SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 to 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 2, 1996
MESTEK, INC.
(Exact name of registrant as specified in Charter)
Pennsylvania 1-448 25-0661650
(state of jurisdiction of (Commission File Number) (IRS Employer
incorporation Identification No.)
260 North Elm Street, Westfield, Massachusetts 01085
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code (413) 568-9571
Not Applicable
(Former name or former address, if changed since last report)
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Item 5. Other Events
On February 2, 1996, Mestek, Inc. through its subsidiary Mestex, Ltd., of
Dallas, Texas acquired certain assets of the press feeding and cut-to-length
line businesses of Rowe Machinery and Automation Inc. of Dallas, Texas.
("Rowe"). Rowe is a leading manufacturer of press feeding and cut-to-length line
equipment serving the appliance, office furniture, automotive, and many other
markets. The purchase price paid is approximately $5 million, including the
assumption of certain liabilities.
On February 5, 1996, Mestek, Inc. acquired all of the issued and outstanding
common stock of Omega Flex, Inc. of Exton, Pennsylvania. Omega Flex is a
manufacturer of flexible metal hose and related hose fabrications. The purchase
price paid for the acquired stock is approximately $9 million.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Mestek, Inc.
Dated: February 13, 1996 By:STEPHEN M. SHEA
Stephen M. Shea
Vice President - Finance, Chief Financial Officer
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AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS
AGREEMENT made as of this 12th day of January, 1996, by and between
Met-Coil Systems Corporation, a Delaware corporation located at 5486 6th
Street, S.W., Cedar Rapids, Iowa 52404, ("Met-Coil"), Rowe Machinery &
Automation, Inc., a Texas corporation, located at 811 Regal Row, Dallas,
Texas ("Seller"), and Mestex,Ltd., a Texas limited partnership with offices
located at 4830 Transport Drive, Dallas, Texas 75247 ("Purchaser").
RECITALS
A. Met-Coil is the owner of all right, title and interest in and to all of
the issued and outstanding shares of Rowe.
B. Seller is the owner of certain assets including machinery, equipment,
and other tangible personal property, inventory, work- in-process, rights under
agreements, accounts or notes receivable, intellectual property, permits,
goodwill and other books, records, information and materials required or
appropriate for the continued operation of that certain business that
manufactures and sells the line of press feed and cut-to-length machinery,
equipment, accessories and related repair and service parts sold under the name
Rowe (the "Rowe Business") (as further defined in Section 1 of this Agreement).
C. Met-Coil and Seller desire and intend to sell the assets and certain
liabilities associated with the Rowe Business of Seller to Purchaser at the
price and on the terms and conditions hereinafter set forth.
D. Purchaser desires and intends to purchase the assets and assume certain
liabilities of Seller associated with the Rowe Business at the price and on the
terms and conditions hereinafter set forth.
AGREEMENTS
NOW, THEREFORE, in consideration of the terms hereof, the parties
hereto, intending to be legally bound hereby, agree as follows:
1. Purchase and Sale of Assets
1.1. The Assets. Upon the closing of the transactions contemplated under
this Agreement on January 31, 1996, or such other date as mutually agreed by the
parties (the "Closing Date"), and subject to the terms and conditions contained
in this Agreement, Seller shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase, acquire and accept from Seller, free
and clear of all liens, encumbrances, restrictions and adverse charges of any
nature whatsoever, except as may be
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permitted by Section 7.7, all of the assets, rights, interests, properties
and goodwill of every nature whatsoever, tangible or intangible and wheresoever
situated, required or appropriate for the continued operation of the Rowe
Business which is further defined as the manufacture, application, design,
development, engineering, distribution and sale of various models and types of
press feeding and cut-to-length automation equipment and machinery and the parts
and accessories related thereto set forth by name and drawing number category in
Schedule 1.1 attached hereto. The assets, rights, interests, properties and
goodwill sold, transferred, conveyed, assigned and delivered by Seller to
Purchaser hereunder (collectively, thetively, the "Assets") shall include, but
shall not be limited to the following: "Assets") shall include, but shall not be
limited to the following:
1.1.1. Personal Property. All of the jigs, dies, patterns, and tooling
fixtures of Seller used in the Rowe Business identified in Schedule 1.1.1 (the
"Personal Property"), together with any rights of Seller to all warranties, if
any, and to the extent assignable, received from the manufacturers and sellers
of such items, all as relates to the operation of the Rowe Business;
1.1.2. Inventory. All saleable, usable, undamaged, non-obsolete and
non-slow-moving inventory of Seller relating to the Rowe Business including raw
materials, work-in-process, and finished goods (the "Inventory") to be
physically counted on or about the Closing Date and listed and attached to this
Agreement thereafter as Schedule 1.1.2;
1.1.3. Material Agreements. Subject to required consents (by customers of
Seller, lessors and tangible asset suppliers), all right, title and interest of
Seller in, to and under executory contracts (including the right to the return
of any and all deposits), the sales backlog and other contract rights and
agreements to provide equipment and services to the Rowe Business customers of
Seller, representative agreements, leases of personal property, licenses,
purchaser orders, sale orders and joint venture, partnership and other
agreements related to the ownership or operation of the Rowe Business all as
identified and listed by Purchaser in Schedule 1.1.3 that shall be affirmatively
and expressly assumed by Purchaser (the "Material Agreements");
1.1.4. Intellectual Property. All patents, patent applications, trademarks
(including the trademark "Rowe"), service marks, tradenames, copyrights and
copyright applications and licenses with respect to any of the foregoing all as
identified in Schedule 1.1.4 and all inventions, inventor's notes, discoveries,
trade secrets, ideas, proprietary processes and formulae, whether patentable or
not, improvements, engineering drawings, computer- assisted design and
manufacturing data, bills of material, designs and specifications (including
design choices), computer software and laboratory certifications, proprietary
and trade rights and data, ideas and know-how, whether patentable or not, and
all shop rights, manufacturing data, licenses, and other intellectual property
and all correspondence related thereto that are used in
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the Rowe Business (all of which are hereinafter collectively referred to as
the "Intellectual Property"); however, notwithstanding the foregoing, nothing
herein shall be deemed a transfer of any rights to intellectual property related
to the Fen- Pro machinery operations of Seller;
1.1.5. Receivables. All accounts or notes receivable, prepaid expenses and
contract rights of Seller relating to the Rowe Business as of the Closing Date,
including those identified in Schedule 1.1.5 attached hereto, arising from the
operation of the Rowe Business (the "Receivables");
1.1.6. Permits. All of Seller's right, title and interest in and to any and
all permits, licenses, authorizations, certifications, consents, orders,
registrations and approvals or any federal, state or local governmental entity
or certifying or regulatory agency or authority required of Seller or otherwise
necessary or advisable for the operation of the Rowe Business as set forth on
Schedule 1.1.6 attached hereto (the "Permits") to the extent the same are
transferable or assignable to Purchaser;
1.1.7. Books and Records. All of Seller's right, title and interest in or
to all books of account, records, files and invoices, including but not limited
to technical and scientific literature, all invoice files kept by serial number,
model or customer and correspondence related thereto, all production data,
testing data, equipment maintenance data, employee files, payroll information
system, accounting records, inventory records, purchasing records, engineering
records, sales and sales promotional data, advertising materials, customer lists
and customer data, cost and pricing information, supplier and vendor lists,
installation and maintenance manuals, business plans, supply reference catalogs
and any other records and data used in connection with the Rowe Business
(whether in computer software, data or any other form) (the "Books and Records")
other than the minute book and records of shareholder and director action by
Seller; and
1.1.8. Goodwill. The goodwill associated with the Rowe Business (the
"Goodwill").
1.2. Conveyance of Assets. The sale, transfer, conveyance, assignment and
delivery of the Assets provided for in this Section 1 shall be made by (i) a
duly executed bill of sale, evidencing the warranty provisions of this
Agreement, and substantially in the form of Exhibit 1.2 attached hereto (the
"Bill of Sale") and (ii) such other good and sufficient instruments of
conveyance and transfer as shall be reasonably necessary to vest in Purchaser as
of the Closing Date, full title to the Assets being sold, transferred, conveyed,
assigned and delivered hereunder.
1.3 Off-Site Assets. All tangible Assets held at any
location other than the Dallas facility of Seller are described on
Schedule 1.3 which schedule includes a description of each of such
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assets, its type, the name and address of the vendor or customer
holding such assets and, if such asset is held pursuant to an
agreement, a copy or description of such agreement is attached to
the schedule.
2. Excluded Assets. The assets excluded from this Agreement (the
"Excluded Assets") are all assets of Seller not specifically
identified in Section 1.
3. Purchase Price
3.1. Calculation of Purchase Price. The purchase price (the
"Purchase Price") of the Assets to be acquired by Purchaser from
Seller shall be the sum of the following:
3.1.1. The amount of Three Million and 00/100 Dollars
($3,000,000.00) for the Personal Property, Material Agreements,
Intellectual Property, Permits, Books and Records and Goodwill; and
3.1.2. An amount equal to the net tangible asset value
defined as the following:
(a) the actual value on the Closing Date of the
Inventory calculated pursuant to the terms of Section 7.15(a) of
the Agreement, plus the actual value of the collectible Receivables
as described in Section 7.12 of the Agreement that are purchased by
Purchaser,
(b) less the value of all of the obligations of
Seller including all trade accounts payable, customer deposits and
other obligations of and associated with the Rowe Business that are
expressly assumed by Purchaser under this Agreement.
3.2 Payment of Purchase Price
3.2.1 On the Closing Date, the portion of the Purchase
Price identified in Section 3.1.1 of the Agreement shall be paid by
Purchaser delivering to Seller a promissory note in the amount of
$3.0 million substantially in the form attached hereto as Exhibit
3.2.1 (the "Initial Note"). The Initial Note shall be payable
within five (5) business days of Met-Coil and Seller completing the
refinancing of its debt currently held by Harris Bank as lead
lender, on December 31, 1996, whichever is earlier. The parties
are deferring the payment of the Purchase Price under the Initial
Note in order to insure a smooth transition of the Rowe Business
and the continued, uninterrupted operation of the Dallas
manufacturing facility. Purchaser desires to purchase the Assets
of Seller; however, Purchaser's agreement to pay a premium amount
of Purchase Price is expressly conditioned upon a smooth transition
of the Rowe Business and continued operation in the Dallas
manufacturing facility. A stable lending relationship among Met-
Coil, Seller and its secured lenders is deemed by Purchaser to be
essential to a smooth transition. Therefore, the payment of the
Purchase Price in cash shall be delayed until the new lending
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relationship contemplated by Seller and Met-Coil and represented to
Purchaser by Seller and Met-Coil to be imminent, is executed,
delivered and funded. In the event that such a new lending
relationship is not closed and Met-Coil seeks bankruptcy protection
or otherwise ceases to engage in business, the value of the Rowe
Business and the Assets to Purchaser would be substantially
diminished. Consequently, the Initial Note contains a provision
that the Purchase Price will be readjusted significantly downward
in the event of a bankruptcy or dissolution of Met-Coil.
3.2.2 On the Closing Date the portion of the Purchase
Price identified in Section 3.1.2 shall be paid by Purchaser
delivering to Seller an adjustable note substantially in the form
attached hereto as Exhibit 3.2.2 (the "Adjustable Note"). The terms,
conditions, covenants and procedures whereby the principal amount
of the Adjustable Note shall be adjusted based upon the actual
count of the Inventory, the application of the terms of the
representations and warranties set forth in Sections 7.12 and 7.15
of the Agreement and the covenant of Seller set forth in Section
10.7 of this Agreement, are set forth more fully in Section 3.3 of
this Agreement and the Adjustable Note. The amount of any state or
local transfer, conveyance or recordation taxes imposed by the
state or municipality on the transfer of title of the Personal
Property shall be paid by Seller.
3.3 Adjustment to Principal Amount of Adjustable Note
3.3.1 Adjustment. Purchaser and Seller agree that the original principal
amount of the Adjustable Note has been calculated by adding the face amount of
the accounts receivable of Seller at the latest date available prior to the
Closing Date but not earlier than December 31, 1995, and the amount of the book
value of the inventory of Seller at the latest date available prior to the
Closing Date but not earlier than November 30, 1995, and subtracting therefrom
the value of the trade accounts payable, customer deposits, accrued liabilities
and other obligations of Seller that will be expressly assumed by Purchaser at
the latest date available prior to the Closing Date but not earlier than
December 31, 1995. Purchaser and Seller further agree that the principal amount
of the Adjustable Note shall be adjusted upward or downward as appropriate,
dollar for dollar, as follows:
(a) downward by the amount of the value of all
liabilities and obligations of Seller relating to and arising from
the ownership and operation of the Assets and the Rowe Business
prior to the Closing Date (whether unrecorded trade accounts
payable, accrued liabilities, customer deposits or other
obligations of Seller), that were not included in the initial
determination of the original principal amount of the Adjustable
Note, that have been paid or accrued for payment by Purchaser at
the time of the final calculation of the principal amount due under
the Adjustable Note;
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(b) downward by the aggregate amount of the face value
of all accounts receivable of Seller that was used in determining
the original principal amount of the Adjustable Note, that are not
collected by Purchaser by May 31, 1996;
(c) upward or downward, as the case may be, by the
amount that the value of the Inventory of Seller, determined based
upon the physical count thereof held on or about the Closing Date,
exceeds or falls short of the amount of the value of the inventory
of Seller that was used in determining the original principal
amount of the Adjustable Note;
(d) downward by an amount equal to the value of those
items in the inventory of Seller determined by the authorized
representatives of Purchaser and Seller to be obsolete, damaged,
defective or without manufacturing value;
(e) downward by an amount equal to the value of those
slow-moving items in the inventory of Seller determined by the
authorized representatives of Purchaser and Seller to be not
consumable in the ordinary course of the manufacture and sale of
the products of the Rowe Business in the 24-month period after the
Closing Date; and
(f) downward by an amount equal to fifty percent (50%)
of the value of those slow-moving items in the inventory of Seller
determined by the authorized representatives of Purchaser and
Seller to be not consumable in the ordinary course of the
manufacture and sale of the products of the Rowe Business in the
12-month period after the Closing Date but not otherwise included
as slow-moving items under Section 3.3.1(e).
Any inventory of Seller determined to be slow-moving under Section
3.3.1(e) of the Agreement shall remain the property of Seller and
it shall be segregated from the Inventory transferred to Purchaser
and disposed of at Seller's discretion. Any inventory of Seller
determined to be slow-moving under Section 3.3.1(f) of the
Agreement shall be included in the Inventory transferred to
Purchaser hereunder.
3.3.2 Terms Relating to Adjustment. Seller shall use
its best efforts to value the physical count of the Inventory to be
taken immediately after the Closing Date at its earliest
convenience, but not later than forty (40) days after the Closing
Date. The parties shall work together making such personnel and
records available as necessary to determine and finalize the
adjustments to the principal amount of the Adjustable Note in good
faith at their earliest convenience based upon the valuation of the
physical count of the Inventory, the calculations and standards set
forth in Section 3.3.1, the representations and warranties set
forth in Sections 7.12 and 7.15 of the Agreement and the covenant
of Seller set forth in Section 10.7 of the Agreement. The final
adjusted amount payable and the calculation of the adjustments to
the Adjustable Note shall be set forth in a memorandum of
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understanding prepared and executed by the authorized
representative of each of the parties. The adjusted amount due
under the Adjustable Note shall be paid in cash to Seller within
five (5) business days of the execution of such memorandum of
understanding and upon such payment the Adjustable Note shall be
stamped "paid in full", canceled and returned to Purchaser.
4. Allocation of Purchase Price. The Purchase Price shall be
allocated by the parties hereto among the Assets as set forth in a
memorandum of allocation delivered on the Closing Date
substantially in the form attached hereto as Exhibit 4.0 (the
"Memorandum of Allocation"). Notwithstanding any allocation by the
parties, Purchaser agreed to purchase and Seller has agreed to sell
the Assets, and the allocation is not intended and shall not be
deemed to constitute an agreement between the parties to transfer
less than all of the Assets. Furthermore, such allocation has been
made solely to ascribe fair value to the Assets and any benefits
deriving therefrom shall not inure to any other third party.
5. Assumption of Liabilities
Upon the Closing Date, Purchaser shall assume or discharge the
following liabilities of Seller:
5.1. Assumed Liabilities. Those trade accounts payables and
customer deposits and other obligations of Seller associated with
the Rowe Business as specifically set forth by Purchaser and Seller
in Schedule 5.1 attached hereto as they exist as of the Closing
Date.
5.2. Assumption of Material Agreements. The obligations and
liabilities of Seller with respect to the assignment to Purchaser
of the Material Agreements described in Section 1.1.3 and listed on
Schedule 1.1.3.
5.3. Limits on Assumption. Except for the assumptions or
discharges of liabilities described in Sections 5.1 and 5.2,
Purchaser shall not assume (a) other liabilities, obligations and
commitments of Seller, whether fixed or contingent, legal or
equitable, mature or inchoate, written or oral, express or implied,
known or unknown, including, but not limited to those related to
taxes, employment practices, employee benefits and pensions,
implied warranty, maintenance and products or professional
liability, and environmental, health and safety obligations all
related to, arising from or in connection with the Rowe Business
for products manufactured and services performed prior to the
Closing Date and (b) those liabilities, obligations and commitments
of Seller that arise after the Closing Date, and the
indemnification provisions contained in Article 16 shall apply to
any liability of Seller which is not assumed by Purchaser and which
is asserted or claimed by any person against Purchaser.
5.4. Assignment of Contracts and Rights. Notwithstanding
anything in this Agreement to the contrary, this Agreement shall
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not constitute an agreement to assign the Material Agreements or
any claim, contract, license, lease, commitment, sales order,
purchase order or any claim or right or any benefit arising
thereunder or resulting therefrom if the agreement to assign or
attempt to assign, without the consent of a third party, would
constitute a breach thereof or in any way adversely affect the
rights of Purchaser or Seller thereunder. Until such consent is
obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights of Seller thereunder so that
the Purchaser would not in fact receive all such rights, Purchaser
and Seller will cooperate with each other in any arrangement
designed to provide for Purchaser the benefits of, and to permit
Purchaser to assume, insofar as expressly set forth herein, stated
liabilities under the Material Agreement including enforcement at
the request and expense and for the benefit of Purchaser of any and
all rights of Seller against a third party thereto arising out of
the breach or cancellation thereof by such third party or
otherwise. Any transfer or assignment to Purchaser by Seller of
any property or property rights or any contract or agreement which
shall require the consent or approval of any third party shall be
made subject to such consent or approval being obtained.
6. Covenants Against Competition
6.1. Covenant Not to Compete. Met-Coil and Seller each
covenant and agree that neither it nor its affiliates shall at any
time within the five (5) year period immediately following the
Closing Date (a) have any ownership interest in any firm,
corporation, partnership, proprietorship or other business that
engages with third parties in the activities now engaged in and in
the territory served by the Rowe Business with respect to the press
feed portion of the Rowe Business and (b) use any proprietary
information, drawings or designs with respect to the cut-to-length
portion of the Rowe Business for its own or any third parties'
benefit or account, so long as Purchaser or any affiliate or
successor thereof, remains engaged in the Rowe Business; provided,
however, that Seller may own, directly or indirectly, solely as an
investment, securities, or any entity which are publicly traded if
Seller does not, directly or indirectly, own five percent (5%) or
more of any class of securities of any such competitive entity. It
is further understood by the parties that Iowa Precision
Industries, an affiliate of Met-Coil, is in the business of
manufacturing cut-to-length lines and will continue to operate in
that market in a competitive capacity subject only to the express
prohibitions of this Section 6.1.
6.2. Non-competition Agreement. The obligations of Met-Coil
and Seller under this Section 6 shall be set forth fully in a non
competition agreement substantially in the form attached hereto as
Exhibit 6.2 (the "Noncompetition Agreement"). The Noncompetition
Agreement shall be executed by Met-Coil and Seller on the Closing
Date.
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6.3. Remedies. Without waiving the Purchaser's rights to
monetary damages, all parties to this Agreement acknowledge that
the breach of the obligations contained in this Article 6 would
result in substantial but indeterminable harm to Purchaser, that
the restraints imposed are reasonable, that there is no adequate
remedy at law for a breach of such obligations, and that therefore
injunctive relief, specific performance or other equitable remedies
are appropriate to enforce the obligations undertaken in this
Article 6. In the event that a court finds that the term,
territory, or scope of this Article 6 is too broad to be
enforceable, Seller and Purchaser further agree that a reformation
of the terms of this Article 6 is appropriate and should be
undertaken by the court in order to protect the value of the Assets
being conveyed pursuant to this Agreement as a going concern, and
to provide for the enforceability of the obligations contained in
this Article 6 to the fullest extent allowed by law and equity.
7. Representations and Warranties of Seller
Seller (and, where applicable, Met-Coil) represents and
warrants to Purchaser as of the Closing Date as follows:
7.1. Corporate Existence. Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Texas and Met-Coil is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware and Seller knows of no violation of the requirement for
good standing in any other jurisdiction in which it is required to
be qualified to carry on the Rowe Business. Seller has full
corporate power and authority to carry on the Rowe Business as now
being conducted. Met-Coil currently owns all of the issued and
outstanding shares of Seller subject to the lien and secured
interest of Harris Bank as agent for the secured lenders which will
not be released at the Closing Date.
7.2. Due Authorization and Enforceability. Seller and Met-
Coil have full corporate power and authority to execute and deliver
this Agreement, the Certificate of Assumption, the Bill of Sale,
Memorandum of Allocation, Noncompetition Agreement, Lease
Agreement, Guarantee and the other documents, instruments and
agreements to which each is a party to be delivered upon the
Closing Date (collectively, the "Related Agreements"), and to
consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Related Agreements
by Seller and Met-Coil and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate actions and no other corporate action or
proceeding on the part of Seller or Met-Coil is necessary to
authorize the execution and delivery of this Agreement or the
Related Agreements or the consummation by Seller of the
transactions contemplated hereby or thereby other than the consent
of Harris Bank as agent for the secured lenders, which consent is
a condition to closing. This Agreement and the Related Agreements
have been duly executed and delivered by Seller and Met-Coil, as
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applicable, and this Agreement and the Related Agreements are
legal, valid and binding obligations of Seller and Met-Coil,
enforceable against each of Seller and Met-Coil in accordance with
their terms.
