party
may seek indemnification under Section 8.2 in respect of the matters
set forth in the Direct Claim. If the validity of a Third Party Notice
is disputed or the notice referred to in this Section 8.4(a) (i) is not
responded to within the stated 30 day period, such Third Party Notice
shall be deemed to constitute a Third Party Claim in respect of which,
the Notifying Party may seek indemnification under Section 8.2.
(b) (i) The Indemnifying Party will have the right to
participate in, or, by giving written notice to the Indemnified Party, to
assume, the defense of any Third Party Claim at the Companies' costs and
expenses (subject to reimbursement, if required hereunder) and by such
Indemnifying Party's own counsel (approved by the Indemnified Party), and the
Indemnified Party will cooperate in good faith in such defense. If an
Indemnified Party receives written notice from the
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Indemnifying Party that the Indemnifying Party has elected to assume the defense
of such Third Party Claim as provided in the immediately preceding sentence, the
Company will pay as and when due all costs and expenses (subject to
reimbursement, if required hereunder) in connection with the defense thereof;
PROVIDED, HOWEVER, that if the Indemnifying Party fails, within ten days after
the Indemnified Party's receipt of such written notice from the Indemnified
Party, to take reasonable steps necessary to defend diligently such Third Party
Claim, the Indemnified Party may assume its own defense.
(ii) Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any
Third Party Claim and, if the Indemnifying Party desires to accept and
agree to such offer of settlement, the Indemnifying Party will give
reasonable prior written notice to the Indemnified Party to that
effect. If the Indemnified Party fails to consent, prior to the time
period set forth in such offer of settlement (but in no event shall the
Indemnified Party have less than three days after receipt of such
notice to consent), to a firm offer (which includes a release of all
claims alleged against the Indemnified Party and provides for the
payment of monetary damages only), in such event, the maximum amount of
Damages to be paid by the Indemnifying Party as to such Third Party
Claim will not exceed the amount of such settlement offer (and the
Indemnified Parties' costs and expenses in respect of the indemnifiable
claims to which such settlement offer relates) and the Indemnified
Party may continue to contest or defend such Third Party Claim at its
own cost and expense without any further right of reimbursement
hereunder.
(iii) The Shareholders will reimburse the Company for all
costs and expenses in connection with defense of Third Party Claims
unless (A) such Third Party Claim was settled without payment or any
other liability relating to such Third Party Claim to such third party,
or (B) a favorable determination has been made for the Indemnified
Party and/or Indemnifying Party (without payment or any other liability
relating to such Third Party Claim to such third party).
(iv) The Indemnified Party will cooperate with the
Indemnifying Party and will provide the Indemnifying Party with
reasonable access during normal business hours (without unreasonably
disrupting the business of the Indemnifying Party) to books, records,
premises and employees of the Indemnified Party, in each such case, to
the extent necessary in connection with the Indemnifying Party's
defense of any Third Party Claim which is the subject of a claim for
indemnification by an Indemnified Party hereunder.
(c) A failure to give timely notice or to include any
specified information in any notice as provided in Sections 6.4, 8.4(a) or
8.4(b) will not affect the rights or obligations of any party hereunder, except
and only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise prejudiced as a result
of such failure. In the event the failure to give timely notice prejudices the
Indemnifying Party, the Indemnified Party's liability for Damages will be
reduced to the extent of the shortfall in insurance recovery or to the extent of
such other dollar amount which constitutes prejudice to the Indemnifying Party
resulting from the failure to give such timely notice.
(d) Notwithstanding anything to the contrary contained in this
Agreement but without limiting the effect of any other provisions in this
Article VIII, Persons entitled to receive
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indemnification for Damages hereunder will be entitled to indemnification solely
for the reasonable fees and expenses in connection therewith of no more than one
law firm.
8.5. PERSONAL LIABILITY OF THE SHAREHOLDERS; INDEMNIFICATION
CAP. (a) Notwithstanding anything in this Agreement to the contrary, but subject
to Section 8.4(d), the aggregate personal liability of each Shareholder with
respect to claims for indemnification under this Agreement is and will be
limited to the following product (the "PERSONAL LIABILITY AMOUNT"): (i) sum of
the Aggregate Closing Consideration (as adjusted pursuant to Sections 2.4 and
2.5), and the amount of the Escrow Amount and the Earnout Amount which becomes
due to Shareholders, and (ii) the Percentage Interest.
(b) Notwithstanding anything to the contrary contained in this
Agreement, (i) the Shareholders' liability under this Agreement (other than with
respect to a breach of any of the representations and warranties contained in
Sections 3.1.9 or 3.2.4, liability under Section 8.3, or the breach of any
representation, warranty or covenant of the Company or any Shareholder which
constitutes fraud) will not exceed, in the aggregate, the Cap, (ii) the amounts
payable under the Cap will be reduced by all amounts paid by the Shareholders to
Indemnified Parties under Article VI or this Article VIII, and (iii) the amount
of indemnifiable Damages otherwise due under Section 8.3 will be reduced by all
amounts previously paid by the Shareholders to Indemnified Parties under this
Article VIII (other than Section 8.3) and under Article VI.
(c) All indemnifiable Damages under this Agreement will be
paid in cash in immediately available funds up to the amount of the Cash Cap,
and all other amounts owed by reason of such indemnifiable Damages by the
Shareholders will be offset against the Non-cash Cap.
(d) Whenever stated in this Agreement that the Shareholders
indemnify "severally" or words of similar import, the aggregate amount of
indemnifiable Damages (including Taxes) shall be multiplied by each
Shareholder's Percentage Interest to ascertain the total amount due by such
Shareholder including, without limitation, amounts owed pursuant to any section
or subsection of this Article VIII.
8.6. TREATMENT OF INDEMNIFICATION PAYMENTS. Any amount paid by
any Shareholder or Buyer under Section 8.2 or 8.3 will be treated as a capital
contribution, on the one hand, and/or an adjustment to the Aggregate
Consideration on the other hand.
8.7. INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED;
SET-OFF. The amount of Damages for which indemnification is provided under
Sections 8.2 and 8.3 will be computed net of any insurance proceeds received by
the Indemnified Party in connection with such Damages, reduced by all costs and
expenses related thereto and any premium increase or expense resulting
therefrom. If the amount with respect to which any claim is made under this
Section 8.7 gives rise to a currently realizable Tax benefit, the indemnity
payment will be reduced by the amount of such currently realizable benefit then
available to the party making the claim if and to the extent actually realized
by such party in the fiscal year in which such indemnity payment is made to such
party or in the next succeeding fiscal year. The Shareholders agree and
acknowledge that Buyer may, but, except as otherwise expressly set forth herein,
will not be obligated to, withhold against amounts payable pursuant to Section
2.7 any amount claimed by Buyer under this Article VIII ("INDEMNIFICATION
CLAIMS") pending final resolution (by settlement or final, unappealable court
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order) of any such claim and to set off the amount of any such finally resolved
Indemnification Claim against such amount payable pursuant to Section 2.7.
8.8. EXCLUSIVE REMEDY. Article VI and this Article VIII
constitute the exclusive remedies for the breach of or default under any of the
covenants, provisions or agreements, or the failure of any representations or
warranties contained in this Agreement; PROVIDED, HOWEVER, that the provisions
of this Section 8.8 will not prevent the Shareholders, the Company or Buyer from
seeking the remedies of specific performance or injunctive relief (other than
recission of this Agreement by any party hereto which right is expressly waived
hereby) in connection with the breach of a covenant or agreement of any party
hereto.
IX. MISCELLANEOUS
9.1. TERMINATION. (a) This Agreement may be terminated at any
time prior to the Closing:
(i) by the mutual written consent of Buyer and the
Shareholders' Representative;
(ii) by Buyer, if there has been a material violation or
breach by either of the Companies or a Shareholder of any covenant,
representation or warranty contained in this Agreement which has prevented the
satisfaction of any condition to the obligations of Buyer at the Closing, and
such violation or breach has not been waived by Buyer or, in the case of a
covenant breach, cured by either of such Companies or such Shareholder within
the earlier of (x) ten days after written notice thereof from Buyer or (y) the
Closing Date;
(iii) by the Shareholders' Representative if there has been a
material violation or breach by Buyer of any covenant, representation or
warranty contained in this Agreement which has prevented the satisfaction of any
condition to the obligations of the Companies at the Closing, and such violation
or breach has not been waived by the Shareholders' Representative or, in the
case of a covenant breach, cured by Buyer within the earlier of (x) ten days
after written notice thereof from the Shareholders' Representative or (y) the
Closing Date;
(iv) by Buyer or the Shareholders' Representative if the
transactions contemplated hereby have not been consummated by March 31, 1999;
PROVIDED, HOWEVER, that neither Buyer nor the Shareholders' Representative will
be entitled to terminate this Agreement pursuant to this Section 9.1(a)(iv) if
such Person's (or, in the case of the Shareholders' Representative, either of
the Companies' or a Shareholder's) breach of this Agreement has prevented the
consummation of the transactions contemplated hereby; or
(v) by Buyer, if the conditions to Closing set forth in
Sections 7.1.9 or 7.1.15 have not been satisfied.
(b) In the event that this Agreement is terminated pursuant to
Sections 9.1(a) (ii) and (iii), all further obligations of the parties hereto
under this Agreement (other than pursuant to Section 9.4, which will continue in
full force and effect) will terminate without further liability or obligation of
any party to any other party hereunder; PROVIDED, HOWEVER, that no party will be
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released from liability hereunder if this Agreement is terminated and the
transactions abandoned by reason of (i) failure of such party to have performed
its obligations hereunder or (ii) any misrepresentation made by such party of
any matter set forth herein.
9.2. NOTICES. All notices, requests and other communications
to any party hereunder will be in writing (including facsimile transmission) and
will be given to such party at its address set forth in SCHEDULE 9.2. All such
notices, requests and other communications will be deemed received on the date
of receipt by the recipient thereof if received prior to 5:00 p.m. in the place
of receipt and such day is a business day in the place of receipt. Otherwise,
any such notice, request or communication will be deemed not to have been
received until the next succeeding business day in the place of receipt.
9.3. AMENDMENTS AND WAIVERS. (a) Any provision of this
Agreement may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed, in the case of an amendment, by each party to this
Agreement (subject to Section 9.17(b)(iii)), or in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder will operate as a waiver thereof nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided will be cumulative and not exclusive of any rights or
remedies provided by law.
9.4. EXPENSES. Except as otherwise expressly provided for
herein, the parties will pay or cause to be paid all of their own fees and
expenses incident to this Agreement and in preparing to consummate and
consummating the transactions contemplated hereby, including the fees and
expenses of any broker, finder, financial advisor, legal advisor or similar
person engaged by such party. Buyer acknowledges that the Companies are
responsible for and will pay prior to or at Closing all such fees and expenses
incurred by either of the Companies and/or the Shareholders.
9.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto; PROVIDED, that, Buyer may assign
its rights (to be exercised through Buyer) under this Agreement to its senior
bank lenders which will provide the financing contemplated by Section 7.1.15
without the consent of any other party hereto.
9.6. NO THIRD PARTY BENEFICIARIES. Except as provided in
Article VIII, this Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied will give or be
construed to give to any Person, other than the parties hereto and such
permitted assigns any legal or equitable rights hereunder.
9.7. GOVERNING LAW. This Agreement will be governed by, and
construed in accordance with, the law of the State of New York, without regard
to the conflict of laws rules of such state.
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9.8. JURISDICTION. Except as otherwise expressly provided in
this Agreement, any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby may be brought in any court of competent
jurisdiction in the Borough of Manhattan or the United States District Court for
the Southern District of New York and each of the parties hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding which is brought in any
such court has been brought in an inconvenient forum. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party by certified
or registered mail, return receipt requested will be deemed effective service of
process on such party.
9.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
9.10. COUNTERPARTS. This Agreement may be signed in any number
of counterparts, each of which will be an original but all of which will
constitute one and the same instrument, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9.11. HEADINGS. The headings, the table of contents and the
Schedule and Exhibit indices in this Agreement are for convenience of reference
only and will not control or affect the meaning or construction of any
provisions hereof.
9.12. ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits hereto) constitutes the entire agreement among the
parties with respect to the subject matter of this Agreement. This Agreement
(including the Schedules and Exhibits hereto) supersedes all prior agreements
and understandings, both oral and written, between the parties with respect to
the subject matter hereof of this Agreement.
9.13. SEVERABILITY. If any provision of this Agreement or the
application of any such provision to any person or circumstance is held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability will not affect any other
provision hereof.
9.14. NO WAIVER. No action or inaction taken or omitted
pursuant to this Agreement will be deemed to constitute a waiver of compliance
with any representations, warranties or covenants contained in this Agreement
and will not operate or be construed as a waiver of any subsequent breach,
whether of a similar or dissimilar nature.
9.15. CERTAIN INTERPRETIVE MATTERS. (i) Unless the context
otherwise requires, (a) all references to Sections, Articles, Exhibits or
Schedules are to Sections, Articles, Exhibits, or Schedules of or to this
Agreement, (ii) each of the Schedules will apply only to the corresponding
Section or Subsection of this Agreement, PROVIDED, HOWEVER, that an item set
forth on a Schedule may be deemed to be disclosed on another Schedule if the
disclosure relating to such item is, on its
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face, expressly responsive to the representation and warranty to which such
other Schedule relates, (iii) each term defined in this Agreement has the
meaning assigned to it, (iv) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, (v) words in
the singular include the plural and VICE VERSA, and (vi) the term "INCLUDING"
means "including without limitation." All references to $ or dollar amounts will
be to lawful currency of the United States. To the extent the term "day" or
"days" is used, it shall mean calendar days.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof or thereof.
(c) (i) All references to the "KNOWLEDGE OF THE COMPANIES",
"KNOWLEDGE OF EITHER OF THE COMPANIES" or to words of similar import will be
deemed to be references to the actual knowledge of one or more of the executive
officers or directors of each of the Companies whose names are listed on
SCHEDULE 9.15(c)(i), and will include such knowledge as such executive officers
or directors would have had after due inquiry of the responsible individuals of
each of the Companies whose names are listed separately on SCHEDULE 9.15(c)(i).
(ii) All references to the "KNOWLEDGE OF BUYER" or to words of
similar import will be deemed to be references to the actual knowledge
of one or more of the executive officers, directors or members of the
management committee of Buyer whose names are listed on SCHEDULE
9.15(c)(ii) and, will include such knowledge as such executive
officers, directors or management committee members would have had
after due inquiry of the responsible individuals of Buyer whose names
are listed separately on SCHEDULE 9.15(c)(ii).
(iii) All references to the "KNOWLEDGE OF SHAREHOLDER",
"KNOWLEDGE OF THE SHAREHOLDERS" or to words of similar import will be
deemed to be references to the actual knowledge of such Shareholder, as
applicable.
9.16. TRANSFER OF PROCEEDS. No Shareholder will transfer or
permit the transfer of any of the Aggregate Closing Consideration received by or
on behalf of such Shareholder if the result thereof would make such Shareholder
unable to satisfy such Shareholder's obligations hereunder as to
indemnification.
9.17. SHAREHOLDERS' REPRESENTATIVE. (a) By the execution
and delivery of this Agreement, each Shareholder hereby irrevocably constitutes
and appoints Mr. Gary Buehler as shareholders' representative ("SHAREHOLDERS'
REPRESENTATIVE") with the exclusive authority to act in accordance with
Section 9.17(b). In the event of the death, resignation or inability to act
of Mr. Buehler, Robert Reagan will be successor Shareholders' Representative
with all powers of his predecessor.
(b) The Shareholders' Representative will have full power:
(i) to act on each Shareholder's behalf in accordance with the
terms of this Agreement, to give and receive notices on behalf of all
Shareholders and to act on their behalf in connection with any matter as to
which one or more Shareholders is an "Indemnified Party" or
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"Indemnifying Party" under this Agreement, all in the absolute discretion of
Shareholders' Representative;
(ii) in general, to do all things and to perform all acts,
including executing and delivering all agreements, certificates, receipts,
instructions and other instruments contemplated by or in connection with this
Agreement to substantiate the representations or warranties or to perform the
covenants made by the Shareholders herein; and
(iii) to amend this Agreement on behalf of the Shareholders.
Notwithstanding anything in this Section 9.17 to the contrary, the Shareholders'
Representative will not be authorized to alter, change or modify the Aggregate
Closing Consideration or the Personal Liability Amount on behalf of the
Shareholders.
This power of attorney, and all authority hereby conferred, is granted in
consideration of the mutual covenants and agreements made herein, and is
irrevocable and will not be terminated by any act of any Shareholder or by
operation of Law, whether by the death or incapacity of any Shareholder or by
the occurrence of any other event. The Shareholders' Representative will not be
liable for any action taken in the capacity of Shareholders' Representative in
accordance with the terms of this Agreement, including the compromise,
settlement, payment or defense of any claim (including expenses and costs
associated therewith) under this Agreement regardless of whether any Shareholder
is the claimant or the party against whom a claim is being made. In connection
with the exercise of his duties, the Shareholders' Representative will be
entitled to consult with and rely upon legal counsel and other professional
advisors, with the costs thereof to be allocated among the Shareholders and will
have no liability hereunder for actions taken in good faith reliance upon the
advice of such advisors. Each Shareholder will, jointly and severally, hold the
Shareholders' Representative harmless from any and all Damage which they, or any
one of them, may sustain as a result of any action taken in good faith
hereunder.
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The parties hereto have caused this Agreement to be duly
executed by their respective authorized officers or in their individual
capacity, if applicable, as of the day and year first above written.
CERTIFIED FABRICATORS, INC.
By: /s/ Gary J. Buehler
------------------------------------
Name: Gary J. Buehler
Title: President
CALBRIT DESIGN, INC.
By: /s/ Gary J. Buehler
------------------------------------
Name: Gary J. Buehler
Title: President
PRECISION PARTNERS, INC.
By: /s/ John Clark
------------------------------------
Name: John Clark
Title: Vice President
/s/ Gary J. Buehler
---------------------------------------------
Gary J. Buehler, individually and as
Shareholders' Representative
<PAGE>
Exhibit 2.6
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of August 27, 1999, by and
among GILLETTE MACHINE & TOOL CO., INC., a New York corporation (the "COMPANY"),
GILLETTE MACHINE & EQUIPMENT COMPANY, a New York general partnership (the
"PARTNERSHIP"), CHARLYNE GILLETTE, MARTIN GILLETTE, JOHN GILLETTE and
TESTAMENTARY TRUST B UNDER WILL OF FRANK P. GILLETTE DATED FEBRUARY 7, 1992
(each individually, a "SHAREHOLDER" and collectively, the "SHAREHOLDERS"), and
PRECISION PARTNERS, INC., a Delaware corporation ("BUYER").
RECITALS
A. The Shareholders own all of the issued and outstanding common stock,
$______ par value per share (the "COMMON STOCK"), of the Company.
B. Buyer desires to purchase from the Shareholders, and the Shareholders
desire to sell to Buyer, the Common Stock in exchange for the Aggregate Closing
Consideration, all on the terms and conditions set forth herein.
C. The parties desire to make certain representations, warranties and
covenants in connection with the transaction and to prescribe various conditions
to the transaction.
Accordingly, the parties hereto agree as follows:
I. DEFINITIONS
1.1. DEFINITIONS. In addition to the terms defined elsewhere herein, the
following terms, as used herein, have the following meanings when used herein
with initial capital letters:
"ACCOUNTANTS" has the meaning ascribed to such term in Section 2.4(b).
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
the first Person and, if such first Person is an individual, any member of the
immediate family (including parents, spouse and children) of such individual and
any trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member or
trust. For the purposes of this definition, "CONTROL," when used with respect to
any Person, means the possession, directly or indirectly, of the power to (i)
vote 10% or more of the securities having ordinary voting power for the election
of directors (or comparable positions) of such Person, or (ii) direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise, and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGGREGATE CLOSING CONSIDERATION" has the meaning ascribed to such
term in Section 2.2.
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"AGREEMENT" means this Agreement, as the same may be amended from time
to time in accordance with the terms hereof.
"ANCILLARY AGREEMENTS" means the Employment Letters, the
Noncompetition Agreements, the Consulting Agreements, the Rochester Lease, the
Assignment and all other instruments, certificates, bills of sale and other
agreements entered into by the Company, the Partnership or any Shareholder in
connection with the consummation of the transactions contemplated by this
Agreement, including the Reorganization.
"ASSIGNMENT" has the meaning ascribed to such term in Section 5.9.
"AUDITED FINANCIAL STATEMENTS" has the meaning ascribed to such term
in Section 5.4(b).
"BALANCE SHEET DATE" means February 28, 1999.
"BALANCE SHEET PRINCIPLES" has the meaning ascribed to such term in
Section 2.4(a).
"BASE SHAREHOLDERS' EQUITY" means $4.7 million.
"BUSINESS DAY" means a day other than a Saturday or Sunday or a day on
which banks located in New York City are authorized or required to close.
"BUYER" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"CAPITALIZED LEASE OBLIGATIONS" means, with respect to any Person, for
any applicable period, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP, and the amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in accordance with GAAP,
together with all obligations to make termination payments under such
capitalized lease obligations.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. ss.ss. 9601, et seq.
"CLOSING" has the meaning ascribed to such term in Section 2.7.
"CLOSING DATE" has the meaning ascribed to such term in Section 2.7.
"CLOSING BALANCE SHEET" has the meaning ascribed to such term in
Section 2.4(a).
"CLOSING SHAREHOLDERS' EQUITY has the meaning ascribed to such term in
Section 2.4(a).
"CLOSING SHAREHOLDERS' EQUITY STATEMENT" has the meaning ascribed to
such term in Section 2.4(a).
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"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"COMMON STOCK" has the meaning ascribed to such term in Recital A.
"COMPANY" has the meaning ascribed to such term in the introductory
paragraph of this Agreement.
"COMPANY NOTES" has the meaning ascribed to such term in Section 5.9.
"COMPANY PROPERTY" means any real property and improvements at any
time owned, leased, used, operated or occupied (whether for storage, disposal or
otherwise) by the Company.
"COMPANY SECURITIES" has the meaning ascribed to such term in Section
3.1.5(b).
"COMPUTER SYSTEMS" has the meaning ascribed to such term in Section
3.1.24.
"CONSTITUENT OF CONCERN" means any substance defined as a hazardous
substance, hazardous waste, hazardous material, pollutant, or contaminant by any
Environmental Law, any petroleum hydrocarbon and any degradation product of a
petroleum hydrocarbon, asbestos, PCB or similar substance, the handling,
storage, treatment or exposure of or to which is subject to regulation under any
Environmental Law.
"CONSULTING AGREEMENTS" means the Consulting Agreements, dated as of
the Closing Date, between the Company and each of John Gillette and Martin
Gillette, each substantially in the form attached hereto as EXHIBIT A.
"DAMAGES" has the meaning ascribed to such term in Section 8.2(a).
"DIRECT CLAIM" has the meaning ascribed to such term in Section
8.4(c).
"DISPUTE NOTICE" has the meaning ascribed to such term in Section 6.1.
"EMPLOYMENT LETTERS" means the employment agreements, dated the
Closing Date, between the Company and each of Darren Gillette and Bruce
Trombley, each substantially in the forms attached hereto as EXHIBIT B.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, citations, summonses,
notices of non-compliance or violation, requests for information, investigations
or proceedings relating to any Environmental Law or any permit issued under any
such Law, including (a) Environmental Claims by Governmental Authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) Environmental Claims by
any third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Constituents of Concern or
arising from alleged injury or threat of injury to human health and safety or
the environment.
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"ENVIRONMENTAL CONDITION" means a condition with respect to the
environment which has resulted or could result in a material loss, liability,
cost or expense to the Company.
"ENVIRONMENTAL LAW" means any Law in effect or, to the Company's
knowledge, reasonably expected to be adopted or made effective, as of the
Closing Date and any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to the environment, human health and safety, including CERCLA, and any
state and local counterparts or equivalents to all or any of the foregoing.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates and approvals of Governmental Authorities relating to or required
by Environmental Laws and necessary for the business of the Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any Person that, together with the Company,
would be considered a single employer within the meaning of Section 4001 of
ERISA or Section 414 of the Code.
"ESTIMATED CLOSING SHAREHOLDERS' EQUITY" has the meaning ascribed to
such term in Section 2.3.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORITY" means any domestic or foreign governmental or
regulatory authority, including any court, arbitral body or other body
administering alternative dispute resolution.
"INDEBTEDNESS" means with respect to any Person, at any date, without
duplication, (i) all obligations of such Person for borrowed money, including,
without limitation, all principal, interest, premiums, fees, expenses,
overdrafts and penalties with respect thereto, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to reimburse any bank or other Person in respect
of amounts paid under a letter of credit or similar instrument, (iv) Capitalized
Lease Obligations of such Person, and (v) all Indebtedness of any other Person
of the type referred to in clauses (i) to (iv) above directly or indirectly
guaranteed by such Person or secured by any assets of such Person.
"INDEMNIFIED PARTY" has the meaning ascribed to such term in Section
8.4(a).
"INDEMNIFYING PARTY" has the meaning ascribed to such term in Section
8.4(a).
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"INTELLECTUAL PROPERTY RIGHT" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how, proprietary computer
software, computer databases, Internet addresses, including uniform resource
locators, or domain names (including any registrations or applications for
registration of any of the foregoing) or any other similar type of proprietary
intellectual property right, in each case which is owned, used or held for use
or otherwise necessary in connection with the conduct of the businesses of the
Company as now conducted or proposed to be conducted.
"IRS" means the Internal Revenue Service.
"LAST OFFER" has the meaning ascribed to such term in Section 2.4(b).
"LAW" means any federal, state or local statute, law, rule,
regulation, ordinance, code, permit, license, policy or rule of common law.
"LIEN" means, with respect to any property or asset, any mortgage,
lien, pledge, charge, security interest, encumbrance or other adverse claim of
any kind in respect of such property or asset. For the purposes of this
Agreement, a Person will be deemed to own, subject to a Lien, any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, assets, liabilities, condition (financial and other), results of
operations or prospects of the Company.
"MILLENNIUM COMPLIANCE" means that the Computer Systems are capable of
the following, during and/or after January 1, 2000: (a) handling date
information involving all and any dates, including accepting input, providing
output and performing date calculations in whole or in part; (b) operating
accurately without interruption on and in respect of any and all dates and
without any change in performance; (c) responding to and processing two digit
year input without creating any ambiguity as to the century; and (d) storing and
providing date input information without creating any ambiguity as to the
century.
"MONTHLY FINANCIAL STATEMENTS" means the unaudited monthly balance
sheets of the Company at the end of each calendar month beginning January 31,
1996 through and including July 31, 1999, together with the related monthly
statements of earnings.
"NONCOMPETITION AGREEMENTS" means the Noncompetition Agreements, dated
as of the Closing Date, between the Company, Buyer and each Shareholder, each
substantially in the form attached hereto as EXHIBIT C.
"OPERATING COMPANY" means an "operating company" within the meaning of
Department of Labor Regulation ss. 2510.3-101(c) or successor rule or
regulation, as from time to time amended and in effect.
"ORDER" means any judgment, injunction, judicial or administrative
order or decree.
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"ORDINARY COURSE OF BUSINESS" means with respect to any Person, the
ordinary course of business of such Person, consistent with such Person's past
practice and custom, including with respect to any category, quantity or dollar
amount, term and frequency of payment, delivery, accrual, expense or any other
accounting entry.
"PERMITTED LIEN" means (a) mechanics', workmen's, repairmen's or other
like Liens arising or incurred in the Ordinary Course of Business in respect of
obligations that are not overdue, (b) other imperfections of title or
encumbrances, which do not materially affect the value or marketability of the
property subject thereto, or (c) the Liens listed in SCHEDULE 3.1.15(a).
"PERSON" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PLAN ASSETS" means "plan assets" within the meaning of Department of
Labor Regulation ss. 2510.3-101(c) or successor rule or regulation, as from time
to time amended and in effect.
"PLANS" has the meaning ascribed to such term in Section 3.1.18(a).
"POST-CLOSING TAX PERIOD" means any Tax period (or portion thereof)
ending after the Closing Date.
"PRE-CLOSING AUDIT" has the meaning ascribed to such term in Section
5.4(b).
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof)
that ends on or before the Closing Date.
"RELATED PARTY INDEBTEDNESS" means Indebtedness (a) of the Company to
(i) any Affiliate of the Company (including the Estate of Frank Gillette) or
(ii) any other current or former shareholder, director, officer or employee of
either the Company or of any such Affiliate and (b) of any Affiliate of the
Company or any other current or former shareholder, director, officer or
employee of either the Company or of any such Affiliate to the Company, as
applicable.
"REORGANIZATION" has the meaning ascribed to such term in Section 5.8.
"RETURNS" has the meaning ascribed to such term in Section
3.1.9(a)(i).
"REVIEWED BALANCE SHEET" means the balance sheet of the Company as of
February 28, 1999 included in the Reviewed Statements.
"REVIEWED STATEMENTS" means the reviewed balance sheets of the Company
as of February 28, 1999, 1998, 1997 and 1996, together with the related
statements of income andretained earnings and cash flows for the periods then
ended and the reports thereon of Bonadio & Co., certified public accountants.
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"ROCHESTER LEASE" means the lease, dated the Closing Date, between
Testamentary Trust A under will of Frank P. Gillette dated February 7, 1992 and
the Company, substantially in the form attached hereto as EXHIBIT D.
"SELECTED BUYER REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 4.1 (Corporate Existence
and Power), 4.2 (Corporate Authorization; Enforceability), 4.3 (Governmental
Authorization), 4.4 (Non-Contravention), and 4.6 (Finders' Fees).
"SELECTED COMPANY REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 3.1.1 (Corporate Existence
and Power), 3.1.2 (Corporate Authorization; Enforceability), 3.1.3 (Governmental
Authorization), 3.1.4 (Non-Contravention; Consents), 3.1.5 (Capitalization; No
Subsidiaries), 3.1.6(c) (Financial Statements; Books and Records -- as to
reserve and accrual amounts and policies), 3.1.15 (Properties; Sufficiency of
Assets), 3.1.18(h) (Change in Control Payments), and 3.1.25 (Finders' Fees).
"SELECTED SHAREHOLDER REPRESENTATIONS AND WARRANTIES" means the
representations and warranties contained in Sections 3.2.1 (Authority;
Enforceability), 3.2.2 (No Conflicts), 3.2.3 (No Consents), 3.2.4 (Ownership of
Shares; Title), and 3.2.7 (Finders' Fees).
"SHAREHOLDERS" has the meaning ascribed to such term in the
introductory paragraph of this Agreement.
"TAX" means (a) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, value added, transfer,
franchise, profits, license, withholding on amounts paid to or by the Company,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest, penalty, addition to tax or additional amount imposed by any Taxing
Authority (as hereinafter defined), (b) any liability of the Company for the
payment of any amounts of any of the foregoing types as a result of being a
member of an affiliated, consolidated, combined or unitary group, or being a
party to any agreement or arrangement whereby liability of the Company for
payment of such amounts was determined or taken into account with reference to
the liability of any other Person, and (c) liability of the Company for the
payment of any amounts as a result of being a party to any Tax Sharing
Agreements or with respect to the payment of any amounts of any of the foregoing
types as a result of any express or implied obligation to indemnify any other
Person.
"TAX MATTER" has the meaning ascribed to such term in Section 6.4.
"TAX SHARING AGREEMENTS" means all existing Tax sharing agreements or
arrangements (whether or not written) binding the Company.
"TAXING AUTHORITY" means any Governmental Authority responsible for
the imposition of any Tax.
"TERMINATION DATE" has the meaning ascribed to such term in Section
9.1(a)(iv).
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"THIRD PARTY CLAIM" means any claim, demand, action, suit or
proceeding made or brought by any Person who or which is not a party to this
Agreement.
II. THE PURCHASE; CLOSING
2.1. PURCHASE OF COMMON STOCK. On the terms and subject to the
conditions of this Agreement, at the Closing, (a) Buyer will purchase from the
Shareholders, and the Shareholders will sell, assign, transfer and deliver
("TRANSFER") to Buyer, free and clear of all Liens, the Common Stock owned by
the Shareholders listed on SCHEDULE 3.1.5(a) opposite such Shareholder's name,
which Common Stock shall represent 100% of the issued and outstanding Company
Securities as of the Closing Date. The certificates representing the Common
Stock will be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by the Shareholders with all necessary transfer Tax and other
revenue stamps, acquired at the Shareholders' expense, affixed and canceled.
Each Shareholder will cure any deficiencies with respect to the endorsement of
the certificates representing the Common Stock owned by such Shareholder or with
respect to the stock powers accompanying any such certificates.
2.2. PURCHASE PRICE. In consideration for the Transfer by the
Shareholders of the Common Stock to Buyer pursuant to Section 2.1 and after
giving effect to the Reorganization, Buyer will deliver at the Closing to the
Shareholders an aggregate amount equal to $11.4 million (the "AGGREGATE CLOSING
CONSIDERATION"), subject to adjustment as provided in Sections 2.3, 2.4 and 2.5,
payable in cash by wire transfer of immediately available funds to one account
designated in writing by the Shareholders.
2.3. ESTIMATED CLOSING SHAREHOLDERS' EQUITY. Not less than two
Business Days prior to the Closing Date, the Company and Buyer will prepare and
agree on an estimate of the Closing Shareholders' Equity determined in
accordance with the second sentence of Section 2.4(a) as if it were the actual
Closing Shareholders' Equity, but based upon the Company's and Buyer's review of
monthly financial information then available and inquiries of personnel
responsible for the preparation of financial information relating to the Company
in the ordinary course (the "ESTIMATED CLOSING SHAREHOLDERS' EQUITY"). The
Aggregate Closing Consideration will be increased or reduced dollar-for-dollar
by the amount by which the Estimated Closing Shareholders' Equity is greater
than or less than the Base Shareholders' Equity, as applicable.
2.4. POST-CLOSING ADJUSTMENT. (a) As soon as practicable (and in no
event later than 60 days after the Closing), Buyer will prepare and deliver or
cause to be prepared and delivered to the Shareholders a balance sheet of the
Company as of the close of business on August 31, 1999 (the "CLOSING BALANCE
SHEET") and a proposed statement of the shareholders' equity of the Company as
of the close of business on August 31, 1999 (the "CLOSING SHAREHOLDERS' EQUITY
STATEMENT"). The Closing Balance Sheet and the Closing Shareholders' Equity
Statement (i) will reflect, respectively, the financial position of the Company
and the components and calculation of the shareholders' equity of the Company in
each case as of the close of business on August 31, 1999, after giving effect to
the Reorganization and the Assignment, and (ii) will be prepared and determined
on a basis consistent with the policies, principles and methodology used in
connection with the preparation of the Reviewed Balance Sheet (the policies,
principles and methodology in clause (ii) of this Section 2.4(a) being referred
to herein as the "BALANCE SHEET PRINCIPLES"). The Reviewed Balance Sheet and
Base Shareholders' Equity will be adjusted as if the Assignment and the
Reorganization had occurred
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as of the Balance Sheet Date, but will not be adjusted as a result of the
transactions contemplated by Section 5.10. Notwithstanding anything contained
herein to the contrary, there will be no changes in reserve or accrual policies
between the Balance Sheet Date and the Closing Date without the prior written
consent of Buyer. The shareholders' equity of the Company as of the close of
business on August 31, 1999 determined in accordance with this Section 2.4 is
referred to herein as the "CLOSING SHAREHOLDERS' EQUITY."
(b) If, within 30 days after the date of Buyer's delivery of the
Closing Balance Sheet and the Closing Shareholders' Equity Statement, the
Shareholders disagree in good faith with the preparation and determination of
the Closing Balance Sheet and the Closing Shareholders' Equity Statement as
proposed by Buyer in accordance with this Agreement, the Shareholders will give
written notice to Buyer within such 30 day period (i) setting forth the
Shareholders' proposed changes to the Closing Balance Sheet as prepared by Buyer
and the determination by the Shareholders of the Closing Shareholders' Equity
and (ii) specifying in detail the Shareholders' basis for disagreement with
Buyer's preparation and determination of the Closing Balance Sheet and the
Closing Shareholders' Equity. The failure by the Shareholders to so express
disagreement and provide such specification within such 30 day period will
constitute the acceptance of Buyer's preparation of the Closing Balance Sheet
and the computation of the Closing Shareholders' Equity. If Buyer and the
Shareholders are unable to resolve any disagreement between them with respect to
the preparation of the Closing Balance Sheet and the determination of the
Closing Shareholders' Equity within 30 days after the giving of notice by the
Shareholders to Buyer of such disagreement, the items in dispute will be
referred for determination to PricewaterhouseCoopers LLP (the "ACCOUNTANTS") as
promptly as practicable, but not later than five days after the expiration of
such 30 day period. Buyer and the Shareholders will use reasonable efforts to
cause the Accountants to render their decision as soon as practicable thereafter
(but in no event later than 30 days after the submission to the Accountants of
the notice of disagreement referred to in the immediately preceding sentence),
including without limitation by promptly complying with all reasonable requests
by the Accountants for information, books, records and similar items. The
Accountants will make a determination as to each of the items in dispute (but
only those items in dispute), which determination will be in writing, furnished
to each of the parties hereto as promptly as practicable after the items in
dispute have been referred to the Accountants (but in no event later than 30
days thereafter), made in accordance with this Agreement, and conclusive and
binding upon each of the parties hereto. Nothing herein will be construed to
authorize or permit the Accountants to determine (i) any question or matter
whatsoever under or in connection with this Agreement, except the determination
of what adjustments, if any, must be made in one or more disputed items
reflected in the Closing Balance Sheet and the Closing Shareholders' Equity
Statement delivered by Buyer in order for the Closing Shareholders' Equity to be
determined in accordance with the provisions of this Agreement or a Closing
Shareholders' Equity that is not equal to one of, or between, the Closing
Shareholders' Equity as determined by the Shareholders and as determined by
Buyer. The fees and expenses of the Accountants will be paid by the party whose
last written settlement offer related to all items in dispute, in the aggregate,
submitted to the Accountants upon the referral of the matter to the Accountants
in accordance with this Section 2.4(b) (each, a "LAST OFFER") varies by the
greatest absolute amount from the determination by the Accountants of all such
disputed items. No party will disclose to the Accountants, and the Accountants
will not consider for any purpose, any settlement discussions or settlement
offer (other than the Last Offer) made by any party.
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(c) During the period that the Shareholders' advisors and personnel
are conducting their review of Buyer's preparation of the Closing Balance Sheet
and determination of the Closing Shareholders' Equity, the Shareholders' and
their representatives will have reasonable access during normal business hours
to the work papers, prepared by or on behalf of Buyer and its representatives in
connection with Buyer's preparation of the Closing Shareholders' Equity
Statement and determination of the Closing Shareholders' Equity; PROVIDED,
HOWEVER, that the Shareholders will conduct such review in a manner that does
not unreasonably interfere with the conduct of the business of the Company or
result in substantial out-of-pocket costs to Buyer. To the extent any such work
papers are in the control of the Shareholders after the Closing, the
Shareholders will grant Buyer and its representatives reciprocal access rights
for the purpose of finalizing the preparation of the Closing Balance Sheet and
the determination of the Closing Shareholders' Equity. The Shareholders and
Buyer agree in good faith to use all reasonable efforts to provide such
information and access described in this Section 2.4(c).
2.5. ADJUSTMENTS TO CLOSING PAYMENTS. (a) Upon the final determination
of the Closing Shareholders' Equity, the parties shall make the following
adjustment:
(i) If the Closing Shareholders' Equity is less than the Estimated
Closing Shareholders' Equity, then the Aggregate Closing Consideration
will be decreased by, and the Shareholders will pay to Buyer (on a
joint and several basis), the amount of such difference.
(ii) If the Closing Shareholders' Equity exceeds the Estimated Closing
Shareholders' Equity, then the Aggregate Closing Consideration will be
increased by, and Buyer will pay to the Shareholders, the amount of
such difference.
(b) Any payment in respect of an adjustment required to be made under
Section 2.5(a) will be made by Buyer or the Shareholders, as applicable, in cash
by wire transfer of immediately available funds to one account as specified by
Buyer or the Shareholders, as applicable, prior to the date such payment is
required to be made hereunder. Such payment will be made on such of the
following dates as may be applicable: (i) if the Shareholders shall have not
objected to the preparation of the Closing Balance Sheet or the determination of
the Closing Shareholders' Equity, the earlier of (A) 37 days after delivery to
the Shareholders of the Closing Balance Sheet and the Closing Shareholders'
Equity Statement or (B) seven days after the Shareholders have indicated that
they have no objections to the preparation of the Closing Balance Sheet or the
determination of the Closing Shareholders' Equity, or (ii) if the Shareholders
shall have objected to the preparation of the Closing Balance Sheet or the
determination of the Closing Shareholders' Equity by Buyer, within seven days
following final agreement or decision with respect to the Closing Balance Sheet
or the Closing Shareholders' Equity, as applicable, as provided in Section 2.4.
2.6. CLOSING. The closing of the purchase and sale (the "CLOSING")
will take place at the offices of Jones, Day, Reavis & Pogue located at 599
Lexington Avenue, New York, New York, at 10:00 a.m., New York time, on August
31, 1999 or as soon thereafter as practicable, but in no event later than
September 3, 1999 (the date on which the Closing occurs is herein referred to as
the "CLOSING DATE"). At the Closing, the Shareholders, the Company and Buyer
will deliver the agreements, instruments and certificates provided for in
Article VII.
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2.7. PROCEEDINGS. Except as otherwise specifically provided for
herein, all proceedings that will be taken and all documents that will be
executed and delivered by the parties hereto on the Closing Date will be deemed
to have been taken and executed simultaneously, and no proceeding will be deemed
taken nor any document executed and delivered until all have been taken,
executed and delivered.
III. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SHAREHOLDERS
3.1. The Company and the Shareholders, jointly and severally,
represent and warrant to Buyer as of the date hereof and the Closing (after
giving effect to the Reorganization) as follows:
3.1.1. CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of New York. The Company has all corporate power and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. The Company is duly qualified to conduct business
as a foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where the failure to
be so qualified or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The Company has
heretofore delivered to Buyer a true and complete copy of its articles of
incorporation and bylaws.
3.1.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution,
delivery and performance by each of the Company and the Partnership of this
Agreement and each Ancillary Agreement to which each of them will be a party to
and will be delivered at the Closing are, and will be at the Closing, within its
corporate or similar powers and have been, and will be at the Closing, as
applicable, duly authorized by all necessary corporate or similar action on its
part. This Agreement has been, and each of the Ancillary Agreements to which the
Company and the Partnership will be a party to and will be delivered at the
Closing will be, duly executed and delivered by the Company and constitutes, and
will constitute at the Closing, the valid and binding agreements of each of the
Company and the Partnership, enforceable against it in accordance with their
respective terms, except to the extent that their enforceability may be subject
to applicable bankruptcy, insolvency, reorganization, moratorium and similar
Laws affecting the enforcement of creditors' rights generally and by general
equitable principles.
3.1.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company and the Partnership of this Agreement, and each
Ancillary Agreement to which the Company and the Partnership will be a party to
and will be delivered at the Closing, does not and will not require any action
by or in respect of, or filing with, any Governmental Authority.
3.1.4. NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE
3.1.4, the execution, delivery and performance by the Company and the
Partnership of this Agreement, and each Ancillary Agreement to which the Company
and the Partnership will be a party to and will be delivered at the Closing, and
the consummation of the transactions contemplated hereby and thereby do not and
will not (a) violate the articles of incorporation, bylaws or other similar
constituent document of the Company or the Partnership, as applicable, (b)
violate any applicable Law or Order, (c) require any filing with or permit,
consent or approval of, or the giving of any
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notice to, any Person (including filings, consents or approvals required under
any permits of the Company or the Partnership or any licenses to which the
Company or the Partnership is a party), (d) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of the Company or the Partnership under
or result in a loss of any benefit to which the Company or the Partnership is
entitled under any agreement or other instrument binding upon, the Company or
the Partnership or any license, franchise, permit or other similar authorization
held by the Company or the Partnership, or (e) result in the creation or
imposition of any Lien on any asset of the Company or the Partnership.
3.1.5. CAPITALIZATION; NO SUBSIDIARIES. (a) As of the date hereof and
immediately prior to the Closing, the authorized, issued and outstanding capital
stock of the Company, and the beneficial owners thereof, are and will be as set
forth on SCHEDULE 3.1.5(a). The Common Stock to be acquired by Buyer will be
duly authorized, validly issued, fully-paid, nonassessable and free and clear of
any Lien or other limitation or restriction (including any restriction on the
right to vote, sell or otherwise dispose of such shares, subject to applicable
securities laws).
(b) There are no outstanding (i) shares of capital stock or other
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or other securities of the Company, or
(iii) options or other rights to acquire from the Company, or other obligation
of the Company to issue, any capital stock, other securities or securities
convertible into or exchangeable for capital stock or other securities of the
Company (the items in clauses (i), (ii) and (iii) being referred to collectively
as the "COMPANY SECURITIES"). There are no outstanding obligations of the
Company to repurchase, redeem or otherwise acquire any Company Securities.
(c) The Company does not own any capital stock or other equity or
ownership or proprietary interest in any Person.
3.1.6. FINANCIAL STATEMENTS; BOOKS AND RECORDS. (a) The Company has
heretofore furnished Buyer with a true and complete copy of the Reviewed
Statements which are attached hereto as EXHIBIT E. Except as set forth on
SCHEDULE 3.1.6(a) (none of which, individually or in the aggregate, is
material), the Reviewed Statements fairly present in all material respects the
financial position of the Company and the Partnership at the respective dates
thereof and the results of the operations and cash flows of the Company and the
Partnership for the periods indicated.
(b) The Company has also heretofore furnished Buyer with a true and
complete copy of the Monthly Financial Statements, which are attached hereto as
EXHIBIT F. Except as set forth on SCHEDULE 3.1.6(b), such Monthly Financial
Statements (i) have been prepared on a basis consistent with the Reviewed
Statements and (ii) fairly represent in all material respects the financial
position of the Company and the Partnership at the respective dates thereof and
the results of the operations and cash flows of the Company and the Partnership
for the respective periods then ended.
(c) Except as disclosed on SCHEDULE 3.1.6(c), there have been no
changes in the Company's reserve or accrual amounts or policies since the
Balance Sheet Date.
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(d) The books of account, minute books, stock record books, and other
records of the Company and the Partnership, all of which have been made
available to Buyer, are complete and correct and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls.
3.1.7. NO UNDISCLOSED LIABILITIES. There are no liabilities of the
Company or the Partnership or any facts or circumstances which could give rise
to liabilities of the Company or the Partnership, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than (a) liabilities
fully provided for in the Reviewed Balance Sheet; (b) liabilities specifically
disclosed on SCHEDULE 3.1.7; and (c) other liabilities incurred since the
Balance Sheet Date in the Ordinary Course of Business which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
3.1.8. INTERCOMPANY ACCOUNTS. SCHEDULE 3.1.8 contains a complete
description of all transactions since January 1, 1996 and balances as of close
of business on the Balance Sheet Date between the Company, on the one hand, and
any Shareholder or other Affiliate of the Company, on the other hand, other than
compensation paid in the Ordinary Course of Business. Other than (a) as
disclosed on SCHEDULE 3.1.8 and (b) compensation paid in the Ordinary Course of
Business, since the Balance Sheet Date there has not been any accrual of
liability by the Company to any such Person, on the other hand, or other
transaction between the Company, on the one hand, and any such Person, or any
action taken (other than as provided for in this Agreement) which could
reasonably be expected to result in any such accrual or the incurrence of any
legal or financial obligation to any such Person after such date.
3.1.9. TAX MATTERS. (a) Except as disclosed in SCHEDULE 3.1.9(a):
(i) All Tax returns, statements, reports and forms (including
estimated tax or information returns and reports) required to be filed
with any Taxing Authority with respect to any Pre-Closing Tax Period
by or on behalf of the Company (collectively, the "RETURNS") have, to
the extent required to be filed on or before the date hereof, been
filed when due in accordance with all applicable Laws;
(ii) The Returns correctly reflected in all material respects the
facts regarding the income, business, assets, operations, activities
and status of the Company;
(iii) All Taxes owed by the Company (whether or not shown as due and
payable on the Returns that have been filed) have been timely paid, or
withheld and remitted to the appropriate Taxing Authority;
(iv) Any reserves established for Taxes with respect to the Company
for any Pre-Closing Tax Period (including any Pre-Closing Tax Period
for which no Return has yet been filed) reflected on the books of the
Company are adequate in accordance with GAAP;
(v) The Company is not delinquent in the payment of any Tax and the
Company has not requested any extension of time within which to file
any Return, except for extensions granted as a matter of right;
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(vi) The Company (or any member of any affiliated, consolidated,
combined or unitary group of which the Company is or has been a
member) has not granted any extension or waiver of the statute of
limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired;
(vii) There is no action, suit or proceeding now pending and no claim,
audit or investigation now pending of which the Company is aware or,
to the knowledge of the Company, any action, suit, claim, audit or
investigation threatened against or with respect to the Company in
respect of any Tax;
(viii) The Company does not own any interest in real property in any
jurisdiction in which a Tax is imposed on the transfer of a
controlling interest in an entity that owns any interest in real
property;
(ix) Neither the Company nor any other Person on behalf of the Company
has entered into any agreement or consent pursuant to Section 341(f)
of the Code;
(x) There are no Liens for Taxes upon the assets of the Company,
except Liens for current Taxes not yet due;
(xi) The Company will not be required to include any adjustment in
taxable income for any Post-Closing Tax Period under Section 481(c) of
the Code (or any similar provision of the Tax Laws of any
jurisdiction) as a result of a change in method of accounting for a
Pre-Closing Tax Period or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax
liability of the Company for any Pre-Closing Tax Period; and
(xii) The Company has not been a member of an affiliated,
consolidated, combined or unitary group or participated in any other
arrangement whereby any income, revenues, receipts, gain or loss of
the Company was determined or taken into account for Tax purposes with
reference to or in conjunction with any income, revenues, receipts,
gain, loss, asset or liability of any other Person.
(b) The Company is not subject to any Tax imposed on overall net
income in any jurisdiction (whether foreign or domestic) other than any such tax
imposed by the State of New York and the United States federal government.
3.1.10. ABSENCE OF CERTAIN CHANGES. Except as disclosed on SCHEDULE
3.1.10, since the Balance Sheet Date, there has not been any event, occurrence,
development, circumstances or state of facts which (a) has had or which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or (b) would have constituted a violation of any covenant of the
Shareholders or the Company hereunder (including under Section 5.1) had such
covenant applied to any of them since the Balance Sheet Date.
3.1.11. CONTRACTS. (a) Except as specifically disclosed in SCHEDULE
3.1.11(a), the Company is not, and will not be, after giving effect to the
Reorganization, a party to or bound by any of the following (whether written or
oral):
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(i) any lease (whether of real or personal property) providing for
annual rentals of $25,000 or more;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets (including in terms of quantity
and dollar amount) that provides for either (A) annual payments by the
Company of $25,000 or more or (B) aggregate payments by the Company of
$50,000 or more, other than amounts payable to utility companies in
the ordinary course of business;
(iii) any sales, distribution or other similar agreement providing for
the sale by the Company of materials, supplies, goods, services,
equipment or other assets that provides for either (A) annual payments
to the Company of $25,000 or more or (B) aggregate payments to the
Company of $50,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or
otherwise) or granting to any Person a right of first refusal or first
offer to purchase any assets or business of the Company;
(vi) any agreement relating to Indebtedness (in any case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii) any license, franchise or similar agreement, including, without
limitation, any agreement pursuant to which any Person has the right
to use any Intellectual Property Right of the Company;
(viii) any agency, dealer, sales representative, marketing or other
similar agreement;
(ix) any agreement that, by its terms, directly or indirectly limits
the freedom of the Company to compete in any line of business,
geographic area or with any Person or which could reasonably be
expected to so limit the freedom of the Company or the Buyer after the
Closing Date;
(x) any agreement with (A) any Shareholder or any of such
Shareholder's Affiliates, (B) any Person directly or indirectly
owning, controlling or holding with power to vote, 5% or more of the
outstanding voting securities of any Shareholders' Affiliates, (C) any
Person 5% or more of whose outstanding voting securities are directly
or indirectly owned, controlled or held with power to vote by any
Shareholder or any such Shareholder's Affiliates, (D) any director or
officer of any Shareholder's Affiliates or any "associates" or members
of the "immediate family" (as such terms are respectively defined in
Rule 12b-2 and Rule 16a-1 of the Exchange Act) of any such director or
officer, or (E) any director or officer of the Company or with any
"associate" or any member of the
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"immediate family" (as such terms are respectively defined in Rules
12b-2 and 16a-1 of the Exchange Act) of any such director or officer;
(xi) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other
distribution in respect of Company Securities;
(xii) any management service, consulting or any other similar type of
contract;
(xiii) any warranty, guaranty or other similar undertaking with
respect to contractual performance extended by the Company other than
in the Ordinary Course of Business;
(xiv) any employment, deferred compensation, severance, bonus,
retirement or other similar agreement or plan in effect as of the date
hereof and entered into or adopted by the Company, on the one hand,
and to which any current or former director or officer of the Company
or any other employee of the Company receiving annual compensation of
$50,000 or more is a party or who is otherwise a beneficiary thereof,
on the other hand;
(xv) any agreement, commitment or understanding having a remaining
term in excess of three months and which is not terminable without
penalty on 30 calendar days' notice or less; or
(xvi) any other agreement, commitment, arrangement or plan not made in
the Ordinary Course of Business or that is material to the Company.
(b) Each agreement, contract, plan, lease, arrangement or commitment
disclosed in SCHEDULE 3.1.11(a) or any other Schedule to this Agreement or
required to be disclosed pursuant to this Section or any other Section of this
Agreement is a valid and binding agreement of the Company and is in full force
and effect. Neither the Company, nor, to the knowledge of the Company, any other
party thereto is in default or breach in any material respect under the terms of
any such agreement, contract, plan, lease, arrangement or commitment. Except as
disclosed in SCHEDULE 3.1.11(a), each such agreement, contract, plan, lease,
arrangement or commitment may be terminated by the Company with not more than 90
days prior written notice and without payment of penalty. To the knowledge of
the Company, there is no event, occurrence, condition or act (including the
consummation of the transactions contemplated hereby) which, with the giving of
notice or the passage of time, or the happening of any other event or condition,
could reasonably be expected to become a material default or event of default
thereunder.
(c) SCHEDULE 3.1.11(c) sets forth every grant by the Company in the
past three years of any severance or termination pay to any employee of the
Company receiving annual compensation of $50,000 or more, or any director or
officer of the Company.
3.1.12. INSURANCE COVERAGE. SCHEDULE 3.1.12 contains a list of all
insurance policies and fidelity bonds covering the assets, business, operations,
employees, officers and
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directors of the Company. There is no material claim by the Company pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and the Company
has complied in all material respects with the terms and conditions of all such
policies and bonds. Such policies of insurance and bonds (or other policies and
bonds providing substantially similar insurance coverage) are in full force and
effect and are of the type and in amounts deemed by the management of the
Company to be sufficient in light of the business of the Company. The Company
does not know of any threatened termination of, and has not received written
notice of any premium increase with respect to, any of such policies or bonds.
No insurance coverage with respect to any of the Company's assets, business,
operations, employees, officers or directors has lapsed for any period due to a
failure to timely make any premium payment or renewal or otherwise and the
Company has not been refused by any insurance carrier to which it has applied
for any insurance since January 1, 1995. Since the last renewal date of any
insurance policy, there has not been any material adverse change in the
relationship of the Company with its insurers or the premiums payable pursuant
to such policies.
3.1.13. LITIGATION. Except as disclosed in SCHEDULE 3.1.13, there is
no action, suit, investigation, arbitration or administrative or other
proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or its properties before any Governmental Authority or
which in any manner challenges or seeks to prevent, enjoin, alter or delay or
otherwise adversely affect the right or ability of the Company or the
Partnership to consummate the transactions contemplated by this Agreement and
the Ancillary Agreements to which the Company or the Partnership is or will be a
party to and will be delivered at the Closing. The Company does not know of any
valid basis for any such action, proceeding or investigation.
3.1.14. COMPLIANCE WITH LAWS; PERMITS. (a) To the knowledge of the
Company, the Company is in compliance in all material respects with all
applicable Laws or Orders.
(b) SCHEDULE 3.1.14(b) sets forth a list of each government or
regulatory license, authorization, permit, consent and approval held by the
Company or the Partnership, issued and held in respect of the Company or the
Partnership or required to be so issued and held to carry on the businesses of
the Company or the Partnership. Except as disclosed in SCHEDULE 3.1.14(b), each
such license, authorization, permit, consent and approval is valid and in full
force and effect and will not be terminated or impaired (or become terminated or
impaired) as a result of the transactions contemplated hereby. To the knowledge
of the Company, neither the Company nor the Partnership is in default under, and
no condition exists that with notice or lapse of time or both would constitute a
default under, any material license, franchise, permit, consent or approval or
similar authorization held by the Company or the Partnership.
3.1.15. PROPERTIES; SUFFICIENCY OF ASSETS. (a) Except as disclosed in
SCHEDULE 3.1.15(a) and for inventory disposed of in the Ordinary Course of
Business, the Company and the Partnership have good title to, or in the case of
leased property have valid leasehold interests in, all property and assets
(whether real or personal, tangible or intangible) reflected in the Reviewed
Balance Sheet or acquired after the Balance Sheet Date. None of such property or
assets is subject to any Liens, except for (i) Liens disclosed in the Reviewed
Balance Sheet or incurred
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after the date thereof in the Ordinary Course of Business; (ii) Liens for Taxes
not yet due or being contested in good faith; and (iii) Permitted Liens.
(b) SCHEDULE 3.1.15(b) sets forth a list of all real property assets
owned or leased by the Company ("REAL PROPERTY"). All such leases of real
property are valid, binding and enforceable in accordance with their respective
terms and the Company is a tenant or possessor in good standing under all such
leases of real property and all rents due under such leases have been paid.
There does not exist under any such lease any default or any event which with
notice or lapse of time or both would constitute a default. The Company is in
peaceful and undisturbed possession of the space and/or estate under each lease
of which it is a tenant and has good and valid rights of ingress and egress to
and from all the Real Property from and to the public street systems for all
usual street, road and utility purposes. Neither the Company nor any Shareholder
has received any notice of any appropriation, condemnation or like proceeding,
or of any violation of any applicable zoning Law or Order relating to or
affecting the Real Property, and to the Company's and each Shareholder's
knowledge, no such proceeding has been threatened or commenced.
(c) The assets owned or leased by each of the Company and the
Partnership (including, real, personal, tangible and intangible property), or
which it otherwise has the right to use (including, real, personal, tangible and
intangible property), constitute all of the assets held for use or used in
connection with the business of the Company and the Partnership and are in good
operating condition and repair (normal wear and tear excepted) and are adequate
to conduct such businesses as currently conducted.
3.1.16. INTELLECTUAL PROPERTY. (a) SCHEDULE 3.1.16(a) sets forth a
list of all Intellectual Property Rights used in connection with the business of
the Company, and all material licenses, sublicenses and other written agreements
as to which the Company or any of its Affiliates is a party and pursuant to
which any Person is authorized to use such Intellectual Property Right,
including the identity of all parties thereto.
(b) Except as disclosed in SCHEDULE 3.1.16(b):
(i) The Company has not since January 1, 1995 been sued or charged in
writing with or been a defendant in any claim, suit, action or
proceeding relating to its business or, to the knowledge of the
Company, threatened that, in either case, involves a claim of
infringement by the Company of any Intellectual Property Right of any
other Person or continuing infringement by any other Person of any
Intellectual Property Right of the Company, and the Company does not
have any knowledge of any basis for such claim of infringement or of
any continuing infringement by any other Person of any
Intellectual Property Right of the Company;
(ii) No Intellectual Property Right of the Company is subject to any
outstanding Order, judgment, decree, stipulation or agreement
restricting the use thereof by the Company or restricting the
licensing thereof by the Company to any Person;
(iii) The Company has not entered into any agreement to indemnify any
other Person against any charge of infringement of any Intellectual
Property
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Right; and
(iv) The Company has duly maintained all registrations for all
Intellectual Property Rights listed or required to be listed in
SCHEDULE 3.1.16(a).
3.1.17. ENVIRONMENTAL MATTERS. (a) Except as disclosed in SCHEDULE
3.1.17:
(i) Constituents of Concern have not been generated, recycled, used,
treated or stored on, transported to or from, or released or disposed
on, the Company Property or, to the knowledge of the Company, any
property adjoining or adjacent thereto, except in compliance with
Environmental Laws;
(ii) To the knowledge of the Company, the Company is in compliance in
all material respects with all Environmental Laws and the requirements
of permits issued under such Environmental Laws with respect to the
Company Property;
(iii) There are no pending or, to the knowledge of the Company,
threatened Environmental Claims against the Company or any Company
Property;
(iv) The Company has not taken any actions and, to the knowledge of
the Company, there are no facts, circumstances, conditions or
occurrences relating to Company Property or any property adjoining any
Company Property, that could reasonably be expected to (i) form the
basis of an Environmental Claim against the Company or any of the
Company Property or assets or (ii) cause any such current Company
Property or assets to be subject to any restrictions on its ownership,
occupancy, use or transferability under any Environmental Law;
(v) There are not now and, to the knowledge of the Company, there have
never been, any underground storage tanks or sumps located on any
Company Property or, to the knowledge of the Company, located on any
property that adjoins or is adjacent to any Company Property;
(vi) Neither the Company nor any Company Property is listed or, to the
knowledge of the Company, proposed for listing on the National
Priorities List under CERCLA or CERCLIS (as defined in CERCLA) or on
any similar federal, state or foreign list of sites requiring
investigation or clean-up;
(vii) There are no Environmental Permits that are nontransferable or
require consent, notification or other action to remain in full force
and effect following the consummation of the transactions contemplated
hereby; and
(viii) To the knowledge of the Company, the Company has no liability
under any Environmental Law (including an obligation to remediate any
Environmental Condition whether caused by the Company or any other
Person), except as could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
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(b) There has been no environmental investigation, study, audit, test,
review or other analysis commenced or conducted by or on behalf of the Company
(or by a third party of which the Company has knowledge) in relation to the
current or prior business of the Company, or any property or facility currently
or, to the knowledge of the Company, previously owned or leased by the Company,
which has not been disclosed or delivered to Buyer prior to the date hereof.
