<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 11, 1997
Connectivity Technologies Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-12113 94-2691724
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
667 Madison Avenue, New York, New York 10021
(Address of principal executive offices) (zip code)
Registrant's Telephone Number, including Area Code: (212) 644-8880
N/A
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 11, 1997 (the "Closing Date"), Connectivity Products
Incorporated, a Delaware corporation (the "Seller"), an 85% owned subsidiary of
Connectivity Technologies Inc., a Delaware corporation (the "Company" or the
"Registrant"), entered into an Asset Purchase Agreement (the "Asset Purchase
Agreement") with Anicom, Inc., a Delaware corporation ("Parent"), and Reel
Acquisition Corp., a wholly owned subsidiary of Parent and a Delaware
corporation ("Purchaser"), pursuant to which Purchaser acquired the business and
substantially all the assets, and assumed certain of the liabilities, of the
Seller's Energy Electric Cable Division ("Division"). The Division is engaged in
the wire and cable sale and distribution business and is based in Auburn Hills,
Michigan.
The assets acquired by the Purchaser from the Seller included
all of the Division's (i) trade accounts receivable, (ii) inventories, (iii)
leasehold interests in real property, including improvements and fixtures, (iv)
furniture, fixtures and equipment located in the Division's facilities, (v)
cash, marketable securities, deposits and prepaid expenses reflected on the
Division's balance sheet as of the Closing Date, (vi) rights under Seller's
contracts relating to the Division, (vii) office, operating and other
supplies, (viii) common law and statutory rights in, and the goodwill associated
with, the name "Energy Electric Cable" and the Division's intellectual property,
(ix) books and records maintained by the Seller relating exclusively to the
Division, (x) claims, demands, judgments and rights of set-off, (xi) licenses,
authorizations and permits issued by any governmental or regulatory agency, to
the extent transferable, and (xii) other assets owned by the Seller and used
exclusively by the Division.
Pursuant to the Asset Purchase Agreement, the Seller received
from Purchaser an aggregate of $29,000,000, subject to adjustment following the
Closing Date (the "Purchase Price"), of which (i) $27,000,000 was paid in cash
and (ii) $2,000,000 consisted of 190,476 shares (the "Parent Stock") of Parent's
common stock, $.001 par value. The Parent Stock has been placed in escrow for a
period of one year to secure certain indemnification obligations of Seller under
the Asset Purchase Agreement. Purchaser and Seller also entered into a Supply
Agreement pursuant to which Purchaser is expected to purchase certain wire and
cable products manufactured by Seller during the five years following the
Closing.
Simultaneously with the closing under the Asset Purchase
Agreement (the "Closing"), Seller refinanced its senior credit facility with
BankBoston and NBD Bank to decrease the amount available for borrowing
thereunder from $43,740,000 to
- 2 -
<PAGE> 3
$30,000,000. Immediately prior to the Closing, Seller had approximately
$36,000,000 outstanding under the credit facility, which amount was reduced by
$24,000,000 of the cash proceeds. Substantially all of the remaining cash
proceeds have been invested in commercial paper.
The purchase price for the Division was determined through
negotiations between the parties. Prior to the transactions described herein,
there was no material relationship between Parent or Purchaser and the
Registrant or Seller or any of their respective affiliates, directors or
officers, or any associate of any such officer or director.
- 3 -
<PAGE> 4
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired. Not
applicable.
(b) Pro forma financial information.
Unaudited Pro
Forma Financial Statements ...............................F-1
Pro Forma Condensed Consolidated Balance
Sheet - March 31, 1997 ...................................F-2
Notes to Pro Forma Condensed Consolidated
Balance Sheet ............................................F-3
Pro Forma Consolidated Income
Statement for the
Three Months Ended March 31, 1997 ........................F-4
Pro Forma Revised Historical Consolidated
Income Statement for the
Year Ended December 31, 1996 .............................F-5
Pro Forma Revised Pro Forma Consolidated
Income Statement for the
Year Ended December 31, 1996 .............................F-6
Notes to Pro Forma Consolidated
Income Statement .........................................F-7
(c) Exhibits
2.1 Asset Purchase Agreement dated as of July 11, 1997
(the "Asset Purchase Agreement") by and among Anicom,
Inc., a Delaware corporation, Reel Acquisition Corp.,
a Delaware corporation ("Purchaser"), Connectivity
Products Incorporated, a Delaware corporation
("Seller"), and the Registrant. (A list of exhibits
and schedules to the Purchase Agreement is set forth
therein. The Registrant agrees to furnish to the
Commission supplementally, upon request, a copy of
any such exhibits or schedules not otherwise filed
herewith.)
99.1 Press Release of the Registrant dated July 14, 1997.
- 4 -
<PAGE> 5
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
On July 11, 1997, Connectivity Products Incorporated ("CPI"), an 85
percent owned subsidiary of Connectivity Technologies Inc. ("CTI"), entered
into an Asset Purchase Agreement with Anicom, Inc. ("Anicom") and Reel
Acquisition Corp., a wholly-owned subsidiary of Anicom, Inc. (the "Purchaser"),
for sale of the business and substantially all of the assets of the CPI's
Energy Electric Cable Division ("EEC"). In connection with the sale, the
Purchaser assumed most of EEC's liabilities other than borrowings, taxes,
and certain other liabilities.
Pursuant to the Agreement, CPI received $29,000,000 subject to
adjustment, including $27,000,000 in cash and $2,000,000 in Anicom's stock,
plus the liabilities assumed by the Purchaser. EEC will be classified as a
discontinued operation by CTI following the sale. The gain on the sale will be
reported as a gain on disposal of a discontinued operation.
The Unaudited Pro Forma Financial Statements which follow include the
accounts of CTI and the effects of the sale on financial position and results of
operation. The Pro Forma Financial Statements for March 31, 1997 and for the
three months then ended assume that the sale was made on January 1, 1997 for
the Consolidated Income Statement and as of March 31, 1997 for the Consolidated
Balance Sheet.
Two separate income statements are presented for 1996. The Pro Forma
Revised Historical Consolidated Income Statement includes results of
operations of CPI from May 31, 1996, the date CPI was acquired by CTI. These
statements assume that EEC was sold as of May 31, 1996. The Pro Forma Revised
Pro Forma Consolidated Income Statement includes the results of operations of
CPI as if it had been acquired on January 1, 1996. The Pro Forma revisions
exclude EEC as if the division were sold on January 1, 1996.
The Pro Forma Consolidated Income Statements are presented for
comparative purposes only and are not indicative of what the actual results of
operations would have been had the transaction occurred as of the beginning of
the respective periods nor do they purport to indicate the results which may be
attained in the future.
F-1
<PAGE> 6
CONNECTIVITY TECHNOLOGIES INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS;
SALE OF
CTI ENERGY ELECTRIC
ASSETS HISTORICAL CABLE PRO FORMA
- ------ ---------- --------------- ---------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 229,902 $ 311,644 (a) $ 541,546
United States Treasury Bills 788,264 788,264
Accounts receivable, less allowance of $791,954 17,489,653 (11,404,890)(a) 6,084,763
Inventories 12,979,894 (7,180,198)(a) 5,799,696
Prepaid expenses and other assets 610,188 (125,340)(a) 484,848
------------ -------------- ------------
Total current assets 32,097,901 (18,398,784) 13,699,117
Property, plant and equipment 7,343,830 (1,120,784)(a) 6,223,046
Deferred tax asset 10,991,722 (2,646,000)(b) 8,345,722
Deposits and other assets 409,156 1,905,787 (a) 2,314,943
Goodwill and intangible assets, net of accumulated
amortization 14,606,561 (6,492,520)(a) 8,114,041
------------ -------------- ------------
$ 65,449,170 $ (26,752,301) $ 38,696,869
============ ============== ============
LIABILITIES
Current portion of long term debt $ 3,022,500 $ (2,572,500)(a) $ 450,000
Trade accounts payable 11,934,916 (7,667,592)(a) 4,267,324
Income taxes payable 3,154,000 (b) 3,154,000
Accrued compensation and commissions 405,635 (203,349)(a) 202,286
Accrued liabilities 928,799 2,516,200 (a) 3,444,999
------------ -------------- ------------
Total current liabilities 16,291,850 (4,773,241) 11,518,609
Long term debt 36,477,500 (24,077,500)(a) 12,400,000
------------ -------------- ------------
Total liabilities 52,769,350 (28,850,741) 23,918,609
------------ -------------- ------------
Minority interest, net of demand notes receivable
$620,310, 6%, from a minority stockholder
of the subsidiary (404,780) (404,780)
STOCKHOLDERS' EQUITY
Preferred stock - par value $.01 per share;
authorized 10,000,000 shares, none issued
Series B Common Stock - par value $.04 per share;
authorized 750,000 shares, none issued
Common Stock - par value $.04; authorized 20,000,000
shares, outstanding 5,565,074 shares, net of
206,601 shares held in treasury 222,613 222,613
Additional paid-in capital 109,336,792 109,336,792
(5,800,000)(b)
Accumulated deficit (96,474,805) 7,898,440 (a) (94,376,365)
------------ ------------- ------------
12,679,820 2,098,440 14,778,260
------------ ------------- ------------
$ 65,449,170 $(26,752,301) $ 38,696,869
============ ============= ============
</TABLE>
See notes to Pro Forma Condensed Consolidated Balance Sheet
F-2
<PAGE> 7
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(a) To eliminate Energy Electric Cable's assets and liabilities and record
net proceeds from and pretax gain on sale of Energy Electric Cable.
(b) To provide estimated taxes on the gain.
F-3
<PAGE> 8
CONNECTIVITY TECHNOLOGIES INC.
PRO FORMA CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS:
SALE OF
CTI ENERGY ELECTRIC
HISTORICAL CABLE PRO FORMA
-------------- ----------------- ------------
<S> <C> <C> <C>
Net Sales $ 24,910,188 $ (13,801,441)(a) $ 11,108,747
Cost of goods sold 17,923,493 (9,246,585)(a) 8,676,908
------------ --------------- -------------
Gross profit 6,986,695 (4,554,856)(a) 2,431,839
Selling, general and administrative expenses 5,774,631 (3,828,196)(a) 1,946,435
------------ --------------- -------------
Operating income 1,212,064 (726,660) 485,404
Other income (expense):
Interest income 10,350 10,350
Interest expense (870,953) 461,870 (b) (409,083)
Other (2,500) (2,500)
------------ --------------- -------------
Net income (loss) before income taxes
and minority interest 348,961 (264,790) 84,171
Provision for income taxes 221,651 (146,651)(c) 75,000
------------ --------------- -------------
Net income (loss) before minority interest 127,310 (118,139) 9,171
Minority interest in subsidiary (61,750) 18,450 (a) (43,300)
------------ --------------- -------------
Net income (loss) $ 65,560 $ (99,689) $ (34,129)
============ =============== =============
Earnings per Share - primary and fully diluted $ 0.01 $ (0.01)
=========== ============
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 5,819,998 5,819,998
Fully Diluted 5,819,998 5,819,998
</TABLE>
See notes to Pro Forma Consolidated Income Statement
F-4
<PAGE> 9
CONNECTIVITY TECHNOLOGIES INC. AND SUBSIDIARIES
PRO FORMA REVISED HISTORICAL CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS:
SALE OF
CTI ENERGY ELECTRIC
HISTORICAL CABLE PRO FORMA
----------- ------------ -----------
<S> <C> <C> <C>
Net Sales $56,697,955 $(30,371,755)(a) $26,326,200
Cost of goods sold 41,275,166 (21,003,096)(a) 20,272,070
----------- ------------ -----------
Gross profit 15,422,789 (9,368,659)(a) 6,054,130
Selling, general and administrative expenses 12,709,069 (7,815,556)(a) 4,893,513
----------- ------------ -----------
Operating income 2,713,720 (1,553,103) 1,160,617
Other income (expense):
Interest income 336,717 336,717
Interest expense (1,968,323) 1,077,697 (b) (890,626)
Other 65,077 65,077
----------- ------------ -----------
Net income (loss) before income taxes
and minority interest 1,147,191 (475,406) 671,785
Provision for income taxes 634,252 (246,163)(c) 388,089
----------- ------------ -----------
Net income (loss) before minority interest 512,939 (229,243) 283,696
Minority interest in subsidiary (153,779) 35,661 (a) (118,118)
----------- ------------ -----------
Net income (loss) $ 359,160 $ (193,582) $ 165,578
=========== ============ ===========
Earnings per Share - primary and fully diluted $ 0.06 $ 0.03
=========== ===========
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 5,987,925 $ 5,987,925
Fully Diluted 5,987,925 $ 5,987,925
</TABLE>
See notes to Pro Forma Consolidated Income Statement
F-5
<PAGE> 10
CONNECTIVITY TECHNOLOGIES INC. AND SUBSIDIARIES
PRO FORMA REVISED PRO FORMA CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SALE OF
ORIGINAL ENERGY ELECTRIC REVISED
PRO FORMA CABLE PRO FORMA
----------- --------------- -----------
<C> <S> <S> <S>
Net sales $97,264,498 $(52,921,562)(a) $44,342,936
Cost of goods sold 71,058,931 (37,156,425)(a) 33,902,506
----------- ------------ -----------
Gross profit 26,205,567 (15,765,137)(a) 10,440,430
Selling, general and administrative expenses 21,053,480 (13,541,304)(a) 7,512,176
----------- ------------ -----------
Operating income 5,152,087 (2,223,833) 2,928,254
Other income (expense):
Interest income 97,596 97,596
Interest expense (3,176,022) 1,847,480(b) (1,328,542)
Other (39,449) 79,526(a) 40,077
----------- ------------ -----------
Net income (loss) before income taxes
and minority interest 2,034,212 (296,827) 1,737,385
Provision for income taxes 1,038,980 (196,980)(c) 842,000
----------- ------------ -----------
Net income (loss) before minority interest 995,232 (99,847) 895,385
Minority interest in subsidiary (227,500) 31,922(a) (195,578)
----------- ------------ -----------
Net income (loss) $ 767,732 $ (67,925) $ 699,807
=========== ============ ===========
Earnings per Share - primary and fully diluted $ 0.13 $ 0.12
=========== ===========
Weighted Average Number of Common
Shares and Common Share Equivalents:
Primary 5,987,925 5,987,925
Fully Diluted 5,987,925 5,987,925
</TABLE>
See notes to Pro Forma Consolidated Income Statement
F-6
<PAGE> 11
NOTES TO PRO FORMA CONSOLIDATED INCOME STATEMENT
(a) To eliminate the operations of Energy Electric Cable.