7.3. No Conflicts. Except as set forth in Schedule 7.3,
neither the execution and delivery of this Agreement or the Related
Agreements nor the consummation of the transactions contemplated
hereby or thereby will (i) conflict with or violate any provision
of the Articles of Incorporation or Bylaws of either of Seller and
Met-Coil, (ii) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree applicable
to the Rowe Business or by which any of the Assets are bound or
affected or (iii) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination or cancellation of, or accelerate the
performance required by or maturity of, or result in the creation
of any security interest, lien, charge or encumbrance on any of the
Assets pursuant to any of the terms, conditions or provisions of,
any note, bond, mortgage, indenture, permit, license, franchise,
lease, contract or other instrument or obligation to which Seller
is a party or by which any of the Assets are bound or affected;
except those Liens permitted by Section 7.7 and in the case of (ii)
or (iii) above, for such conflicts, violations, breaches, defaults,
terminations, cancellations and accelerations which in the
aggregate will not have a material adverse effect on the Rowe
Business.
7.4. Financial Statements. Attached as Schedule 7.4 are the
balance sheets of Seller as of the fiscal year ended May 31, 1995,
and as of the interim period ended November 30, 1995, and the
related statements of income, for the respective fiscal year and
interim period then ended (all of the financial statements referred
to above in this Section 7.4 are herein collectively referred to as
the "Seller Financial Statements"). The Seller Financial
Statements fairly present the assets, liabilities and financial
position of Seller as of the respective dates set forth therein and
the results of operations and changes in financial position of
Seller for the respective periods set forth therein; the Seller
Financial Statements have been prepared in each case in conformity
with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved.
7.5 No Material Changes. Except as set forth in Schedule
7.5, since May 31, 1995, (i) there have been no changes in the
Assets or the liabilities (actual or contingent) of Seller or in
the nature and prospects of the Rowe Business or its condition
(financial or otherwise) which have in the aggregate been material
and adverse to the Rowe Business, and, (ii) Seller has operated the
Rowe Business in the ordinary course and consistent with past
practice.
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7.6 All Necessary Assets. The Assets (including the Personal
Property, Inventory, Material Agreements, Intellectual Property,
Receivables, Permits, Books and Records and Goodwill) being sold,
transferred, conveyed, assigned and delivered by Seller under this
Agreement constitute all of the assets used by Seller in the
conduct of the Rowe Business, except for the land, building,
improvements, machinery and equipment and office furniture of
Seller which is not being conveyed to Purchaser under this
Agreement.
7.7 Title to Assets. Seller warrants that Seller has good
and marketable title to the Assets transferred hereunder and, upon
consummation of the transactions contemplated by this Agreement,
including execution and delivery of the Bill of Sale or other
instruments of transfer, Purchaser will acquire title to the
Assets, free and clear of all mortgages, pledges, liens, security
interests, assignments, conditional sales agreements, encumbrances,
claims or charges of any kind ("Liens"), except for (i) Liens
created by Purchaser and, (ii) Liens set forth on Schedule 7.7
which Seller shall satisfy immediately or prior to the Closing
Date. At the Closing Date, none of the Assets will be subject to
any commitment or other arrangement for its sale or use by third
parties except under Material Agreements disclosed in Schedule
1.1.3.
7.8 Condition of Assets. Except as set forth in Schedule
7.8, the Personal Property included in the Assets set forth in
Schedule 1.1.1 is in good operating condition and repair, ordinary
wear and tear excepted and is reasonably satisfactory for the
purposes for which the Assets are being used, and is capable of
being used to carry on the Rowe Business.
7.9 Compliance with Laws. The operation of the Rowe
Business and the use of the Assets comply in all material respects
with all applicable laws, ordinances, rules, decrees, orders and
regulations, including federal and state and local environmental
laws and rules and laws related to employment, benefits, and
pensions (collectively the "Laws"), except for such failures to
comply which in the aggregate will not have a material adverse
effect on the Assets or Rowe Business. Seller has obtained all
necessary permits, licenses, certificates, exemptions, orders and
approvals and has filed all required notices with federal, state
and local governmental bodies that are required by applicable law
for the use of the Assets and in order to conduct the Rowe Business
as presently conducted, all of which are valid and effective on the
date of this Agreement and will be valid at the Closing Date, and
all payments, fees and costs thereof have been paid in full to the
date of this Agreement and will be paid in full at the Closing
Date. Seller has not received notice of any violations of any Laws
or regulations or any covenants or contracts with respect to the
Rowe Business or any of the Assets, and to Seller's knowledge, no
such notice of violations is pending or has been threatened.
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7.10 Absence of Litigation. There are no judgments or other
judicial or administrative orders outstanding against Seller, nor
is there any action, suit or proceeding at law or in equity or by
or before any governmental or administrative instrumentality or
other agency now pending or, to the knowledge of Seller, threatened
against or affecting Seller, the Assets or any of Seller's property
or rights which, if adversely determined, might materially impair
the right or ability of Seller to carry on the Rowe Business as it
is now conducted or as proposed to be conducted or would materially
adversely affect the financial condition of Seller. A true,
correct and complete list of all suits or proceedings at law, in
equity or by or before any governmental or administrative
instrumentality or other agency and other litigation (whether
material or not) pending or threatened against Seller, or settled
within the last five (5) years noting those which involve the Rowe
Business is attached hereto as Schedule 7.10. Seller is not in
default in any material respect under any applicable statute, rule,
order, certificate or regulation of any governmental authority
having jurisdiction over it. Seller has conducted the Rowe Business
in such a manner so that there have been no occurrences that have
given or will give rise to products liability or breach of warranty
on the part of Seller.
7.11 Material Agreements. Schedule 1.1.3 is an accurate and
complete list of all of Seller's Material Agreements of any kind as
to which the rights and/or obligations are being assumed or
discharged by Purchaser. There are no other Material Agreements
being assumed by Purchaser. Each of the Material Agreements is
valid and effective in accordance with its terms. True and correct
copies of the Material Agreements have been supplied to Purchaser
by Seller, appropriately identified in order that such Material
Agreements can be identified on Schedule 1.1.3. At the Closing
Date, all consents to the assumptions of the obligations of Seller
by Purchaser under the Material Agreements will have been obtained.
All other executory contract rights or obligations of Seller
related to the Rowe Business, not listed on Schedule 1.1.3 and
therefore not being assumed by Purchaser, are listed in Schedule
7.11. No party to any of the Material Agreements (including
Seller) is in material default thereunder and no event has occurred
which with the passage of time or the giving of notice or both
would constitute a material default under any of the Material
Agreements.
7.12 Receivables. The Receivables being conveyed hereunder
and listed in Schedule 1.1.5, will, at the Closing Date, be owned
by Seller, free and clear of all claims, encumbrances, credits,
backcharges, counterclaims, setoffs and deductions, and are not
subject to additional requirements of performance by Seller, and
such Receivables have not been billed or collected for a greater
percentage of the work done or materials supplied than has actually
been performed or supplied by Seller, except as set forth in
Schedule 7.12. Seller guarantees to Purchaser that every dollar of
the Receivables shall be collected by Purchaser.
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7.13 Patents and Trademarks. Schedule 1.1.4 lists all
patents, patent applications, trademarks and service marks and
applications therefor, owned by Seller and heretofore used in the
conduct of the Rowe Business, none of which has been held or
stipulated to be invalid in any litigation which has been concluded
and the validity of none of which has been questioned in any
litigation currently pending or which, to the best knowledge of
Seller, has been threatened. Seller owns or possesses and will
have conveyed to Purchaser at the Closing Date all Intellectual
Property used in the Rowe Business, and the Intellectual Property
does not, to the best knowledge of Seller, infringe any patent or
other rights owned by others, nor has Seller received any notice of
conflict thereof with the asserted rights of others.
7.14 Related Party Agreements. No affiliate, officer or
director of Seller or Met-Coil or any related person has, directly
or indirectly, entered into any transaction with Seller relating to
the Rowe Business, except for any arrangements reflected on the
Seller Financial Statements and described in Schedule 7.14. For
purposes of this Agreement, the term "related person" shall mean
and include any person related to any affiliate, officer or
director of Seller or Met-Coil by blood or by marriage, or any
corporation, partnership, proprietorship, trust or other entity in
which any officer or director of Seller (or any spouse, ancestor or
descendant of the same) has more than a five percent (5%) legal or
beneficial interest.
7.15 Inventory. The Inventory of Seller included in the
Assets (whether raw materials, purchased components, manufactured
parts, work-in-process, finished goods or other) does not contain
any damaged, defective, slow-moving (defined as more than a one
years' supply under normal conditions of sale) or obsolete items
which are not currently usable or saleable in the ordinary course
of the Rowe Business.
(a) Raw materials and purchased components shall be
valued individually at the lower of acquisition costs or market
value in accordance with GAAP consistently applied. Acquisition
costs shall be determined on an item-by-item, FIFO basis and shall
be determined by using the standard costs of Seller in effect at a
date no later than October 31, 1995, adjusted upward or downward on
a case-by-case basis to account for instances where standard costs
differ materially from acquisition costs or market costs. Work-in-
process consisting of manufactured parts, sub-assemblies and
equipment in the process of being assembled and finished goods
shall be valued at the sum of the value of the raw material and
purchased components, direct labor and factory burden applicable to
said items of work-in-process and finished goods as further set
forth herein: (i) raw materials and purchased components shall be
valued at the lower of acquisition costs or market value in
accordance with GAAP consistently applied, (ii) direct labor shall
be valued at Seller's labor standards and rates which are based on
standard direct labor minutes multiplied by the standard direct
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labor rate in effect at December 31, 1995, and (iii) standard
factory burden shall be expressed as a percentage of standard
direct labor costs, for the respective products, which percentage
shall be those used by Seller as of December 31, 1995, adjusted to
eliminate the cost of (i) the wages, fringe costs and expenses of
the service department that are not directly related to pre-
shipment service of products, and (ii) any costs inconsistent with
GAAP in the calculation of burden.
(b) The value at which the Inventory is shown on the
Seller Financial Statements for the interim period ending November
30, 1995, has been determined in accordance with the standard
valuation policy of Seller, consistently applied and in accordance
with GAAP.
(c) All items of Inventory on hand at the Dallas
facility of Seller that are included in the physical counts at the
Closing Date, but not yet set forth or reflected in Seller's
accounts payable reported in the Seller Financial Statements, shall
be disclosed to Purchaser on Schedule 7.15.
(d) All items of Inventory (and their location) held
at locations other than Seller's Dallas facility at the Closing
Date shall be disclosed fully to Purchaser on Schedule 1.3.
7.16 Taxes. With respect to the Rowe Business and the Assets
being conveyed under this Agreement, Seller has filed all federal,
state, county and local tax returns, including information returns,
which it is required by law to file and has paid all income,
payroll, withholding, gross receipts, excise, occupation, sales,
use or other taxes, assessments and other governmental charges due
in respect of such returns, except to the extent that any such
taxes are being contested in good faith and as to which adequate
reserves have been set aside and Seller has accrued all taxes not
yet due. Since December 31, 1995, Seller has not incurred any
taxes other than taxes incurred in the ordinary course of business,
and all such taxes are fully reserved against on the books of
Seller. Seller is not delinquent in the payment of any amount of
taxes, and there are no Liens for any taxes upon the Assets of
Seller, except Liens for current taxes not yet due that are fully
reserved for on the Seller Financial Statements. All taxes that
Seller was or is required by law to withhold or collect, have been
and are being withheld or collected by it and have been or are
being held by it for such payment. All tax returns required to be
filed by or on behalf of Seller have been prepared and filed in
accordance with all applicable laws or requirements and accurately
reflect the taxable income (or other measure of Tax) of the party
filing the tax returns. All such tax returns, estimates, reports
and declarations are complete and accurate and disclose all taxes
required to be paid for the periods covered thereby. True and
complete copies of federal and state income or franchise tax
returns of Seller for each of the fiscal years ended May 31, 1994
and May 31, 1995 have been delivered to Purchaser. Except as
disclosed on Schedule 7.16, no audit, action, suit, investigation,
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claim, assessment or examination with respect to taxes is now
pending or currently in progress with respect to Seller and, to the
best of Seller's knowledge, there is no basis therefor. Seller has
not received from the Internal Revenue Service or from any other
tax authority from any state, foreign, county, local, or other
jurisdiction a notice of underpayment of taxes, a proposed
assessment of taxes, proposed adjustment to any tax returned, filed
or other deficiency that it has not been paid.
7.17 No Misrepresentation or Material Non-disclosures.
Neither this Agreement nor the Related Agreements, nor any other
document, certificate or statement furnished to Purchaser in
connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading. There
is no fact known to Seller which materially adversely affects or in
the future may (so far as can now be foreseen) materially adversely
affect the Rowe Business or the Assets which has not been set forth
in this Agreement.
7.18 Guaranteed Obligations. Seller has not directly or
indirectly guaranteed, become a surety or accommodation party for,
endorsed (other than collection or deposit in the ordinary course
of business), discounted with recourse, or agreed (contingently or
otherwise) to purchase or repurchase, or otherwise acquire any
indebtedness from any entity, nor agreed to supply or advance funds
to any person, firm, corporation or other entity, nor indemnified
any person, firm, corporation or other entity.
7.19 No Defective Products. The products of the Rowe
Business previously manufactured and sold by Seller have, where
necessary, been qualified under and comply in all respects with the
specifications and requirements of applicable rating and compliance
agencies and safety standards. Except for express warranties
disclosed in Schedule 7.27, Seller retains the obligation to pay
for the satisfaction of any customer claims for deficiencies in its
products as more fully set forth in Article 5 of this Agreement.
7.20 Employee Benefit Plans
(a) Set forth in Schedule 7.20(a) is a true and
complete list of each "employee pension benefit plan" (as such term
is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended and the regulations promulgated
thereunder ("ERISA")) maintained by Seller or an ERISA Affiliate
(as defined in Section 7.20(e) below), or with respect to which
Seller or an ERISA Affiliate is or will be required to make any
payment, or which provides or will provide benefits to present or
prior employees of Seller or an ERISA Affiliate due to such
employment (the "Pension Plans"). Set forth in Schedule 7.20(a) is
a true and complete list of each "employee welfare benefit plan"
(as such term is defined in Section 3(1) of ERISA) maintained by
Seller, or with respect to which Seller is or will be required to
make any payment, or which provides or will provide benefits to
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present or prior employees of Seller due to such employment (the
"Welfare Plans") (the Pension Plans and Welfare Plans together
being the "ERISA Benefit Plans"). Neither Seller nor any ERISA
Affiliate (i) maintains or has maintained, or (ii) is or was
required to make any payment with respect to, any "employee pension
benefit plan" (as such term is defined in Section 3(2) of ERISA)
ever subject to Section 302 of ERISA. No ERISA Benefit Plan or
prior Pension Plan is or was a "multi employer plan" (as such term
is defined in Section 3(37) of ERISA).
(b) Other than those plans and programs listed in
Schedule 7.20(a), Schedule 7.20(b) is a true and complete list of
each of the following to which Seller is a party or with respect to
which it is or will be required to make any payment (the "Non-ERISA
Commitments"):
(i) each retirement, savings, profit sharing,
deferred compensation, severance, stock ownership, stock purchase,
stock option, performance, bonus, incentive, vacation or holiday
pay, hospitalization or other medical, disability, life or other
insurance, or other welfare, benefit or fringe benefit plan,
policy, trust, understanding or arrangement of any kind, whether
written or oral; and
(ii) each employee collective bargaining agreement
and each agreement, understanding or arrangement of any kind,
whether written or oral, with or for the benefit of any present or
prior officer, director, employee or consultant (including, without
limitation, each employment, compensation, deferred compensation,
severance or consulting agreement or arrangement and any agreement
or arrangement associated with a change in ownership of Seller).
Seller has delivered to Buyer correct and complete copies of (i)
all written Non-ERISA Commitments and (ii) all insurance and
annuity policies and contracts and other documents relevant to any
Non-ERISA Commitment. Schedule 7.20(b) also contains a complete
and accurate description of all oral Non-ERISA Commitments.
(c) Seller has delivered to Buyer with respect to each
ERISA Benefit Plan correct and complete copies, where applicable,
of (A) all plan documents and amendments thereto, trust agreements
and amendments thereto and insurance and annuity contracts and
policies, (B) the current summary plan description, (C) the Annual
Reports (IRS Form 5500 series) and accompanying schedules, as
filed, for the most recently completed three plan years for which
such reports have been filed, (D) the financial statements for the
most recently completed three plan years for which such statements
have been prepared, (E) the most recent determination letter issued
by the Internal Revenue Service and the application submitted with
respect to such letter and (F) all correspondence with the Internal
Revenue Service, Department of Labor and Pension Benefit Guaranty
Corporation concerning any controversy.
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(d) Each Pension Plan which is intended to qualify
under Section 401(a) of the Code is so qualified under the Code as
amended to the date hereof and no circumstance exists which might
cause such plan to cease being so qualified. With respect to each
ERISA Benefit Plan, (i) there is no pending or, to the best
knowledge of Seller, threatened claim, (ii) all contributions and
premiums due have been made on a timely basis and are deductible by
Seller, (iii) no "prohibited transaction" described in Section 406
of ERISA or Section 4975 of the Code has occurred, and (iv) Seller
has no potential liability under ERISA or the Code. Each of the
ERISA Benefit Plans (i) has been administered in accordance with
its terms and (ii) complies in form, and has been administered in
accordance, with the requirements of ERISA and, where applicable,
the Code. No liability has been asserted (whether or not such
liability is being litigated) against Seller or any affiliate of
Seller in connection with any employee pension benefit plan (as
defined in Section 3(2) of ERISA), including but not limited to,
any withdrawal liability (as described in Section 4201 of ERISA)
with respect to any multi employer plan (as defined in Section
3(37) of ERISA). There are no reserves, assets, surplus or prepaid
premiums with respect to any Welfare Plan. Seller and each ERISA
Affiliate has complied with the health care requirements of Part 6
of Title I of ERISA. Seller has no obligation to provide health or
death benefits to its prior employees or any other person other
than while an employee of Seller, except as specifically required
by Part 6 of Title I of ERISA. The consummation of the
transactions contemplated by this Agreement will not (i) entitle
any individual to severance pay, or (ii) accelerate the time of
payment, vesting or increase the amount of compensation due to any
such individual. Seller has not taken any action or failed to take
any action which will subject Seller or has subjected Seller to
liability under the Worker Adjustment and Retraining Notification
Act of 1988.
(e) For purposes of the Agreement, "ERISA Affiliate"
means (i) any corporation which at any time on or before the
Closing Date is or was a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code) as
Seller; (ii) any partnership, trade or business (whether or not
incorporated) which at any time on or before the Closing Date is or
was under common control (within meaning of Section 414(c) of the
Code) with Seller; and (iii) any entity which at any time on or
before the Closing Date is or was a member of the same affiliated
service group (within the meaning of Section 414(m) of the Code) as
either Seller, any corporation described in clause (i) or any
partnership, trade or business described in clause (ii).
7.21 Employment Activity. To the best of Seller's
knowledge, Seller is in compliance with all applicable laws
respecting employment, employment practices, non-discrimination in
employment and employment practices, and terms and conditions of
employment and wages, and is not engaged in any unfair labor
practice. There is no employment discrimination or unfair labor
practice charge or complaint against Seller pending before the
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National Labor Relations Board, the Equal Employment Opportunity
Commission or any other federal, state or local governmental agency
arising out of Seller's activities, and Seller has no knowledge of
any facts or information which would give rise thereto; there is no
labor strike or labor disturbance pending or threatened against
Seller nor is any grievance currently being asserted thereat; and
Seller has not experienced a work stoppage or other material labor
difficulties thereat except as set forth on Schedule 7.21 attached
hereto.
7.22 No Indebtedness. Seller does not have any outstanding
indebtedness to any person or entity, except for such indebtedness
as is set forth on Schedule 7.22 attached hereto and the lender(s)
of any such indebtedness has consented to the transfer of the
Assets to Purchaser hereunder free and clear of all Liens. For
purposes of the Agreement, "Indebtedness" shall mean all items
which in accordance with GAAP would be included in determining
total liabilities secured by any Lien on property owned or
acquired, whether or not such a liability shall have been assumed,
liabilities in respect of all leases, whether capitalized or
operating, and guarantees, indemnities, endorsements (other than
for collection in the ordinary course of business) and other
contingent obligations, whether secured or not in respect to the
obligations of other persons or entities.
7.23 Environmental Matters. Seller has all permits,
licenses, and other authorizations which are required as of the
date of this Agreement and the Closing Date for the operation of
the Rowe Business under federal, state, local and foreign laws
relating to pollution and protection of the environment, including,
without limitation, the Resource Conservation and Recovery Act, 42
U.S.C. section 6901, et seq., as amended ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.
section 9601, et seq., as amended ("CERCLA"), the Clean Air Act, 42 U.S.C.
section 7401, et seq., as amended ("CAA"), the Clean Water Act, 33 U.S.C.
section 1251, et seq. ("CWA"), the Toxic Substance Control Act, 15 U.S.C.
section 2601, et seq. ("TSCA"), and any other applicable federal, state or
local laws, statutes, ordinances and regulations relating to the
physical or environmental condition of property and to the
maintenance, record-keeping and disposition of any underground
tanks and relating to emissions, discharges, releases or threatened
releases, of pollutants, contaminants, petroleum oils, chemicals or
industrial, hazardous or toxic materials or waste into the
environment (including, without limitation, ambient water, surface
water, groundwater, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, petroleum oils, chemicals or industrial, hazardous
toxic materials or waste or any regulation, order, decree or
judgment issued, entered, promulgated or approved thereunder (the
"Environmental Laws"). With respect to the conduct of its
business, its operations, its properties, and its use of owned and
leased properties, Seller is in compliance in all material respects
with all terms and conditions of the required permits, licenses and
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authorizations necessary under the Environmental Laws, and is also
in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the
Environmental Laws as in effect on the date hereof. There is no
pending civil or criminal litigation, notice of violation or
administrative proceeding arising out of the business or activities
of Seller and/or its shareholders or affiliates, including without
limitation any pending litigation, notice or proceeding relating in
any way to the Environmental Laws (including notices, demands,
letters or claims under RCRA, CERCLA, CAA, CWA, TSCA and similar
foreign, state and local laws. There is no threatened civil or
criminal litigation, notice of violation or administrative action
arising out of the business activities of Seller, including without
limitation, any threatened litigation, notice or proceeding
relating in any way to the Environmental Laws. Except as disclosed
on Schedule 7.23, Seller is not aware of any past or present
events, conditions, circumstances, practices, incidents or actions
which may give rise to any legal liability, or otherwise form the
basis of any claim, action, suit, proceeding, hearing or
investigation against or involving Seller arising out of any
violation or alleged violation of the Environmental Laws or any
circumstances which could reasonably be expected to interfere with
or prevent continued compliance with the Environmental Laws in
effect on the date hereof or the Closing Date. To the best of
Seller's and Met-Coil's knowledge, no hazardous substances,
pollutants, petroleum oils or fraction, contaminants or hazardous
waste including, but not limited to, asbestos, "PCB's" and urea
formaldehyde are contained in or have been, from any source
whatsoever, generated, released, spilled, stored or deposited over,
beneath or on the Dallas facility of Seller, or on adjoining
properties, by Seller, or, to the best of Seller's knowledge, any
other person, EXCEPT only such substances as have been fully
disclosed to Purchaser on Schedule 7.23 attached hereto.
