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EXHIBIT 10
STOCK PURCHASE AGREEMENT
Among
MR. JOHN S. CARTER, JR.
MRS. LETITIA M. CARTER
ELECTRON FUSION DEVICES, INC.
TRUST 1988 FBO JOHN S. CARTER, III
TRUST 1988 FBO KATHERINE MARTINEZ
TRUST 1988 FBO PAMELA ROWE
TRUST 1988 FBO ELISABETH CARTER
TRUST 1991 FBO JOHN CARTER III
TRUST 1991 FBO KATHERINE MARTINEZ
TRUST 1991 FBO PAMELA ROWE
TRUST 1991 FBO ELISABETH CARTER
TRUST 1991 FBO JULIA MARTINEZ
TRUST 1991 FBO MARGARET MARTINEZ
TRUST 1994 JOHN CARTER, GRANTOR
TRUST 1994 LETITIA CARTER, GRANTOR
TRUST 1996 KATHERINE MARTINEZ, GRANTOR
TRUST 1996 PAMELA ROWE, GRANTOR
TRUST 1996 JOHN CARTER III, GRANTOR
TRUST 1996 ELISABETH CARTER, GRANTOR
TRUST 1996 LETITIA CARTER, GRANTOR
And
NORDSON CORPORATION
Dated September 21, 2000
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TABLE OF CONTENTS
Page
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1. Sale and Purchase of EFD Shares; Purchase Price 5
2. Payment of Purchase Price 5
(a) At Effective Time 5
(b) Following Delivery of Preliminary Effective Time Statement 2
(c) Upon Final Settlement of Any Adjustment in Purchase Price 2
(d) Nine (9) and Eighteen (18) Months After Effective Time 6
3. Adjustment in Purchase Price 6
(a) Preparation of Effective Time Statement 6
(b) Dispute Resolution 4
(c) Adjustment. 4
4. Ownership of the EFD Shares 5
5. General Representations and Warranties by the Shareholders 5
(a) Organization; Corporate Power; No Subsidiaries; Directors
and Officers 5
(b) No Conflict 5
(c) Capitalization 6
(d) Financial Statements of the EFD Entities; No Undisclosed
Liabilities 6
(e) Real Estate. 6
(f) Inventory of the EFD Entities 8
(g) Accounts Receivable 8
(h) Actions in Ordinary Course of Business; No Material
Adverse Change 9
(i) Title to Property 9
(j) No Litigation or Claims; No Governmental Investigation 10
(k) Product Warranties 10
(l) Contracts, Leases, and Licenses 10
(m) Intellectual Property 11
(n) Employee Benefits; No Union 12
(o) Compliance with Laws 13
(p) Taxes 13
(q) No Government Grant 14
(r) Corporate and Other Proceedings 14
(s) Computer Software and Databases 14
(t) No Finder's Fee or Brokerage Commission 14
(u) No other Representations or Warranties 14
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6. Representations and Warranties by Nordson 14
(a) Organization; Standing; Corporate Power 14
(b) Authority 14
(c) No Conflict 15
(d) Financing 16
(e) No Finder's Fee or Brokerage Commission 16
7. Covenants 16
(a) By the Shareholders 16
(b) By Both Parties 17
(c) No Shop 17
(d) Employment Agreements; Carter Consulting Agreement 17
(e) Section 338(h)(10) Election 17
(f) Excluded Assets 18
(g) Environmental Matters 19
(h) Nordson's Covenants 19
8. Nordson's Conditions to Closing 20
(a) Performance of Obligations 21
(b) Representations and Warranties Are True 21
(c) HSR Act 21
(d) Consents and Approvals 21
(e) Employment Agreements; Carter Consulting Agreement;
Employee Agreements 21
(f) Environmental Insurance 21
(g) Releases from Phantom Stock Holders 21
9. The Shareholders' Conditions to Closing 21
(a) Performance of Obligations 21
(b) Representations and Warranties Are True 21
(c) Employment Agreements; Carter Consulting Agreement 22
(d) HSR Act 22
(e) Environmental Insurance 22
(f) Releases from Phantom Stock Holders 22
10. Closing; Effective Time 22
11. Covenant Not to Compete 23
12. Survival of Representations, Warranties, and Covenants 23
13. Indemnification 24
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(a) Indemnification by the Shareholders 24
(b) Indemnification by Nordson 24
(c) Deductible 24
(d) Cap 25
(e) Insurance 25
(f) Right to Set-Off 25
(g) Recovery from Trusts 25
(h) Notice of Third-Party Claims 26
(i) Sole and Exclusive Remedy 26
14. Miscellaneous 27
(a) Expenses 27
(b) Best Knowledge of the EFD Parties 27
(c) Entire Agreement 27
(d) Waiver 27
(e) Governing Law; Dispute Resolution; Appointment of
Shareholder Representative 27
(f) Notices 28
(g) Confidentiality 29
(h) Notices to Third Parties and Publicity 29
(i) Assignment 29
(j) Table of Contents; Preamble; Headings 29
INDEX OF DEFINITIONS 34
LIST OF EXHIBITS 34
LIST OF SCHEDULES 34
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated September 21, 2000, is among MR. JOHN S.
CARTER, JR., an individual ("Mr. Carter), MRS. LETITIA M. CARTER, an individual
("Mrs. Carter"), ELECTRON FUSION DEVICES, INC., a Rhode Island corporation doing
business as EFD, Inc. ("EFD"), TRUST 1988 FBO JOHN S. CARTER, III, TRUST 1988
FBO KATHERINE MARTINEZ, TRUST 1988 FBO PAMELA ROWE, TRUST 1988 FBO ELISABETH
CARTER, TRUST 1991 FBO JOHN CARTER III, TRUST 1991 FBO KATHERINE MARTINEZ, TRUST
1991 FBO PAMELA ROWE, TRUST 1991 FBO ELISABETH CARTER, TRUST 1991 FBO JULIA
MARTINEZ, TRUST 1991 FBO MARGARET MARTINEZ, TRUST 1994 JOHN CARTER, GRANTOR,
TRUST 1994 LETITIA CARTER, GRANTOR, TRUST 1996 KATHERINE MARTINEZ, GRANTOR,
TRUST 1996 PAMELA ROWE, GRANTOR, TRUST 1996 JOHN CARTER III, GRANTOR, TRUST 1996
ELISABETH CARTER, GRANTOR, TRUST 1996 LETITIA CARTER, GRANTOR (each a "Trust"
and collectively, the "Trusts"), and NORDSON CORPORATION, a corporation
organized under the laws of the State of Ohio ("Nordson").
Mr. Carter, Mrs. Carter, EFD, and the Trusts (together, the
"Shareholders") collectively own all of the outstanding shares (the "EFD
Shares") of EFD, Dosage 2000, S.A.R.L., a France limited liability company
("Dosage"), and EFD International, Inc., a Rhode Island corporation ("EFDI" and,
together with EFD and Dosage, the "EFD Entities"). The number of EFD Shares
owned by each Shareholder in each of the EFD Entities is set forth in Schedule
5(c) - Capitalization. This Agreement provides for the purchase by Nordson (and,
in the case of a portion of the shares of Dosage, if necessary under French law,
a wholly owned subsidiary designated by Nordson) from the Shareholders of all of
the EFD Shares.
FOR GOOD AND VALUABLE CONSIDERATION, Nordson and the
Shareholders agree as follows:
1. Sale and Purchase of EFD Shares; Purchase Price. At the Effective
Time (as defined in Section 10), the Shareholders will transfer to Nordson (and,
in the case of a portion of the shares of Dosage, if necessary under French law,
a wholly owned subsidiary designated by Nordson) all of the outstanding EFD
Shares, free and clear of any lien, pledge, charge, equity, encumbrance, or
claim. In consideration for the EFD Shares, Nordson will pay to the Shareholders
cash in the amount of Two Hundred Eighty Million Dollars ($280,000,000.00),
subject to adjustment as provided in Section 3, less the amount paid by Nordson
to EFD for payment to the holders of Phantom Stock pursuant to Section 7(h)(v)
(the net amount being referred to as the "Shareholders' Portion").
The Shareholders' Portion will be allocated among the
Shareholders as set forth in Exhibit 1 - Purchase Price Allocation.
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2. Payment of Purchase Price. Nordson will pay the purchase price to
the Shareholders as follows:
(a) At Effective Time. At the Effective Time, Nordson will
pay to the Shareholders the sum of Two Hundred Sixty Seven Million Five Hundred
Thousand Dollars ($267,500,000.00) less the amount paid by Nordson to EFD for
payment to the holders of Phantom Stock.
(b) Following Delivery of Preliminary Effective Time
Statement. When Nordson delivers the Preliminary Effective Time Statement to the
Shareholders pursuant to Section 3(a), Nordson will pay to the Shareholders the
sum of (i) Two Million Five Hundred Thousand Dollars ($2,500,000.00) minus any
estimated decrease, or plus any estimated increase, in the purchase price based
on the Effective Time Tangible Net Equity shown in the Preliminary Effective
Time Statement (the "Initial Purchase Price Adjustment Payment"), plus (ii)
interest on the Initial Purchase Price Adjustment Payment from the Effective
Time to the date of payment at the United States Dollar three-month LIBOR rate
plus 0.375% based on the British Bankers Association (BBA) fixing at 11:00 a.m.
London time (Reuters reference page LIBOR01) (the "Agreed Upon Interest Rate").
(c) Upon Final Settlement of Any Adjustment in Purchase
Price. Immediately after the Shareholders accept or are deemed to have accepted
the Preliminary Effective Time Statement or promptly after resolution of any
dispute, as the case may be, in each case pursuant to Section 3(b), Nordson will
pay to the Shareholders the sum of (i) Two Million Five Hundred Thousand Dollars
($2,500,000.00), minus any Initial Purchase Price Adjustment Payment, minus any
decrease or plus any increase in the purchase price based on the Effective Time
Tangible Net Equity shown in the Effective Time Statement, plus (ii) interest on
the net amount from the Effective Time to the date of payment at the Agreed Upon
Interest Rate. If, however, the amount of any decrease in the purchase price
based on the Effective Time Tangible Net Equity shown in the Effective Time
Statement is greater than Two Million Five Hundred Thousand Dollars
($2,500,000.00), the Shareholders will make up the shortfall by paying to
Nordson the amount of the shortfall plus interest from the Effective Time to the
date of payment at the Agreed Upon Interest Rate.
(d) Nine (19) and Eighteen (18) Months After Effective Time.
Nine (9) months after the Effective Time, Nordson will pay to the Shareholders
the sum of Five Million Dollars ($5,000,000.00), minus any set-off as provided
in Section 13(f), plus interest on the net amount from the Effective Time to the
date of payment at the Agreed Upon Interest Rate. Eighteen (18) months after the
Effective Time, Nordson will pay to the Shareholders another Five Million
Dollars ($5,000,000.00), minus any set-off as provided in Section 13(f), plus
interest on the net amount from the Effective Time to the date of payment at the
Agreed Upon Interest Rate. Nordson will notify the Shareholders of any such
set-off and, in the event of a dispute, will deposit the disputed amount in
escrow as provided in Section 13(f).
