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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): JANUARY 29, 1999
AMERICAN PRECISION INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 1-5601 16-1284388
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
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2777 WALDEN AVENUE, BUFFALO, NEW YORK 14225
(Address of principal executive offices) (Zip code)
(716) 684-9700
(Registrant's telephone number, including area code)
NOT APPLICABLE.
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) On February 1, 1999, API ELMO AB (the "Buyer"), a newly-formed
Swedish limited liability corporation which is a wholly-owned subsidiary of
Registrant's subsidiary API Motion Inc., purchased the ongoing business and
related assets of ELMO Industrier AB (the "Seller"), a Swedish limited liability
corporation with its manufacturing and office facilities in Flen, Sweden. The
Seller is a subsidiary of Vatterledens Invest AB, a privately-owned Swedish
limited liability corporation with offices in Goteborg, Sweden.
The assets acquired included real property, inventory,
machinery and equipment, accounts receivable, intercompany receivables, patents,
trademarks, the trade name "ELMO," and customer and supplier contracts. Not
included in the assets acquired was Seller's subsidiary, Sten Pettersons
Verkstad i Eskistuna AB. Buyer assumed Seller's bank debt and certain business
related payables.
The purchase price consisted of a net cash payment of
Swedish kronor ("SEK") 169,910,000 plus the assumption of SEK 44,200,000 of bank
debt. The February 1, 1999 currency exchange rate was 7.8483 kronor per U.S.
dollar. The net cash payment was the sum of the gross cash purchase price of SEK
193,106,000 plus interest from January 1, 1999 through January 31, 1999 at
4-1/2% per annum (SEK 738,000) less the intercompany receivable acquired by
Buyer (SEK 22,534,000) less SEK 1,400,000. At the closing, the Seller deposited
SEK 10,668,000 in a short term escrow account which covers Seller's obligations
with respect to representations and warranties on tax, environmental and product
liability matters. Buyer will be entitled to a post-closing reduction of the
purchase price if the value of the net assets acquired is less than SEK
63,904,000.
There are no relationships between the Seller or its
affiliates and the Registrant or any of its affiliates.
The funds used by Buyer to pay the cash portion of the
purchase price were obtained by the Registrant under its Credit Agreement with
Marine Midland Bank and Fleet National Bank.
(b) The assets acquired were used by Seller in the design and
manufacture of specialty electric motors. Buyer intends to continue to use the
assets for the same purpose.
ITEM 5. OTHER EVENTS.
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(a) Effective January 29, 1999, the Registrant amended the Rights
Agreement dated as of July 24, 1998, to delete all reference to "Continuing
Directors." A copy of the Amended and Restated Rights Agreement is filed
herewith as an exhibit.
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(b) On January 29, 1999, the Registrant and Marine Midland Bank
and Fleet National Bank entered into the First Amendment to the Credit Agreement
dated August 31, 1998. A copy of that Amendment is filed herewith as an exhibit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(a) Financial Statements of Business Acquired:
Any financial statements of the acquired business described
in Item 2 of this Report required by this Item will be filed by amendment not
later than 60 days after the date by which this Report must be filed.
(b) Pro Forma Financial Information:
Any pro forma financial information relative to the acquired
business described in Item 2 of this Report will be filed by amendment not later
than 60 days after the date by which this Report must be filed.
(c) Exhibits:
2. Asset Purchase Agreement by and among Vatterledens
Invest AB and ELMO Industrier AB and American
Precision Industries Inc. and API ELMO AB, dated
January 28, 1999.
4(A). Amended and Restated Rights Agreement dated as of
January 29, 1999, by and between American
Precision Industries Inc. and American Securities
Transfer & Trust, Inc., as Rights Agent.
4(B). First Amendment to Credit Agreement dated as of
January 29, 1999, by and among American Precision
Industries Inc., Marine Midland Bank and Fleet
National Bank.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
AMERICAN PRECISION INDUSTRIES INC.
By: /s/ Bruce McH. Kirchner
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Bruce McH. Kirchner
Vice President and
Chief Financial Officer
Date: February 5, 1999
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EXHIBIT INDEX
The following designated exhibits are filed herewith:
Exhibits:
2. Asset Purchase Agreement by and among Vatterledens
Invest AB and ELMO Industrier AB and American
Precision Industries Inc. and API ELMO AB, dated
January 28, 1999.
4(A). Amended and Restated Rights Agreement dated as of
January 29, 1999, by and between American
Precision Industries Inc. and American Securities
Transfer & Trust, Inc., as Rights Agent.
4(B). First Amendment to Credit Agreement dated as of
January 29, 1999, by and among American Precision
Industries Inc., Marine Midland Bank and Fleet
National Bank.
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Exhibit 2
ASSET PURCHASE AGREEMENT
BY AND AMONG
VATTERLEDENS INVEST AB
AND
ELMO INDUSTRIER AB
AND
AMERICAN PRECISION INDUSTRIES INC.
AND
API ELMO AB
JANUARY 28, 1999
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TABLE OF CONTENTS
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RECITALS..........................................................................................................1
ARTICLE I.
Purchase and Sale of Assets..............................................................................2
1.1 Purchase and Sale......................................................................2
1.2 Assets to be Transferred...............................................................2
(a) Real Property.................................................................2
(b) Tangible Assets...............................................................2
(c) Intangible Assets.............................................................3
(d) Accounts Receivable...........................................................4
(e) Inventory.....................................................................4
(f) Contracts.....................................................................4
(g) Cash and Cash Equivalents.....................................................5
1.3 Liabilities to be Assumed..............................................................5
1.4 Consideration to be Paid by Buyer......................................................9
(a) Purchase Price for the Assets.................................................9
(b) Cash Paid at Closing..........................................................9
(c) Amounts Held in Escrow........................................................9
1.5 Payment of InterCompany Receivables...................................................10
1.6 Manner of Payments....................................................................12
(a) Cash Payments................................................................12
(b) Assumption of Liabilities....................................................12
1.7 Real Property Provisions..............................................................12
1.8 Non-Assignable Contracts..............................................................13
ARTICLE II.
Representations and Warranties..........................................................................14
2.1 Representations and Warranties of
Seller and the Shareholder............................................................14
(a) Corporate Standing and Authority;
Binding Agreement............................................................14
(b) Stock Ownership..............................................................15
(c) Directors, General Manager and Employees.....................................15
(d) Absence of Conflicting Agreements
or Required Consents.........................................................15
(e) Financial Statements.........................................................16
(f) Liabilities..................................................................17
(g) Taxes........................................................................17
(h) Inventories..................................................................18
(i) Non-Infringement of Patents, Trademarks
and Other Intellectual Property..............................................18
(j) Operations and Use of Properties.............................................19
(k) Licenses.....................................................................20
(l) Insurance....................................................................20
(m) Environmental Matters........................................................21
(n) Receivables..................................................................23
(o) Employees and Labor Laws.....................................................23
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(p) Product Labeling and Product Liability.......................................24
(q) Validity and Existence of Agreements.........................................24
(r) Status of Employee Benefit Plans.............................................27
(s) Debts and Capitalized Leases.................................................28
(t) Guaranties...................................................................28
(u) Litigation...................................................................28
(v) Continuation of Business.....................................................29
(w) Management Personnel.........................................................29
(x) Absence of Changes...........................................................29
(y) No Side Agreements...........................................................30
(z) Customers....................................................................30
(aa) Suppliers....................................................................30
(bb) Title to Assets..............................................................30
(cc) Machinery and Equipment......................................................31
(dd) Year 2000 Compliance.........................................................31
(ee) Euro Currency Planning. ....................................................32
(ff) Democracy at Work Act........................................................33
(gg) Truth of Representations.....................................................33
2.2 Representations and Warranties of Buyer
and Parent............................................................................33
(a) Corporate Standing and Authority
of Buyer.....................................................................33
(b) Corporate Standing and Authority of
Parent.......................................................................34
(c) Litigation...................................................................35
(d) Truth of Representations.....................................................35
ARTICLE III.
Certain Covenants of Seller and the Shareholder.........................................................36
3.1 Indemnity.............................................................................36
3.2 Negative Covenants of Seller and
the Shareholder.......................................................................38
3.3 Affirmative Covenants of Seller and
the Shareholder.......................................................................40
3.4 Payment of Liabilities and Taxes......................................................42
3.5 Exclusivity...........................................................................42
3.6 Audited Financial Statements..........................................................42
3.7 Environmental Testing.................................................................43
ARTICLE IV.
Covenants of Buyer and Parent...........................................................................44
4.1 Indemnity.............................................................................44
ARTICLE V.
Closing.................................................................................................45
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5.1 Conditions to Seller's Obligation to Close............................................45
(a) Representations and Warranties...............................................45
(b) No Litigation................................................................45
(c) Purchase Price...............................................................46
(d) Assumption of Liabilities....................................................46
(e) Real Estate Contracts........................................................46
(f) Escrow Agreement.............................................................46
(g) Regulatory Clearances........................................................46
5.2 Conditions to Buyer's Obligation to Close.............................................47
(a) Representations, Warranties and
Covenants....................................................................47
(b) No Litigation................................................................47
(c) Conveyances..................................................................47
(d) Consents.....................................................................48
(e) InterCompany Receivables.....................................................48
(f) Delivery of Environmental Report.............................................48
(g) Change of Name...............................................................48
(h) Liability Insurance..........................................................48
(i) Financial Institution Debt...................................................49
(j) Employment Agreements........................................................49
(k) Real Estate Contracts........................................................49
(l) Customer Meetings............................................................49
(m) Lender Consents..............................................................49
(n) Exhibit 1.3..................................................................50
(o) Escrow Agreement.............................................................50
(p) Regulatory Clearances........................................................50
(q) Minimum Net Worth............................................................50
(r) Draft Audited Financial Statements...........................................51
5.3 Time and Place........................................................................51
5.4 Best Efforts to Satisfy Conditions....................................................51
5.5 Waiver of Conditions..................................................................51
5.6 Termination of Agreement..............................................................51
5.7 Procedure Upon Termination............................................................52
ARTICLE VI.
Other Matters...........................................................................................54
6.1 Announcements.........................................................................54
6.2 Change of Name........................................................................54
6.3 Non-Competition.......................................................................54
6.4 Product Liability Insurance...........................................................57
ARTICLE VII.
Miscellaneous...........................................................................................58
7.1 Survival of Representations, Warranties and
Covenants; Limitations on Indemnity Claims............................................58
7.2 No Broker.............................................................................59
7.3 Expense...............................................................................60
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7.4 Notices...............................................................................60
7.5 Binding Effect; Assignment............................................................62
7.6 Entire Agreement......................................................................62
7.7 Choice of Law.........................................................................62
7.8 Waiver................................................................................62
7.9 Post-Closing Cooperation..............................................................63
7.10 Counterparts..........................................................................63
7.11 Affiliates............................................................................63
7.12 Risk of Loss..........................................................................63
7.13 Dispute Resolution Procedure..........................................................64
7.14 English Language......................................................................65
7.15 Warranty Service......................................................................66
SIGNATURES.......................................................................................................66
LIST OF EXHIBITS.................................................................................................68
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ASSET PURCHASE AGREEMENT
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THIS AGREEMENT made this 28th day of January, 1999 is by and
among ELMO INDUSTRIER AB, a Swedish limited liability corporation, Org. No.
556140-0192, that is an indirect wholly owned subsidiary of Shareholder
("Seller"); VATTERLEDENS INVEST AB, a Swedish limited liability corporation
("Shareholder"); AMERICAN PRECISION INDUSTRIES INC., a Delaware corporation
("Parent"); and API ELMO AB, a newly formed Swedish limited liability
corporation, Org. No. 556564-2617 that is an indirect wholly owned subsidiary of
Parent ("Buyer").
RECITALS
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A. Seller desires to sell and Buyer desires to purchase the on
going business and related assets of Seller on the terms and conditions set
forth in this Agreement;
B. Seller is the indirect wholly owned subsidiary of
Shareholder; and
C. To induce Buyer to enter into this Agreement, Shareholder
is willing to agree to certain covenants contained in this Agreement.
NOW, THEREFORE, the parties agree as follows:
TERMS OF AGREEMENT
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ARTICLE I.
Purchase and Sale of Assets
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1.1 PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, at the Closing, as hereinafter defined, Seller shall sell and
Buyer shall purchase the Assets constituting the business operation of Seller,
as hereinafter defined, free and clear of all liens, encumbrances and security
interests, other than those expressly assumed by Buyer pursuant to Section 1.3,
and Buyer shall pay to Seller the consideration specified in Section 1.4.
1.2 ASSETS TO BE TRANSFERRED. The following is an
identification of the assets to be transferred to Buyer at Closing (the
"Assets"):
(a) REAL PROPERTY. The real property described
in the attached Exhibit 1.2(a) together with all buildings and improvements on
the real property, all rights of Seller to all streets, highways, alleys,
driveways, easements and rights-of-way relating thereto, and all fixtures
belonging to the Seller on the real property including, without limitation, all
heating facilities, plumbing facilities, lighting fixtures and similar items.
(b) TANGIBLE ASSETS. All tangible property of
Seller, other than Real Property and Inventory (the "Tangible
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Assets"), including without limitation machinery and equipment, replacement
parts, leasehold improvements, furniture, vehicles, sundry tangible assets and
fixtures (including, without limitation, all of such items described on Exhibit
1.2(b) hereto). Tangible Assets shall also include all of Seller's computerized
and hard copy books and records pertaining to Seller's business or the Assets
(including, without limitation, all customer order and inquiry files, brochures,
catalogs and standards books), but not Seller's minute books and shareholder and
stock transfer records, as to which Seller shall provide Buyer reasonable access
after Closing.
(c) INTANGIBLE ASSETS. All the intangible
assets of Seller other than Accounts Receivable (the "Intangible Assets"),
including without limitation all prepaid items, deposits, insurance refunds and
payments, stocks, bonds and other investments, patents, copyrights, trademarks,
trade names, domain names, service marks, logos and other proprietary designs,
computer software, engineering drawings, technical specifications and ratings
data, know-how, trade secrets, the name and goodwill of Seller and Seller's
customer lists (including, without limitation, all of such items described on
Exhibit 1.2(c) attached hereto), and the covenant of Seller and the Shareholder
contained in Section 6.3 provided, however, that Intangible Assets and the
Assets will not include the outstanding shares of
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stock of Sten Pettersons Verkstad i Eskistuna AB (the "Excluded
Stock").
(d) ACCOUNTS RECEIVABLE. All accounts
receivable from customer and other trade debtors of Seller, notes receivable and
all other amounts owing to Seller (the "Accounts Receivables") including all
outstanding accounts receivable and any other indebtedness owed to Seller by
Shareholder and any Affiliates of Shareholder or Seller (the "Affiliate Accounts
Receivable").
(e) INVENTORY. All inventory of Seller and
supplies (including, without limitation, all inventory, whether finished, work
in process or raw, described on Exhibit 1.2(e) hereto) (the "Inventory").
(f) CONTRACTS. Those leases, contracts and
purchase and sales commitments and orders to which Seller is a party or by which
Seller or the properties of Seller is bound which are identified and briefly
described on Exhibit 1.2(f) attached hereto, together with all purchase orders
received and accepted by Seller and sales commitments made by Seller in the
ordinary course of business after the date of this Agreement which provide for
the sale of goods or services on terms and at purchase price rates no less
favorable than Seller's normal and customary terms and rates (the "Contracts"),
and all prepaid items and deposits of Seller with respect to the Contracts.
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(g) CASH AND CASH EQUIVALENTS. All of Seller's
cash and cash equivalents.
