STOCK PURCHASE AGREEMENT
BY AND AMONG
MESTEK, INC.
AND
DAVID H. WEENER, JON M. MORRISON,
WAYNE FRERICHS AND MARK MCCRILL
DATED: OCTOBER 30, 1995
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THIS AGREEMENT is made and entered into as of the 30th day of October,
1995 by and among Mestek, Inc., a Pennsylvania corporation ("Buyer"), and David
H. Weener ("Weener"), Jon M. Morrison ("Morrison"), Wayne Frerichs ("Frerichs")
and Mark McCrill ("McCrill") (collectively the "Sellers" and each individually a
"Seller").
WHEREAS, Sellers are the owners of all of the issued and outstanding
capital stock of National Northeast Corporation, a Massachusetts corporation
(the "Company"), which is engaged in the business of manufacturing, fabricating,
processing, grinding, buying and selling of aluminum and articles made therefrom
(the "Business"); and
WHEREAS, the issued and outstanding capital stock of the Company
consists of one thousand (1,000) shares of Common Stock ("Common Stock"), no par
value per share, and the ownership by Sellers of such outstanding Common Stock
is as set forth on Schedule 3.2 attached hereto; and
WHEREAS, Sellers wish to sell to Buyer, and Buyer wishes to purchase
from Sellers, 830 of such shares of Common Stock (the "Shares") from the
Sellers, as described on said Schedule 3.2, for the consideration and on the
terms and conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the meanings set forth below:
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is under common control with or is
controlled by, that Person. For purposes of this definition, "control"
(including 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.
"Annual Payment" has the meaning set forth in Section 2.6(a) hereof.
"Balance Sheet" has the meaning set forth in Section 3.6 hereof.
"Balance Sheet Date" has the meaning set forth in Section 3.6 hereof.
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"Base Total Equity" shall be One Million Seven Hundred Eight Thousand
and Seven Hundred Ninety-Six Dollars ($1,708,796.00).
"Business" has the meaning set forth in the recitals of this Agreement.
"Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks are required or permitted to close by law in
the State of Massachusetts.
"CERCLA" has the meaning set forth in the definition of "Environmental
Laws".
"Closing" has the meaning set forth in Section 2.3 hereof.
"Closing Date" has the meaning set forth in Section 2.3 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in the recitals to this
Agreement.
"Company" has the meaning set forth in the recitals to this
Agreement.
"Company Plans" means all Employee Benefit Plans maintained,
contributed to or sponsored by the Company for the benefit of any
current or former employee, officer or director of the Company.
"Contingent Consideration" has the meaning set forth in
Section 2.6(a) hereof.
"Damages" has the meaning set forth in Section 8.1(a) hereof.
"Earn-Out Period" means the three-year period commencing
October 29, 1995 and ending on October 31, 1998, or, if such date is
not the end of a fiscal month, on the last day of the fiscal month
ending closest to October 31, 1998.
"Earn-Out Year" means each of the first three twelve-month
periods commencing on the first day of the fiscal month in each year
closest to November 1, and ending on the last day of the fiscal month
in each year ending closest to the last day of October. The first
Earn-Out Year shall commence October 29, 1995.
"Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA, and each other employee benefit
program, policy, agreement, arrangement or payroll practice, whether or
not subject to ERISA that
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(a) provides any bonus, commission, profit sharing, incentive, change
in control, severance or termination benefit, or that is a payroll
policy, fringe benefit, deferred compensation or similar arrangement or
(b) is a collective bargaining agreement.
"Environmental Laws" means the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C., ss.9601, et seq.,
as amended ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. ss.6901, et seq., as amended, the Clean Air Act, 42 U.S.C. ss.
7401 et seq., as amended, the Clean Water Act, 33 U.S.C ss.1251, et
seq., the Toxic Substance Control Act, 15 U.S.C ss.2601 et seq., the
Occupational Safety and Health Act, as amended, and all other federal,
state and local laws, regulations and ordinances relating to pollution
or protection of the environment.
"Environmental Liabilities" means any action, suit or
proceeding in connection with (i) the use of the Leased Real Property
by the Company on or prior to October 28, 1995 for the storage,
treatment, generation, transportation, processing, handling, production
or disposal of any hazardous or polluting substance or waste; (ii)
human exposure to any Hazardous Substance, noises, vibrations or
nuisances of whatever kind to the extent the same arise from the use of
the Leased Real Property by the Company on or prior to October 28,
1995; (iii) a violation of any applicable Environmental Laws or
non-compliance with any environmental permit relating to the Leased
Real Property by the Company on or prior to October 28, 1995; (iv) any
demand letters or other notification received by the Company prior to
October 28, 1995 from any Governmental Entity in connection with any
investigation or clean-up of hazardous or polluting substances or waste
Releases sent directly or indirectly by the Company prior to October
28, 1995 to any site listed or formally proposed for listing on the
National Priority List promulgated pursuant to CERCLA or the
Comprehensive Environmental Response, Compensation and Liability
Information System or to any site listed on any state list of hazardous
substances sites requiring investigation or clean-up.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any Person which together with Sellers
or the Company would be considered a member of the same "controlled
group" or under "common control" within the meaning of Section 414(b)
or (c) of the Code.
"Ernst & Young" means Ernst & Young LLP, the independent auditors of
the Company.
"Estimated Tax Liability Amount" shall mean the product of the
Tax Rate times the Seller's Estimated Short Period Taxable Income.
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"Final Balance Sheet" has the meaning set forth in Section 2.5(a) hereof.
"Final Total Equity" means the amount by which the book value
of the Company's assets exceeds the book value of the Company's
liabilities, as reflected on the Final Balance Sheet.
"Financial Statements" means (i) the Company's unaudited
balance sheet as of February 25, 1995, and the related unaudited
statements of income and retained earnings and cash flows for the
period then ended, and (ii) the Company's audited balance sheet as of
December 31, 1994, and the related audited statements of income and
cash flows for the year then ended, reported on by Ernst & Young,
copies of all of which have been delivered to Buyer.
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government,
whether federal, state or local, domestic or foreign.
"Grant Thornton" means Grant Thornton LLP, the independent auditors of
Buyer.
"Hazardous Substance" has the meaning set forth in 42 U.S.C.
ss.9601, paragraph 14, provided, however, that it also includes
"hazardous waste" as defined in 42 U.S.C. ss.9603, paragraph 5 and
"petroleum" as defined in 42 U.S.C. ss.6992, paragraph 8.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the related regulations and published
interpretations.
"Installment" has the meaning set forth in Section 2.6(a) hereof.
"Installment Date" has the meaning set forth in Section 2.6(a) hereof.
"Intellectual Property Rights" means all of the Company's
right, title and interest in and to all the trademarks, service marks,
patents, copyrights, processes of every kind and description, designs,
manufacturing and technical know-how and information, drawings,
specifications, operational sheets, engineering records, production and
technical data, operating manuals, tests, formulas, instructions,
computer data, printouts and software, specifications and drawings
supplied by suppliers or prospective suppliers and customers or
prospective customers of the Company, trade names, trade secrets and
similar properties (including all registrations, renewals or
applications for registration or renewal of any of them, in each case
whether completed, pending or in the process of preparation), in the
United States and in other countries, now or previously used, acquired
or
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developed by or for the Company, together with the goodwill of the
Company's business associated with the foregoing.
"Knowledge" means the actual knowledge of an individual of a
fact, circumstance or situation. The Knowledge of the Company shall be
limited to the Knowledge of Sellers and any other officers of the
Company.
"Leased Real Property" has the meaning set forth in Section 3.9(b) hereof.
"Lien" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, mortgage, lien, option, pledge, right of
others, or restriction (whether on voting, sale, transfer, disposition,
use or otherwise), whether imposed by agreement, understanding, law,
equity or otherwise.
"Material Adverse Change" means a change that has a Material Adverse
Effect.
"Material Adverse Effect" means any effect that is, or series
of effects that are, in the aggregate, materially adverse to the
financial condition of the Company.
"Material Contracts" has the meaning set forth in Section 3.16 hereof.
"Maximum Indemnification Amount" has the meaning set forth in
Section 8.1(c) hereof.
"New NNE" means National Northeast Corpoation, a Delaware
corporation and the surviving or resulting corporation, as the case may
be, of the merger or consolidation involving New NNE and the Company,
which shall occur immediately following the Closing.
"Notice" means actual notice received by an individual of a
fact, or circumstance or situation. Notice to the Company shall in each
case be limited to Notice to any of the Sellers and any other officers
of the Company.
"Operating Profits" has the meaning set forth in Section 2.6(d) hereof.
"Ownership Percentage" has the meaning set forth in Schedule 3.2.
"Pending" means with respect to any action, suit or
proceeding, a Seller or the Company has received Notice of the service
of any summons or complaint against the Company, has Notice that a
summons or complaint has been issued for service, or with respect to
any governmental investigation or proceeding, a Seller or the Company
has received Notice that such investigation or proceeding has commenced
or will be commenced within a reasonable period of time, or with
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respect to any claim or cause of action, a Seller or the Company has
received Notice of a specific demand in writing that the Company either
pay damages and compensation or cease or desist from a specified course
of conduct.
"Percentage Interests" has the meaning set forth in Schedule 3.2.
"Person" means an individual, sole proprietorship,
corporation, partnership, limited liability company, joint venture,
trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, bank, trust company,
land trust, business trust or other organization, or a Governmental
Entity.
"Purchase Price" has the meaning set forth in Section 2.2 hereof.
"Purchase Price Allocation" has the meaning set forth in Section 5.8(c)
hereof.
"Purchase Price Adjustment" has the meaning set forth in Section 2.5
hereof.
"Release" has the same meaning and definition as set forth in 42 U.S.C.
ss.9601, paragraph 22.
"Removal" has the same meaning and definition as set forth in 42 U.S.C.
ss.9601, paragraph 23.
"Seller's Estimated Short Period Taxable Income" shall mean an
estimate of each Seller's Short Period Taxable Income made as of the
Closing Date.
"Seller's Representative" has the meaning set forth in Section 8.2 hereof.
"Seller's Short Period Taxable Income" shall mean each
Seller's pro rata share (determined under Section 1366 of the Code) of
the taxable income of the Company allocable (in accordance with Section
1362(e)(1) of the Code and Section 1362(e)(6)(D) of the Code to the
period from October 29, 1995 through December 31, 1995 (excluding the
income tax consequences of the Section 338(h)(10) election referred to
in Section 5.8 hereof.)
"Shares" has the meaning set forth in the recitals of this Agreement.
"Tangible Personal Property" means furniture, fixtures,
equipment, machinery, vehicles, supplies, inventories, materials,
apparatus, tools, implements, appliances and other tangible personal
property of every kind and description.
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"Taxes" means any federal, state, local, foreign and other income,
gross receipts, profits, franchise, capital stock, employees' income
withholding, back-up withholding, social security, unemployment,
disability, real property, personal property, license, sales, use,
excise, transfer, customs, payroll, withholdings, employment,
occupation and other taxes or governmental duties, fees or charges,
including any interest, penalties or additions on or to the foregoing.
"Tax Liability Amount" shall mean the product of the Tax Rate
times the Seller's Short Period Taxable Income.
"Tax Rate" shall mean 44%.
"Threshold" has the meaning set forth in Section 8.1(c) hereof.
"Underground Storage Tank" has the same meaning and definition
as set forth in paragraph (1) of 42 U.S.C ss.6991, and shall also
include tank for storing motor fuel, tank used for storing heating oil,
pipeline facility, surface impoundment, pond or lagoon, storm water or
waste water collection system, flow-through process tank, liquid trap
or associated gathering lines directly related to oil or gas production
and gathering operations.
ARTICLE II
PURCHASE AND SALE OF SHARES.
2.1 Purchase and Sale of Shares. On the terms and subject to
the conditions of this Agreement, at the Closing referred to in Section
2.3 hereof, Sellers shall convey, transfer, assign and deliver to the
Buyer, free and clear of all Liens, and Buyer shall purchase from
Sellers, the Shares.
2.2. Purchase Price. The aggregate purchase price payable
hereunder to Sellers by Buyer shall be Four Million Nine Hundred and
Eighty Thousand Dollars ($4,980,000.00) (the "Purchase Price"), subject
to the Purchase Price Adjustment as provided in Section 2.5. below. The
Purchase Price, subject to the Purchase Price Adjustment, shall be paid
to the Sellers pro rata in accordance with their respective Percentage
Interests.
2.3 Time and Place of Closing. The consummation of the
transactions contemplated hereby (the "Closing") shall be effective as
of 12:01 a.m. on January 1, 1996 (the "Closing Date") and shall take
place at the offices of Edwards & Angell, 101 Federal Street, Boston,
Massachusetts, or at such other place as is mutually agreed upon by
Sellers and Buyer, at 10:00 a.m. on January 2, 1996. Each party hereto
agrees to use its best efforts to cause the Closing to be consummated.
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2.4 Closing.
(a) At the Closing, Sellers shall deliver to Buyer:
(i) certificates representing all the Shares, duly endorsed in blank
or accompanied by duly executed stock powers; and
(ii) the closing documents described in Section 6.2 hereof.
(b) At the Closing, Buyer shall deliver:
(i) to Sellers, pro rata in accordance with their
respective Percentage Interests, the Purchase Price by wire
transfer of federal funds to such Sellers' respective bank
accounts as set forth on Exhibit 2.4; and
(ii) to Sellers, the closing documents described in Section 6.1
hereof.
(c) At the Closing, the Sellers shall submit to Buyer their
calculation of the Estimated Tax Liability Amount in respect of each
Seller. At the Closing, Buyer shall pay as additional purchase price to
each Seller the amount of his respective Estimated Tax Liability
Amount.
(d) As soon as reasonably practicable after the Closing, Buyer
will notify Sellers of its calculation of their respective Tax
Liability Amounts. Sellers and Buyer shall negotiate in good faith to
resolve any dispute as to the calculation of the Tax Liability Amount.
If Sellers and Buyer are unable to resolve any such dispute, any such
disputed items shall be submitted for resolution in accordance with the
provisions of Section 2.5(d). As applicable, within five (5) business
days following final determination of the Tax Liability Amount, either
(i) Buyer shall pay to Sellers cash equal to the excess of their
respective Tax Liability Amount over their respective Estimated Tax
Liability Amount, or (ii) Sellers shall pay to Buyer cash equal to the
excess of their respective Estimated Tax Liability Amount over the Tax
Liability Amount.
2.5 Purchase Price Adjustment. The Purchase Price shall be
subject to adjustment, if any, as specified in this Section 2.5 (the
"Purchase Price Adjustment").
(a) Within ninety (90) days after the date hereof, the Buyer
shall submit to Sellers an audited balance sheet of the Company as of
October 28, 1995 (the "Final Balance Sheet"). The Final Balance Sheet
shall be prepared by Grant Thornton, at Buyer's expense, on a year-end
basis and in accordance with generally accepted accounting principles
("GAAP"), consistent with those applied in the Financial Statements,
provided, however, that (i) the Final Balance Sheet
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shall not be affected by any election made under Section 338(h)(10) of
the Code in accordance with the provisions of Section 5.8 hereof, (ii)
all inventory (including supplies, raw materials, work-in-process and
finished goods) shall be valued on a FIFO basis at lower of cost or
market without reserve for obsolete or slow-moving inventory, (iii)
property, plant and equipment that existed at February 25, 1995 shall
continue to be valued at the book value as of such date and property,
plant and equipment purchased subsequent to February 25, 1995 shall be
valued at cost and (iv) accounts receivable shall be valued at face
value without reserve for bad debts. As set forth in Sections 3.22 and
3.23 hereof, respectively, Sellers guarantee such inventory and such
accounts receivable.
(b) Sellers and Ernst & Young, at Sellers' expense, shall have
the right to observe and review the audit by Grant Thornton and shall
have access to the workpapers, schedules, memoranda and other documents
prepared or reviewed by Grant Thornton in connection with such audit.
Sellers shall complete their review within thirty (30) days after
submission to them of the Final Balance Sheet. If Sellers agree with
the Final Balance Sheet, or if Sellers do not object to the same within
such thirty (30) day period, then such Final Balance Sheet shall be
deemed final and adopted by Sellers and Buyer.
(c) If Sellers believe that any amendment should be made to
the Final Balance Sheet they shall give the Buyer written notice of
such proposed amendments within the same thirty (30) day period set
forth in Section 2.5(b) above. If the Buyer agrees with the proposed
amendments, these shall be made and the Final Balance Sheet, as
amended, will be deemed final and adopted by Sellers and Buyer. If any
proposed amendments are disputed by the Buyer, the parties shall
negotiate in good faith to resolve all disputed amendments.
(d) If, after a period of thirty (30) days following the date
on which Sellers have given the Buyer written notice of any proposed
amendments, any such amendments still remain disputed, then the
disputed items shall be referred to an independent auditor, who shall
be one of Coopers & Lybrand or Deloitte & Touche, to be mutually agreed
between Sellers and Buyer or, failing such agreement within seven (7)
days after the expiration of the thirty (30) day period, to be
appointed at the request of either Sellers or Buyer by the President of
the American Institute of Certified Public Accountants, the decision of
which independent auditor shall be final and binding on the parties,
and shall be enforceable in a court of competent jurisdiction. The
expenses and fees of such independent auditor in resolving such
disputes shall be shared equally between the Buyer and Sellers, and,
with respect to Sellers, the allocation of any such expenses and fees
shall be made in proportion to their respective Ownership Percentages.
(e) Buyer shall cause New NNE to provide to such independent
auditor all necessary cooperation and access to its records, premises,
personnel and auditors in order to resolve promptly any dispute as
referred to in Section 2.5(d) above.
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(f) Within ten (10) days after the adoption of the Final
Balance Sheet as final, or at the Closing, whichever date is later, the
Purchase Price Adjustment, if any, shall be made as follows:
(i) in the event that the Final Total Equity
of the Company as shown on the Final Balance Sheet exceeds the
Base Total Equity, then Buyer shall pay to Sellers the full
amount of such excess by wire transfer in immediately
available funds to such account as has been designated in
writing to Buyer by Sellers;
(ii) in the event that the Final Total
Equity of the Company as shown on the Final Balance Sheet is
less than the Base Total Equity, then Sellers shall pay to
Buyer the full amount of such shortfall by wire transfer in
immediately available funds to such account as has been
designated in writing to Sellers by Buyer; and
(iii) with respect to any payment required to be made
pursuant to this Section 2.5(f), such payment shall be made to
or by Sellers, as the case may be, in accordance with their
respective Percentage Interests.
2.6 Contingent Consideration.
(a) Buyer shall cause New NNE to pay as contingent
consideration (the "Contingent Consideration") to each Seller, in
three, successive annual installments (the "Installments") on the first
business day of January in each year commencing January, 1997 and
ending January, 1999 (the "Installment Dates") such Seller's Ownership
Percentage of $666,666.66, subject to adjustment as follows (the
"Annual Payment"):
(i) the Annual Payment shall be reduced by one-half
of the amount by which Operating Profits, for the Earn-Out
Year ending immediately preceding the due date of such Annual
Payment, are less than $3,125,000.00;
(ii) the Annual Payment shall not be adjusted if
Operating Profits, for the Earn-Out Year ending immediately
preceding the due date of such Annual Payment, are in excess
of $3,124,999.99 and less than $3,325,000.01;
(iii) the Annual Payment shall be increased by
one-fourth of the amount by which Operating Profits, for the
Earn-Out Year ending immediately preceding the due date of
such Annual Payment, exceed $3,325,000.00; and
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(iv) Interest shall be payable quarterly, in arrears, on the
first day of each calendar quarter during the period ending
January 1, 1999, commencing April 1, 1995 from the Closing
Date at the rate of seven (7%) percent per annum, on the
unpaid amount, from time to time, of the Contingent
Consideration, based on each Annual Payment having a value of
$666,666.66. As of each Installment Date, Buyer shall adjust
interest payments hereunder to reflect any adjustment in an
Annual Payment. From and after any default in the payment by
New NNE of any Annual Payment, such interest shall accrue for
the default period only at the rate of twelve percent (12%)
per annum, compounded monthly, and in the event of any such
default, Buyer shall cause New NNE to pay on demand all
reasonable costs and expenses incurred by Sellers in
connection with the collection thereof, including, without
limitation, reasonable attorneys fees.
