UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest
event reported) December 2, 1994
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O'SULLIVAN CORPORATION
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(Exact name of registrant as specified in its charter)
VIRGINIA
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(State or other jurisdiction of incorporation)
1-4438 54-0463029
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(Commission File Number) (IRS Employer Identification Number)
1944 Valley Avenue, P.O.Box 3510, Winchester, Virginia 22601
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(Address of principal executive offices, including zip code)
(703) 667-6666
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(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets.
On December 2, 1994, the Corporation sold certain assets of the
Corporation's Gulfstream Division to Automotive Industries, Inc.
The assets sold consisted primarily of property, plant and
equipment, inventories, tooling work in process and the capital
stock of Capitol Plastics of Ohio, Inc. Capitol Plastics of
Ohio, Inc. was a subsidiary of O'Sullivan Corporation operating
as a part of the Gulfstream Division. Consideration received
included cash of $46.5 million and a note receivable of $4.0
million.
Item 7. Pro Forma Financial Information and Exhibits.
(b). Pro Forma Financial Information.
(1). Pro Forma Balance Sheet at September 30, 1994.
Pro Forma Statements of Income for the Year Ended
December 31, 1993 and for the Nine Months Ended
September 30, 1994.
Notes to Pro Forma Financial Statements.
(c). Exhibits.
2.1 Asset Purchase Agreement between O'Sullivan Corporation
and Automotive Industries, Inc.
2.2 Amendment to Asset Purchase Agreement between O'Sullivan
Corporation and Automotive Industries, Inc.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited pro forma financial statements for O'Sullivan
Corporation and Subsidiaries (OSL) have been prepared based upon certain
pro forma adjustments to what would have been the historical financial
statements of (OSL) for the periods presented. The financial statements
should be read in conjunction with the historical financial statements of
(OSL) presented in the Corporation's 1993 Annual Report to Stockholders and
the Form 10-Q submitted for the period ended September 30, 1994.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1994
(Unaudited)
O'Sullivan O'Sullivan
Corporation Pro Forma Corporation
ASSETS Historical Adjustments Pro Forma
------------ ------------ ------------
Current Assets
Cash and cash equivalents $ 1,493,955 $ 6,520,619 (a)$ 8,014,574
Trade receivables 56,924,915 (4,081,437)(b) 52,843,478
Note receivable - - 4,000,000 (b) 4,000,000
Inventories 29,927,144 - - 29,927,144
Net receivable from
disposition of discontinued
operations 46,000,088 (46,000,088) - -
Deferred income tax assets 1,492,746 - - 1,492,746
Other current assets 1,153,113 - - 1,153,113
------------ ------------ ------------
Total current assets $136,991,961 $(39,560,906) $ 97,431,055
------------ ------------ ------------
Property, Plant and Equipment $ 44,729,342 $ - - $ 44,729,342
------------ ------------ ------------
Intangibles $ 996,264 $ - - $ 996,264
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Other Assets $ 11,498,241 $ - - $ 11,498,241
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Total assets $194,215,808 $(39,560,906) $154,654,902
============ ============ ============
See accompanying notes to pro forma consolidated financial statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1994
(Unaudited)
O'Sullivan O'Sullivan
LIABILITIES AND Corporation Pro Forma Corporation
SHAREHOLDERS' EQUITY Historical Adjustments Pro Forma
------------ ------------ ------------
Current Liabilities
Short-term debt $ 3,783,026 $ - - $ 3,783,026
Current portion of
long-term debt 63,437 - - 63,437
Accounts payable 26,069,239 (3,322,774)(b) 22,746,465
Accrued expenses 16,139,739 (738,132)(c) 15,401,607
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Total current liabilities $ 46,055,441 $ (4,060,906) $ 41,994,535
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Long-Term Debt $ 37,118,158 $(35,500,000)(c)$ 1,618,158
------------ ------------ ------------
Other Long-Term Liabilities $ 1,684,191 $ - - $ 1,684,191
------------ ------------ ------------
Deferred Income Taxes $ 3,394,580 $ - - $ 3,394,580
------------ ------------ ------------
Commitments and Contingencies $ - - $ - - $ - -
------------ ------------ ------------
Shareholders' Equity
Common stock, par value
$1.00 per share; authorized
30,000,000 shares $ 16,484,871 $ - - $ 16,484,871
Additional paid-in capital 9,963,876 - - 9,963,876
Retained earnings 79,790,110 - - 79,790,110
Cumulative translation
adjustments (156,123) - - (156,123)
Unrecognized pension costs,
net of deferred tax effect (119,296) - - (119,296)
------------ ------------ ------------
Total shareholders'
equity $105,963,438 $ - - $105,963,438
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Total liabilities and
shareholders' equity $194,215,808 $(39,560,906) $154,654,902
============ ============ ============
See accompanying notes to pro forma consolidated financial statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 1993
(Unaudited)
O'Sullivan O'Sullivan
Corporation Pro Forma Corporation
Historical Adjustments (d) Pro Forma
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Net sales $ 292,255,714 $(118,428,772) $ 173,826,942
Cost of products sold 251,803,879 (112,729,128) 139,074,751
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Gross profit $ 40,451,835 $ (5,699,644) $ 34,752,191
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Operating expenses
Selling and warehousing $ 12,962,527 $ (2,212,344) $ 10,750,183
General and administrative 9,485,791 (1,696,782) 7,789,009
Recovery of restructuring
charge (969,251) 969,251 - -
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$ 21,479,067 $ (2,939,875) $ 18,539,192
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Income from operations $ 18,972,768 $ (2,759,769) $ 16,212,999
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Other income (expense)
Interest expense $ (2,471,269) $ 1,336,514 $ (1,134,755)
Other, net 295,983 (46,783) 249,200
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$ (2,175,286) $ 1,289,731 $ (885,555)
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Income before income taxes
and cumulative effect of
accounting changes $ 16,797,482 $ (1,470,038) $ 15,327,444
Income taxes 7,088,364 (676,057) 6,412,307
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Income before cumulative
effect of accounting
changes $ 9,709,118 $ (793,981) $ 8,915,137
Cumulative effect of
accounting changes 305,338 (281,221) 24,117
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Net income $ 10,014,456 $ (1,075,202) $ 8,939,254
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See accompanying notes to pro forma consolidated financial statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended September 30, 1994
(Unaudited)
O'Sullivan O'Sullivan
Corporation Pro Forma Corporation
Historical (e) Adjustments Pro Forma
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Net sales $ 269,732,967 $(120,604,004) $ 149,128,963
Cost of products sold 234,570,981 (115,164,987) 119,405,994
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Gross profit $ 35,161,986 $ (5,439,017) $ 29,722,969
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Operating expenses
Selling and warehousing $ 11,147,770 $ (2,230,526) $ 8,917,244
General and administrative 6,950,859 (1,743,982) 5,206,877
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$ 18,098,629 $ (3,974,508) $ 14,124,121
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Income from operations $ 17,063,357 $ (1,464,509) $ 15,598,848
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Other income (expense)
Interest expense $ (2,374,533) $ 1,685,691 $ (688,842)
Other, net 113,839 (9,617) 104,222
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$ (2,260,694) $ 1,676,074 $ (584,620)
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Income before income taxes $ 14,802,663 $ 211,565 $ 15,014,228
Income taxes 5,855,676 86,439 5,942,115
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Net income $ 8,946,987 $ 125,126 $ 9,072,113
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See accompanying notes to pro forma consolidated financial statements.
O'SULLIVAN CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
(a) The increase in cash and cash equivalents represents the cash
consideration received from the sale of the Gulfstream Division
assets after giving effect to the retirement of the Corporation's
7.05% Senior Notes and line of credit notes payable which were
attributable to the Gulfstream Division.
(b) The decrease in trade receivables represents the value of tooling
work in process included in the assets of the Gulfstream Division to
be sold subsequent to the preparation of the September 30, 1994,
financial statements. The consideration paid for these assets is
represented by the $4.0 million note receivable shown on the
accompanying pro forma balance sheet. Automotive Industries, Inc.
assumed the accounts payable liability for the purchased tooling work
in process. The assumed amount is shown as a pro forma adjustment to
the "Historical" accounts payable.
(c) The reduction in accrued expenses and long-term debt reflects the pro
forma repayment of the long-term debt attributable to the Gulfstream
Division.
(d) This designation represents the activity of the Gulfstream Division
for the period(s) presented including interest expense associated
with the debt attributable to the division. Operating expenses and
other income (expense) attributed to the division are reported in a
manner consistent with presentations for prior periods.
(e) Amounts reported as "O'Sullivan Corporation Historical" at
September 30, 1994, represent total consolidated corporate activity
without the effect of the disposal of the Gulfstream Division.
Amounts reported in the Form 10-Q for September 30, 1994, for
continuing operations have previously given effect for the disposal
of the division and correspond to the amounts reported as
"O'Sullivan Corporation Pro Forma" in the accompanying Statement
of Income for the Nine Months Ended September 30, 1994.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
O'SULLIVAN CORPORATION
/s/ Anthony A. Barone
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Anthony A. Barone
Vice President, Secretary
and Chief Financial Officer
/s/ C. Bryant Nickerson
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C. Bryant Nickerson
Treasurer and
Chief Accounting Officer
December 19, 1994
ASSET PURCHASE AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
November 21, 1994, among Automotive Industries, Inc., a Virginia
corporation ("Buyer"), and O'Sullivan Corporation, a Virginia corporation
("Seller"). Buyer and Seller are referred to individually herein as a
"Party" and collectively herein as the "Parties." Capitalized terms used
herein and not otherwise defined are defined in Section 9 below.
Subject to the terms and conditions set forth in this Agreement,
Seller desires to sell to Buyer, and Buyer desires to acquire from Seller
certain assets and properties, operating as a going concern of Seller's
Gulfstream division (the "Business"), including, but not limited to, all of
the outstanding capital stock of Seller's wholly owned subsidiary, Capitol
Plastics of Ohio, Inc., an Ohio corporation ("Capitol").
NOW, THEREFORE, in consideration of the mutual promises herein
made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
Section 1. Basic Transaction.
(a) Purchase and Sale of Assets. On and subject to the terms
and conditions of this Agreement, at the Closing (as hereinafter defined),
Buyer agrees to purchase from Seller, and Seller agrees to sell, transfer,
convey, and deliver to Buyer, all right, title and interest in and to all
of the assets (other than Excluded Assets) of Seller relating to the
Business (collectively, the "Acquired Assets"), including:
(i) all raw materials, packing supplies, maintenance and repair
supplies, manufactured and purchased parts, work-in-process and finished goods
inventory used or held for use in the Business;
(ii) all fee, leasehold and other interests in real property
described on Schedule 1(a)(ii) attached hereto, including all leasehold
improvements, buildings, structures and other improvements thereon (the "Real
Estate");
(iii) all machinery, equipment, furniture, fixtures, vehicles,
tooling, molds, dies and other tangible personal property;
(iv) all Intellectual Property, goodwill associated therewith,
licenses and sublicenses granted and obtained with respect thereto, and
rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions (other
than the Excluded Intellectual Property (defined in Section 1(a)(p)
below));
(v) all agreements, contracts, purchase orders and other similar
arrangements (A) set forth on Schedule 4(p) attached hereto and denoted by
a pound sign (#), and (B) not set forth on Schedule 4(p) due solely to the
specific dollar threshold or cancellation provision contained in Section
4(p) below or any open purchase orders entered into in the ordinary course
of business for the purchase of Inventories, but relating primarily to the
Business, in each case to the extent Buyer assumes such agreements,
contracts, purchase orders or similar arrangements;
(vi) all prepayments and deposits to the extent any benefit therefrom
inures to Buyer after the Closing and to the extent set forth on the
Closing Balance Sheets;
(vii) all claims, refunds, rights of recovery, rights of set off, and
rights of recoupment of any kind (except to the extent such items relate to an
Excluded Asset or Excluded Liability);
(viii) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies to the extent assignable and related
primarily to the Business;
(ix) the Gulfstream name and any goodwill associated therewith;
(x) all of the issued and outstanding capital stock of Capitol;
(xi) all books, records (other than accounting records), ledgers,
files, documents, correspondence, lists, drawings, and specifications,
advertising and promotional materials, studies, reports, and other printed or
written materials related primarily to the Business;
(xii) all SPECS Credits (as defined in Section 4(w) below);
(xiii) all Seller's tooling-in-process with respect to the (A)
production tooling for the DN-101 platform, (B) production tooling for the
WN-97 platform and (C) design and engineering (with respect to the post-
engineering release), prototype and production tooling for the VN-127
platform (the "Transition Tooling"); and
(xiv) all of Seller's rights and opportunities to future income for
each item of the Transition Tooling.
Notwithstanding the foregoing, the Acquired Assets shall not
include the following assets (the "Excluded Assets"):
(j) Any fee, leasehold or other interests in real property
other than the Real Estate;
(k) Seller's Unix and Unisys computer system (including but
not limited to hardware, software and peripheral equipment) and those
personal computers and related software used primarily by Seller's
management information systems department;
(l) those agreements, contracts, purchase orders and other
similar arrangements described in Section 1(a)(v) above, in each case to
the extent Buyer does not assume any such agreement, contract, purchase
order or similar arrangement;
(m) any of Seller's prepayments or deposits to the extent
not set forth on the Closing Balance Sheets;
(n) any of Seller's claims, refunds, rights of recovery,
rights of set off, rights of recoupment of any kind to the extent the facts
giving rise thereto existed before the Closing Date and to the extent
related to (A) an Excluded Asset, (B) an Excluded Liability, (C) the
Completed Tooling (as defined in Section 1(h)(i) below), or (D) any matter
in respect of which Buyer may have a claim for indemnification by Seller
hereunder, provided Seller has elected pursuant to Section 7(b)(x) to
assume the defense of such matter.
(o) Seller's telephone switching equipment other than the
upgraded equipment installed at the Harris Facility after July 1, 1994;
(p) Intellectual Property relating solely to (i) personal
computer software used by Seller pursuant to a "shrinkwrap" or "off-the-
shelf" license or (ii) any item set forth on Schedule 4(m) attached hereto
and denoted with an asterisk, to the extent Seller is unable, after
performing its obligations set forth in Section 7(f) hereof, to obtain
third party consent thereto (collectively, the "Excluded Intellectual
Property");
(q) the accounting records of Seller related to the
Business and any other books, records, ledgers, files, documents,
correspondence, lists, drawings, and specifications, advertising and
promotional materials, studies, reports, and other printed or written
materials not related primarily to the Business;
(r) Seller's tractor trailer vehicles (commonly referred to
as its "shuttle fleet") relating to the Business;
(s) Seller's equipment, furniture and fixtures located at
the Harris Facility relating to employees to be retained by Seller in the
human resource, accounting, and management information system functions as
set forth on Schedule 1(a)(s) attached hereto;
(t) the Gulfstream Main Facility and the machinery,
equipment, furniture and fixtures customarily located therein;
(u) any franchise, approval, permit, license, order,
registration, certificate, variance and any similar right obtained from
government or governmental agencies to the extent such item is unassignable
or does not relate primarily to the Business;
(v) all of Seller's cash and cash equivalents and
marketable securities;
(w) all of Seller's accounts, notes and other receivables;
(x) Seller's insurance policies;
(y) Seller's qualifications to conduct business as a
foreign corporation and arrangements with registered agents relating to
foreign qualifications; and
(z) any of the rights of Seller under this Agreement.