(c) The Company does not own or lease or has not owned or leased any
property, and does not conduct and has not conducted any operations, in New
Jersey or Connecticut.
3.1.18. PLANS AND MATERIAL DOCUMENTS. (a) SCHEDULE 3.1.18(a) sets
forth a list of all employee benefit plans (as defined in Section 3(3) of
ERISA), and all other employee benefit plans, programs, arrangements, contracts
or schemes, written or oral, statutory or contractual, with respect to which the
Company or any ERISA Affiliate has or has had in the six years preceding the
date hereof any obligation or liability or which are or were in the six years
preceding the date hereof maintained, contributed to or sponsored by the Company
or any ERISA Affiliate for the benefit of any current or former employee,
officer or director of the Company or any ERISA Affiliate (collectively, the
"PLANS"). With respect to each Plan, the Company has delivered to Buyer a true
and complete copy of each such Plan (including all amendments thereto) and a
true and complete copy of each material document (including all amendments
thereto) prepared in connection with each such Plan including a copy of (i) each
trust or other funding arrangement, (ii) each summary plan description and
summary of material modifications, (iii) the most recently filed IRS Form 5500,
5500-C and 5500-R for each such Plan, if any, and (iv) the most recent
determination letter referred to in Section 3.1.18(d). The Company does not have
any express or implied commitment, whether legally enforceable or not, to
create, incur liability with respect to or cause to exist any employee benefit
plan, program, arrangement, contract or scheme or to modify any Plan, other than
as required by Law.
(b) Except as disclosed in SCHEDULE 3.1.18(b), none of the Plans is a
plan that is or has ever been subject to Title IV of ERISA, Section 302 of
ERISA or Section 412 of the Code. None of the Plans is (i) a "MULTIEMPLOYER
PLAN" as defined in Section 3(37) of ERISA, (ii) a plan or arrangement
described under Section 4(b)(5) or 401(a)(1) of ERISA, or (iii) a plan
maintained in connection with a trust described in Section 501(c)(9) of the
Code. Except as disclosed in SCHEDULE 3.1.18(b), none of the Plans provides
for the payment of separation, severance, termination or similar-type
benefits to any person or provides for, or except to the extent required by
Law, promises retiree medical or life insurance benefits to any current or
former employee, officer or director of the Company.
(c) Except as disclosed in SCHEDULE 3.1.18(c), to the knowledge of the
Company, each Plan is in compliance in all material respects with, and has
always been operated in all material respects in accordance with, its terms and
the requirements of all applicable Laws, foreign and domestic and the Company
and the ERISA Affiliates have satisfied in all material respects all of their
statutory, regulatory and contractual obligations with respect to each such
Plan. No legal action, suit or claim is pending or, to the knowledge of the
Company, threatened with respect to any Plan (other than claims for benefits in
the ordinary course) and no fact or event exists that could reasonably be
expected to give rise to any such action, suit or claim.
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(d) Except as disclosed in SCHEDULE 3.1.18(d), each Plan or trust
which is intended to be qualified or exempt from taxation under Section 401(a),
401(k) or 501(a) of the Code has received a favorable determination letter from
the IRS that it is so qualified or exempt, and no fact or occurrence has
occurred since the date of such determination letter to adversely affect the
qualified or exempt status of any Plan or related trust.
(e) There has been no non-exempt prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any
Plan. Neither the Company nor any ERISA Affiliate has incurred any material
liability for any excise Tax arising under the Code and, to the knowledge of the
Company, no fact or event exists which could give rise to such liability.
Neither the Company nor any ERISA Affiliate has incurred any material liability
relating to Title IV of ERISA (other than for the payment of premiums to the
Pension Benefit Guaranty Corporation), and no fact or event exists which could
give rise to such liability.
(f) All material contributions, premiums or payments required to be
made with respect to any Plan have been made on or before their due dates. For
completed plan years of the Plans all such contributions have been fully
deducted for income Tax purposes and no such deduction has been challenged or
disallowed by any Government Authorities, and no fact or event exists which, to
the knowledge of the Company, could give rise to any such challenge or
disallowance.
(g) There has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any ERISA Affiliate
relating to, or change in employee participation or coverage under, any Plan
that would increase materially the expense of maintaining such Plan above the
level of the expense incurred in respect thereto for the most recent fiscal year
ended prior to the date hereof.
(h) Except as disclosed in SCHEDULE 3.1.18(h) or in this Agreement or
the Ancillary Agreements, no employee or former employee of the Company or any
ERISA Affiliate thereof will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced such benefit (including
acceleration of vesting or exercise of an incentive award) as a result of the
transactions contemplated hereby.
(i) With respect to any Plan benefitting any current or former
employee of the Company or any ERISA Affiliate that is subject to Section 4980B
of the Code or was subject to Section 162(k) of the Code, the Company and each
ERISA Affiliate have complied with (i) the continuation coverage requirements of
Section 4980B of the Code and Section 162(k) of the Code as applicable, and Part
6 of Subtitle B of Title I of ERISA and (ii) the Health Insurance Portability
and Accountability Act of 1996, as amended.
3.1.19. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 3.1.19, to the knowledge of the Company, no Shareholder or any officer,
director or other Affiliate of the Company possesses, directly or indirectly,
any ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
or potential competitor of the Company. Ownership of 2% or less of any class of
securities of a company whose securities are registered under the Exchange Act
will not be deemed to be an ownership interest for purposes of this Section
3.1.19.
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3.1.20. CUSTOMER, SUPPLIER AND EMPLOYEE RELATIONS. The relationships
of the Company with its customers, suppliers and employees are good commercial
working relationships and, except as disclosed in SCHEDULE 3.1.20, none of the
Company's material customers or material suppliers or employees receiving annual
compensation in excess of $50,000 has canceled, terminated or otherwise
materially altered or notified the Company of any intention or otherwise
threatened to cancel, terminate or materially alter its relationship with the
Company or notified the Company of any intention or otherwise threatened to
change its prices or modify its pricing policies for goods or services provided
to the Company, effective prior to, as of, or within one year after, the
Closing. As of the date hereof, there has not been, and the Company has no
reason to believe that there will be, any change in relations with material
customers, material suppliers or employees of the Company as a result of the
transactions contemplated by this Agreement.
3.1.21. OTHER EMPLOYMENT MATTERS. (a) The Company is in compliance
with all Laws and Orders respecting employment and employment practices, terms
and conditions of employment and wages and hours, and has not, and is not,
engaged in any unfair labor practice; no unfair labor practice complaint against
the Company is pending before the National Labor Relations Board; there is no
labor strike, dispute, slowdown or stoppage actually pending or, to the
knowledge of the Company, threatened against or involving the Company; the
Company is not party to any collective bargaining agreement and no collective
bargaining agreement is currently being negotiated by the Company; to the
knowledge of the Company, no representation question exists respecting employees
of the Company; and, except as specifically set forth on SCHEDULE 3.1.21(a), no
claim in respect of the employment of any employee has been asserted and is
currently pending or, to the knowledge of the Company, threatened against the
Company.
(b) SCHEDULE 3.1.21(b) contains a complete and accurate list of the
following information for each current employee and director of the Company,
including each employee on leave of absence or layoff status: employer; name;
job title and description; date of hire; current compensation paid or payable
and any change in compensation since the Balance Sheet Date: vacation accrued as
of a recent date; service credited as of a recent date for purposes of vesting
and eligibility to participate under any pension, retirement, profit-sharing,
thrift-savings, deferred compensation, stock bonus, stock option, cash bonus,
employee stock ownership (including investment credit or payroll stock
ownership), severance pay, insurance, medical, welfare, or vacation plan or
other Plan of the Company; and all accrued bonuses and any other amounts to be
paid by the Company to employees of the Company, including bonuses and such
other amounts at or in connection with the Closing.
(c) SCHEDULE 3.1.21(c) contains a complete and accurate list of the
following information for each retired employee or director of the Company or
their dependents receiving benefits or scheduled to receive benefits in the
future: name, pension benefits, pension option election, retiree medical
insurance coverage, retiree life insurance coverage and other benefits.
(d) No former or current employee or current or former director of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition, or proprietary rights agreement,
between such employee or director and any other Person that adversely affected,
affects, or will affect (i) the performance of his duties as an employee or
director of the Company or (ii) the ability of the Company to conduct its
business.
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3.1.22. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.1.22,
all of the accounts receivable reflected on the Reviewed Balance Sheet (net of
the applicable reserves set forth on such Reviewed Balance Sheet) and all
accounts receivable which have arisen since the Balance Sheet Date (net of any
immaterial additional reserves established since such date in the Ordinary
Course of Business) are valid and enforceable claims, and the goods and services
sold and delivered which gave rise to such accounts receivable were sold and
delivered in conformity with the applicable purchase orders, agreements and
specifications. Such accounts receivable are subject to no defenses, offsets or
recovery in whole or in part by the Persons whose purchase gave rise to such
accounts receivable or by third parties and are fully collectible in the
Ordinary Course of Business without resort to legal proceedings, except to the
extent of the amount of the reserve for doubtful accounts reflected in such
Reviewed Balance Sheet.
3.1.23. INVENTORY. All inventories reflected on the Reviewed Balance
Sheet (net of the applicable reserves set forth on such balance sheet) and all
inventories which have been acquired or produced since the Balance Sheet Date
(net of any immaterial additional reserves established since such date in the
Ordinary Course of Business) are in good condition, conform in all material
respects with the applicable specifications and warranties of the Company, are
not obsolete, and are useable or saleable in the Ordinary Course of Business.
The values at which such inventories are carried are in accordance with GAAP,
consistently applied. The amount and mix of items in the inventories of
supplies, in-process and finished products are, and will be at the Closing Date,
consistent with the past business practices of the Company.
3.1.24. MILLENNIUM COMPLIANCE. SCHEDULE 3.1.24 describes the measures
that have been implemented to determine the extent to which the computer systems
used by the Company in its business (the "COMPUTER SYSTEMS") are not in
Millennium Compliance, and the material details of any program undertaken with a
view towards causing the Computer Systems to achieve Millennium Compliance.
Except as described on SCHEDULE 3.1.24, the Computer Systems used by the Company
in its business are in Millennium Compliance.
3.1.25 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of the Company who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
3.2. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each of the
Shareholders, severally and not jointly, represents and warrants to Buyer as of
the date hereof and the Closing as follows:
3.2.1. AUTHORITY; ENFORCEABILITY. Such Shareholder has all requisite
power and authority, and has taken all action necessary, to execute and deliver
this Agreement and each Ancillary Agreement to which such Shareholder will be a
party at the Closing, to consummate the transactions contemplated hereby and
thereby and to perform his, her or its obligations hereunder and thereunder.
This Agreement has been, and each of the Ancillary Agreements to which such
Shareholder will be a party at the Closing will have been, duly executed and
delivered by such Shareholder, and are and will be at the Closing legal, valid
and binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with their respective terms, except to the extent that
their enforceability may be subject to applicable
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bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.2.2. NO CONFLICTS. The execution and delivery of this Agreement, and
each Ancillary Agreement to which such Shareholder will be a party at the
Closing, do not and will not at the Closing, and the consummation of the
transactions contemplated hereby and thereby and compliance with the terms
hereof and thereof do not and will not at the Closing, violate or conflict with
in any respect or result in a breach under any contract, license, Order or Law
applicable to such Shareholder.
3.2.3. NO CONSENTS. No consent of, approval or filing with, any court,
Governmental Authority or other Person is required to be obtained or made by or
with respect to such Shareholder in connection with the execution and delivery
of this Agreement or any of the Ancillary Agreements to which such Shareholder
will be a party at the Closing or the consummation by such Shareholder of the
transactions contemplated hereby or thereby.
3.2.4. OWNERSHIP OF SHARES; TITLE. All of the issued and outstanding
shares of Common Stock set forth opposite such Shareholder's name on SCHEDULE
3.1.5(a) are and will be at the Closing be lawfully owned of record and
beneficially by such Shareholder, free and clear of any Liens. Such Shareholder
has the full legal right, power and authority to vote, Transfer and convey such
shares of Common Stock. Such shares are not subject to any voting trust
agreement or other contract, agreement, arrangement, commitment, option, proxy,
right of first refusal or understanding, including, without limitation, any
contract restricting or otherwise relating to the voting, dividend rights or
disposition of such shares.
3.2.5. LITIGATION. There is no action, suit, investigation,
arbitration or administrative or other proceeding pending or, to the knowledge
of such Shareholder, threatened against or affecting such Shareholder before any
court or arbitrator or any Governmental Authority which in any manner challenges
or seeks to prevent, enjoin, alter or delay or otherwise adversely affect the
right or ability of such Shareholder to consummate the transactions contemplated
by this Agreement and the Ancillary Agreements to which such Shareholder will be
a party at the Closing. Such Shareholder knows of no valid basis for any such
action, suit, investigation or proceeding.
3.2.6. INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as disclosed in
SCHEDULE 3.2.6, such Shareholder does not possess, directly or indirectly, any
ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
or potential competitor of the Company. Ownership of 2% or less of any class of
securities of a company whose securities are registered under the Exchange Act
will not be deemed to be an ownership interest for purposes of this Section
3.2.6.
3.2.7 FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of such Shareholder who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement or any of the Ancillary
Agreements.
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IV. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company and each Shareholder as of the
date hereof and the Closing as follows:
4.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware. Buyer has all power and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted.
4.2. CORPORATE AUTHORIZATION; ENFORCEABILITY. The execution, delivery
and performance by Buyer of this Agreement are, and each Ancillary Agreement to
which Buyer will be a party at the Closing will be, within Buyer's corporate
powers and have been and will have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been, and each
Ancillary Agreement to which Buyer will be a party at the Closing will have
been, duly executed and delivered by Buyer and constitutes and will constitute a
valid and binding agreement of Buyer, enforceable against Buyer in accordance
with their respective terms, except to the extent that their enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar Laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer of this Agreement, and each Ancillary Agreement to which
Buyer will be a party at the Closing, require no action by or in respect of, or
filing with, any Governmental Authority.
4.4. NON-CONTRAVENTION. The execution, delivery and performance by
Buyer of this Agreement and each Ancillary Agreement to which Buyer is or will
be a party at the Closing, do not and will not at the Closing (i) violate the
certificate of incorporation or bylaws of Buyer or (ii) violate any applicable
Law or Order.
4.5. LITIGATION. There is no action, suit, investigation, arbitration
or administrative or other proceeding pending or, to the knowledge of Buyer,
threatened against or affecting Buyer, or any of Buyer's properties before any
court or arbitrator or any Governmental Authorities which in any manner
challenges or seeks to prevent, enjoin, alter or delay or otherwise adversely
affect the right or ability of Buyer to consummate the transactions contemplated
by this Agreement and any Ancillary Agreements to which Buyer will be a party at
the Closing.
4.6. FINDERS' FEES. Except for Saunders Karp & Megrue, L.P., Carlisle
Group, L.P. and Harvey & Company, LLC, whose fees and expenses (including
transaction fees) will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of Buyer who might be entitled to any fee or commission by Buyer or
any of Buyer's Affiliates upon consummation of the transactions contemplated by
this Agreement or any of the Ancillary Agreements.
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V. CERTAIN COVENANTS
5.1. CONDUCT OF BUSINESS OF THE COMPANY. During the period from the
date of this Agreement to the Closing Date, each Shareholder will cause the
Company to, and the Company will, conduct its operations only in the Ordinary
Course of Business (including managing its working capital in accordance with
its past practice and custom) and use its respective best efforts to: preserve
intact the Company's business organizations, keep available the services of the
Company's officers and employees and maintain the Company's relationships and
goodwill with licensors, suppliers, distributors, customers, landlords,
employees, agents and others having business relationships with the Company.
During the period from the date of this Agreement to the Closing, the Company
will confer with Buyer concerning operational matters of a material nature and
report periodically to Buyer concerning the Company's business, operations and
finances and will deliver all Monthly Financial Statements to Buyer not
previously delivered to Buyer on or prior to the date hereof. Without limiting
the generality or effect of the foregoing, prior to the Closing Date, except
with the prior written consent of Buyer, the Company will not, and the
Shareholders will cause the Company not to:
(a) Amend or modify its articles of incorporation, bylaws or any other
organizational document from its form on the date of this Agreement;
(b) Change any salaries or other compensation of, or pay any bonuses
to any current or former director, officer, employee or shareholder of the
Company, other than the bonuses described on SCHEDULE 5.1, or enter into any
employment, severance, or similar agreement with any current or former director,
officer, shareholder or employee of the Company, provided, however, that the
compensation of employees of the Company receiving annual compensation of less
than $50,000 may be changed in the Ordinary Course of Business;
(c) Adopt or increase any benefits under any Plan for or with any of
its employees;
(d) Enter into any contract or commitment with respect to capital
expenditures, except for those capital expenditures that are set forth on
SCHEDULE 5.1 and that do not, individually or in the aggregate, provide for
payment by the Company of $50,000 or more;
(e) Except as contemplated by Section 5.1(d), enter into any contract
or commitment except contracts and commitments (for capital expenditures or
otherwise) in the Ordinary Course of Business (and in any case not exceeding the
dollar amounts with respect to specified categories of contracts in Section
3.1.11);
(f) Modify or amend in any material respect or terminate any contract
listed or required to be listed in SCHEDULE 3.1.11;
(g) Incur, assume or guarantee Indebtedness or pay any Related Party
Indebtedness;
(h) Enter into any transaction or commitment relating to the assets or
the business of the Company which, individually or in the aggregate, could
reasonably be expected to be material to the Company, or cancel or waive any
claim or right of substantial value which,
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individually or in the aggregate, could reasonably be expected to be material
to the Company, or amend any term of any Company Securities;
(i) Set aside or pay any dividend or make any other distribution with
respect to any Company Securities or repurchase, redeem or otherwise acquire,
directly or indirectly, any Company Securities ;
(j) Make any change in accounting methods or practices (including
changes in accruals or reserve amounts or policies);
(k) Issue or sell any Company Securities or make any other changes in
its capital structure, including the grant of any stock option or other right to
purchase Company Securities;
(l) Sell, lease or otherwise dispose of any material asset or
property;
(m) Except as expressly permitted under this Agreement, write-off as
uncollectible any notes or accounts receivable, except write-offs in the
Ordinary Course of Business charged to applicable reserves, none of which
individually or in the aggregate is material; write-off, write-up or write-down
any other material asset of the Company; or alter its customary time periods for
collection of accounts receivable or payments of accounts payable;
(n) Create or assume any Lien other than Permitted Liens;
(o) Make any loan, advance or capital contributions to or investment
in any Person;
(p) Terminate or close any material facility, business or operation of
the Company;
(q) Cause any other event, occurrence, development or state of
circumstances or facts which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(r) Take any action that would cause any of the representations and
warranties made by the Company or any Shareholder in this Agreement not to
remain true and correct or any of the conditions set forth in Section 7.1 from
being satisfied;
(s) Settle any claim or litigation that could reasonably be expected
to be material to the Company; or
(t) Agree to do any of the foregoing.
5.2. EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of the Closing Date and the termination of this
Agreement in accordance with its terms, neither the Shareholders nor the Company
will, and the Company and the Shareholders will cause their respective
Affiliates and their respective representatives (including advisors, agents,
attorneys, directors, employees and consultants) not to, take any action to,
directly or
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indirectly, encourage, initiate, solicit, accept, approve or engage
in discussions or negotiations with, or provide any information to any Person,
other than Buyer (and its Affiliates and representatives), concerning any
purchase of any Company Security or any asset purchase, merger or similar
transaction involving the Company. The Company and the Shareholders will
disclose to Buyer the existence or occurrence of any proposal or contract which
it or they or any of their representatives described above may receive in
respect of any such transaction as well as the identity of the Person from whom
such a proposal or contract is received.
5.3. REVIEW OF THE COMPANY; CONFIDENTIALITY. (a) Buyer may, prior to
the Closing Date, directly or through its representatives, review the
properties, books and records of the Company and its financial and legal
condition to the extent it deems necessary or advisable to familiarize itself
with such properties, books, records and other matters. The Shareholders will
cause the Company to, and the Company will, permit Buyer and its representatives
to have, after the date of execution of this Agreement, reasonable access to the
premises and to all the respective books and records of the Company and to cause
the officers, accountants and other representatives of the Company to furnish
Buyer with such financial and operating data and other information with respect
to the business and properties of the Company as Buyer may from time to time
reasonably request. The Company will deliver or cause to be delivered to Buyer
such additional instruments, documents, certificates and opinions as Buyer may
reasonably request for the purpose of verifying the information set forth in
this Agreement or on any Schedule attached hereto and consummating or evidencing
the transactions contemplated by this Agreement.
(b) Prior to the Closing, without the prior written consent of the
other parties, no party will, or will permit any of its Affiliates to, disclose
to any other Person (other than such Person's financing sources, existing
shareholders and such Person's directors, officers, employees, advisors and
other representatives that need to know) any proprietary, non-public information
of another party previously delivered or made available to such other party in
connection with the transactions contemplated hereby (including the existence of
and terms of this Agreement and the Ancillary Agreements), other than to the
extent required by applicable Law and upon the advice of counsel. Each party
will direct its financing sources, shareholders, directors, officers, employees
and representatives to keep all such information in strict confidence; provided,
however, that each such Person may disclose such information to the extent
required by Law and upon the advice of counsel.
5.4. BEST EFFORTS; PRE-CLOSING AUDIT. (a) The Company, the
Shareholders and Buyer will cooperate and use their respective reasonable
best efforts to take, or cause to be taken, all appropriate actions, and to
make, or cause to be made, all filings necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
their respective reasonable efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities and parties to contracts with the Company
as are necessary for consummation of the transactions contemplated by this
Agreement and to fulfill the conditions to the sale contemplated hereby.
Notwithstanding any other provision hereof, in no event will Buyer or any of
its Affiliates (including the Company after the Closing) be required to make
any payment in connection with any consent or approval or condition to
Closing set forth in any subsection of Section 7.1 which is necessary or
advisable for the Shareholders or the Company to obtain or satisfy in order
to consummate the transactions contemplated by this Agreement.
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(b) The Shareholders and the Company will use their respective
reasonable best efforts, directly or through their representatives, to provide
such access to the books and records of the Company (including accountants' work
papers) and to employees and other representatives of the Company as is
necessary or advisable in the judgment of Buyer for Bonadio & Co. to complete an
audit report on behalf of the Shareholders and the Company (the "PRE-CLOSING
AUDIT") of the Reviewed Statements as of and for the period ended February 28,
1999 (as so audited, the "AUDITED FINANCIAL STATEMENTS"), the cost of which will
be paid by Buyer.
5.5. SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS. On or prior
to the Closing Date, the Company will terminate all equity-based plans or
agreements listed in any of the Schedules attached hereto.
5.6. PLAN ASSETS. The Company will promptly take all actions necessary
to allow it to continue to constitute an Operating Company, and otherwise not to
cause any of the respective underlying assets of the Company to be deemed "PLAN
ASSETS" with respect to Buyer or any other shareholder of the Company.
5.7. FINANCING DOCUMENTATION. The Company will, and the Shareholders
will cause the Company to, use its best efforts to obtain all necessary
documentation and agreements required in the judgment of Buyer to obtain the
financing contemplated by Section 7.1.13, including leasehold mortgages,
subordination and attornment agreements, UCC-1 financing statements and UCC-3
releases and other related documentation relevant to the security interest of
Buyer's existing and prospective lenders.
5.8. REORGANIZATION. At or prior to the Closing, the Partnership will,
and the Shareholders will cause the Partnership to, transfer to the Company in
such manner and on such terms and conditions as may be approved by Buyer, free
and clear of any Liens, except for Permitted Liens, all of the right, title and
interest in the assets and properties of the Partnership used in the business of
the Company (the "REORGANIZATION"). The Shareholders will bear any and all
Taxes, costs and expenses related to such transfers and assignments. SCHEDULE
5.8 hereto sets forth a list of all such assets and related liabilities which
are outstanding and owed by the Partnership that will be transferred to the
Company pursuant to the Reorganization.
5.9. COMPANY NOTES. At or prior to the Closing, the Shareholders will
assume all obligations and duty of performance of the Company under any and all
notes payable to Testamentary Trust A under will of Frank P. Gillette with
Charlyne, John and Martin Gillette as Co-trustees, such obligations as reflected
on the Reviewed Balance Sheet (the "COMPANY NOTES", and such transactions, the
"ASSIGNMENT"), and the Company and the Shareholders will use their reasonable
best efforts to obtain any consents or approvals required to effect the
Assignment. After the Assignment, the Company will have no further obligations
under the Company Notes.
5.10. AUTOMOBILES. At or prior to the Closing, the Shareholders will
cause the Company to, and the Company will, transfer to each of the Shareholders
and Darren Gillette, free and clear of any Liens, all of the Company's right,
title and interest in the automobiles listed opposite each of the Shareholders'
and Darren Gillette's respective names as set forth in SCHEDULE 5.10, and the
Shareholders will bear any and all Taxes, costs and expenses related to such
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transfer and assignment, except that such transfer will not cause any
corresponding adjustment in the determination of the Closing Balance Sheet and
the Closing Shareholders' Equity.
5.11. BENEFITS. (a) Until the second anniversary of the Closing, Buyer
will cause the Company to continue to offer to its eligible employees benefits
that, in the aggregate, are substantially comparable to the benefits provided
under the Plans listed in SCHEDULE 3.1.18(a) on terms and with contribution and
co-payment levels substantially similar as those provided to its eligible
employees immediately prior to the date hereof under such Plans, including but
not limited to (i) maintaining contribution levels of the Company with respect
to (x) the Gillette Machine & Tool Company, Inc. Profit Sharing Plan for each
employee participant at the annual rate of approximately one-week's salary of
such employee participant and (y) the Gillette Machine & Tool Company, Inc.
Savings and Retirement Plan for each employee participant at the annual rate of
approximately 25% of the first 6% of such employee participant's own
contributions and (ii) continuation of group health and medical coverage for
current and future retired employees of the Company so long as such benefit can
be provided at no cost to the Company.
(b) Nothing contained in this Agreement will confer upon any current
or retired employee of the Company, or any legal representative thereof, any
rights or remedies of any nature or kind whatsoever under or by reason of this
Agreement (other than as provided in any of the Employment Letters), including
but not limited to, any right to employment for any specified period. Subject to
Section 5.11(a), neither Buyer nor any Affiliate of Buyer (including the Company
after the Closing Date) will be required to continue any particular Plan after
the Closing Date for the current and retired employees of the Company, and any
Plan may be amended or terminated in accordance with its terms and any
applicable Law. In the event the Plans are terminated by Buyer and replaced with
a similar benefit program for current or retired employees of the Company, those
employees will be eligible to participate in such benefit program and will
receive full credit for their service with the Company for eligibility and
vesting purposes with respect to such benefit program.
5.12. FURTHER ASSURANCES. From time to time, as and when requested by
any party hereto and subject to Section 5.4, the other parties will execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and will take, or cause to be taken, all such further or other
actions, as the requesting party may reasonably deem necessary or desirable to
consummate the transactions contemplated by this Agreement.
VI. TAX MATTERS
6.1. TAX RETURNS. The Shareholders will have the exclusive authority
and obligation to prepare and timely file, or cause to be prepared and timely
filed, all Returns of the Company with respect to any taxable year or other
taxable period ending on or prior to the Closing Date that are filed prior to
the Closing Date. The Buyer will have the exclusive authority and obligation to
prepare and timely file, or cause to be prepared and timely filed, all Returns
of the Company that are filed after the Closing Date. Such authority will
include, but not be limited to, the determination of the manner in which any
items of income, gain, deduction, loss or credit arising out of the respective
income, properties and operations of the Company will be reported or disclosed
in such Returns; PROVIDED, HOWEVER, that unless otherwise required by law, Buyer
and the Shareholders shall prepare such Returns (and any amended Return) in a
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manner consistent with past practices and shall not change any of the accounting
methods, elections and conventions used in preparing such Returns if the effect
of such change would be to increase the amount of Tax liabilities of the
Shareholders or Buyer, respectively.
6.2. APPORTIONMENT OF TAXES. Except as otherwise provided in this
Agreement, all Taxes and Tax liabilities with respect to the income, property or
operations of the Company that relate to a taxable year or other taxable period
beginning before and ending after the Closing Date will be apportioned between
the Pre-Closing Tax Period and the Post-Closing Tax Period as follows: (A) in
the case of Taxes other than income Taxes and sales and use Taxes, on a per diem
basis, and (B) in the case of income Taxes and sales and use Taxes, as
determined from the books and records of the Company, between Pre-Closing and
Post-Closing Tax Periods as though the taxable year of the Company terminated at
the close of business on the Closing Date, and based on accounting methods,
elections and conventions that do not have the effect of distorting income and
expenses. The Shareholders will be jointly and severally liable for the payment
of all Taxes of the Company which are attributable to any Pre-Closing Tax
Period, whether shown on any original Return or amended Return for the period
referred to therein. The Company will be liable for the payment of all Taxes
which are attributable to any Post-Closing Tax Period. All transfer,
documentary, sales, use, stamp, registration, value added and other Taxes and
fees (including any penalties and interest), imposed on the Buyer or the Company
which are incurred in connection with this Agreement, including pursuant to the
Reorganization, Assignment and Section 5.10, will be borne and paid by the
Shareholders when due, and the Shareholders will, at their own expense, cause to
be filed all necessary Returns and other documentation with respect to all such
Taxes and fees.
6.3. COOPERATION; AUDITS. In connection with the preparation of
Returns, audit examinations and any administrative or judicial proceedings
relating to the Tax liabilities imposed on the Company for all Pre-Closing Tax
Periods, Buyer and the Company, on the one hand, and the Shareholders, on the
other hand, will cooperate fully with each other, including, but not limited to,
the furnishing or making available during normal business hours of records,
personnel (as reasonably required), books of account, powers of attorney and
other materials necessary or helpful for the preparation of such Returns, the
conduct of audit examinations or the defense of claims by Tax authorities as to
the imposition of Taxes.
6.4. CONTROVERSIES. Buyer will promptly notify the Shareholders in
writing upon receipt by Buyer or any Affiliate of Buyer (including the Company
after the Closing Date) of written notice of any inquiries, claims, assessments,
audits or similar events with respect to Taxes relating to a Pre-Closing Tax
Period for which the Shareholders may be liable under this Agreement (any such
inquiry, claim, assessment, audit or similar event, a "TAX MATTER"). The
Shareholders, at their sole expense, will have the exclusive authority to
represent the interests of the Company with respect to any Tax Matter before the
IRS, any other Taxing Authority or any other Governmental Authority or any court
and will have the sole right to extend or waive the statute of limitations with
respect to such Tax Matter and to control the defense, compromise or other
resolution of such Tax Matter, including responding to inquiries, filing Tax
returns and settling audits; PROVIDED, HOWEVER, that the Shareholders will not
enter into any settlement of or otherwise compromise any Tax Matter that affects
or may affect the Tax liability of Buyer or the Company or any Affiliate of the
foregoing for any Post-Closing Tax Period, including the portion of a period
beginning before the Closing Date and ending after the Closing Date, without the
prior written consent of Buyer, which consent will not be unreasonably withheld
or delayed.
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The Shareholders will keep Buyer fully and timely informed with respect to the
commencement, status and nature of any Tax Matter. The Shareholders will consult
with Buyer regarding the conduct of or positions taken in any such proceeding.
6.5. AMENDED RETURNS. The Shareholders will not file or cause or
permit to be filed any amended Return without the prior written consent of
Buyer, which consent will not be unreasonably withheld or delayed. Buyer will
not file or cause to be filed any amended Return covering any period or
adjusting any Taxes for a period which includes any period prior to the Closing
Date without the prior written consent of the Shareholders, which consent will
not be unreasonably withheld or delayed, other than those related to any
requirement of a Taxing Authority or other Governmental Authority.
6.6. NON-FOREIGN PERSON AFFIDAVIT. The Company will furnish to Buyer
on or before the Closing Date a non-foreign person affidavit as required by
Section 1445 of the Code.
VII. CONDITIONS TO CLOSING
7.1. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate the Closing are subject to the satisfaction of the following
conditions (unless waived in writing by Buyer):
7.1.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a)
The representations and warranties of the Company made in this Agreement shall
be true and correct in all respects (or, if any such representation is not
expressly qualified by "materiality," "Material Adverse Effect" or words of
similar import, then in all material respects) as of the date hereof and as of
the Closing, as though made as of the Closing; (b) the Company shall have
performed and complied with all terms, agreements and covenants contained in
this Agreement required to be performed or complied with by the Company on or
before the Closing Date; and (c) the Company shall have delivered to Buyer a
certificate of the Company's Chief Executive Officer, dated the Closing Date,
confirming the foregoing and such other evidence of compliance with its
obligations as Buyer may reasonably request.
7.1.2. CERTIFICATE OF THE COMPANY. The Company shall have delivered to
Buyer a certificate from its Secretary or an Assistant Secretary certifying as
to the due adoption of resolutions adopted by its Board of Directors authorizing
the execution of this Agreement and the taking of any and all actions deemed
necessary or advisable to consummate the transactions contemplated herein.
7.1.3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SHAREHOLDERS.
(a) The representations and warranties of each of the Shareholders made in this
Agreement shall be true and correct in all respects (or, if any such
representation is not expressly qualified by "materiality," "Material Adverse
Effect" or words of similar import, then in all material respects) as of the
date hereof and as of the Closing, as though made as of the Closing; (b) each of
the Shareholders shall have performed and complied with all terms, Agreements
and covenants contained in this Agreement required to be performed or complied
with by such Shareholder on or before the Closing Date; and (c) each of the
Shareholders shall have delivered to Buyer certificates dated the Closing Date
confirming the foregoing and such other evidence of compliance with such
Shareholders' obligations as Buyer may reasonably request.
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7.1.4. NO INJUNCTION, ETC. No provision of any applicable Law or Order
shall be in effect which prohibits the consummation of the Closing.
7.1.5. NO PROCEEDINGS. No proceeding challenging this Agreement, the
Ancillary Agreements or the transactions contemplated hereby or thereby or
seeking to prohibit, alter, prevent or materially delay the Closing or seeking
damages shall have been instituted by any Person before any Governmental
Authority and be pending.
7.1.6. OPINION OF COUNSEL. Buyer shall have received the opinion of
Samuel J. Ianacone, counsel to the Company and the Shareholders, dated the
Closing Date, substantially in the form attached hereto as EXHIBIT G.
7.1.7. DUE DILIGENCE. Buyer shall have completed, or caused to be
completed by its attorneys, accountants and other representatives, business,
legal, environmental and accounting due diligence investigations and reviews of
the Company, with the results of such reviews and investigations satisfactory to
Buyer in its sole discretion.
7.1.8. ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall
have been executed and delivered by the parties thereto other than Buyer or
Affiliates of Buyer.
7.1.9. RESIGNATION OF DIRECTORS. Each of the directors of the Company
immediately prior to the Closing shall have submitted a letter of resignation to
the Company effective as of the Closing.
7.1.10. THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals, waivers and filings, if any, disclosed on any Schedule attached
hereto or otherwise required in connection with the consummation of the
transactions contemplated by this Agreement shall have been received or made.
All of the consents, approvals, authorizations, exemptions, waivers and filings
from Governmental Authorities required in order to enable Buyer to consummate
the transactions contemplated hereby shall have been obtained or made.
7.1.11. FIRPTA. The Company shall have furnished to Buyer, on or prior
to the Closing Date, a non-foreign person affidavit required by Section 1445 of
the Code.
7.1.12. NO MATERIAL ADVERSE CHANGE. Prior to the Closing, no event
shall have occurred which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect.
7.1.13. FINANCING. Buyer shall have obtained financing for the payment
of the Aggregate Closing Consideration on terms satisfactory to it in its sole
discretion. Buyer will provide reasonable advance notice in the event that
financing for the payment of the Aggregate Closing Consideration on terms
satisfactory to Buyer in its sole discretion cannot be obtained, PROVIDED,
HOWEVER, that failure to provide such notice will not limit the condition (or
waiver thereof) to Buyer's obligation to consummate the Closing as set forth in
the preceding sentence.
7.1.14. RELATED PARTY INDEBTEDNESS. The Shareholders shall have
assumed all outstanding Related Party Indebtedness or shall have directed
Buyer to repay all outstanding
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Related Party Indebtedness with a portion of the proceeds of the Aggregate
Closing Consideration, and caused any and all Liens relating thereto to be
released in full.
7.1.15. PRE-CLOSING AUDIT. Buyer shall have received the completed
Pre-Closing Audit and Audited Financial Statements, which shall not reflect any
materially adverse difference from the applicable Reviewed Statements, as
determined by Buyer in its sole discretion.
7.1.16 REORGANIZATION. The Company, the Partnership and the
Shareholders shall have executed and delivered to Buyer such documents and
instruments as are required to consummate the Reorganization and provided Buyer
with such evidence of the consummation of the Reorganization as Buyer may
reasonably request.
7.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
The obligations of the Company and the Shareholders to consummate the Closing
are subject to the satisfaction of the following conditions (unless waived in
writing by the Shareholders owning a majority of the outstanding Common Stock):
7.2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER. (a) The
representations and warranties of Buyer made in this Agreement shall be true and
correct in all respects (or, if any such representation is not expressly
qualified by "materiality," or words of similar import, then in all material
respects) as of the date hereof and as of the Closing, as though made as of the
Closing; (b) Buyer shall have performed and complied in all material respects
with all terms, agreements and covenants contained in this Agreement required to
be performed or complied with by Buyer on or before the Closing Date; and (c)
Buyer shall have delivered to the Company and the Shareholders a certificate of
Buyer's Chief Executive Officer, dated the Closing Date, confirming the
foregoing and such other evidence of compliance with its obligations as the
Company or the Shareholders may reasonably request.
7.2.2. BUYER'S CERTIFICATE. Buyer shall have delivered to the
Company and the Shareholders a certificate from its Secretary or Assistant
Secretary certifying as to the due adoption of resolutions adopted by the Board
of Directors of Buyer authorizing the execution of this Agreement and the taking
of any and all actions deemed necessary or advisable to consummate the
transactions contemplated herein.
7.2.3. NO INJUNCTION, ETC. No provision of any applicable Law or Order
shall be in effect which prohibits the consummation of the Closing.
7.2.4. OPINION OF COUNSEL. The Company and the Shareholders shall have
received an opinion of Jones, Day, Reavis & Pogue, counsel to Buyer, dated the
Closing Date, substantially in the form attached hereto as EXHIBIT H.
7.2.5 ANCILLARY AGREEMENTS. Each of the Ancillary Agreements shall
have been executed and delivered by Buyer, if Buyer or the Company is a party
thereto.
VIII. SURVIVAL; INDEMNIFICATION
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8.1. SURVIVAL. The representations and warranties of the parties
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith will survive the Closing until the
second anniversary of the Closing Date; PROVIDED, HOWEVER, that (i) the
representations and warranties contained in Section 3.1.9 will survive the
Closing until the expiration of the statute of limitations applicable to the
matters covered thereby (after giving effect to any waiver, mitigation or
extension thereof granted by the Company after the Closing) , (ii) the
representations and warranties contained in Section 3.1.17 will survive the
Closing until the fifth anniversary of the Closing Date, and (iii) the Selected
Company Representations and Warranties, the Selected Shareholder Representations
and Warranties and the Selected Buyer Representations and Warranties will
survive the Closing indefinitely. Notwithstanding the immediately preceding
sentence, any representation or warranty in respect of which indemnity may be
sought under this Agreement will survive the time at which it would otherwise
terminate pursuant to the preceding sentence if written notice of the inaccuracy
or breach thereof giving rise to such right of indemnity shall have been given
to the party against whom such indemnity may be sought prior to such time;
PROVIDED, HOWEVER, that the applicable representation or warranty will survive
only with respect to the particular inaccuracy or breach specified in such
written notice. All covenants and agreements of the parties contained in this
Agreement will survive the Closing indefinitely.
8.2. INDEMNIFICATION. (a) Each Shareholder will, jointly and
severally, indemnify, defend and hold harmless Buyer and its officers,
directors, employees, members, managing directors, Affiliates (including, after
the Closing Date, the Company) and agents, and the successors to the foregoing
(and their respective officers, directors, employees, members, managing
directors, Affiliates and agents) (each, a "BUYER INDEMNIFIED PARTY"), against
any and all liabilities, damages and losses and, if, and only to the extent
asserted in a Third Party Claim, punitive damages, and all costs or expenses,
including, without limitation, reasonable attorneys' and consultants' fees and
expenses ("DAMAGES"), incurred or suffered as a result of or actually arising
out of (i) the failure of any representation or warranty made by the Company or
any Shareholder in any subsection of Section 3.1 to be true and correct as of
the date hereof or as of the Closing Date (other than a breach of Section 3.1.9
with respect to Taxes, which will be governed by Section 8.3), (ii) the breach
of any covenant or agreement made or to be performed by the Company pursuant to
this Agreement, (iii) claims in connection with the Reorganization, or (iv)
claims under the Company Notes; PROVIDED, HOWEVER, that neither the Company nor
any Shareholder will be liable under clause (i) of this Section 8.2(a) unless
the aggregate amount of Damages exceeds $100,000 (the "Basket") and then from
the first dollar to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER,
that the Shareholders' aggregate liability under clause (i) of this Section
8.2(a) and clause (i) of Section 8.2(b) will not exceed, in the aggregate, $2.5
million (the "Cap"). Notwithstanding the foregoing, breaches with respect to any
of the Selected Company Representations and Warranties, the Selected Shareholder
Representations and Warranties, and the other representations and warranties
contained in Sections 3.1.6 and 3.1.9 are not subject to the Basket and the Cap.
(b) Each Shareholder will, severally and not jointly, indemnify,
defend and hold harmless each Buyer Indemnified Party against any and all
Damages incurred or suffered as a result of or actually arising out of (i) the
failure of any representation or warranty made by such Shareholder in any
subsection of Section 3.2 of this Agreement to be true and correct as of the
date hereof and the Closing Date or (ii) the breach of any covenant or agreement
made or to be performed by such Shareholder pursuant to this Agreement;
PROVIDED, HOWEVER, that the
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Shareholders' aggregate liability under clause (i) of this Section 8.2(b) and
clause (i) of Section 8.2(a) will not, in the aggregate, exceed the Cap.
Notwithstanding the foregoing, breaches with respect to any of the Selected
Company Representations and Warranties, the Selected Shareholder Representations
and Warranties, and the other representations and warranties contained in
Sections 3.1.6 and 3.1.9 are not subject to the Basket and the Cap.
(c) Buyer will, after the Closing Date, indemnify, defend and hold
harmless the Shareholders against Damages incurred or suffered as a result of or
actually arising out of (i) the failure of any representation or warranty made
by Buyer in this Agreement to be true and correct as of the date hereof and the
Closing Date, (ii) the breach of any covenant or agreement made or to be
performed by Buyer pursuant to this Agreement, or (iii) any of the obligations
of the Company or the Partnership identified on SCHEDULE 8.2(c) that any
Shareholder or partner of the Partnership has personally guaranteed; PROVIDED,
HOWEVER, that Buyer will not be liable under clause (i) of this Section 8.2(c)
unless the aggregate amount of Damages exceeds $100,000 and then from the first
dollar to the full extent of such Damages; PROVIDED, FURTHER, HOWEVER, that
Buyer's liability under clause (i) of this Section 8.2(c) will not exceed, in
the aggregate, $2.5 million.
8.3. TAX INDEMNIFICATION. Each Shareholder will, jointly and
severally, indemnify, defend and hold harmless each Buyer Indemnified Party
against (i) any and all Damages resulting from or actually arising out of, or
incurred with respect to, the failure of any representation or warranty made by
the Company pursuant to Section 3.1.9 to be true and correct as of the date
hereof and as of the Closing Date, (ii) all Taxes imposed on or asserted against
the Company or for which the Company may be liable in respect of the properties,
income or operations of the Company for all Pre-Closing Tax Periods, and (iii)
all Taxes imposed on or asserted against the Company, or for which the Company
may be liable, as a result of any transaction contemplated by this Agreement,
including the Reorganization and the Assignment and pursuant to Section 5.10.
8.4. PROCEDURES. (a) If any Person who or which is entitled to seek
indemnification under Section 8.2 or Section 8.3 (an "INDEMNIFIED PARTY")
receives notice of the assertion or commencement of any Third Party Claim
against such Indemnified Party with respect to which the Person against whom or
which such indemnification is being sought (an "INDEMNIFYING PARTY") is
obligated to provide indemnification under this Agreement, the Indemnified Party
will give such Indemnifying Party reasonably prompt written notice thereof, but
in any event not later than 20 days after receipt of such written notice of such
Third Party Claim. Such notice by the Indemnified Party will describe the Third
Party Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Damages that have been or may be sustained by the
Indemnified Party. The Indemnifying Party will have the right to participate in,
or, by giving written notice to the Indemnified Party, to assume, the defense of
any Third Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel (reasonably satisfactory to the Indemnified
Party), and the Indemnified Party will cooperate in good faith in such defense.
(b) If, within ten days after giving notice of a Third Party
Claim to an Indemnifying Party pursuant to Section 8.4(a), an Indemnified Party
receives written notice from the Indemnifying Party that the Indemnifying Party
has elected to assume the defense of such
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Third Party Claim as provided in the last sentence of Section 8.4(a), the
Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof;
PROVIDED, HOWEVER, that if the Indemnifying Party fails to take reasonable steps
necessary to defend diligently such Third Party Claim within ten days after
receiving written notice from the Indemnified Party that the Indemnified Party
reasonably believes the Indemnifying Party has failed to take such steps or if
the Indemnifying Party has not agreed to indemnify the Indemnified Party in
respect of all Damages relating to the matter, the Indemnified Party may assume
its own defense, and the Indemnifying Party will be liable for all reasonable
costs and expenses paid or incurred in connection therewith. Without the prior
written consent of the Indemnified Party, the Indemnifying Party will not enter
into any settlement of any Third Party Claim which would lead to liability or
create any financial or other obligation on the part of the Indemnified Party
for which the Indemnified Party is not entitled to indemnification hereunder, or
which provides for injunctive or other non-monetary relief applicable to the
Indemnified Party, or, with the exception of tax matters, does not include an
unconditional release of all Indemnified Parties. If a firm offer is made to
settle a Third Party Claim without leading to liability or the creation of a
financial or other obligation on the part of the Indemnified Party for which the
Indemnified Party is not entitled to indemnification hereunder and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnified Party to that effect. If the
Indemnified Party fails to consent to such firm offer within ten days after its
receipt of such notice, the Indemnified Party may continue to contest or defend
such Third Party Claim and, in such event, the maximum liability of the
Indemnifying Party as to such Third Party Claim will not exceed the amount of
such settlement offer. The Indemnified Party will provide the Indemnifying Party
with reasonable access during normal business hours to books, records, and
employees of the Indemnified Party necessary in connection with the Indemnifying
Party's defense of any Third Party Claim which is the subject of a claim for
indemnification by an Indemnified Party hereunder.
(c) Any claim by an Indemnified Party on account of Damages which does
not result from a Third Party Claim (a "DIRECT CLAIM") will be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, but in
any event not later than 20 days after the Indemnified Party becomes aware of
such Direct Claim. Such notice by the Indemnified Party will describe the Direct
Claim in reasonable detail, will include copies of all available material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of Damages that has been or may be sustained by the Indemnified
Party. The Indemnifying Party will have a period of ten days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such ten day period, the Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnified Party will be free to
pursue such remedies as may be available to the Indemnified Party on the terms
and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified
information in any notice as provided in Section 8.4(a), 8.4(b) or 8.4(c) will
not affect the rights or obligations of any party hereunder, except and only to
the extent that, as a result of such failure, any party which was entitled to
receive such notice was deprived of its right to recover any payment under its
applicable insurance coverage or was otherwise materially prejudiced as a result
of such failure.
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8.5. PAYMENT AND TREATMENT OF INDEMNIFICATION PAYMENTS. All
indemnifiable Damages under this Agreement will be paid in cash in immediately
available funds. Any amount paid by the Shareholders or Buyer under Section 8.2
or 8.3 will be treated as a capital contribution, on the one hand, and/or an
adjustment to the Aggregate Closing Consideration on the other hand.
8.6. INDEMNIFICATION AMOUNTS NET OF BENEFITS RECEIVED. The amount of
Damages for which indemnification is provided under Sections 8.2 and 8.3 will be
computed net of any insurance proceeds actually received by the Indemnified
Party in connection with such Damages, reduced by all costs and expenses related
thereto and any premium increase or expense directly resulting therefrom for a
period of 3 years or such other period of time that can be determined for
purposes of calculating the present value of such premium increase or expense as
of the date payment of the amount of damages is made. If the amount with respect
to which any claim is made under this Section 8.6 gives rise to a currently
realizable Tax benefit, the indemnity payment will be reduced by the amount of
such currently realizable benefit then available to the party making the claim
if and to the extent actually realized by such party in the fiscal year in which
such indemnity payment is made to such party or in the next succeeding fiscal
year.
8.7. EXCLUSIVE REMEDY. Absent fraud, Article VIII constitutes the
exclusive remedy for the breach of covenants, agreements, representations or
warranties set forth in this Agreement; PROVIDED, HOWEVER, that the provisions
of this Section 8.7 will not prevent the Shareholders, the Company or Buyer from
seeking the remedies of specific performance or injunctive relief in connection
with the breach of a covenant or agreement of any party hereto.
IX. MISCELLANEOUS
9.1. TERMINATION. (a) This Agreement may be terminated at any time
prior to the Closing:
(i) by the mutual written consent of Buyer and the Shareholders owning
a majority of the outstanding shares of Common Stock;
(ii) by Buyer, if there has been a material violation or breach by the
Company or any Shareholder of any of their respective covenants, representations
or warranties contained in this Agreement which has prevented the satisfaction
of any condition to the obligations of Buyer to consummate the Closing, and such
violation or breach has not been waived by Buyer or, in the case of a covenant
breach, cured by the Company or the Shareholders within ten days after written
notice thereof from Buyer;
(iii) by the Shareholders owning a majority of the outstanding shares
of Common Stock, if there has been a material violation or breach by Buyer of
any covenant, representation or warranty of Buyer contained in this Agreement
which has prevented the satisfaction of any condition to the obligations of the
Company and the Shareholders to consummate the Closing, and such violation or
breach has not been waived by the Company or, in the case of a covenant breach,
cured by Buyer within the ten days after written notice thereof from the
Company;
38
<PAGE>
(iv) by Buyer or the Shareholders owning a majority of the outstanding
shares of Common Stock, if the transactions contemplated hereby have not been
consummated by September 3, 1999 (the "TERMINATION DATE"), PROVIDED, HOWEVER,
that neither Buyer nor such Shareholders will be entitled to terminate this
Agreement pursuant to this Section 9.1(a)(iv) if such Person's breach of this
Agreement has prevented the consummation of the transactions contemplated
hereby; and
(v) by Buyer, if any of the conditions to Closing set forth in
Sections 7.1.7, 7.1.10, 7.1.13 or 7.1.15 have not been satisfied.
(b) In the event that this Agreement is terminated pursuant to Section
9.1(a), all further obligations of the parties hereto under this Agreement
(other than pursuant to Article VIII and Article IX, which will continue in full
force and effect) will terminate without further liability or obligation of any
party to any other party hereunder; PROVIDED, HOWEVER, that no party will be
released from liability hereunder if this Agreement is terminated and the
transactions abandoned by reason of (i) the failure of such party to have
performed its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.
9.2. NOTICES. All notices, requests and other communications to any
party hereunder must be in writing (including facsimile transmission) and must
be given to such party at its address and facsimile number set forth in SCHEDULE
9.2 (which may be changed by such party upon notice in accordance with this
Section 9.2). All such notices, requests and other communications will be deemed
received on the date of receipt by the recipient thereof if received prior to
5:00 p.m. in the place of receipt and such day is a Business Day in the place of
receipt. Otherwise, any such notice, request or communication will be deemed not
to have been received until the next succeeding Business Day in the place of
receipt.
9.3. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder will operate as a waiver thereof, whether of a similar
or dissimilar nature, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided will be
cumulative and not exclusive of any rights or remedies provided by Law.
9.4. EXPENSES. Except as otherwise expressly provided for herein, the
parties will pay or cause to be paid all of their own fees and expenses incident
to this Agreement and in preparing to consummate and consummating the
transactions contemplated hereby, including the fees and expenses of any broker,
finder, financial advisor, legal advisor or similar person engaged by such
party. All such fees and expenses of the Company will be properly accrued on the
Closing Balance Sheet and the Closing Shareholders' Equity Statement.
9.5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement will be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
Transfer (including by operation of
39
<PAGE>
Law) any of its rights or obligations under this Agreement without the
consent of each other party hereto. Notwithstanding the foregoing, the Buyer
may assign its rights and delegate its obligations under the Agreement to an
Affiliate of Buyer without the consent of any other party hereto; PROVIDED,
HOWEVER, that no such assignment will relieve Buyer of its obligations
hereunder. Any assignment in violation of this Section 9.5 will be void ab
initio.
9.6. NO THIRD PARTY BENEFICIARIES. Except as provided in Article VIII
and Section 9.5, this Agreement is for the sole benefit of the parties hereto
and their permitted successors and assigns and nothing herein expressed or
implied will give or be construed to give to any Person, other than the parties
hereto and such permitted successors and assigns any legal or equitable rights
hereunder.
9.7. GOVERNING LAW. This Agreement will be governed by, and construed
in accordance with, the law of the State of New York, without regard to the
conflict of laws rules of such State.
9.8. JURISDICTION. Except as otherwise expressly provided in this
Agreement, any suit, action or proceeding seeking to enforce any provision of,
or based on any matter arising out of or in connection with, this Agreement or
the transactions contemplated hereby may be brought in any court of competent
jurisdiction in the City of Rochester, or the United States District Court for
the Western District of New York (assuming that such court otherwise has
jurisdiction) and each of the parties hereby consents to the non-exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by Law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 9.2
will be deemed effective service of process on such party.
9.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, CLAIM OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN
EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
9.10. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9.11. HEADINGS. The headings in this Agreement are for convenience of
reference only and will not control or affect the meaning or construction of any
provisions hereof.
9.12. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) and the Ancillary Agreements constitute the entire agreement
among the parties with
40
<PAGE>
respect to the subject matter of this Agreement. This Agreement (including
the Schedules and Exhibits hereto) and the Ancillary Agreements supersede all
prior agreements and understandings, both oral and written, between the
parties with respect to the subject matter hereof of this Agreement.
9.13. SEVERABILITY; INJUNCTIVE RELIEF. (a) If any provision of this
Agreement or the application of any such provision to any Person or circumstance
is held invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, the remainder of the provisions of this Agreement (or the
application of such provision in other jurisdictions or to Persons or
circumstances other than those to which it was held invalid, illegal or
unenforceable) will in no way be affected, impaired or invalidated, and to the
extent permitted by applicable Law, any such provision will be restricted in
applicability or reformed to the minimum extent required for such provision to
be enforceable. This provision will be interpreted and enforced to give effect
to the original written intent of the parties prior to the determination of such
invalidity or unenforceability.
(b) The parties acknowledge and agree that the covenants and
agreements contained herein are reasonably necessary to protect the legitimate
interests of the parties and their business and that any violation of such
covenants and warranties will result in irreparable injury to the parties, the
exact amount of which will be difficult to ascertain and the remedies at law for
which will not be reasonable or adequate compensation to the parties for such a
violation. Accordingly, each party agrees that if it violates any of the
provisions of this Agreement, in addition to any other remedy available at Law
or in equity, the non-breaching party will be entitled to seek specific
performance or injunctive relief without posting a bond, or other security, and
without the necessity of proving actual damages.
9.14. CERTAIN INTERPRETIVE MATTERS. (a) Unless the context otherwise
requires, (a) all references to Sections, Articles, Exhibits or Schedules are to
Sections, Articles, Exhibits, or Schedules of or to this Agreement, (b) each of
the Schedules will apply only to the corresponding subsection (or, if there is
no subsection, section) of this Agreement, (c) each term defined in this
Agreement has the meaning assigned to it, (d) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in accordance with
GAAP, (e) words in the singular include the plural and VICE VERSA, and (f) the
term "INCLUDING" means "including without limitation." All references to Laws in
this Agreement will include any applicable amendments thereunder. All references
to $ or dollar amounts will be to lawful currency of the United States. To the
extent the term "DAY" or "DAYS" is used, it shall mean calendar days (unless
referred to as a Business Day).
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) (i) All references to the "knowledge of the Company" or to words
of similar import will be deemed to be references to the actual knowledge of one
or more of the executive officers or directors of the Company whose names are
listed on SCHEDULE 9.15(c)(i), and will include such knowledge as such executive
officers or directors would have had after due inquiry of the responsible
individuals of the Company, its counsel and accountants.
41
<PAGE>
(ii) All references to the "knowledge of Buyer" or to words of similar
import will be deemed to be references to the actual knowledge of one
or more of the executive officers or directors of Buyer whose names
are listed on SCHEDULE 9.15(c)(ii), and will include such knowledge as
such executive officers or directors would have had after due inquiry
of the responsible individuals of Buyer, its counsel and accountants.
(iii) All references to the "knowledge of Shareholder" or to words of
similar import will be deemed to be references to the actual knowledge
of such Shareholder.
9.15. TRANSFER OF PROCEEDS. In the event Buyer provides notice to the
Shareholders pursuant to Section 8.4(a), the Shareholders will not transfer or
permit the transfer of any of the Aggregate Closing Consideration received by or
on behalf of such Shareholder, whether existing in the form of cash or such
other form as all or a portion of the Aggregate Closing Consideration may exist
as of the date of such notice, if the result thereof would make such Shareholder
unable to satisfy its obligations hereunder as to indemnification.
42
<PAGE>
The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers or in their individual capacity, if applicable,
as of the day and year first above written.
GILLETTE MACHINE & TOOL CO., INC.
By: /s/ Charlyne C. Gillette
-------------------------------
Name: Charlyne C. Gillette
Title: President
STATE OF NEW YORK )
)ss.:
COUNTY OF MONROE )
This 1st day of September, 1999, personally came before me
Charlyne C. Gillette, who being by me duly sworn, says that he/she is the
President of Gillette Machine & Tool Co., Inc., a NY corporation, that said
writing was signed by him/her, and the said President acknowledged the said
writing to be the act and deed of said corporation.
/s/ Samuel J. Ianacone Jr.
-------------------------------
Notary Public
My Commission Expires:
- --------------------
43
<PAGE>
GILLETTE MACHINE & EQUIPMENT COMPANY
By: /s/ Martin Gillette
-------------------------------
Name: Martin Gillette
Title: Partner
STATE OF NEW YORK )
)ss.:
COUNTY OF MONROE )
This 1st day of September, 1999, personally came before me
Martin Gillette, who being by me duly sworn, says that he/she is the Partner
of Gillette Machine & Equipment Co., a NY Gen. Partnership, that said writing
was signed by him/her, and the said Partner acknowledged the said writing to
be the act and deed of said Partnership.
/s/ Samuel J. Ianacone Jr.
-------------------------------
Notary Public
My Commission Expires:
- --------------------
44
<PAGE>
/s/ Charlyne Gillette
-------------------------------
Charlyne Gillette
STATE OF NEW YORK )
)ss.:
COUNTY OF MONROE )
This 1st day of September, 1999, came before me, a notary
public in and for the State of New York, personally appeared Charlyne
Gillette, to me known to be the person named in and who executed the
foregoing instrument, and acknowledged that he/she executed the same as
his/her voluntary act and deed.
/s/ Samuel J. Ianacone Jr.
-------------------------------
Notary Public
My Commission Expires:
- --------------------
45
<PAGE>
/s/ Martin Gillette
------------------------------
Martin Gillette
STATE OF NEW YORK )
)ss.:
COUNTY OF MONROE )
This 1st day of September, 1999, came before me, a notary
public in and for the State of New York, personally appeared Martin Gillette,
to me known to be the person named in and who executed the foregoing
instrument, and acknowledged that he/she executed the same as his/her
voluntary act and deed.
/s/ Samuel J. Ianacone Jr.
-------------------------------
Notary Public
My Commission Expires:
- --------------------
46
<PAGE>
/s/ John Gillette
-------------------------------
John Gillette
STATE OF NEW YORK )
)ss.:
COUNTY OF MONROE )
This 1st day of September, 1999, came before me, a notary
public in and for the State of New York, personally appeared John Gillette,
to me known to be the person named in and who executed the foregoing
instrument, and acknowledged that he/she executed the same as his/her
voluntary act and deed.
/s/ Samuel J. Ianacone Jr.