(b) If any of the events specified below in clauses
(b)(i) through (v) occurs and is continuing, the Sellers,
acting through the Seller's Representative, may declare the
unpaid Installments (valued at $666,666.66 each) together with
interest thereon to be immediately due and payable:
(i) New NNE defaults in any payment of any Annual
Payment or interest thereon due under Section 2.6(a) for more
than ten (10) days after the date when the same shall become
due and payable;
(ii) Buyer or New NNE sells substantially all of its assets;
(iii) Buyer or New NNE shall (i) apply for or consent
to the appointment of a receiver, trustee, custodian or
liquidator of it or any of its property, (ii) admit in writing
its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code, or
(v) file a voluntary petition in bankruptcy, or a petition or
an answer seeking reorganization or an arrangement with
creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any
proceeding under any such law or if corporate action shall be
taken for the purpose of effecting any of the foregoing;
(iv) an order, judgment or decree shall be entered,
without the application, approval or consent of the Buyer by
any court of competent jurisdiction, approving a petition
seeking reorganization of the Buyer or New NNE or appointing a
receiver, trustee, custodian or liquidator of the Buyer or New
NNE or of all or a substantial part of the assets of the Buyer
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or New NNE, and such order, judgment or decree shall continue
unstayed and in effect for any period of thirty (30) days; or
(v) Wayne Frerichs' employment with New NNE shall be
terminated by New NNE without cause, or, he shall have
voluntarily resigned at a time when New NNE shall be in
default under any material provision of his employment
agreement with New NNE.
(c) Buyer may prepay the principal amount of
all unpaid Installments (valued at $666,666.66 each) in cash,
at any time; provided, however, that such prepayment shall be
for the entire, outstanding amount thereof and for all accrued
and unpaid interest thereon up to the date of pre-payment,
without any reduction, plus (i), in the event of a prepayment
other than on an Installment Date, the amount which would be
calculated as payable under Section 2.6(a)(iii) if the
cumulative monthly Operating Profits of New NNE for the
portion of the Earn-Out Year ending with the month preceding
the prepayment are annualized to the extent such amount
exceeds $666,666.66, and (ii), if applicable, any amount
payable under Section 2.6(a)(iii) which has not been paid for
a completed Earn-Out Year.
(d) As used in this Section 2.6, the term "Operating
Profits" shall mean the operating earnings of New NNE prior to
giving effect to interest, income taxes, depreciation and
amortization, computed on the accrual basis of accounting
utilizing a FIFO costing method, in accordance with generally
accepted accounting principles ("GAAP") (and consistent with
the accounting principles applied by the Company in its prior
fiscal years), except that the following provisions shall
govern the computation of Operating Profits of New NNE for
purposes of this Section 2.6:
(i) Any extraordinary nonrecurring items of gain or
loss or expense shall be excluded from such computation.
(ii) Any loss, charge or expense (A) not related to
the ordinary business operations of New NNE, or (B) paid,
incurred or charged in connection with expansion of the
business operations presently conducted by the Company as a
result of the making of acquisitions of new businesses or the
opening and staffing of new operational facilities, shall be
excluded from such computation.
(iii) Any charge or expense for the amortization of
goodwill arising out of the fact that Buyer has purchased the
Shares or that the Purchase Price is in excess of the net
worth of the Company as of the Closing Date, shall be excluded
from such computation.
(iv) In the event of an election with respect to the
Company pursuant to Section 338 of the Internal Revenue Code
of 1986, as amended, such computation shall be made as though
no such election had been made.
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(v)Except with respect to (a) third party charges billed to New
NNE performed for New NNE with the prior written approval of
Frerichs, and (b) annual charges not to exceed $50,000 in the
aggregate for outside audit and corporate legal and accounting
services, charges or expenses for allocation of home office,
executive, consulting, general and administrative expenses or
other payments, charges or expenses of Buyer and/or its
affiliates shall be excluded from such computation.
(vi) To the extent that aggregate compensation paid
to individuals qualifying as plan participants under New NNE's
management bonus plan is in excess of $310,000 per annum (plus
annual 4% cost of living adjustments), such excess shall be
excluded from such computation.
(vii) Any transaction entered into by and between New
NNE and Buyer or any Affiliate of Buyer shall be deemed to
have occurred upon terms not less favorable to New NNE than
the terms used by New NNE with respect to its
"most-favored-customers" for the type of product or service
being provided.
(viii) Tooling costs for extrusion dies and related
items shall be capitalized for the purposes of such
computation.
(ix) Except as otherwise expressly provided above,
all amounts determined in accordance with subparagraphs (i)
through (viii) of this Section 2.6(b) shall be determined in
accordance with generally accepted accounting principles
consistently applied.
(e) Within thirty (30) days after the end of each
fiscal month in the Earn-Out Period, commencing with the
fiscal month ending in January, 1996, Buyer shall cause New
NNE to deliver to Sellers' Representative, as defined in
Section 8.2 below, the unaudited balance sheet and statement
of income and retained earnings and of cash flows of New NNE
as of the end of such month and for the portion of the
Earn-Out Year then ended. Such financial statements shall be
prepared in all material respects pursuant to and in
accordance with generally accepted accounting principles
applied on a consistent basis, except as specified in this
Section 2.6, subject to final year end adjustments.
(f) Commencing with the first Earn-Out Year and
continuing until January 1, 1999, as soon as may be
practicable after the last business day of each Earn-Out Year,
but not later than the first (1st) business day of each
January, Buyer will cause Grant Thornton, as auditor for New
NNE, to deliver to Sellers a statement setting forth in
reasonable detail its calculation of the Operating Profits of
New NNE for the immediately preceding Earn-Out Year and the
adjusted Annual Payment and interest thereon (which is due
quarterly) to be paid to Sellers pursuant to this Section 2.6.
The amount of such Annual Payment and interest thereon to be
made to each Seller shall be in proportion to his Ownership
Percentage and shall be made on the first (1st)
<PAGE>
business day of January by wire transfer of federal funds to
such Seller's bank account as set forth on Exhibit 2.4. If
within 30 days after delivery of such statement Sellers have
not given written notice to Buyer disputing such statement and
indicating the basis of such dispute, Buyer shall thereafter
have no further liability to Sellers under this Section 2.6
with respect to such Earn-Out Year. In the event Sellers give
Buyer such notice of dispute within such 30-day period,
Sellers and Buyer will use their best efforts to settle the
dispute within 30 days after the giving of such notice. If,
after a period of thirty (30) days following the date on which
Sellers have given the Buyer written notice of such dispute,
any such differences still remain unresolved, then the
disputed items shall be referred to an independent auditor,
who shall be one of Coopers & Lybrand or Deloitte & Touche, to
be mutually agreed on between Sellers and Buyer or, failing
such agreement within seven (7) days after the expiration of
the thirty (30) day period, to be appointed at the request of
either Sellers or Buyer by the President of the American
Institute of Certified Public Accountants, the decision of
which independent auditor shall be final and binding on the
parties, and shall be enforceable in a court of competent
jurisdiction. The expenses and fees of such independent
auditor in resolving such disputes shall be shared equally
between the Buyer and Sellers, and, with respect to Sellers,
the allocation of any such expenses and fees shall be made in
proportion to their respective Ownership Percentage. Buyer
shall cause New NNE to make any further payments to Sellers
required in order to comply with such decision within 10 days
after such decision is rendered, and such payments shall be
made in the manner as provided in this Section 2.6(f).
(g) Notwithstanding anything to the contrary
contained in this Agreement, Frerichs shall, until the end of
the Earn-Out Period (or until such earlier time as he shall
have died, become permanently disabled, voluntarily resigned
or his employment shall have been terminated for good cause),
be a director and the chief executive officer of New NNE, and
Buyer shall cause him to be so elected. If any of the events
set forth in the parenthetical in the preceding sentence shall
occur, and for so long as the Earn-Out Period has not expired,
the Sellers' Representative shall have the right to approve
New NNE's shareholders' selection of Frerich's successor as
chief executive officer of New NNE, which approval will not be
unreasonably withheld. Subject to the ultimate control and
responsibility of the Board of Directors of New NNE and of
Buyer as a majority stockholder, during the Earn-Out Period
Frerichs shall have the right to manage the business
operations and affairs of New NNE and shall direct the
execution of corporate plans, including, without limitation,
the hiring, retention or termination of employees and the
expansion of the Business. The Board of Directors of New NNE
shall have the authority, subject to Frerich's right of prior
written approval, to formulate long-term corporate plans and
acquisitions, to set compensation and fringe benefits and to
make commitments for capital expenditures. Buyer shall
cooperate with Frerichs in maintaining and increasing New
NNE's profitability. Prior to any sale or disposal by New NNE
of assets other than in the ordinary course of business, Buyer
shall first cause New NNE to receive the written consent of
Frerichs, which consent may be withheld at his discretion for
any reason.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers hereby represent and warrant to Buyer as
follows, which representations and warranties shall be true
and correct as of October 28, 1995 and as of the Closing Date
with respect to the representations set forth in Sections 3.1,
3.2. 3.3, 3.4, 3.5, 3.13 and 3.14:
3.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Massachusetts and has the corporate power
and authority to carry on its Business as now being conducted.
The Company is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in
which the operation of the Business requires such
qualification, except for failures, if any, to be so qualified
and in good standing which would not, when taken together with
all other such failures in the aggregate, have a Material
Adverse Effect. Sellers have, prior to the execution of this
Agreement, made available to Buyer, copies of the Articles of
Organization and By-laws of the Company, each in effect on the
date hereof.
3.2 Authorized Capitalization; Outstanding Stock. The
authorized capital stock of the Company consists of 200,000
shares of Common Stock, no par value per share, of which one
thousand (1,000) shares are issued and outstanding. Sellers
are the lawful owners of all right, title and interest in and
to all of the Shares, and have good and marketable title
thereto free and clear of any Liens. The Shares have been duly
authorized, are validly issued and are fully paid and
non-assessable. There are no outstanding rights, warrants,
options or agreements with respect to any class of capital
stock of the Company. The delivery of a certificate or
certificates representing the Shares in the manner specified
in Section 2.4(a) hereof will transfer to Buyer good and valid
title to the Shares, free and clear of Liens. Schedule 3.2
hereto sets forth the Sellers' ownership of Common Stock and
the Shares.
3.3 Subsidiaries. The Company has no subsidiaries.
3.4 Authority; Binding Effect.
(a) Each Seller has full power, authority and
capacity to execute this Agreement and perform the
transactions required of him at the Closing.
(b) The execution and delivery by each Seller of this
Agreement constitute the legal, valid and binding obligations
of such Seller enforceable against him in accordance with the
respective terms and provisions hereof and thereof, subject to
general equity principles and to applicable bankruptcy,
fraudulent transfer, insolvency, reorganization, moratorium
and other similar laws from time to time in effect affecting
the enforcement of creditors' rights generally (regardless of
whether such enforcement is considered in a proceeding in
equity or at law).
<PAGE>
3.5 Non-Contravention. Except as otherwise set forth
in Schedule 3.5 hereto, neither the execution and delivery of
this Agreement by Sellers nor the other documents and
instruments to be executed and delivered by Sellers pursuant
hereto nor the consummation by Sellers of the transactions
contemplated hereby or thereby (a) will violate any provision
of the Articles of Organization or By-laws of the Company or
(b) will violate or conflict with any applicable statute, law,
ordinance, rule, regulation, order, judgment or decree
applicable to the Company or the Business or (c) will conflict
with or constitute a default (or an event which with notice or
lapse of time or both, would constitute a default) under, or
will result in the termination of, or accelerate performance
required by, any Material Contract to which any of the
Company's assets or properties are subject or (d) will result
in the creation of any Lien upon the stock of the Company or
upon any of the property or assets of the Company with respect
to the Business. Sellers hereby agree and shall cause the
Company to agree that that certain Shareholder Agreement dated
as of March 4, 1992 by and among the Company and Sellers shall
be terminated as of the Closing Date upon the consummation of
the transactions contemplated by this Agreement.
3.6 Financial Statements. Except as reflected on the
Schedules attached hereto, the Financial Statements:
(a) are true, complete and correct in all material respects
and have been
prepared from the books and records kept by the Company;
(b) fairly and accurately present the properties, assets,
liabilities, financial positions and results of operations of the
Company as of the respective dates and for the respective periods
covered thereby; and
(c) have been prepared in all material respects pursuant to
and in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis.
The balance sheet of the Company as of February 25, 1995 is hereinafter
called the "Balance Sheet" and February 25, 1995 is hereinafter called
the "Balance Sheet Date."
3.7 Interim Changes. During the period from the Balance Sheet
Date through and including October 28, 1995, the Business has been
operated in the ordinary course in all material respects, and except as
set forth on Schedule 3.7, the Company has not (nor has it authorized
or proposed or entered into any contract, agreement, commitment or
arrangement to do any of the following):
(a) incurred or become subject to, or agreed to incur or
become subject to, any liability except current liabilities incurred in
the ordinary course of its business consistent with past practice;
<PAGE>
(b) sold, assigned, transferred, conveyed, leased or otherwise disposed
of any material assets or properties of the Company, except in the
ordinary course of business;
(c) entered into any other material transaction, contract or
commitment outside the ordinary course of business, except with respect
to the transactions contemplated by this Agreement;
(d) experienced any work stoppage with respect to the Business or
obtained Knowledge of any threatened or anticipated work stoppage; or
(e) suffered a Material Adverse Change.
3.8 Tangible Personal Property.
(a) The Company has good and marketable title to its owned
Tangible Personal Property free and clear of all Liens, except (i) as
shown on the Balance Sheet, (ii) Liens for current taxes and
assessments not yet delinquent or being contested in good faith by
appropriate proceedings, and (iii) such imperfections of title and
encumbrances, if any, which individually or in the aggregate do not
materially detract from the value of or materially interfere with the
current use of the properties subject thereto or affected thereby.
(b) All leases pursuant to which the Company leases as lessor
or lessee its leased Tangible Personal Property are in good standing
and are valid and binding in accordance with their respective terms,
and there is not under any of such leases any existing default, event
of default or event which with notice or lapse of time or both would
constitute a default, on the part of the Company or, to Company's
Knowledge, on the part of the Person to or from whom the Company leases
Tangible Personal Property. Except as set forth in Schedule 3.8(b)
attached hereto, none of the rights of the Company under any of such
leases is subject to termination or modification as the result of the
transactions contemplated by this Agreement.
3.9 Real Estate.
(a) The Company owns no real property.
(b) All leases and subleases pursuant to which the Company
leases real property as lessor or lessee are set forth on Schedule
3.9(b) (the "Leased Real Property"). The leases and subleases to which
the Company is a party are valid and binding in accordance with their
respective terms, and there is not, to the Knowledge of the Company,
under any of such leases or subleases any existing default, event of
default or event which with notice or lapse of time or both would
constitute a default, on the part of the Company or, to the Company's
Knowledge, on the part of the Person to or from whom the Company leases
the Leased Real Property. Except as set forth on Schedule 3.9(b), none
of the rights of the Company under any of such leases or subleases is
subject to termination or modification as the result of the
transactions contemplated by this Agreement.
<PAGE>
(c) To the Knowledge of the Company, there are no
encroachments upon the Leased Real Property and the improvements
situated upon such premises do not encroach upon or violate any rights
or way, easements or the lands of others. To the Knowledge of the
Company, the use of such premises by the Company and the conduct
therein of the Business of the Company do not violate any law, rule,
regulation or zoning or use ordinance of any governmental body of
authority in any material respect, and, in connection with such use and
conduct, there are no violations of law or rule with respect to water
supply, sewage or waste disposal facilities which would have a Material
Adverse Effect on the business and operations of the Company.
(d) To the Knowledge of the Company, the Company has not
received any Notice of any special assessment or condemnation from a
Governmental Entity with respect to any of the Leased Real Property
which would have a Material Adverse Effect.
3.10 Environmental Matters. Except as disclosed in Schedule
3.10 hereto,
(a) the Company has not received any Notice of any claim,
action or proceeding brought, asserted or threatened by any Person or
Governmental Entity alleging or finding any violation of any
Environmental Laws with respect to any of the Leased Real Property;
(b) the Company has received no Notice that, and has no
Knowledge that, any polychlorinated biphenyls, perchloroethylene,
trichloroethylene or asbestos- containing materials are or have been
present at any of the Leased Real Property, and there are no
Underground Storage Tanks at any of the Leased Real Property;
(c) the Company has received no Notice of and has no Knowledge
of the imposition of any Environmental Liens on any of the Leased Real
Property and the Company has received no Notice of and has no Knowledge
of any government actions which have been taken or are in process which
could subject any of the Leased Real Property to such Environmental
Liens;
(d) since March, 1992, there have been no environmental
inspections, investigations, studies, audits, tests, reviews or other
analyses conducted on behalf of the Company in relation to any of the
Leased Real Property;
(e) the Company has not received any Notice that any portion of the
Leased Real Property is located in a special flood hazard area; and
(f) the Company has received no Notice that it has been named
as a "potentially responsible party" with respect to any site pursuant
to CERCLA.
(g) the lessor of the Leased Real Property will not be able to establish any
indemnification obligations of the Company, with respect to Environmental
<PAGE>
Liabilities, that may become due under that certain commercial lease
agreement set forth in Schedule 3.9(b).
(h) During the term of the Lease described in Section 3.9(b),
there has been no "release" as defined in 42 U.S.C. ss.9601(22) or, to
the knowledge of the Sellers, threat of a "release" of any Hazardous
Substance on, from or under the Leased Real Property.
3.11 Intellectual Property Rights.
(a) Schedule 3.11 (a) hereto lists as of the date hereof: (i)
all registered Intellectual Property Rights, together with applications
therefor that are pending or in the process of preparation, in the
United States of America and in foreign countries; and (ii) all
licenses and other agreements allowing Company to use Intellectual
Property Rights of third parties.
(b) To the Knowledge of the Company, the Company is the sole
and exclusive owner of the Intellectual Property Rights, free and clear
of any claims or Liens.
(c) To the Knowledge of the Company, none of such Intellectual
Property Rights infringes upon the rights of any third party in the
United States of America, nor to the Knowledge of the Company, does any
use by any third party in the United States of America infringe upon
any of the Intellectual Property Rights, and there are no claims
Pending in connection with any such infringement with respect to the
Intellectual Property Rights.
(d) The Company has not received any Notice that any of the
processes or products of the Company infringe upon any Intellectual
Property Rights of any third party.
3.12 Litigation. Except as set forth in Schedule 3.12 hereto,
there are no actions, suits or proceedings by or before any court or
Governmental Entity Pending or, to the Knowledge of the Company,
threatened by or against the Company or involving or affecting the
Business or any of its assets which have or would have a Material
Adverse Effect. From and after October 28, 1995, any liabilities the
Company may suffer or incur in connection with the Resource Logic claim
described in Schedule 3.12 shall be for the account of the Company or
its successors and no reserves for any such liabilities shall be
reflected on the Final Balance Sheet. To the extent the Company, or New
NNE with the prior written consent of Wayne Frerichs, or of Sellers'
Representative in Frerichs' absence, shall pay Resource Logic
commissions with respect to sales by the Company through October 28,
1995, which commissions were not paid on or prior to such date, the
Sellers shall reimburse New NNE or Buyer for the amount of such
payment, and shall reimburse New NNE for all costs and expenses
incurred by New NNE in excess of the amount of such commissions
calculated with respect to sales after October 28, 1995 and up to May
31, 1996.
<PAGE>
3.13 Tax Matters.
(a) All returns with respect to Taxes of the Company,
including estimated tax returns and other information returns,
declarations and reports, which are required to be filed have been duly
and timely filed with the appropriate Governmental Entities for all
periods ending on or before the Closing Date. All Taxes shown as due
and owing on such returns and reports have been paid in full.
(b) There is no action, suit, proceeding, audit or claim now
Pending or, to the Knowledge of the Company, investigation Pending,
regarding any Taxes relating to the income, properties or operations of
the Company or the Business.
(c) There are no tax sharing agreements or arrangements to
which the Company is now or ever has been a party.
(d) There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any return of the
Company for any period with respect to any Tax.
(e) None of Sellers is a "foreign person" within the meaning
of section 1445(b)(2) of the Code.
(f) Since March, 1992, the Company has been qualified as an S
corporation within the meaning of section 1361(a)(1) of the Code (and
under any comparable state or local law under which the Company is
eligible for analogous treatment) (the "S Election"). The Sellers will
take no action to terminate or revoke the S Election before the Closing
Date.
(g) Since the date of its incorporation, the Company has never
been included as a member of any consolidated, affiliated, combined, or
unitary tax return.
3.14 Consents and Approvals. Except as set forth in Schedule
3.14 hereto, no consent, approval or authorization of any
non-governmental third party, and no consent, approval, authorization
or declaration of, or filing or registration with, any Governmental
Entity is required to be made or obtained by the Company in connection
with the execution and delivery of this Agreement or the sale of the
Shares contemplated hereby, other than (i) the Shareholder Agreement
described in Section 3.5 hereof and (ii) any such consents, approvals,
authorizations, declarations, filings or registrations which, if not
made or obtained, would not have a Material Adverse Effect.