(b) To reduce interest expense for the net proceeds from the sale of Energy
Electric Cable.
(c) To adjust income tax expense for effects of other adjustments.
(d) The following table reflects the effects on Earnings Before Interest, Taxes,
Depreciation, and Amortization (EBITDA) of the disposition of the Energy
Electric Cable Division:
<TABLE>
<CAPTION> PRO FORMA
ADJUSTMENTS PRO FORMA
EBITDA SALE OF EBITDA
BEFORE ENERGY ELECTRIC AFTER
SALE CABLE SALE
----------- --------------- ----------
<S> <C> <C> <C>
Three months ended March 31, 1997
Operating income $1,212,064 $ (726,660) $ 485,404
Depreciation and amortization 482,599 (124,982) 357,617
---------- ----------- ----------
EBITDA $1,694,663 $ (851,642) $ 843,021
========== =========== ==========
Historical Consolidated Income Statement
for Year Ended December 31, 1996
Operating income $2,713,720 $(1,553,103) $1,160,617
Depreciation and amortization 1,058,000 (266,906) 791,094
---------- ----------- ----------
EBITDA $3,771,720 $(1,820,009) $1,951,711
========== =========== ==========
Pro Forma Consolidated Income Statement for
Year Ended December 31, 1996
Operating income $5,152,087 $(2,223,833) $2,928,254
Depreciation and amortization 1,530,962 (481,366) 1,049,596
---------- ----------- ----------
EBITDA $6,683,049 $(2,705,199) $3,977,850
========== =========== ==========
</TABLE>
F-7
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CONNECTIVITY TECHNOLOGIES INC.
(Registrant)
Dated: July 24, 1997 By: /s/ James S. Harrington
------------------------
Name: James S. Harrington
Title: President and
Chief Executive
Officer
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<PAGE> 13
INDEX OF EXHIBITS
Exhibit No. Exhibit Description
2.1 Asset Purchase Agreement dated as of July 11, 1997
(the "Asset Purchase Agreement") by and among
Anicom, Inc., a Delaware corporation, Reel
Acquisition Corp., a Delaware corporation
("Purchaser"), Connectivity Products Incorporated,
a Delaware corporation ("Seller"), and the
Registrant. (A list of exhibits and schedules to
the Purchase Agreement is set forth therein. The
Registrant agrees to furnish to the Commission
supplementally, upon request, a copy of any such
exhibits or schedules not otherwise filed
herewith.)
99.1 Press Release of the Registrant dated July 14,
1997.
<PAGE> 1
================================================================================
ASSET PURCHASE AGREEMENT
================================================================================
ASSET PURCHASE AGREEMENT
by and between
ANICOM, INC.
("Parent"),
REEL ACQUISITION CORP.
("Purchaser"),
and
CONNECTIVITY PRODUCTS INCORPORATED
("Seller")
Dated July 11, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
PARTIES AND RECITALS......................................................... 1
ARTICLE I CERTAIN DEFINITIONS............................... 2
Section 1.01. Definitions.............................. 2
ARTICLE II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF
LIABILITIES....................................... 8
Section 2.01. Purchase and Sale of Assets; Assumption
of Liabilities........................... 8
Section 2.02. Purchase Price........................... 8
Section 2.03. Registration Rights...................... 10
Section 2.04. Purchase Price Adjustment................ 10
Section 2.05. Allocation of Purchase Price............. 12
ARTICLE III CLOSING AND RELATED MATTERS....................... 13
Section 3.01. Time and Place of Closing................ 13
Section 3.02. Purchaser's Deliveries at the Closing.... 13
Section 3.03. Seller's Deliveries at the Closing....... 14
Section 3.04. Escrow Agreement......................... 16
Section 3.05. Non-Assignable Instruments............... 16
Section 3.06. Interdependence.......................... 16
Section 3.07. Further Assurances....................... 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER.......... 17
Section 4.01. Corporate Organization and Good Standing. 17
Section 4.02. Authorization, Execution and Binding
Effect................................... 17
Section 4.03. Consents and Approvals................... 18
Section 4.04. Compliance With Laws..................... 18
Section 4.05. Financial Statements; Accounts
Receivable; Inventories................. 19
Section 4.06. Absence of Certain Changes............... 19
Section 4.07. Legal Proceedings........................ 21
Section 4.08. Title to Properties and Related Matters.. 21
Section 4.09. Employee Benefit Plans; ERISA............ 22
Section 4.10. Taxes and Tax Returns.................... 24
Section 4.11. Contracts................................ 25
Section 4.12. Patents, Trademarks, Trade Names, etc.... 26
Section 4.13. Condition of Assets...................... 26
Section 4.14. Insurance................................ 27
Section 4.15. Environmental Matters.................... 27
Section 4.16. Finders.................................. 28
Section 4.17. Employees; Labor Controversies........... 28
Section 4.18. Customers................................ 28
Section 4.19. Suppliers................................ 29
Section 4.20. Sales Representatives.................... 29
Section 4.21. Interest in Customers, etc............... 29
Section 4.22. Operation of Business Prior to Closing... 30
Section 4.23. Completeness of Warranties............... 30
(i)
<PAGE> 3
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND PARENT........................................ 30
Section 5.01. Corporate Organization................... 30
Section 5.02. Authorization, Execution and Binding
Effect................................... 30
Section 5.03. Consents and Approvals................... 31
Section 5.04. Finders.................................. 31
Section 5.05. Legal Proceedings........................ 32
Section 5.06. Capitalization........................... 32
Section 5.07. SEC Filings; Offer Documents............. 32
Section 5.08. Financial Statements..................... 33
Section 5.09. Absence of Certain Changes............... 33
Section 5.10. Completeness of Warranties............... 33
ARTICLE VI COVENANTS......................................... 34
Section 6.01. Post-Closing Cooperation................. 34
Section 6.02. Records.................................. 34
Section 6.03. Employee and Related Matters............. 35
ARTICLE VII SURVIVAL AND INDEMNIFICATION...................... 36
Section 7.01. Survival of Representations and
Warranties, etc.......................... 36
Section 7.02. Indemnification.......................... 36
Section 7.03. Procedure for Indemnification............ 37
Section 7.04. Limitation on Seller's Indemnification
Obligations.............................. 38
Section 7.05. Use of Escrowed Parent Stock............. 39
Section 7.06. Limitation on Purchaser's Indemnification
Obligations.............................. 39
Section 7.07. Sole Remedy.............................. 39
Section 7.08. Dispute Resolution....................... 40
Section 7.09. Special Notice........................... 40
Section 7.10. Environmental Matters.................... 40
ARTICLE VIII MISCELLANEOUS..................................... 42
Section 8.01. Headings; Grammatical Usage.............. 42
Section 8.02. Notices.................................. 42
Section 8.03. Assignment; Third Parties................ 43
Section 8.04. Expenses and Transfer Taxes.............. 43
Section 8.05. Preamble; Preliminary Recitals........... 43
Section 8.06. Reliance................................. 43
Section 8.07. Obligation of Parent; Joint and Several
Obligations.............................. 43
Section 8.08. Complete Agreement....................... 44
Section 8.09. Amendments and Waivers................... 44
Section 8.10. Counterparts............................. 44
Section 8.11. Governing Law............................ 44
Section 8.12. Severability............................. 45
(ii)
<PAGE> 4
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated July 11, 1997, is entered into
by and among (1) ANICOM, INC., a Delaware corporation ("PARENT"), (2) REEL
ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary of
Parent ("PURCHASER"), and (2) CONNECTIVITY PRODUCTS INCORPORATED, a Delaware
corporation ("SELLER").
W I T N E S E T H:
WHEREAS, Seller, through its Energy Electric Cable Division,
is engaged in the wire and cable distribution business (the "DIVISION"); and
WHEREAS, Purchaser is a wholly-owned subsidiary of Parent and
was formed to consummate the transactions described herein; and
WHEREAS, the parties desire that Purchaser purchase from
Seller, and that Seller sell to Purchaser, the assets of the Division, and that
Purchaser assume the liabilities of the Division, upon the terms and subject to
the conditions hereinafter set forth; and
WHEREAS, Seller and Parent have each heretofore filed with the
Antitrust Division of the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice a Notification and
Report form as required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, in respect of the transactions contemplated hereby and the
waiting period under such Act has heretofore expired or otherwise terminated;
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, conditions, agreements, and
undertakings hereinafter set forth, and intending to be legally bound hereby,
the parties hereto hereby agree as follows:
<PAGE> 5
ARTICLE I
CERTAIN DEFINITIONS
Section 1.01. Definitions
The following terms, as used herein, shall have the meanings
set forth below:
(a) "AFFILIATE" shall mean, with respect to any Person, any
Person directly or indirectly controlling, controlled by or under common control
with such other Person.
(b) "AGREEMENT" shall mean this Asset Purchase Agreement,
including the Exhibits and Schedules hereto.
(c) "ACQUIRED ASSETS" shall mean the following properties and
assets of Seller used or held for future use by the Division, in each case as
the same shall exist on the Closing Date, but not including the Excluded Assets:
(i) all trade accounts receivable of the Division;
(ii) all inventories of the Division;
(iii) Seller's leasehold interests in the real
property and facilities described on SCHEDULE 4.08(b) hereto,
together with all of Seller's interest in and to all
improvements, buildings and structures thereon and all
fixtures and appurtenances thereto;
(iv) all of the furniture, fixtures and equipment
owned by Seller and located in the facilities described on
SCHEDULE 4.08(b) hereto (and any of the foregoing used by the
Division in the ordinary course of business but not located in
said facilities), and Seller's leasehold interest in any such
furniture, fixtures and equipment leased by Seller and located
in such facilities;
(v) all cash (including cash held in the Division's
bank accounts), marketable securities, deposits and prepaid
assets and expenses reflected on the Closing Balance Sheet
(plus or minus any amounts deposited in or withdrawn from such
accounts from and after July 1, 1997 and prior to the Closing
as described in SECTION 4.22 hereof);
(vi) all of Seller's rights and claims under all of
the Division Contracts other than the Division Contracts
listed on SCHEDULE 1.01(l) hereto;
2
<PAGE> 6
(vii) all of the office, operating and other supplies
of the Division;
(viii) all of Seller's common law and statutory
rights in, and the goodwill associated with, the name "Energy
Electric Cable" and the Division Intellectual Property;
(ix) all books and records of Seller to the extent
they relate exclusively to the Division;
(x) all claims, demands, judgments and rights of
set-off of the Division;
(xi) to the extent transferable, all licenses,
authorizations and permits issued by any governmental or
regulatory agency relating exclusively to the Division, and
all applications therefor pending or filed; and
(xii) all other assets owned by Seller and used
exclusively by the Division in the ordinary course of business
as presently conducted.
(d) "ASSUMED LIABILITIES" shall mean, collectively, any and
all debts, obligations or liabilities of Seller (other than Excluded
Liabilities) that:
(i) are outstanding on the Closing Date and that are
reflected on the March Balance Sheet (whether or not arising
in the ordinary course of business) or arose or arise in the
ordinary course of business in connection with the operation
of the Division after the date of the March Balance Sheet;
(ii) arise out of or relate to any event occurring
after the Closing in connection with the use or ownership of
any of the Acquired Assets after the Closing;
(iii) arise out of or relate to any Environmental
Matters, but only to the extent so provided by SECTION 7.10
hereto; or
(iv) relate to vacation benefits (not to exceed
$135,000) for the Continued Employees accruing on or prior to
the Closing Date.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "COOPERS" shall mean Coopers & Lybrand L.L.P.
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(g) "DIVISION FINANCIAL STATEMENTS" shall mean those unaudited
financial statements of the Division that are listed on SCHEDULE 4.05 hereto.
(h) "ENVIRONMENTAL LAWS" shall mean all foreign, federal,
state, local and municipal statutes, ordinances, and other laws relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, hazardous, or toxic materials or wastes
into the environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
hazardous, or toxic materials or wastes, or any regulation, rule, code, plan,
order, decree, judgment, injunction, notice, or demand letter issued, entered,
promulgated, or approved thereunder (including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery
Act of 1976, 42. U.S.C. Section 6901 et seq. ("RCRA"), the Emergency Planning
and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq., the Clean Air
Act, 42 U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., and
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, all as
amended, and any regulations, rules, directives, ordinances adopted or
publications promulgated pursuant thereto).
(i) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(j) "ESCROW AGENT" shall mean Harris Trust & Savings
Bank.
(k) "EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended.
(l) "EXCLUDED ASSETS", collectively, shall mean:
(i) all assets and properties of Seller not
used primarily by the Division;
(ii) all rights and claims (including, without
limitation, refunds and claims thereto) of Seller with
respect to the Excluded Liabilities;
(iii) any and all minute books, stock transfer
records, corporate seals and tax returns of Seller and all
other books and records of Seller not used primarily by the
Division;
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(iv) all cash on hand and in banks, prepaid expenses
and marketable securities held by Seller, other than those
reflected on the books of the Division or the Closing Balance
Sheet;
(v) all claims for refunds of Taxes paid by Seller;
(vi) all rights of Seller under this Agreement and
the agreements and instruments delivered to Seller by
Purchaser pursuant to this Agreement;
(vii) all rights of Seller under the Stock Redemption
and Purchase Agreement; and
(vii) all other assets of Seller listed on SCHEDULE
1.01(l) hereto.
(m) "EXCLUDED LIABILITIES" shall mean any and all debts,
obligations or liabilities of Seller:
(i) arising on or prior to March 31, 1997 but that
are not reflected or reserved for on the March Balance Sheet,
except as expressly included in the definition of "Assumed
Liabilities";
(ii) arising after March 31, 1997 other than in the
ordinary course of business in connection with the operation
of the Division.
(iii) in respect of indebtedness for borrowed money;
(iv) relating to Taxes payable by Seller in respect
of periods ending on or prior to the Closing Date, including
without limitation Taxes for income earned by Seller or
property owned by Seller on or prior to the Closing Date and
those matters set forth on SCHEDULE 4.10(a) hereto;
(v) relating to the payment of severance benefits
arising out of any agreement, between Seller and any of its
employees or any other person;
(vi) relating to or arising from the Stock Redemption
and Purchase Agreement;
(vii) relating to or arising from the Excluded
Assets;
(viii) arising out of or relating to any
Environmental Matters, but only to the extent so provided by
SECTION 7.10 hereto;
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(ix) arising out of or relating to employment-related
claims with respect to employees, including claims relating to
the conduct of such employees (in each case to the extent
relating to periods prior to the Closing) or former employees
of the Division, including without limitation any claims by
employees or former employees of the Division alleging
wrongful acts by Seller, other than as reflected on the March
Balance Sheet or as otherwise included in the definition of
"Assumed Liabilities"; and
(x) arising out of or relating to those matters set
forth on SCHEDULE 4.07 hereto.