(b) Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, Buyer agrees to assume the obligations in
respect of the following liabilities of Seller, in respect of the Business
(collectively, the "Assumed Liabilities"):
(i) those certain trade payables and accrued expenses of Seller
identified on Schedule 1(b)(i) attached hereto, to the extent set forth on the
Closing Balance Sheets (the "Dollar Liabilities");
(ii) all liabilities of Seller, with respect to the Business, to the
extent arising out of any action or inaction occurring after the Closing Date
or to be performed after the Closing Date under the agreements, contracts,
leases, licenses and other arrangements (A) set forth on Schedule 4(p) and
denoted by a pound sign (#), and (B) not set forth on Schedule 4(p) due to
the specific dollar threshold or cancellation provision contained in
Section 4(p) below or any open purchase orders entered into in the ordinary
course of business for the purchase of Inventories but relating primarily
to the Business, but excluding any such liability to the extent arising out
of a breach, or any event occurring or state of fact existing which with
notice or lapse of time would constitute a breach, of contract, agreement,
lease, license or other arrangement by Seller on or prior to the Closing
Date (other than a breach of contract, agreement, lease, license or other
arrangement resulting from the failure of Seller to obtain a consent
referred to in Section 4(p) below for which Buyer has agreed to waive as a
condition pursuant to Section 3(a)(vi) below);
(iii) all liabilities of Seller, with respect to the Business, for
vacation pay and bonuses of those employees who accept employment with Buyer or
any of its Affiliates, to the extent, with respect to hourly employee's
vacation pay and all such bonuses, set forth on the Closing Balance Sheets;
(iv) all liabilities of Seller, with respect to the Business, to
the extent related to workers' compensation claims or obligations relating to
insurance programs or arrangements existing under the laws of the State of
Ohio arising and payable under the Seller's retrospective insurance program
with the State of Ohio for the period beginning July 1, 1994 and ending on
the Closing Date to the extent set forth on the Closing Balance Sheets (the
"Retrospective Workers' Compensation");
(v) all liabilities of Seller relating to each item of the
Transition Tooling (the "Seller Tooling Costs"); and
(vi) all of Seller's obligations to complete the Transition Tooling
programs in accordance with the requirements and specifications of the
respective customers.
(c) Excluded Liabilities. Notwithstanding anything to the
contrary in this Agreement or any of the Schedules attached hereto, Buyer will
not assume or be liable for any obligation or liability of Seller of any kind
or nature, known or unknown, contingent or otherwise, including, without
limitation, any obligation or liability relating to any Excluded Asset or
any (I) Tax, (II) indebtedness for borrowed money, (III) breach of
contract, (IV) breach of warranty, (V) tort, (VI) infringement, (VII)
violation of law, (VIII) action, suit or proceeding (including, without
limitation, any obligation or liability arising under any Environmental,
Health and Safety Laws or product liability laws), (IX) health insurance or
other medical benefit, (X) liability or obligation arising out of or
related to the Sales Agreement between Seller and Armstrong & Meissner,
Inc., dated January 1, 1990 or the relationship pursuant thereto or (XI)
workers' compensation claim or obligation relating to any workers'
compensation insurance program or arrangement (other than the Retrospective
Workers' Compensation), except those expressly assumed by Buyer in Section
1(b) above (collectively, the "Excluded Liabilities").
(d) Purchase Price. The purchase price (the "Purchase Price")
for the Acquired Assets shall be equal to (i) the sum of (A) $41.0 million, (B)
Estimated Inventory Value, (C) Net Estimated PP&E Additions and (D)
Estimated Transition Tooling minus (ii) the sum of (A) Estimated Assumed
Liabilities and (B) Estimated Excess Capitol Liabilities minus (iii) $4.0
million minus (iv) $950,741.16, as set forth on Schedule 1(d) attached
hereto (the "Ohio Payoff Amount"), as adjusted pursuant to Sections 1(e),
1(f) and 1(h) below.
(e) Determination of Certain Purchase Price Adjustments.
(i) Within one (1) business day prior to the Closing Date, Buyer and
Seller shall in good faith jointly prepare an estimate of the Closing
Balance Sheets (as defined in Section 1(e)(ii) below) (the "Estimated
Closing Balance Sheets") based on Seller's (with respect to the Business)
and Capitol's books and records and other information then available, in an
attempt to determine Estimated Inventory Value, Net Estimated PP&E
Additions, Estimated Transition Tooling, Estimated Assumed Liabilities and
Estimated Excess Capitol Liabilities. For purposes hereof, (A) "Estimated
Inventory Value" means the book value of all raw materials, packing
supplies, maintenance and repair supplies, manufactured and purchased
parts, work-in-process and finished goods inventory used or held for use by
Seller, with respect to the Business, and by Capitol (the "Inventory"), (B)
"Net Estimated PP&E Additions" means the amount of capital expenditures
made by Seller, with respect to the Business, and by Capitol in respect of
property, plant and equipment plus, without duplication, those items
relating to approved training expenses and deposits and prepayments to the
extent that Buyer obtains any benefit therefrom after the Closing Date, as
set forth on Schedule 1(e)(i) attached hereto minus the greater of (y) the
book value of, or (z) the proceeds received from, any sales, retirements or
other dispositions made by Seller, with respect to the Business, and by
Capitol in respect of property, plant and equipment, in each case, made
during the period beginning after June 30, 1994 and ending on the Closing
Date, (C) "Estimated Transition Tooling" means the book value of the
Transition Tooling, (D) "Estimated Assumed Liabilities" means the book
value of the Dollar Liabilities (which shall include an accrual of $40,000
for 1994 vacation pay liability for Seller's salaried employees and an
accrual for a pro rata portion of the annual bonus paid by Seller to its
employees involved in the Business), the book value of the Seller Tooling
Costs, and the book value of the Retrospective Workers' Compensation and
(E) "Estimated Excess Capitol Liabilities" means the excess, if any, of the
book value of the liabilities of Capitol (including, without limitation,
intercompany liabilities due to Seller (the "Intercompany Debt"), the book
value of the liabilities of Capitol with respect to the Honda Accord and
the Honda Civic programs (the "Capitol Tooling Costs") and the book value
of Capitol's accrued liabilities and reserves relating to workers'
compensation including, without limitation, with respect to Capitol's
retrospective insurance program with the State of Ohio for the period
beginning July 1, 1994 and ending on the Closing Date and accrued vacation
liabilities and obligations) over the net book value of Capitol's assets
(other than Capitol's Inventory and Capitol's property, plant and equipment
and goodwill (or similar intangible assets), but including, without
limitation, the book value of Capitol's tooling-in-process), in each case
as determined from the Estimated Closing Balance Sheets; provided, however,
that if Buyer and Seller are unable to agree on any of the Estimated
Inventory Value, Net Estimated PP&E Additions, Estimated Transition
Tooling, Estimated Assumed Liabilities and Estimated Excess Capitol
Liabilities, such disputed amounts shall be determined based on the amounts
set forth on Seller's and Capitol's unconsolidated balance sheets as of the
month-ending immediately prior to the Closing Date.
(ii) As promptly as practicable after the Closing Date, Buyer's
accountants will prepare unconsolidated balance sheets of Seller, with respect
to the Business, and Capitol as at the close of business on the Closing Date
(the "Closing Balance Sheets") for the purpose of establishing the Closing
Inventory Value, Net Closing PP&E Additions, Closing Transition Tooling,
Closing Assumed Liabilities and Closing Excess Capitol Liabilities. For
purposes hereof, (A) "Closing Inventory Value" means the book value of the
Inventory, (B) "Net Closing PP&E Additions" means the amount of capital
expenditures made by Seller, with respect to the Business, and by Capitol
in respect of property, plant and equipment plus, without duplication,
those items relating to approved training and expenses and deposits and
prepayments to the extent that Buyer obtains benefit therefrom after the
Closing Date set forth on Schedule 1(e)(i) attached hereto minus the
greater of (y) the book value of, or (z) the proceeds received from, any
sales, retirements or other dispositions made by Seller, with respect to
the Business, and by Capitol in respect of property, plant and equipment,
in each case, made during the period beginning after June 30, 1994 and
ending on the Closing Date, (C) "Closing Transition Tooling" means the book
value of the Transition Tooling, (D) "Closing Assumed Liabilities" means
the book value of the Dollar Liabilities (which shall include an accrual of
$40,000 for 1994 vacation pay liability for Seller's salaried employees and
an accrual for a pro rata portion of the annual bonus paid by Seller to its
employees involved in the Business), the book value of the Seller Tooling
Costs, and the book value of the Retrospective Workers' Compensation
("Seller's Retrospective WC Accrual") and (E) "Closing Excess Capitol
Liabilities" means the excess, if any, of the book value of the liabilities
of Capitol (including, without limitation, the intercompany liabilities due
to Seller, the Capitol Tooling Costs and the book value of Capitol's
accrued liabilities and reserves relating to workers' compensation,
including, without limitation, with respect to Capitol's retrospective
insurance program with the State of Ohio for the period beginning July 1,
1994 and ending on the Closing Date ("Capitol's Retrospective WC Accrual")
and accrued vacation liabilities and obligations) over the net book value
of Capitol's assets (other than Capitol's Inventory and Capitol's property,
plant and equipment and goodwill (or similar intangible assets), but
including, without limitation, the book value of Capitol's tooling-in-
process), in each case as determined from the Closing Balance Sheets. In
order for Buyer to properly prepare the Closing Balance Sheets, Seller
shall conduct a physical inventory on the Closing Date (or such other date
promptly thereafter as the parties may agree) and shall permit Buyer and
its accountants to observe such inventory. The Closing Balance Sheets and
the Estimated Closing Balance Sheets shall (a) reflect all Acquired Assets
and Assumed Liabilities and all assets and liabilities of Capitol as at the
close of business on the Closing Date, (b) be prepared in accordance with
GAAP (regardless of whether GAAP was applied in prior periods) and (c)
reflect all items and adjustments regardless of materiality. Within sixty
(60) days after the Closing Date, Buyer shall deliver to Seller the Closing
Balance Sheets.
(iii) If the sum of (A) Closing Inventory Value, (B) Net Closing PP&E
Additions (it being understood that Net Closing PP&E Additions may be a
negative number) and (C) Closing Transition Tooling, minus the sum of (Y)
Closing Assumed Liabilities and (Z) Closing Excess Capitol Liabilities (the
"Net Closing Amount") exceeds the sum of (A) Estimated Inventory Value, (B)
Net Estimated PP&E Additions and (C) Estimated Transition Tooling minus the
sum of (Y) Estimated Assumed Liabilities and (Z) Estimated Excess Capitol
Liabilities (the "Net Estimated Amount"), Buyer shall, subject to Section
7(b)(xi) hereof, within three (3) business days pay to Seller the amount of
such excess. If the Net Closing Amount is less than the Net Estimated
Amount, Seller shall within three (3) business days pay to Buyer the amount
of such shortfall. All amounts owed pursuant to this Section 1(e)(iii)
shall include interest, from the Closing Date to the date of payment, at
the Applicable Rate, calculated on the basis of a 365-day year.
(iv) If Seller disagrees with any item on the Closing Balance
Sheets, Seller shall notify Buyer in writing of such disagreement within thirty
(30) business days after Seller's receipt thereof (such notice setting
forth the basis for such disagreement in reasonable detail). Buyer shall
permit Seller access to such personnel and work papers involved with or
relating to the preparation of the Closing Balance Sheets as may be
reasonably necessary to permit Seller to review in detail the manner in
which the Closing Balance Sheets were prepared. Buyer and Seller shall
thereafter negotiate in good faith to resolve any such disagreements;
provided, however, that Seller or Buyer, as the case may be, shall within
three (3) business days pay to Buyer or Seller, as the case may be, the
amount determined pursuant to Section 1(e)(iii) above which is not subject
to dispute, if any. If Buyer and Seller are unable to resolve any such
disagreements in (A) respect of non-inventory items within thirty (30)
business days and (B) in respect of inventory items within six (6) months
after the Closing Date, Buyer and Seller shall engage the Auditor (as
defined in Section 1(e)(v) below) to resolve the disagreements in
accordance with Section 1(e)(v) below.
(v) The "Auditor" shall be KPMG Peat Marwick and shall be retained
solely to resolve the individual disputed line items. Buyer and Seller shall
use their best efforts to cause the Auditor to resolve all disagreements over
individual line items as soon as practicable. The resolution of such
disagreements by the Auditor shall be final and binding on Buyer and
Seller. The fees and expenses of the Auditor shall be shared equally by
Buyer and Seller.
(f) Determination of FN-116 Adjustment. If Buyer receives a
notification from Ford Motor Company ("Ford") confirming to the reasonable
satisfaction of Buyer that the FN-116 program or its successor program will
remain with the Business for the normal life of the program (the "Ford
Notification"), Buyer will, subject to Section 7(b)(xi) hereof, within
thirty (30) business days after determination of such amount in accordance
with the following terms, pay to Seller an amount equal to (i) $1.5 million
multiplied by (ii) the percentage obtained by dividing (a) the aggregate of
the annual gross profit (as determined below) associated with each
component awarded pursuant to the Ford Notification by (b) the aggregate of
the annual gross profit associated with each component relating to the
existing FN-116 program for the 12-month period ended September 30, 1994,
as set forth on Schedule 1(f) attached hereto; provided that in no event
shall Buyer be obligated to pay more than $1.5 million. For purposes
hereof, "annual gross profit," with respect to the new business, will be
determined by multiplying (y) the sales price of each component set forth
in the written notice from Ford containing such information for each such
component minus the production cost for each such component (determined in
good faith by Buyer in accordance with Buyer's estimated standard costs to
produce such parts and consistent with Buyer's past estimating practices)
by (z) the annual financial planning volume for each such component set
forth in the written notice from Ford containing such information.
(g) Allocation of the Purchase Price. A preliminary allocation
of the Purchase Price (plus the Assumed Liabilities) among the Acquired Assets
will be prepared by Buyer and delivered to Seller on or prior to the
Closing Date (the "Preliminary Allocation Schedule"). A final allocation
based substantially on the allocations set forth on the Preliminary
Allocation Schedule will be prepared by Buyer as promptly as practicable
after the Closing Date and, subject to approval by Seller (which approval
will not be unreasonably withheld), shall be the allocation used by the
Parties in preparing (a) Form 8594, Asset Acquisition Statement, for each
of Buyer and Seller, and (b) all Tax Returns. Buyer and Seller shall each
file Form 8594, prepared in accordance with this Section 1(g), with its
federal income Tax Return for its tax period including the Closing Date.
The Parties hereto agree that all allocations made pursuant to this Section
1(g) are binding upon them and upon each of their successors and assigns,
and that they will report the transaction herein in accordance with such
allocations.
(h) Tooling.
(i) With respect to all tooling completed and billed by Seller
including, without limitation, the design and engineering (with respect to the
pre-engineering release) tooling for the VN-127 platform and the design,
engineering and prototype tooling for the DN-101 platform (the "Completed
Tooling")), with respect to the Business, or Capitol on or prior to the
Closing Date, Seller shall be liable for all costs, expenses and
liabilities of any audit of such tooling and Seller shall indemnify Buyer
for any Losses (as defined in Section 7(b)(i)) Buyer may incur or become
subject to as a result of such audit.
(ii) With respect to tooling commenced and billed by Buyer,
with respect to the Business, or Capitol after the Closing Date, Buyer shall be
liable for all costs, expenses and liabilities of any audit of such tooling
and Buyer shall indemnify Seller for any Losses Seller may incur or become
subject to as a result of such audit.
(iii) As soon as practicable after the full program
approval by the customer of the DN-101 platform, Buyer will prepare an
accounting (the "DN-101 Accounting") for the purposes of determining the
Total Revenues, with respect to such platform (the "DN-101 Revenues") and
the Total Costs, with respect to such platform (the "DN-101 Costs").
Within 90 days following such program approval (the "DN-101 Date"), Buyer
will deliver to Seller the DN-101 Accounting. If the DN-101 Revenues equal
or exceed the DN-101 Costs (such excess, the "DN-101 Reserve"), Buyer will,
subject to Section 7(b)(xi) hereof, within three business days following
the DN-101 Date, pay to Seller $2.5 million. If the DN-101 Costs exceed
the DN-101 Revenues (such excess, the "DN-101 Shortfall"), Buyer will,
subject to Section 7(b)(xi) hereof, within three business days following
the DN-101 Date, pay to Seller an amount equal to $2.5 million less the DN-
101 Shortfall. If the DN-101 Shortfall exceeds $2.5 million, Seller will,
subject to Section 7(b)(xi) hereof, within three business days following
the DN-101 Date, pay to Buyer the amount of such excess. If there exists a
DN-101 Shortfall and Buyer receives additional DN-101 Revenues after the DN-
101 Date, then Buyer shall promptly pay, subject to Section 7(b)(xi)
hereof, such additional DN-101 Revenues to Seller up to an amount equal to
the DN-101 Shortfall.
