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Exhibit 2
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SHARE PURCHASE AGREEMENT
BY AND AMONG
THE LAMSON & SESSIONS CO.,
AMERIDUCT WORLDWIDE, INC.
AND
THE SHAREHOLDERS
LISTED ON THE SIGNATURE PAGES TO THIS AGREEMENT
DATED AS OF DECEMBER 6, 2000
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ARTICLE 1. PURCHASE AND SALE OF SHARES................................................................1
1.1 Purchase and Sale of Shares....................................................................1
1.2 Purchase Price.................................................................................1
1.3 Adjustment to Purchase Price...................................................................2
1.4 Allocation of Purchase Price and Section 338(h)(10) Election...................................3
ARTICLE 2. CLOSING....................................................................................3
2.1 Place and Time of Closing......................................................................3
2.2 Deliveries by the Shareholders.................................................................3
2.3 Deliveries by Buyer............................................................................5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.........................................5
3.1 Share Ownership................................................................................5
3.2 Power and Authority............................................................................5
3.3 Validity of Agreement..........................................................................6
3.4 No Breach......................................................................................6
3.5 Buyer's Ownership..............................................................................6
3.6 No Shareholder Transactions....................................................................6
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY.........................6
4.1 Organization and Standing; Power and Authority; Subsidiaries...................................6
4.2 Validity of Agreement..........................................................................7
4.3 Capitalization of the Company and each Subsidiary of the Company...............................7
4.4 Articles and By-Laws...........................................................................7
4.5 No Breach......................................................................................7
4.6 No Consents Necessary..........................................................................8
4.7 Financial Statements...........................................................................8
4.8 Changes in Circumstances.......................................................................9
4.9 Title to and Condition of Real Property........................................................9
4.10 Books and Records.............................................................................10
4.11 Contracts.....................................................................................11
4.12 Compliance with Laws..........................................................................11
4.13 Taxes.........................................................................................12
4.14 Bank Accounts; Powers of Attorney.............................................................13
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4.15 Insurance.....................................................................................13
4.16 Intellectual Property.........................................................................14
4.17 Permits.......................................................................................15
4.18 Employee Benefit Matters......................................................................15
4.19 Employee Relations; Collective Bargaining Agreements..........................................18
4.20 Employee Matters..............................................................................18
4.21 Environmental Matters.........................................................................19
4.22 Litigation....................................................................................19
4.23 Accounts Receivable; Inventory................................................................20
4.24 Product Warranty and Product Liability........................................................20
4.25 Customers and Suppliers.......................................................................20
4.26 Absence of Certain Commercial Practices.......................................................20
4.27 Indebtedness..................................................................................21
4.28 Title to and Sufficiency of Assets............................................................21
4.29 Business......................................................................................21
4.30 Budget Projections............................................................................21
4.31 Brokers, Finders and Agents...................................................................21
4.32 Disclosure....................................................................................21
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER...................................................21
5.1 Organization and Standing; Corporate Power and Authority......................................22
5.2 Validity of Agreement.........................................................................22
5.3 No Breach.....................................................................................22
5.4 Compliance with Laws..........................................................................22
5.5 No Consents Necessary.........................................................................22
5.6 Brokers, Finders and Agents...................................................................23
5.7 Investment Intent.............................................................................23
ARTICLE 6. COVENANTS.................................................................................23
6.1 Reasonable Access.............................................................................23
6.2 Conduct of Business of the Company............................................................23
6.3 No Solicitation of Offers.....................................................................24
6.4 Filings; Other Actions........................................................................25
6.5 Publicity.....................................................................................25
6.6 Reaffirmation of the Confidentiality Agreement................................................25
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6.7 Satisfaction of Closing Conditions............................................................25
6.8 No Transfers of Shares........................................................................25
6.9 Notice of Certain Events......................................................................25
6.10 Tax Matters...................................................................................26
6.11 Post-Closing Insurance Coverage...............................................................26
6.12 Waiver of Conflicts...........................................................................26
6.13 Aeries Network Commission Contract............................................................26
6.14 Special Bonuses...............................................................................26
ARTICLE 7. CONDITIONS TO CLOSING.....................................................................27
7.1 Conditions to Obligations of the Company, the Shareholders and Buyer..........................27
7.2 Conditions to Obligations of Buyer............................................................27
7.3 Conditions to Obligations of the Company and the Shareholders.................................28
ARTICLE 8. INDEMNIFICATION AND SURVIVAL..............................................................29
8.1 Indemnification by the Shareholders...........................................................29
8.2 Indemnification by Buyer......................................................................30
8.3 Direct Claims.................................................................................30
8.4 Third Person Claims...........................................................................30
8.5 Limitations; Survival.........................................................................31
8.6 Process for Recovery by Buyer Indemnified Parties and Shareholder Indemnified Parties.........32
8.7 Calculation of Losses.........................................................................32
8.8 Pursuit of Certain Claims.....................................................................32
8.9 Shareholders' Representative..................................................................33
8.10 Exclusive Remedy..............................................................................33
ARTICLE 9. TERMINATION OF AGREEMENT..................................................................34
9.1 Termination...................................................................................34
9.2 Effect of Termination.........................................................................34
ARTICLE 10. DEFINITIONS...............................................................................34
ARTICLE 11. MISCELLANEOUS.............................................................................39
11.1 Further Assurances............................................................................39
11.2 Notices.......................................................................................40
11.3 Binding Effect; Assignment....................................................................41
11.4 Incorporation of Exhibits and Schedules.......................................................41
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11.5 Entire Agreement..............................................................................41
11.6 Schedules.....................................................................................41
11.7 Governing Law; Construction...................................................................42
11.8 No Third Party Rights.........................................................................42
11.9 Amendment.....................................................................................42
11.10 Waivers.......................................................................................42
11.11 Fees and Expenses of Transaction..............................................................42
11.12 Counterparts..................................................................................42
11.13 Severability..................................................................................42
11.14 Consent to Jurisdiction.......................................................................42
11.15 Nature of Certain Obligations.................................................................43
11.16 Arbitration...................................................................................43
11.17 Exclusivity of Representations................................................................44
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EXHIBITS AND SCHEDULES
Exhibits
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EXHIBIT A - Escrow Agreement
EXHIBIT B - Legal Opinion
EXHIBIT C - Non-Competition Agreement
EXHIBIT D - Minority Shareholder Non-Competition Agreement
EXHIBIT E - Consulting Agreement
EXHIBIT F - Aeries Network Commission Contract
Schedules
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SCHEDULE 1.2 - Special Bonuses
SCHEDULE 1.4 - Allocation
SCHEDULE 2.2 - Key Managers
SCHEDULE 3.1 - Share Ownership
SCHEDULE 4.1 - Organization; Subsidiaries
SCHEDULE 4.3 - Capitalization
SCHEDULE 4.5 - No Breach
SCHEDULE 4.6 - No Consents Necessary
SCHEDULE 4.7 - Financial Statements
SCHEDULE 4.8 - Changes in Circumstances
SCHEDULE 4.9 - Real Property
SCHEDULE 4.11 - Contracts
SCHEDULE 4.12 - Compliance with Laws
SCHEDULE 4.13 - Taxes
SCHEDULE 4.14 - Bank Accounts; Powers of Attorney
SCHEDULE 4.15 - Insurance
SCHEDULE 4.16 - Intellectual Property
SCHEDULE 4.17 - Permits
SCHEDULE 4.18 - Employee Benefit Matters
SCHEDULE 4.19 - Collective Bargaining Agreements and Union Contracts
SCHEDULE 4.20 - Employee Matters
SCHEDULE 4.21 - Environmental Matters
SCHEDULE 4.22 - Litigation Matters
SCHEDULE 4.23 - Accounts Receivable; Inventory
SCHEDULE 4.24 - Product Liability Claims
SCHEDULE 4.25 - Customers and Suppliers
SCHEDULE 4.27 - Indebtedness
SCHEDULE 4.28 - Liens on Assets
SCHEDULE 4.30 - Budget
SCHEDULE 5.3 - No Breach (Buyer)
SCHEDULE 5.5 - No Consents Necessary (Buyer)
SCHEDULE 6.1 - Confidential Information
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of December 6, 2000, by and among THE LAMSON & SESSIONS CO., an Ohio
corporation (the "Buyer"), AMERIDUCT WORLDWIDE, INC., a Florida corporation (the
"Company") and all of the Shareholders of the Company listed on the signature
pages to this Agreement (collectively, the "Shareholders")(each of Buyer, the
Company, the Surviving Company (as defined below) and the Shareholders is a
"Party," and collectively the "Parties").
RECITALS
A. The Shareholders of the Company are the beneficial and record owners
of all the issued and outstanding shares of capital stock of the Company (the
"Shares").
B. The Shareholders desire to sell to Buyer, and Buyer desires to
purchase from the Shareholders, all of the Shares upon the terms and conditions
set forth in this Agreement.
STATEMENT OF AGREEMENT
In consideration of the respective agreements, covenants,
representations and warranties contained in this Agreement, the Parties agree as
follows:
ARTICLE 1.
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions of
this Agreement, at the Closing (i) the Shareholders shall sell the Shares to
Buyer, free and clear of all Liens, (ii) each Shareholder shall deliver to Buyer
one or more stock certificates representing the Shares owned by that
Shareholder, with duly executed stock powers attached in proper form for
transfer, (iii) Buyer shall purchase the Shares and (iv) Buyer shall pay the
Purchase Price (as defined below) for the Shares.
1.2 PURCHASE PRICE.
(a) In full consideration for the Shares, and subject to adjustment
pursuant to Section 1.3, at the Closing, Buyer shall wire transfer in
immediately available funds an aggregate amount in cash equal to $65,000,000
(the "Purchase Price"), minus (i) the aggregate amount of the Company's
Indebtedness noted on Schedule 4.27 outstanding as of the Closing Date, (ii)
subject to the provisions in Section 6.14, the aggregate amount of the Special
Bonuses set forth on Schedule 1.2 which aggregate amount includes any payroll
Taxes related thereto and (iii) the amount paid to the Escrow Agent (as defined
below) pursuant to Section 1.2(b), to an account established by the
Shareholders' Representative for purposes of receiving, allocating and
distributing the Purchase Price to the Shareholders.
(b) At the Closing, Buyer shall pay $4,500,000 (the "Escrow Amount") to
an escrow agent to be mutually agreed upon by Buyer and the Company (the "Escrow
Agent") to be held and administered by the Escrow Agent pursuant to the terms of
the Escrow Agreement, in the form attached as Exhibit A (the "Escrow
Agreement").
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(c) At the Closing, Buyer shall cause the Company to pay the
appropriate amount of the Company's then-outstanding Indebtedness (except for
the Industrial Development Revenue Bonds and certain capital leases, which will
remain outstanding) to the respective creditors thereof.
1.3 ADJUSTMENT TO PURCHASE PRICE.
(a) Within 30 days after the Closing, Buyer shall prepare and deliver
to the Shareholders' Representative a statement (the "Net Worth Statement"),
based on the Company's balance sheet as of the Closing Date, setting forth the
amount of the net worth exclusive of Indebtedness and the Special Bonuses as of
the close of business on the Closing Date (the "Debt-Free Net Worth"). The Net
Worth Statement shall be prepared in accordance with generally accepted
accounting principles and in a manner consistent with the 1999 Balance Sheet.
(b) Within 30 days following receipt by the Shareholders'
Representative of the Net Worth Statement, the Shareholders' Representative
shall notify Buyer of any dispute he has with respect to the preparation or
content of the Net Worth Statement. In the event of such notification of
dispute, the Shareholders' Representative and Buyer shall negotiate in good
faith to resolve such dispute. If Buyer and the Shareholders' Representative are
unable to resolve such dispute within 30 calendar days after the commencement of
such dispute, PricewaterhouseCoopers (the "Accounting Firm") shall be retained
to resolve such dispute. All determinations made by the Accounting Firm shall be
final, conclusive and binding on the Parties. Buyer and the Shareholders shall
share equally the fees and expenses of the Accounting Firm.
(c) If, upon the completion of the Net Worth Statement and the final
resolution of any disputes pertaining thereto as provided in Section 1.3(b),
Debt-Free Net Worth is less than $14,572,623 (the Company's Debt-Free Net Worth
on June 30, 2000), the Shareholders shall refund to Buyer, payable out of the
Escrow Amount, an amount in cash equal to such deficiency.
(d) If, upon the completion of the Net Worth Statement and the final
resolution of any disputes pertaining thereto as provided in Section 1.3(b),
Debt-Free Net Worth is greater than $14,572,623, Buyer shall pay to the
Shareholders' Representative an amount in cash equal to such amount.
(e) If, upon the completion of the Net Worth Statement and the final
resolution of any disputes pertaining thereto as provided in Section 1.3(b),
Debt-Free Net Worth is equal to $14,572,623, none of the Parties shall owe any
amount to any of the other Parties under this Section 1.3.
(f) Any payments owing pursuant to this Section 1.3 shall include
interest on such amount from the Closing Date until the date of payment at the
Interest Rate and shall be made by bank wire transfer, federal funds check, or
otherwise in immediately available funds, on the earliest of (i) with respect to
any and all items not in dispute, the third business day following the
determination of such amounts, or (ii) if there shall have been a disagreement,
the third business day following the resolution by the Shareholders and the
Buyer of such disagreement.
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Interest shall accrue on any and all amounts owed under this Section 1.3 but not
timely paid in accordance with this Section 1.3(f) at a rate of three percent
above the Interest Rate from the date on which such payments should have been
made.
1.4 ALLOCATION OF PURCHASE PRICE AND SECTION 338(h)(10) ELECTION. In
order to have Section 338(h)(10) of the Code apply to the acquisition of the
Shares by Buyer, the Company, the Shareholders and Buyer shall make a joint
election under Section 338(h)(10) of the Code (and comparable state and local
income Tax provisions) (the "338(h)(10) Election"). In connection with the
making of the Section 338(h)(10) Election, prior to the Closing Date, Buyer and
the Company shall agree upon the allocation of the Purchase Price among the
assets of the Company that are deemed to have been acquired pursuant to Section
338(h)(10) of the Code according to the methodology set forth on Schedule 1.4.
Buyer and the Shareholders shall exchange completed and properly executed copies
of IRS Form 8023, required schedules related thereto, and comparable state and
local forms and schedules, all of which are to be prepared on a basis consistent
with the agreed-upon allocation. If any changes are required to be made to these
forms or schedules as a result of information that first becomes available after
the Closing, the Parties shall promptly and in good faith reach an agreement as
to the precise changes to be made. The Company, the Shareholders and Buyer shall
use the agreed-upon allocation for purposes of preparing all reports and returns
with respect to Taxes.
ARTICLE 2.