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3. Adjustment in Purchase Price. The purchase price will be adjusted as
follows:
(a) Preparation of Effective Time Statement. Within sixty
(60) days after the Effective Time, Nordson will prepare and deliver to the
Shareholders a statement (the "Preliminary Effective Time Statement") showing
the combined tangible assets and the liabilities of the EFD Entities immediately
after the Effective Time, as well as the amount of any increase or decrease in
the purchase price proposed by Nordson. The Preliminary Effective Time Statement
will be prepared in accordance with generally accepted accounting principles
("GAAP"), and, to the extent permitted by GAAP, will be prepared on a basis
consistent with the audited combined balance sheet of the EFD Entities as of
December 31, 1999 attached as part of Schedule 5(d) - Financial Statements (the
"December 31, 1999 Balance Sheet"). In preparing the Preliminary Effective Time
Statement, (i) intercompany accounts between any EFD Entities and the liability
associated with payments to the holders of Phantom Stock will be excluded and
(ii) the one-half of the premium for the Environmental Insurance will be
included as an expense accrual and no prepaid expense or other asset will be
included with respect to the Environmental Insurance. In addition, the tangible
assets to be shown in the Preliminary Effective Time Statement will not include
the assets listed in Exhibit 3(a)(i) - Excluded Assets (the "Excluded Assets").
(b) Dispute Resolution. The Shareholders will have a period
of sixty (60) days after delivery of the Preliminary Effective Time Statement to
notify Nordson of any amount or item in the Preliminary Effective Time Statement
that he, she, or it disputes. Nordson agrees to make available to the
Shareholders, promptly at their request, all workpapers, schedules and
calculations related thereto. If the Shareholders fail to notify Nordson of a
dispute within the applicable sixty (60) day period, the Shareholders will be
deemed to have accepted the Preliminary Effective Time Statement as delivered by
Nordson. If the Shareholders notify Nordson of a dispute within the applicable
sixty (60) day period, Nordson and the Shareholders will endeavor in good faith
to resolve the dispute on an amicable basis. If Nordson and the Shareholders are
unable to resolve any such dispute within thirty (30) days after the
Shareholders notify Nordson of the dispute, either party may refer the dispute
for resolution to the office of PricewaterhouseCoopers LLP, an independent
accounting firm, in Providence, Rhode Island. Any determination by the
independent accounting firm, in the absence of manifest error, will be
conclusive and binding on the parties, without any right of appeal therefrom,
and will be specifically enforceable by the parties. Each of the parties hereto
will bear all costs and expenses incurred by it in connection with such
arbitration, except that the fees and expenses of the accounting firm will be
borne by the parties so that the Shareholders' share of such fees and expenses
equals the product of (x) and (y), where (x) is the aggregate amount of such
fees and expenses and (y) is a fraction, the numerator of which is the amount in
dispute that is ultimately unsuccessfully disputed by the Shareholders (as
determined by the
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accounting firm), and the denominator of which is the total value in dispute,
and Nordson will bear the balance of such fees and expenses. (The Preliminary
Effective Time Statement, as accepted by the Shareholders or adjusted to reflect
the resolution of any dispute, is hereinafter referred to as the "Effective Time
Statement.")
(c) Adjustment. If the Effective Time Tangible Net Equity is
less than the Peg Amount, the amount of the purchase price to be paid by Nordson
to the Shareholders will be decreased by the amount by which the Peg Amount
exceeds the Effective Time Tangible Net Equity. If the Effective Time Tangible
Net Equity is more than the Peg Amount plus Five Hundred Thousand Dollars
($500,000.00), the amount of the purchase price to be paid by Nordson to the
Shareholders will be increased by the amount by which the Effective Time
Tangible Net Equity exceeds the Peg Amount plus Five Hundred Thousand Dollars
($500,000.00). If the Effective Time Tangible Net Equity equals or exceeds the
Peg Amount, but does not exceed the Peg Amount by more than Five Hundred
Thousand Dollars ($500,000.00), the amount of the purchase price to be paid by
Nordson to the Shareholders will not be adjusted. For this purpose, "Effective
Time Tangible Net Equity" means the excess of (i) the book value of the tangible
assets of the EFD Entities as of the Effective Time, as shown in the Effective
Time Statement, over (ii) the book value of the liabilities of the EFD Entities
as of the Effective Time, as shown in the Effective Time Statement. "Peg Amount"
means Seventeen Million Dollars ($17,000,000.00); except that, if it is
determined (using the dispute resolution mechanism of Section 3(b) if necessary)
that a mistake was made in the December 31, 1999 Balance Sheet and that the
amount of the tangible net equity of the EFD Entities (after elimination of the
Excluded Assets) as of December 31, 1999, determined in accordance with GAAP is
actually greater than the tangible net equity (after elimination of the Excluded
Assets) shown in the December 31, 1999 Balance Sheet, then the "Peg Amount" will
be Seventeen Million Dollars ($17,000,000.00) plus the amount by which the
tangible net equity of the EFD Entities (after elimination of the Excluded
Assets) as of December 31, 1999, exceeds the tangible net equity (after
elimination of the Excluded Assets) shown in the December 31, 1999 Balance
Sheet.
4. Ownership of the EFD Shares. Mr. Carter and Mrs. Carter jointly and
severally represent and warrant to Nordson that they own beneficially and of
record the number of EFD Shares set forth opposite their names in Schedule5(c) -
Capitalization, and that they have the right to transfer to Nordson beneficial
and record ownership of those EFD Shares, free and clear of any lien, pledge,
charge, equity, encumbrance, or claim. The Trusts, jointly and severally
represent and warrant to Nordson that the Trusts own beneficially and of record
the number of EFD Shares set forth opposite the name of each Trust in
Schedule5(c) - Capitalization, and that each of them has the right to transfer
to Nordson beneficial and record ownership of those EFD Shares, free and clear
of any lien, pledge, charge, equity, encumbrance, or claim. The Shareholders,
jointly and severally represent and warrant to Nordson that the EFD Shares owned
by the Shareholders constitute all of the outstanding EFD Shares.
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5. General Representations and Warranties by the Shareholders. The
Shareholders further jointly and severally represent and warrant to Nordson as
follows:
(a) Organization; Corporate Power; No Subsidiaries;
Directors and Officers. Each EFD Entity is an entity duly organized under the
laws of the state, province and/or country set forth opposite its name on
Schedule 5(a) - Organization; Directors and Officers, and each EFD Entity has
all requisite corporate power and authority to own or lease its properties and
assets and to conduct its business as it is presently being conducted. Schedule
5(a) sets forth each state or jurisdiction in which each EFD Entity maintains an
office, has employees, or owns or leases property and sets forth each state or
jurisdiction where each EFD Entity is qualified to do business as a foreign
entity. Except as set forth in Schedule 5(a), no EFD Entity is required to be
qualified to do business as a foreign entity in any other jurisdiction except
those jurisdictions where the failure to be so qualified would not result in a
Material Adverse Change (as hereinafter defined) and each EFD Entity is in good
standing in each foreign jurisdiction in which it is so qualified. Except as set
forth in Schedule 5(a), no EFD Entity is a successor to any other corporation,
limited liability company, partnership or other entity. Except as set forth on
Schedule 5(a), no EFD Entity owns any capital stock of, or other equity interest
in, any corporation, limited liability company, partnership, or other entity.
The directors and officers of each EFD Entity are set forth in Schedule 5(a).
(b) No Conflict. Except as set forth in Schedule 5(b) -
Conflicts, neither the execution and delivery of this Agreement, nor the
completion of the transactions contemplated by this Agreement, will (i) violate,
conflict with, or constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under any agreement or commitment
(including any agreement or commitment made in connection with a proposed sale
or other disposition of any of the EFD Entities to any person or organization
other than Nordson, whether through a sale of assets or stock, a merger, or
other business combination) to which any of the Shareholders or any of the EFD
Entities (collectively, the "EFD Parties") is a party or by which any of them
may be bound, (ii) violate any law, rule, or regulation, or any judgment,
decree, or order, of any court or other governmental body, applicable to any of
the EFD Parties, (iii) result in any Encumbrance (as defined in Section 5(i))
upon the EFD Shares or any of the assets of the EFD Entities, or (iv) violate or
be in conflict with any provision of the organizational or governance documents
of any EFD Entity.
(c) Capitalization. Schedule 5(c) - Capitalization sets
forth for each EFD Entity (i) the authorized capital stock and (ii) the number
of shares of capital stock outstanding. Except as set forth in Schedule 5(c), no
EFD Entity has any other equity security of any class authorized, issued,
reserved for issue or outstanding. Except as set forth on Schedule 5(c), there
are (A) no outstanding options, offers, warrants, conversion rights, contracts,
agreements or other rights to subscribe for or to purchase from any EFD Entity,
or agreements obligating any EFD Entity to issue, transfer or sell (whether
formal
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or informal, written or oral, firm or contingent), shares of capital stock or
other securities of any EFD Entity (whether debt, equity or a combination of
debt and equity) or obligating any EFD Entity to grant, extend or enter into any
such agreement and (B) no agreements or other understandings (whether formal or
informal, written or oral, firm or contingent) which require or may require any
EFD Entity to repurchase any of its capital stock. There are no preemptive or
similar rights with respect to any EFD Entity's capital stock. Except as set
forth in Schedule 5(c), no EFD Party is a party to any voting agreements, voting
trusts, proxies or any other agreements, instruments or understandings with
respect to the voting of any shares of the capital stock of any EFD Entity, or
any agreement with respect to the transferability, purchase or redemption of any
shares of the capital stock of any EFD Entity.
(d) Financial Statements of the EFD Entities; No Undisclosed
Liabilities. Attached to this Agreement as Schedule 5(d) - Financial Statements
are the following financial statements of the EFD Entities (collectively, the
"Financial Statements"): (i) audited combined balance sheets of the EFD Entities
as of December 31, 1999, 1998, and 1997, (ii) audited combined income statements
of the EFD Entities for the years ended December 31, 1999, 1998, and 1997, (iii)
unaudited balance sheets of each EFD Entity as of July 31, 2000 (the "July 31,
2000 Balance Sheets"), and (iv) unaudited income statements of each EFD Entity
for the seven months ended July 31, 2000. These Financial Statements were
prepared in accordance with GAAP applied on a consistent basis, subject, in the
case of the July 31, 2000 financial statements, to normal year-end adjustments
that are not material in amount and the absence of footnotes. The balance sheets
included in these Financial Statements fairly present in all material respects
the financial position of each EFD Entity as of their respective dates, and the
income statements fairly present in all material respects the results of
operations of each EFD Entity for the periods indicated. No EFD Entity has any
liabilities or loss contingencies required to be disclosed in the Financial
Statements (including footnote disclosure) in accordance with GAAP, except for
liabilities shown in the July 31, 2000 Balance Sheets and current liabilities,
not unusual in nature or amount, incurred by any EFD Entity in the ordinary
course of business since July 31, 2000. At the Effective Time, no EFD Entity
will have any such liabilities or loss contingencies except for liabilities to
be shown in the Effective Time Statement.
(e) Real Estate.
(i) Except Permitted Encumbrances, each EFD Entity has good
and valid title to the real property identified as owned by it on Schedule
5(e)(i) - Owned Real Estate (the "Owned Real Property"). No EFD Entity has
agreed to purchase, nor is it obligated to purchase, from a third party any
other real property. As of the Effective Time, the Owned Real Property will be
free and clear of all Encumbrances other than Permitted Encumbrances (each as
defined in Section 5(i)). The Owned Real Property represents all of the real
property owned by the EFD Entities.
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(ii) Each EFD Entity is a tenant under leases (individually, a
"Lease," and, collectively, the "Leases") as identified on Schedule 5(e)(ii) -
Leases, which Leases pertain to the real property described on Schedule 5(e)(ii)
(the "Leased Real Property"). No EFD Entity leases any other real property. Each
EFD Entity has previously delivered or made available to Nordson a true and
complete copy of each Lease, and any other agreements related thereto, and,
except to the extent reflected in such other agreements or as otherwise approved
in writing by Nordson, the Leases have not been supplemented, modified or
terminated, and no condition exists with respect to the Leases that, with the
passage of time or giving of notice, or both, would constitute a default by any
EFD Entity under the Leases. Except as set forth on Schedule 5(e)(ii), no EFD
Entity is required to obtain any third party consents required under the Leases
for the EFD Entity to consummate the transactions contemplated herein. The Owned
Real Property and Leased Real Property are hereinafter collectively referred to
as the "Real Property."