(iv) On or prior to June 1, 1997, Buyer will, subject to
Section 7(b)(xi) hereof, pay to Seller the lesser of (A) $0.5 million
(plus interest accruing at the Applicable Rate from the Closing Date) plus
any DN-101 Reserve, minus any Seller Responsible Costs (not otherwise
included in the calculation of the DN-101 Costs above), with respect to
such platform, arising (whether by audit or otherwise) after the DN-101
Date or (B) $0.5 million (plus interest accruing at the Applicable Rate
from the Closing Date). If the computation set forth in clause (A) above
results in the negative amount ("Net Audit Cost"), Seller will, subject to
Section 7(b)(xi) hereof, promptly pay to Buyer an amount equal to the Net
Audit Cost.
(v) With respect to each of the WN-97 platform, the Honda
Civic platform and the Honda Accord platform, as soon as practicable after
the full program approval by the customer of each such platform, Buyer will
prepare an accounting (each, a "Tooling Accounting") for the purposes of
determining the Total Revenues and Total Costs, with respect to each
platform. Within 90 days following each such program approval (each, an
"Approval Date"), Buyer will deliver to Seller the relevant Tooling
Accounting. If the Total Costs set forth on any Tooling Accounting exceed
the Total Revenues set forth on such Tooling Accounting (each, a
"Shortfall"), the Seller will, subject to Section 7(b)(xi) hereof, within
three business days following the relevant Approval Date, pay to Buyer the
amount of any such Shortfall. Seller will, subject to Section 7(b)(xi)
hereof, promptly pay to Buyer any Seller Responsible Costs, with respect to
any such program, arising (whether by audit or otherwise) after the
relevant Approval Date. If, with respect to each such program, there
exists a Shortfall and Buyer receives additional revenues not reflected on
the applicable Tooling Accounting, then Buyer shall promptly pay, subject
to Section 7(b)(xi) hereof, such additional revenues to Seller up to an
amount equal to such Shortfall. If, with respect to each such program,
there exists a Shortfall, then 180 days after the relevant Approval Date,
Buyer will assign, at Seller's request, any claim, refund, right of
recovery, right of setoff or right of recoupment against its customer with
respect to any uncollected revenues relating to such program, to the extent
Buyer is not then pursuing any such claim, refund or right.
(vi) As soon as practicable after the full program approval
by the customer of the VN-127 platform, Buyer shall prepare an accounting
(the "VN-127 Accounting") for the purposes of determining the Total
Revenues, with respect to such platform (the "VN-127 Revenues"), and the
Total Costs, with respect to such platform (the "VN-127 Costs"). Within 90
days following such program approval (the "VN-127 Date"), Buyer will
deliver to Seller the VN-127 Accounting. If the VN-127 Revenues equal or
exceed the VN-127 Costs, Buyer will, subject to Section 7(b)(xi) hereof,
within three business days following the VN-127 Date, pay to Seller $1.0
million. If the VN-127 Costs exceed the VN-127 Revenues (such excess, the
"VN-127 Shortfall") Buyer will, subject to Section 7(b)(xi) hereof, within
three business days following the VN-127 Date, pay to Seller the excess of
$1.0 million over the VN-127 Shortfall. If the VN-127 Shortfall exceeds
$1.0 million, Seller will, subject to Section 7(b)(xi) hereof, within three
business days following the VN-127 Date, pay to Buyer the amount of such
excess. Seller will, subject to Section 7(b)(xi) hereof, promptly pay to
Buyer any Seller Responsible Costs, with respect to such platform, arising
(whether by audit or otherwise) after the VN-127 Date. If there exists a
VN-127 Shortfall and Buyer receives additional VN-127 Revenues after the VN-
127 Date, then Buyer shall, subject to Section 7(b)(xi) hereof, promptly
pay such additional VN-127 Revenues to Seller up to an amount of the VN-127
Shortfall.
(vii) On or prior to the Closing Date, Seller will deliver
to Buyer Schedule 1(h)(vii) (the "Tooling Projection Schedule") which sets
forth a projection of Total Revenues and Total Costs with respect to each
item of tooling described above. Seller represents to Buyer that the
projections set forth on the Tooling Projection Schedule contains no
intentional misstatement or intentional misrepresentation of the projected
revenues of any item of tooling. If, 180 days after the DN-101 Date,
Seller has not received $2.5 million pursuant to Section 1(h)(iii) above,
Buyer will assign, at Seller's request, any claim refund, right of
recovery, right of setoff or right of recoupment against its customer with
respect to any uncollected revenues relating to the DN-101 platform, to the
extent Buyer is not then pursuing any such claim. If, 180 days after the
VN-127 Date, Seller has not received $1.0 million pursuant to Section
1(h)(vi) above, Buyer will assign, at Seller's request, any claim, refund,
right of recovery, right of setoff or right of recoupment against its
customer with respect to any uncollected revenues relating to the VN-127
platform, to the extent Buyer is not then pursuing any such claim, refund
or right. If, with respect to any claim, refund or right that is not
assigned to Seller under this Section or Section 1(h)(v) because Buyer is
pursuing it, Buyer is no longer pursuing such claim, refund or right in
good faith, then Buyer shall assign promptly, at Seller's request, such
claim, refund or right.
(viii) If Seller disagrees with any item on the DN-101
Accounting, the VN-127 Accounting or any Tooling Accounting, or the items
constituting any Net Audit Costs, Seller shall notify Buyer in writing of
such disagreement within thirty (30) business days after Seller's receipt
thereof (such notice setting forth the basis for such disagreement in
reasonable detail). Buyer shall permit Seller access to such personnel and
work papers involved with or relating to the preparation of DN-101
Accounting, the VN-127 Accounting or any Tooling Accounting, or the items
constituting any Net Audit Costs, as the case may be, as may be reasonably
necessary to permit Seller to review in detail the manner in which the DN-
101 Accounting, the VN-127 Accounting or any Tooling Accounting, or the
items constituting any Net Audit Costs, as the case may be, were prepared.
Buyer and Seller shall thereafter negotiate in good faith to resolve any
such disagreements; provided, however, that Seller or Buyer, as the case
may be, shall within three (3) business days pay to Buyer or Seller, as the
case may be, the amount determined pursuant to Section 1(h)(iii), (iv), (v)
or (vi) above, as the case may be, which is not subject to dispute, if any.
If Buyer and Seller are unable to resolve any such disagreements within
thirty (30) business days, Buyer and Seller shall engage the Auditor to
resolve the disagreements in accordance with Section 1(e)(v) above. Buyer
agrees to manage the Transition Tooling in a manner consistent with Buyer's
and its Affiliate's other similar tooling arrangements. The Parties also
agree to advise and consult with one another in respect of the management
of the Transition Tooling.
(ix) All amounts actually paid or setoff pursuant to this
Section 1(h) shall (A) be made in immediately available funds by wire
transfer and (B) (other than payments made to Seller pursuant to Section
1(h)(iv) above) include interest at the Applicable Rate, calculated on the
basis of a 365-day year, accruing from the Closing Date; provided, however,
that any such amounts paid to, or setoff by, Buyer shall accrue interest
from the date on which such amount became due until such amount is paid or
setoff.
(x) For purposes hereof, "Total Costs" means, with respect
to any item of tooling, the actual costs incurred by Buyer plus any Seller
Tooling Cost or Capitol Tooling Costs in respect of such item, except to
the extent any such cost is a Buyer Responsible Cost; "Total Revenues"
means, with respect to any item of tooling, actual revenues received by
Buyer (including, without duplication or limitation, the Closing Transition
Tooling) in respect of such item, except to the extent any such revenue is
received as a result of a Buyer Responsible Cost; "Seller Responsible
Costs" means, with respect to any item of tooling, any cost relating to (A)
a design or engineering mistake or inadequacy during the Seller's
management of the program causing failure in the production of a quality
part (B) excessive normal supplier costs in areas, such as testing,
resulting from Seller's or Capitol's (prior to the Closing Date) mistake or
inadequacy of design and engineering activity requiring re-testing (C)
check fixtures not constructed in accordance with customer specifications
calling for Gauge R & R with a 30% error factor, (D) modifications or
additional tooling necessary to produce a part within the cycle time and
process parameters anticipated in the determination by Seller of the target
piece price for the part, (E) prototype costs to the extent such costs are
not recoverable from the customers as a separate component of the piece
price on the purchase order received from the customer or (F) one-half of
costs incurred because of inconsistent customer specifications such as
CMM/test fixture upgrades; "Buyer Responsible Costs" means, with respect to
any item of tooling, any cost (A) associated with a change caused by the
customer regarding the original requirements of the part concerning fit,
form and function, (B) customarily expected to be absorbed by a supplier
and recovered through the piece price such as initial product testing, (C)
expected to produce a pay-back or return to the Buyer because of
manufacturing efficiency gains over and above what is necessary to produce
a part within the cycle time and process parameters anticipated in the
determination by Seller of target piece price for the part, (D) resulting
from the Buyer's preference for production methods or quality controls in
excess of what is specified by the customer, (E) one-half of costs incurred
because of inconsistent customer specifications such as CMM/test fixture
upgrades or (F) resulting from an error or mistake during Buyer's
management of the program.
(i) Intercompany Indebtedness. Immediately following the
acquisition of the Acquired Assets, Buyer will cause Capitol to pay to Seller
an amount equal to the Intercompany Debt, as reflected in the Estimated Closing
Balance Sheets. Upon final determination of the Closing Balance Sheets,
Buyer and Capitol will settle on the intercompany liabilities due to the
Seller as reflected in the Closing Balance Sheets in a manner consistent
with Section 1(e) and upon such settlement it will represent the discharge
in full of all intercompany indebtedness owed by Capitol to Seller.
(j) Workers' Compensation.
(i) On or prior to December 1 of each year commencing
December 1, 1995 until the final settlement of the Seller's and Capitol's
retrospective workers' compensation insurance program for the period
beginning July 1, 1994 and ending on the Closing Date (the "Retrospective
Program") with the State of Ohio, Buyer will prepare an annual accounting
(each, a "WC Accounting") for the purposes of determining Buyer's and
Capitol's actual costs incurred in connection with the Retrospective
Program based on the information and statements delivered to Buyer from the
State of Ohio for such preceding year (the "Actual Retrospective WC Costs")
and deliver to Seller the WC Accounting. If the Actual Retrospective WC
Costs exceed the sum of Seller's Retrospective WC Accrual and Capitol's
Retrospective WC Accrual (the "Total Retrospective WC Accruals"), Seller
will pay, subject to Section 7(b)(xi) hereof, to Buyer in immediately
available funds the amount of such excess. If the Total Retrospective WC
Accruals exceed the Actual Retrospective WC Costs, Buyer will pay, subject
to Section 7(b)(xi) hereof, to Seller in immediately available funds the
amount of such excess. Buyer shall permit Seller access to Buyer's files,
work papers (including, without limitation, all applicable correspondence
from the State of Ohio) and personnel involved in the preparation of each
WC Accounting. Buyer and Seller shall negotiate in good faith to resolve
any disputes with respect to any calculation or determination made pursuant
to this Section 1(j). If Buyer and Seller are unable to resolve any such
disputes within thirty (30) days, Buyer and Seller shall engage the Auditor
to resolve the disagreements in accordance with Section 1(e)(v) above.
(ii) If, after January 1, 1996, Buyer elects self-insurance
with respect to Buyer's and Capitol's workers' compensation insurance
program in the State of Ohio (the "Self-Insurance Election"), Buyer will
pay, subject to Section 7(b)(xi) hereof, to Seller in immediately available
funds by wire transfer an amount equal to the Ohio Payoff Amount minus the
amount actually paid by Buyer and Capitol to the State of Ohio in
connection with the Self-Insurance Election.
Section 2. Closing of the Transaction.
(a) The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Kirkland
& Ellis in Chicago, effective at 11:59 p.m. local time on December 2, 1994,
or such other date and place as the Parties may mutually determine (the
"Closing Date").
(b) Deliveries at the Closing. At the Closing:
(i) Seller will deliver to Buyer (A) the various certificates,
instruments, and documents referred to in Section 3(a) below, (B) a bill of
sale and assignment, in form and substance reasonably acceptable to Buyer, (C)
real property and Intellectual Property transfer documents in form and
substance reasonably acceptable to Buyer (it being understood that a
special warranty deed for the Real Estate in form acceptable for recording
will be acceptable), (D) stock certificate representing all of the
outstanding capital stock of Capitol, duly endorsed for transfer and (E)
such other instruments of sale, transfer, conveyance, and assignment as
Buyer reasonably may request; and
(ii) Buyer will deliver to Seller (A) the Purchase Price, determined
as of the Closing Date, in immediately available funds by wire transfer, (B)
the various certificates, instruments, and documents referred to in Section
3(b) below, (C) an assumption agreement in form and substance reasonably
acceptable to Seller and (D) such other instruments of assumption as Seller
reasonably may request.
(iii) Buyer will cause Capitol to deliver to Seller an amount equal to
the Intercompany Debt in immediately available funds by wire transfer.
Section 3. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in Section 4 below
shall be true and correct in all material respects at and as of the Closing
Date (without taking into account any disclosure made pursuant to Section 4(x)
below and disregarding the last sentence of Section 4(g) below); provided
that to the extent any such representation or warranty relates solely to an
Excluded Liability, such representation or warranty need not be true and
correct so long as Seller acknowledges in writing to Buyer that any such
breach relates solely to an Excluded Liability (which acknowledgment shall
not be unreasonably withheld);
(ii) Seller shall have performed and complied in all material
respects with all of its covenants hereunder through the Closing;
(iii) Buyer shall have received all of the title insurance
commitments, policies, and riders specified in Section 6(h) below (other than
with respect to item 5 of Schedule 6(h)), and all of the surveys specified in
Section 6(i) below;
(iv) No action, suit, or proceeding shall be pending before any
court, arbitrator or other body or administrative agency of any federal, state,
local, or foreign jurisdiction seeking specifically to prevent consummation
of any of the transactions contemplated by this Agreement (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(v) Seller shall have delivered to Buyer a certificate to the effect
that each of the conditions specified above in Section 3(a)(i)-(ii) is
satisfied in all respects;
(vi) Seller shall have received all third party consents which are
denoted with an asterisk (*) and underlined on either Schedule 4(m) or Schedule
4(p) attached hereto and Seller and Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 4(c) and Section 5(c) below;
(vii) Buyer shall have received from counsel to Seller an opinion in
the form of Exhibit A attached hereto, addressed to Buyer, and dated as of the
Closing Date;
(viii) Buyer shall have obtained on terms and conditions reasonably
satisfactory to it all of the financing it needs in order to consummate the
transactions contemplated hereby and to finance the Business' continuing
operations after the Closing;
(ix) Seller shall have entered into the Main Facility Lease and
Agreement (the "Main Lease") with Buyer in the form set forth on Exhibit B
attached hereto pursuant to which Buyer shall lease a portion of the
Gulfstream main facility (the "Gulfstream Main Facility") and the Main
Lease shall be in full force and effect and shall not have been amended or
modified;
(x) Seller shall have entered into the Harris Facility Lease and
Agreement (the "Harris Lease") with Buyer in the form set forth on Exhibit C
attached hereto pursuant to which Seller shall lease a portion of the Harris
facility (the "Harris Facility"), and the Harris Lease shall be in full
force and effect and shall not have been amended or modified;
(xi) Seller shall have entered into the Transition Services Agreement
(the "Transition Agreement") with Buyer in the form set forth on Exhibit D
attached hereto, and the Transition Agreement shall be in full force and
effect and shall not have been amended or modified; and
(xii) Seller shall have delivered to Buyer a certificate issued by
Seller in form and substance reasonably satisfactory to Buyer, duly executed
and acknowledged, certifying that the sale of the Acquired Assets is exempt
from the provisions of the Foreign Investment in Real Property Act of 1980.
Buyer may waive any condition specified in this Section 3(a) if it
executes a writing so stating at or prior to the Closing and such waiver
will also operate as a waiver of any rights or remedies Buyer may have
hereunder as a result of such nonsatisfaction.