CLOSING
2.1 PLACE AND TIME OF CLOSING. The closing of the purchase and sale of
the Shares (the "Closing") shall take place at Jones, Day, Reavis & Pogue, 77
West Wacker, Chicago, IL 60601, on December 15, 2000, or at such other place,
date and time as the Parties may agree in writing (such date being referred to
as the "Closing Date"); provided, however, that the Closing Date shall be no
later than December 22, 2000. If the Closing shall not have occurred on or
before December 22, 2000, either the Buyer or the Company may terminate this
Agreement pursuant to Section 9.1(b).
2.2 DELIVERIES BY THE SHAREHOLDERS. At the Closing, the Shareholders
shall deliver, or cause the Company to deliver, to Buyer:
(a) stock certificates representing the Shares, accompanied by duly
executed stock powers, in form and substance reasonably satisfactory to Buyer;
(b) the complete minute books, stock ledgers and transfer books of the
Company, all fully updated to the reasonable satisfaction of Buyer;
(c) a certificate of an officer of the Company to the effect that the
conditions set forth in Sections 7.2(a) and 7.2(b) have been satisfied;
(d) a certificate of the Secretary of the Company, in form and
substance reasonably satisfactory to Buyer, certifying as to (i) the resolutions
of the directors approving and authorizing this Agreement and the transactions
contemplated by this Agreement and (ii) the By-laws of the Company;
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(e) a good standing certificate of the Company issued by the Secretary
of State of the State of Florida and each state where it is qualified to do
business as a foreign corporation;
(f) the Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Florida;
(g) tax certificates showing that the Company has paid its franchise
Taxes in the State of Florida and in each state where it is qualified to do
business as a foreign corporation;
(h) a good standing certificate of each Subsidiary of the Company,
issued by the Secretary of State of the state of incorporation of such
Subsidiary and each state where each Subsidiary is qualified to do business as a
foreign corporation;
(i) the Articles of Incorporation of each Subsidiary of the Company,
certified by the Secretary of State of the state of incorporation of such
Subsidiary;
(j) tax certificates showing that each Subsidiary has paid its
franchise Taxes in the state of incorporation of such Subsidiary and in each
state where each Subsidiary is qualified to do business as a foreign
corporation;
(k) the legal opinion of Sachnoff & Weaver, Ltd. ("S&W") in form and
substance as set forth in Exhibit B;
(l) non-competition agreements with each of the Shareholders (other
than the Minority Shareholders), in form and substance as set forth in Exhibit C
(the "Non-Competition Agreements"), executed by each Shareholder;
(m) non-competition agreements with each of the Minority Shareholders,
in form and substance as set forth in Exhibit D (the "Non-Competition
Agreements"), executed by each Minority Shareholder;
(n) employment packages with each of the key managers identified on
Schedule 2.2 (the "Key Managers"), counter-signed by each Key Manager;
(o) a consulting agreement, in form and substance as set forth in
Exhibit E (the "Consulting Agreement") with David Bednarek, executed by David
Bednarek;
(p) resignations of the directors of the Company and its Subsidiaries
and of Carl Jungers and David Jungers;
(q) a payoff letter from Bank of America and associated UCC termination
statements;
(r) Title Policies and Surveys (as defined in Sections 7.2(f) and
7.2(g), respectively) for any Real Property owned by the Company or any of its
Subsidiaries and any other similar documentation reasonably requested by Buyer
in order to satisfy its lenders;
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(s) the Escrow Agreement, duly executed by the Shareholders'
Representative and an authorized officer of Seller;
(t) the Aeries Network Commission Contract, in form and substance as
set forth in Exhibit F (the "Aeries Network Commission Contract"), executed by
each of the Key Managers;
(u) consent of Bank of America, N.A. with respect to the Industrial
Development Revenue Bonds, if required pursuant to the relevant Industrial
Development Revenue Bonds financing documents; and
(v) evidence in form reasonably satisfactory to the Shareholders that
the guarantees of the Company's Indebtedness made by the Shareholders will be
released at Closing.
2.3 DELIVERIES BY BUYER. At the Closing, Buyer shall deliver to the
Shareholders:
(a) the Purchase Price;
(b) a certificate of an officer of Buyer to the effect that the
conditions set forth in Sections 7.3(a) and 7.3(b) have been satisfied;
(c) the Non-Competition Agreements and Minority Shareholder
Non-Competition Agreements, duly executed by an authorized officer of Buyer;
(d) the Consulting Agreement, duly executed by an authorized officer of
Buyer;
(e) the Escrow Agreement, duly executed by an authorized officer of
Buyer; and
(f) the Aeries Network Contract, executed by the Surviving Company.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants to Buyer:
3.1 SHARE OWNERSHIP. Except as set forth in Schedule 3.1, such
Shareholder owns beneficially and of record, free and clear of any Liens, the
Shares set forth opposite such Shareholder's name on Schedule 3.1.
3.2 POWER AND AUTHORITY. Such Shareholder has the full capacity and
right to execute, deliver and perform his, hers or its obligations under this
Agreement. At the Closing, such Shareholder will have the capacity and right to
sell, assign, transfer and deliver to Buyer the Shares set forth opposite his,
her or its name on Schedule 3.1.
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3.3 VALIDITY OF AGREEMENT. This Agreement has been duly executed and
delivered by such Shareholder and constitutes the valid and binding obligation
of such Shareholder, enforceable against such Shareholder in accordance with its
terms.
3.4 NO BREACH. Neither the execution and delivery of, the performance
by such Shareholder of his, hers or its obligations under this Agreement, nor
the consummation of the transactions contemplated by this Agreement, will (a)
violate, conflict with or result in the breach of, any applicable Law or Order
to which such Shareholder is subject, (b) result in the creation of any Lien
upon the Shares or (c) violate, conflict with, result in the breach of or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, accelerate or permit the acceleration of the
performance required by, or otherwise give any Person additional rights or
compensation under, any note, deed, lease, instrument, security agreement or
mortgage, any commitment, Contract, license, sales commitment or other
instrument or oral understanding to which such Shareholder is a party or by
which the Shares held by such Shareholder are bound.
3.5 BUYER'S OWNERSHIP. Upon payment of the Purchase Price, Buyer will
acquire legal and beneficial ownership of the Shares held by such Shareholder,
free and clear of any Lien (except for any Lien created by Buyer and other
restrictions on transfer under the Securities Act of 1933, as amended (the
"Securities Act") and applicable state securities laws).
3.6 NO SHAREHOLDER TRANSACTIONS. Such Shareholder does not have any
interest (other than as a non-controlling holder of securities of a
publicly-traded company), either directly or indirectly, in any Person (whether
as an employee, officer, director, shareholder, agent, independent contractor,
security holder, creditor, consultant or otherwise) that presently (i) provides
any services or designs, produces or sells any products or product lines, or
engages in any activity which is the same, similar to or competitive with the
Business or any activity in which the Company is now engaged, (ii) is a supplier
or creditor of, or has an existing contractual relationship with, the Company or
(iii) has any direct or indirect interest in any asset or property used by the
Company or any property, real or personal, tangible or intangible, that is
necessary for the conduct of the Business of the Company as heretofore
conducted.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY
Each of the Shareholders and the Company represents and warrants to
Buyer:
4.1 ORGANIZATION AND STANDING; POWER AND AUTHORITY; SUBSIDIARIES. The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Florida, and has full corporate power and
authority to operate and carry on the Business as now being conducted. The
Subsidiaries of the Company are listed on Schedule 4.1. Each Subsidiary of the
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the state of its incorporation, and each has full corporate
power and authority to operate and carry on its business as now being conducted.
The Company has the full corporate power and authority to make and perform this
Agreement and the transactions and other agreements and instruments contemplated
by this Agreement. Except as set forth on
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Schedule 4.1, the Company has no Subsidiaries and does not own and has never
owned any interest, direct or indirect, in any other business enterprise, firm
or corporation. The Company and its Subsidiaries are the only business
enterprises, firms or corporations through which the Business is conducted, or
which own, lease or use assets related to the Business. The Company is not a
successor to any other corporation, partnership or other entity and has never
operated as a Subsidiary or a division of any other Person. Schedule 4.1 sets
forth each location in which each of the Company and each Subsidiary of the
Company maintains an office, has employees, conducts business or owns or leases
property. The Company and each Subsidiary of the Company are qualified to do
business and in good standing in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a Material Adverse Effect.
4.2 VALIDITY OF AGREEMENT. This Agreement and all other agreements and
instruments executed and delivered or to be executed and delivered by the
Company in connection with this Agreement have been, or upon execution thereof
will be, duly executed and delivered by a duly authorized officer or
representative of the Company and each constitutes the valid and binding
obligations of the Company, enforceable against the Company in accordance with
its terms. This Agreement and the performance by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company.
4.3 CAPITALIZATION OF THE COMPANY AND EACH SUBSIDIARY OF THE COMPANY.
(a) The authorized capital stock of the Company consists of 10,000
common shares, $1.00 par value, of which 93.1 Shares are issued and outstanding.
Except as set forth on Schedule 4.3, (i) no shares of the capital stock of the
Company have been redeemed or repurchased by the Company, and (ii) the Shares
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no outstanding Options obligating the Company to issue,
directly or indirectly, any additional shares of its capital stock or other
equity securities.
(b) The authorized capital stock, number of shares outstanding and
shareholders of each Subsidiary of the Company is set forth on Schedule 4.3(b).
The outstanding shares of each Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable.
4.4 ARTICLES AND BY-LAWS.
(a) The Articles of Incorporation of the Company, certified by the
Secretary of State of Florida, and the By-laws of the Company, certified by the
Secretary of the Company and previously delivered to Buyer by the Company, are
true and complete.
(b) The Articles of Incorporation of each Subsidiary of the Company,
certified by the Secretary of State of the state of incorporation of each
Subsidiary, and the By-laws of each Subsidiary of the Company, certified by the
Secretary of each Subsidiary and previously delivered to Buyer by the Company,
are true and complete.
4.5 NO BREACH. Except as set forth on Schedule 4.5, neither the
execution and delivery of, nor the performance by the Company of its obligations
under this Agreement, nor the consummation of the transactions contemplated by
this Agreement, will (a) violate, conflict
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with or result in the breach of, any applicable Law or Order, or the Articles of
Incorporation or By-laws of the Company or the Articles of Incorporation or
By-laws of any Subsidiary of the Company, (b) result in the creation of any Lien
upon the Shares or any of the assets or properties of the Company or any
Subsidiary of the Company, or (c) violate, conflict with, result in the breach
of or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or accelerate or permit the
acceleration of the performance required by, or otherwise give any Person
additional rights or compensation under, any note, deed, lease, instrument,
security agreement or mortgage, any commitment, Contract, license, sales
commitment or other instrument or oral understanding to which either the Company
or any Subsidiary of the Company is a party or by which any of their respective
assets or properties are bound.
4.6 NO CONSENTS NECESSARY. Except as set forth on Schedule 4.6, no
Consent is required to be obtained from, made with or given to any Person by the
Company in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated by this
Agreement.
4.7 FINANCIAL STATEMENTS.
(a) Schedule 4.7 includes true and complete copies of (i) the audited
balance sheet of the Company as of December 31, 1999 (the "1999 Balance Sheet")
and the related reviewed statements of income, stockholders' equity and cash
flows for the twelve-month period then ended and the reviewed balance sheet of
the Company as of December 31, 1998 and the related statements of income,
stockholders' equity and cash flows for the period from July 21, 1998 through
December 31, 1998 (collectively, the "Company Year End Financial Statements"),
(ii) the internal, unaudited balance sheets of Gulf Island Pipe, Inc. and
Ameriduct, Inc. as of July 21, 1998 and the related statements of income,
stockholders' equity and cash flows for the period from January 1, 1998 through
July 21, 1998 and the balance sheets of Gulf Island Pipe, Inc. and Ameriduct,
Inc. as of December 31, 1997 and the related statements of income, stockholders'
equity and cash flow for the twelve-month periods then ended (collectively, the
"Subsidiary Year End Financial Statements") and (iii) the interim unaudited
balance sheet of the Company as of June 30, 2000 and the related statements of
income, stockholders' equity and cash flows for the six-month period then ended
(the "Interim Company Financial Statements" and, together with the Company Year
End Financial Statements and the Subsidiary Year End Financial Statements, the
"Financial Statements").
(b) Except as set forth on Schedule 4.7, the Financial Statements were
prepared from the books and records kept by the Company and present fairly the
financial position of the Company as of the dates of each of the Financial
Statements, and the results of its operations for the periods then ended in
accordance with GAAP; provided, however, that the Interim Company Financial
Statements and the Subsidiary Year End Financial Statements are subject to
normal year-end adjustments and lack footnotes and other presentation items. The
reserves on the 1999 Balance Sheets included in the Financial Statements have
been calculated in good faith in a manner consistent with past practice. Except
as set forth on Schedule 4.7 or as incurred since June 30, 2000 in the ordinary
course of business, the Company has no material Indebtedness, liabilities or
obligations of any nature whatsoever, whether absolute, accrued,
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contingent or otherwise, whether or not such liabilities would be required to be
reflected on a balance sheet of the Company as of the date of this Agreement.
4.8 CHANGES IN CIRCUMSTANCES. Except as set forth on Schedule 4.8 or as
permitted in or contemplated by other sections of this Agreement or in
preparation for the transactions contemplated hereby, since June 30, 2000,
neither the Company nor any Subsidiary of the Company has (i) sold, transferred
or otherwise disposed of any of its material properties or assets outside the
ordinary course of the Business, (ii) mortgaged, pledged or subjected to any
Lien any of its material properties or assets, (iii) acquired any material
properties or assets outside the ordinary course of the Business, (iv) declared
or paid any dividend or made any other distribution to its shareholders or
repurchased any of its outstanding capital stock, (v) entered into any
transaction or otherwise conducted any business other than transactions in the
ordinary course of the Business or transactions which involve less than $25,000
in the aggregate, (vi) modified, amended, canceled, or terminated any Contracts
listed or which would be required to be listed on Schedule 4.11 under
circumstances which could reasonably be anticipated to have a Material Adverse
Effect on the Company, (vii) made any loan or advance to any Affiliate of the
Company or any Subsidiary of the Company, other than customary advances for
business expenses, (viii) suffered any change in its assets, properties,
financial condition, results of operations or business which would constitute a
Material Adverse Effect on the Company, (ix) sustained any material damage, loss
or destruction of or to any of its assets or properties (whether or not covered
by insurance), (x) experienced any material labor trouble or any material change
in its personnel or (xi) agreed to or obligated itself to take any of the
actions identified in clauses (i) through (vii) above.
4.9 TITLE TO AND CONDITION OF REAL PROPERTY.
(a) Schedule 4.9 constitutes a complete list of all real properties
owned or leased by the Company or any of its Subsidiaries (collectively, the
"Real Property"). The Company has delivered or caused to be delivered true and
complete copies of all documents evidencing the ownership or the lease of the
Real Property. Except as set forth on Schedule 4.9 or Schedule 4.28, the Company
and each of its Subsidiaries have good and marketable title to or valid and
enforceable leasehold interests in, all of the Real Property, free and clear of
all Liens.