1.3 LIABILITIES TO BE ASSUMED. At Closing Buyer shall assume
and become responsible to pay, perform and discharge (i) those obligations of
Seller of the type set forth on Exhibit 1.3 hereto (the "Trade Debt"), (ii) long
and short term debt owing by Seller to Skandinavski Enskilda Banken and
Nordbanken as set forth on Exhibit 1.3 hereto (the "Financial Institution Debt")
and (iii) long and short term debt owing by Seller to Shareholder as set forth
on Exhibit 1.3 hereto (the "Affiliate Debt"), as such obligations and debt are
adjusted as the result of Seller's operations in the ordinary course of business
(in a manner consistent with past practices) from January 1, 1999 through
Closing Date (collectively the "Assumed Debt"). Notwithstanding any implication
to the contrary above or elsewhere in this Agreement, (i) the Assumed Debt shall
not include any obligations or liabilities which are not of the same type as
those set forth on Exhibit 1.3 hereto or which are incurred by Seller in
violation of the provisions of Sections 3.2 and 3.3 of this Agreement, (ii) the
principal amount of the Financial Institution Debt assumed by Buyer shall in no
event exceed 45,500,000 Swedish kronor ("SEK"), (iii) the principal amount of
the Affiliate Debt assumed by Buyer shall not exceed SEK 31,828,000 and (iv) the
accrued and unpaid interest owing on the Financial Institution Debt and the
Affiliate Debt assumed by Buyer shall not exceed the
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amount that would be owing thereunder if Seller pays such interest in accordance
with applicable terms. In addition, subject to the provisions of Section 1.8
below, Buyer shall assume at Closing the obligations of Seller accruing under
the Contracts after the date of Closing (such contractual obligations and the
Assumed Debt collectively, the "Assumed Liabilities").
Buyer does not assume any liabilities of Seller
other than the Assumed Liabilities, and, notwithstanding any implication to the
contrary above or elsewhere in this Agreement, none of the following liabilities
or obligations are "Assumed Liabilities" for purposes of this Agreement:
(a) Any of Seller's accounts payable,
indebtedness or other liabilities and obligations owing to Seller's shareholders
or other Affiliates (as defined in Section 7.11 below) or any other parties
(other than the Assumed Debt);
(b) Any of Seller's or Shareholder's liabilities
or obligations for expenses or fees incident to or arising out of the
negotiation, preparation, approval, or authorization of this Agreement or the
consummation (or preparation for the consummation) of the transactions
contemplated hereby, including without limitation attorneys' and accountants'
fees and the costs of preparing the Audited Financial Statements referred to in
Section 3.6 below;
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(c) Other than those taxes set forth on Exhibit
1.3, any liability or obligation of Seller with respect to federal, national,
state, provincial, local or foreign taxes, levies, assessments, charges or fees
which are imposed upon or measured by the income of Seller, and any federal,
national, state, provincial, local or foreign sales, use, value added, profits,
capital gains, service, gross receipts, occupation, property, property transfer,
lease, capital stock, premium, excise, franchise, payroll, employment or similar
taxes, levies, assessments, charges or fees (collectively "Taxes") payable by or
imposed upon the assets of Seller and any liabilities for interest, penalties or
additions to any of such Taxes, it being understood that Buyer shall not be
deemed to be Seller's transferee with respect to any tax liability and that,
notwithstanding anything to the contrary contained above, Buyer shall not under
any circumstances be liable for any Taxes imposed upon or measured by the income
of Seller;
(d) Any of Seller's liabilities or obligations
by reason of any violation or alleged violation of any federal, national, state,
provincial, local or foreign law or regulation or any requirement of any
governmental authority (including, without limitation, "Environmental Laws" as
defined in Section 2.1(m) below), or of the rights of others;
(e) Liabilities, if any, arising as a result of
transactions entered into in violation of this Agreement;
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(f) Any liability or obligation which would not
have existed had all of Seller's and the Shareholder's
representations and warranties been true as of the date of this
Agreement and as of the Closing;
(g) Any liability or obligation for product
liability or product nonconformity claims, or product warranty claims arising in
connection with products sold or manufactured by Seller;
(h) Other than those obligations set forth on
Exhibit 1.3(h), any obligation owed to an employee of Seller which accrues on or
prior to the Closing, or which arises after the Closing but is based
substantially on conduct or events occurring prior to Closing, which relates to
a claim for wages, harassment or discrimination, workers' compensation,
disability, accrued vacation benefits, pension benefits, health, life or
disability insurance claims, or severance benefits, including any claim for
severance benefits as a result of Seller's sale of the Assets to Buyer under
this Agreement, (collectively, "Employee Claims");
(i) Any other liability or obligation of Seller
not expressly assumed by Buyer under Section 1.3 hereof; and
(j) Any liability for the payment of premiums on
or any other amounts owing in connection with insurance coverage
maintained by Seller.
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1.4 CONSIDERATION TO BE PAID BY BUYER.
(a) PURCHASE PRICE FOR THE ASSETS. As
consideration for the Assets (the "Purchase Price"), Buyer shall assume the
Assumed Liabilities and pay to Seller the sum of SEK 193,106,000 (less the sum
of SEK 1,400,000 reflecting a negotiated reduction in the purchase price,
resulting in a net amount of SEK 191,706,000) plus the "Interest Payment" as
(defined below) in the manner specified in Sections 1.4(b) and (c). Buyer shall
make a payment to Seller at Closing (the "Interest Payment") in an amount equal
to the amount of interest that would accrue on SEK 193,106,000 if interest
accrued thereon at the per annum rate of four and one-half percent (4-1/2%) from
January 1, 1999 through and including the day immediately preceding the Closing
Date.
(b) CASH PAID AT CLOSING. Seller shall set-off
the amount of the Interest Payment against the InterCompany Receivables payable
by Seller at Closing pursuant to Section 1.5 hereof, and Buyer shall be deemed
to have paid the Interest Payment in full as a result of such set-off. At the
Closing, Buyer shall pay to Seller in cash in Swedish kronor an amount equal to
the difference between (i) SEK 191,706,000 and (ii) SEK 10,668,000 (the "Escrow
Amount").
(c) AMOUNTS HELD IN ESCROW. At the Closing,
Buyer shall deposit the Escrow Amount in an escrow account with
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Skandinavski Enskilda Banken (the "Escrow Agent") to be held in accordance with
the provisions of the Escrow Agreement annexed hereto as Exhibit 1.4(c) (the
"Escrow Agreement"). The Escrow Amount shall be held by the Escrow Agent until
the date 90 days after the date of Seller's delivery to Buyer of the "Audited
Financial Statements" to be delivered to Buyer pursuant to the provisions of
Section 3.6 below, at which time Escrow Agent shall distribute the Escrow Amount
to Seller (subject to the amount of any holdback required under the terms of the
Escrow Agreement in connection with any tax, environmental and product liability
indemnification claims asserted by Buyer pursuant to the provisions of Section
3.1 below).
1.5 PAYMENT OF INTERCOMPANY RECEIVABLES.
(a) At Closing, Shareholder shall pay or cause
to be paid to Buyer in cash an amount equal to all outstanding Affiliate
Accounts Receivable owing to Seller on the Closing, less the amount of the
Affiliate Debt (such net amount referred to as the "InterCompany Receivables"),
and Buyer shall apply such amount to pay-off the Affiliate Accounts Receivables
acquired by Buyer from Seller at Closing. Seller covenants that the InterCompany
Receivables acquired by Buyer hereunder shall be SEK 31,300,000 at the time of
Closing, except to the extent that such amount changes due to changes occurring
in the ordinary course of business. Buyer shall be deemed to have paid the
Affiliate Debt in full as a result Shareholder's set-off of the Affiliate Debt
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against the Affiliate Accounts Receivable as described in the first sentence of
this Section 1.5(a).
(b) Within 30 days following Closing, Buyer
shall deliver to Seller a calculation of the net amount of the book value of the
Assets acquired by Buyer at Closing, less the book value of the Assumed
Liabilities assumed by Buyer at Closing, computed in accordance with Swedish
generally accepted accounting principles consistently applied (the "Proposed Net
Asset Calculation"). The Proposed Net Asset Calculation shall be final and
binding upon the parties hereto, unless Seller delivers written notice to Buyer,
within 10 days of Seller's receipt of the Proposed Net Asset Calculation,
specifying in reasonable detail any objections Seller has to the Proposed Net
Asset Calculation (a "Protest Notice"). If Seller delivers a Protest Notice, the
parties shall thereafter endeavor to resolve any disagreements they may have
regarding the Proposed Net Asset Calculation; provided, however, that if such
disagreements are not resolved within 10 days following Buyer's receipt of the
Protest Notice, then either party may elect to have such disagreements settled
by arbitration in accordance with the provisions of Section 7.13 below. When the
Proposed Net Asset Calculation becomes final in accordance with the above
provisions (the "Final Net Asset Calculation"), Seller and Shareholder jointly
and severally agree to immediately pay to Buyer in Swedish kronor the positive
difference, if any, between (i) SEK
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63,904,000 and (ii) the Final Net Asset Calculation. If the Final Net Asset
Calculation equals or exceeds SEK 63,904,000 then the parties shall have no
further rights or obligations pursuant to this Section 1.5(b).
(c) Any amounts paid to Buyer in accordance with
the provisions of Section 1.5(b) above shall be applied to reduce the Purchase
Price payable by Buyer pursuant to this Agreement.
1.6 MANNER OF PAYMENTS.
(a) CASH PAYMENTS. All cash payments required
under this Article I shall be made in Swedish kronor by certified or bank
official check or by wire transfer at the paying party's option.
(b) ASSUMPTION OF LIABILITIES. To effect the
assumption by Buyer of the Assumed Liabilities, Buyer shall deliver at the
Closing an instrument of assumption reasonably satisfactory in form and
substance to Seller and its counsel.
1.7 REAL PROPERTY PROVISIONS.
Seller shall sell the Real Property to Buyer in
accordance with the terms of the agreements annexed hereto as Exhibit 1.7
(collectively the "Real Estate Contracts") which shall be executed and delivered
by the parties simultaneously with their execution and delivery of this
Agreement. Closing under this Agreement and the Real Estate Contracts shall
occur
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simultaneously, and the parties shall not be obligated to close under each such
agreement unless a closing simultaneously occurs under the other such
agreements.
1.8 NON-ASSIGNABLE CONTRACTS. To the extent that any Contract
is not capable of being assigned or transferred without the consent or waiver of
the other party or parties thereto or any third party (including a government or
governmental unit), or if such assignment or transfer or attempted assignment or
transfer would constitute a breach thereof or a violation of any law, decree,
order, regulation or other governmental edict, this Agreement shall not
constitute an assignment or transfer thereof, or an attempted assignment or
transfer of any such Contract. Seller agrees to use commercially reasonable best
efforts to obtain prior to the Closing Date all such consents and waivers. If
any such consent or waiver is not obtained before the Closing Date and the
Closing is nevertheless consummated, Seller agrees to continue to use its
commercially reasonable best efforts to obtain all such consents as have not
been obtained prior to such date and further agrees to cooperate with Buyer
after such date in any reasonable arrangement (such as subcontracting,
sublicensing or subleasing) designed to provide for Buyer, on terms no less
favorable than Seller is entitled to, the benefits under the applicable
Contracts, including, without limitation, enforcement, at the cost and for the
benefit of Buyer, of any and all rights of Seller against any other party
thereto arising out
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of the breach or cancellation thereof by such party or otherwise. In such event,
Buyer shall pay the consideration or perform the obligations, as applicable, of
Seller arising under each such Contract, but only to the extent and in an amount
commensurate with the amount of the benefit that Buyer actually receives under
each such Contract.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
SHAREHOLDER. Seller and the Shareholder, jointly and severally, represent and
warrant to Buyer and Parent that:
(a) CORPORATE STANDING AND AUTHORITY; BINDING
AGREEMENT. Each of Seller and Shareholder is a limited liability corporation
duly organized and validly existing under the laws of Sweden, and has full
corporate power to own all of its properties and assets and to conduct its
business as it is now being conducted. Except as disclosed in Exhibit 2.1(j),
Seller does not own or lease any facilities or store any inventory or other
assets outside of the country of Sweden. The execution of this Agreement and
consummation of the transactions contemplated herein will not violate any
provision of either Seller's or Shareholder's Deed of Formation, by-laws or
statutes, and each of Seller and Shareholder has obtained all necessary
authorization and approval from its Board of Directors and shareholders for the
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execution of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement is a legal, valid and binding agreement of
Seller and Shareholder enforceable against each of them in accordance with its
terms, subject to the laws of bankruptcy, insolvency and moratorium and other
laws or equitable principles generally affecting creditors' rights.
(b) STOCK OWNERSHIP. Seller is the indirect
wholly owned subsidiary of Shareholder, and there are no options, warrants,
calls, commitments, rights or understandings of any character to purchase or
otherwise acquire any shares of common stock of Seller, or any convertible
security or other security issued or to be issued by Seller. Seller has no
equity interest in and has not made advances to any corporation, association,
partnership, joint venture or other entity, other than Sten Pettersons Verkstad
i Eskistuna AB.
(c) DIRECTORS, GENERAL MANAGER AND EMPLOYEES.
Attached hereto as Exhibit 2.1(c) is a list of all directors, the general
manager and key employees of Seller showing their names, ages, dates of service
with Seller, positions and current annual salaries or rate of compensation
(including bonus and incentive compensation).
(d) ABSENCE OF CONFLICTING AGREEMENTS OR
REQUIRED CONSENTS. Except as set forth in Exhibit 2.1(d), the execution,
delivery and performance of this Agreement by Seller and the
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<PAGE> 21
Shareholder, including, without limitation, the assignment of the Contracts to
Buyer, do not and will not: (i) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to either the Seller or the
Shareholder or by which either of them is bound or affected, (ii) result in any
breach of or constitute a default under any note, bond, mortgage, indenture,
lease, license, franchise or other instrument or obligation to which Seller or
Shareholder is a party, or (iii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, domestic or foreign, or any person or entity not a party to this
Agreement.
(e) FINANCIAL STATEMENTS. Seller and
Shareholder have furnished Buyer with: (i) Seller's income tax returns for the
years ended December 31, 1997, 1996 and 1995; (ii) financial statements as at
December 31, 1997, 1996, and 1995 and for the years then ended audited by Ernst
& Young and (iii) interim balance sheets, statements of profit and loss, cash
flow statements, and supporting schedule of expenses for the 10 month period
ended October 31, 1998 and for each elapsed calendar month since January 1, 1998
through October 31, 1998 (and will furnish Buyer such interim monthly balance
sheets, statements of profit and loss, cash flow statements and supporting
schedules of expenses through the Closing Date) prepared by Seller from its
books and records (collectively, the "Financial Statements").
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<PAGE> 22
The Financial Statements have been or will be, as the case may be, prepared in
accordance with Swedish generally accepted accounting principles consistently
applied throughout the periods indicated except as set forth in the notes to the
Financial Statements, and fairly present or will fairly present, as the case may
be, the results of the operations of Seller and Seller's financial position for
the periods indicated except, with respect to the interim financial statements,
for non-material changes resulting from normal year-end adjustments.
(f) LIABILITIES. There are no liabilities or
obligations of Seller of any kind, whether accrued, absolute contingent or
otherwise, except (i) as indicated in the Financial Statements at December 31,
1997 and (ii) liabilities or obligations arising since December 31, 1997 which
(A) were incurred in the ordinary and usual course of Seller's business, (B)
individually do not exceed SEK 350,000 and (C) are in types and amounts
consistent with Seller's past practices and experience.
(g) TAXES. Seller has filed all Tax returns and
reports which are required by law to be filed in connection with its day to day
operations and sales (the "Tax Returns and Reports") and has paid or set up an
adequate reserve for the payment of all Taxes required to be paid in respect of
the periods covered by those Tax Returns and Reports and all Taxes which have or
may become due pursuant to those Tax Returns and
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<PAGE> 23
Reports and all assessments made and all other accrued Taxes whether or not the
Tax Returns and Reports or payments thereunder are yet due. Exhibit 2.1(g) sets
forth the most recent years for which any of Seller's Tax Returns and Reports
have been examined by a governmental authority or agency. All filed Tax Returns
and Reports of Seller are correct and true in all material respects and there is
no outstanding claimed deficiency with respect to any Tax period, no formal or
informal notice of a proposed deficiency, no notification of any pending audit
of Tax Returns and Reports and no waiver or extension granted by Seller with
respect to any period of limitations affecting assessment of any Tax.