-------------------------------
Notary Public
My Commission Expires:
- --------------------
47
<PAGE>
TESTAMENTARY TRUST B UNDER WILL OF
FRANK P. GILLETTE DATED FEBRUARY 7, 1992
By: /s/ Martin Gillette
-------------------------------
Name: Martin Gillette
Title: Trustee
STATE OF NEW YORK )
)ss.:
COUNTY OF MONROE )
This 1st day of September, 1999, personally came before me
Martin Gillette, who being duly sworn, says that he/she is the Trustee of the
above trust, a _______________________________, that said writing was signed
by him/her, and the said trustee acknowledged the said writing to be the act
and deed of said trust.
/s/ Samuel J. Ianacone Jr.
-------------------------------
Notary Public
My Commission Expires:
- --------------------
48
<PAGE>
PRECISION PARTNERS, INC.
By: /s/ James E. Ashton
-------------------------------
Name: Dr. James E. Ashton
Title: President and CEO
STATE OF TEXAS )
)ss.:
COUNTY OF DALLAS )
This 27th day of August, 1999, personally came before me
James E. Ashton, who being duly sworn, says that he is the President and CEO
of Precision Partners, Inc., a Delaware corporation, that said writing was
signed by him, and the said James E. Ashton acknowledged the said writing to
be the act and deed of said corporation.
/s/ Jacqueline LeFonte
-------------------------------
Notary Public
My Commission Expires:
05-28-2000
49
<PAGE>
Exhibit 2.7
AGREEMENT OF MERGER
This Agreement of Merger (this "AGREEMENT") is entered into between Certified
Fabricators, Inc., a California corporation (the "SURVIVING CORPORATION"), and
Calbrit Design, Inc., a California corporation (the "MERGING CORPORATION").
1. Merging Corporation will be merged into Surviving Corporation.
2. The outstanding shares of Merging Corporation will be canceled and no
shares of Surviving Corporation will be issued in exchange therefor.
3. The outstanding shares of Surviving Corporation will remain outstanding and
will not be affected by the merger.
4. Merging Corporation will from time to time, as and when requested by
Surviving Corporation, execute and deliver all such documents and
instruments and take all such action necessary or desirable to evidence or
carry out this merger.
5. The effect of the merger and the effective date of the merger are as
prescribed by law.
IN WITNESS WHEREOF the parties have executed this Agreement.
Date: May 28, 1999
CERTIFIED FABRICATORS, INC.
By: /s/ Gary J. Buehler
----------------------------------------
Name: Gary J. Buehler
Title: President and Chief Executive Officer
By: /s/ Ronald M. Miller
----------------------------------------
Name: Ronald M. Miller
Title: Vice President, Treasurer and Secretary
CALBRIT DESIGN, INC.
By: /s/ Gary J. Buehler
----------------------------------------
Name: Gary J. Buehler
Title: President and Chief Executive Officer
By: /s/ Ronald M. Miller
----------------------------------------
Name: Ronald M. Miller
Title: Vice President, Treasurer
and Secretary
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRECISION PARTNERS, INC.
---------------------------
Adopted in Accordance with the Provisions of
Section 242 and 245 of the General Corporation Law
of the State of Delaware
---------------------------
The undersigned, being the Chief Financial Officer, Vice President,
Treasurer and Secretary of Precision Partners, Inc., a corporation existing
under the laws of the State of Delaware (the "COMPANY") does hereby certify that
(i) the Certificate of Incorporation of the Company was filed with the Secretary
of State of the State of Delaware on February 3, 1999 and (ii) the Certificate
of Incorporation of the Company is hereby further amended and restated as
follows:
FIRST: The name of the Company is Precision Partners, Inc.
SECOND: The address of the Company's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, DE 19801, county of New Castle, and
the name of its registered agent at such address is The Corporation Trust
Company.
THIRD: The purpose of the Company is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware as it now exists or may hereafter be amended and supplemented.
FOURTH: The total number of shares of stock which the Company will
have authority to issue is 120,000,000. The shares of stock of the Company will
consist of two classes as follows: 60,000,000 shares of Class A Preferred Stock,
par value .01 per share (the "CLASS A PREFERRED STOCK") and 60,000,000 shares of
common stock, par value $.01 per share (the "COMMON STOCK"). The shares of
Common Stock and the Preferred Stock are collectively referred to herein as
"CAPITAL STOCK."
A. DIVIDENDS. The holders of the shares of Capital Stock will be
entitled to receive dividends when, as and if and only if declared by the
Board of Directors, out of funds legally available therefore; PROVIDED,
HOWEVER, no dividend may be declared on any class of Capital Stock unless
similarly declared on the shares of the other classes of Class A Preferred
Stock. A dividend, if declared on the shares of Capital Stock, will be paid
to the holders of record at the close of business on the date specified by
the Board of Directors at the time such dividend is declared.
B. DISTRIBUTIONS UPON LIQUIDATION, DISSOLUTION, WINDING UP, ETC.
(1) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company or other transactions
referred to in Paragraph B(3) of
1
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this Article (collectively "LIQUIDATION TRANSACTIONS"), the holders of shares of
Class A Preferred Stock then outstanding will be entitled to be paid out of the
assets of the Company available for distribution to its stockholders, whether
such assets are capital or surplus and whether or not any dividends are
declared, before any payment will be made or any assets distributed to the
holders of any shares of any other class of Capital Stock, an amount equal to
whichever of the following has a greater fair market value: (i) an amount per
share in cash equal to the Preference Value, plus an amount in cash equal to all
accrued but unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up, and (ii) the cash or other assets distributable upon
such liquidation, dissolution or winding up with respect to the Capital Stock up
to the Preference Value. If the assets of the Company, or the proceeds thereof,
or the merger or other consideration payable to the stockholders, are not
sufficient to pay in full the payments payable on each outstanding share of
Class A Preferred Stock as determined in accordance with this Paragraph B(1),
then each share of Class A Preferred Stock will participate ratably in such
distribution of assets, or the proceeds thereof, or such payments and in any
event no amount will be payable or distributed in respect of any shares of any
other class of Capital Stock.
(2) In the event of a Liquidation Transaction, after the distribution
to be made to holders of Class A Preferred Stock in accordance with the terms
set forth in Paragraph B(1) above, the holders of shares of Common Stock then
outstanding will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders, whether such assets are capital
or surplus and whether or not any dividends are declared, an amount equal to
the Liquidation Amount (as defined below), plus an amount in each equal to all
accrued but unpaid dividends on the date fixed for liquidation, dissolution or
winding up. The assets of the Company, or the proceeds thereof, or the merger
or other consideration payable to the stockholders remaining after payment
of the Liquidation Amount to the holders of Common Stock will be distributed
pro rata to the holders of the Capital Stock.
(3) Without limiting the generality or effect of Paragraphs B(1) or
B(2) of this Article, for all purposes hereof, the term "LIQUIDATION
TRANSACTION" will include any (i) sale, lease, transfer or other disposition
of all or substantially all of the property or assets of the Company or (ii)
consolidation or merger of the Company with or into one or more other entities,
or (iii) any other business combination or acquisition transaction.
(4) The liquidation payment with respect to each outstanding
factional share of Common Stock under Paragraph B will be equal to a ratably
proportionate amount of the liquidation payment under Paragraph B with respect
to each outstanding share of Common Stock.
(5) The term "LIQUIDATION AMOUNT" means, as it relates to Common
Stock, the price per share at which each such share of Common Stock is issued.
(6) The term "PREFERENCE VALUE" means, as it relates to Class A
Preferred Stock, $.6265 per share.
2
<PAGE>
C. VOTING.
(1) The holders of Common Stock shall vote as one class on all
actions for which stockholder approval is required by law, this Certificate or
the By-Laws of the Company, and each share of Common Stock will have one vote.
(2) The Class A Preferred Stock will be non-voting, except as
required by law, except as provided in Paragraph D of this Article, and except
that, without the vote or consent of the majority of holders of the
then-outstanding Class A Preferred Stock, voting separately as a class, no
amendment to the certificate of incorporation of the Company (directly or in
connection with a merger, consolidation or other event or by reason of the
authorization or issuance of any additional shares of capital stock) may be
effected which would adversely affect the powers, privileges, preferences or
other rights of or pertaining to the Class A Preferred Stock.
(3) The holders of the Common Stock will be entitled to elect an
aggregate of six directors to the Board of Directors of the Company, four of
whom will be designated by the managing member of Precision Partners Investment
Fund, L.L.C., one of whom will be designated by Harvey (as defined in the
Precision Partners, L.L.C. Limited Liability Company, dated as of September 30,
1998), and one of whom will be designated by the Corporate Management Investors
(as defined in the Precision LLC Agreement).
D. RESTRICTIONS ON TRANSFER. The Capital Stock will not be
transferable without the consent of the holders of a majority of the outstanding
shares of Capital Stock.
E. GENERAL PROVISIONS. The headings of the paragraphs,
subparagraphs, clauses and subclauses hereto are for convenience of reference
only and will not define, limit or affect any of the provisions hereof.
FIFTH: The name and mailing address of the incorporator is:
Sanford B. Kaynor, Jr.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
SIXTH: The personal liability of the directors of the Company is
hereby eliminated to the fullest extent permitted by paragraph (7) of subsection
(b) of Section 102 of the General Corporation Law of the State of Delaware, as
the same may be amended and supplemented. Any repeal or modification of this
Article Sixth will not adversely affect any right or protection of a director of
the Company existing immediately prior to such repeal or modification.
SEVENTH: The Company will, to the fullest extent permitted or required
by Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons to whom it
will have power to indemnify under said section from and against any and all of
the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein will not be deemed
exclusive of any other rights to which those indemnified may be entitled under
3
<PAGE>
any By-Law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and will continue as to a person who
has ceased to be a director, officer, employee or agent and will inure to the
benefit of the heirs, executors and administrators of such person. Any repeal or
modification of this Article Seventh will not adversely affect any right or
protection existing hereunder immediately prior to such repeal or modification.
EIGHTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Company by this
certificate of incorporation are granted subject to the provisions of this
Article Eighth.
NINTH: In furtherance and not in limitation of the rights, powers,
privileges and discretionary authority granted or conferred by the General
Corporation Law of the State of Delaware or other statutes or laws of the state
of Delaware, the Board of Directors is expressly authorized to make, alter,
amend or repeal the By-Laws of the Company, without any action on the part of
the Stockholders, but the Stockholders may make additional By-Laws and may
alter, amend or repeal any By-Law whether adopted by them or otherwise. The
Company may in its By-Laws confer powers upon its Board of Directors in
additional to the foregoing and in addition to the powers and authorities
expressly conferred upon the Board of Directors by applicable law.
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Dated: March 18, 1999
PRECISION PARTNERS, INC.
By: /s/ Ronald M. Miller
--------------------
Name: Ronald M. Miller
Title: Chief Financial Officer, Vice
President, Treasurer and
Secretary
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Exhibit 3.2
BYLAWS
OF
PRECISION PARTNERS, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of
Precision Partners, Inc. (the "Corporation") shall be held either within or
without the State of Delaware, at such place and on such date and time as the
Board of Directors may designate from time to time in the call of the meeting or
in a waiver of notice thereof, on such date as the Board of Directors shall fix
by resolution in each year beginning with the year 1999 for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special Meetings of the stockholders may be
called by the Board of Directors or by the President, and shall be called by the
President or by the Secretary upon the written request of the holders of record
of at least thirty-five percent (35%) of the shares of stock of the Corporation,
issued and outstanding and entitled to vote, at such times and at such place
either within or without the State of Delaware as may be stated in the call or
in a waiver of notice thereof.
SECTION 3. NOTICE OF MEETINGS. Notice of the time, place and purpose of
every meeting of stockholders shall be delivered personally or mailed not less
than ten days nor more than sixty days previous thereto to each stockholder of
record entitled to vote, at such stockholder's post office address appearing
upon the records of the Corporation or at such other address as shall be
furnished in writing by him or her to the Corporation for such purpose. Such
further notice shall be given as may be required by law or by these Bylaws. Any
meeting may be held without notice if all stockholders entitled to vote are
present in person or by proxy, or if notice is waived in writing, either before
or after the meeting, by those not present.
SECTION 4. QUORUM. The holders of record of at least a majority of the
shares of the stock of the Corporation, issued and outstanding and entitled to
vote, present in person or by proxy, shall, except as otherwise provided by law
or by these Bylaws, constitute a quorum at all meetings of the stockholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the stockholders shall be
presided over by the Chairman of the Board, if there be one, or if the Chairman
of the Board is not present by the President, or if the President is not
present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, shall act as Secretary of the meeting, if present.
SECTION 6. VOTING. At each meeting of stockholders, except as otherwise
provided by statute or the Certificate of Incorporation, every holder of record
of stock entitled to vote shall be entitled
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to one vote in person or by proxy for each share of such stock standing in his
or her name on the records of the Corporation. Elections of directors shall be
determined by a plurality of the votes cast and, except as otherwise provided by
statute, the Certificate of Incorporation, or these Bylaws, all other action
shall be determined by a majority of the votes cast at such meeting. Each proxy
to vote shall be in writing and signed by the stockholder or by such
stockholder's duly authorized attorney.
At all elections of directors, the voting shall be by ballot or in such
other manner as may be determined by the stockholders present in person or by
proxy entitled to vote at such election. With respect to any other matter
presented to the stockholders for their consideration at a meeting, any
stockholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the stockholders entitled to vote at each such meeting,
arranged in alphabetical order, with the address of each, and the number of
shares registered in the name of each stockholder, shall be prepared by the
Secretary and shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 7. INSPECTORS OF ELECTION. The Board of Directors in advance of any
meeting of stockholders may appoint one or more Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of the meeting may, and on the request of any
stockholder entitled to vote shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his or her ability. If appointed, Inspectors of Election shall take charge of
the polls and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be required by law.
SECTION 8. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of stockholders may be taken without a meeting, without prior
notice and without a vote, if, prior to such action, a written consent or
consents thereto, setting forth such action, is signed by the holders of record
of shares of the stock of the Corporation, issued and outstanding and entitled
to vote thereon, having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
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ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. The Board of Directors
of the Corporation shall consist of six persons. The number of directors may be
changed by a resolution passed by a majority of the whole Board or by a vote of
the holders of record of at least a majority of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, subject to the terms
of the Certificate of Incorporation of the Company.
A majority of the members of the Board of Directors then holding office
(but not less than one-third of the total number of directors ) shall constitute
a quorum for the transaction of business, but if at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Directors shall hold office until the next annual election and until their
successors shall have been elected and shall have qualified, unless sooner
displaced.
Whenever any vacancy shall have occurred in the Board of Directors, by
reason of death, resignation, or otherwise, other than removal of a director
with or without cause by a vote of the stockholders, it shall be filled by a
majority of the remaining directors, though less than a quorum (except as
otherwise provided by law), or by the stockholders, and the person so chosen
shall hold office until the next annual election and until a successor is duly
elected and has qualified.
Any one or more of the directors of the Corporation may be removed either
with or without cause at any time by a vote of the holders of record of at least
a majority of the shares of stock of the Corporation, issued and outstanding and
entitled to vote, and thereupon the term of the director or directors who shall
have been so removed shall forthwith terminate and there shall be a vacancy or
vacancies in the Board of Directors, to be filled by a vote of the stockholders
as provided in these Bylaws.
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall
be held at such place either within or without the State of Delaware, as may
from time to time be fixed by resolution of the Board, or as may be specified in
the call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present.
SECTION 3. COMMITTEES. The Board of Directors may, in its discretion,
by resolution passed by a majority of the whole Board, designate from among its
members one or more committees which shall consist of two or more directors. The
Board may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at
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any meeting of the committee. Such committees shall have and may exercise such
powers as shall be conferred or authorized by the resolution appointing them. A
majority of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board shall have power at any time to change the membership of any such
committee, to fill vacancies in it, or to dissolve it.
SECTION 4. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if prior to such action a written consent or
consents thereto is signed by all members of the Board, or of such committee as
the case may be, and such written consent or consents is filed with the minutes
of proceedings of the Board or committee.
SECTION 5. COMPENSATION. The Board of Directors may determine, from
time to time, the amount of compensation which shall be paid to its members. The
Board of Directors shall also have power, in its discretion, to allow a fixed
sum and expenses for attendance at each regular or special meeting of the Board,
or of any committee of the Board. In addition, the Board of Directors shall also
have power, in its discretion, to provide for and pay to directors rendering
services to the Corporation not ordinarily rendered by directors, as such,
special compensation appropriate to the value of such services, as determined by
the Board from time to time.
SECTION 6. CONFERENCE TELEPHONE MEETINGS. One or more directors may
participate in a meeting of the Board of Directors, or of a committee of the
Board of Directors, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the Corporation, who
shall be chosen by the Board of Directors at its first meeting after each annual
meeting of stockholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
SECTION 2. TERMS OF OFFICE. Officers shall hold office until their
successors are chosen and qualify.
SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
shall take effect at the time specified
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therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. If the office of any officer or agent becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the directors may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy occurred.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the Board of
Directors and of the stockholders, and the Chairman shall have and perform such
other duties as from time to time may be assigned to the Chairman by the Board
of Directors.
SECTION 7. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, in the absence of the Chairman, shall preside at
all meetings of the Board of Directors, and of the stockholders. The President
shall exercise the powers and perform the duties usual to the chief executive
officer and, subject to the control of the Board of Directors, shall have
general management and control of the affairs and business of the Corporation;
the President shall appoint and discharge employees and agents of the
Corporation (other than officers elected by the Board of Directors) and fix
their compensation; and the President shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President shall have the
power to execute bonds, mortgages and other contracts, agreements and
instruments of the Corporation, and shall do and perform such other duties as
from time to time may be assigned to the President by the Board of Directors.
SECTION 8. VICE PRESIDENTS. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments of the Corporation, and shall do and perform such
other duties incident to the office of Vice President and as the Board of
Directors, or the President shall direct.
SECTION 9. SECRETARY. The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and record all votes and the minutes
of proceedings in a book to be kept for that purpose. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
SECTION 10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name
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and to the credit of the Corporation, in such depositories as may be designated
by the Board of Directors. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the directors whenever they may require it,
an account of all his or her transactions as Treasurer and of the financial
condition of the Corporation.
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the
absence or disability of any officer of the Corporation, or for any other
reason that the Board may deem sufficient, the Board may delegate, for the time
being, the powers or duties, or any of them, of such officer to any other
officer, or to any director.
ARTICLE IV
INDEMNIFICATION
SECTION 1. ACTIONS BY OTHERS. The Corporation (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
director or an officer of the Corporation and (2) except as otherwise required
by Section 3 of this Article, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee,
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and with respect to any criminal action or
proceeding, had no reasonable .cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NO1O CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance
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of his or her duty to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a person who is or
was a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or Section 2 of this Article, or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
SECTION 4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1
or Section 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections 1 and 2. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
SECTION 5. ADVANCE OF EXPENSES. Expenses incurred by any person who
may have a right of indemnification under this Article in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he or she is entitled to be indemnified
by the. Corporation pursuant to this Article.
SECTION 6. RIGHT OF INDEMNITY NOT EXCLUSIVE. The indemnification
provided by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 7. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article, Section 145 of the General Corporation Law
of the State of Delaware or otherwise.
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SECTION 8. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The
invalidity or unenforceability of any provision of this Article shall not affect
the validity or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time prescribe. The certificates of
stock shall be signed by the President or a Vice President and by the Secretary,
or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed
with the seal of the Corporation or a facsimile thereof, and countersigned and
registered in such manner, if any, as the Board of Directors may by resolution
prescribe. Where any such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or registered by a registrar other than
the Corporation or its employee, the signature of any such officer may be a
facsimile signature. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
Corporation.
SECTION 2. TRANSFER. The shares of stock of the Corporation shall be
transferred only upon the books of the Corporation by the holder thereof in
person or by his or her attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require.
SECTION 3. RECORD DATES. The Board of Directors may fix in advance a
date, not less than ten nor more than sixty days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the distribution or allotment of any fights, or the date when any
change, conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any distribution or allotment of such fights, or to
exercise the fights in respect of any such change, conversion or exchange of
capital stock, and in such case only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend, or to receive such
distribution or allotment or fights or to exercise such fights, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
SECTION 4. LOST CERTIFICATES. In the event that any certificate of
stock is lost, stolen, destroyed or mutilated, the Board of Directors may
authorize the issuance of a new certificate of the same tenor and for the same
number of shares in lieu thereof. The Board may in its discretion,
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before the issuance of such new certificate, require the owner of the lost,
stolen, destroyed or mutilated certificate, or the legal representative of the
owner to make an affidavit or affirmation setting forth such facts as to the
loss, destruction or mutilation as it deems necessary, and to give the
Corporation a bond in such reasonable sum as it directs to indemnify the
Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
SECTION 1. CHECKS, NOTES, ETC. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President, any Vice President or the Treasurer and may also be
signed by such other officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. OFFICES. The registered office of the Corporation shall be
located at The Corporation Trust Company, 1209 Orange Street, in the City of
Wilmington, County of New Castle, in the State of Delaware and said corporation
shall be the registered agent of this Corporation in charge thereof. The
Corporation may have other offices either within or without the State of
Delaware at such places as shall be determined from time to time by the Board of
Directors or the business of the Corporation may require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
SECTION 3. CORPORATE SEAL. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, and the year and state
of its incorporation. Such seal may be altered from time to time at the
discretion of the Board of Directors.
SECTION 4. BOOKS. There shall be kept at such office of the
Corporation as the Board of Directors shall determine, within or without the
State of Delaware, correct books and records of account of all its business and
transactions, minutes of the proceedings of its stockholders, Board of Directors
and committees, and the stock book, containing the names and addresses of the
stockholders, the number of shares held by them, respectively, and the dates
when they respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and records as the
Board of Directors may from time to time determine.
SECTION 5. VOTING OF STOCK. Unless otherwise specifically authorized
by the Board of Directors, all stock owned by the Corporation, other than stock
of the Corporation, shall be voted, in person or by proxy, by the President or
any Vice President of the Corporation on behalf of the Corporation.
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ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. The vote of the holders of at least a majority
of the shares of stock of the Corporation, issued and outstanding and entitled
to vote, shall be necessary at any meeting of stockholders to amend or repeal
these Bylaws or to adopt new Bylaws. These Bylaws may also be amended or
repealed, or new By- Laws adopted, at any meeting of the Board of Directors by
the vote of at least a majority of the entire Board; provided that any Bylaws
adopted by the Board may be amended or repealed by the stockholders in the
manner set forth above.
Any proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be stated in the notice of the meeting of the Board of Directors or the
stockholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
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Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
NATIONWIDE ACQUISITION NEW YORK, INC.
UNDER
SECTION 402 OF THE BUSINESS CORPORATION LAW
I, THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the Business
Corporation Law of the State of New York, as from time to time amended, do
hereby certify as follows:
FIRST: The name of the Corporation is
NATIONWIDE ACQUISITION NEW YORK, INC.
SECOND: The name and address of the registered agent which is to be
the agent of the corporation upon whom process against it may be served is CT
Corporation System, 1633 Broadway, New York, NY 10019.
THIRD: The purpose of the Corporation is to engage in any lawful
activity for which corporations may be organized under the Business Corporation
Law of the State of New York as from time to time amended. The Corporation is
not formed to engage in any act or activity requiring the consent or approval of
any state official, department, board, agency or other body without such consent
or approval first being obtained.
FOURTH: The office of the Corporation will be located in Monroe
County.
FIFTH: The total authorized capital stock of the Corporation will be
100 shares of Common Stock, par value $.01 per share.
SIXTH: The secretary of state of the State of New York is designated
as an agent of the Corporation upon whom process against it may be served. The
secretary of state will mail notice of such process against the Corporation to
CT Corporation System, 1633 Broadway, New York, New York 10019.
SEVENTH: The name and mailing address of the incorporator is as
follows:
NAME MAILING ADDRESS
Sanford B. Kaynor, Jr. 599 Lexington Avenue
New York, New York 10022
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EIGHTH: The Corporation shall, to the fullest extent permitted by
Article 7 of the Business Corporation Law of the State of New York, as the same
may be amended and supplemented, indemnify any and all persons whom it shall
have power to indemnify under said Article from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
Article, and, pursuant to Section 726 of such Article 7, the Corporation shall
be authorized to purchase and maintain insurance to so indemnify such persons.
The indemnification provided for herein shall not be deemed exclusive of any
other rights to which any officer or director may be entitled under any By-Law,
resolution of shareholders, a resolution of directors, agreement, or otherwise,
as permitted by said Article, as to action in any capacity in which he served at
the request of the Corporation.
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IN WITNESS WHEREOF, I have hereunto set my hand this 3rd day of March, 1999.
/s/ Sanford B. Kaynor, Jr.
--------------------------
Sanford B. Kaynor, Jr.
Sole Incorporator
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
NATIONWIDE ACQUISITION NEW YORK, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
The undersigned, being the Vice President, Treasurer and Secretary of
NATIONWIDE ACQUISITION NEW YORK, INC. (the "Corporation"), hereby certifies:
1. The name of the Corporation is NATIONWIDE ACQUISITION NEW YORK, INC.
2. The Certificate of Incorporation was filed by the Department of State on
March 5, 1999.
3. The Certificate of Incorporation, as now in full force and effect, is
hereby amended to effect the following changes as authorized by Section 801 of
the Business Corporation Law:
(a) To change the name of the Corporation to NATIONWIDE PRECISION PRODUCTS
CORP. The Paragraph designated "FIRST" in the Certificate of Incorporation
is hereby amended to read in its entirety as follows:
FIRST: The name of the Corporation is
NATIONWIDE PRECISION PRODUCTS CORP.
4. This Amendment to the Certificate of Incorporation was authorized by the
unanimous written consent of the Board of Directors followed by the unanimous
written consent of the Shareholders.
IN WITNESS WHEREOF, we have signed this Certificate of Amendment this 19th
day of March, 1999 and we affirm the statements contained therein as true under
penalties of perjury.
By: /s/ Ronald M. Miller
-----------------------------------
Name: Ronald M. Miller
Title: Vice President, Treasurer,
and Secretary
<PAGE>
Exhibit 3.4
BYLAWS
OF
NATIONWIDE ACQUISITION NEW YORK, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of
Nationwide Acquisition New York, Inc. (the "Corporation") will be held either
within or without the State of New York, at such place and on such date and time
as the Board of Directors may designate from time to time in the call of the
meeting or in a waiver of notice thereof, on such date as the Board of Directors
will fix by resolution in each year beginning with the year 1999 and at which
meeting the stockholder shall elect by a plurality vote, a Board of Directors,
and transact such other business as may properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special Meetings of the stockholders may
held at such time and place within or without the State of New York as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof. Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by law or by the certificate of incorporation, may
be called by the president, the Board of Directors, and shall be called by the
President or by the Secretary upon the written request of the holders of record
of not less than 35% percent of the stock issued and outstanding and entitled to
vote at the meeting.
SECTION 3. NOTICE. Written or electronic notice of the annual meeting
stating the place, date and hour of the meeting shall be delivered not less than
ten nor more than sixty days before the date of the meeting, by or at the
direction of the president, the secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. Written
or electronic notice of a special meeting stating the place, date and hour of
the meeting and the purpose or purposes for which the meeting is called, shall
be delivered not less than ten nor more than sixty days before the date of the
meeting, by or at the direction of the president, the secretary, or the officer
or persons calling the meeting, to each shareholder of record entitled to vote
at such meeting. The special meeting notice should also indicate that it is
being issued by, or at the direction of, the person calling the meeting. The
business transacted at any special meeting of shareholders shall be limited to
the purposes stated in the notice.
SECTION 4. QUORUM. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote, represented in person or by proxy,
shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the shareholders, the shareholders present in
person or represented by proxy shall have power to adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted which might have
been transacted at the meeting as originally notified.
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SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the stockholders will
be presided over by the Chairman of the Board, if there be one, or if the
Chairman of the Board is not present, by the President, or if the President is
not present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, will act as Secretary of the meeting, if present.
SECTION 6. VOTING. At each meeting of stockholders, except as otherwise
provided by statute or the Certificate of Incorporation, every holder of record
of stock entitled to vote shall be entitled to one vote in person or by proxy
for each share of such stock standing in his or her name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast and, except as otherwise provided by statute, the Certificate of
Incorporation, or these Bylaws, all other action shall be determined by a
majority of the votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the stockholder or by such stockholder's duly authorized
attorney.
At all elections of directors, the voting shall be by ballot or in such
other manner as may be determined by the stockholders present in person or by
proxy entitled to vote at such election. With respect to any other matter
presented to the stockholders for their consideration at a meeting, any
stockholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the stockholders entitled to vote at each such
meeting, arranged in alphabetical order, with the address of each, and the
number of shares registered in the name of each stockholder, shall be prepared
by the Secretary and shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
SECTION 7. INSPECTORS OF ELECTION. The Board of Directors in advance of
any shareholders' meeting may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and, on the request of any
shareholder entitled to vote thereat, shall appoint one or more inspectors. If
the corporation has a class of voting stock that is listed on a national
securities exchange or authorized for quotation on an inter-dealer quotation
system of a registered national securities association, one or more inspectors
shall be appointed as provided herein. In case any person appointed as inspector
fails to appear or act, the vacancy may be filled by the Board in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability.
SECTION 8. ACTION BY CONSENT. Whenever shareholders are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the holders of
all outstanding shares entitled to vote thereon or, if the certificate of
incorporation so permits, signed by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a
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meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those shareholders who have not
consented in writing.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. Directors shall be
at least eighteen years of age and need not be residents of the State of New
York nor shareholders of the corporation. The Directors, other than the first
Board of Directors, shall be elected at the annual meeting of the shareholders,
except as hereinafter provided, and each Director elected shall serve until the
next succeeding annual meeting and until his successor shall have been elected
and qualified. The first Board of Directors shall hold office until the first
annual meeting of shareholders.
A majority of the members of the Board of Directors then holding office
(but not less than one-third of the total number of Directors ) shall constitute
a quorum for the transaction of business unless a greater or lesser number is
required by law or by the certificate of incorporation. The vote of a majority
of the Directors present at any meeting at which a quorum is present shall be
the act of the Board of Directors, unless the vote of a greater number is
required by law or by the certificate of incorporation. If a quorum shall not be
present at any meeting of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than an nouncement at the
meeting, until a quorum shall be present.
Directors will hold office until the next annual election and until
their successors will have been elected and will have qualified, unless sooner
displaced.
Unless otherwise provided in the certificate of incorporation, newly
created Directorships resulting from an increase in the Board of Directors and
all vacancies occurring in the Board of Directors, including vacancies caused by
removal without cause, may be filled by the affirmative vote of a majority of
the Board of Directors. However, if the number of Directors then in office is
less than a quorum, then such newly created Directorships and vacancies may be
filled by a vote of a majority of the Directors then in office. A Director
elected to fill a vacancy shall hold office until the next meeting of
shareholders at which election of Directors is the regular order of business,
and until his successor shall have been elected and qualified. A Director
elected to fill a newly created Directorship shall serve until the next
succeeding annual meeting of shareholders and until his successor shall have
been elected and qualified.
Any or all of the Directors may be removed, with or without cause, at
any time by the vote of the shareholders at a special meeting called for that
purpose. Any Director may be removed for cause by the action of the Directors at
a special meeting called for that purpose.
If elected by cumulative voting, a Director may be removed only by the
shareholders and then only when the votes cast against his removal would not be
sufficient to elect him if voted cumulatively at an election at which the same
total number of votes were cast and the entire Board or the entire class of
Directors of which he is a member were then being elected. If the Director
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being removed was elected by the holders of the shares of any class or series,
he cannot be removed by the Directors and may be removed only by the applicable
vote of the holders of shares of that class or series, voting as a class.
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall
be held at such place either within or without the State of New York, as may
from time to time be fixed by resolution of the Board, or as may be specified in
the call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic, facsimile telecommunication or written notice,
duly served on or sent or mailed to each director not less than two days before
such meeting. A meeting of the Board may be held without notice immediately
after the annual meeting of stockholders at the same place at which such meeting
was held. Notice need not be given of regular meetings of the Board. Any meeting
may be held without notice, if all directors are present, or if notice is waived
in writing, either before or after the meeting, by those not present.
SECTION 3. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the entire Board, may designate, from among its members, an
executive committee and other committees, each consisting of one or more
Directors, and each of which, to the extent provided in the resolution, or in
the certificate of incorporation or these Bylaws, shall have all the authority
of the Board, except as otherwise required by law. Vacancies in the membership
of the committee shall be filled by the Board of Directors at a regular or
special meeting of the Board of Directors. The executive committee shall keep
regular minutes of its proceedings and report the same to the Board when
required.
SECTION 4. ACTION BY CONSENT. Unless the certificate of incorporation
provides otherwise, any action required or permitted to be taken at a meeting of
the Directors or a committee thereof may be taken without a meeting if a consent
in writing to the adoption of a resolution authorizing the action so taken,
shall be signed by all of the Directors entitled to vote with respect to the
subject matter thereof.
SECTION 5. COMPENSATION. The Board of Directors, by the affirmative
vote of a majority of the Directors then in office, and irrespective of any
personal interest of any of its members, shall have authority to establish
reasonable compensation of all Directors for services to the corporation as
Directors, officers or otherwise.
SECTION 6. CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted
by the certificate of incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
SECTION 7. BUSINESS AFFAIRS. The business affairs of the corporation
shall be managed by its Board of Directors which may exercise all such powers of
the corporation and do all such lawful
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acts and things as are not by law or by the certificate of incorporation or by
these Bylaws directed or required to be exercised or done by the shareholders.
ARTICLE III
OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the corporation shall
be chosen by the Board of Directors and shall be a president, a vice-president,
a secretary and a treasurer. The Board of Directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
The Board of Directors at its first meeting after each annual meeting of
shareholders shall choose a president, one or more vice-presidents, a secretary
and a treasurer, none of whom need be a member of the Board.
Any two or more offices may be held by the same person. When all the
issued and outstanding stock of the corporation is owned by one person, such
person may hold all or any combination of offices.
SECTION 2. TERMS OF OFFICE. Officers will hold office until their
successors are chosen and qualify.
SECTION 3. REMOVAL. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors.
SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
will take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation will not be necessary to make it
effective.
SECTION 5. VACANCIES. Any vacancy occurring in any office of the
corporation shall be filled by a majority vote of the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors will preside at all meetings of the Board of Directors and of the
stockholders, and the Chairman will have and perform such other duties as from
time to time may be assigned to the Chairman by the Board of Directors.
SECTION 7. PRESIDENT. The president shall be the chief executive
officer of the corporation, shall preside at all meetings of the shareholders
and the Board of Directors, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall execute bonds,
mortgages and other contracts requiring a seal under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
SECTION 8. VICE PRESIDENTS. The vice-president or, if there shall be
more than one, the vice-presidents in the order determined by the Board of
Directors, shall, in the absence or disability of
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the president, perform the duties and exercise the powers of the president and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
SECTION 9. SECRETARY. The secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and, when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
The assistant secretary or, if there be more than one, the assistant
secretaries in the order determined by the Board of Directors, shall, in the
absence or disability of the secretary, perform the duties and exercise the
powers of the secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECTION 10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. He or she shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
The assistant treasurer, or, if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors, shall,
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence
or disability of any officer of the Corporation, or for any other reason that
the Board may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any Director.
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SECTION 12. SALARIES. The salaries of all officers shall be fixed by
the Board of Directors, and the fact that any officer is a Director shall not
preclude him from receiving a salary as an officer, or from voting upon the
resolution providing the same.
ARTICLE IV
INDEMNIFICATION
SECTION 1. ACTIONS BY OTHERS. The Corporation (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
director or an officer of the Corporation and (2) except as otherwise required
by Section 3 of this Article, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee,
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and with respect to any criminal action or
proceeding, had no reasonable .cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NO1O CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his or her duty to the Corporation unless and
only to the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a person who is or
was a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or Section 2 of this Article, or in defense
of
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any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
SECTION 4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1
or Section 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections 1 and 2. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
SECTION 5. ADVANCE OF EXPENSES. Expenses incurred by any person who may
have a right of indemnification under this Article in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he or she is entitled to be indemnified
by the. Corporation pursuant to this Article.
SECTION 6. RIGHT OF INDEMNITY NOT EXCLUSIVE. The indemnification
provided by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 7. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of or participant in another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify him or her against such liability
under the provisions of this Article, the laws of the State of New York or
otherwise.
SECTION 8. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity
or unenforceability of any provision of this Article shall not affect the
validity or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES. Certificates of stock shall be in such form as
required by the Business Corporation Law of New York and as shall be adopted by
the Board of Directors. They shall be numbered and registered in the order
issued; shall be signed by the Chairman or a
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Vice-Chairman of the Board (if any) or by the President or a Vice-President and
by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and may be sealed with the corporate seal or a facsimile thereof. When
such a certificate is countersigned by a transfer agent or registered by a
registrar, the signatures of any such officers may be facsimile.
SECTION 2. TRANSFER. Transfer of shares shall be made only upon the
books of the Corporation by the registered holder in person or by attorney, duly
authorized, and upon surrender of the certificate or certificates for such
shares properly assigned for transfer.
SECTION 3. RECORD DATES. The holder of any certificate representing
shares of stock of the Corporation may notify the Corporation of any loss, theft
or destruction thereof, and the Board of Directors may, thereupon, in its
discretion, cause a new certificate for the same number of shares, to be issued
to such holder upon satisfactory proof of such loss, theft or destruction, and
the deposit of indemnity by way of bond or otherwise, in such form and amount
and with such surety or sureties as the Board of Directors may require, to
indemnify the Corporation against loss or liability by reason of the issuance of
such new certificates.
SECTION 4. LOST CERTIFICATES. In the event that any certificate of
stock is lost, stolen, destroyed or mutilated, the Board of Directors may
authorize the issuance of a new certificate of the same tenor and for the same
number of shares in lieu thereof. The Board may in its discretion, before the
issuance of such new certificate, require the owner of the lost, stolen,
destroyed or mutilated certificate, or the legal representative of the owner to
make an affidavit or affirmation setting forth such facts as to the loss,
destruction or mutilation as it deems necessary, and to give the Corporation a
bond in such reasonable sum as it directs to indemnify the Corporation.
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ARTICLE VI
CHECKS, NOTES, ETC.
SECTION 1. CHECKS, NOTES, ETC. Checks, notes, drafts, bills of exchange
and orders for the payment of money shall be signed or endorsed by such officer
of officers or such other person or persons and in such manner as the Board of
Directors may, from time to time, designate. The funds of the Corporation shall
be deposited in such bank or trust company, and checks drawn against such funds
shall be signed by such officer or officers or such other person or persons and
in such manner as the Board of Directors may, from time to time, designate.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. OFFICES. The office of the corporation shall be located in
the County of Monroe, State of New York. The corporation may also have offices
at such other places both within and without the State of New York as the Board
of Directors may from time to time determine or the business of the corporation
may require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by the Board of Directors.
SECTION 3. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, New York". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
SECTION 4. BOOKS. The Directors may keep the books of the corporation,
except such as are required by law to be kept within the state, outside the
State of New York, at such place or places as they may from time to time
determine.
SECTION 5. VOTING OF STOCK. Unless otherwise specifically authorized by
the Board of Directors, all stock owned by the Corporation, other than stock of
the Corporation, will be voted, in person or by proxy, by the President or any
Vice President of the Corporation on behalf of the Corporation.
SECTION 6. NOTICE AND WAIVER OF NOTICE. Any notice required to be given
under these Bylaws may be waived by the person entitled thereto, in writing, by
telegram, cable or radiogram, and the presence of any person at a meeting shall
constitute waiver of notice thereof as to such person.
Whenever any notice is required by these Bylaws to be given, personal
notice is not meant unless expressly so stated; and any notice so required shall
be deemed to be sufficient if given by depositing it in a post office or post
office box in a sealed postpaid wrapper, addressed to such stockholder, officer
or Director, at such address as appears on the books of the Corporation and such
notice shall be deemed to have been given on the day of such deposit.
ARTICLE VIII
10
<PAGE>
AMENDMENTS
SECTION 1. AMENDMENTS. These Bylaws may be amended at any stockholders'
meeting by vote of the stockholders holding a majority (unless the Certificate
of Incorporation requires a larger vote) of the outstanding stock having voting
power, present either in person or by proxy, provided notice of the amendment is
included in the notice or waiver of notice of such meeting. The Board of
Directors may also amend these Bylaws at any annual or special meeting of the
Board by a majority (unless the Certificate of Incorporation requires a larger
vote) vote of the entire Board, but any Bylaws so made by the Board of Directors
may be altered or repealed by the stockholders.
Any proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be stated in the notice of the meeting of the Board of Directors or the
stockholders, or in the waiver of notice thereof, as the case may be, unless all
of the Directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present for such
meeting.
11
<PAGE>
Exhibit 3.5
State of Maine
----------
Certificate of Organization of a Corporation under the General Law
----------
The undersigned, officers of a corporation organized at Waterville, Maine
at a meeting of the signers of the articles of agreement therefor, duly called
and held at Waterville in the County of Kennebec on Monday the 24th day of July
A.D. 1967 hereby certify as follows:
The name of said corporation is MID STATE MACHINE PRODUCTS
The purposes of said corporation are to engage in the manufacture of every kind
and type and design of personal property, whatsoever, by any and every method
and means now in use or to be developed and used in the future and in relation
thereto, without limiting or qualifying the same and in general, to engage in
the business of transportation of raw materials, finished products, freight of
every description whatsoever by means of automobiles, motor busses, motor
trucks, airplanes, vehicles of every kind however propelled; to do generally in
all and every other thing necessary and incident to the enjoyment of the powers
and privileges hereingranted, to operate and maintain establishments for the
servicing of said manufactured goods, whether manufactured by this corporation
under this charter or any other person or corporation or other charter, or
partnership or other legal entity, and to store, repair, rent or lease all such
personal property and to purchase and sell and to transport all fuels and
accessories necessary for the carrying on of the business of said manufactured,
and to do all and everything necessary, suitable and proper for the
accomplishment of the above purposes or attainment of any of the above objects,
or the furtherance of any of the powers herein before set forth, either alone or
in association with any other corporations, firms, or individuals, and to do
every other act or acts, thing, or things incidental or pertinent to, or going
out of, or connected with the aforesaid business or powers for any part or parts
thereof, to borrow money or to make and issue notes, bonds, or indentures,
obligations and evidences of indebtedness of all kinds whether secured by
mortgage, pledged or otherwise, without limit as to amount and to secure the
same as by the mortgage, pledge, or otherwise, and generally to make and form
agreements and contracts of every kind and description, on and to the same
extent as a natural person might or could do, to purchase or otherwise acquire
or to hold or maintain, work, develop, sell, lease, exchange, hire, convey
mortgage or otherwise dispose of and deal in lands and lease holds in any
interest and real property or personal property or mixed property, or
franchises, or rights or licenses and privileges necessary, convenient or
appropriate to any or all of the purposes herein before expressed. The business
or purpose of the company is from time to time to do any one or more of the acts
and things hereinabove set forth, and it shall have power to conduct and carry
on its business, or any part thereof and to have one or more offices and
manufacturing establishments, or warehouses, or any other structure to house any
of its legitimate and lawful functions above described, and to exercise all or
any of its corporate powers and rights in any state in the United States and the
District of Columbia; all of the foregoing, provided that the same be not
inconsistent with the laws under which this corporation is organized.
<PAGE>
The amount of capital stock is 100 Shares
The amount of common stock is 100 Shares
The amount of preferred stock is 0
The amount of capital stock already paid in is 0
The par value of the shares is 0
The names and addresses of the owners of said shares are as follows:
================================================================================
NO. OF SHARES
NAMES ADDRESSES COMMON PREFERRED
================================================================================
S. Douglas Sukeforth R#3 Waterville, Maine 20
Rita Sukeforth R#3 Waterville, Maine 10
Curtis L. Young R#3 Waterville, Maine 20
Patricia E. Young R#3 Waterville, Maine 10
Jerome G. Daviau 50 Main St., Waterville 1
<PAGE>
Said corporation is located at North Vassalboro in the County of Kennebec
The number of directors is four and their names are
S. Douglas Sukeforth Rita C. Sukeforth
Curtis L. Young Patricia E. Young
The name of the clerk is Jerome G. Daviau and his residence is 50 Main St.,
Waterville, Me.
The undersigned, S. Douglas Sukeforth is president; the undersigned, Curtis L.
Young of R#3 Waterville, Maine is Secretary/treasurer; and the undersigned
(Street) (City or Town)
/s/ S. Douglas Sukeforth
/s/ Rita C. Sukeforth
/s/ Curtis L. Young
/s/ Patricia E. Young
are a majority of the directors of said corporation.
Witness our hands this 24th day of July A.D. 1967
/s/ S. Douglas Sukeforth President.
/s/ Curtis L. Young Treasurer.
/s/ S. Douglas Sukeforth
/s/ Curtis L. Young Directors.
/s/ Patricia E. Young
/s/ Rita C. Sukeforth
Kennebec SS. July 24th, A.D. 1967
Then personally appeared S. Douglas Sukeforth, Rita C. Sukeforth,
Curtis L. Young and Patricia Young
and severally made oath to the foregoing certificate, that the same is true.
Before me,
/s/ [Illegible]
Justice of the Peace.
----------
State of Maine
----------
Attorney General's Office, August 8 A.D. 1967
I hereby certify that I have examined the foregoing certificate, and the
same is properly drawn and signed, and is conformable to the constitution and
laws of the State.
/s/ [Illegible]
Assistant Attorney General.
<PAGE>
STATE OF MAINE
Office of Secretary of State
Augusta, Sept. 7, 1967
A copy of the Record of the within certificate of organization, duly certified
by the Register of Deeds of Kennebec County, has this day been received and
filed in this office.
Recorded in Vol. 208 Page 50 of Records of Corporations.
ATTEST:
/s/ Joseph V. Edgar
-------------------
Secretary of State
COPY
[Name of Corporation]
- --------------------------------------------------------------------------------
MID STATE MACHINE PRODUCTS
- --------------------------------------------------------------------------------
----------
Kennebec SS.
- --------------------------------------------------------------------------------
Registry of Deeds.
Received August 21 1967 at 11 h. m. A.M
Recorded in Vol. 1298 Page 496
ATTEST:
/s/ Miss W. Jackson
- --------------------------------------------------------------------------------
Deputy Register
----------
STATE OF MAINE
----------
Office of Secretary of State
Augusta, ________ 19
Received and filed this day.
ATTEST:
- --------------------------------------------------------------------------------
Secretary of State.
Recorded in Vol. Page
<PAGE>
Filing Fee (See Sec.1401) This Space For Use By
For Use By The Secretary of State
Secretary of State
STATE OF MAINE MAINE
SECRETARY OF STATE
File No. 208 - 50 ARTICLES OF AMENDMENT FILED
--------- (Amendment by Shareholders
Fee Paid $5.00 Voting as One Class) August 17, 1973
-------- ------------------------
C.B. 85 OF /s/ [Illegible]
--------- -------------------------
Date 8-17-73 MID STATE MACHINE PRODUCTS [Illegible]
--------- -------------------------- AGENT
A true copy attest:
/s/ [Illegible]
-------------------------
Agent
Pursuant to 13-A MRSA ss.ss.805 and 807, the undersigned corporation adopts
these Articles of Amendment.
FIRST: All outstanding shares of the corporation were entitled to vote on
the following amendment as one class.
SECOND: The amendment to the Articles of Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders thereof at
a meeting legally called and held on January 2, 1973.
THIRD: On said date, the number of shares outstanding and entitled to vote
on such amendment, and the number of shares voted for and against said
amendment, respectively, were as follows:
Number of Shares Outstanding
and Entitled to Vote Voted For Voted Against
- ---------------------------- --------- -------------
100 100 none
-------------------- --------- -------------
Totals 100 100 none
FOURTH: If such amendment provides for exchange, reclassification or
cancellation of issued shares, the manner in which the same shall be effected is
contained in Exhibit B attached hereto, if it is not set forth in the amendment
itself.
*FIFTH: If such amendment effects a change in the number or par values of
authorized shares the number of shares which the corporation has authority to
issue after giving effect to such amendment is as follows:
Series Number Par Value
Class (If Any) of Shares (If Any)
- ----- -------- --------- --------
The aggregate par value of all such shares (of all classes and series) having
par value is $____________.
The total number of all such shares (of all classes and series) without par
value is ____________ shares.
<PAGE>
SIXTH: The address of the registered office of the corporation in the
State of Maine is 18 Silver Street, Waterville, Maine
-----------------------------------
(street, city and zip code)
Dated: August 15, 1973
----------------------------------------
MID STATE MACHINE PRODUCTS **
---------------------------------
(name of corporation)
Legibly print or type name
and capacity of all signers By /s/ Jerome G. Daviau
13-A MRSA ss.104. ------------------------------
Jerome G. Daviau, Clerk
---------------------------------
(type or print name and capacity)
I certify that I have custody of the minutes
showing the above action by the
shareholders.
By
-------------------------------
---------------------------------
(type or print name and capacity)
/s/ [Illegible]
- -------------------------------------
(clerk, secretary or asst. secretary)
NOTE: This form should not be used if any class of shares entitled to vote as a
separate class for any of the reasons set out in ss.806, or because the
articles so provide. For vote necessary for adoption see ss.805.
- ------------------------------
* To be completed only if Exhibit A or B do not give this required
information.
** The name of the corporation should be typed, and the document must be
signed by (1) the Clerk or (2) by the President or a vice-president and by
the Secretary or an assistant secretary or such other officer as the
bylaws may designate as a second certifying officer or (3) if there are no
such officers, then by a majority of the directors or by such directors as
may be designated by a majority of directors then in office or (4) if
there are no such directors, then by the holders, or such of them as may
be designated by the holders, of record of a majority of all outstanding
shares entitled to vote thereon or (5) by the holders of all of the
outstanding shares of the corporation.
<PAGE>
EXHIBIT A
At a special meeting of the stockholders of Mid State Machine
Products, a corporation existing under the laws of the State of Maine and having
a principal place of business in Waterville, Maine, the following amendment to
the Articles of Incorporation was unanimously approved:
It is hereby voted to amend the Articles and the By-Laws of Mid
State Machine Products so as to reduce the number of directors from
three to two in accordance with the new Maine Corporate Laws.
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------
FOR USE BY THE MAINE
SECRETARY OF STATE STATE OF MAINE SECRETARY OF STATE
CHANGE OF CLERK OR FILED
File No. 208-50 REGISTERED OFFICE OR BOTH
------ OF April 22, 1975
Fee Paid $5.00 -------------------
------ MID STATE MACHINE PRODUCTS
C.B. 75C1601 --------------------------
------- /s/ Linwood F. Ress
Date 4-25-75 -------------------
------- AGENT
- -------------------------------
</TABLE>
Pursuant to 13-A MRSA Section 304 the undersigned corporation advises you of
the following change(s):
FIRST: The name and business address of its present clerk are
Jerome G. Daviau, 50 Main Street, Waterville, Maine.
- ----------------------------------------------------
(street, city, state and zip code)
SECOND: The name and business address of its successor clerk* are
Robert J. Daviau, 18 Silver Street, Waterville, Maine.
- ------------------------------------------------------
(street, city, state and zip code)
THIRD: Upon a change in clerk this must be completed:
(x) Such change was authorized by the board of directors and the
power to make such change is not reserved to the shareholders
by the articles or the bylaws.
( ) Such change was authorized by the shareholders. (Complete the
following)
I certify that I have custody of the minutes showing the
above action by the shareholders.
/s/ Robert J. Daviau
-----------------------------------------
(clerk, secretary or assistant secretary)
MID STATE MACHINE PRODUCTS**
----------------------------------------
(name of corporation)
Dated: February 26, 1975 By /s/ Robert J. Daviau
----------------- ----------------------------------------
Robert J. Daviau, Clerk
Legibly print or type ----------------------------------------
name and capacity of (type or print name and capacity)
all signers
13-A MRSA Section 104.
By
----------------------------------------
----------------------------------------
(type or print name and capacity)
- ----------------------------
*The clerk of a domestic corporation must be a person resident in Maine. The
business address of the clerk and the registered office must be identical.
**The name of the corporation should be typed, and the document must be
signed by (1) the Clerk OR (2) by the President or a vice-president and by
the Secretary or an assistant secretary or such other officer as the
bylaws may designate as a second certifying officer or (3) if there are no
such officers, then by a majority of the directors or by such directors as
may be designated by a majority of directors then in office or (4) if
there are no such directors, then by the holders, or such of them as may
be designated by the holders, of record of a majority of all outstanding
shares entitled to vote thereon or (5) by the holders of all of the
outstanding shares of the corporation.
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------
FOR USE BY THE MAINE
SECRETARY OF STATE STATE OF MAINE SECRETARY OF STATE
NOTIFICATION BY CLERK OF FILED
File No. 208-50 CHANGE IN NAME OR
------ REGISTERED OFFICE April 23, 1979
Fee Paid $5.00 ----------------------
------
C.B. 79C1291
------- /s/ James S. Henderson
Date 5-8-79 ----------------------
------- AGENT
</TABLE>
Pursuant to 13-A MRSA Section 304(6), the undersigned clerk for one or
more domestic corporations gives notice of the following change of name or
registered office of each corporation listed in item FIFTH:
---------------------
FIRST: Name of clerk* appearing on the record in Secretary of State's
office ROBERT J. DAVIAU
----------------
SECOND: New name of clerk, if name has changed
-------------------------
THIRD: Address of former registered office 18 Silver Street
-----------------------------
Waterville, ME 04901
----------------------------------
(street, city, state and zip code)
FOURTH: Address of new registered office One Center Street
-------------------------------
Waterville, ME 04901
----------------------------------
(street, city, state and zip code)
FIFTH: Notice of the above change in name and/or change in registered
office has been sent to each of the following corporations by the undersigned
as clerk of each:
ALLEN LOGGING INC.
------------------------------------------
DUMAS, INC.
------------------------------------------
JOHN'S LUMBER COMPANY
------------------------------------------
JOHN W. JOHNSON, INC.
------------------------------------------
L.J.L. PIZZA SUPPLY COMPANY, INC.
------------------------------------------
LARSEN'S WRECKER SERVICE, INC.
------------------------------------------
MID STATE MACHINE PRODUCTS
------------------------------------------
PENOBSCOT NURSING HOME
------------------------------------------
RANCOURT'S BUILDING MAINTAINANCE CO., INC.
------------------------------------------
Dated: April 20, 1979
--------------
/s/ Robert J. Daviau
--------------------
(clerk's signature)
Robert J. Daviau
--------------------
(type or print name)
- --------------------------
* The clerk of a domestic corporation must be a natural person resident in
Maine.
<PAGE>
Filing Fee (See Sec.1401)
This Space For Use By
For Use By The Secretary of State
Secretary of State STATE OF MAINE MAINE
SECRETARY OF STATE
File No. 208 - 50 ARTICLES OF AMENDMENT FILED
------------- (Amendment by Shareholders
Fee Paid $10 + $10 Voting as One Class) January 10, 1978
------------ -------------------------
C.B. 355 OF /s/ Doris Hayes
------------- -------------------------
Date 1-12-80 MID STATE MACHINE PRODUCTS AGENT
----------------
A true copy attest:
/s/ Doris Hayes
-------------------------
Agent
Pursuant to 13-A MRSA ss.ss.805 and 807, the undersigned corporation adopts
these Articles of Amendment.
FIRST: All outstanding shares of the corporation were entitled to vote on
the following amendment as one class.
SECOND: The amendment to the Articles of Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders thereof at
a meeting legally called and held on December 30, 1977.
THIRD: On said date, the number of shares outstanding and entitled to vote
on such amendment, and the number of shares voted for and against said
amendment, respectively, were as follows:
Number of Shares Outstanding
and Entitled to Vote Voted For Voted Against
- ---------------------------- --------- -------------
100 100 none
-------------------- --------- -------------
Totals 100 100 none
FOURTH: If such amendment provides for exchange, reclassification or
cancellation of issued shares, the manner in which the same shall be effected is
contained in Exhibit B attached hereto, if it is not set forth in the amendment
itself.
*FIFTH: If such amendment effects a change in the number or par values of
authorized shares the number of shares which the corporation has authority to
issue after giving effect to such amendment is as follows:
Series Number Par Value
Class (If Any) of Shares (If Any)
- ----- -------- --------- --------
Common 100 no par
Preferred 900 no par
The aggregate par value of all such shares (of all classes and series) having
par value is $ none.
The total number of all such shares (of all classes and series) without par
value is 1000 shares.
<PAGE>
SIXTH: The address of the registered office of the corporation in the
State of Maine is 18 Silver Street, Waterville, Maine 04901
-----------------------------------------
(street, city and zip code)
Dated: December 30, 1977
--------------------------
MID STATE MACHINE PRODUCTS **
-----------------------------
(name of corporation)
Legibly print or type name By /s/ Robert J. Daviau
and capacity of all signers ----------------------------
13-A MRSA ss.104. (signature)
Robert J. Daviau, Clerk
------------------------------
(type or print name and
capacity)
I certify that I have custody of the minutes
showing the above action by the
shareholders. By
----------------------------
(signature)
/s/ Robert J. Daviau
- ------------------------------ ------------------------------
(signature of clerk, secretary (type or print name and
or asst. secretary) capacity)
NOTE: This form should not be used if any class of shares entitled to vote as a
separate class for any of the reasons set out in ss.806, or because the
articles so provide. For vote necessary for adoption see ss.805.
- ------------------------------
* To be completed only if Exhibit A or B do not give this required
information.
** The name of the corporation should be typed, and the document must be
signed by (1) the Clerk or (2) by the President or a vice-president and by
the Secretary or an assistant secretary or such other officer as the
bylaws may designate as a second certifying officer or (3) if there are no
such officers, then by a majority of the directors or by such directors as
may be designated by a majority of directors then in office or (4) if
there are no such directors, then by the holders, or such of them as may
be designated by the holders, of record of a majority of all outstanding
shares entitled to vote thereon or (5) by the holders of all of the
outstanding shares of the corporation.
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
MID STATE MACHINE PRODUCTS
A special meeting of the stockholders of the corporation was held on
December 30, 1977, at 10:00 a.m. at the offices of Daviau, Jabar & Batten, 18
Silver Street, Waterville, Maine. Present were S. Douglas Sukeforth and Rita
Sukeforth, being the owners of all of the stock of Mid State Machine Products.
The purpose of the meeting was to amend the Articles of Incorporation as
originally drawn and the following amendment was unanimously adopted:
RESOLVED: That the Articles of Incorporation of Mid State Machine Products
is amended to allow said corporation to issue 900 shares of preferred
stock over and above the original 100 shares of common stock for a total
of 1000 shares.
As there was no further actions to discuss, the meeting was duly
ADJOURNED.
Dated: December 30 ,1977
/s/ Rita Sukeforth
--------------------------
Rita Sukeforth - Secretary
EXHIBIT A
<PAGE>
Filing Fee (See Sec. 1401)
This Space For Use By
Secretary of State
For Use By The
Secretary of State STATE OF MAINE MAINE
SECRETARY OF STATE
File No. 670164D ARTICLES OF AMENDMENT FILED
------------ (Amendment by Shareholders
Fee Paid: $90 - $10 Voting as One Class) July 15, 1985
------------ ----------------------
C.B. --- OF /s/ Carol E. Hanks
------------ ----------------------
Date: 8-9-85 MID STATE MACHINE PRODUCTS Secretary of State
------------
Pursuant to 13 A MRSA Sections 805 and 807, the undersigned corporation
adopts these Articles of Amendment.
FIRST: All outstanding shares of the corporation were entitled to vote
on the following amendment as one class.
SECOND: The amendment to the Articles of Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders thereof
at a meeting legally called and held on July 12, 1985.
THIRD: On said date, the number of shares outstanding and entitled to
vote on such amendment and the number of shares voted for and against said
amendment, respectively, were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares Outstanding
and Entitled to Vote Voted For Voted Against
---------------------------- --------- -------------
100 100
Totals ------------------------- --------- -------------
100 100
</TABLE>
FOURTH: If such amendment provides for exchange, reclassification or
cancellation of issued shares, the manner in which the same shall be effected
is contained in Exhibit B attached hereto, if it is not set forth in the
amendment itself.
FIFTH: If such amendment effects a change in the number or par values
of authorized shares the number of shares which the corporation has authority
to issue after giving effect to such amendment is as follows:
<TABLE>
<CAPTION>
Series Number Par Value
Class (If Any) of Shares (If Any)
----- -------- --------- ----------
<S> <C> <C> <C>
Common 100,000 none
</TABLE>
The aggregate par value of all such shares (of all classes and series)
HAVING PAR VALUE IS $ None
---------
The total number of all such shares (of all classes and series) WITHOUT PAR
VALUE is 100,000 shares
----------
<PAGE>
SIXTH: The address of the registered office of the corporation in the
State of Maine is One Center St., Waterville, ME 04901
--------------------------------------
(Street, City and Zip Code)
Dated July 12, 1985
----------------------
MID STATE MACHINE PRODUCTS
--------------------------------
Legibly print or type name (name of corporation)
and capacity of all signers
13-A MRSA Section 104. By: /s/ Robert J. Daviau
--------------------------------
(signature)
Robert J. Daviau, Esq.--Clerk
--------------------------------
(type or print name and capacity)
I certify that I have custody of
the minutes showing the above By:------------------------------
action by the shareholders. (signature)
/s/ Robert J. Daviau ---------------------------------
- --------------------------------- (type or print name and capacity)
(signature of clerk, secretary or
asst. secretary)
NOTE: This form should not be used if any class of shares entitled to vote
as a separate class for any of the reasons set out in Section 806, or
because the articles so provide. For vote necessary for adoption see
Section 805.
- -----------------------------------------
*To be completed only if Exhibit A or B do not give this required
information.