(b) Except as set forth on Schedule 4.9, (i) there is no pending or, to
the Knowledge of the Company, (A) threatened condemnation proceeding,
administrative action or judicial proceeding of any type relating to the Real
Property or any portion thereof or (B) other matters materially and adversely
affecting (1) the current use or occupancy thereof by the Company or any of its
Subsidiaries or (2) the value of the Real Property; (ii) the Real Property does
not serve any adjoining property for any purpose inconsistent with the Company's
or any of its Subsidiaries' use of the Real Property, and the Real Property is
not located within any special service district or subject to any similar type
of restriction for which any insurance, permits or licenses necessary to the use
thereof have not been obtained; (iii) there are no leases, subleases, licenses,
easements, concessions or other agreements, written or oral, granting to any
Person the right to use or occupy any portion of the Real Property that are not
listed on Schedule 4.9; (iv) no Person (other than the Company or any of its
Subsidiaries) is in possession of any of the Real Property; (v) neither the
current use of the Real Property nor the operations of the Company or any of its
Subsidiaries thereon violates in any material respect any instrument of record
or
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<PAGE> 16
agreement affecting the Real Property or any applicable Law; (vi) all water,
gas, electrical, steam, compressed air, telecommunication, sanitary and storm
sewage lines as applicable and other utilities and systems serving the Real
Property are sufficient to enable the continued operation of the Real Property
as currently operated; (vii) all material certificates of occupancy, permits,
licenses, approvals and other authorizations required in connection with the
present operation of the Company and its Subsidiaries and the Real Property have
been obtained and are in full force and effect, and the Company and its
Subsidiaries and the Real Property are in compliance in all material respects
with all applicable zoning Laws (after giving effect to any variances granted
thereunder); (viii) the Real Property has access to public roads and utilities;
(ix) each Real Property comprises a single contiguous parcel of land with no
intervening strips, parcels or easements between such Real Property and adjacent
public roads and utilities; (x) none of the Liens interferes with or prevents
the continuation of current operations of the Company or its Subsidiaries at the
Real Property; and (xi) no written notice of any increase in the assessed
valuation of the Real Property or of any contemplated special assessment has
been received by the Company, its Subsidiaries or the Shareholders and, to the
Knowledge of the Company, there is no threatened special assessment pertaining
to the Real Property. The Real Property and the buildings, structures and other
improvements, fixtures and appurtenances owned by the Company or its
Subsidiaries and located on the Real Property (collectively, the "Improvements")
are in compliance in all material respects with all applicable zoning and land
use Laws. All Improvements are in operating condition, ordinary wear and tear
consistent with the age of the Improvements excepted, and, to the Knowledge of
the Company, free from latent defects.
(c) Except as set forth on Schedule 4.9, neither the Company nor any
its Subsidiaries is, and, to the Knowledge of the Company, no other party is, in
material default under any lease listed on Schedule 4.9, and there exists no
event which, with or without notice or the lapse of time, or both, would
constitute a material default by the Company or any Subsidiary of the Company
or, to the Knowledge of the Company, any other party, under any lease listed on
Schedule 4.9. Any lease under which either the Company or any Subsidiary of the
Company is a party and the other party to such lease is an entity in which a
Shareholder has an interest is at prevailing market rates.
4.10 BOOKS AND RECORDS. The minute books of the Company and its
Subsidiaries, copies of which have been made available to Buyer for its
inspection, are in all material respects complete and correct. The stock ledgers
of the Company and each Subsidiary of the Company have been made available to
Buyer for its inspection, are complete and accurately reflect all issuances,
transfers, repurchases and cancellations of shares of capital stock of each of
the Company and each Subsidiary of the Company. All accounting, financial,
reporting, business, tax, corporate and other similar books and records of the
Company and each Subsidiary of the Company accurately reflect in all material
respects the business and financial condition of the Company and each Subsidiary
of the Company.
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4.11 CONTRACTS. Schedule 4.11 sets forth each Contract or other
instrument that is of a type described below to which the Company or any
Subsidiary of the Company is a party the performance of which would involve
payments or receipts in excess of $25,000:
(a) Any material Contract with any representative, distributor or sales
agent which is not terminable without cost or penalty to the Company or any
Subsidiary of the Company on 60 days' or less notice;
(b) Any material Contract with any Governmental Authority;
(c) Any Contract involving payments or receipts in excess of $25,000;
(d) Any Contract containing a covenant not to compete or restricting in
any material respect the ability of the Company or any Subsidiary of the Company
to transact business in any jurisdiction of the United States or a foreign
country;
(e) Any material Contracts or other agreements for indemnification;
(f) Any Contract with any Affiliate or any Subsidiary of the Company;
(g) Any indenture, mortgage, loan or credit Contract under which the
Company or any Subsidiary of the Company has borrowed any money or issued any
note, bond, indenture or other evidence of Indebtedness, or guaranteed
Indebtedness borrowed by others; and
(h) Any other Contract material to the assets, properties, financial
condition, results of operations or business of the Company or any Subsidiary of
the Company.
Except as expressly set forth on Schedule 4.11, each Contract listed or
described on Schedule 4.11 (or required to be so listed or described) is a valid
and binding obligation of the Company or one of its Subsidiaries and is in full
force and effect. Except as expressly set forth on Schedule 4.11, the Company or
such Subsidiary of the Company has performed all of its material obligations
required to be performed though the date of this Agreement under the Contracts
so listed or described and neither the Company nor such Subsidiary is in breach
or default in any material respect thereunder nor has any event or circumstance
occurred which, with notice or lapse of time or both, would constitute any such
material breach or default. Neither the Company nor any Subsidiary of the
Company is a party to any Contract where either the Company or any Subsidiary of
the Company would reasonably expect to incur a loss with respect to such
Contract. To the Knowledge of the Company, none of the other parties to such
Contracts is in breach or default in any respect thereunder nor has any event or
circumstance occurred which, with notice or lapse of time or both, would
constitute any such breach or default, except in any such case for such breaches
or defaults which would not have a Material Adverse Effect on the Company.
4.12 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.12, to the
Knowledge of the Company, the Company and each of its Subsidiaries is currently
in compliance in all material respects with all applicable Laws, and no
expenditures are presently anticipated to be required so to comply with any such
Law. Neither the Company nor any Subsidiary of the Company is in material
default under, and to the Knowledge of the Company, no event has
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<PAGE> 18
occurred which, with the lapse of time or action by a third party, could result
in default under, the terms of any Laws.
4.13 TAXES.
(a) Tax Returns. Except as set forth on Schedule 4.13, each of the
Company and each Subsidiary of the Company has prepared in good faith and duly
and timely filed, or caused to be duly and timely filed, all material federal,
state, foreign and local Tax Returns and reports required to be filed by it. The
Tax Returns are true and correct in all material respects. The Company has paid,
or has made adequate provision or set up an adequate accrual or reserve (in each
case as reflected on the Financial Statements) for the payment of, all material
Taxes due with respect to all periods covered by such Tax Returns. The provision
for Taxes shown on the Financial Statements is sufficient in all material
respects to cover all liabilities or obligations of the Company for Taxes
(including, without limitation, interest through the date of the Financial
Statements and any additions to Taxes or penalties) that may be due in respect
of periods through the date of such Financial Statements for which returns and
reports as of such date are not yet due. Neither the Company nor any Subsidiary
of the Company is a party to any Action, nor to the Knowledge of the Company is
any such Action threatened, by any Governmental Authority for the assessment or
collection of any Taxes, and no deficiency notices or reports have been received
by the Company or any Subsidiary of the Company in respect of any deficiencies
for any Taxes. The Company has not elected pursuant to the Code, to be treated
as a collapsible corporation pursuant to Section 341(f) of the Code, nor has it
made any other elections pursuant to the Code which would have a Material
Adverse Effect on the Company, its financial condition, or its business as
presently conducted or proposed to be conducted immediately after the Closing or
any of its properties or material assets.
(b) Audits. Except as set forth on Schedule 4.13, no Tax Return filed
by or on behalf of the Company or any Subsidiary of the Company has been, or is
currently being, audited or examined by any Taxing Authority, and there are no
outstanding agreements or waivers extending the statutory period of limitations
applicable to any Tax Return filed by the Company or any Subsidiary of the
Company. There are no claims pending against the Company or any Subsidiary of
the Company for past due Taxes, and, to the Knowledge of the Company, there are
no threatened claims and there are no matters under discussion with any Taxing
Authority with respect to any additional Taxes.
(c) Parachute Payments. Neither the Company nor any Subsidiary of the
Company is a party to any oral or written Contract under which any Person may
receive payments from any Person characterized as "excess parachute payments"
within the meaning of section 280G(b) of the Code.
(d) Tax Sharing Agreements. Neither the Company nor any Subsidiary of
the Company is a party to any oral or written Contract under which either (i)
the Company or any Subsidiary of the Company may be obligated to pay certain Tax
liabilities of any Person (other than the Company or any Subsidiary of the
Company), or (ii) any Person (other than the Company or any Subsidiary of the
Company) may be obligated to pay certain Tax liabilities of the Company or any
Subsidiary of the Company.
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(e) Current Period Taxes. Each estimated payment for any Taxes for any
period on or prior to the Closing Date payable by the Company or any Subsidiary
of the Company has been made on or before the date on which the payment is
required under applicable Law to be made in an amount sufficient to avoid the
imposition of a penalty.
(f) Withholdings. All Taxes which the Company or any Subsidiary of the
Company is or has been required by Law to withhold or to collect have been duly
withheld and collected, and have been timely paid to the proper Governmental
Authority or are properly held by the Company or any Subsidiary of the Company
for such payment.
(g) Changes in Methods of Accounting. Except as set forth on Schedule
4.13, the IRS has not successfully invoked, nor could it successfully invoke,
section 481 of the Code with respect to any method of accounting of the Company
or any Subsidiary of the Company.
(h) "S corporation" Election. (i) The Company made a timely and valid
election, effective as of August 1, 1998 to be treated as an "S corporation" for
federal income tax purposes pursuant to Section 1362 of the Code (and for state
purposes in all states in which the Company was engaged in business that permit
an equivalent election). Each of the Company's Subsidiaries made a timely and
valid election, effective as of January 1, 1992 (Gulf Island Pipe, Inc.), August
29, 1995 (Ameriduct, Inc.) and March 1, 1998 (Ameriduct of Georgia, Inc.) to be
treated as an "S corporation" for federal income tax purposes pursuant to
Section 1362 of the Code (and for state purposes in all states in which any such
Subsidiary was engaged in business that permit an equivalent election). The S
corporation election of the Company has not been terminated and remains valid
and effective.
(ii) The Company made valid and timely elections, effective as
of August 1, 1998, to treat each of its Subsidiaries as "Qualified Subchapter S
Subsidiaries" for federal income tax purposes pursuant to Section 1361 of the
Code (and for state purposes in all states in which the Company and each
Subsidiary were engaged in business that permit an equivalent election), and
each such election has not been terminated and each remains valid and effective.
(iii) The Section 338(h)(10) Election and resulting deemed
asset sale will not give rise to the imposition of any Tax on the Company or any
of its Subsidiaries by reason of Section 1374 of the Code or any corresponding
provision of state or local Law.
4.14 BANK ACCOUNTS; POWERS OF ATTORNEY. Set forth on Schedule 4.14 is
an accurate and complete list showing (i) the name and address of each bank in
which the Company or any Subsidiary of the Company has an account or safe
deposit box, the number of any such account or any such box and the names of all
Persons authorized to draw thereon or to have access thereto, and (ii) the names
of all Persons, if any, holding powers of attorney from the Company or of any of
its Subsidiaries and a summary statement of the terms thereof.
4.15 INSURANCE. Schedule 4.15 lists all insurance policies currently
maintained by the Company or any Subsidiary of the Company or under which the
Company or any Subsidiary of the Company is covered in respect of its
properties, assets, business or personnel as of the date of this Agreement. Each
policy is in full force and effect and will remain in full force and effect
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<PAGE> 20
through the Closing. Except as set forth on Schedule 4.15, to the Knowledge of
the Company, no event relating to the Company, any Subsidiary of the Company or
the Business has occurred which can reasonably be expected to result in a
retroactive adjustment in premiums under any such insurance policies or which is
likely to result in a material prospective upward adjustment in such premiums.
Excluding insurance policies that have expired and been replaced in the ordinary
course of business, no insurance policy has been canceled within the last two
years and, to the Knowledge of the Company, no threat has been made to cancel
any insurance policy of the Company or any Subsidiary of the Company during such
period. To the Knowledge of the Company, no event has occurred, including,
without limitation, the failure by the Company or any Subsidiary of the Company
to give any notice or information or the Company or any Subsidiary of the
Company giving any inaccurate or erroneous notice or information, which limits
or impairs the rights of the Company or any Subsidiary of the Company under any
such insurance policies.
4.16 INTELLECTUAL PROPERTY.
(a) "Intellectual Property" shall mean (i) patents, patent
applications, patent disclosures and the ideas, inventions and improvements
thereto and all reissues, continuations, continuations-in-part, divisions and
reexaminations thereof, (ii) trademarks, service marks, trade names, trade
dress, logos and registrations and applications for registrations thereof, and
all renewals and extensions thereof, (iii) copyrights and maskworks, and all
registrations and applications for registration thereof, (iv) computer software,
data, data bases, and user documentation and audio-visual and text materials,
(v) all trade secret and confidential information (including, but not limited
to, manufacturing processes research and development materials, know-how,
drawings and designs, technical data, marketing financial and business plans,
and customer lists), and (vi) copies and tangible embodiments thereof (in
whatever form or medium).
(b) Schedule 4.16 hereto sets forth a complete and correct list of all
United States and foreign patents and patent applications, trade names,
trademarks and service marks, trademark and service mark registrations,
applications for trademark and service mark registrations, copyright
registrations and applications for copyright registrations, that form a part of
the Intellectual Property owned by the Company or any Subsidiary of the Company,
or, where not owned, expressly licensed for use by the Company or any Subsidiary
of the Company in the Business, and all licenses or other agreements under which
the Company or any Subsidiary of the Company obtained or licenses the right to
use Intellectual Property. Except as expressly set forth on Schedule 4.16, the
Company or any Subsidiary of the Company is the sole owner of the entire right,
title, and interest in and to all Intellectual Property necessary to conduct the
Business as currently conducted. To the Knowledge of the Company, the
Intellectual Property listed on Schedule 4.16 comprises all of the material
patents, patent applications, trademarks, trade names, copyrights, inventions,
and discoveries, of every type and description, used in or necessary to the
present conduct of the Business. Except as provided on Schedule 4.16, neither
the Company nor any Subsidiary of the Company has granted any express license or
other rights to such Intellectual Property, and is not liable or obligated under
any Contract for its use of any Intellectual Property, whether for royalties or
otherwise.