(b) Conditions to Obligation of Seller. The obligation of
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) The representations and warranties set forth in Section 5 below
shall be true and correct in all material respects at and as of the Closing
Date (without taking into account any disclosure made pursuant to Section 5(e)
below);
(ii) Buyer shall have performed and complied in all material respects
with all of its covenants hereunder through the Closing;
(iii) No action, suit, or proceeding shall be pending before any
court, arbitrator or other body or administrative agency of any federal, state,
local, or foreign jurisdiction seeking specifically to prevent consummation
of any of the transactions contemplated by this Agreement (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) Buyer shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in Section 3(b)(i)-(ii) is
satisfied in all respects;
(v) Seller and Buyer shall have received all authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 4(c) and Section 5(c) below;
(vi) Seller shall have received from counsel to Buyer an opinion in
the form of Exhibit E attached hereto, addressed to Seller, and dated as of the
Closing Date;
(vii) Buyer shall have entered into the Main Lease with Seller in the
form set forth on Exhibit B attached hereto, and the Main Lease shall be in
full force and effect and shall not have been amended or modified; and
(viii) Buyer shall have entered into the Harris Lease with Seller in
the form set forth on Exhibit C attached hereto, and the Harris Lease shall be
in full force and effect and shall not have been amended or modified; and
(ix) Buyer shall have entered into the Transition Agreement with
Seller in the form set forth on Exhibit D attached hereto, and the
Transition Agreement shall be in full force and effect and shall not have
been amended.
Seller may waive any condition specified in this Section 3(b) if it
executes a writing so stating at or prior to the Closing and such waiver
will also operate as a waiver of any rights or remedies Seller may have as
a result of such nonsatisfaction.
Section 4. Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows:
(a) Organization of Seller. Each of Seller and Capitol is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Schedule 4(a) attached hereto
lists all of the jurisdictions in which Seller, with respect to the
Business, and Capitol are required to qualify to do business as foreign
corporations.
(b) Authorization of Transaction. Seller has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of Seller, enforceable in accordance with its terms and
conditions, subject to the effect of bankruptcy, insolvency, reorganization
or other similar laws and to general principles of equity (whether
considered in proceedings at law or in equity).
(c) Noncontravention. Except as set forth on Schedule 4(c)
attached hereto, neither the execution and the delivery of this Agreement, nor
th consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute (other than any so-called bulk transfer laws), regula
tion, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
Seller or Capitol is subject or any provision of the charter or bylaws of
Seller or Capitol or (ii) result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which Seller, with respect to the Business, or Capitol is a party or by
which either of them is bound or to which any of their respective assets is
subject or (iii) result in the imposition of any security interest upon any
of Capitol's assets or the Acquired Assets. Except as set forth on
Schedule 4(c) attached hereto, neither Seller nor Capitol is required to
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for
the Parties to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Except for Nomura Securities International,
Inc., neither Seller nor Capitol has any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement. Seller is solely responsible for
the fees and expenses of Nomura Securities International, Inc.
(e) Subsidiaries, Investments and Capital Stock.
(i) Other than Capitol or as set forth on Schedule 4(e) attached
hereto, Seller, with respect to the Business, has no Subsidiaries or investment
in any Person.
(ii) The authorized capital stock of Capitol consists of 10,000
shares of common stock, no par value (the "Common Stock"), 1,000 shares of
which are issued and outstanding. Capitol has no outstanding stock or
securities convertible or exchangeable for any shares of its capital stock or
containing any profit participation features, and Capitol does not have
outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable
for its capital stock or any stock appreciation rights or phantom stock
plans. Capitol is not subject to any obligation (contingent or otherwise)
to repurchase or otherwise acquire or retire any shares of its capital
stock or any warrants, options or other rights to acquire its capital
stock. All of the outstanding shares of Capitol's capital stock are
validly issued, fully paid and nonassessable. Seller owns 100% of the
issued and outstanding capital stock of Capitol, free and clear of any
liens, charges, encumbrances and other claims.
(iii) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the sale of the Common Stock
hereunder. Capitol has not violated any applicable federal or state
securities laws in connection with the offer, sale or issuance of any of
its capital stock, and the offer and sale of the Common Stock hereunder do
not and will not require registration under the Securities Act of 1933, as
amended, or any applicable state securities laws. There are no agreements
among Capitol's stockholders with respect to the voting or transfer of
Capitol's capital stock or with respect to any other aspect of Capitol's
affairs.
(f) Financial Statements. Schedule 4(f) attached hereto
contains the following financial statements (collectively the "Financial
Statements"): (i) the unaudited statements of income for the fiscal years ended
December 31, 1991, December 31, 1992, for Seller, with respect to the
Business; (ii) the consolidated unaudited statements of income for the
fiscal year ended December 31, 1993 (the "Most Recent Fiscal Year End") for
Seller, with respect to the Business, and Capitol; (iii) the unaudited
statements of income for the fiscal years ended November 30, 1991,
November 30, 1992 and for the period commencing December 1, 1992 and
continuing through March 31, 1993 for Capitol; and (iv) the consolidated
unaudited statements of income for the eight-months ended August 31, 1994
for Seller, with respect to the Business, and Capitol. The Financial
Statements (other than the notes thereto) have been prepared in accordance
with GAAP throughout the periods covered thereby and present fairly the
results of operations of Seller, with respect to the Business, and Capitol
for such periods. Schedule 4(f) attached hereto contains (i) an unaudited
schedule of certain assets and liabilities related to the Business
(including Capitol) as of June 30, 1994 (the "Most Recent Balance Sheet")
and (ii) an unaudited balance sheet as of June 30, 1994 for Capitol (the
"Most Recent Capitol Balance Sheet." The valuation of the assets and
liabilities set forth in the Most Recent Balance Sheet has been determined
in accordance with GAAP, and the Most Recent Balance Sheet fairly presents
the categories of assets and liabilities reflected therein as of such date
for the Business (including Capitol), except that required footnote
disclosure has not been provided. The Most Recent Capitol Balance Sheet
has been prepared in accordance with GAAP and presents fairly the financial
position of Capitol as of such date, except that required footnote
disclosure has not been provided.
(g) Events Subsequent to June 30, 1994. Since June 30, 1994,
there has not been any material adverse change in the business, financial
condition, results of operations, assets, employees, employee relations,
customer or supplier relations of the Business, except as set forth on
Schedule 4(g) attached hereto. Since June 30, 1994, except as set forth on
Schedule 4(g) attached hereto:
(i) Neither Seller nor Capitol has sold, leased, transferred, or
assigned any of the assets having a value in excess of $50,000 of the Business
or Capitol, respectively, tangible or intangible, other than inventory in the
ordinary course of business;
(ii) Neither Seller, with respect to the Business, nor Capitol has
entered into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, or licenses) involving more than $50,000,
other than in the ordinary course of business or other than any such item
which is terminable without penalty upon sixty days' notice;
(iii) Neither Seller, with respect to the Business, nor Capitol has
accelerated, terminated, modified, or cancelled any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, or
licenses) involving more than $50,000 to which Capitol is a party or by
which Capitol is bound;
(iv) Capitol has not delayed or postponed the payment of accounts
payable and other obligations and liabilities outside the ordinary course
of business;
(v) Neither Seller, with respect to the Business, nor Capitol has
experienced any damage, destruction, or loss (whether or not covered by
insurance) to its property in excess of $50,000;
(vi) Neither Seller, with respect to the Business, nor Capitol has
entered into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement;
(vii) Neither Seller, with respect to the Business, nor Capitol has
granted any increase in the base compensation of any of their respective
directors, officers, and employees other than as consistent with past custom
and practice;
(viii) Neither Seller, with respect to the Business, nor Capitol has
adopted, amended, modified, or terminated any bonus, profit-sharing,
incentive, severance, or other plan, contract, or agreement for the benefit
of any of their respective directors, officers, and employees (or taken any
such action with respect to any other Employee Benefit Plan);
(ix) Neither Seller, with respect to the Business, nor Capitol has
entered into any transaction with any of its directors, officers, employees
or Affiliates, other than ordinary course employment arrangements entered
into in accordance with past custom and practice;
(x) Capitol has not entered into any agreement, contract or other
arrangement with respect to the incurrence of borrowed money; and
(xi) Neither Seller, with respect to the Business, nor Capitol, as
applicable, has committed to any of the foregoing.
Buyer acknowledges that there exists a labor organizing campaign at
Seller's Huron, Ohio facility and such activity, regardless of its outcome,
shall not represent a breach of this Section 4(g).
(h) Undisclosed Liabilities. Neither Seller, with respect to
the Business, nor Capitol has any liability or obligation (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated) arising out of transactions entered
into on or prior to the Closing Date, or any action or inaction on or prior
to the Closing Date, or any state of facts existing on or prior to the
Closing Date, except for (i) liabilities or obligations set forth on the
face of the Most Recent Balance Sheet or the Most Recent Capitol Balance
Sheet (rather than in any notes thereto), (ii) liabilities or obligations
which have arisen after June 30, 1994 in the ordinary course of business
(none of which relates to (A) breach of contract, (B) breach of warranty,
(C) tort, (D) infringement, (E) violation of law, or (F) any action, suit
or proceeding (including, without limitation, any clean-up obligation or
liability for personal injury or property damage under any Environmental,
Health and Safety Laws)), (iii) liabilities or obligations arising under
agreements, contracts and purchase orders set forth on Schedule 4(p)
attached hereto (or under those not set forth on Schedule 4(p) due to the
specific dollar threshold or cancellation provision contained in Section
4(p) below) and (iv) liabilities or obligations reflected on the Schedules
attached hereto.
(i) Legal Compliance. Seller, with respect to the Business,
Capitol and their predecessors and Affiliates have complied with all applicable
laws, rules and regulations (other than ERISA and Environmental, Health,
and Safety Laws which matters are addressed in Sections 4(u) and 4(v)
below) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any
of them alleging any failure to so comply.
(j) Tax Matters. Capitol has timely filed all Tax Returns it is
required to file. Each such Tax Return has been prepared in compliance
with all applicable laws and regulations. All Taxes owed by Capitol have
been paid (or are accrued on the Most Recent Capitol Balance Sheet or will
be accrued on the Closing Balance Sheets). Seller, with respect to the
Business, and Capitol have properly withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, creditor, independent contractor, or other third party. All
Taxes for which Capitol may be liable under Treasury Regulation 1.1502-6
(or analogous state or foreign provisions) by virtue of having been a
member of any "affiliated group" (or other group filing on a consolidated
basis) at any time prior to the Closing Date have been paid or, if such
Taxes are not yet due and payable, will be paid by Seller when due and
payable. Seller is not a "foreign person" within the meaning of Section
1445 of the Code. Capitol has not filed any agreement or consent under
Section 341(f) of the Code (or analogous state or foreign provisions).
Except as set forth on Schedule 4(j) attached hereto:
(i) During the past five (5) years, there has been no action, suit,
proceeding or audit or any notice of inquiry of any of the foregoing
against or with respect to Capitol regarding Taxes, and, to the best of
Seller's knowledge, no action, suit, proceeding or audit has been
threatened against or with respect to Capitol regarding Taxes;
(ii) Capitol is neither a party to or bound by any Tax allocation or
Tax sharing agreement nor does it have any current or potential contractual
obligation to indemnify any other Person with respect to Taxes;
(iii) No claim has ever been made by a taxing authority in a
jurisdiction where Capitol does not file income Tax Returns that Capitol is or
may be subject to income Taxes assessed by such jurisdiction;
(iv) None of the Assumed Liabilities or any liabilities of Capitol
consists of an obligation to make any payments, that will be non-deductible
under Section 280G of the Code (or any corresponding provision of state,
local or foreign income Tax law);
(v) Schedule 4(j) contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which Capitol is required to file
Tax Returns relating to federal, state or local Taxes or other Taxes imposed
upon or measured by net income or receipts of Capitol; and
(vi) Capitol will not be required as a result of a change in method
of accounting for a taxable period ending on or prior to the Closing Date, to
include any adjustment in taxable income for any taxable period (or portion
thereof) ending after the Closing Date.
As of December 31, 1993, Capitol had general business tax credits
equal to at least $509,600 and the use of such credits (i) is not subject
to any limitations set forth in any section of the Code other than those
limitations set forth in Section 383 of the Code and (ii) is currently
available to Capitol on an annual basis in an amount not less than $20,650.
(k) Title to Personal Property. Seller has good and marketable
title to, or a valid leasehold interest in, the tangible Acquired Assets and
Capitol has good and marketable title to, or a valid leasehold interest in,
its tangible personal property (other than the real property described in
Section 4(l) below), free and clear of any security interest or restriction
on transfer.
(l) Real Property. Schedule 4(l)(i) attached hereto lists and
describes briefly all real property owned by Capitol or related to the
Business and owned by Seller. Except as set forth on Schedule 4(l)(ii),
with respect to each such parcel of real property, (i) the identified owner
has good and marketable title, free and clear of any security interest,
easement, covenant, or other restriction, except for installments of
special assessments not yet delinquent and recorded easements, covenants,
and other restrictions which do not impair the current use or occupancy of
the property subject thereto, (ii) there are no leases, subleases, licens
es, concessions, or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion thereof; and
(iii) there are no outstanding options or rights of first refusal to
purchase such parcel or any portion thereof or interest therein.
Schedule 4(l)(iii) attached hereto sets forth all of the real property
leased by Seller, with respect to the Business, or Capitol (the "Leased
Property"). The leases under which Seller or Capitol leases the Leased
Property are in full force and effect. With respect to the Leased
Property, neither Seller nor Capitol and, to the best of Seller's
knowledge, no third party, is in breach or default, and no event has
occurred (including the consummation of the transactions contemplated
hereby) which, with or without the lapse of time or the giving of notice,
would constitute such a breach or default or permit termination,
modification, or acceleration under such lease or sublease.
(m) Intellectual Property.
(i) Schedule 4(m) attached hereto identifies (A) each patent or
registration which has been issued to Seller or Capitol with respect to any
Intellectual Property used in connection with the Business or by Capitol,
(B) each pending patent application or application for registration which
Seller or Capitol has made with respect to any Intellectual Property used
in connection with the Business or by Capitol, (C) each license, agreement,
or other permission which Seller or Capitol has granted to any third party
with respect to any Intellectual Property used in connection with the
Business or by Capitol (together with any exceptions), and (D) each item of
Intellectual Property that any third party owns and that Seller or Capitol
uses in connection with the Business or that Capitol uses pursuant to
license, sublicense, agreement, or permission, and denotes with an asterisk
(*) whether the consent of any third party thereto is required as a result
of the consummation of the transactions contemplated by this Agreement
(other than any "shrinkwrap" or "off-the-shelf" software). Seller has
delivered to Buyer a complete and accurate list of all corporate or trade
names used by Seller in connection with the Business or by Capitol (other
than "Gulfstream" and "Capitol"), and correct and complete copies of all
such patent, trademark or copyright registrations, applications, licenses,
sublicenses, agreements, and permissions (as amended to date) and have made
available to Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of the
Intellectual Property used by Seller, with respect to the Business, or
Capitol (other than any "shrinkwrap" or "off-the-shelf" software). The
Intellectual Property (other than the Excluded Intellectual Property) owned
or used by Seller or Capitol in connection with the Business immediately
prior to the Closing will be owned or available for use by Buyer
immediately subsequent to the Closing.
(ii) Except as set forth on Schedule 4(m), (A) neither Seller nor
Capitol has interfered with, infringed upon or misappropriated any Intellectual
Property rights of third parties, (B) neither Seller nor Capitol has
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation, (C) Seller has
no knowledge that any third party has interfered with, infringed upon or
misappropriated any Intellectual Property used by Capitol or by Seller in
connection with the Business, (D) no action is pending, or to Seller's
knowledge threatened, which challenges the use or ownership of the
Intellectual Property used by Capitol or by Seller in connection with the
Business, (E) Seller or Capitol possesses all right, title, and interest in
and to, or has a valid license, sublicense, agreement or permission to use,
all of the Intellectual Property necessary for the operation of the
Business or Capitol as presently conducted or as currently proposed to be
conducted; and (F) the license, sublicense, agreement, or permission
covering any such used Intellectual Property (including any such
"shrinkwrap" or "off-the-shelf" software) is in full force and effect.
(n) Tangible Assets. The Acquired Assets and the assets owned
by Capitol include all buildings, machinery, equipment, and other tangible
assets necessary for the conduct of the Business and the business of
Capitol as presently conducted except for the Excluded Assets. Each
Acquired Asset used in the Business and each tangible asset owned and used
by Capitol is free from defects, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
(o) Inventory. The inventory relating to the Business and owned
by Capitol consists of raw materials and packing supplies, maintenance and
repair supplies, manufactured and purchased parts, work-in-process, and
finished goods, all of which is merchantable and fit for the purpose for
which it was procured or manufactured, and none of which is slow-moving,
obsolete, damaged, or defective, subject only to the reserve for inventory
writedown reflected on the Most Recent Balance Sheet, the Most Recent
Capitol Balance Sheet, as adjusted in connection with the preparation of,
and set forth on, the Closing Balance Sheets.