7.24 Approvals and Consents. Except as set forth on Schedule
7.24, no consent, authorization or approval of, or waiver or
exemption by, or filing with any other person or entity is required
in connection with the execution, delivery or performance of this
Agreement by Seller or Met-Coil or the consummation by Seller of
the transactions contemplated hereby.
7.25 Insurance. Attached hereto on Schedule 7.25 is a
complete and correct list of all policies of insurance of which
Seller is the owner, insured or beneficiary, or covering the Rowe
Business or any of the Assets for any policy period after June 1,
1992. Such Schedule indicates for each policy the carrier, names
of all insured parties thereunder (including the named insured and
additional insured parties, if any), risks insured, the amounts of
coverage, deductibles and retentions, if any and any pending claims
thereunder. Except as set forth on Schedule 7.25, all premiums
under such policies for periods through the date hereof have been
paid and through the Closing Date will be paid. No notice of
cancellation or non-renewal with respect to or disallowance of any
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claim under, or increase of the premium for any such insurance
policy has been received by Seller.
7.26 Other Intangibles. The vendor and customer lists of
Seller related to the Rowe Business attached hereto on Schedule
7.26 are true and complete as of the Closing Date; and the
engineering drawings, bills of material, manufacturing data,
software and data collection services and other intangibles
conveyed to Purchaser as described in Section 1.1.6 are all of such
items used in the Rowe Business that are in the possession of
Seller. Except as set forth on Schedule 7.26, there exists no
actual or, to the knowledge of Seller, threatened termination,
cancellation or material limitation of, or material modification
in, the business relationship of Seller with any customer or
supplier.
7.27 Warranties. Set forth on Schedule 7.27 are the express
warranty terms and disclaimers for all forms of warranties given
(or extended warranties sold) by Seller during the ten-year period
prior to the Closing Date with respect to the Rowe Business for
product sold or services related thereto performed by Seller.
Under the Rowe name, Seller, in operating the Rowe Business, has
not sold any parts or equipment or performed any services related
thereto which fail to comply with any express or implied warranties
or guarantees of Seller applicable to such parts or equipment or
services related thereto.
8. Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller as of the Closing
Date as follows:
8.1 Corporate Existence. Purchaser is a limited partnership
duly formed, validly organized and existing in good standing under
the laws of the State of Texas. Purchaser has full power and
authority to own its assets and to carry on its business as and
where such business is now conducted.
8.2 Due Authorization and Enforceability. Purchaser has
full power and authority to execute and deliver this Agreement and
the Related Agreements to which it is a party, and to consummate
the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Related Agreements to which
it is a party, by Purchaser of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action and
no other action or proceeding on the part of Purchaser is necessary
to authorize the execution and delivery by Purchaser of this
Agreement or Related Agreements to which it is a party or the
consummation by Purchaser of the transactions contemplated hereby
or thereby. This Agreement and the Related Agreements to which
Purchaser is a party have been duly executed and delivered by
Purchaser and this Agreement and the Related Agreements to which
Purchaser is a party are legal, valid and binding obligations of
Purchaser, enforceable against Purchaser in accordance with their
stated terms.
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8.3 No Conflicts. Neither the execution and delivery of
this Agreement or the Related Agreements to which Purchaser is a
party, nor the consummation of the transactions contemplated hereby
or thereby will (i) conflict with or violate any provision of the
Partnership Agreement or other formation documents of Purchaser,
(ii) conflict with or violate any law, rule, regulation, ordinance,
order, writ, injunction, judgment or decree applicable to Purchaser
or by which any of its properties or assets are bound or affected
or (iii) conflict with or result in any breach of or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights or
termination or cancellation of, or result in the creation of any
lien, charge or encumbrance on any of their assets or properties
pursuant to any of the terms, conditions, or provisions of, any
note, bond, mortgage, indenture, permit, license, franchise
agreement, lease, contract, or other instrument or obligation to
which Purchaser is a party or by which any of Purchaser's
properties or assets are bound or affected; except, in the case of
(ii) and (iii) above, for such conflicts, violations, breaches,
defaults, terminations, cancellations and accelerations which in
the aggregate will not have a material adverse effect on the
ability of Purchaser to consummate the transactions contemplated by
this Agreement and the Related Agreements to which it is a party.
9. Survival of Representations and Warranties. The
representations and warranties made in this Agreement or pursuant
hereto shall survive the execution and delivery of this Agreement
and the conclusion and closing of the transactions contemplated
hereby.
10. Covenants
10.1 Retention of Records. Purchaser hereby covenants that
for a period of seven (7) years following the Closing Date,
Purchaser will retain, at Purchaser's sole expense, the Books and
Records of Seller relating to the operation of the Rowe Business
prior to the Closing Date. During such period, Purchaser will
afford to Seller, its counsel and accountants, during normal
business hours, reasonable access to such books, records and other
data, to the extent that such access may reasonably be required to
facilitate the preparation by Seller of such tax returns as they
may be required to file with respect to Seller and the
investigation, litigation and final disposition of any claims which
may be made against Seller. Following the expiration of such seven
(7) year period, Purchaser may dispose of any such books, records
and other data; provided, however, that before disposing of any
such materials it will first notify Seller and permit Seller at its
sole expense, to remove such materials.
10.2 Further Actions. Upon the terms and subject to the
conditions hereof, each of the parties hereto agrees to use its
best efforts or take or cause to be taken all action and to do or
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cause to be done all things necessary, proper and advisable to
consummate the transactions contemplated by this Agreement, the
Related Agreements and other documents necessary to close this
transaction, and shall use its best efforts to obtain all necessary
waivers, consents and approvals and to effect all necessary
registrations and filings. In addition, Seller covenants and
agrees that it will take all actions and execute and deliver all
documents, instruments, and agreements necessary to assist
Purchaser in the removal of all Liens whether set forth in Schedule
7.7 or not, after Purchaser has satisfied its obligations (pursuant
to its assumption of Seller's liabilities) for the underlying
indebtedness of such Liens.
10.3 Press Releases. Purchaser and Seller will consult with
each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the
transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such
consultation, except as may be required by law or any listing
agreement with a national securities exchange. Notwithstanding the
foregoing, Seller shall, simultaneously with the Closing, notify
its employees and creditors of the sale of assets contemplated by
this Agreement, specifically noting that Purchaser is not assuming
liabilities beyond those described in this Agreement.
10.4 Lease Agreement. Purchaser and Seller shall enter into
a lease for the occupation and use by Purchaser of the Dallas
facility, including the manufacturing office and building,
machinery and equipment and tooling, of Seller, substantially in
the form of Exhibit 10.4 attached hereto (the "Lease Agreement")
which Lease Agreement shall be effective on the Closing Date.
10.5 Receipt of Funds. After the Closing Date, each of
Purchaser and Seller shall segregate any monies or other amounts
paid to either of them in respect of receivables or assets that
belong to the other party whether received in a lock-box account or
otherwise, and each party shall pay over and remit to the other
party any such monies and amounts weekly after receipt thereof.
Each of Purchaser and Seller shall take all reasonable actions,
including the giving of timely notices to assure that the covenants
set forth in this Section 10.5 are faithfully and timely fulfilled.
10.6 Rowe Employees.
10.6.1 Potential Employees. Effective as of the
Closing Date, Purchaser or an agent or affiliate of Purchaser may
offer employment to any of Seller's personnel now working at the
Dallas facility of Seller (a "Potential Employee"), except those
employees whom Seller intends to retain as set forth on Exhibit
10.6.1 ("Retained Employees"). Any Potential Employee who accepts
any such offer of employment and who commences employment upon the
terms of such offer on or after the Closing Date is an "Accepting
Employee". Seller shall be responsible and liable for any required
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notification and payments under the Worker Adjustment and
Retraining Notification Act of 1988.
10.6.2 Separation Benefits. Purchaser will not assume
or have any liability, responsibility or obligation under any of
the Pension Plans, Welfare Plans or Non-ERISA Commitments of Seller
or Met-Coil. Seller will be responsible and liable for and
discharge at or prior to Closing all obligations to, for or on
behalf of all Retained Employees and Potential Employees under any
Pension Plans, Welfare Plans and Non-ERISA Commitments, including,
without limitation, the cost of accrued and unpaid wages, unpaid
bonuses, stock options, severance pay, accrued vacation pay, pay
for personal days, holidays, and sick leave, the cost of retirement
benefits and pensions, the cost of payroll taxes, including FICA,
Federal Unemployment Insurance, State Unemployment Insurance and
Federal and State withholding, and the cost of health insurance,
dental insurance, disability insurance, life insurance and the
like. Seller also will be responsible and liable for the costs of
administration and compliance with COBRA (as defined in Section
10.6.5 of this Agreement) or similar group health contribution
coverage benefits under federal and state law, and the costs of
liability and defense of claims related to the wrongful or
discriminatory termination of employment for Accepting Employees
who do not remain as employees of Purchaser after the termination
of the Lease Agreement or voluntarily leave the employ of Purchaser
prior thereto (collectively such costs and those set forth in the
sentence prior hereto shall be defined as "Separation Benefits").
10.6.3 Eligibility of Accepting Employees. For
purposes of eligibility for employment plans, programs and for
vacation during employment with Purchaser, Purchaser's policies or
those of its affiliates as set forth from time to time hereafter
shall be applied in accordance with their terms and conditions to
all Accepting Employees. The service of Accepting Employees with
Seller prior to the Closing Date shall be recognized for purposes
of eligibility for vacation accrued in accordance with and subject
to the terms and conditions of Purchaser's or its affiliates'
applicable vacation policies as stated from time to time.
10.6.4 Claims of Accepting Employees. Seller hereby
agrees to indemnify and hold harmless Purchaser, its agents,
officers or directors, employees, and affiliates against any
liabilities, costs or expenses (including reasonable attorneys'
fees) resulting from claims made by any Retained Employees or
Potential Employees for Separation Benefits. Subject to the
accuracy of the representations of Seller contained herein,
Purchaser hereby agrees to indemnify Seller, its agents, officers,
directors, employees and subsidiaries against any liabilities,
costs or expenses including reasonable attorney's fees) resulting
from claims made by any Accepting Employees relating to acts and
omissions of Purchaser with respect to the employment of such
Accepting Employees by Purchaser after the Closing Date.
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10.6.5 Health Benefits. With respect to any Accepting
Employees of Seller who do not remain as employees of Purchaser
after the termination of the Lease Agreement, Seller shall promptly
reimburse Purchaser for the cost of administration of group health
continuation coverage required under the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") for any qualifying event
or as required under applicable state law.
10.7 Discharge of Liabilities. Seller will pay and discharge
in due course after the Closing Date, and hold Purchaser harmless
from, all liabilities and obligations of Seller relating to and
arising from the ownership and operation of the Assets and the Rowe
Business prior to the Closing Date, (whether unrecorded accounts
payable, accrued liabilities, customer deposits or other
obligations), it being understood that Purchaser is assuming no
liabilities or obligations of Seller other than those expressly set
forth in Article 5 of this Agreement. If Seller fails to pay and
discharge any such liabilities and, in the case of bona fide
disputes regarding such liabilities, fails to disclose to Purchaser
the existence of and all facts relating to such bona fide disputes,
Purchaser may, without having any duty, pay or discharge such
liabilities of Seller and offset such amounts paid from the
Adjustable Note as set forth in Section 3.3(a) of this Agreement or
use the indemnification provisions of Article 16 of this Agreement.
11. Closing
11.1 Closing. The closing of the transaction contemplated by
this Agreement (the "Closing") shall be held on the 31st day of
January, 1996 or such other date as mutually agreed by the parties,
at the offices of _________________________________
in______________________________ at _______ __.m., local time, or
at such other time and place as the parties may agree.
11.2 Closing Events. At the Closing upon the Closing
Date:
11.2.1 Purchaser shall deliver to Seller the Initial
Note and the Adjustable Note.
11.2.2 Seller shall execute and deliver to Purchaser the Bill of Sale.
11.2.3 Seller shall provide to Purchaser any and all required
written consents to assumption of the Material Agreements.
11.2.4 Purchaser shall execute and deliver to Seller the Certificate of
Assumption, in the form attached hereto as Exhibit 11.2.4 for those liabilities
of Seller assumed by Purchaser pursuant to Section 5.1 of this Agreement.
11.2.5 Purchaser shall have received a written legal opinion from counsel
to Seller substantially in the form attached hereto as Exhibit 11.2.5.
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11.2.6 Seller shall have received from the Chief Executive officer and the
Chief Financial Officer of Purchaser and Purchaser shall have received from the
Chief Executive Officer and the Chief Financial Officer of Seller, a certificate
that, as to such party, the representations and warranties made by such party
are true as of the Closing Date, and that all covenants to be performed by such
parties have been performed.
11.2.7 The parties shall complete and execute the Memorandum of Allocation.
11.2.8 Seller shall have received from the Secretary of Purchaser and
Purchaser shall have received from the Secretaries of each of Seller and of
Met-Coil a certificate setting forth, as to such party, the corporate
resolutions or partnership actions authorizing and approving the execution,
delivery and performance of the Agreement and the other documents to be executed
by that party in connection herewith, and a good standing certificate or similar
document from the applicable Secretary of State of each party's state of
incorporation or formation.
11.2.9 Purchaser shall have received from the counsel of Seller (a) a copy
of a UCC search of the Texas central file for all filings of financing
statements under Seller's and Met-Coil's name, and (b) a copy of a tax lien,
suit and judgment search of the records of any county where the real or personal
property of Seller is located.
11.2.10 Seller and Purchaser shall execute and deliver the Lease Agreement
in the form set forth in Exhibit 10.4 of the Agreement.
11.2.11 Met-Coil shall execute and deliver the Guarantee in the form set
forth in Exhibit 16.6 of this Agreement.
11.2.12 Seller and Met-Coil shall execute and deliver the Non-Competition
Agreement in the form set forth in Exhibit 6.2 of this Agreement.
11.2.13 Seller and Met-Coil shall obtain from its secured and judgment
creditors and lenders and deliver to Purchaser such lien releases, terminations
and other documents necessary to assure Purchaser to its satisfaction that the
Assets are being transferred by Seller to Purchaser under this Agreement free
and clear of all liens and encumbrances.
12. Conditions to Purchaser's Obligation to Complete Closing
The obligation of Purchaser to purchase and pay for the Assets
at Closing shall be subject to the satisfaction, prior to or
concurrently with the Closing Date, of each of the following
express conditions precedent, unless waived by Purchaser:
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12.1 Consents and Releases. Seller shall have obtained and
delivered to Purchaser (based upon Purchaser's assumption thereof)
any and all required consents to the assignment of the Material
Agreements and the lien and judgment releases and terminations of
security interests described in Section 11.2.13 of this Agreement
so that the Assets may be transferred by Seller to Purchaser free
and clear of all liens and encumbrances.
12.2 Governmental Approvals. Purchaser and Seller shall have
obtained all requisite government approvals, if any, for their
participation in the transactions contemplated under this
Agreement.
12.3 Accuracy of Representations. The representations and
warranties of Seller shall be true and correct in all material
respects at the Closing Date, and Seller shall have complied with
all covenants set forth in this Agreement.
12.4 Closing Documents Delivered. Seller shall have executed
and delivered the documents, certificates, instruments and
agreements and done the acts required of Seller in connection with
the Closing as described in Section 11.
12.5 No Prohibition. No order, statute, rule, regulation,
executive order, injunction, stay, decree or restraining order
shall have been enacted, entered, promulgated or enforced by any
court or competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the
transactions contemplated hereby.
12.6 Bankruptcy. Neither Seller or Met-Coil shall be the
subject of a petition for reorganization or liquidation under the
Federal bankruptcy laws, or under state insolvency laws, nor shall
an assignment for the benefit of creditors or any similar
protective proceeding or act or event of bankruptcy have occurred.
12.7 Non-Fulfillment Date. In the event that one or more of
the foregoing conditions in this Section 12 is not fulfilled by the
date of March 15, 1996, Purchaser may, upon notice to Seller or
Met-Coil, on or prior to Closing, elect either (i) to waive the
condition and proceed to Closing; or (ii) terminate this Agreement
without any further liability on the part of either of the parties
except that the foregoing shall not relieve either of the parties
from liability for damages actually incurred as a result of breach
of this Agreement.
13. Conditions to Seller's obligation to Complete the Closing
The obligation of Seller to sell and convey the Assets at the
Closing shall be subject to the satisfaction, prior to or
concurrently with the Closing Date, of each of the following
express conditions precedent:
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13.1 Government Approvals. Purchaser and Seller have
obtained all requisite government approvals, if any, for their
participation in transactions contemplated under this Agreement.
13.2 Accuracy of Representations. The representations and
warranties of Purchaser shall be true and correct in all material
respects at the Closing Date, and for Purchaser shall have complied
with all of its covenants set forth in this Agreement.
13.3 Closing Documents Delivered. Purchaser shall have
executed and delivered the documents, certificates, instruments and
agreements and done the acts required of Purchaser in connection
with the Closing, as described in Section 11.
13.4 No Prohibition. No order, statute, rule, regulation,
executive order, injunction, stay, decree or restraining order,
shall have been enacted, entered, promulgated or enforced by any
court or competent jurisdiction or governmental or regulatory
authority or instrumentality that prohibits the consummation of the
transactions contemplated hereby.
14. Post-Closing Covenants
14.1 Bulk Sale. Seller hereby agrees to indemnify and save
and hold harmless Purchaser, its shareholders, directors and
officers from and against any and all claims, losses, damages,
costs or expenses of any kind or character, including attorneys'
fees, other than those expressly assumed by Purchaser, arising out
of or resulting from failure to comply with the "Uniform Commercial
Code -- Bulk Transfers" of the State of Texas or of such other
state as to which such act or equivalent act applies or may apply
to the transactions contemplated by this Agreement.
14.2 Further Accrued Liabilities. In the event that
liabilities of Seller related to the Rowe Business not disclosed in
this Agreement shall be discovered after the Closing Date,
Purchaser may demand in writing and Seller shall promptly satisfy
such liability and provide evidence thereof to Purchaser; and if
such demand is not satisfied in full by Seller, or Seller, in the
case of a bona fide dispute regarding the liability, is not
defending the dispute, Purchaser may, but is not required to,
assume or discharge such liability and (a) offset such amount
against any obligations of Purchaser to Seller, (b) make a demand
in writing to Seller for reimbursement and Seller shall promptly
reimburse Purchaser, or (c) seek redress under the indemnification
procedure set forth in Article 16 of this Agreement.
15. Amendment and Waiver
15.1 Amendment. This Agreement may be amended only by a
writing executed by the authorized representatives of Purchaser and
Seller.
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15.2 Waiver. Any party hereto may (a) agree to extend the
time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the
part of the party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the
authorized representative of such party.
16. Indemnification
16.1 Purchaser Indemnification. For a period of thirty-six
(36) months following the Closing Date, Purchaser hereby agrees to
indemnify and hold Seller harmless, from and against any and all
loss, liability (whether known or unknown, actual or contingent,
legal or equitable, mature or inchoate, as guarantor or principal
obligor, howsoever arising), claim, damage and expense, including,
but not limited to, reasonable attorneys, fees and amounts
reasonably expended in settlement of litigation, pending or
threatened, after the date hereof, incurred after the Closing Date
and arising out of or relating to: (i) any liabilities or
obligations of the Rowe Business which were expressly assumed by
Purchaser under this Agreement; (ii) any material misrepresentation
or material breach of any of Purchaser's representations and
warranties set forth in this Agreement; or (iii) any material
breach of any of Purchaser's covenants or obligations under this
Agreement.
16.2 Seller and Met-Coil Indemnification
16.2.1 For a period of thirty-six (36) months following the Closing Date,
Seller hereby agrees to indemnify and hold Purchaser harmless from and against
any and all loss, liability (whether known or unknown, actual or contingent,
legal or equitable, mature or inchoate, howsoever arising), damage and expense,
including but not limited to reasonable attorneys' fees and amounts reasonably
expended in settlement of litigation, pending or threatened, incurred after the
Closing Date and arising out of or relating to: (i) any liabilities and
obligations of Seller not expressly assumed by Purchaser under the Agreement;
(ii) any material misrepresentation or material breach of any of Seller's
representations and warranties set forth in this Agreement; (iii) any material
breach of any of Seller's covenants or obligations under this Agreement; (iv)
any liabilities and obligations of Seller related to the operation of its other
businesses including Fen-Pro; and (v) any material breach of any of Seller's
covenants under the Lease Agreement and the Non-Competition Agreement.
16.2.2 For a period of thirty-six (36) months following the Closing Date,
Met-Coil hereby agrees to indemnify and hold Purchaser harmless from and against
any and all loss, liability (whether known or unknown, actual or contingent,
legal or equitable,
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mature or inchoate, howsoever arising), damage and expense, including
but not limited to reasonable attorneys' fees and amounts reasonably
expended in settlement of litigation, pending or threatened, incurred
after the Closing Date and arising out of or relating to: (i) any
material misrepresentation or material breach of any of Met-Coil's
representations and warranties set forth in the Agreement; and (ii)
any material breach of any of Met-Coil's covenants or obligations
under this Agreement, the Guarantee and the Non-Competition
Agreement.
16.3 Procedure of Indemnification
16.3.1 Neither Purchaser nor Seller nor Met-Coil are
required to take any action or make any claim to any third person as
a precondition of seeking indemnification from the other(s)
hereunder. The party seeking indemnification (the "Claimant") shall
promptly give notice to the indemnifying party or parties of any
matter or item which forms a basis for indemnification hereunder (a
"Claim"). The Claimant shall afford the indemnifying party or
parties, or their authorized representatives, the opportunity to
defend, discharge or compromise such Claim and examine the books and
records of the Claimant insofar as they relate to such Claim and to
copy or make extracts therefrom, and will (at the expense of the
indemnifying party) provide full cooperation of itself and its
employees and agents with respect to such Claim. At an indemnifying
party's request and expense, the Claimant will assign any claims or
rights which the Claimant may have against any third party in an
action against the third parties, and, at the indemnifying party's
expense, the Claimant will cooperate fully with the indemnifying
party in pursuing any such claim or right.