**The name of the corporation should be typed, and the document must be signed
by (1) the Clerk OR (2) by the President or a vice-president and by the
Secretary or an assistant secretary or such other officer as the bylaws may
designate as a second certifying officer or (3) if there are no such
officers, then by a majority of the directors or by such directors as may
be designated by a majority of directors then in office or (4) if there are
no such directors, then by the holders, or such of them as may be designated
by the holders, of record of a majority of all outstanding shares entitled
to vote thereon or (5) by the holders of all of the outstanding shares of
the corporation.
<PAGE>
EXHIBIT A
SPECIAL MEETING OF STOCKHOLDERS
MID STATE MACHINE PRODUCTS
A special meeting of the stockholders of Mid State Machine Products was
held at the offices of Daviau, Jabar & Batten, One Center Street, Waterville,
Maine, on July 12, 1985, at 2:00 p.m. All stockholders were present. The
purpose of the meeting was to amend the Articles of Incorporation as
originally drawn and to increase the number of shares authorized from 100
shares of no par to 100,000 shares of no par stock. The following amendment
was unanimously approved:
RESOLVED: The authorized capital stock of Mid State Machine Products
shall be increased from 100 shares of no par to 100,000 shares of no par
stock.
As there was no further business to discuss, the meeting was duly
ADJOURNED.
Dated: July 12, 1985
/s/ Robert J. Daviau
-----------------------------
Robert J. Daviau, Clerk
<PAGE>
- -------------------------- ---------------------------------
For Use By The For Use By The Secretary of State
Secretary of State FILED
July 24, 1986
File No. 670164D ---------------------------
--------------- [illegible]
Fee Paid $10.00 ---------------------------
--------------- Deputy Secretary of State
C.B. ------ ---------------------------
-------------------- A True Copy When Attested
Date JUL 31 1986 By Signature
--------------------
--------------------------
- -------------------------- Deputy Secretary of State
----------------------------------
STATE OF MAINE
ARTICLES OF AMENDMENT
(Amendment by Shareholders
Voting as One Class)
Pursuant to 13-A MRSA Sections 805 and 807, the undersigned
corporation adopts these Articles of Amendment:
FIRST: All outstanding shares were entitled to vote on the following
amendment as ONE class.
SECOND: The amendment set out in Exhibit A attached was adopted by the
shareholders (Circle One)
A. at a meeting legally called and held on, OR
X B. by unanimous written consent on July 18, 1986.
THIRD: Shares outstanding and entitled to vote and shares voted for and
against said amendment were:
Number of Shares Outstanding NUMBER NUMBER
and Entitled to Vote Voted for Voted Against
---------------------------- --------- -------------
100 100 -0-
FOURTH: If such amendment provides for exchange, reclassification or
cancellation of issued shares, the manner in which this shall be
effected is contained in Exhibit B attached if it is not set forth
in the amendment itself.
FIFTH: (Complete if Exhibits do not give this information.) If the
amendment changes the number or par values of authorized shares,
the number of shares the corporation has authority to issue
thereafter, is as follows:
Class Series (If Any) Number of Shares Par Value (If Any)
----- --------------- ---------------- ------------------
Common Class A * 50,000 NP
Common Class B 50,000 NP
The aggregate par value of all such shares (of all classes and
series) HAVING PAR VALUE AT $ .
-------------
The total number of all such shares (of all classes and series)
WITHOUT PAR VALUE IS shares.
------------------
SIXTH: Address of the registered office in Maine:
One Center Street, Waterville, ME 04901
-----------------------------------------------------------
(Street, city and zip code)
Mid State Machine Products
-----------------------------------------------------------
(Name of Corporation -- Typed or Printed)
By* /s/ Robert J. Daviau
-----------------------------------------------------------
Robert J. Daviau, Clerk
-----------------------------------------------------------
(type or print name and company)
By*
--------------------------------------------------------
(signature)
-----------------------------------------------------------
(type or print name and capacity)
- -----------------------------------
MUST BE COMPLETED FOR VOTE OF
SHAREHOLDERS
- -----------------------------------
I certify that I have custody of the
minutes showing the above action by
the shareholders.
/s/ Robert J. Daviau
- -----------------------------------
(signature of clerk)
- -----------------------------------
Dated: July 23, 1986
---------------------------
*In addition to any certification of custody of minutes this document must be
signed by (1) the CLERK OR (2) the PRESIDENT or a vice-president AND the
SECRETARY, an assistant secretary or other officer the bylaws designate as
second certifying officer or (3) if no such officers, a majority of the
directors or such directors designated by a majority of directors then in
office or (4) if no directors, the holders, or such of them designated by
the HOLDERS OF RECORD OF A MAJORITY OF ALL OUTSTANDING SHARES entitled to
vote thereon or (5) the HOLDERS OF ALL OUTSTANDING SHARES.
NOTE: This form should not be used if any class of shares is entitled to vote
as a separate class for any of the reasons set out in section 806, or because
the articles so provide. For vote necessary for adoption see Section 803.
<PAGE>
EXHIBIT A
VOTED: To repeal all provisions of the Articles of Incorporation
(formerly called Certificate of Organization) relating to the
authorized shares of capital stock of this Corporation,
including without limitation, the Articles of Amendment filed
in the Office of the Secretary of State of Maine on January 10,
1978, and July 15, 1985, and, pursuant to the provision of
Section 805(5) of the Maine Business Corporations Act, to adopt
the following authorized capital stock provisions in
substitution for the authorized capital stock provisions
heretofore contained in the Articles of Incorporation of this
Corporation as amended, to wit:
Capital Stock Provisions
------------------------
The total number of shares of all classes of stock which the corporation
shall have authority to issue is 100,000 shares without par value, of which
50,000 shares shall be Class A common stock and 50,000 shares shall be Class
B common stock. The powers, designations, preferences and rights, and the
qualifications, limitations and restrictions of the Class A common stock and
Class B common stock shall be as follows:
Except as otherwise provided by law, all voting rights shall be vested
exclusively in the Class A common stock, which shall be entitled to one vote
per share. In all other respects, including without limitation, dividends and
rights upon liquidation, each share of Class A common stock and Class B
common stock shall be equal.
VOTED: That the 100 shares of the Common Capital Stock, without par
value, of this Corporation issued and outstanding immediately
prior to the effectiveness of the foregoing vote (such issued
and outstanding Common Capital Stock being hereinafter called
the "Old Stock"), shall be changed to 25,000 shares of Class A
common stock on the basis of 250 shares of Class A common stock
for each share of Old Stock. Upon surrender for cancellation of
stock certificates representing Old Stock, shareholders shall
be entitled to receive new stock certificate(s) representing
the shares of Class A common stock to which they are entitled
upon the change in issued and outstanding shares of the
Corporation pursuant to the foregoing sentence becoming
effective
<PAGE> by filing Articles of Amendment with the Secretary of State of
Maine containing this and the foregoing vote.
VOTED: To repeal the provisions of the Articles of Incorporation
(formerly called Certificate of Organization) relating to the
number of directors of this Corporation as amended by Articles
of Amendment filed in the Office of the Secretary of State of
Maine on August 17, 1973, and to substitute therefore the
following.
"The Board of Directors is authorized to increase or
decrease the number of directors, and the minimum number should
be one director. (See Section 703, 1.A.) and the maximum number
shall be seven directors."
-2-
<PAGE>
[STATE SEAL OF MAINE] Minimum Fee $80 (See ss.1401
sub ss.19)
BUSINESS CORPORATION ------------------------------
STATE OF MAINE
(Merger of Domestic and Foreign Corporations)
ARTICLES OF MERGER
MID STATE ACQUISITION, INC. -----------------------------
A corporation [ILLEGIBLE] Deputy Secretary of State
MID STATE MACHINE PRODUCTS
A corporation organized under the laws of Maine ------------------------------
Pursuant to 13-A MRSA ss.906, the preceding A True Copy When Attested
corporations adopt these Articles of Merger: By Signature
-------------------------
Deputy Secretary of State
------------------------------
FIRST: The laws of the State(s) of Delaware, under which the foreign
corporation(s) is (are) organized, permit such merger.
SECOND: The name of the surviving corporation is Mid State Machine Products; and
it is to be governed by the laws of the State of Maine.
THIRD: The plan of merger is set forth in Exhibit A attached hereto and made a
part hereof.
FOURTH: As to each participating domestic corporation, the shareholders of which
voted on such plan of merger, the number of shares outstanding and the
number of shares entitled to vote on such plan, and the number of such
shares for and against the plan, are as follows:
Name of Number of Shares Number of Shares NUMBER NUMBER
Corporation Outstanding Entitled to Vote Voted For Voted Against
- ----------- ---------------- ---------------- --------- -------------
Mid State 50,000 25,000 25,000 0
Machine
Products
Mid State 100 100 100 0
Acquisition,
Inc.
FIFTH: If the shares of any class were entitled to vote as a class, the
designation and number of the outstanding shares of each such class, and
the number of shares of each such class voted for and against the plan,
are as follows:
Name of Designation Number of Shares NUMBER NUMBER
Corporation of Class Outstanding Voted For Voted Against
- ----------- ----------- ---------------- --------- -------------
(Include the following paragraph if the merger was authorized without the vote
of the shareholders of the surviving corporation. Omit if not applicable.)
SIXTH: The plan of merger was adopted by the participating corporation which is
to become the surviving corporation in the merger without any vote of
its shareholders, pursuant to section 902, subsection 5. The number of
shares of each class outstanding immediately prior to the effective date
of the merger, and the number of shares of each class to be issued or
delivered pursuant to the plan of merger of the surviving corporation
are set forth as follows:
Number of Shares Outstanding Number of Shares to Be Issued
Designation Immediately Prior to Effective Or Delivered Pursuant to the
of Class Date of Merger Merger
- ---------- ------------------------------ -----------------------------
A 25,000 1
B 25,000 0
<PAGE>
SEVENTH: The address of the registered office of the surviving corporation in
the State of Maine is *
-----------------------------------------------
Daviau, Jabar & Batten, 1 Center Street, Waterville, ME 04901-542
- --------------------------------------------------------------------------------
(street, city and zip code)
The address of the registered office of the merged corporation in
the State of Maine is *
--------------------------------------------
(street, city and zip code)
EIGHTH: Effective date of the merger (if other than date of filing of the
Articles) is September 30, 1998.
--------------------
(Not to exceed 60 days from date of filing of the Articles)
DATED: Mid State Machine Products
--------------------------- -------------------------------------
(participating domestic corporation)
MUST BE COMPLETED FOR VOTE
OF SHAREHOLDERS
- --------------------------------- **By /s/ Robert J. Daviau
I certify that I have custody ------------------------------------
of the minutes showing the (signature)
above action by the shareholders.
Robert J. Daviau, Esq., Clerk
Mid State Machine Products ------------------------------------
- --------------------------------- (type or print name and capacity)
(name of coroporation)
- --------------------------------- **By /s/ Rita C. Sukeforth
(signature of clerk, secretary or ------------------------------------
asst. secretary) (signature)
- ---------------------------------
Rita C. Sukeforth, Secretary
DATED: ------------------------------------
--------------------------- (type or print name and capacity)
MUST BE COMPLETED FOR VOTE /s/ S. Douglas Sukeforth Pres.
OF SHAREHOLDERS
- --------------------------------- Mid State Acquisition, Inc.
I certify that I have custody ------------------------------------
of the minutes showing the (participating foreign corporation)
above action by the shareholders.
Mid State Acquisition, Inc. **By /s/ John Clark
- --------------------------------- ------------------------------------
(name of coroporation) (signature)
- --------------------------------- John Clark, President
(signature of clerk, secretary or ------------------------------------
asst. secretary) (type or print name and capacity)
- ---------------------------------
**By /s/ William Gumina
------------------------------------
(signature)
William Gumina, Secretary
------------------------------------
(type or print name and capacity)
NOTE: If a foreign corporation is the survivor of this merger, see ss.906.4 and
ss.908.3 as to whether Form MBCA-10Ma is required.
* Give address of registered office in Maine. If the corporation does not have a
registered office in Maine, the address given should be the principal or
registered office wherever located.
- --------------------------------------------------------------------------------
** This document MUST be signed by (1) the Clerk OR (2) the President or a
vice-president and the Secretary or an assistant secretary, or such other
officers as the bylaws may designate as a second certifying officer OR (3) if
there are no such officers, then a majority of the directors or such
directors as may be designated by a majority of directors then in office OR
(4) if there are no such directors, then the holders, or such of them as may
be designated by the holders, of record of a majority of all outstanding
shares entitled to vote thereon OR (5) by the holders of all of the
outstanding shares of the corporation.
SUBMIT COMPLETED FORMS TO: CORPORATE EXAMINING SECTION, SECRETARY OF STATE,
101 STATE HOUSE STATION, AUGUSTA, ME 04333-0101
TEL. (207) 278-4195
RM NO. MBCA-10C Rev. 9/97
<PAGE>
Exhibit A
PLAN OF MERGER
OF
MID STATE ACQUISITION, INC.
INTO MID STATE MACHINE PRODUCTS
PURSUANT TO SECTION 901
OF THE MAINE BUSINESS CORPORATION ACT
1. Plan or Merger. Pursuant to this Plan of Merger, Mid State Acquisition,
Inc. a Delaware corporation ("Merger Sub") will be merged (the "Merger")
with and into Mid-State Machine Products, Inc. a Maine corporation (the
"Company"). In the Merger the Company shall be the surviving corporation
(the "Surviving Corporation"). The terms and conditions of the Merger and
the consideration to be paid by the Surviving Corporation upon surrender
of each outstanding share of the Company are as set forth below.
2. Agreement. This Merger shall take place pursuant to a REDEMPTION AND
MERGER AGREEMENT ("Agreement"), dated as of September 16, 1998, among MID
STATE MACHINE PRODUCTS, a Maine corporation (the "Company"), S. DOUGLAS
SUKEFORTH (the "Principal Stockholder"). MID STATE HOLDING CO., INC., a
Delaware corporation ("Parent") and MID STATE ACQUISITION, INC., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Merger
Sub").
3. Exchange of Shares. Parent has formed Merger Sub solely for the purpose of
facilitating an efficient exchange by stockholders of the Company of their
shares of Class A common stock of the Company, no par value per share, and
Class B common stock of the Company, no par value per share (collectively,
"Company Stock") for the Aggregate Closing Merger Consideration pursuant
to the terms of this Agreement, and Merger Sub will not conduct any
separate business activity nor serve any function other than to effect for
the benefit of Parent and the Stockholders the conversion of Company Stock
into the Aggregate Closing Merger Consideration.
4. Effective Date. The Merger shall be effective (the "Effective Date") on
the date on which the Articles of Merger with respect to the Merger shall
have been duly executed and filed in the office of the Secretary of State
of Maine in accordance with the provisions of the Maine Business
Corporation Act.
5. Material Terms of Agreement. The material terms of the Merger taken
directly from the Agreement are as follows (capitalized terms not defined
herein shall have the meanings given such terms in the Merger Agreement.):
"2.1. The Redemption. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the Maine Business
Corporation
1
<PAGE>
Act (the "MBCA"), on the Closing Date and prior to the Effective Time, the
Principal Stockholder will cause the Company to, and the Company will,
redeem (the "Redemption") from the Stockholder whose names are listed on
Schedule 3 attached hereto under the heading "Redeemed Stockholders" (the
"Redeemed Stockholders") an aggregate number of issued and outstanding
shares of Company Stock then held by such Redeemed Stockholders equal to
(i) the after-Tax proceeds of the liquidation of Investment Securities
provided for in Section 7.1.17 divided by (ii) the Per Share Closing
Merger consideration (the quotient of clause (i) divided by clause (ii),
the "Redeemed Shares"). The allocation of the Redeemed Shares among the
Redeemed Stockholders will be determined by the Stockholders'
Representative with the consent of Parent (which will not be unreasonably
withheld), on or before the date immediately preceding the Closing Date,
and Schedule 3 of the Agreement will be updated prior to the Closing upon
such determination to reflect such allocation.
2.2. The Merger. Subject to and in accordance with the terms and
conditions of this Agreement and in accordance with the Delaware General
Corporation Law (the "DGCL") and the MBCA, at the Effective Time, Merger
Sub will be merged with and into the Company. As a result of the Merger,
the separate corporate existence of Merger Sub will cease and the Company
will continue as the surviving corporation (sometimes referred to herein
as the "Surviving Corporation") and will succeed to and assume all of the
rights and obligations of Merger Sub in accordance with the DGCL and the
MBCA.
2.3 Consummation of the Merger. As soon as practicable on the Closing
Date, the parties will cause the Merger to be consummated by filing with
the Delaware Secretary of State and the Maine Secretary of State a
certificate of merger or articles of merger, in form reasonably
satisfactory to the Company, Parent and Merger Sub, executed in accordance
with the relevant provisions of the DGCL and MBCA and will make all other
filings or recordings required under the DGCL and MBCA to effect the
Merger. The "Effective Time" as that term is used in this Agreement will
mean the effective time set forth in the certified copy of the certificate
of merger or articles of merger issued by the Maine Secretary of State and
the Delaware Secretary of State with respect to the Merger.
2.4. Effects of the Merger. The Merger will have the effects set forth in
the DGCL and the MBCA.
2.5. Articles of Incorporation; By-laws. The Articles of Incorporation and
By-laws of the Company, as in effect immediately prior to the Effective
Time, will be the Articles of Incorporation and By-laws of the Surviving
Corporation and thereafter will continue to be its Articles of
Incorporation and By-Laws until amended as provided therein and under the
MBCA.
2.6. Directors and Officers. The director of Merger Sub immediately prior
to the Effective Time will be the initial director of the Surviving
Corporation, to hold
2
<PAGE>
office in accordance with the Articles of Incorporation and By-Laws of the
Surviving Corporation until his successor is duly elected or appointed and
qualified. The officers of the Company immediately prior to the Effective
Time will be the initial officers of the Surviving Corporation, each to
hold office until their respective successors are duly elected or
appointed and qualified.
2.7. Payment of Redemption Amount; Delivery of Redeemed Shares.
(a) Subject to adjustment in accordance with Sections 2.16, 2.17 and
2.18, on the Closing Date and prior to the Effective Time, in
consideration of the Redemption (including the delivery of the
Redeemed Shares pursuant to Section 2.7(b)), the Principal
Stockholder will cause the Company to, and the Company will, pay to
the Stockholders' Representative (for the benefit of the Redeemed
Stockholders), by wire transfer in immediately available funds, an
amount equal to the product of the aggregate number of Redeemed
Shares and the Per Share Closing Merger Consideration (such product,
the "Redemption Amount") as follows: (i) an amount equal to the
Redemption Amount less the percentage of the Escrow Amount equal to
the percentage that the number of Redeemed Shares bears to the
aggregate number of shares of Company Stock issued and outstanding
immediately prior to the consummation of the Redemption (the
"Redemption Escrow Amount") to one account designated in writing by
the Stockholders' Representative for the benefit of the Redeemed
Stockholders and (ii) the Redemption Escrow Amount to one account
(the "Escrow Account") designated in writing by the escrow agent
(the "Escrow Agent") appointed pursuant to the terms and conditions
of the Escrow Agreement to be held in escrow pursuant to the terms
and conditions of such Escrow Agreement.
(b) Simultaneously with payment of the Redemption Amount pursuant to
Section 2.7(a), the Stockholders' Representative will cause the
Redeemed Stockholders to deliver to Parent stock certificates
representing an aggregate number shares of Company Stock equal to
the Redeemed Shares. Such stock certificates will be duly endorsed
(or accompanied by stock powers duly endorsed) for transfer to the
Company with all necessary transfer Tax and other revenue stamps,
acquired at the Redeemed Stockholders' expense, affixed and
canceled. The Redeemed Stockholders will cover any deficiencies with
respect to the endorsement of the certificates representing the
Redeemed Shares and with respect to the stock powers accompanying
such certificates. The Redeemed Shares will be retired upon the
redemption thereof.
2.8. Conversion of Securities; Merger Consideration. Subject to the terms
and conditions of this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Parent, Merger
Sub or their respective shareholders (including, without limitation, the
Stockholders): Each share of Company Stock issued and outstanding after
consummation of the Redemption and immediately prior to the Effective Time
as set forth on Schedule 3 attached to the Agreement under the heading
"Other Stockholders" opposite each Person's name thereon will be converted
into the right to receive, in cash, an amount per share of
3
<PAGE>
Company Stock equal to (i)(A) $31.8 million plus (B) the Estimated Closing
Working Capital Balance plus (C) the New Capital Equipment Aggregate
Purchase Price (the aggregate of (A) plus (B), plus (C), the "Aggregate
Closing Merger Consideration") divided by (ii) the number of shares of
Company Stock issued and outstanding after consummation of the Redemption
and immediately prior to the Effective Time.
(a) As of the Effective Time, all Company Stock will no
longer be outstanding and will automatically be canceled
and retired and will cease to exist, and each holder of
a certificate representing any sharers of Company Stock
will cease to have any rights with respect thereto,
except the right to receive such holder's appropriate
portion of the Aggregate Closing Merger Consideration as
set forth in Section 2.8(a), upon surrender of such
certificate in accordance with Section 2.8(d).
(b) Each share of Company Stock held in the treasury of the
Company immediately prior to the Effective Time will be
canceled and extinguished at the Effective Time without
any conversion thereof and no payment will be made with
respect thereto.
(c) At the Effective Time, each Stockholder will be
entitled, upon surrender to Parent of such Stockholder's
certificates representing shares of Company Stock, to
receive in exchange therefor an amount equal to the Per
Share Closing Merger Consideration (as adjusted in
accordance with Sections 2.16, 2 17 and 2.18) multiplied
by the number of shares of Company Stock set forth
opposite such Stockholder's name on Schedule 3 under the
heading "Other Stockholders".
(d) Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to
the Effective Time will automatically without any action
on the part of the holder thereof, be converted into one
validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation which as of
the Effective Time will constitute all of the issued and
outstanding shares of the Surviving Corporation.
2.9. Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Company Stock outstanding prior to the
Effective Time will not be made on the stock transfer books of the
Surviving Corporation.
4
<PAGE>
2.10. Payment of Aggregate Closing Merger Consideration. Subject to
adjustment in accordance with Sections 2.l6, 2.17 and 2.18, payment of the
Aggregate Closing Merger Consideration will be made in immediately
available funds by wire transfer at Closing as follows: (a) an amount
equal to the Aggregate Closing Merger Consideration less the excess of the
Escrow Amount over the Redemption Escrow Amount (the "Merger Escrow
Amount") to the account designated pursuant to Section 2.7(a)(i) and (b)
the Merger Escrow Amount to the account designated pursuant to the terms
of Section 2.7(a)(ii) to be held in escrow pursuant to the terms and
conditions of such Escrow Agreement."
6. Abandonment. Parent and the Company expressly reserve the right to abandon
the Merger and this Plan of Merger, at any time prior to the Effective
Date, in the absolute discretion of the directors or either of them.
7. Shareholders. It is a condition of the Agreement that there will be no
dissenting Shareholders, and consequently all Shareholders will either
consent to the Agreement or provide Waivers of their Right to Dissent to
the Agreement.
5
<PAGE>
Exhibit 3.6
AMENDED AND RESTATED BYLAWS
OF
MID STATE MACHINE PRODUCTS
ARTICLE I
---------
SHAREHOLDERS
------------
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
Mid State Machine Products (the "Corporation") will be held at such time as the
Board of Directors may designate for the purpose of electing directors and for
the transaction of such other business as may come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. The Board of Directors may designate
any location as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. If no designation is made, or if a
special meeting be otherwise called, the meeting shall be held at the principal
office of the corporation in the State of Maine.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may
be called either by the President, by the Board of Directors or by the holders
of not less than thirty-five percent (35%) of all the outstanding shares of the
corporation entitled to vote on the matter for which the meeting is called, for
the purpose or purposes stated in the call of the meeting.
SECTION 3. NOTICE OF MEETINGS. Notice of the time, place and purpose of
every meeting of shareholders shall be delivered personally or mailed not less
than ten days nor more than sixty days previous thereto to each shareholder of
record entitled to vote, at such shareholder's post office address appearing
upon the records of the Corporation or at such other address as shall be
furnished in writing by him or her to the Corporation for such purpose. Such
further notice shall be given as may be required by law or by these Bylaws. Any
meeting may be held without notice if all shareholders entitled to vote are
present in person or by proxy, or if notice is waived in writing, either before
or after the meeting, by those not present.
SECTION 4. QUORUM. The holders of record of at least a majority of the
shares of the Corporation, issued and outstanding and entitled to vote, present
in person or by proxy, shall, except as otherwise provided by law or by these
Bylaws, constitute a quorum at all meetings of the shareholders; if there be no
such quorum, the holders of a majority of such shares so present or represented
may adjourn the meeting from time to time until a quorum shall have been
obtained.
SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the shareholders shall
be presided over by the Chairman of the Board, if there be one, or if the
Chairman of the Board is not present by the President, or if the President is
not present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, shall act as Secretary of the meeting, if present.
1
<PAGE>
SECTION 6. VOTING. At each meeting of shareholders, except as otherwise
provided by statute or the Articles of Incorporation, every holder of record of
shares entitled to vote shall be entitled to one vote in person or by proxy for
each share of such shares standing in his or her name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast and, except as otherwise provided by statute, the Articles of
Incorporation, or these Bylaws, all other action shall be determined by a
majority of the votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the shareholder or by such shareholder's duly authorized
attorney.
At all elections of directors, the voting shall be by ballot or in such
other manner as may be determined by the shareholders present in person or by
proxy entitled to vote at such election. With respect to any other matter
presented to the shareholders for their consideration at a meeting, any
shareholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the shareholders entitled to vote at each such
meeting, arranged in alphabetical order, with the address of each, and the
number of shares registered in the name of each shareholder, shall be prepared
by the Secretary and shall be open to the examination of any shareholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any shareholder
who is present.
SECTION 7. INSPECTORS OF ELECTION. At any meeting of shareholders, the
chairman of the meeting may, or upon the request of any shareholders shall,
appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or
her or by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
SECTION 8. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of shareholders may be taken without a meeting, without
prior notice and without a vote, if, prior to such action, a written consent or
consents thereto, setting forth such action, is signed by the holders of record
of shares of the Corporation, issued and outstanding and entitled to vote
thereon, having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
2
<PAGE>
ARTICLE II
----------
DIRECTORS
---------
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. The number of
directors constituting the Board shall be three. Each director shall hold office
until the next annual meeting of shareholders or until his or her successor
shall have been elected and qualified. Directors need not be residents of Maine
or shareholders of the corporation. No decrease in the number of directors
constituting the Board of Directors shall have the effect of shortening the term
of any incumbent director.
A majority of the number of directors fixed by these by-laws shall
constitute a quorum for transaction of business at any meeting of the Board of
Directors, provided that if less than a majority of such number of directors are
present at said meeting, a majority of the directors present may adjourn the
meeting at any time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the vote of a greater number is required by
statute, these By-Laws, or the Articles of Incorporation.
Directors will hold office until the next annual election and until
their successors will have been elected and will have qualified, unless sooner
displaced.
Any vacancy occurring in the Board of Directors, including a vacancy
caused by a removal of a director, and any directorship to be filled by reason
of an increase in the number of directors, may be filled by election at the next
annual meeting or at a special meeting of shareholders called for that purpose;
provided, however, that any vacancies occurring between meetings of shareholders
may be filled by a majority of the Board of Directors. A director elected by the
shareholders to fill a vacancy shall hold office for the balance of the term for
which he or she was elected. A director appointed to fill a vacancy by the Board
shall serve until the next meeting of shareholders at which directors are to be
elected.
A director may resign at any time upon written notice to the Board of
Directors, the Chairman of the Board, or to the President or the Secretary of
the corporation. A director may be removed with or, subject to the Articles of
Incorporation, without cause, at a meeting of shareholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of directors; provided, however, that no director shall be
removed at a meeting of shareholders unless the notice of such meeting shall
state that a purpose of the meeting is to vote upon the removal of one or more
directors named in the notice, and only the named director or directors may be
removed at such meeting; and provided further that, if the corporation has
cumulative voting and less than all the directors are to be removed, no director
may be removed, with or without cause, if the votes cast against his or her
removal would be sufficient to elect him or her if then cumulatively voted at an
election of the entire board of directors; and provided further that a director
elected by the holders of a class or series of shares may be removed only by the
shareholders of that class or series.
3
<PAGE>
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall
be held at such place either within or without the State of Maine, as may from
time to time be fixed by resolution of the Board, or as may be specified in the
call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
shareholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present.
SECTION 3. COMMITTEES. A majority of the directors may create one or
more committees and appoint two or more members of the Board to serve on the
committee or committees at the pleasure of the Board. Unless the appointment by
the Board of Directors requires a greater number, a majority of any committee
shall constitute a quorum and a majority of a quorum is necessary for committee
action. A committee may act by unanimous consent in writing without a meeting
and, subject to the provisions of these By-Laws or action by the Board of
Directors, the committee, by majority vote of its members, shall determine the
time and place of meetings and the notice required therefor. To the extent
specified by the Board of Directors, each committee may exercise the powers of
the Board of Directors, provided however, that a committee may not take any
action which a committee of the Board is prohibited from taking by the Maine
Business Corporation Act. Vacancies in the membership of the committee shall be
filled by the Board of Directors. Each committee shall keep regular minutes of
its proceedings and report the same to the Board when required.
SECTION 4. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if prior to such action a written consent or
consents thereto is signed by all members of the Board, or of such committee as
the case may be, and such written consent or consents is filed with the minutes
of proceedings of the Board or committee.
SECTION 5. COMPENSATION. A majority of the Board of Directors may, by
resolution, establish reasonable compensation for their services and the
services of officers, irrespective of any personal interest.
SECTION 6. CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted
by the Articles of Incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
SECTION 7. BUSINESS AFFAIRS. The business of the corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the
4
<PAGE>
corporation and do all such lawful acts and things as are not by law or by the
Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders.
ARTICLE III
-----------
OFFICERS
--------
SECTION 1. TITLES AND ELECTION. The officers of the Corporation, who
shall be chosen by the Board of Directors at its first meeting after each annual
meeting of shareholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
SECTION 2. TERMS OF OFFICE. Each officer shall hold office until his or
her successor shall have been duly elected and shall have qualified or until his
or her earlier death, resignation or removal.
SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
will take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation will not be necessary to make it
effective.
SECTION 5. VACANCIES. Any vacancy occurring in any office or new
offices created shall be filled by a majority vote of the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors will preside at all meetings of the Board of Directors and of the
shareholders, and the Chairman will have and perform such other duties as from
time to time may be assigned to the Chairman by the Board of Directors.
SECTION 7. PRESIDENT. The President shall be the chief executive
officer of the corporation. Subject to the direction and control of the Board of
Directors, he or she shall supervise and control the business of the
corporation, shall see that the resolutions and directions of the Board of
Directors are carried into effect except in those instances in which that
responsibility is specifically assigned to some other person by the Board of
Directors, and, in general, shall discharge all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time. The President shall preside at all meetings of the
shareholders and of the Board of Directors. Except in those instances in which
the authority to execute is expressly delegated to another officer or agent of
the corporation or a different mode of execution is expressly prescribed by the
Board of Directors or these Bylaws, the President may execute for the
corporation certificates for its shares, and any contracts, deeds, mortgages,
bonds, or other instruments which the Board of Directors has authorized to be
executed, and he or she may accomplish such execution
5
<PAGE>
either under or without the seal of the corporation and either individually or
with the Secretary, any Assistant Secretary, or any other officer thereunto
authorized by the Board of Directors, according to the requirements of the form
of the instrument. The President may vote all securities which the corporation
is entitled to vote except as and to the extent such authority shall be vested
in a different officer or agent of the corporation by the Board of Directors.
SECTION 8. VICE PRESIDENTS. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments of the Corporation, and shall do and perform such
other duties incident to the office of Vice President and as the Board of
Directors, or the President shall direct.
SECTION 9. SECRETARY. The Secretary shall attend all sessions of the
Board and all meetings of the shareholders and record all votes and the minutes
of proceedings in a book to be kept for that purpose. The Secretary shall give,
or cause to be given, notice of all meetings of the shareholders and of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
The assistant secretary or, if there be more than one, the assistant
secretaries in the order determined by the Board of Directors, shall, in the
absence or disability of the secretary, perform the duties and exercise the
powers of the secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECTION 10. TREASURER. The Treasurer shall be the principal accounting
and financial officer of the corporation. The Treasurer shall: (a) have charge
of and be responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him or her by the
President, by a Vice President acting as or on behalf of the President, or by
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the Board of Directors may determine.
The assistant treasurer, or, if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors, shall,
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
6
<PAGE>
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence
or disability of any officer of the Corporation, or for any other reason that
the Board may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any Director.
SECTION 12. SALARIES. The salaries of all officers shall be fixed by
the Board of Directors, and the fact that any officer is a Director shall not
preclude him from receiving a salary as an officer, or from voting upon the
resolution providing the same.
ARTICLE IV
----------
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. ACTIONS BY OTHERS. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or who is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation or, with respect to any
criminal action or proceeding, that the person had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit, if such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, provided that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the corporation unless, and only to the extent that, the court in
which such action or suit was brought shall determine upon application that
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
7
<PAGE>
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of a corporation has been successful, on the merits or
otherwise, in the defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article IV, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
SECTION 4. AUTHORIZATION. Any indemnification under Sections 1 and 2 of
this Article IV (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case, upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standards of conduct set
forth in Sections 1 and 2 of this Article IV. Such determination shall be made
(a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the shareholders.
SECTION 5. ADVANCEMENT OF EXPENSES. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding, as
authorized by the Board of Directors in the specific case, upon receipt of (a)
an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount, unless it shall ultimately be determined that he or she is
entitled to be indemnified by the corporation as authorized in this Article IV,
and (b) a written affirmation by the officer, director, employee or agent that
the person has met the conduct necessary for indemnification by the corporation
in this Article IV.
SECTION 6. OTHER RIGHTS. The indemnification provided by this Article
IV shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. INSURANCE. The corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such liability
under the provisions of this Article IV.
SECTION 8. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity
or unenforceability of any provision of this Article shall not affect the
validity or enforceability of the remaining provisions of this Article.
ARTICLE V
---------
SHARES
------
8
<PAGE>
SECTION 1. CERTIFICATES. Shares of the corporation shall be represented
by certificates. Certificates representing shares of the corporation shall be
signed by the appropriate corporate officers (which, in the absence of a
contrary action by the Board, shall be the President or a Vice President and the
Secretary or any Assistant Secretary of the corporation) and may be sealed with
the seal or a facsimile of the seal of the corporation. If a certificate is
countersigned by a transfer agent or registrar, other than the corporation or
its employee, any other signatures or countersignature on the certificate may be
facsimile. Each certificate representing shares shall be consecutively numbered
or otherwise identified, and shall also state the name of the person to whom
issued, the number and class of shares (with designation of series, if any), the
date of issue, and that the corporation is organized under the laws of Maine. If
the corporation is authorized to issue shares of more than one class or of
series within a class, the certificate shall also contain such information or
statement as may be required by law.
The name and address of each shareholders, the number and
class of shares held and the date on which the shares were issued shall be
entered on the books of the corporation. The person in whose name shares stand
on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
SECTION 2. TRANSFER. Shares of the corporation shall be transferable
only on the books of the corporation and upon endorsement and surrender of the
certificate(s) representing such shares, as provided in this Section 2. Transfer
of shares represented by a certificate, except in the case of a lost, destroyed,
or stolen certificate for which a replacement certificate has not been issued
pursuant to Section 4 of this Article V, shall be made on surrender for
cancellation of the certificate for such shares. A certificate presented for
transfer must be duly endorsed and accompanied by proper guaranty of signature
and other appropriate assurances that the endorsement is effective.
SECTION 3. RECORD DATES. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the corporation may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than 60 days and for a meeting of shareholders, not less than 10 days, or in the
case of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets, not less than 20 days before the date of such meeting,
except as otherwise required by statute. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders. A
determination of shareholders shall apply to any adjournment of the meeting.
SECTION 4. LOST CERTIFICATES. The Board of Directors may, in its
discretion upon review of the relevant evidence, direct that a new certificate
representing shares be issued in the place of any previously issued certificate
which is alleged to have been lost, stolen or destroyed, and the corporation may
require the owner of the lost, stolen or destroyed certificate, or his or her
legal representative, to give the corporation a bond sufficient to indemnify it
against any claim that may
9
<PAGE>
be made against it on account of the alleged loss, theft or destruction of the
certificate or the issuance of a new certificate.
ARTICLE VI
----------
CHECKS, NOTES, ETC.
-------------------
SECTION 1. CHECKS, NOTES, ETC. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President, any Vice President or the Treasurer and may also be
signed by such other officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
-----------
MISCELLANEOUS PROVISIONS
------------------------
SECTION 1. OFFICES. The registered office of the corporation shall be
located in Winslow, State of Maine. The corporation may also have offices at
such other places both within and without the State of Maine as the Board of
Directors may from time to time determine or the business of the corporation may
require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by the Board of Directors.
SECTION 3. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Maine." The
seal may be used by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced, provided that the affixing of the corporate
seal to an instrument shall not give the instrument additional force or effect,
or change the construction thereof, and the use of the corporate seal is not
mandatory.
SECTION 4. BOOKS. The Directors may keep the books of the corporation,
except such as are required by law to be kept within the state, outside the
State of Maine, at such place or places as they may from time to time determine.
SECTION 5. VOTING OF SHARES. Unless otherwise specifically authorized
by the Board of Directors, all shares owned by the Corporation, other than
shares of the Corporation, will be voted, in person or by proxy, by the
President or any Vice President of the Corporation on behalf of the Corporation.
ARTICLE VIII
------------
AMENDMENTS
----------
SECTION 1. AMENDMENTS. The vote of the holders of at least a majority
of the shares of the Corporation, issued and outstanding and entitled to vote,
shall be necessary at any meeting of shareholders to amend or repeal these
Bylaws or to adopt new Bylaws. These Bylaws may also be amended or repealed, or
new Bylaws adopted, at any meeting of the Board of Directors by the vote
10
<PAGE>
of at least a majority of the entire Board; provided that any Bylaws adopted by
the Board may be amended or repealed by the shareholders in the manner set forth
above.
Any proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be stated in the notice of the meeting of the Board of Directors or the
shareholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
11
<PAGE>
Exhibit 3.7
Form BCA-2.10 ARTICLES OF INCORPORATION
- --------------------------------------------------------------------------------
(Rev. Jan. 1999) This space for use by Secretary of State
Jesse White SUMBIT IN DUPLICATE!
Secretary of State -----------------------
Department of Business Services FILED This space for use by
Springfield, IL 62756 Secretary of State
hppt://www.sos.state.il.us MAR 5 1999
- ---------------------------------- Date 3-5-99
Payment must be made by certi-
fied check, cashier's check, Illi- JESSE WHITE Franchise Tax $ 25.00
nois attorney's check, Illinois SECRETARY OF STATE Filing Fee $ 75.00
C.P.A's check or money order, -------
payable to "Secretary of State." $100.00
Approved: [ILLEGIBLE]
- --------------------------------------------------------------------------------
1. CORPORATE NAME: GA ACQUISITION ILLINOIS, INC.
--------------------------------------------------------------------------
(The corporate name must contain the word "corporation", "company,"
"incorporated," "limited" or an abbreviation thereof.)
- --------------------------------------------------------------------------------
2. Initial Registered Agent: CT CORPORATION SYSTEM
----------------------------------------------
First Name Middle Initial Last Name
Initial Registered Office: 208 South LaSalle Street
----------------------------------------------
Number Street Suite #
Chicago IL Cook 60604
----------------------------------------------
City County Zip Code
- --------------------------------------------------------------------------------
3. Purpose or purposes for which the corporation is organized:
(If not sufficient space to cover this point, add one or more sheets of
this size.)
To engage in activity for which corporations may be formed under the
Illinois Business Corporation Act of 1983.
- --------------------------------------------------------------------------------
4. Paragraph 1: Authorized Shares, Issued Shares and Consideration Received:
<TABLE>
<CAPTION>
Par Value Number of Shares Number of Shares Consideration to be
Class per Share Authorized Proposed to be Issued Received Therefor
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
common $ 0.01 100 100 $100
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
TOTAL = $100
</TABLE>
Paragraph 2: The preferences, qualifications, limitations, restrictions
and special or relative rights in respect of the shares of each class are:
(If not sufficient space to cover this point, add one or more sheets of
this size.)
one class of common stock
EXPEDITED
038-101-1
MAR 5 1999
SECRETARY OF STATE
<PAGE>
5. OPTIONAL: (a) Number of directors constituting the initial board of
directors of the corporation:_________________________________
(b) Names and addresses of the persons who are to serve as
directors until the first annual meeting of shareholders or
until their successors are elected and qualify:
Name Residential Address City, State, ZIP
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
--------------------------------------------------------------
- --------------------------------------------------------------------------------
6. OPTIONAL: (a) It is estimated that the value of all property to
be owned by the corporation for the following
year wherever located will be: $___________
(b) It is estimated that the value of the property
to be located within the State of Illinois
during the following year will be: $___________
(c) It is estimated that the gross amount of
business that will be transacted by the
corporation during the following year will be: $___________
(d) It is estimated that the gross amount of
business that will be transacted from places of
business in the State of Illinois during the
following year will be: $___________
- --------------------------------------------------------------------------------
7. OPTIONAL: OTHER PROVISIONS
Attach a separate sheet of this size for any other provision to be
included in the Articles of Incorporation, e.g., authorizing
preemptive rights, denying cumulative voting, regulating internal
affairs, voting majority requirements, fixing a duration other
than prepetual, etc.
- --------------------------------------------------------------------------------
8. NAME(S) & ADDRESS(ES) OF INCORPORATOR(S)
The undersigned incorporator(s) hereby declare(s), under penalties or
prejury, that the statements made in the foregoing Articles of Incorporation are
true.
Dated March 3 1999 1999
-----------------, ----
(Month & Day) Year
Signature and Name Address
1. /s/ Sanford B. Kaynor, Jr. 1. 599 Lexington Avenue
--------------------------------- -------------------------------
Signature Street
SANFORD B. KAYNOR, JR New York, New York 10022
--------------------------------- -------------------------------
(Type or Print Name) City/Town State ZIP Code
2. 2.
--------------------------------- -------------------------------
Signature Street
--------------------------------- -------------------------------
(Type or Print Name) City/Town State ZIP Code
3. 3.
--------------------------------- -------------------------------
Signature Street
--------------------------------- -------------------------------
(Type or Print Name) City/Town State ZIP Code
(Signature must be in BLACK INK on original document. Carbon copy, photocopy or
rubber stamp signatures may only be used on conformed copies).
NOTE: If a corporation acts as incorporator, the name of the corporation and the
state of incorporation shall be shown and the execution shall be by its
president or vice president and verified by him, and attested by its secretary
or assistant secretary.
- --------------------------------------------------------------------------------
FEE SCHEDULE
o The initial franchise tax is assessed at the rate of 15/1000 of 1 percent
($1.50 per $1,000) on the paid-in capital represented in this state, with
a minimum of $25.
o The filing fee is $75.
o The minimum total due (franchise tax + filing fee) is $100.
(Applies when the Consideration to be Received as set forth in Item 4 does
not exceed $16,667)
o The Department of Business Services in Springfield will provide assistance
in calculating the total fees if necessary.
Illinois Secretary of State Springfield, IL 62756
Department of Business Services Telephone (217) 782-9522 or
782-9523
<PAGE>
Form BCA-11.25 ARTICLES OF MERGER
(Rev. Jan. 1999) CONSOLIDATION OR EXCHANGE File # 6038-101-1
- --------------------------------------------------------------------------------
Jesse White SUMBIT IN DUPLICATE
Secretary of State -----------------------
Department of Business Services FILED This space for use by
Springfield, IL 62756 Secretary of State
Telephone (217) 782-6961 MAR 18 1999
hppt://www.sos.state.il.us Date 3/18/99
- ---------------------------------- JESSE WHITE
DO NOT SEND CASH! SECRETARY OF STATE Filing Fee $100.00
Remit payment in check or money
order, payable to "Secretary of Approved: [ILLEGIBLE]
State."
Filing Fee is $100, but if merger
or consolidation involves more
than 2 corporations, $50 for each
additional corporation.
- --------------------------------------------------------------------------------
1. Names of the corporations proposing to merge, and the state or country of
their incorporation:
State or Country Corporation
Name of Corporation of Incorporation File Number
GA ACQUISITION ILLINOIS, INC. ILLINOIS 6038-101-1
--------------------------------------------------------------------------
GA ACQUISITION DELAWARE, INC. DELAWARE
--------------------------------------------------------------------------
--------------------------------------------------------------------------
--------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The law of the state or country under which each corporation is
incorporated permits such merger, consolidation or exchange.
- --------------------------------------------------------------------------------
3. (a) Name of the surviving corporation: GA ACQUISITION ILLINOIS, INC.
(b) It shall be governed by the laws of: ILLINOIS
- --------------------------------------------------------------------------------
If not sufficient space to cover this point, add one or more sheets of
this size.
4. Plan of merger is as follows:
GA ACQUISITION DELAWARE, INC. will be merged with and into GA ACQUISITION
ILLINOIS, INC. with GA Acquisitions Illinois, Inc. surviving.
GA Acquisition Illinois' Articles of Incorporation shall remain in full
effect.
All the issued and outstanding shares of stock of each of GA Acquisition
Delaware, Inc. GA Acquisition Illinois, Inc. are owned by Precision
Partners, Inc. GA Acquisition Illinois, Inc.'s stock shall remain issued
and outstanding. The shares of GA Acquisition Delaware, Inc.'s stock and
rights therein shall be canceled.
The bylaws of GA Acquisition Illinois, Inc. in effect on the date of the
merger shall remain the bylaws of the surviving company. The directors and
officers of GA Acquisition Illinois, Inc. shall serve the same positions
with the surviving company until their successors have been elected and
qualified.
EXPEDITED
MAR 18 1999
SECRETARY OF STATE
<PAGE>
5. Plan of merger was approved, as to each corporation not organized in
Illinois, incompliance with the laws of the state under which it is
organized, and (b) as to each Illinois corporation, as follows:
(The following items are not applicable to mergers under ss.11.30 -- 90%
owned subsidiary provisions. See Article 7.)
(Only "X" one box for each Illinois corporation)
<TABLE>
<CAPTION>
By the shareholders, a reso-
lution of the board of directors By written consent of the
having been duly adopted and shareholders having not less
submitted to a vote at a meeting than the minimum number of votes
of shareholders. Not less than required by statute and by the By written consent of
the minimum number of votes articles of incorporation. ALL the shareholders
required by statute and by the Shareholders who have not entitled to vote on
articles of incorporation voted consented in writing have been the action, in
in favor of the action taken. given notice in accordance with accordance with
Name of Corporation (ss. 11.20) ss. 7.10 (ss. 11.220) ss. 7.10 & ss. 11.20
------------------- -------------------------------- --------------------------------- ----------------------
<S> <C> <C> <C>
GA ACQUISITION ILLINOIS, INC. |_| |_| |X|
- -------------------------------
|_| |_| |_|
- -------------------------------
|_| |_| |_|
- -------------------------------
|_| |_| |_|
- -------------------------------
|_| |_| |_|
- -------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. (Not applicable if surviving, new or acquiring corporation is an Illinois
corporation)
It is agreed that, upon and after the issuance of a certificate of merger,
consolidation or exchange by the Secretary of State of the State of
Illinois:
a. The surviving, new or acquiring corporation may be served with
process in the State of Illinois in any proceeding for the
enforcement of any obligation of any corporation organized under the
laws of the State of Illinois which is a party to the merger,
consolidation or exchange and in any proceeding for the enforcement
of the rights of a dissenting shareholder of any such corporation
organized under the laws of the State of Illinois against the
surviving, new or acquiring corporation.
b. The Secretary of State of the State of Illinois shall be and hereby
is irrevocably appointed as the agent of the surviving, new or
acquiring corporation to accept service of process in any such
proceedings, and
c. The surviving, new, or acquiring corporation will promptly pay to
the dissenting shareholders of any corporation organized under the
laws of the State of Illinois which is a party to the merger,
consolidation or exchange the amount, if any, to which they shall be
entitled under the provisions of "The Business Corporation Act of
1983" of the State of Illinois with respect to the rights of
dissenting shareholders.
- --------------------------------------------------------------------------------
<PAGE>
7. (Complete this item if reporting a merger under 11.30-90% owned
subsidiary provision)
a. The number of outstanding shares of each class of each merging
subsidiary corporation and the number of such shares of each class
owned immediately prior to the adoption of the plan or merger by the
parent corporation, are:
Total Number of Shares Number of Shares of Each Class
Outstanding Owned Immediately Prior to
Name of Corporation of Each Class Merger by the Parent Corporation
_____________________ ______________________ ________________________________
_____________________ ______________________ ________________________________
_____________________ ______________________ ________________________________
_____________________ ______________________ ________________________________
_____________________ ______________________ ________________________________
b. (Not applicable to 100% owned subsidiaries)
The date of mailing a copy of the plan of merger and notice of the
right to dissent to the shareholders of each merging subsidiary
corporation was ____________________, _________.
(Month & Day) Year
Was written consent for the merger or written waiver of the 30-day
period by the holders of all the outstanding shares of all
subsidiary corporations received? |_| Yes |_| No
(If the answer is "No," the duplicate copies of the Articles of
Merger may not be delivered to the Secretary of State until after 30
days following the mailing of a copy of the plan of merger and of
the notice of the right to dissent to the shareholders of each
merging subsidiary corporation.)
8. The undersigned corporations have caused these articles to be signed by
their duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true. (All signatures must be in
BLACK INK.)
Dated March 10, 1999 GA ACQUISITION ILLINOIS, INC.
------------------------------ --------------------------------------
(Month & Day) (Year) (Exact Name of Corporation)
attested by /s/ Melvin Johnson by /s/ James Ashton
------------------------ -----------------------------------
(Signature of Secretary (Signature of President or Vice
or Assistant Secretary) President)
MELVIN JOHNSON, VP &
Asst. Secretary Dr. James Ashton, President & CEO
-------------------------- -----------------------------------
(Type or Print Name and (Type or Print Name and Title)
Title)
Dated March 10, 1999 GA Acquisition Delaware, Inc.
------------------------------ --------------------------------------
(Month & Day) (Year) (Exact Name of Corporation)
attested by /s/ Melvin Johnson by /s/ James Ashton
------------------------ -----------------------------------
(Signature of Secretary (Signature of President or Vice
or Assistant Secretary) President)
MELVIN JOHNSON, VP &
Asst. Secretary Dr. James Ashton, President & CEO
-------------------------- -----------------------------------
(Type or Print Name and (Type or Print Name and Title)
Title)
Dated
------------------------------ --------------------------------------
(Month & Day) (Year) (Exact Name of Corporation)
attested by
by
------------------------ -----------------------------------
(Signature of Secretary (Signature of President or Vice
or Assistant Secretary) President)
-------------------------- -----------------------------------
(Type or Print Name and (Type or Print Name and Title)
Title)
C-195-8
<PAGE>
Form BCA-10.30 ARTICLES OF AMENDMENT File # 6038-101-1
(Rev. Jan. 1995)
- --------------------------------------------------------------------------------
SUBMIT IN DUPLICATE
George H. Ryan FILED ---------------------
Secretary of State MAR 19 1999 This space for use
Department of Business Services by Secretary of
Springfield, IL 62756 JESSE WHITE State
Telephone (217) 782-1832 SECRETARY OF STATE
- ------------------------------- Date 3/19/99
Remit payment in check or
money order, payable to Franchise Tax $
"Secretary of State." Filing Fee* $25.00
Penalty $
* The filing fee for articles
of amendment - $25.00 Approved: /s/
[Illegible initials]
- --------------------------------------------------------------------------------
1. CORPORATE NAME: GA ACQUISITION ILLINOIS, INC.
----------------------------------------------------------
(Note 1)
2. MANNER OF ADOPTION OF AMENDMENT:
The following amendment of the Articles of Incorporation was adopted on
MARCH 17 1999 in the manner indicated below. ("X" one box only)
|_| By a majority of the Incorporators, provided no directors were named
in the articles of incorporation and no directors have been elected;
(Note 2)
|_| By a majority of the board of directors, in accordance with Section
10.10, the corporation having issued no shares as of the time of
adoption of this amendment;
(Note [Illegible])
|_| By a majority of the board of directors, in accordance with Section
10.15, shares having been issued [illegible] shareholder action not
being required for the adoption of the amendment;
(Note 3)
|_| By the shareholders, in accordance with Section 10.20, a resolution
of the board of directors having been duly adopted and submitted to
the shareholders. At a meeting of shareholders, not less than the
minimum number of votes required by statute and by the articles of
incorporation were voted in favor of the amendment;
(Note 4)
|_| By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed
by shareholders having not less than the minimum number of votes
required by statute and by the articles of incorporation.
Shareholders who have not consented in writing have been given
notice in accordance with Section 7.10;
(Note 4&5)
|X| By the shareholders, in accordance with Sections 10.20 and 7.10, a
resolution of the board of directors having been duly adopted and
submitted to the shareholders. A consent in writing has been signed
by all the shareholders entitled to vote on this amendment.
(Note 5)
3. TEXT OF AMENDMENT:
a. When amendment effects a name change, insert the new corporate name
below. Use Page 2 for all other amendments.
Article I: The name of the corporation is:
GENERAL AUTOMATION, INC.
- --------------------------------------------------------------------------------
(NEW NAME)
All changes other than name include [illegible]
EXPEDITED
MAR 19 1999
SECRETARY OF STATE
<PAGE>
Text of Amendment
b. (If amendment affects the corporate purpose, the amended purpose is
required to be set forth in its entirety. If there is not sufficient
space to do so, add one or more sheets of this size.)
<PAGE>
4. The manner, if not set forth in Article 3b, in which any exchange,
reclassification or cancellation of issued shares, or a reduction of the
number of authorized shares of any class below the number of issued shares
of that class, provided for or affected by this amendment, is as follows:
(if not applicable, insert "No change")
NO CHANGE
5. (a) The manner, if not set forth in Article 3b, in which said amendment
effects a change in the amount of paid-in capital (Paid-in capital
replaces the terms Stated Capital and Paid-in Surplus and is equal to the
total of these accounts) is as follows: (if not applicable, insert "No
change")
NO CHANGE
(b) The amount of paid-in capital (Paid-in Capital replaces the terms
Stated Capital and Paid-in Surplus and is equal to the total of these
accounts) as changed by this amendment is as follows: (if not applicable,
insert "No change")
Before Amendment After Amendment
Paid-in Capital $ NO CHANGE $ NO CHANGE
----------- -----------
(Complete either Item 6 or 7 below. All signatures must be in BLACK INK.)
6. The undersigned corporation has caused this statement to be signed by its
duly authorized officers, each of whom affirms, under penalties of
perjury, that the facts stated herein are true.
Dated MARCH 17, 1999 GA ACQUISITION ILLINOIS, INC.
------------------------------------
(Exact Name of Corporation at
date of execution)
attested by /s/ Melvin D. Johnson by /s/ James E. Ashton
----------------------------- ---------------------------------
(Signature of Secretary or (Signature of President or
Assistant Secretary) Vice President)
MELVIN D. JOHNSON, ASSIST. SECRETARY JAMES E. ASHTON, PRESIDENT
- ---------------------------------------- -------------------------------------
(Type or Print Name and Title) (Type or Print Name and Title)
7. If amendment is authorized pursuant to Section 10.10 by the incorporators,
the incorporators must sign below, and type or print name and title.
OR
If amendment is authorized by the directors pursuant to Section 10.10 and
there are no officers, then a majority of the directors or such directors
as may be designated by the board, must sign below, and type or print name
and title.
The undersigned affirms, under the penalties of perjury, that the facts
stated herein are true.
Dated ______________________, 19 ___
____________________________________ _______________________________________
____________________________________ _______________________________________
____________________________________ _______________________________________
____________________________________ _______________________________________
<PAGE>
Exhibit 3.8
BYLAWS
OF
GA ACQUISITION ILLINOIS, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of GA
Acquisition Illinois, Inc. (the "Corporation") will be held at such time as the
Board of Directors may designate for the purpose of electing directors and for
the transaction of such other business as may come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day. The Board of Directors may designate
any location as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. If no designation is made, or if a
special meeting be otherwise called, the meeting shall be held at the principal
office of the corporation in the State of Illinois.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders may
be called either by the President, by the Board of Directors or by the holders
of not less than thirty-five percent (35%) of all the outstanding shares of the
corporation entitled to vote on the matter for which the meeting is called, for
the purpose or purposes stated in the call of the meeting.
SECTION 3. NOTICE. Notice of the time, place and purpose of every
meeting of stockholders shall be delivered personally or mailed not less than
ten days nor more than sixty days previous thereto to each stockholder of record
entitled to vote, at such stockholder's post office address appearing upon the
records of the Corporation or at such other address as shall be furnished in
writing by him or her to the Corporation for such purpose. Such further notice
shall be given as may be required by law or by these Bylaws. Any meeting may be
held without notice if all stockholders entitled to vote are present in person
or by proxy, or if notice is waived in writing, either before or after the
meeting, by those not present.
SECTION 4. QUORUM. The holders of record of at least a majority of the
shares of the stock of the Corporation, issued and outstanding and entitled to
vote, present in person or by proxy, shall, except as otherwise provided by law
or by these Bylaws, constitute a quorum at all meetings of the stockholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the stockholders shall
be presided over by the Chairman of the Board, if there be one, or if the
Chairman of the Board is not present by the President, or if the President is
not present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, shall act as Secretary of the meeting, if present.
SECTION 6. VOTING. Unless otherwise provided in the Articles of
Incorporation, each outstanding share, regardless of class, shall be entitled to
one vote in each matter submitted to
1
<PAGE>
vote at a meeting of stockholders, and, except as otherwise provided herein, in
all elections for directors, every stockholders shall have the right to vote the
number of shares owned by such stockholders for as many persons as there are
directors to be elected, or to cumulate such votes and give one candidate as
many votes as shall equal the number of directors multiplied by the number of
such shares or to distribute such cumulative votes in any proportion among any
number of candidates. Each stockholders may vote either in person or by proxy as
described below.
Each stockholders may appoint a proxy to vote or otherwise act for him
or her by signing an appointment form and delivering it to the person so
appointed, but no such proxy shall be valid after 11 months from the date of its
execution, unless otherwise provided in the proxy.
The Articles of Incorporation may be amended to limit or eliminate
cumulative voting rights in all or specified circumstances, or to limit or deny
voting rights or to provide special voting rights as to any class or classes or
series of shares of the corporation.
Shares held by the corporation in a fiduciary capacity may be voted and
shall be counted in determining the total number of outstanding shares entitled
to vote at any given time.
Shares registered in the name of another corporation, domestic or
foreign, may be voted by any officer, agent, proxy or other legal representative
authorized to vote such shares under the law of incorporation of such
corporation.
Shares registered in the name of a deceased person, a minor ward or a
person under legal disability may be voted by his or her administrator, executor
or court appointed guardian, either in person or by proxy without a transfer of
such shares into the name of such administrator, executor or court appointed
guardian. Shares registered in the name of a trustee may be voted by him or her,
either in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority to
do so is contained in an appropriate order of the court by which such receiver
was appointed.
A stockholders whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Any number of stockholders may create a voting trust for the purpose of
conferring upon a trustee or trustees the right to vote or otherwise represent
their shares, for a period not to exceed 10 years, by entering into a written
voting trust agreement specifying the terms and conditions of the voting trust,
and by transferring their shares to such trustee or trustees for the purpose of
the agreement. Any such trust agreement shall not become effective until a
counterpart of the agreement is deposited with the corporation at its registered
office. The counterpart of the voting trust agreement so deposited with the
corporation shall be subject to
2
<PAGE>
the same right of examination by a stockholders of the corporation, in person or
by agent or attorney, as is the record of stockholders of the corporation, and
shall be subject to examination by any holder of a beneficial interest in the
voting trust, either in person or by agent or attorney, at any reasonable time
for any proper purpose.
Shares of its own stock belonging to this corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own share held by it in a fiduciary capacity may be voted and shall be
counted in determining the total number of outstanding shares at any given time.
SECTION 7. INSPECTORS OF ELECTION. At any meeting of stockholders, the
chairman of the meeting may, or upon the request of any stockholders shall,
appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or
her or by a majority of them if there be more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
SECTION 8. ACTION BY CONSENT. Unless otherwise provided in the Articles
of Incorporation or by the Illinois Business Corporation Act, any action
required by law to be taken at a meeting of the stockholders, or any other
action which may be taken at a meeting of the stockholders, may be taken without
a meeting and without a vote, if a consent in writing, setting forth the action
so taken shall be signed (a) by the holders of outstanding shares having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voting or (b) by all of the stockholders entitled to vote with
respect to the subject matter thereof.
If such consent is signed by less than all of the stockholders entitled
to vote, then such consent shall become effective only if at least 5 days prior
to the execution of the consent a notice in writing is delivered to all of the
stockholders entitled to vote with respect to the subject matter thereof and,
after the effective date of the consent, prompt notice of the taking of the
corporation action without a meeting by less than unanimous written consent
shall be delivered in writing to those stockholders who have not consented in
writing.
In the event that the action which is consented to is such as would
have required the filing of a certificate under any Section of the Illinois
Business Corporation Act if such action had been voted on by the stockholders at
a meeting thereof, the certificate filed under such Section shall state, in lieu
of any statement required by such Section concerning any vote of stockholders,
that written consent has been delivered in accordance with the provisions of
3
<PAGE>
Section 7.10 of the Illinois Business Corporation Act and that written notice
has been given as provided in such Section 7.10.
ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. The number of
directors constituting the Board shall be three. Each director shall hold office
until the next annual meeting of stockholders or until his or her successor
shall have been elected and qualified. Directors need not be residents of
Illinois or stockholders of the corporation. No decrease in the number of
directors constituting the Board of Directors shall have the effect of
shortening the term of any incumbent director.
A majority of the number of directors fixed by these by-laws shall
constitute a quorum for transaction of business at any meeting of the Board of
Directors, provided that if less than a majority of such number of directors are
present at said meeting, a majority of the directors present may adjourn the
meeting at any time without further notice. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors, unless the vote of a greater number is required by
statute, these By-Laws, or the Articles of Incorporation.
Directors will hold office until the next annual election and until
their successors will have been elected and will have qualified, unless sooner
displaced.
Any vacancy occurring in the Board of Directors, including a vacancy
caused by a removal of a director, and any directorship to be filled by reason
of an increase in the number of directors, may be filled by election at the next
annual meeting or at a special meeting of stockholders called for that purpose;
provided, however, that any vacancies occurring between meetings of stockholders
may be filled by a majority of the Board of Directors. A director elected by the
stockholders to fill a vacancy shall hold office for the balance of the term for
which he or she was elected. A director appointed to fill a vacancy by the Board
shall serve until the next meeting of stockholders at which directors are to be
elected.
A director may resign at any time upon written notice to the Board of
Directors, the Chairman of the Board, or to the President or the Secretary of
the corporation. A director may be removed with or, subject to the Articles of
Incorporation, without cause, at a meeting of stockholders by the affirmative
vote of the holders of a majority of the outstanding shares then entitled to
vote at an election of directors; provided, however, that no director shall be
removed at a meeting of stockholders unless the notice of such meeting shall
state that a purpose of the meeting is to vote upon the removal of one or more
directors named in the notice, and only the named director or directors may be
removed at such meeting; and provided further that, if the corporation has
cumulative voting and less than all the directors are to be removed, no director
may be removed, with or without cause, if the votes cast against his or her
removal would be sufficient to elect him or her if then cumulatively voted at an
election of the entire board of directors; and provided further that a director
elected by the holders of a class or series of shares may be removed only by the
stockholders of that class or series.
4
<PAGE>
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall
be held at such place either within or without the State of Illinois, as may
from time to time be fixed by resolution of the Board, or as may be specified in
the call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present.
SECTION 3. COMMITTEES. A majority o The Board of Directors may, in its
discretion, by resolution passed by a majority of the whole Board, designate
from among its members one or more committees which shall consist of two or more
directors. The Board may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committees shall have and may exercise such
powers as shall be conferred or authorized by the resolution appointing them. A
majority of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board shall have power at any time to change the membership of any such
committee, to fill vacancies in it, or to dissolve it.
SECTION 4. ACTION BY CONSENT. Unless otherwise specifically prohibited
by the Articles of Incorporation or these By-Laws, any action required by law to
be taken at a meeting of the Board of Directors or any other action which may be
taken at a meeting of the Board of Directors or a committee thereof may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed in accordance with the Illinois Business Corporation Act by all
of the directors entitled to vote with respect to the subject matter thereof, or
by all members of such committee, as the case may be. The Secretary shall file
the written approvals of the directors evidencing the consent in the corporate
records.
SECTION 5. COMPENSATION. A majority of the Board of Directors may, by
resolution, establish reasonable compensation for their services and the
services of officers, irrespective of any personal interest.
SECTION 6. CONFERENCE TELEPHONE MEETINGS. Unless otherwise restricted
by the certifi cate of incorporation or these Bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
SECTION 7. BUSINESS AFFAIRS. The business of the corporation shall be
managed by or under the direction of its Board of Directors which may exercise
all such powers of the
5
<PAGE>
corporation and do all such lawful acts and things as are not by law or by the
certificate of incorporation or by these Bylaws directed or required to be
exercised or done by the stockholders.
ARTICLE III
OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the Corporation, who
shall be chosen by the Board of Directors at its first meeting after each annual
meeting of stockholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
SECTION 2. TERMS OF OFFICE. Each officer shall hold office until his or
her successor shall have been duly elected and shall have qualified or until his
or her earlier death, resignation or removal. Election of an officer shall not
of itself create contract rights.
SECTION 3. REMOVAL. Any officer may be removed by the Board of
Directors whenever in its judgment the best interest of the corporation would be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed.
SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
will take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation will not be necessary to make it
effective.
SECTION 5. VACANCIES. Any vacancy occurring in any office or new
offices created shall be filled by a majority vote of the Board of Directors.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors will preside at all meetings of the Board of Directors and of the
stockholders, and the Chairman will have and perform such other duties as from
time to time may be assigned to the Chairman by the Board of Directors.
SECTION 7. PRESIDENT. The President shall be the chief executive
officer of the corporation. Subject to the direction and control of the Board of
Directors, he or she shall supervise and control the business of the
corporation, shall see that the resolutions and directions of the Board of
Directors are carried into effect except in those instances in which that
responsibility is specifically assigned to some other person by the Board of
Directors, and, in general, shall discharge all duties incident to the office of
President and such other duties as may be prescribed by the Board of Directors
from time to time. The President shall preside at all meetings of the
stockholders and of the Board of Directors. Except in those instances in which
the authority to execute is expressly delegated to another officer or agent of
the corporation or a different mode of execution is expressly prescribed by the
Board of Directors or these Bylaws, the President may execute for the
corporation certificates for its shares, and any contracts, deeds, mortgages,
bonds, or other instruments which the Board of Directors has authorized to be
executed, and he or she may
6
<PAGE>
accomplish such execution either under or without the seal of the corporation
and either individually or with the Secretary, any Assistant Secretary, or any
other officer thereunto authorized by the Board of Directors, according to the
requirements of the form of the instrument. The President may vote all
securities which the corporation is entitled to vote except as and to the extent
such authority shall be vested in a different officer or agent of the
corporation by the Board of Directors.
SECTION 8. VICE PRESIDENTS. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments of the Corporation, and shall do and perform such
other duties incident to the office of Vice President and as the Board of
Directors, or the President shall direct.
SECTION 9. SECRETARY. The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and record all votes and the minutes
of proceedings in a book to be kept for that purpose. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
The assistant secretary or, if there be more than one, the assistant
secretaries in the order determined by the Board of Directors, shall, in the
absence or disability of the secretary, perform the duties and exercise the
powers of the secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECTION 10. TREASURER. The Treasurer shall be the principal accounting
and financial officer of the corporation. The Treasurer shall: (a) have charge
of and be responsible for the maintenance of adequate books of account for the
corporation; (b) have charge and custody of all funds and securities of the
corporation, and be responsible therefor and for the receipt and disbursement
thereof; and (c) perform all the duties incident to the office of Treasurer and
such other duties as from time to time may be assigned to him or her by the
President, by a Vice President acting as or on behalf of the President, or by
the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the Board of Directors may determine.
The assistant treasurer, or, if there shall be more than one, the
assistant treasurers in the order determined by the Board of Directors, shall,
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
7
<PAGE>
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence
or disability of any officer of the Corporation, or for any other reason that
the Board may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any Director.
SECTION 12. SALARIES. The salaries of all officers shall be fixed by
the Board of Directors, and the fact that any officer is a Director shall not
preclude him from receiving a salary as an officer, or from voting upon the
resolution providing the same.
ARTICLE IV
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
SECTION 1. ACTIONS BY OTHERS. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or who is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation or, with respect to any
criminal action or proceeding, that the person had reasonable cause to believe
that his or her conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit, if such person acted in good faith and in
a manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, provided that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of his or
her duty to the corporation unless, and only to the extent that, the court in
which such action or suit was brought shall determine upon application that
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper.
8
<PAGE>
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee or agent of a corporation has been successful, on the merits or
otherwise, in the defense of any action, suit or proceeding referred to in
Sections 1 and 2 of this Article IV, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection therewith.
SECTION 4. AUTHORIZATION. Any indemnification under Sections 1 and 2 of
this Article IV (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case, upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he or she has met the applicable standards of conduct set
forth in Sections 1 and 2 of this Article IV. Such determination shall be made
(a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
SECTION 5. ADVANCEMENT OF EXPENSES. Expenses incurred in defending a
civil or criminal action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding, as
authorized by the Board of Directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount, unless it shall ultimately be determined that he or she is entitled
to be indemnified by the corporation as authorized in this Article IV.
SECTION 6. OTHER RIGHTS. The indemnification provided by this Article
IV shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any Bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. INSURANCE. The corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against such person and incurred by such person in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such liability
under the provisions of this Article IV.
SECTION 8. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity
or unenforceability of any provision of this Article shall not affect the
validity or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES. Shares of the corporation either shall be
represented by certificates or shall be uncertificated shares. Certificates
representing shares of the corporation shall be signed
9
<PAGE>
by the appropriate corporate officers (which, in the absence of a contrary
action by the Board, shall be the President or a Vice President and the
Secretary or any Assistant Secretary of the corporation) and may be sealed with
the seal or a facsimile of the seal of the corporation. If a certificate is
countersigned by a transfer agent or registrar, other than the corporation or
its employee, any other signatures or countersignature on the certificate may be
facsimile. Each certificate representing shares shall be consecutively numbered
or otherwise identified, and shall also state the name of the person to whom
issued, the number and class of shares (with designation of series, if any), the
date of issue, and that the corporation is organized under the laws of Illinois.
If the corporation is authorized to issue shares of more than one class or of
series within a class, the certificate shall also contain such information or
statement as may be required by law.
Unless prohibited by the Articles of Incorporation, the Board
of Directors may provide by resolution that some or all of any class or series
of shares of the corporation shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until the certificate has
been surrendered to the corporation. Within a reasonable time after the issuance
or transfer of uncertificated shares, the corporation shall send to the
registered owner thereof a written notice containing all information required by
law to be set forth on a certificate. Except as otherwise expressly provided by
law, the rights and obligations of the holders of uncertificated shares shall be
identical to those of the holders of certificates representing shares of the
same class and series.
The name and address of each stockholders, the number and
class of shares held and the date on which the shares were issued shall be
entered on the books of the corporation. The person in whose name shares stand
on the books of the corporation shall be deemed the owner thereof for all
purposes as regards the corporation.
SECTION 2. TRANSFER. Shares of the corporation shall be transferable
only on the books of the corporation and upon endorsement and surrender of the
certificate(s) representing such shares, as provided in this Section 2. Transfer
of shares represented by a certificate, except in the case of a lost, destroyed,
or stolen certificate for which a replacement certificate has not been issued
pursuant to Section 4 of this Article V, shall be made on surrender for
cancellation of the certificate for such shares. A certificate presented for
transfer must be duly endorsed and accompanied by proper guaranty of signature
and other appropriate assurances that the endorsement is effective. Transfer of
an uncertificated share shall be made on receipt by the corporation of an
instruction from the registered owner or other appropriate person. The
instruction shall be in writing or a communication in such form as may be agreed
upon in writing by the corporation.
SECTION 3. RECORD DATES. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders, or
stockholders entitled to receive payment of any dividend, or in order to make a
determination of stockholders for any other proper purpose, the Board of
Directors of the corporation may fix in advance a date as the record date for
any such determination of stockholders, such date in any case to be not more
than 60 days and for a meeting of stockholders, not less than 10 days, or in the
case of a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets, not less than 20 days before the date of such meeting,
except as otherwise required by statute. If no record date is fixed for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled
10
<PAGE>
to receive payment of a dividend, the date on which notice of the meeting is
mailed or the date on which the resolution of the Board of Directors declaring
such dividend is adopted, as the case may be, shall be the record date for such
determination of stockholders. A determination of stockholders shall apply to
any adjournment of the meeting.
SECTION 4. LOST CERTIFICATES. The Board of Directors may, in its
discretion upon review of the relevant evidence, direct that a new certificate
representing shares be issued in the place of any previously issued certificate
which is alleged to have been lost, stolen or destroyed, and the corporation may
require the owner of the lost, stolen or destroyed certificate, or his or her
legal representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of the certificate or the issuance of a new certificate.
ARTICLE VI
CHECKS, NOTES, ETC.
SECTION 1. CHECKS, NOTES, ETC. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President, any Vice President or the Treasurer and may also be
signed by such other officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. OFFICES. The registered office of the corporation shall be
located in the County of Cook, State of Illinois. The corporation may also have
offices at such other places both within and without the State of Illinois as
the Board of Directors may from time to time determine or the business of the
corporation may require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by the Board of Directors.
SECTION 3. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Illinois."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any other manner reproduced, provided that the affixing of the
corporate seal to an instrument shall not give the instrument additional force
or effect, or change the construction thereof, and the use of the corporate seal
is not mandatory.
SECTION 4. BOOKS. The Directors may keep the books of the corporation,
except such as are required by law to be kept within the state, outside the
State of Illinois, at such place or places as they may from time to time
determine.
SECTION 5. VOTING OF STOCK. Unless otherwise specifically authorized by
the Board of Directors, all stock owned by the Corporation, other than stock of
the Corporation, will be voted, in person or by proxy, by the President or any
Vice President of the Corporation on behalf of the Corporation.
11
<PAGE>
SECTION 6. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required
to be given under the provisions of these Bylaws or under the provisions of the
Articles of Incorporation or under the provisions of the Illinois Business
Corporation Act, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice. Attendance at any meeting
shall constitute waiver of notice thereof unless the person at the meeting
objects to the holding of the meeting because proper notice was not given.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. The vote of the holders of at least a majority
of the shares of stock of the Corporation, issued and outstanding and entitled
to vote, shall be necessary at any meeting of stockholders to amend or repeal
these Bylaws or to adopt new Bylaws. These Bylaws may also be amended or
repealed, or new By- Laws adopted, at any meeting of the Board of Directors by
the vote of at least a majority of the entire Board; provided that any Bylaws
adopted by the Board may be amended or repealed by the stockholders in the
manner set forth above.
Any proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be stated in the notice of the meeting of the Board of Directors or the
stockholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
12
<PAGE>
Exhibit 3.9
MAXIM [ILLEGIBLE] ZAZZARA
ATTORNEY AT LAW
8251 SECOND STREET
DOWNEY, CALIFORNIA 90241
TELEPHONE 861-9219
907071
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
DEC 29 1978
MARCH FONG EU, Secretary of State
Kathleen P. Gutierrez
Deputy
ARTICLES OF INCORPORATION
of
CERTIFIED FABRICATORS, INC.
The undersigned, desiring to form a corporation under the Laws of the
State of California, declares:
FIRST: The name of this corporation is:
CERTIFIED FABRICATORS, INC.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
THIRD: The name and address in this state of the corporation's initial
agent for service of process is:
Gary J. Buehler
2254 Clover Street
Tustin, California 92680
FOURTH: The corporation is authorized to issue 250 Shares of capital
stock, all of one class, to be designated 'common stock'.
FIFTH: All of the corporation's issued shares of all classes shall be held
of record by not more than eight (8) persons.
SIXTH: This corporation is a close corporation.
-1-
<PAGE>
MAXIM [ILLEGIBLE] ZAZZARA
ATTORNEY AT LAW
8251 SECOND STREET
DOWNEY, CALIFORNIA 90241
TELEPHONE 861-9219
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this 26 day of December, 1978.
/s/ Gary J. Buehler
----------------------------------------
Gary J. Buehler
I, Gary J. Buehler, hereby declare that I am the person who executed the
foregoing Articles of Incorporation of Certified Fabricators, Inc. and that said
Articles of Incorporation are my own act and deed.
Executed at Downey, California, this 26 day of December, 1978.
/s/ Gary J. Buehler
----------------------------------------
Gary J. Buehler
-2-
<PAGE>
[GRAPHIC OMITTED] State [GRAPHIC OMITTED]
of
California
OFFICE OF THE SECRETARY OF STATE
I, MARCH FONG EU, Secretary of State of the State of California, hereby
certify:
That the annexed transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that same is full, true and
correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
DEC 6 - 1979
-------------------------------
[SEAL] /s/ March Fong Eu
Secretary of State
================================================================================
<PAGE>
MAXIM [ILLEGIBLE] ZAZZARA
ATTORNEY AT LAW
8251 SECOND STREET
DOWNEY, CALIFORNIA 90241
TELEPHONE 861-9219
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
NOV 30 1979
MARCH FONG EU, Secretary of State
By JAMES E. HARRIS
Deputy
CERTIFICATE OF AMENDMENT
of
ARTICLES OF INCORPORATION
GARY J. BUEHLER AND JOE H. IVY, JR. certify that:
1. They are the President and Secretary, respectively, of CERTIFIED FABRICATORS,
INC., a California Corporation.
2. Article FOURTH of the Articles of Incorporation of this corporation is
amended to read as follows:
FOURTH: The corporation is authorized to issue 25,000 Shares
of capital stock, all of one class, to be designated 'common
stock'.
3. The foregoing amendment of Articles of Incorporation has been duly approved
by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly approved
by the required vote of shareholders in accordance with Section 902 of the
Corporations Code. The total number of shares outstanding of the corporation,
prior to
-1-
<PAGE>
MAXIM [ILLEGIBLE] ZAZZARA
ATTORNEY AT LAW
8251 SECOND STREET
DOWNEY, CALIFORNIA 90241
TELEPHONE 861-9219
this amendment, is 150 shares. The number of shares voting in favor of the
amendment is 150 shares, or 100% of the vote required.
/s/ Gary J. Buehler
----------------------------------------
Gary J. Buehler, President
/s/ Joe H. Ivy, Jr.
----------------------------------------
Joe H. Ivy, Jr.
The undersigned declare under penalty of perjury that the matters
set forth in the foregoing certificate are true of their own knowledge.
Executed at Fullerton, California on Nov. 26th, 1979.
/s/ Gary J. Buehler
----------------------------------------
Gary J. Buehler, President
/s/ Joe H. Ivy, Jr.
----------------------------------------
Joe H. Ivy, Jr.
-2-
<PAGE>
================================================================================
A448365
[GRAPHIC OMITTED] State
of
California
=================================== SECRETARY OF STATE'S OFFICE ================
CORPORATION DIVISION
I, TONY MILLER, Acting Secretary of State of the State of California,
hereby certify:
That the annexed transcript has been compared with the corporate record on
file in this office, of which it purports to be a copy, and that same is full,
true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
JUN 29 1994
------------------------------
[SEAL] /s/ Tony Miller
Acting Secretary of State
================================================================================
<PAGE>
A448365
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
JUN 20 1994
TONY MILLER, Acting Secretary of State
CERTIFICATE OF AMENDMENT
OF
ARTICLE OF INCORPORATION
OF
CERTIFIED FABRICATORS, INC.
ROBERT L. REAGAN and GARY J. BUEHLER certify that:
1. They are the Vice President and Secretary, respectively, of
CERTIFIED FABRICATORS, INC., a California corporation.
2. Articles Fifth and Sixth of the Articles of Incorporation of said
corporation shall be deleted in its entirety.
3. The foregoing amendment of the Articles of Incorporation has been
approved by all of the members of the Board of Directors.
4. The amendment has been duly approved by the required vote of the
shareholders in accordance with Section 902 of the California Corporations Code.
The corporation has only one class of shares. Each outstanding share is entitled
to one vote. The corporation has 9,305 shares outstanding and the total number
of shares entitled to vote with respect to the amendment was 9,305. The number
of shares voting in favor of the amendment exceeded the vote required, in that
the affirmative vote of a majority of the outstanding shares was required for
approval of the amendment and the amendment was approved by the affirmative vote
of 9,305 shares or 100 percent.
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Executed at Buena Park, California, on June 12, 1992.
/s/ Robert L. Reagan
----------------------------------------
Robert L. Reagan, Vice President
/s/ Gary J. Buehler
----------------------------------------
Gary J. Buehler, Secretary
<PAGE>
Exhibit 3.10
AMENDED AND RESTATED BYLAWS
OF
CERTIFIED FABRICATORS, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of
Certified Fabricators, Inc. (the "Corporation") shall be held either within or
without the State of California, at such place and on such date and time as the
Board of Directors may designate from time to time in the call of the meeting or
in a waiver of notice thereof, on such date as the Board of Directors shall fix
by resolution in each year beginning with the year 1999 for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special Meetings of the shareholders may be
called by the Board of Directors or by the President, and shall be called by the
President or by the Secretary upon the written request of the holders of record
of at least thirty-five percent (35%) of the shares of stock of the Corporation,
issued and outstanding and entitled to vote, at such times and at such place
either within or without the State of California as may be stated in the call or
in a waiver of notice thereof.
SECTION 3. NOTICE OF MEETINGS. Notice of the time, place and purpose of
every meeting of shareholders shall be delivered personally or mailed not less
than ten days (or, if mailed by third-class mail, not less than thirty days) nor
more than sixty days previous thereto to each shareholder of record entitled to
vote, at such shareholder's post office address appearing upon the records of
the Corporation or at such other address as shall be furnished in writing by him
or her to the Corporation for such purpose. Such further notice shall be given
as may be required by law or by these Bylaws. Any meeting may be held without
notice if all shareholders entitled to vote are present in person or by proxy,
or if notice is waived in writing, either before or after the meeting, by those
not present.
SECTION 4. QUORUM. The holders of record of at least a majority of the
shares of the stock of the Corporation, issued and outstanding and entitled to
vote, present in person or by proxy, shall, except as otherwise provided by law
or by these Bylaws, constitute a quorum at all meetings of the shareholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the shareholders shall be
presided over by the Chairman of the Board, if there be one, or if the Chairman
of the Board is not present by the President, or if the President is not
present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, shall act as Secretary of the meeting, if present.
1
<PAGE>
SECTION 6. VOTING. At each meeting of shareholders, except as otherwise
provided by statute or the Articles of Incorporation, every holder of record of
stock entitled to vote shall be entitled to one vote in person or by proxy for
each share of such stock standing in his or her name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast and, except as otherwise provided by statute, the Articles of
Incorporation, or these Bylaws, all other action shall be determined by a
majority of the votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the shareholder or by such shareholder's duly authorized
attorney.
At all elections of directors, the voting shall be by ballot or in such
other manner as may be determined by the shareholders present in person or by
proxy entitled to vote at such election. With respect to any other matter
presented to the shareholders for their consideration at a meeting, any
shareholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the shareholders entitled to vote at each such meeting,
arranged in alphabetical order, with the address of each, and the number of
shares registered in the name of each shareholder, shall be prepared by the
Secretary and shall be open to the examination of any shareholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any shareholder who is
present.
SECTION 7. INSPECTORS OF ELECTION. The Board of Directors in advance of any
meeting of shareholders may appoint one or more Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of the meeting may, and on the request of any
shareholder entitled to vote shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his or her ability. If appointed, Inspectors of Election shall take charge of
the polls and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be required by law.
SECTION 8. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if, prior to such action, a written consent or
consents thereto, setting forth such action, is signed by the holders of record
of shares of the stock of the Corporation, issued and outstanding and entitled
to vote thereon, having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
2
<PAGE>
ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. The Board of Directors
of the Corporation shall not be less than three persons nor more than five
persons. The number of directors may be changed by a resolution passed by a
majority of the whole Board or by a vote of the holders of record of at least a
majority of the shares of stock of the Corporation, issued and outstanding and
entitled to vote.
A majority of the members of the Board of Directors then holding office
(but not less than one-third of the total number of directors ) shall constitute
a quorum for the transaction of business, but if at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Directors shall hold office until the next annual election and until their
successors shall have been elected and shall have qualified, unless sooner
displaced.
Whenever any vacancy shall have occurred in the Board of Directors, by
reason of death, resignation, or otherwise, other than removal of a director
with or without cause by a vote of the shareholders, it shall be filled by a
majority of the remaining directors, though less than a quorum (except as
otherwise provided by law), or by the shareholders, and the person so chosen
shall hold office until the next annual election and until a successor is duly
elected and has been qualified.
Any one or more of the directors of the Corporation may be removed either
with or without cause at any time by a vote of the holders of record of at least
a majority of the shares of stock of the Corporation, issued and outstanding and
entitled to vote, and thereupon the term of the director or directors who shall
have been so removed shall forthwith terminate and there shall be a vacancy or
vacancies in the Board of Directors, to be filled by a vote of the shareholders
as provided in these Bylaws.
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall be
held at such place either within or without the State of California, as may from
time to time be fixed by resolution of the Board, or as may be specified in the
call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
shareholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present.
SECTION 3. COMMITTEES. The Board of Directors may, in its discretion, by
resolution passed by a majority of the whole Board, designate from among its
members one or more committees which shall consist of two or more directors. The
Board may designate one or more directors as
3
<PAGE>
alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of the committee. Such committees shall have
and may exercise such powers as shall be conferred or authorized by the
resolution appointing them. A majority of any such committee may determine its
action and fix the time and place of its meetings, unless the Board of Directors
shall otherwise provide. The Board shall have power at any time to change the
membership of any such committee, to fill vacancies in it, or to dissolve it.
SECTION 4. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting, if prior to such action a written consent or consents
thereto is signed by all members of the Board, or of such committee as the case
may be, and such written consent or consents is filed with the minutes of
proceedings of the Board or committee.
SECTION 5. COMPENSATION. The Board of Directors may determine, from time to
time, the amount of compensation which shall be paid to its members. The Board
of Directors shall also have power, in its discretion, to allow a fixed sum and
expenses for attendance at each regular or special meeting of the Board, or of
any committee of the Board. In addition, the Board of Directors shall also have
power, in its discretion, to provide for and pay to directors rendering services
to the Corporation not ordinarily rendered by directors, as such, special
compensation appropriate to the value of such services, as determined by the
Board from time to time.
SECTION 6. CONFERENCE TELEPHONE MEETINGS. One or more directors may
participate in a meeting of the Board of Directors, or of a committee of the
Board of Directors, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the Corporation, who shall
be chosen by the Board of Directors at its first meeting after each annual
meeting of shareholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
SECTION 2. TERMS OF OFFICE. Officers shall hold office until their
successors are chosen and qualified.
SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
shall take effect at the time specified
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therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. If the office of any officer or agent becomes vacant
by reason of death, resignation, retirement, disqualification, removal from
office or otherwise, the directors may choose a successor, who shall hold office
for the unexpired term in respect of which such vacancy occurred.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors,
if one be elected, shall preside at all meetings of the Board of Directors and
of the shareholders, and the Chairman shall have and perform such other duties
as from time to time may be assigned to the Chairman by the Board of Directors.
SECTION 7. PRESIDENT. The President shall be the chief executive officer of
the Corporation and, in the absence of the Chairman, shall preside at all
meetings of the Board of Directors, and of the shareholders. The President shall
exercise the powers and perform the duties usual to the chief executive officer
and, subject to the control of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation; the
President shall appoint and discharge employees and agents of the Corporation
(other than officers elected by the Board of Directors) and fix their
compensation; and the President shall see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall have the power
to execute bonds, mortgages and other contracts, agreements and instruments of
the Corporation, and shall do and perform such other duties as from time to time
may be assigned to the President by the Board of Directors.
SECTION 8. VICE PRESIDENTS. If chosen, the Vice Presidents, in the order of
their seniority, shall, in the absence or disability of the President, exercise
all of the powers and duties of the President. Such Vice Presidents shall have
the power to execute bonds, notes, mortgages and other contracts, agreements and
instruments of the Corporation, and shall do and perform such other duties
incident to the office of Vice President and as the Board of Directors, or the
President shall direct.
SECTION 9. SECRETARY. The Secretary shall attend all sessions of the Board
and all meetings of the shareholders and record all votes and the minutes of
proceedings in a book to be kept for that purpose. The Secretary shall give, or
cause to be given, notice of all meetings of the shareholders and of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
SECTION 10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the
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credit of the Corporation, in such depositories as may be designated by the
Board of Directors. The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the directors whenever they may require it, an account of all
his or her transactions as Treasurer and of the financial condition of the
Corporation.
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence or
disability of any officer of the Corporation, or for any other reason that the
Board may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director.
ARTICLE IV
INDEMNIFICATION
SECTION 1. ACTIONS BY OTHERS. The Corporation (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
director or an officer of the Corporation and (2) except as otherwise required
by Section 3 of this Article, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee,
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts actually and reasonably incurred by such person in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he or she is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee, agent of or participant in another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance
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of his or her duty to the Corporation unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses and then only to the extent that such court shall determine.
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a person who is or was a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 1 or Section 2 of this Article, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him or her in connection
therewith.
SECTION 4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1 or
Section 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections 1 and 2. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
shareholders.
SECTION 5. ADVANCE OF EXPENSES. Expenses incurred by any person who may
have a right of indemnification under this Article in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the specific case upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount unless
it shall ultimately be determined that he or she is entitled to be indemnified
by the Corporation pursuant to this Article.
SECTION 6. RIGHT OF INDEMNITY NOT EXCLUSIVE. The indemnification provided
by this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify him or her against such liability under the
provisions of this Article, Section 317(i) of the California General Corporation
Law or otherwise.
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SECTION 8. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity or
unenforceability of any provision of this Article shall not affect the validity
or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES. The interest of each shareholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time prescribe. The certificates of
stock shall be signed by the President or a Vice President and by the Secretary,
or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed
with the seal of the Corporation or a facsimile thereof, and countersigned and
registered in such manner, if any, as the Board of Directors may by resolution
prescribe. Where any such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or registered by a registrar other than
the Corporation or its employee, the signature of any such officer may be a
facsimile signature. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
Corporation.
SECTION 2. TRANSFER. The shares of stock of the Corporation shall be
transferred only upon the books of the Corporation by the holder thereof in
person or by his or her attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require.
SECTION 3. RECORD DATES. The Board of Directors may fix in advance a date,
not less than ten nor more than sixty days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
distribution or allotment of any fights, or the date when any change, conversion
or exchange of capital stock shall go into effect, as a record date for the
determination of the shareholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend, or to receive
any distribution or allotment of such fights, or to exercise the fights in
respect of any such change, conversion or exchange of capital stock, and in such
case only such shareholders as shall be shareholders of record on the date so
fixed shall be entitled to such notice of, and to vote at, such meeting, or to
receive payment of such dividend, or to receive such distribution or allotment
or fights or to exercise such fights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
SECTION 4. LOST CERTIFICATES. In the event that any certificate of stock is
lost, stolen, destroyed or mutilated, the Board of Directors may authorize the
issuance of a new certificate of
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the same tenor and for the same number of shares in lieu thereof. The Board may
in its discretion, before the issuance of such new certificate, require the
owner of the lost, stolen, destroyed or mutilated certificate, or the legal
representative of the owner to make an affidavit or affirmation setting forth
such facts as to the loss, destruction or mutilation as it deems necessary, and
to give the Corporation a bond in such reasonable sum as it directs to indemnify
the Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
SECTION 1. CHECKS, NOTES, ETC. All checks and drafts on the Corporation's
bank accounts and all bills of exchange and promissory notes, and all
acceptances, obligations and other instruments for the payment of money, may be
signed by the President, any Vice President or the Treasurer and may also be
signed by such other officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. OFFICES. The registered office of the Corporation shall be
located at CT Corporation System, 818 West Seventh Street, Los Angeles, in the
State of California and said corporation shall be the registered agent of this
Corporation in charge thereof. The Corporation may have other offices either
within or without the State of California at such places as shall be determined
from time to time by the Board of Directors or the business of the Corporation
may require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
SECTION 3. CORPORATE SEAL. The seal of the Corporation shall be circular in
form and contain the name of the Corporation, and the year and state of its
incorporation. Such seal may be altered from time to time at the discretion of
the Board of Directors.
SECTION 4. BOOKS. There shall be kept at such office of the Corporation as
the Board of Directors shall determine, within or without the State of
California, correct books and records of account of all its business and
transactions, minutes of the proceedings of its shareholders, Board of Directors
and committees, and the stock book, containing the names and addresses of the
shareholders, the number of shares held by them, respectively, and the dates
when they respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and records as the
Board of Directors may from time to time determine.
SECTION 5. VOTING OF STOCK. Unless otherwise specifically authorized by the
Board of Directors, all stock owned by the Corporation, other than stock of the
Corporation, shall be voted,
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in person or by proxy, by the President or any Vice President of the
Corporation on behalf of the Corporation.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. The vote of the holders of at least a majority of
the shares of stock of the Corporation, issued and outstanding and entitled to
vote, shall be necessary at any meeting of shareholders to amend or repeal these
Bylaws or to adopt new Bylaws. These Bylaws may also be amended or repealed, or
new Bylaws adopted, at any meeting of the Board of Directors by the vote of at
least a majority of the entire Board; provided that any Bylaws adopted by the
Board may be amended or repealed by the shareholders in the manner set forth
above.
Any proposal to amend or repeal these Bylaws or to adopt new Bylaws shall
be stated in the notice of the meeting of the Board of Directors or the
shareholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
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Exhibit 3.11
RESTATED CERTIFICATE OF INCORPORATION
OF
GILLETTE MACHINE & TOOL CO., INC.
UNDER
SECTION 807 OF THE BUSINESS CORPORATION LAW
The undersigned, being the President and the Secretary of Gillette
Machine & Tool Co., Inc. (the "Corporation"), pursuant to Section 807 of the
Business Corporation Law of the State of New York, do hereby restate, certify
and set forth:
(1) The name of the corporation is Gillette Machine & Tool Co., Inc.
(2) The certificate of incorporation of the Corporation was filed by
the Department of State on February 3, 1955, as amended by certificates of
amendment filed on each of January 22, 1982, August 22, 1988 and April 2, 1990
(as amended, the "Certificate of Incorporation").
(3) The Certificate of Incorporation is hereby further amended to
effect the following amendments authorized by the Business Corporation Law:
(a) Paragraph SECOND of the Certificate of Incorporation,
which sets forth the purposes of the Corporation, is deleted in its
entirety and replaced with the following:
The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be
organized under the Business Corporation Law of the
State of New York as from time to time amended. The
Corporation is not formed to engage in any act or
activity requiring the consent or approval of any
state official, department, board, agency or other
body without such consent or approval first being
obtained.
(b) Paragraph THIRD of the Certificate of Incorporation, which
sets forth the amount of capital of the Corporation, is deleted in its
entirety.
(c)(i) Paragraph FOURTH of the Certificate of Incorporation,
which sets forth the aggregate number of shares which the Corporation
shall have authority to issue, is deleted in its entirety and replaced
with the following:
(1) The aggregate number of shares which the
Corporation shall have authority to issue is 1000
shares of common stock, par value $.01 per share
("Common Stock"). Upon filing of the Restated
Certificate of Incorporation by the Department of
State of the State of New York, each share of Class A
Voting Common
<PAGE>
Stock, par value $2.00 per share, of the Corporation
then issued and outstanding and each share of Class B
Non-Voting Common Stock, par value $2.00 per share,
of the Corporation then issued and outstanding, will
be changed into 1/37.5 shares of Common Stock, par
value $.01 per share, of the Corporation.
(2) The holders of Common Stock will vote as one
class on all actions for which shareholder approval
is required by law, this Certificate of Incorporation
or the By-laws of the Corporation, and each share of
Common Stock will have one vote.
(ii)(A) The capital structure of the Corporation prior to the
filing of the Restated Certificate of Incorporation by the Department
of State is as follows: (1) 5,000 authorized shares, par value $2.00
per share, of Class A Voting Common Stock, of which 375 shares are
issued and outstanding and 4,625 shares are unissued, and (2) 45,000
authorized shares, par value $2.00 per share, of Class B Non-Voting
Common Stock, of which 3,375 shares are issued and outstanding and
41,625 shares are unissued.
(B) The terms of the changes to be effected by the Restated
Certificate of Incorporation are as follows: (1) the elimination of the
division between Class A Voting Common Stock and Class B Non-Voting
Common Stock, which shall result in 50,000 authorized shares of Common
Stock; (2) the execution of a reverse share-split whereby each share of
Common Stock then issued and outstanding shall be changed into 1/37.5
shares of Common Stock, which shall result in an aggregate of 100
shares of Common Stock then issued and outstanding; (3) the reduction
of the aggregate number of authorized shares of Common Stock from
50,000 shares to 1,000 shares; and (4) the reduction of the par value
per share of Common Stock from $2.00 par value per share to $.01 par
value per share.
(C) Upon the filing of the Restated Certificate of
Incorporation by the Department of State, the Corporation shall have an
aggregate of 1,000 authorized shares, par value $.01 per share, of
Common Stock of the Corporation, of which 100 shares are issued and
outstanding and 900 shares are unissued.
(d) Paragraph SIXTH of the Certificate of Incorporation, which
sets forth a designation of the Secretary of State of the State of New
York as agent of the Corporation upon whom process against it may be
served and the post office address to which the Secretary of State
shall mail a copy of any process against the Corporation served upon
him or her as agent of the Corporation, is deleted in its entirety and
replaced with the following:
The Secretary of State of the State of New York is
designated as agent of the Corporation upon whom
process against it may be served. The Secretary of
State will mail notice of such process against the
Corporation to CT Corporation System, 111 Eighth
Avenue, New York, New York 10011.
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(e) Paragraph SEVENTH of the Certificate of Incorporation,
which sets forth the duration of the Corporation, is deleted in its
entirety.
(f) Paragraph EIGHTH of the Certificate of Incorporation,
which sets forth the number of directors of the Corporation, is deleted
in its entirety.
(g) Paragraph NINTH of the Certificate of Incorporation, which
sets forth the names and addresses of the initial directors of the
Corporation, is deleted in its entirety.
(h) Paragraph TENTH of the Certificate of Incorporation, which
sets forth the names and addresses of the initial subscribers of the
Corporation, is deleted in its entirety.
(i) Paragraph ELEVENTH of the Certificate of Incorporation,
which sets forth the age and residency of the initial subscribers of
the Corporation and the residency of the initial directors of the
Corporation, is deleted in its entirety.
(j) Paragraph TWELFTH of the Certificate of Incorporation,
which sets forth the quorum and voting requirements for meetings of
Shareholders of the Corporation, is deleted in its entirety.
(k) Paragraph THIRTEENTH of the Certificate of Incorporation,
which sets forth the quorum and voting requirements for meetings of the
Board of Directors of the Corporation, is deleted in its entirety.
(l) The Certificate of Incorporation is supplemented to add
the following as Paragraph SIXTH of the Certificate of Incorporation,
which sets forth the authorization for indemnification by the
Corporation:
The Corporation shall be authorized, to the fullest
extent permitted by Article 7 of the Business
Corporation Law of the State of New York, as the same
may be amended and supplemented, to indemnify any and
all persons whom it shall have power to indemnify
under said Article from and against any and all of
the expenses, liabilities, or other matters referred
to in or covered by said Article and, pursuant to
Section 726 of such Article 7, the Corporation shall
be authorized to purchase and maintain insurance to
so indemnify such persons. The indemnification
provided for herein shall not be deemed exclusive of
any other rights to which any officer or director may
be entitled under any By-Law, resolution of
shareholders, resolution of directors, agreement, or
otherwise, as permitted by said Article, as to action
in any capacity in which he or she served at the
request of the Corporation.
(m) The Certificate of Incorporation is supplemented to add
the following as Paragraph SEVENTH of the Certificate of Incorporation,
which eliminates the personal liability of the Directors of the
Corporation:
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The personal liability of the Directors of the
Corporation is hereby eliminated to the fullest
extent permitted by the provisions of Section 402 of
the Business Corporation Law, as the same may be
amended and supplemented.
(n) The Certificate of Incorporation is supplemented to add
the following as Paragraph EIGHTH of the Certificate of Incorporation,
which sets forth the procedures for amending the By-laws of the
Corporation:
In furtherance and not in limitation of the rights,
powers, privileges and discretionary authority
granted or conferred by the Business Corporation Law
of the State of New York as from time to time
amended, the Board of Directors of the Corporation is
expressly authorized to make, alter, amend or repeal
the By-laws of the Corporation, without any action on
the part of the shareholders of the Corporation, but
the shareholders may make additional Bylaws and may
alter, amend or repeal any By-law whether adopted by
them or otherwise. The Corporation may in its By-laws
confer powers upon its Board of Directors in addition
to the foregoing and in addition to the powers and
authority expressly conferred upon the Board of
Directors by applicable law.
(4) The text of the Certificate of Incorporation is hereby restated as
amended to read as herein set forth in full:
FIRST: The name of the corporation is Gillette Machine & Tool Co., Inc.
(the "Corporation").
SECOND: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Business
Corporation Law of the State of New York as from time to time amended. The
Corporation is not formed to engage in any act or activity requiring the consent
or approval of any state official, department, board, agency or other body
without such consent or approval first being obtained.
THIRD: (1) The aggregate number of shares which the Corporation
shall have authority to issue is 1000 shares of common stock, par value $.01
per share ("Common Stock").
(2) The holders of Common Stock will vote as one class on all
actions for which shareholder approval is required by law, this Certificate
of Incorporation or the Bylaws of the Corporation, and each share of Common
Stock will have one vote.
FOURTH: The office of the Corporation is located in the County of
Monroe, State of New York.
FIFTH: The Secretary of State of the State of New York is designated as
agent of the Corporation upon whom process against it may be served. The
Secretary of State will mail notice of such process against the Corporation to
CT Corporation System, 111 Eighth Avenue, New York, New York 10011.
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SIXTH: The Corporation shall be authorized, to the fullest extent
permitted by Article 7 of the Business Corporation Law of the State of New York,
as the same may be amended and supplemented, to indemnify any and all persons
whom it shall have power to indemnify under said Article from and against any
and all of the expenses, liabilities, or other matters referred to in or covered
by said Article and, pursuant to Section 726 of such Article 7, the Corporation
shall be authorized to purchase and maintain insurance to so indemnify such
persons. The indemnification provided for herein shall not be deemed exclusive
of any other rights to which any officer or director may be entitled under any
By-Law, resolution of shareholders, resolution of directors, agreement, or
otherwise, as permitted by said Article, as to action in any capacity in which
he or she served at the request of the Corporation.
SEVENTH: The personal liability of the Directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of Section
402 of the Business Corporation Law, as the same may be amended and
supplemented.
EIGHTH: In furtherance and not in limitation of the rights, powers,
privileges and discretionary authority granted or conferred by the Business
Corporation Law of the State of New York as from time to time amended, the Board
of Directors of the Corporation is expressly authorized to make, alter, amend or
repeal the By-laws of the Corporation, without any action on the part of the
shareholders of the Corporation, but the shareholders may make additional Bylaws
and may alter, amend or repeal any By-law whether adopted by them or otherwise.
The Corporation may in its By-laws confer powers upon its Board of Directors in
addition to the foregoing and in addition to the powers and authority expressly
conferred upon the Board of Directors by applicable law.
(5) This amendment to and restatement of the Certificate of
Incorporation was authorized, pursuant to Sections 803(a), 708(b) and 615(a) of
the Business Corporation Law, by unanimous written consent of the Board of
Directors setting forth the action so taken signed by all the Directors,
followed by unanimous written consent setting forth the action so taken signed
by the holders of all outstanding shares entitled to vote thereon.
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IN WITNESS WHEREOF, the undersigned have executed, and subscribed this
certificate and do affirm the foregoing as true under penalty of perjury this
29TH day of October, 1999.
/s/ Darren J. Gillette
-------------------------------------
Darren J. Gillette
President
/s/ Ronald M. Miller
-------------------------------------
Ronald M. Miller
Vice President, Treasurer and Secretary
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Exhibit 3.12
BY-LAWS
OF
GILLETTE MACHINE & TOOL CO., INC.
ARTICLE I
SHAREHOLDERS
SECTION . ANNUAL MEETING. The annual meeting of the shareholders of
Gillette Machine & Tool Co., Inc. (the "Corporation") shall be held either
within or without the State of New York, at such place and on such date and time
as the Board of Directors may designate from time to time in the call of the
meeting or in a waiver of notice thereof, on such date as the Board of Directors
shall fix by resolution in each year beginning with the year 1999 for the
purpose of electing directors and for the transaction of such other business as
may properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special Meetings of the shareholders may be
called by the Board of Directors or by the President, and shall be called by the
President or by the Secretary upon the written request of the holders of record
of at least thirty-five percent (35%) of the shares of stock of the Corporation,
issued and outstanding and entitled to vote, at such times and at such place
either within or without the State of New York as may be stated in the call or
in a waiver of notice thereof.
SECTION 3. NOTICE OF MEETINGS. Notice of the time, place and purpose of
every meeting of shareholders shall be delivered personally or mailed not less
than ten days nor more than sixty days previous thereto to each shareholder of
record entitled to vote, at such shareholder's post office address appearing
upon the records of the Corporation or at such other address as shall be
furnished in writing by him or her to the Corporation for such purpose. Such
further notice shall be given as may be required by law or by these By-laws. Any
meeting may be held without notice if all shareholders entitled to vote are
present in person or by proxy, or if notice is waived in writing, either before
or after the meeting, by those not present.
SECTION 4. QUORUM. The holders of record of at least a majority of the
shares of the stock of the Corporation, issued and outstanding and entitled to
vote, present in person or by proxy, shall, except as otherwise provided by law
or by these By-laws, constitute a quorum at all meetings of the shareholders; if
there be no such quorum, the holders of a majority of such shares so present or
represented may adjourn the meeting from time to time until a quorum shall have
been obtained.
SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the shareholders shall be
presided over by the Chairman of the Board, if there be one, or if the Chairman
of the Board is not present by the President, or if the President is not
present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, shall act as Secretary of the meeting, if present.
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SECTION 6. VOTING. At each meeting of shareholders, except as otherwise
provided by statute or the Certificate of Incorporation, every holder of record
of stock entitled to vote shall be entitled to one vote in person or by proxy
for each share of such stock standing in his or her name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast and, except as otherwise provided by statute, the Certificate of
Incorporation, or these By-laws, all other action shall be determined by a
majority of the votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the shareholder or by such shareholder's duly authorized
attorney.
At all elections of directors, the voting shall be by ballot or in such
other manner as may be determined by the shareholders present in person or by
proxy entitled to vote at such election. With respect to any other matter
presented to the shareholders for their consideration at a meeting, any
shareholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the shareholders entitled to vote at each such meeting,
arranged in alphabetical order, with the address of each, and the number of
shares registered in the name of each shareholder, shall be prepared by the
Secretary and shall be open to the examination of any shareholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any shareholder who is
present.
SECTION 7. INSPECTORS OF ELECTION. The Board of Directors in advance of any
meeting of shareholders may appoint one or more Inspectors of Election to act at
the meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of the meeting may, and on the request of any
shareholder entitled to vote shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his or her ability. If appointed, Inspectors of Election shall take charge of
the polls and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be required by law.
SECTION 8. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if, prior to such action, a written consent or
consents thereto, setting forth such action, is signed by the holders of record
of shares of the stock of the Corporation, issued and outstanding and entitled
to vote thereon, having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
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ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. The Board of Directors
of the Corporation shall consist of at least one person. The number of directors
may be changed by a resolution passed by a majority of the whole Board or by a
vote of the holders of record of at least a majority of the shares of stock of
the Corporation, issued and outstanding and entitled to vote.
A majority of the members of the Board of Directors then holding office
(but not less than one-third of the total number of directors ) shall constitute
a quorum for the transaction of business, but if at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting from time to time until a quorum shall have been obtained.
Directors shall hold office until the next annual election and until their
successors shall have been elected and shall have qualified, unless sooner
displaced.
Whenever any vacancy shall have occurred in the Board of Directors, by
reason of death, resignation, or otherwise, other than removal of a director
with or without cause by a vote of the shareholders, it shall be filled by a
majority of the remaining directors, though less than a quorum (except as
otherwise provided by law), or by the shareholders, and the person so chosen
shall hold office until the next annual election and until a successor is duly
elected and has qualified.
Any one or more of the directors of the Corporation may be removed either
with or without cause at any time by a vote of the holders of record of at least
a majority of the shares of stock of the Corporation, issued and outstanding and
entitled to vote, and thereupon the term of the director or directors who shall
have been so removed shall forthwith terminate and there shall be a vacancy or
vacancies in the Board of Directors, to be filled by a vote of the shareholders
as provided in these By-laws.
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall be
held at such place either within or without the State of New York, as may from
time to time be fixed by resolution of the Board, or as may be specified in the
call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duly served on or sent or
mailed to each director not less than two days before such meeting. A meeting of
the Board may be held without notice immediately after the annual meeting of
shareholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board of Directors,
if one be elected, shall preside at all meetings of the Board of Directors and
of the shareholders, and the Chairman shall have and perform such other duties
as from time to time may be assigned to the Chairman by the Board of Directors.
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SECTION 4. COMMITTEES. The Board of Directors may, in its discretion, by
resolution passed by a majority of the whole Board, designate from among its
members one or more committees which shall consist of two or more directors. The
Board may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committees shall have and may exercise such powers as shall
be conferred or authorized by the resolution appointing them. A majority of any
such committee may determine its action and fix the time and place of its
meetings, unless the Board of Directors shall otherwise provide. The Board shall
have power at any time to change the membership of any such committee, to fill
vacancies in it, or to dissolve it.
SECTION 5. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting, if prior to such action a written consent or consents
thereto is signed by all members of the Board, or of such committee as the case
may be, and such written consent or consents is filed with the minutes of
proceedings of the Board or committee.
SECTION 6. COMPENSATION. The Board of Directors may determine, from time to
time, the amount of compensation which shall be paid to its members. The Board
of Directors shall also have power, in its discretion, to allow a fixed sum and
expenses for attendance at each regular or special meeting of the Board, or of
any committee of the Board. In addition, the Board of Directors shall also have
power, in its discretion, to provide for and pay to directors rendering services
to the Corporation not ordinarily rendered by directors, as such, special
compensation appropriate to the value of such services, as determined by the
Board from time to time.
SECTION 7. CONFERENCE TELEPHONE MEETINGS. One or more directors may
participate in a meeting of the Board of Directors, or of a committee of the
Board of Directors, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the Corporation, who shall
be chosen by the Board of Directors at its first meeting after each annual
meeting of shareholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
SECTION 2. TERMS OF OFFICE. Officers shall hold office until their
successors are chosen and qualify.
SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
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SECTION 4. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the Secretary. Such resignation
shall take effect at the time specified therein, and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 5. VACANCIES. If the office of any officer or agent becomes vacant
by reason of death, resignation, retirement, disqualification, removal from
office or otherwise, the directors may choose a successor, who shall hold office
for the unexpired term, as applicable, in respect of which such vacancy
occurred.
SECTION 7. PRESIDENT. The President shall be the chief executive officer of
the Corporation and, in the absence of the Chairman, shall preside at all
meetings of the Board of Directors, and of the shareholders. The President shall
exercise the powers and perform the duties usual to the chief executive officer
and, subject to the control of the Board of Directors, shall have general
management and control of the affairs and business of the Corporation; the
President shall appoint and discharge employees and agents of the Corporation
(other than officers elected by the Board of Directors) and fix their
compensation; and the President shall see that all orders and resolutions of the
Board of Directors are carried into effect. The President shall have the power
to execute bonds, mortgages and other contracts, agreements and instruments of
the Corporation, and shall do and perform such other duties as from time to time
may be assigned to the President by the Board of Directors.
SECTION 8. VICE PRESIDENTS. If chosen, the Vice Presidents, in the order of
their seniority, shall, in the absence or disability of the President, exercise
all of the powers and duties of the President. Such Vice Presidents shall have
the power to execute bonds, notes, mortgages and other contracts, agreements and
instruments of the Corporation, and shall do and perform such other duties
incident to the office of Vice President and as the Board of Directors, or the
President shall direct.
SECTION 9. SECRETARY. The Secretary shall attend all sessions of the Board
and all meetings of the shareholders and record all votes and the minutes of
proceedings in a book to be kept for that purpose. The Secretary shall give, or
cause to be given, notice of all meetings of the shareholders and of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors. The Secretary, or in absence of the Secretary an Assistant
Secretary or the Treasurer or an Assistant Treasurer, shall have the
authorization to affix the corporate seal to any instrument requiring it. The
Secretary shall have and be the custodian of the stock records and all other
books, records and papers of the Corporation (other than financial) and shall
see that all books, reports, statements, certificates and other documents and
records required by law are properly kept and filed.
SECTION 10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board, taking proper
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vouchers for such disbursements, and shall render to the directors whenever they
may require it, an account of all his or her transactions as Treasurer and of
the financial condition of the Corporation.
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the absence or
disability of any officer of the Corporation, or for any other reason that the
Board may deem sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other officer, or to
any director.
ARTICLE IV
INDEMNIFICATION
SECTION 1. ACTIONS BY OTHERS. The Corporation (1) shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that the person is or was a
director or an officer of the Corporation and (2) except as otherwise required
by Section 3 of this Article, may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that the person is or was an employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that the person's
conduct was unlawful.
SECTION 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
the person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise against amounts paid in settlement and expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the Corporation, except that no indemnification shall be made
in respect of (1) a threatened action, or a pending action which is settled or
otherwise disposed of, or (2) any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the
extent that the court in which such action or suit was brought, or if no action
or suit was brought,
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any court of competent jurisdiction, shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which such court shall deem proper.
SECTION 3. SUCCESSFUL DEFENSE. To the extent that a present or former
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 1 or Section 2 of this Article, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
therewith.
SECTION 4. SPECIFIC AUTHORIZATION. Any indemnification under Section 1 or
Section 2 of this Article (unless ordered by a court), shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee or agent is
proper in the circumstances because such person has met the applicable standard
of conduct set forth in said Sections 1 and 2. Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders.
SECTION 5. ADVANCE OF EXPENSES. Expenses (including attorney's fees)
incurred by a present or former director, officer, employee, or agent in
defending any civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it shall be ultimately determined that such person is not
to be indemnified by the Corporation as authorized in this Article. Any advance
of expenses pursuant to this Section shall be made by the Corporation only as
authorized in the specific case by the Board of Directors by a majority vote of
a quorum of directors.
SECTION 6. RIGHT OF INDEMNITY NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other sections
of this Article shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors or otherwise,
both as to action in such person's official capacity and as to action in another
capacity while holding such office.
SECTION 7. INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article, the Business General Corporation Law of the State of New York or
otherwise.
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SECTION 8. CONTINUATION OF INDEMNITY. The indemnification and advancement
of expenses provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
SECTION 9. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity or
unenforceability of any provision of this Article shall not affect the validity
or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES. The interest of each shareholder of the
Corporation shall be evidenced by certificates for shares of stock in such form
as the Board of Directors may from time to time prescribe. The certificates of
stock shall be signed by the President or a Vice President and by the Secretary,
or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed
with the seal of the Corporation or a facsimile thereof, and countersigned and
registered in such manner, if any, as the Board of Directors may by resolution
prescribe. Where any such certificate is countersigned by a transfer agent other
than the Corporation or its employee, or registered by a registrar other than
the Corporation or its employee, the signature of any such officer may be a
facsimile signature. In case any officer or officers who shall have signed, or
whose facsimile signature or signatures shall have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates shall have been delivered by the Corporation, such
certificate or certificates may nevertheless be adopted by the Corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
have been used thereon had not ceased to be such officer or officers of the
Corporation.
SECTION 2. TRANSFER. The shares of stock of the Corporation shall be
transferred only upon the books of the Corporation by the holder thereof in
person or by his or her attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require.
SECTION 3. RECORD DATES. The Board of Directors may fix in advance a date,
not less than ten nor more than sixty days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
distribution or allotment of any rights, or the date when any change, conversion
or exchange of capital stock shall go into effect, as a record date for the
determination of the shareholders entitled to notice of, and to vote at, any
such meeting, or entitled to receive payment of any such dividend, or to receive
any distribution or allotment of such rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, and in such
case only such shareholders as shall be shareholders of record on the date so
fixed shall be
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entitled to such notice of, and to vote at, such meeting, or to receive payment
of such dividend, or to receive such distribution or allotment or rights or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
SECTION 4. LOST CERTIFICATES. In the event that any certificate of stock is
lost, stolen, destroyed or mutilated, the Board of Directors may authorize the
issuance of a new certificate of the same tenor and for the same number of
shares in lieu thereof. The Board may in its discretion, before the issuance of
such new certificate, require the owner of the lost, stolen, destroyed or
mutilated certificate, or the legal representative of the owner to make an
affidavit or affirmation setting forth such facts as to the loss, destruction or
mutilation as it deems necessary, and to give the Corporation a bond in such
reasonable sum as it directs to indemnify the Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
SECTION 1. CHECKS, NOTES, ETC. All checks and drafts on the Corporation's
bank accounts and all bills of exchange and promissory notes, and all
acceptances, obligations and other instruments for the payment of money, may be
signed by the President, any Vice President or the Treasurer and may also be
signed by such other officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. OFFICES. The office of the Corporation shall be in the County of
Monroe, State of New York. The Corporation may have other offices either within
or without the State of New York at such places as shall be determined from time
to time by the Board of Directors as the business of the Corporation may
require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
SECTION 3. CORPORATE SEAL. The seal of the Corporation shall be circular in
form and contain the name of the Corporation, and the year and state of its
incorporation. Such seal may be altered from time to time at the discretion of
the Board of Directors.
SECTION 4. BOOKS. There shall be kept at such office of the Corporation as
the Board of Directors shall determine, within or without the State of New York,
correct books and records of account of all its business and transactions,
minutes of the proceedings of its shareholders, Board of Directors and
committees, and the stock book, containing the names and addresses of the
shareholders, the number of shares held by them, respectively, and the dates
when they respectively
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became the owners of record thereof, and in which the transfer of stock shall be
registered, and such other books and records as the Board of Directors may from
time to time determine.
SECTION 5. VOTING OF STOCK. Unless otherwise specifically authorized by the
Board of Directors, all stock owned by the Corporation, other than stock of the
Corporation, shall be voted, in person or by proxy, by the President or any Vice
President of the Corporation on behalf of the Corporation.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. The vote of the holders of at least a majority of
the shares of stock of the Corporation, issued and outstanding and entitled to
vote, shall be necessary at any meeting of shareholders to amend or repeal these
By-laws or to adopt new By-laws. These Bylaws may also be amended or repealed,
or new By-laws adopted, at any meeting of the Board of Directors by the vote of
at least a majority of the entire Board; provided that any By-laws adopted by
the Board may be amended or repealed by the shareholders in the manner set forth
above.
Any proposal to amend or repeal these By-laws or to adopt new By-laws shall
be stated in the notice of the meeting of the Board of Directors or the
shareholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
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Exhibit 3.13
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MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
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(FOR BUREAU USE ONLY) FILED Date Received
JAN 25 1985 JAN 25 1985
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Administrator
MICHIGAN DEPT. OF COMMERCE -------------
EFFECTIVE DATE: Corporation & Securities Bureau
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CORPORATION IDENTIFICATION NUMBER | 1 | 0 | 3 | - | 1 | 5 | 8 |
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ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read instructions on last page before completing form)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
Article I
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The name of the corporation is:
GALAXY INDUSTRIES CORPORATION
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Article II
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The purpose or purposes for which the corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the Business Corporation Act of Michigan.
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Article III
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The total authorized capital stock is:
1. Common Shares 5,000 Par Value Per Share $10.00
Preferred Shares None Par Value Per Share $-----
and/or shares without par value as follows:
2. Common Shares None Stated Value Per Share $-----
Preferred Shares None Stated Value Per Share $-----
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
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<PAGE>
Article IV
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1. The address of the registered office is:
41150 Joy Road Plymouth Michigan 48170
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(Street Address) (City) (Zip Code)
2. The mailing address of the registered office if different than above:
41150 Joy Road Plymouth Michigan 48170
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(P.O. Box) (City) (Zip Code)
3. The name of the resident agent at the registered office is ROBERT H.
LEIDAL
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Article V
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The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
ROBERT H. LEIDAL 41150 Joy Road, Plymouth, MI 48170
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Article VI (Optional. Delete if not applicable)
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When a compromise or arrangement or a plan of reorganization of this corporation
is proposed between this corporation and its creditors or any class of them or
between this corporation and its shareholders or any class of them, a court of
equity jurisdiction within the state, on application of this corporation or of a
creditor or shareholder thereof, or on application of a receiver appointed for
the corporation, may order a meeting of the creditors or class of creditors or
of the shareholders or class of shareholders to be affected by the proposed
compromise or arrangement or reorganization, to be summoned in such manner as
the court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, or of the shareholders or class of shareholders
to be affected by the proposed compromise or arrangement or a reorganization,
agree to a compromise or arrangement or a reorganization of this corporation as
a consequence of the compromise or arrangement the compromise or arrangement and
the reorganization, if sanctioned by the court to which the application has been
made, shall be binding on all the creditors or class of creditors, or on all the
shareholders or class of shareholders and also on this corporation.
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Article VII (Optional, Delete if not applicable)
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Any action required or permitted by the Act to be taken at an annual or special
meeting of shareholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take the action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
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Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
I ( ), the incorporator(s) sign my ( ) name( )
this 18th day of January, 1985.
/s/ Robert H. Leidal
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Robert H. Leidal
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DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS INDICATED
IN THE BOX BELOW. Include name, street and number (or
P.O. box), city, state and ZIP code.
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Charles G. [ILLEGIBLE], Esq. Telephone:
32900 Five Mile Rd. Area Code 313
Livonia, MI 48154 --------------
Number 647-5990
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INFORMATION AND INSTRUCTIONS
1. Submit one original copy of this document. Upon filing, a microfilm copy
will be prepared for the records of the Corporation and Securities Bureau.
The original copy will then be returned to the address appearing in the
box above as evidence of filing.
Since this document must be microfilmed, it is important that the filing
be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
2. This document is to be used pursuant to the provisions of Act 284, P.A. of
1972, by one or more persons for the purpose of forming a domestic profit
corporation.