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(c) Except as set forth on Schedule 4.16, no claims by any Person
contesting the validity, enforceability, use or ownership of any of the
Intellectual Property listed thereon have been made, are currently outstanding
or to the Knowledge of the Company are threatened, against the Company or any
Subsidiary of the Company, and to the Knowledge of the Company there are no
facts or circumstances which would reasonably be anticipated to result in any
such claim or which would reasonably lead the Company or any Subsidiary of the
Company to conclude that the continued operation and conduct of any material
aspect of the Business would result in any such claim. Neither the Company nor
any Subsidiary of the Company has received any written notice of, nor to the
Knowledge of the Company are there any facts which would indicate a reasonable
likelihood of, any infringement or misappropriation by the Company or any
Subsidiary of the Company upon, or other conflict by the Company or any
Subsidiary of the Company with, any Intellectual Property or right of any other
Person. The transactions contemplated by this Agreement will have no adverse
effect on any Intellectual Property listed on Schedule 4.16. Except as set forth
on Schedule 4.16, neither the Company nor any of its Subsidiaries nor, to the
Knowledge of the Company, any of the Company's officers or employees have any
agreements or arrangements with former employers of such officers and employees
relating to confidential information or trade secrets of such employers, the
assignment of inventions of such employers, or such officer's or employee's
engagement in activities competitive with such employers. The activities of such
officers and employees on behalf of the Company do not violate any agreements or
arrangements Known to the Company which any such officers or employees have with
former employers.
4.17 PERMITS. Schedule 4.17 lists all registrations, licenses, permits,
approvals, franchises, authorizations and qualifications issued to the Company
by any Governmental Authority (collectively, "Permits"). The Company is in
compliance in all material respects with the terms of each Permit, and there is
no pending or, to the Knowledge of the Company, threatened cancellation,
termination, non-renewal or revocation of any such Permit. No other Permit, in
addition to the Permits currently held by the Company, is necessary to lawfully
conduct the Business as it is now conducted.
4.18 EMPLOYEE BENEFIT MATTERS.
(a) Set forth on Schedule 4.18 is a true, complete and correct list of
all "employee benefit plans" as defined in Section 3(3) of ERISA, and all other
employee profit-sharing, incentive, deferred compensation, welfare, pension,
retirement, severance, group insurance and other employee benefit plans,
arrangements, agreements and practices (including all trust agreements,
insurance contracts or other funding vehicles, and all administrative services
or similar agreements relating thereto) currently maintained or contributed to
by the Company, or to which the Company currently is obligated to contribute,
relating to present or former employees, directors, officers, shareholders or
consultants of the Company (collectively, "Employee Plans").
(b) Except as set forth on Schedule 4.18 or as shown on the Company's
Balance Sheet for the year ended December 31, 1999 (the "1999 Balance Sheet"),
the Company has no material liability with respect to any plans, arrangements or
practices of the type described in the preceding paragraph (i) previously
maintained or contributed to by (A) the Company, (B) any other entity to which
the Company is a successor by merger or all or
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substantially all of the assets of which were purchased by the Company (a
"Predecessor"), or (C) any entity at any time treated, together with any
Predecessor, as a single employer under Section 414 of the Code or Section 4001
of ERISA or (ii) to which the Company, any Predecessor or any other such entity
referred to in (C) above previously had an obligation to contribute. The Company
has delivered to Buyer true, complete and correct copies of each of the Employee
Plans, including all amendments thereto, and any other documents, forms or other
instruments relating thereto.
(c) All Employee Plans are being, and have been, maintained, operated
and administered in accordance with their respective terms and in compliance in
all material respects with all applicable Laws, and the Company has performed
all material obligations required to be performed under, and is not in default
under or in violation of, any of the Employee Plans.
(d) Neither the Company nor any entity which is or at any time within
the last six years has been treated together with the Company as a single
employer under Section 414 of the Code or Section 4001 of ERISA has or has ever
had, an obligation to contribute to a "defined benefit plan" as defined in
Section 3(35) of ERISA, a pension plan subject to the minimum funding standards
of Section 302 of ERISA or Section 412 of the Code, a "multiemployer plan" as
defined in Section 3(37) of ERISA or Section 414(f) of the Code or a "multiple
employer plan" within the meaning of Section 210(a) of ERISA or Section 413(c)
of the Code. No Employee Plan is funded through a "welfare benefit fund" as
defined in Section 419(e) of the Code.
(e) Each Employee Plan intended to be qualified under Section 401(a) of
the Code is so qualified and has, prior to the date of this Agreement, been
determined by the IRS to be so qualified, and each trust created thereunder is,
and has, prior to the date of this Agreement, been determined by the IRS to be,
exempt from Tax under the provisions of Section 501(a) of the Code, and nothing
has occurred since the date of any such determination that could reasonably be
expected to give the IRS grounds to revoke such determination. No reportable
event (within the meaning of Section 4043 of ERISA) has occurred.
(f) There have been no prohibited transactions or material breaches of
any of the duties imposed on "fiduciaries" (within the meaning of Section 3(21)
of ERISA) by ERISA with respect to the Employee Plans that could result in the
Company becoming liable directly or indirectly (by indemnification or otherwise)
for any excise Tax, penalty or other liability under ERISA or the Code.
(g) There are no Actions or claims pending or, to the Knowledge of the
Company, threatened, with respect to any Employee Plan (other than routine
claims for benefits), there are no investigations or audits of any Employee Plan
by any Government at Authority currently pending and there have been no such
investigations or audits that have been concluded that resulted in any liability
of the Company that has not been fully discharged.
(h) All (i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and (iii)
contributions, transfers, or payments required to be made to, any Employee Plan
have been paid, made or accrued as a liability on the Interim Company Financial
Statements. Except as set forth on
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Schedule 4.18, with respect to any insurance policy providing funding for
benefits under any Employee Plan, (i) there is no liability of the Company, in
the nature of a retroactive or retrospective rate adjustment, loss sharing
arrangement, or other actual or contingent liability, nor would there be any
such liability if such insurance policy was terminated on the date of this
Agreement, and (ii) to the Knowledge of the Company, no insurance company
issuing any such policy is in receivership, conservatorship, liquidation or
similar proceeding and no such proceedings with respect to any insurer are
imminent.
(i) Each Employee Plan that is a group health plan subject to Section
4980B of the Code (or which was subject to Section 162(k) of the Code) has been
operated in compliance in all material respects with the continuation coverage
requirements of Section 4980B of the Code and Section 162(k) of the Code, as
applicable, and Part 6 of Subtitle B of Title I of ERISA. The Company has
complied in all material respects with the Health Insurance Portability and
Accountability Act of 1996 with respect to any group health plan within the
meaning of Section 5000(b)(1) of the Code.
(j) Each Employee Plan that is subject to Section 1862(b)(1) of the
Social Security Act has been operated in compliance in all material respects
with the secondary payer requirements of Section 1862(b)(1) of such Act.
(k) Schedule 4.18 contains a separate identification of each Employee
Plan that provides benefits, including, without limitation, death or medical
benefits, beyond termination of employment or retirement other than (A) coverage
mandated by Law or (B) death or retirement benefits under any qualified Employee
Plan (the "Post-Employment Benefits"). Except as set forth on Schedule 4.18, the
1999 Balance Sheet accurately reflects the liabilities relating to the
Post-Employment Benefits including, where appropriate, accruals and other
disclosure information required by the terms of Financial Accounting Standards
Board Statements of Financial Accounting Standards Number 106 and 112 (whether
or not such standards, or either thereof, apply to or are in effect with respect
to the Company).
(l) The execution and performance of this Agreement will not, solely in
and of itself, (A) constitute a stated triggering event under any Employee Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due from the Company to any present or former officer, employee, director,
shareholder or consultant (or dependents of any thereof), or (B) accelerate the
time of payment or vesting, or increase the amount, of compensation due to any
present or former employee, officer, director, shareholder or consultant of the
Company.
(m) Except as set forth on Schedule 4.18, the Company has not agreed or
committed to make any amendments to any of the Employee Plans not already
embodied in the documents comprising any such Employee Plan, other than any
amendments required by Law, nor has the Company obligated itself to institute
any plans, programs or amendments that would be Employee Plans if in existence
on the date of this Agreement.
(n) The Company has reserved all rights necessary to amend or terminate
each of the Employee Plans without the consent of any other Person, except with
respect to claims
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under any such Employee Plan that are accrued but unpaid as of the date of any
such amendment or termination.
(o) No Employee Plan provides benefits to any individual who is not a
current or former employee of the Company, or the dependents or other
beneficiaries of any such current or former employee.
(p) All contributions required to be paid with respect to workers'
compensation or similar arrangements of the Company have been made or accrued as
a liability on the Interim Company Financial Statements.
(q) No other trade or business is or, at any time within the past six
years, has been treated, together with the Company, as a single employer under
Section 414 of the Code or Section 4001 of ERISA.
4.19 EMPLOYEE RELATIONS; COLLECTIVE BARGAINING AGREEMENTS. Schedule
4.19 sets forth the collective bargaining agreements and union contracts to
which the Company or any Subsidiary of the Company is a party. Except as set
forth on Schedule 4.19, no trade union, council of trade unions, employee
bargaining agency or affiliated bargaining agent (i) holds bargaining rights
with respect to any of the Company's or any Subsidiary of the Company's
employees by way of certification, interim certification, voluntary recognition,
designation or successor rights, or (ii) to the Knowledge of the Company, has
applied to be certified as the bargaining agent of any of the Company's or any
Subsidiary of the Company's employees. There are no material controversies
pending, or, to the Knowledge of the Company, threatened which involve any
employees employed in connection with the Business.
4.20 EMPLOYEE MATTERS.
(a) The rates of compensation (whether base or bonus or other incentive
based compensation) of the five most highly compensated employees of the Company
are listed on Schedule 4.20. Except as set forth on Schedule 4.20, and to the
Knowledge of the Company, no officer or key employee, nor any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. The Company is in compliance in all material respects with all
applicable Laws respecting labor, employment, fair employment practices, terms
and conditions of employment and wages and hours and there are no charges of
employment discrimination or unfair labor practices pending or, to the Knowledge
of the Company, threatened against the Company. To the Knowledge of the Company,
during the past three years, no officer, director or senior manager of the
Company has ever been investigated for, arrested for, been part of a proceeding
for, charged with, convicted of or indicted for any material crime, nor has any
officer, director or senior manager of the Company been engaged in any criminal
activity.
(b) Except as disclosed on Schedule 4.20, there are no (i) Contracts of
employment entered into with any employees or independent contractors of the
Company or any Subsidiary of the Company which are not terminable on the giving
of reasonable notice in accordance with applicable law, (ii) employment policies
relating to termination of employees, including policies regarding incentive
compensation, stock options, severance pay or other terms
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or conditions of employment or terms or conditions upon which employees may be
terminated, which are binding upon the Company or any Subsidiary of the Company
or (iii) complaints against the Company or any Subsidiary of the Company before
any employment standards branch or tribunal or Governmental Authority, nor, to
the Knowledge of the Company, are there any threatened complaints. To the
Knowledge of the Company, there has been no occurrence which would reasonably be
expected to lead to a complaint under any human rights legislation or employment
standards legislation. There are no outstanding decisions or settlements or
pending settlements against the Company or any Subsidiary of the Company under
the employment standards legislation which place any obligation upon the Company
or any Subsidiary of the Company to do or refrain from doing any act.
4.21 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4.21, (a)
the Company and each Subsidiary has been and currently is in compliance in all
material respects with all applicable Environmental Laws; (b) there has been no
Release and is no continuing or threatened Release of a Hazardous Substance from
any Real Property; (c) there has been no Release or threatened Release of a
Hazardous Substance from any property previously owned, leased or operated by
the Company or any Subsidiary prior to the time the Company or Subsidiary ceased
owning, leasing or operating such property; (d) neither the Company nor any
Subsidiary disposed of or arranged for the disposal of any Hazardous Substance
at any property from which there has been or is a continuing or threatened
Release of a Hazardous Substance; (e) neither the Company nor any Subsidiary has
generated, treated, stored, transported, handled, disposed of or otherwise
managed any Hazardous Substance except in a manner that is in compliance in all
material respects with all applicable Environmental Laws and that cannot
reasonably be expected to result in a Release or threatened Release of such
Hazardous Substance; (f) neither the Company nor any Subsidiary has received any
claim or notice relating to any potential liability of the Company or Subsidiary
arising under any Environmental Laws or relating to any alleged failure of the
Company or Subsidiary to comply with any Environmental Laws or relating to any
alleged failure of the Company or Subsidiary to comply with any Environmental
Law; and (g) Buyer has been furnished with true and complete copies of all
reports, assessments, audits or investigations in the possession or control of
the Shareholders, Company or any Subsidiary pertaining to environmental
conditions or compliance at any property currently or previously owned, leased
or operated by the Company; (h) all the Permits, licenses, approvals or other
authorizations required to operate the Business have been issued to the Company,
are currently effective and are listed on Schedule 4.21; (i) there are no
present facts or circumstances which would adversely affect or render
significantly more costly in the future the Company's compliance in all material
respects with existing Environmental Laws; and (j) no PCB's (polychlorinated
biphenyls), asbestos, or underground storage tanks are or were ever used in the
construction or operation of, or located on, the premises or facilities
presently or previously owned, leased or used by the Company.
4.22 LITIGATION. Except as set forth on Schedule 4.22, (i) neither the
Company nor any Subsidiary of the Company is subject to any order of, or written
agreement or memorandum of understanding with, any Governmental Authority which
would have a Material Adverse Effect, (ii) neither the Company nor any of its
Subsidiaries is a party to any Action pending at law or in equity or before or
by any Governmental Authority, or, to the Knowledge of the Company, threatened,
against the Company or any Subsidiary of the Company or any of their assets or
properties or the transactions contemplated by this Agreement, and to the
Knowledge of the
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Company, there exist no facts or circumstances which reasonably could be
anticipated to result in any such Action and (iii) no Person has asserted, and,
to the Knowledge of the Company, no Person has a valid basis upon which to
assert, any claims against the Company or any Subsidiary of the Company which
would materially adversely affect the transactions contemplated by this
Agreement or result in or form the basis of any such Action.