(n) "GAAP" shall mean generally accepted accounting
principles, applied on a basis consistent with past practice.
(o) "KNOWLEDGE", with respect to Seller, shall mean the actual
knowledge after due inquiry of James S. Harrington, Gregory C. Kowert, Duane A.
Gawron, Donald T. Pascal and James Hopkins.
(p) "MARCH BALANCE SHEET" shall mean the balance sheet of the
Division as of March 31, 1997, included in the Division Financial Statements.
(q) "MATERIAL ADVERSE EFFECT" shall mean, with respect to any
Person, or to the Division individually, any change(s), effect(s),
circumstance(s) or condition(s) that, individually or in the aggregate, are or
may reasonably be expected to be materially adverse to (i) the assets, business,
operations, income or condition (financial or otherwise) of such Person or such
Person and its Affiliates taken as a whole, or the transactions contemplated by
this Agreement or (ii) the ability of such Person to perform its obligations
under this Agreement.
(r) "NET ASSET VALUE" shall mean, with respect to the
Division, the Acquired Assets minus the Assumed Liabilities, calculated in
accordance with GAAP.
(s) "PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation
or governmental entity (or any department, agency or political subdivision
thereof).
(t) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(u) "SEC" shall mean the United States Securities and Exchange
Commission.
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(v) "TAXES" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
(w) "TAX RETURN" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
(x) "TRANSACTION DOCUMENTS" shall mean each of the agreements,
documents, certificates and instruments being delivered at the Closing by
Seller, Purchaser or Parent, as the case may be, pursuant to this Agreement.
(y) "TRANSFER TAXES" shall mean all sales, use, value added,
transfer, and similar taxes or fees imposed by any governmental entity in
connection with the transfers carried out pursuant to this Agreement.
The following additional terms are defined in the Sections of
this Agreement set forth below:
Term Section
"AAA" 7.08
"ADJUSTED PURCHASE PRICE" 2.04
"ALLOCATION SCHEDULE" 2.05
"BANKS" 2.02
"BASKET AMOUNT" 7.04
"CAP AMOUNT" 7.04
"CASH PURCHASE PRICE" 2.02
"CERCLA" 1.01
"CLOSING" 3.01
"CLOSING BALANCE SHEET" 2.04
"CLOSING DATE" 3.01
"CLOSING DATE PURCHASE PRICE" 2.02
"CONTINUED EMPLOYEES" 6.03
"DIVISION" Recitals
"DIVISION CONTRACTS" 4.11
"DIVISION INTELLECTUAL PROPERTY" 4.12
"EMPLOYEE BENEFITS PLANS" 4.09
"ENCUMBRANCES" 4.08
"ENVIRONMENTAL MATTERS" 7.10
"ESCROW AGREEMENT" 3.04
"GAWRON EMPLOYMENT AGREEMENT" 2.02
"INDEMNIFIABLE LOSS" 7.02
"INDEMNIFIABLE LOSSES" 7.02
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"INDEMNIFYING PARTY" 7.03
"INDEMNITEE" 7.03
"INDEPENDENT ACCOUNTING FIRM" 2.04
"INTRA-SELLER TRANSACTIONS" 4.21
"LOAN SATISFACTION AMOUNT" 2.02
"MATERIAL CONSENTS" 3.03
"NET ASSET VALUE STATEMENT" 2.04
"NOVATION" 2.02
"PARENT" Preamble
"PERMISSIBLE EXCEPTIONS" 4.08
"PURCHASE PRICE" 2.02
"PURCHASER" Preamble
"PARENT'S SEC FILINGS" 5.07
"PARENT STOCK" 2.02
"RECORDS" 6.02
"RCRA" 1.01
"REGISTRATION RIGHTS AGREEMENT" 2.03
"SELLER" Preamble
"SHARED SERVICES AND
FACILITIES AGREEMENT" 3.02
"STOCK REDEMPTION AND
PURCHASE AGREEMENT" 4.11
"SUPPLY AGREEMENT" 3.02
"SURVIVAL PERIOD" 7.01
"THIRD PARTY CLAIM" 7.03
"VALUATION PRICE" 2.02
ARTICLE II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
Section 2.01. Purchase and Sale of Assets; Assumption of
Liabilities
(a) Upon the terms and subject to the conditions hereof, at
the Closing, (i) Seller shall sell, convey, assign, transfer, and deliver to
Purchaser and Purchaser's permitted successors and assigns forever, all of the
Acquired Assets, free and clear of all Encumbrances other than Permissible
Exceptions, and (ii) Purchaser shall purchase, acquire and accept all of the
Acquired Assets and assume the Assumed Liabilities.
(b) Purchaser shall not assume any of the Excluded
Liabilities, and Seller shall and does hereby retain responsibility for such
liabilities.
Section 2.02. Purchase Price
(a) The aggregate purchase price for the Acquired Assets shall
be $29,000,000 (the "CLOSING DATE PURCHASE PRICE"), subject to adjustment as
hereinafter provided in SECTION 2.04 and payable by Purchaser as follows, plus
the amount, if any, payable
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by Purchaser pursuant to paragraph (b) of this SECTION 2.02 (collectively, the
"PURCHASE PRICE"):
(i) $10,000,000 (the "CASH PURCHASE PRICE") shall be
payable at the Closing to Seller, in same day funds, by a bank
or certified check or by wire transfer to an account or
accounts in the United States designated in writing by Seller
not later than three business days prior to the Closing Date;
(ii) $17,000,000.00 (the "LOAN SATISFACTION AMOUNT")
shall be payable at the Closing either (x) by Purchaser's
delivery of such amount to Seller's bank lenders identified on
SCHEDULE 2.02 hereto (the "BANKS"), on behalf of Seller in
repayment (to the extent of such amount) of Seller's
obligations to the Banks, such delivery to be made at Closing,
in same day funds, by a bank or certified check, or wire
transfer to an account or accounts in the United States
designated in writing by the Banks, or (y) at Purchaser's
election (but only with the consent of the Banks), by
Purchaser's assumption at the Closing of $17,000,000.00 of
Seller's indebtedness to the Banks, but only if Purchaser
shall also cause Seller to be released by the Banks at the
Closing from all liability in respect of such indebtedness
(the "NOVATION"); and
(iii) 190,476 shares of Parent's common stock, par
value $.001 per share ("PARENT STOCK") shall be delivered at
the Closing to, and registered in the name of, Seller or its
designee in accordance with the terms of the Escrow Agreement
(such number of shares having been determined based upon the
average closing price of Parent's common stock, as reported by
the Nasdaq Stock Market, for each of the ten consecutive
trading days on which Parent's common stock was traded ending
on (and including) the second trading day prior to the Closing
Date (the "VALUATION PRICE"); provided, however, that if such
average closing price is greater than $10.50 per share, then
the Valuation Price shall be deemed to be $10.50 per share,
and if such average closing price is less than $9.50 per
share, then the Valuation Price shall be deemed to be $9.50
per share).
(b) As part of the Purchase Price, Purchaser shall pay Seller
an amount equal to fifty percent (50%) of the amounts, if any, that are or
become payable to (or in the case of benefits, on behalf of) Duane Gawron from
and after the Closing in respect of salary, benefits and/or severance (but not
in respect of bonus payments), plus related payroll and employment taxes, under
or pursuant to either (i) the Employment Agreement dated May 17, 1996 between
Mr. Gawron and Seller (the "GAWRON EMPLOYMENT AGREEMENT") or (ii) any agreement
entered into after the Closing between Seller and Mr. Gawron amending or
terminating the Gawron
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Employment Agreement (provided that the amounts payable under such agreement are
less than the amounts that would otherwise by payable under the Gawron
Employment Agreement), in either case with such reimbursement to be made not
later than the date or dates that such payments are required to be made to Mr.
Gawron. The maximum aggregate amount payable by Purchaser to Seller pursuant to
this paragraph shall be $200,000. Seller agrees (x) that to the extent permitted
by applicable law and the terms of the relevant contracts or agreements, Seller
shall enforce on behalf of itself and Purchaser (other than against Purchaser
and its affiliates) the non-competition and any other restrictive covenants
between Seller and Mr. Gawron, and (y) not to amend or terminate nor agree to
amend or terminate such non-competition or other restrictive covenants without
the prior written consent of Purchaser.
Section 2.03. Registration Rights
Seller shall be entitled to the registration rights set forth
in the Registration Rights Agreement attached as EXHIBIT A hereto with respect
to the Parent Stock (the "REGISTRATION RIGHTS AGREEMENT").
Section 2.04. Purchase Price Adjustment
(a) Within 60 days after the Closing Date, Seller shall cause
to be prepared and shall deliver to Purchaser a balance sheet of the Division
(the "CLOSING BALANCE SHEET"), as of the close of business on June 30, 1997,
which Closing Balance Sheet shall (i) not include Excluded Assets or Excluded
Liabilities, (ii) not include an accrual for vacation benefits, (iii) be
prepared in a manner consistent with the preparation of the March Balance Sheet
and, except as described on SCHEDULE 4.05 hereto, in accordance with GAAP, (iv)
be audited by Coopers (under the supervision of the Coopers audit partner who
supervised the most recent audit of Seller's financial statements), and (v) be
accompanied by a statement prepared by Seller (the "NET ASSET VALUE STATEMENT")
of the Net Asset Value of the Division at such date. In connection with the
preparation of the Closing Balance Sheet, after the Closing Purchaser shall
provide Seller with access to the Continued Employees (including without
limitation temporary (contract) Continued Employees Jay Rudolph, Mike Magyar and
Dolores Lechkun) who, prior to the Closing, worked on the preparation of the
Closing Balance Sheet, and such Continued Employees shall continue to work on
the preparation of the Closing Balance Sheet and shall assist Seller in the
review and finalization by Seller of such Closing Balance Sheet.
(b) A physical count of inventory (to the extent necessary for
audited financial statements) has been conducted by Seller prior to and as close
as practicable to June 30, 1997 for the purpose of preparing the Closing Balance
Sheet. A copy of all documents prepared in connection with such inventory
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(including without limitation all count sheets) shall be provided or made
available to both parties promptly after such inventory shall have been
conducted, and each party shall be permitted to review the working papers
relating to such Closing Balance Sheet and to discuss the Closing Balance Sheet
and the preparation thereof with representatives of the other party familiar
therewith.
(c) The Closing Balance Sheet and Net Asset Value Statement
shall become final and binding upon the parties unless Purchaser shall, within
thirty (30) days after the date on which Purchaser received the Closing Balance
Sheet, notify Seller in writing of Purchaser's disagreement. Any such notice of
disagreement shall (i) specify the nature of the dispute, (ii) provide in
reasonable detail the facts or accounting principles upon which such dispute is
based, and (iii) be accompanied by a certificate of Purchaser's Chief Financial
Officer stating his agreement with the facts or accounting principles upon which
such dispute is based. In the event of any such disagreement with respect to the
Closing Balance Sheet, Seller and Purchaser shall attempt in good faith to
resolve such disagreement. If Seller and Purchaser are unable to resolve any
such disagreement within twenty (20) days after Seller's receipt of such notice
of disagreement, Seller and Purchaser shall submit such disagreement to a
certified independent public accounting firm that is nationally recognized (the
"INDEPENDENT ACCOUNTING FIRM") and mutually agreeable to Seller and Purchaser.
If Seller and Purchaser cannot agree upon such selection within thirty (30) days
after Seller's receipt of Purchaser's notice of disagreement, the Independent
Accounting Firm shall be selected by lot from among the six largest independent
public accounting firms in the United States, excluding Coopers. The dispute
shall be immediately submitted by Purchaser and Seller to the Independent
Accounting Firm for resolution of such dispute within twenty (20) days after
submission to the Independent Accounting Firm. At the time of the submission of
such dispute to the Independent Accounting Firm for resolution, Seller and
Purchaser shall each file with the Independent Accounting Firm a written
statement of its position with regard to any matters in dispute. Upon receipt of
written position statements by each of Seller and Purchaser, the Independent
Accounting Firm shall resolve the dispute in accordance with GAAP. The decision
of the Independent Accounting Firm shall be final and binding upon all parties
hereto.
(d) The Purchase Price shall be increased by the amount by
which the Net Asset Value as of the close of business on June 30, 1997 exceeds
$12,000,000; and the Purchase Price shall be reduced by the amount by which the
Net Asset Value as of the close of business on June 30, 1997 is less than
$12,000,000 (the Purchase Price as so increased or decreased shall hereinafter
be referred to as the "ADJUSTED PURCHASE PRICE"). If the Purchase Price is less
than the Adjusted Purchase Price, Purchaser shall, and if the Purchase Price is
more than the
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Adjusted Purchase Price, Seller shall, within ten business days after the
delivery to Purchaser and Seller of the Net Asset Value Statement, make payment
to Seller or to Purchaser, as the case may be, by bank or certified check or by
wire transfer, of the amount of such difference. Any payments required to be
made by Seller to Purchaser or by Purchaser to Seller pursuant to this SECTION
2.04 shall not be subject to the limitations set forth in SECTIONS 7.04 or 7.06
hereof.
(e) Purchaser and Seller shall each pay 50% of the cost of
taking the physical inventory referred to in paragraph (b) of this Section and
of Coopers' fees and expenses incurred in connection with the audit of the
Closing Balance Sheet.
(f) In the event of a dispute as to the Closing Balance Sheet
or the Net Asset Value Statement, each party shall bear its own expenses,
including expenses of its accountants and attorneys in connection with the
resolution of any such dispute. In the event that any such dispute is submitted
to an Independent Accounting Firm as provided in this Section, the fees and
expenses of the Independent Accounting Firm shall be paid by the parties pro
rata in proportion to the decision of the Independent Accounting Firm. (By way
of example, (A) if (x) Purchaser asserts that Net Asset Value is $100,000 less
than as reflected on the Net Asset Value Statement prepared by Seller and (y)
the Independent Accounting Firm determines that Net Asset Value is $50,000 less
than as set forth on the Net Asset Value Statement prepared by Seller and
$50,000 more than as asserted by Purchaser, then Purchaser and Seller would each
pay 50% of the fees and expenses of the Independent Accounting Firm; and (B) if
(x) Purchaser asserts that Net Asset Value is $100,000 less than as reflected on
the Net Asset Value Statement prepared by Seller and (y) the Independent
Accounting Firm determines that Net Asset Value is $80,000 less than as set
forth on the Net Asset Value Statement and $20,000 more than as asserted by
Purchaser, then Seller would pay 80% and Purchaser would pay 20% of the fees and
expenses of the Independent Accounting Firm.)