3.15 Compliance with Applicable Law. The Company has all
licenses, permits, approvals, and other authorizations as are
reasonably necessary in order to enable it to own and conduct the
Business as currently conducted, except where the failure to obtain any
such license, permit, approval or other authorization would not, either
individually or in the aggregate, have a Material Adverse Effect. To
the Knowledge of the Company, the operations of the Business are in
compliance with all federal, state and local ordinances, rules and
regulations affecting the Business, except where such violations,
defaults or noncompliance would not have a Material
<PAGE>
Adverse Effect. Except as set forth in Schedule 3.15 hereto, neither
the Company nor any of the Sellers has received written Notice of any
violation of, or liability or responsibility under, any applicable
federal, state, or local rule, regulation, order or decree relating to
the Business, and neither the Company nor any of the Sellers has
received Notice of any threatened claim of such a violation, liability
or responsibility (including any investigations relating thereto).
3.16 Certain Agreements. As used in this Agreement, "Material
Contracts" shall mean: (a) each employment agreement not terminable
within one hundred eighty (180) days and requiring annual payments in
excess of Fifty Thousand Dollars ($50,000.00); (b) each capital
construction contract requiring payment over the remainder of its term
in excess of Fifty Thousand Dollars ($50,000.00); (c) each loan
agreement or other financing arrangement (other than sales of goods or
services to the Company calling for full payment within not less than
ninety (90) days after the invoiced date) requiring payments over the
remainder of its term in excess of One Hundred Thousand Dollars
($100,000.00); (d) each contract with a customer requiring the
commitment by the Company of more than ten percent (10%) of its
manufacturing capacity over any one (1) year period; (e) each contract
with a supplier not terminable within one hundred eighty (180) days and
requiring annual payments or payments over the remainder of its term in
excess of One Hundred Thousand Dollars ($100,000.00); (f) each lease of
Tangible Personal Property requiring annual payments in excess of Fifty
Thousand Dollars ($50,000.00); (g) the leases of Leased Real Property
set forth on Schedule 3.9(b) hereto; (h) each service agreement
requiring annual payments in excess of Fifty Thousand Dollars
($50,000.00); (i) all collective bargaining agreements, and (j) all
licensing agreements which are material to the Business. All Material
Contracts are in full force and effect and are valid and binding,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity). Except as set forth on
Schedule 3.16 hereto, the Company is not in default, nor does the
Company have Knowledge that any other party thereto is in default, nor
has the Company waived any material rights under any material term of
any of the Material Contracts. A true and complete copy of each
Material Contract has been made available to Buyer.
3.17 Employee Benefit Plans.
(a) Schedule 3.17(a) hereto lists all Company Plans. The
Company has delivered or made available to Buyer true and complete
copies of each Company Plan. No Company Plan (i) invests in or
maintains any holdings in any stock or security of the Company or any
ERISA Affiliate or (ii) is a "multiemployer plan" as defined in Section
3(37) of ERISA.
(b) The Company does not maintain or participate in any
Company Plan which is intended to qualify under Sections 401(a) or
403(a) of the Code, or, other than a group health plan, is subject to
ERISA.
3.18 Transactions with Affiliates. Except as set forth in
Schedule 3.18 hereto, the Company (a) has no outstanding contract,
agreement or other arrangement with Sellers or any Affiliate of Sellers
and (b) since the Balance Sheet Date, has not engaged in any
transaction with
<PAGE>
Sellers or any Affiliate of Sellers, except in the ordinary course of
business and upon terms not less favorable to the Company than the
terms historically used by the Company with respect to its
"most-favored-customers."
3.19 Insurance. Each insurance policy currently in effect that
insures the Business or the operations or employees of the Company with
respect to the Business or affects or relates to the ownership, use or
operation of any of the assets or properties of the Company with
respect to the Business and that has been issued to or for the benefit
of the Company is listed on Schedule 3.19 hereto and is in full force
and effect, the premiums due thereunder have been paid as they became
due and payable and neither the Company nor any of the Sellers has
received any notice of cancellation or termination in respect of any
such policy or is in default thereunder in any material respect.
3.20 Labor Relations. As of the date hereof, no work stoppage
against the Business is Pending, or to the Knowledge of the Company, is
threatened. The Company is not involved in nor, to the Knowledge of the
Company, threatened with any labor dispute, arbitration, lawsuit or
administrative proceeding relating to labor matters involving any of
the employees of the Company with respect to the Business (excluding
workers' compensation claims which, in the aggregate, would not have a
Material Adverse Effect).
3.21 Location of Off Site Assets. Set forth on Schedule 3.21
is a description of assets of the Company and the respective locations
thereof, which are not located on the Leased Real Property.
3.22 Inventory. All inventory of the Company which shall be
reflected on the Final Balance Sheet shall have been acquired in the
ordinary course of business and consistent with the Company's prior
practice. Such inventory is of good and merchantable quality and will
be usable or saleable in the ordinary course of its business within the
twelve-month period commencing October 29, 1995. To Sellers' Knowledge,
the Company is not under any liability or obligation with respect to
the return or repurchase of any goods in the possession of customers
except for amounts which are not material and are consistent with
historical levels of returns and allowances.
3.23 Accounts Receivable. The accounts receivable of the
Company as set forth on the Final Balance Sheet shall be valid and
genuine and shall be collectible within the twelve-month period
commencing October 29, 1995, provided that payments from any customer
shall be applied as specified by the customer, or if unspecified, to
the oldest, unpaid invoices with respect to such customer.
3.24 Final Total Equity. The Final Total Equity shall not be
less than $1,708,796.00.
3.25 Disclosure. No statement contained in any certificate,
schedule, or other instrument specified in this Agreement, whether
heretofore furnished to Buyer or hereafter required to be furnished to
Buyer, contains or will contain any untrue statement of a material fact
or omits or
<PAGE>
will omit to state a material fact necessary to make the statements
contained therein not misleading.
3.26 Credit Arrangements. Other than listed on Schedule 3.26,
there are no bonds, guarantees, notes, sureties, letters of credit, or
other similar credit agreements or debt obligations that exist with
respct to the Company, its business or any of its assets. The Company
is not in default on the payment of any principal or interest on any
indebtedness for borrowed money, nor is the Company otherwise in
default under any indemnity, fidelity or contract bond or letter of
credit, note, guarantee or other credit agreement or debt obligation or
instrument.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to each Seller as
follows:
4.1 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power and authority
to carry on its business as now being conducted. Buyer has, prior to
the execution of this Agreement, made available to Sellers, copies of
its Articles of Incorporation and By-laws, each as in effect on the
date hereof.
4.2 Authority; Binding Effect. Buyer has the necessary
corporate power and authority to enter into this Agreement and the
other documents and instruments to be executed by Buyer pursuant hereto
and to consummate the transactions contemplated hereby and thereby. The
Board of Directors of Buyer has duly authorized the execution and
delivery of this Agreement and the other documents and instruments to
be executed and delivered by Buyer pursuant hereto and the consummation
of the transactions contemplated hereby and thereby. No other corporate
action or proceeding on the part of Buyer is necessary to authorize
this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation by Buyer of
the transactions contemplated hereby and thereby. When fully executed
and delivered, this Agreement and each of the other documents and
instruments to be executed and delivered by Buyer pursuant hereto will
constitute valid and binding agreements of Buyer enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now
or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally and subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.3 Non-Contravention. Neither the execution and delivery of
this Agreement by Buyer nor the other documents and instruments to be
executed and delivered by Buyer pursuant hereto nor the consummation by
Buyer of the transactions contemplated hereby and thereby (a) will
violate any provision of the Articles of Incorporation or By-laws of
Buyer or (b) will violate or conflict with any applicable statute, law,
ordinance, rule, regulation, order, judgment or decree applicable to
Buyer or (c) will conflict with or constitute a default (or an event
which with notice or lapse of time or both, would constitute a default)
under, or will result in the termination of, or
<PAGE>
accelerate performance required by, any material contract, commitment,
understanding, arrangement, agreement or restriction of any kind
binding upon Buyer, or to which any of Buyer's assets or properties are
subject which would have a Material Adverse Effect on Buyer or (d) will
result in the creation of any Lien upon any of Buyer's assets or
properties which would have a Material Adverse Effect on Buyer.
4.4 Consents and Approvals. No consent, approval or
authorization of any non-governmental third party, and no consent,
approval, authorization or declaration of, or filing or registration
with, any Governmental Entity is required to be made or obtained by the
Buyer in connection with the execution and delivery of this Agreement
by the Buyer or the consummation by the Buyer of the transactions
contemplated hereby, other than any such consents, approvals,
authorizations, declarations, filings or registrations which, if not
obtained or made, would not have a material adverse effect on the
Buyer's ability to consummate the transactions contemplated hereby.
4.5 Purchase for Investment. The Shares will be acquired by
Buyer for its own account for the purpose of investment. Buyer will
refrain from transferring or otherwise disposing of any of the Shares
or any interest therein, in such manner as to cause Sellers or the
Company to be in violation of the registration requirements of the
Securities Act of 1933, as amended, or applicable state securities or
blue sky laws.
4.6. Financing. As of the Closing, Buyer will have the
financial capacity to perform all
of its obligations under this Agreement.
ARTICLE V
FURTHER AGREEMENTS OF THE PARTIES.
5.1 Conduct of Business prior to Closing. Between October 29,
1995 and the Closing, Sellers shall cause the Company to carry on its
Business in the ordinary course, and consistent with prior practice.
Without limiting the foregoing, except as contemplated by this
Agreement, Sellers shall not cause or permit the Company to (and shall
not cause or permit the Company to authorize or propose or enter into
any contract, agreement, commitment or arrangement to do any of the
following):
(i) except as otherwise set forth on Schedule 5.1 hereto,
split, combine or reclassify any capital stock or issue any other
security in respect of, in lieu of or in substitution for shares of the
Company's capital stock, or repurchase, redeem or otherwise acquire any
shares of capital stock of the Company;
(ii) issue, deliver, pledge, encumber, sell, or purchase any
shares of the Company's capital stock or securities convertible into,
or rights, warrants or options to acquire, any shares of capital stock
or other convertible securities of the Company, other than the Shares;
<PAGE>
(iii) acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock or
assets of, or by any other manner, any business, corporation,
partnership, association or other business organization, or any
division thereof;
(iv) amend the Articles of Organization or By-laws of the Company;
(v) mortgage, pledge or subject to any mortgage, pledge, lien,
charge or other encumbrance of any kind any of the Company's assets,
other than pursuant to existing Liens or in the ordinary course of
business;
(vi) grant any increase in the compensation of any officers of
the Company other than in the ordinary course of business and
consistent with past practice (it being agreed that payment of
management bonuses prior to December 31, 1995 in connection with the
plan described in Schedule 3.17(a) is in the ordinary course of
business);
(vii) enter into any employment or compensation agreement with
any officer or employee of the Company (other than in connection with
the hiring of new employees (but not pursuant to written employment
agreements) in the ordinary course of business) or terminate the
employment of any officer or employee of the Company (other than in the
ordinary course of business);
(viii) modify, cancel or establish any Company Plan in regard to any of
the current employees of the Company;
(ix) cancel or compromise any claim or liability of the
Business other than in the ordinary course of business, other than the
Resource Logic claim described in Schedule 3.12;
(x) make, pay or declare any dividends or make other
distributions to Sellers in respect of their ownership of Shares except
as otherwise agreed to herein and except that the Company may pay
expenses of Sellers related to transactions contemplated hereby if all
such payments are reimbursed to the Company at or prior to the Closing;
(xi) acquire or commit to acquire any capital asset having a cost in excess
of $100,000;
(xii) take any actions, other than in the ordinary course of
business, which would restrict the availability of, or these services
performed by, the current employees of its Company;
(xiii) sell all or substantially all the assets of the Company; or
<PAGE>
(xiv) terminate any insurance policy currently in effect that
insures the Business unless it is replaced by similar insurance
coverage.
5.2 Maintenance of Corporate Existence. Prior to the Closing,
Sellers shall cause the Company to maintain its corporate existence and
good standing in its jurisdiction of incorporation.
5.3 Access to Information. Prior to the Closing, Buyer may
make such investigation of the Business and properties of the Company
as Buyer may desire, and upon reasonable Notice, Sellers shall give to
Buyer and its counsel, accountants and other representatives reasonable
access, during normal business hours throughout the period prior to the
Closing, to the property, books, commitments, agreements, records,
files and personnel of the Company, and Sellers shall furnish to Buyer
during that period all copies of documents and information concerning
the Company and the Business as Buyer may reasonably request subject to
applicable law. Buyer shall hold, and shall cause its counsel,
accountants, other agents and representatives, and prospective lenders
to hold, all such information and documents in a confidential capacity.
Buyer agrees that all such information and documents will be used by it
solely for the purpose of its studies, analyses and other work with
respect to consummating the transactions contemplated by this Agreement
and will be returned promptly, or destroyed by Buyer, as Sellers may
request, in the event the Closing does not take place under this
Agreement.
5.4 [Intentionally Omitted] .
5.5 Expenses. Except as otherwise specifically provided in
this Agreement, Buyer and Sellers shall bear their own respective
expenses incurred in connection with this Agreement and in connection
with all obligations required to be performed by each of them under
this Agreement.
5.6 Publicity. Buyer and Sellers shall consult with each other
before issuing any press release concerning the transactions
contemplated by this Agreement and, except as may be required by
applicable law or rules of a national security exchange, will not issue
a press release prior to such consultation. If Buyer or Sellers are so
required to issue a press release such party shall use its best efforts
to inform the other prior to issuing it.
5.7 Liability. Except to the extent of Sellers'
indemnification obligations under Article VIII of this Agreement, and
except as set forth in Section 3.12 hereof with respect to Resource
Logic, Buyer hereby acknowledges and agrees that Sellers shall have no
further liability for any debt or obligation of the Company, whether
liquidated or unliquidated and whether accrued or contingent.
5.8 Section 338 Elections.
(a) Sellers and Buyer agree to execute Internal Revenue
Service Form 8023-A as required by this Section 5.8 and to jointly and
timely file an election under Section 338(h)(10) of
<PAGE>
the Code with respect to the purchase of the Shares. Sellers agree to
pay any federal, state and local income taxes imposed on or measured by
income imposed pursuant to applicable law resulting solely from such
election.
(b) Without limiting the effect of Section 5.8(a), if no joint
election is made under Section 338(h)(10) of the Code with respect to
the purchase of the Shares, Buyer shall be liable for and hereby agrees
to indemnify Sellers for any and all liability for Taxes imposed on
Sellers or New NNE attributable, directly or indirectly, to any
elections made by Buyer pursuant to Section 338(g) of the Code.
(c) Buyer shall attach Internal Revenue Service Form 8023-A,
executed by the Sellers and the Buyer, to the Company's federal income
tax return for the taxable year which ends on the Closing Date and New
NNE's Federal income tax return for the taxable year which begins
immediately after the Closing Date. Buyer shall attach Internal Revenue
Service Form 8023-A, executed by the Sellers and Buyer, to its Federal
income tax return for the taxable year which includes the Closing Date.
In the event that a joint election is made under Section 338(h)(10) of
the Code with respect to the purchase of the Shares, Buyer and Sellers
agree that the Purchase Price reflects the fair market value of the
assets of the Company deemed sold pursuant to such election and the
Purchase Price shall be allocated among the assets as set forth in
Schedule 5.8(c) hereto (the "Purchase Price Allocation"). Buyer also
agrees to report or cause New NNE to report, and the Sellers agree to
report, the deemed sale of the Company's assets in a manner consistent
with the Purchase Price Allocation issued pursuant to this Section
5.8(c).
(d) Sellers and Buyer acknowledge that each has independently
consulted with its own respective tax advisors concerning the tax
consequences of an election under Section 338(h)(10) of the Code, and
neither party has any recourse against the other with respect to the
actual tax effect thereof.
(e) Sellers and Buyer agree that the obligations specified in
this Section 5.8 shall be modified as necessary to reflect adjustments
of the Purchase Price as requred by Section 7.4.
5.9 Brokers. Sellers, in proportion to their respective
Ownership Percentage, will indemnify and hold harmless Buyer in respect
of any and all claims or demands for commission, compensation, or other
damages by any broker, finder, or other agent (whether or not a present
or former employee or agent of Sellers or the Company) claiming to have
been engaged by Sellers or the Company in connection with the
transactions contemplated by this Agreement, and Sellers, in proportion
to their respective Ownership Percentage, will bear the cost of the
reasonable out-of-pocket expenses incurred by Buyer in investigating,
defending against, or appealing any such claim. Buyer will indemnify
and hold harmless each Seller in respect of any and all claims or
demands for commission, compensation, or other damages by The First
National Bank of Boston and any other broker, finder or agent (whether
or not a present or former employee or agent of Buyer) claiming to have
been engaged by Buyer in connection with the transactions contemplated
by this Agreement, and Buyer will bear the cost of the reasonable
out-of-pocket expenses incurred by each Seller in investigating,
defending against, or appealing any such claim.
<PAGE>
5.10 Reassignment of Accounts Receivable. Buyer shall exert
all reasonable efforts to collect the accounts receivable set forth on
the Final Balance Sheet. In the event Seller shall be required to make
payments to Buyer pursuant to the indenmification set forth in Section
8.1 of this Agreement with respect to the failure to collect such
accounts receivable as a result of the breach of Sellers'
representation and warranty set forth in Section 3.23 hereof, the
rights to all such uncollected accounts receivable shall be transferred
and assigned to Sellers.
5.11 Further Assurances. Subject to the terms and conditions
herein provided, each of the Sellers and Buyer agrees to use his or its
reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement.
5.12. Transition Fee. At the Closing, Buyer shall pay to
Sellers pro rata in accordance with their respective Percentage
Interest, a transition fee totalling $58,000.
ARTICLE VI
CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of Sellers. The obligations of
Sellers to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of
each of the following further conditions, unless Sellers, in their sole
discretion, shall waive such fulfillment:
(a) Representations and Warranties. Each of the representations and
warranties of Buyer contained in this Agreement shall be true and
correct in all material respects as of the date hereof and at and as of
the Closing with the same force and effect as if made as of the
Closing, and Sellers shall have received from Buyer a certificate of an
authorized executive officer of Buyer to such effect.
(b) Covenants. All covenants contained in this Agreement to be
complied with by the Buyer on or before the Closing shall have been
complied with in all material respects, and Sellers shall have received
from Buyer a certificate of an authorized executive officer of Buyer to
such effect.
(c) Opinion of Buyer's Counsel. Sellers shall have received,
within five (5) days of the execution of this Agreement, an opinion of
Baker & McKenzie, counsel to the Buyer, dated as of the date hereof,
substantially in the form of Exhibit 6.1(c) hereto.
<PAGE>
(d) No Litigation. No suit, action or other proceeding shall be Pending or
threatened before any court or Governmental Entity seeking to restrain,
prohibit or to obtain damages or other relief in connection with, or as
a consequence of, this Agreement or the consummation of the
transactions contemplated hereby.
(e) Resolutions. Sellers shall have received from Buyer
certified copies of resolutions duly adopted by the Board of Directors
of the Buyer and New NNE authorizing the execution and performance of
this Agreement and the documents and transactions contemplated hereby
and thereby.
(f)Charter Documents. Sellers shall have received from Buyer (i) a copy
of the charter documents of each of New NNE and Buyer, certified by an
authorized executive officer of each of New NNE and Buyer,
respectively, and (ii) a copy of the by-laws of each of New NNE and
Buyer, certified by an authorized executive officer of each of New NNE
and Buyer, respectively, to be true and complete as of the Closing.
(g) Certificate of Good Standing. Buyer shall have delivered
to Sellers a certificate issued by the Secretary of State, or its
equivalent, of the state of incorporation of Buyer and New NNE,
evidencing the good standing of the Buyer and New NNE in such
jurisdictions.
The agreements, certificates, documents and opinion described
in subparagraphs (c), (e), (f) and (g) above shall be delivered to
Sellers upon the execution and delivery of this Agreement.
6.2 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of
each of the following further conditions, unless Buyer, in its sole
discretion, shall waive such fulfillment:
(a) Representations and Warranties. Each of the representations and
warranties of each of the Sellers contained in this Agreement shall be true and
correct in all material respects as of October 28, 1995 and Buyer shall
have received from Sellers a certificate to such effect.