4.23 ACCOUNTS RECEIVABLE; INVENTORY. All accounts receivable reflected
on the 1999 Balance Sheet and all accounts receivable arising subsequent to the
1999 Balance Sheet with respect to the Business have arisen only in the ordinary
course of business, consistent with past practice, are bona fide, are not
subject to defenses, set-offs or counterclaims, and are collectible in the
ordinary course of business, except to the extent reflected in the 1999 Balance
Sheet as an allowance for doubtful accounts, which allowance is reasonable and
appropriate based on the experience of the Company. The Company's inventory of
raw materials, work-in-progress, finished goods, spare parts, supplies and other
inventory items reflected on the 1999 Balance Sheet and acquired subsequent to
the date of the 1999 Balance Sheet consists of items of a type, quantity and
quality which can be sold, used or consumed in the ordinary course of the
Company's business, and, to the Knowledge of the Company based on current market
conditions, at normal and customary profit margins, and is valued on the
first-in first-out basis at the lower of cost or market. Except as set forth on
Schedule 4.23, none of the Company's inventory is held by the Company on
consignment from third parties. None of the Company's inventory is held on
consignment, or otherwise, by third parties.
4.24 PRODUCT WARRANTY AND PRODUCT LIABILITY. Except as set forth on
Schedule 4.24, there are no product warranty or product liability claims pending
or, to the Knowledge of the Company, threatened against the Company and, to the
Knowledge of the Company, there is no state of facts or the occurrence of any
event forming the basis for any such product warranty, product liability or
other tort claim. Schedule 4.24 sets forth a complete and accurate summary of
product liability claims made against the Company within the past five years.
4.25 CUSTOMERS AND SUPPLIERS. Schedule 4.25 sets forth the ten largest
customers and suppliers of the Company and its Subsidiaries. To the Knowledge of
the Company, there exists no present condition or state of facts involving such
customers or suppliers which the Company expects to have a Material Adverse
Effect (individually or in the aggregate). To the Knowledge of the Company, no
customer or supplier has notified the Company that such customer or supplier
will not continue to do business with the Company after the Closing Date in
substantially the same capacity or manner as it did prior to the Closing Date.
4.26 ABSENCE OF CERTAIN COMMERCIAL PRACTICES. Neither the Company, nor
to the Knowledge of the Company any officer, director or senior manager of the
Company (or any Person acting on behalf of any of the foregoing), has (i) except
for entertainment expenditures normal and customary in the business of the
Company, given or agreed to give any gift or similar benefit of more than $2,500
on behalf of the Company to any individual customer (other than promotional
benefits offered generally to customers), supplier, employee or official of any
Governmental Authority (domestic or foreign), to induce the recipient or his
employer to do business, grant favorable treatment or compromise or forego any
claim, (ii) made any payment in an amount greater than $1,000 which might be
improper under prevailing United States laws (regardless of the jurisdiction in
which such payment was made) to promote or retain sales or to
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help, procure or maintain good relations with suppliers, (iii) engaged in any
activity which would constitute a violation of the federal or applicable state
antitrust laws of the United States or (iv) failed to perform its obligations in
any material respect under any Contract with, or violated in any material
respect any federal law Known to the Company in its dealings with, the federal
government or any agency or department thereof, including, but not limited to,
any law with respect to conspiracy to defraud, false claims, conspiracy to
defraud the United States, embezzlement or theft of public money, fraud and
false statements, false demands against the United States, mail fraud, wire
fraud, RICO, and truth in negotiations.
4.27 INDEBTEDNESS. Schedule 4.27 sets forth an accurate and complete
list of the Company's Indebtedness.
4.28 TITLE TO AND SUFFICIENCY OF ASSETS. The material, tangible
personal properties and assets of the Company (including, without limitation,
the assets and properties reflected on the Financial Statements) are in good
operating condition and repair (subject to normal wear and tear consistent with
the age of the properties or assets) and are sufficient for the operations of
the Company as currently conducted. Except as set forth on Schedule 4.28, the
Company has good title to all its material tangible and intangible personal
properties and assets, free and clear of any and all Liens.
4.29 BUSINESS. The Company is not engaged in any material business or
operations other than the Business.
4.30 BUDGET PROJECTIONS. The budget projections for the Company for the
period from January 1, 2000 through December 31, 2000 attached as Schedule 4.30
(the "Budget Projections") have been made in good faith by the Company. Except
as set forth on Schedule 4.30, the Company is currently operating in compliance
in all material respects with the Budget Projections and, to the Knowledge of
the Company, there is reasonable basis to believe that it shall continue to be
in compliance in all material respects, subject to changes in market conditions,
with the Budget for the remainder of the year.
4.31 BROKERS, FINDERS AND AGENTS. Other than Billow Butler & Company,
L.L.C., no broker, finder or similar agent has been employed by or on behalf of
the Company, and no Person with which the Company has had any dealings or
communications of any kind is entitled to any brokerage commission, finder's fee
or any similar compensation in connection with this Agreement or the
transactions contemplated by this Agreement.
4.32 DISCLOSURE. No information in this Agreement, or in any Schedule
or Exhibit attached to this Agreement, contains any untrue statement of a
material fact or, when considered together with all such information delivered
to Buyer pursuant hereto, omits to state any material fact necessary in order to
make the statements made in the light of the circumstances under which they were
made, when taken as a whole, not misleading.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to each of the Shareholders:
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5.1 ORGANIZATION AND STANDING; CORPORATE POWER AND AUTHORITY. Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio, and has the corporate power and authority to make and
perform this Agreement, and to perform the transactions contemplated by this
Agreement. This Agreement and all other agreements and instruments executed and
delivered by Buyer in connection with this Agreement and the transactions
contemplated by this Agreement have been duly executed and delivered by Buyer.
This Agreement and the transactions and other agreements and instruments
contemplated by this Agreement have been duly approved by the Board of Directors
of Buyer, and constitute the valid and binding obligations of Buyer, enforceable
in accordance with their respective terms.
5.2 VALIDITY OF AGREEMENT. This Agreement and all other agreements and
instruments executed and delivered or to be executed and delivered by the Buyer
in connection with this Agreement have been, or upon execution thereof will be,
duly executed and delivered by a duly authorized officer or representative of
the Buyer and each constitutes the valid and binding obligations of the Buyer,
enforceable against the Buyer in accordance with its terms. This Agreement and
the performance by the Buyer of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Buyer.
5.3 NO BREACH. Except as set forth on Schedule 5.3, neither the
execution and delivery of, nor the performance by Buyer of its obligations under
this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate, conflict with or result in the breach of, any applicable Law
or Order, or the Articles of Incorporation or Code of Regulations of Buyer, (b)
result in the creation of any Lien upon any of the assets or properties of Buyer
or (c) violate, conflict with, result in the breach of or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or accelerate or permit the acceleration of the performance
required by, or otherwise give any Person additional rights or compensation
under, any note, deed, lease, instrument, security agreement or mortgage, any
commitment, Contract, license, sales commitment or other instrument or oral
understanding to which Buyer is a party or by which any of its assets or
properties are bound, except where the violation, conflict, breach, default,
acceleration, termination, or modification would not have a Material Adverse
Effect on Buyer or on the ability of the Parties to consummate the transactions
contemplated by this Agreement.
5.4 COMPLIANCE WITH LAWS. To the Knowledge of the Buyer, the Buyer is
currently in compliance in all material respects with all applicable Laws, and
no expenditures are presently anticipated to be required to comply with any such
Law. The Buyer is not in material default under, and to the Knowledge of the
Buyer, no event has occurred which, with the lapse of time or action by a third
party, could result in default under, the terms of any Laws.
5.5 NO CONSENTS NECESSARY. Except as set forth on Schedule 5.5, no
Consent is required to be obtained from, made with or given to any Person by the
Buyer in connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated by this
Agreement, except where the failure to obtain such Consent would not have a
Material Adverse Effect on the Buyer or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
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5.6 BROKERS, FINDERS AND AGENTS. Other than Lincoln Partners LLC, no
broker, finder or similar agent has been employed by or on behalf of Buyer, and
no Person with which Buyer has had any dealings or communications of any kind is
entitled to any brokerage commission, finder's fee or any similar compensation
in connection with this Agreement or the transactions contemplated by this
Agreement for which the Company or any Shareholder could become liable or
obligated.
5.7 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities
Act.
ARTICLE 6.
COVENANTS
6.1 REASONABLE ACCESS. From the date of this Agreement until the
Closing, the Shareholders shall cause the Company and its officers and directors
to give Buyer and its representatives (including its lenders or other sources of
financing), upon reasonable notice to the Shareholders and the Company,
reasonable access to the assets, properties, offices, facilities, books,
records, Tax records, Tax Returns and Contracts of the Company in order to
permit Buyer and its representatives to make such inspections as they may
reasonably require in a manner so as not to interfere with the normal business
operations of the Company or any of its Subsidiaries and to furnish Buyer and
its representatives during such period with all such information relating to the
Company as Buyer may from time to time reasonably request; provided, however,
that the Company may decline to furnish certain confidential information
pertaining to the contracts and customers listed on Schedule 6.1 prior to such
time as all the conditions set forth in Sections 7.1 and 7.2 are fulfilled to
the reasonable satisfaction of the Company. Such access shall include the
opportunity for Buyer and its representatives (including its lenders or other
sources of financing) to discuss the affairs, finances and accounts of the
Company with any of the Company's executive officers, directors or independent
accountants.
6.2 CONDUCT OF BUSINESS OF THE COMPANY. Prior to the Closing Date, the
Shareholders shall cause each of the Company and its Subsidiaries to (i) conduct
its business only in the ordinary course, (ii) maintain in traditional repair
all of its tangible property, (iii) use reasonable best efforts to preserve
intact its business organization, (iv) use reasonable best efforts to keep
available the services of its present officers and employees, and (v) use
reasonable best efforts to preserve in all material respects its present
business relationships and goodwill. Without limiting the foregoing, except as
otherwise expressly permitted by this Agreement, the Company, without the prior
consent of Buyer, shall not and the Shareholders shall cause each of the Company
and its Subsidiaries not to:
(a) amend its articles of incorporation or By-laws or other charter
documents;
(b) purchase, redeem, issue, sell, offer to sell or otherwise dispose
of, directly or indirectly, any of its capital stock or other equity securities,
or create or suffer to be created any Lien thereon, or reclassify, split-up or
otherwise change any of its capital stock or other equity securities or grant or
enter into any options, covenants or calls or other rights to purchase, exchange
or convert any obligation into any of its capital stock or other equity
securities;
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(c) organize any Subsidiary or acquire any capital stock or other
equity securities of any Person or any Investment in any Person;
(d) incur any Indebtedness, except for Indebtedness incurred in the
ordinary course of business consistent with past practice;
(e) pay, discharge or satisfy any claim, liability or obligation
(whether fixed or contingent), other than in the ordinary course of business;
(f) make or grant any increases in salaries, bonuses, benefits or other
remuneration to the officers or employees of the Company not in the ordinary
course of business;
(g) sell, assign, transfer, convey, lease, pledge, encumber or
otherwise dispose of or agree to sell, assign, transfer, convey, lease, pledge,
encumber or otherwise dispose of any of its assets or properties, or any other
material right, other than in the ordinary course of business;
(h) declare or pay any dividend or make any other payment or
distribution in respect of its capital stock or other equity securities, except
payments or distributions made in the ordinary course of business consistent
with past practice;
(i) enter into any Contract that would be required to be disclosed on
Schedule 4.11, including, without limitation, any Contract with any Affiliate of
any Shareholder or the Company;
(j) make any change in any method of accounting or auditing practice;
(k) amend, modify or cancel any Contract, Permit or lease;
(l) grant or extend any power of attorney or act as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any Person, other than through endorsements of negotiable
instruments in the ordinary course of business;
(m) in any other manner, modify, change or otherwise alter the
fundamental nature of the Business;
(n) enter into any Contract whereby the Company or any Subsidiary of
the Company would incur a loss with respect to such Contract; or
(o) agree to take any of the foregoing actions.
6.3 NO SOLICITATION OF OFFERS. None of the Shareholders, the Company or
any of their Affiliates or officers, directors, employees, stockholders,
partners, agents, advisers or representatives shall, directly or indirectly,
solicit or initiate discussions, inquiries, offers or proposals, or participate
in any negotiation for the purpose or with the intention of leading to any offer
or proposal, concerning any acquisition (in whatever form of transaction) of all
or a substantial portion of the capital stock or substantial assets of the
Company or any of its Subsidiaries, except for this Agreement.
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6.4 FILINGS; OTHER ACTIONS. Subject to the terms and conditions of this
Agreement, the Shareholders and Buyer shall (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act,
(b) use their reasonable best efforts to cooperate with each other in
determining which filings are required to be made prior to the Closing Date
with, and which Consents are required to be obtained prior to the Closing Date
from, Governmental Authorities in connection with the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
timely making all such filings and timely seeking all such Consents and (c) use
their reasonable best efforts to cause the conditions to each of the
Shareholders, the Company's and the Buyers obligations hereunder to be
fulfilled.
6.5 PUBLICITY. The Company and Buyer shall make a joint press release
announcing the execution of this Agreement and the transactions contemplated by
this Agreement that shall be acceptable to each of the Company and Buyer. No
other publicity release or announcement concerning the transactions contemplated
by this Agreement shall be issued by either party without the advance written
consent of such other party; provided, however, that such restriction shall not
apply to any disclosure by Buyer of any information required in Buyer's sole
judgment to be disclosed pursuant to the Securities Act or the Securities
Exchange Act of 1934, as amended, or the rules and regulations of the New York
Stock Exchange or the Pacific Stock Exchange.
6.6 REAFFIRMATION OF THE CONFIDENTIALITY AGREEMENT. Buyer hereby
reaffirms that it is bound by that certain Confidentiality Agreement by and
between Buyer and the Company dated as of April 24, 2000 (the "Confidentiality
Agreement").
6.7 SATISFACTION OF CLOSING CONDITIONS. Without limiting the other
provisions of this Article 6, (a) each of the Shareholders and the Company shall
use reasonable best efforts to cause the conditions to both the Buyer's and
their own obligation to close to be satisfied on or prior to the Closing Date
and (b) Buyer shall use reasonable best efforts to cause the conditions to both
the Shareholders' and its own obligation to close to be satisfied on or prior to
the Closing Date.
6.8 NO TRANSFERS OF SHARES. The Shareholders shall not, directly or
indirectly, sell, assign, transfer, distribute, pledge, hypothecate, encumber or
otherwise dispose of any Shares (whether voluntarily, involuntarily, by
operation of law or otherwise), or agree to do any of the foregoing.
6.9 NOTICE OF CERTAIN EVENTS. Each Party shall give prompt written
notice to the other Parties of (i) the occurrence, or failure to occur, of any
event which to their awareness could cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any respect at any
time from the date of this Agreement through the Closing Date, promptly upon
becoming aware of such event, (ii) any material failure on its part to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, promptly upon becoming aware of such
failure, and (iii) any changes to any of the Schedules to this Agreement;
provided, however, that the delivery of any notice pursuant to this Section
shall not limit or otherwise affect the remedies available to the other Parties.