(iii) Except as set forth on Schedule 5(e)(iii) - Exclusive
Possession of Owned Real Property, the EFD Entities are in exclusive possession
of the Owned Real Property. None of the material structures on the Owned Real
Property encroaches upon real property of another person or entity, and no
structure of any other person or entity encroaches upon any of the Owned Real
Property. To the best knowledge of the EFD Parties, the buildings and other
structures and improvements located on the Owned Real Property are not subject
to any material structural defects, and the Shareholders have delivered to
Nordson a written report from a structural engineer to this effect with respect
to the Owned Real Property located in Rhode Island. Except as set forth on
Schedule 5(e)(iii), there are no adverse or other parties in possession of the
Owned Real Property or any portion or portions thereof, and the Owned Real
Property is free and clear of any and all leases, licenses, occupants, or
tenants other than the EFD Entities. There are no pending or, to the best
knowledge of the EFD Parties, threatened actions by any governmental entity, or
similar proceedings, or litigation or other proceedings affecting the Owned Real
Property or any portion or portions thereof. All water, sewer, gas, electric,
telephone, drainage, and other utility equipment, facilities, and services
required by law or necessary for the operation of the Owned Real Property as
presently operated are installed and connected pursuant to valid permits, and no
notice has been received by or served on the EFD Parties regarding the
termination or material impairment of any such service. All easements necessary
for normal operations on the Owned Real Property as presently conducted exist
and are in full force and effect.
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(iv) The Owned Real Property is contiguous to and has direct
vehicular and pedestrian access to public roads or otherwise has direct
vehicular and pedestrian access to public roads by perpetual, appurtenant and
insurable easements, providing access to such roads for entry to and exit from
all plants, buildings and structures thereon, and further has access to all
appropriate public utilities, in each case to the extent necessary for the
conduct of the business of the EFD Entities as presently conducted.
(v) The business of the EFD Entities as presently conducted is
an allowable use of the Owned Real Property under all current zoning
requirements, including, without limitation, those pertaining to parking. The
Owned Real Property currently satisfies in all material respects all fire,
safety, and building code requirements. The EFD Entities have all occupancy
permits required for their current operations, and no new permits and no
building inspections will be required or result from the transactions
contemplated by this Agreement. To the best knowledge of the EFD Parties, there
are neither any (i) applications, ordinances, petitions, resolutions or other
matters pending before any governmental authority having jurisdiction to act on
zoning changes that would prohibit or make nonconforming the use of any of the
Owned Real Property as presently conducted nor (ii) any pending or threatened
compulsory purchase or demolition proceedings relating to the Owned Real
Property, or proposed sale in lieu thereof.
(f) Inventory of the EFD Entities. The value of all
inventory, including parts inventory, work in process, subassembly inventory,
and finished goods to be shown in the Effective Time Statement that is slow
moving (held for two years or more), excessive, or obsolete will be written down
to the lower of cost or net realizable market value in accordance with GAAP. All
of the inventory to be shown in the Effective Time Statement that is not written
down to the lower of cost or net realizable market value will be in generally
good and merchantable condition and usable or saleable in the ordinary course of
business consistent with past practices. Each EFD Entity has good title to all
of its inventory, free and clear of any Encumbrances other than Permitted
Encumbrances. The inventory is of a quality, quantity, and mix for such items
consistent with the prior business practices of each EFD Entity.
(g) Accounts Receivable. All of the accounts receivable
shown in the July 31, 2000 Balance Sheets, including trade receivables,
represent valid claims for goods sold or services rendered by the respective EFD
Entity (and all such accounts receivable to be shown in the Effective Time
Statement will represent such valid claims). The aggregate amount of the
accounts receivable, minus the sum of (i) the allowance for bad debts that is
shown in the Effective Time Statement and (ii) the amount of any recovery on
previously written off accounts receivable, will be collected within six months
after the Effective Time. If and to the extent that Nordson recovers
indemnification from the Shareholders
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for a failure to collect any such accounts receivable, Nordson will cause the
appropriate EFD Entity to assign the uncollected accounts receivable, together
with all previously written off accounts receivable, to the appropriate
Shareholders. If more than one invoice is outstanding for any customer, any
payment received from the customer will be first applied against the oldest
invoice, unless the payment clearly relates to a more recent invoice. A
receivable shall be deemed uncollected only to the extent it is a bad debt, i.e.
relates to an obligation on the part of the customer to pay for products
accepted and retained by the customer. A bad debt will not arise by operation of
a "credit memo" issued by an EFD Entity for the benefit of a customer in the
ordinary course, consistent with its past practice.
(h) Actions in Ordinary Course of Business; No Material
Adverse Change. Except as set forth on Schedule 5(h) - Certain Changes or
otherwise authorized by this Agreement, since July 31, 2000, each EFD Entity
has:
(i) Operated its business in the ordinary course as previously
and ordinarily conducted and has not incurred any debt or liability, or entered
into any contract, except in the ordinary course.
(ii) Used all reasonable efforts to maintain its relationships
with employees, distributors, sales representatives, customers, suppliers, and
others with whom it has business relations.
(iii) Not declared, paid, or agreed to declare or pay any
dividend.
(iv) Not redeemed or agreed to redeem any EFD Shares or other
equity interests in any EFD Entity.
(v) Not issued or agreed to issue any EFD Shares or other
equity interests in any EFD Entity or any options, warrants, convertible
securities, or other rights to acquire EFD Shares or other equity interests in
any EFD Entity.
(vi) Paid trade creditors in accordance with its normal credit
terms and collected from account debtors in accordance with its normal
collection practices.
(vii) Not increased the compensation or benefits (including
any severance or change in control benefits) of any directors, officers, or
employees, other than normal merit increases for employees who are not directors
or officers that are consistent in nature and amount with past practices.
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(viii) Not entered into or amended any agreement between an
EFD Entity, on the one hand, and any of the Shareholders or any person or
organization related to them, on the other.
Since July 31, 2000, there has not been any material adverse change in the
financial condition, results of operations or business of the EFD Entities,
taken as a whole (a "Material Adverse Change").
(i) Title to Property. Except for equipment subject to
financing leases or as described in Schedule 5(i) - Title Matters, each EFD
Entity has good and marketable title to all of its assets, including the assets
reflected in the July 31, 2000 Balance Sheets (except for inventory sold and
accounts receivable collected since July 31, 2000 in the ordinary course of
business), free and clear of any charge, equity, security interest, lien,
pledge, mortgage, restriction, option, or claim ("Encumbrance"), other than
Permitted Encumbrances. At the Effective Time, each EFD Entity will have good
and marketable title to all of its assets, including the assets reflected in the
Effective Time Statement, free and clear of any Encumbrance, other than
Permitted Encumbrances. Schedule 5(i) identifies any binders of title insurance,
title insurance policies, or title opinions or reports that are in the
possession of any of the EFD Parties and relate to any of the assets owned by
the EFD Entities; the Shareholders have previously delivered or made available
to Nordson copies of all such binders, policies, and opinions. Except for the
Excluded Assets and as set forth on Schedule 5(i), neither the Shareholders or
any person or organization related to them owns any of the assets or rights that
are used in or useful to the business of any EFD Entity. The assets owned by the
EFD Entities, together with assets held under any valid and subsisting licenses
or leases, comprise all assets necessary for the continuation of the respective
businesses of the EFD Entities as now carried on. "Permitted Encumbrances" means
(a) Encumbrances for taxes due but not yet payable as of the applicable date,
(b) Encumbrances arising by operation of law in the ordinary course of business,
such as mechanics' liens, materialmen's liens, carriers' liens, warehouseman's
liens, and similar liens, none of which are substantial in character, amount or
extent and none of which materially detract from the value or materially
interfere with the present use of the asset to which such Encumbrance attaches,
(c) Encumbrances reflected on the July 31, 2000 Balance Sheets or incurred in
the ordinary course of business since that date and reflected in the Effective
Time Statement, (d) matters of title respecting the Owned Real Property listed
as exceptions on those title insurance policies set forth on Schedule 5(i), (e)
pledges or deposits under workers' compensation or similar laws, unemployment
insurance or other types of social security or to secure the performance of
tenders, statutory obligations, bonds, bids, leases, contracts and similar
obligations, (f) all rights reserved to or vested in any governmental authority
to control or regulate any Real Property or interest therein, and (h) with
respect to the Leased Real Property, Encumbrances arising pursuant to the terms
of the applicable Lease. Subject to the limitations in Sections 12, 13(c),
13(d), 13(e) and 13(g), the Shareholders will jointly and severally indemnify
Nordson against any Losses (as defined in Section 13(a)) incurred by Nordson or
any EFD Entity as a result of any Permitted Encumbrances that represent
liabilities, whether fixed or contingent, of any
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<PAGE> 15
EFD Entity as of the Effective Time that are not reflected in the Effective Time
Statement.
(j) No Litigation or Claims; No Governmental Investigation.
Schedule 5(j) - Litigation describes all pending and, to the best knowledge of
the EFD Parties, threatened actions, suits, claims (including products liability
claims but excluding warranty claims in the ordinary course of EFD's business)
or proceedings against any EFD Entity or any Shareholder in relation to any EFD
Entity, any of its assets, or the EFD Shares and, to the best knowledge of the
EFD Parties, there exist no facts or circumstances which reasonably could be
anticipated to result in any such action, suit, claim or proceeding. To the best
knowledge of the EFD Parties, no EFD Entity is the subject of any investigation
or inquiry by any governmental authority. No third party has asserted, and to
the best knowledge of the EFD Parties, no third party has a valid basis upon
which to assert, any claim against any EFD Entity that, individually or in the
aggregate, will result in, or would reasonably be expected to result in, a
Material Adverse Change.
(k) Product Warranties. The standard warranty given by each
EFD Entity for products manufactured or sold by it is set forth in Schedule 5(k)
- Product Warranties. Schedule 5(k) also describes any warranty given by any EFD
Entity that varies in any material respect from the standard warranty. The
Effective Time Statement will include a reserve for product liabilities and
warranty claims; the amount of the reserve will be determined in accordance with
GAAP.
(l) Contracts, Leases, and Licenses. Schedule 5(l) -
Contract List identifies and describes the subject matter of each of the
following:
(i) Any contract with a customer or supplier that provides for
the purchase or sale of more than Fifty Thousand Dollars ($50,000) in goods or
services in any twelve (12) month period.
(ii) Any contract with a sales representative, sales agent, or
distributor.
(iii) Any contract that limits an EFD Entity's right to
compete, or to sell or distribute products, in any territory.
(iv) Any lease for real property.
(v) Any personal property lease with annual rentals in excess
of Fifty Thousand Dollars ($50,000).
(vi) Any partnership or joint venture contract.
(vii) Any contract between an EFD Entity, on the one hand, and
any of the Shareholders or any person or organization related to them, on
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the other, and any guaranty or other security given by an EFD Entity for any
obligation of any of the Shareholders or any such related person or
organization.
(viii) Any contract governing or securing indebtedness for
borrowed money, bank overdrafts, or letters of credit.
(ix) Any proposal, offer, letter of intent, agreement in
principal, agreement to negotiate, or other commitment by any of the
Shareholders or any EFD Entity relating to a potential sale or other disposition
of an EFD Entity, whether through a sale of assets or stock, a merger, or other
business combination.