3. Article I -- The corporate name of a domestic profit corporation is
required to contain one of the following words or abbreviations:
"Corporation", "Company", "Incorporated", "Limited", "Corp.", "Co.",
"Inc.", or "Ltd."
4. Article II -- State, in general terms, the character of the particular
business to be carried on. Under section 202(b) of the Act, it is
sufficient to state substantially, alone or without specifically
enumerated purposes, that the corporation may engage in any activity
within the purposes for which corporations may be organized under the Act.
The Act requires, however, that educational corporations state their
specific purposes.
5. Article III (2) -- The Act requires the incorporators of a domestic
corporation having shares without par value to submit in writing the
amount of consideration proposed to be received for each share which shall
be allocated to stated capital. Such stated value may be indicated either
in item 2 of article III or in a written statement accompanying the
articles of incorporation.
6. Article IV -- A post office boy may not be designated as the address of
the registered office. The mailing address may differ from the address of
the registered office only if a post office box address in the same city
as the registered office is designated as the mailing address.
7. Article V -- The Act requires one or more incorporators. The address(es)
should include a street number and name (or other designation), city and
state.
8. The duration of the corporation should be stated in the articles only if
the duration is not perpetual.
9. This document is effective on the date approved and filed by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated as an additional article.
10. The articles must be signed in ink by each incorporator. The names of the
incorporators as set out in article V should correspond with the
signatures.
11. FEES: Filing fee ............................................... $10.00
Franchise fee -- 1/2 mill (.0005) on each dollar
of authorized capital stock, with a minimum
franchise fee of ............................................... $25.00
Total minimum fees (Make remittance payable to State of Michigan) $35.00
12. Mail form and fee to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Box 30054
Lansing, MI 48909
Telephone: (517) 373-0493
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Exhibit 3.14
AMENDED AND RESTATED BYLAWS
OF
GALAXY INDUSTRIES CORPORATION
ARTICLE I
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the stockholders of
Galaxy Industries Corporation (the "Corporation") shall be held either within or
without the State of Michigan, at such place and on such date and time as the
Board of Directors may designate from time to time in the call of the meeting or
in a waiver of notice thereof, on such date as the Board of Directors shall fix
by resolution in each year beginning with the year 1999 for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special Meetings of the stockholders may
be called by the Board of Directors or by the President, and shall be called by
the President or by the Secretary upon the written request of the holders of
record of at least thirty-five percent (35%) of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, at such times and at
such place either within or without the State of Michigan as may be stated in
the call or in a waiver of notice thereof.
SECTION 3. NOTICE OF MEETINGS. Notice of the time, place and purpose of
every meeting of stockholders shall be delivered personally or mailed not less
than ten days nor more than sixty days previous thereto to each stockholder of
record entitled to vote, at such stockholder's post office address appearing
upon the records of the Corporation or at such other address as shall be
furnished in writing by him or her to the Corporation for such purpose. Such
further notice shall be given as may be required by law or by these Bylaws. Any
meeting may be held without notice if all stockholders entitled to vote are
present in person or by proxy, or if notice is waived in writing, either before
or after the meeting, by those not present.
SECTION 4. QUORUM. The holders of record of at least a majority of the
shares of the stock of the Corporation, is issued and outstanding and entitled
to vote, present in person or by proxy, shall, except as otherwise provided by
law or by these Bylaws, constitute a quorum at all meetings of the stockholders;
if there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time until a quorum shall
have been obtained.
SECTION 5. ORGANIZATION OF MEETINGS. Meetings of the stockholders shall
be presided over by the Chairman of the Board, if there be one, or if the
Chairman of the Board is not present by the President, or if the President is
not present, by a chairman to be chosen at the meeting. The Secretary of the
Corporation, or in the Secretary of the Corporation's absence, an Assistant
Secretary, shall act as Secretary of the meeting, if present.
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SECTION 6. VOTING. At each meeting of stockholders, except as otherwise
provided by statute for the Certificate of Incorporation, every holder of record
of stock entitled to vote shall be entitled to one vote in person or by proxy
for each share of such stock standing in his or her name on the records of the
Corporation. Elections of directors shall be determined by a plurality of the
votes cast and, except as the otherwise provided by statute, the Certificate of
Incorporation, or these Bylaws, all other action shall be determined by a
majority of the votes cast at such meeting. Each proxy to vote shall be in
writing and signed by the stockholder or by such stockholder's duly authorized
attorney.
At all elections of directors, the voting shall be by ballot or in such
other manner as may be determined by the stockholders present in person or by
proxy entitled to vote at such election. With respect to any other matter
presented to the stockholders for their consideration at a meeting, any
stockholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the stockholders entitled to vote at each such
meeting, arranged in alphabetical order, with the address of each, and the
number of shares registered in the name of each stockholder, shall be prepared
by the Secretary and shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
SECTION 7. INSPECTORS OF ELECTION. The Board of Directors in advance of
any meeting of stockholders may appoint one or more Inspectors of Election to
act at the meeting or any adjournment thereof. If Inspectors of Election are not
so appointed, the chairman of the meeting may, and on the request of any
stockholder entitled to vote shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discard of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his or her ability. If appointed, Inspectors of Election shall take charge of
the polls and, when the vote is completed, shall make a certificate of the
result of the vote taken and of such other facts as may be required by law.
SECTION 8. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if, prior to such action, a written consent or
consents thereto, setting forth such action, is signed by the holders of record
of shares of the stock of the Corporation, issued and outstanding and entitled
to vote thereon, having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
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ARTICLE II
DIRECTORS
SECTION 1. NUMBER, QUORUM, TERM, VACANCIES, REMOVAL. The Board of
Directors of the Corporation shall consist of three persons. The number of
directors may be changed by a resolution passed by a majority of the whole Board
or by a vote of the holders of record of at least a majority of the shares of
stock of the Corporation, issued and outstanding and entitled to vote.
A majority of the members of the Board of Directors then holding office
(but not less than one-third of the total number of directors) shall constitute
a quorum for the transaction of business, but if at any meeting of the Board
there shall be less than a quorum present, a majority of those present may
adjourn the meeting form time to time until a quorum shall have been obtained.
Directors shall hold office until the next annual election and until
their successors shall have been elected and shall have qualified, unless sooner
displaced.
Whenever any vacancy shall have occurred in the Board of Directors,
by reason of death, resignation, or otherwise, other than removal of a
director with or without cause by a vote of the stockholders, it shall be
filled by a majority of the remaining directors, though less than a quorum
(except as otherwise provided by law), or by the stockholders, and the person
so chosen shall hold office until the next annual election and until a
successor is duly elected and has qualified.
Any one or more of the directors of the Corporation may be removed
either with or without cause at any time by a vote of the holders of record of
at least a majority of the shares of stock of the Corporation, issued and
outstanding and entitled to vote, and thereupon the term of the director or
directors who shall have been so removed shall forthwith terminate and there
shall be a vacancy or vacancies in the Board of Directors, to be filled by a
vote of the stockholders as provided in these Bylaws.
SECTION 2. MEETINGS, NOTICE. Meetings of the Board of Directors shall
be held at such place either within or without the State of Delaware, as may
from time to time be fixed by resolution of the Board, or as may be specified in
the call or in a waiver of notice thereof. Regular meetings of the Board of
Directors shall be held at such times as may from time to time be fixed by
resolution of the Board, and special meetings may be held at any time upon the
call of two directors, the Chairman of the Board, if one be elected, or the
President, by oral, telegraphic or written notice, duel served on or sent or
mailed to each director not less than two days before such meetings. A meeting
of the Board may be held without notice immediately after the annual meeting of
stockholders at the same place at which such meeting was held. Notice need not
be given of regular meetings of the Board. Any meeting may be held without
notice, if all directors are present, or if notice is waived in writing, either
before or after the meeting, by those not present.
SECTION 3. COMMITTEES. The Board of Directors may, in its discretion,
by resolution passed by a majority of the whole board, designate form among its
members one or more committees which shall consist of two or more directors. The
Board may designate one or more directors as alternate members of any such
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committees shall have any may exercise such powers as shall
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be confronted or authorized by the resolution appointing them. A majority of any
such committee may determine its action and fix the time and place of its
meetings, unless the board of Directors shall otherwise provide. The Board
shall have power at any time to change the membership of any such committee, to
fill vacancies in it, or to dissolve it.
SECTION 4. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting, if prior to such action a written consent or
consents thereto is signed by all members of the Board, or of such committee as
the case may be, and such written consent or consents is filed with the minutes
of proceedings of the Board or Committee.
SECTION 5. COMPENSATION. The Board of Directors may determine, from
time to time, the amount of compensation which shall be paid to its members.
The Board of Directors shall also have power, in its discretion, to allow a
fixed sum and expenses for attendance at each regular or special meeting of
the Board, or of any committee of the Board. In addition, the Board of
Directors shall also have power, in its discretion, to provide for and pay to
directors rendering services to the Corporation not ordinarily rendered by
directors, as such, special compensation appropriate to the value of such
services, as determined by the Board from time to time.
SECTION 6. CONFERENCE TELEPHONE MEETINGS. One or more directors may
participate in a meeting of the Board of Directors, or of a committee of the
Board of Directors, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
SECTION 1. TITLES AND ELECTION. The officers of the Corporation, who
shall be chosen by the Board of Directors at its first meeting after each annual
meeting of stockholders, shall be a President, a Treasurer and a Secretary. The
Board of Directors from time to time may elect a Chairman of the Board, one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and agents as it shall deem necessary, and may define their powers and
duties. Any number of offices may be held by the same person.
SECTION 2. TERMS OF OFFICE. Officers shall hold office until their
successors are chosen and qualify.
SECTION 3. REMOVAL. Any officer may be removed, either with or without
cause, at any time, by the affirmative vote of a majority of the Board of
Directors.
SECTION 4. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the Secretary. Such
resignation shall take effect at the time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
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SECTION 5. VACANCIES. If the office of any officer or agent becomes
vacant by reason of death, resignation, retirement, disqualification, removal
from office or otherwise, the directors may choose a successor, who shall hold
office for the unexpired term in respect of which such vacancy occurred.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors, if one be elected, shall preside at all meetings of the Board of
Directors and of the stockholders, and the Chairman shall have and perform such
other duties as from time to time may be assigned to the Chairman by the Board
of Directors.
SECTION 7. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, in the absence of the Chairman, shall preside at
all meetings of the Board of Directors, and of the stockholders. The President
shall exercise the powers and perform the duties usual to the chief executive
officer and, subject to the control of the Board of Directors, shall have
general management and control of the affairs and business of the Corporation;
the President shall appoint and discharge employees and agents of the
Corporation (other than officers elected by the Board of Directors) and fix
their compensation; and the President shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President shall have the
power to execute bonds, mortgages and other contracts, agreements and
instruments of the Corporation, and shall do and perform such other duties as
from time to time may be assigned to the President by the Board of Directors.
SECTION 8. VICE PRESIDENTS. If chosen, the Vice Presidents, in the
order of their seniority, shall, in the absence or disability of the President,
exercise all of the powers and duties of the President. Such Vice Presidents
shall have the power to execute bonds, notes, mortgages and other contracts,
agreements and instruments of the Corporation, and shall do and perform such
other duties incident to the office of Vice President and as the Board of
Directors, or the President shall direct.
SECTION 9. SECRETARY. The Secretary shall attend all sessions of the
Board and all meetings of the stockholders and record all votes and the minutes
of proceedings in a book to be kept for that purpose. The Secretary shall give,
or cause to be given, notice of all meetings of the stockholders and of the
Board of Directors, and shall perform such other duties as may be prescribed by
the Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
SECTION 10. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys, and other valuable effects in the name and to the credit of
the Corporation, in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the
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Board, taking proper vouchers for disbursements, and shall render to the
directors whenever they may require it, an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation.
SECTION 11. DUTIES OF OFFICERS MAY BE DELEGATED. In case of the
absence or disability of any officer of the Corporation, or for any other
reason that the Board may deem sufficient, the Board may delegate, for the
time being, the powers or duties, or any of them, of such officer to any
other officer, or to any director.
ARTICLE IV
INDEMNIFICATION
SECTION 1. INDEMNIFICATION. The Corporation shall, to the fullest
extent authorized or permitted by the Michigan Business Corporation Act, except
as may be otherwise limited by Sections 2 through 9 of this Article, (a)
indemnify any person, and his or her heirs, personal representatives, executors,
administrators and legal representatives, who was, is, or is threatened to be
made, a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that such person is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation (including a subsidiary corporation), limited
liability company, partnership, joint venture, trust, employee benefit plan or
other enterprise, whether or not for profit, or by reason of anything done by
such person in such capacity (collectively, "Covered Matters"); and (b) pay or
reimburse the reasonable expenses incurred by such person and his or her heirs,
executors, administrators and legal representatives in connection with any
Covered Matter in advance of final disposition of such Covered Matter. The
Corporation may provide such other indemnification to directors, officers,
employees and agents by insurance, contract or otherwise as is permitted by law
and authorized by the Board of Directors.
SECTION 2. ACTIONS BY OTHERS. The Corporation (1) shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she is or was a
director or an officer of the Corporation and (2) except as otherwise
required by Section 3 of this Article, may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he or she is or was an employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of NO LO CONTENDERE or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the
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best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
SECTION 3. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee, agent of or participant in
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Corporation and
except that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that a court of the State of
Michigan or the court in which such action or suit was brought shall
determine upon application that, despite adjudication of liability but in
view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which a court of the state
of Michigan or such other court shall deem proper.
SECTION 4. SUCCESSFUL DEFENSE. To the extent that a person who is or
was a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1, 2 or 3 of this Article, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
SECTION 5. SPECIFIC AUTHORIZATION. Any indemnification under Section 1
or Section 2 of this Article (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections 1, 2, and 3. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
SECTION 6. ADVANCE OF EXPENSES. Expenses incurred by any person who
may have a right of indemnification under this Article in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to
repay such amount unless it shall ultimately be determined that he or she is
entitled to be indemnified by the Corporation pursuant to this Article.
SECTION 7. RIGHT OF INDEMNITY NOT EXCLUSIVE. The indemnification
provided by this Article shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise,
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both as to action in his or her official capacity and as to action in another
capacity while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of or participant in
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her
in any such capacity, or arising out of such person's status as such, whether
or not the Corporation would have the power to indemnify him or her against
such liability under the provisions of this Article, the Michigan Business
Corporation Act or otherwise.
SECTION 9. INVALIDITY OF ANY PROVISIONS OF THIS ARTICLE. The invalidity
or unenforceability of any provision of this Article shall not affect the
validity or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
SECTION 1. CERTIFICATES. The interest of each stockholder of the
Corporation shall be evidenced by certificates for shares of stock in such
form as the Board of Directors may from time to time prescribe. The
certificates of stock shall be signed by the President or a Vice President
and by the Secretary, or the Treasurer, or an Assistant Secretary, or an
Assistant Treasurer, sealed with the seal of the Corporation or a facsimile
thereof, and countersigned and registered in such manner, if any, as the
Board of Directors may by resolution prescribe. Where any such certificate is
countersigned by a transfer agent other than the Corporation or its employee,
or registered by a registrar other than the Corporation or its employee, the
signature of any such officer may be a facsimile signature. In case any
officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate
or certificates may nevertheless be adopted by the Corporation and be issued
and delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers of the Corporation.
SECTION 2. TRANSFER. The shares of stock of the Corporation shall be
transferred only upon the books of the Corporation by the holder thereof in
person or by his or her attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require.
SECTION 3. RECORD DATES. The Board of Directors may fix in advance a
date, not less than ten nor more than sixty days preceding the date of any
meeting of stockholders, or the date for the payment of any dividend, or the
date for the distribution or allotment of any fights, or the date
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when any change, conversion or exchange of capital stock shall go into effect,
as a record date for the determination of the stockholders entitled to notice
of, and to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any distribution or allotment of such fights, or to
exercise the fights in respect of any such change, conversion or exchange of
capital stock, and in such case only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend, or to receive such
distribution or allotment or fights or to exercise such fights, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation
after any such record date fixed as aforesaid.
SECTION 4. LOST CERTIFICATES. In the event that any certificate of
stock is lost, stolen, destroyed or mutilated, the Board of Directors may
authorize the issuance of a new certificate of the same tenor and for the same
number of shares in lieu thereof. The Board may in its discretion, before the
issuance of such new certificate, require the owner of the lost, stolen,
destroyed or mutilated certificate, or the legal representative of the owner to
make an affidavit or affirmation setting forth such facts as to the loss,
destruction or mutilation as it deems necessary, and to give the Corporation a
bond in such reasonable sum as it directs to indemnify the Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
SECTION 1. CHECKS, NOTES, ETC. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President, any Vice President or the Treasurer and may also be
signed by such officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 1. OFFICES. The registered office of the Corporation shall be
located at The Corporation Company, 30600 Telegraph Road, Bingham Farms,
Michigan 48025 and said corporation shall be the registered agent of this
Corporation in charge thereof. The Corporation may have other offices either
within or without the State of Michigan at such places as shall be determined
from time to time by the Board of Directors or the business of the Corporation
may require.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
determined by the Board of Directors.
SECTION 3. CORPORATE SEAL. The seal of the Corporation shall be
circular in form and contain the name of the Corporation, and the year and state
of its incorporation. Such seal may be altered from time to time at the
discretion of the Board of Directors.
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SECTION 4. BOOKS. There shall be kept at such office of the Corporation
as the Board of Directors shall determine, within or without the State of
Delaware, correct books and records of account of all its business and
transactions, minutes of the proceedings of its stockholders, Board of Directors
and committees, and the stock book, containing the names and addresses of the
stockholders, the number of shares held by them, respectively, and the dates
when they respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and records as the
Board of Directors may from time to time determine.
SECTION 5. VOTING OF STOCK. Unless otherwise specifically authorized by
the Board of Directors, all stock owned by the Corporation, other than stock of
the Corporation, shall be voted, in person or by proxy, by the President or any
Vice President of the Corporation on behalf of the Corporation.
ARTICLE VIII
AMENDMENTS
SECTION 1. AMENDMENTS. The vote of the holders of at least a majority
of the shares of stock of the Corporation, issued and outstanding and entitled
to vote, shall be necessary at any meeting of stockholders to amend or repeal
these Bylaws or to adopt new Bylaws. These Bylaws may also be amended or
repealed, or new By-Laws adopted, at any meeting of the Board of Directors by
the vote of at least a majority of the entire Board; provided that any Bylaws
adopted by the Board may be amended or repealed by the stockholders in the
manner set forth above.
Any proposal to amend or repeal these Bylaws or to adopt new Bylaws
shall be stated in the notice of the meeting of the Board of Directors or the
stockholders, or in the waiver of notice thereof, as the case may be, unless all
of the directors or the holders of record of all of the shares of stock of the
Corporation, issued and outstanding and entitled to vote, are present at such
meeting.
10
<PAGE>
Exhibit 4.2
FIRST SUPPLEMENTAL INDENTURE
Dated as of October 15, 1999
TO
INDENTURE,
Dated as of March 19, 1999
among
PRECISION PARTNERS, INC.,
as Company,
THE GUARANTORS named therein,
and
THE BANK OF NEW YORK,
as Trustee
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of October 15, 1999 (the "First
Supplemental Indenture"), by and among PRECISION PARTNERS, INC., a Delaware
corporation (the "Company"), the Guarantors under the Indenture referred to
below (the "Guarantors") and THE BANK OF NEW YORK, as Trustee (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company and the Guarantors have heretofore executed
and delivered to the Trustee an Indenture (the "Indenture"), dated as of
March 19, 1999, providing for the issuance of an aggregate principal amount
of $150,000,000 of 12% Senior Subordinated Notes due 2009 (the "Securities");
WHEREAS the Company has issued and outstanding $100 million of
Securities;
WHEREAS the Company desires and has requested the Trustee to join
with the Company in the execution and delivery of this First Supplemental
Indenture for the purpose of amending the Indenture in order to cure an
ambiguity, omission, defect and inconsistency requiring the execution and
delivery of a supplemental indenture by the Company or a Guarantor that is
already a party to, and bound by, the Indenture in the event a Guarantor is
merged with or into it in order to become a party to, and bound by, the
Indenture;
WHEREAS Section 9.1 of the Indenture provides that a supplemental
indenture may be entered into by the Company, the Guarantors and the
Trustee to change certain provisions of the Indenture or modify certain
rights of the Holders of Securities without notice to or the consent of any
Holder so long as such change does not, in the opinion of the Trustee,
adversely affect the rights of any of the Holders in any material respect,
including to cure any ambiguity, omission, defect or inconsistency;
WHEREAS, an Opinion of Counsel stating that the modification of the
terms of the Indenture pursuant to this First Supplemental Indenture do not
adversely affect the rights of any of the Holders in any material respect
has been delivered to the Trustee; and
WHEREAS pursuant to Section 9.1 of the Indenture, the Trustee, the
Company and the Guarantors are authorized to execute and deliver this
Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
the Company, the Guarantors and the Trustee mutually covenant and agree for
the equal and ratable benefit of the Holders of the Securities as follows:
1. DEFINITIONS. (a) Capitalized terms used herein without definition shall
have the meanings assigned to them in the Indenture.
(b) For all purposes of this First Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise
requires: (i) the terms and expressions
1
<PAGE>
used herein shall have the same meanings as corresponding terms and expressions
used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and
other words of similar import used in this First Supplemental Indenture refer to
this First Supplemental Indenture as a whole and not to any particular section
hereof.
2. AMENDMENT. Clause (i) of Section 5.1 of the Indenture is amended to
insert, at the end thereof, the following:
"; PROVIDED that a Guarantor may merge with or into the Company or another
Guarantor without complying with this clause (i)."
3. EFFECTIVENESS. This First Supplemental Indenture shall be effective on
the date hereof and upon such effectiveness the Indenture shall be deemed to be
modified and amended in accordance herewith and the respective rights,
limitations of rights, obligations, duties and immunities under the Indenture of
the Trustee, the Company, the Guarantors and the Holders of the Securities shall
thereafter be determined, exercised and enforced under the Indenture subject in
all respects to such modifications and amendments, and all the terms and
conditions of this First Supplemental Indenture shall be deemed to be part of
the terms and conditions of the Indenture for any and all purposes.
4. MISCELLANEOUS.
4.1. This First Supplemental Indenture is an indenture supplemental to
and in implementation of the Indenture, and the Indenture and this First
Supplemental Indenture shall henceforth be read and construed together.
4.2. The Indenture as supplemented by this First Supplemental
Indenture is in all respects confirmed and preserved.
4.3. If any provision of this First Supplemental Indenture limits,
qualifies or conflicts with any provision of the TIA, that is required
under the TIA to be part of and govern any provision of this First
Supplemental Indenture, the provision of the TIA shall control. If any
provision of this First Supplemental Indenture modifies or excludes any
provision of the TIA that may be so modified or excluded, the provisions of
the TIA shall be deemed to apply to the Indenture as so modified or to be
excluded by this First Supplemental Indenture, as the case may be.
4.4. In case any provision of this First Supplemental Indenture shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
4.5. The Section headings herein are for convenience only and shall
not affect the construction hereof.
4.6. Nothing in this First Supplemental Indenture, the Indenture, or
the Securities, express or implied, shall give to any Person, other than
the parties hereto and thereto and their successors hereunder and
thereunder, and the Holders of the Securities, any benefit of
2
<PAGE>
any legal or equitable right, remedy or claim under the Indenture, this First
Supplemental Indenture or the Securities.
4.7. All covenants and agreements in this First Supplemental Indenture
by the Company shall bind its successors and assigns, whether so expressed
or not.
4.8. THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE OR ENTERED INTO AND PERFORMED WITHIN THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
4.9. This First Supplemental Indenture may be executed in
counterparts, each of which shall be an original, and all of which taken
together shall constitute one and the same instrument.
4.10 The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
THE COMPANY:
PRECISION PARTNERS, INC.
By: /s/ Ronald M. Miller
---------------------------------
Name: Ronald M. Miller
Title: Chief Financial Officer
GUARANTORS:
CERTIFIED FABRICATORS, INC.
By: /s/ Ronald M. Miller
---------------------------------
Name: Ronald M. Miller
Title: Vice President
GENERAL AUTOMATION, INC.
By: /s/ Ronald M. Miller
---------------------------------
Name: Ronald M. Miller
Title: Vice President
NATIONWIDE PRECISION PRODUCTS CORP.
By: /s/ Ronald M. Miller
---------------------------------
Name: Ronald M. Miller
Title: Vice President
MID STATE MACHINE PRODUCTS
By: /s/ Ronald M. Miller
--------------------------------
Name: Ronald M. Miller
Title: Vice President
4
<PAGE>
GALAXY INDUSTRIES CORPORATION
By: /s/ Ronald M. Miller
---------------------------------
Name: Ronald M. Miller
Title: Vice President
CALBRIT DESIGN, INC.
By: /s/ Ronald M. Miller
--------------------------------
Name: Ronald M. Miller
Title: Vice President
TRUSTEE:
THE BANK OF NEW YORK
By: /s/ Remo J. Reale
---------------------------------
Name: Remo J. Reale
Title: Assistant Vice President
5
<PAGE>
Exhibit 4.3
SECOND SUPPLEMENTAL INDENTURE
dated as of October 29, 1999
TO
INDENTURE
dated as of March 19, 1999
among
PRECISION PARTNERS, INC.,
as Company,
THE GUARANTORS named therein, and
THE BANK OF NEW YORK,
as Trustee,
as amended
-1-
<PAGE>
SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental Indenture"),
dated as of October 29, 1999, among GILLETTE MACHINE & TOOL CO., INC., a
New York corporation (the "New Guarantor") and a newly acquired subsidiary
of PRECISION PARTNERS, INC. (the "Company"), the Company, the existing
guarantors (the "Existing Guarantors") under the Indenture referred to
below, and THE BANK OF NEW YORK, a national banking corporation, as trustee
under the Indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Company has heretofore executed and delivered to the
Trustee an Indenture, dated as of March 19, 1999 (as amended by the First
Supplemental Indenture dated as of October 15, 1999, the "Indenture"),
providing for the issuance of an aggregate principal amount of $150,000,000
of 12% Senior Subordinated Notes due 2009 (the "Securities");
WHEREAS the Company has issued and outstanding $100 million of
Securities under the Indenture;
WHEREAS Section 4.14 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute
and deliver to the Trustee a supplemental indenture pursuant to which the
New Guarantor shall unconditionally guarantee all of the Company's
obligations under the Securities pursuant to a Guarantee on the terms and
conditions set forth herein and in Article 11 of the Indenture;
WHEREAS Section 9.1 of the Indenture provides that a supplemental
indenture may be entered into by the Company, the Existing Guarantors and
the Trustee to change certain provisions of the Indenture or modify certain
rights of the Holders of Securities without notice to or the consent of any
Holder so long as such change does not, in the opinion of the Trustee,
adversely affect the rights of any of the Holders in any material respect,
including to add Guarantees with respect to the Securities; and
WHEREAS pursuant to Section 9.1 of the Indenture, the Trustee, the
Company, the Existing Guarantors and the New Guarantor are authorized to
execute and deliver this Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged,
the New Guarantor, the Company, the Existing Guarantors and the Trustee
mutually covenant and agree for the equal and ratable benefit of the
holders of the Securities as follows:
1. DEFINITIONS. (a) Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
(b) For all purposes of this Second Supplemental Indenture, except as
otherwise herein expressly provided or unless the context otherwise
requires: (i) the terms and expressions used herein shall have the same
meanings as corresponding terms and expressions used in the Indenture; and
(ii) the words "herein," "hereof" and "hereby" and other words of
-2-
<PAGE>
similar import used in this Second Supplemental Indenture refer to this Second
Supplemental Indenture as a whole and not to any particular section hereof.
2. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees, jointly
and severally with all other Guarantors, to guarantee the Company's
obligations under the Securities on the terms and subject to the conditions
set forth in Article 11 of the Indenture and to be bound by all other
applicable provisions of the Indenture. From and after the date hereof, the
New Guarantor shall be a Guarantor for all purposes under the Indenture and
the Securities.
3. RATIFICATION OF INDENTURE; SECOND SUPPLEMENTAL INDENTURE PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and
provisions thereof shall remain in full force and effect. This Second
Supplemental Indenture shall form a part of the Indenture for all purposes,
and every holder of Securities heretofore or hereafter authenticated and
delivered shall be bound hereby.
4. MISCELLANEOUS.
4.1 GOVERNING LAW. THIS SECOND SUPPLEMENTAL INDENTURE SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
4.2 TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Second
Supplemental Indenture.
4.3 COUNTERPARTS. The parties may sign any number of copies of this
Second Supplemental Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
4.4 EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not affect the construction thereof.
4.5 CONFLICT WITH TIA. If any provision of this First Supplemental
Indenture limits, qualifies or conflicts with any provision of the TIA,
that is required under the TIA to be part of and govern any provision of
this First Supplemental Indenture, the provision of the TIA shall control.
If any provision of this First Supplemental Indenture modifies or excludes
any provision of the TIA that may be so modified or excluded, the
provisions of the TIA shall be deemed to apply to the Indenture as so
modified or to be excluded by this First Supplemental Indenture, as the
case may be.
4.6. SEVERABILITY. In case any provision of this First Supplemental
Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
4.7. NO THIRD PARTY BENEFICIARIES. Nothing in this Second Supplemental
Indenture, the Indenture, or the Securities, express or implied, shall give
to any Person, other
-3-
<PAGE>
than the parties hereto and thereto and their successors hereunder and
thereunder, and the Holders of the Securities, any benefit of any legal or
equitable right, remedy or claim under the Indenture, this Second Supplemental
Indenture or the Securities.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed as of the date first above
written.
New Guarantor:
GILLETTE MACHINE & TOOL CO., INC.
By: /s/ Ronald M. Miller
--------------------------------
Name: Ronald M. Miller
Title: Vice President
Company:
PRECISION PARTNERS, INC.
By: /s/ Ronald M. Miller
-------------------------------
Name: Ronald M. Miller
Title: Chief Financial Officer
Existing Guarantors:
CERTIFIED FABRICATORS, INC.
By: /s/ Ronald M. Miller
--------------------------------
Name: Ronald M. Miller
Title: Vice President
GENERAL AUTOMATION, INC.
By: /s/ Ronald M. Miller
---------------------------------
Name: Ronald M. Miller
Title: Vice President
NATIONWIDE PRECISION PRODUCTS CORP.
-4-
<PAGE>
By: /s/ Ronald M. Miller
----------------------------------
Name: Ronald M. Miller
Title: Vice President
MID STATE MACHINE PRODUCTS
By: /s/ Ronald M. Miller
-----------------------------------
Name: Ronald M. Miller
Title: Vice President
GALAXY INDUSTRIES CORPORATION
By: /s/ Ronald M. Miller
------------------------------------
Name: Ronald M. Miller
Title: Vice President
Trustee:
THE BANK OF NEW YORK
By: /s/ Remo J. Reale
-------------------------------------
Name: Remo J. Reale
Title: Assistant Vice President
-5-
<PAGE>
Exhibit 4.6
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of March 19, 1999
Among
PRECISION PARTNERS, INC.
and
THE GUARANTORS NAMED HEREIN
as Issuers
and
SALOMON SMITH BARNEY INC.
and
NATIONSBANC MONTGOMERY SECURITIES LLC
as Initial Purchasers
12% Senior Subordinated Notes due 2009
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is dated as of
March 19, 1999, by and among PRECISION PARTNERS, INC., a Delaware corporation
(the "COMPANY"), and each of the Company's subsidiaries listed on the signature
pages hereof, as guarantors (the "GUARANTORS" and, together with the Company,
the "ISSUERS"), as issuers, and SALOMON SMITH BARNEY INC. and NATIONSBANC
MONTGOMERY SECURITIES LLC., as Initial Purchasers (the "INITIAL PURCHASERS").
This Agreement is entered into in connection with the Purchase
Agreement, dated March 16, 1999, by and among the Company, the Guarantors and
the Initial Purchasers (the "PURCHASE AGREEMENT"), which provides for, among
other things, the sale by the Company to the Initial Purchasers of $100,000,000
aggregate principal amount of the Company's 12% Senior Subordinated Notes due
2009 (the "NOTES") guaranteed by the Guarantors (the "GUARANTEES"). The Notes
and the Guarantees are referred to herein as the "SECURITIES." In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchasers and any subsequent holder or holders of
each of the Notes. The execution and delivery of this Agreement is a condition
to the Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ADDITIONAL INTEREST: See Section 4(a) hereof.
ADVICE: See Section 5 hereof.
AFFILIATE: With respect to any specified person, "Affiliate"
shall mean any other Person which, directly or indirectly, controls or is
controlled by or under direct or indirect common control with such specified
person. For the purposes of this definition, "control," when used with respect
to any person, means the power to direct the management and poli-
<PAGE>
-2-
cies of such person, directly or indirectly whether through the ownership of
voting securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
AGREEMENT: See the introductory paragraphs hereto.
CLOSING: See Purchase Agreement.
COMPANY: See the introductory paragraphs hereto.
EFFECTIVENESS DATE: See Section 3(a) hereof.
EFFECTIVENESS PERIOD: See Section 3(a) hereof.
EVENT DATE: See Section 4(b) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: The 12% Senior Subordinated Notes due 2009, of
the Company, guaranteed on a senior subordinated basis by each of the
Guarantors, that are identical to the Notes in all material respects, except for
the provisions regarding restrictions on transfer and Additional Interest, and
the issuance thereof pursuant to the Exchange Offer shall have been registered
pursuant to an effective Registration Statement in compliance with the
Securities Act.
EXCHANGE OFFER: See Section 2(a) hereof.
EXCHANGE REGISTRATION STATEMENT: See Section 2(a) hereof.
GUARANTORS: See the introductory paragraphs hereto.
HOLDER: Any holder of a Registrable Note.
INDEMNIFIED PERSON: See Section 7(c) hereof.
INDEMNIFYING PERSON: See Section 7(c) hereof.
INDENTURE: The Indenture, dated as of March 19, 1999, by and
among the Issuers and The Bank of New York, as Trustee, pursuant to which the
Notes and the Guarantees are be-
<PAGE>
-3-
ing issued, as the same may be amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraphs hereto.
INITIAL SHELF REGISTRATION: See Section 3(a) hereof.
INSPECTORS: See Section 5(m) hereof.
ISSUE DATE: March 19, 1999, the date of original issuance of
the Securities.
ISSUERS: See the introductory paragraphs hereto.
NASD: See Section 5(r) hereof.
NOTES: See the introductory paragraphs hereto.
OFFERING MEMORANDUM: The final offering memorandum of the
Company dated March 16, 1999, in respect of the offering of the Securities.
PARTICIPANT: See Section 7(a) hereof.
PARTICIPATING BROKER-DEALER: See Section 2(b) hereof.
PERSON: An individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
PRIVATE EXCHANGE: See Section 2(b) hereof.
PRIVATE EXCHANGE NOTES: See Section 2(b) hereof.
PROSPECTUS: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act and any term sheet filed pursuant
to Rule 434 under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by refer-
<PAGE>
-4-
ence or deemed to be incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs hereto.
RECORDS: See Section 5(m) hereof.
REGISTRABLE NOTES: Each Note upon its original issuance and at
all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without complying with the prospectus delivery
requirements under the Securities Act, (iii) such Note, Exchange Note or Private
Exchange Note, as the case may be, ceases to be outstanding for purposes of the
Indenture or (iv) such Note, Exchange Note or Private Exchange Note, as the case
may be, may be resold without restriction pursuant to Rule 144 under the
Securities Act.
REGISTRATION STATEMENT: Any registration statement of the
Issuers that covers any of the Notes, the Exchange Notes or the Private Exchange
Notes (and the related Guarantees), filed with the SEC under the Securities Act,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of the issuer of
<PAGE>
-5-
such securities being free of the registration and prospectus delivery
requirements of the Securities Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES: See the introductory paragraphs hereto.
SECURITIES ACT: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c) hereof.
SHELF REGISTRATION: See Section 3(b) hereof.
SUBSEQUENT SHELF REGISTRATION: See Section 3(b) hereof.
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and the trustee under
any indenture governing the Exchange Notes and Private Exchange Notes.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Issuers are sold to an underwriter for
reoffering to the public.
2. EXCHANGE OFFER
(a) The Issuers shall (A) prepare and, on or prior to 180 days
after the date of original issuance of the Notes (the "ISSUE DATE"), file with
the SEC a Registration Statement under the Securities Act with respect to an
offer by the Company to the holders of the Notes to issue and deliver to such
holders, in exchange for Notes, a like principal amount of Exchange Notes (the
"EXCHANGE OFFER"), (B) use their best efforts
<PAGE>
-6-
to cause the Registration Statement relating to the Exchange Offer to be
declared effective by the SEC under the Securities Act on or prior to 181 days
after the Issue Date and (C) commence the Exchange Offer and use their best
efforts to issue, on or prior to 210 days after the Issue Date, the Exchange
Notes. The offer and sale of the Exchange Notes pursuant to the Exchange Offer
shall be registered pursuant to the Securities Act on the appropriate form (the
"EXCHANGE REGISTRATION STATEMENT") and duly registered or qualified under all
applicable state securities or Blue Sky laws and will comply with all applicable
tender offer rules and regulations under the Exchange Act and state securities
or Blue Sky laws. The Exchange Offer shall not be subject to any condition,
other than that the Exchange Offer does not violate any applicable law or
interpretation of the staff of the SEC. Upon consummation of the Exchange Offer
in accordance with this Section 2, the Issuers shall have no further
registration obligations other than with respect to (i) Private Exchange Notes,
(ii) Exchange Notes held by Participating Broker-Dealers and (iii) Notes or
Exchange Notes as to which Section 3(a)(iii) hereof applies. No securities shall
be included in the Exchange Registration Statement other than the Exchange
Notes.
(b) The Issuers may require each holder of Notes as a
condition to its participation in the Exchange Offer to represent to the Issuers
and their counsel in writing (which may be contained in the applicable letter of
transmittal) that at the time of the consummation of the Exchange Offer (i) any
Exchange Notes received by such holder will be acquired in the ordinary course
of its business, (ii) such holder will have no arrangement or understanding with
any Person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes and (iii) such holder is not an Affiliate
of an Issuer, or if it is an Affiliate of an Issuer, it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable, (iv) if such Holder is a broker-dealer, receive Exchange
Notes for its own account in exchange for the Notes that were acquired as a
result of market-making or other trading activities and that it will be required
to acknowledge that it will deliver a Prospectus in connection with any resale
of such Exchange Notes, (v) such Holder will be able to trade the Exchange Notes
acquired in the Exchange Offer without restriction under the Securities Act, and
(vi) such Holder has full power and authority to transfer the Notes in exchange
for the Exchange Notes and that
<PAGE>
-7-
the Company will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claims.
If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds any Notes acquired by it and having, or that are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, or any other holder of Notes is not entitled to
participate in the Exchange Offer, the Company, upon the request of such Initial
Purchaser or any such holder if a Shelf Registration Statement with respect to
Notes held by such person is not then in effect shall, simultaneously with the
delivery of the Exchange Notes in the Exchange Offer, issue and deliver to such
Initial Purchaser and any such holder, in exchange (the "PRIVATE EXCHANGE") for
such Notes held by such Initial Purchaser and any such holder, a like principal
amount of debt securities of the Company, guaranteed by each of the Guarantors
on a senior subordinated basis, that are identical in all material respects to
the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and that are issued pursuant
to the same indenture as the Exchange Notes), except that the Private Exchange
Notes may be subject to restrictions on transfer and bear a legend to such
effect. The Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes.
The Issuers and the Initial Purchasers acknowledge that the
staff of the SEC has taken the position that any broker-dealer that owns
Exchange Notes that were received by such broker-dealer for its own account in
the Exchange Offer (a "PARTICIPATING BROKER-DEALER") may be deemed to be an
"underwriter" within the meaning of the Securities Act and must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes (other than a resale of an unsold allotment
resulting from the original offering of the Notes).
The Issuers and the Initial Purchasers also acknowledge that
it is the SEC staff's position that if the Prospectus contained in the Exchange
Registration Statement includes a plan of distribution containing a statement to
the above effect and the means by which Participating Broker-Dealers may resell
the Exchange Notes, without naming the Participating Bro-
<PAGE>
-8-
ker-Dealers or specifying the amount of Exchange Notes owned by them, such
Prospectus may be delivered by Participating Broker-Dealers to satisfy their
prospectus delivery obligations under the Securities Act in connection with
resales of Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the Securities Act.
In light of the foregoing, if requested by a Participating
Broker-Dealer, the Issuers agree (x) to use their best efforts to keep the
Exchange Registration Statement continuously effective for a period of up to 180
days or such earlier date as each Participating Broker-Dealer shall have
notified the Company in writing that such Participating Broker-Dealer has resold
all Exchange Notes acquired in the Exchange Offer (the "Applicable Period"), and
(y) to comply with the provisions of Section 5 of this Agreement, as they relate
to the Exchange Offer and the Exchange Registration Statement.
Interest on the Exchange Notes and the Private Exchange Notes
will accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor and (ii) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date on such interest
payment date or (B), if no interest has been paid on the Notes, from the Issue
Date.
In connection with each Exchange Offer, the Issuers shall:
(1) mail, or cause to be mailed, to each Holder of record
entitled to participate in the Exchange a copy of the Prospectus
forming part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) use their best efforts to keep the Exchange Offer open for
not less than 20 business days after the date that notice of the
Exchange Offer is mailed to Holders (or longer if required by
applicable law);
(3) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York;
(4) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the
<PAGE>
-9-
last business day on which the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the applicable
Exchange Offer and the applicable Private Exchange, if any, the Issuers shall:
(1) accept for exchange all Registrable Notes validly tendered
and not validly withdrawn pursuant to the applicable Exchange Offer and
the applicable Private Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange and cause the Trustee to authenticate
and deliver promptly to each Holder that validly tendered Notes and has
not withdrawn such tender, Registrable Notes, Exchange Notes or Private
Exchange Notes, as the case may be, equal in principal amount to the
securities of such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and that, in either case, has been qualified under the
TIA or is exempt from such qualification and shall provide that (a) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (b) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in such indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as one class and that none of the
Exchange Notes, the Private Exchange Notes or the Notes will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the SEC, the Issuers are not
permitted to effect the Exchange Offer, (ii) the Exchange Offer is not
consummated within 210 days of the Issue Date, (iii) any holder of any Private
Exchange Notes so requests in writing to the Issuers within 60 days after the
<PAGE>
-10-
consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under state and
federal securities laws (other than due solely to the status of such Holder as
an affiliate of the Issuers within the meaning of the Securities Act), then in
the case of each of clauses (i) to and including (iv) of this paragraph, the
Issuers shall promptly deliver to the Holders and the Trustee written notice
thereof (the "SHELF NOTICE") and shall file a Shelf Registration pursuant to
Section 3 hereof.
3. SHELF REGISTRATION
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) SHELF REGISTRATION. The Issuers shall file with the SEC a
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415 covering all of the Registrable Notes not exchanged in the Exchange
Offer, Private Exchange Notes and Exchange Notes as to which Section 2(c)(iv) is
applicable (the "INITIAL SHELF REGISTRATION"). The Issuers shall use their best
efforts to file with the SEC the Initial Shelf Registration on or before the
applicable Filing Date. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders. The Issuers shall not permit any securities other than the
Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below).
The Issuers shall use their best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act on or prior
to the 60th day after such filing obligation arises (the "EFFECTIVENESS DATE")
and to keep the Initial Shelf Registration continuously effective under the
Securities Act until the date which is two years from the Issue Date (the
"EFFECTIVENESS PERIOD"), or such shorter period ending when (i) all Registrable
Notes covered by the Initial Shelf Registration have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Registrable Notes covered by and not sold
under the Initial Shelf Registration or an earlier Subsequent Shelf Registration
has been declared effective under the Securities Act; PROVIDED, HOWEVER, that
the
<PAGE>
-11-
Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the Securities Act and as
otherwise provided herein.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Issuers shall use
their best efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof, and in any event shall within 60 days of such cessation
of effectiveness amend the Initial Shelf Registration in a manner to obtain the
withdrawal of the order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415 covering all of
the Registrable Notes covered by and not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (each, a "SUBSEQUENT
SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed, the Issuers
shall use their best efforts to cause the Subsequent Shelf Registration to be
declared effective under the Securities Act as soon as practicable after such
filing and to keep such subsequent Shelf Registration continuously effective for
the remainder of the Effectiveness Period. As used herein the term "SHELF
REGISTRATION" means the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Issuers shall promptly
supplement and amend any Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
4. ADDITIONAL INTEREST
(a) The Issuers and the Initial Purchasers agree that the
Holders will suffer damages if the Issuers fail to fulfill their obligations
under Section 2 or Section 3 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Issuers
agree to pay, as liquidated damages, additional interest on the Notes
<PAGE>
-12-
("ADDITIONAL INTEREST") under the circumstances and to the extent set forth
below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the applicable
Filing Date or (B) notwithstanding that the Issuers have consummated or
will consummate the Exchange Offer, the Issuers are required to file a
Shelf Registration and such Shelf Registration is not filed on or prior
to the Filing Date applicable thereto; or
(ii) if (A) neither the Exchange Registration Statement nor
the Initial Shelf Registration is declared effective by the SEC on or
prior to the relevant Effectiveness Date or (B) notwithstanding that
the Issuers have consummated or will consummate the Exchange Offer, the
Issuers are required to file a Shelf Registration and such Shelf
Registration is not declared effective by the SEC on or prior to the
Effectiveness Date in respect of such Shelf Registration;
(iii) if (A) the Issuers have not exchanged Exchange Notes for
all Notes validly tendered in accordance with the terms of the Exchange
Offer on or prior to the 180th day after the Issue Date or (B) if
applicable, a Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period (other than such time as all Notes have been
disposed of thereunder);
(each such event referred to in clauses (i) through (iii) above being a
"Registration Default") then, as the sole remedy available to affected Holders,
commencing on the date of such Registration Default, Additional Interest shall
accrue on the principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days immediately following the date of such Registration Default and
the rate of such Additional Interest shall increase by an additional 0.25% per
annum at the beginning of each subsequent 90-day period PROVIDED, HOWEVER, that
the rate of Additional Interest that shall accrue on the Notes may not exceed in
the aggregate 1.0% per annum; PROVIDED, FURTHER, HOWEVER, that (1) upon the
filing of the applicable Exchange Registration Statement or the applicable Shelf
Registration as required hereunder (in the case of clause (i) above of this
Sec-
<PAGE>
-13-
tion 4(a)), (2) upon the effectiveness of the applicable Exchange Registration
Statement or the applicable Shelf Registration Statement as required hereunder
(in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of
the applicable Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) of this Section 4(a), or upon the effectiveness of the applicable Shelf
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) of this Section 4(a)), Additional Interest on the Notes in respect of
which such events relate as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue or accumulate, as the case
may be. If, after the cure of all Registration Defaults then in effect, there is
a subsequent Registration Default, the rate of additional interest for such
subsequent Registration Default shall initially be 0.50%, regardless of the
additional interest rate in effect with respect to any prior Registration
Default at the time of the cure of such Registration Default.
(b) The Issuers shall notify the Trustee (who shall be acting
under and protected by the terms of the Indenture) within five business days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section
4 shall be payable in cash semiannually on each [ ] and [ ] (to the holders of
record on the [ ] and [ ] immediately preceding such dates), commencing with the
first such date occurring after any such Additional Interest commences to accrue
until the applicable Registration Default has been cured. The amount of
Additional Interest will be determined by multiplying the applicable rate of
Additional Interest by the principal amount of the Registrable Notes, multiplied
by a fraction, the numerator of which is the number of days such rate of
Additional Interest was applicable during such period (determined on the basis
of a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the denominator of which
is 360.
5. REGISTRATION PROCEDURES
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or meth-
<PAGE>
-14-
ods of disposition thereof, and pursuant thereto and in connection with any
Registration Statement filed by the Issuers hereunder, the Issuers shall:
(a) Prepare and file with the SEC prior to the applicable
Filing Date, a Registration Statement or Registration Statements as prescribed
by Sections 2 or 3 hereof, and use their best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto, before filing any
Registration Statement or Prospectus or any amendments or supplements thereto,
the Issuers shall furnish to and afford the Initial Purchasers, and, if
requested, their counsel and the managing underwriters, if any, a reasonable
opportunity to review copies of all such documents (including copies of any
documents to be incorporated by reference therein and all exhibits thereto)
proposed to be filed (in each case at least five days prior to such filing, or
such later date as is reasonable under the circumstances). The Issuers shall not
file any Registration Statement or Prospectus or any amendments or supplements
thereto if the Holders of a majority in aggregate principal amount of the
Registrable Notes included in such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the managing
underwriters, if any, shall reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration Statement or Exchange
Registration Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period or
the Applicable Period, as the case may be; cause the related Prospectus to be
supplemented by any prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions then in
force) promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any se-
<PAGE>
-15-
curities being sold by a Participating Broker-Dealer covered by any such
Prospectus. The Issuers shall be deemed not to have used their best efforts to
keep a Registration Statement effective during the Effectiveness Period or the
Applicable Period, as the case may be, relating thereto if the Issuers
voluntarily take any action that would result in selling Holders of the
Registrable Notes covered thereby or Participating Broker-Dealers seeking to
sell Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless such action is required by applicable
law or permitted by this Agreement including without limitation, the provision
in Sections 5(c)(v) and 5(e) and the last paragraph of Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period relating thereto from whom the Company has
received written notice that such Broker Dealer will be a Participating
Broker-Dealer in the applicable Exchange Offer, notify the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may be,
at the request of such Person, their counsel and the managing underwriters, if
any, promptly (but in any event within 2 business days), and confirm such notice
in writing, (i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act (including in such notice a written statement that any Holder
may, upon request, obtain, at the sole expense of the Issuers, one conformed
copy of such Registration Statement or post-effective amendment including
financial statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of any
stop order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus or the
initiation of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers contained in
any agreement (including any underwriting agreement) contemplated
<PAGE>
-16-
by Section 5(l) hereof cease to be true and correct in all material respects,
(iv) of the receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction, or the initiation or written threat of any proceeding for such
purpose, (v) of the happening of any event, the existence of any condition or
any information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in or amendments or supplements to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of the Issuers' determination that a
post-effective amendment to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its reasonable best efforts to prevent
the issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is issued,
to use its best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if reasonably requested by the managing underwriter or underwriters (if any),
the Holders of a majority in aggregate principal amount of the Registrable Notes
being sold
<PAGE>
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in connection with an underwritten offering (i) as promptly as practicable
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters (if any), such Holders,
or counsel for any of them determine is reasonably necessary to be included
therein, (ii) make all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable after the Issuers have received
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to such
Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, furnish to each selling Holder of
Registrable Notes and to each such Participating Broker-Dealer who so requests
and, at the request of any such Person, to their respective counsel and each
managing underwriter, if any, at the sole expense of the Issuers, one conformed
copy of the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and schedules,
and, if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-
<PAGE>
-18-
Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to
each selling Holder of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, at the request of any such Person, their
respective counsel, and the underwriters, if any, at the sole expense of the
Issuers, as many copies of the Prospectus or Prospectuses (including each form
of preliminary prospectus) and each amendment or supplement thereto and any
documents incorporated by reference therein as such Persons may reasonably
request; and, subject to the last paragraph of this Section 5, the Issuers
hereby consent to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the underwriters or agents,
if any, and dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers of the
Exchange Notes pursuant to, such Prospectus and any amendment or supplement
thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration Statement by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, use its reasonable best efforts to register or qualify, and
to cooperate with the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Notes for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or underwriters
reasonably request in writing; provided, however, that where Exchange Notes held
by Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h), keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Exchange held by Participating Broker-Dealers or the
Registrable Notes covered by the Registration Statement; PROVIDED, HOWEVER, that
the Issuers shall not be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that would
subject it to general service of process in any such jurisdiction where it is
not then so subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold, which
cer-
<PAGE>
-19-
tificates shall not bear any restrictive legends and shall be in a form eligible
for deposit with The Depository Trust Company; and enable such Registrable Notes
to be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably request.
(j) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof during the period for which
the Company is required to maintain an effective Registration Statement, as
promptly as practicable prepare and (subject to Section 5(a) hereof) file with
the SEC, at the sole expense of the Issuers, a supplement or post-effective
amendment to the applicable Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold thereunder or to
the purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, the Issuers shall not be required to amend or supplement a
Registration Statement, any related Prospectus or any document incorporated
therein by reference, in the event that, and for a period not to exceed an
aggregate of 120 days in any calendar year if, (i) an event occurs and is
continuing as a result of which a Shelf Registration would, in the Issuers' good
faith judgment, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and (ii) (a)
the Issuers determine in their good faith judgment that the disclosure of such
event at such time would have a material adverse effect on the business,
operations or prospects of the Issuers or (b) the disclosure otherwise relates
to a pending material business transaction that has not yet been publicly
disclosed.
<PAGE>
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(k) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes in a form eligible for deposit with The
Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Notes.
(l) in the case of a Shelf Registration, enter into such
agreements (including underwriting agreements) and take all such other
appropriate actions as are reasonably requested in order to expedite or
facilitate the registration or the disposition of such Registrable Notes, and in
such connection, (i) make such representations and warranties to Holders of such
Registrable Notes with respect to the business of the Issuers and their
subsidiaries as then conducted and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters in
underwritten offerings, and confirm the same if and when requested; and (ii) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set forth
in Section 7 hereof (or such other provisions and procedures acceptable to the
Issuers and the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration with respect to all parties to be
indemnified pursuant to said Section including, without limitation, such selling
Holders). The above shall be done at each closing in respect of the sale of
Registrable Notes, or as and to the extent required thereunder.
(m) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, make available for inspection by any selling
Holder of such Registrable Notes being sold, or each such Participating
Broker-Dealer, as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant or other
agent retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"INSPECTORS"), at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
instruments of the Is-
<PAGE>
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suers and subsidiaries of the Issuers (collectively, the "RECORDS") as shall be
reasonably necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of the Issuers
and any of their subsidiaries to supply all information reasonably requested by
any such Inspector in connection with such Registration Statement and
Prospectus. Each Inspector shall agree in writing that it will keep the Records
confidential and that it will not disclose or use for any market transactions in
the Securities of any of Issuers any of the Records that the Issuers determine,
in good faith, to be confidential and notify the Inspectors in writing are
confidential unless (i) the disclosure of such Records is necessary to avoid or
correct a material misstatement or material omission in such Registration
Statement or Prospectus, (ii) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent jurisdiction, or (iii) the
information in such Records has been made generally available to the public;
provided, however, that prior notice shall be provided as soon as practicable to
the Issuers of the potential disclosure of any information by such Inspector
pursuant to clauses (i) or (ii) of this sentence to permit the Issuers to obtain
a protective order (or waive the provisions of this paragraph (m)) and that such
Inspector shall take such actions as are reasonably necessary to protect the
confidentiality of such information (if practicable) to the extent such action
is otherwise not inconsistent with, an impairment of or in derogation of the
rights and interests of the Holder or any Inspector.
(n) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the Holders
of the Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use their reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such changes, and
all other forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
<PAGE>
-22-
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to their securityholders with regard to any
applicable Registration Statement, a consolidated earning statement satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45 days
after the end of any twelve-month period (or 90 days after the end of any
12-month period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which any Registrable Notes are sold to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers after the effective date of a Registration
Statement, which statements shall cover said 12-month periods, consistent with
the requirements of Rule 158.
(p) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers addressed to the Trustee
for the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or Private Exchange, as the case may be, that the Exchange Notes
or Private Exchange Notes as the case may be, and the related indenture
constitute legal, valid and binding obligations of the Issuers and the related
Guarantees, the legal, valid and binding obligations of each Guarantor,
enforceable against them in accordance with their respective terms subject to
customary exceptions and qualifications, consistent with the requirements of
Rule 158.
(q) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the Issuers
(or to such other Person as directed by the Issuers) in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be, the Issuers
shall mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being canceled in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be; PROVIDED that in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in connection
with any filings re-
<PAGE>
-23-
quired to be made with the National Association of Securities Dealers, Inc. (the
"NASD").
(s) Use their reasonable best efforts to take all other steps
reasonably necessary to effect the registration of the applicable Registrable
Notes covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of any Registrable Notes
as to which any registration is being effected to furnish to the Issuers such
information regarding such seller and the distribution of such Registrable Notes
as the Issuers may, from time to time, reasonably request. The Issuers may
exclude from such registration the Registrable Notes of any seller for so long
as such seller fails to furnish such information within a reasonable time after
receiving such request and in such event shall have no further obligation under
this Agreement (including without limitation the obligation under Section 4)
with respect to such seller or any subsequent holder of such Registrable Notes.
The Issuers shall not be required to provide any indemnification relating to any
information provided in writing by any underwriter or any other Person with
respect to the underwriter or other Person that provided such information to the
Issuers for inclusion in such Registration Statement. Each seller as to which
any Shelf Registration is being effected agrees to furnish promptly to the
Issuers all information required to be disclosed in order to make the
information previously furnished to the Issuers by such seller not materially
misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Issuers, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Issuers, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
applicable Regis-
<PAGE>
-24-
tration Statement filed or prepared subsequent to the time that such reference
ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by its acquisition of such Registrable Notes or Exchange
Notes, as the case may be, to be sold by such Participating Broker-Dealer, as
the case may be, that, upon actual receipt of any notice from the Issuers of the
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv),
5(c)(v), or 5(c)(vi) hereof, such Holder or Participating Broker-Dealer, as the
case may be, will forthwith discontinue disposition of such Registrable Notes or
Exchange Notes, as the case may be, covered by such Registration Statement or
Prospectus until such Holder's or Participating Broker-Dealer's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 5(j)
hereof, or until it is advised in writing (the "ADVICE") by the Issuers that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event that the Issuers shall give any
such notice, the Applicable Period shall be extended by the number of days
during such periods from and including the date of the giving of such notice to
and including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof or (y)
the Advice.
6. REGISTRATION EXPENSES
All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers (other than any underwriting
discounts or commissions) shall be borne by the Issuers whether or not the
Exchange Registration Statement or any Shelf Registration is filed or becomes
effective or the Exchange Offer is consummated, including, without limitation,
(i) all registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange
<PAGE>
-25-
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes or Exchange Notes, as the case may be, are located, or (y)
as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes, as the case may be, to be sold by a Participating Broker-Dealer during
the Applicable Period)), (ii) printing expenses, including, without limitation,
expenses of printing certificates for Registrable Notes or Exchange Notes in a
form eligible for deposit with The Depository Trust Company and of printing or
reproducing prospectuses if the printing or reproducing of prospectuses is
requested by the managing underwriter or underwriters, if any, by the Holders of
a majority in aggregate principal amount of the Registrable Notes included in
any Registration Statement or to be sold by any Participating Broker-Dealer, as
the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Issuers and fees and disbursements of one
special counsel for all of the sellers of each of the Registrable Notes
(exclusive of any counsel retained pursuant to Section 7(c) hereof), (v)
Securities Act liability insurance, if the Issuers desire such insurance, (vi)
fees and expenses of all other Persons retained by the Issuers, (vii) internal
expenses of the Issuers (including, without limitation, all salaries and
expenses of officers and employees of the Issuers performing legal or accounting
duties), (viii) the expense of any annual audit, (ix) any fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange, and the obtaining of a rating of the securities, in
each case, if applicable, and (x) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, indentures and any other documents necessary in order to comply with
this Agreement. The Company shall not have any obligation to pay any
underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities.
7. INDEMNIFICATION AND CONTRIBUTION
(a) The Issuers agree to indemnify and hold harmless each
Holder of the Registrable Notes and each Participating Broker-Dealer selling the
Exchange Notes during the Applicable Period, the affiliates, officers, directors
and employees of each such Person, and each Person, if any, who controls any
such Person within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "PAR-
<PAGE>
-26-
TICIPANT"), from and against any and all losses, claims, damages, judgments,
liabilities and expenses (including, without limitation, the reasonable legal
fees and other reasonable out-of-pocket expenses actually incurred in connection
with any suit, action or proceeding or any claim asserted) caused by, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
or Prospectus (as amended or supplemented if the Issuers shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by, arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the case of the Prospectus in the light of the
circumstances under which they were made, not misleading, EXCEPT insofar as such
losses, claims, damages or liabilities are caused by, arise out of or are based
upon any untrue statement or omission or alleged untrue statement or omission
made in reliance upon and in conformity with information relating to any
Participant furnished to the Issuers in writing by such Participant expressly
for use therein and with respect to any preliminary Prospectus, to the extent
that any such loss, claim, damage or liability arises primarily from the fact
that any Participant sold Registrable Notes or Exchange Notes to a person to
whom there was not sent or given a copy of the Prospectus (as amended or
supplemented) at or prior to the written confirmation of such sale if the
Issuers shall have previously furnished copies thereof to the Participant in
accordance herewith and the Prospectus (as amended or supplemented) would have
corrected any such untrue statement or omission.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Issuers, the Affiliates, officers, directors and
employees, of the Issuers and each Person who controls the Issuers within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent (but on a several, and not joint, basis) as the foregoing
indemnity from the Issuers to each Participant, but only with reference to
information relating to such Participant furnished to the Issuers in writing by
or on behalf of such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received
<PAGE>
-27-
by such Participant from sales of Registrable Notes or Exchange Notes giving
rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either of the two preceding paragraphs, such Person (the "INDEMNIFIED
PERSON") shall promptly notify the Persons against whom such indemnity may be
sought (the "INDEMNIFYING PERSONS") in writing, and the Indemnifying Persons,
upon request of the Indemnified Person, will be entitled to participate therein
and may assume the defense thereof, including the employment of counsel
reasonably acceptable to such Indemnified Person and payment of all fees and
expenses relating to assumption of the defense by the Indemnifying Persons;
PROVIDED, HOWEVER, that the failure to so notify the Indemnifying Persons will
not relieve it from any liability under paragraph (a) or (b) above unless and to
the extent such failure results in the forfeiture by the Indemnifying Person of
substantial rights and defenses and the Indemnifying Person was not otherwise
aware of such action or claim. After notice from the Indemnifying Parties to the
Indemnified Parties of its election so to assume the defense thereof and
approval by the Indemnified Parties of counsel appointed to defend such action,
the Indemnifying Parties will not be liable to such Indemnified Parties under
this Section 7 for any legal or other expenses, other than reasonable
out-of-pocket costs of investigation, incurred by such indemnified party in
connection with such defense, except as set forth in the next sentence. In any
such proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Persons and the Indemnified
Person shall have mutually agreed to the contrary, (ii) the Indemnifying Persons
shall have failed within a reasonable period of time to assume the defense and
retain counsel reasonably satisfactory to the Indemnified Person on a timely
basis, or (iii) the named parties in any such proceeding (including any
impleaded parties) include both any Indemnifying Person and the Indemnified
Person or any affiliate thereof and the Indemnified Persons shall have
reasonably concluded, based on the advice of counsel, that representation of
both parties by the same counsel would be inappropriate under applicable
standards of professional conduct due to actual or potential differing interests
between them. It is understood that the Indemnifying Per-
<PAGE>
-28-
sons shall not, in connection with such proceeding or separate but substantially
similar related proceedings in the same jurisdiction arising out of the same
general allegations, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified Persons,
and that all such fees and expenses shall be reimbursed promptly as they are
incurred. Any such separate firm for the Participants and such control Persons
of Participants shall be designated in writing by Participants who sold a
majority in interest of Registrable Notes and Exchange Notes sold by all such
Participants and shall be reasonably acceptable to the Issuers, and any such
separate firm for the Issuers, their affiliates, officers, directors,
representatives, employees and agents and such control Persons of such Issuers
shall be designated in writing by such Issuers and shall be reasonably
acceptable to the Holders.