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6.10 TAX MATTERS. (a) After the Closing, the Shareholders, the Buyer,
and the Surviving Company shall cooperate with one another and with any Taxing
Authority in preparing, filing and responding to any inquiries regarding any Tax
Return and in any audit of the Company or any Subsidiary of the Company for, or
concerning any portion of, any period ended on or prior to the Closing Date. In
addition, the Shareholders, the Buyer and the Surviving Company shall make
available to one another, as reasonably requested, and to any Taxing Authority,
all information, records or documents relating to the liability for Taxes or
potential liability of the Company or any of its Subsidiaries for Taxes for all
such periods.
(b) The Shareholders' Representative will have the right to control any
audit or determination by any Taxing Authority, to initiate any claim for refund
or file any amended Tax Return, and to contest, resolve and defend against any
assessment, notice of deficiency or other adjustment or proposed adjustment of
Taxes for any period prior to the Closing Date; provided, however, that the
Shareholders' Representative shall not settle any claim with respect to Taxes
which may affect the Tax liability of the Company or the Surviving Company for
periods in which the Shareholders are not responsible under this Agreement
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld. The Shareholders' Representative shall keep Buyer
informed with respect to all material aspects of such claims relating to Taxes.
(c) After the Closing Date, Buyer will have the right to control the
defense of any claim brought against the Shareholders, the Company or Buyer by
any Taxing Authority regarding a change to the allocation of any asset type set
forth on Schedule 1.4. Buyer will be responsible for any attorney's and
accountant's fees in connection with the control of the defense of any such
claim.
6.11 POST-CLOSING INSURANCE COVERAGE. From and after the Closing Date
and for so long as any of the Shareholders shall remain liable for claims for
Losses under Section 8.1 of a type covered by insurance currently maintained by
the Company or any of its Subsidiaries, Buyer shall cause the Surviving Company
and its Subsidiaries to maintain insurance in the amounts and types of coverages
(which may be in the form of "tail coverage") currently carried by the Company
or any of its Subsidiaries or in such greater or broader coverages as may
otherwise be in accordance with sound business practices (the "Post-Closing
Insurance Coverage"). Furthermore, the Shareholders shall be named as additional
insured parties under the Post-Closing Insurance Coverage.
6.12 WAIVER OF CONFLICTS. Buyer hereby agrees to waive any conflict
that would exclude S&W from representing any of the Shareholders after the
Closing relating to any claim for Losses under Article 8 of this Agreement, or
any dispute relating to this Agreement, or in any transactions contemplated
hereby, and to waive any privilege that may exist due to S&W's prior
representation of any Person.
6.13 AERIES NETWORK COMMISSION CONTRACT. At the Closing, Buyer will
cause the Surviving Company to enter into the Aeries Network Commission
Contract.
6.14 SPECIAL BONUSES. Buyer shall cause the Company to pay the Special
Bonuses to the employees listed on Schedule 1.2 on the Closing Date, subject to
the precondition that each
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such employee shall have signed a release in form reasonably satisfactory to the
Shareholders or the Shareholders having waived such requirement, with respect to
such employee, in writing. Any Special Bonus not paid to an employee, by reason
of the employee's refusal to sign such a release and the refusal of the
Shareholders to waive such requirement, shall be paid to the Shareholders as
part of the Purchase Price.
ARTICLE 7.
CONDITIONS TO CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY, THE SHAREHOLDERS AND
BUYER. The respective obligations of the Company, the Shareholders and Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction or waiver at or prior to the Closing of each of the following
conditions:
(a) The waiting period applicable to the consummation of the
transactions contemplated by this Agreement under the HSR Act shall have expired
or been terminated.
(b) None of the Parties to this Agreement shall be subject to any Order
that prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such Order shall have been issued, each Party agrees
to use its reasonable best efforts to have any such Order overturned or lifted.
Any of the Company, the Shareholders or the Buyer may waive any condition
specified in this Section 7.1 if such Party executes a writing so stating at or
prior to the Closing.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the satisfaction or waiver at or prior to the Closing, of the following
conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of the Shareholders and the Company contained in this Agreement shall
be true and correct in all material respects as made, both on the date of this
Agreement and at and as of the Closing, except for representations or warranties
made as of a specified date or for a specified period ending on or prior to the
date of this Agreement, which as of the Closing shall remain true and correct in
all material respects as of the specified date or for such specified period.
(b) Performance of Covenants and Agreements. The Shareholders and the
Company shall have performed or complied with, in all material respects, all
covenants and agreements contemplated by this Agreement to be performed or
complied with by them at or prior to the Closing.
(c) Receipt of Documents. The Shareholders shall have delivered, or
caused to be delivered, to Buyer each of the documents required by Section 2.2.
(d) Material Adverse Change in Business. Between the date of this
Agreement and the Closing there shall have been no occurrence which would
reasonably be expected to have a Material Adverse Effect on the Company.
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(e) Consents and Permits. All Consents and Permits of any Person
necessary for the consummation of the transactions contemplated by this
Agreement, including those listed on Schedules 4.6 or 4.17, shall have been
made, given or obtained without the payment of any consideration or modification
of any terms or conditions of the applicable Contract, Permit or license and
shall be in full force and effect.
(f) Title Policies. Buyer shall have obtained, at its cost, ALTA Form
10-17-92 (or such other from as reasonably acceptable to Buyer) title insurance
policies (the "Title Policies") on or before the Closing, from a title insurer
satisfactory to Buyer (the "Title Insurer") insuring fee title to each parcel of
Real Property of the Company (in amounts reasonably satisfactory to Buyer and
its lenders) free of all Liens. The Shareholders will deliver to the Title
Insurer all affidavits, undertakings and other title clearance documents
reasonably necessary to issue the Title Policies and endorsements thereto. Each
such Title Policy will be dated as of the Closing Date and (i) insure title to
the applicable parcels of Real Property and all recorded easements benefiting
such parcels and (ii) contain a non-imputation endorsement and such other
endorsements as Buyer and Buyer's lenders may reasonably request, in each such
circumstance where the endorsement is available.
(g) Surveys. Buyer shall have received current surveys of each parcel
of Real Property, prepared by a licensed surveyor satisfactory to Buyer, and
conforming to 1997 ALTA/ACSM Minimum Detail Requirements for Urban Land Title
Surveys (the "Surveys"), except for the survey of the Company's Mountain Grove,
Missouri property, which shall be a Boundary and As-Built Survey, and such
standards as the Title Insurer may require as a condition to the removal of any
survey exceptions from the Title Policy, and certified to Buyer, Buyer's lenders
and the Title Insurer, within ten days of the Closing Date, in a form
satisfactory to such parties. The Surveys shall disclose the location of all
Improvements, easements, party walls, sidewalks, roadways, utility lines and
such matters shown customarily on such surveys and show access affirmatively to
public streets and roads. No Survey shall disclose any survey defect or
encroachment from or onto any of the Real Property which is material to the
operations of the Business that has not been cured or insured over prior to the
Closing.
(h) The Buyer may waive any condition specified in this Section 7.2 if
it executes a writing so stating at or prior to the Closing.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS. The
obligation of the Company and the Shareholders to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction or waiver at
or prior to the Closing of the following conditions:
(a) Accuracy of Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects as made, both on the date of this Agreement and at and as of
the Closing, except for representations or warranties made as of a specified
date or for a specified period ending on or prior to the date of this Agreement,
which as of the Closing shall remain true and correct in all material respects
as of the specified date or for such specified period.
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(b) Performance of Covenants and Agreements. Buyer shall have performed
or complied with, in all material respects, all covenants and agreements
contemplated by this Agreement to be performed or complied with by Buyer at or
prior to the Closing.
(c) Receipt of Documents. Buyer shall have delivered, or caused to be
delivered, to the Shareholders each of the documents required by Section 2.3.
(d) Aeries Network Commission Contract. The Surviving Company shall
have entered into the Aeries Network Commission Contract.
The Shareholders may waive any condition specified in this Section 7.3 if such
Shareholders execute a writing so stating at or prior to the Closing.
ARTICLE 8.
INDEMNIFICATION AND SURVIVAL
8.1 INDEMNIFICATION BY THE SHAREHOLDERS. Subject to the terms and
conditions of this Article 8, the Shareholders shall, in the manner described in
Section 11.15, indemnify, defend and hold harmless the Company after the Closing
Date (the "Surviving Company"), Buyer, its Affiliates and their respective
officers, directors, agents and employees (collectively, the "Buyer Indemnified
Parties") from and against, and reimburse any Buyer Indemnified Party for, any
and all damages, liabilities, obligations, claims, Actions, losses, penalties,
fines, judgments, awards, settlements, Taxes, costs, fees, expenses and
disbursements (including reasonable attorneys' and consultants' fees and
expenses and other reasonable legal costs and expenses reasonably incurred in
prosecution, investigation, remediation, defense or settlement) (collectively
"Losses") that any Buyer Indemnified Party may at any time suffer or incur or
become subject to resulting from or arising out of (a) any inaccuracy in any
representation or warranty made by the Shareholders or the Company in this
Agreement, (b) any failure by the Shareholders or the Company to perform any of
their or its covenants (in the case of the Company, solely covenants to be
performed prior to the Closing Date) or agreements contained in this Agreement,
(c) legal obligations or liabilities imposed by Environmental Laws with respect
to any and all known or unknown environmental matters or conditions, existing or
occurring on Real Property owned or leased by the Company or any of its
Subsidiaries on or prior to the Closing Date, (d) any product liability relating
to products manufactured by the Company prior to the Closing Date to the extent
such liability or occurrence is not covered by insurance maintained by Buyer and
would not have been covered by insurance maintained by the Company prior to the
Closing Date, (e) any liability or obligation of the Company with respect to any
Taxes (in excess of the reserves for such Taxes set forth on the Net Worth
Statement) on or before the Closing Date or (f) any liability not reflected on
the Financial Statements, except as incurred since the date of the Financial
Statements in the ordinary course of business consistent with past practice.
For purposes of Section 8.1(a), in determining whether there has been a
breach of a representation or warranty made by the Shareholders in this
Agreement or in determining the amount of any Losses in connection therewith,
each representation and warranty of the Shareholders shall be deemed to have
been made without any "materiality" qualification
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(including "material," "in all material respects," "Material Adverse Effect" or
other formulations) contained in such representation or warranty.
8.2 INDEMNIFICATION BY BUYER. Subject to the terms and conditions of
this Article 8, Buyer and the Surviving Company, jointly and severally, shall
indemnify, defend and hold harmless the Shareholders and each of their
respective successors, assigns, heirs, executors and personal representatives
(collectively, the "Shareholder Indemnified Parties") from and against, and
reimburse any Shareholder Indemnified Party for, any and all Losses that any
Shareholder Indemnified Party may at any time suffer or incur or become subject
to resulting from or arising out of (a) any inaccuracy in any representation or
warranty made by Buyer in this Agreement, (b) any failure by Buyer to perform
any of its covenants or agreements contained in this Agreement, (c) except as
set forth in Section 8.1, any Third Person Claim related to the operation of the
Surviving Company, or (d) any direct or indirect Tax liability, obligation or
Loss incurred by the Shareholders relating solely to a change by any Taxing
Authority to the allocation of any asset type set forth on Schedule 1.4. Any
amounts payable to the Shareholder's under this Section 8.2(d) shall be "grossed
up" to reflect the amount of any additional federal income tax, liability,
obligation or loss incurred by the Shareholders.
For purposes of Section 8.2(a), in determining whether there has been a
breach of a representation or warranty made by Buyer in this Agreement or in
determining the amount of any Losses in connection therewith, each
representation and warranty of Buyer shall be deemed to have been made without
any "materiality" qualification (including "material," "in all material
respects," "Material Adverse Effect" or other formulations) contained in such
representation or warranty.
8.3 DIRECT CLAIMS. In the event a Buyer Indemnified Party or a
Shareholder Indemnified Party (the "Claimant") desires to make a claim for
indemnification pursuant to Section 8.1 or 8.2 against the other (the
"Indemnitor"), the Claimant shall give prompt written notice of the claim to the
Indemnitor, describing, in reasonable detail, to the extent known, the nature of
the claim. Failure to give such notice shall not affect the indemnification
provided under this Article 8 except to the extent that such failure shall have
actually and materially prejudiced the Indemnitor as a result thereof.
8.4 THIRD PERSON CLAIMS.
(a) If any third Person shall notify a Buyer Indemnified Party or a
Shareholder Indemnified Party (the "Indemnified Party") with respect to any
matter (a "Third Person Claim") that may give rise to a claim for
indemnification pursuant to Sections 8.1 or 8.2, then the Indemnified Party
shall promptly notify the Shareholders or Buyer, as the case may be (the
"Indemnifying Party"), thereof in writing. Failure to give such notice shall not
affect the indemnification provided under this Article 8 except to the extent
that such failure shall have actually and materially prejudiced the Indemnifying
Party as a result thereof.
(b) The Indemnifying Party shall notify the Indemnified Party in
writing, as promptly as possible (but in any case before the due date for the
answer or response to a claim) after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 8.4(a), of its
election to defend any such Third Person Claim. Subject to
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Section 8.4(d) below, if the Indemnifying Party elects to defend such Third
Person Claim, the Indemnifying Party will have the right to assume and
thereafter conduct at its own expense the defense of the Third Person Claim with
counsel of its choice, which counsel is reasonably acceptable to the Indemnified
Party. The Indemnified Party shall make available to the Indemnifying Party or
its agents all records and other materials in the Indemnified Party's possession
reasonably required by the Indemnifying Party for use in defending any Third
Person Claim. The Indemnifying Party shall not consent to the entry of any
judgment or settle or compromise any such claim, unless the Indemnified Party is
given a full, complete and unconditional release of any and all liability for
such Third Person Claim. So long as the Indemnifying Party is actively and
diligently defending any such Third Person Claim, the Indemnified Party shall
not consent to the entry of any judgment or settle or compromise such claim
without the prior written consent of the Indemnifying Party.
(c) Unless and until an Indemnifying Party assumes the defense of the
Third Person Claim as provided in Section 8.4(b), the Indemnified Party shall
defend against or settle the Third Person Claim. The reasonable costs of such
defense or settlement shall be included in determining Losses relating to the
Third Person Claim. If the Indemnifying Party is not defending any such Third
Person Claim, the Indemnified Party may settle or compromise such claim on
reasonable terms, provided that it shall not enter into any settlement or
compromise with respect to a Third Person Claim without the prior written
consent of each of the Indemnifying Parties, which consent shall not be
unreasonably withheld.
(d) The Indemnified Party and the Indemnifying Party shall each have
the right to participate in the defense of any Third Person Claim for which it
is not controlling the defense, at its own expense.
8.5 LIMITATIONS; SURVIVAL.
(a) Subject to Section 8.5(b) below, no Shareholder shall have any
liability under Section 8.1, (i) unless and until the amount of all Losses
affecting the Buyer Indemnified Parties (in the aggregate) exceeds $500,000 (the
"Basket"), in which event the Shareholders shall indemnify the Buyer Indemnified
Parties solely to the extent such Losses exceed a $250,000 aggregate deductible
(the "Deductible") (subject to clause (ii) below) and (ii) to the extent the
aggregate amount of such payments for Losses to the Buyer Indemnified Parties
(in the aggregate) would exceed a $13,000,000 aggregate ceiling (the "Cap")
(after which point no Shareholder will have any further obligation to indemnify
any Buyer Indemnified Party from and against further such Losses).