(x) Any contract or agreement that was not negotiated at
"arm's length".
(xi) Any contract or agreement that contains change-in-control
provisions.
Except as described on Schedule 5(l), neither the execution and delivery of this
Agreement, nor the performance by the Shareholders of their obligations under
this Agreement, will result in the breach of, or give rise to a right of
termination under, any of these contracts, leases, or licenses. Except as
described on Schedule 5(l), each of these contracts, leases, and licenses is
valid and in full force and effect, each EFD Entity has performed all
obligations required to be performed by it thereunder, and, to the best
knowledge of the Shareholders, all of the other parties thereto have performed
all obligations required to be performed by them thereunder. Except as stated on
Schedule 5(l), to the best knowledge of the EFD Parties, none of these
contracts, leases, or licenses will be canceled before the end of its term.
(m) Intellectual Property.
(i) Schedule 5(m) - Intellectual Property identifies the
following: all (A) Intellectual Property Rights (as defined in subsection (x)
below) owned by the EFD Entities, (B) unexpired licenses or other agreements
relating to Intellectual Property Rights owned in whole or in part by the EFD
Entities that have been granted by any EFD Entity to any other person or
organization, and (C) other licenses or agreements relating to Intellectual
Property Rights to which any EFD Entity is a party or bound, together with a
list of all Encumbrances affecting, and rights of third parties to use, such
Intellectual Property Rights.
(ii) Schedule 5(m) also identifies the following: all (A)
Intellectual Property Rights not owned by the EFD Entities that are used by
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<PAGE> 17
an EFD Entity in its business, (B) Intellectual Property Rights that are owned
by any of the Shareholders or any person or organization related to the them,
that are used in or useful to the business of any EFD Entity, and (C) unexpired
licenses or other agreements relating to Intellectual Property Rights not owned
by the EFD Entities that have been granted to an EFD Entity by any other person
or organization, including the Shareholders. Except as set forth in Schedule
5(m), each EFD Entity possesses a valid and subsisting license to use all
Intellectual Property Rights not owned by that EFD Entity that are used by that
EFD Entity in its business, and all such licenses are free and clear of all
Encumbrances.
(iii) The Shareholders have delivered or made available to
Nordson copies of all licenses or agreements referred to in Sections 5(m)(i) and
5(m)(ii), including any applicable supplements and amendments. Each of these
licenses or agreements is valid and in full force and effect, each EFD Entity
has performed all of its obligations under the licenses and agreements, and, to
the best knowledge of the Shareholders, all of the other parties to the licenses
and agreements have also performed all of their respective obligations.
(iv) Except as set forth in Schedule 5(m), each EFD Entity
owns or has the right to use all of the Intellectual Property Rights used by it
in its business. Such ownership and right to use is free and clear of all
Encumbrances. As to the Intellectual Property Rights owned by any EFD Entity,
that EFD Entity has the unrestricted right to license such Intellectual Property
Rights to others.
(v) Each EFD Entity has taken all reasonable steps to
safeguard and maintain the secrecy and confidentiality of, or its proprietary
rights in, all of the Intellectual Property Rights owned or used by it. Except
as set forth on Schedule 5(m), each EFD Entity has obtained confidentiality and
invention assignment agreements in one of the two forms attached to Schedule
5(m) from all past and present employees involved in the creation or development
of the Intellectual Property Rights owned or used by that EFD Entity.
(vi) Except for licenses and agreements listed in Schedule
5(m) as royalty bearing, there are no royalties, honoraria, fees, or other
payments payable by any EFD Entity to any person or organization by reason of
the ownership, use, license, sale, or disposition of any Intellectual Property
Rights, other than maintenance and prosecution fees payable to governmental
bodies.
(vii) No EFD Entity is infringing the right or claimed right
of
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<PAGE> 18
any other person or organization with respect to any Intellectual Property
Rights. To the best knowledge of the EFD Parties, the use by the EFD Entities of
the Intellectual Property Rights anticipated to derive from research and
development projects being conducted by the EFD Entities will not infringe the
right or claimed right of any other person or organization with respect to any
Intellectual Property Rights. Except as set forth on Schedule 5(m), no EFD
Entity has received notice of, any alleged or claimed infringement by any other
person or organization with respect to any Intellectual Property Rights that
relate to any product or process manufactured, used, sold, or under development
by or for any EFD Entity in connection with or in any way relating to the
business of any EFD Entity.
(viii) None of the Shareholders nor any independent
contractors who have performed services for any EFD Entity has any right, title,
or interest in the Intellectual Property Rights owned or used by any EFD Entity.
(ix) The execution, delivery, and performance of this
Agreement, and the completion of the transactions contemplated by this
Agreement, will not (A) breach, violate, or conflict with any agreement
governing the Intellectual Property Rights owned or used by any EFD Entity, (B)
cause the forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any license or other right to use Intellectual Property Rights
that are used by any EFD Entity in its business, or (C) impair the right of any
EFD Entity after the Effective Time to use, sell, license, or dispose of any of
Intellectual Property Rights that are owned by any EFD Entity or used by any EFD
Entity in its business.
(x) For purposes of this Agreement, the term "Intellectual
Property Rights" means any and all intellectual property rights, including but
not limited to patents, patent applications, patent rights, trademarks,
trademark applications, trade names, service marks, service mark applications,
domain names, copyrights, copyright applications, publication rights, computer
programs and other computer software (including source codes and object codes),
inventions, know how, trade secrets, technology, proprietary processes, and
formulae.
(n) Employee Benefits; No Union. Schedule 5(n) - Employee
Benefits identifies and describes all incentive compensation, health and
welfare, disability, life insurance, severance, retirement, pension, and other
benefit plans and arrangements maintained by the EFD Entity for present or
former employees of each EFD Entity or their dependents. Each such plan or
arrangement is in substantial compliance with law and has been administered
substantially in accordance with law and the provisions of the plan or
arrangement. Except as set forth on Schedule 5(n), no EFD Entity is obligated to
provide
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<PAGE> 19
any retiree health or welfare benefits to any present or former employees or
their dependents for periods extending beyond their retirement or other
termination of service, other than coverage mandated by applicable federal or
state law. Schedule 5(n) identifies and describes all employment, consulting, or
severance agreements or arrangements (whether written or oral) to which each EFD
Entity is a party. Schedule 5(n) also describes the way in which each EFD Entity
funds, or insures against, workers' compensation liabilities. Except as set
forth on Schedule 5(n), the sale and purchase of shares pursuant to this
Agreement will not result in the vesting or acceleration of any benefits for
present or former employees of any EFD Entity or their dependents. None of the
employees of any EFD Entity is represented by a labor union, and, to the best
knowledge of the EFD Parties, no effort is under way to bring any such employees
into a union. Except as reflected in the Effective Time Statement, no EFD Entity
has any liability, fixed or contingent, for employee benefits or other
employment matters, including employee bonuses, management bonuses, pensions,
workers' compensation, and all other benefits, other than liabilities fully
accrued or reserved against in the July 31, 2000 Balance Sheets and current
liabilities, ordinary in nature and amount, accrued since that date in the
ordinary course of business. At the Effective Time, no EFD Entity will have any
liability, fixed or contingent, for employee benefits or other employment
matters, including employee bonuses, management bonuses, pensions, workers'
compensation, all other benefits and accruals for vacation and sick pay, other
than liabilities to be fully accrued or reserved against in the Effective Time
Statement.
(o) Compliance with Laws. Each EFD Entity complies with all
applicable laws, including but not limited to laws relating to employment
practices, product safety, and safety in the work place. No EFD Entity has (and
at the Effective Time will not have) any liability, fixed or contingent, for a
violation of any laws applicable to it. This representation does not cover
compliance with those laws that are the subject of the representations in
Sections 5(a) (Organization), 5(e) (Real Estate), 5(n) (Employment Benefits) and
5(p) (Taxes) or laws relating to environmental protection or exposure to
hazardous materials, which are covered by Section 7(g).
(p) Taxes. Each of EFD and EFDI has been a validly electing
S corporation within the meaning of Section 1361 and 1362 of the Internal
Revenue Code of 1986, as amended (the "Code"), for at least ten years and will
be an S corporation up to the Effective Time, but will not be a validly existing
S corporation upon consummation of the purchase of the EFD Shares at the
Closing. Each EFD Entity has filed all Tax returns and reports (including
information returns and reports) ("Returns") required to be filed by it on or
before the date of this Agreement and has paid or withheld all Taxes required to
be paid or withheld with respect to Tax periods ending on or before the date of
this Agreement. As of the time of filing, all such Returns correctly reflected
the income (or other measure of Tax) and any other information required to be
shown thereon. Except as set forth in Schedule 5(p) - Tax Matters, no
agreements, waivers, or other arrangements with any governmental authority
providing for an extension of time for filing any Returns or the assessment of
any Tax or Tax deficiency is presently in effect, no Tax deficiency has been
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asserted by a governmental authority, and no actions, suits, proceedings,
investigations, or claims are pending or, to the best knowledge of the EFD
Parties, threatened against any EFD Entity with respect to any Tax or
assessment. No EFD Entity has any liability for Taxes arising out of membership
or participation in any consolidated, affiliated, combined, or unitary group.
The last federal income tax Return of each EFD Entity audited by the Internal
Revenue Service is as set forth in Schedule 5(p). Accruals for Taxes shown on
the July 31, 2000 Balance Sheets are sufficient to cover all liabilities, fixed
or contingent, of each EFD Entity for Taxes attributable to periods ending on or
before July 31, 2000, including any liability arising out of the underpayment of
Taxes for any of those periods, and, since July 31, 2000, no EFD Entity has
incurred any liability for Taxes that is unusual in nature or amount. The
Effective Time Statement will include accruals for Taxes that are sufficient to
cover all liabilities, fixed or contingent, of each EFD Entity for Taxes
attributable to periods ending on or before the Effective Time, including any
liability arising out of the underpayment of Taxes for any of those periods. Any
prepaid Taxes or other Tax assets included in the July 31, 2000 Balance Sheets
were (and any prepaid Taxes or other Tax assets to be included in the Effective
Time Statement will be) properly recorded and reflect value to the appropriate
EFD Entity in the amount shown. All payments to the Shareholders have been
properly characterized for Tax purposes, and no EFD Entity has liability for
Taxes with respect to those payments. Except as set forth on Schedule 5(p), none
of the EFD Entities have, in the past 10 years, (i) acquired any assets from
another corporation in a transaction in which the EFD Entity's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets in the hands of the transferor or (ii) acquired the
stock of any corporation which is a qualified subchapter S subsidiary. For
purposes of this Section 5(p), "Taxes" includes any federal, state, county, or
local net income, profits, alternative or add-on minimum, gross receipts,
capital, estate, excise, property, sales, use, import, ad valorem, transfer,
franchise, license, social security, unemployment insurance, workers'
compensation, withholding taxes, payroll, and employment, premiums, and other
amounts payable to a governmental authority including costs, charges, interest,
fines, penalties, and expenses incidental or relating to such taxes.
(q) No Government Grant. No EFD Entity has applied for or
received any grant, subsidy, tax abatement, or allowance from any governmental
authority for which it may be liable for a reduction, forfeiture, or repayment.
(r) Corporate and Other Proceedings. All of the corporate
and other proceedings of each EFD Entity are (and at the Effective Time will be)
proper and complete in all material respects and reflect (and at the Effective
Time will reflect) transactions by each EFD Entity in a manner consistent in all
material respects with law and the Tax Returns filed by each EFD Entity and the
Shareholders.