The Indemnifying Persons shall not be liable for any
settlement of any proceeding effected without its prior written consent (which
consent shall not be unreasonably withheld or delayed), but if settled with such
consent or if there be a final non-appealable judgment for the plaintiff for
which the Indemnified Person is entitled to indemnification pursuant to this
Agreement, each of the Indemnifying Persons agrees to indemnify and hold
harmless each Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. No Indemnifying Person shall, without the
prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, or indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
<PAGE>
-29-
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative fault of the parties shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Issuers on the one hand
or such Participant or such other Indemnified Person, as the case may be, on the
other, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages, judgments, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any reasonable legal or other expenses actually
incurred by such Indemnified Person in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall a Participant be required to contribute any amount
in excess of the amount by which proceeds received by such Participant from
sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the
amount of any damages that such Participant has otherwise been required to pay
or has paid by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled
<PAGE>
-30-
to contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability that the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
The Issuers covenant and agree that they will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner in
accordance with the requirements of the Securities Act and the Exchange Act and,
if at any time such Issuers are not required to file such reports, such Issuers
will, upon the request of any Holder or beneficial owner of Registrable Notes,
make available such information necessary to permit sales pursuant to Rule 144A
under the Securities Act. The Issuers further covenant and agree, for so long as
any Registrable Notes remain outstanding they will take such further action as
any Holder of Registrable Notes may reasonably request to the extent required
from time to time to enable such holder to sell Registrable Notes without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
9. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Issuers have not, as of
the date hereof, and the Issuers shall not, after the date of this Agreement,
enter into any agreement with respect to any of their securities that is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Issuers' other issued
and outstanding securities under any such agreements. The Issuers will not enter
into any agreement with respect to any of their securities which will grant to
any Person piggy-back registration rights with respect to any Registration
Statement.
<PAGE>
-31-
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Issuers
shall not, directly or indirectly, take any action with respect to the
Registrable Notes that would adversely affect the ability of the Holders of
Registrable Notes to include such Registrable Notes in a registration undertaken
pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, otherwise than with the
prior written consent of (I) the Issuers and (II)(A) the Holders of not less
than a majority in aggregate principal amount of the then outstanding
Registrable Notes and (B) in circumstances that would adversely affect the
Participating Broker-Dealers, the Participating Broker-Dealers holding not less
than a majority in aggregate principal amount or liquidation preference, as the
case may be, of the Exchange Notes held by all Participating Broker-Dealers;
PROVIDED, HOWEVER, that Section 7 and this Section 10(c) may not be amended,
modified or supplemented without the prior written consent of the Issuers and
each Holder and each Participating Broker-Dealer (including any person who was a
Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as
the case may be, disposed of pursuant to any Registration Statement) affected by
any such amendment, modification or supplement. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable may be given by Holders of at least a majority in
aggregate principal of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) NOTICES. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail (return receipt requested), next-day air courier or facsimile:
(i) if to a Holder of Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case
<PAGE>
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may be, set forth on the records of the registrar under the Indenture,
the Exchange Indenture or of the Issuers, as appropriate.
(ii) if to the Issuers, at the address as follows:
PRECISION PARTNERS, INC.
5605 MacArthur Blvd., Suite 760
Irving, TX 75038
Facsimile No.:(972) 580-1551
Attention: Chief Financial Officer
(iii) if to the Initial Purchasers, as provided in the
Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; one business
day after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in the Indenture if such communication
relates to the Notes, Exchange Notes or Private Exchange Notes.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; PROVIDED, HOWEVER,
that this Agreement shall not inure to the benefit of or be binding upon a
successor of assign of a Holder or a Participating Broker-Dealer unless and to
the extent such successor or assign holds Registrable Notes.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
<PAGE>
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(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) SECURITIES HELD BY THE ISSUERS OR THEIR AFFILIATES.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Issuers
or their affiliates (as such term is defined in Rule 405 under the Securities
Act) shall not be counted in determining whether such consent or approval was
given by the Holders of such required percentage.
(k) THIRD-PARTY BENEFICIARIES. Holders of Registrable Notes,
and Participating Broker-Dealers are intended third-party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
(l) ENTIRE AGREEMENT. This Agreement and together with the
Purchase Agreement and the Indenture are intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein and any and all prior
oral or written agreements, representations, or warranties, contracts,
understandings, correspondence, conversations and memoranda between the Holders
on the one hand and the Issuers
<PAGE>
-34-
on the other, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest
with respect to the subject matter hereof and thereof are merged herein and
replaced hereby.
<PAGE>
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PRECISION PARTNERS, INC.
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Chief Financial Officer
CERTIFIED FABRICATORS, INC.
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Vice President
GENERAL AUTOMATION, INC.
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Vice President
NATIONWIDE PRECISION PRODUCTS CORP.
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Vice President
<PAGE>
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MID STATE MACHINE PRODUCTS
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Vice President
GALAXY INDUSTRIES CORPORATION
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Vice President
CALBRIT DESIGN, INC.
By: /s/ Ronald M. Miller
---------------------------------------
Name: Ronald M. Miller
Title: Vice President
<PAGE>
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The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
SALOMON SMITH BARNEY INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
as Initial Purchasers
By: SALOMON SMITH BARNEY INC.
By: /s/ Darren Friedman
----------------------------------
Name: Darren Friedman
Title: Vice President
By: NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Brad A. Bernstein
----------------------------------
Name: Brad A. Bernstein
Title: Managing Director
<PAGE>
Exhibit 10.2
WAIVER AND AMENDMENT
This WAIVER AND AMENDMENT ("Waiver and Amendment") is made as of August
9, 1999 by and among PRECISION PARTNERS, INC., a Delaware corporation (the
"BORROWER"), PRECISION PARTNERS HOLDING COMPANY, a Delaware corporation, MID
STATE MACHINE PRODUCTS, a Maine corporation, GALAXY INDUSTRIES CORPORATION, a
Michigan corporation, CERTIFIED FABRICATORS, INC., a California corporation,
CALBRIT DESIGN, INC., a California corporation, GENERAL AUTOMATION, INC., an
Illinois corporation, and NATIONWIDE PRECISION PRODUCTS CORP., a New York
corporation, the Lenders listed on the signature pages hereof (the "Lenders")
and CITICORP U.S.A., INC., as Administrative Agent for the Lenders (in such
capacity, the "Agent"). This agreement is made with reference to that certain
Credit Agreement dated as of March 19, 1999, by and among the Borrower, the
Guarantors, the Agent, Bank of America, N.A. (successor to NationsBank, N.A.),
as Syndication Agent, Sun Trust Bank, Atlanta, as Documentation Agent, and the
Lenders (the "Credit Agreement"). All capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Credit
Agreement.
WHEREAS, the Borrower, the Agent, the Documentation Agent, the
Syndication Agent and the Lenders entered into the Credit Agreement;
WHEREAS, the Borrower has requested waivers of compliance with, and
amendment to, certain provisions of the Credit Agreement; and
WHEREAS, the Required Lenders desire to waive compliance with and amend
certain provisions of the Credit Agreement;
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. WAIVERS
1.1 Compliance with Section 7.1(b) (Consolidated Interest Coverage
Ratio) only with respect to the period ending June 30, 1999, is hereby waived.
1.2 Compliance with Section 7.1(c) (Consolidated Fixed Charge Coverage
Ratio) only with respect to the period ending June 30, 1999, is hereby waived.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT
2.1 Section 7.1(b) of the Credit Agreement is hereby amended by
replacing it with the following:
CONSOLIDATED INTEREST COVERAGE RATIO. Permit the Consolidated Interest
Coverage Ratio of the Borrower for any period of four consecutive fiscal
quarters ending during any period set forth below (i) if the Consolidated Senior
Leverage Ratio at the end of any such period for four consecutive fiscal
quarters is less than or equal to 2.0 to 1.0, to be less than that set forth
below in column A opposite such period, or (ii) if the Consolidated Senior
Leverage Ratio is greater than 2.0 to 1.0, to be less than that set forth below
in column B opposite such period:
<PAGE>
-2-
<TABLE>
<CAPTION>
Consolidated
Period Interest Coverage Ratio
------ -----------------------
A B
<S> <C> <C>
Closing Date - March 31, 1999 1.90 to 1.0 1.90 to 1.0
April 1, 1999 - June 30, 1999 2.00 to 1.0 (waived) 2.00 to 1.0 (waived)
July 1, 1999 - September 30, 1999 1.85 to 1.0 1.85 to 1.0
October 1, 1999 - December 31, 1999 1.90 to 1.0 1.90 to 1.0
January 1, 2000 - December 31, 2000 2.00 to 1.0 2.25 to 1.0
January 1, 2001 - December 31, 2001 2.25 to 1.0 2.50 to 1.0
January 1, 2002 - and thereafter 2.50 to 1.0 2.75 to 1.0
</TABLE>
2.2 Section 7.1(c) of the Credit Agreement is hereby amended by
replacing clause (iii) contained therein with the following:
(iii) for the three quarters ending September 30, 1999, to be less than
0.95 to 1.0;
SECTION 3. RATIFICATION OF AGREEMENT
3.1 To induce the Required Lenders to enter into this Waiver and
Amendment, the Borrower and the Guarantors jointly and severally represent and
warrant that after giving effect to this Waiver and Amendment no violation of
the terms of the Credit Agreement exist and all representations and warranties
contained in the Credit Agreement are true, correct and complete in all material
respects on and as of the date hereof except to the extent such representations
and warranties specifically relate to an earlier date in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
3.2 Except as expressly set forth in this Waiver and Amendment, the
terms, provisions and conditions of the Credit Agreement and the Credit
Documents are unchanged, and said agreements, as amended, shall remain in full
force and effect and are hereby confirmed and ratified.
SECTION 4. COUNTERPARTS; CONDITIONS TO EFFECTIVENESS
This Waiver and Amendment may be executed in any number of
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same instrument. Signature pages may be detached from
counterpart documents and reassembled to form duplicate executed originals. This
Waiver and Amendment shall become effective as of the date hereof upon the
execution of the counterparts hereof by the Borrower, the Guarantors and the
Required Lenders.
SECTION 5. GOVERNING LAW
THIS WAIVER AND AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW.
SECTION 6. ACKNOWLEDGMENT AND CONSENT BY THE GUARANTORS
Each Guarantor hereby acknowledges that it has read this Waiver and
Amendment and consents to the terms hereof and further confirms and agrees that
its obligations under its Guarantee are not impaired or adversely affected by
this Waiver and Amendment, and such Guarantee is, and shall continue to be, in
full force and effect and is hereby confirmed and ratified in all respects.
<PAGE>
-3-
Witness the execution hereof by the respective duly authorized officers
of the undersigned as of the date first above written.
PRECISION PARTNERS, INC.
NATIONWIDE PRECISION PRODUCTS
CORPORATION
GALAXY INDUSTRIES CORPORATION
MID STATE MACHINE PRODUCTS
GENERAL AUTOMATION, INC.
CERTIFIED FABRICATORS, INC.
CALBRIT DESIGN, INC.
By: /s/ R.M. Miller
----------------------------------
Name: Ronald M. Miller
Title: Vice President
PRECISION PARTNERS HOLDING COMPANY
By: /s/ R.M. Miller
----------------------------------
Name: Ronald M. Miller
Title: Chief Financial Officer
<PAGE>
-4-
CITICORP U.S.A, INC.
as Administrative Agent
By: /s/ Nicolas Erni
------------------------------
Name: Nicolas Erni
Title: Attorney In Fact
CITICORP U.S.A., INC.
as a Lender
By: /s/ Nicolas Erni
-------------------------------
Name: Nicolas Erni
Title: Attorney In Fact
BANK OF AMERICA, N.A. (successor to
NationsBank, N.A.), as a Lender
By: /s/ John J. O'Neill
-------------------------------
Name: John J. O'Neill
Title: Managing Director
SUNTRUST BANK, ATLANTA
as a Lender
By: /s/ S. M. Hall
-------------------------------
Name: Susan M. Hall
Title: Director
By: /s/ Chris T. Jones
-------------------------------
Name: Chris T. Jones
Title: Vice President
<PAGE>
Exhibit 10.3
GENERAL ELECTRIC COMPANY
GAS TURBINE SYSTEMS SOURCING OPERATION
REFERENCE: AGREEMENT NUMBER: GE - Mid-State - 0002
BETWEEN: General Electric Company (Purchaser)
Gas Turbine Sourcing Operation
300 Garlington Road
P.O. Box 648
Greenville, SC 29602-0648
And: Mid-State Machine Products, Inc. (Seller)
1501 Verti Drive
Winslow, Maine 04901
Whereas the parties wish to enter into a contractual relationship to establish
terms, delivery periods, and pricing for the purchase and sale of certain
machined products listed in Attachments "A" thru "D" and in consideration of
mutual promises, Purchaser and Seller agree as follows:
CONTRACT VISION
A commitment to fully satisfy the ultimate customer by entering into a
long term, mutually beneficial business relationship for a competitive
advantage through continuous improvement processes.
MUTUAL UNDERSTANDING:
* build a creative partnership with multi-functional partnering teams
to manage design integration, resource planning and quality
* manage the relationship not transactions
* commit totally to continuous improvement
* manage total cost for mutual profitability
* recognize co-destiny in business decisions through long term,
productivity-based Agreement
* share forecasts, plan long-range
* reduce cycles through stocking programs, smooth loading and
production control.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-1-
<PAGE>
1. TERM:
The initial term of this agreement starts Nov. 1, 1998 and continues
through those dates listed on Attachments "A" thru "D" with an option
to extend for subsequent years.
2. TERMINATION:
Purchaser or Seller may terminate this agreement at any time upon 180
days prior written notice to the other party. If the agreement is
terminated by the purchaser other than for Seller's default, the
purchaser is responsible to purchase from the Seller:
* Reserve quantities of materials that have been stocked
specifically for the Purchaser, provided, however, that in no
case shall Purchaser's obligation in this regard exceed 1
year's worth of requirements (prior to any reschedule) or items
normally stocked by Seller upon termination taking effect.
Purchaser will buy back in accordance with his production
schedule and will utilize this inventory prior to other
established inventories.
* Should potential cost reduction programs require equipment or
tooling which is agreed to by both parties and solely
beneficial to the Purchaser's process, the Purchaser will
reimburse the Seller for all moneys expended but not amortized
at the time of termination. Should this occur, Seller agrees to
transfer or convey titles to Purchaser any and all such tooling
and equipment as requested.
3. SCOPE:
Seller shall supply the Purchaser machined products to support the
Industrial & Power Systems Business in accordance with the items listed
in Attachments "A" thru "D", updated periodically to incorporate the
latest revisions.
4. GOAL:
The Goal is defined as the ability of the Seller to support the
Purchaser with quality parts, having on-time deliveries at competitive
pricing. Both parties working together have the responsibility to
achieve the Goal.
5. PRICING:
A) Base pricing is fixed and shall not increase for the term of this
Agreement
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-2-
<PAGE>
except for when the Purchaser makes changes in design, materials,
or requirements (new prices shall be set on development, drawing
amendments or additional parts subsequently amending Attachments
"A" thru "D").
6. PRODUCTIVITY:
Seller will continue to implement continuous productivity gains through
6 Sigma project activities.
The productivity projects are jointly agreed on by both parties and
involve the following types of activities:
* Seller manufacturing process improvements, i.e.
(cellularization, dedicated equipment, new equipment,
upgraded tooling, etc.)
* Seller involvement in design to assure manufacturability.
* Joint effort at product standardization.
* Seller will maximize productivity on fixed processes.
* Seller will increase worker productivity.
* Inventory control to level load shop activities and to
maximize repeatability of similar units.
* Purchaser will evaluate suggestions on a timely basis and
rapidly implement those that are acceptable.
* Purchaser to review their product in depth with the Seller
to evaluate the feasibility of the following:
A) Reducing testing requirements
B) Relaxing tolerances when possible
C) Developing similar shapes and features
D) Material substitutions
E) Redesigning to optimize manufacturability.
* Scrap reduction for both mature and development parts.
* Review of processes and equipment to ensure quality.
* Added volume of similar components.
All projects requiring Purchaser's approval will be documented and
responded to utilizing the supplier CRS input form.
An immediate reduction in the Seller's price will occur upon
implementation of a productivity project funded by the Purchaser
pursuant to Articles 4 and 5. For a productivity project funded by the
Seller, the Seller's price will be reduced only after the Seller's is
reimbursed for the tooling, fixturing, and/or equipment
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-3-
<PAGE>
purchased for the project by the savings generated from the project
pursuant to Articles 4 and 5. In both cases, tooling, fixturing, and/or
equipment as identified in the productivity project will become the
property of Purchaser upon completion.
7. GENERAL COST SAVINGS:
Purchaser agrees to identify those savings and reductions gained
through 6 Sigma project activities which are directly related to
conducting business with the Seller and to share any savings that can
be calculated and audited as directly attributable in terms of credit
towards our cost reduction goals. Such examples are as listed:
* Reduced transportation costs as compared to existing
supplier use.
* Reduced applied overhead.
* Reduction of total effort extended by Purchaser to maintain
program integrity.
* Methods Changes
8. ORDERING:
Purchase orders shall be issued by the individual Purchaser locations
and subject to the Standard GE Conditions of Purchase. If a conflict
exists between the terms of this contract and the Conditions of
Purchase, the terms of this contract will take precedence FOR
COMMERCIAL ORDERS ONLY. On Government orders the Conditions of Purchase
shall take precedence. The purchase order shall contain the following
specific data:
A.) Purchase order number and date
B.) Location
C.) The FOB point and mode of shipment
D.) Name and address of the person representing the Seller
and Purchaser
Purchase orders may include supplemental agreement clauses applicable
to orders relating to the United States Government agreement and
sub-contract. It is the intent of this agreement, that each Purchaser,
when available, will order and invoice via Electronic Data Interchange
(EDI), on a daily basis or as required. Each EDI order will reference
the 1ocation's purchase order number, date ordered, and the name of the
person entering the order. This method is solely a vehicle for
transporting data between the parties.
Purchaser commits to place a full 100% of its annual requirements of
material and/or equipment covered under this Agreement with the
exception of customer directed procurements and any notes appearing on
attachments. Purchaser reserves the right on any purchase order issued
hereunder for the work covered by this Agreement, to award up to 100%
of its requirements to other suppliers in the event that one or more of
the following occurs:
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-4-
<PAGE>
A.) Seller ceases to remain a qualified supplier pursuant to
Purchaser's qualification requirements.
B.) Seller is unable to meet Purchaser's delivery, quality,
or Goal requirements (Articles 8, 16, and 4,
respectively)
C.) Seller is in default of any of its obligations under this
Agreement or under purchase order issued pursuant to this
Agreement.
In the event, however, that Purchaser does not achieve this purchase
commitment, Seller may continue the relationship, on terms stated, or
terminate this Agreement as if Seller had given notice of termination
pursuant to Article 2. The preceding sentence states the sole recourse
of the Seller for any inability or failure by the Purchaser to meet the
stated purchase commitment.
9. CYCLE TIME:
Seller is committed to the Goal of continuous improvement on all
current cycle for commodities covered under this agreement.
10. AGREEMENT ADMINISTRATION:
Contractual agreement review meetings will be held on an as-needed
basis, but no fewer than one (1) per calendar year, to mutually
evaluate the performance of each of the parties. The GEPS Supplier
Scorecard will be the basis for the review with the areas to be
addressed will include, but not be limited, to the following:
- Information communication quality and accuracy
- Purchase volume/payment history
- Delivery/order lead time performance
- Emergency order handling
- Productivity teams status (i.e. Design Integration, Quality
and Resource Planning)
- Cost reductions implemented/documented
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-5-
<PAGE>
At each review, the performance of each participant will be quantified
where applicable. Goals to be achieved before the next review will be
mutually established.
11. FORECASTING:
Purchaser will provide as much forecasting information as possible to
assist Seller in establishing and maintaining adequate stocking levels
and/or to apply effective production control techniques (i.e. level
load shop, perform line of balance, etc.)
12. TERMS OF PAYMENT:
Payment by Purchaser shall be Net 45 days following the later date of
Seller's invoices or receipt of product and services by Purchaser.
Seller will re-bill any unearned discounts beyond 17 calendar days. GE
Capital will negotiate payment discounts separately.
13. INVOICING:
Invoices will be submitted by Seller to the Purchaser location
indicated on the purchase order. Invoices will reference Purchaser's
purchase order number and will contain such other information as
Purchaser may reasonably request. As referenced in Article 8 "ORDERING"
in the future the Seller will invoice the Purchaser via Electronic Data
Interchange (EDI). Each EDI invoice must reference the 1ocation's
purchase order number, item number, schedule number, and other required
data as determined by Purchaser's Accounts Payable Organization.
14. SHIPPING TERMS:
All shipments will be FOB Shipping Point, title to said goods to pass
to Purchaser upon delivery to Purchaser's dock. Transportation charges
to be billed directly to Purchaser by carrier and will be borne by
Purchaser. Seller must use Purchaser's designated corporate- agreement
careers which are indicated on the purchase order. Risk of loss remains
with Seller until delivered to Purchaser.
15. SPECIFICATIONS:
Product supplied under this agreement to be either commercial grade or
specialty grade as defined by Purchaser's specifications or
manufacturer stock number. No substitutions will be allowed without
Purchaser's written approval.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-6-
<PAGE>
16. QUALITY:
Seller agrees to meet purchaser's quality requirements and to work
towards the established Purchaser's goal of a 6 Sigma Quality Level.
Purchaser requirements include:
* Process control of critical processes.
* Responding to corrective action requests.
* Established quality measurements.
* Established quality improvement measurements.
* A continuous improvement program to increase quality.
* A documented quality system.
* A documented quality program.
* Maintain ISO 9000 Certification.
The Seller also agrees to meet all quality requirements defined in
Purchaser's supplier product quality plans as set forth in the purchase
order. Failure of Seller to meet Purchaser's quality and qualification
requirements will result in disqualification.
17. SECRECY AGREEMENT:
The technical data and information which has been or may hereafter be
furnished to Seller by Purchaser in connection with the Seller's supply
of turbine related items, or purchasing services therefore, is the
property of Purchaser, and has been furnished solely to enable Seller
to render service to Purchaser, and has been furnished solely to enable
Seller to render service to Purchaser and with the understanding (1)
that Seller will not use or reproduce such technical data and
information for any other purpose, (2) that Seller will take all
reasonable care to ensure that such technical data and information is
not disclosed to other parties, except to enable such parties to render
service to Purchaser for products covered under this Agreement provided
that in all such cases Seller shall require acceptance of this
provision by the other party, (3) that Seller will not furnish,
disclose, ship, export or re-export, directly or indirectly, any
Purchaser furnished technical data or information (including computer
software) and direct products thereof without first receiving the prior
written consent of Purchaser and (4) that upon request Seller will
promptly return all such technical data and information at any time
during or after completion of such supply or purchasing services. The
foregoing restrictions on disclosure and use of Purchaser's technical
information and data shall not apply to any technical information and
data which:
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-7-
<PAGE>
a.) is already in Seller's possession at the time of first
receipt from Purchaser; or
b.) is independently developed by Seller's employees who had
not had access to the technical information and data; or
c.) is or becomes part of the public domain without breach of
this agreement by Seller; or
d.) is rightfully obtained by Seller from third persons
without restriction or breach by this agreement by Seller.
Execution of this agreement by both Purchaser and Seller
indicates acceptance of the above provision.
18. INDEMNIFICATION:
The Seller agrees to hold harmless and indemnify the Purchaser (its
Customer) and other third parties from any rightful claims for personal
and property damage and any associated costs, including but not limited
to legal expenses, when such claims arise out of the performance of
this agreement and are determined to be the result of the willful
misconduct, or negligent acts or omissions of the Seller or Seller's
agents, employees, or subcontractors. Furthermore, Seller agrees to
maintain and provide insurance covering these liabilities in the amount
and form as required under the Insurance Clause of this agreement.
19. INSURANCE:
The Seller shall comply with the Social Security and Unemployment
Insurance Laws, as now or hereafter enforced, and holds the Purchaser
harmless against any demands for contribution of taxes with respect to
the work payable under any such laws. Without limiting any of the other
obligations or liabilities of the Seller, the Seller shall, before
commencing work on the Purchaser's or its Customer's premises provide
and maintain, until the work is completed and accepted by the
Purchaser, minimum insurance coverage as follows:
<TABLE>
<CAPTION>
TYPE OF COVERAGE LIMITS
---------------- ------
<S> <C>
Workmen's Compensation, including Statutory
coverage under Longshoremen's and Harbor
Worker's act, where applicable
Employer's Liability $1,000,000 Each Occurrence
Comprehensive General Liability $2,000,000
Bodily Injury... Combined Single Limit Property
Damage (including coverage for damaged Each Occurrence
caused by blasting, collapse or structural
injury and/or damage to property in the
Seller's care, custody, or control)
</TABLE>
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-8-
<PAGE>
<TABLE>
<CAPTION>
TYPE OF COVERAGE LIMITS
---------------- ------
<S> <C>
Contractor's Protective Liability, operations of $1,000,000 covering
subcontractors, where applicable Combined Single Limit
Bodily Injury... Each Occurrence
Property Damage...
Contractor's Liability in accordance $1,000,000
with agreement(s) between Purchaser and Seller Combined Single Limit
Bodily Injury... Each Occurrence
Property Damage...
Comprehensive Automobile Liability covering $1,000,000
all owned, hired and non-owned automotive Combined Single Limit
equipment used by or with the permission of Each Occurrence
the Seller (including the loading and unloading
thereof) with the Purchaser included as an
additional insured Bodily Injury...
Property Damage...
</TABLE>
All such insurance policies shall be delivered to the Purchaser, if and
when directed by the Purchaser, and in any event, the Seller shall
arrange with the insurance carriers to furnish the Purchaser with a
completed Certificate of Insurance Form, indicating that the required
coverage are in force and will not be canceled or changed until ten
(10) days after written notice is given to the Purchaser.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-9-
<PAGE>
20. PROPRIETARY RIGHTS AND PATENT INDEMNIFICATIONS:
(a) If Seller provides Purchaser with one of Seller's "off-the-shelf"
items which has been designed and developed by Seller, Purchaser
acknowledges that Seller has all proprietary rights to such items, and
Seller provides Purchaser with a license to use such items by selling
said items to Purchaser. Such items are subject to the patent
indemnification provisions of Article 18 of the "Conditions of
Purchase".
b) If Purchaser and Seller work together to design and develop a
product or a process, all proprietary rights in such product or process
will belong to Purchaser. Seller agrees to assign all rights in such
products or processes to Purchaser. Purchaser reserves the right to
assign or license all or part of such proprietary rights to Seller on a
case-by-case basis, depending on several factors such as the amount of
any development funds provided by Seller, the amount of time spent by
Seller's engineers in developing a product or process at Seller's
expense, and the amount of risk incurred by Seller with respect to the
final commercial acceptability of the product or process. Any such
assignment or license will be subject to GE Corporate Policy No. 30-10.
The patent indemnification provisions of Article 18 of the "Conditions
of Purchase" will not apply when Purchaser owns all proprietary rights;
however, when Purchaser assigns or licenses all or part of the
proprietary rights to Seller, the patent indemnification provisions of
Article 18 of the "Conditions of Purchase" will be reviewed for
applicability on a case-by-case basis.
(c) If Purchaser provides Seller with specifications for a product or
process, and Purchaser has designed and developed the specifications at
its own cost through its own employees, consultants, subcontractors,
etc., then all proprietary rights to the product or process belong to
Purchaser. In this case, the patent indemnification provisions of
Article 18 of the "Conditions of Purchase" will not apply to Seller.
21. FORCE MAJEURE:
Neither party shall be liable to the other for default or delay in the
performance of any of its obligations hereunder due to act of God,
accident, fire, flood, storm, riot, war, sabotage, explosion, strike,
government law, labor disturbance, national defense requirement,
ordinance, rule or regulation, inability to obtain electricity or other
type of energy, raw material, labor, equipment, or transportation, or
any other cause beyond its reasonable control and without its fault or
negligence, or as
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-10-
<PAGE>
otherwise provided herein. Seller shall notify Purchaser in writing of
any impending delay due to the occurrence of any of the preceding
events. In the event of a partial interruption or failure of Seller's
sources of product or distribution capability, Purchaser shall have the
right to determine the distribution of its allocation among it's
locations serviced from Seller's producing points.
22. COMPLETE AGREEMENT:
This Agreement, including all matters expressly incorporated herein by
reference, and the partnering agreement dated May 8th 1992, constitutes
the entire and any agreement between the parties respecting the subject
matter hereof, and there are merged herein all prior and pre-existing
representations and agreements made by and between Purchaser and
Seller.
23. NOTICES:
Notices, reports, and other communications made with respect to this
agreement shall be given in writing, addressed to the parties at the
following addresses or such other addresses as may be designated in
writing by either party to the other. All notices required to be given
hereunder shall be effective when delivered by hand or when deposited
in the United States Mail, with proper postage for First Class Mail
Prepaid.
<TABLE>
<CAPTION>
To Purchasers:
<S> <C>
Manny Gaspar Others on distribution:
Jay Valachovic Walter Rhodes
Strategic Sourcing
General Electric Company
GE Power Systems
P.O. Box 648
Greenville, SC 29602
To Seller: Others on distribution:
Richard M. Bolduc Douglas Sukeforth
Outside Sales Contracts Manager Jim Ashton
Ralph Robbins
Manager of Sales
Mid-State Machine Products, Inc.
1501 Verti Drive
Winslow, ME 04901
(207) 873-6136
</TABLE>
24. AMENDMENTS AND WAIVERS:
No terms or provisions of this agreement may be changed, waived,
discharged or terminated orally but only by an instrument in writing
signed by the party against
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-11-
<PAGE>
whom the enforcement of such change, waiver, discharge or termination
is sought.
25. GOVERNING LAW:
The validity, interpretation and performance of this agreement shall be
determined in accordance with the Laws of the State of New York.
IN WITNESS WHEREOF THE PARTIES HAVE CAUSED THIS
AGREEMENT TO BE EXECUTED:
PURCHASER SELLER
General Electric Company Mid-State Machine Products, Inc.
Power Systems Sourcing Operation 1501 Verti Drive
P.O. Box 648, 300 Garlington Road Winslow, ME 04901
Greenville, SC 29602
Signed /s/ Manny Gaspar Signed /s/ Richard M. Bolduc
---------------------------- --------------------------
By: Manny Gaspar By: Richard M. Bolduc
Title: Strategic Sourcing Title: Outside Sales Contracts
Manager
Date 12/01/98 Date 12/01/98
------------------------------ ----------------------------
Signed: /s/ Jay B. Valachovic Signed: /s/ Ralph Robbins
--------------------------- -------------------------
By: Jay Valachovic By: Ralph Robbins
Title: Strategic Sourcing Title: Manager of Sales
Date: 12/01/98 Date: 12/01/98
--------------------------- --------------------------
rbgeagre
November 9, 1998
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
-12-
<PAGE>
STANDARD SCRAP AGREEMENT
*
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
<PAGE>
ATTACHMENT A
*
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
<PAGE>
ATTACHMENT B
*
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
<PAGE>
ATTACHMENT C
*
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
<PAGE>
ATTACHMENT D
*
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
<PAGE>
Exhibit 10.4
PURCHASE AGREEMENT
This Agreement is made as of the 26th day of October, 1999, by and between
Caterpillar Inc., a Delaware corporation ("Buyer"), and Galaxy Industries
Corporation, a privately held Michigan Corporation, ("Seller"), 41150 Joy Road,
Plymouth, Michigan 48170, for purchase and sale of 3406C and 3406E cylinder
block assemblies. Buyer and Seller hereby agree as follows:
1. PRODUCTS COVERED BY AGREEMENT
- ---------------------------------
This Agreement concerns the purchase and sale of 3406C and 3406E cylinder block
assemblies for the Caterpillar model 3406C and 3406E engines (such cylinder
block assemblies are hereinafter called "Product" and are more particularly
identified by the Caterpillar Part numbers specified in Exhibit A), manufactured
to Buyer's specifications.
2. PURCHASE AND SALE OF PRODUCT
- --------------------------------
Seller will maintain adequate capacity to manufacture not less than * units
of Product annually based on a five day per week work schedule calculated at an
eighty (80) percent efficiency factor. Buyer commits to purchase a minimum of
* units of Product annually. Notwithstanding the foregoing purchase
requirements obligation, nothing in this Agreement shall preclude Buyer from
sourcing Product from suppliers other than Seller in order to enable Buyer to
meet governmentally determined local country sourcing or minimum content
requirements, whether mandated or established by other means such as quotas,
duties or fiscal incentives or penalties.
3. PRODUCT PRICES
- ------------------
Prices are effective February 23, 2000 and are as shown in Exhibit A and
subsequently adjusted as provided in Section 9. Exhibit A may be modified from
time to time by the signed written agreement of both parties.
4. TOOLING
- -----------
From time to time, Buyer will issue to Seller durable tooling, fixture and/or
gauging purchase orders authorizing Seller to purchase, and to charge back to
Buyer, certain durable tooling, fixtures and/or gauging. Such durable tooling,
fixtures and/or gauging will not exceed * in cost and is identified in
Exhibit B hereto. Buyer shall retain ownership of all such items listed in
Exhibit B, and Seller agrees to properly maintain such items at its own expense.
5. TERM
- --------
Buyer shall commence its purchases under this Agreement February 23, 2000.
Unless terminated pursuant to other provisions herein, this Agreement shall
continue until terminated by either party at any time upon not less than twelve
(12) months prior written notice to the other party specifying the effective
date of termination; provided, however, that in no event shall the effective
date of termination be prior to February 23, 2006.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
1
<PAGE>
6. TERMINATION
- --------------
Buyer may terminate this Agreement at any time, either totally or partially, in
the event of the following defaults by the Seller which are not cured within
thirty (30) days of written notice to the Seller.
(a) QUALITY - Products do not consistently meet Buyer's technical,
quality, reliability, and other specifications as they exist today and are
communicated to Seller from time to time. Buyer will not be liable for any
expenses, material, tooling, labor, or burden due to substandard quality.
(b) DELIVERY - Seller does not meet all Buyer schedules with timely
shipments and daily shipments, if required. Buyer should not have to expedite
normal deliveries. It is the obligations of the Seller to maintain an up to
schedule condition after a reasonably time period. That time period will be
agreed upon by Seller and Buyer for each part number listed in Exhibit A. Upon
cases of nondelivery, in addition to any other rights hereunder or provided by
law, Buyer has the right to purchase the needed Product on the open market in a
commercially reasonable manner, and Buyer and Seller agree to negotiate "cost to
cover" charges as well as mitigate Buyer damages.
(c) COMPETITIVENESS - Seller fails to be responsive to the market place
or fails to remain competitive with other manufacturers of comparable parts in
terms of price, quality, quantity, availability, engineering, services,
technology, reliability, and timely delivery. For purposes of this contract,
prices shown in Exhibit A are deemed to be competitive.
(d) SELLER INSOLVENCY - Seller shall become insolvent or otherwise
generally be unable to pay debts as they come due, or make a general assignment
for the benefit of creditors.
(e) SELLER BANKRUPTCY - A petition under any bankruptcy act or similar
statute is filed by a creditor or Seller and is not vacated with ten (10) days
through court order.
(f) DEFAULT GENERALLY - Default by Seller in any obligation owed by
Seller to Buyer.
Buyer's decision on termination shall be final. Seller has (30) days from
postmarked date of written notice to rectify defaults. Buyer will be reasonably
in making the final decision.
7. USE OF OTHER SUPPLY SOURCES
- -------------------------------
Nothing in this Agreement shall prevent Buyer from seeking other sources for
Product if Seller's production capacity is insufficient to meet Buyer's needs.
Seller will be provided the opportunity to quote additional volumes.
8. SHIPPING INSTRUCTIONS, TERMS AND CONDITIONS
- -----------------------------------------------
Buyer requires 100% on time shipments of the delivery plan to meet production
and service requirements.
Orders will be placed using Buyer's standard purchase order and shipping
instruction forms. Any special freight charges will be Seller's responsibility
if necessary to meet not more than one hundred fifteen percent (115%) of Buyer's
then current requirements, provided Seller is given not less than twenty (20)
days notice of such requirements. The terms and conditions of Buyer's purchase
order will govern these purchases to the extent that they are not inconsistent
with this Agreement.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
2
<PAGE>
9. PRICE CONTAINMENT
- ---------------------
Both Seller and Buyer are committed to controlling and reducing costs, and both
recognize that effective cost control is of the essence to this Agreement. While
this Agreement is in effect, Seller will maintain a cost control and reduction
program with respect to Product, and will review costs on a regular basis for
progress toward the objective of maintaining or reducing Seller's prices to
Buyer. A constant interaction between Buyer's and Seller's engineering personnel
is essential. All documented cost savings on Seller's machining of the cylinder
block, whether through the efforts of Seller or Buyer, will be shared on a 50/50
basis.
10. ASSIGNMENT; APPLICABLE LAW
- -------------------------------
This Agreement is not assignable by Seller without the written consent of Buyer
and will be governed by and construed in accordance with the laws of the State
of Illinois, without regard to the conflict of laws provisions thereof.
11. CHANGE IN OWNERSHIP AND CONTROL
- ------------------------------------
During this Agreement, if there is a change in the ownership and control of
either party, the other party shall have the option of terminating this
Agreement immediately by giving written notice thereof. For the purposes of this
Section 11, a change in the ownership and control of either Buyer or Seller or a
parent company of either party, if appropriate, shall be deemed to have occurred
if and when any one or more persons acting individually or jointly hereafter
becomes a beneficial owner, directly or indirectly, of securities representing
twenty-five percent (25%) or more of the combined voting power of the then
outstanding securities of Seller or Buyer or the parent company of either party.
12. QUALITY
- ------------
The Quality System Standard QS-9000 Section 1 shall be the fundamental quality
system standard applied to the processes required to produce Caterpillar
products. In addition, there are Buyer specific quality system and process
control elements that shall be included as stated in the Supplier Guideline for
preparing Quality Plans and the Engine Division Supplier Certification
Guidelines (the "Buyer Standards"). The seller shall develop quality systems and
process control programs that are documented in adequate detail that fulfill
both the QS-9000 standard and Buyer standards. There may be additional data
required based on the type of product being produced and supplied to
Caterpillar. The supplier shall provide copies of the Quality Manual, quality
systems and process control support documentation upon request by Buyer
representatives. Buyer may request the supplier provide periodic statistical
data on critical process and product characteristics.
Changes to the manufacturing processes and/or product shall be communicated to
Buyer prior to implementing the change by completing the Production Part
Approval Process (PPAP) and utilizing the Process Change Management process.
This will include changes required by Buyer's design changes or changes by the
seller to improve the process throughput, cost, quality and/or capability. The
Global 8D Problem Solving process shall be the preferred method for documenting
problems and corrective actions.
Seller shall validate and report metallurgical, dimensional, and soundness data
to ensure Buyer's specification are fulfilled. Seller shall retain all records
for a minimum of 2 years from the date of the last shipment. Copies of these
records shall be provided to Buyer upon request.
The seller shall obtain registration to QS-9000 by an accredited registrar by
December 31, 2000.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
3
<PAGE>
13. INDEMNIFICATION
- --------------------
Seller agrees to indemnify, defend, and hold buyer harmless against and from all
claims, demands, liabilities, loss, damage, cost, and expense, of whatsoever
nature, arising from or in any way connected with the injury or death of any
person or loss or damage to property as a consequence of, or attributable to,
any defect of design, material, or workmanship of Product or failure of Product
to conform with Seller's and Buyer's specifications, drawings, and data.
14. FORCE MAJEURE
- ------------------
Neither Buyer nor Seller shall be liable for any delay in or failure of
performance of their respective obligations hereunder if such performance is
rendered impossible by reason of fire, explosion, earthquake, accident,
breakdown, strike, drought, embargo, war, riot, act of God or of public enemy,
an act of governmental authority, agency or entity, shortage of raw materials,
or any other contingency, delay, failure or cause, beyond the reasonable control
of the party whose performance is affected, irrespective of whether such
contingency is specified herein or is presently occurring or anticipated by
either party. Upon the occurrence of any event covered by this provision, Seller
and Buyer shall make every effort to continue to maintain as much as possible
the supplier-customer relationship established under this Agreement. However, in
the event Buyer and Seller is unable to meet its obligations hereunder because
of the conditions described above and such inability continues for a period of
two (2) months, the other party shall have the right to terminate this Agreement
upon thirty (30) days prior written notice.
15. WARRANTY PARTICIPATION
- ---------------------------
Seller warrants that each Product shall be in full conformity with Seller's and
Buyer's specifications, drawings, and data. Seller agrees to credit Caterpillar
for any Product covered under the standard warranty provided by Caterpillar to
its customers and sold by Seller, which is deemed defective through a joint
review process performed by Buyer and Seller, in the amount of Dealer Net Price,
limited to three (3) times the purchase order price, plus any reasonable and
customary charges for labor performed during normal working hours caused by
failure of the Product or its replacement.
For any ancillary damage caused by Product failure, where Product was the causal
part, as identified through a joint review process, Seller shall credit Buyer
for the cost of any and all parts damaged because of the Product failure in the
amount of dealer net price, not to exceed a total amount for ancillary damage of
$100,000 per calendar year.
These costs shall be identified by Caterpillar through its Field Incident
Reports and Service Information System. Caterpillar agrees to make available
appropriate engineering personnel for review of defective Product as requested
by Seller, at Caterpillar's facility.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
4
<PAGE>
16. MISCELLANEOUS
- ------------------
This Agreement and the terms and conditions referenced in any purchase order
issued by Buyer in connection with this Agreement (to the extent not
inconsistent with this Agreement) constitute the entire agreement and
understanding between the parties with respect to the subject matters herein and
therein, and supersede and replace any prior agreements and understandings,
whether oral or written, between them with respect to such matters. The
provisions of this Agreement may be waived, altered, amended or repealed in
whole or in part only upon the written consent of all parties to this Agreement.
The waiver by either party of any breach of this Agreement shall not be deemed
or construed as a waiver of any other breach, whether prior, subsequent or
contemporaneous of this Agreement. Invalidation of any of the provisions
contained herein, or the application of such invalidation thereof to any person,
by legislation, judgment or court order shall in no way affect any of the other
provisions hereof or the application thereof to any other person, and the same
shall remain in full force and effect unless enforcement as so modified would be
unreasonable or grossly inequitable under all the circumstances or would
frustrate the purposes hereof. Section headings contained herein are for ease of
reference only and shall not be given substantive effect. This Agreement may be
signed in one or more counterparts each to be effective as an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives as of the date first set forth above.
CATERPILLAR INC. GALAXY INDUSTRIES CORPORATION
("BUYER") ("SELLER")
By: /s/ W. M. McCowan By: /s/ BUD GOLDSMITH
------------------------- --------------------------------
Title: GESM Title: PRESIDENT/CEO
---------------------- --------------------------------
Date: November 9, 1999 Date: OCTOBER 26, 1999
---------------------- --------------------------------
By: /s/ C.P. Elwyn
----------------------
Title: Manufacturing Manager
----------------------
Date: December 15, 1999
----------------------
By:
----------------------
Title:
----------------------
Date:
----------------------
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
5
<PAGE>
EXHIBIT A
*
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
6
<PAGE>
EXHIBIT B
Durable tooling, fixtures and/or gauging owned by the Buyer:
At the completion of this project Seller will provide complete documentation for
the durable tooling, fixtures and/or gauging purchased on the Buyer's behalf.
Documentation will include a complete description of the durable tooling,
fixtures and/or gauging purchased and the price paid by Seller. Seller further
commits to label all durable tooling, fixtures and/or gauging so that it is
easily identifiable as the property of Buyer and to provide a complete list of
all durable tooling, fixture and/or gauging to Buyer. Exhibit B will then be
revised to reflect the additional detail.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
7
<PAGE>
Exhibt 10.5
PURCHASE AGREEMENT
This Purchase Agreement ("Agreement"), dated as of the 7th day of February 2000,
is made by and between DANA CORPORATION, SPICER HEAVY AXLE & BRAKE DIVISION,
6938 Elm Valley Drive, Kalamazoo, Michigan, 49009 (hereinafter called "DANA"),
and NATIONWIDE PRECISION PRODUCTS CORPORATION, 200 Tech Park Drive, Rochester,
New York 14623 (hereinafter called "NPP").
WHEREAS, DANA is engaged in the design, manufacture and sale of axles, brakes
and other powertrain components for medium and heavy duty trucks; and
WHEREAS, NPP is in the business of performing machining services; and
WHEREAS, DANA desires to use NPP to perform machining services on purchased
components which are incorporated into DANA's axle products;
NOW, THEREFORE, in consideration of the obligations and premises set forth
herein, NPP and DANA agree as follows:
1.0 SERVICES AND TERMS OF PURCHASE
1.1 During the term of this Agreement DANA agrees to
purchase from NPP and NPP agrees to supply to DANA,
machined parts (collectively referred to hereinafter
as "Parts") to be incorporated into DANA's axle
products.
1.2 The Parts that Nationwide will supply include all
part numbers listed on the attached Exhibit A.
Exhibit A may be revised from time to time to add or
delete Parts as agreed to by both parties.
1.3 The purchased components (such as raw castings,
forgings, bearings, hardware, etc.) which are to be
machined shall be purchased by NPP from suppliers and
at costs designated by DANA.
1.4 DANA shall issue a blanket purchase order or orders
to NPP for the Parts based on the agreed prices. DANA
shall order Parts from NPP by issuing releases
against such purchase orders, designating the mix and
volume of Parts, delivery date and agreed delivery
location.
1.5 Except as otherwise provided in this Agreement,
Dana's standard purchase order items and conditions
("Standard Terms") in effect on the date a release is
issued shall apply to all purchases made by DANA. The
current Standard Terms are set out in the attached
Exhibit B. DANA may change these Standard Terms from
time to time without prior notice to NPP.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
1
<PAGE>
2.0 PRICE
2.1 NPP's invoice price for each Part supplied to DANA
will be the sum (a) the price paid by NPP for the
purchased component, (b) a handling fee equal to *
of NPP's price for the purchased component(s), (c)
the price of the machining services performed on the
component.
2.2 The prices for all machining services performed
through December 31, 2001, will be those set out in
Exhibit A. The prices for machining services will be
reduced by * in the year 2000 from 2001 pricing. The
2002 prices will remain in effect for the remainder
of the term of this Agreement.
2.3 The machining services prices are based on NPP's
receiving aggregate annual revenue of * for
performing the services, including the * handling
fee, in 2001 and * including the *
handling fee, thereafter during the term of this
Agreement. These prices will be in effect as long as
NPP received +/- 10% of this value added billing
annually. If the value added billings are outside the
+/- 10%, DANA and NPP agree to reevaluate the pricing
structure. Parts over-and-above those listed in
Exhibit A may be added to meet revenue targets.
2.4 Charges for inbound freight to NPP from designated
DANA suppliers and any non-returnable containers will
be billed to DANA at cost.
2.5 NPP will procure all special gages, special cutting
tools and general gages required to perform the
machining services, at the best available prices, and
DANA will pay NPP * for the tooling, on or
after January 1, 2001, upon receipt of NPP's itemized
invoice for the tooling and subject to full
Production Part Approval Process ("PPAP") approval of
the machined Parts produced therefrom. The tooling
will be "Special Tooling" under Section 11 of the
Standard Terms. The tooling will belong solely to
DANA upon payment therefor and NPP will cooperate
with DANA in the filing of any UCC Form 1 or similar
documents evidencing its title. NPP will also procure
all necessary machine fixtures, at its own expense,
and these fixtures will belong solely to NPP.
3.0 DELIVERY
3.1 Delivery and pricing of the Parts will be F.O.B NPP's
Plant in Rochester, NY.
3.2 DANA will provide reusable outbound shipping
containers for the Parts.
3.3 DANA and NPP will mutually develop a packaging
specification satisfactory to both parties.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
2
<PAGE>
3.4 DANA will select the freight carriers for inbound
shipments to NPP and outbound shipments from NPP to
DANA, negotiate the corresponding freight rates, and
reimburse NPP for all freight charges that NPP will
invoice separately.
4.0 INVOICE AND PAYMENT TERMS
4.1 NPP will invoice DANA when the Parts are shipped.
4.2 The terms of payment for undisputed invoices are net
thirty (30) days from the receipt of the invoice,
with a 1/2% discount off the invoice price for
payments made within ten (10) days.
5.0 TERM AND CANCELLATION
5.1 This Agreement will be in effect from the date first
written above through December 31, 2006, unless
cancelled sooner as provided herein or in the
Standard Terms. If the parties wish to extend this
Agreement beyond the initial term for one-year
renewal terms, they will commence renewal
negotiations by July 1, 2005.
5.2 Section 18 of the Standard Terms (or any equivalent
provision in a subsequent version of the Standard
Terms providing for the termination by DANA for
convenience) will not apply to this Agreement and
DANA will not exercise any of its cancellation rights
as long as NPP meets all performance criteria
outlined in this Agreement.
5.3 The notice and cure period provided in Section 19 of
the Standard Terms (or any equivalent provision in a
subsequent version of the Standard Terms) will be
ninety (90) days.
5.4 In the event either NPP or DANA (1) ceases to
function, (2) liquidates, dissolves, sells
substantially all of its assets, (3) undergoes
significant management realignment or change, (4)
merges or consolidates and is not the surviving
corporation, the other party shall have the right to
cancel this Agreement immediately by giving written
notice.
6.0 OBLIGATIONS OF NPP
In performance of its obligations under this Agreement, NPP
agrees that it will:
6.1 PPAP all Parts prior to November 30, 2000. The PPAP
process will commence no later than July 1, 2000. NPP
is not responsible for the PPAP approval of purchased
components.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
3
<PAGE>
6.2 Maintain adequate facilities and personnel to meet
its obligations hereunder, including, but not limited
to, development of an inventory control system to
assure proper storage of purchased components and
finished Parts and prompt handling of inquiries,
orders and shipments.
6.3 Perform the machining services according to DANA's
Supplier Quality Manual (11/89 Rev. 2) and Spicer
Heavy Axle & Brake Division's QSR- 109 (October
1999).
6.4 Provide evidence of conformance to DANA's quality
assurance procedures as reasonably requested and
permit DANA or its designee upon reasonable advance
notice to audit NPP's quality assurance procedures
and review pertinent inspection records.
6.5 Not make modifications to the purchased components
except in accordance with DANA's Parts specifications
and/or written instructions.
6.6 Notify DANA promptly of all problems relating to the
machining services or NPP's other obligations to be
performed under this Agreement if such problems will
impact delivery or quality of the Parts to be shipped
to DANA.
6.7 Maintain such records relating to machining services
provided under this Agreement as DANA may reasonably
require.
6.8 Deliver the Parts in accordance with DANA's releases,
subject to the following provisions:
a. NPP is committed to 100% on time delivery,
but in no event will be less than 98% on
time, based on DANA's providing NPP with a
rolling 4 (four) week firm schedule and a 5
(five) month planning forecast.
b. If DANA permanently cancels its orders for
any Parts, it will reimburse NPP for the
costs of components for those Parts which
NPP purchased within the forecast period and
which are not returnable.
c. DANA will assure that quantities of outbound
packaging are sufficient to meet delivery
schedules.
d. Lack of performance by the freight carrier
or the purchased components supplier without
fault of NPP will not be considered non
performance by NPP.
6.9 Maintain high quality standards that include but are
not limited to the following:
a. Maintain quality systems compliant with
QS-9000.
b. Achieve a 200 parts per million ("PPM")
maximum target.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
4
<PAGE>
6.10 Maintain an inventory bank of 5 (five) days for high
volume Parts and 10 (ten) days for low volume Parts.
These banks may vary +50%. The high - versus low
volume designations will be mutually agreed upon
prior to January 1, 2001.
6.11 Provide an inventory of the tooling that is owned by
DANA under Section 2.5.
6.12 Cooperatively work with DANA on an exit program to
transition this business to another supplier or
DANA's internal operations on the expiration,
termination or cancellation of this Agreement.
7.0 DANA'S OBLIGATIONS
In the performing of its obligations under this Agreement,
DANA agrees that it will:
7.1 Provide NPP with the most current print revisions
(including all specifications) available for the
Parts at the commencement of this Agreement and from
time to time thereafter as changes are made. In
addition, if there are any revisions to the Part
prints or specifications, DANA agrees to purchase all
obsolete components and finished Parts in inventory
at NPP, not to exceed a reasonable quantity and mix
consistent with DANA's firm schedules and NPP's
customary lead times for purchased components, prior
to changeover.
7.2 Own the tooling used by third parties to manufacture
the components that are purchased by NPP hereunder
for machining and be responsible for any and all
design changes, repairs and replacements for such
tooling.
7.3 Provide facility space at no cost to NPP for the
inventory bank described in Section 6.10, should DANA
and NPP mutually agree to have the bank located
outside NPP's facilities.
7.4 Provide all returnable drainage and packaging
necessary for outbound shipments of Parts from NPP to
DANA.
7.5 Assist NPP in resolving any quality issues with the
purchased component suppliers should NPP be unable to
resolve them directly and promptly.
7.6 Consider NPP as a preferred source for machining
services and afford NPP the opportunity to quote any
new or replacement business.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
5
<PAGE>
8.0 CONFIDENTIALITY
8.1 The confidentiality provisions of the Standard Terms
attached hereto as Exhibit B will apply mutually to
both parties during the term of this Agreement and
will not be superseded by any subsequent version of
the Standard Terms without both parties' written
consent.
8.2 All materials, including without limitation
documents, drawings, models, apparatus, sketches,
designs and lists, furnished to NPP by DANA shall
remain the property of DANA and shall be returned to
DANA, erased and/or destroyed promptly at DANA's
request, as well as all copies made thereof.
9.0 MISCELLANEOUS
9.1 NOTICES. All notices, requests, consents and other
communications hereunder shall be deemed to have been
duly given hereunder if in writing and, upon receipt
when delivered by hand or sent by courier, facsimile
transmission or telex, or three (3) calendar days
after being mailed by first class mail, postage
prepaid, in each case addressed as follows:
To DANA: To NPP:
Dana Corporation Nationwide Precision Products
Spicer Heavy Axle & Brake Div. 200 Tech Park Drive
6938 Elm Valley Drive Rochester, New York 14623
Kalamazoo, Michigan 49009
Attn: Purchasing Manager Attn: Vice President - Sales
or such address as the addressee party may have
previously designated in writing by notice to the
other party, and such notice or communication shall
be deemed to have been given as of the date so
delivered or mailed.
9.2 SUCCESSORS AND ASSIGNS; OTHER PARTIES. This Agreement
and the parties' respective rights and obligations
hereunder are not assignable by NPP or DANA without
the prior written consent of the other party.
9.3. ENTIRE AGREEMENT. This Agreement, together with the
Exhibits attached hereto, constitutes the entire
agreement between the parties about the subject
matter hereof and supersedes all prior agreements,
representations, warranties, statements, promises,
information, arrangements and understandings, whether
oral or written, expressed or implied with respect to
this subject. No modification or waiver of this
Agreement shall be binding upon any party unless in
writing and signed by or on behalf of the party
against which the modification or waiver is asserted.
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
6
<PAGE>
9.4 SEVERABILITY. Any term or provision of this Agreement
which is held to be invalid or unenforceable shall be
ineffective to the extent of such invalidity or
unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of'
this Agreement.
9.5 WAIVER. Neither the failure nor any delay on the part
of NPP or DANA to exercise any right, power or
privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude any other
or further exercise thereof, or the exercise of any
other right, power or privilege available to NPP or
DANA at law or in equity.
9.6 GOVERNING LAW. This Agreement shall in all respects
be interpreted, construed and governed by and in
accordance with the laws of the State of Ohio,
without recourse to the conflicts of laws provisions
thereof, and any action relating to this Agreement
shall be brought exclusively in a state or federal
court in the State of Ohio.
IN WITNESS WHEREOF, NPP and DANA have caused this Agreement to be duly executed
as of the date first above written.
NATIONWIDE PRECISION DANA CORPORATION,
PRODUCTS CORPORATION SPICER HEAVY AXLE & BRAKE DIVISION
By: /S/ RONALD S. RICOTTA By: /S/ NORM BOISVERT
-------------------------------- ---------------------------------
Ronald S. Ricotta Norm Boisvert
President & CEO VP & General Manager
Date: 02/08/00 Date: 02/09/00
-------------------------------- ---------------------------------
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
7
<PAGE>
EXHIBIT A
*
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
<PAGE>
EXHIBIT B
PURCHASE ORDER FOR MATERIALS AND COMPONENTS
TERMS AND CONDITIONS
1. CONTRACT, ACCEPTANCE. This Order and the documents incorporated or referred
to herein constitute the entire contract between the parties for the Goods
ordered and supersede any prior written or oral agreements between the parties
therefor. Seller's written acknowledgment of this Order or Seller's delivery of
any Goods hereunder will constitute Seller's acceptance of these terms and
conditions. Any reference herein to Seller's quotation is for informational
purposes only and does not constitute Buyer's acceptance of any terms and
conditions contrary or supplemental to those set out herein.
2. SELLER'S STATUS, ASSIGNMENT. Seller is an independent contractor and not an
employee or agent of Buyer. Seller may not assign or subcontract this Order or
any of its rights or obligations hereunder without Buyer's prior written
consent.
3. CHANGES TO ORDER. Buyer may change this Order in any respect at any time on
written notice to Seller. If any change made by Buyer materially affects
Seller's costs of producing the Goods, the purchase price of the affected Goods
will be equitably adjusted and this Order amended accordingly.
4. PACKING AND SHIPMENT. Seller will pack and ship the Goods in accordance with
Buyer's instructions, without charge for packaging or handling unless otherwise
specified. All Goods will be packed to comply with applicable common carrier
requirements and so as to secure the best available freight rates. All U.S.
shipments will be accompanied by a fully completed bill of lading in the form
prescribed by the National Motor Freight Classification and by a packing list
showing the number and description of items contained therein. Buyer's name and
Order number will be plainly marked on all Terms and Conditions packages, bills
of lading, packing slips, and other shipping documents and on Seller's invoices.
Buyer's count or weight will be final and conclusive for all shipments.
5. DELIVERIES. Seller will deliver all Goods in accordance with Buyer's
instructions. Buyer may reject any or all Goods shipped in excess of quantities
ordered or in advance of schedule and may either return the same to Seller at
Seller's expense or retain the same and invoice Seller for Buyer's incidental
costs of handling and/or storage. Buyer will not process invoices for Goods
shipped in advance of the schedule until the scheduled delivery date. Buyer may
change scheduled deliveries at any time and will reimburse Seller for Seller's
reasonable, documented incremental costs due to such changes.
6. INSPECTIONS, DEFECTS AND NONCONFORMITIES. Buyer may inspect and/or test the
Goods at reasonable times and places and in reasonable quantities, at its own
expense; provided that Seller will, at no charge, make its premises available
for such purposes and will provide all necessary assistance to make such
inspections and/or tests safe and convenient. No inspections and/or tests by
Buyer hereunder will relieve Seller of its obligation to make full and adequate
inspections and/or tests of the Goods. If any Goods are found to be defective or
not in conformity with Buyer's specifications or requirements, Buyer may reject
them, in whole or in part, or require Seller to repair or
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
1
<PAGE>
replace them at Seller's sole expense. If Buyer returns any rejected Goods,
Seller will reimburse Buyer for the purchase price and all freight, handling,
insurance and other incidental costs incurred by Buyer. If Seller fails to
promptly repair or replace any defective or nonconforming Goods as requested by
Buyer, Buyer may repair or replace the same and invoice Seller for Buyers costs
of repair or replacement and any incidental costs.