(b) The Basket and the Deductible provided for in Section 8.5(a) shall
not apply to any claim for Losses made pursuant to Sections 8.1(b), 8.1(c),
8.1(d), 8.1(e) or to any claim for Losses resulting from breach of those
representations and warranties contained in Sections 3.1, 3.2, 4.1, 4.3, 4.13,
4.18, 4.21 and 4.22. The Cap provided for in Section 8.5(a) shall not apply to
any claim for Losses made pursuant to Sections 8.1(b) or 8.1(e) or to any claim
for Losses resulting from breaches of those representations and warranties
contained in Sections 3.1, 3.2, 4.1, 4.3 and 4.13.
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(c) All of the representations and warranties of the Parties contained
in this Agreement or in any certificate furnished pursuant to this Agreement
shall survive the Closing and continue in full force and effect until the
15-month anniversary of the Closing Date, except that (i) the representations
and warranties made in Sections 4.13, 4.18 and 4.22 shall survive until the
respective statutory periods of limitations (taking into account any extensions
or waivers thereof), plus 60 days, have expired, (ii) the representations and
warranties made in Section 4.21 shall survive until the fifth anniversary of the
Closing Date, (iii) the representations and warranties made in Sections 3.1,
4.1, 4.3, 4.31 and 5.6 shall survive indefinitely, (iv) the covenants and
agreements made in Article 6 shall survive until such time as fully complied
with and (v) the covenants and agreements that are to be performed in whole or
in part after the Closing Date and that, by their terms, expire on a specified
date shall survive until such date. Notwithstanding anything herein to the
contrary, no claim for indemnification shall be made under (i) Section 8.1(c)
after the fifth anniversary of the Closing Date, (ii) Section 8.1(d) after the
later of the second anniversary of the Closing Date or expiration of any
applicable warranty period, (iii) Section 8.1(e) after the statutory period of
limitations (taking into account any extensions or waivers thereof), plus 60
days, have expired and (iv) Section 8.1(f) after the 15-month anniversary of the
Closing Date. Notwithstanding anything to the contrary herein, no claim for
indemnification under this Article 8 shall be made with respect to any
representation or warranty herein after the survival period for such
representation or warranty, except as to any matters with respect to which a
bona fide written claim shall have been made or an Action at law or in equity
shall have commenced before such date, in which event the applicable survival
period shall continue (but only with respect to, and to the extent of, such
claim) until the final resolution of such claim or Action, including all
applicable periods for appeal.
8.6 PROCESS FOR RECOVERY BY BUYER INDEMNIFIED PARTIES AND SHAREHOLDER
INDEMNIFIED PARTIES. If any Buyer Indemnified Party is entitled to
indemnification under this Agreement, such Buyer Indemnified Party shall seek to
collect the amount for such claim from the Escrow Amount and the Shareholders as
follows: (i) first, by submitting a claim therefor against the Escrow Amount, if
any, then being held pursuant to the Escrow Agreement (subject to the right of
Shareholders' Representative to object to such claim all as provided in the
Escrow Agreement) and (ii) second, directly against the Shareholders.
8.7 CALCULATION OF LOSSES. The amount of any Losses under this Article
8 shall be reduced by (a) any related Tax benefits if and when actually received
or realized (but only after taking into account any Tax benefits (including any
net operating losses or other deductions and any carryovers or carrybacks) to
which the Buyer Indemnified Party or Shareholder Indemnified Party, as the case
may be, would be entitled without regard to such item), except to the extent
such recovery has already been taken into account in determining the amount of
any such Losses, and (b) any insurance recovery if and when actually realized or
received, in each case in respect of such Losses.
8.8 PURSUIT OF CERTAIN CLAIMS. To the extent that insurance or
"pass-through" warranty coverage from a manufacturer or other recovery or
reimbursement from a third party is available to any Buyer Indemnified Party to
cover any item for which Losses are sought pursuant to Section 8.1, such Buyer
Indemnified Party shall pursue diligently and in good faith any claim such Buyer
Indemnified Party may have against the insurer or the manufacturer, as the case
may be, prior to seeking to collect such Losses from the Shareholders. However,
such Buyer
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Indemnified Party shall be entitled to seek collection of such Losses from the
Shareholders if and to the extent the claim against the other party is not
reasonably likely to cover the entire amount of claims for Losses. To the extent
any Buyer Indemnified Party has not received reimbursement from an insurer or
manufacturer in accordance with this Section 8.8, and such Buyer Indemnified
Party is indemnified by any of the Shareholders in accordance with Section 8.1,
then the relevant Buyer Indemnified Party shall assign to the Shareholders'
Representative on behalf of the Shareholders, to the fullest extent allowable,
its claim against such insurance, warranty coverage or third party, or in the
event assignment is not permissible, the Shareholders' Representative shall be
allowed in such capacity to pursue such claim in the name of Buyer or the
Surviving Company at the Shareholders' expense. The Shareholders shall be
entitled to retain all recoveries made as a result of any such action.
8.9 SHAREHOLDERS' REPRESENTATIVE. For purposes of payment due to the
Shareholders and notice requirements under this Agreement, the Shareholders
hereby appoint Carl Jungers, Jr. (the "Shareholders' Representative") to serve
as their agent and attorney-in-fact with full power and authority (including
power of substitution), in the name of and for and on behalf of each of the
Shareholders, or in their own names as Shareholders' Representative, to take all
actions required or permitted under this Agreement, including the giving and
receiving of all service of process, reports, notices and consents and the
signing of all certificates, notices, instructions and other documents and the
making of all determinations thereunder. The authority conferred by this Section
8.7 shall be deemed an agency coupled with an interest, and all authority
conferred hereby is irrevocable and not subject to termination by any of the
Shareholders, or by operation of law, whether by the death or incapacity of any
of the Shareholders, or the occurrence of any other event. If any of the
Shareholders should die or become incapacitated, or if any other such event
should occur, any action taken by the Shareholders' Representative shall be as
valid as if such death or incapacity, termination or other event had not
occurred regardless or whether or not the Shareholders' Representative, the
Surviving Company, Buyer or any of the Shareholders shall have received notice
of such death, incapacity, termination or other event. Any notice given to the
Shareholders' Representative under this Agreement shall constitute effective
notice to the Shareholders, and Buyer may rely on any notice, consent, election
or other communication received from the Shareholders' Representative as if such
notice, consent, election or other communication had been received from each of
the Shareholders. Buyer shall not be liable to the Shareholders for any action
taken or omitted to be taken by the Shareholders' Representative under this
Agreement or in connection therewith.
8.10 EXCLUSIVE REMEDY. The Shareholders, the Surviving Company and
Buyer hereby acknowledge and agree that, after the Closing, the foregoing
indemnification provisions in this Article 8 shall be the exclusive remedy of
the Shareholders, the Surviving Company and Buyer with respect to the
Shareholders, the Company and its Subsidiaries and the transactions contemplated
by this Agreement, except that the limitations set forth in this Section 8.10
shall not apply to fraud by any Party.
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ARTICLE 9.
TERMINATION OF AGREEMENT
9.1 TERMINATION. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of Buyer, the Shareholders and the
Company;
(b) by Buyer or the Company, upon written notice to the other Party, if
the transactions contemplated by this Agreement shall not have been consummated
on or prior to December 22, 2000 unless such failure of consummation shall be
due to the failure of the Party seeking such termination to perform or observe
in all material respects the covenants and agreements of this Agreement to be
performed or observed by such Party or, in the case of the Company, the
Shareholders;
(c) by Buyer or the Company, upon written notice to the other Party, if
a Governmental Authority of competent jurisdiction shall have issued an Order
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement, and such Order shall have become final and
non-appealable; provided, however, that the Party seeking to terminate this
Agreement pursuant to this clause (c) has used its reasonable best efforts to
remove such Order; or
(d) by Buyer or the Company, if any condition to such Party's
obligation (and, in the case of the Company, obligations of the Shareholders) to
consummate the transactions contemplated by this Agreement has not been
satisfied as of the Closing Date or if satisfaction of such condition becomes
impossible (other than through the failure of such Party to comply with his, her
or its obligations under this Agreement) and such Party has not waived such
condition on or before the Closing Date.
9.2 EFFECT OF TERMINATION. The termination of this Agreement shall be
effected by delivery by the Party terminating the Agreement to the other Party
of written notice of such termination. If this Agreement is terminated as
permitted under Section 9.1, such termination shall be without liability to any
Party to this Agreement, or to any partner, principal, shareholder, director,
officer, or representative of such Party, and, following such termination, no
Party shall have any liability under this Agreement to any other Party;
provided, however, that no such termination shall relieve any Party that has
willfully or knowingly breached any representation or warranty or failed to
comply with any of his or its covenants or agreements contained in this
Agreement from liability for such breach or failure, and such breaching Party
shall remain fully liable for any and all Losses incurred or suffered by any
other Party to this Agreement as a result of such breach. The Confidentiality
Agreement and Sections 6.5, 6.6, 11.10, 11.13 and 11.15 shall survive any
termination of this Agreement.
ARTICLE 10.
DEFINITIONS
As used in this Agreement the following terms shall have the meanings
set forth below:
"Accounting Firm" has the meaning set forth in Section 1.3(b).
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"Action" means any action, suit or legal, administrative or arbitral
proceeding or investigation before or by any Governmental Authority.
"Aeries Network Commission Contract" has the meaning set forth in
Section 2.2(t).
"Affiliate" means, with respect to any Person, any other Person who (i)
directly or indirectly, controls or is controlled by that Person, or is under
common control with that Person, (ii) is an officer, director or employee of
that Person, (iii) is a partner, stockholder or other Person holding, directly
or indirectly, an interest in that Person, or (iv) is an entity in which that
Person is a director, officer, employee, partner or stockholder. For the
purposes of this definition, "control" (including, with correlative meaning, the
terms "controlled by" and "under common control with"), as used with respect to
any Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Balance Sheets" has the meaning set forth in Section 4.7(a).
"Basket" has the meaning set forth in Section 8.5(a).
"Budget Projections" has the meaning set forth in Section 4.30.
"Business" means the vertically integrated stocking, distribution and
manufacture of polyethylene pipe, including HDPE plastic pipe used as conduit in
the telecommunications industry.
"Buyer" has the meaning set forth in the preamble to this Agreement.
"Buyer Indemnified Parties" has the meaning set forth in Section 8.1.
"Buyer Indemnified Parties" has the meaning set forth in Section 8.1.
"Cap" has the meaning set forth in Section 8.5(a).
"Claimant" has the meaning set forth in Section 8.3.
"Closing" has the meaning set forth in Section 2.1.
"Closing Date" has the meaning set forth in Section 2.1.
"Code" means the Internal Revenue Code of 1986 and all regulations
promulgated thereunder, as the same may be amended from time to time.
"Confidentiality Agreement" has the meaning set forth in Section 6.6.
"Consent" means any consent, approval, license or authorization of,
notice to, or designation, registration, declaration or filing with, any Person.
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"Contract" means any contract, agreement, commitment, undertaking or
arrangement (whether oral or written) to which a Person is a party or by which a
Person or its assets is bound.
"Consulting Agreement" has the meaning set forth in Section 2.2(n).
"Debt-Free Net Worth" has the meaning set forth in Section 1.3(a).
"Deductible" has the meaning set forth in Section 8.5(a).
"Employee Plans" has the meaning set forth in Section 4.18(a).
"Environmental Law" means any Law which regulates or controls
pollution, contamination or the condition of or a Release to groundwater,
surface water, soil, sediment or air.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" has the meaning set forth in Section 1.2(b).
"Escrow Agreement" has the meaning set forth in Section 1.2(b).
"Escrow Amount" has the meaning set forth in Section 1.2(b).
"Financial Statements" has the meaning set forth in Section 4.7(a).
"GAAP" means generally accepted accounting principles in the United
States, consistently applied.
"Governmental Authority" means any domestic or foreign national, state,
multi-state, municipal or other local government, any subdivision, agency,
instrumentality, department, board, commission or authority thereof, or any
quasi-governmental or private body exercising any regulatory or taxing authority
thereunder or any federal, state, local or foreign court, tribunal or
arbitrator.
"Hazardous Substance" means any substance (i) which is or has been
defined or identified as a hazardous waste, hazardous substance, pollutant or
contaminant under any Environmental Law; (ii) petroleum or any
petroleum-containing substance or (iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mastagenic, reactive or
otherwise hazardous.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Improvements" has the meaning set forth in Section 4.9(b).
"Indebtedness" of the Company means all obligations of the Company and
its Subsidiaries (i) for borrowed money, (ii) evidenced by notes, bonds,
debentures or similar instruments, (iii) for the deferred purchase price of
goods or services (other than trade payables
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or accruals incurred in the ordinary course of business), (iv) under capital
leases and (v) in the nature of guarantees of the obligations described in
clauses (i) through (iv) above.
"Indemnified Party" has the meaning set forth in Section 8.4(a).
"Indemnifying Party" has the meaning set forth in Section 8.4(a).
"Indemnitor" has the meaning set forth in Section 8.3.
"Industrial Development Revenue Bonds" means the $3,800,000 Industrial
Development Revenue Bonds (Ameriduct Worldwide Inc. Project) Series 2000, issued
by the Industrial Development Authority of the City of Cabool, Missouri on April
1, 2000.
"Intellectual Property" has the meaning set forth in Section 4.16(a).
"Interim Company Financial Statements" has the meaning set forth in
Section 4.7(a).
"Interest Rate" means the "Prime Rate" as reported by The Wall Street
Journal in its column entitled "Money Rates," such rate being the base rate on
corporate loans posted by at least 75% of the nation's 30 largest banks;
provided, however, that if The Wall Street Journal no longer publishes such rate
or changes the definition of such rate, Buyer and the Shareholders'
Representative shall substitute another reference to be used to define such
interest rate which closely approximates the original definition used in this
Agreement.
"IRS" means the Internal Revenue Service.
"Investment" means any equity investment or interest, directly or
indirectly, in any Person.
"Key Managers" has the meaning set forth in Section 2.2(n).
"Knowledge of the Company", including the terms "Know", "Known" and
other derivatives thereof, means the actual knowledge of each of the
Shareholders, directors and officers of the Company and its Subsidiaries, after
reasonable inquiry of the Company's officers, supervisory employees or outside
professional advisors having responsibility for relevant matters.
"Laws" means any law, statute, rule, code, regulation, ordinance or
other legally enforceable requirement of any Governmental Authority.