(s) Computer Software and Databases. Schedule 5(s) -
Computer Software and Databases identifies all material computer software and
databases owned, licensed, leased, internally developed, or otherwise used in
connection with the business of each
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EFD Entity ("Computer Software and Databases"). Each EFD Entity owns, or has the
right to use pursuant to valid and subsisting licenses or leases, all Computer
Software and Databases and related documentation that are materially necessary
to conduct its business as presently conducted. The Computer Software and
Databases perform in all material respects in accordance with the documentation
used in connection therewith, are free in all material respects of defects in
programming and operation, and are fit in all material respects for the purposes
for which they are used. The Computer Software and Databases and all computer
hardware used by each EFD Entity process dates correctly, including century
recognition, calculations that accommodate same century and multi-century
formulas and date values, and interface values that reflect the century and
century changes.
(t) No Finder's Fee or Brokerage Commission. No EFD Entity
nor any Shareholder has any obligation to pay a finder's fee or brokerage
commission in connection with the transactions contemplated by this Agreement.
(u) No Other Representations or Warranties. Nordson
acknowledges that the representations and warranties made in this Section 5 are
the sole representations and warranties of the EFD Parties made hereunder, and
the only representations and warranties upon which Nordson will be permitted to
rely.
6. Representations and Warranties by Nordson. Nordson represents and
warrants to the Shareholders, as follows:
(a) Organization; Standing; Corporate Power. Nordson is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Ohio and has the necessary corporate power to execute and
deliver this Agreement and to perform its obligations under this Agreement.
(b) Authority. This Agreement been duly authorized by all
necessary corporate action on the part of Nordson.
(c) No Conflict. Neither the execution and delivery of this
Agreement, nor the completion of the transactions contemplated by this
Agreement, will (i) violate, conflict with, or constitute a default (or an event
that, with notice or lapse of time or both, would constitute a default) under
any agreement or commitment (including any commitment made in connection with a
proposed sale or other disposition of Nordson, whether through a sale of assets
or stock, a merger, or other business combination) to which Nordson is a party
or by which it may be bound, (ii) violate any law, rule, or regulation, or any
judgment, decree, or order, of any court or other governmental body, applicable
to Nordson, (iii) result in any Encumbrance upon any of the assets of Nordson,
or (iv) violate or be in conflict with any provision of the articles of
incorporation or regulations of Nordson.
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(d) Financing. Nordson has sufficient borrowing capacity to
finance the payment of the purchase price.
(e) No Finder's Fee or Brokerage Commission. Nordson has no
obligation to pay a finder's fee or brokerage commission in connection with the
transactions contemplated by this Agreement.
7. Covenants.
(a) By the Shareholders. From the date of this Agreement to
the Effective Time, except as expressly provided in this Agreement or as
otherwise agreed in writing by Nordson, the Shareholders will:
(i) Operate Businesses in Ordinary Course; Maintain Business
Relationships; Etc. Cause each EFD Entity (A) to operate its business in the
ordinary course, as previously and ordinarily conducted, (B) to use all
reasonable efforts to maintain its relationships with employees, distributors,
sales representatives, customers, suppliers, and others with whom it has
business relations, (C) not to declare, pay, or agree to declare or pay any
dividends, except as provided in Section 7(f), (D) not to redeem or agree to
redeem any EFD Shares or other equity interests in any EFD Entity, (E) not to
issue or agree to issue any EFD Shares, any other equity interests in any EFD
Entity, or any options, warrants, or other rights to purchase EFD Shares or
other equity interest in any EFD Entity, (F) to pay trade creditors in
accordance with each EFD Entity's normal credit terms and to collect from
account debtors in accordance with each EFD Entity's normal collection
practices, (G) not to borrow any funds in amounts exceeding normal working
capital requirements, (H) not to change the compensation or benefits (including
any severance or change in control benefits) of its directors, officers, or
employees, other than normal merit increases to employees who are not directors
or officers that are consistent in nature and amount with past practices, (I)
not to enter into any contract, lease, or license of the type required to be
disclosed pursuant to Section 5(l) (Nordson will promptly respond to a request
to consent to any such contract, lease, or license and will not unreasonably
withhold its consent), (J) not to make any payments to any of the Shareholders
or any person or organization related to them, except for the payment of
compensation at existing rates in the ordinary course of business and for the
payment of rent under the existing lease for the Real Property, and (K) from
time to time to consult with Nordson about material decisions affecting its
business. Nordson acknowledges that it has approved in concept an expansion of
EFD's Lincoln facilities, although final plans for that expansion have not been
completed or approved by Nordson; the Shareholders will not proceed with the
expansion without Nordson's approval of such plans, which approval will not be
unreasonably withheld.
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(ii) Assist in Nordson's Investigation. Cause each EFD Entity
to continue to furnish Nordson with information about each EFD Entity and its
business, assets, and liabilities and to permit Nordson's representatives to
review its books and records; to talk with its employees to facilitate
consummation of the transactions contemplated hereby and to visit its
facilities. Nordson will conduct its investigation in a manner that does not
disrupt the business of any EFD Entity and will preserve the confidentiality of
all information that it receives from each EFD Entity or the Shareholders.
(iii) Patent Matters. Cause each EFD Entity to permit Nordson
to work with each EFD Entity in relation to its existing, pending, and proposed
patent portfolio (including patents and patents applications) and to assist in
the review and preparation of all registrations and filings in connection
therewith.
(b) By Both Parties.
(i) From the date of this Agreement to the Effective Time,
unless otherwise agreed in writing by the parties, Nordson and the Shareholders
will use all reasonable efforts to satisfy their respective conditions to
closing at or before October 30, 2000. Nordson and the Shareholders will notify
each other of any event that occurs, or condition that comes to their attention,
that may delay the Effective Time or that constitutes a breach of their
respective representations and warranties in this Agreement and will use all
reasonable efforts to mitigate any such delay or to cure any such breach.
(ii) Without limiting the foregoing, Nordson will, and the
Shareholders will cause each EFD Entity to, (A) make the filings required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) comply at the earliest practicable date with any request by the
Federal Trade Commission or the Department of Justice for additional information
or documents under the HSR Act, and (C) cooperate with the other party in
connection with making any filing under the HSR Act and in connection with the
resolution of any investigation or other inquiry by the Federal Trade
Commission, the Department of Justice, or any other governmental authority.
(iii) Each party will give prompt written notice to the others
of any material adverse development causing a breach of any of its own
representations and warranties in Section 4, 5 or 6. No disclosure by any party
pursuant to this Section 7(b)(iii), however, shall be deemed to prevent or cure
any misrepresentation or breach of warranty.
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(c) No Shop. The Shareholders will not, and will cause each
EFD Entity and each EFD Entity's directors, officers, employees, agents, and
advisors not to, solicit offers from, negotiate with, execute agreements with,
or provide non-public information to, any party other than Nordson with respect
to the possible sale or other disposition of any EFD Entity, whether through a
sale of stock or assets, a merger, or other business combination. The
Shareholders will, and will cause each EFD Entity and its directors, officers,
employees, agents, and advisors to, cease any current discussions with any party
other than Nordson concerning any such sale or other disposition.
(d) Employment Agreements; Carter Consulting Agreement. At
the Effective Time, each of the persons listed on Exhibit 7(d)(i) - List of
Employees with Employment Agreements will enter into an employment agreement
with EFD in the form of Exhibit7(d)(ii) - Form of Employment Agreements (the
"Employment Agreements"), and Mr. Carter and EFD will enter into a consulting
agreement in the form of Exhibit 7(d)(iii) - Carter Consulting Agreement (the
"Carter Consulting Agreement").
(e) Section 338(h)(10) Election.
(i) Each of the EFD Entities and the Shareholders will join
with Nordson in making an election under Section 338(h)(10) of the Code (and any
corresponding election under state and local tax laws) with respect to the
purchase and sale of the EFD Shares under this Agreement. Nordson and the
Shareholders agree that, for federal and state Tax purposes, the purchase and
sale of the EFD Shares pursuant to this Agreement will be treated as a purchase
and sale of the assets of each EFD Entity in accordance with the provisions of
Code Section 338 generally and Code Section 338(h)(10) specifically. The
Shareholders will include any income, gain, loss deduction, or other Tax item
resulting from the Section 338(h)(10) election on their Tax returns to the
extent required by law.
(ii) The EFD Entities and the Shareholders will not revoke
EFD's election to be taxed as an S corporation under Sections 1361 and 1362 of
the Code and will not take any action (other than a sale of the EFD Shares under
this Agreement) that would result in the termination of EFD's or EFDI's status
as an S corporation.
(iii) Nordson and the Shareholders agree that the fair market
value of the assets of each EFD Entity for purposes of allocating the
consideration to be paid for, and the amount realized on the sale of, the assets
of the EFD Entities (the "Assets") in accordance with the provisions of Code
Sections 1060(a) and 338(b)(5) will be as set forth in Exhibit 7(e) - Allocation
of Purchase Price for Tax Purposes. The fair market valuations
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of the Assets agreed upon pursuant to this Section 7(e) will be the fair market
valuations of such Assets for Tax purposes and will be binding upon the
Shareholders and Nordson as provided in this Agreement.
(iv) Neither the Shareholders nor Nordson will take a position
in any tax proceeding, tax audit or otherwise inconsistent with the fair market
values described in the preceding paragraph; provided, however, that nothing
contained herein will require the Shareholders or Nordson to contest any
challenge to such values beyond, or otherwise than by the exhaustion of,
administrative remedies before any taxing authority or agency, and neither the
Shareholders nor Nordson will be required to litigate before any court any
proposed deficiency or adjustment by taxing authority agency which challenges
such fair market values. In the event that any claim is made by any taxing
authority against either Nordson or any EFD Entity on the one hand, or the
Shareholders, on the other hand, that, if successful, would have the effect of
altering such fair market values, then the party that is the subject of such
claim (the "Involved Party") will give notice thereof to the other party (the
"Other Party") in writing within the ten business days thereof. Thereafter, the
Involved Party will consider in good faith any request or suggestion by the
Other Party for any conference, hearing or proceeding relating to such contest,
will (to the extent it is feasible to do so) permit the Other Party to
participate therein at such Other Party's expense, will not object to such Other
Party's submission of briefs and memoranda of law relating thereto, and will
provide the Other Party with any relevant information reasonably requested by
such Other Party.
(v) Nordson and the Shareholders each agree to prepare and
file (and cause the EFD Entities to file, as applicable) all Internal Revenue
Service forms and the required schedules thereto, and all requisite state and
local forms and schedules (the "Forms") required to be filed by either or both
of them (or any EFD Entity) providing for treatment of the purchase and sale of
the EFD Shares as purchases and sales of Assets in accordance with the
provisions of this Section 7(e). Nordson will request in writing from the
Shareholders, or the Shareholders will request in writing from Nordson, any
information (reasonably within the knowledge or possession of the Person from
whom requested) necessary to complete the Forms, which information will be
provided no later than thirty days following any such request. All such Forms
will be prepared consistent with the fair market valuations of the Assets
determined under this Section 7(e).
(f) Excluded Assets. Prior to the Effective Time, the
Shareholders will cause EFD (or the appropriate EFD Entity) to sell to the
appropriate Shareholders or their assignees those assets listed on Exhibit
3(a)(i) - Excluded Assets, and to distribute all of
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the cash and cash equivalents to the Shareholders as dividends. Any liability of
the EFD Entities (whether for Taxes or otherwise) resulting from such transfer
will be included as a liability in the Effective Time Statement.
(g) Environmental Matters.