16.3.2 The indemnifying party or parties may, within twenty (20) days after
the Claimant has given notice of the Claim, give notice to the Claimant that the
indemnifying party or parties intend to litigate or otherwise attempt to resolve
the claim identified in the Claimant's notice. Upon such notice from the
indemnifying party or parties to the Claimant: (1) the indemnifying party or
parties, or any of them, shall have the right, at their sole cost and expense
and without liability, cost or expense, to Claimant, to prosecute any such
proceeding, defend any such Claim or otherwise attempt to resolve the Claim
(including, but not limited to, settling such claim by paying all amounts in
settlement), and (ii) Claimant shall have the right to participate at its
expense in the defense of any such Claim. The indemnifying party or parties
shall keep the Claimant appraised of all material developments in connection
with any such Claim.
16.3.3. So long as any indemnifying party shall continue to handle a Claim
or proceeding in good faith, or until a final determination that monies are
payable by Claimant to a third person, the indemnifying party or parties will
not be obligated to pay to Claimant the monies so claimed.
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16.3.4 Notwithstanding the foregoing Section 16.3.3; if as a result of any
Claim, a judgment is entered against Claimant in a court of competent
jurisdiction, or a lien attaches to any property or asset of Claimant, or any
injunction, order or decree is obtained in any court of competent jurisdiction
which materially and adversely affects or threatens to materially affect the
assets, property, business or operations of Claimant, Claimant will be entitled
to discharge, compromise or settle such Claim in good faith without the consent
of the indemnifying party or parties.
16.3.5 All amounts incurred or paid by the Claimant for which it is
entitled to indemnification by the indemnifying party or parties pursuant to the
terms and conditions of this Agreement shall be promptly reimbursed to it by the
indemnifying party or parties if not reimbursed within thirty (30) days of
written request therefor, Claimant shall have the right to offset from any other
amounts it owes or may owe to the indemnifying party or parties. In the event
Claimant collects or retains an amount in excess of the amount of claim or lien,
including reasonable costs and expenses including attorneys fees, Claimant shall
return such funds to the indemnifying party. Claimant shall cooperate in
accordance with its best business judgment, in attempting to cause third parties
who are liable to it or to the indemnifying party, to cause such third parties
to reimburse the indemnifying party for payment made by it to Claimant; and
Claimant shall subrogate the indemnifying party to Claimant's rights against
third parties, with respect to claims paid by the indemnifying party to
Claimant.
16.4 Exclusive Remedy. So long as the indemnifying party is in
compliance with this Article 16, the remedies provided in this
Article 16 shall be exclusive, except for (a) remedies set forth
elsewhere in this Agreement and (b) specific performance or
injunctive relief which shall be available regardless of the
provisions of this Article 16 so long as claims for specific
performance or injunctive relief are made within thirty six (36)
months of the Closing Date.
16.5 Limitation on Scope of Time Limitations. Notwithstanding
the foregoing, the time limitation set forth in Sections 16.1, 16.2.1
and 16.2.2 of this Agreement, shall not apply to claims of fraud or
actions to enforce Article 6, Sections 7.2, 7.7, 7.16, 8.2, 10.1,
16.6 and Article 19 of this Agreement.
16.6 Met-Coil Guarantee. In consideration of the execution of
this Agreement by Purchaser, and the benefit that flows therefrom to
Met-Coil as the sole shareholder of Seller, as well as for other
considerations, Met-Coil shall guarantee the obligations of Seller
under this Agreement by the execution and delivery of a guarantee
substantially in the form attached hereto as Exhibit 16.6 (the
"Guarantee") and such Guarantee shall survive the dissolution or
liquidation of Seller and shall survive any statute of limitations
applicable to Seller.
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17. Notices
Any notices or other communications required or permitted
hereunder or otherwise in connection herewith shall be in writing and
shall be deemed to have been duly given when delivered in person or
transmitted by facsimile transmission or on receipt after dispatch by
express, registered or certified mail, postage prepaid, addressed as
follows:
If to Seller:
Rowe Machinery & Automation, Inc.
c/o Met-Coil Systems Corporation
5486 6th Street, S.W.
Cedar Rapids, IA 52403
Attention: Raymond H. Blakeman
cc: Carroll J. Reasoner
Shuttleworth & Ingersoll, P.C.
500 Firstar Building
P.O. Box 2107
Cedar Rapids, IA 52406-2107
If to Purchaser:
Mestex, Ltd.
c/o Mestek, Inc.
260 North Elm Street
Westfield, Massachusetts 01085
Attention: R. Bruce Dewey
Senior Vice President
and General Counsel
or such other address as the person to whom notice is to be given has
furnished in writing to the other parties.
18. Further Assurance -- After Closing
18.1 Assurance of Seller and Met-Coil. At any time and from
time to time after the Closing Date, at Purchaser's request and
without further consideration, Seller and Met-Coil shall cooperate in
good faith and promptly execute and deliver all such further
instruments or documents and perform such other and further acts as
Purchaser may reasonably request is in order to fully conclude the
transactions contemplated hereby.
18.2 Delivery of Notices. After the Closing Date, Seller and
Met-Coil shall promptly deliver to Purchaser any notices,
correspondence and other documents relating to the Assets being
conveyed hereunder and the Rowe Business, which are, from time to
time, received by Seller and/or Met-Coil.
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19. Confidentiality
19.1 Proprietary information. Purchaser acknowledges its
receipt of substantial information from Seller concerning the Rowe
Business. All such information is hereinafter called the
"Proprietary Information".
19.2 Nondisclosure. Seller and Met-Coil acknowledge that they
are now in possession of the same Proprietary Information concerning
the Rowe Business as described above in Section 19.1. Seller and
Met-Coil agree to keep all of the Proprietary Information
confidential after the Closing Date, except such Proprietary
Information that becomes public information without the fault of
Seller or Met-Coil.
20. Entire Agreement -- Binding Effect. This Agreement (together
with the Exhibits and Schedules hereto, and the other agreements
executed at the Closing) sets forth the entire integrated
understanding and agreement of the parties with respect to the
subject matter hereof and supersedes all prior agreements whether
written or verbal. This Agreement may not be modified, amended or
terminated except in a writing signed by all of the parties hereto.
21. Assignment. No party to this Agreement shall have the right to
assign any of its rights and obligations hereunder without the prior
written consent of the other parties hereto. To the extent that such
consent is given, this Agreement and all provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
22. Miscellaneous
22.1 Expenses. Except as otherwise agreed herein, each
party hereto shall bear its own expenses incurred in connection with
this Agreement and the consummation of the transactions contemplated
hereby.
22.2 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original
instrument, but all such counterparts together shall constitute one
and the same instrument.
22.3 Governing Law. This Agreement is being made in and
shall be governed by and construed and enforced in accordance with
the laws of the State of Texas and the United States of America,
except for the conflicts laws of those jurisdictions.
22.4 No Third Party Rights. This Agreement, the Related
Agreements and the other agreements entered into at the Closing are
solely for the benefit of the parties hereto. No third person shall
acquire any rights or claims by reason of or under this Agreement,
the Related Agreements or the other agreements entered into at the
Closing.
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22.5 Severability. Should any terms, provision or clause
hereof, or of any other agreement or document which is required by
this Agreement, be held to be invalid, such invalidity shall not
affect or render invalid any other provisions or clauses hereof or
thereof the consideration or mutuality of which can be given effect
without such invalid provision, and all of which shall remain in
full force and effect. If any provision of this Agreement is so
broad as to be unenforceable, such provision shall be interpreted to
be only so broad as is enforceable under applicable law.
22.6 Headings. The headings to the sections of this Agreement
are inserted for convenience and reference only and are not intended
to define or limit the substance of any section.
22.7 Singular and Plural. Singular terms in this Agreement
may be deemed to include plural, and plural terms to include the
singular.
22.8 No Brokerage Fees. Neither Seller nor Purchaser, nor any
of their officers, directors or employees, nor Met-Coil, has incurred
any liability for any brokerage fees, commissions, finders, fees or
similar fees or expenses for which either Seller, Purchaser or Met-
Coil may be liable.
22.9 Exhibits and Schedules. The exhibits and schedules
referenced in this Agreement and attached hereto shall be deemed to
be a part of this Agreement and are incorporated herein by this
reference.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement under seal, with the intent that this be a sealed
instrument, on the date first above written.
SELLER: ROWE MACHINERY & AUTOMATION, INC.
CORPORATE SEAL
ATTEST:
BY: /s/ By:_/s/_____________________
Joeseph Ceryanec Raymond H. Blakeman, Chairman
PURCHASER: MESTEX, LTD.,
CORPORATE SEAL A Texas limited partnership
ATTEST:
By: GENTEX PARTNERS, INC.
By: /s/ Its General Partner
R. Bruce Dewey
By: /s/
Stephen M. Shea, Senior
Vice President-Finance
CORPORATE SEAL MET-COIL SYSTEMS CORPORATION
ATTEST:
By: /s/ By: /s/
Joseph Ceryanec Raymond H. Blakeman, Chairman
33
AMENDMENT TO AGREEMENT FOR THE
PURCHASE AND SALES OF ASSETS
This Amendment to the Agreement for the Purchase and Sales of Assets is
made as of this 5th day of February, 1996, by and between Met-Coil Systems
Corporation, a Delaware corporation, ("Met-Coil"), Rowe Machinery & Automation,
Inc., a Texas corporation, ("Seller"), and Mestex, Ltd., a Texas Limited
partnership, ("Purchaser").
Met-Coil, Seller, and Purchaser entered into an Agreement for the Purchase
and Sales of Assets as of January 12, 1996 ("Agreement") and now to desire to
amend certain of the terms of that Agreement prior to Closing.
Met-Coil, Seller and Purchaser agree as follows:
1. The first paragraph of Section 1.1 of the Agreement is amended to read
as follows:
1.1 The Assets. Upon the closing of the transactions contemplated under
this Agreement on January 31, 1996, or such other date as mutually agreed by the
parties (the "Closing Date"), and subject to the terms and conditions contained
in this Agreement, Seller shall sell, transfer, convey, assign and deliver to
Purchaser, and Purchaser shall purchase, acquire and accept from Seller, free
and clear of all liens, encumbrances, restrictions and adverse charges of any
nature whatsoever, except as may be permitted by Section 7.7, all of the assets,
rights, interests, properties and goodwill of every nature whatsoever, tangible
or intangible and wheresoever situated, required or appropriate for the
continued operation of the Rowe Business which is further defined as the
manufacture, application, design, development, engineering, distribution and
sale of various models and types of press feeding and cut-to-length automation
equipment and machinery and the parts and accessories related thereto set forth
by name and drawing number category in Schedule 1.1 attached hereto, and
specifically excepting the assets listed in Section 2. The assets, rights,
interests, properties and goodwill sold, transferred, conveyed, assigned and
delivered by Seller to Purchaser hereunder (collectively, the "Assets") shall
include but not be limited to the following:
2. Section 2 of the Agreement is amended to read as follows:
2. Excluded Assets. The assets excluded from the Agreement (the "Excluded
Assets") are all of the assets of Seller not specifically identified in Section
1, including without limitation the real property and fixtures of Seller, any
rents or profits from the rental of the real property or the right to receive
same, and all of the machinery located in the Seller's facility and any rents or
profits from the rental of the machinery or the right to receive same and any
rights of Seller in the Agreement and Adjustable Note.
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3. Section 3.2 of the Agreement is amended to read as follows:
3.2 Payment of Purchase Price
3.2.1 On the Closing Date, the portion of the Purchase Price identified in
Section 3.1.1 of the Agreement shall be paid by Purchaser delivering such amount
in cash by wire transfer or other immediately available funds to Seller (the
"Initial Payment").
3.2.2 On the Closing Date the portion of the Purchase Price identified in
Section 3.1.2 shall be paid by Purchaser delivering to Seller an adjustable note
substantially in the form attached hereto as Exhibit 3.2.2 (the "Adjustable
Note"). The terms, conditions, covenants and procedures whereby the principal
amount of the Adjustable Note shall be adjusted based upon the actual count of
the Inventory, the application of the terms of the representations and
warranties set forth in Section 7.12 and 7.15 of the Agreement and the covenant
of Seller set forth in Section 10.7 of this Agreement are set forth more fully
in Section 3.3 of this Agreement and the Adjustable Note. The amount of any
state of local transfer, conveyance or recordation taxes imposed by the state or
municipality on the transfer of title of the personal property shall be paid by
Seller.
4. Section 3.3.2 of the Agreement is amended to read as follows:
3.3.2 Terms Relating to Adjustment. Seller shall use its best efforts to
value the physical count of the Inventory to be taken immediately after the
Closing Date at its earliest convenience, but not later than thirty (30) days
after the Closing Date. The parties shall work together making such personnel
and records available as necessary to determine and finalize the adjustments to
the principal amount of the Adjustable Note in good faith at their earliest
convenience based upon the valuation of the physical count of the Inventory, the
calculations and standards set forth in Section 3.3.1., the representations and
warranties set forth in Section 7.12 and 7.15 of the Agreement and the covenant
of Seller set forth in Section 10.7 of the Agreement. Notwithstanding the
foregoing, forty-five days after the Closing Date, Purchaser shall pay Seller in
cash a partial payment under the Adjustable Note of the greater of the amount of
$200,000 or the sum of all categories of the net tangible asset value as defined
in Section 3.1.2 which are not in dispute and are set forth in a preliminary
memorandum of understanding executed by the authorized representatives of each
of the parties. The final adjusted amount due under the Adjustable Note and the
calculation of all remaining adjustments to the Adjustable Note shall be payable
in cash not later than ninety days after the Closing Date, subject to reasonable
reserve for amounts in dispute. All such final adjustments shall be set forth in
a memorandum of understanding prepared and executed by the authorized
representatives of each of the parties.
In the event the parties are unable to agree upon any final adjustments,
such disputes shall be submitted to a partner at a national accounting firm
mutually selected by both sides with a determination to be made no later than
May 31, 1996.
5. Section 11.2.1 is amended to read:
11.2.1 Purchaser shall deliver to Seller in cash the Initial Payment and
the Adjustable Note with the Adjustable Note.
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6. Section 11.2.13 is amended by adding the following sentence at the end
of the section:
Purchaser shall have received from the secured lenders of Seller a letter
of nondisturbance subject to attornment and subordination in a form acceptable
to Purchaser which allows Purchaser the right to remain undisturbed as a
tenant of the real property of Seller and to use the machinery leased under the
Lease as long as Purchaser is a tenant in good standing under the Lease.
7. All other provisions of the Agreement except as modified herein remain
in full force and effect.
MET-COIL SYSTEMS CORPORATION
By: /S/ Raymond H. Blakeman
President
ROWE MACHINERY AND AUTOMATION, INC.
By: /S/ Raymond H. Blakeman
Chairman and Senior Vice President
MESTEX, LTD., a Texas limited partnership
By: GENTEX PARTNERS, INC., its General Partner
By: /S/ R. B. Dewey
Vice President
3
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of this 2nd day of February,
1996, by and between Mestek, Inc., a Pennsylvania corporation ("Purchaser"); and
Koji Shimada ("Seller"), who owns all of the shares of the issued and
outstanding capital stock of Omega Flex, Inc., a Pennsylvania corporation
("Omega"). The Purchaser and Seller are sometimes collectively referred to
herein as the "Parties," and either one of the Parties is sometimes referred to
as a "Party."
WITNESSETH
WHEREAS, Seller is the sole beneficial and record owner of all the issued
and outstanding capital stock of Omega (the "Shares");
WHEREAS, Omega is engaged in the business of designing, manufacturing,
fabricating, assembling, buying and selling flexible metal hose products
(hereinafter the "Omega Business");
WHEREAS, Omega retains and owns all such assets, goodwill, properties and
contractual and other rights necessary to conduct the Omega Business (the "Omega
Assets");
WHEREAS, Seller is domiciled in Pennsylvania; and
WHEREAS, Purchaser desires to purchase the Shares, and Seller desires to
sell the Shares, upon the terms herein specified.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
hereinafter set forth, and of other good and valuable consideration, the Parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
PURCHASE OF THE SHARES
Seller hereby agrees to sell, assign, transfer, and convey to Purchaser at
the Closing hereinafter identified, for the consideration set forth and payable
in accordance with the provisions of Article II, all of Seller's rights, title,
and interest in and to the Shares, free and clear of all liens, encumbrances and
adverse charges of any nature. At the Closing, the Seller shall deliver to
Purchaser certificates representing all the Shares owned by the Seller, validly
endorsed in blank or accompanied by stock powers with respect to such Shares
validly endorsed in blank.
<PAGE>
ARTICLE II
PAYMENT FOR THE SHARES
2.1. Consideration. Subject to the terms and conditions set forth herein,
Purchaser hereby agrees to pay to the Seller at the Closing, as consideration
for the purchase of the Shares and for Seller's covenants contained herein, the
amount of $9,000,000 (Nine Million U.S. Dollars) in current funds, by wire
transfer, subject to adjustment in accordance with Section 2.2.
2.2. Adjustment of Purchase Price.
(a) On the Closing Date, Purchaser shall pay $8,500,000 (Eight Million Five
Hundred Thousand Dollars) of the Purchase Price to Seller.
(b) The Purchase Price shall be adjusted dollar-for-dollar for any
reduction in, or increase in, the net worth of the Company (as defined
hereinafter) between (i) the net worth of $1,996,000 (One Million, Nine Hundred
Ninety-Six Thousand Dollars) stated on the Recast Balance Sheet (as hereinafter
defined) and (ii) the net worth of the Company as at the Closing Date as
determined in accordance with the principles set forth in Section 2.3 (the
"Final Net Worth").
(c) Within 90 days after the Closing Date, financial statements as at the
Closing Date (the "Closing Date Financial Statement") shall be prepared by the
Purchaser (or the Purchaser shall cause the Company to prepare such Closing Date
Financial Statement in accordance with this Section) pursuant to the principles
set forth in Section 2.3. On the basis of the Closing Date Financial Statement,
Purchaser shall make a determination of the Final Net Worth of the Company (the
"Purchaser's Net Worth Determination") and shall communicate it and the Closing
Date Financial Statement to Seller in writing; the Closing Date Financial
Statement, the Purchaser's Net Worth Determination, and Purchaser's
communication thereof to Seller shall be accomplished within 90 days after
Closing. If Seller disagrees with Purchaser's Net Worth Determination, Seller
may so advise Purchaser within thirty days of receiving the Purchaser's Net
Worth Determination, failing which the Purchaser's Net Worth Determination shall
become the conclusive determination of the Final Net Worth of the Company as at
the Closing Date. If Seller does advise Purchaser that he disagrees with
Purchaser's Net Worth Determination, the Parties shall endeavor to reach
agreement on the Final Net Worth of the Company; in such a case the Seller may
hire a certified public accountant of his own choosing to conduct an additional
audit. If the Parties cannot agree on the Final Net Worth of the Company, an
independent certified public accountant shall be selected by the Parties, and
such independent certified public accountant's determination of the Final Net
Worth of the Company shall be conclusive, final and binding on both Parties. Any
such independent certified public accountant's costs and fees shall be shared
equally by the Parties.
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(d) Subject to Section 16.3, if the Final Net Worth of the Company is in
excess of $1,996,000, Purchaser shall pay Seller the difference within 10 days
after the conclusive determination pursuant to the provisions of Section 2.2(c)
of the Final Net Worth of the Company; provided, however, that if such
conclusive determination indicates the net worth of the Company to be less than
1,996,000 (One Million Nine Hundred Ninety-Six Thousand Dollars), then Seller
shall pay the difference to Purchaser within 10 days.
(e) When Purchaser shall have (i) made the payment called for by Section
2.2(a), (ii) made any payment required by Section 2.2(d), and (iii) made any
payment required by the last sentence of Section 16.4, Purchaser's entire
obligation under this Agreement with respect to the Purchase Price shall have
been satisfied.
(f) For the purposes of this Agreement, the term "Recast Balance Sheet"
means the recast balance sheet of the Company as at September 30, 1995, as
prepared by Geneva Capital Markets, Inc., which is attached hereto as Schedule
3.9(B).
2.3 Principles for Determining Final Net Worth.
(a) The actual assets and liabilities of the Company (including without
limitation those assets and liabilities as to which there are footnotes on the
Recast Balance Sheet) shall be calculated in accordance with generally accepted
accounting principles, except to the extent that other provisions of this
Section 2.3 provide otherwise.
(b) Inventory of the Company shall be valued as follows:
(i) Raw materials and purchased components shall be valued individually at
the lower of acquisition costs or market value. Acquisition costs shall be
determined on an item-by-item, FIFO basis.
(b) Work-in-process and finished goods consisting of manufactured flexible
hose and flexible hose products in the process of being assembled shall be
valued at the sum of the value of the raw materials and purchased components,
direct labor and factory burden applicable to said items of work-in-process and
finished goods as further set forth herein: (i) raw materials and purchased
components shall be valued at the lower of acquisition costs or market value,
(ii) direct labor shall be valued at the Company's labor standards and rates
which are based on standard direct labor minutes multiplied by the average
direct labor rate in effect at December 31, 1995, and (iii) standard factory
burden shall be expressed as a percentage of standard direct labor costs, for
the respective products, which percentage shall be those used by the Company as
of December 31, 1995, adjusted to eliminate the cost of the (x) wages, fringe
costs and expenses of any engineering activities that are not directly related
to application engineering or product maintenance, (y) the wages, fringe costs
and expenses of any sales, marketing and service activities, and (z) any other
costs,
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including general and administrative costs, inconsistent with generally
accepted accounting principles in the calculation of burden.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The term "the Company" as used in this Agreement includes Omega and all
corporations, partnerships and other entities owned by it entirely or in part,
all of which are listed on Schedule 3 attached hereto. All representations and
warranties contained herein shall survive the Closing, and none shall merge into
any Closing document, and breaches of representations and warranties may be set
off against any amounts due from Purchaser to the Seller, but only to the extent
specifically set forth in the Lease Agreement (as hereinafter defined). Each of
the representations and warranties set forth in Sections 3.3, 3.8, 3.17 and 3.31
shall expire on the expiration of the statute of limitations applicable with
respect to the subject matter of such representation and warranty. Each of the
remaining representations and warranties in this Article III shall expire on the
date that is fourteen months after the Closing Date.
Where the expression "to the Knowledge of the Company" is used in this
Agreement, it shall mean what any of the individuals in the following list knew
or should have known based on their respective areas of responsibility at the
Company: the Seller, Mrs. Kim Shimada, Steven Tanzola, Steven Rongione, and
Steven Treichel.