Section 2.05. Allocation of Purchase Price
The Purchase Price shall be allocated among the Acquired
Assets as set forth on SCHEDULE 2.05 hereto. Schedule 2.05 (the "ALLOCATION
SCHEDULE") shall be prepared in accordance with Code Section 1060 and the
regulations thereunder, and shall allocate the Purchase Price (including, for
purposes of this SECTION 2.05, any other consideration to be paid to Seller,
including the Assumed Liabilities) among the Acquired Assets. Promptly following
the making of the Purchase Price adjustments contemplated by SECTION 2.04,
Purchaser and Seller shall in good faith negotiate adjustments to the Allocation
Schedule to reflect any differences between the Purchase Price and the Adjusted
Purchase Price (as defined in SECTION 2.04(d)), and execute a revised Allocation
Schedule. The allocation of the Purchase Price among the Acquired Assets made
pursuant to this SECTION
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2.05, and the following undertaking with respect to tax reporting, have been
specifically negotiated by Seller and Purchaser at arms' length and are a part
of the basis of this Agreement. Seller and Purchaser shall prepare their
federal, state and local income tax returns (including, but not limited to, IRS
Form 8594) employing the allocation of the Purchase Price made pursuant to this
SECTION 2.05 and shall not take a position in any tax proceeding, tax audit or
otherwise inconsistent with such allocation; provided, however, that nothing
contained herein shall require Seller or Purchaser to contest or exhaust
administrative remedies before any taxing authority or agency, and Seller and
Purchaser shall not be required to litigate before any court (including without
limitation the United States Tax Court), any proposed deficiency or adjustment
by any taxing authority or agency which challenges such allocation of the
Purchase Price. Seller and Purchaser shall give prompt notice to each other of
the commencement of any tax audit or the assertion of any proposed deficiency or
adjustment by any taxing authority or agency which challenges such allocation of
the Purchase Price.
ARTICLE III
CLOSING AND RELATED MATTERS
Section 3.01. Time and Place of Closing
The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place, simultaneously with the execution and delivery
of this Agreement, at the offices of Zimet, Haines, Friedman & Kaplan, 460 Park
Avenue, New York, New York 10022, at 10:00 a.m., local time, on July 11, 1997
(the "CLOSING DATE").
Section 3.02. Purchaser's Deliveries at the Closing
At the Closing, Purchaser shall:
(a) pay and deliver the Closing Date Purchase Price by: (i)
delivery of the Cash Purchase Price to Seller; (ii) delivery of the Loan
Satisfaction Amount to the Banks (or, at Purchaser's election with the consent
of the Banks, effecting the Novation); and (iii) delivery of a certificate
representing the Parent Stock to the Escrow Agent in accordance with the Escrow
Agreement.
(b) deliver to Seller:
(i) the supply agreement between Purchaser and Seller
in the form of EXHIBIT B hereto (the "SUPPLY AGREEMENT"), duly
executed by Purchaser;
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(ii) a duly executed Bill of Sale, Assignment and
Assumption Agreement substantially in the form of EXHIBIT C
hereto;
(iii) the Registration Rights Agreement, duly
executed by Parent;
(iv) a transition agreement between Purchaser and
Seller in the form of EXHIBIT D hereto (the "SHARED SERVICES
AND FACILITIES AGREEMENT") relating to the facilities and
services heretofore shared by the Division and Seller's EEA
division;
(v) the opinion of Katten, Muchin & Zavis, counsel to
Purchaser, in substantially the form attached as EXHIBIT E
hereto (for which such firm may assume that Michigan law is
the same as Illinois law);
(vi) a certificate executed by the chief executive
officer or the chief financial officer of Purchaser certifying
that each of the obligations of Purchaser to be performed by
it on or before the Closing Date pursuant to the terms hereof
has been duly performed and complied with (except to the
extent such performance and compliance has been waived by
Purchaser);
(vii) certified copies of resolutions adopted by the
Boards of Directors of Purchaser and Parent authorizing the
execution and delivery of this Agreement and the Transaction
Documents and consummation of the transactions contemplated
hereby; and
(viii) Certificates of Good Standing with respect to
Purchaser and Parent issued by the Office of the Secretary of
State of the State of Delaware, dated not more than ten (10)
calendar days prior to the Closing Date.
Section 3.03. Seller's Deliveries at the Closing
At the Closing, Seller shall deliver to Purchaser:
(i) a duly executed Bill of Sale, Assignment and
Assumption Agreement transferring to Purchaser all the
Acquired Assets;
(ii) the Registration Rights Agreement, duly executed
by Seller;
(iii) all other documents of title, deeds,
endorsements, assignments and other instruments as are
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reasonably necessary to vest in Purchaser good and
valid title to the Acquired Assets;
(iv) the consents and waivers of third parties listed
on SCHEDULE 3.03 hereto (the "MATERIAL CONSENTS");
(v) the Supply Agreement, duly executed by Seller;
(vi) the Shared Services and Facilities Agreement,
duly executed by Seller;
(vii) the opinion of Zimet, Haines, Friedman &
Kaplan, counsel to Seller, in substantially the form of
EXHIBIT F hereto (for which such firm may assume that Michigan
law is the same as New York law);
(viii) a certificate executed by the President of
Seller certifying that each of the obligations of Seller to be
performed by it on or before the Closing Date pursuant to the
terms hereof has been duly performed and complied with (except
to the extent such performance and compliance has been waived
by Purchaser);
(ix) a certified copy of resolutions adopted by the
Board of Directors of Seller authorizing the execution and
delivery of this Agreement and the Transaction Documents and
consummation of the transactions contemplated hereby;
(x) reports of lien searches dated no earlier than
May 28, 1997, showing that there are no financing statements,
judgments, taxes or other Encumbrances outstanding against
Seller or any of the Acquired Assets in the jurisdictions in
which the Division maintains facilities, other than
Permissible Exceptions or Encumbrances (to be released at
Closing) in favor of the Banks;
(xi) a Certificate of Good Standing with respect to
Seller issued by the Office of the Secretary of State of the
State of Delaware, dated not more than ten (10) calendar days
prior to the Closing Date; and
(xii) an investor representation letter in the form
attached hereto as EXHIBIT G, duly executed by Seller.
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Section 3.04. Escrow Agreement
At the Closing, Purchaser, Seller and the Escrow Agent shall
execute and deliver an escrow agreement in the form of EXHIBIT H hereto (the
"ESCROW AGREEMENT").
Section 3.05. Non-Assignable Instruments
Nothing in this Agreement shall be construed as an attempt or
agreement to assign (i) any contract, agreement, license, lease, sales order,
purchase order or other commitment which is nonassignable without the consent of
the other party or parties thereto unless such consent shall have been given, or
(ii) any contract or claim as to which the remedies for the enforcement thereof
enjoyed by Seller would not pass to Purchaser as an incident of the assignments
provided for by this Agreement. In order, however, that the full value of every
contract and claim of the character described in clauses (i) and (ii) above and
all claims and demands on such contracts may be realized, Seller shall, by
itself or by its agents, at the request and under the direction of Purchaser,
and at Purchaser's expense, in the name of Seller or otherwise as Purchaser
shall specify and as shall be permitted by law, take all such action and do or
cause to be done all such things as shall be reasonably necessary and proper (x)
in order that the rights and obligations of Seller under such contracts shall be
preserved, (y) to the extent permitted by applicable law and the terms of the
relevant contracts or agreements, enforce any non-solicitation, non-competition,
non-interference or other restrictive covenant or agreement with respect to the
Division to which Seller is currently a party, and (z) for, and to facilitate,
the collection of the monies due and payable, and to become due and payable, to
Seller in and under every such contract and claim and in respect of every such
claim and demand, and Seller shall hold the same for the benefit of and shall
pay the same over promptly to Purchaser. Notwithstanding the foregoing, nothing
in this SECTION 3.05 shall effect the parties obligations under SECTION 3.07
hereof, including without limitation the provisions of that Section relating to
the payment of fees and expenses.
Section 3.06. Interdependence
The transfers and deliveries described in this Article III to
take place at the Closing are mutually interdependent and regarded as occurring
simultaneously as of the close of business on the Closing Date; and, unless
waived by both Purchaser and Seller, no such transfer or delivery shall become
effective unless and until all other transfers and deliveries provided for in
this Article III have also been consummated.
Section 3.07. Further Assurances
The parties hereto agree that each will execute and deliver to
the other any and all documents in addition to those
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expressly provided for in this Agreement that may be reasonably necessary or
appropriate to carry out the purposes of this Agreement and the transactions
contemplated hereby, whether at or after the Closing. Without limiting the
generality of the foregoing, Seller shall, (i) use all reasonable efforts to
cause to be removed of record any Encumbrances listed on SCHEDULE 4.08(a) hereto
related to Taxes, and (ii) from time to time after the Closing, upon the request
of Purchaser or Parent, do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, all such further acts, assignments,
transfers, assurances and instruments as may reasonably be required for the
assignment, transfer, grant and conveyance to Purchaser of the Acquired Assets.
Seller on the one hand, and Purchaser and Parent on the other hand, shall each
be responsible for all fees and expenses incurred by them in performance of
their respective obligations under this SECTION 3.07; provided, that Purchaser
shall be responsible for any fees or other amounts payable to any third parties
(other than Seller's attorney's fees and expenses, which shall be payable by
Seller) in connection with the parties obligations under this SECTION 3.07.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLER
Seller hereby represents and warrants to Purchaser and Parent
as follows, and acknowledges and confirms that Purchaser and Parent are relying
upon such representations and warranties notwithstanding any investigation made
by Purchaser or Parent or on their behalf:
Section 4.01. Corporate Organization and Good Standing
Seller is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware and is qualified to do
business and is in good standing as a foreign corporation in such jurisdictions
where the nature of its business or properties makes such qualification
necessary, except where the failure to so qualify would not have a Material
Adverse Effect on Seller or the Division. Seller has all requisite corporate
power and authority to own, operate, and lease its properties and to carry on
its businesses as now being conducted. Seller has heretofore delivered to
Purchaser complete and correct copies of its Certificate of Incorporation and
ByLaws, each as amended and in effect on the date hereof.
Section 4.02. Authorization, Execution and Binding Effect
Seller has full corporate power and authority to execute and
deliver this Agreement and each of the Transaction Documents executed and
delivered by Seller and to consummate the transactions contemplated hereby and
thereby. The Board of
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Directors of Seller has duly approved and authorized the execution and delivery
of this Agreement and such Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, and no other corporate proceedings
on the part of Seller are necessary to approve and authorize the execution and
delivery of this Agreement or any of such Transaction Documents or the
consummation of the transactions contemplated hereby or thereby. This Agreement
and such Transaction Documents have been duly executed and delivered by Seller
and constitute the valid and binding agreements of Seller, enforceable against
Seller in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
or other similar laws affecting creditors' rights generally and by general
principles of equity.
Section 4.03. Consents and Approvals
Neither the execution and delivery by Seller of this Agreement
and the Transaction Documents being delivered by Seller, nor the consummation by
Seller of the transactions contemplated hereby and thereby, nor compliance by
Seller with any of the provisions hereof or thereof, will (i) violate or
conflict with any provision of the certificate of incorporation or by-laws of
Seller, (ii) result in a violation of any order, writ, injunction, decree,
judgment, ruling, law, rule, or regulation of any court or governmental
authority, applicable to Seller, the Division, or the Acquired Assets, (iii)
result in the breach of any note, bond, mortgage, indenture, deed of trust,
license, franchise, contract, agreement, or other instrument or commitment or
obligation of Seller relating to the Division or the Acquired Assets which
breach would have a Material Adverse Effect on Seller or the Division, or (iv)
require any consent, approval, or authorization of, or notice to, or
declaration, filing, or registration with, any governmental or regulatory
authority or any other Person, except for such consents, approvals,
authorizations, notices, declarations, filings or registrations (A) which have
been obtained, given or made, as the case may be, and which are unconditional
and in full force and effect, (B) the failure of which to obtain, give or make
would not have a Material Adverse Effect on Seller or the Division, or (C) which
are listed on SCHEDULE 4.03 hereto.
Section 4.04. Compliance With Laws
To the Knowledge of Seller, Seller is in compliance with all
laws, regulations, decrees and orders applicable to the Division, including
without limitation the Occupational Safety and Health Act (42 U.S.C. Section 651
et seq.), except where noncompliance would not have a Material Adverse Effect on
the Division. Seller has duly filed all reports and returns required to be filed
by it with governmental authorities with respect to the Division and has
obtained all governmental permits and licenses and other governmental consents
which are required in
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connection with the Division, except for such reports, returns, permits,
licenses, and consents which, if not filed or obtained, would not, individually
or in the aggregate, have a Material Adverse Effect on the Division. All of such
permits, licenses and consents are in full force and effect, and no proceedings
for the suspension or cancellation of any of them is pending or, to the
Knowledge of Seller, threatened.
Section 4.05. Financial Statements; Accounts Receivable;
Inventories
(a) Seller has heretofore delivered to Purchaser copies of the
unaudited Division Financial Statements listed on SCHEDULE 4.05 hereto. Seller
has maintained its books of account relating to the Division in compliance in
all material respects with applicable laws, rules and regulations. Except as
described on SCHEDULE 4.05, the Division Financial Statements have been prepared
in conformity with GAAP and, taken as a whole, are correct and complete in all
material respects and present fairly the financial position of the Division as
of the respective dates of such Division Financial Statements and the results of
operations of the Division for the periods covered by such Division Financial
Statements.
(b) All accounts receivable reflected on the March Balance
Sheet or on the Closing Balance Sheet have arisen from bona fide transactions in
the ordinary course of the Division's business and have been collected or, to
the Knowledge of Seller, are collectable in the ordinary course of business in
the recorded amounts thereof without valid set-off or counterclaim, or are
otherwise adequately reserved against on the March Balance Sheet (or will be
adequately reserved against on the Closing Balance Sheet, as the case may be),
in accordance with GAAP.