(h) INVENTORIES. The Inventory: (i) complies
with all applicable governmental laws and regulations and with all applicable
laws and regulations of each jurisdiction into which any product would be
shipped directly by Seller; and (ii) does not consist of any damaged or
unmarketable items.
(i) NON-INFRINGEMENT OF PATENTS, TRADEMARKS AND
OTHER INTELLECTUAL PROPERTY. Exhibit 2.1(i) contains a complete and correct list
of all of the patents, copyrights, trademarks, trade names, service marks, logos
and domain names owned or used by Seller (such items, along with any trade
secrets, industrial designs and technical know how owned or used by Seller,
hereinafter referred to collectively as the "Intellectual Property"). Exhibit
2.1(i) also contains a list of Seller's
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<PAGE> 24
applications and registrations in any governmental office or registry with
respect to any Intellectual Property. Except as disclosed in Exhibit 2.1(i), the
Intellectual Property is owned by Seller and is free and clear of any license,
sublicense, lien, charge or encumbrance. The Intellectual Property being
transferred to Buyer pursuant to this Agreement constitute all intellectual
property rights necessary to conduct Seller's business as it is currently
conducted. None of the Intellectual Property has a material defect or been
misappropriated from any third party. Seller is not infringing upon or otherwise
violating any intellectual property rights of any third party, and Buyer's
continued use of any and all of the Intellectual Property after the Closing in a
manner consistent with Seller's past practices shall not result in any such
infringement or violation. Seller is not in default under any license or
sublicense agreement with a third party. Each of Seller and Shareholder does not
know of (1) any claim by a third party that the use of the Intellectual Property
infringes or violates the intellectual property rights of said third party, or
(2) any infringement or violation by a third party of Seller's rights in the
Intellectual Property or any default by a third party under a license or
sublicense agreement with Seller.
(j) OPERATIONS AND USE OF PROPERTIES. Seller's
operations, business and properties, including the Real Property
and any leased properties, are in conformity with all applicable
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<PAGE> 25
laws or orders or other governmental or administrative laws, ordinances,
regulations or orders, including without limitation zoning, land use and
building codes and motor vehicle registration, permitting, inspection and
operation. The Assets are reasonably sufficient for the conduct of Seller's
business as it currently is conducted. Other than the Real Property, which is
owned by Seller, Seller does not own or lease, directly or indirectly, any real
property other than the real property leases which are described on Exhibit
2.1(j) hereto.
(k) LICENSES. Seller has all licenses, permits,
approvals and other governmental authorizations necessary to own all of its
properties and assets and carry on its business as now being conducted, all of
which are listed in Exhibit 2.1(k) (collectively, the "Licenses"). Each License
is valid and in full force and effect. The continuation, validity and
effectiveness of each License will in no way be affected by the consummation of
the transactions contemplated by this Agreement, including the transfer of same
to Buyer. Seller has not breached any provision of, is not in default under the
terms of, and has not engaged in any activity that would cause revocation or
suspension of, any License and no action or proceeding looking to or
contemplating the revocation or suspension of any License is pending or
threatened.
(l) INSURANCE. Seller is covered by valid and
currently effective insurance policies issued in favor of Seller
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<PAGE> 26
in amounts which are, in Seller's best judgment after advice from its insurance
brokers, customary in its locales of operation for companies operating similar
businesses and operations. Seller has been insured for products liability
continuously since 1992. Seller's policies of insurance are listed and described
on Exhibit 2.1(l) hereto.
(m) ENVIRONMENTAL MATTERS. Seller has been and
remains in full compliance with all applicable laws and regulations relating to
Hazardous Substances (as hereinafter defined), Environmentally Hazardous
Activity (as hereinafter defined), air quality and groundwater pollution
(collectively, "Environmental Laws") (i) at all property or facilities owned or
leased by Seller including, without limitation, the Real Property (collectively,
"Seller's Facilities") and (ii) in connection with all operations of Seller
regardless of whether conducted at Seller's Facilities. Except as set forth in
Exhibit 2.1(m), there is not now, and has not been since Seller commenced
operations, any (i) presence or disposal (except as permitted under applicable
Environmental Laws) or release or threatened release of any Hazardous Substance
at any of Seller's Facilities or (ii) Environmentally Hazardous Activity
conducted at any of Seller's Facilities, and to the best of Seller's and the
Shareholder's knowledge, no such event occurred at any of Seller's Facilities
prior to Seller's ownership or leasing of same. Except as set forth in Exhibit
2.1(m), no asbestos, urea-
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<PAGE> 27
formaldehyde foam or other forms of urea formaldehyde have been installed or are
included in the furnishing or construction of any building or other improvement
at Seller's Facilities. There are no pending or threatened claims with respect
to Hazardous Substances or Environmentally Hazardous Activity relating to any of
the Seller's Facilities or relating to any operations of Seller regardless of
whether conducted at Seller's Facilities, and neither Seller nor the Shareholder
knows of any basis for a claim being made against Seller with respect to any
Hazardous Substance or Environmentally Hazardous Activity or under any
applicable law or regulation for the protection of the environment. Except as
disclosed in Exhibit 2.1(m), Seller has never used nor owned any underground
storage tanks. With respect to the underground storage tanks disclosed in
Exhibit 2.1(m), if any, there is not now and never has been any leakage or loss
of any contents of any such tanks. Except as disclosed in Exhibit 2.1(m), any
Hazardous Substances generated by Seller or which were present at Seller's
Facilities prior to the Closing will be properly disposed of off site in
accordance with all Environmental Laws no later than the date of the Closing.
For purposes of this Agreement, "Environmentally Hazardous Activity" shall have
the meaning set forth in the Environment Protection Act as amended (1969:387)
and the Environmental Code (1998:808), and the regulations adopted pursuant
thereto. For the purposes of this Agreement, "Hazardous Substances" shall mean
air, surface, soil and groundwater pollution, solid and hazardous
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<PAGE> 28
wastes, hazardous substances, hazardous materials, toxic substances, petroleum
and petroleum products, and any substance classified as "hazardous" or otherwise
regulated for purposes of protecting health or the environment under applicable
laws and regulations, and shall include polychlorinated biphenals ("PCBs"),
asbestos and urea formaldehyde foam.
(n) RECEIVABLES. All Accounts Receivable of
Seller have been properly recorded on Seller's books and arose in connection
with the sale of goods in the ordinary course of business. None of the Accounts
Receivable outstanding on the date of this Agreement or on the date of the
Closing is in dispute or subject to any reduction, offset or counterclaim that
would not be customary in the ordinary course of business, and all of the
Accounts Receivable are collectible in accordance with their terms.
(o) EMPLOYEES AND LABOR LAWS. Except as
disclosed in Exhibit 2.1(o), there have been no strikes, lockouts, or other
material labor disputes or demands for recognition of a union as collective
bargaining agent for all or any part of Seller's employees, and Seller is not a
party to any collective bargaining or other labor agreement. Except as disclosed
in Exhibit 2.1(o), Seller has no written agreements of employment and no oral
agreements or understandings with any employee as to any specific period of
employment. Seller is in compliance with all applicable laws and regulations
relating to
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<PAGE> 29
the employment of labor, including provisions relating to wages, fringe
benefits, hours, working conditions, occupational safety and health, safety of
the premises, collective bargaining, payment of social security and unemployment
taxes, civil rights and discrimination in hiring, retention, promotion, pay and
other conditions of employment; and Seller is not liable for arrears on wages or
any tax or penalties for failure to comply with those laws or regulations. There
are no oral agreements or understandings with employees except as to current
salary or wage rates, and there are no other oral agreements or understandings
which will affect Seller's employment practices or operations.
(p) PRODUCT LABELING AND PRODUCT LIABILITY.
Seller is in compliance with all applicable laws and regulations relating to
product labeling, product safety and public health and safety. Seller has not
received any notice of any claim that any product now or heretofore offered for
sale or sold by it or distributed by it in connection with product sales is
injurious to the health and safety of any person or is not in conformity with
its specifications or not suitable for any purpose or application for which it
is offered for sale, sold or distributed.
(q) VALIDITY AND EXISTENCE OF AGREEMENTS.
Exhibit 2.1(q) sets forth and briefly describes all the following with respect
to Seller to the extent that they are not listed and described in Exhibit 1.2(f)
of this Agreement:
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<PAGE> 30
(1) All written agreements, contracts,
arrangements, commitments, understandings or obligations to which Seller is a
party or by which it or its properties is or may be bound which have (i) a
remaining term in excess of one year and which provide for Seller's delivery of
consideration, services or materials with a value of more than SEK 192,500
during the remaining term thereof or (ii) a remaining term of less than one year
and which provide for Seller's delivery of consideration, services or materials
with a value of more than SEK 385,000 during the remaining term thereof;
(2) All employee pension benefit plans,
all employee welfare benefit plans, all fringe benefit plans, and all executive
compensation, retirement, supplemental retirement, deferred compensation,
incentive, bonus, severance, compensation associated with change in control,
perquisite, health care, death benefit, medical, disability, life insurance,
vacation pay, sick pay or other plans, programs, and arrangements, whether or
not government mandated, to which the Seller is or has been a party, with
respect to which the Seller has an obligation, or that have been or are
maintained, contributed to, or sponsored by Seller for the benefit of any
current or former employee, manager or director (such plans, programs and
arrangements to be referred to collectively as "Employee Benefit Plans");
(3) Each instrument evidencing any
liability of Seller for borrowed money or for the obligations of any
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<PAGE> 31
person, or defining the terms on which any other debt of Seller has been or may
be issued or incurred;
(4) All agreements, contracts,
arrangements, commitments, understandings or obligations, oral or written,
limiting in any respect the freedom of Seller or any of its key employees to
compete in any line of business or with any person or to do business with any
particular customers or class of customers or to carry on business in any
geographic area;
(5) All agreements, contracts,
arrangements, commitments, understandings, or obligations, oral or written,
relating to Seller, its business, operations, prospects, properties, assets or
condition (financial or otherwise) in which any of the Seller's shareholders or
Affiliates has any interest, direct or indirect, including a description of any
transactions between Seller and any of such shareholders or Affiliates or any
entity in which any of such shareholders or Affiliates has any interest;
(6) All products currently sold by
Seller; and
(7) All equipment leases to which Seller
is a party.
Seller has delivered or made available to Buyer a true and
complete copy of each written contract, lease,
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<PAGE> 32
agreement, instrument or other document listed on Exhibit 2.1(q) and Exhibit
1.2(f), which copies accurately reflect the understanding of Seller with respect
to those instruments. Seller has delivered or made available to Buyer a fair and
accurate summary of each oral contract, agreement or understanding listed on
Exhibit 2.1(q) and Exhibit 1.2(f) of this Agreement. Each of the Contracts of
Seller listed on Exhibit 1.2(f) is a valid and binding obligation of the parties
thereto in accordance with its respective terms, and Seller has performed and
complied in all material respects with all the provisions of, and no party is in
default or would be in default with the lapse of time or notice under the terms
of, any of the Contracts. The execution of this Agreement and the consummation
of the transactions contemplated hereby, including the assignment of the
Contracts to Buyer, will not violate any provision of any of the Contracts and
will not result in or create a right of termination, cancellation or adverse
modification of any of the Contracts.
(r) STATUS OF EMPLOYEE BENEFIT PLANS. Each
Employee Benefit Plan complies in form and operation in all material respects
with the requirements of all applicable laws, rules and regulations, and neither
Seller nor any manager, director, employee or fiduciary of Seller or any plan
has committed any breach under any Employee Benefit Plan which would subject
Buyer or any of its directors, officers or employees to
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<PAGE> 33
liability under any applicable law, rule or regulation. Seller has no written or
oral plan, arrangement, obligation or understanding to pay severance benefits to
any employee.
(s) DEBTS AND CAPITALIZED LEASES. Exhibit 2.1
(s) contains a list of all liabilities under any capitalized leases of Seller.
The consummation of the transactions contemplated by this Agreement will not
cause the acceleration of or otherwise adversely affect the terms or conditions
of any such liabilities or obligations.
(t) GUARANTIES. Seller is not a party to any
guaranty, repurchase agreements or other credit accommodations which accommodate
the credit of another person.
(u) LITIGATION. Except as disclosed in Exhibit
2.1(u), there are no (i) claims, suits, actions, citations, administrative or
arbitration or other proceedings or governmental investigations pending or, to
the best knowledge of Seller and the Shareholder after due inquiry of Seller's
key employees, threatened against Seller or to which Seller is a party or
relating to any of the properties, businesses or business practices of Seller or
the transactions contemplated by this Agreement (including, without limitation
proceedings and investigations related to Environmental Laws, civil rights,
discrimination in employment and occupational safety and health) or (ii)
judgments, orders, writs, injunctions or decrees of any
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<PAGE> 34
court or administrative agency involving Seller or affecting the Assets or
Seller's business.
(v) CONTINUATION OF BUSINESS. Seller knows of
no facts or circumstances which might reasonably be expected to have an adverse
effect on Buyer's continuance of Seller's business after the Closing in the same
manner as such business was conducted by Seller prior to Closing.
(w) MANAGEMENT PERSONNEL. To the best of
Seller's knowledge, none of the current directors or management personnel of
Seller has been arrested for or convicted of a criminal act (other than a
traffic violation) during the ten-year period immediately preceding the date of
this Agreement.
(x) ABSENCE OF CHANGES. Since December 31,
1997, there has not been (i) any material adverse change in the financial
condition, assets, liabilities, business or properties of Seller, (ii) any
damage to, destruction of or loss of property, whether or not covered by
insurance, materially adversely affecting the property or business of Seller,
(iii) any material changes in compensation or bonus payments or arrangements for
any employees of Seller, (iv) any sale or transfer of any assets of Seller other
than in the ordinary course of its business, (v) any cancellation or compromise
of any debts or claims owed to Seller other than in the ordinary course of its
business, (vi) any transaction not in the ordinary course
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of Seller's business, or (vii) any amendment or termination of any contract or
agreement which adversely affects the assets or business of Seller.
(y) NO SIDE AGREEMENTS. Except for this
Agreement and the items listed in the exhibits hereto, Seller is not a party to
any agreement calling for any action by Seller outside of the ordinary course of
business; no agreement or understanding exists calling for any payment or
consideration from a customer or supplier of Seller to a manager, director or
shareholder of Seller respecting any transaction between Seller and such
supplier or customer; and no Affiliate of Seller, directly or through any
business concern affiliated with such Affiliate, transacts any business with
Seller.
(z) CUSTOMERS. Except as disclosed in Exhibit
2.1(z), no single customer or group of affiliated customers has accounted for
more than five percent (5%) of Seller's gross sales during any of Seller's last
three fiscal years.
(aa) SUPPLIERS. Except as disclosed in Exhibit
2.1(aa), no single supplier or group of affiliated suppliers has supplied Seller
with products which would account for more than ten percent (10%) of gross
purchases during any of Seller's last three fiscal years.
(bb) TITLE TO ASSETS. Except for liens or
security interests described on Exhibit 2.1(bb), there are no
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<PAGE> 36
liens, claims, security interests, mortgages, easements, restrictions, charges
or encumbrances affecting any of the Assets or Seller's Facilities and, at the
Closing, Seller will have good and marketable title to the Assets. Exhibit
2.1(bb) includes a recently issued certificate of encumbrances with respect to
any outstanding floating charge covering the Assets.
(cc) MACHINERY AND EQUIPMENT. All of Seller's
machinery and equipment currently functions in accordance with its intended
purpose and has been maintained in accordance with manufacturer's
specifications. The machinery and equipment transferred by Seller to Buyer at
the Closing will be sufficient for the conduct of Seller's business as now
conducted and will constitute all machinery and equipment used by Seller in its
business as of December 31, 1997, except for items which have been replaced with
newer items of greater value.