The Seller represents and warrants the following as of the date hereof and
as of the Closing Date:
3.1. Corporate Standing. The Company is duly organized, validly existing,
and in good standing under the laws of its jurisdiction of incorporation. The
Company has full corporate authority to own, lease and operate its properties
and businesses, and is in good standing and is qualified to transact business as
a foreign corporation in all states in which the nature of its business or the
properties owned by it require it to qualify to transact business, except for
failures to be so qualified or in good standing that would not, in the
aggregate, have a material adverse effect on the Company or on the transactions
contemplated hereby.
3.2. Authority. The Seller has the full power and authority to enter into,
execute, deliver, and perform this Agreement and all Exhibits to which they are
a party. The execution, delivery and performance of this Agreement and such
Exhibits, and the consummation of all transactions contemplated herein and
therein, have been duly authorized by all necessary action of the Seller. This
Agreement and such Exhibits, when executed and delivered by the Seller, shall be
valid and binding obligations of the Seller, enforceable
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<PAGE>
against him in accordance with their terms, subject to bankruptcy, insolvency
and other similar laws affecting the rights of creditors generally and except
that the remedies of specific performance, injunction and other forms of
mandatory equitable relief may not be available. Except for approvals of
governmental authorities described in Section 7.6 and except as set forth in
Schedule 3.2 attached hereto, neither the execution and delivery of this
Agreement nor the execution and delivery of the certificates and documents set
forth as Exhibits hereto nor the consummation of the transactions contemplated
hereby or thereby will (i) conflict with or violate any provision of the
Articles or Certificate of Incorporation or By- Laws of the Company, (ii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to the Seller or the Company or their
businesses or by which any of their assets is affected, or (iii) conflict with
or result in any material breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination or cancellation of, or accelerate the
performance required by or maturity of, or result in the creation of any
security interest, lien, charge or encumbrance on any of the Seller's or the
Company's assets pursuant to any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, permit, license, franchise, lease, contract, or
other instrument or obligation to which the Seller or the Company is a party or
by which any of their assets is affected. Except as set forth in Schedule 3.2
attached hereto, neither the Seller nor the Company are required to submit any
notice, declaration, report or other filing or registration with any
governmental or regulatory authority or instrumentality, and no approvals or
non- objections are required to be obtained or made by the Seller or the Company
in connection with the execution, delivery or performance by the Seller of this
Agreement or any Exhibit or the consummation of the transactions contemplated
hereby or thereby, except where the failure to obtain such consent would not
have a material adverse effect on the Omega Business as operated on the date
hereof or on the Omega Assets.
3.3. Capitalization. The Company is a Pennsylvania corporation having
authorized capital stock consisting only of 1000 shares of common stock, $60 par
value per share, of which 1000 are issued and outstanding. Schedule 3.3(A) lists
all persons or entities owning shares of any class of the Company's stock, as
well as the amount and nature of stock held by each such person or entity.
Schedule 3.3(B) lists all persons or entities holding options or warrants to
acquire any of the Company's capital stock, as well the amount of stock covered
by each such option or warrant and the exercise price therefor. The Shares
constitute one hundred percent (100%) of the issued and outstanding capital
stock of the Company. All of the Shares are validly issued, fully paid and
nonassessable and are owned of record and beneficially by the Seller, free and
clear of any liens, claims, options, encumbrances or restrictions of any nature
whatsoever. Except as described in Schedule 3.3(C), there are no agreements,
arrangements, warrants, calls, options, convertible rights or other rights
(vested or contingent) to acquire any capital stock of the Company, and no such
agreements, arrangements, warrants, calls, options, convertible rights or other
rights (vested or contingent) to acquire any capital stock of the Company will
be issued, entered into, or granted prior to the Closing Date without the prior
written approval of the Purchaser. The Seller has the absolute right, power and
capacity to sell, assign and deliver the Shares to
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Purchaser, and has good and marketable title to the Shares, free and clear
of all liens, claims, options, encumbrances or restrictions of any nature
whatsoever.
3.4. Operation of the Company's Business. The Company owns and retains all
such assets, tangible or intangible, contractual, license and leasehold rights
necessary for the Purchaser (i) to operate the business of the Company as the
Company operates it on the date hereof, and (ii) to utilize the assets and
contractual, license and leasehold rights in the same manner as they were used
on the date of this Agreement. With the exception of those assets used in the
business of the Company pursuant to license and leasehold rights in favor of the
Company, all of the assets used in the business of the Company are owned by the
Company, and none are owned by any other party.
3.5. No Material Change. Except as set forth in Schedule 3.5A attached
hereto, there has been no materially adverse change since the September 30, 1995
(the "Balance Sheet Date") in the nature or, to the Knowledge of the Company,
the prospects of the Company and its business or condition (financial or
otherwise), or properties, assets, liabilities (actual or contingent),
operations, or the manner of conducting its business, other than changes in the
ordinary course of business which in the aggregate are not material and adverse.
Since the Balance Sheet Date, there has been no event or condition of any
character which, either individually or in the aggregate, might reasonably be
expected to affect in a materially adverse manner the business prospects,
operations, properties, assets, liabilities, earnings or financial condition of
the Company. Except as set forth in Schedule 3.5B attached hereto, since the
Balance Sheet Date the Company has not (i) declared or, directly or indirectly,
paid any dividends or made any other distributions or payments of any kind to
its shareholders or partners, (ii) incurred any indebtedness for borrowed money,
(iii) created or permitted to be created any liens, encumbrances, or adverse
charges of any nature on any of the assets of the Company, (iv) discharged,
satisfied or paid, in whole or in part, or permitted to be discharged, satisfied
or paid, in whole or in part, any obligation or liability (contingent or
absolute) relating to the business or the properties of the Company, other than
in the ordinary course of business, or (v) waived or permitted to be waived any
material right or claim of the Company.
3.6. Assets. The Company has good and marketable title to all of its assets
(except for Third Party Software, for which the Company has valid and
enforceable licenses), free and clear of all mortgages, options, leases,
covenants, conditions, agreements, liens, security interests, adverse claims,
restrictions, charges, encumbrances or rights of others, except for liens set
out on Schedule 3.6A. There exists no restriction on the use or transfer of any
of the Company's assets. Schedule 3.6A sets forth a list of (i) all furniture,
office equipment, machinery, and equipment, including without limitation,
computer hardware, used to conduct the business of the Company with an original
market value in excess of $1,000 (the "Equipment") and the location of each
piece of Equipment and (ii) all "Company Software," which shall include all of
the Company's software and computer programs used in its business, including any
software or computer programs not wholly-owned by the Company ("Third Party
Software") embedded therein, in machine readable source code forms and in
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machine executable object code forms and all related specifications
(including, without limitation, all logic architectures, algorithms and logic
flows and all physical, functional, operating and design parameters), operating
systems and procedures (including development methodology), designs, design
revisions, related applications software in any language, concepts, ideas,
processes, techniques, software design and test tools, third party software
interfaces, methods of implementation and packaging, all associated know-how and
show- how and all related programmer and user manuals, which are used by the
Company to install, operate, maintain, correct, test, repair, enhance, extend,
modify, prepare derivative works based upon, design, develop, reproduce and
package such software and computer programs. Except as set forth in Schedule
3.6B attached hereto, the tangible assets of the Company are in satisfactory
operating condition and repair, ordinary wear and tear excepted, and are
satisfactory for the purposes for which such assets are being used in the
Company's business. The Company does not, and has not since the date of its
formation, own or have any interest in real estate except as described in
Schedule 3.6C.
3.7. Compliance with Laws. Except as listed on Schedule 3.7, the operation
of the Company's business and the use of its assets are in material compliance
with all applicable laws, ordinances, rules and regulations, including but not
limited to Federal, state, local and foreign environmental, work place safety
and employee benefits laws and rules (collectively the "Laws"). The Company has
all requisite licenses, permits and certificates from federal, state and local
governmental authorities as may be necessary to conduct its business and own and
operate its assets, and such permits are valid and in full force and effect and
will not be terminated or adversely affected by the consummation of the
transactions contemplated hereby. Except as disclosed on Schedule 3.7 attached
hereto, the Company has not received any notice alleging any violations by the
Company of any Laws, or of investigations of the Company initiated by
administrative agencies, and, to the knowledge of the Company, no allegations or
investigations are pending or have been threatened.
3.8. Employee Benefit Plans.
3.8.1. Except as set forth on Schedule 3.8.1(A) attached hereto, with
respect to all employees and former employees of the Company, neither the
Company nor any ERISA Affiliate of the Company presently maintains, contributes
to or has any liability under:
(a) any bonus, incentive compensation, profit sharing, retirement, pension,
group insurance, death benefit, group health, medical expense reimbursement,
cafeteria, dependent care, stock option, stock purchase, stock appreciation
rights, savings, deferred compensation, consulting, severance pay or termination
pay, vacation pay, life insurance, welfare or other employee benefit or fringe
benefit plan, program or arrangement;
(b) any plan, program or arrangement which is an "employee pension benefit
plan" as such term is defined in Section 3(2) of the Employee Retirement
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Income Security Act of 1974, as amended ("ERISA"), or an "employee welfare
benefit plan" as defined in Section 3(1) or ERISA.
For purposes of this Agreement, "ERISA Affiliate" shall mean each person
(as defined in section 3(9) of ERISA) that, together with the Company (or any
person whose liabilities the Company has assumed or is otherwise subject to),
currently or in the past would be treated as a single employer under section
4001(b) of ERISA or that would be deemed to be a member of the same "controlled
group" within the meaning of section 414(b), (c), (m) and (o) of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"). The plans,
programs and arrangements set forth on Schedule 3.8.1(A) are herein referred to
as the "Employee Benefit Plans."
3.8.2. With respect to all employees and former employees of the Company,
neither the Company nor any ERISA Affiliate of the Company presently maintains,
contributes to or has any liability under any funded or unfunded medical, health
or life insur- ance plan or arrangement for present or future retirees or
present or future terminated employees except as required by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") or as required
by any state law providing for the continuation of such benefits for present or
future retirees or present or future terminated employees. Neither the Company
nor any ERISA Affiliate of the Company maintains or contributes to a trust,
organization or association described in any of Sections 501(c)(9), 501(c)(17)
or 501(c)(20) of the Internal Revenue Code.
3.8.3. Favorable determination letters have been received from the Internal
Revenue Service with respect to each Employee Benefit Plan which is intended to
comply with the provisions of Section 401(a) of the Internal Revenue Code,
evidencing compliance with the relevant provisions of the Tax Equity and Fiscal
Responsibility Act of 1982, the Tax Reform Act of 1984 and the Retirement Equity
Act of 1984. Each such Employee Benefit Plan complies in form and in operation
with the requirements of the Internal Revenue Code and meets the requirements of
a "qualified plan" under Section 401(a) of the Internal Revenue Code.
Additionally, amendments have been made to each such Employee Benefit Plan for
the Tax Reform Act of 1986 and subsequent legislation and regulations to the
extent they are required. A proper and timely application for a favorable
determination letter with respect to each such Employee Benefit Plan, as
amended, has been made with the Internal Revenue Service, and no unfavorable
responses have been received with respect to any such application from the
Internal Revenue Service.
3.8.4. With respect to each Employee Benefit Plan which is subject to Title
1 of ERISA, neither the Company nor any ERISA Affiliate of the Company has
failed to comply with any of the applicable reporting, disclosure or other
requirements of ERISA and the Internal Revenue Code, and there has been no
"prohibited transaction" as described in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA.
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3.8.5. Neither the Company nor any ERISA Affiliate of the Company, nor any
of their respective directors, officers, employees or any other "fiduciary," as
such term is defined in Section 3(21) of ERISA, has any liability for failure to
comply with ERISA or the Internal Revenue Code for any action or failure to act
in connection with the administration or investment of the Employee Benefit
Plans.
3.8.6. With respect to any Employee Benefit Plan which is subject to
Section 412 of the Internal Revenue Code or Section 302 of ERISA, there has been
no "accumulated funding deficiency" within the meaning of Section 302 of ERISA
or Section 412 of the Internal Revenue Code (whether or not waived). With
respect to the Employee Benefit Plans, all applicable contributions and premium
payments for all periods ending prior to the Closing Date (including periods
from the first day of the then current plan year to the Closing Date) have been
made, and shall be made prior to the Closing Date in accordance with past
practice and, with respect to each Employee Benefit Plan subject to Title IV of
ERISA, the recommended contribution in the applicable actuarial report. No
Employee Benefit Plan has any unfunded liability.
3.8.7. The actuarially determined present value of all accrued benefits
under each Employee Benefit Plan subject to Title IV of ERISA (computed on a
plan termination basis) does not exceed the fair market value of the assets of
each such Employee Benefit Plan.
3.8.8. Neither the Company nor any ERISA Affiliate of the Company presently
maintains, contributes to or has any liability (including current or potential
withdrawal liability) with respect to any "multiemployer plan" as such term is
defined in Section 3(37) of ERISA.
3.8.9. Neither the Company nor any ERISA Affiliate of the Company has
maintained an employee pension benefit plan that has been the subject of a
"reportable event," as that term is defined in Section 4043 of ERISA, as to
which notices would be required to be filed with the Pension Benefit Guaranty
Corporation ("PBGC"), or of any event requiring disclosure under Section 4063(a)
of ERISA. Neither the Company nor any ERISA Affiliate of the Company has
incurred any outstanding liability under Section 4062 of ERISA to the PBGC. All
premiums or other amounts due and payable to the PBGC have been paid. Neither
the Company nor any ERISA Affiliate of the Company has terminated any employee
pension benefit plan subject to Title IV of ERISA, and no proceeding by the PBGC
to terminate any employee pension benefit plan pursuant to Title IV of ERISA has
ever been instituted or (to the Seller's knowledge) threatened, no notice of any
such termination has been received and no condition exists which presents a
material risk of termination of an Employee Benefit Plan.
3.8.10. There is no pending or (to the Seller's knowledge) threatened legal
action, proceeding or investigation against or involving any Employee Benefit
Plan maintained by the Company or any ERISA Affiliate of the Company (other than
routine
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claims for benefits) and, to the Seller's knowledge, there is no basis for
or fact which could give rise to any such legal action, proceeding or
investigation. Any bonding required with respect to the Employee Benefit Plans
in accordance with applicable provisions of ERISA has been obtained and is in
full force and effect.
3.8.11. Except as set forth on Schedule 3.8.11,
(a) The Company is not a party to any employment agreement, whether written
or oral, or agreement with change in control or similar provisions, or
collective bargaining agreement or contract with any labor union relating to any
employees or former employees of the Company;
(b) The Company does not have outstanding any loan or loans to any current
or former employees of the Company, nor has the Company guaranteed such loans;
(c) No amount payable to an employee or former employee of the Company will
be an "excess parachute payment" which is non-deductible under Section 280G of
the Internal Revenue Code.
3.8.12. There has been no act or acts which would result in a disallowance
of a deduction or the imposition of a tax pursuant to Section 4980B, or with
regard to plan years beginning before December 31, 1988, Section 162(i) of the
Internal Revenue Code as in effect immediately prior to the enactment of the
Technical and Miscellaneous Revenue Act of 1988, or any regulations promulgated
thereunder, whether final, temporary or proposed. No event has occurred with
respect to which the Company or any ERISA Affiliate of the Company could be
liable for a tax imposed by any of Sections 4972, 4976, 4977, 4979, 4980 or
4980B of the Internal Revenue Code, or for a civil penalty under Section 502(c)
of ERISA.
3.8.13. With respect to each of the Employee Benefit Plans, the Seller and
the Company have delivered to Purchaser true and complete copies of: (i) the
plan documents, including any related trust agreements, insurance contracts or
other funding arrangements, or a written summary of the terms and conditions of
the plan if there is no written plan document; (ii) the most recent
determination letter received from the Internal Revenue Service; (iii) the most
recent IRS Form 5500; (iv) the most recent actuarial valuation; (v) the most
recent financial statement; (vi) all correspondence with the Internal Revenue
Service, the Department of Labor and the Pension Benefit Guaranty Corporation
with respect to the past three plan years other than IRS Form 5500 filings and
PBGC premium payments; and (vii) the most recent summary plan description.
3.9. Financial Statements. Attached hereto as Schedule 3.9(A) is the
balance sheet(the "Balance Sheet") of the Company at the Balance Sheet Date, and
the income statement of the Company for the nine months then ended. Attached
hereto as Schedule 3.9(B) is the
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Recast Balance Sheet. The financial statement data on the Balance Sheet is
true and complete and fairly presents the financial condition of the Company as
of the Balance Sheet Date and the income and expenses of the Company for the
nine months then ended, other than the absence of year-end adjustments to be
made in the ordinary course of business and consistent with such adjustments, if
any, as have been made in prior years. The financial statement data on the
Recast Balance Sheet is true and complete and fairly presents the consolidated
financial condition of the Company as of September 30, 1995. There are no assets
or liabilities with respect to the Omega Business or the Omega Assets, whether
known or unknown, whether mature or inchoate, that are not accurately reflected
on the Balance Sheet and the Recast Balance Sheet.
3.10. Disposition of Assets. No fixed tangible asset of the Company having
a value in excess of $500 per item, and no intangible asset which is part of the
assets of the Company, has been disposed of since the Balance Sheet Date, except
as set forth on Schedule 3.10 attached hereto.
3.11. Litigation. Other than as listed in Schedule 3.11 attached hereto,
there is no claim, counterclaim, suit, order, proceeding, action, or
investigation pending, notice of which has been received, or, to the knowledge
of the Seller, threatened against the Company, including but not limited to
product liability claims. Neither the Company nor any other the Company is a
plaintiff or petitioner in any litigation or proceeding other than as listed in
Schedule 3.11.
3.12. Agreements, Leases and Licenses. Schedule 3.12 lists accurately and
completely all leases, licenses, contracts and agreements of the Company with
both a value in excess of $5,000 per year and a term of one year or more,
including all amendments or modifications thereto (collectively the
"Contracts"). Each of the Contracts is valid and effective in accordance with
its terms. The Company is not in default under any of the Contracts and, to the
knowledge of the Seller, no other party to any of the Contracts is in default
thereunder. No event has occurred which with the passage of time or the giving
of notice or both would constitute a default under any of the Contracts. Each of
the Contracts is appropriate in nature and scope to the operation of the
business of the Company as it exists at the date hereof. Other than the
Contracts, there are no leases, licenses, contracts or agreements necessary (i)
to operate the business of the Company as it was operated as at the date hereof,
or (ii) to utilize the assets and contractual, license and leasehold rights in
the same manner as the Company utilizes such assets and contractual, license and
leasehold rights as at the date hereof. Except as set forth on Schedule 3.12,
each of the Contracts is valid, binding and enforceable against the Company and,
to the Knowledge of the Company, each other party thereto in accordance with its
terms without any defenses, setoffs, counterclaims or disputes of any nature and
is in full force and effect. No purchase commitment for materials, supplies,
component parts or other items of inventory of the business to which the Company
is a party is in excess of the ordinary, normal, usual and current requirements
of the business or at a price in excess of the current reasonable market price.
The Company has not waived any right under any Contract. The Company is not a
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party to, nor are any of the Company's assets bound by, any agreement that is
adverse to its business. The Company has not received notice that any party to
any of the Contracts intends to cancel or terminate any contract or to exercise
or not exercise any option under any Contract.
3.13. Environmental and Health and Safety Matters.
3.13.1. Set forth on Schedule 3.13.1 attached hereto is a true, accurate
and complete list of all real property, owned, leased and/or otherwise currently
or previously used or occupied by the Company or for the business of the
Company, or at which the Company has carried on its business at any time since
its incorporation, or at which any other person or entity has carried on the
business of the Company since the incorporation of Omega (including but not
limited to Lots 36, 37, and 48 at the Oaklands Corporate Center, Exton,
Pennsylvania, and at West Conshohocken, Pennsylvania) (the "Property").
3.13.2. Except as set forth in Schedule 3.13.2, to the Knowledge of the
Company, the Company and the Property have been at all times and are in
compliance with the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Superfund
Amendments and Reauthorization Act, the Federal Water Control Act, the
Occupational Safety and Health Act, and all other federal, state and local laws,
regulations and ordinances, and common-law principles, relating to pollution,
safety, health or protection of the environment, including, without limitation,
those relating to containment, emissions, discharges, releases or threatened
releases of industrial, toxic or hazardous substances, materials or wastes or
other pollutants, contaminates, petroleum products, asbestos, polychlorinated
biphenyls ("PCBs"), or chemicals (collectively, "Hazardous Substances") into the
environment (including without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacturing, processing, distribution, use, treatment, labeling, storage,
disposal, abatement, transport or handling of Hazardous Substances (the
"Environmental Laws").
3.13.3. To the Knowledge of the Company, the Company has obtained and is in
full compliance with all permits, licenses and other consents or authorizations
which are required with respect to the operation of its business under the
Environmental Laws, including without limitation those that are required to (a)
operate or install any equipment or facilities and (b) generate, manufacture,
formulate, store, treat, handle, transport, discharge, emit or dispose of
Hazardous Substances generated by its business, a true and complete list of
which is included in Schedule 3.13.3.
3.13.4. To the Knowledge of the Company, except as listed in Schedule
3.13.4(a), there are no PCBs, TCE, PCE, or asbestos containing materials
generated, used, treated, stored, maintained, disposed of, or otherwise
deposited in, located on, or related to the Property, the business of the
Company at any time since the incorporation of the Company, or any premises at
which the business of the Company were or are located. Additionally, except as
described in Schedule 3.13.4(b), to the Knowledge of the Company,
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there are and were no underground storage tanks used, stored, maintained,
located on or otherwise related to the Property, the business of the Company at
any time since its incorporation, or any premises at which the business of the
Company were or are located. To the Knowledge of the Company, the Company has
removed and properly disposed of all used or other obsolete materials regulated
by environmental, health and safety laws, including chemical or other hazardous
substances or wastes, that are not used by the Company's business. With respect
to underground storage tanks, to the Knowledge of the Company, Schedule
3.13.4(b) sets forth the size, location, construction, installation date, use
and testing history of all such underground storage tanks (whether or not
excluded from regulation under Environmental Laws), including all underground
storage tanks in use, out of service, closed, abandoned or decommissioned.
3.13.5. To the Knowledge of the Company, there has been no "release" as
defined in 42 U.S.C. section 9601(22) or, to the knowledge of the Seller, threat
of a "release" of any Hazardous Substance on, from or under any premises from
which the operations of the Company or its predecessors have been or are being
conducted.