(c) The inventories of the Division as of March 31, 1997 are
properly recorded on the March Balance Sheet, and the inventories of the
Division as of June 30, 1997 will be properly recorded on the Closing Balance
Sheet, in each case at the lower of cost or market in accordance with GAAP, and
such inventories consist or consisted (as the case may be) only of material in
merchantable condition and saleable or usable in the ordinary course of
business.
Section 4.06. Absence of Certain Changes
Except as contemplated by this Agreement or as described on
SCHEDULE 4.06 hereto, since March 31, 1997, (x) there has not been any material
adverse change in the operations, condition (financial or otherwise), operating
results, assets, liabilities or employee, customer or supplier relations of the
Division or its business, and (y) Seller has not, with respect to the Division
or the Acquired Assets:
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(i) paid, discharged, or satisfied any claim,
liability, or obligation (absolute, accrued, contingent, or
otherwise) relating to the Division, other than the payment,
discharge, or satisfaction of claims, liabilities and
obligations, in the ordinary course of business and consistent
with past practice;
(ii) disposed of or permitted to lapse any rights to
the use of any Division Intellectual Property;
(iii) sold, transferred, or otherwise disposed of any
of the properties or assets of Seller used by the Division,
except for the sale of inventory in the ordinary course of
business;
(iv) waived or released any rights of material value
relating to the Division;
(v) entered into any agreement, whether in writing or
otherwise, to do any of the foregoing;
(vi) suffered any casualty loss or damage (whether or
not covered by insurance) which affects in any material
respect the Acquired Assets or the conduct of the Division;
(vii) made any loan or advance to, or given a
guarantee for the benefit of, any Person, other than (x)
intracompany cash management transactions and (y) loans or
advances made in the ordinary course of business consistent
with past practices;
(viii) incurred any debts, liabilities or obligations
except (w) current liabilities incurred in connection with or
for services rendered (including benefits listed on SCHEDULE
4.09) or finished goods supplied in the ordinary course of
business consistent with past practices, (x) liabilities on
account of Taxes and governmental charges (excluding
penalties, interest or fines in respect thereof), (y)
obligations or liabilities incurred by virtue of the execution
of this Agreement, and (z) Excluded Liabilities;
(ix) made or committed to make capital expenditures
by the Division in excess of $25,000 individually or $75,000
in the aggregate; or
(x) increased the compensation payable to any
Continued Employee or paid any bonus to any Continued
Employee, other than any compensation increases and bonuses to
which any such Continued Employee was entitled under
employment agreements listed on SCHEDULE 4.11(a) hereto.
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Section 4.07. Legal Proceedings
Except as described on SCHEDULE 4.07 hereto, there are no
material claims, actions, suits, inquiries, investigations, or proceedings
pending or, to the Knowledge of Seller, threatened in writing or imminent before
or by any court or governmental body, (i) against Seller relating to the
Acquired Assets or the Division, (ii) which question or challenge the validity
of this Agreement or any of the Transaction Documents or any action taken or to
be taken by Seller pursuant hereto or thereto, or (iii) which relate to actual
or claimed violations of Environmental Law by or with respect to the Division or
constitute requests for environmental clean-up actions, cost reimbursement or
contribution by any Federal, state or local agencies or any private parties with
respect to any property leased by Seller and used by the Division. The Division
is not subject to any judgment, order or decree, or to any governmental
restriction (other than those applicable generally to companies engaged in the
same business as the Division) which is likely to have a Material Adverse Effect
on the Division.
Section 4.08. Title to Properties and Related Matters
(a) Seller has, and pursuant to this Agreement will convey,
sell, transfer, assign and deliver to Purchaser good and valid title to all of
the Acquired Assets, except that with respect to Acquired Assets leased by
Seller, Seller has and will convey, sell, transfer, assign and deliver to
Purchaser valid and enforceable leasehold interests therein (assuming that the
consents to assignment listed on SCHEDULE 4.03 hereto shall have been obtained).
Such Acquired Assets and properties and title thereto are free and clear of all
title defects and all liens, mortgages, pledges, claims, charges, security
interests, and other encumbrances ("ENCUMBRANCES") except Encumbrances which are
disclosed on SCHEDULE 4.08(a) hereto or which do not, individually or in the
aggregate, impair the current use, occupancy, or value, or the validity of
title, of the property subject thereto (such exceptions being referred to herein
as the "PERMISSIBLE EXCEPTIONS"). Notwithstanding the foregoing, Encumbrances in
favor of the Banks and the Encumbrance listed as item 5 of SCHEDULE 4.08(a)
shall not be deemed to be Permissible Exceptions.
(b) SCHEDULE 4.08(b) hereto lists and describes all real
property leased by Seller and included in the Acquired Assets. Except as
described on SCHEDULE 4.08(b), such real property represents all real property
currently used or occupied by the Division. All facilities on such real property
included in the Acquired Assets have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof, except where the failure to obtain such approvals, licenses
or permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Division. To the Knowledge of Seller, all
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facilities operated by the Division have been operated and maintained in
compliance in all material respects with all applicable laws, rules, and
regulations. With respect to each parcel of leased real property listed on
SCHEDULE 4.08(b) hereto:
(i) Seller has delivered to Purchaser a correct and
complete copy of the relevant lease, which lease is legal,
valid, binding, enforceable and in full force and effect;
(ii) there are no disputes, oral agreements or
forbearance in effect as to the relevant lease and to the
Knowledge of Seller neither party to the relevant lease is in
breach or default of the terms thereof;
(iii) to the Knowledge of Seller, no event has
occurred which, with the giving of notice or passage of time
or both, would constitute a default under such lease; and
(iv) all rental and other amounts required to be paid
under the relevant lease has been duly paid.
Section 4.09. Employee Benefit Plans; ERISA
(a) SCHEDULE 4.09 hereto lists each pension, retirement,
profit-sharing, deferred compensation, bonus or other incentive plan, or other
employee benefit program, arrangement, agreement or understanding, or medical,
vision, dental or other health plan, or life insurance or disability plan, or
any other employee benefit plan, including, without limitation, any "employee
benefit plan" as defined in Section 3(3) of ERISA, to which the Division
contributes or has contributed, within the last three years (or, in the case of
a plan subject to Title IV of ERISA, within the last six years), or has been
required to contribute or is a party or is bound or under which it may have
liability or under which employees or former employees of the Division (or their
beneficiaries) are or were eligible to participate or derive a benefit
("EMPLOYEE BENEFIT PLANS"). Seller has delivered to Purchaser true, correct and
complete copies of all Employee Benefit Plans and any related funding agreements
as pertain to employees or former employees of the Division, including all
amendments, supplements, and modifications thereto, all of which are legally
valid and binding and in full force and effect, and not in default in any
respect, and copies of the most recent determination letter received from the
Internal Revenue Service and the most recent Form 5500 Annual Report with
respect to each such plan. The Division has not been a participating employer in
any "multiemployer plan" within the meaning of Section 3(37) of ERISA. None of
the assets of the Division is subject to any lien in favor of, or enforceable
by, the Pension Benefit Guaranty Corporation or the Internal Revenue Service.
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(b) The execution and delivery of this Agreement by Seller and
the consummation of the transactions contemplated hereunder do not constitute
and will not result in any "prohibited transaction" within the meaning of
Section 406 of ERISA, or Section 4975 of the Code.
(c) The Employee Benefit Plans and any trusts thereunder as
pertain to the employees or former employees of the Division have been
maintained and administered in all material respects in accordance with their
terms and with all provisions of ERISA and other laws applicable thereto and to
the extent intended to qualify under Section 401 of the Code are so qualified,
and nothing has occurred which might cause the loss of such qualification or the
imposition of any liability, penalty or tax thereunder with respect to the
operation of such Employee Benefit Plans. The Division has not incurred, and
neither Purchaser nor the Division will incur as a result of the transactions
under this Agreement, any liability to the Pension Benefit Guaranty Corporation
or the Internal Revenue Service. Neither any of the Employee Benefit Plans which
are covered by Title IV of ERISA nor any trusts thereunder as pertain to the
employees or former employees of the Division have been terminated or have
incurred any "accumulated funding deficiency," as such term is defined in
Section 302 of ERISA or Section 412 of the Code (whether or not waived), nor
have there been any "reportable events", as such term is defined in Section 4043
of ERISA, with respect thereto since the effective date of ERISA, nor does the
present value of accrued benefits (vested or non-vested) of the participants of
any such Employee Benefit Plan or trust thereunder exceed the assets of such
Employee Benefit Plan. No proceeding by the Pension Benefit Guaranty Corporation
to terminate any such Employee Benefit Plan has been instituted. No action,
suit, proceeding, hearing or investigation with respect to the administration or
the investment of the assets of any Employee Benefit Plan as pertains to the
employees or former employees of the Division is pending.
(d) The execution and delivery of this Agreement by Seller and
the consummation of the transactions contemplated hereunder will not result in
any obligation or liability of Division or Purchaser (with respect to accrued
benefits or otherwise) to any employee or former employee of the Division or to
the Pension Benefit Guaranty Corporation or the Internal Revenue Service in
respect of any such Employee Benefit Plans or any trust thereunder.
(e) All required reports, returns and descriptions have been
filed or distributed appropriately with respect to each Employee Benefit Plan.
(f) All contributions (including without limitation all
employer contributions and all employee salary reduction contributions) which
are due with respect to employees or former employees of the Division have been
paid to each Employee Benefit
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Plan and all contributions with respect to employees or former employees of the
Division for any period ending on or before the Closing Date which are not yet
due have been paid to each such Employee Benefit Plan or accrued in accordance
with past custom and practice of the Division. All premiums or other payments
for all periods ending on or before the Closing Date with respect to employees
or former employees of the Division have been paid with respect to each such
Employee Benefit Plan which is a welfare benefit plan within the meaning of
Section 3(1) of ERISA.
Section 4.10. Taxes and Tax Returns
(a) Except as described in SCHEDULE 4.10(a) hereto, the
Division (or Seller, on behalf of or with respect to the Division) has timely
filed all Tax Returns that it was required to file with respect to the Division
and all of such Tax Returns were correct and complete in all material respects.
All Taxes which are due and payable by the Division (or Seller, on behalf of or
with respect to the Division) have been paid in full, and the Division (or
Seller, on behalf of or with respect to the Division) is not delinquent in the
payment of any Tax and has no tax deficiency or claim outstanding, proposed or
assessed against it. There is no dispute or claim concerning any Taxes of or
relating to the Division either (i) claimed or raised by any authority in
writing or (ii) as to which Seller has Knowledge. There is not now in force any
waiver or agreement by the Division (or Seller, on behalf of or with respect to
the Division) for the extension of time for the assessment of any Tax. There are
no liens on any of the assets of the Division that arose in connection with any
failure (or alleged failure) to pay any Tax. No claim has ever been made in any
jurisdiction where the Division does not file Tax Returns that the Division is
or may be subject to taxation by that jurisdiction.
(b) The Division (or Seller, on behalf of or with respect to
the Division) has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other Person.
(c) The Division (or Seller, on behalf of or with respect to
the Division) (i) has not filed a consent under Code Sec. 341(f) concerning
collapsible corporations, (ii) is not or was not party to any Tax allocation or
sharing agreement, (iii) has not been a member of an affiliated group filing a
consolidated federal income Tax Return, and (iv) has no liability for the Taxes
of any other person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
(d) Seller shall, with respect to the Division, prepare and
file all Tax Returns and will pay all applicable Taxes relating to the Division
with respect to the taxable period which includes the Closing Date.
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(e) At or prior to Closing, Seller shall have paid or
discharged all Taxes that may result in the filing of a lien on the assets
purchased hereunder or that may result in the imposition of successor,
transferee or other liability on Purchaser for the payment of such Taxes, except
for Taxes not yet due and payable (such Taxes to be paid when due by Seller).
Section 4.11. Contracts
(a) SCHEDULE 4.11(a) hereto lists all contracts, agreements,
instruments, arrangements, understandings, leases, and rental agreements,
whether written or oral, to which Seller is a party or is otherwise bound and
which relate to the Division or the Acquired Assets, other than immaterial
contracts (which for purposes of this Agreement shall mean contracts which (i)
do not provide for aggregate payments by or to Seller in excess of $35,000 and
(ii) are not otherwise material to the Division) (collectively, including such
immaterial contracts, "DIVISION CONTRACTS")). (Notwithstanding the foregoing,
the Stock Redemption and Purchase Agreement dated as of May 17, 1996, by and
among James S. Harrington; Duane A. Gawron, trustee of the Living Trust of Duane
Gawron; Margo Gawron; John Pylak, trustee of the John E. Pylak Living Trust;
Rebecca Pylak; Kurt Cieszkowski; Tigera Group, Inc. (now known as Connectivity
Technologies Inc.); and Seller (the "STOCK REDEMPTION AND PURCHASE AGREEMENT"),
and promissory notes, agreements, contracts and other instruments between Seller
and the Banks or executed by Seller in favor of the Banks relating to Seller's
credit facilities shall not be deemed to be "Division Contracts".) True and
correct copies of all Division Contracts listed on SCHEDULE 4.11(a) have
heretofore been delivered to Purchaser.
(b) Except as set forth and described (including a reference
in each case to the relevant clause of this SECTION 4.11(b)) on SCHEDULE 4.11(b)
hereto:
(i) the Division Contracts do not include any
contracts with any of Seller's officers, directors, employees
(other than employment agreements listed on SCHEDULE 4.11(a)
hereto) or Affiliates;
(ii) to the Knowledge of Seller, all Division
Contracts are valid and in full force and effect and
constitute the legal, valid and binding obligations of Seller
and the other parties thereto;
(iii) there are no existing material defaults by
Seller or, to the Knowledge of Seller, by any other party,
under any Division Contract, and to the Knowledge of Seller,
no event, act or omission has occurred which (with or without
notice, lapse of time or the happening or occurrence of any
other event) would result in a default thereunder;
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(iv) no other party to any Division Contract has
asserted the right, and to the Knowledge of Seller, no basis
exists for the assertion of any right, to renegotiate the
terms or conditions of any such Division Contract; and
(v) assuming that the consents to assignment listed
on Schedule 4.03 hereto shall have been obtained, all Division
Contracts are assignable by Seller in connection with the
transactions contemplated by this Agreement.
Section 4.12. Patents, Trademarks, Trade Names, etc.