(b) Covenants. All covenants contained in Sections 2.1,
2.4(a), 5.1, 5.2 and 5.3 of this Agreement to be complied with by
Sellers on or before the Closing shall have been complied with in all
material respects and the Buyer shall have received from Sellers a
certificate to such effect.
(c) Opinion of Counsel. Buyer shall have received an opinion of
Edwards & Angell, counsel to Sellers, date as of the Closing,
substantially in the form of Exhibit 6.2(c) hereto.
<PAGE>
(d) No Litigation. No suit, action or other proceeding shall be Pending
or threatened before any court or Governmental Entity seeking to
restrain, prohibit or to obtain damages or other relief in connection
with, or as a consequence of, this Agreement or the consummation of the
transactions contemplated hereby.
(e) IRS Form W-9. Each of Sellers shall have delivered to
Buyer a duly executed IRS Form W-9.
ARTICLE VII
TAXES.
Sellers and Buyer agree as follows:
7.1 Tax Covenants. Within ninety (90) days after the Closing
Date, Sellers will cause to be prepared, at the Sellers' expense, the
Company's income tax returns for the 1995 calendar year.
7.2 Tax Indemnities.
(a) Each Seller, in an amount proportionate to his Ownership
Percentage, will be liable for and will indemnify, defend and hold
harmless Buyer, New NNE, or any successor corporation thereto or
Affiliate thereof from and against all income taxes of the Company
(except to the extent such income taxes are adequately reserved for on
the Closing Balance Sheet) with respect to (i) all years or periods of
the Company ending on or prior to the Closing Date, and (ii) all years
or periods beginning before the Closing Date and ending after the
Closing Date to the extent that the income taxes are allocable to the
operations of the Company on or prior to the Closing Date determined on
the basis of the Company's permanent financial records.
(b) Buyer shall indemnify, defend and hold harmless each
Seller from and against all Taxes with respect to all years or periods
of New NNE beginning after the Closing Date, and with respect to all
years or periods beginning before the Closing Date and ending after the
Closing Date to the extent Taxes are allocable to the operations of New
NNE after the Closing Date determined on the basis of New NNE's
permanent financial records. In addition, Buyer shall indemnify, defend
and hold harmless each Seller from and against all Taxes (i) payable by
New NNE or any Seller as a result of an election (or deemed election)
under Section 338 of the Code or any comparable provision of state or
local law with respect to a qualified stock purchase of the Company by
Buyer with respect to which a Code Section 338(h)(10) election is not
made, or (ii) payable as a result of any events occurring on the
Closing Date, but after the consummation of the transactions
contemplated by this Agreement, that are the result of actions taken by
Buyer that are outside the ordinary course of business.
(c) Buyer and Sellers agree that if the Company is permitted
but not required under applicable state or local income tax laws to
treat the Closing Date as the last day of a taxable
<PAGE>
period, Buyer and Sellers shall cause the Company to treat such day as
the last day of a taxable period.
(d) Any taxable period which ends on the Closing Date shall
include the operations of the Company through the close of business on
December 31, 1995. Any Taxes for a taxable period beginning before the
Closing Date and ending after the Closing Date with respect to the
Company or New NNE, as the case may be, shall be apportioned among
Sellers and Buyer, in accordance with each Sellers' Ownership
Percentage and with the Buyer, respectively, based on the actual
operations of the Company or New NNE, as the case may be, during the
portion of such period ending at the close of business on December 31,
1995 and the portion of such period beginning on the day after the
Closing Date as determined on the basis of the Company's permanent
financial records.
7.3 Conveyance Taxes. Buyer agrees to assume liability for and
to pay all sales, transfer, stamp, real property transfer and similar
taxes incurred as a result of the sale of the Shares. Buyer agrees to
file all required tax returns and reports due in connection with the
Taxes assumed under this Section 7.3.
7.4 Purchase Price Adjustments. Sellers and Buyer agree to
treat all payments made under Article II, Article VII or Article VIII
hereof as adjustments to the Purchase Price for Tax purposes, and such
adjustments shall be made pursuant to the provisions of Treasury
Regulations section 1.338(b)-3T, as well as other relevant provisions
of section 338 of the Code and the regulations thereunder. Moreover,
Buyer shall prepare revisions to Schedule 5.8(c) hereto to reflect such
adjustments, and shall timely forward such revised schedule to Sellers.
Buyer and Sellers further agree to timely make all filings as may be
required by any or all of them by any relevant taxing jurisdictions to
reflect such adjustments and to file all tax returns in a manner
consistent with such adjustments.
ARTICLE VIII
INDEMNIFICATION.
8.1 Indemnification.
(a) Subject to the provisions of this Agreement, Sellers,
severally in proportion to such Seller's respective Ownership
Percentage agree to indemnify and hold Buyer and its Affiliates,
predecessors, successors and assigns (and their respective officers,
directors, employees and agents) harmless from and against and in
respect of any liability, actions, suits, proceedings, demands,
assessments, judgments, loss, claim, damages, costs and expenses,
including reasonable attorneys' and experts' fees and costs of
investigation and analysis (collectively, "Damages"), with respect to
any misrepresentation, breach of warranty or covenant or non-
fulfillment of any agreement on the part of Sellers under the terms of
this Agreement or in any closing document executed by Sellers
hereunder. With respect to any indemnity claim made against the Sellers
hereunder, the amount of such claim that each Seller shall be liable
for shall be proportionate to such Seller's Ownership Percentage.
Notwithstanding anything in this
<PAGE>
Agreement to the contrary, if any Seller breaches the representations
and warranties set forth in the second, third and fifth sentence of
Section 3.2 hereof, such breach shall be the sole responsibility of
such Seller.
(b) Subject to the provisions of this Agreement, Buyer agrees
to indemnify and hold Sellers and their successors and assigns harmless
from and against and in respect of any Damages, with respect to the
following:
(i) any misrepresentation, breach of warranty or covenant, or
non- fulfillment of any agreement on the part of Buyer under the terms
of this Agreement or in any closing document executed by Buyer
hereunder; and
(ii) the operation of the Company, New NNE and the Business on
and after the Closing Date, excluding any claims which may be made
against any Seller who becomes an employee of Buyer or New NNE arising
with respect to any events after the Closing in connection with such
employment.
(c) Anything contained in this Agreement to the contrary
notwithstanding, (i) Sellers shall not be liable for any amounts for
which the Buyer is otherwise entitled to indemnification pursuant to
Article VII hereof or this Article VIII until the aggregate amount for
which Buyer is entitled to indemnification under all such claims for
indemnification under the aforesaid Articles in the aggregate exceed
One Hundred Thousand Dollars ($100,000.00) (the "Threshold"), at which
time Sellers shall be liable for any such excess, and (ii) Sellers
shall not be required to make indemnification payments pursuant to
Article VII hereof or this Article VIII to the extent indemnification
payments thereunder and hereunder would exceed in the aggregate Four
Million Dollars ($4,000,000.00) (the "Maximum Indemnification Amount")
and provided, further, that the maximum aggregate liability of the
Sellers with respect to claims for indemnification made hereunder after
the eighteen (18) months following the Closing Date shall be limited to
the amount of contingent consideration payable pursuant to Section 2.6
hereof. In determining the foregoing Threshold and in otherwise
determining the amount to which Buyer is entitled to assert a claim for
indemnification pursuant to Article VII hereof or this Article VIII,
only actual losses, net of all tax benefits, and no consequential or
other special damages or losses shall be indemnifiable. Both parties
hereto waive any claim to exemplary or punitive damages.
(d) The obligation of Sellers to indemnify under Section
8.1(a) above shall only be with respect to indemnity claims made by
Buyer within eighteen (18) months after the Closing Date, except that
indemnity claims with respect to Section 3.2, costs and expenses
incurred by New NNE in connection with the termination of Resource
Logic as provided in Section 3.12, and tax indemnity claims under
Section 7.2(a), may be made within the statute of limitations period
specified by applicable law. Any indemnification payment that becomes
due and owing to Buyer pursuant to this Article VIII shall be satisfied
first by off-set against the aggregate amount due of the Contingent
Consideration, such off-set to be made pro rata in accordance with
Sellers' respective Ownership Percentage.
<PAGE>
(e) Promptly after receipt by an indemnified party under this
Section 8.1 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8.1, notify the
indemnifying party in writing of the claim or the commencement of that
action stating in reasonable detail the nature and basis of such claim
and a good faith estimate of the amount thereof, provided that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to the indemnified party unless and only to
the extent such failure prejudices the ability of the indemnifying
party to defend against or mitigate damages arising out of such claim.
If any claim shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party
shall be entitled to participate therein, and to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party,
and to settle and compromise any such claim or action. After notice
from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party
shall not be liable for other expenses subsequently incurred by the
indemnified party in connection with the defense thereof; provided,
however, that if the indemnifying party elects not to assume such
defense, the indemnified party may retain counsel satisfactory to it
and to defend, compromise or settle such claim on behalf of and for the
account and risk of the indemnifying party, and the indemnifying party
shall pay all reasonable fees and expenses of such counsel for the
indemnified party promptly as statements therefore are received; and,
provided, further, that the indemnified party shall not consent to
entry of any judgment or enter into any settlement or compromise
without the written consent of the indemnifying party which consent
shall not be unreasonably withheld. Buyer and Sellers each agree to
render to each other such assistance as may reasonably be requested in
order to insure the proper and adequate defense of any such claim or
proceeding. The indemnified party shall also have the right to select
its own counsel, at its own expense, to represent the indemnified party
and to participate in the defense of such claim, as applicable.
8.2 Sellers' Representative. The Sellers hereby authorize and
direct Weener to act as Sellers' Representative and to make any and all
decisions to be made and to take or omit to take any and all actions
which may be made or be taken by Sellers under this Agreement,
including, without limitation, making, compromising or paying claims
for indemnification as contemplated by Section 8.1 and taking all
actions with respect to the determination of the Tax Liability Amount
and Final Balance Sheet. All out-of-pocket expenses incurred by Weener
in acting on behalf of Sellers with respect to such matters shall be
shared among all Sellers in proportion to their respective Ownership
Percentage to the extent that the amount of such expenses are not fully
recovered from Buyer.
8.3 Remedies Exclusive. The remedies provided in this Article
VIII and Section 10.3 of this Agreement shall be the exclusive remedies
of the parties hereto from and after the Closing in connection with any
breach of a representation or warranty, or non-performance, partial or
total, or any covenant or agreement contained herein. The provisions of
this Article VIII shall apply to claims for indemnification asserted as
between the parties hereto as well as to third-party claims.
<PAGE>
ARTICLE IX
TRANSACTIONS SUBSEQUENT TO CLOSING.
9.1 Preservation of Books and Records. Sellers acknowledge and
agree that from and after the Closing, Buyer shall be entitled to
possession of all documents, books, records and financial data of any
sort relating exclusively to New NNE, the Company and the Business. At
all reasonable times after the Closing, Buyer shall make available
without cost, for inspection and/or copying by Sellers, such books and
records. Such books and records shall be preserved by Buyer for a
period of at least six (6) years after the Closing Date.
Notwithstanding the foregoing, in the case of all books and records
relating to Taxes, Buyer shall maintain such books and records until
the later of (i) eight (8) years or (ii) the expiration of the statute
of limitations of the taxable periods to which such books and records
relate, including extensions to the extent notified by Sellers of such
extensions.
9.2 Cooperation in Litigation. Each of Sellers and Buyer shall
provide the other with cooperation as may reasonably be requested, at
the expense of the requesting party (unless the requesting party is to
be indemnified with respect thereto in which case such cooperation
shall be given at the expense of the indemnifying party), in connection
with the defense of any litigation whether existing on the Closing Date
or arising thereafter out of, or relating to, an occurrence or event
happening before, on or after the Closing Date, including without
limitation by making available all books and records relating thereto
and all employees having Knowledge of the matters in controversy.
9.3 Other Cooperation. After the Closing, each of Sellers and
Buyer shall, and shall cause its appropriate personnel to, provide the
other, at the expense of the requesting party, in the normal and
customary manner with financial, accounting, tax, and other information
requested covering periods of operation of the Business up to the
Closing Date. Buyer agrees, and shall cause New NNE and any successors
and assigns to agree, to timely provide to Sellers, but in any event
within thirty (30) days after Sellers' request, the information
relating to the Business up to the Closing Date, which customarily has
been provided to Sellers in connection with the preparation of any and
all returns or reports with respect to Taxes required to be filed by
Sellers with any Governmental Entity and in connection with the conduct
of any audit, action, proceeding or other determinations with respect
to Taxes; and, in substantially the form in which such information has
customarily been provided in the past. Buyer agrees, and shall cause
New NNE and any successors and assigns to agree, without expense to
Sellers and upon the request of Sellers, promptly to make available to
Sellers all work papers and records (or copies thereof), relating to
the Business up to the Closing Date, as well as the services of any
personnel reasonably necessary and, to execute all necessary powers of
attorney to enable Sellers to prepare and file any and all returns or
reports with respect to Taxes which Sellers are required to file;
and/or, in connection with the conduct of all audits, actions,
proceedings or other determinations with respect to Taxes.
9.4 No Other Representations. Sellers make no representations
or warranties whatsoever, express or implied, with respect to the
Business or condition of the Company or its assets and
<PAGE>
properties, the transactions contemplated hereby or any related matter,
except for those representations and warranties contained herein.
Without limitation as to the foregoing, Buyer acknowledges that Sellers
make no representations or warranties with respect to any financial
projection or forecast relating to the Business. Buyer further
acknowledges that it conducted an investigation of the Company and the
Business prior to the Closing Date and had an opportunity to ask
Sellers any questions rising from such investigation. With respect to
any projection or forecast delivered by or on behalf of the Company to
Buyer, Buyer acknowledges that (i) there are uncertainties inherent in
attempting to make such projections, (ii) it is taking full
responsibility for making its own evaluation of the adequacy and
accuracy of all such projections and forecasts furnished to it and
(iii) it shall have no claim against Sellers or its representatives,
stockholders, officers, directors, employees, agents or Affiliates with
respect thereto.
ARTICLE X
TERMINATION.
10.1 Termination. Subject to the provisions of Section 10.2,
if the Closing shall not have occurred by the close of business on
January 2, 1996, this Agreement may be terminated by written notice
given by Buyer or Sellers to the other, provided, however, that either
Buyer or Sellers may, upon notice to the other parties, terminate this
Agreement if all of Jeffrey J. Panek, Frerichs and McCrill have not
executed employment agreements within five (5) days from the date of
this Agreement with the Buyer or New NNE to be effective at the
Closing. Nothing contained in this Section 10.1 shall relieve any party
of any liability for a breach of this Agreement.
10.2 Cure. Notwithstanding anything to the contrary contained
in Section 10.1, if Buyer intends to terminate this Agreement on
account of any breach or default by Sellers hereunder, Buyer shall
notify Sellers and, if the Sellers shall represent to Buyer that they
are diligently seeking to cure any such breach or default, Sellers
shall have the right to postpone the Closing for a period not to exceed
thirty days during which Sellers shall have the right to cure such
breach or default.
10.3 Specific Performance. The obligations of the Sellers and
Buyer under this Agreement are unique. If either the Sellers or Buyer
should default in their obligations under this Agreement, the Sellers
and Buyer acknowledge that it would be extremely impracticable to
measure the resulting damages. Accordingly, the Sellers and Buyer may,
in addition to any other available rights or remedies, sue in equity
for specific performance, and hereby expressly waive the defense that a
remedy in damages will be adequate.
<PAGE>
ARTICLE XI
GENERAL.
11.1 Amendment and Waiver. No amendment of any provision of
this Agreement shall in any event be effective, unless the same shall
be in writing and signed by the parties hereto. Any failure of any
party to comply with any obligation, agreement or condition hereunder
may only be waived in writing by the other party but such waiver shall
not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. No failure by any party to take any action against
any breach of this Agreement or default by the other party shall
constitute a waiver of such party's right to enforce any provision
hereof or to take any such action.
11.2 Notices. Any notices or other communications required to
be given pursuant to this Agreement shall be in writing and shall be
deemed given: (i) upon delivery, if by hand; (ii) three (3) Business
Days after mailing, if sent by registered or certified mail, postage
prepaid, return receipt requested; (iii) one (1) Business Day after
mailing, if sent by express mail or air courier; or (iv) upon
transmission, if sent by telex or facsimile (provided that a
confirmation copy is sent in the manner provided in Section 11.2(ii) or
(iii) above within thirty six (36) hours after such transmission),
except that if notice is received by telex or facsimile after 5:00 p.m.
on a Business Day at the place of receipt, it shall be effective as of
the following Business Day. All notices hereunder shall be given as
follows:
(a) If to Buyer:
Mestek, Inc.
280 North Elm Street
Westfield, MA 01086
Attention: John E. Reed, President
Fax: (413) 568-7428
(b) If to Sellers:
Nucon Capital Corporation
225 Franklin Street
Boston, MA 02110
Attention: David H. Weener
Fax: (617) 338-2150
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: Richard M.C. Glenn III, Esq.
Fax: (401)276-6611
<PAGE>
Any party may change its address for receiving notice by
written notice given to the other names above in the manner
provided above.
11.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
Agreement.
11.4 Parties in Interest. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective
heirs, successors and assigns. This Agreement shall not be
assignable by any party without the prior written consent of the
other party, except that Buyer may assign this Agreement to any
wholly-owned Affiliate of Buyer, in which event, the
representations and warranties contained in Article IV hereof
shall be deemed amended to refer also to such assignee, and
provided further that such assignment shall not release Buyer
from its liabilities with respect to any obligations hereunder
or in connection with any breach of any representation, warranty
or covenant under this Agreement, whether by Buyer or its
assignee and whether before or after the Closing Date. Any
attempted assignment of this Agreement in breach of this
provision shall be void and of no effect.
11.5 Entire Agreement. This Agreement, together with the
exhibits and schedules attached hereto and the other agreements
and documents referenced herein, contains the entire agreement
and understanding of the parties hereto with respect to the
matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement
are merged herein and are superseded and canceled by this
Agreement. This Agreement may not be modified except in writing,
signed by both of the parties. hereto.
11.6 Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of
the Commonwealth of Massachusetts, without giving effect to the
principles of conflicts of laws thereof.
11.7 Dispute Resolution. Except as provided in Sections
2.5(d), 2.6 (g) and 10.3 of this Agreement, any controversy or
claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by
majority decision of the three arbitrators may be entered in any
court having jurisdiction thereof. The site of the arbitration
shall be Boston, Massachusetts. The arbitrators shall award
reimbursement of attorneys' fees and other costs of arbitration
to the prevailing party, in such manner as the arbitrators shall
deem appropriate. In addition, the losing party shall reimburse
the prevailing party for attorneys' fees and disbursements and
court costs incurred by the prevailing party in successfully
seeking any preliminary equitable relief or judicially enforcing
any arbitration award.
11.8 Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not
affect any way the meaning or interpretation of this Agreement.
<PAGE>
11.9 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or entity other than the parties hereto and their
affiliates, successors or assigns, any rights or remedies under
or by reason of this agreement.
11.10. Severability. In the event that any provision of this
Agreement is declared by a court of competent jurisdiction or
arbitration tribunal to be void or unenforced, the parties
hereto expressly agree that such void or unenforceable provision
shall be deemed severed from this Agreement, and the remainder
of this Agreement shall not be affected thereby and shall remain
in full force and effect to the extent feasible in the absence
of the void and unenforceable provision. The parties furthermore
agree to execute and deliver such amendatory contractual
provisions to accomplish lawfully as nearly possible the goals
and purposes of the provision so held to be void or
unenforceable.
11.11 Confidentiality. TheThe Buyer shall treat all documents
and information furnished to it by Sellers or the Company in
connection with Buyer's due diligence, which is not available to
the general public, as confidential, and in the event the
Closing shall not occur, Buyer shall return all such documents
and information to the Company and shall not keep any copies
thereof.
IN WITNESS WHEREOF, this Agreement has been duly executed by
or on behalf of each of the parties hereto as of the date first
above written.
MESTEK, INC.
By: JOHN E. REED
Name: John E. Reed
Title: President
DAVID H. WEENER
David H. Weener
JON M. MORRISON
Jon M. Morrison
WAYNE FRERICHS
Wayne Frerichs
MARK MCCNILL
Mark McCrill
<PAGE>
STOCK PURCHASE AGREEMENT
BY AND AMONG
MESTEK, INC.
AND
DAVID H. WEENER, JON M. MORRISON,
WAYNE FRERICHS AND MARK MCCRILL
DATED: OCTOBER 30, 1995
<PAGE>
THIS AGREEMENT is made and entered into as of the 30th day of October,
1995 by and among Mestek, Inc., a Pennsylvania corporation ("Buyer"), and David
H. Weener ("Weener"), Jon M. Morrison ("Morrison"), Wayne Frerichs ("Frerichs")
and Mark McCrill ("McCrill") (collectively the "Sellers" and each individually a
"Seller").