3.13.6. To the Knowledge of the Company, the Company has not received
notice that any of them have any potential liability with respect to the
contamination, investigation, or cleanup of any site at which Hazardous
Substances have been or have alleged to have been generated, treated,
stored, released, discharged, emitted or disposed of, and there are no past or
present (or, to the knowledge of the Seller, future) events, facts, conditions
or circumstances which may interfere with or prevent compliance by the business
of the Company in accordance with Environmental Laws, or with any order, decree,
judgment, injunction, notice or demand issued, entered, promulgated or approved
thereunder, or which may give rise to any common-law or other legal liability,
including, without limitation, liability under any Environmental Laws, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to the
manufacture, process, distribution, use, treatment, storage, disposal, transport
or handling, or the emission, discharge, release or threatened release into the
environment of Hazardous Substances by the Company or a predecessor, as a result
of any act or omission of the Company or a predecessor.
3.13.7. To the Knowledge of the Company, Schedule 3.13.7 contains a true,
correct and complete listing of all Hazardous Substances used by the business of
the Company in the conduct of its operations since January 1, 1980, and a list
of the methods used by the Company and any other entity or person carrying out
the business of the Company (including, but not limited to, a list of past and
present disposal or recycling sites, waste haulers, and manifest numbers) since
January 1, 1980 to dispose of or recycle Hazardous Substances generated by the
Company's operations and by the activities of the Company and any other person
or entity carrying on the business of the Company.
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3.13.8. To the Knowledge of the Company, except as disclosed in Schedule
3.13.8, all of the Company's disposal and recycling practices relating to
Hazardous Substances have been accomplished in accordance with all applicable
Environmental Laws.
3.13.9. Purchaser acknowledges that Seller has caused the Company to
provide Purchaser access to (i) view the Property at which the Company currently
operates and to (ii) conduct due diligence with respect to the Company's
business operations and records in order to allow the Purchaser to form its own
opinion whether the Property at which the Company currently operates and the
operations of the Company's business are in compliance with the Environmental
Laws. The Seller acknowledges that Purchaser's access to the Property and the
Company's business operations and records, including the Phase I audit report
dated on or about October 20, 1993, shall have no effect on Seller's
representations, warranties, obligations or liabilities under this Agreement.
The Purchaser acknowledges that except as stated in this Agreement the Company
makes no representations about the condition of the Property or the operation of
the Company's business.
3.14. Intellectual Property. All of the patents, trademarks, service marks,
trade names, copyrights, processes of every kind and description, designs,
know-how, formulae, shop rights, trade secrets, and similar properties, as well
as the registrations and applications therefor, and the renewals thereof, that
are used in the business of the Company (collectively, the "Intellectual
Property") are owned or lawfully used by the Company. None of the Intellectual
Property has been held or stipulated to be invalid in any litigation or
proceeding. Schedule 3.14A attached hereto lists all the registered Intellectual
Property. Except as disclosed on Schedule 3.14B attached hereto, the validity of
the Intellectual Property, and of the Company's rights to the Intellectual
Property, has not been questioned in any litigation or proceeding currently
pending or which, to the knowledge of the Seller, has been threatened, and, to
the Knowledge of the Company, there exists no basis for a claim against the
Company for infringement of any third party's intellectual property. The Company
has not received any notice to the effect that any product it makes or sells, or
the distribution or use by it or another of any such product, or any services it
performs in the course of its business, may infringe any trademark, service
mark, trade name, copyright, patent, trade secret, or similar legally
protectable right of another. All patentable inventions utilized or first
reduced to practice in connection with the business or activities of the Company
or the employment by same of individuals are the property of the Company and no
other party. Except as set forth in Schedule 3.14A or Schedule 3.14B, the
Company has not entered into and is not a party to any development, work for
hire, license or other agreement pursuant to which the Company has secured the
right or obligation to use, or granted others the right or obligation to use,
any trademarks, service marks, trade names, copyrights, patents or know-how.
3.15. Related Party Transactions. No officer or director of the Company or
any affiliate thereof has, directly or indirectly, entered into any transaction
with the Company, except for any arrangements which are either (i) specifically
disclosed on the Balance Sheet or (ii) listed on Schedule 3.15 attached hereto.
For purposes of this Section 3.15 only, the
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term "affiliate" of the Company shall mean and include any officer or director
or shareholder of the Company or any person related to any officer, director or
shareholder of the Company by blood or by marriage, or any corporation,
partnership, proprietorship, trust or other entity in which such officer or
director or shareholder of the Company (or any spouse, ancestor or descendant of
the same) has more than a five percent (5%) legal or beneficial interest, or any
corporation, partnership, proprietorship, trust or other entity which controls,
is controlled by or is under common control with the Company.
3.16. Increases in Salaries and Wages. Except as listed in Schedule 3.16
attached hereto, none of the Company has, since the Balance Sheet Date, paid any
salary, wage, bonus payments or any other benefits to its employees at rates
exceeding the respective rates paid to such employees which were in effect at
the Balance Sheet Date, except for bonuses to Company employees paid in the
ordinary course of business.
3.17. Taxes. As to any tax imposed by the Federal government, or any state
government or any subdivision or municipality thereof, or the government of any
other country or political subdivision thereof, including, without limitation,
(i) taxes imposed on or measured by income, (ii) taxes based on employment
(including amounts withheld from employees' compensation), and (iii) any
property, franchise or sales tax, which, in each case, relates to or could cause
a lien or encumbrance upon any of the assets or the business of the Company, the
Company has timely, properly and lawfully filed all returns and elections
necessary to be filed and has paid in full the applicable taxes (including any
penalties, assessment and deficiencies in respect of such taxes) due on such
returns; no claims for any unpaid taxes, interest or penalties are being
asserted by any governmental authority, for any period, against the Company or
any assets of the Company. The Company has not paid and is not required to pay
any income taxes to any country other than those listed on Schedule 3.17A
attached hereto, or to any state other than those listed on Schedule 3.17B
attached hereto. The Company pays personal property and/or franchise taxes with
respect to its business and properties only in those countries, states or
political subdivisions listed on Schedule 3.17C attached hereto. The Company has
timely filed and paid all estimated taxes due on or prior to the Closing Date,
and has made accruals on the Balance Sheet for all taxes due with respect to the
[nine] months ended at the Balance Sheet Date. The Company has furnished
Purchaser with true and complete copies of each of the Federal, state, local and
foreign income and excise tax returns, and franchise tax returns, and any
amendments thereto, of the Company, as they relate to taxable periods for 1992,
1993, and 1994, and the Company has made available to Purchaser all reports of
and communications from Internal Revenue Service agents and the corresponding
agents of other state, local and foreign governmental agencies who have examined
the books and records of the Company at any time including and since the last
IRS audit. Except as disclosed on Schedule 3.17D attached hereto, no audit or
examination of the Company by any taxing authority or agency is now pending or
currently in progress, nor has the Company received from any taxing authority or
agency any notice of such an audit or examination. The Company has paid all
deficiencies proposed as a result of the audits and examinations listed on
Schedule 3.17D. No waiver of
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any statute of limitations has been given and is in effect in respect to the
assessment of any taxes against the Company.
3.18. Employee Salaries and Benefits. The Company has provided Purchaser
with an accurate list of all salaried employees of the Company, and the current
rate of compensation for each such employee (including a separate statement of
bonuses and fringe benefits). Except as listed on Schedule 3.18, there is no
liability for unpaid salary or wages, bonuses, vacation time, or other employee
benefits due or accrued, nor liability for withheld or deducted amounts from
employees' earnings, for the period ending on or immediately prior to the
Closing Date, including without limitation commission payments to agents,
representatives or employees. There are no labor disputes, strikes, work
stoppages or other interruptions in service or performance, and all
relationships between the Company and its employees are generally stable and
satisfactory.
3.19. Insurance. The Company maintains in effect, and at all times has
maintained in effect, product liability insurance, motor vehicle and
comprehensive general liability insurance and workers' compensation insurance
covering the business of the Company and fire and extended coverage insurance
with respect to the properties and assets of the Company. Schedule 3.19 attached
hereto is a complete list of all insurance policies (including the amount of
coverage thereunder) in effect at present. All such insurance policies are owned
solely and exclusively by the Company.
3.20. Customer and Supplier Relationships; Warranty Claims. The Company has
not received any notice that any customer or supplier of the Company intends to
discontinue or alter the prices or terms of, or substantially diminish, its
relationship with the Company. Other than as set forth on Schedule 3.20, to the
Knowledge of the Company, there are no outstanding warranty claims against the
Company by any of its customers with respect to products sold or services
rendered by the Company.
3.21. Accounts Receivable and Notes Receivable. The accounts receivable and
notes receivable of the Company, other than those listed on Schedule 3.21,
represent bona fide claims which the Company has against debtors for sales or
services arising on or before the Closing Date, to the Knowledge of the Company,
are not subject to counterclaims, setoffs or deductions of any kind, and are not
subject to additional requirements of performance by the Company. The aggregate
amount of customer advance payments (i.e., payments in excess of actual work
performed or materials supplied as of the date of such payment) received by the
Company at or prior to the Closing Date with respect to such accounts receivable
are set forth on the Balance Sheet and Recast Balance Sheet as such. All of the
accounts receivable and notes receivable have been created since September 1,
1995, pursuant to shipments of goods or services conforming to the terms of
purchase orders executed by and received from unrelated third parties in the
normal course of business. Such receivables have been recorded in accordance
with the Company's historical revenue recognition policy and have been collected
or are collectable in accordance with their terms at the full recorded amount
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thereof within such period of time as conforms to the Company's historic norms
for collection of receivables.
3.22. Accounts Payable. The accounts payable of the Company represent bona
fide claims which creditors have against the Company for sales or services, are
not subject to counterclaims, setoffs or deductions by the Company, and are not
subject to additional requirements of performance due to the Company. All of the
accounts payable have been created pursuant to receipt of goods or services
conforming to the terms of purchase orders executed in favor of unrelated third
parties in the normal course of business.
3.23. Bonds; Guarantees. Other than as listed on Schedule 3.23, there are
no bonds, guarantees, notes, sureties, letters of credit, or other similar
credit agreements or debt obligations that exist with respect 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.
3.24. Absence of Undisclosed Liabilities. Except as specifically reserved
against or reflected in the Balance Sheet, or described in Schedule 3.24, the
Company is not subject to any liability or financial obligation (known or
unknown, direct or indirect, absolute, contingent, accrued or otherwise), other
than liabilities or financial obligations arising in the ordinary course of
business since the date of the Balance Sheet. The Company is not in default with
respect to any term or condition of any indebtedness or liability (including any
current or deferred trade payable). The Seller does not know of any facts or
circumstances which might reasonably serve as the basis for any liabilities or
financial obligations with respect to the Company which are not disclosed in the
Schedules.
3.25. Inventories. The inventories of Seller reflected in the Balance
Sheet, plus any replacements for such items acquired on or before the Closing
Date, and minus any such items sold or otherwise disposed of by the Company in
the ordinary course before the Closing Date (whether raw materials, purchased
components, manufactured parts, work-in- process, finished goods or other) (the
"Inventories"), do not contain any damaged, defective, slow-moving (defined as
more than a one year's supply under normal conditions of sale) or obsolete items
which are not currently usable or saleable in the ordinary course of the Omega
Business, and are properly valued in accordance with generally accepted
accounting principles consistently maintained and applied and as follows:
With respect to inventory in the hands of suppliers for which the Company
is committed as of the date hereof or as of the Closing Date, such inventory is
described in Schedule 3.25 and is reasonably expected to be usable in the
ordinary course of business as the business is presently being conducted. All
items included in the Inventories are the property of the Company, except for
those items sold in the ordinary course of business. No items included in the
Inventories have been pledged as collateral or are held by the Company
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on consignment from others. The Inventories are free of defects and, to the
extent that they consist of finished or semi-finished goods, also comply with
the specifications submitted by the purchasers thereof.
3.26. Equipment and Manufacturing. In Seller's opinion, the equipment,
patterns, tools, dies, jigs, fixtures and other assets owned, retained, used or
held for use by the Company are complete and adequate for the purpose of
manufacturing the items made by the Company and for the purpose of providing the
services rendered by the Company in connection with its business. In Seller's
opinion, the engineering drawings, specifications and manufacturing data
possessed or owned by the Company are all of such items that are necessary to
manufacture the products presently being manufactured by the Company and to
provide the services rendered by the Company in connection with its business.
3.27. Charter Documents. The Company has delivered or made available to
Purchaser certified copies of its Articles or Certificate of Incorporation and
By-laws, each as amended to date, as well as copies of its minute books covering
the period from the Company's incorporation to the date hereof. Such Articles or
Certificate of Incorporation and By-laws are complete, correct and current. The
minute books of the Company contain a complete, correct and current record of
all meetings and other corporate actions of the stockholders and Board of
Directors of the Company since the incorporation of the Company.
3.28. Subsidiaries and Affiliates. Schedule 3.28 lists all subsidiaries and
Affiliates of the Company. For the purposes of this Agreement (except for
Section 3.15), the term "Affiliate" of a person shall mean any person or entity
that, directly or indirectly, controls, is controlled by or is under common
control with such person.
3.29. Location of Assets. Schedule 3.29 is a complete list of all
facilities, together with the locations of such facilities, at which any of the
Company's assets are situated, together with a description of the nature of such
assets at each such location.
3.30. Certain Equipment Leases. Schedule 3.30 is a complete list of all
equipment leases entered into by Omega for which the Seller has signed a
personal guaranty.
3.31. Product Liability. To the Knowledge of the Company, no person who is
or was the owner or user of any product designed, manufactured or sold by the
Company has a claim, or, in the Seller's opinion, the basis for a claim, against
the Company for product liability. No product designed, manufactured or sold by
the Company contains PVCs.
3.32. No Misrepresentations or Nondisclosures. Neither this Agreement nor
any Exhibit or Schedule attached hereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact not
disclosed to Purchaser by the Seller which adversely affects the Company or its
business or assets, or which in the future, as a result of existing
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material facts whose impact has not yet been experienced, may (so far as the
Seller can now reasonably foresee) adversely affect the Company or its business
or assets.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
All representations and warranties contained herein shall survive the Closing,
and none shall merge into any Closing documents, and breaches of representations
and warranties may be set off against any amounts due from the Seller to
Purchaser. As of the date of this Agreement and as of the Closing Date,
Purchaser represents and warrants to the Seller as follows:
4.1. Corporate Standing. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of state of incorporation.
Purchaser has full corporate authority to own, lease and operate its properties
and businesses, and is in good standing and is qualified to transact business as
a foreign corporation in all states in which the nature of its business or the
properties owned by it require it to qualify to transact business, except for
failures to be so qualified or in good standing that would not, in the
aggregate, have a material adverse effect on Purchaser or on the transactions
contemplated hereby.
4.2. Authority. Purchaser has the full corporate power and authority to
enter into, execute, deliver, and perform this Agreement and all Exhibits to
which it is a party. The execution, delivery and performance of this Agreement
and such Exhibits, and the consummation of all transactions contemplated herein
and therein, have been duly authorized by all necessary corporate action of
Purchaser. This Agreement and such Exhibits, when executed and delivered by
Purchaser, shall be valid and binding obligations of Purchaser, enforceable
against it in accordance with the terms hereof and thereof, subject to
bankruptcy, insolvency and other similar laws affecting the rights of creditors
generally and except that the remedies of specific performance, injunction and
other forms of mandatory equitable relief may not be available. Except for
approvals of governmental authorities described in Section 7.6, neither the
execution and delivery of this Agreement nor the execution and delivery of the
certificates and documents set forth as Exhibits hereto nor the consummation of
the transactions contemplated hereby or thereby will (i) conflict with or
violate any provision of the Articles or Certificate of Incorporation or By-Laws
of Purchaser, (ii) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree applicable to Purchaser,
or by which any of Purchaser's assets are bound or affected, or (iii) conflict
with or result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination or cancellation of, or accelerate the performance
required by or maturity of, or
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result in the creation of any security interest, lien, charge or encumbrance on
any of Purchaser's assets pursuant to any of the terms, conditions or provisions
of, any note, bond, mortgage, indenture, permit, license, franchise, lease,
contract, or other instrument or obligation to which Purchaser is a party or by
which any of its assets are bound or affected. Except as set forth in Schedule
4.2 attached hereto, Purchaser is not required to submit any notice,
declaration, report or other filing or registration with any governmental or
regulatory authority or instrumentality and no approvals or non-objections are
required to be obtained or made by Purchaser in connection with the execution,
delivery or performance by Purchaser of this Agreement or the Exhibits or the
consummation of the transactions contemplated hereby or thereby.
4.3. Investment Intent. Purchaser is acquiring the Shares for the purpose
of investment and not with a view to or for sale in connection with any
distribution thereof.
4.4. No litigation. There is no claim, counterclaim, suit, order,
proceeding, action, or investigation pending, notice of which has been received,
or, to Purchaser's best knowledge, threatened against Purchaser with respect to
the transactions contemplated by this Agreement. ARTICLE V COVENANTS OF THE
SELLER Between the date of this Agreement and the Closing Date, the Seller
shall, and shall cause the Company to:
5.1. Management of the Company. Operate the business of the Company in a
prudent manner consistent with past practices, and in the usual and ordinary
course, and use its best efforts to preserve the goodwill of suppliers,
distributors, sales representatives, customers, creditors and others having
business relationships with the Company, and shall safeguard and preserve the
confidentiality of all books, records and information relating to the Company in
a prudent manner consistent with past practices.
5.2. Accounting Practices. Refrain from making any change in the accounting
practices or procedures governing the Company.
5.3. No Distribution of Dividends. Refrain from redeeming, purchasing or
otherwise acquiring any of the Shares, or issuing any shares of capital stock of
the Company, or granting, issuing, selling or disposing of any option, warrant
or right to acquire any shares of capital stock of the Company; and refrain from
paying, declaring or setting aside any dividend, or making any distribution on
account of any of the Shares that causes Omega to have less than $100,000 in
cash.
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5.4. No New Stock Rights. Not enter into, issue, or grant any agreements,
arrangements, warrants, calls, options, convertible rights or other rights
(vested or contingent) to acquire any capital stock of the Company.
5.5. Purchases and Sales. Except as approved in advance by Purchaser,
maintain the fixed assets of the Company in at least as good a condition as at
the date of this Agreement, repair and working order, normal wear and tear
excepted; and refrain from (a) making or permitting any sales, transfers or
dispositions of any asset of the business of the Company (other than inventory
in the ordinary course of business); (b) entering into any contracts, leases, or
commitments, or any amendments or modifications to contracts, leases or
commitments existing at the date of the execution of this Agreement, involving
the business or assets of the Company, other than those in the ordinary course
of business involving consideration or other expenditure of less than $2,000,
and other than those that can be terminated without obligation or penalty at the
Closing; and (c) taking or permitting any action or entering into or permitting
any contract or agreement prohibited by Section 3.5.
5.6. Compensation of the Company's Employees. Refrain from making or
permitting any change in the compensation or benefits payable or to become
payable to any of the employees or agents of the business of the Company, or
making any new bonus payment or arrangement or benefit to or with any of them,
or hiring any additional employees.
5.7. Insurance. Have in effect and maintain at all times all insurance now
in force relating to the Company and the business and assets of the Company.
5.8. Preserve Organization. Use its best efforts to preserve the business
organization of the Company intact, to keep available the services of the
present officers and employees of the Company.
5.9. Access to the Records of the Company. Allow Purchaser, its
representatives, attorneys and accountants to continue to have reasonable access
to the records and files, audits and properties of the Company relating to the
Company, the business and assets of the Company, as well as all information
relating to taxes, commitments, contracts, titles and financial condition of, or
otherwise pertaining to, the Company. The Company agrees to cause its
accountants to cooperate with Purchaser and its accountants in making available
all financial information concerning the Company as is requested, and Purchaser
and its accountants shall have the right to examine all working papers
pertaining to examinations of the Company relating to the Company and its
business and assets, provided that such examinations shall be designed to cause
minimal disruption to the Company and its business and work force, and in any
event, shall be undertaken with reasonable prior notice and during normal
business hours of the Company.
5.10. Consents and Authorizations. Use its best efforts to obtain all
government authorizations and contractual and leasehold consents and permits
necessary to enable the
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consummation of all transactions contemplated hereby without causing the
discontinuation or termination of any permits or of any contractual
relationships maintained by the Company.
5.11. Fulfill Closing Conditions. Use its best efforts to take, or to cause
to be taken, all action reasonably necessary or appropriate to cause each of the
conditions set forth in Articles VII and VIII to be fulfilled on or prior to the
Closing Date.
5.12. Taxes. Pay when due all federal, state, local and foreign income,
franchise and other taxes of the Company, including any taxes on or arising out
of this transaction.
5.13. Financial Reports. Provide Purchaser with (i) copies of any financial
statements prepared by the Company in the course of its business, to be provided
promptly after they become available, and (ii) written notice immediately upon
any significant change in the Company's business prospects, deviations from the
ordinary course of business, or any other event that represents a material
adverse change in the prospects of the Company's business, financial position or
operations.
5.14. Certificate of Incorporation and By-Laws. Refrain from amending the
Articles or Certificate of Incorporation or By-Laws of the Company.
5.15. Damage or Destruction of Assets. Notify Purchaser immediately in the
event of any damage to or destruction of any of the material assets of the
Company.
5.16. No Shop. Refrain, and cause the Company's officers, directors,
employees, agents and Affiliates to refrain, from initiating or entering into
any negotiations or soliciting or discussing or encouraging (including by way of
furnishing non-public information) any offer or proposal regarding the sale,
direct or indirect, of any of the Shares; the sale, direct or indirect, of any
of the assets of the Company (other than inventory in the ordinary course of
business); the issuance of any capital stock of the Company or any options,
warrants, or rights to acquire capital stock of the Company; or any merger,
consolidation or similar transaction involving the Shares or any of the assets
of the Company; with any party other than Purchaser or an Affiliate of
Purchaser. The Seller shall promptly notify Purchaser of any such proposal or
offer, or any inquiry or contact with any person with respect thereto, and the
terms thereof.
5.17. Confidentiality.
1. Not disclose, and use reasonable efforts to cause the Company's
officers, directors, employees, agents and Affiliates not to disclose, any terms
of the transactions which are the subject of this Agreement (the "Proposed
Transactions"), or to make any public statement regarding the Proposed
Transactions prior to the Closing, without the prior consent of Purchaser;
provided, however, that the Parties understand and agree that certain
disclosures regarding the Proposed Transactions may be to be made to third
parties whose consent or approval may be required in connection with the
Proposed Transactions or
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may be required by applicable law, and that in each case such disclosures may be
made by the Company, without Purchaser's prior written consent, but only to the
extent such disclosures are so required.
2. Continue, and cause the Company's officers, directors, employees, agents
and Affiliates to continue, to observe, perform, and comply with that certain
confidentiality agreement dated December 7, 1995, between the Company and
Purchaser.