(a) SCHEDULE 4.12(a) hereto lists all material patents, patent
applications, common law and registered trademarks, service marks, trade names,
logos, and assumed names and pending registrations thereof owned or licensed by
Seller and used by or in the Division, including for each such patent,
trademark, or service mark, if registered (and to the extent applicable), the
registration number, application and registration dates, and expiration dates,
and class, and including for each such patent, trademark, service mark, trade
name, logo and assumed name used by the Division but not owned by Seller, a
description of the license agreement or other arrangement pursuant to which each
is so used. All of the foregoing, together with all other trade secrets,
copyrights, know-how, processes, and proprietary information owned by Seller and
used by the Division which are entitled to legal protection (but excluding any
of the foregoing used by Seller primarily in connection with Seller's divisions
other than the Division), are sometimes referred to collectively herein as the
"DIVISION INTELLECTUAL PROPERTY."
(b) Except as described on SCHEDULE 4.12(b) hereto, Seller has
not received any notice that its current use of any of the Division Intellectual
Property constitutes infringement or any other violation of the intellectual
property of any third party, and to the Knowledge of Seller, such current use of
the Division Intellectual Property does not constitute infringement or any other
violation of the intellectual property of any third party. Except as described
on SCHEDULE 4.12(b), Seller has no Knowledge that any third party is infringing
or otherwise violating any of the Division Intellectual Property. None of the
Division Intellectual Property is subject to any outstanding order, decree,
judgment, stipulation, injunction, or settlement agreement restricting the use
thereof by Seller.
Section 4.13. Condition of Assets
The material improvements, fixtures and appurtenances on or to
the real property included in the Acquired Assets or on or to any real property
the subject of any lease included in the Acquired Assets, and the material
tangible property included in
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the Acquired Assets, or the subject of any lease included in the Acquired
Assets, are in good operating condition, subject to ordinary wear and tear, and
are suitable for the purposes for which they are presently being used.
Section 4.14. Insurance
SCHEDULE 4.14 hereto sets forth a list and brief description
(specifying the insurer, the policy number, the deductible amount, the policy
limits, the policy dates, and descriptions of outstanding claims) of all
policies or binders of insurance maintained by Seller with respect to the
Division and in effect on the date hereof, including, without limitation,
workers' compensation, personal liability, fire and theft. Seller has not
received any notice from any of its insurance carriers that any insurance
premiums will be materially increased in the future or that any insurance
coverage listed on such SCHEDULE 4.14 will not be available in the future on
substantially the same terms as now in effect. None of the insurance policies
carried by Seller with respect to the Division at any time within the six months
prior to the Closing Date has lapsed, been cancelled or otherwise terminated.
Section 4.15. Environmental Matters
(a) Seller has obtained all permits, licenses and other
authorizations which are required to be held or obtained by Seller in connection
with the Division under all Environmental Laws, except for such permits,
licenses and other authorizations the failure of which to obtain would not,
individually or in the aggregate, have a Material Adverse Effect on the
Division. Seller is in compliance in all material respects with the terms and
conditions of such permits, licenses and authorizations, and to the Knowledge of
Seller, with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the Environmental Laws and applicable to the Division.
(b) To the Knowledge of Seller, there is no pending or,
threatened civil or criminal litigation, notice of violation, or administrative
proceeding relating in any way to the Environmental Laws involving the Division
or any of the Acquired Assets. To the Knowledge of Seller, there have not been
and there are not any events, conditions, circumstances, activities, practices,
incidents, actions, plans, studies or reports which may interfere with or
prevent continued compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, suit, proceeding,
hearing, or investigation against Seller relating to the Division or the
Acquired Assets, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release, or threatened release into the environment, of any
pollutant, contaminant, chemical, industrial, hazardous, or toxic material
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or waste, including, without limitation, any liability arising, or any claim,
action, demand, suit, proceeding, hearing, or investigation which may be
brought, under RCRA, CERCLA, or similar state or local laws.
Section 4.16. Finders
Neither Seller nor any of its Affiliates has paid or become
obligated to pay any fee or commission to any broker, finder, or intermediary
for or on account of the transactions provided for in this Agreement. Seller
agrees to indemnify Purchaser against, and to hold Purchaser harmless from, any
claims for brokerage or similar commission or other compensation which may be
made against Purchaser by any third party in connection with the transactions
contemplated hereby, which claim is based upon such third party having acted as
broker, finder, investment banker, or in any similar capacity on behalf of
Seller or any of its Affiliates.
Section 4.17. Employees; Labor Controversies
Seller has heretofore delivered to Purchaser a full and
complete list of all employees of the Division, together with a description of
each such employee's compensation arrangements (including without limitation
salaries and bonus compensation) affecting them. Except as described on SCHEDULE
4.17 hereto, there have been no changes to the information set forth on such
list since the date thereof. Except as described on SCHEDULE 4.17 hereto, there
are no controversies between Seller and any of its employees which might
reasonably be expected to have a Material Adverse Effect on the Division, or any
unresolved labor grievances or unfair labor practice or labor arbitration
proceedings pending or, to the Knowledge of Seller, threatened relating to the
Division. None of the employees of the Division is covered by a collective
bargaining agreement, and no union or other organization is authorized to
bargain on behalf of any of the employees of the Division, and, to the Knowledge
of Seller, there are not any union organizational efforts presently being made
or threatened involving any employees of the Division. Seller has not received
notice of any claim that the Division has not complied with any laws relating to
the employment of labor, including any provisions thereof relating to wages,
hours, collective bargaining, the payment of social security and similar taxes,
equal employment opportunity, employment discrimination and employment safety,
or that Seller is liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing with respect to employees of the
Division.
Section 4.18. Customers
No single customer of the Division accounted for more than 10%
of the Division's 1996 revenue. Seller has heretofore delivered to Purchaser an
accurate and complete list of the Division's 25 largest customers (by revenue)
and the amount of
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gross revenue attributable to each such customer during 1996 and for the period
from January 1, 1997 to May 31, 1997. To the Knowledge of Seller, the Division
has not received any notice that any such customer of the Division intends to
discontinue or substantially diminish its relationship with the division on
account of the transaction contemplated hereby or otherwise, although during
1997 some of such customers have, on an annualized basis, purchased products
from the Division at above 1996 levels and some of such customers have purchased
products from the Division at below 1996 levels.
Section 4.19. Suppliers
Seller has heretofore delivered to Purchaser an accurate and
complete list of the Division's 25 largest suppliers (by dollar volume of sales
to the Division during 1996). No such supplier has canceled or otherwise
terminated, modified in a manner materially adverse to the Division or, to
Seller's Knowledge, threatened to cancel or otherwise terminate, or to modify in
a manner materially adverse to the Division, its relationship with the Division
on account of the transaction contemplated hereby or otherwise.
Section 4.20. Sales Representatives
Seller has heretofore delivered to Purchaser an accurate and
complete list of the Division's commissions paid in 1996 to the Division's sales
representatives, and of employees (including sales representatives) terminated
(whether at the employee's or Seller's initiative) from and after January 1,
1996 and through the date hereof. None of such sales representatives, other than
those listed as having been terminated, has to Seller's Knowledge, threatened to
cancel or otherwise terminate, or to modify in a manner materially adverse to
the Division, its relationship with the Division.
Section 4.21. Interest in Customers, etc.
(a) Except for business conducted by Seller and business
relationships between the Division and other divisions of Seller (the
"INTRA-SELLER TRANSACTIONS"), or as described on SCHEDULE 4.21 hereto, neither
Seller nor any of its Affiliates has any direct or indirect interest in any
competitor, supplier or customer of the Division or in any Person from whom or
to whom the Division leases any real or personal property or in any other Person
with whom the Division has any business relationship.
(b) The Intra-Seller Transactions have been conducted in a
manner substantially similar to Seller's transactions with third parties with
regard to matters of pricing, timeliness of shipment, timeliness of payment and
collection and completeness and quality of products purchased or sold.
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Section 4.22. Operation of Business Prior to Closing
All receivables collected by the Division from and after July
1, 1997 and through the Closing Date have been deposited into the Division's
bank accounts, and Seller has not written checks or withdrawn any amounts from
the Division's bank accounts during such period other than in payment of
accounts payable arising and paid in the ordinary course of business (which may
include accounts payable to other divisions of Seller to the extent arising and
paid in the ordinary course of business).
Section 4.23. Completeness of Warranties
No warranty or representation by Seller in this Agreement or
any Transaction Document or any statement or certificate furnished or to be
furnished by Seller to Purchaser pursuant to this Agreement or any Transaction
Document contains or will contain any untrue statement of material fact or omits
or will omit to state a material fact required in order to make such warranty,
representation, statement or certificate not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND PARENT
Purchaser and Parent each jointly and severally represents and
warrants to Seller as follows and acknowledges and confirms that Seller is
relying upon such representations and warranties notwithstanding any
investigation made by Seller or on its behalf:
Section 5.01. Corporate Organization
Purchaser and Parent are corporations duly organized, validly
existing, and in good standing under the laws of the State of Delaware.
Purchaser and Parent have all requisite corporate power and authority to own,
operate, and lease their respective properties and to carry on their respective
businesses as now being conducted. Purchaser and Parent have heretofore
delivered to Seller complete and correct copies of their respective Certificates
of Incorporation and By-Laws, as amended and in effect on the date hereof.
Purchaser is a wholly-owned subsidiary of Parent.
Section 5.02. Authorization, Execution and Binding Effect
Purchaser and Parent have full corporate power and authority
to execute and deliver this Agreement and each of the Transaction Documents
executed and delivered by Purchaser or Parent, as the case may be, and to
consummate the transactions
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contemplated hereby and thereby. The Boards of Directors of Purchaser and Parent
have duly approved and authorized the execution and delivery of this Agreement
and such Transaction Documents and the consummation of the transactions
contemplated hereby and thereby, and no other corporate proceedings on the part
of Purchaser or Parent are necessary to approve and authorize the execution and
delivery of this Agreement or any of such Transaction Documents or the
consummation of the transactions contemplated hereby or thereby. This Agreement
and such Transaction Documents have been duly executed and delivered by
Purchaser and Parent and constitutes the valid and binding agreements of
Purchaser and Parent, enforceable against Purchaser and parent in accordance
with their respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, or other similar
laws affecting creditors' rights generally and by general principles of equity.
Section 5.03. Consents and Approvals
Neither the execution and delivery by Purchaser and Parent of
this Agreement and the Transaction Documents being delivered by Purchaser and/or
Parent, nor the consummation by Purchaser and Parent of the transactions
contemplated hereby and thereby, nor compliance by Purchaser and Parent with any
of the provisions hereof and thereof, will (i) violate or conflict with any
provision of the certificate of incorporation or by-laws of Purchaser or Parent,
(ii) result in a violation of any order, writ, injunction, decree, judgment,
ruling, law, rule, or regulation of any court or governmental authority,
applicable to Purchaser or Parent, (iii) result in the breach of any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, contract,
agreement, or other instrument or commitment or obligation of Purchaser or
Parent which breach would have a Material Adverse Effect on Purchaser or Parent,
(iv) require any consent, approval, or authorization of, or notice to, or
declaration, filing, or registration with, any governmental or regulatory
authority or any other Person, except for such consents, approvals,
authorizations, notices, declarations, filings or registrations (A) which have
been obtained, given or made, as the case may be, and which are unconditional
and in full force and effect, or (B) the failure of which to obtain, give or
make would not have a Material Adverse Effect on Purchaser or Parent.
Section 5.04. Finders
Neither Purchaser, Parent nor any of their respective
Affiliates has paid or become obligated to pay any fee or commission to any
broker, finder, or intermediary, for or on account of the transactions provided
for in this Agreement. Purchaser and Parent jointly and severally agree to
indemnify Seller against, and to hold Seller harmless from, any claims for
brokerage or similar commission or other compensation which may
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be made against Seller by any other third party in connection with the
transactions contemplated hereby, which claim is based upon such third party
having acted as broker, finder, investment banker, or in any similar capacity on
behalf of Purchaser, Parent or any of their respective Affiliates.
Section 5.05. Legal Proceedings
There are no material claims, actions, suits, inquiries,
investigations or proceedings pending, or to the actual knowledge after due
inquiry of Purchaser and Parent, threatened in writing or imminent, against
Purchaser or Parent before or by any court or governmental body (i) against
Purchaser, or (ii) which questions or challenges the validity of this Agreement
or any of the Transaction Documents or any action taken or to be taken by
Purchaser or Parent pursuant hereto or thereto.
Section 5.06. Capitalization
As of the date hereof, the authorized capital stock of Parent
consists of 60,000,000 shares of common stock, par value $.001 per share, and
1,000,000 shares of preferred stock, par value $.01 per share. As of the date
hereof (and giving effect to the transactions contemplated hereby), there are
issued and outstanding 15,811,105 shares of such common stock, all of which is
of one class, and 27,000 shares of Series A Convertible Preferred Stock, which
by its terms is convertible into 3,130,425 shares of common stock (without
taking into account the anti-dilution and pay-in-kind dividend provisions of
such Series A Convertible Preferred Stock); provided, that in July 1997, 9,000
shares of Series A convertible Preferred Stock were deemed converted into
1,043,478 shares of Parent's common stock which have not yet been issued.
Additionally, there are outstanding warrants to purchase 104,364 shares of
Parent's common stock. The Parent Stock is duly authorized, validly issued,
fully paid and nonassessable, and is listed for trading on the Nasdaq Stock
Market. As of the date hereof, 1,750,159 shares of Parent's common stock are
issuable upon exercise of options to purchase such stock, which options were
issued pursuant to Parent's stock option plan. Except as set forth in this
Section, as of the date hereof there are no other outstanding shares of, no
securities of Parent convertible into or exchangeable for, no options or other
rights (including any pre-emptive rights) to acquire from Parent, and no other
contracts, understandings, arrangements or obligations (whether or not
contingent) providing for the issuance or sale by Parent, directly or
indirectly, of any capital stock or other equity or debt security of Parent.
Section 5.07. SEC Filings; Offer Documents
Parent has previously delivered to Seller a true, correct and
complete copy of Parent's Annual Report on Form 10-KSB for the year ended
December 31, 1996, Parent's proxy
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statement relating to its annual meeting of shareholders held on May 21, 1997,
all other reports or registration statements filed by Parent with the SEC since
January 1, 1996 and all amendments and supplements to the foregoing (together,
"PARENT'S SEC FILINGS"). Each of Parent's SEC Filings has been timely filed,
subject to any allowable extensions, and was prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be. Parent's SEC Filings constitute all of the documents
required to be filed by Parent with the SEC since January 1, 1996.