(p) Contracts. Schedule 4(p) lists the following contracts,
agreements and other arrangements to which Capitol is a party or related to
the Business to which Seller is a party and denotes with an asterisk (*)
whether the consent of any third party thereto is required as a result of
the consummation of the transactions contemplated by this Agreement:
(i) any agreement concerning a partnership or joint venture;
(ii) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or any capitalized lease obligation under which it has imposed a
security interest on any of its assets, tangible or intangible;
(iii) any agreement concerning confidentiality or noncompetition;
(iv) any arrangement, understanding, or agreement (other than at
will oral employment agreements), involving any of its Affiliates or
shareholders (including any shareholder's family members by blood,
marriage, adoption or otherwise);
(v) any profit sharing, stock option, stock purchase, stock
appreciation, bonus, deferred compensation, severance, welfare benefit plan or
other plan or arrangement (whether formal or informal) for the benefit of its
current or former directors, officers, and employees other than those set forth
on Schedule 4(u) attached hereto;
(vi) any agreement (whether formal or informal) with its directors,
officers, employees (other than oral at will employment agreements) and
consultants, including any collective bargaining agreement other than those
set forth on Schedule 4(u) attached hereto;
(vii) any agreement (or group of related agreements) for the lease or
sublease of personal property to or from any Person providing for payments
in excess of $50,000 per annum;
(viii) any open purchase orders related to the purchase of Inventories
other than those entered into in the ordinary course of business prior to
the Closing Date;
(ix) any power of attorney;
(x) any agreement which may not be cancelled by Seller or Capitol
with less than sixty (60) days' notice without premium or penalty payable by
Seller or Capitol and pursuant to which the remaining obligations are
greater than $50,000;
(xi) any agreement (other than covered in clause (viii) above) under
which the consequences of a default or termination could reasonably be expected
to have a material adverse effect on the business, financial condition,
results of operations of Seller, with respect to the Business, or Capitol; or
(xii) any other agreement not covered in clauses (i) through (xi) above
(or group of related agreements) the performance of which involves
consideration in excess of $50,000, including but not limited to any
distribution and supply agreements, but not including any open purchase
order related to the purchase of Inventories entered into in the ordinary
course of business prior to the Closing Date.
Seller has delivered or made available to Buyer a correct and complete
copy of each written agreement listed in Schedule 4(p). Seller has also
delivered to Buyer a brief description of all oral contracts, agreements
and other arrangements required to be disclosed on Schedule 4(p). With
respect to each of Seller's, with respect to the Business, or Capitol's
agreements, contracts or arrangements disclosed on Schedule 4(p): (A) such
agreement, contract or arrangement is in full force and effect; (B) neither
Seller nor Capitol is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default by Seller
or Capitol or permit any third party to terminate, modify, or accelerate,
such agreement; (C) neither Seller nor Capitol has repudiated any provision
of such agreement, contract or arrangement; (D) to the best of Seller's
knowledge, no third party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default by such third party or permit Seller or Capitol to terminate,
modify, or accelerate, such agreement, contract or arrangement; and (E)
neither Seller nor Capitol has any actual knowledge of any breach or
anticipated breach by any other party to any contract set forth on Schedule
4(p).
(q) Notes and Accounts Receivable. All notes and accounts
receivable of Capitol are reflected properly on the Most Recent Capitol Balance
Sheet and in the books and records of Capitol, are valid receivables subject to
no setoffs or counterclaims, are current and collectible, and will be
collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts reflected thereon and to be used in the
preparation of, and set forth on, the Closing Balance Sheets.
(r) Insurance. Schedule 4(r) attached hereto sets forth the
following information with respect to each insurance policy to which
Capitol has been a party, a named insured, or otherwise the beneficiary of
coverage at any time since April 1, 1993.
(i) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(ii) the scope, period and amount of coverage; and
(iii) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
(s) Litigation. Schedule 4(s) attached hereto sets forth each
instance in which Seller, with respect to the Business, or Capitol (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to Seller's knowledge, is threatened to be
made a party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court, arbitrator or other body or administrative agency
of any federal, state, local, or foreign jurisdiction.
(t) Employees. To the actual knowledge of Anthony Barone or
James Holland, without a duty to inquire, none of the key employees of Seller or
Capitol set forth on Schedule 4(t) attached hereto has any plans to
terminate employment with Seller or Capitol (except in order to accept
employment with Buyer). Except as set forth on Schedule 4(t) attached
hereto, Seller has no knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
the employees of Seller, with respect to the Business, or of Capitol.
Seller, with respect to the Business, and Capitol have complied with all
applicable laws relating to the employment of labor and within the last
three (3) years neither Seller, with respect to the Business, nor Capitol
has experienced any strikes, unresolved grievances, unfair labor practice
claims or unresolved disputes with former employees regarding termination
and/or severance pay.
(u) Employee Benefits.
(i) Pension Plans. Except as set forth in Schedule 4(u) attached
hereto, with respect to all employees and former employees of Seller, with
respect to the Business, or of Capitol, neither Seller nor Capitol maintains,
contributes to or has any liability under (or with respect to) any Employee
Pension Benefit Plan, whether or not terminated.
(ii) Welfare Plans. Except as set forth in Schedule 4(u), with
respect to all employees and former employees of Seller, with respect to the
Business, and Capitol, neither Seller nor Capitol maintains or has any
obligation to contribute to (or any other liability with respect to) any
Employee Welfare Benefit Plan, whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for current or
future retirees or current or future former employees or their spouses or
dependents (other than in accordance with Section 4980B(f) of the Code).
(iii) Multiemployer Plans. With respect to all employees and former
employees of Seller, with respect to the Business, and Capitol, neither
Seller nor Capitol has any obligation to contribute to (or any other
liability with respect to) any (i) Multiemployer Plan or (ii) plan of the
type described in Sections 4063 and 4064 of ERISA or Section 413(c) of the
Code, and neither Seller nor Capitol has incurred any current or potential
withdrawal liability as a result of a complete or partial withdrawal (or
potential partial withdrawal) from any Multiemployer Plan.
(iv) Other Benefit Plans. Except as set forth in Schedule 4(u),
neither Seller nor Capitol maintains, contributes to or has any liability
under (or with respect to) any deferred compensation or retirement plans or
arrangements, employee welfare, fringe benefit or bonus plan, program,
policy or other arrangement for employees or any other arrangement for
employees or former employees of Seller, with respect to the Business, or
Capitol, their spouses or dependents, whether or not terminated. The
plans, programs, policies and other arrangements set forth on Schedule 4(u)
are hereinafter referred to collectively as the "Plans."
(v) Administration and Compliance of the Plans. With respect to
each of the Plans sponsored or maintained for employees of Capitol:
(A) all required or discretionary (in accordance with
historical practices) payments, premiums, contributions or reimbursements that
are presently due for all periods ending prior to or as of the Closing Date
shall have been made, and all accruals, in accordance with GAAP, shall have
been made on the Closing Balance Sheets;
(B) there is no unfunded liability which is not reflected
on the Most Recent Capitol Balance Sheet or will not be reflected on the
Closing Balance Sheets, to the extent required to be reflected in accordance
with GAAP;
(C) there have been no violations of ERISA with respect
thereto (including, without limitation, any Prohibited Transactions) for which
Capitol is, or could be, liable; no Fiduciary (as defined in Section 3(21)
of ERISA) has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets thereof for which Capitol is, or could be, liable;
no action, suit, proceeding, hearing or investigation with respect to the
administration or the investment of the assets thereof (other than routine
claims for benefits) is pending or, to the best of Seller's knowledge,
threatened; and Seller has no knowledge of any basis for any such action,
suit, proceeding, hearing, or investigation; and
(D) Seller has provided Buyer with true and complete copies
of all documents pursuant to which such Plan is maintained and administered and
the most recent annual reports (Form 5500 and attachments) and financial
statements therefor.
(vi) Neither Seller nor Capitol has incurred any liability to the
Pension Benefit Guaranty Corporation ("PBGC"), the Internal Revenue Service, or
any multiemployer plan with respect to any employee pension benefit plan
currently or previously maintained by members of the controlled group of
companies (as determined in Sections 414(b) and (c) of the Code (the
"Controlled Group")) that has not been satisfied in full, and no condition
exists that presents a risk to Seller or any member of the Controlled Group
of incurring such a liability, other than liability for premiums due the
PBGC.
(v) Environment, Health, and Safety. Each of Seller, Capitol
and their predecessors and Affiliates has obtained all material permits,
licenses, and other authorizations which are required for the ownership and
operation of the Business and the business of Capitol under all applicable
Environmental, Health, and Safety Laws. Except as set forth on Schedule
4(v), none of Seller, Capitol or their predecessors has, with respect to
the ownership and operation of the Business and Capitol, handled, released
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or
owned or operated the Business and Capitol or any property or facility so
as to give rise to any material liability or corrective or remedial
obligation under any Environmental, Health, and Safety Laws. Except as set
forth on Schedule 4(v), Seller, Capitol and their predecessors have, with
respect to the ownership and operation of the Business, complied with, and
are in compliance in all material respects with, all Environmental, Health,
and Safety Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed, commenced or,
to Seller's knowledge, threatened against any of them alleging any failure
to so comply or alleging any material liability or corrective or remedial
obligations under any Environmental, Health and Safety Laws. Except as set
forth on Schedule 4(v), none of Seller, Capitol or their predecessors has,
with respect to the ownership and operation of the Business and the
business of Capitol, either expressly or by operation of law, assumed or
undertaken any material liability of any other Person under any
Environmental, Health, and Safety Laws. Except as set forth on Schedule
4(v), no underground storage tanks, asbestos-containing materials, or pcb-
containing equipment or fluids have been or are present on any real
property listed on Schedule 4(l)(i) or Schedule 4(l)(iii). The
transactions contemplated by this Agreement do not impose any obligations
under any Environmental, Health, and Safety Laws for site investigation or
cleanup, or notification to any government agencies or third parties.
Except as set forth on Schedule 4(v), without limiting the foregoing, no
facts, events or conditions relating to the past or present facilities,
properties or operations of Seller, Capitol or the Business will prevent,
hinder or limit continued compliance in all material respects with
Environmental, Health and Safety Laws by the Business or Capitol or give
rise to any material liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise) or any material investigatory, remedial or
corrective obligations pursuant to Environmental, Health and Safety Laws,
including without limitation any relating to onsite or offsite releases or
threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resource damage.
(w) Business.
(i) SPECS Credits. Seller has at least $2,462,000 in PTPD SPECS
credits (the "PTPD Credits") and at least $1,849,000 in NAAO SPECS credits (the
"NAAO Credits" and collectively, with the PTPD credits, the "SPECS
Credits") from Ford Motor Company. Seller may, and after the Closing Buyer
may, use the excess PTPD Credits to offset NAAO SPECS credit requirements
set forth under the Ford Motor Company long term contract with Seller (the
"Ford LTA"). The PTPD SPECS saves required pursuant to the Ford LTA are
covered for each of fiscal 1994, 1995 and 1996 and the NAAO SPECS saves
required pursuant to the Ford LTA (after giving effect to the application
of excess PTPD SPECS saves) are covered for each of fiscal 1994 and 1995.
(ii) Pricing. Attached on Schedule 4(w) are (A) copies of letters
that Seller has received from Ford Motor Company with respect to the pricing of
the MN12, VN58 and VN127 platforms indicating for the MN12 platform an
increase in annual sales revenues by not less than $1.65 million and for
the VN58 and VN127 platforms an across-the-board 6% price increase and with
respect to the elimination of the 3.5% productivity requirement set forth
in Ford LTA for fiscal year 1996 and the decrease of the current commodity
price increase absorption rate set forth in the Ford LTA from 4% to 2% for
fiscal 1995 and 1996 in each case for that portion of the Business located
in Huron, Ohio and (B) a list of existing prices for the MN12 platform and
a list of the modified prices for such platform as disclosed in such
letters.
(x) Closing Date. The representations and warranties contained
in this Section 4 and elsewhere in this Agreement will be true and correct on
the Closing Date as though then made, except for written disclosures made
by Seller to Buyer prior to the Closing.
Section 5. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows:
(a) Organization of Buyer. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Authorization of Transaction. Buyer has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of Buyer, enforceable in accordance with its terms and
conditions, subject to the effect of bankruptcy, insolvency, reorganization
or other similar laws and to general principles of equity (whether
considered in proceedings at law or in equity).
(c) Noncontravention. Except as set forth on Schedule 5(c)
attached hereto, neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute (other than any so-called bulk transfer laws),
regulation, rule, injunction, judgment, order, decree, ruling, charge, or
other restriction of any government, governmental agency, or court to which
Buyer is subject or any provision of its charter or bylaws or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which Buyer is a party
or by which it is bound or to which any of its assets is subject. Except
as set forth on Schedule 5(c) attached hereto, Buyer does not need to give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement.
(d) Brokers' Fees. Except with respect to Robert W. Baird &
Co., Buyer has no liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by
this Agreement for which Seller could become liable or obligated. Buyer is
solely responsible for the fees and expenses of Robert W. Baird & Co.
(e) Closing Date. The representations and warranties contained
in this Section 5 and elsewhere in this Agreement will be true and correct on
the Closing Date as though then made, except for written disclosures made
by Buyer to Seller prior to the Closing.
(f) Investment Purposes. Buyer is acquiring the Common Stock
for its own account and not with a view to sale or distribution thereof in
violation of any securities laws, and it has no present intention of
selling or distributing all or any portion of the Common Stock in violation
of any securities laws.
Section 6. Pre-Closing Covenants. The Parties agree as follows
with respect to the period between the execution of this Agreement and the
Closing.
(a) General. Each of the Parties will use reasonable efforts to
take all action and to do all things necessary in order to consummate and make
effective the transactions contemplated by this Agreement.
(b) Notices and Consents. Each Party will give any notice to
third parties, and such Party will use reasonable efforts to obtain any third-
party consents, that the other Party reasonably may request including,
without limitation, those consents indicated as necessary pursuant to
Sections 4(m) and 4(p) and those notices as necessary pursuant to Sections
4(c) and 5(c). Each of the Parties will give any notices to, make any
filings with, and use reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in
connection with the matters referred to in Section 4(c) and Section 5(c)
above.
(c) Operation of the Business.
(i) Seller will not engage in any practice, take any action, or
enter into any transaction relating to the Business or to Capitol outside the
ordinary course of business, including the management of its working
capital other than in accordance with past custom and practice. Without
limiting the generality of the foregoing, Seller will not, and will cause
Capitol to not, engage in any practice, take any action, or enter into any
transaction which would be required to be disclosed under Section 4(g)
above. Seller and Capitol may not make without Buyer's prior approval
capital expenditures in excess of $10,000 per item; provided that Seller or
Capitol may make capital expenditures on an emergency basis of up to
$20,000 per item.
(ii) Neither Capitol nor Seller will make any payments to any of
their respective tooling vendors, other than in accordance with its past custom
and practice.
(d) Preservation of the Business. Seller will, and will cause
Capitol to, make all commercially reasonable efforts to conduct their
respective businesses and maintain their respective properties in
accordance with past custom and practice, including their present
operations, physical facilities, equipment, working conditions, and
relationships with lessors, licensors, suppliers, customers, and employees.
Without limiting the generality of the foregoing, Seller will, and will
cause Capitol to, make all commercially reasonable efforts to pay expenses
and payables, purchase inventory, perform all maintenance and repairs and
collect receivables in the ordinary course of business in accordance with
past custom and practice. Seller will not be deemed to be in breach under
this section if Buyer does not approve an expenditure pursuant to Section 6(c).
(e) Full Access. Seller will permit representatives of Buyer
(including its accountants, attorneys, consultants, lenders and other
agents) to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of Seller to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to the Business and the business
of Capitol.
(f) Notice of Developments. Seller will give prompt written
notice to Buyer of any development causing, or reasonably likely to cause, a
breach in any material respect of any of the representations and warranties
in Section 4 above. Buyer will give prompt written notice to Seller of any
development causing, or reasonably likely to cause, a breach in any
material respect of any of its representations and warranties in Section 5
above. No disclosure by any Party pursuant to this Section 6(f), however,
shall be deemed to cure any breach of any representation or warranty
contained herein.