ARTICLE VI
COVENANTS OF PURCHASER
Between the date of this Agreement and the Closing Date, Purchaser shall:
6.1. Fulfill Closing Conditions. Use its best efforts to take, or cause to
be taken, all action reasonably necessary or appropriate to cause each of the
conditions set forth in Articles VII and VIII to be fulfilled on or prior to the
Closing Date.
6.2. Third Parties and Government Approvals. Use its best efforts to file
and obtain approval of all necessary documentation, and to obtain all necessary
approvals of third parties and of appropriate regulatory authorities, with
respect to the transactions contemplated by this Agreement.
6.3. Confidentiality.
1. Not disclose, and cause Purchaser's officers, directors, employees,
agents and Affiliates not to disclose, any terms of the Proposed Transactions),
or to make any public statement regarding the Proposed Transactions prior to the
Closing, without the prior written consent of the Seller; provided, however,
that the Parties understand and agree that certain disclosures regarding the
Proposed Transactions may be to be made to third parties whose consent or
approval may be required in connection with the Proposed Transactions, or may be
required by applicable law or by applicable stock exchange requirements, and
that in each case such disclosures may be made by Purchaser, without the
Seller's prior written consent, but only to the extent such disclosures are so
required.
2. Continue, and cause Purchaser's officers, directors, employees, agents
and Affiliates to continue, to observe, perform, and comply with that certain
confidentiality agreement dated December 7, 1995, between the Company and
Purchaser.
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ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING BY PURCHASER
Purchaser shall not be required to proceed on the Closing Date with the
transactions contemplated by this Agreement unless the following conditions
precedent shall have been fulfilled and satisfied, or shall have been waived in
writing by Purchaser:
7.1. Representations and Warranties. Each of the warranties and
representations of the Seller contained herein shall be true and correct as of
the date of this Agreement, and shall also be true and correct as of the Closing
Date as if then originally made.
7.2. Covenants. The Seller shall have complied with each of the covenants
required of him on or prior to Closing;
7.3. Officers Certificate. The Seller shall have delivered to Purchaser a
certificate of Seller, and a certificate of the President and Chief Financial
Officer of the Company, dated the Closing Date, certifying to the best of the
knowledge and belief of such persons and in such detail as Purchaser reasonably
requests to the accuracy of the Seller's representations and warranties
contained herein, and to the fulfillment of the Seller's covenants and to the
conditions precedent to Purchaser's obligations to consummate the transactions
contemplated by this Agreement;
7.4. Good Standing. The Seller shall have delivered to Purchaser
certificates of good standing in the state or country of incorporation for the
Company and each of its Affiliates;
7.5. Legal Opinion. The Seller shall have delivered to Purchaser a legal
opinion, in substantially the form attached hereto as Exhibit A, from Greenbaum,
Rowe, Smith, Ravin, & Davis, counsel to the Seller;
7.6. Governmental Approvals. The Seller, the Company, or Purchaser shall
have received all governmental and regulatory consents, non-objections or
permits from all Federal, state, local and foreign governmental authorities
necessary to permit Seller, Purchaser, and the Company to consummate the
transactions contemplated by this Agreement, and to enable the Company to
conduct its business after the Closing Date in all material respects as the
Company conducted such business on the date of this Agreement;
7.7. Material Adverse Change. There shall have been no material adverse
change (or changes which in the aggregate are materially adverse) since the date
hereof in the financial condition, results of operations, properties, business,
prospects or products and services provided by the Company, whether by reason of
change in government regulation or action or otherwise;
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7.8. Bankruptcy. Neither the Company nor Seller shall be the subject of a
petition for reorganization or liquidation under the Federal bankruptcy laws, or
under state or foreign insolvency laws, nor shall an assignment for the benefit
of creditors or any similar protective proceeding or act or event of bankruptcy
have occurred;
7.9. Due Conveyance; Consents. The Shares shall have been conveyed and
assigned to Purchaser free and clear of all liens, charges, encumbrances and
third party adverse claims, and all necessary consents of other parties to the
contracts, agreements and licenses forming a part of the Omega Business, shall
have been obtained without burdensome limitations or conditions;
7.10. Employment Agreement and Consulting Agreement. Seller, Omega and
Purchaser shall have executed and delivered the employment agreement
substantially in the form of Exhibit B (the "Employment Agreement") and the
consulting agreement substantially in the form of Exhibit F (the "Consulting
Agreement"), effective as of the Closing Date;
7.11. Lawsuits. No action, suit or proceeding shall have been instituted or
threatened before a court, arbitration panel or governmental body with respect
to the transactions contemplated hereby, and no regulatory enforcement
proceeding shall be pending before any governmental agency or body with respect
to the transactions contemplated hereby;
7.12. Debt. At the Closing Date the Company shall have no debt burden,
other than trade debt, other accounts payable incurred in the ordinary course of
business, and the debt listed on Schedule 3.2;
7.13. Directors. The members of the Board of Directors of the Company shall
have resigned in writing from the Board of Directors effective upon the Closing;
7.14. Lease Agreement. Seller, Omega, and Purchaser shall have executed and
delivered the lease agreement substantially in the form of Exhibit C (the "Lease
Agreement"), effective as of the Closing Date;
7.15. Escrow Agreement. Seller, Purchaser, and John T. Egan, Esq., shall
have executed and delivered the escrow agreement substantially in the form of
Exhibit E (the "Escrow Agreement"), effective as of the Closing Date.
7.16. Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article VII is not fulfilled as of February 29, 1996 (the
"Non-Fulfillment Date"), Purchaser may, upon notice to the Company and on or
prior to the Closing Date, elect either (i) to waive the condition and proceed
to Closing; or (ii) not to consummate the transactions provided for herein and
terminate this Agreement without any further liability on the part of either of
the Parties, except that the foregoing shall not relieve either of the Parties
from liability for damages actually incurred as a result of breach of this
Agreement.
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ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING BY THE SELLER
The Seller shall not be required to proceed on the Closing Date with the
transactions contemplated by this Agreement unless the following conditions
precedent shall have been fulfilled and satisfied, or shall have been waived in
writing by the Seller:
8.1. Representations and Warranties. Each of the representations and
warranties of Purchaser contained herein shall be true and correct as of the
date of this Agreement and shall be true and correct as of the Closing Date as
if then originally made;
8.2. Covenants. Purchaser shall have complied with each of the covenants
required of it on or prior to Closing;
8.3. Officers Certificate. Purchaser shall have delivered to the Seller a
certificate of its President and Chief Financial Officer, dated the Closing
Date, certifying to the best of the knowledge and belief of such officers and in
such detail as the Seller reasonably request to the accuracy of Purchaser's
representations and warranties, and to the fulfillment of Purchaser's covenants
and of the conditions precedent to the Seller's obligations to consummate the
transactions contemplated by this Agreement;
8.4. Bankruptcy. Purchaser shall not be the subject of a petition for
reorganization or liquidation under the Federal bankruptcy laws, or under state
insolvency laws, nor shall an assignment for the benefit of creditors or any
similar protective proceeding or act or event of bankruptcy have occurred;
8.5. Lawsuits. No action, suit or proceeding shall have been instituted or
threatened before a court, arbitration panel or governmental body with respect
to the transactions contemplated hereby, and no regulatory enforcement
proceeding shall be pending before any governmental agency or body with respect
to the transactions contemplated hereby;
8.6. Legal Opinion. Purchaser shall have delivered to the Seller a legal
opinion, in substantially the form attached hereto as Exhibit D, from Baker &
McKenzie, counsel to Purchaser.
8.7. Corporate Authorizations. There shall have been obtained, by means in
conformity with all applicable provisions of federal and Pennsylvania law, the
approval of Purchaser's Board of Directors to the transactions contemplated by
this Agreement;
8.8. Good Standing. Purchaser shall have delivered to the Seller a
certificate of good standing in its state of incorporation.
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8.9 Lease Agreement. Seller, Omega, and Purchaser shall have executed and
delivered the Lease Agreement;
8.10. Employment Agreement and Consulting Agreement. Seller, Omega and
Purchaser shall have executed and delivered the Employment Agreement and the
Consulting Agreement;
8.11. Escrow Agreement. Seller, Purchaser, and John T. Egan, Esq., shall
have executed and delivered the Escrow Agreement.
8.12. Non-Fulfillment Date. In the event that one or more of the foregoing
conditions in this Article VIII is not fulfilled as of the Non-Fulfillment Date,
the Seller may, upon notice to Purchaser and on or prior to the Closing Date,
elect either (i) to waive the condition and proceed to Closing; or (ii) not to
consummate the transactions provided for herein and terminate this Agreement
without any further liability on the part of either of the Parties, except that
the foregoing shall not relieve either of the Parties from liability for damages
actually incurred as a result of breach of this Agreement.
ARTICLE IX
CLOSING
The actual consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place on the later of: (i) February 2, 1996, and (ii) the
fifth business day following the last to occur of the conditions set forth in
Articles VII and VIII (the "Closing Date") at the offices of Greenbaum, Rowe,
Smith, Ravin & Davis in Woodbridge, New Jersey. The Closing Date may be set at
such other date or at such other place as shall be fixed by agreement of the
Parties hereto.
ARTICLE X
OBLIGATIONS AT THE CLOSING
10.1. Seller's Obligations. At the Closing, the Seller shall deliver to
Purchaser:
10.1.1. Certificates signed by the Seller to the effect that, to the actual
knowledge of such persons, each of the representations and warranties made by
the Seller hereunder is true and correct as of the Closing Date (or, if any such
representation or warranty is untrue or incorrect, specifying the respect in
which it is untrue or incorrect), and that the Seller has fulfilled his
covenants hereunder as of the Closing Date (or, if any such
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covenant is unfulfilled, specifying the respect in which it is unfulfilled), and
that the Seller has fulfilled the conditions precedent to Purchaser's
obligations to consummate the purchase contemplated by this Agreement (or, if
any such condition is unfulfilled, specifying the respect in which it is
unfulfilled);
10.1.2. An opinion of Greenbaum, Rowe, Smith, Ravin & Davis, counsel for
the Seller, addressed to Purchaser, in substantially the form attached hereto as
Exhibit A;
10.1.3. The Employment Agreement, executed by Seller;
10.1.4. The certificates representing all of the Shares, together with
appropriate stock powers in a form satisfactory to Purchaser and executed by the
Seller with signature guaranteed by a bank, assigning such certificates to
Purchaser, free and clear of any liens, claims, options, encumbrances or
restrictions of any nature whatsoever;
10.1.5. The Lease Agreement, executed by Seller;
10.1.6. The Consulting Agreement, executed by Seller; and
10.1.7 The Escrow Agreement, executed by Seller.
10.2. Purchaser's Obligations. At the Closing Purchaser shall make the
payment called for by Section 16.4, and Purchaser shall deliver to the Seller:
10.2.1. Certificates signed by the President and Chief Financial Officer of
Purchaser to the effect that, to the best of the knowledge of such officers,
each of the representations and warranties made by Purchaser hereunder are true
and correct as of the Closing Date (or, if any such representation or warranty
is untrue or incorrect, specifying the respect in which it is untrue or
incorrect), and that Purchaser has fulfilled its covenants hereunder as of the
Closing Date (or, if any such covenant is unfulfilled, specifying the respect in
which it is unfulfilled), and that Purchaser has fulfilled the conditions
precedent to the Seller's obligations to consummate the purchase contemplated by
this Agreement (or, if any such condition is unfulfilled, specifying the respect
in which it is unfulfilled);
10.2.2. A copy of resolutions adopted by the Board of Directors of
Purchaser, certified by its Secretary, authorizing or ratifying the execution
and delivery of this Agreement and the performance by Purchaser of its
respective obligations hereunder;
10.2.3. An opinion of Baker & McKenzie, counsel for Purchaser, addressed to
the Seller, in substantially the form attached hereto as Exhibit D;
10.2.4. The Employment Agreement, substantially in the form of Exhibit B,
executed by Purchaser;
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10.2.5. The Lease Agreement, executed by Purchaser;
10.2.6. The Escrow Agreement, executed by Purchaser;
10.2.7. The Consulting Agreement, executed by Purchaser; and
10.2.8. Current funds in the amount specified in Section 2.2(a).
ARTICLE XI
FURTHER COVENANTS OF
THE SELLER AND PURCHASER
The Seller and Purchaser shall, as described below, each perform the
indicated tasks designated to be performed by them:
11.1. Joint Notice. After the Closing, the Seller and Purchaser shall
cooperate, to the extent practicable and reasonable, in giving joint notice of
the consummated transactions to each customer, creditor, distributor, sales
representative and supplier of the business of the Company.
11.2. Further Assurances. Each Party agrees that, from time to time and
without further consideration, he or it will execute and deliver such further
documents and take such other action as the other Party may require in order
more effectively to transfer to and vest in Purchaser and put Purchaser in
possession of the Shares and all right and interest in the Shares and to ensure
the carrying out of such Party's obligations under this Agreement.
11.3. Contracts. If any of the Contracts require the consent of a third
party in order not to be discontinued or terminated due to the transfer of
Shares consummated hereunder, and such consent cannot be obtained prior to
Closing despite the Parties' best efforts, the Parties shall continue to use
their best efforts to obtain the third party's consent after the Closing Date.
11.4. Mrs. Shimada. Purchaser agrees that after the Closing, for as long as
Seller shall be active on a day-to-day basis either as an employee with the
Omega Business or as a consultant with Purchaser, Purchaser or its designee
shall employ Mrs. Kim Shimada substantially in the role that she serves Omega on
the date hereof, at her present salary of $36,000 per annum, increased each year
on the anniversary date of the Closing Date by the percentage increase in the
Consumer Price Index since the previous anniversary of the Closing Date, plus a
typical benefits package for the Company as set forth by the Company's board of
directors from time to time, plus a car lease allowance and related car
expenses.
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11.5 No Gap in Insurance. After the Closing, Purchaser will maintain, or
cause the Company to maintain, products liability insurance for the Company with
coverage at least as great as, and with a deductible no greater than $500,000 in
the aggregate, the products liability insurance coverage listed on Schedule
3.19.
ARTICLE XII
TAX MATTERS
12.1. Certain Definitions.
12.1.1. Taxes: means all federal, foreign, state or local net or gross
income, gross receipts, sales, use, ad valorem, value-added, franchise,
withholding, "tollgate", payroll, employment, excise, property or similar taxes,
assessments, duties, fees, levies or other governmental charges (including,
without limitation, any liability for taxes arising from a consolidated return
and imposed by Treasury Regulations section 1.1502-6) together with any interest
thereon, penalties, additions to tax or additional amounts with respect thereto
and any interest in respect of such penalties, additions or additional amounts.
12.1.2. Carryforwards: means any federal or state tax loss carryforwards,
investment tax credits, and foreign tax credits of the Company arising from
taxable years or periods prior to the Closing Date.
12.2. [Intentionally Omitted.]
12.3. Tax Indemnification.
12.3.1. Notwithstanding any other provision of this Agreement, the Seller
hereby agrees to indemnify Purchaser against and hold it harmless from (i) all
liability for Taxes of the Company attributable to taxable years or periods
ending on or before the Closing Date and, in the case of taxable years or
periods beginning before and ending after the Closing Date, the portion of such
years or periods ending at the close of business on the Closing Date (the
"Pre-Closing Tax Period"), (ii) all liability whenever incurred for Taxes of the
Seller, and (iii) any liability resulting from a failure of the Seller to
fulfill his obligations under this Article XII.
12.3.2. Notwithstanding any other provision of this Agreement, Purchaser
hereby agrees to indemnify the Seller and hold him harmless from (i) any
liability for Taxes of the Company attributable to any taxable periods or
portions thereof commencing after the Pre-Closing Tax Period, and (ii) any
liability resulting from a failure of Purchaser to fulfill its obligations under
this Article XII.
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12.4. Closing of Taxable Period. Each of Purchaser and the Seller agrees to
cause Company to file all appropriate federal, state, local and foreign tax
returns (the "Tax Returns") on the basis that the relevant taxable period ended
as of the close of business on the Closing Date, unless the relevant taxing
authority will not accept a Tax Return filed on that basis.
12.5. Preparation and Filing of Tax Returns by the Seller. The Seller shall
prepare and timely file or shall cause the preparation and timely filing of all
appropriate Tax Returns that include, on a consolidated or any other basis, the
income of Company for all periods ending on or before the Closing Date for those
jurisdictions which permit or require a short period tax return ending as of the
close of business on the Closing Date. Purchaser will cooperate with the Seller
in making available to him any records necessary to enable him to comply with
this Section 12.5. At the request of the Seller, the Purchaser shall cause the
Company to grant a Power of Attorney to such persons as the Seller may designate
to file such Tax Returns in the name of the Company.
12.6. Preparation and Filing of Tax Returns by the Company. Purchaser
and/or the Company shall prepare and timely file or shall cause the preparation
and timely filing of (i) all Tax Returns with those jurisdictions not allowing a
short period Tax Return ending as of the close of business on the Closing Date
and (ii) all other Tax Returns of any kind with respect to Company that are due
after the Closing Date (other than Tax Returns to be filed by the Seller
pursuant to Section 12.5). The Seller will cooperate with Purchaser and the
Company in making available to Purchaser any records necessary to enable
Purchaser and the Company to comply with this Section 12.6. For all tax periods
commencing after the Closing Date, Purchaser and the Company shall have
responsibility for the preparation and filing of all Tax Returns relating to the
assets, operations and income of the Company.
12.7. Payment of Taxes by the Seller Directly to Taxing Authorities. Except
as provided in Section 12.8, the Seller shall pay or cause to be paid all Taxes
due with respect to Tax Returns which it is required to file pursuant to Section
12.5.
12.8. Payment of Taxes by the Seller to Purchaser. With respect to any
jurisdiction which does not permit or require a short period Tax Return ending
as of the close of business on the Closing Date, the Seller shall compute or
cause to be computed the Tax liability which would be reflected on an Tax Return
for the Company for that jurisdiction for the period through and including the
Closing Date (as if such a short taxable period existed and a return was
permitted or requested in respect thereof), and the Seller shall pay such amount
(less any estimated tax payments paid prior to the Closing Date) to Purchaser or
the Company on or before the due date, including extensions for the payment of
taxes to such jurisdiction with respect to the Tax Return to be filed by
Purchaser and/or Company. In the event that the estimated tax payment paid prior
to the Closing Date exceeds the amount of tax to be paid by the Company on a tax
return required under this Section 12.8, Purchaser shall pay or cause to be paid
such excess to the Seller. Any tax credits and any exemptions,
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allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis.
12.9. Consolidated and Unitary Tax Returns. The Seller agrees to permit
Purchaser to cause the Company to elect, where permitted by law, to carry
forward any net operating loss, net capital loss, charitable contribution or
other item arising after the Closing Date that would, absent such election, be
carried back to a taxable period of the Company ending on or before the Closing
Date.
12.10. Cooperation in Preparing and Filing Returns. The Seller and
Purchaser shall, and Seller and Purchaser shall cause the Company to, cooperate
fully with each other in connection with the preparation and filing of the Tax
Returns or other tax returns, including but not limited to the furnishing or
making available of records, books of account and any other information
necessary for the preparation of any tax returns. Purchaser shall, and Purchaser
shall cause the Company to, provide the Seller with completed Tax Returns or tax
return information packages for the Company including, but not limited to, all
supporting documentation as required in prior years within 90 days after the
Closing Date, for taxable periods ending on or prior to or including but not
ending on the Closing Date. The Seller shall furnish Purchaser with completed
federal and state Tax Returns or with pro-forma returns for the Company by the
earlier of 90 days after receipt of all information required for the proper
completion of such returns or on or before 30 days prior to the due date of such
returns.
12.11. Adjustments.
12.11.1. Pre-Closing Tax Period Adjustments. If any Adjustment is made to
any Tax Return of the Company attributable to periods up to and including the
Pre-Closing Tax Period, and if such Adjustment results in an increase in any Tax
liability borne by the Seller hereunder, and results in a Tax benefit (including
without limitation any benefit attributable to a decrease in income, increase in
deduction or credit or increase in basis) to the Company or Purchaser with
respect to any taxable period or portion thereof after the Pre- Closing Tax
Period, then Purchaser shall pay to the Seller the amount of such Tax benefit
(calculated on a present value basis and after taking into account any loss or
credit carryover from a prior year); provided that the amount payable by
Purchaser shall not exceed the detriment to the Seller arising from such
Adjustment.
12.11.2. Post-Closing Tax Period Adjustments. If any Adjustment is made to
any Tax Return of the Company attributable to any taxable period or portion
thereof commencing after the Pre-Closing Tax Period, and if such Adjustment
results in an increase in any Tax liability borne by Purchaser or the Company,
and results in a Tax benefit (including without limitation any benefits
attributable to a decrease in income, increase in deduction or credit or
increase in basis) to the Seller with respect to a Pre-Closing Tax Period, which
benefit is used by Seller, then the Seller shall pay to Purchaser the amount of
such Tax benefit (calculated on a present value basis and taking into account
any loss or
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credit carryover from a prior year); provided that the amount payable by the
Seller shall not exceed the detriment to Purchaser arising from such Adjustment.
12.11.3. Adjustment. For purposes of this Section 12.11, "Adjustment" shall
mean an adjustment to any Tax Return as a result of or in settlement of any
audit, other administrative proceeding or judicial proceeding or as a result of
the filing of an amended Tax Return to reflect the consequences of any
determination made in connection with any such audit or proceeding.
12.12. Transfer Taxes. The Seller shall be liable for any taxes arising
from the sale of the Shares.
12.13. Negotiation, Settlement, or Contest of Tax Disputes. The Seller and
his duly appointed representatives shall have the sole right to supervise or
otherwise coordinate any tax examination process and to negotiate, resolve,
settle or contest any asserted Tax deficiencies or assert and prosecute any
claim for refund of Taxes (a "Tax Claim") for taxable periods ending on or
before the Closing Date. In addition, the Seller shall be entitled to
participate at his expense in the defense of any Tax Claim relating to any year
or period that includes the Closing Date for which the Seller may be required to
pay amounts to Purchaser and/or the Company pursuant to this Article XII, and
with the written consent of Purchaser and/or the Company, and at the Seller's
sole expense, may assume the entire defense of such Tax Claim. Purchaser shall
not, and shall not allow the Company to, settle any Tax Claim for a year or
period ending on or before the Closing Date or including the Closing Date
without the consent of the Seller (which shall not be unreasonably withheld) if,
with respect to such claim, the Seller would be required to pay amounts to
Purchaser and/or the Company pursuant to this Article XII.