WHEREAS, Sellers are the owners of all of the issued and outstanding
capital stock of National Southeast Aluminum Corporation, a Florida corporation
(the "Company"), which is engaged in the business of manufacturing, fabricating,
processing, grinding, buying and selling of aluminum and articles made therefrom
(the "Business"); and
WHEREAS, the issued and outstanding capital stock of the Company
consists of two thousand (2,000) shares of Common Stock ("Common Stock"), $.01
par value per share, and the ownership by Sellers of such outstanding Common
Stock is as set forth on Schedule 3.2 attached hereto; and
WHEREAS, Sellers wish to sell to Buyer, and Buyer wishes to purchase
from Sellers, 830 of such shares of Common Stock (the "Shares") from the
Sellers, as described on said Schedule 3.2, for the consideration and on the
terms and conditions contained in this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the meanings set forth below:
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is under common control with or is
controlled by, that Person. For purposes of this definition, "control"
(including 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.
"Annual Payment" has the meaning set forth in Section 2.6(a) hereof.
"Balance Sheet" has the meaning set forth in Section 3.6 hereof.
"Balance Sheet Date" has the meaning set forth in Section 3.6 hereof.
<PAGE>
"Base Total Equity" shall be One Hundred Thirty Two Thousand Ninety
Eight Dollars ($132,098.00).
"Business" has the meaning set forth in the recitals of this Agreement.
"Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks are required or permitted to close
by law in the State of Massachusetts.
"CERCLA" has the meaning set forth in the definition of "Environmental
Laws".
"Closing" has the meaning set forth in Section 2.3 hereof.
"Closing Date" has the meaning set forth in Section 2.3 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in the recitals to this
Agreement.
"Company" has the meaning set forth in the recitals to this Agreement.
"Company Plans" means all Employee Benefit Plans maintained,
contributed to or sponsored by the Company for the benefit of any
current or former employee, officer or director of the Company.
"Contingent Consideration" has the meaning set forth in Section 2.6(a)
hereof.
"Damages" has the meaning set forth in Section 8.1(a) hereof.
"Earn-Out Period" means the three-year period commencing
October 29, 1995 and ending on October 31, 1998, or, if such date is
not the end of a fiscal month, on the last day of the fiscal month
ending closest to October 31, 1998.
"Earn-Out Year" means each of the first three twelve-month
periods commencing on the first day of the fiscal month in each year
closest to November 1, and ending on the last day of the fiscal month
in each year ending closest to the last day of October. The first
Earn-Out Year shall commence October 29, 1995.
"Employee Benefit Plan" means any employee benefit plan as
defined in Section 3(3) of ERISA, and each other employee benefit
program, policy, agreement, arrangement or payroll practice, whether or
not subject to ERISA that (a) provides any bonus, commission, profit
sharing, incentive, change in control,
<PAGE>
severance or termination benefit, or that is a payroll policy, fringe
benefit, deferred compensation or similar arrangement or (b) is a
collective bargaining agreement.
"Environmental Laws" means the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C., ss.9601, et seq.,
as amended ("CERCLA"), the Resource Conservation and Recovery Act, 42
U.S.C. ss.6901, et seq., as amended, the Clean Air Act, 42 U.S.C. ss.
7401 et seq., as amended, the Clean Water Act, 33 U.S.C ss.1251, et
seq., the Toxic Substance Control Act, 15 U.S.C ss.2601 et seq., the
Occupational Safety and Health Act, as amended, and all other federal,
state and local laws, regulations and ordinances relating to pollution
or protection of the environment.
"Environmental Liabilities" means any action, suit or
proceeding in connection with (i) the use of the Leased Real Property
by the Company on or prior to October 28, 1995 for the storage,
treatment, generation, transportation, processing, handling, production
or disposal of any hazardous or polluting substance or waste; (ii)
human exposure to any Hazardous Substance, noises, vibrations or
nuisances of whatever kind to the extent the same arise from the use of
the Leased Real Property by the Company on or prior to October 28,
1995; (iii) a violation of any applicable Environmental Laws or
non-compliance with any environmental permit relating to the Leased
Real Property by the Company on or prior to October 28, 1995; (iv) any
demand letters or other notification received by the Company prior to
October 28, 1995 from any Governmental Entity in connection with any
investigation or clean-up of hazardous or polluting substances or waste
Releases sent directly or indirectly by the Company prior to October
28, 1995 to any site listed or formally proposed for listing on the
National Priority List promulgated pursuant to CERCLA or the
Comprehensive Environmental Response, Compensation and Liability
Information System or to any site listed on any state list of hazardous
substances sites requiring investigation or clean-up.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means any Person which together with Sellers
or the Company would be considered a member of the same "controlled
group" or under "common control" within the meaning of Section 414(b)
or (c) of the Code.
"Ernst & Young" means Ernst & Young LLP, the independent auditors of
the Company.
"Estimated Tax Liability Amount" shall mean the product of the
Tax Rate times the Seller's Estimated Short Period Taxable Income.
<PAGE>
"Final Balance Sheet" has the meaning set forth in Section 2.5(a) hereof.
"Final Total Equity" means the amount by which the book value
of the Company's assets exceeds the book value of the Company's
liabilities, as reflected on the Final Balance Sheet.
"Financial Statements" means (i) the Company's unaudited
balance sheet as of July 29, 1995, and the related unaudited statements
of income and retained earnings and cash flows for the period then
ended, and (ii) the Company's audited balance sheet as of December 31,
1994, and the related audited statements of income and cash flows for
the year then ended, reported on by Ernst & Young, copies of all of
which have been delivered to Buyer.
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government,
whether federal, state or local, domestic or foreign.
"Grant Thornton" means Grant Thornton LLP, the independent auditors of
Buyer.
"Hazardous Substance" has the meaning set forth in 42 U.S.C. ss.9601,
paragraph 14, provided, however, that it also includes "hazardous waste" as
defined in 42 U.S.C. ss.9603, paragraph 5 and "petroleum" as defined in 42
U.S.C. ss.6992, paragraph 8.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the related regulations and published
interpretations.
"Installment" has the meaning set forth in Section 2.6(a) hereof.
Installment Date" has the meaning set forth in Section 2.6(a) hereof.
"Intellectual Property Rights" means all of the Company's
right, title and interest in and to all the trademarks, service marks,
patents, copyrights, processes of every kind and description, designs,
manufacturing and technical know-how and information, drawings,
specifications, operational sheets, engineering records, production and
technical data, operating manuals, tests, formulas, instructions,
computer data, printouts and software, specifications and drawings
supplied by suppliers or prospective suppliers and customers or
prospective customers of the Company, trade names, trade secrets and
similar properties (including all registrations, renewals or
applications for registration or renewal of any of them, in each case
whether completed, pending or in the process of preparation), in the
United States and in other countries, now or previously used, acquired
or
<PAGE>
developed by or for the Company, together with the goodwill of the
Company's business associated with the foregoing.
"Knowledge" means the actual knowledge of an individual of a
fact, circumstance or situation. The Knowledge of the Company shall be
limited to the Knowledge of Sellers and any other officers of the
Company.
"Leased Real Property" has the meaning set forth in Section 3.9(b) hereof.
"Lien" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, mortgage, lien, option, pledge, right of
others, or restriction (whether on voting, sale, transfer, disposition,
use or otherwise), whether imposed by agreement, understanding, law,
equity or otherwise.
"Material Adverse Change" means a change that has a Material Adverse
Effect.
"Material Adverse Effect" means any effect that is, or series
of effects that are, in the aggregate, materially adverse to the
financial condition of the Company.
"Material Contracts" has the meaning set forth in Section 3.16 hereof.
"Maximum Indemnification Amount" has the meaning set forth in
Section 8.1(c) hereof.
"New NNE" means National Northeast Corpoation, a Delaware
corporation and the surviving or resulting corporation, as the case may
be, of the merger or consolidation involving New NNE and the Company,
which shall occur immediately following the Closing.
"Notice" means actual notice received by an individual of a
fact, or circumstance or situation. Notice to the Company shall in each
case be limited to Notice to any of the Sellers and any other officers
of the Company.
"Operating Profits" has the meaning set forth in Section 2.6(d) hereof.
"Ownership Percentage" has the meaning set forth in Schedule 3.2.
"Pending" means with respect to any action, suit or
proceeding, a Seller or the Company has received Notice of the service
of any summons or complaint against the Company, has Notice that a
summons or complaint has been issued for service, or with respect to
any governmental investigation or proceeding, a Seller or the Company
has received Notice that such investigation or proceeding has commenced
or will be commenced within a reasonable period of time, or with
<PAGE>
respect to any claim or cause of action, a Seller or the Company has
received Notice of a specific demand in writing that the Company either
pay damages and compensation or cease or desist from a specified course
of conduct.
"Percentage Interests" has the meaning set forth in Schedule 3.2.
"Person" means an individual, sole proprietorship,
corporation, partnership, limited liability company, joint venture,
trust, unincorporated organization, mutual company, joint stock
company, estate, union, employee organization, bank, trust company,
land trust, business trust or other organization, or a Governmental
Entity.
"Purchase Price" has the meaning set forth in Section 2.2 hereof.
"Purchase Price Allocation" has the meaning set forth in Section 5.8(c)
hereof.
"Purchase Price Adjustment" has the meaning set forth in Section 2.5
hereof.
"Release" has the same meaning and definition as set forth in 42 U.S.C.
ss.9601, paragraph 22.
"Removal" has the same meaning and definition as set forth in 42 U.S.C.
ss.9601, paragraph 23.
"Seller's Estimated Short Period Taxable Income" shall mean an
estimate of each Seller's Short Period Taxable Income made as of the
Closing Date.
"Seller's Representative" has the meaning set forth in Section 8.2 hereof.
"Seller's Short Period Taxable Income" shall mean each
Seller's pro rata share (determined under Section 1366 of the Code) of
the taxable income of the Company allocable (in accordance with Section
1362(e)(1) of the Code and Section 1362(e)(6)(D) of the Code to the
period from October 29, 1995 through December 31, 1995 (excluding the
income tax consequences of the Section 338(h)(10) election referred to
in Section 5.8 hereof.)
"Shares" has the meaning set forth in the recitals of this Agreement.
"Tangible Personal Property" means furniture, fixtures,
equipment, machinery, vehicles, supplies, inventories, materials,
apparatus, tools, implements, appliances and other tangible personal
property of every kind and description.
<PAGE>
"Taxes" means any federal, state, local, foreign and other income,
gross receipts, profits, franchise, capital stock, employees' income
withholding, back-up withholding, social security, unemployment,
disability, real property, personal property, license, sales, use,
excise, transfer, customs, payroll, withholdings, employment,
occupation and other taxes or governmental duties, fees or charges,
including any interest, penalties or additions on or to the foregoing.
"Tax Liability Amount" shall mean the product of the Tax Rate
times the Seller's Short Period Taxable Income.
"Tax Rate" shall mean 44%.
"Threshold" has the meaning set forth in Section 8.1(c) hereof.
"Underground Storage Tank" has the same meaning and definition
as set forth in paragraph (1) of 42 U.S.C ss.6991, and shall also
include tank for storing motor fuel, tank used for storing heating oil,
pipeline facility, surface impoundment, pond or lagoon, storm water or
waste water collection system, flow-through process tank, liquid trap
or associated gathering lines directly related to oil or gas production
and gathering operations.
ARTICLE II
PURCHASE AND SALE OF SHARES.
2.1 Purchase and Sale of Shares. On the terms and subject to
the conditions of this Agreement, at the Closing referred to in Section
2.3 hereof, Sellers shall convey, transfer, assign and deliver to the
Buyer, free and clear of all Liens, and Buyer shall purchase from
Sellers, the Shares.
2.2. Purchase Price. The aggregate purchase price payable
hereunder to Sellers by Buyer
shall be Four Million Nine Hundred and Eighty Thousand Dollars
($4,980,000.00) (the "Purchase Price"), subject to the Purchase Price
Adjustment as provided in Section 2.5. below. The Purchase Price,
subject to the Purchase Price Adjustment, shall be paid to the Sellers
pro rata in accordance with their respective Percentage Interests.
2.3 Time and Place of Closing. The consummation of the
transactions contemplated hereby (the "Closing") shall be effective as
of 12:01 a.m. on January 1, 1996 (the "Closing Date") and shall take
place at the offices of Edwards & Angell, 101 Federal Street, Boston,
Massachusetts, or at such other place as is mutually agreed upon by
Sellers and Buyer, at 10:00 a.m. on January 2, 1996. Each party hereto
agrees to use its best efforts to cause the Closing to be consummated.
2.4 Closing.
<PAGE>
(a) At the Closing, Sellers shall deliver to Buyer:
(i) certificates representing all the Shares, duly endorsed in blank
or accompanied by duly executed stock powers; and
(ii) the closing documents described in Section 6.2 hereof.
(b) At the Closing, Buyer shall deliver:
(i) to Sellers, pro rata in accordance with their
respective Percentage Interests, the Purchase Price by wire
transfer of federal funds to such Sellers' respective bank
accounts as set forth on Exhibit 2.4; and
(ii) to Sellers, the closing documents described in Section 6.1
hereof.
(c) At the Closing, the Sellers shall submit to Buyer their
calculation of the Estimated Tax Liability Amount in respect of each
Seller. At the Closing, Buyer shall pay as additional purchase price to
each Seller the amount of his respective Estimated Tax Liability
Amount.
(d) As soon as reasonably practicable after the Closing, Buyer
will notify Sellers of its calculation of their respective Tax
Liability Amounts. Sellers and Buyer shall negotiate in good faith to
resolve any dispute as to the calculation of the Tax Liability Amount.
If Sellers and Buyer are unable to resolve any such dispute, any such
disputed items shall be submitted for resolution in accordance with the
provisions of Section 2.5(d). As applicable, within five (5) business
days following final determination of the Tax Liability Amount, either
(i) Buyer shall pay to Sellers cash equal to the excess of their
respective Tax Liability Amount over their respective Estimated Tax
Liability Amount, or (ii) Sellers shall pay to Buyer cash equal to the
excess of their respective Estimated Tax Liability Amount over the Tax
Liability Amount.
2.5 Purchase Price Adjustment. The Purchase Price shall be
subject to adjustment, if any, as specified in this Section 2.5 (the
"Purchase Price Adjustment").
(a) Within ninety (90) days after the date hereof, the Buyer
shall submit to Sellers an audited balance sheet of the Company as of
October 28, 1995 (the "Final Balance Sheet"). The Final Balance Sheet
shall be prepared by Grant Thornton, at Buyer's expense, on a year-end
basis and in accordance with generally accepted accounting principles
("GAAP"), consistent with those applied in the Financial Statements,
provided, however, that (i) the Final Balance Sheet shall not be
affected by any election made under Section 338(h)(10) of the Code in
accordance with the provisions of Section 5.8 hereof, (ii) all
inventory
<PAGE>
(including supplies, raw materials, work-in-process and finished goods)
shall be valued on a FIFO basis at lower of cost or market without
reserve for obsolete or slow-moving inventory, (iii) property, plant
and equipment that existed at July 29, 1995 shall continue to be valued
at the book value as of such date and property, plant and equipment
purchased subsequent to July 29, 1995 shall be valued at cost and (iv)
accounts receivable shall be valued at face value without reserve for
bad debts. As set forth in Sections 3.22 and 3.23 hereof, respectively,
Sellers guarantee such inventory and such accounts receivable.
(b) Sellers and Ernst & Young, at Sellers' expense, shall have
the right to observe and review the audit by Grant Thornton and shall
have access to the workpapers, schedules, memoranda and other documents
prepared or reviewed by Grant Thornton in connection with such audit.
Sellers shall complete their review within thirty (30) days after
submission to them of the Final Balance Sheet. If Sellers agree with
the Final Balance Sheet, or if Sellers do not object to the same within
such thirty (30) day period, then such Final Balance Sheet shall be
deemed final and adopted by Sellers and Buyer.
(c) If Sellers believe that any amendment should be made to
the Final Balance Sheet they shall give the Buyer written notice of
such proposed amendments within the same thirty (30) day period set
forth in Section 2.5(b) above. If the Buyer agrees with the proposed
amendments, these shall be made and the Final Balance Sheet, as
amended, will be deemed final and adopted by Sellers and Buyer. If any
proposed amendments are disputed by the Buyer, the parties shall
negotiate in good faith to resolve all disputed amendments.
(d) If, after a period of thirty (30) days following the date
on which Sellers have given the Buyer written notice of any proposed
amendments, any such amendments still remain disputed, then the
disputed items shall be referred to an independent auditor, who shall
be one of Coopers & Lybrand or Deloitte & Touche, to be mutually agreed
between Sellers and Buyer or, failing such agreement within seven (7)
days after the expiration of the thirty (30) day period, to be
appointed at the request of either Sellers or Buyer by the President of
the American Institute of Certified Public Accountants, the decision of
which independent auditor shall be final and binding on the parties,
and shall be enforceable in a court of competent jurisdiction. The
expenses and fees of such independent auditor in resolving such
disputes shall be shared equally between the Buyer and Sellers, and,
with respect to Sellers, the allocation of any such expenses and fees
shall be made in proportion to their respective Ownership Percentages.
(e) Buyer shall cause New NNE to provide to such independent
auditor all necessary cooperation and access to its records, premises,
personnel and auditors in order to resolve promptly any dispute as
referred to in Section 2.5(d) above.
<PAGE>
(f) Within ten (10) days after the adoption of the Final Balance Sheet
as final, or at the Closing, whichever date is later, the Purchase
Price Adjustment, if any, shall be made as follows:
(i) in the event that the Final Total Equity
of the Company as shown on the Final Balance Sheet exceeds the
Base Total Equity, then Buyer shall pay to Sellers the full
amount of such excess by wire transfer in immediately
available funds to such account as has been designated in
writing to Buyer by Sellers;
(ii) in the event that the Final Total
Equity of the Company as shown on the Final Balance Sheet is
less than the Base Total Equity, then Sellers shall pay to
Buyer the full amount of such shortfall by wire transfer in
immediately available funds to such account as has been
designated in writing to Sellers by Buyer; and
(iii) with respect to any payment required to be made
pursuant to this Section 2.5(f), such payment shall be made to
or by Sellers, as the case may be, in accordance with their
respective Percentage Interests.
2.6 Contingent Consideration.
(a) Buyer shall cause New NNE to pay as contingent
consideration (the "Contingent Consideration") to each Seller, in
three, successive annual installments (the "Installments") on the first
business day of January in each year commencing January, 1997 and
ending January, 1999 (the "Installment Dates") such Seller's Ownership
Percentage of $666,666.66, subject to adjustment as follows (the
"Annual Payment"):
(i) the Annual Payment shall be reduced by one-half
of the amount by which Operating Profits, for the Earn-Out
Year ending immediately preceding the due date of such Annual
Payment, are less than $3,125,000.00;
(ii) the Annual Payment shall not be adjusted if
Operating Profits, for the Earn-Out Year ending immediately
preceding the due date of such Annual Payment, are in excess
of $3,124,999.99 and less than $3,325,000.01;
(iii) the Annual Payment shall be increased by
one-fourth of the amount by which Operating Profits, for the
Earn-Out Year ending immediately preceding the due date of
such Annual Payment, exceed $3,325,000.00; and
<PAGE>
(iv) Interest shall be payable quarterly, in arrears, on the
first day of each calendar quarter during the period ending
January 1, 1999, commencing April 1, 1995 from the Closing
Date at the rate of seven (7%) percent per annum, on the
unpaid amount, from time to time, of the Contingent
Consideration, based on each Annual Payment having a value of
$666,666.66. As of each Installment Date, Buyer shall adjust
interest payments hereunder to reflect any adjustment in an
Annual Payment. From and after any default in the payment by
New NNE of any Annual Payment, such interest shall accrue for
the default period only at the rate of twelve percent (12%)
per annum, compounded monthly, and in the event of any such
default, Buyer shall cause New NNE to pay on demand all
reasonable costs and expenses incurred by Sellers in
connection with the collection thereof, including, without
limitation, reasonable attorneys fees.