(g) Exclusivity. Seller will not, and will cause Capitol and
their respective officers, directors, agents and Affiliates to not, discuss a
possible sale or other disposition of all or any part of the assets of the
Business or the stock or assets of Capitol, other than inventory in the
ordinary course of business (whether by merger, reorganization,
recapitalization or otherwise) with any party other than Buyer (an
"Acquisition Proposal") or provide any information to any other party
regarding the Business or Capitol other than information which is
traditionally provided in the regular course of its business operations to
third parties where Seller and its officers, directors, agents and
Affiliates have no reason to believe that such information may be utilized
to evaluate a possible sale or other disposition of the Business or
Capitol. Seller and its officers, directors and Affiliates (i) do not have
any agreement, arrangement or understanding with respect to any Acquisition
Proposal, (ii) will cease and cause to be terminated any and all
discussions with third parties regarding any Acquisition Proposal and (iii)
will promptly notify Buyer if any Acquisition Proposal, or any inquiry or
contact with any person or entity with respect thereto, is made.
(h) Title Insurance. Seller will assist Buyer in obtaining an
Owner's Policy of Title Insurance reasonably acceptable to Buyer for each
parcel of real property set forth on Schedule 4(l)(i), in an amount equal
to the fair market value of such real property (including all improvements
located thereon), insuring title to such real property to be in Buyer as of
the Closing (subject only to the title exceptions described in
Schedule 4(l)(i) and Schedule 4(l)(ii)) and containing the special
endorsements set forth on Schedule 6(h) attached hereto; provided, however,
to the extent not obtained prior to the Closing Date, Seller will continue
to assist Buyer in obtaining any such special endorsement after the Closing
Date. Buyer and Seller will share equally the fees and expenses related to
obtaining such title insurance.
(i) Surveys. With respect to each parcel of real property as to
which a title insurance policy is to be procured pursuant to Section 6(h)
above, Seller will assist Buyer in procuring a current survey of such real
property certified to Buyer, prepared by a licensed surveyor and conforming
to current ALTA Minimum Detail Requirements for Land Title Surveys (the
"Survey"). The Survey shall not disclose any material survey defect or
encroachment from or onto the real property (other than those set forth on
Schedule 4(l)(ii)) which has not been cured or insured over prior to the
Closing. Seller and Buyer will share equally the fees and expenses related
to procuring the Surveys.
Section 7. Additional Agreements.
(a) Survival. Subject to Section 7(b) below, the
representations, warranties, covenants and agreements set forth in this
Agreement or in any certificate or other writing delivered in connection with
this Agreemen will survive the Closing Date and the consummation of the
transactions contemplated hereby notwithstanding any examination made for or on
behalf of Buyer or Seller or the knowledge of any of Buyer's or Seller's
officers, directors, shareholders, employees, Affiliates or agents.
Notwithstanding the foregoing, the representations and warranties set forth in
Section 4(v) (Environment, Health, and Safety) shall not survive the Closing
Date.
(b) Indemnification.
(i) Subject to the limitations set forth in Sections 7(b)(ii),
7(b)(iii), 7(b)(v), and 7(b)(vi) below, Seller agrees to indemnify and hold
Buyer, its officers, directors, shareholders, employees and Affiliates
(collectively, the "Buyer Group") harmless against any loss, liability, damage
or expense, including reasonable legal expenses and costs ("Losses"), which
they may suffer, sustain, or become subject to, as the result of:
(A) the breach of any representation or warranty contained
in this Agreement (other than a representation or warranty set forth in Section
4(v) above);
(B) the breach of any covenant or agreement contained in
this Agreement;
(C) any Excluded Liability;
(D) any claim by any shareholder, or class or group of
shareholders, of Seller in respect of the transactions contemplated hereby;
(E) any Known Environmental Conditions; or
(F) any Unknown Environmental Conditions.
(ii) With respect to claims for breaches of representations and
warranties referred to in Section 7(b)(i)(A) above (other than representations
and warranties set forth in Section 4(w) (Business), in Section 4(j) (Tax
Matters) (to the extent relating to Capitol's obligations) above or Section
1(h)), (w) Seller will not be liable to the Buyer Group for any Loss
relating to any particular breach if such Loss is less than $10,000, (x)
Seller will be liable to the Buyer Group for Losses only if the aggregate
amount of all such Losses relating to all such breaches plus Losses
relating to Section 7(b)(i)(F) above, subject to the limitations set forth
in Section 7(b)(v) below, exceeds $500,000, in which case Seller will be
liable only for such excess, (y) Seller will not be liable for any Losses
arising therefrom unless written notice of such breach is given by the
Buyer Group to Seller within fifteen (15) months after the Closing Date,
except for: (A) Losses arising from the representations and warranties
contained in Sections 4(a) (Organization), 4(b) (Authority), 4(c)
(Noncontravention), 4(h) (Undisclosed Liabilities), 4(i) (Legal
Compliance), 4(m) (Intellectual Property), 4(s) (Litigation), 4(u)
(Employee Benefits), and 4(w) (Business) in which case written notice of
such breach may be given by the Buyer Group to Seller within three (3)
years after the Closing Date; (B) Losses arising from a breach of the
representation and warranty contained in Section 4(j) (Tax Matters) above
in which case written notice of such breach may be given by the Buyer Group
to Seller prior to the expiration of the applicable statute of limitations;
and (C) Losses arising from a breach of the representation and warranty
contained in Sections 4(k) (Title to Personal Property) and 4(e)
(Subsidiaries, Investments and Capital Stock) above in which case Seller
shall remain liable forever; provided that in the case of a breach of any
representation or warranty set forth in Section 4(x) (Closing Date) where
the subject matter of such breach is addressed by one of the
representations and warranties referred to in the previous exceptions, the
time limitation set forth in such exceptions shall control when written
notice of such breach must be given and (z) Seller will be liable to the
Buyer Group for Losses relating to any breach of Section 4(n), 4(o) or 4(q)
only to the extent such Loss has not previously been collected by Buyer
pursuant to the preparation of the Closing Balance Sheets. If any Loss
arising from a breach of representation or warranty referred to in Section
7(b)(i)(A) above also constitutes a Loss arising out of or relating to an
Excluded Liability, such Loss will be deemed to be an Excluded Liability
for purposes of Section 7(b)(i), and, thus, not subject to the limitations
set forth in the first sentence of this Section 7(b)(ii).
(iii) With respect to any matter for which indemnification is provided
pursuant to Section 7(b)(i)(E) or (F) hereof, Seller shall have sixty (60)
days after receipt of written notice thereof (with such notice stating with
reasonable specificity the nature and basis of the assertion and the amount
thereof to the extent known) from Buyer (such notice being deemed given for
any Known Environmental Conditions) (or such shorter period as exigent
circumstances may dictate in Buyer's sole but reasonable judgment) to
either (A) acknowledge in writing that it will indemnify (such
acknowledgement being deemed given for any Known Environmental Condition)
Buyer with respect to such matter, in which case Seller shall undertake,
conduct and control, through counsel, consultants and contractors of
Seller's own choosing (and reasonably satisfactory to Buyer) and expense,
the defense, investigation, remediation, and settlement thereof or (B) fail
to acknowledge in writing that it will indemnify Buyer with respect to such
matter, in which case Seller shall permit Buyer to assume the conduct and
control of the defense, investigation, remediation, and settlement thereof
through counsel, consultants and contractors of Buyer's own choosing (and
reasonably satisfactory to Seller); provided that if it is ultimately
determined that Seller is liable to Buyer with respect to such matter, the
fees and expenses of Buyer's counsel, consultants and contractors shall be
indemnified hereunder. If Seller does not notify Buyer within sixty (60)
days after the receipt of Buyer's notice of a claim of indemnity hereunder
(or such shorter period as exigent circumstances may dictate in Buyer's
sole but reasonable judgment) of its election pursuant to this Section
7(b)(iii), Buyer shall have the right to assume the defense, investigation,
remediation, and settlement thereof, and to contest, settle or compromise
any claim relating thereto, and shall not waive any right to indemnity
thereby. Upon acknowledging its indemnification obligations hereunder,
Seller shall have the right to conduct all Remedial Actions and other
activities necessary to comply with its obligations hereunder and Seller
shall have principal decision-making authority and control as to such
matters; provided that in exercising its rights and obligations, Seller
shall not take actions that would prevent or hinder Buyer from complying in
all material respects with Environmental, Health and Safety Laws, or
unreasonably interfere with any of Buyer's operations (taking into account
the scope of the Remedial Actions). Buyer shall have the right to review
all nonprivileged documents and other information relating to Seller's
investigations, studies, actions and activities in the performance of any
obligations hereunder and Buyer shall be afforded a reasonable opportunity
to attend all nonprivileged material meetings and conferences relating
thereto. Seller shall consult in good faith with Buyer with respect to
such matters. Seller will not, without the written consent of Buyer (which
consent shall not unreasonably be withheld) consent to the entry of any
judgment or enter into any settlement with respect to any matter
indemnified hereunder. A Remedial Action shall be deemed adequate for
purposes of satisfying Seller's obligations hereunder to the extent such
Remedial Action:
(Y) attains compliance in a reasonably cost effective
manner with Environmental, Health and Safety Laws and applicable or
relevant and appropriate action levels or cleanup standards promulgated
thereunder, and reasonably mitigates any substantial risk to human health
and the environment; and
(Z) complies with any lawful order or directive of an
appropriate governmental authority.
(iv) Notwithstanding anything in this Agreement to the contrary,
with respect to Item 2 of Schedule 7(b) for which indemnification is provided
pursuant to Section 7(b)(i)(E) hereof, the following shall apply. Seller
shall draft a detailed plan to repair and/or replace the inadequate floor
and hydraulic oil collection system at the Harris facility in Winchester,
Virginia ("Floor and Oil Collection System Plan" or "System Plan"). The
Floor and Oil Collection System Plan shall be based on the Floor and Oil
Collection System Outline set forth in Schedule 7(b)(iv) hereto. The Floor
and Oil Collection System Plan shall: (i) describe how the floor and the
hydraulic oil collection system shall be repaired and/or replaced to
prevent hydraulic oil releases to soil or groundwater; (ii) identify the
personnel and/or contractors that will be used; (iii) describe how all
activities shall be carried out so as not to prevent or hinder Buyer from
complying in all material respects with all applicable laws, rules and
regulations or unreasonably interfere with any of Buyer's operations; (iv)
contain a schedule for implementation; (v) comply with all applicable laws,
rules and regulations; and (vi) be consistent with good engineering
practice. Seller shall promptly, and in any case within sixty (60) days
after the Closing Date, present the Floor and Oil Collection System Plan to
Buyer for approval by Buyer. Buyer shall promptly, and in any case within
twenty (20) days of receipt of the System Plan, indicate in writing whether
it approves the System Plan, with such approval not to be unreasonably
withheld by Buyer. If Buyer does not approve the System Plan, Buyer shall
provide Seller with the reasons for its disapproval and Buyer and Seller
shall cooperate in good faith to promptly resolve the reasons for such
disapproval. Promptly after Buyer approves the Floor and Oil Collection
System Plan, and in any case within one year after such approval, Seller
shall conduct and implement the Floor and Oil Collection System Plan. The
implementation of the System Plan shall be carried out pursuant to the
terms of the System Plan and shall not prevent or hinder Buyer from
complying in all material respects with all applicable laws, rules and
regulations nor shall it unreasonably interfere with any of Buyer's
operations. Upon completion of the actions called for in the System Plan,
Seller shall so notify Buyer in writing and Buyer shall be permitted to
inspect the completed work. Buyer shall promptly, and in any case within
twenty (20) days of receipt of a notice of completion, indicate in writing
whether it approves of the work, with such approval not to be unreasonably
withheld by Buyer. If Buyer does not approve of the work, Buyer shall
provide Seller with the reasons for its disapproval and Buyer and Seller
shall cooperate in good faith to promptly resolve the reasons for such
disapproval. Once Buyer approves of the work (the "Buyer Approval"), Item
2 shall be deemed to have been removed from Schedule 7(b).
(v) With respect to claims for Unknown Environmental Conditions
referred to in Section 7(b)(i)(F) above, (y) Seller will not be liable to Buyer
Group for any Loss arising therefrom unless written notice of an
Environmental Condition is given by the Buyer Group to Seller within five
(5) years after the Closing Date (with such notice stating with reasonable
specificity the nature and basis of the assertion and the amount thereof to
the extent known) and (z) Seller will be liable to the Buyer Group for
Losses only if the aggregate amount of all such Losses relating to all such
Unknown Environmental Conditions plus Losses relating to Section 7(b)(i)(A)
above, subject to the limitations set forth in Section 7(b)(ii) and Section
7(b)(vi), exceeds $500,000. If any Loss arising from a claim for an
Unknown Environmental Condition referred to in Section 7(b)(i)(F) above
also constitutes a Loss arising out of an Excluded Liability such Loss will
be deemed to be an Unknown Environmental Condition for purposes of Section
7(b)(i), and, thus, will be subject to the limitations set forth in this
Section 7(b)(v).
(vi) Seller's obligations under this Agreement in respect of Unknown
Environmental Conditions shall be reduced to the extent that any actual
knowing (without imputing knowledge) act or failures to act by, or gross
negligence of, Buyer or its Affiliates, successors or assigns after the
Closing substantially and adversely affect such obligations. Seller's
obligations under this Agreement in respect of Item 3 of Schedule 7(b)
shall be reduced to the extent that any act or failures to act by Buyer or
its Affiliates, successors or assigns occurring after the date of the Buyer
Approval adversely affects such obligations. Buyer agrees to act in a
reasonably prudent manner in respect of monitoring the existing pumping
facilities located at the Harris Facility and maintaining the hydraulic oil
collection system for the equipment located therein.
(vii) Notwithstanding any other provision herein, Seller's obligations
under this Agreement in respect to Item 6 of Schedule 7(b) shall be limited to
the following: (x) Seller shall be responsible for Losses arising from
exceedance of air permit limitations by Seller, at the Harris Facility
before the Closing Date, and (y) if the Permit Amendment (as defined below)
is not issued by the Virginia Department of Environmental Quality ("DEQ"),
Seller shall indemnify Buyer for its reasonable costs incurred during the
one-year period following the Closing Date (a) in moving such portion of
its painting operations from the Harris Facility to another of Buyer's
locations and (b) of outsourcing any such operations in the event Buyer is
unable to move such operations to its other locations, each as is
sufficient to allow Buyer to conduct business at the Harris Facility under
the air permit limitations for the Harris Facility in existence on the
Closing Date. Buyer's obligations under clause (y) above shall be reduced
to the extent that changes in operations at the Harris Facility following
the Closing Date contribute to the exceedance of applicable air permit
limitations. The Parties agree to cooperate and work in good faith to
minimize the costs referred to in clause (y) if the Permit Amendment is not
obtained. "Permit Amendment" shall mean a revision of the current air
permit issued to Seller by the DEQ to provide for increases in permitted
emissions as requested by Seller in an application that has been submitted
to the DEQ and provided to the Buyer. The Parties agree to use their
reasonable efforts to obtain Ford's consent to accept parts painted with
water based paint to help avoid having to relocate the painting operations
at the Harris Facility.
(viii) Subject to Section 7(b)(xi) below, Buyer agrees to indemnify
and hold Seller, its officers, directors, shareholders, employees and
Affiliates (the "Seller Group") harmless against any Losses which they may
suffer, sustain or become subject to, as the result of:
(A) a breach of any representation, warranty, covenant, or
agreement by Buyer contained in this Agreement;
(B) any Assumed Liability; or
(C) Buyer's failure to cause Capitol after the Closing Date
to honor any collective bargaining agreement to which Capitol is a party.
(ix) With respect to claims for breaches of representations and
warranties referred to in Section 7(b)(viii)(A) above, (w) Buyer will not
be liable to the Seller Group for any Loss relating to a particular breach
if such Loss is less than $10,000, (x) Buyer will be liable to Seller Group
for Losses arising therefrom only if the aggregate amount of all such
Losses resulting to the Seller Group from all such breaches or claims
exceeds $500,000, in which case Buyer will be liable only for such excess,
and (y) Buyer will not be liable for any Losses arising therefrom unless
written notice thereof is given by Seller to Buyer within three years after
the Closing Date.