"Lien" means any security interest, mortgage, pledge, encumbrance,
lien, charge, adverse claim or restriction of any kind, including, but not
limited to, any restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership.
"Losses" has the meaning set forth in Section 8.1.
"Material Adverse Effect" means a material adverse effect or impact
upon the assets, condition (financial or otherwise), results of operations or
business of the Company and its
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Subsidiaries taken as a whole or on the Buyer or the Surviving Company, as the
case may be, or on the ability of the Parties to consummate the transactions
contemplated hereby, other than any effect resulting from changes in general
economic conditions, including changes in rates for fuel or energy, or
applicable laws or regulations or generally accepted accounting principles.
"Minority Shareholders" has the meaning set forth in Section 11.15(b).
"Minority Shareholder Non-Competition Agreements" has the meaning set
forth in Section 2.2(m).
"Net Worth Statement" has the meaning set forth in Section 1.3(a).
"Non-Competition Agreements" has the meaning set forth in Section
2.2(l).
"Option" means any option, warrant, call, convertible or exchangeable
security, subscription, claim, unsatisfied preemptive right, commitment, other
agreement or right of similar nature.
"Order" means any order, judgment, injunction, award, decree or writ of
any Governmental Authority.
"Permits" has the meaning set forth in Section 4.17.
"Person" or "Persons" means any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity or Governmental
Authority.
"Post-Closing Insurance Coverage" has the meaning set forth in Section
6.11.
"Post-Employment Benefits" has the meaning set forth in Section
4.18(k).
"Predecessor" has the meaning set forth in Section 4.18(b).
"Purchase Price" has the meaning set forth in Section 1.2(a).
"Real Property" has the meaning set forth in Section 4.9(a).
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including the abandonment or discarding of barrels, containers
and other closed receptacles containing any Hazardous Substance).
"S&W" has the meaning set forth in Section 2.2(k).
"Section 338(h)(10) Election" has the meaning set forth in Section 1.4.
"Securities Act" has the meaning set forth in Section 3.5.
"Shareholder Indemnified Parties" has the meaning set forth in Section
8.2.
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"Shareholders' Representative" has the meaning set forth in Section
8.9.
"Shares" has the meaning set forth in the Recitals to this Agreement.
"Special Bonuses" means the bonuses (inclusive of all related payroll
Taxes) to be paid to certain employees of the Company, all as listed on Schedule
1.2.
"Subsidiary" means with respect to any specified Person, any other
Person (a) whose board of directors or similar governing body, or a majority
thereof, may be directly or indirectly elected or appointed by such specified
Person, (b) whose management decisions and corporate actions are directly or
indirectly subject to the present control of such specified Person, or (c) whose
voting securities are more than 50% owned, directly or indirectly, by such
specified Person.
"Surveys" has the meaning set forth in Section 7.2(g).
"Surviving Company" has the meaning set forth in Section 8.1.
"Tax" or "Taxes" means any and all taxes based on or measured by income
and any other tax whatsoever (whether federal, state, local or foreign),
including, without limitation, gross receipts, profits, sales, use, occupation,
value added, ad valorem, transfer, franchise, withholding, payroll, employment,
excise, or property taxes, together with any interest, penalties or additions to
tax imposed with respect thereto.
"Taxing Authority" means a Governmental Authority exercising taxing
authority including, without limitation, the IRS.
"Tax Returns" means returns, reports, statements, certificates,
schedules, forms and other documents required to be filed with or provided to
any Taxing Authority.
"Third Person Claim" has the meaning set forth in Section 8.4(a).
"Title Insurer" has the meaning set forth in Section 7.2(f).
"Title Policies" has the meaning set forth in Section 7.2(f).
"1999 Balance Sheet" has the meaning set forth in Section 4.18(b).
"Year End Financial Statements" has the meaning set forth in Section
4.7(a).
ARTICLE 11.
MISCELLANEOUS
11.1 FURTHER ASSURANCES. Each of the Parties hereto agrees that, from
and after the Closing, upon the reasonable request of any other Party hereto and
without further consideration, such Party will use reasonable best efforts to
execute and deliver to such other Party such documents, information, and further
assurances and will take such other actions (without cost to
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such Party) as such other Party may reasonably request in order to carry out the
purpose and intention of this Agreement. Buyer further agrees to cooperate with
the reasonable best efforts of the Shareholders' Representative on behalf of the
Shareholders to prosecute or defend lawsuits, arbitrations, settlement
conferences and other procedures which have been or in the future are filed or
entered into by or against any or all of the Shareholders in connection with the
Surviving Company or any of its Subsidiaries. In connection with the preceding
sentence, Buyer shall use its reasonable best efforts to, without limitation,
(i) make available to the Shareholders from time to time upon the Shareholders'
reasonable request access to such premises, equipment, books, records and other
documents and information of the Company or any of its Subsidiaries, or of the
Surviving Company and any of its Subsidiaries, as the case may be, as may be
relevant with respect to any such proceedings, and (ii) make employees of the
Surviving Company or of any of its Subsidiaries available to the Shareholder in
connection with any such proceedings.
11.2 NOTICES. All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given upon personal delivery, telecopy or other method
of facsimile transmission, or on delivery after being sent by recognized
overnight delivery service, when delivered and addressed to the following
addresses:
(a) if to Buyer, to:
The Lamson & Sessions Co.
25701 Science Park Drive
Beachwood, Ohio 44122
Attention: President
Facsimile: (216) 464-1455
with a copy to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: William H. Coquillette, Esq.
Facsimile: (216) 579-0212
(b) if to Company, to:
Ameriduct Worldwide, Inc.
237 Forest View Drive
Seymour, MO 65746
Attention: Carl Jungers, Jr.
Facsimile: (417) 767-2421
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with a copy to:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive, 29th Floor
Chicago, IL 60606
Attention: Stewart Dolin, Esq.
Facsimile: (312) 207-6400
(c) if to the Shareholders, to the Shareholders' Representative:
Carl Jungers, Jr.
c/o Ameriduct Worldwide, Inc.
237 Forest View Drive
Seymour, MO 65746
Facsimile: (417) 767-2421
with a copy to:
Sachnoff & Weaver, Ltd.
30 South Wacker Drive, 29th Floor
Chicago, IL 60606
Attention: Stewart Dolin, Esq.
Facsimile: (312) 207-6400
provided, however, that if any Party shall have designated a different address
by notice to the other, then to the last address so designated.
11.3 BINDING EFFECT; ASSIGNMENT. This Agreement and the rights and
duties under this Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of each of the Parties to this Agreement.
Except for the assignment by Buyer of this Agreement and all or any of its
rights and obligations under this Agreement to (i) its lenders, (ii) any of its
Affiliates or (iii) any Person who acquires (whether in a single transaction or
a series of transactions and whether by operation of law or otherwise) all or
substantially all of the assets of Buyer or at least a majority of the
outstanding capital stock of Buyer (any of which assignments may be made without
the consent of the Shareholders)(in any or all of which cases the Buyer
nonetheless shall remain responsible for the performance of all of its
obligations hereunder), no Party shall assign or delegate this Agreement or any
rights or obligations under this Agreement without the prior written consent of
the other Parties.
11.4 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and the
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.5 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
set forth the entire understanding of the Parties to this Agreement and
supersede all prior agreements, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any Party or any
officer, employee, shareholder or representative of any Party to this Agreement.
11.6 SCHEDULES. Neither the specification (directly or indirectly by
reference to a defined term hereof) of any dollar amount in the representations
and warranties set forth in
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Article 4 nor the inclusion of any items in the Schedules shall be deemed to
constitute an admission by the Shareholders or the Company, or otherwise imply,
that any such amount or such items so included are material for the purposes of
this Agreement. The inclusion or, or reference to, any item within any
particular Schedule does not constitute an admission by any of the Shareholders
or the Company that the item constitutes a violation of any federal, state or
local law, rule statute, regulation, ordinance, permit, judgment, decree or
other equivalent.
11.7 GOVERNING LAW; CONSTRUCTION. This Agreement shall be construed and
enforced in accordance with and governed by the internal substantive laws of the
State of Illinois without giving effect to the principles of conflicts of law
thereof. The headings of the Articles and Sections of this Agreement and in the
Schedules and Exhibits to this Agreement are inserted for convenience of
reference only and shall not be used in interpreting this Agreement.
11.8 NO THIRD PARTY RIGHTS. Nothing in this Agreement expressed or
implied is intended or shall be construed to confer upon or give to any Person,
other than the Parties to this Agreement, any rights or remedies under or by
reason of this Agreement.
11.9 AMENDMENT. This Agreement may be amended only by an instrument in
writing duly executed by the Parties to this Agreement, which makes specific
reference to this Agreement.
11.10 WAIVERS. Any waiver by any Party of any breach of or failure to
comply with any provision of this Agreement by any other Party shall be in
writing and shall not be construed as, or constitute, a continuing waiver of
such provision, or a waiver of any other breach of, or failure to comply with,
any other provision of this Agreement.
11.11 FEES AND EXPENSES OF TRANSACTION. The Shareholders shall pay the
fees, costs and expenses incurred by the Shareholders and the Company in
connection with the negotiation of this Agreement and the consummation of the
transactions contemplated by this Agreement. Buyer shall pay the fees, costs and
expenses incurred by Buyer in connection with the negotiation of this Agreement
and the consummation of the transactions contemplated by this Agreement and the
fees, costs and expenses associated with the HSR Act filing.
11.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute a single instrument.
11.13 SEVERABILITY. In case any provision of this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement will not be
affected or impaired thereby.
11.14 CONSENT TO JURISDICTION. Except to the extent prohibited by
applicable Law, and subject to Sections 1.3(b) and 11.16, the Parties agree that
any suit, action or other legal proceeding arising our of this Agreement or the
transactions contemplated by this Agreement may be brought in the courts of
record of the State of Illinois located in Chicago, Illinois, and each Party to
this Agreement consents to the jurisdiction of each such court in any such suit,
action or proceeding.
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11.15 NATURE OF CERTAIN OBLIGATIONS.
(a) The covenants of each of the Shareholders in Section 1.1 concerning
the sale of his, her or its Shares to the Buyer and the representations and
warranties of each of the Shareholders in Article 3 above concerning the
transactions contemplated by this Agreement are several obligations. This means
that the particular Shareholder making the representation, warranty or covenant
will be solely responsible for any Losses the Buyer may suffer as a result of
any breach thereof by such particular Shareholder.
(b) The remainder of the representations, warranties, and covenants in
this Agreement, including, any indemnification obligations of any of the
Shareholders under Article 8 of this Agreement are joint and several
obligations. This means that each Shareholder will be responsible to the extent
provided in Article 8 above for the entirety of any Losses the Buyer may suffer
as a result of any breach thereof; provided, however, that all the respective
obligations of David Galloway and Mark Hamilton (the "Minority Shareholders")
hereunder shall be several obligations in proportion to their respective
ownership of stock in the Company, and not joint and several obligations.
11.16 ARBITRATION.
(a) Any dispute arising out of or relating to this Agreement, or the
breach, termination or validity of this Agreement, shall be finally settled by
arbitration conducted expeditiously in accordance with the American Arbitration
Association Commercial Arbitration Rules by a sole arbitrator selected by the
parties to the dispute from the National or Chicago, Illinois panel of
arbitrators. If the parties are unable to agree upon an arbitrator within ten
calendar days, each party shall select an arbitrator. The two arbitrators
selected shall select a third arbitrator and all decisions thereafter shall be
made by a majority of the arbitrators. The arbitration shall be governed by the
Untied States Arbitration Act. 9, U.S.C. 1-16, and judgment upon the award
rendered by the arbitrator(s) may be entered by any court having jurisdiction
thereof. The arbitrator(s) is not empowered to award damages in excess of
compensatory damages, and each Party hereby irrevocably waives any damages in
excess of compensatory damages.
(b) Arbitration proceedings shall be commenced by either Buyer or the
Shareholders Representative by delivering to the other a written notice
requesting arbitration. Each Party shall bear its own costs and expenses in
connection with the arbitration and all other costs, including the arbitrator s
fees and expenses, shall be borne by the Party or Parties against which an award
is rendered in the dispute. Notwithstanding the foregoing, if the arbitrator(s)
determines that one Party acted unreasonably and not in good faith, the
arbitrator(s) shall have authority to assess the costs and expenses of the
arbitration, including the arbitrator s fee and reasonable attorneys fees,
against that Party. Any arbitration hearing shall be held in Chicago, Illinois,
unless the Parties to the dispute agree otherwise. Any award rendered by
arbitration shall be final and binding on the Parties, and judgment thereon may
be entered in any court of competent jurisdiction. Notwithstanding any
arbitration rules to the contrary, the award of the arbitrator(s) must be made
no later than three months following the date on which the arbitrator(s) is
appointed, unless the issue is the subject of litigation brought by a third
Party and the arbitrator(s) deems it appropriate to defer its award until the
litigation is resolved.
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11.17 EXCLUSIVITY OF REPRESENTATIONS. The representations and
warranties made by the Shareholders, the Company and Buyer, respectively, in
this Agreement are in lieu of and are exclusive of all other representations and
warranties, including, without limitation, any implied warranty of
merchantability or of fitness for a particular purpose and any other implied
warranties, of the Shareholders, the Company and Buyer, respectively. Each of
the Shareholders, the Company and Buyer hereby disclaims any such other or
implied representations or warranties, notwithstanding the delivery or
disclosure by the Shareholders or the Company or any other Person to Buyer or
any of its directors, officers, employees, agents or representatives, or by
Buyer or any other Person to the Shareholders or to the Company or any of its
directors, officers, employees, agents or representatives, of any documentation
or other information in connection with this Agreement or the transactions
contemplated by this Agreement.
[SIGNATURES ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, the Parties to this Agreement have executed or
caused this Agreement to be executed by their duly authorized officers as of the
day and year first above written.
BUYER:
THE LAMSON & SESSIONS CO.
By /s/ John B. Schulze
------------------------------
Name: John B. Schulze
----------------------------
Title: Chairman, President &
Chief Executive Officer
---------------------------
COMPANY:
AMERIDUCT WORLDWIDE, INC.
By: /s/ David Bednarek
-----------------------------
Name: David Bednarek
----------------------------
Title: CFO
---------------------------
SHAREHOLDERS:
/s/ Carl Jungers
----------------------------------
Carl Jungers
/s/ Carl Jungers, Jr.
----------------------------------
Carl Jungers, Jr.
/s/ David Jungers
----------------------------------
David Jungers
/s/ Dan Jungers
----------------------------------
Dan Jungers
/s/ Phil Jamieson
----------------------------------
Phil Jamieson
/s/ David Bednarek
----------------------------------
David Bednarek
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/s/ Michael Morgan
----------------------------------
Michael Morgan
/s/ Dave Galloway
----------------------------------
Dave Galloway
/s/ Mark Hamilton
----------------------------------
Mark Hamilton
46