(dd) YEAR 2000 COMPLIANCE. Except as otherwise
disclosed in Exhibit 2.1(dd), the "Technology" (as defined below) is and shall
be on the Closing Date "Year 2000 Compliant" (as defined below) in all material
respects; provided, however, that Buyer acknowledges that it shall be
responsible for performing those tasks referenced in Exhibit 2.1(dd) which are
scheduled to be performed after the Closing Date. "Year 2000 Compliant" means
that any and all Technology: (1) will correctly differentiate between years in
different centuries, which years end in the same two digits; (2) will accurately
and consistently receive,
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<PAGE> 37
provide, store and process date and time data before, during and after January
1, 2000, including, but not limited to, accepting, calculating, comparing,
providing and sequencing date and time data, from, into and between the
twentieth and twenty-first centuries, including the years 1999 and 2000 and leap
year calculations; and (3) will not (i) malfunction, (ii) cease to function or
(iii) provide or produce invalid or incorrect results as a result of date and
time data. "Technology" means any and all software, hardware, firmware, embedded
microcontrollers in non-computer equipment or other information technology owned
by, leased, licensed or loaned to, or otherwise used by the Seller in the course
of its business. Nothing contained in this Section 2.1(dd) shall be construed as
a representation or warranty that (i) the information technology utilized by
Seller's suppliers, vendors or customers is Year 2000 Compliant or (ii) Seller's
Technology will not malfunction as a result of any such third party's
information technology not being Year 2000 Compliant.
(ee) EURO CURRENCY PLANNING. Seller has taken
all actions necessary to ensure that the Technology and its business (including
without limitation its operating, treasury, purchasing, marketing and sales
practices and systems) will not be materially disrupted or impaired as a result
of (i) the impending conversion of the national currencies of various members of
the European Union into a single "Euro" currency and
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<PAGE> 38
(ii) the various legal and regulatory changes and changes in business and
financing practices arising in connection therewith.
(ff) DEMOCRACY AT WORK ACT. Seller has and will
prior to Closing take all actions necessary to comply with the provisions of the
Democracy at Work Act (SFS 1976:580), including, without limitation, any
obligations arising thereunder as a result of the provisions of this Agreement.
(gg) TRUTH OF REPRESENTATIONS. On the date of
this Agreement and on the date of the Closing, no representation or warranty of
Seller or Shareholder in this Agreement, nor any written statement or
certificate executed by Seller or Shareholder and furnished or to be furnished
to Buyer or Parent pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained therein not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT. Buyer
and Parent, jointly and severally, represent and warrant to Seller and
Shareholder that:
(a) CORPORATE STANDING AND AUTHORITY OF BUYER.
Buyer is a limited liability corporation duly organized and validly existing
under the laws of Sweden, and has full corporate power and authority to
consummate the transactions contemplated
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<PAGE> 39
by this Agreement. The execution of this Agreement and consummation of the
transactions contemplated herein will not violate any provision of Buyer's Deed
of Formation, by-laws or statutes or any law, regulation or ordinance or any
provision of any contract, instrument, order, award, judgment or decree to which
Buyer is a party or by which Buyer is bound. This Agreement is a legal, valid
and binding agreement of Buyer enforceable against Buyer in accordance with its
terms, subject to the laws of bankruptcy, insolvency and moratorium and other
laws or equitable principles generally affecting creditors' rights. Buyer has
obtained all necessary authorization and approval by its Board of Directors and
sole stockholder for the execution of this Agreement and the consummation of the
transactions contemplated hereby.
(b) CORPORATE STANDING AND AUTHORITY OF PARENT.
Parent is a corporation duly organized and validly existing under the laws of
the State of Delaware, USA, and has full corporate power and authority to
consummate the transactions contemplated by this Agreement. The execution of
this Agreement and consummation of the transactions contemplated herein will not
violate any provision of Parent's Certificate of Incorporation or By-Laws or any
law, regulation, or ordinance or any provision of any contract, instrument,
order, award, judgment or decree to which Parent is a party or by which Parent
is bound. This Agreement is a legal, valid and binding agreement of Parent
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<PAGE> 40
enforceable against Parent in accordance with its terms, subject to the laws of
bankruptcy, insolvency and moratorium and other laws or equitable principles
generally affecting creditors' rights. Parent has obtained all necessary
authorization and approval by its Board of Directors for the execution of this
Agreement and the consummation of the transactions contemplated hereby.
(c) LITIGATION. There is no litigation pending
or, to the best knowledge of Buyer and Parent after due inquiry of their
respective officers, threatened against Buyer or Parent which seeks to prevent,
or if successful would prevent, Buyer or Parent from consummating the purchase
contemplated by this Agreement.
(d) TRUTH OF REPRESENTATIONS. On the date of
this Agreement and on the date of the Closing, no representation or warranty of
Buyer or Parent in this Agreement, nor any written statement or certificate
executed by Buyer or Parent and furnished or to be furnished to Seller or
Shareholder pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a
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<PAGE> 41
material fact necessary to make the statements contained therein not misleading.
ARTICLE III.
Certain Covenants of Seller and the Shareholder
-----------------------------------------------
3.1 INDEMNITY. Subject to the provisions of Section 7.1 below,
Seller and the Shareholder jointly and severally agree to defend, indemnify and
hold Buyer and Parent harmless from and against any liabilities, losses, claims,
damages, costs and expenses (each a "Loss") resulting from (i) any
misrepresentation or breach of warranty or of covenant (including but not
limited to the covenant contained in Section 3.4) on the part of Seller or
Shareholder made herein or pursuant hereto, or (ii) the assertion against Buyer
or Parent of any liability of Seller, other than the Assumed Liabilities
(including, without limitation, any liabilities or claims which may be asserted
against Buyer or Parent pursuant to the provisions of any applicable law,
statute, rule or regulation which imposes upon Buyer or Parent liabilities
arising in connection with Seller's operations prior to Closing, such as the Act
on Security of Employment and the Act Governing the Security of Pension
Commitments). As soon as reasonably practicable after receipt by Buyer or
Parent, as applicable, of notice of any claim that, in the judgment of such
party, may reasonably be expected to give rise to any Loss for which such party
would be entitled to
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indemnification pursuant to this Section 3.1, such party shall deliver to Seller
a notice describing in reasonable detail such claim. Buyer and Parent shall have
the right to conduct the defense against any such matter which may be claimed
against Buyer or Parent which they will do diligently and in good faith; and any
proposed settlement or failure to take an available appeal which would result in
a claim against Seller or the Shareholder hereunder shall be approved by the
Seller and Shareholder, which approval will not be unreasonably withheld. Buyer
and Parent will be reimbursed by Seller and the Shareholder jointly and
severally for all liabilities and damages incurred by Buyer or Parent and all
reasonable costs and reasonable expenses incurred in the defense of the claim
and all expenses incurred in enforcing this indemnity. In enforcing this
indemnity, Buyer and Parent may, at their option, enforce this right of
indemnification against either of the indemnitors hereunder. Amounts payable by
Seller or Shareholder for Losses pursuant to the provisions of this Section 3.1
("Indemnification Payments") shall be calculated and paid on the basis of one
(1) SEK for each one (1) SEK of Loss incurred by Buyer or Parent. To the extent
permissible (without the incurrence of costs, expenses or penalties by Buyer or
Parent) under applicable tax laws and regulations, the parties shall for tax
purposes treat the receipt by Buyer of an Indemnification Payment as a reduction
of the Purchase Price previously paid for the Assets. In addition, in the event
any Indemnification Payment arises from a Loss which
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generates a tax deductible item or a tax deductible reserve, such
Indemnification Payment shall be reduced by an amount equal to the actual tax
benefit attributable to such Loss and which is currently usable by Buyer or
Parent, as applicable, at the time such Indemnification Payment is made (but
only after taking into account the tax consequences to Buyer or Parent, as
applicable, of receiving such Indemnification Payment).
3.2 NEGATIVE COVENANTS OF SELLER AND THE SHAREHOLDER. Between
the date hereof and the date of the Closing, Seller will not, and the
Shareholder will not permit Seller to, do any of the following without Buyer's
prior written consent:
(a) Make any change in the compensation,
bonuses, or benefits payable to any employee of Seller except non-material
changes in the compensation of non-supervisory employees;
(b) Pay or discharge any claim, lien,
encumbrance or liability (whether absolute, accrued, contingent or otherwise and
whether or not due or to become due) other than in the ordinary course of
business;
(c) Enter into any contract or commitment other
than in the ordinary course of business;
(d) Enter into any collective bargaining
agreement or create, enter into or amend any Employee Benefit
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Plan (unless required to do so by any applicable law governing labor management
relations or Employee Benefit Plans);
(e) Create, assume or incur any encumbrance on
any of the Assets other than in the ordinary course of business;
(f) Sell, assign, lease, exchange or otherwise
transfer or dispose of any of the Assets other than in the
ordinary course of business;
(g) Merge or consolidate with or into any other
entity or enter into any agreements relating thereto;
(h) Accelerate the collection of accounts
receivable or decelerate the payment of accounts payable;
(i) Issue any capital stock of Seller of any
class, any options, warrants, calls, commitments or rights of any character to
purchase capital stock of Seller, or any securities convertible into shares of
capital stock of Seller or into options, warrants, calls, commitments or rights
of any character to purchase capital stock of Seller;
(j) Declare or pay any dividends in cash or in
kind upon any capital stock of Seller or return any capital to Seller's
shareholders in the form of cash or property other than cash, or pay or make any
distribution of property other than cash to such shareholders;
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(k) Guarantee or otherwise accommodate the
obligation of any person except as results from the endorsement
of negotiable instruments in the ordinary course of business;
(l) Enter into any agreement or commitment to
(i) purchase goods or services having a purchase price exceeding SEK 350,000,
(ii) make any capital expenditure in excess of SEK 1,000,000 or other than in
the normal and usual course of Seller's business or (iii) incur any material
obligation or liability other than in the normal and usual course of Seller's
business; or
(m) Take any action or agree, in writing or
otherwise, to take any of the foregoing actions or any action which would make
any representation or warranty in Section 2.1 hereof untrue or incorrect.
3.3 AFFIRMATIVE COVENANTS OF SELLER AND THE SHAREHOLDER.
Between the date hereof and the date of the Closing, except as otherwise
consented to or approved by Buyer in writing, Seller will, and the Shareholder
will cause Seller to:
(a) Make available to Buyer and its counsel,
accountants and other representatives for examination all corporate and
financial books and records of Seller, Seller's operating facilities, Seller's
customers and all other matters reasonably considered by Buyer to be relevant to
the business and affairs of Seller;
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(b) Operate the business of Seller substantially
as currently operated and only in the usual and ordinary course, and consistent
with that operation Seller and the Shareholder will use their best efforts to
preserve intact Seller's present business organization and goodwill of Seller's
employees, customers, suppliers and others having business relations with
Seller;
(c) Maintain its books of account, records and
files substantially in the same manner as they are maintained as of the date of
this Agreement and make no change in accounting principles from those followed
in the preparation of the Financial Statements;
(d) Maintain the Assets in customary repair,
order and condition, normal wear and tear excepted, replace all items of
machinery and equipment at time intervals consistent with past practice and
repair or replace, consistent with past practice, any of the Assets that may be
damaged or destroyed;
(e) Maintain and enforce existing policies of
insurance or substitute policies providing reasonably comparable insurance
coverage in amounts not less than those in effect on the date of this Agreement;
(f) Pay obligations under all contracts,
agreements, leases, commitments, understandings, franchises,
licenses or similar arrangements as and when they become due; and
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(g) Take all required corporate action to
effectuate the transactions contemplated by this Agreement.
(h) Take all required actions, including
information and negotiation obligations, arising under the Democracy at Work Act
(SFS 1976:580) in connection with the transactions contemplated under this
Agreement.
(i) Seller shall take all required actions
arising under the Act Governing the Security of Pension Commitments (1976:531)
in connection with the transactions contemplated under this Agreement.
3.4 PAYMENT OF LIABILITIES AND TAXES. Seller and the
Shareholder agree that following the Closing Seller shall, and the Shareholder
shall cause Seller to, continue to pay Seller's liabilities, including Taxes,
other than the Assumed Liabilities as they may become due. The foregoing
covenant shall be for the benefit of Buyer and Parent and shall not be deemed to
give any third party rights under this Agreement.
3.5 EXCLUSIVITY. Unless and until this Agreement is terminated
pursuant to Section 5.6, Seller and the Shareholder jointly and severally agree
to deal exclusively with Buyer and Parent with respect to the subject matter of
this Agreement and to refrain from any discussions with any other persons
expressing an interest in acquiring Seller or its assets.
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3.6 AUDITED FINANCIAL STATEMENTS. Seller shall deliver to
Buyer and Parent no later than February 15, 1999, an audited consolidated
balance sheet and consolidated statement of income, retained earnings and
changes in cash flows for Seller and its subsidiaries for the fiscal year ending
December 31, 1998, and any required notes thereto, each prepared in accordance
with Swedish generally accepted accounting principles consistently applied, and
each examined and reported upon by Ernst & Young LLP, which report shall not
contain any qualification or disclaimer of opinion by reason of audit
limitations imposed by Seller (the "Audited Financial Statements"). Buyer,
Parent and their representatives shall have access to all of the books, records
and work papers of Seller and Ernst & Young LLP used in connection with the
preparation of the Audited Financial Statements.
3.7 ENVIRONMENTAL TESTING. Buyer shall be entitled, prior to
Closing, to undertake such environmental testing as it deems appropriate
regarding the Real Property and any other of Seller's Facilities. In the event
that such environmental testing reveals that corrective action is required under
applicable Environmental Laws, Buyer may elect to (i) terminate this Agreement
in accordance with the provisions of Section 5.6(e) below or (ii) require Seller
to undertake such corrective action, in which event Seller shall promptly and
diligently undertake such corrective action, at its own expense, in
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accordance with the requirements of such Environmental Laws, and the Closing
shall be postponed to permit the performance of such corrective action by
Seller; provided, however, that Buyer shall have no obligation to proceed with
the consummation of the transactions contemplated hereunder if any such
corrective action is not completed in all material respects, in accordance with
the requirements of such Environmental Laws, by June 30, 1999.
ARTICLE IV.
COVENANTS OF BUYER AND PARENT
4.1 INDEMNITY. Subject to the provisions of Section 7.1 below,
Buyer and Parent jointly and severally agree to defend, indemnify and hold
Seller and Shareholder harmless from and against any liabilities, losses,
claims, damages, costs and expenses resulting from any misrepresentation or
breach of warranty or covenant on the part of Buyer or Parent made herein or
pursuant hereto including without limitation the failure to pay, perform or
discharge the Assumed Liabilities. As soon as reasonably practicable after
receipt by Seller or Shareholder, as applicable, of notice of any claim that, in
the judgment of such party, may reasonably be expected to give rise to any Loss
for which such party would be entitled to indemnification pursuant to this
Section 4.1, such party shall deliver to Buyer a notice describing in reasonable
detail such claim. Seller and Shareholder shall have the right to conduct the
defense against
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any such matter which may be claimed against Seller or Shareholder which they
will do diligently and in good faith; and any proposed settlement or failure to
take an available appeal which would result in a claim against Buyer or Parent
hereunder shall be approved by the Buyer and Parent, which approval will not be
unreasonably withheld. Seller and Shareholder will be reimbursed by Buyer and
Parent for all liabilities and damages incurred by Seller or Shareholder and all
reasonable costs and reasonable expenses incurred in the defense of the claim
and all expenses incurred in enforcing this indemnity. In enforcing this
indemnity, Seller and Shareholder may, at their option, enforce this right of
indemnification against either of the indemnitors hereunder.
ARTICLE V.
CLOSING
-------
5.1 CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The
obligations of Seller to Close shall be subject to satisfaction of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer set forth in Section 2.2 hereof shall be
true and correct as of the date of this Agreement and as of the Closing as
though those representations and warranties have been made at and as of that
time, and Seller
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shall have received at the Closing a certificate signed by duly authorized
officers of Buyer and Parent to that effect.
(b) NO LITIGATION. There shall not have been
instituted or threatened on or before the Closing any action or proceeding to
restrict or prohibit the transactions contemplated by this Agreement.