12.14. Cooperation in Connection with Examinations. Purchaser shall, and
shall cause the Company to, give prompt notice to the Seller of the assertion of
any claim, or the commencement of any suit, action, proceeding, investigation or
audit with respect to any Tax Return for any period or portion thereof ending on
or before the Closing Date that includes the operations of the Company,
describing in reasonable detail the facts pertaining thereto and the amount or
an estimate of the amount of the liability arising therefrom. The Seller and
Purchaser shall, and the Purchaser shall cause the Company to, cooperate fully
in any such action by furnishing or making available records, books of account
or other materials or taking such other actions as may be necessary or helpful
for the defense against the assertions of any taxing authority as to any
consolidated, combined or separate Tax Return for such periods.
12.15. Assignment of Tax Refunds. Purchaser shall, and shall cause the
Company to, assign to the Seller all Tax refunds, including interest, relating
to the Company with respect to any taxable year or period ended as of or prior
to the close of business on the Closing Date, and, with respect to any taxable
year or period that includes the Closing Date, the portion of such year or
period ending on and including the Closing Date. Purchaser
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shall, and shall cause the Company to, pay over to the Seller promptly upon
receipt all such refunds received directly by any of them.
12.16. Record Retention. The Seller and Purchaser shall retain, and cause
the Company to retain, for six years from the closing date full and complete
records for all tax periods which remain subject to audit by action of statute
or waiver for all periods or portions thereof through and including the Closing
Date. To the extent that such records are currently maintained in both a hard
copy and an electronic media format, the Parties agree to cause both such types
of records that pertain to the income or operations of the Company prior to the
close of business on the Closing Date to be retained by Company and not to be
destroyed without prior written approval of the Seller or Purchaser, as the case
may be. The Parties agree to cause the Company to enter into such record
retention agreements as may be requested by the Internal Revenue Service with
respect to all tax periods ending on or prior to the Closing Date.
12.17. Termination of Tax Allocation Agreement. Any tax allocation
agreement or arrangement with respect to the Company that may have been entered
into by the Seller or its affiliates on the one hand and the Company on the
other hand shall be terminated as of the Closing Date, and no payments that are
owed by or to the Company pursuant thereto shall be of effect or enforceable,
except that any provision in such tax allocation agreement to provide
information regarding attributes or characteristics of the Company relevant to
the determination of any Taxes to the Company upon departure from the
consolidated group of which the Seller was a member shall be carried out by, and
enforceable against, the Seller or as provided for in such tax allocation
agreement.
12.18. Section 338(h)(10) Election.
(a) Seller and Purchaser agree to execute Internal Revenue Service Form
8023-A and to jointly and timely file an election under Section 338(h)(10) of
the Internal Revenue Code (the "Code"), and any comparable election, under
applicable state or local tax laws that provide for an election comparable to a
Code Section 338(h)(10) election, with respect to the purchase of the Shares.
Seller and Purchaser shall cooperate fully with each other to take all necessary
and appropriate actions to accomplish the completion and filing of such election
in accordance with the provisions of Treasury Regulations Section 1.338(h)(10)-1
and the provision of applicable state or local tax laws and regulations. Seller
agrees 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, whether such taxes are levied on Seller, on Omega, or otherwise.
(b) With respect to the joint election to be made under Section 338(h)(10)
of the Code with respect to the purchase of the Shares, Purchaser and Seller
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 according to the method set forth in Treasury
Regulations Section 1.338(b)-2T (the "Purchase Price
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Allocation"), and that a memorandum of such allocation (the "Allocation
Memorandum") shall be entered into between the Parties upon the execution of
this Agreement. Purchaser agrees to report or cause the Company to report, and
the Seller agrees to report, the deemed sale of the Company's assets in a manner
consistent with the Purchase Price Allocation issued pursuant to this Section
12.18.
(c) Seller and Purchaser each 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 shall
have any recourse against the other with respect to the actual tax effects
thereof.
(d) Seller and Purchaser agree that the obligations specified in this
Section 12.18 shall be modified as necessary to reflect adjustments to the
Purchase Price as required by Article II of this Agreement, 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, Purchaser shall prepare revisions to the
Allocation Memorandum hereto to reflect such adjustments and shall timely
forward such revised schedule to Seller. Purchaser and Seller 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.
(e) In addition to their obligations under the foregoing subsections,
Seller and Purchaser shall, and Seller and Purchaser shall cause Omega and their
Affiliates to, cooperate fully with each other in connection with the
preparation and filing of all tax returns relating to Omega, including but not
limited to the furnishing or making available of records, books of account and
any other information necessary for the preparation of such tax returns.
12.19. Survival. All rights and obligations provided for in this Article
XII shall remain in force notwithstanding any other provision of this Agreement,
except in the event of termination of this Agreement pursuant to Section 7.16 or
Section 8.12.
12.20. Priority of Article. In the event of a conflict between the
provisions of this Article XII and any other provision of this Agreement, the
provisions of this Article XII shall control.
ARTICLE XIII
COVENANTS AGAINST COMPETITION
In partial consideration of the purchase price paid for the Shares by
Purchaser and for other good and sufficient consideration:
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13.1. Seller, on behalf of himself and his Affiliates, agrees not to
engage, directly or indirectly, as a proprietor, stockholder, partner, employee,
independent contractor or otherwise in competition with the Omega Business
during the Noncompetition Period (as hereinafter defined) in any place where the
Company is then conducting the Omega Business
13.2. Seller, on behalf of himself and his Affiliates, agrees not to do any
of the following during the Noncompetition Period in any place where the Company
is then doing business: (i) directly or indirectly solicit or otherwise contact
any present or past customers of the Company, for itself or any other person,
firm or corporation, for the purpose of obtaining business in competition with
the Omega Business; (ii) directly or indirectly solicit, interfere with or
endeavor to entice away from the Company any employees (other than Mrs. Kim
Shimada or Lisa Shimada), sales representatives, or distributors; or (iii)
directly or indirectly solicit, interfere with or endeavor to entice away from
the Company any person, firm or corporation dealing or doing business with the
Company. Seller, on behalf of himself and his Affiliates, agrees not to do any
of the following at any time after the Closing Date: (a) directly or indirectly
make use of any know-how relating to the Omega Business's technology or any
intellectual property rights of the Company; or (b) take any actions that in any
manner are detrimental to the Company or its business. Nothing in this Article
XIII shall prohibit Seller or any of his Affiliates from ownership of an equity
interest not greater than 5% of any class of securities in a publicly held
company engaged in a business in competition with Purchaser or with the Company.
13.3. For purposes of this Agreement, the "Noncompetition Period" shall
mean the period beginning at Closing and ending on the second anniversary of the
termination of the employment agreement delivered pursuant to Section 10.1.3 of
this Agreement.
13.4. Without waiving the Purchaser's rights to monetary damages, all
Parties to this Agreement acknowledge that the breach of the obligations
contained in this Article XIII would result in substantial but indeterminable
harm, that the restraints imposed are reasonable, that there is no adequate
remedy at law for a breach of such obligations, and therefore, that injunctive
relief, specific performance or other equitable remedies are appropriate to
enforce the obligations undertaken in this Article XIII. In the event that a
court finds that the terms of this covenant not to compete are so broad as to be
unlawful and unenforceable, the Parties further agree that a reformation of the
terms of this Article XIII may be appropriate in order to protect the value of
the Company as a going concern, the value of the Shares being conveyed pursuant
to this Agreement, and the value of the non- competition covenant, and to
provide for the enforceability of the obligations contained in this Article XIII
to the fullest extent permitted by law.
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ARTICLE XIV
EXPENSES WITH RESPECT TO TRANSACTION
The Seller agrees that he will pay all fees, costs and expenses incurred by
him in connection with this transaction, including, without limitation, the fees
and expenses of his attorneys, accountants and other persons, and no portion
thereof shall be paid by Purchaser. Purchaser agrees that it will pay all fees,
costs and expenses incurred by it in connection with this transaction,
including, without limitation, the fees and expenses of its attorneys,
accountants and other persons, and no portion thereof shall be paid by the
Seller. Notwithstanding the foregoing, the Seller and Purchaser shall share
equally any fees accompanying filings required to be made to governmental
agencies in connection with the transactions contemplated by this Agreement.
ARTICLE XV
BROKERS
Each of the Parties hereby agrees to indemnify and save and hold harmless
the other Party, its shareholders, directors and officers from and against any
and all claims, losses, damages, costs or expenses of any kind or character
(including attorneys' fees) arising out of or resulting from any agreement,
arrangement or understanding alleged to have been made by such party with any
broker or finder in connection with this Agreement or the transactions
contemplated hereby, and to supply at Closing a letter releasing the other Party
to this Agreement from the claims of any such broker and finder. In furtherance
and not in limitation of the foregoing, Seller shall indemnify and hold
Purchaser harmless from any claims made by Seller's broker, Geneva Capital.
ARTICLE XVI
INDEMNIFICATION
16.1. Mutual Indemnification.
(a) Notwithstanding any other provisions of this Agreement, from and after
the Closing, Seller, jointly and severally on behalf of himself and his
Affiliates, and the successors and assigns of any of them, hereby indemnifies
Purchaser, its Affiliates, successors and assigns, and agrees to hold Purchaser,
its Affiliates, successors and assigns, harmless from all Losses (as hereinafter
defined) resulting from (i) a breach by the Seller of
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any representation, warranty, covenant or agreement under this Agreement, (ii)
any liabilities arising at or prior to the Closing, or any events occurring at
or prior to the Closing giving rise to liability (whether such liabilities or
events were known, unknown or could not be known by the Seller at or prior to
the Closing), relating to the Company or the Omega Business or the Omega Assets,
or (iii) any liabilities arising at, prior to or subsequent to the Closing
(whether such liabilities or events were known, unknown or could not be known by
the Seller at or prior to the Closing), relating to any products manufactured by
or any services rendered by the Company at or prior to the Closing.
(b) From and after the Closing Date, Purchaser, on behalf of its Affiliates
and its successors and assigns, hereby indemnifies Seller, his heirs, executors,
successors and permitted assigns, and agrees to hold Seller, his heirs,
executors, successors and permitted assigns, harmless from all Losses resulting
from (i) a breach by Purchaser of any representation, warranty, covenant or
agreement under this Agreement, or (ii) any liabilities arising after the
Closing Date relating to Omega, the Omega Business or the Omega Assets, except
for those liabilities described in Section 16.1(a), or (iii) any liabilities
arising following the Closing under any equipment leases listed on Schedule
3.30, except for those liabilities described in Section 16.1(a).
(c) As used in this Agreement, the term "Indemnifying Party" shall mean the
person or persons against whom a party (the "Indemnified Party") makes a claim
for indemnification hereunder.
(d) The Indemnified Party shall give written notice to the Indemnifying
Party of any claim or event known to it which does or may give rise to a claim
by the Indemnified Party against the Indemnifying Party based on this Agreement,
stating the nature and basis of said claims or events and the amounts thereof,
to the extent known. Such notice shall be given in accordance with Article XVIII
hereof. The giving of such notice shall be a condition precedent to any
liability of the Indemnifying Party hereunder. Such notice shall be given
reasonably promptly, but the fact that the Indemnified Party failed to give
notice with reasonable promptness shall not defeat a claim made pursuant hereto
except to the extent that the Indemnifying Party can establish that it has been
injured by such delay.
(e) In the event of any claim, action, suit or proceeding made or brought
by third parties against the Indemnified Party, the Indemnified Party shall give
written notice of such claim, action, suit or proceeding as described in (d)
above, with a copy of the claim, process and all legal pleadings with respect
thereto. After notification, the Indemnifying Party shall participate in, and
jointly with any other Indemnifying Party similarly notified, assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party at the
time of such assumption. The Indemnified Party shall have the right to employ
its own counsel and such counsel may participate in such action, but the fees
and expenses of such counsel shall be at the expense of the Indemnified Party,
when and as incurred, unless (1) the employment of counsel by such Indemnified
Party has been authorized by the Indemnifying Party, or (2) the Indemnifying
Party shall not in fact have employed counsel to assume the defense of such
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action reasonably satisfactory to the Indemnified Party at the time of the
Indemnifying Party's assumption of the defense. If clause (2) of the preceding
sentence shall be applicable, then counsel for the Indemnified Party shall have
the right to direct the defense of such claim, action, suit or proceeding on
behalf of the Indemnified Party. The Indemnified Party and the Indemnifying
Party, as the case may be, shall be kept fully informed of such claim, action,
suit or proceeding at all stages thereof whether or not such party is
represented by its own counsel.
(f) As used in this Agreement, "Losses" means any and all claims, demands,
costs, losses, damages and liabilities. The term "Losses" includes reasonable
attorneys' fees and costs incurred in the investigation and defense of a claim,
demand, cost, loss or liability, provided however that the term "Losses" does
not include remuneration to the Indemnified Party's employees for time spent
investigating or litigating any claim or demand. With respect to environmental
matters, the term Losses also includes hazardous substances removal, remedial
activity or response action required by any Environmental Law, required by
judicial order or by order of or agreement with any governmental authority, or
requested by or for Seller, or its Affiliates.
16.2 Certain Limitations. The liability of Seller or Purchaser, as
applicable, for claims under this Agreement shall be limited by the following:
(a) after the date that is fourteen months after the Closing Date, Seller
shall have no further obligations under this Article XVI of this Agreement or
otherwise, except for (i) Losses with respect to which the Purchaser has given
Seller written notice prior to such date, and (ii) Losses with respect to
Sections 3.3, 3.8, 3.17, and 3.31.
(b) the amount of Losses otherwise recoverable by an Indemnified Party
under this Article XVI shall be reduced by the amount of insurance proceeds
actually received and self-insured retentions applied by such Indemnified Party
with respect to such Losses.
(c) no claim for indemnification shall be asserted by an Indemnified Party
under this Article XVI until the aggregate amount of all Losses of that Party
relating to this Agreement exceeds $75,000, and then only to the extent that
such Losses exceed $75,000.
(d) the aggregate amount of all Losses recoverable by Purchaser pursuant to
the provisions of this Article XVI shall be limited to the Purchase Price;
provided, however, nothing in this Article XVI shall be deemed to limit any
right or remedy of Purchaser for fraud; and further provided that nothing in
this Article XVI shall be construed as limiting Purchaser's rights, if any, to
seek any appropriate non-monetary relief.
16.3. Set-offs. Without limiting Purchaser's rights or remedies under this
Agreement, from the date that is fourteen months after the Closing Date through
the date that is thirty-eight months after the Closing Date Purchaser may set
off amounts that Purchaser owes to Seller under the Lease Agreement against
amounts due to Purchaser by reason of a
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failure or breach of Seller'srepresentations, warranties, covenants or
obligations or by reason of an increase in liabilities or obligations incurred
by Purchaser in connection with the transactions contemplated by this Agreement.
16.4. Escrow.
(a) Notwithstanding any provision in this Agreement to the contrary,
Purchaser shall on the Closing Date deliver $500,000 (Five Hundred Thousand
Dollars) of the Purchase Price to the Escrow Agent named in the Escrow
Agreement, who shall place the funds in an interest-bearing account (the "Escrow
Account").
(b) At any time or from time to time prior to the date that is fourteen
months after the Closing Date, Purchaser may obtain from the Escrow Account, in
accordance with the procedures provided in the Escrow Agreement, amounts equal
to the amounts of any Losses for which it is entitled to indemnification under
this Article XVI. If at any time Purchaser obtains an amount from the Escrow
Account in accordance with the previous sentence, Seller shall forthwith pay to
Escrow Agent such amount in order to replenish the Escrow Account.
(c) At its option, and in addition to any other rights or remedies that
Purchaser may have hereunder, Purchaser may obtain from the Escrow Account, in
accordance with the procedures provided in the Escrow Agreement, any amount that
Seller is required to pay pursuant to Section 2.2, provided that Seller shall
immediately thereafter replenish such amount. For the avoidance of doubt, and
notwithstanding any provision in this Agreement to the contrary, the provisions
of Section 16.2(c) shall not be applicable to Purchaser's rights under this
Section 16.4(c).
16.5. Remedies Cumulative. All rights and remedies existing under this
Agreement are cumulative with, and not exclusive of, (i) each other, and (ii)
any rights or remedies otherwise available.
ARTICLE XVII
NOTICES
17.1. Notice. All notices and other communications required to be given
under the terms of this Agreement or which any of the Parties may desire to give
hereunder shall be in writing and delivered personally or sent by express
delivery, or by facsimile, or by registered or certified mail, with proof of
receipt, postage and expenses prepaid, return receipt requested, addressed as
follows:
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(a) As to Purchaser, addressed to:
Mestek, Inc,
280 North Elm Street
Westfield, Massachusetts 01086
Attn: John E. Reed, President
Fax: (413) 568-7428,
with a copy to:
R. Bruce Dewey, Esq.
Mestek, Inc,
280 North Elm Street
Westfield, Massachusetts 01086
Fax: (413) 568-7428;
or to such other address or addresses and to the attention of such other person
or persons as Purchaser may from time to time designate in writing to Seller;
(b) As to Seller, addressed to:
Mr. Koji Shimada
298 Diana Court
Gulph Mills, PA 19426
Fax: 610-524-7282,
with a copy to:
Alan Davis, Esq.
Greenbaum, Rowe, Smith, Ravin & Davis
99 Wood Avenue South
Iselin, New Jersey 08830
Fax: (908) 549-1881,
or to such other address or addresses and to the attention of such other person
or persons as Seller may from time to time designate in writing to Purchaser.
17.2. Receipt of Notice. Any notice given in accordance with this Article
XVII shall be deemed to have been given when delivered personally, or when
received if sent via express delivery, facsimile, or registered or certified
mail, return receipt requested.
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ARTICLE XVIII
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
This Agreement shall become effective when executed and delivered by
Purchaser and Seller, and shall be binding in all respects upon the respective
successors and permitted assigns of each of the Parties hereto. No Party hereto
may assign this Agreement in whole or in part without first obtaining the
written consent of the other Party, except that Purchaser may assign its rights
and obligations under this Agreement to one or more Affiliates so long as
Purchaser remains responsible for its performance hereunder.
ARTICLE XIX
ANNOUNCEMENT OF TRANSACTION
Subject to the provisions of Section 11.1, no party hereto shall make a
public announcement of any of the transactions contemplated by this Agreement
without approval of the other Party, unless required by law or by applicable
stock exchange requirements, and in any event such person shall provide notice
accompanied by a copy of all proposed announcements to the other Party. Nothing
in this Agreement shall be construed to inhibit Seller or Purchaser from
communicating with their employees regarding this Agreement, so long as Seller
or Purchaser, as the case may be, use their best efforts to make such employees
comply with the confidentiality obligations contained in this Article XIX.
ARTICLE XX
COMPLETENESS OF AGREEMENT
This Agreement and the Schedules and Exhibits hereto and Closing documents
represent the entire contract between the Parties with respect to the subject
matter hereof and supersede all offers, proposals, statements, representations
and agreements with respect to the subject matter hereof, including but not
limited to that certain letter of intent dated December 7, 1995. The Exhibits
and Schedules hereto and Closing documents are incorporated herein by reference,
and shall be deemed to be included in any reference to this Agreement. This
Agreement may not be amended except by action of each of the Parties hereto set
forth in an instrument in writing signed on behalf of each of the Parties
hereto.
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ARTICLE XXI
CAPTIONS
The captions to the Articles and Sections contained in this Agreement are
for reference only, do not form a substantive part of this Agreement and shall
not restrict nor enlarge any substantive provision of this Agreement.
ARTICLE XXII
APPLICABLE LAW
This Agreement, the Schedules and Exhibits, and all other documents given
in connection herewith, shall be construed in accordance with the laws of the
State of Pennsylvania, without regard to the principles of conflicts of laws.
ARTICLE XXIII
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any claim, suit, action, or proceeding between Purchaser and Seller
relating to this Agreement; or relating to any document, instrument, or
agreement delivered pursuant hereto, referred to herein, or contemplated hereby;
or in any other manner arising out of or relating to the transactions
contemplated by or referenced in this Agreement, shall be commenced and
maintained exclusively in the United States District Court for the Eastern
District of Pennsylvania, or, if that Court lacks jurisdiction over the subject
matter, in a state court of competent subject-matter jurisdiction sitting in
Chester County, Pennsylvania. Purchaser and the Seller hereby submit themselves
unconditionally and irrevocably to the personal jurisdiction of such courts.
Purchaser and the Seller further agree that venue shall be in Chester County,
Pennsylvania. Purchaser and the Seller irrevocably waive any objection to such
personal jurisdiction or venue including, but not limited to, the objection that
any claim, suit, action, or proceeding brought in Chester County, Pennsylvania,
has been brought in an inconvenient forum. Purchaser and the Seller irrevocably
agree that process issuing from such courts may be served on them, either
personally or by certified mail, return receipt requested, at the addresses
given in Article XVII hereof; and Purchaser and the Seller further irrevocably
waive any objection to service of process made in such manner and at such
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addresses, including without limitation any objection that service in such
manner and at such addresses is not authorized by the local or procedural laws
of Pennsylvania.
ARTICLE XXIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be considered an original but all of which shall constitute but one and
the same Agreement by and among the Parties.
ARTICLE XXV
NO THIRD PARTY BENEFICIARY
This Agreement is intended to inure to the benefit of Purchaser and the
Seller only; and no third party shall have any rights, express or implied, by
reason of this Agreement.
ARTICLE XXVI
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
26.1. Waiver. Any of the Parties may:
26.1.1. Extend in writing the time for the performance of any of the
obligations herein contained to be performed for the benefit of such party;
26.1.2. Waive in writing any inaccuracies in the representations and
warranties made to it contained in this Agreement or any Exhibit or Schedule
hereto or any certificate or certificates delivered by another party to this
Agreement;
26.1.3. Waive in writing the failure in performance of any of the
conditions herein expressed for its benefit; and
26.1.4. Waive in writing compliance with any of the covenants herein
contained for its benefit.
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26.2. Effect of Waiver. No such waiver or extension shall be valid unless
in writing and signed by the party granting the waiver or extension, and no such
waiver or extension shall be construed to excuse or mitigate any subsequent
breach or violation of this Agreement not specifically covered by such waiver.
ARTICLE XXVII
SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
not affect the other provisions hereof, and the Agreement shall be construed in
all respects as if such invalid or unenforceable provisions were omitted.
Furthermore, upon the request of any party hereto, the Parties to this Agreement
shall add, in lieu of such invalid or unenforceable provisions, provisions as
similar in terms to such invalid or unenforceable provisions as may be possible
and legal, valid and enforceable.
[Next page is signature page.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the day and year first above written.
Purchaser: MESTEK, INC., a Pennsylvania corporation
By: _/s/________________________
Stephen M. Shea, Senior Vice
President -Finance
Seller: _/s/_____________________________
Koji Shimada
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