(b) If any of the events specified below in clauses
(b)(i) through (v) occurs and is continuing, the Sellers,
acting through the Seller's Representative, may declare the
unpaid Installments (valued at $666,666.66 each) together with
interest thereon to be immediately due and payable:
(i) New NNE defaults in any payment of any Annual
Payment or interest thereon due under Section 2.6(a) for more
than ten (10) days after the date when the same shall become
due and payable;
(ii) Buyer or New NNE sells substantially all of its assets;
(iii) Buyer or New NNE shall (i) apply for or consent
to the appointment of a receiver, trustee, custodian or
liquidator of it or any of its property, (ii) admit in writing
its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code, or
(v) file a voluntary petition in bankruptcy, or a petition or
an answer seeking reorganization or an arrangement with
creditors or to take advantage of any bankruptcy,
reorganization, insolvency, readjustment of debt, dissolution
or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any
proceeding under any such law or if corporate action shall be
taken for the purpose of effecting any of the foregoing;
(iv) an order, judgment or decree shall be entered,
without the application, approval or consent of the Buyer by
any court of competent jurisdiction, approving a petition
seeking reorganization of the Buyer or New NNE or appointing a
receiver, trustee, custodian or liquidator of the Buyer or New
NNE or of all or a substantial part of the assets of the Buyer
<PAGE>
or New NNE, and such order, judgment or decree shall continue
unstayed and in effect for any period of thirty (30) days; or
(v) Wayne Frerichs' employment with New NNE shall be
terminated by New NNE without cause, or, he shall have
voluntarily resigned at a time when New NNE shall be in
default under any material
provision of his employment agreement with New NNE.
(c) Buyer may prepay the principal amount of
all unpaid Installments (valued at $666,666.66 each) in cash,
at any time; provided, however, that such prepayment shall be
for the entire, outstanding amount thereof and for all accrued
and unpaid interest thereon up to the date of pre-payment,
without any reduction, plus (i), in the event of a prepayment
other than on an Installment Date, the amount which would be
calculated as payable under Section 2.6(a)(iii) if the
cumulative monthly Operating Profits of New NNE for the
portion of the Earn-Out Year ending with the month preceding
the prepayment are annualized to the extent such amount
exceeds $666,666.66, and (ii), if applicable, any amount
payable under Section 2.6(a)(iii) which has not been paid for
a completed Earn-Out Year.
(d) As used in this Section 2.6, the term "Operating
Profits" shall mean the operating earnings of New NNE prior to
giving effect to interest, income taxes, depreciation and
amortization, computed on the accrual basis of accounting
utilizing a FIFO costing method, in accordance with generally
accepted accounting principles ("GAAP") (and consistent with
the accounting principles applied by the Company in its prior
fiscal years), except that the following provisions shall
govern the computation of Operating Profits of New NNE for
purposes of this Section 2.6:
(i) Any extraordinary nonrecurring items of gain or
loss or expense shall be excluded from such computation.
(ii) Any loss, charge or expense (A) not related to
the ordinary business operations of New NNE, or (B) paid,
incurred or charged in connection with expansion of the
business operations presently conducted by the Company as a
result of the making of acquisitions of new businesses or the
opening and staffing of new operational facilities, shall be
excluded from such computation.
(iii) Any charge or expense for the amortization of
goodwill arising out of the fact that Buyer has purchased the
Shares or that the Purchase Price is in excess of the net
worth of the Company as of the Closing Date, shall be excluded
from such computation.
(iv) In the event of an election with respect to the
Company pursuant to Section 338 of the Internal Revenue Code
of 1986, as amended, such computation shall be made as though
no such election had been made.
<PAGE>
(v) Except with respect to (a) third party charges billed to New
NNE performed for New NNE with the prior written approval of
Frerichs, and (b) annual charges not to exceed $50,000 in the
aggregate for outside audit and corporate legal and accounting
services, charges or expenses for allocation of home office,
executive, consulting, general and administrative expenses or
other payments, charges or expenses of Buyer and/or its
affiliates shall be excluded from such computation.
(vi) To the extent that aggregate compensation paid
to individuals qualifying as plan participants under New NNE's
management bonus plan is in excess of $310,000 per annum (plus
annual 4% cost of living adjustments), such excess shall be
excluded from such computation.
(vii) Any transaction entered into by and between New
NNE and Buyer or any Affiliate of Buyer shall be deemed to
have occurred upon terms not less favorable to New NNE than
the terms used by New NNE with respect to its
"most-favored-customers" for the type of product or service
being provided.
(viii) Tooling costs for extrusion dies and related
items shall be capitalized for the purposes of such
computation.
(ix) Except as otherwise expressly provided above,
all amounts determined in accordance with subparagraphs (i)
through (viii) of this Section 2.6(b) shall be determined in
accordance with generally accepted accounting principles
consistently applied.
(e) Within thirty (30) days after the end of each
fiscal month in the Earn-Out Period, commencing with the
fiscal month ending in January, 1996, Buyer shall cause New
NNE to deliver to Sellers' Representative, as defined in
Section 8.2 below, the unaudited balance sheet and statement
of income and retained earnings and of cash flows of New NNE
as of the end of such month and for the portion of the
Earn-Out Year then ended. Such financial statements shall be
prepared in all material respects pursuant to and in
accordance with generally accepted accounting principles
applied on a consistent basis, except as specified in this
Section 2.6, subject to final year end adjustments.
(f) Commencing with the first Earn-Out Year and
continuing until January 1, 1999, as soon as may be
practicable after the last business day of each Earn-Out Year,
but not later than the first (1st) business day of each
January, Buyer will cause Grant Thornton, as auditor for New
NNE, to deliver to Sellers a statement setting forth in
reasonable detail its calculation of the Operating Profits of
New NNE for the immediately preceding Earn-Out Year and the
adjusted Annual Payment and interest thereon (which is due
quarterly) to be paid to Sellers pursuant to this Section 2.6.
The amount of such Annual Payment and interest thereon to be
made to each Seller shall be in proportion to his Ownership
Percentage and shall be made on the first (1st)
<PAGE>
business day of January by wire transfer of federal funds to
such Seller's bank account as set forth on Exhibit 2.4. If
within 30 days after delivery of such statement Sellers have
not given written notice to Buyer disputing such statement and
indicating the basis of such dispute, Buyer shall thereafter
have no further liability to Sellers under this Section 2.6
with respect to such Earn-Out Year. In the event Sellers give
Buyer such notice of dispute within such 30-day period,
Sellers and Buyer will use their best efforts to settle the
dispute within 30 days after the giving of such notice. If,
after a period of thirty (30) days following the date on which
Sellers have given the Buyer written notice of such dispute,
any such differences still remain unresolved, then the
disputed items shall be referred to an independent auditor,
who shall be one of Coopers & Lybrand or Deloitte & Touche, to
be mutually agreed on between Sellers and Buyer or, failing
such agreement within seven (7) days after the expiration of
the thirty (30) day period, to be appointed at the request of
either Sellers or Buyer by the President of the American
Institute of Certified Public Accountants, the decision of
which independent auditor shall be final and binding on the
parties, and shall be enforceable in a court of competent
jurisdiction. The expenses and fees of such independent
auditor in resolving such disputes shall be shared equally
between the Buyer and Sellers, and, with respect to Sellers,
the allocation of any such expenses and fees shall be made in
proportion to their respective Ownership Percentage. Buyer
shall cause New NNE to make any further payments to Sellers
required in order to comply with such decision within 10 days
after such decision is rendered, and such payments shall be
made in the manner as provided in this Section 2.6(f).
(g) Notwithstanding anything to the contrary
contained in this Agreement, Frerichs shall, until the end of
the Earn-Out Period (or until such earlier time as he shall
have died, become permanently disabled, voluntarily resigned
or his employment shall have been terminated for good cause),
be a director and the chief executive officer of New NNE, and
Buyer shall cause him to be so elected. If any of the events
set forth in the parenthetical in the preceding sentence shall
occur, and for so long as the Earn-Out Period has not expired,
the Sellers' Representative shall have the right to approve
New NNE's shareholders' selection of Frerich's successor as
chief executive officer of New NNE, which approval will not be
unreasonably withheld. Subject to the ultimate control and
responsibility of the Board of Directors of New NNE and of
Buyer as a majority stockholder, during the Earn-Out Period
Frerichs shall have the right to manage the business
operations and affairs of New NNE and shall direct the
execution of corporate plans, including, without limitation,
the hiring, retention or termination of employees and the
expansion of the Business. The Board of Directors of New NNE
shall have the authority, subject to Frerich's right of prior
written approval, to formulate long-term corporate plans and
acquisitions, to set compensation and fringe benefits and to
make commitments for capital expenditures. Buyer shall
cooperate with Frerichs in maintaining and increasing New
NNE's profitability. Prior to any sale or disposal by New NNE
of assets other than in the ordinary course of business, Buyer
shall first cause New NNE to receive the written consent of
Frerichs, which consent may be withheld at his discretion for
any reason.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS.
Sellers hereby represent and warrant to Buyer as
follows, which representations and warranties shall be true
and correct as of October 28, 1995 and as of the Closing Date
with respect to the representations set forth in Sections 3.1,
3.2. 3.3, 3.4, 3.5, 3.13 and 3.14:
3.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Florida and has the corporate power and
authority to carry on its Business as now being conducted. The
Company is duly qualified to do business as a foreign
corporation and is in good standing in every jurisdiction in
which the operation of the Business requires such
qualification, except for failures, if any, to be so qualified
and in good standing which would not, when taken together with
all other such failures in the aggregate, have a Material
Adverse Effect. Sellers have, prior to the execution of this
Agreement, made available to Buyer, copies of the Articles of
Organization and By-laws of the Company, each in effect on the
date hereof.
3.2 Authorized Capitalization; Outstanding Stock. The
authorized capital stock of the Company consists of 20,000
shares of Common Stock, $.01 par value per share, of which two
thousand (2,000) shares are issued and outstanding. Sellers
are the lawful owners of all right, title and interest in and
to all of the Shares, and have good and marketable title
thereto free and clear of any Liens. The Shares have been duly
authorized, are validly issued and are fully paid and
non-assessable. There are no outstanding rights, warrants,
options or agreements with respect to any class of capital
stock of the Company. The delivery of a certificate or
certificates representing the Shares in the manner specified
in Section 2.4(a) hereof will transfer to Buyer good and valid
title to the Shares, free and clear of Liens. Schedule 3.2
hereto sets forth the Sellers' ownership of Common Stock and
the Shares.
3.3 Subsidiaries. The Company has no subsidiaries.
3.4 Authority; Binding Effect.
(a) Each Seller has full power, authority and
capacity to execute this Agreement and perform the
transactions required of him at the Closing.
(b) The execution and delivery by each Seller of this
Agreement constitute the legal, valid and binding obligations
of such Seller enforceable against him in accordance with the
respective terms and provisions hereof and thereof, subject to
general equity principles and to applicable bankruptcy,
fraudulent transfer, insolvency, reorganization, moratorium
and other similar laws from time to time in effect affecting
the enforcement of creditors' rights generally (regardless of
whether such enforcement is considered in a proceeding in
equity or at law).
<PAGE>
3.5 Non-Contravention. Except as otherwise set forth
in Schedule 3.5 hereto, neither the execution and delivery of
this Agreement by Sellers nor the other documents and
instruments to be executed and delivered by Sellers pursuant
hereto nor the consummation by Sellers of the transactions
contemplated hereby or thereby (a) will violate any provision
of the Articles of Organization or By-laws of the Company or
(b) will violate or conflict with any applicable statute, law,
ordinance, rule, regulation, order, judgment or decree
applicable to the Company or the Business or (c) will conflict
with or constitute a default (or an event which with notice or
lapse of time or both, would constitute a default) under, or
will result in the termination of, or accelerate performance
required by, any Material Contract to which any of the
Company's assets or properties are subject or (d) will result
in the creation of any Lien upon the stock of the Company or
upon any of the property or assets of the Company with respect
to the Business. Sellers hereby agree and shall cause the
Company to agree that that certain Shareholder Agreement dated
as of June 1, 1991 by and among the Company, Sellers and
certain former stockholders of the Company shall be terminated
as of the Closing Date upon the consummation of the
transactions contemplated by this Agreement.
3.6 Financial Statements. Except as reflected on the Schedules
attached hereto, the
Financial Statements:
(a) are true, complete and correct in all material respects
and have been
prepared from the books and records kept by the Company;
(b) fairly and accurately present the properties, assets,
liabilities, financial positions and results of operations of the
Company as of the respective dates and for the respective periods
covered thereby; and
(c) have been prepared in all material respects pursuant to
and in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis.
The balance sheet of the Company as of July 29, 1995 is hereinafter
called the "Balance Sheet" and July 29, 1995 is hereinafter called the
"Balance Sheet Date."
3.7 Interim Changes. During the period from the Balance Sheet
Date through and including October 28, 1995, the Business has been
operated in the ordinary course in all material respects, and except as
set forth on Schedule 3.7, the Company has not (nor has it authorized
or proposed or entered into any contract, agreement, commitment or
arrangement to do any of the following):
(a) incurred or become subject to, or agreed to incur or
become subject to, any liability except current liabilities incurred in
the ordinary course of its business consistent with past practice;
<PAGE>
(b) sold, assigned, transferred, conveyed, leased or otherwise disposed
of any material assets or properties of the Company, except in the
ordinary course of business;
(c) entered into any other material transaction, contract or
commitment outside the ordinary course of business, except with respect
to the transactions contemplated by this Agreement;
(d) experienced any work stoppage with respect to the Business or
obtained Knowledge of any threatened or anticipated work stoppage; or
(e) suffered a Material Adverse Change.
3.8 Tangible Personal Property.
(a) The Company has good and marketable title to its owned
Tangible Personal Property free and clear of all Liens, except (i) as
shown on the Balance Sheet, (ii) Liens for current taxes and
assessments not yet delinquent or being contested in good faith by
appropriate proceedings, and (iii) such imperfections of title and
encumbrances, if any, which individually or in the aggregate do not
materially detract from the value of or materially interfere with the
current use of the properties subject thereto or affected thereby.
(b) All leases pursuant to which the Company leases as lessor
or lessee its leased Tangible Personal Property are in good standing
and are valid and binding in accordance with their respective terms,
and there is not under any of such leases any existing default, event
of default or event which with notice or lapse of time or both would
constitute a default, on the part of the Company or, to Company's
Knowledge, on the part of the Person to or from whom the Company leases
Tangible Personal Property. Except as set forth in Schedule 3.8(b)
attached hereto, none of the rights of the Company under any of such
leases is subject to termination or modification as the result of the
transactions contemplated by this Agreement.
3.9 Real Estate.
(a) The Company owns no real property.
(b) All leases and subleases pursuant to which the Company
leases real property as lessor or lessee are set forth on Schedule
3.9(b) (the "Leased Real Property"). The leases and subleases to which
the Company is a party are valid and binding in accordance with their
respective terms, and there is not, to the Knowledge of the Company,
under any of such leases or subleases any existing default, event of
default or event which with notice or lapse of time or both would
constitute a default, on the part of the Company or, to the Company's
Knowledge, on the part of the Person to or from whom the Company leases
the Leased Real Property. Except as set forth on Schedule 3.9(b), none
of the rights of the Company under any of such leases or subleases is
subject to termination or modification as the result of the
transactions contemplated by this Agreement.
<PAGE>
(c) To the Knowledge of the Company, there are no
encroachments upon the Leased Real Property and the improvements
situated upon such premises do not encroach upon or violate any rights
or way, easements or the lands of others. To the Knowledge of the
Company, the use of such premises by the Company and the conduct
therein of the Business of the Company do not violate any law, rule,
regulation or zoning or use ordinance of any governmental body of
authority in any material respect, and, in connection with such use and
conduct, there are no violations of law or rule with respect to water
supply, sewage or waste disposal facilities which would have a Material
Adverse Effect on the business and operations of the Company.
(d) To the Knowledge of the Company, the Company has not
received any Notice of any special assessment or condemnation from a
Governmental Entity with respect to any of the Leased Real Property
which would have a Material Adverse Effect.
3.10 Environmental Matters. Except as disclosed in Schedule 3.10 hereto,
(a) the Company has not received any Notice of any claim,
action or proceeding brought, asserted or threatened by any Person or
Governmental Entity alleging or finding any violation of any
Environmental Laws with respect to any of the Leased Real Property;
(b) the Company has received no Notice that, and has no
Knowledge that, any polychlorinated biphenyls, perchloroethylene,
trichloroethylene or asbestos- containing materials are or have been
present at any of the Leased Real Property, and there are no
Underground Storage Tanks at any of the Leased Real Property;
(c) the Company has received no Notice of and has no Knowledge
of the imposition of any Environmental Liens on any of the Leased Real
Property and the Company has received no Notice of and has no Knowledge
of any government actions which have been taken or are in process which
could subject any of the Leased Real Property to such Environmental
Liens;
(d) since April, 1994, there have been no environmental
inspections, investigations, studies, audits, tests, reviews or other
analyses conducted on behalf of the Company in relation to any of the
Leased Real Property;
(e) the Company has not received any Notice that any portion of the
Leased Real Property is located in a special flood hazard area; and
(f) the Company has received no Notice that it has been named
as a "potentially responsible party" with respect to any site pursuant
to CERCLA.
(g) the lessor of the Leased Real Property will not be able to establish any
indemnification obligations of the Company, with respect to Environmental
<PAGE>
Liabilities, that may become due under that certain commercial lease
agreement set forth in Schedule 3.9(b).
(h) During the term of the Lease described in Section 3.9(b),
there has been no "release" as defined in 42 U.S.C. ss.9601(22) or, to
the knowledge of the Sellers, threat of a "release" of any Hazardous
Substance on, from or under the Leased Real Property.
3.11 Intellectual Property Rights.
(a) Schedule 3.11 (a) hereto lists as of the date hereof: (i)
all registered Intellectual Property Rights, together with applications
therefor that are pending or in the process of preparation, in the
United States of America and in foreign countries; and (ii) all
licenses and other agreements allowing Company to use Intellectual
Property Rights of third parties.
(b) To the Knowledge of the Company, the Company is the sole
and exclusive owner of the Intellectual Property Rights, free and clear
of any claims or Liens.
(c) To the Knowledge of the Company, none of such Intellectual
Property Rights infringes upon the rights of any third party in the
United States of America, nor to the Knowledge of the Company, does any
use by any third party in the United States of America infringe upon
any of the Intellectual Property Rights, and there are no claims
Pending in connection with any such infringement with respect to the
Intellectual Property Rights.
(d) The Company has not received any Notice that any of the
processes or products of the Company infringe upon any Intellectual
Property Rights of any third party.
3.12 Litigation. Except as set forth in Schedule 3.12 hereto,
there are no actions, suits or proceedings by or before any court or
Governmental Entity Pending or, to the Knowledge of the Company,
threatened by or against the Company or involving or affecting the
Business or any of its assets which have or would have a Material
Adverse Effect.
3.13 Tax Matters.
(a) All returns with respect to Taxes of the Company,
including estimated tax returns and other information returns,
declarations and reports, which are required to be filed have been duly
and timely filed with the appropriate Governmental Entities for all
periods ending on or before the Closing Date. All Taxes shown as due
and owing on such returns and reports have been paid in full.
(b) There is no action, suit, proceeding, audit or claim now
Pending or, to the Knowledge of the Company, investigation Pending,
regarding any Taxes relating to the income, properties or operations of
the Company or the Business.
<PAGE>
(c) There are no tax sharing agreements or arrangements to
which the Company is now
or ever has been a party.
(d) There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any return of the
Company for any period with respect to any Tax.
(e) None of Sellers is a "foreign person" within the meaning
of section 1445(b)(2) of the Code.
(f) Since December, 1993, the Company has been qualified as an
S corporation within the meaning of section 1361(a)(1) of the Code (and
under any comparable state or local law under which the Company is
eligible for analogous treatment) (the "S Election"). The Sellers will
take no action to terminate or revoke the S Election before the Closing
Date.
(g) Since the date of its incorporation, the Company has never
been included as a member of any consolidated, affiliated, combined, or
unitary tax return.
3.14 Consents and Approvals. Except as set forth in Schedule
3.14 hereto, no consent, approval or authorization of any
non-governmental third party, and no consent, approval, authorization
or declaration of, or filing or registration with, any Governmental
Entity is required to be made or obtained by the Company in connection
with the execution and delivery of this Agreement or the sale of the
Shares contemplated hereby, other than (i) the Shareholder
Agreement described in Section 3.5 hereof and (ii) any such consents,
approvals, authorizations, declarations, filings or registrations
which, if not made or obtained, would not have a Material Adverse
Effect.
3.15 Compliance with Applicable Law. The Company has all
licenses, permits, approvals, and other authorizations as are
reasonably necessary in order to enable it to own and conduct the
Business as currently conducted, except where the failure to obtain any
such license, permit, approval or other authorization would not, either
individually or in the aggregate, have a Material Adverse Effect. To
the Knowledge of the Company, the operations of the Business are in
compliance with all federal, state and local ordinances, rules and
regulations affecting the Business, except where such violations,
defaults or noncompliance would not have a Material Adverse Effect.