(c) PURCHASE PRICE. The considerations required
to be paid at the Closing pursuant to Section 1.4 shall have been
paid.
(d) ASSUMPTION OF LIABILITIES. Buyer shall have
assumed the Assumed Liabilities by an instrument of assumption reasonably
satisfactory in form and substance to Seller and its counsel.
(e) REAL ESTATE CONTRACTS. A closing
simultaneously occurs under the terms of the Real Estate
Contracts.
(f) ESCROW AGREEMENT. The parties to the Escrow
Agreement shall have executed and delivered such agreement.
(g) REGULATORY CLEARANCES. The waiting period
arising under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall
have expired or been terminated (to the extent applicable to the transactions
contemplated under this Agreement) and any other clearances or approvals
required under applicable
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Swedish or other foreign statutes shall have been obtained (to the extent that
any such statutes apply to the transactions contemplated under this Agreement).
5.2 CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligations
of Buyer to Close shall be subject to satisfaction of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations and warranties of Seller and the Shareholder sets forth in
Section 2.1 hereof shall be true and correct as of the date of this Agreement
and as of the Closing as though those representations and warranties had been
made at and as of that time, the covenants contained in Sections 3.2 and 3.3
hereof shall have been performed, and Buyer shall have received at the Closing a
certificate signed by duly authorized officers of Seller and Shareholder to that
effect.
(b) NO LITIGATION. There shall not have been
instituted or threatened any action or proceeding to restrict or prohibit the
transactions contemplated by this Agreement.
(c) CONVEYANCES. Seller shall have duly
executed and delivered to Buyer instruments reasonably satisfactory in form and
substance to Buyer and its counsel conveying good title to all of the Assets,
free and clear of all liens, encumbrances and security interests, except for (i)
any exceptions permitted under the terms of the Real Estate Contract and (ii)
any
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outstanding floating charges which remain in effect in connection with Buyer's
assumption of the Financial Institution Debt.
(d) CONSENTS. Any and all consents listed or
required to be listed under Exhibit 2.1(d) shall have been duly executed by the
person or entity required to consent and shall have been delivered to Buyer by
Seller.
(e) INTERCOMPANY RECEIVABLES. Shareholder shall
have paid, or caused to be paid, to Buyer the amounts required under the
provisions of Section 1.5 above.
(f) DELIVERY OF ENVIRONMENTAL REPORT. Buyer
shall have received a report of an environmental consulting firm engaged by
Buyer regarding the Real Property and any other of Seller's Facilities the
contents of which are acceptable to Buyer, and Seller shall have performed any
corrective action required under the provisions of Section 3.7 above.
(g) CHANGE OF NAME. Seller shall have delivered
to Buyer such documentation and consents as Buyer shall reasonably request to
effect the changes of name contemplated by Section 6.2 herein.
(h) LIABILITY INSURANCE. Seller shall have
prepaid its product liability insurance for a period to extend not less than one
year after the Closing and caused the insurer to affirmatively insure Seller's
indemnification obligations to
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Buyer under this Agreement for product liability claims. In addition, Buyer
shall have been named as an additional insured with respect to Seller's product
liability insurance policy and Seller's comprehensive general liability
insurance policy. Insurance certificates evidencing Seller's compliance with
this covenant shall be delivered to Buyer at or prior to the Closing.
(i) FINANCIAL INSTITUTION DEBT. Buyer shall
have obtained agreements, in form and content reasonably satisfactory to Buyer,
pursuant to which Buyer shall assume the Financial Institution Debt on terms and
conditions no less favorable than those previously in effect.
(j) EMPLOYMENT AGREEMENTS. Buyer shall have
entered into an employment agreement with Mr. Bo Goecke and with Mr. Edward
Kubalski each in form and substance acceptable to Buyer.
(k) REAL ESTATE CONTRACTS. A closing
simultaneously occurs under the terms of the Real Estate Contracts.
(l) CUSTOMER MEETINGS. Representatives of
Seller and Buyer shall have met with the customers of Seller identified on
Exhibit 5.2(l) hereto regarding the transactions contemplated hereunder and
Buyer's relationship with such customers after Closing, and the results of such
meetings are reasonably satisfactory to Buyer.
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(m) LENDER CONSENTS. Parent has obtained any
consents from its commercial lenders which are required for Parent and Buyer to
consummate the transactions contemplated hereunder.
(n) EXHIBIT 1.3. The parties shall have agreed
on an updated version of Exhibit 1.3 hereto which shall have been updated in
accordance with the provisions of Section 1.3 of this Agreement.
(o) ESCROW AGREEMENT. The parties to the Escrow
Agreement shall have executed and delivered such agreement.
(p) REGULATORY CLEARANCES. The waiting period
arising under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall
have expired or been terminated (to the extent applicable to the transactions
contemplated under this Agreement) and any other clearances or approvals
required under applicable Swedish or other foreign statutes shall have been
obtained (to the extent that any such statutes apply to the transactions
contemplated under this Agreement).
(q) MINIMUM NET WORTH. Buyer shall have
received reasonably satisfactory proof that the net worth of Seller as of the
Closing, computed in accordance with Swedish generally accepted accounting
principles consistently applied, is no less than the amount of such net worth
shown on the October 31, 1998 balance sheet of Seller previously delivered to
Buyer by Seller.
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(r) DRAFT AUDITED FINANCIAL STATEMENTS. Seller
shall have delivered to Buyer and Parent a draft of the Audited Financial
Statements in form and content acceptable to Parent's commercial lenders.
5.3 TIME AND PLACE. The closing hereunder (the "Closing")
shall take place on February 1, 1999, or on such other date as the parties may
agree, at a time and place to be agreed upon by the parties (the "Closing
Date").
5.4 BEST EFFORTS TO SATISFY CONDITIONS. Each party
shall use its best efforts to secure promptly the satisfaction of
the conditions to Closing.
5.5 WAIVER OF CONDITIONS. Seller and Buyer may, at their
respective options, waive any conditions to their respective obligations to
Closing.
5.6 TERMINATION OF AGREEMENT. This Agreement may be terminated
at any time prior to the Closing:
(a) by written agreement of all of the parties
hereto;
(b) by Buyer, if there has been a material
violation or breach by Seller or the Shareholder of any of their respective
agreements, representations, warranties or covenants contained in this Agreement
which has not been waived by Buyer in writing or if there has been any event or
occurrence which has
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rendered the satisfaction of a condition to the obligations of Buyer impossible
and such condition has not been waived by Buyer in writing;
(c) by Seller if there has been a material
violation or breach by Buyer or Parent of any of their respective agreements,
representations, warranties or covenants contained in this Agreement which has
not been waived by Seller in writing or if there has been any event or
occurrence which has rendered the satisfaction of a condition to the obligations
of Seller impossible and such condition has not been waived by Seller in
writing;
(d) by any party hereto if the Closing shall not
have occurred on or before April 30, 1999 (provided, however, that a party may
not elect to terminate this Agreement pursuant to this Section 5.6(d) if the
Closing shall not have occurred as a result of such party's violation or a
breach of its agreements, representations and warranties contained in this
Agreement); and
(e) by Buyer, if Buyer reasonably anticipates
that the costs of corrective action referenced in Section 3.7 will exceed SEK
2,000,000 or if Seller does not complete such corrective action by June 30,
1999.
5.7 PROCEDURE UPON TERMINATION. In the event of
termination by Buyer or by Seller pursuant to Section 5.6 hereof, written notice
thereof shall forthwith be given to the other
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parties and the transactions contemplated by this Agreement shall be terminated
without further action by the parties hereto. If the transactions contemplated
by this Agreement are terminated as provided herein:
(a) Each party, if requested, will redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same;
(b) All confidential information received by any
party hereto with respect to the business of any other party shall not be used
or disclosed to another person to the detriment of any other party; and
(c) No party hereto and none of their respective
directors, officers, stockholders, affiliates or controlling persons shall have
any liability or further obligation to any other party to this Agreement, except
that each party hereto shall remain liable for any claims arising as a result of
any misrepresentation or breach of warranty or covenant by such party
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under this Agreement which occurs prior to the date of termination of this
Agreement.
ARTICLE VI.
Other Matters
-------------
6.1 ANNOUNCEMENTS. No press releases, announcements, or other
disclosure related to this Agreement or the transactions contemplated herein
will be issued or made to the press, employees, customers, suppliers or any
other person without the joint approval of Buyer and Seller, except for any
public disclosure which each such party in good faith determines is required by
law (in which case such party will consult with the other party prior to such
disclosure).
6.2 CHANGE OF NAME. Following the Closing, Buyer and its
successors and assigns intend to utilize the name "ELMO Industries" (the "Name")
or such other similar name as Buyer may select. As of the Closing and
thereafter, Seller shall cease all use of the Name and any other similar name
and shall adopt a corporate name dissimilar to the Name.
6.3 NON-COMPETITION.
(a) The parties recognize that the value of the
business being purchased by Buyer is dependent upon the particular method in
which Seller has conducted business and the contacts of Seller with customers of
Seller, and the particular
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technical know-how developed by the Seller, and that Buyer is entering into this
transaction with a view toward that value. Accordingly, Seller and Shareholder,
on behalf of itself and its Affiliates (as defined in Section 7.11 below),
hereby agree that, for a period of five years following Closing, Seller,
Shareholder and Shareholder's Affiliates shall not, in the "Territory" (as
defined below), directly or indirectly:
(1) Have any interest (financial or
otherwise) in, or accept employment from, or serve in any capacity (such as
owner, investor, principal, agent, consultant, partner or otherwise) with, any
person or entity (other than Buyer) which is engaged in the business of selling
or distributing any of the types of products that were manufactured or
distributed by Seller during the five year period prior to the Closing
(collectively, the "Products"), or
(2) Sell to or solicit purchases of
Products by customers who were customers of Seller at the time of the Closing or
during the five-year period prior thereto.
For the purposes hereof, the "Territory"
shall mean all territories where, under applicable law, the above referenced
parties may be prohibited from undertaking the above-referenced activities in
accordance with the provisions of this Section 6.3(a).
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(b) Seller and the Shareholder acknowledge that
the identity of the customers of Seller, the engineering drawings and know-how
of Seller and the pricing policies, sales and marketing strategies, employee
training practices and other operating practices of Seller are confidential and
valuable proprietary information which are included in the Assets purchased by
Buyer. Seller, Shareholder and Shareholder's Affiliates will not disclose the
identity of the customers, the engineering drawings and know-how of Seller, or
Seller's sales policies, strategies and employee training and operating
practices to any person or entity unless permitted in writing to do so by Buyer.
Seller, Shareholder and Shareholder's Affiliates will transfer to Buyer at the
Closing, and will not retain, any of their copies, documents, manuals,
summaries, memos, notes, computer programs, disks, and database information in
any form containing any of the above described customer identities, engineering
drawings and know-how, policies, strategies and employee training and operating
practices.
(c) Seller and Shareholder recognize that their
failure, or the failure of Shareholder's Affiliates, to comply with the
provisions of this Section 6.3 shall cause irreparable harm to Buyer and that
money damages alone would be insufficient to compensate Buyer. Seller and
Shareholder, on behalf of itself and its Affiliates, therefore agree that any
court having jurisdiction may enter a preliminary or permanent restraining
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order or injunction against Seller, Shareholder and Shareholder's Affiliates in
the event of actual or threatened breach of any of the provisions of this
Section. Any such relief shall not preclude Buyer from seeking any other relief
at law or equity with respect to any such claim; and Seller and Shareholder
shall be jointly and severally liable for any breach by Seller, Shareholder or
any of Shareholder's Affiliates of the provisions of this Section 6.3.
(d) If any provision of this Section is deemed
by a court of competent jurisdiction to be in violation of law or unenforceable
for any reason, the remainder of this Section shall remain in full force and
effect and shall continue to be binding upon Seller, Shareholder and
Shareholder's Affiliates, and the parties agree that such court shall substitute
a reasonable, judicially enforceable limitation in place of the unenforceable
provision in order to serve the intent of the parties as expressed herein and
the reasonable business needs and expectations of Buyer in purchasing the
Assets, including Seller's know-how and the goodwill of Seller's customers.
6.4 PRODUCT LIABILITY INSURANCE. Seller shall maintain its
product liability insurance policy for a period of at least five years after the
Closing. The policy shall affirmatively insure Seller's indemnity obligations to
Buyer and Parent under this Agreement for product liability claims and name
Buyer and Parent (and any successor to the interests of Buyer
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under this Agreement) as an additional insured. Seller shall furnish an
insurance certificate to Buyer evidencing Seller's compliance with this covenant
within ten days after the due date of any premium payment required by the terms
of the policy.
ARTICLE VII.
Miscellaneous
-------------
7.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; LIMITATIONS ON INDEMNITY CLAIMS.
(a) All representations, warranties and
covenants made by the parties shall survive the Closing; provided, however, that
the (i) representations and warranties contained in Sections 2.1(g), 2.1(m) and
2.1(p) hereof shall expire on the third anniversary of the date Seller delivers
the Audited Financial Statements to Buyer in accordance with the provisions of
Section 3.6 hereof (the "Delivery Date") and (ii) all other representations and
warranties contained in Sections 2.1 and 2.2 of this Agreement shall expire on
the date which is 18 months after the Delivery Date.
(b) Notwithstanding anything to the contrary
contained in this Agreement, a party ("an Indemnified Party") shall not be
entitled to assert a claim for indemnification under this Agreement for a breach
by another party (the "Indemnifying Party") of such Indemnifying Party's
representations and
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warranties contained in Sections 2.1 or 2.2 hereof, as applicable (a "Claim"),
unless: (i) the Indemnified Party delivers written notice of such Claim to the
Indemnifying Party (which notice shall describe such Claim in reasonable detail)
prior to the date of the expiration (as provided in Section 7.1(a) above) of the
representations and warranties the breach of which form the basis of such Claim;
and (ii) the aggregate amount of all liabilities, losses, claims, damages, costs
and expenses (collectively, "Losses") for which the Indemnified Party and its
Affiliates are entitled to indemnification pursuant to the provisions of
Sections 3.1 or 4.1 hereof (as applicable) are in excess of SEK 2,000,000 (the
"Basket Amount"), in which event the Indemnified Party shall be entitled to seek
indemnification for any and all Losses incurred by it and its Affiliates in
excess of the aggregate Basket Amount.
7.2 NO BROKER. Buyer and Parent represent to Seller and
Shareholder, and Seller and Shareholder represent to Buyer and Parent, that such
parties have not engaged or incurred any unpaid liability to any broker, finder
or consultant in connection with this transaction. Seller and Shareholder will
jointly and severally indemnify the Buyer and Parent, and their respective
directors, officers, shareholders and employees, and will hold them harmless
from and against any claims by any broker, finder or consultant deemed to be
engaged by Seller or Shareholder for a brokerage fee, finder's fee or the like.
Buyer
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and Parent will jointly and severally indemnify Seller and Shareholder, and
their respective directors, officers, shareholders and employees, and will hold
them harmless from and against any claims by any broker, finder or consultant
deemed to be engaged by Buyer or Parent for a brokerage fee, finder's fee or the
like.
7.3 EXPENSE. The parties shall each pay all of their
respective legal, accounting and other expenses incurred in connection with the
transactions contemplated by this Agreement; provided, however, that Shareholder
agrees to pay Seller's expenses incurred in connection with the transactions
contemplated by this Agreement.
7.4 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and delivered personally, by
international courier service, or by registered airmail, postage prepaid,
addressed as follows or to such other address as a party shall specify for this
purpose in a notice given in the same manner:
To Seller:
ELMO INUDSTRIER AB
c/o VATTERLEDENS INVEST AB
Box 53205
Ostra Hamngatan 52
S-400 16 Goteborg, Sweden
To Shareholder:
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<PAGE> 66
VATTERLEDENS INVEST AB
Box 53205
Ostra Hamngatan 52
S-400 16 Goteborg, Sweden
To Buyer:
API ELMO AB
c/o AMERICAN PRECISION INDUSTRIES INC.