7. QUALITY. In performing this Order, Seller will comply with the quality
compliance and quality assurance standards and procedures set out in the Quality
System Manual and the OS-9000 standards published by the International
Organization for Standardization.
8. CONFIDENTIAL INFORMATION. Except as required by law, as reasonably necessary
to perform this Order, or with Buyer's prior written consent. Seller will keep
confidential, at all times, all information, drawings, specifications and data
furnished by Buyer and/or derived or developed by Seller in connection with the
performance of this Order. Seller will not divulge such confidential information
or use it (directly or indirectly) for its own benefit or for the benefit or any
other party or make copies of such confidential information or permit copies to
be made. The foregoing confidentiality obligations do not apply to information
known by Seller at the time it is disclosed by Buyer, to information lawfully
obtained by Seller from a third party entitled to disclose it, and to
information which is or later becomes public knowledge other than through
disclosure by Seller.
9. INTELLECTUAL PROPERTY RIGHTS, PATENT WARRANTY. If Buyer furnishes the design
for the Goods or reimburses Seller for the cost of designing the Goods, Buyer
will own all intellectual property rights relating to that design. Conversely,
if Seller furnishes the design for the Goods or bears the sole cost of designing
the Goods, Seller will own all intellectual property rights relating to the
design. In either case, the owner of the intellectual property rights warrants
to the other party that the design of the Goods will not infringe upon or
contribute to the infringement of any U.S. or foreign patent or patent right.
10. PRODUCT WARRANTY. Seller warrants to Buyer, its customers and end users,
that Seller has good title to the Goods, free and clear of all liens; that the
Goods are free from defects in material and workmanship; that the Goods are
merchantable; conform fully with all specifications, drawings and/or samples
furnished by Buyer (or furnished by Seller and accepted by Buyer); that the
Goods are fit and sufficient for their intended uses; and that the Goods conform
to all applicable Federal Motor Vehicle Safety Standards issued under the
National Traffic and Motor Vehicle Safety Act of 1966, as amended.
11. SPECIAL TOOLING. "Special Tooling" means all special dies, jigs, fixtures,
drawings, molds, patterns, templates and gages acquired or manufactured by
Seller under this Order for use in manufacturing or assembling Goods which are
proprietary to Buyer, excluding any standard or perishable tooling or gages.
Special tooling separately itemized in this Order will be Buyer's property upon
Buyer's full payment of the purchase price for same; provided, however, that
Buyer will have no payment obligation until it has accepted such tooling or the
first run of Goods manufactured or assembled therewith. Seller will furnish
Buyer with an itemized list of such tooling and will maintain adequate cost
records for the same, which records will be available for review or audit
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
2
<PAGE>
by Buyer. If Seller fails to maintain such cost records, Buyer will be obligated
to pay Seller solely the fair market value of the special tooling, regardless of
the purchase price stated herein. Seller will be responsible for all loss or
damage to such tooling and for all taxes, assessments, and similar charges
levied with respect to or upon such tooling while in Seller's possession. Seller
will mark and number such tooling with Buyer's name and the number of the part
made therewith to permit accurate identification of same at all times and will
segregate the same from other tooling in its possession to the extent feasible.
Seller will repair, maintain and keep such tooling in good working condition and
replace the same at its own expense as necessary. Seller will use such tooling
exclusively for the production of Goods for Buyer and for no other use. Upon
completion, cancellation, or termination of this Order, Seller will hold such
tooling and any operation sheets or process data necessary to show the use
thereof, at no charge, pending Buyer's instructions with respect to removal or
disposition at Buyer's expense.
12. LEGAL COMPLIANCE. Seller warrants that it will comply with all applicable
federal, state and local laws, regulations, ordinances, and executive, judicial
or administrative orders in the performance of this order. Seller will furnish
Buyer with certificates of compliance in such form as Buyer may request, from
time to time, and will promptly furnish to the proper person or entity any
reports which are properly required of Seller by law, regulation, ordinance, or
order.
13. HAZARDOUS MATERIALS. Seller will property classify, describe, package, mark,
label and provide Material Safety Data Sheets (MSDS) for all Goods to be shipped
hereunder. Seller will prepare all such Goods for transportation in accordance
with any applicable state or federal laws or regulations. Seller will indemnify
and hold harmless Buyer from any claims penalties or damages incurred by Buyer
as a result of any Goods received from Seller not in accordance therewith.
14. COUNTRY OF ORIGIN INFORMATION. Upon request, Seller agrees to provide Buyer
with documentation that establishes the country of origin of the Goods,
including where applicable, affidavits of manufacture, NAFTA certificates of
origin or other documentation that Buyer may reasonably require.
15. INDEMNIFICATION. Seller will defend and indemnity Buyer and its customers
and end users from and against all claims, suits, damages, losses and expenses
arising from (a) any personal injury, death or property loss or damage caused by
Seller's negligent or willful acts or omissions in performing this Order, (b)
Seller's breach of any warranty contained herein, or (c) Seller's breach of or
default under this Order.
16. INSURANCE. While performing this Order, Seller will maintain insurance
coverage at its own cost in amounts and with insurers satisfactory to Buyer for
workers' compensation (unless self-insured), public liability (including
contractual liability and products liability) and automobile liability. At
buyer's request, Seller will furnish certificates of insurance evidencing such
coverage (which certificates will name Buyer as an additional insured and
provide that the coverage will not be cancelable or subject to limit reductions
without 15 day's written notice to Buyer) and/or evidence of self-
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
3
<PAGE>
insurance for workers' compensation. Seller's compliance with these insurance
requirements will not relieve Seller of its defense and indemnification
obligations under Paragraph 15.
17. ALLOCATION. In the event of a partial failure of Seller's ability to supply
the entire quantity of Goods purchased hereunder, Seller will first meet all of
Buyer's requirements hereunder prior to any allocation among customers under
12-615 of the Uniform Commercial Code.
18. TERMINATION FOR CONVENIENCE. Buyer may terminate this Order for convenience
at any time on written notice to Seller. Upon termination, Buyer will be liable
to Seller solely for (a) unpaid invoices for Goods shipped, and (b) Seller's
reasonable, documented costs for raw materials, work-in-process and finished
Goods (subject to the volumes specified in this Order or any firm releases
hereunder) that cannot be canceled without penalty or sold in the general trade;
provided that Seller has delivered the same to Buyer.
19. CANCELLATION FOR CAUSE. To the extent permitted by law, Buyer may cancel
this Order without liability to Seller at any time on written notice to Seller
in the event of Seller's insolvency, Seller's filing of a voluntary petition in
bankruptcy, the appointment of a receiver or trustee for Seller, Seller's
execution of an assignment for the benefit of creditors, or other comparable
event. In addition, Buyer may cancel this Order without liability to Seller at
any time on 30 days' written notice to Seller if Seller breaches any provision
of this Order (or Buyer anticipates such breach); provided, that the
cancellation will be void if Seller cures the breach (or provides adequate
assurances of performance) within the 30-day notice period.
20. BINDING EFFECT. The obligations of the parties hereunder will be binding on
their respective directors, officers, employees, agents, subcontractors, and
duly authorized successors and assigns (if any).
21. CUMULATIVE REMEDIES, WAIVER. Buyer's remedies herein are cumulative and in
addition to any other or further remedies available at law or equity. Buyer's
waiver of any right herein will not constitute a subsequent waiver of the same
right or any other right provided herein.
22. GOVERNING LAW. This Order will be interpreted and enforced under the laws of
the state of Ohio (including, without limitation, the provisions of the Uniform
Commercial Code as adopted by the State of Ohio), without recourse to the
conflicts of laws provisions thereof. In no event will the provisions of the
U.N. Convention on the Sale of Goods apply to this order.
23. DISPUTE RESOLUTION. Any dispute arising connection with the interpretation,
performance or non-performance, or enforceability of this Order will be resolved
by prompt good faith negotiation between the parties. If the parties are unable
to resolve any such dispute, either party may request that it be resolved
through binding arbitration conducted under the Commercial Rules of the American
Arbitration Association in Toledo, Ohio, U.S.A. or elsewhere as the parties may
mutually agree; provided, that neither party may institute an arbitration
proceeding hereunder unless it has given written notice 30 days prior thereto to
the other party, stating its intent to do so and specifying the basis therefor
in reasonable detail. Any award, order or judgment made or issued pursuant to
arbitration hereunder will be deemed final and may be entered and enforced in
any court of competent jurisdiction. The parties hereby agree to submit to the
jurisdiction of such
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
4
<PAGE>
court for purposes of enforcement of such award, order or judgment. In any
arbitration proceeding hereunder, the arbitrator(s) are authorized (but not
obligated) to award reasonable attorneys' fees and other arbitration-related
costs to the prevailing party. Any arbitration proceeding hereunder will be
conducted on a confidential basis. Except by mutual written agreement, no
arbitration arising out of or related to this Order will include by
consolidation, joinder, or any other means, any person or entity not a party
hereto.
24. YEAR 2000 COMPLIANCE. Seller warrants that all software and hardware
furnished under this Agreement (including all enhancements, upgrades,
customizations, modifications and maintenance) will be Year 2000 compliant.
Seller agrees to defend and indemnify Dana from and against all claims, losses,
damages, and costs arising from Seller's Breach of this warranty, regardless of
any limitations of remedies contained elsewhere in this agreement or in any
other agreement between the parties.
EXEMPTION CERTIFICATION
(PURCHASE FOR FURTHER MANUFACTURE UNDER THE INTERNAL REVENUE CODE)
Dana Corporation hereby certifies that it is a manufacturer or producer of
entries taxable under the Internal Revenue Code and holds certificate of
Registry #34-43-8104-0 issued by the District Director of Internal Revenue at
Cleveland, Ohio, and that the article or articles specified in the accompanying
order will be used by him as materials in the manufacture of production of, or
as a component part of, an article or articles enumerated in the code, to be
manufactured or produced by him.
It is understood that for all the purposes of such taxes, the Buyer will be
considered the manufacturer or producer of the articles purchased hereunder, and
(except as specifically provided by law) must pay tax on resale or use,
otherwise than as specified above, of the articles purchased hereunder. It is
further understood that the fraudulent use of this Certificate no secure
exemption will subject the Buyer and all guilty parties to revocation of the
privilege of purchasing tax free and to a fine of not more than $10,000 or to
Imprisonment for not more than five years or both together with costs of
prosecution.
February 1, 2000
- -----------
* This portion of the agreement has been omitted and filed with the
Securities and Exchange Commission pursuant to a request for confidential
treatment in accordance with Rule 406 of Regulation C.
5
<PAGE>
PRECISION PARTNERS
Exhibit 12.1
PRECISION PARTNERS, INC.
STATEMENT RE COMPUTATION OF RATIOS
<TABLE>
<CAPTION>
(PREDECESSOR) (PRECISION PARTNERS)
JANUARY 1, 1998 SEPTEMBER 9, 1998
THROUGH THROUGH
1995 1996 1997 SEPTEMBER 30, 1998 DECEMBER 31, 1998 1999
(IN THOUSANDS, EXCEPT RATIO DATA)
<S> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income (loss) before income taxes, $1,844 $4,938 $ 5,853 $ 4,381 $(286) $ (7,645)
extraordinary items, and cumulative
effect of accounting change
Interest and amortization of debt expense 108 69 85 37 526 12,812
Rental expense representative of interest
factor 188 188 188 141 92 802
------- ------- ------- ------------ -------- --------
TOTAL EARNINGS $2,140 $5,195 $ 6,126 $4,559 $ 332 $ 5,969
======= ======= ======= ============ ======== ========
FIXED CHARGES:
Interest and amortization of debt expense 108 69 85 37 526 12,812
Rental expense representative of interest
factor 188 188 188 141 92 802
------- ------- ------- ------------ -------- --------
TOTAL FIXED CHARGES $ 296 $ 257 $ 273 $178 $ 618 $ 13,614
======= ======= ======= ============ ======== ========
RATIO OF EARNINGS TO FIXED CHARGES(1) 7.2 20.2 22.4 25.6 0.5 0.4
</TABLE>
(1) For the purposes of computing the ratio of earnings to fixed charges,
earnings consists of income (loss) before income taxes, extraordinary
items and cumulative effect of change in accounting, plus fixed charges.
Fixed charges consist of interest and amortization of debt expense plus
a portion of operating lease expense.
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF PRECISION PARTNERS, INC.
Galaxy Industries Corporation
Mid State Machine Products
Certified Fabricators, Inc.
General Automation, Inc.
Nationwide Precision Products Corp.
Gillette Machine & Tool Co., Inc.
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports noted below included in the Registration Statement (Form S-4)
and related Prospectus of Precision Partners, Inc. for the registration of
$100,000,000 of Senior Subordinated Notes due 2009:
<TABLE>
<CAPTION>
Company Period Date of Report
------- ------ --------------
<S> <C> <C>
Precision Partners, Inc. Year Ended December 31, March 27, 2000
1999 and the Period from
September 9, 1998
(Inception) to December 31,
1998
Mid State Machine Nine month period ended January 19, 1999
Products September 30, 1998
General Automation, Inc. Period from January 1, 1999 March 10, 2000
to March 19, 1999 and
Years Ended December 31,
1998 and 1997
Certified Fabricators, Inc. Period from November 1, March 10, 2000
and Calbrit Design, Inc. 1998 to March 19, 1999 and
the Years Ended October
31, 1998 and 1997
Nationwide Precision Period from June 1, 1998 to February 25, 2000
Products Corp. March 19, 1999
Gillette Machine & Tool Period from March 1, 1999 March 10, 2000
Co., Inc. to August 31, 1999
</TABLE>
/s/ Ernst & Young LLP
March 23, 2000
Dallas, Texas
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 2, 1998, with respect to the audited
consolidated statements of operations, stockholders' equity and cash flows of
Mid State Machine Products, Inc. for the year ended December 31, 1997,
included in the Registration Statement and the related Prospectus of
Precision Partners, Inc. for the registration of $100,000,000 of 12% Senior
Subordinated Notes.
/s/ Baker Newman & Noyes
Limited Liability Company
Portland, Maine
March 27, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
March 27, 2000
Board of Directors
Precision Partners, Inc.
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated June 29, 1998 relating to the audited financial
statements of Nationwide Precision Products Corporation in the Registration
Statement (Form S-4) and related Prospectus of Precision Partners, Inc.
/s/ Insero, Kasperski, Ciaccia & Co., P.C.
Rochester, New York
March 27, 2000
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
registration statement (Registration Statement File No. 333-_____).
/s/ BONADIO & CO., LLP
Rochester, New York
March 23, 2000
<PAGE>
EXHIBIT 24.1
POWERS OF ATTORNEY
By signing below, I hereby constitute and appoint Ronald M. Miller,
Dr. James E. Ashton and Christopher M. Kelly, Esq. my true and lawful attorney
and agent to do any and all acts and things and to execute any and all
instruments in my name and behalf in my capacities as director and/or officer of
Precision Partners, Inc., a Delaware corporation, Mid State Machine Products, a
Maine corporation, Galaxy Industries Corporation, a Michigan corporation,
Certified Fabricators, Inc., a California corporation, Nationwide Precision
Products Corp., a New York corporation, General Automation, an Illinois
corporation, and Gillette Machine and Tool Co., Inc., a New York corporation
(collectively, the "Companies" and each a "Company"), which said attorney and
agent may deem necessary or advisable or which may be required to enable the
applicable Company to comply with the Securities Act of 1933, as amended (the
"Securities Act"), and any rules, regulations or requirements of the Securities
and Exchange Commission in respect thereof, in connection with a Registration
Statement on Form S-4 (or any other appropriate form) for the purpose of
registering pursuant to the Securities Act $100,000,000 of Precision
Partners, Inc.'s 12% Senior Subordinated Notes due 2009, including specifically,
and the other Companies' guarantees thereof, but without limiting the generality
of the foregoing, the power and authority to sign for me, in my name and behalf
in my capacities as director and/or officer of the applicable Company
(individually or on behalf of such Company), such Registration Statement and any
such abbreviated registration statement, and any and all amendments and
supplements thereto, and to file the same, with all exhibits thereto and other
instruments or documents in connection therewith, with the Securities and
Exchange Commission, and hereby ratify and confirm all that said attorneys and
agents, or any of them, may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, I have executed this Power of Attorney as of March ,
2000.
<TABLE>
<S> <C>
/s/ DR. JAMES E. ASHTON /s/ RICHARD DETWEILER
- ------------------------------------------- -------------------------------------------
Dr. James E. Ashton Richard Detweiler
/s/ MELVIN D. JOHNSON /s/ DAVID W. M. HARVEY
- ------------------------------------------- -------------------------------------------
Melvin D. Johnson David W. M. Harvey
/s/ WILLIAM J. GUMINA /s/ RICHARD FAGAN
- ------------------------------------------- -------------------------------------------
William J. Gumina Richard Fagan
/s/ JOHN F. MEGRUE /s/ BYRDELL C. GOLDSMITH
- ------------------------------------------- -------------------------------------------
John F. Megrue Byrdell C. Goldsmith
/s/ S. DOUGLAS SUKEFORTH /s/ RONALD S. RICOTTA
- ------------------------------------------- -------------------------------------------
S. Douglas Sukeforth Ronald S. Ricotta
/s/ EDWARD R. GAJEWSKI /s/ DARREN J. GILLETTE
- ------------------------------------------- -------------------------------------------
Edward R. Gajewski Darren J. Gillette
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A) the
condensed financial statements of Precision Partners, Inc. included in Form S-4
and is qualified in its entirety by reference to such (B) financial statements.
</LEGEND>
<CIK> 0001086478
<NAME> PRECISION PARTNERS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 313
<SECURITIES> 0
<RECEIVABLES> 23,613
<ALLOWANCES> 261
<INVENTORY> 18,404
<CURRENT-ASSETS> 45,549
<PP&E> 82,260
<DEPRECIATION> 10,649
<TOTAL-ASSETS> 206,391
<CURRENT-LIABILITIES> 41,705
<BONDS> 100,000
0
0
<COMMON> 0
<OTHER-SE> 36,132
<TOTAL-LIABILITY-AND-EQUITY> 206,391
<SALES> 123,188
<TOTAL-REVENUES> 123,188
<CGS> 93,434
<TOTAL-COSTS> 24,840
<OTHER-EXPENSES> 12,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,645)
<INCOME-TAX> (2,130)
<INCOME-CONTINUING> (5,515)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,515)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
PRECISION PARTNERS, INC.
OFFER FOR ALL OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2009
IN EXCHANGE FOR
12% SENIOR SUBORDINATED NOTES DUE 2009
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
PURSUANT TO THE PROSPECTUS DATED [ ]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ] OR
SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER MAY BE EXTENDED
(THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
The Exchange Agent for the Exchange Offer is:
The Bank of New York
<TABLE>
<CAPTION>
By Registered or Certified Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
(For Eligible Institutions Only)
<S> <C> <C>
The Bank of New York The Bank of New York
101 Barclay Street - 7E (212) 815-6339 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attn: Reorganization Section Confirm by Telephone: Attn: Reorganization Section
(212) 815-6337
For Information Call:
(212) 815-633]
</TABLE>
Delivery of this letter of transmittal to an address other than as set
forth above, or transmission of instructions via facsimile other than as set
forth above, does not constitute a valid delivery.
The undersigned acknowledges that he or she has received the prospectus
dated [ ] of Precision Partners, Inc., a corporation organized under the laws of
Delaware (the "Company"), and this letter of transmittal, which together
constitute the Company's offer (the "Exchange Offer") to exchange up to
$100,000,000 aggregate principal amount of 12% Senior Subordinated Notes due
2009 of the Company, for an equal principal amount of the Company's issued and
outstanding 12% Senior Subordinated Notes due 2009. The terms of the exchange
notes are identical in all material respects (including principal amount,
interest rate and maturity) to those of the outstanding notes, except that the
exchange notes will be registered under the Securities Act of 1933.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein have the meanings given
to such terms in the prospectus.
This letter of transmittal is to be completed by holders of outstanding
notes either if outstanding notes are to be forwarded herewith or if tenders of
outstanding notes are to be made by book-entry transfer to an account maintained
by The Bank of New York, as exchange agent, at The Depository Trust Company
("DTC") pursuant to the procedures set forth in the
<PAGE>
prospectus under "The Exchange Offer -- Procedures for Tendering Outstanding
Notes." Delivery of this letter of transmittal and any other required documents
should be made to the exchange agent.
If a holder desires to tender outstanding notes pursuant to the
Exchange Offer but time will not permit this letter of transmittal, certificates
representing outstanding notes or other required documents to reach the exchange
agent on or before the Expiration Date, or the procedure for book-entry transfer
cannot be completed on a timely basis, such holder may effect a tender of such
notes in accordance with the guaranteed delivery procedures set forth in the
prospectus under "Exchange Offer --Procedures for Tendering Outstanding Notes."
See Instruction 2.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
The undersigned has completed the appropriate boxes below and signed
this letter of transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
List below the outstanding notes to which this letter of transmittal
relates. If the space provided below is inadequate, the certificate numbers and
principal amount of outstanding notes should be listed on a separate schedule
affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OUTSTANDING NOTES (1) (2) (3)
Name(s) and Address(es) of Registered Holder(s) Aggregate Principal Amount
(Please fill in, if blank) Principal of Outstanding
Certificate Amount of Notes
Number(s)* Outstanding Notes Tendered
(if less than all)**
<S> <C> <C> <C>
</TABLE>
* Need not be completed if outstanding notes are being tendered by
book-entry holders.
** Outstanding notes may be tendered in whole or in part in denominations
of $100,000 and integral multiples of $1,000 in excess thereof,
provided that if any outstanding notes are tendered for exchange in
part, the untendered principal amount thereof must be at least $100,000
or any integral multiple of $1,000 in excess thereof. See instruction
3. Unless this column is completed, a holder will be deemed to have
tendered the full aggregate principal amount of the outstanding notes
represented by the outstanding notes indicated in column 2.
-2-
<PAGE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
---------------------------------------------
Account Number
------------------------------------------------------------
Transaction Code Number
--------------------------------------------------
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s)
-----------------------------------------
Window Ticket Number (if any)
-------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
-------------------
Date of Execution of Notice of Guaranteed Delivery
----------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution
-------------------------------------------
Account Number
---------------------------------------------------------
Transaction Code Number
-------------------------------------------------
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OUTSTANDING
NOTES ARE TO BE RETURNED BY CREDITING THE BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER THAT ACQUIRED THE OUTSTANDING NOTES
FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING
ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND
10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-------------------------------------------------------------------
Address:
----------------------------------------------------------------
-3-
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
outstanding notes indicated above in exchange for a like aggregate principal
amount of exchange notes. Subject to, and effective upon, the acceptance for
exchange of the outstanding notes tendered hereby, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such outstanding notes.
The undersigned hereby irrevocably constitutes and appoints the
exchange agent its agent and attorney-in-fact (with full knowledge that the
exchange agent also acts as the agent of the Company) with respect to the
tendered outstanding notes with the full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest),
subject to the right of withdrawal described in the prospectus, to (i) deliver
certificates for such outstanding notes to the Company and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company and (ii) present such outstanding notes for transfer on the books of
the Company and (iii) receive all benefits and otherwise exercise all rights of
beneficial ownership of such outstanding notes, all in accordance with the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the
outstanding notes tendered hereby and that, when the same are accepted for
exchange, the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claims or proxies. The undersigned will, upon request, execute and
deliver any additional documents deemed by the exchange agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
the outstanding notes tendered hereby, and the undersigned will comply with its
obligations under the Registration Rights Agreement. The undersigned has read
and agreed to all of the terms of the Exchange Offer.
The undersigned agrees that acceptance of any tendered outstanding
notes by the Company and the issuance of exchange notes in exchange therefor
will constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company will have no further
obligations or liabilities thereunder (except in limited circumstances).
The name(s) and address(es) of the registered holders of the
outstanding notes tendered hereby should be printed above, if they are not
already set forth above, as they appear on the outstanding notes. The
Certificate number(s) and the outstanding notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on certain interpretive letters by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions. On the basis
thereof, the exchange notes issued in exchange for the outstanding notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such exchange notes are acquired in the
ordinary course of such holders' business and such holders are not participating
in, and have no arrangement or understanding with any person to participate in,
the distribution of such exchange notes. The undersigned acknowledges that any
holder of outstanding notes using the Exchange Offer to participate in a
distribution of the exchange notes (i) cannot rely on the position of the staff
of the SEC enunciated in its interpretive letter with respect to Exxon Capital
Holdings Corporation (available April 13, 1989) or similar letters, and (ii)
must comply with the registration and prospectus requirements of the Securities
Act in connection with a secondary resale transaction. If the undersigned is not
a broker-dealer, the undersigned represents that it is not engaged in, and does
not intend to engage in, a distribution of exchange notes. If the undersigned is
a broker-dealer that will receive exchange notes for its own account in exchange
for outstanding notes that were acquired as a result of market-making activities
or other trading activities, it acknowledges that it will deliver a prospectus
in connection with any resale of such exchange notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned represents that (i) it is not an affiliate of either
the Company or its subsidiaries or, if the undersigned is an affiliate of the
Company or its subsidiaries, it will comply with the registration and prospectus
requirements of the Securities Act to the extent applicable, (ii) the exchange
notes are being acquired in the ordinary course of business of the person
receiving such exchange notes, whether or not such person is the holder, (iii)
the undersigned has not entered into an arrangement or understanding with any
other person to participate in the distribution (within the meaning of the
Securities Act) of the exchange notes, (iv) the undersigned is not a
broker-dealer who purchased the notes for resale pursuant to an exemption under
the Securities
-4-
<PAGE>
Act, and (v) the undersigned will be able to trade exchange notes acquired in
the Exchange Offer without restriction under the Securities Act.
The Company and the subsidiary guarantors have agreed that, subject to
the provisions of the Registration Rights Agreement, the prospectus may be used
by a participating broker-dealer (as discussed below) in connection with resales
of exchange notes received in exchange for outstanding notes, where such
outstanding notes were acquired by such participating broker-dealer for its own
account as a result of market-making activities or other trading activities, for
a period ending 180 days after the Expiration Date (subject to extension under
certain limited circumstances described in the prospectus) or, if earlier, when
all such exchange notes have been disposed of by such participating
broker-dealer. In that regard, each participating broker-dealer that acquired
outstanding notes for its own account as a result of market-making or other
trading activities, by tendering such outstanding notes and executing this
letter of transmittal, agrees that, upon receipt of notice from the Company of
the occurrence of any event or the discovery of any fact which makes any
statement contained or incorporated by reference in the prospectus untrue in any
material respect or which causes the prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
therein, in light of the circumstances under which they were made, not
misleading or of the occurrence of certain other events specified in the
Registration Rights Agreement, such participating broker-dealer will suspend the
sale of exchange notes pursuant to the prospectus until the Company and the
subsidiary guarantors have amended or supplemented the prospectus to correct
such misstatement or omission and have furnished copies of the amended or
supplemented prospectus to the participating broker-dealer or the Company has
given notice that the sale of the exchange notes may be resumed, as the case may
be. If the Company gives such notice to suspend the sale of the exchange notes,
the 180-day period referred to above during which participating broker-dealers
are entitled to use the prospectus in connection with the resale of exchange
notes shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
participating broker-dealers shall have received copies of the supplemented or
amended prospectus necessary to permit resales of the exchange notes or to and
including the date on which the Company has given notice that the sale of
exchange notes may be resumed, as the case may be.
The undersigned understands that tenders of the outstanding notes
pursuant to any one of the procedures described under "The Exchange Offer --
Procedures for Tendering Outstanding Notes" in the prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company in accordance with the terms and subject to the conditions set
forth herein and in the prospectus.
The undersigned recognizes that under certain circumstances set forth
in the prospectus under "The Exchange Offer --Conditions to the Exchange Offer,"
the Company will not be required to accept for exchange any of the outstanding
notes tendered. Outstanding notes not accepted for exchange or withdrawn will be
returned to the undersigned at the address set forth below unless otherwise
indicated under "Special Delivery Instructions" below (or, in the case of
outstanding notes tendered by book-entry transfer, credited to an account
maintained by the tendering holder at DTC).
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the exchange notes
(and, if applicable, any substitute certificates representing outstanding notes
not exchanged or not accepted for exchange) be issued in the name(s) of the
undersigned and be delivered to the undersigned at the address, or, in the case
of book-entry transfer of outstanding notes, be credited to the account at DTC
shown above in the box entitled "Description of Outstanding Notes."
Holders of the outstanding notes whose outstanding notes are accepted
for exchange will not receive accrued interest on such outstanding notes for any
period from and after the last interest payment date to which interest has been
paid or duly provided for on such outstanding notes prior to the original issue
date of the exchange notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such outstanding notes,
and the undersigned waives the right to receive any interest on such outstanding
notes accrued from and after such interest payment date or, if no such interest
has been paid or duly provided for from and after the original issue date of the
exchange notes.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the outstanding notes tendered hereby. All
authority herein conferred or agreed to be conferred in this letter of
transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. This tender
may be withdrawn only in accordance with the procedures set forth in the
prospectus and in the instructions contained in this letter of transmittal.
-5-
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF
OUTSTANDING NOTES" ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL AND DELIVERING
SUCH NOTES AND THIS LETTER OF TRANSMITTAL TO THE EXCHANGE AGENT, WILL BE DEEMED
TO HAVE TENDERED THE OUTSTANDING NOTES AS SET FORTH IN SUCH BOX ABOVE.
-6-
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
X ________________________ Date: ______________, 2000
X ________________________ Date: ______________, 2000
Signature(s) of Owner
The above lines must be signed by the registered holder(s) exactly as
their name(s) appear(s) on the outstanding notes, or by person(s) authorized to
become registered holder(s) by a properly completed bond power from the
registered holder(s), a copy of which must be transmitted with this letter of
transmittal. If outstanding notes to which this letter of transmittal relate are
held of record by two or more joint holders, then all such holders must sign
this. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, then please set forth the full title of the person
signing in such capacity. See Instruction 4.
Name(s):
---------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Capacity:
--------------------------------------------------------------
Address:
--------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone Number:
----------------------------------------
Tax Identification or
Social Security Number(s):
---------------------------------------------
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 4)
Signatures Guaranteed
by an Eligible Institution:
--------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name of Firm)
- --------------------------------------------------------------------------------
(Address and Telephone Number)
Dated: _________________, 2000.
-7-
<PAGE>
<TABLE>
<CAPTION>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5) (SEE INSTRUCTIONS 4 AND 5)
<S> <C>
To be completed ONLY if certificates for outstanding To be completed ONLY if certificates for
notes not exchanged and/or exchange notes are to be issued outstanding notes not exchanged and/or exchange notes
in the name of and sent to someone other than the person or are to be sent to someone other than the person or persons
persons whose signature(s) appear(s) on this letter of whose signature(s) appear(s) on this letter of transmittal
transmittal above. above or to such person or persons at an address other
than shown in the box above entitled "Description of
Issue exchange notes and/or outstanding notes to: Outstanding Notes."
Name(s): ....................................... Deliver exchange notes and/or outstanding notes to:
(Please Type or Print)
Name(s): .........................................
................................................ (Please Type or Print)
(Please Type or Print)
.........................................
Address: ........................................ (Please Type or Print)
................................................ Address: .........................................
(Zip Code)
.........................................
Telephone Number:................................ (Zip Code)
Tax Identification or Telephone Number:.................................
Social Security Number(s):......................
Tax Identification or
(Complete Substitute Form W-9) Social Security Number(s):........................
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH, THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF
(TOGETHER WITH THE CERTIFICATE(S) FOR OUTSTANDING NOTES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE EXCHANGE AGENT
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
</TABLE>
-8-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OUTSTANDING NOTES.
This letter of transmittal is to be used to, and must accompany, (i)
all certificates representing outstanding notes tendered pursuant to the
Exchange Offer and (ii) all tenders or outstanding notes made pursuant to the
procedures for book-entry transfer set forth in the prospectus under "The
Exchange Offer -- Procedures for Tendering Outstanding Notes." Certificates
representing the outstanding notes in proper form for transfer, or a timely
confirmation of a book-entry transfer of such outstanding notes into the
exchange agent's account at DTC, as well as a properly completed and duly
executed copy of this letter of transmittal (or facsimile thereof), with any
required signature guarantees, a Substitute Form W-9 (or facsimile thereof) and
any other documents required by this letter of transmittal must be received by
the exchange agent at its address set forth herein on or before the Expiration
Date.
The method of delivery of this letter of transmittal, the outstanding
notes and all other required documents is at the election and risk of the
tendering holders, but delivery will be deemed made only when actually received
or confirmed by the exchange agent. If such delivery is by mail, it is
recommended that registered mail properly insured, with return receipt
requested, be used. In all cases, sufficient time should be allowed to permit
timely delivery.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a letter of transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEED DELIVERY PROCEDURES.
If a holder desires to tender outstanding notes, but time will not
permit a letter of transmittal, certificates representing the outstanding notes
to be tendered or other required documents to reach the exchange agent on or
before the Expiration Date, or if the procedure for book-entry transfer cannot
be completed on or prior to the Expiration Date, such holder's tender may be
effected if:
(a) such tender is made by or through an eligible institution
(as discussed below);
(b) on or before to the Expiration Date, the exchange agent
has received a properly completed and duly executed notice of
guaranteed delivery, substantially in the form made available by the
Company (or a facsimile thereof) (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from such eligible
institution setting forth the name and address of the holder of such
outstanding notes, the name(s) in which the outstanding notes are
registered and the principal amount of outstanding notes tendered and
stating that the tender is being made thereby and guaranteeing that,
within three New York Stock Exchange trading days after the Expiration
Date, certificates representing the outstanding notes to be tendered,
in proper form for transfer, or a book-entry confirmation, as the case
may be, together with a duly executed letter of transmittal and any
other documents required by this letter of transmittal and the
instructions hereto, will be deposited by such eligible institution
with the exchange agent; and
(c) a letter of transmittal (or a facsimile thereof) and
certificates representing the outstanding notes to be tendered, in
proper form for transfer, or a book-entry confirmation, as the case may
be, and all other required documents are received by the exchange agent
within three New York Stock Exchange trading days after the Expiration
Date.
3. PARTIAL TENDERS AND WITHDRAWAL RIGHTS.
Tenders of outstanding notes will be accepted only in a minimum
principal amount of $100,000 and integral multiples of $1,000 in excess thereof,
provided that if any outstanding notes are tendered for exchange in part, the
untendered minimum principal amount thereof must be $100,000 or any integral
multiple of $1,000 in excess thereof. If less than all the outstanding notes
evidenced by any certificate submitted are to be tendered, fill in the principal
amount of outstanding notes which are to be tendered in the box entitled
"Principal Amount of Outstanding Notes Tendered (if less than all)." In such
case, new certificate(s) for the remainder of the outstanding notes that were
evidenced by your old certificate(s) will only be sent to the holder of the
outstanding notes (or, in the case of outstanding notes tendered pursuant to
book-entry transfer, will only be credited to the account at DTC maintained by
the holder of the outstanding notes) promptly after the Expiration Date. All
outstanding notes
-9-
<PAGE>
represented by certificates or subject to a book-entry confirmation delivered to
the exchange agent will be deemed to have been tendered unless otherwise
indicated.
Any holder who has tendered outstanding notes may withdraw the tender
by delivering written notice of withdrawal (which may be sent by facsimile) to
the exchange agent at its address set forth herein prior to the Expiration Date.
Any such notice of withdrawal must specify (i) the person named in the letter of
transmittal as having tendered the outstanding notes to be withdrawn, (ii) the
certificate numbers of the outstanding notes to be withdrawn, (iii) the
principal amount of outstanding notes to be withdrawn, (iv) a statement that
such holder is withdrawing its election to have such outstanding notes
exchanged, and (v) the name of the registered holder of such outstanding notes
and must be signed by the holder in the same manner as the original signature on
the letter of transmittal (including any required signature guarantees) by which
such outstanding notes were tendered, or be accompanied by evidence satisfactory
to the Company that the person withdrawing the tender has succeeded to the
beneficial ownership of the outstanding notes being withdrawn. If outstanding
notes have been tendered pursuant to the procedures for book-entry transfer set
forth in the prospectus under "The Exchange Offer -- Procedures for Tendering
Outstanding Notes," the notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawal of outstanding notes, in
which case a notice of withdrawal will be effective if delivered to the exchange
agent by written, telegraphic, telex or facsimile transmission. Withdrawals of
tenders of outstanding notes may not be rescinded. Outstanding notes properly
withdraw will not be deemed validly tendered for purposes of the Exchange Offer,
but may be retendered at any subsequent time on or prior to the Expiration Date
by following any of the procedures described in the prospectus under "The
Exchange Offer -- Procedures for Tendering Outstanding Notes." The exchange
agent will return the properly withdrawn outstanding notes promptly following
receipt of notice of withdrawal.
All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Company, and such determinations will
be final and binding on all parties. Neither the Company nor the exchange agent
shall be under any duty to give any notification of any irregularities in any
notice of withdrawal or incur any liability for failure to give such
notification.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this letter of transmittal is signed by the registered holder of the
outstanding notes tendered herewith, the signature must correspond exactly with
the name as written on the face of the certificates without any alteration,
enlargement or change whatsoever.
If any tendered outstanding notes are owned of record by two or more
joint owners, all such owners must sign this letter of transmittal. If any
tendered outstanding notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this letter of transmittal as there are names in which tendered
outstanding notes are registered.
If this letter of transmittal is signed by the registered holder, and
exchange notes are to be issued and any untendered or unaccepted principal
amount of outstanding notes are to be reissued or returned to the registered
holder, then the registered holder need not and should not endorse any tendered
outstanding notes or provide a separate bond power. In any other case, the
registered holder must either properly endorse the outstanding notes tendered or
transmit a properly completed separate bond power with this letter of
transmittal (in either case, executed exactly as the name of the registered
holder appears on such outstanding notes), with the signature on the endorsement
or bond power guaranteed by an eligible institution, unless such certificates or
bond powers are signed by an eligible institution.
If this letter of transmittal or any outstanding notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and submit with this
letter of transmittal evidence satisfactory to the Company of their authority to
so act.
The signatures on this letter of transmittal or a notice of withdrawal,
as the case may be, must be guaranteed unless the outstanding notes surrendered
for exchange pursuant thereto are tendered (i) by a registered holder (which
term, for purposes of this document, shall include any participant in DTC whose
name appears on the register of holders maintained by the Company as owner of
the outstanding notes) who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in this letter of transmittal
or (ii) for the account of an eligible institution. In the event that the
signatures in this letter of transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantees must be by an eligible
institution, which includes commercial banks and trust companies located or
having an office or correspondent in the
-10-
<PAGE>
United States, member firms of a national securities exchange or the National
Association of Securities Dealers, Inc., and members of a signature medallion
program such as "STAMP." If outstanding notes are registered in the name of a
person other than the signer of this letter of transmittal, the outstanding
notes surrendered for exchange must be endorsed by, or be accompanied by a
written instrument or instruments of transfer or exchange, in satisfactory form
as determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an eligible
institution.
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of outstanding notes should indicate in the
applicable box the name and address or account at DTC to which exchange notes
issued pursuant to the Exchange Offer and/or substitute outstanding notes for
principal amounts not tendered or not accepted for exchange are to be issued,
sent or deposited if different from the name and address or account of the
person signing this letter of transmittal. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. If no such instructions are given, any
exchange notes will be issued in the name of, and delivered to, the name and
address (or account at DTC, in the case of any tender by book-entry transfer) of
the person signing this letter of transmittal, and any outstanding notes not
accepted for exchange will be returned to the name and address (or account at
DTC, in the case of any tender by book-entry transfer) of the person signing
this letter of transmittal.
6. BACKUP FEDERAL INCOME TAX WITHHOLDING AND SUBSTITUTE FORM W-9.
Under the federal income tax laws, payments that may be made by the
Company on account of exchange notes issued pursuant to the Exchange Offer may
be subject to backup withholding at the rate of 31%. In order to avoid such
backup withholding, each tendering holder should complete and sign the
Substitute Form W-9 included in this letter of transmittal and either (a)
provide the correct taxpayer identification number ("TIN") and certify, under
penalties of perjury, that the TIN provided is correct and that (i) the holder
has not been notified by the Internal Revenue Service that the holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer subject to
backup withholding; or (b) provide an adequate basis for exemption. If the
tendering holder has not been issued a TIN and has applied for one, or intends
to apply for one in the near future, such holder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, sign and
date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the paying agent under the Indenture governing the exchange notes) will retain
31% of payments made to the tendering holder during the 60-day period following
the date of the Substitute Form W-9. If the holder furnishes the exchange agent
or the Company with its TIN within 60-days after the date of the Substitute Form
W-9, the Company (or the paying agent) will remit such amounts retained during
the 60-day period to the holder and no further amounts shall be retained or
withheld from payments made to the holder thereafter. If, however, the holder
has not provided the exchange agent or the Company with its TIN within such
60-day period, the Company (or the paying agent) will remit such previously
retained amounts to the IRS as backup withholding. In general, if a holder is an
individual, the taxpayer identification number is the Social Security Number of
such individual. If the exchange agent or the Company is not provided with the
correct taxpayer identification number, the holder may be subject to a $50
penalty imposed by the IRS. Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, such holder must submit a statement (generally,
IRS Form W-8), signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the exchange agent. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the Substitute
Form W-9 if outstanding notes are registered in more than one name), consult the
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute From W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
outstanding notes to be deemed invalidly tendered, but may require the Company
(or the paying agent) to withhold 31% of the amount of any payments made on
account of the exchange notes. Backup withholding is not an additional federal
income tax. Rather, the federal income tax liability of a person subject to
backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
7. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of outstanding notes to it or its order pursuant to the Exchange Offer.
If, however, exchange notes and/or substitute outstanding notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the outstanding notes tendered
herewith, or if tendered outstanding notes are registered in the name of any
person other than the person signing this letter of
-11-
<PAGE>
transmittal, or if a transfer tax is imposed for any reason other than the
transfer of outstanding notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the outstanding notes specified in this
letter of transmittal.
8. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part,
any of the conditions to the Exchange Offer set forth in the prospectus.
9. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders of
outstanding notes or transmittals of this letter of transmittal will be
accepted. All tendering holders of outstanding notes, by execution of this
letter of transmittal, shall waive any right to receive notice of the acceptance
of their outstanding notes for exchange.
Neither the Company, the exchange agent nor any other person is
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
10. INADEQUATE SPACE.
If the space provided herein is inadequate, the aggregate principal
amount of outstanding notes being tendered and the certificate number or numbers
(if applicable) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this letter of transmittal.
11. MUTILATED, LOST, STOLEN OR DESTROYED OUTSTANDING NOTES.
If any certificate has been lost, mutilated, destroyed or stolen, the
holder should promptly notify The Bank of New York at 101 Barclay Street 7-E,
New York, New York 10286, telephone (212) 815-6333. The holder will then be
instructed as to the steps that must be taken to replace the certificate. This
letter of transmittal and related documents cannot be processed until the
outstanding notes have been replaced.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the prospectus and this letter of transmittal, may be
directed to the exchange agent at the address and telephone number indicated
above.
13. VALIDITY OF TENDERS.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered outstanding notes will be determined by the
Company, in its sole discretion, which determination will be final and binding.
The Company reserves the right to reject any and all outstanding notes not
validly tendered or any outstanding notes, the Company's acceptance of which
may, in the opinion of the Company or counsel to the Company, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of outstanding notes as to any
ineligibility of any holder who seeks to tender outstanding notes in the
Exchange Offer, whether or not similar conditions or irregularities are waived
in the case of other holders. The interpretation of the terms and conditions of
the Exchange Offer (including this letter of transmittal and the instructions
hereto) by the Company shall be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of outstanding notes
must be cured within such time as the Company shall determine. The Company will
use reasonable efforts to give notification of defects or irregularities with
respect to tenders of outstanding notes, but neither the Company nor the
exchange agent shall incur any liability for failure to give such notification.
-12-
<PAGE>
14. ACCEPTANCE OF TENDERED OUTSTANDING NOTES AND ISSUANCE OF EXCHANGE NOTES;
RETURN OF OUTSTANDING NOTES.
Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered outstanding notes as soon as
practicable after the Expiration Date and will issue exchange notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered outstanding notes when, as and if the
Company has given written and oral notice thereof to the exchange agent. If any
tendered outstanding notes are not exchanged pursuant to the Exchange Offer for
any reason, such unexchanged outstanding notes will be returned, without
expense, to the name and address shown above or, if outstanding notes have been
tendered by book-entry transfer, to the account at DTC shown above, or at a
different address or account at DTC as may be indicated under "Special Delivery
Instructions."
-13-
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 6)
PAYOR'S NAME: PRECISION PARTNERS, INC.
<TABLE>
<S> <C> <C>
SUBSTITUTE FORM W-9 Part I--Taxpayer Identification
Number
Department of the Treasury _______________________________________
Internal Revenue Service Enter your taxpayer identification Social Security Number
number in the appropriate box. For
most individuals, this is your social OR
security number. If you do not have a
number, see how to obtain a "TIN" in
the enclosed Guidelines. _______________________________________
Employer Identification Number
NOTE: If the account is in more than
one name, see the chart on page 2 of
the enclosed Guidelines to determine
what number to give.
Part II--For Payees Exempt from Backup Withholding (see enclosed
Guidelines)
Payor's Request for Taxpayer CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
Identification Number (TIN) CERTIFY THAT:
and Certification (1) the number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am no subject to backup withholding
either because I have not been
notified by the Internal Revenue
Service (the "IRS") that I am subject
to backup withholding as a result of
a failure to report all interest or
dividends or the IRS has notified me
that I am no longer subject to backup
withholding.
SIGNATURE________________________________ DATE____________
</TABLE>
Certificate Guidelines--You must cross out Item (2) of the above certification
if you have been notified by the IRS that you are subject to backup withholding
because of underreporting of interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding,
you received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out Item (2).
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payor, 31% of all payments made
to me on account of the exchange notes shall be retained until I provide a
Taxpayer Identification Number to the payor and that, if I do not provide my
Taxpayer Identification Number within 60 days, such retained amounts shall be
remitted to the Internal Revenue Service as a backup withholding and 31% of all
reportable payments made to me thereafter will be withheld and remitted to the
Internal Revenue Service until I provide a Taxpayer Identification Number.
SIGNATURE___________________________________ DATE______________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE EXCHANGE NOTES.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-14-
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
ANY AND ALL OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2009
IN EXCHANGE FOR NEW 12% SENIOR
SUBORDINATED NOTES DUE 2009
OF
PRECISION PARTNERS, INC.
FULLY AND UNCONDITIONALLY GUARANTEED
BY PRECISION PARTNERS, INC.
GALAXY INDUSTRIES CORPORATION
MID STATE MACHINE PRODUCTS
NATIONWIDE PRECISION PRODUCTS CORP.
GENERAL AUTOMATION, INC.
CERTIFIED FABRICATORS, INC.
GILLETTE MACHINE & TOOL CO., INC.
This notice of guaranteed delivery, or one substantially equivalent to
this form, must be used by registered holders of outstanding 12% Senior
Subordinated Notes due 2009 of Precision Partners, Inc., a corporation organized
under the laws of Delaware (the "Company"), who wish to tender their outstanding
notes for an equal principal amount of new 12% Senior Subordinated Notes of the
Company due 2009 that have been registered under the Securities Act of 1933 if
(i) the outstanding notes, a duly completed and executed letter of transmittal
and all other required documents cannot be delivered to The Bank of New York, as
exchange agent, on or prior to 5:00 p.m., New York City time, on the Expiration
Date (as defined in the accompanying letter of transmittal) or (ii) the
procedures for delivery of the outstanding notes being tendered by book-entry
transfer, together with a duly completed and executed letter of transmittal,
cannot be completed on or prior to 5:00 p.m., New York City time on the
Expiration Date. This notice of guaranteed delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
delivery), to the exchange agent. See "The Exchange Offer -- Procedures for
Tendering Outstanding Notes" in the prospectus. The Company has the right to
reject a tender of outstanding notes made pursuant to the guaranteed delivery
procedures unless the registered holder using the guaranteed delivery procedure
submits either (a) the outstanding notes tendered thereby, in proper form for
transfer, or (b) confirmation of book-entry transfer as set forth in the
prospectus, in either case together with one or more properly completed and duly
executed letter(s) of transmittal (or facsimile thereof) and any other required
documents by 5:00 p.m., New York City time, on the third New York Stock Exchange
trading day following the Expiration Date.
<PAGE>
The exchange agent for the Exchange Offer Is:
The Bank of New York
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL FACSIMILE TRANSMISSIONS: BY HAND OR OVERNIGHT DELIVERY
(Eligible Institutions Only)
<S> <C> <C>
The Bank of New York (212) 815-6339 The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 CONFIRM BY TELEPHONE: Corporate Trust Services Window
Attn: Reorganization Section (212) 815-6337 Ground Level
New York, New York 10286
For Information Call: Attn: Reorganization Section
(212) 815-6337
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DLIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the prospectus dated [ ], and the related
letter of transmittal (which together constitute the "Exchange Offer"), receipt
of which is hereby acknowledged, the aggregate principal amount of the
outstanding notes set forth below pursuant to the guaranteed delivery procedures
set forth in the prospectus under the caption "The Exchange Offer -- Procedures
for Tendering Outstanding Notes" and in Instruction 2 to the letter of
transmittal.
2
<PAGE>
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
Name and address of
registered holder as it Certificate number(s) Aggregate principal Principal amount of
appears on the outstanding of outstanding notes amount represented outstanding notes
notes (Please print) tendered by outstanding notes* tendered
<S> <C> <C> <C>
- -------------------------- ------------------------ ------------------------- --------------------
- -------------------------- ------------------------ ------------------------- --------------------
- -------------------------- ------------------------ ------------------------- --------------------
- -------------------------- ------------------------ ------------------------- --------------------
- -------------------------- ------------------------ ------------------------- --------------------
- -------------------------- ------------------------ ------------------------- --------------------
</TABLE>
* Must be in denominations of a principal amount of $100,000 and any
integral multiple of $1,000.
If the outstanding notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number:
------------------------------------------------------------
- --------------------------------------------------------------------------------
All authority herein conferred or agreed to be conferred shall survive the death
or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
X Date: , 2000
------------------------------ -------------
X Date: , 2000
------------------------------ -------------
Signature(s) of Owner(s)
or Authorized Signatory
Area Code and Telephone Number:
Must be signed by the holder(s) of the outstanding notes as their name(s)
appear(s) on certificates of the outstanding notes or on a security position
listing, or by person(s) authorized to become registered holder(s) by
endorsement and documents transmitted with this notice of guaranteed delivery.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must set forth his or her full title below.
3
<PAGE>
Please print name(s) and address(es)
Names(s):
----------------------------------------------------------------------
-------------------------------------
----------------------------------------------------------------------
-------------------------------------
Capacity:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
Address(es):
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
4
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934 as an "eligible guarantor institution,"
including (as such terms are defined therein): (i) a bank; (ii) a broker,
dealer, municipal securities broker, municipal securities dealer, government
securities broker, government securities dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association or learning
agency; or (v) a savings association that is a participant in a Securities
Transfer Association recognized program hereby guarantees to deliver to the
exchange agent, at one of its addresses set forth above, either (a) the
outstanding notes tendered hereby, in proper from for transfer, or (b)
confirmation of the book-entry transfer of such outstanding notes to the
exchange agent's account at The Depositary Trust Company maintained for such
purpose, pursuant to the procedures for book-entry transfer set forth in the
prospectus, in either case together with one or more properly completed and duly
executed letter(s) of transmittal (or facsimile thereof) and any other required
documents by 5:00 p.m., New York City time, on the third New York Stock Exchange
trading day following the Expiration Date.
The undersigned acknowledged that it must deliver the letter(s) of
transmittal and the outstanding notes tendered hereby to the exchange agent
within the time period set forth above and that failure to do so could result in
a financial loss to the undersigned.
Name of Firm:
-------------------------- -------------------------------
(Authorized Signature)
Address: -------------------------- Title:-------------------------
-------------------------- Name:--------------------------
(zip code) (Please type or print)
Area Code and
Telephone Number:-------------------------- Date:--------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OUTSTANDING NOTES WITH THIS FORM.
CERTIFICATES FOR OUTSTANDING NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
5
<PAGE>
Exhibit 99.3
OFFER TO EXCHANGE
12% SENIOR SUBORDINATED NOTES DUE 2009, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2009
OF
PRECISION PARTNERS, INC.
To The Depository Trust Company participants:
We are enclosing herewith the materials listed below relating to the offer
by Precision Partners, Inc. (the "Company") to exchange up to $100,000,000
aggregate principal amount of its 12% Senior Subordinated Notes Due 2009,
pursuant to an offering registered under the Securities Act of 1933 for a like
principal amount of its issued and outstanding 12% Senior Subordinated Notes Due
2009, upon the terms and subject to the conditions set forth in the prospectus
dated [ ] of the Company, and the related letter of transmittal,
in each case as amended or supplemented from time to time (which together
constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated [ ]
2. Letter of transmittal;
3. Notice of guaranteed delivery;
4. Instruction to book-entry transfer participant from owner; and
5. Letter which may be sent to your clients for whose account you
hold outstanding notes in your name or in the name of your
nominee, to accompany the instruction form referred to above,
for obtaining such client's instruction with regard to the
Exchange Offer.
WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], UNLESS
EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of
outstanding notes being tendered.
To participate in the Exchange Offer, a beneficial holder of outstanding
notes must cause a DTC participant to tender such holder's outstanding notes to
The Bank of New York's account, as exchange agent, maintained at The Depository
Trust Company ("DTC") for the benefit of the exchange agent through DTC's
Automated Tender Offer Program ("ATOP"), including transmission of a
computer-generated message that acknowledges and agrees, on behalf of the DTC
participant and the beneficial owners of tendered outstanding notes, to be bound
by the terms of the letter of transmittal. By complying with DTC's ATOP
procedures with respect the Exchange Offer, the DTC participant confirms, on
behalf of itself and the beneficial or owners of tendered outstanding notes, all
provisions of the letter of transmittal applicable to it and such beneficial
owners as fully as if it completed, executed and returned the letter of
transmittal to the exchange agent.
Pursuant to the letter of transmittal, each holder of outstanding notes
will represent to the Company that (i) it is not an affiliate of the Company or
its subsidiaries or, if the holder is an affiliate of the Company or its
subsidiaries, it will comply with the registration and prospectus requirements
of the Securities Act to the extent applicable, (ii) the exchange notes are
being acquired in the ordinary course of business of the person receiving such
exchange notes, whether or not such person is the holder, (iii) the holder has
not entered into an arrangement or understanding with any person to participate
in the distribution (within the meaning of the Securities Act) of the exchange
notes, (iv) the holder is not a broker-dealer who purchased the notes for resale
pursuant to an exemption under the Securities Act, and (v) the holder will be
able to trade exchange notes acquired in the Exchange Offer without restriction
under the Securities Act. If the tendering holder is a broker-dealer that will
receive exchange notes for its own account pursuant to the Exchange Offer, the
Company will represent on behalf of such broker-dealer that the outstanding
notes to be exchanged for the
<PAGE>
exchange notes were acquired by it as a result of market-making activities or
other trading activities, and acknowledge on behalf of such broker-dealer that
it will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such exchange notes. By acknowledging that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such exchange notes, such broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The enclosed instruction to the book-entry transfer participant from owner
contains an authorization by the beneficial owners of the outstanding notes for
you to make the foregoing representations.
We will not pay any fee or commission to any broker or dealer or to any
other persons (other than the exchange agent) in connection with the
solicitation of tenders of outstanding notes pursuant to the Exchange Offer. We
will pay or cause to be paid any transfer taxes payable on the transfer of
outstanding notes to it, except as otherwise provided in Instruction 7 of the
enclosed letter of transmittal.
Additional copies of the enclosed material may be obtained from The Bank of
New York, 101 Barclay Street, 7E, New York, New York 10286, Attention:
Reorganization Section.
Very truly yours,
PRECISION PARTNERS, INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF PRECISION PARTNERS, INC., OR THE BANK OF NEW YORK OR AUTHORIZE YOU TO
USE ANY DOCUMENT OR MAKE ANY STATEMENT ON THEIR BEHALF IN CONNECTION WITH THE
EXCHANGE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS
CONTAINED THEREIN.
<PAGE>
Exhibit 99.4
OFFER TO EXCHANGE
12% SENIOR SUBORDINATED NOTES DUE 2009, WHICH
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR OUTSTANDING
12% SENIOR SUBORDINATED NOTES DUE 2009
OF
PRECISION PARTNERS, INC.
To our clients:
We are enclosing herewith a prospectus dated [_____________] of
Precision Partners, Inc. (the "Company"), and a letter of transmittal (which
together constitute the "Exchange Offer") relating to the offer by the
Company to exchange up to $100,000,000 aggregate principal amount of its 12%
Senior Subordinated Notes Due 2009, pursuant to an offering registered under
the Securities Act of 1933, for a like principal amount of its issued and
outstanding 12% Senior Subordinated Notes Due 2009, upon the terms and
subject to the conditions set forth in the Exchange Offer.
PLEASE NOTE THAT THE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON [ ], UNLESS EXTENDED.
The Exchange Offer is not conditioned upon any minimum number of
outstanding notes being tendered.
We are the participants in the book-entry transfer facility of
outstanding notes held by us for your account. A tender of such outstanding
notes can be made only by us as the participant in the book-entry transfer
facility and pursuant to your instructions. The letter of transmittal is
furnished to you for your information only and cannot be used by you to
tender outstanding notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the outstanding notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we
may on your behalf make the representations contained in the letter of
transmittal that are to be made with respect to you as beneficial owner.
Pursuant to the letter of transmittal, each holder of outstanding notes
will represent to the Company that (i) it is not an affiliate of either the
Company or its subsidiaries or, if the holder is an affiliate of the Company
or its subsidiaries, it will comply with the registration and prospectus
requirements of the Securities Act to the extent applicable, (ii) the
exchange notes are being acquired in the ordinary course of business of the
person receiving such exchange notes, whether or not such person is the
holder, (iii) the holder has not entered into an arrangement or understanding
with any person to participate in the distribution (within the meaning of the
Securities Act) of the exchange notes, (iv) the holder is not a broker-dealer
who purchased the notes for resale pursuant to an exemption under the
Securities Act, and (v) the holder will be able to trade exchange notes
acquired in the Exchange Offer without restriction under the Securities Act.
If the tendering holder is a broker-dealer that will receive exchange notes
for its own account pursuant to the Exchange Offer, we will represent on
behalf of such broker-dealer that the outstanding notes to be exchanged for
the exchange notes were acquired by it as a result of market-making
activities or other trading activities, and acknowledge on behalf of such
broker-dealer that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such exchange notes. By
acknowledging that it will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such exchange notes, such
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
Very truly yours,
<PAGE>
EXHIBIT 99.5
INSTRUCTION TO
BOOK-ENTRY TRANSFER PARTICIPANT FROM OWNER
OF
PRECISION PARTNERS, INC.
12% SENIOR SUBORDINATED NOTES DUE 2009
To participant of the book-entry transfer facility:
The undersigned hereby acknowledges receipt of the prospectus dated
[ ] of Precision Partners, Inc. (the "Company"), and a related
letter of transmittal (which together constitute the "Exchange Offer").
This will instruct you, the book-entry transfer facility participant,
as to the action to be taken by you relating to the Exchange Offer with respect
to the outstanding notes held by you for the account of the undersigned.
The aggregate face amount of the outstanding notes held by you for the
account of the undersigned is (fill in amount):
$ of the 12% Senior Subordinated Notes Due 2009.
------------------------
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate statement):
A.______________________ To TENDER the following outstanding notes
held by you for the account of the undersigned (insert principal
amount of outstanding notes to be tendered):
$_______________________ 1 of the 12% Senior Subordinated Notes Due
2009, and not to tender other outstanding notes, if any, held by you
for the account of the undersigned;
OR
B.______________________ NOT to tender any outstanding notes held by
you for the account of the undersigned.
If the undersigned instructs you to tender the outstanding notes held
by you for the account of the undersigned, it is understood that you are
authorized to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representations and warranties
contained in the letter of transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations, that (i) it is not an affiliate of either the Company or, if
the undersigned is an affiliate of the Company, it will comply with the
registration and prospectus requirements of the Securities Act to the extent
applicable, (ii) the exchange notes are being acquired in the ordinary course of
business of the person receiving such exchange notes, whether or not such person
is the holder, (iii) the undersigned has not entered into an arrangement or
understanding with any other person to participate in the distribution (within
the meaning of the Securities Act) of the exchange notes, (iv) the undersigned
is not a broker-dealer who purchased the notes for resale pursuant to an
exemption under the Securities Act, and (v) the undersigned will be able to
trade exchange notes acquired in the Exchange Offer without restriction under
the Securities Act. If the undersigned is a broker-dealer (whether or not it is
also an "affiliate") that will receive exchange notes for its own account
pursuant to the Exchange Offer, it represents that such outstanding notes to be
exchanged were acquired by it as a result of market-making activities or other
trading activities, and it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such exchange notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in
- --------
(1) Must be a minimum aggregate principal amount of at least $100,000 or
an integral multiple of $1,000 thereof.
<PAGE>
connection with any resale of such exchange notes, the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
SIGN HERE
Name of beneficial owner(s):----------------------------------------------------
Signature(s):-------------------------------------------------------------------
Name(s) (please print):---------------------------------------------------------
Address:------------------------------------------------------------------------
(zip code)
Telephone Number:---------------------------------------------------------------
(area code)
Taxpayer identification or Social Security Number:
- -------------------------------------
Date:--------------------------------