(i) Environmental Audits; Remediation. Prior to the execution
and delivery of this Agreement, phase II environmental audits were completed
with respect to all of the Real Property at Nordson's expense. Copies of the
audit reports are attached as Exhibit 7(g)(i) - Environmental Audit Reports (the
"Audit Reports"). Such reports disclosed levels of arsenic at the Owned Real
Estate located at 823-825 Waterman Avenue, East Providence, Rhode Island and 977
and 985 Waterman Avenue, East Providence, Rhode Island in excess of reportable
levels under regulations issued by the Rhode Island Department of Environmental
Management (the "DEM"). EFD shall report such conditions to DEM as required by
such DEM regulations. Notwithstanding any provisions in this Agreement to the
contrary, any action taken by DEM in respect of or in response to such reporting
shall not constitute a Material Adverse Change or other condition to Nordson's
obligation to complete the purchase of the EFD Shares under this Agreement.
(ii) Environmental Insurance. Nordson has received a binder
from Indian Harbor Insurance Company to provide insurance against certain
environmental risks (the "Environmental Insurance"). The terms of the
Environmental Insurance are as set forth in the binder attached to Exhibit
7(g)(ii) - Terms of Environmental Insurance. Such coverage is conditional only
on consummation of the transactions contemplated hereby and payment of the
premium therefor. Nordson and EFD will each pay one-half (1/2) of the premium
for the Environmental Insurance. Subject to the limitation in Section 13(c), the
Shareholders and Nordson will share equally the amount of the deductible for the
Environmental Insurance, but only as and to the extent that Nordson or EFD
incurs losses, liabilities, or claims of the type that would have been covered
by the Environmental Insurance but for the deductible. Except for its share of
the premium and deductible for the Environmental Insurance, the Shareholders
will have no liability to Nordson or EFD for environmental losses, liabilities,
or claims, other than those covered by Section 7(g)(iii).
(iii) Liability to Employees for Exposure to Hazardous
Materials and Substances. Subject to the limitations in Sections 12, 13(c),
13(d), 13(e) and 13(g), the Shareholders will jointly and severally indemnify
Nordson against any Losses (as defined in Section 13(a)) incurred by Nordson or
EFD arising out of any exposure, prior to the
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Effective Time, of any employee of an EFD Entity to hazardous materials or other
substances during the course of his or her employment with EFD. Nordson and EFD
will be solely responsible for any Losses arising out of any such exposure after
the Effective Time.
(h) Nordson's Covenants.
(i) Director and Officer Indemnification. Nordson agrees that
all rights to indemnification existing in favor of the present or former
directors, officers and employees of any EFD Entity (as such) or present or
former directors of any EFD Entity serving or who served at any EFD Entity's
request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, as
provided in such EFD Entity's charter or bylaws as in effect on the date hereof,
with respect to matters occurring at or prior to the Effective Time, will
survive the Effective Time and will continue in full force and effect and
without modification (other than modifications which would enlarge the
indemnification rights) for a period of not less than the statutes of
limitations applicable to such matters, and Nordson will comply fully with its
obligations hereunder and cause each EFD Entity to comply with its obligations
thereunder. In addition, Nordson will (or will cause each EFD Entity to)
periodically advance expenses as incurred with respect to the foregoing
(including with respect to any action to enforce rights to indemnification or
the advancement of expenses) to the fullest extent permitted under applicable
law; provided, however, that the person to whom the expenses are advanced
provides an undertaking to repay such advance if it is ultimately determined
that such person is not entitled to indemnification. Notwithstanding the
foregoing, no Shareholder will be entitled to indemnification from the EFD
Entity for claims arising out of breach of this Agreement or claims as to which
such Shareholder is obligated to make an indemnification payment under Section
13.
(ii) EFD Insurance. For a period of eighteen (18) months
following the Effective Time, Nordson will cause each of the EFD Entities to
continue in full force and effect those insurance policies listed on Schedule
7(h)(ii)- Insurance Policies (the "Insurance Policies"), except that Nordson or
any EFD Entity may modify or replace any Insurance Policy if such modification
or replacement policy provides (A) a comparable or greater scope of coverage,
(B) comparable or greater policy limits, and (C) a comparable or lower
deductible.
(iii) Payment of Accrued Bonuses. EFD pays annual incentive
bonuses to employees, and Schedule 5(n) sets forth the names of the executive
and managerial employees entitled to receive these bonuses for
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year 2000 and the amount of the bonus accrued for each of them through the
Effective Time. Schedule 5(n) also includes an estimate of the aggregate bonuses
payable to all other employees of the EFD Entities. At the instruction of the
Shareholders, Nordson will cause EFD to pay some, all or none of these accrued
bonuses immediately prior to the Effective Time. The Effective Time Statement
will include an accrual in the amount of the accrued bonuses. Any accrued
bonuses not paid prior to the Effective Time will be paid as soon as practicable
after the Effective Time.
(iv) Employee Benefits. For a period of three (3) years
following the Effective Time, Nordson will cause each of the EFD Entities to
maintain the benefit plans and arrangements listed on Schedule 5(n) (other than
plans and arrangements relating to cash compensation and bonuses), except that
Nordson or any EFD Entity may replace or modify any such plan or arrangement so
long as such replacement or modification does not result in a decrease in
benefits, in the aggregate, provided to the employees who participate in such
plan or arrangement.
(v) Phantom Stock. Immediately prior to the Closing, Nordson
will transfer the aggregate amount of $27,258,665.90 to EFD, and EFD will pay to
each holder of Phantom Stock of EFD (a "Phantom Stock Holder") the amount set
forth opposite his or her name on Exhibit 7(h)(v) - Payments to Holders of
Phantom Stock.
(vi) Access to Records. Nordson will, and will cause each of
the EFD Entities to, allow the Shareholders and their representatives to have
access to and obtain copies of all records reasonably necessary to allow the
Shareholders to prepare and file Tax returns with respect to the operations of
the EFD Entities for the period ending on the Effective Time.
(vii) Arrangements with Contract Fusion. Nordson will cause
EFD to maintain for up to three (3) years, including all renewal options, from
the Effective Time, renewable annually during such three-year period at the
option of Contract Fusion, Inc. ("CFI"), on terms no less favorable to CFI than
as exist as of the date of this Agreement, the arrangements with CFI with
respect to (A) its lease of the facilities at 977 Waterman Avenue described on
Schedule 5(e)(iii) (the language concerning termination of such lease upon a
change of control notwithstanding), (B) administrative services, as described on
Schedule 5(l)(vii), (C) the Distributor Agreement set forth on Schedule 5(l)(ii)
and (D) the intercompany pricing described on Schedule 5(l)(vii), consistent
with EFD's past practice. CFI is an intended third party beneficiary of this
covenant.
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8. Nordson's Conditions to Closing. Nordson's obligation to complete
the purchase of the EFD Shares under this Agreement is conditioned upon the
satisfaction or waiver by Nordson of the following conditions:
(a) Performance of Obligations. The Shareholders have
performed in all material respects the obligations under this Agreement that are
to be performed by them at or before the Effective Time.
(b) Representations and Warranties Are True. The
representations and warranties made by the Shareholders in this Agreement
continue to be true in all material respects on the Effective Time as though
they were made as of the Effective Time, without giving effect to any
supplemental disclosure pursuant to Section 7(b)(iii), and Nordson has received
from the Shareholders a certificate to this effect dated as of the Effective
Time.
(c) HSR Act. The waiting period or periods under the HSR Act
have expired or been terminated early, and neither the Federal Trade Commission,
the Justice Department, or any other governmental authority has advised Nordson
that it will seek to enjoin the sale of the EFD Shares to Nordson under this
Agreement, require any significant divestiture by Nordson or any EFD Entity, or
impose restrictions on the operation of any business by Nordson or any EFD
Entity.
(d) Consents and Approvals. All material consents and
approvals of third parties, including governmental authorities, required in
connection with the sale of the EFD Shares to Nordson under this Agreement have
been obtained.
(e) Employment Agreements; Carter Consulting Agreement;
Employee Agreements. Those individuals listed on Exhibit 7(d)(i) have executed
and delivered to EFD the Employment Agreements, Mr. Carter has executed and
delivered to EFD the Carter Consulting Agreement and standard Nordson employee
agreements have been signed by substantially all other employees of the EFD
Entities in the following positions: marketing, sales, engineering, research and
development, and salaried supervisory and managerial personnel.
(f) Environmental Insurance. Nordson has obtained the
Environmental Insurance on the terms set forth in Exhibit 7(g)(ii).
(g) Releases from Phantom Stock Holders. Each Phantom Stock
Holder has executed and delivered to Nordson and each of the EFD Entities a
release substantially in the form attached as Exhibit 8(g) - Form of Phantom
Stock Release.
9. The Shareholders' Conditions to Closing. The Shareholders'
obligation to complete the sale of shares under this Agreement is conditioned
upon the satisfaction or waiver by the Shareholders of the following conditions:
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<PAGE> 30
(a) Performance of Obligations. Nordson has performed in all
material respects the obligations under this Agreement that are to be performed
by it at or before the Effective Time.
(b) Representations and Warranties Are True. The
representations and warranties made by Nordson in this Agreement continue to be
true in all material respects as of the Effective Time as though they were made
at the Effective Time, without giving effect to any supplemental disclosure
pursuant to Section 7(b)(iii), and the Shareholders have received from Nordson a
certificate to this effect dated as of the Effective Time.
(c) Employment Agreements; Carter Consulting Agreement.
Nordson has executed and delivered to those individuals listed on Exhibit
7(d)(i) the Employment Agreements, and Nordson has executed and delivered to Mr.
Carter the Carter Consulting Agreement.
(d) HSR Act. The waiting period or periods under the HSR Act
have expired or been terminated early, and neither the Federal Trade Commission,
the Justice Department, or any other governmental authority has advised any EFD
Entity that it will seek to enjoin the sale of the EFD Shares to Nordson under
this Agreement, require any significant divestiture by Nordson or any EFD
Entity, or impose restrictions on the operation of any business by Nordson or
any EFD Entity.
(e) Environmental Insurance. Nordson has obtained the
Environmental Insurance on the terms set forth in Exhibit 7(g)(ii).
(f) Releases from Phantom Stock Holders. Each Phantom Stock
Holder has executed and delivered to Nordson and each of the EFD Entities a
release substantially in the form attached as Exhibit 8(g) - Form of Phantom
Stock Release.
10. Closing; Effective Time.
(a) The closing of the sale and purchase of shares pursuant
to this Agreement will occur within five business days after all of the
conditions to closing have been satisfied or waived, but not earlier than
October 30, 2000, and will be effective as of the opening of business on that
date or such other date and time as the parties may agree (the "Effective
Time"). As of the Effective Time, upon satisfaction or waiver of the conditions
to closing, Nordson will pay the Shareholders' Portion, by wire transfer to an
account designated by each Shareholder and will pay EFD the portion of the
Purchase Price to be paid to the holders of Phantom Stock by wire transfer to an
account designated by EFD, upon receipt of the following:
(i) certificates for all of the outstanding EFD Shares, duly
endorsed for transfer to Nordson or accompanied by duly executed stock powers;
and
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(ii) the corporate minute, stock transfer, and other books and
records of each EFD Entity (duly written up to date).
(b) The parties will execute and deliver all other
documents, and take all further actions, necessary to complete the sale and
purchase of shares and to carry out the other transactions contemplated by this
Agreement.
(c) The parties acknowledge that time is of the essence and,
therefore, agree to use all reasonable efforts to complete the sale and purchase
of shares on or before October 30, 2000. Any party may terminate this Agreement
if the Effective Time does not occur on or before October 30, 2000, unless the
delay in the Effective Time results from the failure, by the party seeking to
terminate this Agreement, to perform its, his, or her obligations under this
Agreement. Subject to the provisions of Sections 10(d) and (e), termination of
this Agreement by any party will not relieve the other party of any liability
that he, she, or it may have for a breach of the representations, warranties, or
covenants made by him, her, or it in this Agreement.