2777 Walden Avenue
Buffalo, New York 14225 U.S.A.
ATTENTION: President
To Parent:
AMERICAN PRECISION INDUSTRIES INC.
2777 Walden Avenue
Buffalo, New York 14225 U.S.A.
ATTENTION: President
Copies of notices to Seller and the Shareholder shall
be sent to:
Stybjorn Garde Advokatbyra
Hamngatan 2
P. O. Box 684
S-55119 Jonkoping, Sweden
ATTENTION: Staffan Lindblad, Esq.
Copies of notices to Buyer and Parent shall be sent
to:
JAECKLE FLEISCHMANN & MUGEL, LLP
800 Fleet Bank Building
12 Fountain Plaza
Buffalo, New York 14202 U.S.A.
ATTENTION: James J. Tanous, Esq. and
Tim C. Loftis, Esq.
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<PAGE> 67
Any notice given pursuant to this Section shall be deemed given upon delivery.
7.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns but may not be assigned by any party without
the written consent of all the other parties.
7.6 ENTIRE AGREEMENT. This Agreement and all schedules and
Exhibits attached hereto contain the entire agreement between the parties and
supersedes all prior agreements and understandings, oral or written, with
respect to the transactions contemplated herein. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by the
party to be charged therewith.
7.7 CHOICE OF LAW. This Agreement shall be interpreted under
the internal laws of the country of Sweden without regard to the conflicts of
law principles thereof; provided, however, that the parties agree that the
United Nations Convention on the International Sale of Goods shall not be
applicable to this Agreement.
7.8 WAIVER. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver
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<PAGE> 68
constitute a continuing waiver. Any waiver must be in writing and signed by the
party entitled to performance.
7.9 POST-CLOSING COOPERATION. After Closing, each of the
parties agrees that, at the reasonable request of another party, it will take
such actions and furnish such additional documents and instruments as may be
necessary or reasonably desirable to better effectuate the transactions
contemplated by this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in
counterparts and will be effective when at least one counterpart has been
executed by each party hereto. This Agreement may be executed in duplicate
originals, each of which shall be deemed to be an original instrument. All such
counterparts and duplicate originals together shall constitute but one
Agreement.
7.11 AFFILIATES. For the purposes of this Agreement,
"Affiliates" of a party shall mean such party and any person, company or entity
that directly or indirectly controls, is controlled by or is under common
control with such party.
7.12 RISK OF LOSS. During the period between the date hereof
and the Closing, the risk of loss shall be on Seller and Seller shall continue
to carry the fire and extended coverage insurance on the Assets at the full
replacement cost thereof. In the event that any of the Assets are destroyed or
damaged requiring repairs costing in excess of SEK 350,000 and are not
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<PAGE> 69
restored to their present condition by the date of Closing, the Buyer may either
accept title to the Assets and receive the benefit of all insurance monies
recovered or recoverable by Seller on account of such destruction or damage, or
terminate this Agreement (without penalty or liability hereunder). Any damage to
the Assets requiring repairs costing SEK 350,000 or less shall be repaired by
Seller prior to the date of Closing. If any portion of the Assets is impaired,
confiscated, condemned or otherwise taken pursuant to a condemnation proceeding
prior to the Closing, the proceeds from such condemnation proceeding shall be
used by Seller to restore the Assets to their present condition by the date of
Closing; provided, however, that if any such condemnation proceeding results in
a material adverse change in the Assets and the Assets cannot be restored as
described above, then Buyer may either (i) terminate this Agreement (without
penalty or liability hereunder) or (ii) proceed to Closing hereunder (in which
event Buyer shall receive the benefit of all proceeds recovered or recoverable
by Seller in connection with any such condemnation proceeding).
7.13 DISPUTE RESOLUTION PROCEDURE. Seller and Shareholder, on
the one hand, and Buyer and Parent, on the other hand, shall attempt to resolve
between them any dispute, controversy or claim which arises out of or connection
with this Agreement or the breach, termination or invalidity hereof. If they
cannot agree within ten (10) calendar days after either
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<PAGE> 70
party submits a written demand for arbitration to the other party, then such
dispute shall be settled by arbitration in accordance with the Rules of the
Arbitration Institute of the Stockholm Chamber of Commerce (the "Institute").
The arbitration tribunal shall consist of three (3) arbitrators, with Seller and
Shareholder having the right to appoint one (1) arbitrator, Buyer and Parent
having the right to appoint one (1) arbitrator, and those two (2) arbitrators
mutually selecting a third arbitrator. The rules of the Institute shall apply
and the decision of two (2) of the three (3) arbitrators shall be final and
binding. The arbitration shall take place in Stockholm, Sweden and shall be
conducted in the English language. The arbitrators shall apply Swedish law.
Seller and Shareholder, on the one hand, and Buyer and Parent, on the other
hand, shall be jointly and severally liable for all awards rendered in any such
arbitration proceeding relating to the payment of costs and expenses incurred by
the opposing party or parties in such arbitration proceeding (including fees
payable to the Institute and its arbitrators).
7.14 ENGLISH LANGUAGE. All notices required or permitted under
Section 7.4 above, and information set forth in any Exhibit or schedule
delivered pursuant to this Agreement, any disputes related to or arising out of
this Agreement or the transaction contemplated hereby, and any closing documents
delivered hereunder shall be in the English language.
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<PAGE> 71
7.15 WARRANTY SERVICE. Provided that Buyer is promptly
reimbursed by Seller and Shareholder in accordance with the provisions of this
Section, Buyer will provide warranty services after the Closing, in a manner
consistent with Seller's previous warranty terms and service practices, with
respect to products sold by Seller prior to Closing (the "Warranty Work").
Seller and Shareholder shall be jointly and severally obligated to pay Buyer,
within ten (10) days of invoicing, for Buyer's cost of performing the Warranty
Work (consisting of Buyer's labor, material and overhead costs and out of pocket
expenses incurred in performing the Warranty Work, calculated in a manner
consistent with Buyer's calculation of warranty costs incurred by Buyer with
respect to warranty service performed by Buyer on products sold by it).
IN WITNESS WHEREOF, this Agreement has been executed the day
and year first above written.
SELLER: ELMO INDUSTRIER AB
By /s/ Nils-Olov Jonsson
-------------------------------------
Name: NILS-OLOV JONSSON
-------------------------
Title: Chairman
------------------------
SHAREHOLDER: VATTERLEDENS INVEST AB
By /s/ Nils-Olov Jonsson
-------------------------------------
Name: NILS-OLOV JONSSON
-------------------------
Title: Chairman
------------------------
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<PAGE> 72
BUYER: API ELMO AB
By /s/ Richard W. Warzala
---------------------------------------
Name: RICHARD S. WARZALA
---------------------------
Title: Director
--------------------------
PARENT: AMERICAN PRECISION INDUSTRIES
INC.
By /s/ Kurt Wiedenhaupt
---------------------------------------
Name: KURT WIEDENHAUPT
---------------------------
Title: President
--------------------------
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<PAGE> 73
EXHIBITS
--------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
1.2(a) Real Property
1.2(b) Tangible Assets
1.2(c) Intangible Assets
1.2(e) Inventory
1.2(f) Contracts
1.3 Accounts Payable and Long Term Debt
1.3(h) Employee Claims
1.4(c) Escrow Agreement
1.7 Real Estate Contract
2.1(c) Directors, General Manager and Key
Employees
2.1(d) Conflicts and Consents
2.1(g) Tax Information
2.1(i) Intellectual Property
2.1(j) Real Property Leases
2.1(k) Licenses
2.1(l) Insurance
2.1(m) Environmental
2.1(o) Labor Information
2.1(q) Agreements and Employee Benefit Plans
2.1(s) Capitalized Leases
2.1(u) Litigation
</TABLE>
- 68 -
<PAGE> 74
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
2.1(z) Customers
2.1(aa) Suppliers
2.1(bb) Liens & Security Interests
2.1(dd) Year 2000 Compliance
5.2(l) Key Customers
</TABLE>
- 69 -
<PAGE> 1
Exhibit 4(A)
AMERICAN PRECISION INDUSTRIES INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
RIGHTS AGENT
AMENDED AND RESTATED
RIGHTS AGREEMENT
DATED AS OF January 29, 1999
<PAGE> 2
AMENDMENT
TO
RIGHTS AGREEMENT
This AMENDMENT, dated as of January 29, 1999, is by and between
American Precision Industries Inc., a Delaware corporation (the "Company"), and
American Securities Transfer & Trust, Inc., a Colorado corporation (the "Rights
Agent").
R E C I T A L S :
WHEREAS, the Company and the Rights Agent are parties to a Rights
Agreement dated as of July 24, 1998 (the "Agreement"); and
WHEREAS, the Company and the Agent desire to amend the Agreement to
delete all references to the term "Continuing Director," as such term is defined
in Section 1(h) of the Agreement, and to restate the Agreement in its entirety
as so amended.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. AMENDMENT OF AGREEMENT
(a) Sections 1(b), 1(h), 3(a), 4(b), 7(e), 11(a)(ii)(A),
11(a)(ii)(B), 23(a), 26 and 28 in the Agreement are hereby amended to delete all
reference to the term "Continuing Directors," and Section 1(h), as amended, is
left intentionally blank.
(b) Exhibit C to the Agreement is hereby amended to delete all
references to the term "Continuing Directors."
2. RESTATEMENT OF AGREEMENT
The Agreement, as amended pursuant to paragraph 1 above, is
hereby restated in its entirety:
RIGHTS AGREEMENT
AS
AMENDED AND RESTATED
This RIGHTS AGREEMENT, originally dated as of July 24, 1998 and amended
and restated as of January 29, 1999 (the "Agreement"), is between American
Precision Industries Inc.,
<PAGE> 3
a Delaware corporation (the "Company"), and American Securities Transfer &
Trust, Inc., a Colorado corporation (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on July 24, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared (i) a dividend
distribution of one Right for each share of common stock, par value $.66-2/3 per
share, of the Company (the "Common Stock") outstanding at the close of business
on August 14, 1998 (the "Record Date"), and (ii) a dividend distribution of one
and a quarter (1.25) Rights for each share of the Company's Series B Seven
Percent (7%) Cumulative Convertible Preferred Stock, $1.00 par value, ("Series B
Preferred Stock") outstanding on the Record Date, and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the earlier of the Distribution Date or the
Expiration Date, each whole Right initially representing the right to purchase
one two-thousandth (1/2000) of a share of Series A Junior Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights of the
Company attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "Rights"); and
WHEREAS, the Company and the Rights Agent amended this Agreement as of
January 13, 1999 to delete all references to the term "Continuing Directors,"
and restated this Agreement as so amended.
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii)
any employee benefit plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan, (iv) InterScan Holding Ltd.
("InterScan") or any of its Affiliates or Associates, but only to the extent of
their beneficial ownership of Series B Preferred
- 2 -
<PAGE> 4
Stock and any shares of Common Stock which may be issued upon the conversion of
Series B Preferred Stock which were issued and outstanding on the Record Date,
or (v) any Person who becomes an Acquiring Person solely as a result of a
reduction in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, unless and until such
Person shall purchase or otherwise become (as a result of actions taken by such
Person or its Affiliates or Associates) the Beneficial Owner of additional
shares of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock; provided, however, that if a Person shall become the Beneficial
Owner of 15% or more of the Common Stock of the Company then outstanding by
reason of share repurchases by the Company and shall, after such share
repurchases by the Company, become the Beneficial Owner of any additional Common
Stock of the Company, then such Person shall be deemed to be an "Acquiring
Person," unless upon the consummation of the acquisition of such additional
shares of Common Stock such Person does not beneficially own 15% or more of the
shares of Common Stock then outstanding. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph, has become such inadvertently (including, without
limitation, because (i) such Person was unaware that it beneficially owned a
percentage of Common Stock that would otherwise cause such Person to be an
Acquiring Person, or (ii) such Person was aware of the extent of its Beneficial
Ownership of Common Stock but had no actual knowledge of the consequences of
such Beneficial Ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an Acquiring Person as defined pursuant to the
foregoing provisions of this paragraph, then such Person shall not be deemed to
be or to have become an Acquiring Person for any purposes of this Agreement.
For purposes of the foregoing and all other
provisions of this Agreement, in computing the percentage of the shares of
Common Stock outstanding at any time which are beneficially owned by a Person
and its Affiliates and Associates, the shares of Common Stock then outstanding
shall be deemed to include all shares of Common Stock beneficially owned by such
Person and its Affiliates and Associates but not actually then outstanding,
including the shares of Common Stock, if any, then issuable to such Person and
its Affiliates and Associates upon the exercise of conversion rights, exchange
rights, rights, warrants or options.
(b) "Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors of the Company, upon a determination by
the Directors who are not officers of the Company that the criteria set forth in
Section 11(a)(ii)(B) apply to such Person; provided, however, that InterScan's
ownership of Series B Preferred Stock, or the exercise by InterScan of its right
to convert Series B Preferred Stock into shares of the Company's Common Stock,
or its ownership of such shares of Common Stock issued on such conversion shall
not be considered by the Directors in determining whether InterScan is a
Beneficial Owner of at least 10% of the shares of Common Stock then outstanding.
- 3 -
<PAGE> 5
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and in effect
on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3(a) or Section 22 hereof (the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
owner" of, or to "beneficially own," any security under this subparagraph (ii)
as a result of an agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the General
Rules and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D or Schedule 13G under the Exchange Act
(or any comparable or successor reports); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (d)) or
disposing of any voting securities of the Company; provided, however, that
nothing in this paragraph (d) shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such Person's participation in good faith
in a
- 4 -
<PAGE> 6
firm commitment underwriting until the expiration of forty days after the date
of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value
$.66-2/3 per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(h) [This subsection 1(h) is intentionally left blank.]
(i) "Person" shall mean any individual, firm, corporation,
partnership, trust, limited liability partnership, limited liability
corporation, or other entity.
(j) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $50.00 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other class or series of preferred stock of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Junior Participating Preferred Stock.
(k) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii)(A) or (B) hereof.
(l) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(m) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) or Section 13(g)
under the Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
- 5 -
<PAGE> 7
(o) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event; provided, however, that a "Triggering Event" shall not
include the ownership by InterScan of the Company's Series B Preferred Stock, or
the exercise by InterScan of its right to convert the Series B Preferred Stock
into shares of the Company's Common Stock or its ownership of such shares of
Common Stock.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earliest of (i) the close of business on the
tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), (ii) the close of business on the tenth Business Day (or such
later date as the Board of Directors of the Company shall determine) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding and (iii) the close of business on the day that
the Board of Directors of the Company determines, pursuant to the criteria set
forth in Section 11(a)(ii)(B) hereof that a Person is an Adverse Person (the
earliest of (i), (ii) and (iii) being herein referred to as the "Distribution
Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for the Common Stock and the Series B
Preferred Stock registered in the names of the holders of the Common Stock and
Series B Preferred Stock, respectively, (which certificates shall be deemed also
to be certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock and Series B Preferred Stock, respectively,
(including a transfer to, or redemption by, the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock and Series B
Preferred Stock, respectively, as of the close of business on the Distribution
Date, at the address of such holder shown on the records of the Company, one or
more right certificates, in substantially the form of Exhibit B hereto (the
"Rights Certificates"), evidencing one Right for each share of Common Stock so
held and 1.25 Rights for each share of Series B Preferred Stock so held, subject
in each case to adjustment as provided herein. In the event that an adjustment
in the number of Rights per share of Common Stock and per share of Series B
Preferred Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Right Certificates, the Company shall make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and
- 6 -
<PAGE> 8
cash is paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights") to each record holder of
the Common Stock and Series B Preferred Stock as of the close of business on the
Record Date, at the address of such holder shown on the records of the Company.
With respect to certificates for the Common Stock and Series B Preferred Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates and the registered holders of the Common Stock
and Series B Preferred Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock or Series B Preferred Stock in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock and Series B Preferred
Stock.