Except as set forth in Schedule 3.15 hereto, neither the Company nor
any of the Sellers has received written Notice of any violation of, or
liability or responsibility under, any applicable federal, state, or
local rule, regulation, order or decree relating to the Business, and
neither the Company nor any of the Sellers has received Notice of any
threatened claim of such a violation, liability or responsibility
(including any investigations relating thereto).
3.16 Certain Agreements. As used in this Agreement, "Material
Contracts" shall mean: (a) each employment agreement not terminable
within one hundred eighty (180) days and requiring annual payments in
excess of Fifty Thousand Dollars ($50,000.00); (b) each capital
construction contract requiring payment over the remainder of its term
in excess of Fifty Thousand Dollars ($50,000.00); (c) each loan
agreement or other financing arrangement (other than sales of goods or
services to the Company calling for full payment within not less than
<PAGE>
ninety (90) days after the invoiced date) requiring payments over the
remainder of its term in excess of One Hundred Thousand Dollars
($100,000.00); (d) each contract with a customer requiring the
commitment by the Company of more than ten percent (10%) of its
manufacturing capacity over any one (1) year period; (e) each contract
with a supplier not terminable within one hundred eighty (180) days and
requiring annual payments or payments over the remainder of its term in
excess of One Hundred Thousand Dollars ($100,000.00); (f) each lease of
Tangible Personal Property requiring annual payments in excess of Fifty
Thousand Dollars ($50,000.00); (g) the leases of Leased Real Property
set forth on Schedule 3.9(b) hereto; (h) each service agreement
requiring annual payments in excess of Fifty Thousand Dollars
($50,000.00); (i) all collective bargaining agreements, and (j) all
licensing agreements which are material to the Business. All Material
Contracts are in full force and effect and are valid and binding,
subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws now or hereafter in effect relating to or
affecting the enforcement of creditors' rights generally and subject to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity). Except as set forth on
Schedule 3.16 hereto, the Company is not in default, nor does the
Company have Knowledge that any other party thereto is in default, nor
has the Company waived any material rights under any material term of
any of the Material Contracts. A true and complete copy of each
Material Contract has been made available to Buyer.
3.17 Employee Benefit Plans.
(a) Schedule 3.17(a) hereto lists all Company Plans. The
Company has delivered or made available to Buyer true and complete
copies of each Company Plan. No Company Plan (i) invests in or
maintains any holdings in any stock or security of the Company or any
ERISA Affiliate or (ii) is a "multiemployer plan" as defined in Section
3(37) of ERISA.
(b) The Company does not maintain or participate in any
Company Plan which is intended to qualify under Sections 401(a) or
403(a) of the Code, or, other than a group health plan, is subject to
ERISA.
3.18 Transactions with Affiliates. Except as set forth in
Schedule 3.18 hereto, the Company (a) has no outstanding contract,
agreement or other arrangement with Sellers or any Affiliate of Sellers
and (b) since the Balance Sheet Date, has not engaged in any
transaction with Sellers or any Affiliate of Sellers, except in the
ordinary course of business and upon terms not less favorable to the
Company than the terms historically used by the Company with respect to
its "most-favored-customers."
3.19 Insurance. Each insurance policy currently in effect that
insures the Business or the operations or employees of the Company with
respect to the Business or affects or relates to the ownership, use or
operation of any of the assets or properties of the Company with
respect to the Business and that has been issued to or for the benefit
of the Company is listed on Schedule 3.19 hereto and is in full force
and effect, the premiums due thereunder have been paid as they became
due and payable and neither the Company nor any of the Sellers has
received any notice of cancellation or termination in respect of any
such policy or is in default thereunder in any material respect.
<PAGE>
3.20 Labor Relations. As of the date hereof, no work stoppage
against the Business is Pending, or to the Knowledge of the Company, is
threatened. The Company is not involved in nor, to the Knowledge of the
Company, threatened with any labor dispute, arbitration, lawsuit or
administrative proceeding relating to labor matters involving any of
the employees of the Company with respect to the Business (excluding
workers' compensation claims which, in the aggregate, would not have a
Material Adverse Effect).
3.21 Location of Off Site Assets. Set forth on Schedule 3.21
is a description of assets of the Company and the respective locations
thereof, which are not located on the Leased Real Property.
3.22 Inventory. All inventory of the Company which shall be
reflected on the Final Balance Sheet shall have been acquired in the
ordinary course of business and consistent with the Company's prior
practice. Such inventory is of good and merchantable quality and will
be usable or saleable in the ordinary course of its business within the
twelve-month period commencing October 29, 1995. To Sellers' Knowledge,
the Company is not under any liability or obligation with respect to
the return or repurchase of any goods in the possession of customers
except for amounts which are not material and are consistent with
historical levels of returns and allowances.
3.23 Accounts Receivable. The accounts receivable of the
Company as set forth on the Final Balance Sheet shall be valid and
genuine and shall be collectible within the twelve-month period
commencing October 29, 1995, provided that payments from any customer
shall be applied as specified by the customer, or if unspecified, to
the oldest, unpaid invoices with respect to such customer.
3.24 Final Total Equity. The Final Total Equity shall not be less
than $132,098.00.
3.25 Disclosure. No statement contained in any certificate,
schedule, or other instrument specified in this Agreement, whether
heretofore furnished to Buyer or hereafter required to be furnished to
Buyer, contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make the
statements contained therein not misleading.
3.26 Credit Arrangements. Other than listed on Schedule 3.26,
there are no bonds, guarantees, notes, sureties, letters of credit, or
other similar credit agreements or debt obligations that exist with
respct to the Company, its business or any of its assets. The Company
is not in default on the payment of any principal or interest on any
indebtedness for borrowed money, nor is the Company otherwise in
default under any indemnity, fidelity or contract bond or letter of
credit, note, guarantee or other credit agreement or debt obligation or
instrument.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer hereby represents and warrants to each Seller as
follows:
4.1 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has the corporate power and authority
to carry on its business as now being conducted. Buyer has, prior to
the execution of this Agreement, made available to Sellers, copies of
its Articles of Incorporation and By-laws, each as in effect on the
date hereof.
4.2 Authority; Binding Effect. Buyer has the necessary
corporate power and authority to enter into this Agreement and the
other documents and instruments to be executed by Buyer pursuant hereto
and to consummate the transactions contemplated hereby and thereby. The
Board of Directors of Buyer has duly authorized the execution and
delivery of this Agreement and the other documents and instruments to
be executed and delivered by Buyer pursuant hereto and the consummation
of the transactions contemplated hereby and thereby. No other corporate
action or proceeding on the part of Buyer is necessary to authorize
this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation by Buyer of
the transactions contemplated hereby and thereby. When fully executed
and delivered, this Agreement and each of the other documents and
instruments to be executed and delivered by Buyer pursuant hereto will
constitute valid and binding agreements of Buyer enforceable in
accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now
or hereafter in effect relating to or affecting the enforcement of
creditors' rights generally and subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
4.3 Non-Contravention. Neither the execution and delivery of
this Agreement by Buyer nor the other documents and instruments to be
executed and delivered by Buyer pursuant hereto nor the consummation by
Buyer of the transactions contemplated hereby and thereby (a) will
violate any provision of the Articles of Incorporation or By-laws of
Buyer or (b) will violate or conflict with any applicable statute, law,
ordinance, rule, regulation, order, judgment or decree applicable to
Buyer or (c) will conflict with or constitute a default (or an event
which with notice or lapse of time or both, would constitute a default)
under, or will result in the termination of, or accelerate performance
required by, any material contract, commitment, understanding,
arrangement, agreement or restriction of any kind binding upon Buyer,
or to which any of Buyer's assets or properties are subject which would
have a Material Adverse Effect on Buyer or (d) will result in the
creation of any Lien upon any of Buyer's assets or properties which
would have a Material Adverse Effect on Buyer.
4.4 Consents and Approvals. No consent, approval or
authorization of any non-governmental third party, and no consent,
approval, authorization or declaration of, or filing or registration
with, any Governmental Entity is required to be made or obtained by the
Buyer in connection with the execution and delivery of this Agreement
by the Buyer or the consummation
<PAGE>
by the Buyer of the transactions contemplated hereby, other than any
such consents, approvals, authorizations, declarations, filings or
registrations which, if not obtained or made, would not have a material
adverse effect on the Buyer's ability to consummate the transactions
contemplated hereby.
4.5 Purchase for Investment. The Shares will be acquired by
Buyer for its own account for the purpose of investment. Buyer will
refrain from transferring or otherwise disposing of any of the Shares
or any interest therein, in such manner as to cause Sellers or the
Company to be in violation of the registration requirements of the
Securities Act of 1933, as amended, or applicable state securities or
blue sky laws.
4.6. Financing. As of the Closing, Buyer will have the
financial capacity to perform all
of its obligations under this Agreement.
ARTICLE V
FURTHER AGREEMENTS OF THE PARTIES.
5.1 Conduct of Business prior to Closing. Between October 29,
1995 and the Closing, Sellers shall cause the Company to carry on its
Business in the ordinary course, and consistent with prior practice.
Without limiting the foregoing, except as contemplated by this
Agreement, Sellers shall not cause or permit the Company to (and shall
not cause or permit the Company to authorize or propose or enter into
any contract, agreement, commitment or arrangement to do any of the
following):
(i) except as otherwise set forth on Schedule 5.1 hereto,
split, combine or reclassify any capital stock or issue any other
security in respect of, in lieu of or in substitution for shares of the
Company's capital stock, or repurchase, redeem or otherwise acquire any
shares of capital stock of the Company;
(ii) issue, deliver, pledge, encumber, sell, or purchase any
shares of the Company's capital stock or securities convertible into,
or rights, warrants or options to acquire, any shares of capital stock
or other convertible securities of the Company, other than the Shares;
(iii) acquire or agree to acquire by merging or consolidating
with, or by purchasing any material portion of the capital stock or
assets of, or by any other manner, any business, corporation,
partnership, association or other business organization, or any
division thereof;
(iv) amend the Articles of Organization or By-laws of the Company;
<PAGE>
(v) mortgage, pledge or subject to any mortgage, pledge, lien, charge
or other encumbrance of any kind any of the Company's assets, other
than pursuant to existing Liens or in the ordinary course of business;
(vi) grant any increase in the compensation of any officers of
the Company other than in the ordinary course of business and
consistent with past practice;
(vii) enter into any employment or compensation agreement with
any officer or employee of the Company (other than in connection with
the hiring of new employees (but not pursuant to written employment
agreements) in the ordinary course of business) or terminate the
employment of any officer or employee of the Company (other than in the
ordinary course of business);
(viii) modify, cancel or establish any Company Plan in regard to any of
the current employees of the Company;
(ix) cancel or compromise any claim or liability of the Business other than
in the ordinary course of business;
(x) make, pay or declare any dividends or make other
distributions to Sellers in respect of their ownership of Shares except
as otherwise agreed to herein and except that the Company may pay
expenses of Sellers related to transactions contemplated hereby if all
such payments are reimbursed to the Company at or prior to the Closing;
(xi) acquire or commit to acquire any capital asset having a cost in excess
of $100,000;
(xii) take any actions, other than in the ordinary course of
business, which would restrict the availability of, or these services
performed by, the current employees of its Company;
(xiii) sell all or substantially all the assets of the Company; or
(xiv) terminate any insurance policy currently in effect that
insures the Business unless it is replaced by similar insurance
coverage.
5.2 Maintenance of Corporate Existence. Prior to the Closing,
Sellers shall cause the Company to maintain its corporate existence and
good standing in its jurisdiction of incorporation.
5.3 Access to Information. Prior to the Closing, Buyer may
make such investigation of the Business and properties of the Company
as Buyer may desire, and upon reasonable Notice, Sellers shall give to
Buyer and its counsel, accountants and other representatives reasonable
<PAGE>
access, during normal business hours throughout the period prior to the
Closing, to the property, books, commitments, agreements, records,
files and personnel of the Company, and Sellers shall furnish to Buyer
during that period all copies of documents and information concerning
the Company and the Business as Buyer may reasonably request subject to
applicable law. Buyer shall hold, and shall cause its counsel,
accountants, other agents and representatives, and prospective lenders
to hold, all such information and documents in a confidential capacity.
Buyer agrees that all such information and documents will be used by it
solely for the purpose of its studies, analyses and other work with
respect to consummating the transactions contemplated by this Agreement
and will be returned promptly, or destroyed by Buyer, as Sellers may
request, in the event the Closing does not take place under this
Agreement.
5.4 [Intentionally Omitted] .
5.5 Expenses. Except as otherwise specifically provided in
this Agreement, Buyer and Sellers shall bear their own respective
expenses incurred in connection with this Agreement and in connection
with all obligations required to be performed by each of them under
this Agreement.
5.6 Publicity. Buyer and Sellers shall consult with each other
before issuing any press release concerning the transactions
contemplated by this Agreement and, except as may be required by
applicable law or rules of a national security exchange, will not issue
a press release prior to such consultation. If Buyer or Sellers are so
required to issue a press release such party shall use its best efforts
to inform the other prior to issuing it.
5.7 Liability. Except to the extent of Sellers'
indemnification obligations under Article VIII of this Agreement, and
except as set forth in Section 3.12 hereof with respect to Resource
Logic, Buyer hereby acknowledges and agrees that Sellers shall have no
further liability for any debt or obligation of the Company, whether
liquidated or unliquidated and whether accrued or contingent.
5.8 Section 338 Elections.
(a) Sellers and Buyer agree to execute Internal Revenue
Service Form 8023-A as required by this Section 5.8 and to jointly and
timely file an election under Section 338(h)(10) of the Code with
respect to the purchase of the Shares. Sellers agree to pay any
federal, state and local income taxes imposed on or measured by income
imposed pursuant to applicable law resulting solely from such election.
(b) Without limiting the effect of Section 5.8(a), if no joint
election is made under Section 338(h)(10) of the Code with respect to
the purchase of the Shares, Buyer shall be liable for and hereby agrees
to indemnify Sellers for any and all liability for Taxes imposed on
Sellers or New NNE attributable, directly or indirectly, to any
elections made by Buyer pursuant to Section 338(g) of the Code.
<PAGE>
(c) Buyer shall attach Internal Revenue Service Form 8023-A,
executed by the Sellers and the Buyer, to the Company's federal income
tax return for the taxable year which ends on the Closing Date and New
NNE's Federal income tax return for the taxable year which begins
immediately after the Closing Date. Buyer shall attach Internal Revenue
Service Form 8023-A, executed by the Sellers and Buyer, to its Federal
income tax return for the taxable year which includes the Closing Date.
In the event that a joint election is made under Section 338(h)(10) of
the Code with respect to the purchase of the Shares, Buyer and Sellers
agree that the Purchase Price reflects the fair market value of the
assets of the Company deemed sold pursuant to such election and the
Purchase Price shall be allocated among the assets as set forth in
Schedule 5.8(c) hereto (the "Purchase Price Allocation"). Buyer also
agrees to report or cause New NNE to report, and the Sellers agree to
report, the deemed sale of the Company's assets in a manner consistent
with the Purchase Price Allocation issued pursuant to this Section
5.8(c).
(d) Sellers and Buyer acknowledge that each has independently
consulted with its own respective tax advisors concerning the tax
consequences of an election under Section 338(h)(10) of the Code, and
neither party has any recourse against the other with respect to the
actual tax effect thereof.
(e) Sellers and Buyer agree that the obligations specified in
this Section 5.8 shall be modified as necessary to reflect adjustments
of the Purchase Price as requred by Section 7.4.
5.9 Brokers. Sellers, in proportion to their respective
Ownership Percentage, will indemnify and hold harmless Buyer in respect
of any and all claims or demands for commission, compensation, or other
damages by any broker, finder, or other agent (whether or not a present
or former employee or agent of Sellers or the Company) claiming to have
been engaged by Sellers or the Company in connection with the
transactions contemplated by this Agreement, and Sellers, in proportion
to their respective Ownership Percentage, will bear the cost of the
reasonable out-of-pocket expenses incurred by Buyer in investigating,
defending against, or appealing any such claim. Buyer will indemnify
and hold harmless each Seller in respect of any and all claims or
demands for commission, compensation, or other damages by The First
National Bank of Boston and any other broker, finder or agent (whether
or not a present or former employee or agent of Buyer) claiming to have
been engaged by Buyer in connection with the transactions contemplated
by this Agreement, and Buyer will bear the cost of the reasonable
out-of-pocket expenses incurred by each Seller in investigating,
defending against, or appealing any such claim.
5.10 Reassignment of Accounts Receivable. Buyer shall exert
all reasonable efforts to collect the accounts receivable set forth on
the Final Balance Sheet. In the event Seller shall be required to make
payments to Buyer pursuant to the indenmification set forth in Section
8.1 of this Agreement with respect to the failure to collect such
accounts receivable as a result of the breach of Sellers'
representation and warranty set forth in Section 3.23 hereof, the
rights to all such uncollected accounts receivable shall be transferred
and assigned to Sellers.
5.11 Further Assurances. Subject to the terms and conditions
herein provided, each of the
Sellers and Buyer agrees to use his or its reasonable efforts to take,
or cause to be taken, all
<PAGE>
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement.
5.12. Transition Fee. At the Closing, Buyer shall pay to
Sellers pro rata in accordance
with their respective Percentage Interest, a transition fee totalling
$58,000.
ARTICLE VI
CONDITIONS TO CLOSING.
6.1 Conditions to Obligations of Sellers. The obligations of
Sellers to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of
each of the following further conditions, unless Sellers, in their sole
discretion, shall waive such fulfillment:
(a) Representations and Warranties. Each of the representations and
warranties of Buyer contained in this Agreement shall be true and
correct in all
material respects as of the date hereof and at and as of the Closing
with the same force and effect as if made as of the Closing, and
Sellers shall have received from Buyer a certificate of an authorized
executive officer of Buyer to such effect.
(b) Covenants. All covenants contained in this Agreement to be
complied with by the Buyer on or before the Closing shall have been
complied with in all material respects, and Sellers shall have received
from Buyer a certificate of an authorized executive officer of Buyer to
such effect.
(c) Opinion of Buyer's Counsel. Sellers shall have received,
within five (5) days of the execution of this Agreement, an opinion of
Baker & McKenzie, counsel to the Buyer, dated as of the date hereof,
substantially in the form of Exhibit 6.1(c) hereto.
(d) No Litigation. No suit, action or other proceeding
shall be Pending or
threatened before any court or Governmental Entity seeking to restrain,
prohibit or to obtain damages or other relief in connection with, or as
a consequence of, this Agreement or the consummation of the
transactions contemplated hereby.
(e) Resolutions. Sellers shall have received from Buyer
certified copies of resolutions duly adopted by the Board of Directors
of the Buyer and New NNE authorizing the execution and performance of
this Agreement and the documents and transactions contemplated hereby
and thereby.
<PAGE>
(f) Charter Documents. Sellers shall have received from Buyer (i) a copy
of the charter documents of each of New NNE and Buyer, certified by an
authorized executive officer of each of New NNE and Buyer,
respectively, and (ii) a copy of the by-laws of each of New NNE and
Buyer, certified by an authorized executive officer of each of New NNE
and Buyer, respectively, to be true and complete as of the Closing.
(g) Certificate of Good Standing. Buyer shall have delivered
to Sellers a certificate issued by the Secretary of State, or its
equivalent, of the state of incorporation of Buyer and New NNE,
evidencing the good standing of the Buyer and New NNE in such
jurisdictions.
The agreements, certificates, documents and opinion described
in subparagraphs (c), (e), (f) and (g) above shall be delivered to
Sellers upon the execution and delivery of this Agreement.
6.2 Conditions to Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of
each of the following further conditions, unless Buyer, in its sole
discretion, shall waive such fulfillment:
(a) Representations and Warranties. Each of the representations and
warranties of each of the Sellers contained in this Agreement shall be
true and
correct in all material respects as of October 28, 1995 and Buyer shall
have received from Sellers a certificate to such effect.
(b) Covenants. All covenants contained in Sections 2.1,
2.4(a), 5.1, 5.2 and 5.3 of this Agreement to be complied with by
Sellers on or before the Closing shall have been complied with in all
material respects and the Buyer shall have received from Sellers a
certificate to such effect.
(c) Opinion of Counsel. Buyer shall have received an opinion
of Edwards & Angell, counsel to Sellers, date as of the Closing, substantially
in the form of Exhibit 6.2(c) hereto.