(d) In the event the transactions contemplated by this
Agreement are not consummated by October 31, 2000 due to Nordson's breach of its
obligations under this Agreement, then the Shareholders shall be entitled to the
immediate payment of $5,000,000, plus interest from October 31, 2000 to the date
of payment at the Agreed Upon Interest Rate, as liquidated damages (the
"Liquidated Damages Amount"), which Liquidated Damages Amount the parties agree
is a fair and reasonably measure of the damages that the Shareholders would
sustain as a result of such termination. The Shareholders shall be entitled to
obtain specific enforcement of payment of the Liquidated Damages Amount, plus
attorneys' fees and expenses, in a court of competent jurisdiction.
(e) In the event Nordson has terminated this Agreement due
to the failure of the condition set forth in Section 8(b), and such failure of
condition has not been caused by any action on the part of any of the EFD
Parties between the date of this Agreement and the Effective Time, the Agreement
shall be null and void and Nordson shall have no further recourse against the
Shareholders.
11. Covenant Not to Compete.
(a) For a period of seven (7) years from the Effective Time,
none of the Shareholders will: (i) anywhere in the United States or in any other
country in which any EFD Entity, Nordson, or any of their subsidiaries sells
products, own (except as the owner of not more than five percent of any class of
securities listed on a national securities exchange or The Nasdaq Stock Market
or comparable or successor market), manage, operate, or control, directly or
indirectly, or serve as a director, officer, employee, agent, or consultant of,
any business (other than any EFD Entity, Nordson, or any of their
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subsidiaries) that is engaged (A) in the manufacture or sale of precision
adhesive/fluid dispensing systems and industrial grade dispense components or
any other products that are similar to, substitutes for, or competitive with
equipment or products of any EFD Entity, Nordson, or any of their subsidiaries
or (B) in the development of Intellectual Property Rights that are useful in the
manufacture of any such equipment or other products, or (ii) solicit any
customers of any EFD Entity, Nordson, or any of their subsidiaries for the sale
of any such equipment or other products.
(b) For a period of seven (7) years from the Effective Time,
none of the Shareholders will induce or attempt to induce any employee of any
EFD Entity, Nordson, or any of their subsidiaries to leave his or her
employment.
12. Survival of Representations, Warranties, and Covenants. The
representations, warranties, and covenants made by Nordson and the Shareholders
in this Agreement will survive the sale and purchase of EFD Shares pursuant this
Agreement and any investigation or inquiry made by them, although any claim for
indemnification with respect to the incorrectness or breach of representations,
warranties, or covenants must be brought within the following periods:
(a) With respect to any covenants other than the covenants
in Sections 5(g) (Accounts Receivable), 5(i) (Title), and 7(g)(ii) and (iii)
(Environmental Liability to Employees), without limitation as to time. With
respect to the covenants in Sections 5(g), 5(i), and 7(g)(ii) and (iii), within
a period of 18 months following the Effective Time.
(b) With respect to the representations and warranties in
Sections 4 and 5(c), without limitation as to time.
(c) With respect to the representations and warranties in
Section 5(p) (Taxes), and with respect to any matter that is fraudulently or
deliberately concealed by one party from another (which, in the case of the
Shareholders, will mean an intentional, knowing misrepresentation by Mr. or Mrs.
Carter), until two months after the lapse of time specified in the applicable
statute of limitation.
(d) With respect to all representations and warranties not
referred to in clause (b) or (c) of this Section 12, within a period of 18
months following the Effective Time.
Any claim brought within the periods described above will continue to survive
until it is resolved.
13. Indemnification.
(a) Indemnification by the Shareholders. Subject to the
limitations in Sections 12, 13(c), 13(d), 13(e) and 13(g), the Shareholders will
jointly and severally
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indemnify Nordson against any expense, loss, liability, or claim (including
attorneys' fees and reimbursable expenses) (each a "Loss" and, collectively,
"Losses") incurred by Nordson or any EFD Entity by reason of (i) the
incorrectness of any of the representations or warranties made by the
Shareholders in this Agreement, (ii) the failure of the representations or
warranties made by the Shareholders in this Agreement (except those that speak
as of a specific date) to continue to be true as of the Effective Time as though
they were made on the Effective Time, (iii) the breach by the Shareholders of
any of the covenants made by the them in this Agreement, or (iv) any obligation
to the Phantom Stock Holders as such, including the method of determining the
amount payable to each of them.
(b) Indemnification by Nordson. Subject to the limitations
in Sections 12 and 13(c) and 13(d), Nordson will indemnify the Shareholders
against any Losses incurred by the them by reason of (i) the incorrectness of
any of the representations or warranties made by Nordson in this Agreement, (ii)
the failure of the representations or warranties made by Nordson in this
Agreement (except those that speak as of a specific date) to continue to be true
as of the Effective Time as though they were made on the Effective Time, or
(iii) the breach by Nordson of any of the covenants made by Nordson in this
Agreement.
(c) Deductible. Nordson will not be entitled to
indemnification under Section 13(a)(i) or Section 13(a)(ii) for the
incorrectness of any of the representations or warranties made by the
Shareholders in this Agreement, and the Shareholders will not be entitled to
indemnification under Section 13(b)(i) or Section 13(b)(ii) for the
incorrectness of any of the representations or warranties made by Nordson in
this Agreement or for breach of any of the covenants in Sections 5(g), 5(i) and
7(g)(ii) and (iii), except to the extent that the aggregate amount of the Losses
for which it or they would otherwise be entitled to indemnification under such
sections of this Agreement exceeds Three Hundred Thousand Dollars ($300,000.00);
any payments in respect of Nordson's or the Shareholders' portion of the
deductible for Environmental Insurance pursuant to Section 7(g)(ii) will be
counted in determining whether this Three Hundred Thousand Dollar ($300,000.00)
deductible has been exhausted with respect to Nordson and the Shareholders,
respectively. This limitation does not apply to indemnification for breach of
any of the covenants made by Nordson or the Shareholders in this Agreement,
including the covenant to indemnify Nordson under Section 13(a)(iii) and
13(a)(iv), but excluding the covenants in Sections 5(g), 5(i), and 7(g)(ii) and
(iii). This limitation does not apply to indemnification for breach of the
representations and warranties in Section 4.
(d) Cap. The Shareholders will not be required to pay
indemnification under this Agreement in an aggregate amount that exceeds Forty
Million Dollars ($40,000,000.00). Any amount set-off by Nordson pursuant to
Section 13(f) and any amounts paid by the Shareholders with respect to the
deductible for the Environmental Insurance or in respect of the premiums for
Environmental Insurance will be counted in determining whether this cap has been
reached. Any indemnification to which Nordson
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<PAGE> 34
may be entitled by reason of a breach of the representations and warranties in
Section 4, and any indemnification to which Nordson may be entitled under
Section 13(a)(iv), will not be counted in determining whether this cap has been
reached. Any obligation of Nordson to indemnify the Shareholders under this
Agreement for breach of the representations and warranties made by Nordson to
the Shareholders will not exceed the amount of, and may be satisfied in full by
the payment of, any portion of the purchase price that has yet to be paid to the
Shareholders under Section 2. There shall be no limit to the obligation of
Nordson to indemnify the Shareholders for breach of any of the covenants made by
Nordson in this Agreement.
(e) Insurance. In determining the amount of any Loss for
which a party is entitled to indemnification under this Agreement, the gross
amount of the Loss will be reduced by the proceeds of any insurance collected by
that party with respect to the Loss, including without limitation, in the case
of indemnification under Section 7(g)(iii), the proceeds of any workers'
compensation or other insurance. Nordson will be required to recover from
available insurance policies reimbursement on any Loss prior to seeking
indemnification for such Loss from the Shareholders under this Agreement.
(f) Right to Set-Off. Nordson will be entitled to set-off,
against the amounts that it is required to pay to the Shareholders under Section
2(d), the amount of any indemnification to which it is entitled under this
Agreement. Nordson will give written notice to the Shareholders of any such
set-off, and the Shareholders will have the right to contest any such set-off
within 30 days after receipt of the notice of set-off. If the Shareholders so
elect, they will have the right to submit the matter to arbitration in
accordance with Section 14(e). If the Shareholders contest any such set-off,
Nordson will, at the request of the Shareholders, deposit the disputed amount in
escrow with Chase Manhattan Trust Company, National Association, or another
escrow agent agreed to by the parties, pursuant to an escrow agreement that is
on terms acceptable to the parties. The fees and expenses of any such escrow
agent will be borne by the parties so that the Shareholders' share of such fees
and expenses equals the product of (x) and (y), where (x) is the aggregate
amount of such fees and expenses and (y) is a fraction, the numerator of which
is the amount in dispute that is ultimately unsuccessfully disputed by the
Shareholders, and the denominator of which is the total value in dispute, and
Nordson will bear the balance of such fees and expenses.
(g) Recovery from Trusts. Nordson will seek to recover
indemnification from the Trusts, over and above any set-off under Section 13(f),
only if and to the extent that it is unable, after having used commercially
reasonable efforts, to recover the full amount of the indemnification from Mr.
Carter and Mrs. Carter; for this purpose, "reasonable commercial efforts" do not
include the initiation of any action, suit or proceeding other than arbitration
under Section 14(e). Mr. Carter and Mrs. Carter will, as trustees of the Trusts,
cause the Trusts to retain an aggregate of $25,000,000 in the Trusts until at
least eighteen (18) months after the Effective Time.
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(h) Notice of Third-Party Claims. If a third party asserts a
claim for which any of the parties is entitled to indemnification under Section
5(g), 5(i), 7(g)(ii) or (iii), or 13 (the "Indemnified Party"), the party
against whom the claim is asserted will give prompt notice of the claim to the
party required to pay the indemnification (the "Indemnifying Party"). The
failure to give any such notice will not, however, relieve the Indemnifying
Party of his, her, or its obligation to indemnify the Indemnified Party, except
to the extent such failure to give notice has been prejudicial to the
Indemnifying Party. The Indemnifying Party will have the right to assume control
of the defense against the claim, at his, her, or its expense, and to compromise
and settle the claim; except that, the Shareholders may not, without the prior
written consent of Nordson, compromise or settle any claim in a manner that
would impair the value of any assets or rights of Nordson or any EFD Entity or
that would interfere with the continued operation of their respective
businesses; provided further that the Indemnifying Party will not agree to any
settlement of such third-party claim which does not include an unconditional
release of the Indemnified Party by the third-party claimant on account thereof,
provided that no such release of the Indemnified Party needs to be obtained if
the Indemnified Party does not provide a corresponding release of the
third-party claimant with respect to such third-party claim. If the Indemnifying
Party does not assume the defense of the third-party claim pursuant to this
Section 13(h), the Indemnified Party will have the right to assume the defense
of the claim; the Indemnified Party will also have the right to settle the
claim, but only if (i) the Indemnified Party notifies the Indemnifying Party of
its intention to settle the claim and of the material terms of any proposed
settlement, (ii) the Indemnifying Party does not notify the Indemnified Party in
writing of the Indemnifying Party's election to assume the defense of the
third-party claim within ten (10) days after receipt of such notice of intention
to settle and promptly thereafter takes appropriate action to implement such
defense, (iii) the terms of the settlement are not materially inconsistent with
those set forth in such notice of intention to settle, and (iv) the settlement
includes an unconditional release of the Indemnifying Party by the third-party
claimant on account thereof, provided that no such release of the Indemnifying
Party needs to be obtained if the Indemnifying Party does not provide a
corresponding release of the third-party claimant with respect to such
third-party claim. Notwithstanding the foregoing, Nordson and EFD will have the
right to settle any warranty claims that arise in the ordinary course of
business, without notice to or consent by the Shareholders, provided that
Nordson's settlement of these warranty claims is consistent with the way in
which EFD has settled similar claims prior to the Effective Time. The
Indemnifying Party and the Indemnified Party will use all reasonable efforts to
cooperate fully with respect to the defense of any third-party claim covered by
this Section 13(h).