Section 5.08. Financial Statements
The audited and unaudited consolidated financial statements
(including the notes thereto) of Parent included in Parent's SEC Filings have
been prepared in conformity with GAAP and, taken as a whole, are correct and
complete in all material respects and present fairly the financial position of
Parent as of the respective dates thereof and its results of operations for the
respective periods covered by such financial statements.
Section 5.09. Absence of Certain Changes
Since March 31, 1997, Parent has not suffered any Material
Adverse Effect, and no event has occurred (or failed to occur) which is likely
to result in a Material Adverse Effect with respect to Parent. In addition, and
without limiting the generality of the foregoing, since March 31, 1997, Parent
has not:
(i) declared, set aside or paid any dividend or other
distribution with respect to its capital stock (other than
dividends required to be paid pursuant to the terms of
Parent's Series A Convertible Preferred Stock);
(ii) made any material change in accounting
principles; or
(iii) entered into any agreement, whether in writing
or otherwise, to do any of the foregoing.
Section 5.10. Completeness of Warranties
No warranty or representation by Purchaser or Parent in this
Agreement or any Transaction Document or any statement or certificate furnished
or to be furnished by Purchaser or Parent to Seller pursuant to this Agreement
or any Transaction Document contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact required in order
to make such warranty, representation, statement or certificate not misleading.
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ARTICLE VI
COVENANTS
Section 6.01. Post-Closing Cooperation
Purchaser, Parent and Seller shall cooperate and shall cause
their officers, employees, agents, auditors and representatives to cooperate
with each other during the period prior to the Closing (in order to effect the
Closing) and after the Closing (i) to ensure the orderly transition of the
Acquired Assets from Seller to Purchaser, (ii) to assist Seller in its closing
of the Division's books and other accounting functions relating to Seller's
winding up of the affairs of the Division, and (iii) to ensure the orderly
transition to another of Seller's divisions of the accounting and tax functions,
currently provided to Seller's EEA division by the Division and to effect the
other transitional services and functions described in the Shared Services and
Facilities Agreement. In addition, Seller will request that its auditors, at
Parent's expense (provided, that prior to the Closing Seller shall be
responsible for Seller's auditors' fees for work performed by such auditors,
whether for the benefit of Seller or Parent, at Seller's request), (x) provide
Parent's auditors with the work papers used in preparing the Division's
financial reports (y) consent to the inclusion of its unaudited financial
statements of the Division into Parent's present and future filings with the
Securities and Exchange Commission, as reasonably required (and in that
connection Seller shall cooperate with Parent's auditors as reasonably requested
and Seller shall not unreasonably refuse to execute and deliver to Parent's
auditors customary representation letters as from time to time are requested by
such auditors), and (z) work with Parent's auditors to assist such auditors in
their review of the Division. Neither Seller, Purchaser nor Parent shall be
required by this Section to take any action that would unreasonably interfere
with the conduct of its business.
Section 6.02. Records
(a) On the Closing Date, Seller shall deliver or cause to be
delivered to Purchaser all of Seller's original agreements, documents, books,
records and files relating to the Division (collectively, "RECORDS"), subject to
the following exceptions:
(i) Seller shall not be required to deliver any
Records that constitute Excluded Assets;
(ii) Seller may retain the originals of any and all
Records relating to Tax Returns (including without limitation
payroll records and paid invoices);
(iii) Purchaser shall not destroy any Records
delivered by Seller hereunder without first offering to turn
over possession thereof to Seller by written
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notice to Seller at least 30 days prior to the proposed
date of such disposition or destruction;
(b) (i) Seller may retain such copies of Records delivered to
Purchaser hereunder to the extent such Records relate to Seller's continuing
operations or are or may be required for tax, accounting or financial reporting
purposes (and such Records, other than those relating to Seller's continuing
operations, shall only be used for such purposes), and, (ii) after the Closing,
upon reasonable written notice, Purchaser agrees to furnish or cause to be
furnished to Seller and its representatives, employees, counsel and accountants
reasonable access, during normal business hours, such information and Records
pertinent to the Division and assistance (relating to the Division), as are
reasonably necessary for financial reporting, benefits administration and
accounting matters, the preparation and filing of any Tax Returns or other
filings required to be made with any governmental entity or the defense of any
Tax claim or assessment or other claim; provided, however, that such access
shall not unreasonably disrupt the normal operations of Purchaser or Parent.
(c) After the Closing, upon reasonable written notice, Seller
agrees to furnish or cause to be furnished to Purchaser, Parent and their
representatives, employees, counsel and accountants reasonable access, during
normal business hours, to the books and records of the Division retained by
Seller pursuant to the terms of this Agreement; provided, however, that such
access shall not unreasonably disrupt the normal operations of Seller.
Section 6.03. Employee and Related Matters
(a) Purchaser and Seller agree that all employees of the
Division included on the list of employees heretofore delivered by Purchaser to
Seller (the "CONTINUED EMPLOYEES") shall be offered employment with Purchaser,
and that any Continued Employees who accept such offer of employment shall, for
purposes of eligibility, vesting and level of benefits under Purchaser's
employee benefit plans, receive credit for such Continued Employee's service
with Seller; provided, however, that after the Closing Date Purchaser shall not
be obligated by this Agreement to continue the employment of any Continued
Employee on any particular terms or for any particular period of time. In
connection with this transaction, each Continued Employee shall receive from
Parent ten (10) shares of Parent's common stock.
(b) Promptly after the Closing, Seller shall transfer to
Purchaser any records or copies of such records (including, but not limited to,
Forms W-4 and Employee Withholding Allowance Certificates) relating to
withholding and payment of income and employment taxes (federal, state and
local) and FICA taxes with respect to wages paid by Seller during the 1997
calendar year to any Continued Employees. Purchaser shall, to the extent
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permitted by applicable law, provide all such employees with properly completed
Forms W-2, Wage and Tax Statements for the 1997 calendar year setting forth the
wages and taxes withheld with respect to such employees for the 1997 calendar
year by Seller and Purchaser as predecessor and successor employers,
respectively. Purchaser and Seller shall also comply with the filing
requirements set forth in Revenue Procedure 96-60, 1996-53 I.R.B. 24 to
implement this SECTION 6.03. If Purchaser shall determine that it is not
permitted by applicable law to provide such Forms W-2, Purchaser shall so inform
Seller and shall return such records to Seller not later than sixty (60) days
prior to the time that Seller is required to provide such employees with such
Forms W-2.
(c) Nothing in this Agreement, express or implied, is intended
to confer or shall confer upon any of Seller's employees or former employees, or
any Continued Employee, any rights or remedies of any nature or kind whatsoever
under or by reason of this Agreement, including, without limitation, any rights
of employment.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
Section 7.01. Survival of Representations and Warranties, etc.
Except as otherwise expressly provided by this Agreement or
any of the Transaction Documents, all representations and warranties, covenants,
agreements and other undertakings of the parties contained in this Agreement or
in any writing delivered pursuant hereto (including without limitation the
indemnification obligations contained in this Article VII), shall survive the
Closing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of any party hereto, for a period commencing
on the date hereof and ending on May 31, 1999 (the "SURVIVAL PERIOD"); provided,
however, that all representations and warranties of Seller made in SECTIONS
4.08(a), 4.09 and 4.10 hereof (and Seller's indemnification obligations with
respect thereto as provided in this Article VII) shall survive until the
expiration of all applicable statutes of limitation; and provided further, that
the expiration of any representation or warranty shall not affect any claim
asserted prior to the date of such expiration.
Section 7.02. Indemnification
(a) Subject to the limitations set forth in this Article VII,
Seller shall indemnify, defend, and hold harmless Purchaser, Parent and their
respective Affiliates from and against any and all losses, liabilities, damages
(whether direct or consequential), obligations, payments, duties, demands,
claims, diminutions in value, penalties, fines, costs and
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expenses (including, without limitation, losses in the absence of third party
claims, the costs and expenses of any and all actions, suits, proceedings,
judgments, settlements and compromises relating thereto, and reasonable legal
costs and attorneys' fees in connection therewith) (collectively, "INDEMNIFIABLE
LOSSES"; each being an "INDEMNIFIABLE LOSS") of Purchaser, Parent and their
respective Affiliates, related to, arising out of or due to, directly or
indirectly:
(i) any inaccuracy in or breach of any of the
representations, warranties, covenants, agreements or
undertakings of Seller contained in this Agreement or in any
agreement, document or instrument executed and delivered
pursuant hereto or in connection herewith;
(ii) any Excluded Liability or Excluded Asset; or
(iii) the failure of Seller to comply with any bulk
sales or transfer laws of any jurisdiction.
(b) Subject to the limitations set forth in this Article VII,
Purchaser and Parent shall, jointly and severally, indemnify, defend, and hold
harmless Seller and Seller's Affiliates from and against any and all
Indemnifiable Losses of Seller and Seller's Affiliates related to, arising out
of or due to, directly or indirectly:
(i) any inaccuracy in or breach of any of the
representations, warranties, covenants, agreements or
undertakings of Purchaser or Parent contained in this
Agreement or in any agreement, document or instrument executed
and delivered pursuant hereto in connection herewith; or
(ii) any Assumed Liability.
(c) The amount of any Indemnifiable Loss for which
indemnification is provided under this SECTION 7.02 shall be net of (i) any
amounts actually recovered by the indemnified party under insurance policies
with respect to such Indemnifiable Loss and (ii) the amount of any adjustment to
the Purchase Price pursuant to SECTION 2.04 hereof resulting from such
Indemnifiable Loss or from the facts or circumstances underlying, resulting in
or giving rise to such Indemnifiable Loss.
Section 7.03. Procedure for Indemnification
(a) If a party entitled to indemnification pursuant to SECTION
7.02 (the "INDEMNITEE") receives notice of the assertion by a Person who is not
a party to this Agreement of any claim or of the commencement by any such Person
of any action or proceeding (a "THIRD PARTY CLAIM") with respect to which
another party to this Agreement (the "INDEMNIFYING PARTY") is obligated to
provide indemnification, the Indemnitee shall give the
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Indemnifying Party written notice thereof after becoming aware of such Third
Party Claim. Such notice shall describe the Third Party Claim in reasonable
detail, and shall indicate the amount (estimated if necessary) of the
Indemnifiable Loss that has been or may be sustained by the Indemnitee. With
respect to any Third Party Claim, the Indemnifying Party may elect to compromise
or defend, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim; provided, however, that without the
consent of the Indemnitee, which consent shall not unreasonably be withheld or
delayed, the Indemnifying Party shall not settle or compromise any claim unless
such settlement or compromise (i) is for money damages only, which damages are
paid solely by the Indemnifying Party, (ii) includes a release of the
Indemnitee, and (iii) does not involve an admission of liability or fault on the
part of the Indemnitee. If the Indemnifying Party elects to compromise or defend
such Third Party Claim, it shall within 30 days (or sooner if the nature of the
Third Party Claim so requires) notify the Indemnitee of its intent to do so, and
the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, such Third Party Claim. If the Indemnifying
Party elects not to compromise or defend against the Third Party Claim, or fails
to notify the Indemnitee of its election as herein provided, the Indemnitee may
defend such Third Party Claim without waiving its claim for indemnification
hereunder; provided, however, that the Indemnitee shall not settle or compromise
any such claim without the consent of the Indemnifying Party. In any event, the
Indemnitee and the Indemnifying Party may each participate, at its own expense,
in the defense of such Third Party claim, it being understood that the
Indemnifying Party may, if it so elects, control such defense. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available on a reasonable basis to the Indemnifying Party any personnel or any
books, records, or other documents within its control that are necessary for
such defense.
(b) Any claim for indemnity between the parties other than
with respect to a Third Party Claim shall be asserted by written notice given by
the Indemnitee to the Indemnifying Party, setting forth in reasonable detail the
basis for such claim. The Indemnifying Party shall have a period of 45 days
within which to respond thereto. If the Indemnifying Party does not respond
within such 45-day period, the Indemnifying Party shall be deemed to have
accepted responsibility to make payment, and shall have no further right to
contest the validity of such claim. If the Indemnifying Party does respond
within such 45-day period and rejects such claim in whole or in part, the
Indemnitee shall, subject to the limitations as to liability and otherwise as
set forth in this Article VII, be free to pursue such remedies as may be
available to such party by applicable law.
Section 7.04. Limitation on Seller's Indemnification Obligations
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Purchaser's and Parent's indemnification rights provided by
this Article VII, other than with respect to Excluded Liabilities, shall be
subject to the following limitations:
(i) Purchaser, Parent and their respective Affiliates shall
not be entitled to assert any claim with respect to any Indemnifiable Losses
until such time as the aggregate amount of all of such Indemnifiable Losses
exceed $150,000 (the "BASKET AMOUNT").
(ii) At such time as Purchaser's, Parent's and their
respective Affiliates' Indemnifiable Losses exceed, in the aggregate, the Basket
Amount, then Purchaser, Parent and their respective Affiliates may assert all of
their claims for such Indemnifiable Losses up to a maximum aggregate amount of
$2,000,000 (the "CAP AMOUNT").
Section 7.05. Use of Escrowed Parent Stock
So long as shares of Parent Stock continue to be held by the
Escrow Agent pursuant to the Escrow Agreement, any claim by Purchaser, Parent or
their Affiliates for indemnification under this Article VII hereof shall, to the
extent that Purchaser, Parent or their Affiliates are entitled to such
Indemnification, first be satisfied by delivery of shares of Parent Stock held
in escrow by the Escrow Agent equal in value to the relevant Indemnifiable Loss,
which Parent Stock shall be valued at the Valuation Price.
Section 7.06. Limitation on Purchaser's Indemnification
Obligations
Seller's indemnification rights provided by this Article VII,
other than with respect to Assumed Liabilities, shall be subject to the
following limitations:
(i) Seller and its Affiliates shall not be entitled to assert
any claim with respect to any Indemnifiable Losses until such time as the
aggregate amount of all of such Indemnifiable Losses exceed the Basket Amount.
(ii) At such time as Seller's and its Affiliates'
Indemnifiable Losses exceed, in the aggregate, the Basket Amount, then Seller
and its Affiliates may assert all of their claims for such Indemnifiable Losses
up to a maximum aggregate amount equal to the Cap Amount.
Section 7.07. Sole Remedy
Except as otherwise expressly provided by this Agreement or
the Transaction Documents (including without limitation the Registration Rights
Agreement), the indemnification provisions of this Article VII shall from and
after the Closing be the sole remedy for any breach or alleged
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breach of any the representations, warranties or covenants contained in this
Agreement.