(c) Unless otherwise specifically decided by a majority of the
Company's Board of Directors, Rights shall be issued in respect of all shares of
Common Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date; provided, however, that any shares of Series B
Preferred Stock that are converted into Common Stock prior to the Distribution
Date shall forfeit all Rights related to those shares converted in exchange for
Rights with respect to the Common Stock issued on such conversion; no Rights
shall be issued on any Common Stock issued upon the conversion of Series B
Preferred Stock after the Distribution Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates for Rights, and
shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between American
Precision Industries Inc. (the "Company") and American Securities
Transfer & Trust, Inc. dated as of July 24, 1998 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge promptly after receipt of
a written request therefor. Under certain circumstances set forth in
the Rights Agreement, Rights issued to, or held by, any Person who is,
was or becomes an Acquiring Person, an Adverse Person or any Affiliate
or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by
any subsequent holder, may become null and void."
- 7 -
<PAGE> 9
With respect to such certificates containing the foregoing legend, and with
respect to certificates for shares of Common Stock and Series B Preferred Stock
which were issued and outstanding on the Record Date, until the earlier of (i)
the Distribution Date or (ii) the Expiration Date or redemption date, the Rights
associated with the Common Stock and Series B Preferred Stock represented by
such certificates shall be evidenced by such certificates alone and registered
holders of Common Stock and Series B Preferred Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock and Series B Preferred Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one two-thousandth of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one two-thousandth of a share is referred to as the "Purchase Price"), but
the amount and type of securities purchasable upon the exercise of each Right
and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate of an Acquiring Person
or Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person or Adverse Person becomes such, or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Directors of the Company have determined is
part of a plan, arrangement or understanding which has as a primary purpose or
effect avoidance of Section 7(e) hereof, and any Rights Certificate issued
pursuant to Section 6, Section 11 or Section 22 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
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"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an [Acquiring
Person][Adverse Person] or an Affiliate or Associate of an [Acquiring
Person][Adverse Person] (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances
specified in Section 7(e) of such Agreement."
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the Person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of one two-thousandths of a
share of Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing
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<PAGE> 11
delivered to the Rights Agent, and shall surrender the Rights Certificate or
Certificates to be transferred, split up, combined or exchanged at the principal
office or offices of the Rights Agent designated for such purpose. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Rights Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one two-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, and an amount equal to any applicable
transfer tax, at or prior to the earlier of (i) the close of business on July
24, 2008 (the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i) and (ii) being
herein referred to as the "Expiration Date").
(b) The Purchase Price for each one two-thousandths of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be
$80.00, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below.
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<PAGE> 12
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one two-thousandth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one two-thousandths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company shall have elected
to deposit the total number of shares of Preferred Stock issuable upon exercise
of the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one two-thousandths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash, or by certified
check or official bank check payable to the order of the Company. In the event
that the Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash and/or distribute other property pursuant to Section
11(a) hereof, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Adverse Person or an
Associate or Affiliate of an Acquiring Person or an Adverse Person, (ii) a
transferee of an Acquiring Person or an Adverse Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person or an Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person or an Adverse Person becoming such and
receives such Rights pursuant to either (A) a
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<PAGE> 13
transfer (whether or not for consideration) from the Acquiring Person or an
Adverse Person to holders of equity interests in such Acquiring Person or an
Adverse Person or to any Person with whom the Acquiring Person or an Adverse
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Directors of the Company have
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or an Adverse Person or any of its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
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<PAGE> 14
(b) If and so long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Securities Act of
1933 (the "Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
(d) The Company will take all such action as may be necessary
to ensure that all one two-thousandths of a share of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Rights Certificates and of any certificates for
a number of one two-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the
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<PAGE> 15
issuance or delivery of a number of one two-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) in respect
of a name other than that of, the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for a number of one two-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any Rights until such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for a number of one two-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in
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<PAGE> 16
effect, the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock transfer books of the
Company were open, that holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of
any such plan or InterScan or any of its Affiliates or Associates [but
only to the extent of their beneficial ownership of Series B Preferred
Stock and any shares of Common Stock which may be issued upon the
conversion of Series B Preferred Stock which were issued and
outstanding on the Record Date]), alone or together with its Affiliates
and Associates, shall, at any time after the Rights Dividend
Declaration Date, become the Beneficial owner of 15% or more of the
shares of Common Stock then outstanding, unless the event causing the
15% threshold to be crossed is a transaction set forth in Section 13(a)
hereof, or is an acquisition of shares of Common Stock pursuant to a
tender offer or an exchange offer for all outstanding shares of Common
Stock at a price and on terms determined by at least a majority of the
Directors of the Company who are not representatives, nominees,
Affiliates or Associates of the Person making such tender or exchange
offer, after receiving advice from one or more investment banking firms
selected by the Directors, to be (a) at a price which is fair to
shareholders (taking into account all factors which Directors of the
Company deem relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an
orderly basis designed to realize maximum value) and (b) otherwise in
the best interests of the Company and its shareholders, or
(B) the Board of Directors of the
Company shall declare any Person to be an Adverse Person, upon a
determination that such Person, alone or together with its Affiliates
and Associates, had, at any time after this Agreement has been filed
with the Securities and Exchange Commission as an exhibit to a filing
under the Exchange Act, become the Beneficial Owner of at least 10% of
the shares of Common Stock then outstanding, and a determination by at
least a majority of the Directors who are not officers of the Company,
after reasonable inquiry and investigation, including consultation
which such Persons as such Directors shall deem appropriate, that (a)
such Beneficial Ownership by such Person is intended to cause the
Company to repurchase the Common Stock beneficially owned by such
Person or to cause pressure on the Company to take action or enter into
a transaction or series of transactions intended to provide such Person
with short-term financial gain under circumstances where such Directors
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<PAGE> 17
determine that the best long-term interests of the Company and its
shareholders would not be served by taking such action or entering into
such transactions or series of transactions at that time or (b) such
Beneficial Ownership is causing or reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers, impairment of the Company's ability to
maintain its competitive position or impairment of the Company's
business reputation or ability to deal with governmental agencies) on
the business or prospects of the Company to the detriment of the
Company's shareholders,
then, promptly following the occurrence of any such event described in
(11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one two-thousandths of a share of Preferred Stock, such number of
shares of Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
two-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of
Common Stock which are authorized by the Company's certificate of incorporation
but not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section 11(a),
the Company shall (A) determine the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value"), and (B) with respect to each
Right (subject to Section 7(e) hereof), make adequate provision to substitute
for the Adjustment Shares, upon the exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)
Common Stock or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock, such as the
Preferred Stock, which the Board of Directors of the Company has deemed to have
essentially the same value or economic rights as shares of Common Stock (such
shares of preferred stock being referred to as "Common Stock Equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board of Directors
of the Company; provided, however, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without
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requiring payment of the Purchase Price, shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. For purposes of the preceding sentence, the
term "Spread" shall mean the excess of (i) the Current Value over (ii) the
Purchase Price. If the Board of Directors of the Company determines in good
faith that it is likely that sufficient additional shares of Common Stock could
be authorized for issuance upon exercise in full of the Rights, the thirty (30)
day period set forth above may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek shareholder approval for the authorization of such
additional shares (such period, as extended, is herein called the "Substitution
Period"). To the extent that action is to be taken pursuant to the first and/or
third sentences of this Section 11(a)(iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (2) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek such shareholder
approval for such authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of each Adjustment Share shall be the Current Market Price per share
of the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or
per unit value of any Common Stock Equivalent shall be deemed to equal the
Current Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company,
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<PAGE> 19
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock and the
denominator of which shall be such Current Market Price per share of Preferred
Stock (as determined pursuant to Section 11(d)(ii) hereof). Such adjustments
shall be made successively whenever such a record date is fixed, and in the
event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days immediately prior to such date, and for
purposes of computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common Stock for
the ten (10) consecutive Trading Days immediately following such date; provided,
however, that in the event that the Current Market Price per share of the Common
Stock is determined during a period following the announcement by the issuer of
such Common Stock of (A) a dividend or distribution on such Common Stock payable
in shares of such Common Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
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<PAGE> 20
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company. If on any such date no market
maker is making a market in the Common Stock, the fair value of such shares on
such date as determined in good faith by the Board of Directors of the Company
shall be used. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, a Business Day. If the Common Stock is not publicly held or not so
listed or traded, Current Market Price per share shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation
hereunder, the "Current Market Price" per share of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock in clause
(i) of this Section 11(d) (other than the last sentence thereof). If the Current
Market Price per share of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the Current
Market Price per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 2,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied by the
Current Market Price per share of the Common Stock. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded, Current Market
Price per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made
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<PAGE> 21
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one two-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one two-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one two-thousandths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one two-thousandths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one two-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at
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<PAGE> 22
least ten (10) calendar days later than the date of the public announcement. If
Rights Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Rights Certificates
on such record date Rights Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one two-thousandths of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
two-thousandth of a share and the number of one two-thousandth of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one two-thousandths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable such number of one two-thousandths of
a share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one two-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one two-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in their good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of
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<PAGE> 23
Preferred Stock at less than the Current Market Price, (iii) issuance wholly for
cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such shareholders.
(n) The Company will not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), (ii) merge
with or into any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or (iii) sell or transfer
(or permit any Subsidiary to sell or transfer), in one transaction, or a series
of related transactions, assets, cash flow or earning power aggregating more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) After the Distribution Date, the Company will not, except
as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary
to take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights then outstanding, or issued or delivered thereafter but prior
to the Distribution Date, shall be proportionately adjusted so that the number
of Rights outstanding following any such event shall equal the result obtained
by multiplying the number of Rights outstanding immediately prior to such event
by a fraction the denominator of which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the event and
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(q) The failure by the Board of Directors of the Company to
declare a Person to be an Adverse Person following such Person becoming the
Beneficial Owner of 10% or more of the outstanding Common Stock shall not imply
that such Person is not an Adverse Person or
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<PAGE> 24
limit the right at any time in the future of the Board of Directors of the
Company to declare such Person to be an Adverse Person.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock, the Common Stock and the Series B Preferred Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock and the Series B Preferred
Stock) in accordance with Section 25 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS, CASH
FLOW OR EARNING POWER.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o) hereof), then, and in each such case
(except as may be contemplated by Section 13(d) hereof), proper provision shall
be made so that: (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one two-thousandths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one two-thousandths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase
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<PAGE> 25
Price in effect immediately prior to such first occurrence), and dividing that
product (which, following the first occurrence of a Section 13 Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by (2) 50% of the Current Market Price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal Party
on the date of consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such Principal
Party, it being specifically intended that the provisions of Section 11 hereof
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets, cash flow or earning power
transferred pursuant to such transaction or transactions; provided, however,
that in any such case, (1) if the Common Stock of such Person is not at such
time and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or
indirect Subsidiary of another Person the Common Stock of which is and has been
so registered, "Principal Party" shall refer to such other Person; and (2) in
case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets, cash flow or earnings power
mentioned in paragraph (a) of this Section 13, the Principal Party will
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<PAGE> 26
(i) prepare and file a registration statement
under the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as practicable
after such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly
apply to successive mergers or consolidations or sales or other transfers. In
the event that a Section 13 Event shall occur at any time after the occurrence
of a Section 11(a)(ii) Event, the Rights which have not theretofore been
exercised shall thereafter become exercisable in the manner described in Section
13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of Section 11(a)(ii) hereof (or
a wholly owned subsidiary of any such Person or Persons), (ii) the price per
share of Common Stock offered in such transaction is not less than the price per
share of Common Stock paid to all holders of shares of Common Stock whose shares
were purchased pursuant to such tender offer or exchange offer and (iii) the
form of consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) Except for the Rights granted to InterScan as a result of
its ownership of shares of Series B Preferred Stock as of the Record Date, the
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock
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<PAGE> 27
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one two-thousandths of a share of Preferred Stock) upon exercise of the Rights
or to distribute certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of one two-thousandths
of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock
that are not integral multiples of one two-thousandth of a share of Preferred
Stock, the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one two-thousandth of a share
of Preferred Stock. For purposes of this Section 14(b), the current market value
of one two-thousandth of a share of Preferred Stock shall be one two-thousandth
of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of Common
Stock shall be the closing price of one share of Common Stock (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock and Series B Preferred Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Stock and
Series B Preferred Stock), without the consent of the Rights Agent or of the
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<PAGE> 28
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock and Series B Preferred Stock), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock and Series B
Preferred Stock, as the case may be;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock or Series B Preferred Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Rights Certificates or the associated Common
Stock or Series B Preferred Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
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<PAGE> 29
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
two-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or Series B Preferred Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have
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<PAGE> 30
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
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<PAGE> 31
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing
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<PAGE> 32
that repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, the Series B Preferred Stock and Preferred
Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York or of
any other state of the United States, in good standing, which is authorized
under such laws to exercise corporate trust powers and is subject to supervision
or examination by federal or state authority. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock, the Series B Preferred Stock and
the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board
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<PAGE> 33
of Directors of the Company to reflect any adjustment or change in the Purchase
Price and the number or kind or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
issued by the Company prior to the Distribution Date, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) to the extent that any adjustments
in the Company's securities have been made as a result of the issuance of Rights
Certificates (including, without limitation, adjustments to conversion ratios or
other adjustments resulting from the operation of anti-dilution provisions in
convertible securities, stock options or similar securities), the number of
Rights, or fractions thereof, issuable shall equal, and not exceed, the number
necessary to enable the holder to receive, upon such conversion, exchange or
exercise of such security and after exercise of such Rights, the number of
shares of Common Stock such holder would have received if it had converted,
exchanged or exercised such security immediately prior to the Distribution Date
and had subsequently exercised the Rights issuable in respect of such shares.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding the foregoing, the Board of Directors of the Company may not
redeem any Rights following a determination made pursuant to section
11(a)(ii)(B) that any person is an Adverse Person. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
"current market price", as defined in Section 11(d)(i) hereof, of the Common
Stock at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of the Company.
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<PAGE> 34
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors of the
Company ordering the redemption of the Rights, the Company shall give notice of
such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent for the Common
Stock and the Series B Preferred Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets, cash flow or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In case any event set forth in Section 11(a)(ii) hereof
shall occur, then, in such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights
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<PAGE> 35
Certificate, to the extent feasible and in accordance with Section 25 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph to Preferred Stock shall be
deemed thereafter to refer to Common Stock and/or, if appropriate, other
securities.
Section 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201-1596
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock and Series B Preferred Stock) shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed to such holder
at the address of such holder as shown on the registry books of the Company.
Section 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any term,
definition or other provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock or Series B
Preferred Stock; provided, however, that no such supplement or amendment shall
diminish any rights granted to holders of Common Stock or Series B Preferred
Stock in the Company's Certificate of Incorporation or in any contract or
agreement between the Company and InterScan. From and after the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which
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<PAGE> 36
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of Rights Certificates (other than an Acquiring
Person or an Adverse Person or an Affiliate or Associate of such Acquiring
Person or Adverse Person); provided, this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price, the Final Expiration Date, the Purchase
Price or the number of one two-thousandths of a share of Preferred Stock for
which a Right is exercisable; provided, however, that any time prior to (i) the
existence of an Acquiring Person or (ii) the date that a tender or exchange
offer by any person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
the Board may amend this Agreement to increase the Purchase Price or extend the
Final Expiration Date. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock and Series B Preferred Stock, as the case may be.
Section 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to such Board or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board of Directors of the Company in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the
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<PAGE> 37
holders of the Rights and all other parties, and (y) not subject the Board of
Directors of the Company to any liability to the holders of the Rights.
Section 29. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock and Series B Preferred
Stock) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock and Series B
Preferred Stock).
Section 30. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors of
the Company.
Section 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 32. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
and Restatement of the Agreement to be duly executed and their respective
corporate seals to be hereunto affixed and attested, all as of the day and year
first above written.
Attest: AMERICAN PRECISION INDUSTRIES INC.
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<PAGE> 38
By: /s/ James J. Tanous By: /s/ Kurt Wiedenhaupt
----------------------------- ---------------------------------
James J. Tanous, Secretary Kurt Wiedenhaupt, President and
Chief Executive Officer
Attest: AMERICAN SECURITIES TRANSFER
& TRUST, INC.