(x) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter which may give rise to a claim for
indemnification against any other Party (the "Indemnifying Party") under
this Section 7(b), then the Indemnified Party shall promptly notify each
Indemnifying Party thereof, stating the nature and basis of the assertion
and the amount thereof to the extent known. Failure of the Indemnified
Party to give such prompt notice shall not relieve the Indemnifying Party
from any liability which it may have on account of this indemnification or
otherwise, except to the extent that the Indemnifying Party is prejudiced
thereby. Once the Indemnified Party has given notice of the matter to all
of the Indemnifying Parties, the Indemnified Party may defend against the
matter in any manner it reasonably may deem appropriate. Within thirty
(30) days after receipt of notice of a particular matter, the Indemnifying
Party may assume the defense of such matter if the Indemnifying Party
admits responsibility and reaffirms its obligation for indemnification with
respect to such matter; provided, however, that (x) the Indemnifying Party
will retain counsel reasonably acceptable to the Indemnified Party, (y) the
Indemnified Party may participate at its own expense in the defense of such
claim with co-counsel of its choice to the extent that the Indemnified
Party believes in its sole discretion that such matter will materially and
adversely affect its ongoing business and (z) the Indemnifying Party will
not consent without written consent of the Indemnified Party (which consent
shall not be unreasonably withheld) to the entry of any judgment with
respect to the matter or enter into any settlement with respect to the
matter which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all liability with
respect thereto. If, within such 30-day period, the Indemnifying Party
does not assume the defense of such matter, the Indemnified Party may
consent to the entry of any judgment with respect to the matter or enter
into any settlement with respect to matter without the consent of the
Indemnifying Party.
(xi) Subject to the terms and conditions set forth in this Section
7(b), in the event that Seller or Buyer breaches any representation, warranty,
covenant or agreement contained in this Agreement, Buyer or Seller, as the
case may be, may, at its option, setoff all or any portion of the Losses
which the Buyer Group or the Seller Group, as the case may be, suffers,
sustains or becomes subject to as a result of such breach against any
amounts due or to become due to Seller, or Buyer, as the case may be,
including, without limitation, any amounts due or to become due to Seller
under Sections 1(e), 1(f), 1(h) and 1(j) hereof.
(c) Press Release and Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement (including announcements to customers, suppliers, etc.)
prior to the Closing without the prior written approval of each of the
other Parties, except that any Party may make any announcement required by
law after notice to the other Party and consultation with such Party.
(d) Expenses. Except as otherwise provided herein, each of
Buyer and Seller will bear its own costs and expenses (including, without
limitation, all legal, accounting, consulting, investment banking, brokerage
and other fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby; provided, however, that Buyer and Seller
shall share equally the filing fee relating to the filing required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
(e) Tax Covenants.
(i) Seller shall prepare and file, or cause to be prepared and
filed, with appropriate federal, state, local and foreign governmental agencies
all Tax Returns required to be filed relating to Capitol for periods ending on
or prior to the Closing Date and all Tax Returns required to be filed for
which Seller and Capitol are members of an "affiliated group" (or other
group filing on a consolidated basis) (a "Pre-Closing Return"). Seller
shall deliver a copy of any Pre-Closing Return filed after the Closing Date
to Buyer promptly after filing if and to the extent such return relates to
Capitol. Seller shall be liable for, and indemnify Buyer for, all Taxes
due and payable (whether by audit, amended Tax Return or any other action)
by Seller, with respect to the Business, or Capitol for any period ending
on or prior to the Closing Date. Buyer shall prepare and file, or cause to
be prepared and filed, all Tax Returns required to be filed by Capitol
covering a tax year commencing prior to the Closing Date and ending after
the Closing Date (a "Straddle Tax Return"). Buyer shall have the right to
receive from Seller that portion of the Taxes which relates to the portion
of such taxable period ending on the Closing Date to the extent such Taxes
are not accrued, with respect to Capitol, on the Closing Balance Sheets.
For purposes of this Section 7(e), in the case of any Taxes that are
imposed on a periodic basis and are payable for a taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such taxable period ending on the Closing
Date shall be deemed equal to the amount which would be payable if the
relevant taxable period ended on the Closing Date. If an audit, amended
Tax Return or other action results in a refund of Taxes with respect to any
period ending on or prior to the Closing Date, such refund (including any
interest paid thereon) shall be paid to Seller if and when received by
Capitol or Buyer. Seller will furnish to Buyer all information and records
reasonably requested by Buyer for use in preparation of any Straddle Tax
Returns. Buyer shall allow Seller to review, comment upon and reasonably
approve without undue delay any Straddle Tax Return at any time during the
forty-five (45) days immediately preceding the filing of such Straddle Tax
Return.
(ii) All transfer (including real estate transfer taxes),
documentary, sales, use, stamp, registration taxes and fees (including any
penalties and interest) incurred in connection with the consummation of the
transactions contemplated by this Agreement, shall be shared equally by Buyer
and Seller when due, and each Party will, at its own expense, file all
necessary Tax Returns and other documentation with respect to all such
transfer, documentary, sales, use, stamp, registration taxes and fees, and, if
required by applicable law, each Party will, and will cause its Affiliates
to, join in the execution of any such Tax Returns and other documentation.
(f) Further Assurances. Each Party will execute and deliver
such further instruments of conveyance and transfer and take such additional
action as the other Party may reasonably request to effect, consummate,
confirm or evidence the transfer to each Party of the Acquired Assets
and/or Assumed Liabilities, as applicable, and Seller will execute such
documents as may be necessary to assist Buyer in preserving or perfecting
its rights in the Acquired Assets. For one year following the Closing Date,
Seller shall use its reasonable efforts to obtain all third party consents
which Seller was unable to obtain prior to the Closing Date and will use
its reasonable efforts to obtain for Buyer the benefit of any Excluded
Intellectual Property.
(g) Confidentiality. Whether or not the transactions
contemplated hereby are consummated, Buyer and Seller will keep confidential
all information and materials regarding the other Party, except that Buyer may
disclose such information and materials to its accountants, attorneys,
lenders and agents and each Party may disclose information or material
which was or becomes generally available to the public other than as a
result of a disclosure by such Party or which was or becomes available to
such Party on a nonconfidential basis from a third party. If the
transactions contemplated hereby are consummated, Seller will maintain
confidential and will not use or disclose, directly or indirectly (except
as required by law or as authorized in writing by Buyer prior to such
disclosure), any confidential or proprietary information or materials
regarding the Business or Capitol.
(h) Noncompetition and Nonsolicitation. Seller agrees as
follows:
(i) During the period from the date hereof to and including the
fifth anniversary of the date hereof (the "Noncompete Period"), it shall not
have any affiliation with any corporation, partnership or other business entity
or enterprise (wherever located) with respect to injection molding for any
original equipment manufacturer of automotive component parts (a
"Competitor"); provided, however, Seller may enter into a transaction
(whether in the form of a sale, merger, share exchange or otherwise) in
which Seller's stock or all or substantially all of its assets are acquired
by a Competitor. For purposes of this Section 7(h), the term "affiliation"
shall mean any direct or indirect interest in such entity or enterprise,
whether as an investor, partner, stockholder, sole proprietor, trustee,
consultant, agent, representative, broker, finder or promoter; and
(ii) During the Noncompete Period, it shall not, and shall not permit
any of its officers, directors, shareholders, employees or Affiliates to, (i)
induce or attempt to induce any employee of Buyer (in respect of the
Business) or Capitol to leave the employ of Buyer (in respect of the
Business) or Capitol, respectively, or in any way interfere with the
relationship between Buyer (in respect of the Business) or Capitol and any
employee thereof, (ii) hire directly or through another entity any person
who was an employee at the manager level or above of Buyer (in respect of
the Business) or Capitol at any time prior to or during the Noncompete
Period until six months after such employee's employment terminates with
Buyer or Capitol, or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of Buyer (in respect of the
Business) or Capitol to cease doing business with Buyer (in respect of the
Business), or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation and Buyer (in respect of
the Business) or Capitol.
Notwithstanding anything in this Section 7(h) to the contrary, if at
any time a court holds that the restrictions stated in Section 7(h)(i) or
Section 7(h)(ii) are unreasonable or otherwise unenforceable under
circumstances then existing, the Parties hereto agree that the maximum
period, scope or geographical area deter- mined to be reasonable under such
circumstances by such court will be substituted for the stated period,
scope or area. Seller acknowledges and agrees that money damages may not
be an adequate remedy for any breach or threatened breach of the provisions
of subparagraph (i) or (ii) and that, in such event, Buyer or its
successors or assigns may, in addition to any other rights and remedies
existing in its or their favor, apply to any court of competent
jurisdiction for specific performance, injunctive and/or other relief in
order to enforce or prevent any violations of the provisions of this
Section 7(h) (including the extension of the Noncompete Period by a period
equal to the length of court proceedings necessary to stop such violation
but not beyond the seventh anniversary of the Closing). Any injunction
shall be available without the posting of any bond or other security. In
the event of an alleged breach or violation by Seller of any of the
provisions of this Section 7(h), the Noncompete Period will be tolled until
such alleged breach or violation is resolved but not beyond the seventh
anniversary of the Closing. Seller agrees that the restrictions contained
in this Section 7(h) are reasonable in all respects.
(i) Use of Gulfstream Name. As of the Closing, Seller will not
use any corporate name or trade name similar in any way to its former division
name. Notwithstanding the foregoing, Seller shall not in any way be
prohibited from using the name "O'Sullivan" or any of its derivatives.
Without limiting the generality of the foregoing, Seller shall not directly
or indirectly use any corporate name or trade name containing "Gulfstream."
(j) Gulfstream Employees. At the Closing, either Buyer or one
of its Affiliates (including Capitol) will offer equivalent employment to each
employee of Seller, with respect to the Business, and of Capitol who is
employed by Seller or Capitol on the Closing Date; provided, however, that
with respect to members of senior management Buyer will only be obligated
to offer employment to such persons if each such person has been employed
by Seller or Capitol throughout the period commencing April 30, 1994 and
ending on the Closing Date. Notwithstanding the foregoing, nothing set
forth herein shall limit Buyer or Capitol in any way from terminating, or
modifying the terms of employment of, any such employee after the Closing
Date, except as otherwise required by any applicable collective bargaining
agreement. Buyer shall extend employee benefits to each employee of the
Business which are consistent with those extended to other similarly
situated employees of Buyer, except as otherwise required by any applicable
collective bargaining agreement. If, prior to the first anniversary of the
Closing Date, Buyer or Capitol elects to terminate the employment of Thom
Bee and/or Bruce Tallmadge and Buyer is obligated to make any severance
payments pursuant to their employment letter agreements dated June 27, 1994
and June 22, 1994, respectively, then Seller will promptly reimburse Buyer
the amount of any such severance payment.
(k) Capitol Plastics Employees' Money Purchase Plan. Before the
Closing, Seller shall submit on Capitol's behalf the Capitol Plastics
Employees' Money Purchase Plan (the "Money Purchase Plan") to the Internal
Revenue Service for a determination letter. Seller will prepare any
amendments required by the Internal Revenue Service to cause a favorable
determination letter to be issued. After the Closing, Buyer will cause
Capitol to cooperate with Seller with respect to the Internal Revenue
Service submission and to have any Money Purchase Plan amendments required
by the Internal Revenue Service adopted and executed. Seller shall pay all
expenses related to the amendment and submission of the Money Purchase Plan
to the Internal Revenue Service. Prior to the Closing, Seller shall cause
Capitol to make a contribution to the Money Purchase Plan, in accordance
with the terms of the Money Purchase Plan, for the period before the
Closing Date.
(l) O'Sullivan Corporation Employees' Retirement Savings Plan.
With respect to the O'Sullivan Corporation Employees' Retirement Savings Plan
("Seller's Plan"), Seller shall fully vest the account balance of each
employee of the Business who is employed by the Buyer as of the Closing
Date and participates in Seller's Plan as of the Closing Date and shall
make a monthly contribution to Seller's Plan, on behalf of each such
participant based on the participant's compensation and elective deferrals
for the period ending on the Closing Date.
(m) Savings Plan.
(i) Seller shall cause Capitol to freeze all contributions under the
Capitol Plastics of Ohio, Inc. Tax-Deferred Savings Plan (the "Capitol
Savings Plan") as of the earlier of (i) November 30, 1994 or (ii) the
Closing Date. Seller shall cause Capitol to make all contributions required
to be made to the Capitol Savings Plan for the period ending on the date as
of which the Capitol Savings Plan is frozen.
(ii) Effective immediately before the Closing, Seller shall assume
all of Capitol's rights and obligations as plan sponsor, plan administrator and
named fiduciary with respect to the Capitol Savings Plan, and Capitol shall
transfer responsibility as plan sponsor, plan administrator and named
fiduciary of the Capitol Savings Plan to Seller. Capitol shall no longer
maintain or be plan sponsor, plan administrator or named fiduciary of the
Capitol Savings Plan on or after the Closing. Seller and Capitol shall
take all actions necessary in order for Seller to be substituted for
Capitol as plan sponsor, plan administrator and named fiduciary for the
Capitol Savings Plan before the Closing.
(iii) After the Closing, Seller intends to terminate the Capitol
Savings Plan and distribute the Capitol Savings Plan accounts to Capitol
Savings Plan participants, subject, however, to and conditioned on receipt of a
favorable determination letter from the Internal Revenue Service with
respect to the Capitol Savings Plan termination and distribution. Seller
shall submit the Capitol Savings Plan to the Internal Revenue Service for a
favorable determination letter. Seller shall pay the expenses of freezing
and terminating the Capitol Savings Plan and the submission of the Capitol
Savings Plan to the Internal Revenue Service.
(n) Retention of documents. Buyer and Seller agree (i) to
retain, and permit each Party access to, all books and records with respect to
Tax matters reasonably pertinent to the Business or Capitol relating to any
taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by Buyer or Seller,
any extensions thereof) of the respective taxable periods, and to abide by
all record retention agreement entered into with any taxing authority, (ii)
to retain, and permit each Party reasonable access to, all other corporate
books, records, ledgers, files and documents relating to the Business or
Capitol until the seventh anniversary of the Closing Date and (iii) to give
the other party reasonable notice prior to transferring, destroying or
discarding any such books and records and, if the other Party so requests,
Buyer or Seller, as the case may be, shall allow the other Party to take
possession of such books and records.
(o) Financing. If Buyer does not consummate the transactions
set forth herein solely as a result of the failure of the condition set forth
in Section 3(a)(viii), Buyer shall promptly pay to Seller $750,000 in
immediately available funds by wire transfer.
(p) Vacation Pay. Buyer will assume liability for accrued
vacation pay for calendar year 1993, determined in a manner consistent with
Seller's past practices (the "Accrued Vacation Pay"), with respect to each of
Seller's salaried employees who are employed by Buyer or its Affiliate
immediately after the Closing (the "Salaried Employees"). If any Salaried
Employee's employment with Buyer and each of its Affiliates is terminated
by Buyer and its Affiliates for any reason within twelve (12) months
following the Closing Date and if Buyer is required to pay such employee
any Accrued Vacation Pay, Seller will reimburse Buyer for any such Accrued
Vacation Pay paid to such employee.
(q) Financial Information. Seller shall, and shall cause its
accountants to, assist Buyer and take all actions reasonably necessary to
enable the Buyer to prepare the pro forma financial information required to
be disclosed pursuant to Buyer's reporting obligations under the Securities
Exchange Act of 1934, as amended.
Section 8. Termination. This Agreement may be terminated as
provided below:
(a) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice
to Seller at any time prior to the Closing (A) in the event Seller has
breached any representation, warranty, or covenant contained in this Agree
ment in any material respect, or (B) if the Closing shall not have occurred
on or before December 31, 1994, by reason of the failure of any condition
precedent under Section 3(a) above; and
(c) Seller may terminate this Agreement by giving written notice
to Buyer at any time prior to the Closing (A) in the event Buyer has breached
any representation, warranty, or covenant contained in this Agreement in
any material respect or (B) if the Closing shall not have occurred on or
before December 31, 1994, by reason of the failure of any condition
precedent under Section 3(b) above.
Notwithstanding anything in this Section 8 to the contrary,
no Party may terminate this Agreement if the circumstance giving rise to
such Party's right to terminate results primarily from such Party itself
breaching any representation, warranty, or covenant contained in this
Agreement. If any Party terminates this Agreement pursuant to this Section
8, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party, except for any
liability of any Party then in breach.