(i) Sole and Exclusive Remedy. The sole and exclusive
remedies of Nordson as against any of or all of the Shareholders, and the sole
and exclusive liability of the Shareholders to Nordson (and/or after the Closing
to the EFD Entities), with respect to any obligation, matter or claim arising
out of or relating to this Agreement will be the provisions of Sections 5(g),
5(i), 7(g)(iii), and 13. The sole and exclusive remedies of the EFD
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<PAGE> 36
Parties as against Nordson, and the sole and exclusive liability of Nordson to
the EFD Parties, with respect to any obligation, matter or claim arising out of
or relating to this Agreement will be the provisions of Sections 2, 7(g), and
13.
14. Miscellaneous.
(a) Expenses. Except as otherwise provided in Sections 3(b),
7(g), 13(f), and 14(e), each of the parties will pay its, his, or her own
expenses incurred in connection with the negotiation, execution, and performance
of this Agreement and the completion of the transactions contemplated by this
Agreement, including fees and reimbursable expenses of counsel, accountants, and
other advisors. Without limiting the foregoing, Nordson will be responsible for
all fees and expenses associated with the audit of the financial results of the
EFD Entities for the ten-month period ended October 29, 2000.
(b) "Best Knowledge of the EFD Parties". For purposes of
this Agreement, the phrase "best knowledge of the EFD Parties" means the actual
knowledge of any of the following: Mr. Carter, Mrs. Carter, Harry Baird, Tom
O'Connell, Larry Hoover, Steve Lord, Roman Skonieczny, and, with respect to
accounting and legal matters, the independent accountant and legal counsel of
the appropriate EFD Entity.
(c) Entire Agreement. This Agreement and its Exhibits and
Schedules contain the entire understanding among Nordson and the Shareholders on
their subject matter, and there are no representations, warranties, or covenants
by or among them other than those set forth in this Agreement and its Exhibits
and Schedules.
(d) Waiver. Any of the terms or conditions of this Agreement
may be waived in writing at any time by the party that is entitled to the
benefit of that term or condition.
(e) Governing Law; Dispute Resolution; Appointment of
Shareholder Representative.
(i) The validity, interpretation, and enforceability of this
Agreement will be governed by the laws of the State of Rhode Island. In the
event of a dispute regarding this Agreement or the transactions contemplated by
it, the parties will use all reasonable efforts to resolve the dispute on an
amicable basis. If the dispute is not resolved on that basis within a 60 days,
any party may refer the dispute (other than a dispute that is covered by Section
3(b)) for resolution by one arbitrator in an arbitration administered by the
American Arbitration Association in accordance with its Commercial Arbitration
Rules, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction. Any such arbitration will take place at
Providence, Rhode Island. Except as provided in Section 3(b) and 13(f), the
prevailing party in any dispute under this Agreement will be entitled to recover
from the non-prevailing party the fees and expenses of counsel to the prevailing
party.
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<PAGE> 37
(ii) The Shareholders hereby appoint Mr. Carter as their
representative in connection with this Agreement, with full authority, for and
on their behalf, to give and receive notices and to compromise and settle any
dispute regarding this Agreement or the transactions contemplated by it. Without
limiting the foregoing, Mr. Carter has the authority to resolve issues regarding
any purchase price adjustment under Section 3, any indemnification claim under
Sections 7(g) and 13 (including third-party claims), and any arbitration under
Section 14(e)(i). Mr. Carter hereby accepts such authorization and appointment,
provided that he will have no duty or liability whatsoever to Nordson in his
capacity as such representative. In addition, the Shareholders agree that Mr.
Carter will have no personal liability to the Shareholders for any action taken
hereunder or for any omission to act where such action or omission is not the
result of gross negligence or willful misconduct on the part of Mr. Carter. Mr.
Carter's authority will continue until the earlier of his death or the
revocation of his authority in a writing signed by Shareholders that,
immediately prior to the Effective Time, owned a majority of the voting EFD
Shares. Nordson may rely upon Mr. Carter's continued authority until it receives
written notice of Mr. Carter's death or the revocation of his authority. Upon
the receipt of written evidence satisfactory to Nordson to the effect that a
substituted representative has been appointed to act as representative of the
Shareholders hereunder by reason of Mr. Carter's death or the revocation of his
authority, Nordson will be entitled to rely on such substituted representative
to the same extent as it was theretofore entitled to rely upon Mr. Carter with
respect to the matters covered by this Section 14(e)(ii). Such substituted
representative need not be a Shareholder in his or her individual capacity,
provided he or she is a trustee of, or has a beneficial interest in, one of the
Trusts.
(f) Notices. Any notice or other communication required or
permitted under this Agreement will be adequately given when it is personally
delivered; when it is sent by fax, with confirmation of receipt; or one day
after it is sent by overnight courier paid by the sender, and addressed as
follows:
To Nordson at:
Nordson Corporation
28601 Clemens Road
Westlake, Ohio 44145
Fax no.: (440) 892-9253
Attn: Robert Veillette
Assistant General Counsel
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<PAGE> 38
with a copy to:
James Carlson, Esq.
Thompson Hine & Flory LLP
3900 Key Tower
127 Public Square
Cleveland, OH 44114
Fax no.: 216-566-5800
To the Shareholders:
c/o Mr. John S. Carter, Jr.
201 Arlington Avenue
Providence, RI 02906
with a copy to:
Richard G. Small, Esq.
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, RI 02903
Fax no.: 401-276-6611
Any party may change the address or fax number to which notices or other
communications are to be given by furnishing the other party with written notice
of the change.
(g) Confidentiality. Nordson agrees that it and its
officers, directors, and other representatives will hold in strict confidence,
and will not use to the detriment of any EFD Entity or the Shareholders, all
data and information about the business of the EFD Entities disclosed to them by
the EFD Parties in connection with the transactions contemplated by this
Agreement (except for any date or information that is publicly available or is
disclosed to them by a source other than an EFD Party without a duty of
confidentiality to any EFD Party). If the transactions contemplated by this
Agreement are not consummated, Nordson will, upon request by the Shareholders,
return to the Shareholders or destroy any written documents in Nordson's
possession that include such data or information, including worksheets, reports,
lists, memoranda, and other documents prepared by or made available to Nordson.
(h) Notices to Third Parties and Publicity. All notices to
third parties and publicity concerning the transaction contemplated by this
Agreement will be jointly planned and coordinated by Nordson and the
Shareholders. No party may act in this regard without the prior consent of the
others; however, this consent will not be unreasonably withheld.
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<PAGE> 39
(i) Assignment. Neither of the parties may assign this
Agreement without the prior written consent of the other party.
(j) Table of Contents; Preamble; Headings. The Table of
Contents, the preamble to this Agreement, and the headings used in this
Agreement are for convenience of reference only and are not intended to affect
the interpretation of this Agreement.
[The rest of this page is left blank intentionally.]
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<PAGE> 40
IN WITNESS WHEREOF, Nordson and the Shareholders have executed
this Agreement on the date first written above.
NORDSON CORPORATION
By: /s/ Edward P. Campbell
-------------------------------
Edward P. Campbell
President and Chief Executive
Officer
/s/ John S. Carter, Jr.
----------------------------------
JOHN S. CARTER, JR.
/s/ Letitia M. Carter
----------------------------------
LETITIA M. CARTER
TRUST 1988 FBO JOHN S. CARTER, III
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
TRUST 1988 FBO KATHERINE MARTINEZ
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
TRUST 1988 FBO PAMELA ROWE
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
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<PAGE> 41
TRUST 1988 FBO ELISABETH CARTER
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
TRUST 1991 FBO JOHN CARTER, III
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1991 FBO KATHERINE MARTINEZ
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1991 FBO PAMELA ROWE
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1991 FBO ELISABETH CARTER
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
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<PAGE> 42
TRUST 1991 FBO JULIA MARTINEZ
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1991 FBO MARGARET MARTINEZ
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1994 JOHN CARTER, GRANTOR
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1994 LETITIA CARTER, GRANTOR
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
TRUST 1996 KATHERINE MARTINEZ,
GRANTOR
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
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<PAGE> 43
TRUST 1996 PAMELA ROWE, GRANTOR
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1996 JOHN CARTER III, GRANTOR
By: /s/ Letitia M. Carter
-------------------------------
Letitia M. Carter
Trustee
TRUST 1996 ELISABETH CARTER, GRANTOR
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
TRUST 1996 LETITIA CARTER, GRANTOR
By: /s/ John S. Carter, Jr.
-------------------------------
John S. Carter, Jr.
Trustee
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<PAGE> 44
INDEX OF DEFINITIONS
Page
----
Agreed Upon Interest Rate 2
Assets 21
Audit Reports 23
Best knowledge of the EFD Parties 33
Carter Consulting Agreement 21
CFI 25
Code 16
Computer Software and Databases 17
December 31, 1999 Balance Sheet 3
Dosage 1
EFD 1
EFD Entities 1
EFD Parties 5
EFD Shares 1
EFDI 1
Effective Time 28
Effective Time Statement 4
Effective Time Tangible Net Equity 4
Employment Agreements 21
Encumbrance 10
Environmental Insurance 23
Financial Statements 6
Forms 22
GAAP 3
HSR Act 20
Indemnified Party 32
Indemnifying Party 32
Initial Purchase Price Adjustment Payment 2
Intellectual Property Rights 15
Involved Party 22
July 31, 2000 Balance Sheets 6
Lease 7
Leased Real Property 7
Losses 30
Material Adverse Change 10
Mr. Carter 1
Mrs. Carter 1
Nordson 1
Other Party 22
Owned Real Property 7
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<PAGE> 45
Peg Amount 4
Phantom Stock Holder 25
Preliminary Effective Time Statement 3
Real Property 7
Returns 16
Shareholders 1
Shareholders' Portion 1
Taxes 17
Trust 1
LIST OF EXHIBITS
Page
----
1 - Purchase Price Allocation 5
3(a)(i) - Excluded Assets 7
7(d)(i) - List of Employees with Employment Agreements 17
7(d)(ii) - Form of Employment Agreements 17
7(d)(iii) - Carter Consulting Agreement 17
7(e) - Allocation of Purchase Price for Tax Purposes 18
7(g)(i) - Environmental Audit Reports 19
7(g)(ii) - Terms of Environmental Insurance 19
7(h)(v) - Payments to Holders of Phantom Stock 20
8(g) - Form of Phantom Stock Release 22
LIST OF SCHEDULES
Page
----
5(a) - Organization; Directors and Officers 5
5(b) - Conflicts 5
5(c) - Capitalization 6
5(d) - Financial Statements 6
5(e)(i) - Owned Real Estate 6
5(e)(ii) - Leases 7
5(e)(iii) - Exclusive Possession of Owned Real Property 7
5(h) - Certain Changes 9
5(i) - Title Matters 9
5(j) - Litigation 10
5(k) - Product Warranties 10
5(l) - Contract List 10
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<PAGE> 46
5(m) - Intellectual Property 11
5(n) - Employee Benefits 12
5(p) - Tax Matters 13
5(s) - Computer Software and Databases 14
7(h)(ii) - Insurance Policies 20
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