By: /s/ Kellie Gwinn By: /s/ Laura Sisneros
----------------------------- ---------------------------------
Kellie Gwinn, Laura Sisneros, Vice-President
Senior Vice-President
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<PAGE> 1
Exhibit 4(B)
FIRST AMENDMENT
TO
CREDIT AGREEMENT
This First Amendment ("Amendment") dated as of January 29,
1999, is made by and among AMERICAN PRECISION INDUSTRIES INC., a Delaware
corporation ("Company") and MARINE MIDLAND BANK, a bank organized under the laws
of the State of New York, as Agent ("Agent"), MARINE MIDLAND BANK as a Lender
("Marine") and FLEET NATIONAL BANK, a bank organized under the laws of the
United States of America, as a Lender ("Fleet").
RECITALS
--------
1. The Company, Agent, Marine and Fleet are parties to a Credit
Agreement dated August 31, 1998 ("Original Agreement"). Pursuant to the Original
Agreement, the Company executed and delivered to Marine and Fleet the Revolving
Notes and Foreign Currency Notes described in the Original Agreement and dated
August 31, 1998. All capitalized terms used herein and not otherwise defined are
used with their defined meanings as set forth in the Original Agreement.
2. In December 1998, the Company advised the Agent, Marine and Fleet of
certain proposed mergers involving various U.S. Subsidiaries of the Company
which were also Guarantors under the Original Agreement, and requested the
consent of the Agent and the Lenders thereto to the extent required under the
Original Agreement.
3. The Company also informed the Agent, Marine and Fleet of its
intention to form a new Swedish limited liability company named API ELMO AB as a
wholly-owned subsidiary of API Motion Inc. to acquire the assets of ELMO
Industrier AB for a cash purchase price of approximately 193 Million Swedish
Krona plus the assumption of liabilities owed to affiliates, financial
institutions and trade creditors ("ELMO Acquisition"); requested the consent of
the Agent and the Lenders thereto; and also requested the ability to borrow
Swedish Krona from the Lenders as a Foreign Currency under the Original
Agreement.
4. The Company has also requested, and the Lenders desire to make
available to the Company, the ability to add the Euro as a Foreign Currency
under the Original Agreement now that the Euro has become a currency of the
European Monetary Union, and to provide for borrowings in Euros as a substitute
for any particular Foreign Currency after the date such Foreign Currency is
replaced by the Euro as the lawful currency of a participating member state of
the European Monetary Union.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE> 2
- 2 -
A. CONDITIONS.
This Amendment shall be conditioned upon the following:
1. Delivery to the Agent and the Lenders of satisfactory
evidence of the completion of the Mergers (as defined in Part B below).
2. Execution by the Company, the Agent, and the Lenders of
this Amendment, and delivery of duplicate originals thereof to each of the
foregoing parties.
3. Delivery to the Agent and the Lenders of satisfactory
evidence of the completion of the ELMO Acquisition within fourteen (14) days
after the date hereof.
4. Execution by each of the Post-Mergers Guarantors of this
Amendment in order to make the reaffirmations set forth in Part E below, and
delivery of duplicate originals thereof to each of the Agent and the Lenders.
B. CONSENTS.
1. The Agent and the Lenders hereby consent to the following
mergers and name changes which occurred on or about December 30, 1998:
a. The merger of API Heat Transfer Inc. into
API Airtech Inc., and the name change of API Airtech Inc. to API Heat Transfer
Inc.
b. The merger of API Portescap U.S. Inc. into
its parent API Portescap Inc.
2. The Agent and the Lenders hereby consent to the following
mergers and name changes which occurred on or about December 31, 1998:
a. The mergers of API Basco Inc., API Ketema
Inc. and API Schmidt-Bretten Inc. into API Heat Transfer Inc. formerly known as
API Airtech Inc.
b. The mergers of API Electronic Components
Inc. and API Delevan Inc. into API SMD Inc., and the change of name of API SMD
Inc. to API Delevan Inc.
c. The mergers of API Controls Inc., API
Deltran Inc., API Harowe Inc. and API Portescap Inc. into API Motion Inc.
d. The merger of API AF Corporation into API
Development Corporation.
<PAGE> 3
- 3 -
All of the foregoing mergers are hereby referred to collectively as the
"Mergers".
3. Based on the documentation received from the Company with
respect to the terms of the ELMO Acquisition, the Agent and the Lenders hereby
consent to the ELMO Acquisition in accordance with the provisions of Section 6.5
of the Original Agreement.
C. AMENDMENTS.
The Original Agreement is hereby amended as follows:
1. The following definitions are added to Section 1.1 of the
Original Agreement in the appropriate places in alphabetic sequence:
"EURO" - the legal currency of the European participating
member states which participate in the European Monetary Union.
"EUROPEAN CURRENCY" - a currency (other than the Euro) of a
"participating member state" as described in the legislative measures of the
European Council for the introduction of, changeover to or operation of the
European Monetary Union, including but not limited to the Treaty of Rome of
March 25, 1957, as amended by the Single European Act 1986 and the Maastricht
Treaty which was signed on February 7, 1992 and came into force on November 1,
1993, all as amended, modified or supplemented from time to time.
"SWEDISH KRONA" - the lawful currency of Sweden.
2. The existing definition of "FOREIGN CURRENCY" and "FOREIGN
CURRENCIES" is deleted in its entirety and replaced by the following:
"FOREIGN CURRENCY" or "FOREIGN CURRENCIES" - any or all
of: French Francs, Swiss Francs, Deutsche Marks, Japanese Yen,
Pounds Sterling, Swedish Krona, Canadian Dollars, and the Euro.
3. The following Sections 10.12 and 10.13 are hereby added to
the Original Agreement:
Section 10.12. EUROPEAN MONETARY UNION. If, in the reasonable
judgment of the Agent, as a result of the implementation of the European
Monetary Union, (A) any European Currency ceases to be lawful currency of the
nation issuing the same and is replaced by the Euro, or (B) any European
Currency and the Euro are at the same time recognized by any governmental
authority of the nation issuing such European Currency as lawful currency of
such nation, such European Currency shall cease to be a Foreign Currency
hereunder and the Agent shall give prompt
<PAGE> 4
- 4 -
notice to the Company and each Lender that, on the date any Foreign Currency
Advance denominated in such European Currency would become due under the terms
of this Agreement the Company shall repay such Foreign Currency Advance by
paying to each Lender an amount in the Euro equal to the amount determined in
good faith by such Lender (which determination shall be conclusive absent
manifest error) necessary to compensate such Lender for the principal of and
accrued interest on such Foreign Currency Advance being repaid in the Euro
(rather than in the denominated Foreign Currency) as determined by converting
the amount payable in such European Currency to the Euro at the exchange rate
recognized by the European Central Bank for the purpose of implementing European
Monetary Union. Prior to the occurrence of the event or events described in
paragraphs (A) and (B) of the first sentence of this section, each amount
payable under this Agreement in any European Currency shall, except as otherwise
provided herein, continue to be payable only in such European Currency. The
Company affirms and agrees that neither the fixation of the exchange rate of any
European Currency against the Euro as recognized by the European Central Bank
for the purpose of implementing European Monetary Union, nor the conversion of
any Foreign Currency Advance denominated in any European Currency to a Foreign
Currency Advance denominated in the Euro will be (A) a reason for the early
termination or the revision or reformation, in whole or in part, of this
Agreement or any other Loan Document, or (B) create any liability of any Lender
toward the Company or any other Lender for any direct, consequential, or other
loss arising from the occurrence of the event or events described in paragraphs
(A) and (B) of the first sentence of this section.
Section 10.13. EURO AMENDMENTS. Upon the implementation of the
Euro resulting in a change in any European Currency in which the Company is
permitted to request a Foreign Currency Advance under this Agreement, this
Agreement, including without limitation, the definition of LIBOR contained
herein, will be amended to the extent determined by the Agent and the Lenders,
acting reasonably and in consultation with the Company, to be necessary to
reflect the change in currency and to put the Agent, each Lender and the Company
in the same position, so far as possible that they would have been in if no
change in currency had occurred. The Company hereby agrees to execute and
deliver to the Agent and each Lender such amendments to this Agreement as the
Agent and each Lender may reasonably request in order to carry out the intent of
this Section 10.13.
4. Existing Schedules 4.11 and 4.15 to the Original Agreement
are deleted and Schedules 4.11 (1999) and 4.15 (1999) attached hereto as
Exhibits A and B are hereby substituted in their place.
<PAGE> 5
- 6 -
5. The existing form of Schedule to the Foreign Currency Notes
is hereby replaced by the form of Schedule attached hereto as Exhibit C.
D. REPRESENTATIONS AND WARRANTIES.
1. The Company hereby represents and warrants to the Agent and
the Lenders that:
a. No default or Event of Default exists under
the Original Agreement.
b. The Mergers all occurred on the dates and as
described in Part B hereof.
c. The Original Agreement, except as
specifically modified by this Amendment, remains in full force
and effect.
d. The Mergers, the ELMO Acquisition, and the
making and performance of this Amendment by the Company and the Post-Mergers
Guarantors, have been duly authorized by all required corporate and shareholder
action.
E. REAFFIRMATIONS. By their execution of this Amendment, each of the
Post-Mergers Guarantors hereby reaffirms the granting, and continuing
effectiveness, of their respective Guaranty and further agrees that the Net
Worth amounts set forth in the last sentence of their respective Guaranty is
replaced by the amount set forth below next to such Guarantor's name:
<TABLE>
<CAPTION>
Guarantor Net Worth*
--------- ----------
<S> <C>
API Motion Inc. $46,000,000
API Heat Transfer Inc.
(formerly API Airtech Inc.) 19,500,000
API Gettys Inc. greater than 460,000 less than
API Delevan Inc.
(formerly API SMD Inc.) 5,800,000
API Development Corporation 3,500,000
</TABLE>
*Calculated based on November 30, 1998 figures, but
reflecting the effect of the Mergers.
F. OTHER PROVISIONS.
1. This Amendment may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which
when so executed and delivered shall be an original, but all such counterparts
shall together constitute one and the same Amendment.
<PAGE> 6
- 6 -
2. This Amendment shall be governed by and construed under the
internal laws of the State of New York, as the same may from time to time be in
effect, without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the date first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /S/ Bruce Mch. Kirchner
------------------------------
Bruce McH. Kirchner
Vice President and Chief
Financial Officer
MARINE MIDLAND BANK, as Agent
By /S/ Robert J. Mcknight
------------------------------
Robert J. McKnight
Vice President
MARINE MIDLAND BANK, as a Lender
By /S/ Robert J. Mcknight
------------------------------
Robert J. McKnight
Vice President
FLEET NATIONAL BANK, as a Lender
By /S/ John G. Tierney
------------------------------
John G. Tierney
Vice President
Agreed as of this 29th day of
January, 1999:
API MOTION INC. API GETTYS INC.
BY /S/ DEBORAH K. PAWLOWSKI BY /S/ DEBORAH K. PAWLOWSKI
------------------------ ---------------------------
DEBORAH K. PAWLOWSKI DEBORAH K. PAWLOWSKI
SECRETARY SECRETARY
API HEAT TRANSFER INC. API DELEVAN INC.
BY /S/ DEBORAH K. PAWLOWSKI BY /S/ DEBORAH K. PAWLOWSKI
------------------------ ---------------------------
DEBORAH K. PAWLOWSKI DEBORAH K. PAWLOWSKI
SECRETARY SECRETARY
API DEVELOPMENT CORPORATION
<PAGE> 7
- 7 -
BY /S/ DEBORAH K. PAWLOWSKI
------------------------
DEBORAH K. PAWLOWSKI
SECRETARY
<PAGE> 8
EXHIBIT A
---------
SCHEDULE 4.11 (1999)
SUBSIDIARIES - OTHER THAN GUARANTORS
American Precision Industries (U.K.) Ltd.
API-FS Corporation
API of Canada Inc.
Nitta-Apitron Co. Ltd.
API Harowe (St. Kitts) Ltd.
API Deltran (St. Kitts) Ltd.
API Schmidt Bretten Beteiligungs GmbH
API Schmidt Bretten Verwaltung GmbH
API Schmidt-Bretten GmbH & Co. KG
Schmidt-Bretten Nederland B.V.
API ELMO AB
Portescap U.S. Inc.
Portescap S.A.
Portescap International S.A.
API Portescap (U.K.) Ltd.
API Portescap Deutschland GmbH
API Portescap Scandinavia AB
API Portescap Polska SP.zo.o.
API Portescap France S.A.
API Portescap Japan Ltd.
API Positran Ltd.
<PAGE> 9
EXHIBIT B
---------
SCHEDULE 4.15 (1999)
INDEBTEDNESS FOR BORROWED MONEY
I. INDEBTEDNESS OF AMERICAN PRECISION INDUSTRIES INC.
1. All agreements and other documents to which the Company is a
party listed on the Index to the Wyoming County Industrial
Development Agency $2,800,000 Marine Midland Adjustable Rate
Service (MMars) 1988 Industrial Development Revenue Bonds,
Series A (American Precision Industries Inc. Facility) Closing
Binder.
2. All agreements and other documents to which the Company is a
party listed on the Index to the Wyoming County Industrial
Development Agency $6,600,000 Marine Midland Adjustable Rate
Service (MMars) 1995 Industrial Development Revenue Bonds,
Series A (American Precision Industries Inc. Facility) Closing
Binder.
3. All agreements and other documents to which the Company is a
party listed in the Table of Contents in the Grand Prairie
Industrial Development Authority $6,000,000 Marine Midland
Adjustable Rate Service (MMars) Industrial Development Revenue
Bonds, Series 1996 (Precision/API Ketema Project) Closing
Binder.
II. INDEBTEDNESS OF SUBSIDIARIES OF AMERICAN PRECISION
INDUSTRIES INC.
1. All agreements and other documents to which API
Schmidt-Bretten Beteiligungs GmbH and Landesgirokasse are
parties on a DM 13,000,000 credit facility, of which DM
9,086,792 was in use as of November 30, 1998.
2. All agreements and other documents to which API
Schmidt-Bretten GmbH & Co. KG and Landesgirokasse are parties
for a DM 2,000,000 line of credit.
3. All agreements and other documents to which API
Schmidt-Bretten GmbH & Co. KG and Sparkasse Bruchsal- Bretten
are parties for a DM 3,000,000 line of credit.
4. As of November 30, 1998, DM 836,664 of the lines of credit
described in paragraphs 2 and 3 above was in use.
5. All agreements and other documents to which Portescap and
certain of its subsidiaries are parties with several banks in
Switzerland, the United Kingdom, Germany and France. At
November 30, 1998, total borrowing under these arrangements
was approximately CHF 19,487,000.
<PAGE> 10
- 2 -
6. A credit facility between API ELMO AB and Skandinaviska
Enskilda Banken, effective upon the acquisition of the
assets of ELMO Industrier AB by API ELMO AB. The
credit facility is for a total of 46,000,000 Swedish
Krona ("SEK"), of which, effective at the closing of
the acquisition of ELMO Industrier AB, 44,200,000 SEK
will be outstanding, of which 33,000,000 SEK will be
secured by real estate; in addition, the facility will
be guaranteed by API Motion Inc.
<PAGE> 11
EXHIBIT C
---------
SCHEDULE
FOREIGN CURRENCY ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
====================================================================================================================================
AMOUNT OF
DATE LOAN LOAN MADE, AMOUNT OF AGGREGATE
MADE, CON- CONTINUED LIBOR RATE PRINCIPAL UNPAID NOTATION
APPLICABLE TINUED OR OR PERIOD DUE PAID OR PRINCIPAL MADE BY
CURRENCY* CONVERTED CONVERTED DATES, DATE PREPAID BALANCE AND DATE
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<S> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
*Specify: French Francs, Swiss Francs, Deutsche Marks, Swedish Krona,
Euro, Japanese Yen, Pounds Sterling or Canadian Dollars