Section 9. Definitions.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as
amended.
"Applicable Rate" means the corporate base rate of interest
announced from time to time by The Bank of Nova Scotia.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare
Benefit Plan, fringe benefit, bonus plan or other plan or program.
"Employee Pension Benefit Plan" shall have the meaning set
forth in Section 3(2) of ERISA.
"Employee Welfare Benefit Plan" shall have the meaning set
forth in Section 3(1) of ERISA.
"Environmental Condition" means (i) any violation of, or
noncompliance with, any Environmental, Health and Safety Laws by or with
respect to the operations or facilities of the Business or Capitol on or
prior to the Closing Date; (ii) the offsite treatment, storage, disposal or
other disposition, or the arrangement for such treatment, storage, disposal
or disposition of Hazardous Substances generated in connection with the
operation of the Business or the business of Capitol on or prior to the
Closing Date; or (iii) any other facts, events or conditions occurring or
in existence on or prior to the Closing Date, including without limitation
any discharge, release, or threatened release of any Hazardous Substances,
which thereafter give rise to any liability or investigatory, corrective or
remedial obligation pursuant to Environmental, Health and Safety Laws,
including without limitation responsibility for cleanup, liability for
cleanup costs, or liability for personal injury, property damage, or
natural resource damage.
"Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Resource Conservation and Recovery Act of 1976, the Occupational
Safety and Health Act of 1970, each as amended, together with all other
laws, rules and regulations of federal, state, local, and foreign
governments (and all agencies thereof) and other requirements having the
force or effect of law relating to or imposing liability or standards of
conduct concerning pollution or protection of the environment, public
health and safety, or employee health and safety, and all judgments, orders
and decrees of federal, state, local and foreign governments (and all
agencies thereof) issued or promulgated thereunder, and all related common
law theories.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"GAAP" means United States generally accepted accounting
principles, applied on a consistent basis by Seller or Capitol, as
applicable.
"Hazardous Substance" means any waste, pollutant, hazardous
or toxic material, substance or waste, chemical, petroleum, petroleum-based
substance or waste, asbestos-containing material, special waste, or any
other material, substance or waste with respect to which liability or
standards of conduct are imposed pursuant to any Environmental, Health and
Safety Laws.
"Intellectual Property" means (a) all inventions, all
improvements thereto, and all patents, patent applications, and patent
disclosures, and all other documents relating to the prosecution of such
patents, together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof; (b) all
trademarks, service marks, trade dress, logos, trade names, and corporate
names (other than "O'Sullivan" and any derivative thereof), including all
goodwill associated therewith, and all applications, registrations, and
renewals in connection therewith and all other documents relating to the
prosecution of such trademarks; (c) all copyrightable works, all
copyrights, and all applications, registrations, and renewals in connection
therewith and all other documents relating to the registration of such
copyrights; (d) all trade secrets, know-how, manufacturing and production
processes and techniques and other confidential business information;
(e) all computer software; (f) all other proprietary rights; and (g) all
copies and tangible embodiments thereof.
"Known Environmental Condition" means any of the matters
disclosed in Schedule 7(b)."
"Multiemployer Plan" shall have the meaning set forth in
Section 3(37) of ERISA.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Prohibited Transaction" has the meaning set forth in
Section 406 of ERISA and Section 4975 of the Code.
"Release" shall have the meaning set forth in the
Comprehensive Environmental Response, Compensation and Liability Act of
1980.
"Remedial Actions" means actions to clean up, contain or
otherwise ameliorate or remedy any Release or threatened Release of a
Hazardous Substance or performing studies, investigations or monitoring
with respect thereto.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) has the power to vote or direct
the voting of sufficient securities to elect a majority of the directors.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties,
capital stock, franchise, profits, withholding, social security, unem
ployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not, and including any
obligation to indemnify or otherwise assume or succeed to the Tax liability
of any other Person.
"Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Unaffiliated Person" means any Person that is not an
Affiliate of Seller.
"Unknown Environmental Condition" means any Environmental
Condition not disclosed in Schedule 7(b)."
Section 10. Miscellaneous.
(a) No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties
and supersedes any prior understandings, agreements, or representations by
or between the Parties, written or oral, that may have related in any way
to the subject matter hereof.
(c) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without
the prior written approval of the other Party; provided, however, that
Buyer may (x) assign any or all of its rights and interests hereunder to
one or more of its direct or indirect wholly owned Subsidiaries and
(y) designate one or more of its direct or indirect wholly owned
Subsidiaries to perform its obligations hereunder (in any or all of which
cases Buyer nonetheless shall remain responsible for the performance of all
of its obligations hereunder).
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two (2) business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to Seller:
O'Sullivan Corporation
P.O. Box 3510
Winchester, VA 22601
Attention: Anthony A. Barone
with a copy to:
McGuire, Woods, Battle & Boothe
One James Center
Richmond, VA 23219
Attention: J. Christopher Wiltshire
If to Buyer:
Automotive Industries, Inc.
4508 IDS Center
Minneapolis, MN 55402
Attention: President
Scott Rued
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Jeffrey C. Hammes, Esq.
John A. Schoenfeld, Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth
above using any other means, but no such notice, request, demand, claim, or
other communication shall be deemed to have been duly given unless and
until it is actually received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Virginia without
giving effect to any choice or conflict of law provision or rule (whether
of the State of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Virginia.
(h) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Seller. No waiver by any Party of any default, misrepre
sentation, or breach of warranty or covenant hereunder, whether intentional
or not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in
any way any rights arising by virtue of any prior or subsequent such occur
rence.
(i) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
(j) Construction. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall
not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. Nothing in any Schedule
attached hereto shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless such Schedule identifies the
exception with reasonable particularity.
(k) Remedies. The Parties shall each have and retain all other
rights and remedies existing in their favor at law or equity, including,
without limitation, any actions for specific performance and/or injunctive
or other equitable relief (including, without limitation, the remedy of
rescission) to enforce or prevent any violations of the provisions of this
Agreement. Without limiting the generality of the foregoing, Seller hereby
agrees that in the event Seller fails to convey the Acquired Assets to
Buyer in accordance with the provisions of this Agreement, Buyer's remedy
at law may be inadequate. In such event, Buyer shall have the right, in
addition to all other rights and remedies it may have, to specific
performance of the obligations of Seller to convey the Acquired Assets.
(l) Bulk Sales. The Parties do not contemplate complying
with the provisions of any so-called bulk transfer laws of any jurisdiction in
connection with the sale of Acquired Assets. Notwithstanding anything to
the contrary in Section 7(b) hereof, Seller agrees to indemnify Buyer
against all liability, damage or expense which Buyer may suffer due to the
failure to so comply.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
AUTOMOTIVE INDUSTRIES, INC.
By:/s/ Scott Rued
Title: /s/ Vice President
O'SULLIVAN CORPORATION
By:/s/ Anthony A. Barone
Anthony A. Barone
Title: Vice President,
Secretary and Chief
Financial Officer
AMENDMENT TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT (the "Amendment") is made and entered into as of
December 2, 1994 by and between Automotive Industries, Inc., a Virginia
corporation ("Buyer"), and O'Sullivan Corp., a Virginia corporation
("Seller").
Buyer and Seller are parties to that certain Asset Purchase
Agreement dated as of November 21, 1994 (the "Purchase Agreement").
Capitalized terms used and not defined herein are used as defined in the
Purchase Agreement.
The parties hereto are entering into this Amendment to amend the
Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, the
parties hereby agree as follows:
1. Amendments.
(1) Section 1(a)(xiii). Section 1(a)(xiii) shall be
amended as follows: The word "and" shall be deleted immediately preceding
clause (C), a comma shall be inserted immediately preceding clause (C) and the
words ", (D) production tooling for the 97GM W-CAR platform and (E) production
tooling for the 1995 Honda Accord platform" shall be inserted before the
words "(the `Transition Tooling')".
(2) Section 1(h)(v). Section 1(h)(v) shall be amended as
follows: In the first and second lines, the words "the WN-97 platform, the Honda
Civic platform and the Honda Accord platform," shall be replaced by the words
"the WN-97 platform, the 97GM W-CAR platform, the Honda Civic platform, the
1995 Honda Accord platform and the 1997 Honda Accord platform,".
(3) Schedule 4(c). Schedule 4(c) of the Purchase
Agreement shall be amended as follows:
(1) Under the "Capitol Plastics of Ohio, Inc." section of
"Agreements Requiring Consent, Waiver or Notification", item 3 shall be amended
by deleting the words ", no signature by Honda".
(2) Under the "Capitol Plastics of Ohio, Inc." section of
"Agreements Requiring Consent, Waiver or Notification", item 6 shall be amended
by deleting the words "signed and dated December 19, 1989 by Capitol, no date
or signature by Honda" and inserting in the place thereof the words "dated
January 2, 1990".
(3) The "Capitol Plastics of Ohio, Inc." section of
"Agreements Requiring Consent, Waiver or Notification", shall be amended by
adding thereto items 11 and 12 as shown on Schedule A attached hereto.
(4) Under the "O'Sullivan Corporation (Gulfstream
Division)" section, item 1 (Confidentiality Agreement between General Motors
Corporation and O'Sullivan Corporation, dated May 6, 1993) and item 19
(Confidentiality Agreement between the Dexter Automotive Materials Division
of the Dexter Corporation and O'Sullivan Corporation, dated May 17, 1994)
shall be deleted in their entirety.
(5) Under the "O'Sullivan Corporation (Gulfstream
Division)" section of "Agreements Requiring Consent, Waiver or Notification",
item 4 shall be amended by deleting the words "no date or signature by Honda"
and inserting in the place thereof the words "dated May 14, 1991".
(6) The "O'Sullivan Corporation (Gulfstream Division)"
section of "Agreements Requiring Consent, Waiver or Notification", shall be
amended by adding thereto item 28 as shown on Schedule A attached hereto.
(4) Schedule 4(g). Schedule 4(g) of the Purchase Agreement
shall be amended to include the following items:
(1) Proposed Fourth Amendment to the O'Sullivan
Corporation Pension Plan for Hourly-Paid Employees.
(2) O'Sullivan Corporation Severance Policy for Salaried
Employees (effective as of November 1, 1994).
(5) Schedule 4(m). Schedule 4(m) of the Purchase Agreement
shall be amended as follows:
(1) Under the "Capitol Plastics of Ohio, Inc." section of
"Licenses, Contracts and Other Agreements", item 3 shall be amended by deleting
the words ", no signature by Honda".
(2) Under the "Capitol Plastics of Ohio, Inc." section of
"Licenses, Contracts and Other Agreements", item 6 shall be amended by deleting
the words "signed and dated December 19, 1989 by Capitol, no date or signature
by Honda" and inserting in the place thereof the words "dated January 2,
1990".
(3) The "Capitol Plastics of Ohio, Inc." section of
"Licenses, Contracts and Other Agreements", shall be amended by adding thereto
items 11 and 12 as shown on Schedule B attached hereto.
(4) Under the "O'Sullivan Corporation" section, item
1 (Confidentiality Agreement between General Motors Corporation and
O'Sullivan Corporation, dated May 6, 1993) and item 10 (Confidentiality
Agreement between the Dexter Automotive Materials Division of the Dexter
Corporation and O'Sullivan Corporation, dated May 17, 1994) shall be
deleted in their entirety.
(5) Under the "O'Sullivan Corporation" section of
"Licenses, Contracts and Other Agreements", item 4 shall be amended by deleting
the words "no date or signature by HONDA" and inserting in the place thereof
the words "dated May 14, 1991".
(6) The "O'Sullivan Corporation" section of "Licenses,
Contracts and Other Agreements", shall be amended by adding thereto item 17 as
shown on Schedule B attached hereto.
(6) Schedule 4(p). Schedule 4(p) of the Purchase Agreement
shall be amended as follows:
(1) Under the "Capitol Plastics of Ohio, Inc." section,
item 3 shall be amended by deleting the words ", no signature by Honda".
(2) Under the "Capitol Plastics of Ohio, Inc." section,
item 6 shall be amended by deleting the words "signed and dated December 19,
1989 by Capitol, no date or signature by Honda" and inserting in the place
thereof the words "dated January 2, 1990".
(3) The "Capitol Plastics of Ohio, Inc." section shall be
amended by adding thereto items 11 and 12 as shown on Schedule C attached
hereto.
(4) Under the "O'Sullivan Corporation" section,
item 4 (Confidentiality Agreement between General Motors Corporation and
O'Sullivan Corporation, dated May 6, 1993) and item 28 (Confidentiality
Agreement between the Dexter Automotive Materials Division of the Dexter
Corporation and O'Sullivan Corporation, dated May 17, 1994) shall be
deleted in their entirety.
(5) Under the "O'Sullivan Corporation" section, item 7
shall be amended by deleting the words "no date or signature by HONDA" and
inserting in the place thereof the words "dated May 14, 1991".
(6) The "O'Sullivan Corporation" section shall be amended
by adding thereto item 37 as shown on Schedule C attached hereto.
(7) Schedule 4(s). Schedule 4(s) of the Purchase Agreement
shall be amended by deleting the item which reads "Cheryl Kline - Huron: An
unasserted claim of wrongful termination.".
(8) Schedule 4(t). Schedule 4(t) of the Purchase Agreement
shall be amended by deleting the item which reads "Cheryl Kline - Huron: An
unasserted claim of wrongful termination.".
(9) Schedule 4(u). Schedule 4(u) of the Purchase Agreement
shall be amended to include the following item:
(1) O'Sullivan Corporation Severance Policy for Salaried
Employees.
2. Effect. Except as amended by this Amendment, the Purchase
Agreement shall remain in full force and effect. All references to the
"Agreement" in the Purchase Agreement shall hereafter be deemed to refer to
the Purchase Agreement as amended hereby.
3. Counterparts. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
4. Governing Law. This Amendment shall be governed by and
construed in accordance with the domestic laws of the State of Virginia without
giving effect to any choice or conflict of law provision or rule (whether
of the State of Virginia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Virginia.
* * * * *
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment
as of the date first above written.
AUTOMOTIVE INDUSTRIES, INC.
By:/s/ Carl E. Nelson
Title:/s/ V.P.
O'SULLIVAN CORPORATION
By: /s/ Anthony A. Barone
Anthony A. Barone
Title: Vice President, Secretary and
Chief Financial Officer
Schedule A
AMENDMENTS TO SCHEDULE 4(c)
Capitol Plastics of Ohio, Inc.:
11. Confidentiality Agreement between Honda of Canada Mfg., Inc. and
Capitol Plastics of Ohio, Inc., dated January 1, 1989.
12. Amendment to Agreement for Purchase and Sale of Goods between
American Honda Motor Co., Inc. and Capitol Plastic of Ohio, Inc.,
dated July 15, 1994.
O'Sullivan Corporation (Gulfstream Division):
28. Confidentiality Agreement among Honda Research of America, Inc.,
Ohio Division, and Honda of America Mfg., Inc. and O'Sullivan
Corporation-Gulfstream Div., dated April 9, 1990.
Schedule B
AMENDMENTS TO SCHEDULE 4(m)
Capitol Plastics of Ohio, Inc.
* 11. Confidentiality Agreement between Honda of Canada Mfg., Inc.
and Capitol Plastics of Ohio, Inc., dated January 1, 1989.
* 12. Amendment to Agreement for Purchase and Sale of Goods between
American Honda Motor Co., Inc. and Capitol Plastics of Ohio,
Inc., dated July 15, 1994.
O'Sullivan Corporation
* 17. Confidentiality Agreement among Honda Research of America,
Inc., Ohio Division, and Honda of America Mfg., Inc. and
O'Sullivan Corporation-Gulfstream Div., dated April 9, 1990.
Schedule C
AMENDMENTS TO SCHEDULE 4(p)
Capitol Plastics of Ohio, Inc.
* 11. Confidentiality Agreement between Honda of Canada Mfg., Inc.
and Capitol Plastics of Ohio, Inc., dated January 1, 1989.
* 12. Amendment to Agreement for Purchase and Sale of Goods between
American Honda Motor Co., Inc. and Capitol Plastics of Ohio,
Inc., dated July 15, 1994.
O'Sullivan Corporation
* # 37. Confidentiality Agreement among Honda Research of
America, Inc., Ohio Division, and Honda of America
Mfg., Inc. and O'Sullivan Corporation-Gulfstream Div.,
dated April 9, 1990.