(d) No Litigation. No suit, action or other proceeding shall
be Pending or threatened before any court or Governmental Entity
seeking to restrain, prohibit or to obtain damages or other relief in
connection with, or as a consequence of, this Agreement or the
consummation of the transactions contemplated hereby.
(e) IRS Form W-9. Each of Sellers shall have delivered to
Buyer a duly executed IRS Form W-9.
<PAGE>
ARTICLE VII
TAXES.
Sellers and Buyer agree as follows:
7.1 Tax Covenants. Within ninety (90) days after the Closing
Date, Sellers will cause to be prepared, at the Sellers' expense, the
Company's income tax returns for the 1995 calendar year.
7.2 Tax Indemnities.
(a) Each Seller, in an amount proportionate to his Ownership
Percentage, will be liable for and will indemnify, defend and hold
harmless Buyer, New NNE, or any successor corporation thereto or
Affiliate thereof from and against all income taxes of the Company
(except to the extent such income taxes are adequately reserved for on
the Closing Balance Sheet) with respect to (i) all years or periods of
the Company ending on or prior to the Closing Date, and (ii) all years
or periods beginning before the Closing Date and ending after the
Closing Date to the extent that the income taxes are allocable to the
operations of the Company on or prior to the Closing Date determined on
the basis of the Company's permanent financial records.
(b) Buyer shall indemnify, defend and hold harmless each
Seller from and against all Taxes with respect to all years or periods
of New NNE beginning after the Closing Date, and with respect to all
years or periods beginning before the Closing Date and ending after the
Closing Date to the extent Taxes are allocable to the operations of New
NNE after the Closing Date determined on the basis of New NNE's
permanent financial records. In addition, Buyer shall indemnify, defend
and hold harmless each Seller from and against all Taxes (i) payable by
New NNE or any Seller as a result of an election (or deemed election)
under Section 338 of the Code or any comparable provision of state or
local law with respect to a qualified stock purchase of the Company by
Buyer with respect to which a Code Section 338(h)(10) election is not
made, or (ii) payable as a result of any events occurring on the
Closing Date, but after the consummation of the transactions
contemplated by this Agreement, that are the result of actions taken by
Buyer that are outside the ordinary course of business.
(c) Buyer and Sellers agree that if the Company is permitted
but not required under applicable state or local income tax laws to
treat the Closing Date as the last day of a taxable period, Buyer and
Sellers shall cause the Company to treat such day as the last day of a
taxable period.
(d) Any taxable period which ends on the Closing Date shall
include the operations of the Company through the close of business on
December 31, 1995. Any Taxes for a taxable period beginning before the
Closing Date and ending after the Closing Date with respect to the
Company or New NNE, as the case may be, shall be apportioned among
Sellers and Buyer, in accordance with each Seller's Ownership
Percentage and with the Buyer, respectively, based on the actual
operations of the Company or New NNE, as the case may be, during the
portion of
<PAGE>
such period ending at the close of business on December 31, 1995 and
the portion of such period beginning on the day after the Closing Date
as determined on the basis of the Company's permanent financial
records.
7.3 Conveyance Taxes. Buyer agrees to assume liability for and
to pay all sales, transfer, stamp, real property transfer and similar
taxes incurred as a result of the sale of the Shares. Buyer agrees to
file all required tax returns and reports due in connection with the
Taxes assumed under this Section 7.3.
7.4 Purchase Price Adjustments. Sellers and Buyer agree to
treat all payments made under Article II, Article VII or Article VIII
hereof as adjustments to the Purchase Price for Tax purposes, and such
adjustments shall be made pursuant to the provisions of Treasury
Regulations section 1.338(b)-3T, as well as other relevant provisions
of section 338 of the Code and the regulations thereunder. Moreover,
Buyer shall prepare revisions to Schedule 5.8(c) hereto to reflect such
adjustments, and shall timely forward such revised schedule to Sellers.
Buyer and Sellers further agree to timely make all filings as may be
required by any or all of them by any relevant taxing jurisdictions to
reflect such adjustments and to file all tax returns in a manner
consistent with such adjustments.
ARTICLE VIII
INDEMNIFICATION.
8.1 Indemnification.
(a) Subject to the provisions of this Agreement, Sellers,
severally in proportion to such Seller's respective Ownership
Percentage agree to indemnify and hold Buyer and its Affiliates,
predecessors, successors and assigns (and their respective officers,
directors, employees and agents) harmless from and against and in
respect of any liability, actions, suits, proceedings, demands,
assessments, judgments, loss, claim, damages, costs and expenses,
including reasonable attorneys' and experts' fees and costs of
investigation and analysis (collectively, "Damages"), with respect to
any misrepresentation, breach of warranty or covenant or non-
fulfillment of any agreement on the part of Sellers under the terms of
this Agreement or in any closing document executed by Sellers
hereunder. With respect to any indemnity claim made against the Sellers
hereunder, the amount of such claim that each Seller shall be liable
for shall be proportionate to such Seller's Ownership Percentage.
Notwithstanding anything in this Agreement to the contrary, if any
Seller breaches the representations and warranties set forth in the
second, third and fifth sentence of Section 3.2 hereof, such breach
shall be the sole responsibility of such Seller.
(b) Subject to the provisions of this Agreement, Buyer agrees
to indemnify and hold Sellers and their successors and assigns harmless
from and against and in respect of any Damages, with respect to the
following:
<PAGE>
(i) any misrepresentation, breach of warranty or covenant, or non-
fulfillment of any agreement on the part of Buyer under the terms of
this Agreement or in any closing document executed by Buyer hereunder;
and
(ii) the operation of the Company, New NNE and the Business on
and after the Closing Date, excluding any claims which may be made
against any Seller who becomes an employee of Buyer or New NNE arising
with respect to any events after the Closing in connection with such
employment.
(c) Anything contained in this Agreement to the contrary
notwithstanding, (i) Sellers shall not be liable for any amounts for
which the Buyer is otherwise entitled to indemnification pursuant to
Article VII hereof or this Article VIII until the aggregate amount for
which Buyer is entitled to indemnification under all such claims for
indemnification under the aforesaid Articles in the aggregate exceed
One Hundred Thousand Dollars ($100,000.00) (the "Threshold"), at which
time Sellers shall be liable for any such excess, and (ii) Sellers
shall not be required to make indemnification payments pursuant to
Article VII hereof or this Article VIII to the extent indemnification
payments thereunder and hereunder would exceed in the aggregate One
Million Dollars ($1,000,000.00) (the "Maximum Indemnification Amount")
and provided, further, that the maximum aggregate liability of the
Sellers with respect to claims for indemnification made hereunder after
the eighteen (18) months following the Closing Date shall be limited to
the amount of contingent consideration payable pursuant to Section 2.6
hereof. In determining the foregoing Threshold and in otherwise
determining the amount to which Buyer is entitled to assert a claim for
indemnification pursuant to Article VII hereof or this Article VIII,
only actual losses, net of all tax benefits, and no consequential or
other special damages or losses shall be indemnifiable. Both parties
hereto waive any claim to exemplary or punitive damages.
Notwithstanding anything to the contrary set forth herein or in that
certain Stock Purchase Agreement (the "Northeast Agreement") of even
date herewith between Buyer and Sellers pursuant to which Buyer has
agreed to purchase capital stock of National Northeast Corporation, (i)
in the event that indemnity payments are made by Sellers pursuant to
this Agreement, then the maximum indemnification amount specified in
the Northeast Agreement shall be reduced by the amount of such
indemnity payments, and (ii) in the event that indemnity payments are
made by Sellers pursuant to the Northeast Agreement, and the amount of
such indemnity payments in the aggregate exceeds $3,000,000.00, then
the Maximum Indemnification Amount specified herein shall be reduced by
the full amount of such excess.
(d) The obligation of Sellers to indemnify under Section
8.1(a) above shall only be with respect to indemnity claims made by
Buyer within eighteen (18) months after the Closing Date,
except that indemnity claims with respect to Section 3.2, costs and
expenses incurred by New NNE in connection with the termination of
Resource Logic as provided in Section 3.12, and tax indemnity claims
under Section 7.2(a), may be made within the statute of limitations
period specified by applicable law. Any indemnification payment that
becomes due and owing to Buyer pursuant to this Article VIII shall be
satisfied first by off-set against the aggregate amount due of the
Contingent Consideration, such off-set to be made pro rata in
accordance with Sellers' respective Ownership Percentage.
<PAGE>
(e) Promptly after receipt by an indemnified party under this
Section 8.1 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8.1, notify the
indemnifying party in writing of the claim or the commencement of that
action stating in reasonable detail the nature and basis of such claim
and a good faith estimate of the amount thereof, provided that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to the indemnified party unless and only to
the extent such failure prejudices the ability of the indemnifying
party to defend against or mitigate damages arising out of such claim.
If any claim shall be brought against an indemnified party, and it
shall notify the indemnifying party thereof, the indemnifying party
shall be entitled to participate therein, and to assume the defense
thereof with counsel reasonably satisfactory to the indemnified party,
and to settle and compromise any such claim or action. After notice
from the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party
shall not be liable for other expenses subsequently incurred by the
indemnified party in connection with the defense thereof; provided,
however, that if the indemnifying party elects not to assume such
defense, the indemnified party may retain counsel satisfactory to it
and to defend, compromise or settle such claim on behalf of and for the
account and risk of the indemnifying party, and the indemnifying party
shall pay all reasonable fees and expenses of such counsel for the
indemnified party promptly as statements therefore are received; and,
provided, further, that the indemnified party shall not consent to
entry of any judgment or enter into any settlement or compromise
without the written consent of the indemnifying party which consent
shall not be unreasonably withheld. Buyer and Sellers each agree to
render to each other such assistance as may reasonably be requested in
order to insure the proper and adequate defense of any such claim or
proceeding. The indemnified party shall also have the right to select
its own counsel, at its own expense, to represent the indemnified party
and to participate in the defense of such claim, as applicable.
8.2 Sellers' Representative. The Sellers hereby authorize and
direct Weener to act as Sellers' Representative and to make any and all
decisions to be made and to take or omit to take any and all actions
which may be made or be taken by Sellers under this Agreement,
including, without limitation, making, compromising or paying claims
for indemnification as contemplated by Section 8.1 and taking all
actions with respect to the determination of the Tax Liability Amount
and Final Balance Sheet. All out-of-pocket expenses incurred by Weener
in acting on behalf of Sellers with respect to such matters shall be
shared among all Sellers in proportion to their respective Ownership
Percentage to the extent that the amount of such expenses are not fully
recovered from Buyer.
8.3 Remedies Exclusive. The remedies provided in this Article
VIII and Section 10.3 of this Agreement shall be the exclusive remedies
of the parties hereto from and after the Closing in connection with any
breach of a representation or warranty, or non-performance, partial or
total, or any covenant or agreement contained herein. The provisions of
this Article VIII shall apply to claims for indemnification asserted as
between the parties hereto as well as to third-party claims.
<PAGE>
ARTICLE IX
TRANSACTIONS SUBSEQUENT TO CLOSING.
9.1 Preservation of Books and Records. Sellers acknowledge and
agree that from and after the Closing, Buyer shall be entitled to
possession of all documents, books, records and financial data of any
sort relating exclusively to New NNE, the Company and the Business. At
all reasonable times after the Closing, Buyer shall make available
without cost, for inspection and/or copying by Sellers, such books and
records. Such books and records shall be preserved by Buyer for a
period of at least six (6) years after the Closing Date.
Notwithstanding the foregoing, in the case of all books and records
relating to Taxes, Buyer shall maintain such books and records until
the later of (i) eight (8) years or (ii) the expiration of the statute
of limitations of the taxable periods to which such books and records
relate, including extensions to the extent notified by Sellers of such
extensions.
9.2 Cooperation in Litigation. Each of Sellers and Buyer shall
provide the other with cooperation as may reasonably be requested, at
the expense of the requesting party (unless the requesting party is to
be indemnified with respect thereto in which case such cooperation
shall be given at the expense of the indemnifying party), in connection
with the defense of any litigation whether existing on the Closing Date
or arising thereafter out of, or relating to, an occurrence or event
happening before, on or after the Closing Date, including without
limitation by making available all books and records relating thereto
and all employees having Knowledge of the matters in controversy.
9.3 Other Cooperation. After the Closing, each of Sellers and
Buyer shall, and shall cause its appropriate personnel to, provide the
other, at the expense of the requesting party, in the normal and
customary manner with financial, accounting, tax, and other information
requested covering periods of operation of the Business up to the
Closing Date. Buyer agrees, and shall cause New NNE and any successors
and assigns to agree, to timely provide to Sellers, but in any event
within thirty (30) days after Sellers' request, the information
relating to the Business up to the Closing Date, which customarily has
been provided to Sellers in connection with the preparation of any and
all returns or reports with respect to Taxes required to be filed by
Sellers with any Governmental Entity and in connection with the conduct
of any audit, action, proceeding or other determinations with respect
to Taxes; and, in substantially the form in which such information has
customarily been provided in the past. Buyer agrees, and shall cause
New NNE and any successors and assigns to agree, without expense to
Sellers and upon the request of Sellers, promptly to make available to
Sellers all work papers and records (or copies thereof), relating to
the Business up to the Closing Date, as well as the services of any
personnel reasonably necessary and, to execute all necessary powers of
attorney to enable Sellers to prepare and file any and all returns or
reports with respect to Taxes which Sellers are required to file;
and/or, in connection with the conduct of all audits, actions,
proceedings or other determinations with respect to Taxes.
9.4 No Other Representations. Sellers make no representations
or warranties whatsoever,
express or implied, with respect to the Business or condition of the
Company or its assets and
<PAGE>
properties, the transactions contemplated hereby or any related matter,
except for those representations and warranties contained herein.
Without limitation as to the foregoing, Buyer acknowledges that Sellers
make no representations or warranties with respect to any financial
projection or forecast relating to the Business. Buyer further
acknowledges that it conducted an investigation of the Company and the
Business prior to the Closing Date and had an opportunity to ask
Sellers any questions rising from such investigation. With respect to
any projection or forecast delivered by or on behalf of the Company to
Buyer, Buyer acknowledges that (i) there are uncertainties inherent in
attempting to make such projections, (ii) it is taking full
responsibility for making its own evaluation of the adequacy and
accuracy of all such projections and forecasts furnished to it and
(iii) it shall have no claim against Sellers or its representatives,
stockholders, officers, directors, employees, agents or Affiliates with
respect thereto.
ARTICLE X
TERMINATION.
10.1 Termination. Subject to the provisions of Section 10.2,
if the Closing shall not have occurred by the close of business on
January 2, 1996, this Agreement may be terminated by written notice
given by Buyer or Sellers to the other, provided, however, that either
Buyer or Sellers may, upon notice to the other parties, terminate this
Agreement if all of Jeffrey J. Panek, Frerichs and McCrill have not
executed employment agreements within five (5) days from the date of
this Agreement with the Buyer or New NNE to be effective at the
Closing. Nothing contained in this Section 10.1 shall relieve any party
of any liability for a breach of this Agreement.
10.2 Cure. Notwithstanding anything to the contrary contained
in Section 10.1, if Buyer intends to terminate this Agreement on
account of any breach or default by Sellers hereunder, Buyer shall
notify Sellers and, if the Sellers shall represent to Buyer that they
are diligently seeking to cure any such breach or default, Sellers
shall have the right to postpone the Closing for a period not to exceed
thirty days during which Sellers shall have the right to cure such
breach or default.
10.3 Specific Performance. The obligations of the Sellers and
Buyer under this Agreement are unique. If either the Sellers or Buyer
should default in their obligations under this Agreement, the Sellers
and Buyer acknowledge that it would be extremely impracticable to
measure the resulting damages. Accordingly, the Sellers and Buyer may,
in addition to any other available rights or remedies, sue in equity
for specific performance, and hereby expressly waive the defense that a
remedy in damages will be adequate.
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ARTICLE XI
GENERAL.
11.1 Amendment and Waiver. No amendment of any provision of
this Agreement shall in any event be effective, unless the same shall
be in writing and signed by the parties hereto. Any failure of any
party to comply with any obligation, agreement or condition hereunder
may only be waived in writing by the other party but such waiver shall
not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. No failure by any party to take any action against
any breach of this Agreement or default by the other party shall
constitute a waiver of such party's right to enforce any provision
hereof or to take any such action.
11.2 Notices. Any notices or other communications required to
be given pursuant to this Agreement shall be in writing and shall be
deemed given: (i) upon delivery, if by hand; (ii) three (3) Business
Days after mailing, if sent by registered or certified mail, postage
prepaid, return receipt requested; (iii) one (1) Business Day after
mailing, if sent by express mail or air courier; or (iv) upon
transmission, if sent by telex or facsimile (provided that a
confirmation copy is sent in the manner provided in Section 11.2(ii) or
(iii) above within thirty six (36) hours after such transmission),
except that if notice is received by telex or facsimile after 5:00 p.m.
on a Business Day at the place of receipt, it shall be effective as of
the following Business Day. All notices hereunder shall be given as
follows:
(a) If to Buyer:
Mestek, Inc.
280 North Elm Street
Westfield, MA 01086
Attention: John E. Reed, President
Fax: (413) 568-7428
(b) If to Sellers:
Nucon Capital Corporation
225 Franklin Street
Boston, MA 02110
Attention: David H. Weener
Fax: (617) 338-2150
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: Richard M.C. Glenn III, Esq.
Fax: (401)276-6611
<PAGE>
Any party may change its address for receiving notice by
written notice given to the other names above in the manner
provided above.
11.3 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
Agreement.
11.4 Parties in Interest. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective
heirs, successors and assigns. This Agreement shall not be
assignable by any party without the prior written consent of the
other party, except that Buyer may assign this Agreement to any
wholly-owned Affiliate of Buyer, in which event, the
representations and warranties contained in Article IV hereof
shall be deemed amended to refer also to such assignee, and
provided further that such assignment shall not release Buyer
from its liabilities with respect to any obligations hereunder
or in connection with any breach of any representation, warranty
or covenant under this Agreement, whether by Buyer or its
assignee and whether before or after the Closing Date. Any
attempted assignment of this Agreement in breach of this
provision shall be void and of no effect.
11.5 Entire Agreement. This Agreement, together with the
exhibits and schedules attached hereto and the other agreements
and documents referenced herein, contains the entire agreement
and understanding of the parties hereto with respect to the
matters herein set forth, and all prior negotiations and
understandings relating to the subject matter of this Agreement
are merged herein and are superseded and canceled by this
Agreement. This Agreement may not be modified except in writing,
signed by both of the parties. hereto.
11.6 Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of
the Commonwealth of Massachusetts, without giving effect to the
principles of conflicts of laws thereof.
11.7 Dispute Resolution. Except as provided in Sections
2.5(d), 2.6 (g) and 10.3 of this Agreement, any controversy or
claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by
majority decision of the three arbitrators may be entered in any
court having jurisdiction thereof. The site of the arbitration
shall be Boston, Massachusetts. The arbitrators shall award
reimbursement of attorneys' fees and other costs of arbitration
to the prevailing party, in such manner as the arbitrators shall
deem appropriate. In addition, the losing party shall reimburse
the prevailing party for attorneys' fees and disbursements and
court costs incurred by the prevailing party in successfully
seeking any preliminary equitable relief or judicially enforcing
any arbitration award.
11.8 Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not
affect any way the meaning or interpretation of this Agreement.
<PAGE>
11.9 Third Parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any
person or entity other than the parties hereto and their
affiliates, successors or assigns, any rights or remedies under
or by reason of this agreement.
11.10. Severability. In the event that any provision of this
Agreement is declared by a court of competent jurisdiction or
arbitration tribunal to be void or unenforced, the parties
hereto expressly agree that such void or unenforceable provision
shall be deemed severed from this Agreement, and the remainder
of this Agreement shall not be affected thereby and shall remain
in full force and effect to the extent feasible in the absence
of the void and unenforceable provision. The parties furthermore
agree to execute and deliver such amendatory contractual
provisions to accomplish lawfully as nearly possible the goals
and purposes of the provision so held to be void or
unenforceable.
11.11 Confidentiality. The Buyer shall treat all documents and
information furnished to it by Sellers or the Company in
connection with Buyer's due diligence, which is not available to
the general public, as confidential, and in the event the
Closing shall not occur, Buyer shall return all such documents
and information to the Company and shall not keep any copies
thereof.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by
or on behalf of each of the parties hereto as of the date first
above written.
MESTEK, INC.
By: JOHN E. REED
Name: John E. Reed
Title: President
DAVID H. WEENER
David H. Weener
JON M. MORRISON
Jon M. Morrison
WAYNE FRERICHS
Wayne Frerichs
MARK MCCNILL
Mark McCrill