Section 7.08. Dispute Resolution
(a) If the Indemnifying Party disputes any claim for
indemnification, or its obligation to indemnify any claim, pursuant to this
Article VII, the Indemnifying Party shall notify the Indemnitee of such dispute
within twenty (20) days of receipt of notice of the claim. If the matter cannot
be reconciled by mutual agreement within sixty (60) days of the date of the
notice of the claim, the matter shall be submitted to arbitration. The dispute
shall be resolved by three (3) arbitrators in Detroit, Michigan, according to
the Commercial Arbitration Rules of the American Arbitration Association ("AAA")
as then in effect, and be binding on all of the parties hereto. The three (3)
arbitrators shall be selected as follows: (i) the AAA shall provide a list of
ten (10) potential arbitrators, each familiar with the distribution industry (or
in the case of an accounting dispute, a list consisting of the "Big Six"
accounting firms, excluding Coopers), (ii) the Indemnifying Party and the
Indemnitee shall each select one arbitrator and (iii) the third arbitrator shall
be selected by the other two. Such arbitrators shall each agree to be bound by
the terms and delivery requirements of this Agreement, the Escrow Agreement and
the other Transaction Documents. Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(b) If the Indemnifiable Loss subject to dispute relates to a
Third Party Claim which is a final non-appealable judgment, then the
Indemnifying Party may not dispute the substance of the claim, but only its
liability therefor.
(c) Each party shall pay its own costs and expenses (including
attorneys' fees and expenses) in connection with any arbitration pursuant to
this SECTION 7.08, and the fees and expenses of the arbitrator in any such
arbitration shall be paid by the non-prevailing party as determined by the
arbitrator.
Section 7.09. Special Notice
Seller agrees to provide Purchaser with written notice of any
and all formal claims for indemnity it makes or receives to or from any third
party under the Stock Redemption Agreement if and to the extent that such claim
relates to the operation of the Division.
Section 7.10. Environmental Matters
(a) For the period beginning on the Closing Date and ending on
the third anniversary of the Closing Date (the "ENVIRONMENTAL SURVIVAL PERIOD"),
Purchaser and Seller shall each be responsible for fifty percent (50%) of the
first $500,000 of
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the cost of any debt, liability, payment or obligation relating to any
Environmental Law or otherwise relating to the environment or environmental
cleanup costs, or disposal of any contaminants, to the extent relating to the
Acquired Assets or any of the properties or facilities leased by Seller
immediately prior to the Closing in connection with the Division, and which
leases are being assumed by Purchaser pursuant to this Agreement, and
attributable to events, circumstances or actions occurring on or prior to the
Closing Date ("DIVISION ENVIRONMENTAL LIABILITIES"), but only to the extent that
(i) such Division Environmental Liabilities result from or relate to (x) a Third
Party Claim made during the Environmental Survival Period, or (y) an affirmative
obligation arising under any Environmental Law during the Environmental Survival
Period, and (ii) during the Environmental Survival Period, Purchaser has given
written notice to Seller of such Third Party Claim or affirmative obligation in
accordance with SECTION 7.03 hereof (such Division Environmental Liabilities
being referred to herein as "SHARED ENVIRONMENTAL LIABILITIES").
(b) To the extent that the aggregate amount of all Shared
Environmental Liabilities exceeds $500,000, then the excess of such Shared
Environmental Liabilities over $500,000 shall be deemed to be Excluded
Liabilities and Seller shall be liable for 100% of such excess.
(c) Any Division Environmental Liabilities (i) that do not
result from or relate to (x) a Third Party Claim made during the Environmental
Survival Period, or (y) an affirmative obligation arising under any
Environmental Law during the Environmental Survival Period, or (ii) with respect
to which Purchaser has not given written notice to Seller during the
Environmental Survival Period, and any debts, liabilities, payments and
obligations in the nature of Division Environmental Liabilities but attributable
to events, circumstances or actions occurring after the Closing Date, shall be
deemed to be Assumed Liabilities and Purchaser shall be liable for 100% thereof;
provided, however, that Divisional Environmental Liabilities of which Seller has
Knowledge as of the date hereof shall be deemed Excluded Liabilities and not
Assumed Liabilities.
(d) During the Environmental Survival Period, Purchaser's and
Seller's respective liabilities under paragraphs (a), (b) and (c) of this
Section shall be deemed to be Indemnifiable Losses subject to the
indemnification provisions and procedures of SECTIONS 7.02 and 7.03 hereof, and
the parties' obligations under indemnification provisions and procedures shall,
notwithstanding the provisions of SECTION 7.01 hereof, survive until the
termination of the Environmental Survival Period. After the termination of the
Environmental Survival Period, the provisions of SECTIONS 7.02 and 7.03 shall
cease to apply with respect to such respective liabilities of the parties,
except with respect to claims asserted prior to the termination of the
Environmental Survival Period. During the Environmental Survival Period,
Purchaser's and Seller's respective liabilities
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under paragraphs (a), (b) and (c) of this Section shall not be subject to the
"basket" and "cap" limitations contained in SECTIONS 7.04 and 7.06 hereof.
(e) Notwithstanding the provisions of SECTION 7.07, nothing in
this Agreement shall prohibit Seller from asserting in any legal proceedings, or
from causing Purchaser to be named a party to any such proceedings for the
purpose of asserting and establishing, that such Divisional Environmental
Liabilities referred to in paragraph (c) of this Section are Assumed Liabilities
and the sole responsibility of Purchaser.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Headings; Grammatical Usage
The descriptive headings of the several Articles and Sections
of this Agreement are inserted for convenience only and do not constitute a part
of this Agreement. In construing this Agreement, feminine or neuter pronouns
shall be substituted for those masculine in form and vice versa, and plural
terms shall be substituted for singular terms and vice versa, in any place in
which the context so requires.
Section 8.02. Notices
Any notices or other communications required or permitted
hereunder shall be given in writing and shall be sufficient if delivered
personally or sent by certified or registered mail, postage prepaid, or by
reputable overnight carrier, addressed as follows:
If to Seller, to:
Connectivity Products Incorporated
680 Mechanic Street, Suite 1201
Leominster, Massachusetts 01453
Attention: Mr. James S. Harrington
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Herbert M. Friedman, Esq.
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If to Purchaser or Parent, to:
Anicom, Inc. or
Reel Acquisition Corp.
6133 North River Road, Suite 1000
Rosemont, Illinois 60018
Attention: Mr. Donald C. Welchko
in each case, with a copy to:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661
Attention: Jeffrey R. Patt, Esq.
or to such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been given
when so personally delivered, or if mailed, three days after mailing, or if sent
by overnight courier, on the following business day; provided, that any notice
or communications changing any of the addresses set forth above shall be
effective and deemed given only upon its receipt.
Section 8.03. Assignment; Third Parties
This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interest, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Neither
this Agreement nor any other agreement contemplated hereby shall be deemed to
confer upon any Person not a party hereto or thereto any rights or remedies.
Section 8.04. Expenses and Transfer Taxes
(a) Except as expressly provided to the contrary in this
Agreement, all fees and expenses incurred by Seller in connection with this
Agreement shall be borne by Seller, and all fees and expenses incurred by
Purchaser or Parent in connection with this Agreement shall be borne by
Purchaser or Parent.
(b) Seller shall pay all Transfer Taxes which may be payable
in connection with the transactions contemplated by this Agreement, other than
any Transfer Taxes which may be payable in connection with the sale or other
transfer to Purchaser of any vehicles included in the Acquired Assets, which
Transfer Taxes shall be paid by Purchaser.
Section 8.05. Preamble; Preliminary Recitals
The preliminary recitals set forth in the preamble hereto are
hereby incorporated and made a part of this Agreement.
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Section 8.06. Reliance
All covenants, warranties and representations made herein by
any party shall be deemed to be material and relied upon by the other party,
notwithstanding any investigation by or knowledge of such other party.
Section 8.07. Obligation of Parent; Joint and Several
Obligations
Whenever this Agreement requires Purchaser to take any action,
such requirement shall be deemed to include an undertaking on the part of Parent
to cause Purchaser to take such action. Without limiting the generality of the
foregoing, Purchaser and Parent shall be jointly and severally liable and
responsible for all representations, warranties, covenants, agreements,
liabilities and obligations of Purchaser and Parent under this Agreement and the
Transaction Documents.
Section 8.08. Complete Agreement
This Agreement, which includes each of the Exhibits and
Schedules hereto, contains the entire understanding of the parties with respect
to the transactions contemplated hereby and supersedes all prior arrangements or
understandings with respect thereto (including without limitation the letter
agreement dated June 9, 1997 between Purchaser and Connectivity Technologies
Inc.). There are no restrictions, agreements, promises, warranties, covenants,
or undertakings other than those expressly set forth herein or therein.
Section 8.09. Amendments and Waivers
This Agreement may be amended or modified, and the terms
hereof may be waived, only by a written instrument signed by the parties hereto
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
Section 8.10. Counterparts
This Agreement may be executed in counterparts, all of which
shall be considered one and the same Agreement and each of which shall be deemed
an original.
Section 8.11. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT THAT THE TRANSFER AND
CONVEYANCE OF ANY REAL PROPERTY OR INTEREST THEREIN SHALL BE GOVERNED BY THE
LAWS OF THE STATE IN WHICH SUCH REAL PROPERTY IS SITUATED. EACH OF THE PARTIES
HERETO
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HEREBY AGREES THAT ANY SUIT, ACTION OR PROCEEDING FOR THE ENFORCEMENT OF THIS
AGREEMENT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF OR FEDERAL COURTS SITTING
IN THE STATE OF MICHIGAN. EACH PARTY HERETO IRREVOCABLY CONSENTS TO THE PERSONAL
JURISDICTION OF SUCH COURTS AND TO SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION
OR PROCEEDING BEING MADE UPON SUCH PARTY BY REGISTERED OR CERTIFIED MAIL AT THE
ADDRESS SPECIFIED IN SECTION 8.02 HEREOF. EACH PARTY HERETO HEREBY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING OR ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT COURT.
Section 8.12. Severability
This Agreement shall be deemed severable; the invalidity or
unenforceability of any term or provision of this Agreement shall not affect the
validity or enforceability of this Agreement or of any other term hereof.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the day and year first above written.
PURCHASER: SELLER:
REEL ACQUISITION CORP. CONNECTIVITY PRODUCTS
INCORPORATED
By: /s/ Carl E. Putnam By: /s/ James S. Harrington
---------------------- ----------------------
Carl E. Putnam James S. Harrington
President President and Chief
Executive Officer
PARENT:
ANICOM, INC.
By: /s/ Carl E. Putnam
----------------------
Carl E. Putnam
President and Chief
Operating Officer
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The following Exhibits and Schedules have been omitted from the Asset Purchase
Agreement:
Exhibits:
Exhibit A - Registration Rights Agreement
Exhibit B - Form of Supply Agreement
Exhibit C - Form of Bill of Sale and Assignment and Assumption Agreement
Exhibit D - Form of Shared Services and Facilities Agreement
Exhibit E - Form of Katten, Muchin & Zavis Opinion
Exhibit F - Form of Zimet, Haines, Friedman & Kaplan Opinion
Exhibit G - Form of Investor Representation Letter
Exhibit H - Form of Escrow Agreement
Schedules:
1.01(l) - Excluded Assets
2.02 - Seller's Bank Lenders
2.05 - Allocation Schedule
3.03 - Material Consents (Consents and Waivers of Third Parties)
4.03 - Consents and Approvals
4.05 - EEC's Unaudited Financial Statements
4.06 - Change in Conditions of EEC since March 31, 1997
4.07 - Legal Proceedings
4.08(a) - Encumbrances
4.08(b) - Seller's Facilities (Real Property Leased)
4.09 - Employee Benefit Plans
4.10(a) - Delinquent Tax Returns
4.11(a) - Division Contracts
4.11(b) - Related Parties, Validity, Material Defaults, Renegotiation,
Assignment of Division Contracts
4.12(a) - Patents and Trademarks
4.12(b) - Intellectual Property Infringement by EEC and Infringement of EEC's
Intellectual Property Rights by Third Parties
4.14 - Insurance Policies
4.17 - Labor Controversies
4.21 - EEC's Interest in Competitors, etc.
<PAGE> 1
CONNECTIVITY TECHNOLOGIES INC.
667 Madison Avenue
NEW YORK, NEW YORK 10021
NEWS RELEASE
FOR IMMEDIATE RELEASE CONTACT:
Monday, July 14, 1997 Donald R. Dwight
(603) 795-2800
CONNECTIVITY TECHNOLOGIES ANNOUNCES SALE
OF ENERGY ELECTRIC CABLE DIVISION TO ANICOM
New York, N.Y. - July 14 - Connectivity Technologies Inc. (OTC:BB:CVTK)
today announced that its 85 percent-owned operating subsidiary, Connectivity
Products, Inc., has sold its Energy Electric Cable division to a wholly-owned
subsidiary of Anicom, Inc. (NASDAQ:ANIC) for $29 million subject to adjustments.
The purchase comprised $10 million in cash, $2.0 million of Anicom's common
stock, and the paydown of $17 million of Connectivity Products' bank debt.
Connectivity Products also announced that it has entered into a supply
agreement with Anicom.
Connectivity Technologies will report a significant gain, a substantial
portion of which is sheltered by the company's net operating loss (NOL)
carryforward. Net proceeds of the sale will be used to retire bank indebtedness.
As a consequence of the reduced debt,the company's bank credit facility has been
amended and allows for additional acquisition funding capacity.
James S. Harrington, president and chief executive officer of
Connectivity Technologies, said "The company is now better positioned for growth
externally by acquisition, with our amended credit facility, and internally with
the exclusive focus on our core manufacturing and assembly businesses. We also
look forward to the potential for significant business from the combined
Anicom-EEC company, which is a large and growing force in the wire and cable
distribution industry."
Connectivity Technologies, which acquired its 85 percent interest in
Connectivity Products on May 31, 1996, manufactures and assembles wire and cable
products. Manufacturing is conducted by BSCC Corp. in Leominster, Mass., and
assembly activities are housed at the Energy Electric Assembly division in
Detroit. The major industrial markets served by the company are commercial and
residential security, factory automation, traffic and transit signal control and
audio systems.
-end-
SAFE HARBOR STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 This release contains, in addition to historical information,
forward-looking statements. These forward looking statements are subject to
risks and uncertainties, and actual results could differ materially from those
set forth in the forward-looking statements.
